UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K


  [ X ]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                   For the Fiscal Year Ended December 31, 2000
                                             -----------------

                                       OR

  [   ]     Transition Report Pursuant to Section 13 or 15 (d) of the Securities
                              Exchange Act of 1934
              For the Transition Period from _________ to _________

                        Commission File Number:  0-24526
                                                 -------

                              COASTAL BANCORP, INC.
                              ---------------------
             (Exact name of Registrant as specified in its charter)


                Texas                     76-0428727
                -----                     ----------
(State  or  other  jurisdiction  of     (IRS  Employer
incorporation  or  organization)     Identification  No.)

                           5718 Westheimer, Suite 600
                              Houston, Texas 77057
                           ---------------------------
                     (Address of principal executive office)

                                 (713) 435-5000
                                 --------------
                         (Registrant's telephone number)

           Securities registered pursuant to Section 12(b) of the Act:

     Title  of  each  class     Name  of  each  exchange  on  which  registered
              N/A                                  N/A

           Securities registered pursuant to section 12(g) of the Act:
                     Common Stock, $0.01 par value per share
                     ---------------------------------------
                                (Title of Class)

                    9.12% Series A Cumulative Preferred Stock
                    -----------------------------------------
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
by  Section  13  or  15(d)  of  the  Securities  Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for the
past  90  days.   Yes   X  No
                      ---

Indicate  by  check mark if disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-K  is  not contained herein, and will not be contained, to the
best  of  Registrant's  knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form  10-K.  [   ]

As  of  March  16,  2001,  the aggregate market value of the 5,737,376 shares of
Common  Stock  of  the Registrant issued and outstanding on such date, excluding
1,675,183  shares held by all directors and executive officers of the Registrant
as a group, was $108,663,663.  This figure is based on the closing sale price of
$26.75 per share of the Registrant's Common Stock on March 16, 2001, as reported
in  The  Wall  Street  Journal  on  March  19,  2001.

Number of shares of Common Stock outstanding as of March 16, 2001:     5,737,376

     DOCUMENTS  INCORPORATED  BY  REFERENCE
     List  hereunder  the  following documents incorporated by reference and the
Part  of  Form  10-K  into  which  the  document  is  incorporated:
(1)     Portions  of  the  Registrant's  Annual  Report  to Stockholders for the
fiscal year ended December 31, 2000, are incorporated into Part II, Items 5-8 of
this  Form  10-K.
(2)     Portions  of  the  Registrant's  definitive proxy statement for its 2001
Annual  Meeting  of  Stockholders ("Proxy Statement") are incorporated into Part
III,  Items  10-13  of  this  Form  10-K.

<PAGE>

PART  I.

ITEM  1.  BUSINESS
------------------

     COASTAL  BANCORP,  INC.

     In  addition  to  historical  information,  this Annual Report on Form 10-K
includes  certain "forward-looking statements," as defined in the Securities Act
of  1933,  as amended (the "Securities Act"), and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), based on current management expectations.
Coastal  Bancorp,  Inc.'s (the "Company") actual results could differ materially
from  those  management  expectations.  Such  forward-looking statements include
statements  regarding  the Company's intentions, beliefs or current expectations
as well as the assumptions on which such statements are based.  Stockholders and
potential  stockholders  are  cautioned that any such forward-looking statements
are  not  guarantees  of future performance and involve risks and uncertainties,
and  that  actual  results may differ materially from those contemplated by such
forward-looking  statements.  Factors  that  could  cause future results to vary
from  current  management  expectations include, but are not limited to, general
economic  conditions,  legislative  and  regulatory changes, monetary and fiscal
policies  of  the  federal  government,  changes  in  tax  policies,  rates  and
regulations  of  federal,  state  and local tax authorities, changes in interest
rates,  deposit  flows,  the cost of funds, demand for loan products, demand for
financial  services,  competition,  changes in the quality or composition of the
Company's  loan  and  investment  portfolios,  changes in accounting principles,
policies  or  guidelines,  and  other  economic,  competitive,  governmental and
technological  factors  affecting  the  Company's operations, markets, products,
services and fees.  The Company undertakes no obligation to update or revise any
forward-looking  statements  to  reflect  changed assumptions, the occurrence of
unanticipated  events  or  changes  to  future  operating  results  over  time.

     Coastal  Bancorp,  Inc.  is engaged primarily in the business of serving as
the  parent  holding company for Coastal Banc ssb (the "Bank").  The Company was
incorporated in March 1994 in connection with the reorganization of Coastal Banc
Savings  Association,  a  Texas-chartered thrift institution (the "Association")
into  the  holding  company  form  of  organization.  In  connection  with  the
reorganization,  which  was completed in July 1994, the Association concurrently
converted  into  a  Texas-chartered  savings bank and took its present name.  In
November  1996,  in  order  to  minimize  state  taxes,  the Company's corporate
structure  was  again  reorganized by forming Coastal Banc Holding Company, Inc.
("HoCo")  as  a Delaware holding company.  HoCo became a wholly-owned subsidiary
of  the  Company  and  the  Bank  became  a  subsidiary  of HoCo.  Each of these
reorganizations was treated for accounting purposes as combinations similar to a
pooling-of-interests.  The financial information and references presented herein
have been restated to give effect where appropriate to the reorganizations as if
they  had occurred at the earliest date presented.  In October 1997, the Company
formed Coastal Banc Capital Corp. ("CBCC") as a wholly-owned subsidiary of HoCo.
CBCC  is  a  registered  broker-dealer and was formed to trade packages of whole
loan  assets,  primarily for the Bank and for other institutional investors.  In
June  2000, the Company acquired Coastal Banc Insurance Agency, Inc. ("CBIA") as
a  wholly-owned subsidiary of the Bank.  CBIA was a former affiliate of the Bank
and  receives  fees  related  to  insurance  and investment product sales to the
Bank's  deposit  and  loan  customers.

     At  December  31,  2000,  the Company had total consolidated assets of $3.1
billion,  total  deposits  of  $1.7 billion, $28.8 million in Series A Preferred
Stock  of  the  Bank, 9.12% Series A Cumulative Preferred Stock of $27.5 million
and  common  stockholders'  equity  of  $111.0  million.

     The  Company  is  subject  to  examination  and regulation by the Office of
Thrift  Supervision  (the  "OTS")  and  the  Company and the Bank are subject to
examination  and  regulation  by  the  Texas  Savings  and  Loan Department (the
"Department").  The  Company  is  also  subject  to  various reporting and other
requirements  of  the  Securities  and  Exchange  Commission  (the  "SEC").  See
"Regulation  -  The  Company."

     The  Company's  executive  offices  are located at Coastal Banc Plaza, 5718
Westheimer,  Suite  600,  Houston, Texas 77057-5745, and its telephone number is
(713)  435-5000.

     COASTAL  BANC  ssb

     The Bank is a Texas-chartered, Federally insured state savings bank.  It is
headquartered  in  Houston,  Texas  and  operates  through  50 branch offices in
metropolitan  Houston,  Austin,  Corpus Christi, the Rio Grande Valley and small
cities  in  the  southeast  quadrant  of  Texas.

     The  Bank,  which was originally organized in 1954, was acquired in 1986 by
an investor group (which includes a majority of the current members of the Board
of  Directors  and  the  present  Chairman  of  the  Board,  President and Chief
Executive Officer of the Company) as a vehicle to take advantage of the failures
and  consolidation  in the Texas banking and thrift industries.  At February 28,
1986 (the date of change in ownership), the Bank had one full service office and
total  assets of approximately $10.7 million.  Since then, the Bank has acquired
deposits  and  branch  offices  in  transactions with the Federal government and
other private institutions, and, in 1995, acquired an independent national bank.
By  December  31,  2000,  the Bank's total assets had increased to $3.1 billion,
total  deposits  were  $1.7  billion  and  stockholders'  equity  totaled $209.0
million.

     The  Bank  attempts to maximize profitability through the generation of net
interest  income  and  fee  income.  To  meet  this  objective,  the  Bank  has
implemented  a  strategy  of  building its core deposit base while deploying its
funds  in assets which provide an attractive return with acceptable credit risk.
In  carrying  out this strategy, and to ultimately provide an attractive rate of
return  to  the  Company's  shareholders,  the  Bank  adheres  to four operating
principles:  (i)  continuing  to  expand  its  low  cost core deposit base; (ii)
minimizing  interest  rate risk; (iii) controlling credit risk, while increasing
the emphasis on commercial business lending; and (iv) maintaining a low level of
general  overhead expense relative to its peers.  These operating principles are
briefly  discussed  below.

     The  Bank  operates  a  website  on the Internet for business and marketing
purposes at www.coastalbanc.com.  (The website is not a part of this Form 10-K.)
            -------------------

     CORE  DEPOSITS.  The Bank began to implement the first operating principle,
developing  and  expanding  a  core  deposit  base,  in 1988 through a series of
transactions  with  the Federal government and competitively priced transactions
with  private sector financial institutions.  In 1988, the Bank became the first
acquiror  of  failed  or  failing  savings  institutions  under  the  Federal
government's  "Southwest  Plan."  In  this  transaction  (the  "Southwest  Plan
Acquisition"),  the  Bank  acquired  from the Federal Savings and Loan Insurance
Corporation  ("FSLIC"), as receiver for four insolvent savings associations (the
"Acquired  Associations"),  approximately  $543.4  million of assets and assumed
approximately  $543.4  million  of  deposits  and  other  liabilities.  The Bank
acquired an aggregate of 14 branch offices from the Acquired Associations in new
and existing markets in southwest Houston, west of Houston along the Houston-San
Antonio  corridor  and  in  the  Rio  Grande  Valley.

     Since  completion  of  the Southwest Plan Acquisition, the Bank has entered
into  a  series  of  branch  office  transactions  (including  two  disposition
transactions)  and  one  whole  bank  acquisition.  All  of  these  transactions
resulted  in the net assumption of $1.9 billion of primarily retail deposits and
58  branch offices (16 of which were subsequently closed or sold).  The Bank has
also  opened  seven  de  novo  branches  since its inception, six in the Houston
metropolitan  area  and  one  in  Austin.  The  Bank  will  continue  to  pursue
acquisitions  in  Texas  as  a  vehicle  for  growth,  although  there can be no
assurance  that the Bank will be able to continue to do so on an accretive basis
in  the  future,  or  at  all.

     INTEREST  RATE  RISK.  The  Bank  has  implemented  its  second  operating
principle,  minimizing  interest rate risk, by matching, to the extent possible,
the  repricing  or  maturity  of its interest-earning assets to the repricing or
expected  terms  of  its  interest-bearing  liabilities.  The Bank also tries to
match  the  basis  or  index  (for  example,  the  London Interbank Offered Rate
("LIBOR")  or  the 11th District Federal Home Loan Bank cost of funds index upon
which  these assets and liabilities reprice.  Generally this is achieved through
management  of  the  composition of the Bank's assets and liabilities.  The Bank
also  attempts to reduce its exposure to fluctuations in interest rates by using
interest  rate  swap  and  cap  agreements.  See  "Management's  Discussion  and
Analysis  of Financial Condition and Results of Operations - Asset and Liability
Management"  set  forth  in  Item  7  hereof.

     CREDIT  RISK.  The  Bank  has  implemented  the  third operating principle,
controlling  credit  risk,  while  increasing  the  emphasis  on  its commercial
business  lending,  by  (i)  holding  a  substantial  portion  of  its assets in
primarily  adjustable  rate  mortgage-backed  securities  and first lien (single
family)  residential  mortgage loans, and (ii) taking a cautious approach to its
direct  lending  operations,  including  the  development of commercial business
lending.  At  December  31, 2000, of the Company's $3.1 billion in total assets,
$980.2 million or 31.7% of total assets consisted of mortgage-backed securities.
At December 31, 2000, the Company's total loans receivable portfolio amounted to
$1.9 billion or 61.3% of total assets, $908.8 million of which were comprised of
first  lien  single  family  residential  mortgage  loans.

