**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**







**FORM
      10-QSB/A**








(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**
            **20-1191778**(State
                or other Jurisdiction of incorporation)
            (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 xNo 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
oNo
x










Coastal
      Bancshares Acquisition Corp., a Delaware corporation (the “Company”), hereby
      amends, as set forth herein, the Company’s Quarterly Report on Form 10-QSB for
      the period ended March 31, 2006 filed with the Securities and Exchange
      Commission on May 12, 2006 (the “Form 10-QSB”). The item numbers and responses
      thereto are in accordance with the requirements of Form 10-QSB. All capitalized
      terms used and not otherwise defined herein shall have the meaning specified
      in
      the Form 10-QSB.







**PART
      I. CONDENSED FINANCIAL INFORMATION**


**Item
      1. Condensed Financial Statements**





**COASTAL
      BANCSHARES ACQUISITION CORP.**


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


**CONDENSED
      BALANCE SHEETS**




**December
                31,**
              **2005**
              **(Restated)**
            
            **March
                31,****2006**
              **(Restated)**
              **(Unaudited)****ASSETS****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
            
            
            64,000Warrant
                liability
            
            
            4,747,200
            
            
            6,624,000**Total
                Liabilities**
            
            
            4,965,750
            
            
            6,963,929**Common
                stock subject to stockholders’ 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 valueAuthorized
                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
            
            
            16,836,761
            
            
            16,778,429Deferred
                compensation
            
            
            (93,506
            )
            
            (57,542
            )Earnings
                accumulated during the development stage
            
            
            2,600,811
            
            
            814,073**Total
                Stockholders’ Equity**
            
            
            19,398,232
            
            
            17,589,126**Total
                Liabilities and Stockholders’ Equity**
            
            $
            30,215,000
            
            $
            30,462,405




*See
        accompanying notes to condensed financial statements.*


2


**COASTAL
      BANCSHARES ACQUISITION CORP.**


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


**CONDENSED
      UNAUDITED STATEMENTS OF OPERATIONS**


**(RESTATED)**


**Period
                  from May 19,**
                **2004
                  (inception) to****Three
                  Months Ended March 31,****March
                  31, 2006**
              
              
              **2005**
              
              
              **2006**(Increase)
                  decrease in warrant liability
              
              
              552,000
              
              
              (1,545,600
              )
              
              (1,876,800
              )Formation
                  and operating costs
              
              $
              (653,825
              )
              $
              (67,935
              )
              $
              (143,413
              )Operating
                  loss
              
              
              (101,825
              )
              
              (1,613,535
              )
              
              (2,020,213
              )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 (loss)
              
              
              1,000,175
              
              
              (1,532,519
              )
              
              (1,723,636
              )Provision
                  for income taxes (benefit)
              
              
              186,102
              
              
              3,600
              
              
              63,102Net
                  income (loss)
              
              $
              814,073
              
              $
              (1,536,119
              )
              $
              (1,786,738
              )Weighted
                  average shares outstanding:Basic
              
              
              4,290,925
              
              
              3,576,000
              
              
              6,520,000Diluted
              
              
              10,872,775
              
              
              3,576,000
              
              
              6,520,000Net
                  income (loss) per share:Basic
              
              $
              0.19
              
              $
              (0.43
              )
              $
              (0.27
              )Diluted
              
              $
              0.02
              
              $
              (0.43
              )
              $
              (0.27
              )
 See
          accompanying notes to condensed financial statements.


3


**COASTAL
      BANCSHARES ACQUISITION CORP.**


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


**CONDENSED
      UNAUDITED STATEMENTS OF CASH FLOWS**


**(RESTATED)**




**Period
                  from May 19,**
                **2004
                  (inception) to**
              
              **Three
                      Months Ended March 31,****March
                  31, 2006**
              
              **2005**
              
              **2006**CASH
                  FLOW FROM OPERATING ACTIVITIESNet
                  income (loss)
              
              $
              814,073
              
              $
              (1,536,119
              )
              $
              (1,786,738
              )Adjustments
                  to reconcile net income (loss) to net cash provided by operating
                  activities:Increase
                  in market value of treasury bill
              
              
              (347,203
              )
              
              (78,490
              )
              
              (291,806
              )Amortization
                  of deferred compensation
              
              
              141,458
              
              
              —
              
              
              35,964Common
                  stock granted as compensation
              
              
              (199,000
              )Increase
                  (decrease) in warrant liability
              
              
              (552,000
              )
              
              1,545,600
              
              
              1,876,800Changes
                  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
              
              
              (63,396
              )
              
              (155,111
              )
              
              (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
              
              
              (3,227,055
              )
              
              (3,362,525
              )
              
              —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
              
              
              29,808,362
              
              
              29,702,475
              
              
              (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.
  4


**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.


5





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).