     NONINTEREST  EXPENSE.  The  Bank  has  implemented  the  fourth  operating
principle,  maintaining  a low level of general overhead expense relative to its
peers,  by  operating an efficiently staffed operations and branch office system
which  is  able  to  administer  and  deliver  its  products  and services in an
economical  manner.  Currently, the Bank believes that it has the infrastructure
in  place  to  handle  additional  commercial  customers,  and  that  continued
incremental  growth in its customer base will not cause its overhead expenses to
increase  by a corresponding amount.  The Company's ratio of noninterest expense
to  average  total  assets  on a consolidated basis was 1.91% for the year ended
December  31,  2000.

     The  Bank  is  subject  to  regulation by the Department, as its chartering
authority,  and  by  the  Federal  Deposit Insurance Corporation ("FDIC"), which
regulates  the  Bank  and insures its deposits to the fullest extent provided by
law.  The  Bank  also is subject to certain regulation by the Board of Governors
of  the  Federal Reserve System (the "Federal Reserve Board") and is a member of
the  Federal Home Loan Bank of Dallas (the "FHLB"), one of the 12 regional banks
which  comprise the Federal Home Loan Bank System.  See "Regulation - Regulation
of  the  Bank."

LENDING  ACTIVITIES

     GENERAL.  Since  1995,  the  Bank  has  attempted  to  re-align its lending
products  to  compete  with  commercial  banks  in an effort to increase its net
interest  margin  while  at  the same time controlling credit risk.  In order to
avoid  incurring undue credit risk, the Bank historically invested a significant
percentage  of  its  assets  in  alternative financial instruments, particularly
mortgage-backed  securities, most of which have certain repayments guaranteed by
the  United  States  government  or  government  sponsored  enterprises.  See
"Mortgage-Backed  Securities."  In  addition,  the  Bank  has  originated  and
purchased  for  retention  in  its  portfolio  only  those  loans  determined by
management  to  have  an  acceptable  credit  risk  and which provide a positive
interest  rate  spread  over funding liabilities matched with similar maturities
and  other  characteristics.  This strategy is designed to achieve an acceptable
risk  adjusted  rate  of return, as determined and continuously evaluated by the
Board  of  Directors  and  management.

     The Bank has taken a cautious approach to the development and growth of its
direct  lending  operations  in its efforts to control credit risk.  In November
1995,  the  Bank  acquired  its first commercial bank, Texas Capital Bancshares,
Inc. ("Texas Capital").  The $103.3 million in loans acquired from Texas Capital
included  first  lien  residential,  multifamily  and  commercial  real  estate,
residential  construction,  real estate acquisition and development, commercial,
financial  and industrial and consumer loans.  In 1998, the Bank acquired twelve
commercial  bank branches (the "1998 Branch Acquisition") and designated them as
the  foundation  for  the  Bank's  Business  Banking Centers, which focus on the
Bank's  commercial  banking  customers.  In  an effort to enhance its ability to
service  its  commercial  customers, during the fourth quarter of 1997, the Bank
implemented  a new process for originating, underwriting and approving all loans
over  $1.0  million.  The  staff of the Portfolio Control Center ("PCC") manages
this process and applies Internet and network computer technology to take a loan
from  application  to  closing  in  less  time than before by incorporating more
comprehensive credit information than previously reviewed by the Bank.  The PCC,
as  part  of  the  Bank's  Asset/Liability Subcommittee, is also responsible for
monitoring  and managing the Bank's assets and liabilities and their sensitivity
to  interest  rate  changes.

     The  following  table  sets forth information concerning the composition of
the  Company's  net  loans  receivable  portfolio  by  type of loan at the dates
indicated.
<TABLE>
<CAPTION>

                                                                  At  December  31,
<S>                                    <C>              <C>          <C>          <C>          <C>
                                                 2000         1999         1998         1997         1996
                                       ---------------  -----------  -----------  -----------  -----------
                                                                   (In thousands)
Real estate mortgage loans:
 First lien residential                $      908,841   $  836,005   $  690,510   $  689,767   $  791,337
 Multifamily                                  224,361      163,059      119,447      131,454      139,486
 Residential construction                     157,950      136,675      115,714       83,359       77,146
 Acquisition and development                  133,005      103,357       75,932       31,619       26,132
 Commercial                                   347,921      314,292      257,723      181,315      119,004
 Commercial construction                       90,256       65,934       40,344       14,506        3,963
Commercial secured by residential
 mortgage loans held for sale
 ("Warehouse")                                  8,518       60,372      173,124       98,679       53,573
Commercial secured by mortgage
 servicing rights ("MSR")                          --           --        3,867       32,685       21,380
Commercial, financial and industrial          120,420      100,195       92,218       30,877       21,965
Loans secured by deposits                      13,681       13,094       13,164        8,695        8,849
Consumer and other                             56,522       63,383       66,989       15,030       14,400
                                       ---------------  -----------  -----------  -----------  -----------

 Total loans                                2,061,475    1,856,366    1,649,032    1,317,986    1,277,235
                                       ---------------  -----------  -----------  -----------  -----------

Loans in process                             (142,451)    (108,561)     (99,790)     (47,893)     (38,742)
Allowance for loan losses                     (14,507)     (10,493)     (11,358)      (7,412)      (6,880)
Unearned interest and loan fees                (3,864)      (2,947)      (3,493)      (2,926)      (2,344)
Net (discount) premium on
 purchased loans                               (4,425)         716        3,758        1,680          479
                                       ---------------  -----------  -----------  -----------  -----------
 Total loans receivable, net           $    1,896,228   $1,735,081   $1,538,149   $1,261,435   $1,229,748
                                       ===============  ===========  ===========  ===========  ===========
</TABLE>


<PAGE>
     SCHEDULED  MATURITIES.       The  following  table  sets  forth  certain
information  at  December  31,  2000  regarding  the  principal  amount of loans
maturing  in  the  Company's  net  loans  receivable  portfolio  based  on their
contractual  terms  to  maturity assuming no periodic amortization of principal.
Demand  loans,  loans  having  no  stated  schedule  of repayments and no stated
maturity  are  reported  as  due  in  one  year  or  less.

<TABLE>
<CAPTION>
                                                                      AT DECEMBER 31, 2000
                                                                        (In thousands)

<S>                              <C>        <C>           <C>             <C>             <C>            <C>       <C>
                                            More than     More than       More than       More than      Over
                                 One year   one year to   three years     five years to   ten years to   twenty
                                 or less    three years   to five years   ten years       twenty years   years     Total
                                 ---------  ------------  --------------  --------------  -------------  --------  ----------

First lien residential mortgage  $  12,663  $     31,293  $       48,711  $       55,779  $     409,702  $343,151  $  901,299
Multifamily mortgage                78,536       122,319          12,067           8,173          1,829        --     222,924
Residential construction            91,943         1,371             284             533             --        --      94,131
Real estate acquisition
 and development                    36,329        45,854           3,280              --             --        --      85,463
Commercial real estate              98,233        96,870          74,636          32,110         42,244        --     344,093
Commercial construction             17,819        22,578           8,793             778          4,096        --      54,064
Commercial, other                   65,607        37,774          22,170           3,017             89        --     128,657
Consumer and other                  18,037        21,324          16,061           5,479          4,696        --      65,597
                                 ---------  ------------  --------------  --------------  -------------  --------  ----------

 Total loans                     $ 419,167  $    379,383  $      186,002  $      105,869  $     462,656  $343,151  $1,896,228
                                 =========  ============  ==============  ==============  =============  ========  ==========
</TABLE>


     The  average  maturity  of loans is generally substantially less than their
average  contractual  terms  because  of  prepayments  and,  in  the  case  of
conventional  mortgage loans, due-on-sale clauses, which generally give the Bank
the  right  to  declare  a  loan immediately due and payable in the event, among
other  things, that the borrower sells the real property subject to the mortgage
and  the  loan  is  not  repaid.  The  average  life  of mortgage loans tends to
increase when current mortgage loan rates are substantially higher than rates on
existing  mortgage  loans  and,  conversely,  decrease  when  rates  on  current
mortgages  are  substantially  lower  than  existing mortgage loan rates (due to
refinancings  of adjustable-rate and fixed-rate loans at lower rates). Under the
latter  circumstances,  the  weighted average yield on loans decreases as higher
yielding  loans  are  repaid  or  refinanced  at  lower  rates.

     The  following table sets forth the amount of loans due after one year from
December 31, 2000 by category and which have fixed or adjustable interest rates.
<TABLE>
<CAPTION>
                                                   Interest  Rate
                                                   --------------

<S>                                      <C>              <C>          <C>
                                             Fixed        Adjustable      Total
                                         -----------    -------------  ----------
                                          (In thousands)

First lien residential mortgage          $   324,374    $   564,262    $   888,636
Multifamily mortgage                           7,359        137,029        144,388
Residential construction                       1,267            921          2,188
Real estate acquisition and development          445         48,689         49,134
Commercial real estate                        75,627        170,233        245,860
Commercial construction                        6,706         29,539         36,245
Commercial, other                             31,987         31,063         63,050
Consumer and other                            47,351            209         47,560
                                         -----------    -----------    -----------
 Total                                   $   495,116    $   981,945    $ 1,477,061
                                         ===========    ===========    ===========
</TABLE>


<PAGE>
     ORIGINATION,  PURCHASE  AND  SALE OF LOANS.  The following table sets forth
the  loan origination, purchase and sale activity of the Bank during the periods
indicated.  The  table  does not reflect the activity of mortgage loans serviced
for  third  party  investors  during  the periods presented.  See "Mortgage Loan
Servicing."

<TABLE>
<CAPTION>
                                                                Year  Ended  December  31,

<S>                                                      <C>           <C>          <C>
                                                                2000           1999         1998
                                                           ----------    -----------  -----------
                                                                        (In thousands)
 Loan Originations:
   First lien residential mortgage                        $   40,957     $   26,042     $   16,195
   First lien residential mortgage by correspondent
     lenders                                                      --             --          1,426
   Home equity                                                 6,406          4,520          7,022
   Residential construction and acquisition
     and development                                         302,839        255,732        189,686
   Warehouse                                                 359,270      1,366,880      1,642,445
   MSR                                                            --          5,134          7,554
   Multifamily mortgage                                       86,404        103,718        228,553
   Commercial real estate                                    130,581        179,196        126,916
   Commercial construction                                    39,724         52,718         15,543
   Commercial, financial and industrial                      138,959        161,776        107,890
   Consumer                                                   46,057         43,298         38,002
                                                         ------------    -----------    -----------
     Total loan originations                               1,151,197      2,199,014      2,381,232
 Purchase of residential mortgage loans
   (net of repurchases by investors)                         236,362        365,951        293,024
 Loans acquired in the 1998 Branch Acquisition                    --             --        176,157
 Purchase of residential construction loans                      608         11,077             --
 Purchase of automobile loans                                     --         10,176         34,609
                                                         ------------    -----------    -----------
     Total loan originations and purchases                 1,388,167      2,586,218      2,885,022
                                                         ------------    -----------    -----------
 Foreclosures                                                  3,672          4,398          4,178
 Principal repayments and reductions to
   principal balance                                       1,217,229      2,372,243      2,587,252
 Residential loans sold                                           --             --         10,663
     Total foreclosures, repayments and sales
       of loans                                            1,220,901      2,376,641      2,602,093
                                                         ------------    -----------    -----------
 Amortization of premiums, discounts and fees on
   loans                                                        (329)        (2,070)        (3,115)
 Provision for loan losses                                    (5,790)       (10,575)        (3,100)
                                                         ------------    -----------    -----------
     Net increase in loans receivable                    $   161,147     $  196,932     $  276,714
                                                         ============    ===========    ===========
</TABLE>


     FIRST  LIEN  RESIDENTIAL  MORTGAGE  LOAN ORIGINATIONS, PURCHASES AND SALES.
The  Bank  originates and purchases for its own portfolio loans secured by first
lien mortgages on completed single family residences.  The Bank originates these
loans  primarily  in the Houston metropolitan area and in other geographic areas
surrounding  the  Bank's branch locations.  During 2000, 1999 and 1998, the Bank
originated  residential  mortgage  loans  for  portfolio totaling $41.0 million,
$26.0  million  and  $16.2  million,  respectively.  The  majority of the Bank's
residential  mortgage  loans  have  been  acquired through bulk purchases in the
traditional  secondary  market and are secured by real estate located throughout
the  United  States.  During  2000,  1999  and  1998,  the Bank purchased $236.4
million,  $366.0  million  and  $293.6  million  of  such  loans,  respectively.

     The  Bank  offers,  but  does  not  actively solicit, a variety of mortgage
products  designed  to  respond  to  consumer  needs  and  competitive  factors.
Conventional  conforming  loans  that  are  secured  by first liens on completed
residential  real  estate  are generally originated for amounts up to 95% of the
appraised  value  or selling price of the mortgaged property, whichever is less.
All  loans  with  loan-to-value  ratios  in  excess of 80% generally require the
borrower  to  purchase  private  mortgage  insurance  from  approved third party
insurers.  The  Bank  also originates conventional non-conforming mortgage loans
(i.e.,  loans  for single family homes with an original balance in excess of the
maximum  loan  balance  amount  set by the Federal National Mortgage Association
("FNMA")  or  the  Federal  Home  Loan  Mortgage Corporation ("FHLMC"), which is
presently $275,000, or loans that do not otherwise meet the criteria established
by  FNMA  or  FHLMC).

     In  addition to 15-year and 30-year conventional mortgages, the Bank offers
special products designed to provide to its customers lower rates of interest or
lower principal and interest payments.  Borrowers may choose from a wide variety
of  combinations  of interest rates and points on many products so that they may
elect  to  pay  higher points at closing and lower interest over the life of the
loan,  or  pay  a higher interest rate and reduce the points payable at closing.
In  addition,  from  time  to  time  mortgages  are  offered  in  the  following
categories:  those  which  allow the borrower to make lower monthly payments for
the  first  one,  two  or  three  years  of  the loan; fixed rate mortgages; and
adjustable  rate  mortgages  having interest rate adjustments every one, five or
seven  years  based  upon  a  specified  independent  index.

     Borrower  demand  for adjustable rate mortgage loans compared to fixed rate
mortgage  loans is a function of interest rate levels, consumer expectations for
changes  in  interest  rate levels and the difference between interest rates and
loan fees offered for fixed rate mortgage loans and for adjustable rate mortgage
loans.  The  Bank's  loan  origination  volume  has  been  subject to some minor
seasonal  variations,  with  the  heaviest  demand in the late spring and summer
months.  Loan  demand  is also affected by the general interest rate environment
and,  to  a  large  measure,  by  the  general  state  of  the  local  economy.

     During  times of relatively lower market interest rates, demand by previous
borrowers  for  refinancings  increases.  Refinancings  are not solicited by the
Bank.  However,  if  a  request  for  a  refinancing  is received, borrowers are
offered  current mortgage loan products. Refinancings are generally processed in
a  manner  identical  to  original  originations  and  charged  the  same  fees.

     The  Bank  also  acquires  first  lien  residential  mortgage loans for its
portfolio  through  bulk  purchases  when  the  prices  of  these  purchases are
considered  to be favorable.  The acquisition of first lien residential mortgage
loans  has been accomplished primarily through bulk purchases in the traditional
secondary  market  (from  mortgage companies, financial institutions, investment
banks  and,  beginning  in  1997,  from CBCC).  Bulk purchases allow the Bank to
obtain  these  residential  mortgage  loans  without  the  cost  of  origination
activities.  Personnel  from  the  Bank  generally analyze loan bid packages, as
they  become  available from CBCC and from third parties, and the members of the
Bank's  Asset/Liability Subcommittee review the information in the loan packages
to  determine  whether  to  bid (or make an offer) on a package and the price of
such  bid (or offer).  The bid price with respect to such loan packages is based
on  a  number  of  factors, including the ability to create spread income with a
funding  source  of comparable maturity, the pricing of alternative investments,
particularly  mortgage-backed  securities, which offer little or no credit risk,
assumed  prepayment speeds and the credit risk profile of the portfolio offered.
The  Bank analyzes credit risk in a whole loan package through its due diligence
investigation,  which  is designed to provide management with basic underwriting
information  on  each  loan  or group of loans, including loan-to-value, payment
history, insurance and other documentation. Because the Bank is purchasing loans
in  bulk,  the  Bank  prices the loan packages to take into consideration, among
other  things,  delinquency  and  foreclosure  assumptions  based  on  the  risk
characteristics  of  the  loan  packages.  The  Bank intends to continue to make
competitive  bids  on  loan  portfolios  that meet the Bank's purchase criteria.

     The  Bank has sold mortgage loans from time to time in order to replace the
loans  with  instruments which have higher credit quality and less interest rate
risk.  During  2000,  1999  or  1998, the Bank did not originate or purchase any
loans  with  the intent to sell them to third party investors.  During 1998, the
Bank  sold  $10.7 million of loans to third party investors.  No loans were sold
in  2000  or  1999.

     While  the  Bank  has the general authority to originate and purchase loans
secured  by  real  estate  located  anywhere  in  the United States, the largest
concentration  of  its  first  lien  residential  mortgage  and  residential
construction  loan  portfolios  is  secured  by  realty  located  in  Texas.

     RESIDENTIAL  CONSTRUCTION  LENDING.  The  Bank  initiated  a  construction
lending  program  with local builders in the latter part of 1989 which has grown
considerably  since its inception.  At the initiation of the program, management
of the Bank surveyed the members of the residential construction industry in the
Bank's  Houston  market  area  and targeted those companies, and, in the ensuing
years,  others  that  management believed, based upon its market research, to be
financially  strong and reputable.  Loans are made primarily to fund residential
construction.  Construction  loans  are  made  on  pre-sold  and  speculative
residential  homes  considered  by  management  to  be  in  well located, viable
subdivisions  and  planned  unit  developments.

     Most  of  the builders with whom the Bank does business generally apply for
either  a  non-binding short-term line of credit or for an annual line of credit
(subject  to  covenants)  from  the Bank for a maximum amount of borrowing to be
outstanding  at  any  one  time.  Upon  approval of the line of credit, the Bank
issues  a letter which indicates to the builder the maximum amount which will be
available  under the line, the term of the line of credit (which is generally 90
days  to  one year), the interest rate of the loans to be offered under the line
(which  is  generally  set at a rate above The Wall Street Journal prime rate or
LIBOR  on the outstanding monthly loan balance) and the loan fees payable.  When
the  builder  desires  to draw upon a short-term line of credit, a separate loan
application  must  be made under the line for a specific loan amount.  Each loan
commitment  under  a  short-term  line  of credit is separately underwritten and
approved  after  the  builder's  master  file  is  updated  and  reviewed.

     The terms of the Bank's construction loans are generally for nine months or
less,  unless  extended  by  the  Bank.  If a construction loan is extended, the
borrower  is generally charged a loan fee for each 90 day extension period.  The
Bank  reserves  the right to extend any loan term, but generally does not permit
the original term and all extensions to exceed 24 months without amortization of
principal  either  in  monthly  increments  or  a  lump  sum.

     The  loan-to-value  ratio  (applied  to  the  underlying  property  that
collateralizes the loan) of any residential construction loan may not exceed the
lesser  of  85%  of  appraised value or 100% of the actual cost.  All individual
loans  are  limited  in  dollar  amount  based  upon the project proposed by the
builder.  Draws  for lot purchases are generally limited to the contracted sales
price  of  the  lot  (to  include  escalations)  not to exceed 100% of the lot's
appraised  value.  Other  special  conditions  which  the  Bank  attaches to its
construction  loans  include  a  requirement  that  limits the number and dollar
amount  of  loans  which  may be made based upon unsold inventory.  The Bank may
also,  in  its  sole  discretion,  discontinue  making  any further loans if the
builder's  unsold  inventory exceeds a certain level from all lending sources or
if  the builder fails to pay its suppliers or subcontractors in a timely manner.

     The  Bank  provides  construction  financing  for  homes that generally are
priced below $450,000, with most homes priced between $125,000 and $300,000.  In
this  price  range,  the Bank has experienced the shortest duration of term, the
highest  annualized  yield  and  the least likelihood of defaults because of the
generally  high  number  of  pre-completion  sales.  The  Bank  will  also  make
individual  construction  loans  to  builders  or individuals on single homes or
groups  of homes on substantially the same terms and conditions as loans granted
under  the  Bank's  line  of  credit  program.

     At December 31, 2000, the Bank had $95.1 million in outstanding residential
construction  loans (net of loans in process of $62.8 million) of which $390,000
were  on nonaccrual status.  At the present time, the Bank has approved builders
primarily domiciled in the Houston, Dallas, and Austin metropolitan areas and is
selectively  soliciting  new  builders  for its residential construction lending
program.  In  addition,  the  Bank  participates  in  the funding of residential
construction  loans  with  other  institutions.  Four  of  the  Bank's  approved
builders  are  authorized for the funding of loans on properties located outside
the  state  of  Texas.  At  December  31,  2000, there were loans totaling $15.1
million for these builders in the states of Arizona, Illinois, New Mexico, North
Carolina  and  Ohio.  The  Bank  intends  to  continue  to  do business with the
companies  involved  in  its  line  of  credit program and believes that it will
continue  to  have  construction  loan  demand  from  the  builders with whom it
currently  has  an  established  lending  relationship.

     Construction  financing  is generally considered to involve a higher degree
of  risk than long-term financing on improved, occupied residential real estate,
due  to  the  lender's reliance on the borrower to add to the estimated value of
the  property  through  construction  within  the  budget  set forth in the loan
application.  The  Bank  attempts  to  limit  its  risk exposure by, among other
things:  limiting  the  number  of  borrowers  to whom it lends and establishing
specific  qualification  requirements  for  borrowers  generally;  continually
monitoring  the general economic conditions in the market, recent housing starts
and  sales;  continually  monitoring  the  financial  position  of its borrowers
throughout  the  term  of  the  loan; continually monitoring the progress of the
development through site inspections prior to loan disbursements; utilizing only
qualified,  approved  appraisers;  and  requiring  that  the  builder maintain a
pre-approved  ratio  (generally not greater than 50%) of speculative to pre-sold
homes  in  the  development.