*Restatement*





Under
      EITF No. 00-19, *“Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock”* (“EITF
      No. 00-19”), the fair value of the warrants issued as part of the Units have
      been reported as a liability. The warrant agreement provides for the Company
      to
      register the shares underlying the warrants and is silent as to the penalty
      to
      be incurred in the absence of the Company’s ability to deliver registered shares
      to the warrant holders upon warrant exercise. Under EITF No. 00-19, registration
      of the common stock underlying the warrants is not within the Company’s control.
      As a result, the Company must assume that it could be required to settle the
      warrants on a net-cash basis, thereby necessitating the treatment of the
      potential settlement obligation as a liability. Further EITF No. 00-19, requires
      the Company to record the potential settlement liability at each reporting
      date
      using the current estimated fair value of the warrants, with any changes being
      recorded through the Company’s statement of operations. The potential settlement
      obligation will continue to be reported as a liability until such time as the
      warrants are exercised, expire, or the Company is otherwise able to modify
      the
      registration requirements in the warrant agreement to remove the provisions
      which require this treatment. The fair value of the warrant liability in the
      accompanying balance sheets was determined using the trading value of the
      warrants. The value assigned to the warrant liability at February 14 and 18,
      2005 (the dates of issuance), December 31, 2005, and March 31, 2006 was
      $7,176,000, $4,747,200 and $6,624,000, respectively. The fair value of the
      warrants was determined by the trading value of the securities on the last
      day
      of each period.





Amounts
      reported as warrant liability expense in the accompanying statement of
      operations resulting from the change in valuation of the warrant liability
      was
      $1,545,600 and $1,876,800 for three month periods ended March 31, 2005 and
      2006,
      respectively.





The
      Company had previously issued financial statements which did not present the
      warrant liability. The accompanying financial statements have been restated
      to
      correct this error. The impact of the correction of this error in previously
      reported financial statements is as follows:




6





*(in
      thousands except share and per share amounts)*




**As
                of and for the Three Months**
              **Ended
                March 31, 2005**
            
            **As
                of and for the Three Months**
              **Ended
                March 31, 2006****As
                Previously Reported**
            
            **As
                Restated**
            
            **As
                Previously Reported**
            
            **As
                Restated**Assets
            
            $
            29,762
            
            $
            29,762
            
            $
            30,462
            
            $
            30,462Liabilities
            
            $
            36
            
            $
            8,758
            
            $
            340
            
            $
            6,964Common
                stock subject to conversion
            
            $
            5,709
            
            $
            5,709
            
            $
            5,909
            
            $
            5,909Stockholders'
                equity
            
            $
            24,016
            
            $
            15,295
            
            $
            24,213
            
            $
            17,589Warranty
                liability income (expense)
            
            $
            -
            
            $
            (1,546
            )
            $
            -
            
            $
            (1,877
            )Pre-tax
                income (loss)
            
            $
            13
            
            $
            (1,533
            )
            $
            153
            
            $
            (1,724
            )Provision
                for income taxes
            
            $
            3
            
            $
            3
            
            $
            63
            
            $
            63Net
                income (loss)
            
            $
            9
            
            $
            (1,536
            )
            $
            90
            
            $
            (1,787
            )**Weighted
                average shares:**Basic
            
            
            3,576,000
            
            
            3,576,000
            
            
            6,520,000
            
            
            6,520,000Diluted
            
            
            3,576,000
            
            
            3,576,000
            
            
            6,520,000
            
            
            6,520,000**Earnings
                (loss) per share:**Basic
            
            $
            -
            
            $
            (0.43
            )
            $
            0.01
            
            $
            (0.27
            )Diluted
            
            $
            -
            
            $
            (0.43
            )
            $
            0.01
            
            $
            (0.27
            )





**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.


7





**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.**  **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.**  **PROPOSED
      BUSINESS COMBINATION**





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.





*Restatement*





Under
      EITF No. 00-19, *“Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock”* (“EITF
      No. 00-19”), the fair value of the warrants issued as part of the Units sold in
      our initial public offering have been reported as a liability. The warrant
      agreement provides for us to register the shares underlying the warrants and
      is
      silent as to the penalty to be incurred in the absence of our ability to deliver
      registered shares to the warrant holders upon warrant exercise. Under EITF
      No.
      00-19, registration of the common stock underlying the warrants is not within
      our control. As a result, we must assume that we could be required to settle
      the
      warrants on a net-cash basis, thereby necessitating the treatment of the
      potential settlement obligation as a liability. Further EITF No. 00-19, requires
      us to record the potential settlement obligation at each reporting date using
      the current estimated fair value of the warrants, with any changes being
      recorded through our statement of operations. The potential settlement
      obligation will continue to be reported as a liability until such time as the
      warrants are exercised, expire, or we are otherwise able to modify the
      registration requirements in the warrant agreement to remove the provisions
      which require this treatment. The fair value of the warrant liability in our
      balance sheets was determined using the trading value of the warrants. The
      value
      assigned to the warrant liability at February 14 and 18, 2005 (the dates of
      issuance), December 31, 2005, and March 31, 2006 was $7,176,000, $4,747,200
      and
      $6,624,000, respectively. The fair value of the warrants was determined by
      the
      trading value of the securities on the last day of each period.