     COMMERCIAL  REAL  ESTATE  AND  MULTIFAMILY  MORTGAGE  LENDING.  The  Bank
initiated  a  program  in  1993  to actively seek loans secured by commercial or
multifamily  properties.  Commercial  real estate and multifamily mortgage loans
typically  involve higher principal amounts and repayment of the loans generally
depends,  in  large  part,  on  sufficient  cash  flow  being  generated  by the
underlying  properties  to cover operating expenses and loan repayments.  Market
values may vary as a result of economic events or governmental regulations which
are  outside  the  control  of  the  borrower or lender and which can affect the
future cash flow of the properties.  The loans are for a short to medium term of
between  one  to  seven years, and have floating rates or fixed rates based on a
spread  over  similarly fixed borrowings from the FHLB.  The properties securing
the  loans  originated  by  the  Bank  are primarily located in Texas.  The Bank
attempts  to  limit  its risk exposure by, among other things: lending to proven
developers/owners,  only  considering  properties  with  existing  operating
performance  which can be analyzed, requiring conservative debt coverage ratios,
and  continually  monitoring  the  operation  and  physical  condition  of  the
collateral.  At  December 31, 2000, commercial real estate loans totaling $347.9
million  and  multifamily mortgage loans of $224.4 million were outstanding.  At
December  31,  2000,  the  Bank  had  commercial  real  estate  loans  totaling
approximately  $1.1  million  that  were on nonaccrual status and no multifamily
mortgage  loans  on  nonaccrual  status.

     The  Bank  began  originating  commercial  real  estate  and  multifamily
construction  loans  in 1996.  The Bank generally underwrites these loans in the
same  way  it  underwrites its multifamily mortgage loans and attempts to manage
the  risk  of  such  loans  by  requiring that each builder maintain a specified
amount  of  equity  in  the  project  and by monitoring other financial strength
requirements.  At  December  31,  2000,  commercial and multifamily construction
loans  totaling  $56.2  million  (net of loans in process of $34.1 million) were
outstanding,  none  of  which  were  on  nonaccrual  status.

     WAREHOUSE  LENDING.  Since  1992,  the Bank has provided or participated in
lines  of credit to mortgage companies generally for their origination of single
family  residential  loans  which  are  typically sold no more than 90 days from
origination  to  FNMA,  FHLMC,  the  Government  National  Mortgage  Association
("GNMA")  or  to  private investors. The lines of credit are generally renewable
annually.  Borrowers  pay  interest  on  funds  drawn  at  a  floating rate.  In
addition,  the  Bank  usually  receives a fee for each loan file processed.  The
Bank  (or  the  lead lender in a participation) holds the original mortgage loan
notes and other documentation as collateral until repayment of the related lines
of  credit, except when a third party lender is acting as the lead lender in the
lending  relationship.

     Warehouse  loans  are  underwritten  in  accordance  with Bank policies and
procedures.  Interested  loan  originators  who  contact or are contacted by the
Bank are asked to prepare a loan application which seeks detailed information on
the  originator's  business.  After evaluating the application and independently
verifying  the  applicant's  credit  history,  if the originator appears to be a
likely  candidate  for  approval,  Bank  personnel will visit the originator and
review,  among  other  things,  its  business  organization, management, quality
control,  funding  sources,  risk  management,  loan  volume  and  historical
delinquency  rate,  financial  condition,  contingent obligations and regulatory
compliance.  The  originator  pays  a fee for this review to offset a portion of
the Bank's expense; this amount is deducted from the origination fee if the line
of  credit  is  approved.  If the originator meets the established criteria, its
application  is  submitted  for approval.  It is the policy of the Bank to apply
substantially  the  same  underwriting  standards  to loan participations as are
applied  to  loans with similar characteristics originated directly by the Bank.

     Bank  personnel  attempt  to  minimize  the  risk of making Warehouse loans
(excluding  participations  in  loans  where a third party bank is acting as the
lead  bank)  by,  among  other  things,  (i)  taking  physical possession of the
originator's  collateral,  (ii) directly receiving payment from secondary market
investors  when  the  loans  are  sold and remitting any balance to the borrower
after deducting the amount borrowed for that particular loan, (iii) visiting the
originator's  office from time to time to review its financial and other records
and  (iv)  monitoring  each originator by periodically reviewing their financial
statements, loan production delinquency and commitment reports and, on an annual
basis,  by  reviewing their audited financial statements and auditor's letter to
its  board  of  directors.  In  loan  participations where a third party bank is
acting  as  the  lead  bank,  the  Bank  relies  on  the  lead  bank  to perform
substantially  the  same  procedures  as  noted  above.

     During  1999, the Bank experienced significant loan losses in Warehouse and
MSR  loans due to the default of two borrowers.  The first loss was connected to
the  $10.0  million  participation  purchased  in  1998  in  a  Warehouse  loan
aggregating $25.0 million to MCA Financial Corp., and certain of its affiliates,
of  Southfield,  Michigan  (collectively "MCA").  In late January 1999, due to a
lack  of  liquidity,  MCA ceased operations and shortly thereafter was seized by
the  Michigan  Bureau of Financial Institutions.  A conservator was appointed to
take  control  of  MCA's  books and records, marshal its assets and continue its
loan  servicing  operations.  A  voluntary petition under Chapter 11 of the U.S.
Bankruptcy  Code was filed in the U.S. Bankruptcy Court for the Eastern District
of  Michigan  for  MCA  on  or  about  February  10,  1999,  by the conservator.

     Throughout  1999,  the  Bank worked with the lead lender and the bankruptcy
trustee  to  determine the value of, and sell, the underlying collateral.  As of
December  31, 1999, the Bank had received only $1.1 million in proceeds from the
MCA  loan.  In  addition,  on January 12, 2000, the Bank filed a lawsuit against
the  lead  lender  in  the participation seeking to recover losses incurred as a
result  of  actions  or omissions of the lead lender related to the loan to MCA.
Due  to  the  uncertainty  of  the  value  of  the  remaining  collateral,  its
marketability  and  the  timing  of recovery, if any, from the lawsuit, the Bank
charged-off the remaining $8.9 million balance of this loan in 1999 resulting in
the  additional  provision for loan losses of $6.8 million during the year.  The
Bank  will continue to work with the bankruptcy trustee to recover any funds, if
possible,  from the collateral or MCA.  During the year ended December 31, 2000,
Coastal  received $180,000 in proceeds from the MCA loan which was recorded as a
recovery  in  the allowance for loan losses during the period.  In addition, the
lawsuit  filed  against the lead lender is currently scheduled for trial in late
June of 2001, or as soon thereafter as the court's docket will permit.  See Item
3,  "Legal  Proceedings."

     In  the  second  situation,  during  1999, the Bank purchased approximately
$10.1  million  of  the  underlying loans securing a $13.2 million Warehouse and
servicing  rights  line of credit due to default by the borrower.  The remaining
outstanding  balance on this Warehouse and servicing rights line of $990,000 was
charged-off  during  1999.

     In  1999,  the  Bank  began  to decrease its emphasis on Warehouse lending.
During  the  year  ended  December 31, 1999, the Bank originated $1.4 billion of
Warehouse loans and had Warehouse loans outstanding of $60.4 million at December
31,  1999.  During  the year ended December 31, 2000, the Bank originated $359.3
million  of  Warehouse  loans  and  had  Warehouse  loans  outstanding  to three
customers  of  $8.5  million  at December 31, 2000.  At December 31, 2000, there
were  no  Warehouse  loans  on  nonaccrual  status.

     MSR  LENDING.  Beginning  in 1992 and discontinued in 1999, the Bank loaned
funds  to  mortgage companies for their purchase of mortgage servicing rights or
to  finance  the  mortgage companies' ongoing operations to originate and retain
mortgage  servicing.  Loans  of  this  nature generally had terms of one to five
years,  and  were  generally  limited to 70.0% of the price paid by the mortgage
company for servicing rights, or of the value of the originated servicing rights
(subject  to  the regulatory maximum for loans to one borrower).  MSR loans were
made  at adjustable rates of interest tied to LIBOR or the Bank's borrowing rate
plus  a spread and a commitment fee.  MSR loans were collateralized by purchased
or  originated  mortgage  servicing  rights  to  the  remaining cash flows after
remittance  of  payments  to  FNMA,  FHLMC  or  other investors on the servicing
portfolio.  MSR  loans  were  underwritten  in  substantially the same manner as
Warehouse  loans, where Bank personnel closely monitored MSR borrowers by, among
other things, reviewing the borrower's financial condition and operations in the
same  manner  as  they did for Warehouse loans and by examining the value of the
borrower's  MSR  portfolio  (through evaluation of the estimated future net cash
flows from the servicing rights) in order to ensure that the loan-to-value ratio
did  not  exceed  75.0%  during  the  life  of  the loan.  During 1999, the Bank
incurred  a  loss  on  a  Warehouse  and  servicing rights line of credit due to
default  of the borrower as discussed previously.  The Bank did not have any MSR
loans  outstanding  at  December  31,  2000  or  1999.

     REAL ESTATE ACQUISITION AND DEVELOPMENT LENDING.  The Bank originates loans
to  residential  real  estate builders and developers for the acquisition and/or
development  of  vacant  land.  The  proceeds of the loans are generally used to
acquire  the  land  and make the site improvements necessary to develop the land
into saleable lots.  The Bank generally lends only to developers with good track
records and strong financial capacity and on property where a substantial number
of  the lots to be developed are pre-sold.  The term of the loans have generally
been  from  18 to 36 months at a spread over the prime rate, plus an origination
fee.  Repayment on the loans is generally made as the lots are sold to builders.
Land acquisition and development loans involve additional risks when compared to
loans  on  existing  residential  properties.  These  loans  typically  involve
relatively large loan balances to single borrowers, and the repayment experience
is  dependent  upon the successful development of the land and the resale of the
lots.  These risks can be significantly impacted by supply and demand conditions
and  the  general economic conditions in the local market area.  At December 31,
2000,  the  Bank had $87.5 million (net of loans in process of $45.5 million) of
real  estate  acquisition  and  development  loans outstanding.  At December 31,
2000,  there were no real estate acquisition and development loans on nonaccrual
status.

     COMMERCIAL  BUSINESS LENDING.  Development of a commercial business lending
program  continues to be a strategic goal of Bank management.  The Texas Capital
acquisition  provided  the  Bank with an established commercial business lending
program  to small and medium sized companies primarily in the Houston and Austin
metropolitan  areas.  Over the past three years, management continued to develop
the  infrastructure  for commercial business lending in most of the Bank's major
markets  by  developing  the  PCC and adding business banking loan officers.  In
1998,  the  Bank  acquired  twelve  commercial  bank branches in the 1998 Branch
Acquisition  and  significantly  increased  the  Bank's commercial business loan
origination  capacity.  The  commercial,  financial  and  industrial  loans
("Commercial  Business  loans")  are  generally  made to provide working capital
financing or asset acquisition financing to businesses and are generally secured
by  the borrower's working capital assets (i.e., accounts receivable, inventory,
etc.)  or  assets  purchased by the borrower (i.e., operating assets, equipment,
etc.).  Commercial  Business  loans  generally  have  shorter terms (one to five
years)  at  a  spread over prime rate or LIBOR and are of greater risk than real
estate  secured  loans  because  of  the  type and nature of the collateral.  In
addition,  Commercial  Business  loan  collections  are  more  dependent  on the
continuing financial stability of the borrower.  The Bank intends to continue to
expand  the  acquired  commercial  business lending programs, while managing the
associated  credit  risk by continually monitoring borrowers' financial position
and  underlying collateral securing the loans.  At December 31, 2000, Commercial
Business  loans  outstanding  totaled  $120.4 million, with $1.2 million of such
loans  on  nonaccrual  status.

     CONSUMER  LENDING.  The  Bank  makes  available traditional consumer loans,
such  as home improvement, home equity, new and used car financing, new and used
boat and recreational vehicle financing and loans secured by savings deposits to
consumers  in  the  markets  served  by its retail branches and business banking
centers.  The  interest  rate  on loans secured by savings deposits is typically
set  at a rate above that paid on the underlying account and adjusts if the rate
on  the  account  changes.  At  December 31, 2000, the Bank had $56.5 million in
consumer  and  other  loans  outstanding  and  $13.7 million in loans secured by
deposits.

     Consumer  loans  (other  than savings deposit secured loans) generally have
shorter  terms and higher interest rates than mortgage loans but usually involve
greater  credit  risk  than mortgage loans because of the type and nature of the
collateral.  In  addition,  consumer  lending  collections  are dependent on the
borrower's  continuing  financial stability, and are thus likely to be adversely
affected  by  job  loss,  changes  in  marital  status,  illness  and  personal
bankruptcy.  In many cases, repossessed collateral for a defaulted consumer loan
will not provide an adequate source of repayment of the outstanding loan balance
because  of  depreciation  of the underlying collateral.  The Bank believes that
the  generally  higher  yields  earned  on  consumer  loans  compensate  for the
increased  credit  risk  associated  with such loans and that consumer loans are
important  to  its  efforts to serve the credit needs of the communities that it
serves.

     Through  May  1999,  the  Bank  had  a  lending agreement to purchase loans
through a correspondent to refinance new and used automobiles.  During 1999, the
Bank  purchased  $10.2 million in automobile loans under this agreement.  During
2000,  no loans were purchased under this agreement.  As of December 31, 2000, a
total of $16.0 million of these automobile loans were included in total consumer
and  other  loans,  of  which  $447,000  were  on  nonaccrual  status.

     ASSET  QUALITY.  The  Bank,  like all financial institutions, is exposed to
certain  credit risks related to the value of the collateral which secures loans
held  in  its portfolio and the ability of borrowers to repay their loans during
the  term  thereof.  Management  of the Bank monitors the loan portfolio and the
Bank's  real  estate  acquired  as a result of foreclosure ("REO") for potential
problems  on  a  weekly basis and reports to the Board of Directors on a monthly
basis. When a borrower fails to make a required loan payment or other weaknesses
are detected in a borrower's financial condition, the Bank attempts to determine
an  appropriate  course of action by contacting the borrower.  Delinquencies are
cured  promptly in most cases.  If the delinquency on a mortgage loan exceeds 90
days  and  is  not  cured through the Bank's normal collection procedures, or an
acceptable  arrangement  is  not  worked  out  with  the borrower, the Bank will
institute  measures  to  remedy  the default, including commencing a foreclosure
action.  As  a  matter  of  policy,  the Bank generally does not accept from the
mortgagor  a  voluntary deed of the secured property in lieu of foreclosure.  If
foreclosure  is  effected, the property is sold at a public auction in which the
Bank  may  participate  as  a bidder.  If the Bank is the successful bidder, the
foreclosed  real estate is then included in the Bank's REO portfolio until it is
sold.

     Upon  acquisition, REO is recorded at the lower of unpaid principal balance
adjusted for any remaining acquisition premiums or discounts less any applicable
valuation  allowance  or  estimated  fair  value,  based  on  an appraisal, less
estimated  selling  costs.  Subsequent  to  foreclosure,  real  estate  owned is
carried  at  the  lower  of  the  new cost basis or fair value, with any further
declines  in fair value charged to operations.  All costs incurred from the date
of  acquisition  forward  relating to maintaining the property are recorded as a
current  period  expense.

     It  is  the Bank's general policy not to recognize interest income on loans
past  due  90  days  or  more.  When  a  loan  is  placed  on nonaccrual status,
previously  accrued  but  unpaid  interest is generally reversed against current
interest  income.  On  a  loan-by-loan  basis,  Bank  management may continue to
accrue  interest  on  loans that are past due more than 90 days, particularly if
management  believes that the individual loan is in the process of collection or
renewal  and  the  interest  is  fully  collectible.

<PAGE>
     The  following  table  sets  forth  information  regarding  the  Bank's
nonperforming  assets  as  of  the  dates  shown.

<TABLE>
<CAPTION>

<S>                                                  <C>          <C>       <C>
                                                                At December 31,
                                                          2000      1999      1998
                                                        -------  --------  --------
                                                           (Dollars in thousands)
Nonaccrual loans:
 First lien residential mortgage                        $16,062   $13,344   $11,883
 Residential construction                                   390       184       192
 Commercial real estate                                   1,134       104       149
 Commercial, Warehouse                                       --        --    10,042
 Commercial, financial and industrial                     1,152       694       496
 Consumer and other                                         496       340        75
                                                        -------  --------  --------
 Total nonaccrual loans                                  19,234    14,666    22,837
                                                        -------  --------  --------
Loans greater than 90 days delinquent
 and still accruing:
 First lien residential mortgage                            475     1,137       189
 Multifamily mortgage                                        --        --       190
 Commercial real estate                                     736       690       293
 Commercial, financial and industrial                       634       531       808
 Consumer and other                                         153        94       224
   Total loans greater than 90 days
     delinquent and still accruing
     interest                                             1,998     2,452     1,704
                                                        -------  --------  --------
Total nonperforming loans                                21,232    17,118    24,541
                                                        -------  --------  --------

Total REO and repossessed assets                          4,095     4,531     4,927
                                                        -------  --------  --------
Total nonperforming assets                              $25,327   $21,649   $29,468
                                                        ========  ========  ========

Ratio of nonaccrual loans to total
 loans receivable                                         1.01%     0.85%     1.48%
                                                        ========  ========  ========
Ratio of nonperforming loans to total
 loans receivable                                         1.12%     0.99%     1.60%
                                                        ========  ========  ========
Ratio of nonperforming
 assets to total assets                                   0.82%     0.73%     0.99%
                                                        ========  ========  ========
</TABLE>

     For  the  year  ended  December  31,  2000,  approximately  $1.2 million in
additional interest income would have been recorded on the above loans accounted
for  on  a  nonaccrual  basis  if such loans had been current in accordance with
their  original  terms  and  had been outstanding throughout the period or since
origination  if  held  for  part  of  the  period.  Net income for 2000 included
$706,000  in  interest  income  for these same loans prior to the time they were
placed  on  nonaccrual  status.

     At  December  31,  2000,  the  Bank had 198 first lien residential mortgage
loans  on  nonaccrual status, aggregating $16.1 million, with an average balance
of  approximately  $81,000.  A  total  of  159 of these loans, with an aggregate
balance  of  $13.4  million,  were  acquired  through loan purchases. Of the 159
nonaccrual  residential  mortgage  loans  acquired  through  loan  purchases, at
December 31, 2000, 53 of such loans totaling $6.7 million were being serviced by
other  institutions,  which  constituted 2.4% of the $277.3 million of aggregate
loans  serviced  by  others.

     At  December  31, 2000, nonperforming assets included REO with an aggregate
book value of $4.0 million and repossessed assets of $49,000.  At such date, the
Bank's  REO  consisted  of 26 single family residential properties totaling $2.2
million,  6  commercial  properties  totaling  $1.6  million,  1  residential
construction  property  totaling $72,000 and 1 multi-family property with a book
value  of  $188,000.

     The  Bank  considers  a  loan  to  be  impaired  when,  based  upon current
information  and  events, it is probable that the Bank will be unable to collect
all  amounts  due  according  to the contractual terms of the loan agreement. In
determining  impairment,  the  Bank  considers,  among  other  things,  large
non-homogeneous  loans  which  may  include  nonaccrual  loans  or troubled debt
restructurings, and performing loans which exhibit, among other characteristics,
high  loan-to-value  ratios,  low  debt coverage ratios, or indications that the
borrowers  are  experiencing increased levels of financial difficulty.  The Bank
bases  the measurements of collateral-dependent impaired loans on the fair value
of  their  collateral.  The  amount by which the recorded investment in the loan
exceeds  the  measure  of  the fair value of the collateral securing the loan is
recognized  by  recording  a  valuation  allowance.  At  December  31, 2000, the
carrying  value  of  impaired  loans  totaled approximately $4.4 million and the
related  allowance for loan losses on those impaired loans totaled $1.6 million.
Of  the impaired loans outstanding at December 31, 2000, one loan with a balance
of  $650,000  did  not  have a specific portion of the allowance for loan losses
allocated  to it at such date.  The average balance of impaired loans during the
year ended December 31, 2000 was approximately $3.5 million.  For the year ended
December  31,  2000,  the  Bank  did  not  recognize  interest  income  on loans
considered  impaired.

     The  Bank  had  loaned  $158.0  million  at  December  31,  2000, under its
residential  construction  lending program to multiple borrowers who are engaged
in  similar  activities.  Certain of these borrowers could be similarly impacted
by  economic  conditions  in  the  Houston  metropolitan area.  See "Residential
Construction  Lending."  The  Bank  had  no  other  loan  concentrations.


<PAGE>
     ALLOWANCE  FOR  LOAN  LOSSES.  The  Bank  maintains loan loss allowances to
absorb  future  losses  that  may be realized on its loans receivable portfolio.
The  following table summarizes activity in the Bank's allowance for loan losses
during  the  periods  indicated.

<TABLE>
<CAPTION>
                                                    Year  Ended  December  31,

<S>                                   <C>        <C>        <C>       <C>       <C>
                                         2000       1999      1998      1997     1996
                                      ---------  ---------  --------  --------  -------
                                                     (Dollars in thousands)
Balance at beginning of year          $ 10,493   $ 11,358   $ 7,412   $ 6,880   $5,703
Charge-offs                             (2,174)   (11,830)   (1,693)   (1,416)    (851)
Recoveries                                 398        390       282       148      103
Provision for loan losses                5,790     10,575     3,100     1,800    1,925
Allowance of acquired entities(1)           --         --     2,257        --       --
                                      ---------  ---------  --------  --------  -------
Balance at end of year                $ 14,507   $ 10,493   $11,358   $ 7,412   $6,880
                                      =========  =========  ========  ========  =======
Ratio of net charge-offs during the
 period to average net loans
 outstanding during the period           0.09%      0.69%     0.10%     0.10%    0.06%
                                      =========  =========  ========  ========  =======
</TABLE>

________________________

(1)The  allowance of acquired entities in 1998 represents the allowance for loan
losses  recorded  in  connection  with  the  loans  acquired  in the 1998 Branch
Acquisition.


     The  following  table sets forth the charge-offs by type of loan during the
periods  indicated.

<TABLE>
<CAPTION>
                                                 Year Ended December 31,
                                        2000       1999      1998     1997     1996
                                      -------   --------   -------   -------   ------
                                                         (In thousands)
<S>                                   <C>       <C>       <C>       <C>        <C>
First lien residential mortgage       $  735    $   331    $  544    $  591     $ 651
Residential construction                  --         26        --        --        --
Commercial real estate                    55         10        24         4        --
Commercial, Warehouse and MSR             --      9,924        --        --        --
Commercial, financial and industrial     763        829       648       472        58
Consumer and other                       621        710       477       349       142
                                      -------   --------   -------     -------   ------
Total charge-offs                     $2,174    $11,830    $1,693      $1,416    $ 851
                                      =======   ========   =======     =======   ======
</TABLE>


<PAGE>
     The  following  table  sets  forth the allocation of the allowance for loan
losses  by  type  of  loan  outstanding  at  the  dates  indicated.