Amounts
      reported as warrant liability expense in the accompanying statement of
      operations resulting from the change in valuation of the warrant liability
      was
      $1,545,600 and $1,876,800 for three month periods ended March 31, 2005 and
      2006,
      respectively.





The
      Company had previously issued financial statements which did not present the
      warrant liability. The accompanying financial statements have been restated
      to
      correct this error. The impact of the correction of this error in previously
      reported financial statements is as follows:


9


*(in
      thousands except share and per share amounts)*




**As
                  of and for the Three Months**
                **Ended
                  March 31, 2005**
              
              **As
                  of and for the Three Months**
                **Ended
                  March 31, 2006****As
                  Previously Reported**
              
              **As
                  Restated**
              
              **As
                  Previously Reported**
              
              **As
                  Restated**Assets
              
              $
              29,762
              
              $
              29,762
              
              $
              30,462
              
              $
              30,462Liabilities
              
              $
              36
              
              $
              8,758
              
              $
              340
              
              $
              6,964Common
                  stock subject to conversion
              
              $
              5,709
              
              $
              5,709
              
              $
              5,909
              
              $
              5,909Stockholders'
                  equity
              
              $
              24,016
              
              $
              15,295
              
              $
              24,213
              
              $
              17,589Warranty
                  liability income (expense)
              
              $
              -
              
              $
              (1,546
              )
              $
              -
              
              $
              (1,877
              )Pre-tax
                  income (loss)
              
              $
              13
              
              $
              (1,533
              )
              $
              153
              
              $
              (1,724
              )Provision
                  for income taxes
              
              $
              3
              
              $
              3
              
              $
              63
              
              $
              63Net
                  income (loss)
              
              $
              9
              
              $
              (1,536
              )
              $
              90
              
              $
              (1,787
              )**Weighted
                  average shares:**Basic
              
              
              3,576,000
              
              
              3,576,000
              
              
              6,520,000
              
              
              6,520,000Diluted
              
              
              3,576,000
              
              
              3,576,000
              
              
              6,520,000
              
              
              6,520,000**Earnings
                  (loss) per share:**Basic
              
              $
              -
              
              $
              (0.43
              )
              $
              0.01
              
              $
              (0.27
              )Diluted
              
              $
              -
              
              $
              (0.43
              )
              $
              0.01
              
              $
              (0.27
              )
 **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 loss of $1,786,738. We incurred
      operating expenses of $143,413 and warrant liability expense resulting from
      an
      increase in the potential settlement liability related to our warrants of
      $1,876,800. Our operating expenses and warrant liability expense were partially
      offset by our interest income. 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. Our expenses, other than our warrant liability expense, 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.




10





**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.





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.




11


**Item
      3. Controls and Procedures**




Under  the  supervision
        and with  the
        participation of our management, including our principal executive officers
        and
        principal financial officer, we have evaluated  the  effectiveness
        of the design and operation of our disclosure controls and procedures as
        of
        December 31, 2005 (the “Evaluation Date”), and, based on their evaluation, our
        principal executive officers and principal financial officer have concluded  that
        these controls and procedures  were
        effective as of the Evaluation Date. However, in connection with the preparation
        of Amendment No. 1 to our Proxy Statement related to the Agreement and Plan
        of
        Merger, dated as of April 5, 2006, by and among our company and our wholly-owned
        subsidiary Coastal Merger Corp., a Texas corporation and Intercontinental
        Bank
        Shares Corporation, a Texas corporation, in consultation with our independent
        registered accounting firm, Hein & Associates LLP (“Hein”), we determined
        that we needed to reclassify certain amounts in our financial statements
        to
        report the warrants issued as part of the units in our initial public offering
        as a liability. Hein based its conclusions upon a comment received from the
        Securities and Exchange Commission in connection with the preparation of
        the
        Registration Statement for another targeted acquisition company similar to
        ourselves and after further review of the relevant accounting literature.
        We
        addressed this concern by determining to restate our Form 10-KSB for the
        fiscal
        year ended December 31, 2005 and our Form 10-QSB for the period ended March
        31,
        2006 to reflect this reclassification. There were no significant changes
        in our
        internal controls or in other factors that could significantly affect these
        controls subsequent to the Evaluation Date. ****




**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)**




12




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*







*
      filed
      herewith





**
      previously filed





(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


13


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:
      June 22, 2006


COASTAL
              BANCSHARES
              ACQUISITION CORP./s/ Cary
              M.
              GrossmanCary
              M. GrossmanChief
              Executive Officer


14


**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*







*
      filed
      herewith





**
      previously filed