<TABLE>
<CAPTION>

<S>                                        <C>        <C>       <C>       <C>       <C>
                                                              At December 31,
                                                2000      1999      1998     1997     1996
                                             --------  --------  --------  -------  -------
                                                              (In thousands)
First lien residential mortgage              $  2,408  $  2,529  $  3,238  $ 2,566  $ 2,217
Multifamily mortgage                              608       442       383      511      369
Residential construction                          622       384       343      251      223
Real estate acquisition and development         1,330     1,034       759      316      261
Commercial real estate                          2,574     2,221     2,112    1,468    1,151
Commercial construction                         1,480       972       225      203       20
Commercial, Warehouse and MSR                      45       256     1,722      494      361
Commercial, financial and industrial            2,611     1,650     1,750    1,008      985
Consumer and other                              1,119       992       826      233      374
Unallocated                                     1,710        13        --      362      919
                                             --------  --------  --------  -------  -------
                                             $ 14,507  $ 10,493  $ 11,358  $ 7,412  $ 6,880
                                             ========  ========  ========  =======  =======
</TABLE>


     The  following  table  sets  forth  the  allocation of the provision or the
reduction  of  allowance  for  loan  losses  by  loan  type  during  the periods
indicated.

<TABLE>
<CAPTION>
<S>                                        <C>          <C>       <C>        <C>       <C>
                                                             Year Ended December 31,
                                                2000       1999      1998      1997      1996
                                             --------  ---------  --------  --------  --------
                                                                (In thousands)
First lien residential mortgage               $   573   $   (446)  $ 1,142   $   908   $  (180)
Multifamily mortgage                              166         59      (184)      142       120
Residential construction                          238         67        55        28       (84)
Real estate acquisition and development           296        275       443        55       131
Commercial real estate                            406        119        82       321        79
Commercial construction                           508        747       (36)      183        20
Commercial, Warehouse and MSR                    (397)     8,456     1,228       133       131
Commercial, financial and industrial            1,616        561       240       416       618
Consumer and other                                687        724       846       171       322
Unallocated                                     1,697         13      (716)     (557)      768
                                             --------  ---------  --------  --------  --------
                                              $ 5,790   $ 10,575   $ 3,100   $ 1,800   $ 1,925
                                             ========  =========  ========  ========  ========
</TABLE>

     Provisions  for  loan  losses  are  charged  to earnings to bring the total
allowance  for  loan losses to a level deemed appropriate by management based on
such  factors  as  historical  loss  experience,  the volume and type of lending
conducted by the Bank, identification of adverse situations which may affect the
ability  of  borrowers  to  repay,  the  existing nonperforming assets, industry
standards,  regulatory policies, accounting principles generally accepted in the
United  States  of  America,  general  economic conditions, particularly as they
relate  to  the  Bank's  lending  area,  and  other  factors  related  to  the
collectibility  of  the  Bank's  loan portfolio.  During 2000, Coastal's lending
continued  to  focus  on  increasing  the  size  of  Coastal's  commercial  loan
portfolio.  As  such,  Coastal  continued  to  execute on its plan to eventually
build  the  allowance  for  loan  losses to a benchmark of approximately 100% of
nonperforming  loans.  As  discussed  above,  during the year ended December 31,
1999, $6.8 million of the increase in the provision for loan losses was specific
to  the  MCA  loan.  The  remainder of the increase was due to the charge-off of
$990,000  on  another  Warehouse  borrower  due  to bankruptcy, as well as other
changes in the composition of and growth in the Bank's loan portfolio, including
the  commercial type loans acquired in the 1998 Branch Acquisition.  At December
31,  2000,  the  Bank's  ratio of the allowance for loan losses to nonperforming
loans  was  68.32% and the ratio of the allowance for loan losses to total loans
receivable  was  0.77%.

     The  Board  of  Directors  of the Bank reviews its Asset Classification and
Allowance  Policy ("ACAP") at least annually.  The policy provides that the Bank
will  annually establish a monthly provision amount to be added to the allowance
for  loan  losses  and  the  resultant  allowance  will  be "tested" monthly for
adequacy  based  on  policy  guidelines.  Management maintains the allowance for
loan  losses  at  levels  considered adequate to cover probable losses on loans.
This  allowance  covers  all loans, including loans deemed to be impaired, loans
not  impaired, and loans excluded from the impairment test.  The adequacy of the
allowance  is  based  on management's periodic evaluation of the loan portfolio,
which  considers  the  volume  and  type  of  lending  conducted  by  Coastal,
identification  of  adverse situations which may affect the ability of borrowers
to  repay,  assessment  of  current  and  future economic conditions, regulatory
policies  and  the  estimated  value  of  the  underlying  collateral,  if  any.

     The  Bank's  management believes that its present allowance for loan losses
is adequate based upon, among other considerations, the factors discussed above,
its  current  level  of  nonperforming loans and its historical loss experience.
Management  continues to review its loan portfolio to determine whether its ACAP
should  be  altered  in  light  of current conditions and to make any additional
provisions  which  may  be  deemed  necessary.  While  management  uses the best
information  available  to  make  such determinations, additional provisions for
loan  losses  may be required to be established in the future should economic or
other  conditions  change  substantially.  In  addition,  the  FDIC  and  the
Department,  as  an  integral  part of their examination processes, periodically
review  the  Bank's  allowance  for loan losses.  These agencies may require the
Bank  to  increase  the  allowance  for  loan  losses, based on their respective
judgments  of  the  information  available  at  the  time  of  the examinations.

     MORTGAGE  LOAN  SERVICING.  Prior  to  the  sale  of  its  entire  mortgage
servicing  rights  portfolio  effective  March  31,  2000,  the  Bank  serviced
residential  real  estate  loans  for  others,  including  FNMA, FHLMC and other
private  investors.  Loan servicing for others included collecting and remitting
loan  payments,  accounting for principal and interest, making advances to cover
delinquent  payments,  making  inspections  as  required  of mortgaged premises,
contacting  delinquent  mortgagors,  supervising  foreclosures  and  property
dispositions in the event of unremedied defaults and generally administering the
loans.

     Due to the Bank's declining servicing for others portfolio (with an average
remaining  loan  life  of approximately seven years), management decided to sell
its entire servicing rights portfolio based on the current market conditions for
loan  servicing  rights  and  the  expected  declining  income  benefits of that
servicing  portfolio  on  an  ongoing basis.  Effective March 31, 2000, the Bank
sold  its  rights  to service approximately $389.1 million of mortgage loans for
third party investors, primarily FNMA and FHLMC, pursuant to a purchase and sale
agreement.  The  Bank subserviced those mortgage loans until the transfer to the
purchaser  was completed in the second quarter of the year.  The Bank recorded a
$2.2  million gain on the sale of the above mentioned mortgage servicing rights.

     The  Bank  received  fees  for  servicing  mortgage loans for others, which
generally  ranged  from  0.250%  to  0.375% per annum on the declining principal
balance  of fixed rate mortgage loans and from 0.375% to 0.500% per annum on the
declining principal balance of adjustable rate mortgage loans.  Such fees served
to  compensate  the  Bank  for  the  costs of performing the servicing function.
Other  sources  of  loan  servicing  revenues  include  late  charges  and other
ancillary  fees.  For  the  years  ended  2000,  1999  and 1998, the Bank earned
servicing  fees of $244,000, $680,000 and $642,000, respectively, in conjunction
with  its  loan  servicing.  Servicing  fees  were  collected out of the monthly
mortgage payments made by borrowers and were recorded net of the amortization of
mortgage  servicing  rights.

     The Bank's servicing portfolio was subject to reduction by normal principal
amortization,  by  prepayment  or  by  foreclosure  of  outstanding  loans.  The
following  table  sets  forth  certain information regarding the Bank's mortgage
loan  servicing  for  others  portfolio  for  the  periods  indicated.

<TABLE>
<CAPTION>
                                        Year  Ended  December  31,
<S>                              <C>           <C>         <C>
                                     2000        1999        1998
                                   ----------  ----------  ----------
                                             (In thousands)
Beginning servicing portfolio      $ 407,938   $ 519,237   $ 675,737
Servicing sold or transferred       (382,658)         --          --
Amortization and payoffs             (25,005)   (110,578)   (155,059)
Foreclosures                            (275)       (721)     (1,441)
                                   ----------  ----------  ----------
Ending servicing portfolio         $      --   $ 407,938   $ 519,237
                                   ==========  ==========  ==========
</TABLE>


MORTGAGE-BACKED  SECURITIES

     The Bank maintains a significant portfolio of mortgage-backed securities as
a  means  of investing in housing-related mortgage instruments without the costs
associated with originating mortgage loans for portfolio retention.  At December
31,  2000,  the  Company's mortgage-backed securities portfolio (including $94.7
million  of  mortgage-backed  securities available-for-sale), net of unamortized
premiums  and unearned discounts, amounted to $980.2 million, or 31.7%, of total
assets.  When  investing  in  mortgage-backed  securities,  management  seeks to
achieve  a  positive  spread  over  the  cost  of  funds  used to purchase these
securities.  At  December 31, 2000, the Company's net mortgage-backed securities
had  an  aggregate  market  value  of  $955.2  million.


<PAGE>
     The  following  table  sets  forth  the  composition  of  the  Company's
mortgage-backed  securities  portfolio  at  the  dates  indicated.

<TABLE>
<CAPTION>

     At  December  31,

<S>                          <C>        <C>       <C>                      <C>       <C>          <C>
                                 2000                    1999                     1998
                             ---------  --------  -----------------------  ----------------------
                             Amount     Percent      Amount     Percent      Amount     Percent
                             ---------  --------  ----------   ---------  ----------   ----------
                                                  (Dollars in thousands)
Held-to-maturity:
 REMICS                      $812,460     91.77%  $  838,499     91.45%   $1,059,924     91.82%
 FNMA certificates             49,013      5.54       54,749      5.97        61,590      5.34
 GNMA certificates             17,582      1.99       16,074      1.75        21,235      1.84
 Non-agency certificates        6,273      0.70        7,537      0.83        11,530      1.00
 Interest-only securities          --        --           --        --             1        --
                             ---------  --------    ---------  --------   -----------  --------
                              885,328    100.00%     916,859    100.00%    1,154,280    100.00%
                                        ========               ========                ========
 Unamortized premium            1,503                  1,703                   2,100
 Unearned discount             (1,266)                (1,350)                 (2,264)
                             ---------              ---------             -----------
Total held-to-maturity       $885,565             $  917,212              $1,154,116
                             =========            ===========             ===========

Available-for-sale:
 REMICS                      $ 77,590             $   77,861              $   98,892
 GNMA certificates             19,946                 24,615                      --
                             ---------              ---------             -----------
                               97,536                102,476                  98,892
 Unamortized premium              149                    180                       8
 Unearned discount               (141)                  (149)                   (168)
 Net unrealized loss           (2,871)                (2,842)                 (2,123)
                             ---------              ---------             -----------
Total available-for-sale     $ 94,673             $   99,665              $   96,609
                             =========            ===========             ===========

Total mortgage-backed
 securities                  $980,238             $1,016,877             $1,250,725
                             =========            ===========            ===========
</TABLE>


     The mortgage-backed securities which the Company purchases and maintains in
portfolio  can  include  FNMA,  FHLMC  and  GNMA certificates, certain privately
issued, credit-enhanced mortgage-backed securities which are rated "A" or better
by  the  national securities rating agencies and certain types of collateralized
mortgage  obligations  ("CMOs").  The  FNMA,  FHLMC  and  GNMA  certificates are
modified  pass-through  mortgage-backed  securities,  which  represent undivided
interests  in  underlying  pools  of  fixed-rate, or certain types of adjustable
rate,  single  family  residential  mortgages issued by these quasi-governmental
(GNMA)  and private (FNMA and FHLMC) corporations.  FNMA and GNMA provide to the
certificate  holder a guarantee (which is backed by the full faith and credit of
the  U.S.  government  in  the  case of GNMA certificates) of timely payments of
interest  and  scheduled  principal  payments,  whether  or  not  they have been
collected.  FHLMC guarantees the timely payment of interest and the full (though
not  necessarily timely) payment of principal.  The guarantees of FNMA and FHLMC
are  not  backed  by  the  full  faith  and  credit of the U.S. government.  The
mortgage-backed  securities  acquired  by  the Company that have been pooled and
sold  by  private issuers, generally large investment banking firms, provide for
the timely payments of principal and interest either through insurance issued by
a  reputable  insurer  or  the  right  to receive certain payments thereunder is
subordinated  in  a  manner  which  is  sufficient  to have such mortgage-backed
securities  generally  earn a credit rating of "A" or better from one or more of
the  national  securities  rating  agencies.

     A  CMO is a special type of pay-through debt obligation in which the stream
of  principal  and  interest  payments  on  the  underlying  mortgages  or
mortgage-backed  securities  is used to create classes with different maturities
and,  in  some  cases,  amortization  schedules  and a residual class of the CMO
security  being  sold,  with  each  such  class  possessing  different  risk
characteristics.  The  residual interest sold represents any residual cash flows
which  result from the excess of the monthly receipts generated by principal and
interest  payments  on  the  underlying mortgage collateral and any reinvestment
earnings  thereon,  less  the  cash  payments  to  the  CMO  holders  and  any
administrative expenses.  As a matter of policy, due to the risk associated with
residual  interests,  the  Bank  has  never  invested in, and does not intend to
invest  in,  residual  interests  in  CMOs.

     Mortgage-backed  securities  generally  yield  less  than  the  loans which
underlie  such  securities  because  of  their  payment  guarantees  or  credit
enhancements  which reduce credit risk.  In addition, mortgage-backed securities
are  more liquid than individual mortgage loans and may be used to collateralize
obligations  of  the  Bank.  Mortgage-backed  securities issued or guaranteed by
FNMA  or  FHLMC  (except  interest-only  securities or the residual interests in
CMOs) are weighted at no more than 20% for risk-based capital purposes, compared
to  a weight of 50% to 100% for residential loans.  See "Regulation - Regulatory
Capital  Requirements."

     The FDIC has issued a statement of policy which states, among other things,
that mortgage derivative products (including CMOs and CMO residuals and stripped
mortgage-backed  securities)  which  possess average life or price volatility in
excess  of  a benchmark fixed rate 30 year mortgage-backed pass-through security
are "high-risk mortgage securities," are not suitable investments for depository
institutions,  and  if considered "high risk" at purchase must be carried in the
institution's  trading account or as assets held for sale, and must be marked to
market  on a regular basis.  In addition, if a security was not considered "high
risk"  at purchase but was later found to be "high risk" based on the tests, the
security may remain in the held-to-maturity portfolio as long as the institution
has  the  positive  intent to hold the security to maturity and has a documented
plan  in  place  to  manage the higher risk.  At December 31, 2000, the Bank had
mortgage-backed  securities considered "high risk" with a recorded book value of
approximately $3.6 million.  These securities were not considered "high risk" at
purchase,  but  were  later  found to be "high risk" based on the results of the
required  tests.  The  Bank  has the positive intent to hold these securities to
maturity  and  has documented the Bank's plan to manage the higher risk of these
securities.  If the Bank should elect to consider a new type of security for its
portfolio,  the  Bank intends to ascertain in advance that the security does not
fail  any  of the tests that will qualify it as a "high risk mortgage security."
The  Bank  will not purchase any security that fails such tests unless it has in
place  a  documented  plan  to  manage  the higher risk of that security and has
approval  from  the  Board  of  Directors.


<PAGE>
The  following  table  sets  forth  the  Company's  activities  with  respect to
mortgage-backed  securities  (including held-to-maturity and available-for-sale)
during  the  periods  indicated.

<TABLE>
<CAPTION>
                                                  Year  Ended  December  31,
<S>                                           <C>        <C>         <C>
                                                   2000        1999        1998
                                               ---------  ----------  ----------
                                                       (In thousands)
Mortgage-backed securities
 held-to-maturity purchased                    $  4,815   $   3,080   $   8,203

Mortgage-backed securities
 available-for-sale purchased                        --      26,489          --

Mortgage-backed securities
 available-for-sale sold                             --          --     (48,550)

Discount accretion (premium
 amortization), net                                (159)        430        (132)

Change in unrealized loss on
 mortgage-backed securities
 available-for-sale                                 (29)       (719)      1,375

Principal repayments on
 mortgage-backed securities                     (41,266)   (263,128)   (225,258)
                                               ---------  ----------  ----------

Net decrease in
 mortgage-backed securities                    $(36,639)  $(233,848)  $(264,362)
                                               =========  ==========  ==========
</TABLE>

     The  Company  classifies  securities  as  either  held-to-maturity  or
available-for-sale.  Securities  are  classified  as  held-to-maturity  when the
Company has the positive intent and ability to hold such securities to maturity.
Securities  held-to-maturity are recorded at amortized cost.  Permanent declines
in  the  value  of  held-to-maturity  securities  are charged to earnings in the
periods in which the declines are determined.  Securities available-for-sale are
securities  other  than  those  held-to-maturity or for trading purposes and are
recorded  at fair value, with unrealized gains and losses excluded from earnings
and  recorded  net  of tax as other comprehensive income (loss) in stockholders'
equity  until realized.  Realized gains and losses on securities are recorded in
earnings  in  the  year  of  sale  based  on the specific identification of each
individual  security sold.  Premiums and discounts on mortgage-backed securities
are  amortized or accreted as a yield adjustment over the life of the securities
using  the  interest  method,  with the amortization or accretion being adjusted
when  the  prepayments  are  received.

INVESTMENT  ACTIVITIES

     Under  the  Texas  Savings  Bank  Act (the "Act"), the Bank is permitted to
invest  in  obligations  of,  or guaranteed as to principal and interest by, the
United  States  or  the  State  of  Texas, in the stock or in any obligations or
consolidated  obligations  of  the  FHLB,  and  in  various  other  specified
instruments.  The  Bank  holds  investment  securities from time to time to help
meet  its liquidity requirements and as temporary investments until funds can be
utilized  to  purchase residential mortgage loans, mortgage-backed securities or
to  originate  other  loans for the Bank's portfolio.  See Item 7, "Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results  of
Operations-Liquidity  and  Capital  Resources."

SOURCES  OF  FUNDS

     GENERAL.  Advances  from  the  FHLB,  deposits,  sales  of securities under
agreements  to  repurchase, as well as maturities of and principal repayments on
loans  and  mortgage-backed  securities have been the major sources of funds for
use  in  the  Bank's  lending  and  investments,  and for other general business
purposes.  Management  of the Bank closely monitors rates and terms of competing
sources of funds on at least a weekly basis and utilizes the source which is the
most  cost  effective.

     DEPOSITS.  The  Bank  attracts  a  majority  of its deposits through its 50
branch  offices  in metropolitan Houston, Austin, Corpus Christi, the Rio Grande
Valley  and  small  cities  in  the  southeast quadrant of Texas.  The Bank also
obtains  deposits through acquisitions.  In 1998, the Bank assumed approximately
$355.4 million in deposits in an acquisition of twelve commercial bank branches.
The Bank offers a variety of traditional retail deposit products which currently
includes interest-bearing checking, noninterest-bearing checking, savings, money
market  demand  accounts  and  certificates  of deposit which generally range in
terms  from  three  to  60  months.  Included  among  these deposit products are
individual  retirement  account  certificates.  Beginning  in  1995  with  the
acquisition  of  Texas  Capital,  the Bank's management has pursued a commercial
banking  strategy  related  to  deposits designed to increase the level of lower
cost  transaction  and  commercial deposit accounts.  The Bank offers a range of
products  for  commercial businesses including Small Business Checking, Business
Interest  Checking, Analysis Checking and Commercial Money Market Accounts.  The
acquisitions  and marketing efforts have resulted in the outstanding balances of
demand  deposit  accounts  increasing to 33.4% of total deposits at December 31,
2000  from  26.4%  at  December  31,  1997.


<PAGE>
     The following table shows the distribution of and certain other information
relating  to  the  Company's  deposits  by  type  at  the  dates  indicated.

<TABLE>
<CAPTION>

                                                               At  December  31,
                                                               -----------------
<S>                                <C>          <C>            <C>           <C>        <C>         <C>
                                             2000                       1999                   1998(1)
                                                 Percent                      Percent                Percent
                                                 of                           of                     of
                                   Amount        Deposits         Amount      Deposits   Amount      Deposits
                                   -----------  ---------        ----------  ---------  ----------  ---------
                                                               (Dollars in thousands)
Demand deposit accounts:
 Noninterest-bearing checking(2)   $   80,849      4.83%        $   97,146      5.98%  $   95,398      5.60%
 Interest-bearing checking(2)          61,046      3.64             65,229      4.02       63,067      3.70
 Savings                               43,891      2.62             46,011      2.83       48,571      2.85
 Money market demand(2)               374,210     22.34            331,082     20.39      339,481     19.91
   Total demand deposit accounts      559,996     33.43            539,468     33.22      546,517     32.06
                                   -----------  ---------        ----------  ---------  ----------  ---------
Certificate accounts:
 Maturing within 1 year             1,038,522     62.00            968,838     59.66      965,443     56.64
 1-2 years                             53,378      3.19             82,705      5.09      148,049      8.69
 2-3 years                             13,678      0.82             17,020      1.05       22,347      1.31
 3-4 years                              4,284      0.26             10,772      0.66       11,833      0.69
 4-5 years                              4,745      0.28              4,917      0.30       10,176      0.60
 Over 5 years                             323      0.02                380      0.02          240      0.01
     Total certificate accounts     1,114,930     66.57          1,084,632     66.78    1,158,088     67.94
                                   -----------  ---------        ----------  ---------  ----------
                                    1,674,926    100.00%         1,624,100    100.00%   1,704,605    100.00%
                                                =========                    ========                =======
 Premium on purchased
   deposits, net                           55                          189                    399
                                   -----------                   ----------             ----------
     Total                         $1,674,981                   $1,624,289             $1,705,004
                                   ===========                   ==========             ==========
</TABLE>


________________________

(1)In  1998,  the  Bank  assumed  approximately  $355.4  million  in deposits in
connection  with  the  acquisition  of  twelve  branches  of  another  financial
institution.
(2)The  Bank  reclassifies  a portion of the balances in noninterest-bearing and
interest-bearing  checking  accounts to money market demand accounts pursuant to
deposit  types  under  Federal  Reserve Regulation D.  At December 31, 2000, the
amount  of such reclassification was approximately $136.6 million ($68.1 million
from  noninterest-bearing  checking  and  $68.5  million  from  interest-bearing
checking).  The amount of such reclassification was approximately $117.7 million
($56.3  million  from  noninterest-bearing  checking  and  $61.4  million  from
interest-bearing  checking)  at  December  31,  1999.  The  amount  of  such
reclassification  was  approximately  $126.0  million  ($55.8  million  from
noninterest-bearing  checking  and $70.2 million from interest-bearing checking)
at  December  31,  1998.


<PAGE>
     The following table sets forth the average balance of each deposit type and
the  average  rate  paid  on  each  deposit  type  for  the  periods  indicated.

<TABLE>
<CAPTION>

                                                       Year  Ended  December  31,
<S>                             <C>          <C>                     <C>          <C>         <C>          <C>
                                         2000                     1999                   1998
                                       -------                   ------                 ------
                                                                 (Dollars in thousands)
                                Average      Average      Average      Average     Average      Average
                                Balance      Rate Paid    Balance      Rate Paid   Balance      Rate Paid
                                -----------  ---------  -----------  -----------  ----------  -----------
Demand deposit accounts:
 Noninterest-bearing checking   $    74,575        --%  $    80,367         --%  $    51,612         --%
 Interest-bearing checking           50,622      2.00        49,588       1.96        20,628       2.18
 Savings                             47,950      2.15        50,805       1.99        35,162       2.20
 Money market demand(1)             366,200      2.56       356,860       2.27       315,141       2.37
Certificate accounts              1,095,760      5.62     1,104,378       4.95     1,063,277       5.40
                                -----------  ---------  -----------  ----------  -----------  ----------
 Total deposits                 $ 1,635,107      4.47%  $ 1,641,998       3.94%  $ 1,485,820       4.45%
                                ===========  =========  ===========  ==========  ===========  ==========
</TABLE>


________________________

(1)Includes  amounts  reclassified from noninterest-bearing and interest-bearing
checking  accounts  pursuant  to  the  Bank's  program  under  Federal  Reserve
Regulation  D  as  follows:

<TABLE>
<CAPTION>
<S>                           <C>        <C>       <C>
                                 2000      1999      1998
                              --------  --------  --------
                                   (In thousands)
Noninterest-bearing checking  $ 71,053  $ 70,780  $ 63,130
Interest-bearing checking       69,523    68,486    67,778
                              --------  --------  --------
                              $140,576  $139,266  $130,908
                              ========  ========  ========
</TABLE>


     The  following  table  presents  by  various  interest  rate categories the
amounts  of  certificate  accounts  at  the  dates  indicated and the amounts of
certificate  accounts  at  December  31,  2000  which  mature during the periods
indicated.

<TABLE>
<CAPTION>
                                                            Amounts  at  December  31,  2000  Maturing  In
                                                                      (In  thousands)
<S>                        <C>           <C>           <C>           <C>           <C>           <C>
                                                         One Year                                 Greater than
                            Amounts at December 31,      or Less       Two Years    Three Years   Three Years
                            -----------------------      ----------    ---------    ------------  ------------
                                2000         1999
                            -----------    ---------
Certificate accounts:
2.00% to 3.99%               $      586    $   23,749    $       504    $     30     $    --      $    52
4.00% to 5.99%                  301,328       990,726        258,509      25,229      10,858        6,732
6.00 to 7.99%                   812,850        69,943        779,410      28,119       2,753        2,568
8.00 to 9.99%                       166           202             99          --          67           --
over 10.00%                          --            12             --          --          --           --
                             ----------    ----------    -----------    --------     -------       ------
Total                        $1,114,930    $1,084,632     $1,038,522    $ 53,378     $13,678       $9,352
                             ==========    ==========     ==========    ========     =======       ======
</TABLE>


     Certificates  maturing  within  one year consist primarily of six month and
one year certificates. Historically, a majority of such certificate holders roll
over  their balances into new certificates with similar terms at the Bank's then
current interest rates.  The Bank believes that it can continue to attract these
levels  of  deposits  on  a  continuing  basis  through  competitive  pricing.

     The following table sets forth the net deposit flows of the Bank during the
periods  indicated.

<TABLE>
<CAPTION>
                                                        Year  Ended  December  31,
<S>                                                  <C>          <C>         <C>
                                                         2000        1999        1998
                                                     ---------   ---------   ---------
                                                              (In thousands)
Net increase (decrease) before interest credited(1)  $ (20,970)  $(145,219)  $ 264,148

Interest credited                                       71,662      64,504      65,796
                                                     ---------   ---------   ---------
Net deposit increase (decrease)                      $  50,692   $ (80,715)  $ 329,944
                                                     ==========  ==========  =========
</TABLE>


________________________

(1)For  the  year ended December 31, 1998, reflects the effect of the assumption
of  $355.4  million  of  net deposit liabilities acquired in connection with the
1998  Branch Acquisition.  The net deposit outflow in each year (net of acquired
deposits)  was  primarily due to financial disintermediation as described below.

     The  following  table  sets  forth the amount of the Bank's certificates of
deposits at December 31, 2000 which are $100,000 or more by time remaining until
maturity.

<TABLE>
<CAPTION>
                                                   At  December  31,  2000
<S>                                 <C>                 <C>             <C>
                                    Number of accounts                  Deposit Amount
                                    ------------------                  ---------------
                                                                         (In thousands)
Three months or less                               474                  $        66,653
Over three through six months                      456                           50,456
Over six through twelve   months                   954                          107,674
Over twelve months                                 133                           14,459
                                    ------------------                  ---------------
   Total                                         2,017                  $       239,242
                                    ==================                  ===============
</TABLE>


     The Bank's deposits are obtained primarily from businesses and residents of
Houston,  Austin,  Corpus Christi, the Rio Grande Valley and small cities in the
southeast  quadrant of Texas.  Currently, the principal methods used by the Bank
to  attract  and  retain  deposit  accounts  include competitive interest rates,
having  branch  locations  in  under-served  markets  and  offering a variety of
services  for the Bank's commercial business and retail customers. The Bank uses
traditional  marketing  methods to attract new customers and deposits, including
newspaper  and radio advertising.  Through 2000, except as noted below, the Bank
has  not  solicited  brokered  deposit accounts and generally has not negotiated
rates  on  larger  denomination (i.e., jumbo) certificates of deposit.  In early
1997,  the  Bank  began  the  solicitation  of deposit accounts through a "money
desk."  Money  desk  rates  are  only  offered to institutions (primarily credit
unions  and municipal utility districts) and are generally up to 50 basis points
higher  than  on  regular  certificate  of  deposit  accounts.

     The  Bank  also  provides  its  customers with the opportunity to invest in
noninsured  mutual  funds,  including  government bond funds, tax-free municipal
bond  funds,  growth funds, income growth funds, and sector funds specific to an
industry,  which  are  provided  through  a third party arrangement with another
company, which maintains representatives at the Bank's branch offices.  The Bank
earns  a  fee  after  the payment of all expenses, which was not material to the
Bank's  results  of  operations  for  the years ended December 31, 2000, 1999 or
1998.  See  "Subsidiaries  of  the  Bank  -  CoastalBanc  Financial  Corp",  and
"Subsidiaries  of  the  Bank  -  Coastal  Banc  Insurance  Agency,  Inc."

     BORROWINGS.  The  following  table sets forth certain information regarding
the  borrowings  of  the  Bank  at  or  for  the  dates  indicated.

<TABLE>
<CAPTION>
                                               At  or  For  the  Year
                                                Ended  December  31,
<S>                                       <C>          <C>          <C>
                                                2000         1999        1998
                                          ----------  -----------   ---------
                                          (Dollars in thousands)
FHLB advances:

 Average balance outstanding              $  926,659   $  951,953   $713,197

 Maximum amount outstanding at any
   month-end during the period             1,275,541    1,115,713    969,036

 Balance outstanding at end of period      1,150,305    1,096,931    966,720

 Average interest rate during the period       6.29%        5.31%      5.55%

 Average interest rate at end of period        6.48%        5.72%      5.24%

Securities sold under agreements
 to repurchase:

 Average balance outstanding              $  249,655   $  103,211   $579,561

 Maximum amount outstanding at any
   month-end during the period               605,214      271,103    874,784

 Balance outstanding at end of period             --           --    100,000

 Average interest rate during the period       6.68%        5.44%      5.49%

 Average interest rate at end of period           --           --       4.93%
</TABLE>


     The  Bank  obtains  long  term,  fixed  rate  and short term, variable rate
advances  from  the  FHLB  upon  the  security  of  certain  of  its  first lien
residential  and  multifamily  mortgage  loans  and  mortgage-backed securities,
provided  certain  standards  related  to creditworthiness of the Bank have been
met.  FHLB  advances  are  generally  available for general business purposes to
expand lending and investing activities.  Borrowings have generally been used to
fund  the  purchase  of  loans  receivable  and  mortgage-backed  securities.

     Advances  from  the  FHLB  are  made  pursuant  to several different credit
programs,  each of which has its own interest rate and range of maturities.  The
programs  of  the  FHLB  currently  utilized by the Bank include a $50.0 million
variable  rate  line of credit, various short-term, fixed rate advances and long
term,  fixed  and  variable-rate  advances.  At  December 31, 2000, the Bank had
total  FHLB  advances  of  $1.2  billion  at a weighted average interest rate of
6.48%.  Of  the  advances  outstanding at December 31, 2000, $792.3 million were
short-term  advances  with  an  original  maturity  of  less  than  60  days.

     The  Bank  also  obtains  funds  from the sales of securities to investment
dealers  under agreements to repurchase ("reverse repurchase agreements").  In a
reverse  repurchase  agreement  transaction,  the  Bank  will  generally  sell a
mortgage-backed security agreeing to repurchase the same security on a specified
later  date  at an agreed upon price.  The mortgage-backed securities underlying
the  agreements  are delivered to the dealers who arrange the transactions.  The
dealers  may  lend the Bank's securities to others in the normal course of their
operations;  however,  such  dealers  or  third  party  custodians safe-keep the
securities  which  are  to  be  specifically  repurchased  by the Bank.  Reverse
repurchase  agreements represent a competitive cost funding source for the Bank;
however, the Bank is subject to the risk that the lender may default at maturity
and  not  return  the  collateral. In order to minimize this potential risk, the
Bank only deals with large, established investment brokerage firms when entering
into  these  transactions.  At  December  31,  2000,  the  Bank did not have any
borrowings  under  reverse  repurchase  agreements.

     To  a lesser extent, beginning in 1997, the Bank has utilized federal funds
purchased  from  a correspondent bank for overnight borrowing purposes.  Federal
funds  purchased averaged approximately $18,000, $19,000 and $149,000 during the
years  ended  December  31,  2000,  1999  and 1998, respectively with an average
interest rate during the periods of 5.56%, 5.26% and 5.33%, respectively.  There
were  no  federal funds purchased outstanding at any month-end during 2000, 1999
or  1998.

     The Asset/Liability Subcommittee of the Bank attempts to match the maturity
of  its borrowings with particular repricing dates of certain assets in order to
maintain  a  pre-determined  interest  rate  spread.  The Bank's objective is to
minimize  the increase or decrease in the interest rate spread during periods of
fluctuating  interest  rates  from  that  which was contemplated at the time the
assets  and  liabilities  were  first  put  on  the Bank's books.  The Bank also
attempts  to alter the interest rate risk associated with its borrowings through
the  use  of  interest rate swaps and interest rate caps purchased from selected
securities  brokers/dealers.  See  "Management's  Discussion  and  Analysis  of
Financial  Condition and Results of Operations - Asset and Liability Management"
in  Item  7  hereof.

SUBSIDIARIES  OF  THE  BANK

     GENERAL.  The Bank is permitted to invest in the capital stock, obligations
and  other  securities of its service corporations in an aggregate amount not to
exceed  10%  of  the  Bank's  assets.  In addition, the Bank may make conforming
loans in an amount not exceeding 50% of the Bank's regulatory capital to service
corporations of which the Bank owns more than 10% of the stock.  At December 31,
2000,  the  Bank  was  authorized  to have a maximum investment of approximately
$309.2  million  in  its  subsidiaries.

     At  December  31,  2000, the Bank had two active wholly-owned subsidiaries,
the  activities  of which are described below.  At December 31, 2000, the Bank's
aggregate  equity  investment  in  its  subsidiaries  was  $144,000.

     On  December 30, 1998, CBS Mortgage Corp., a former subsidiary of the Bank,
was  merged  into  the  Bank.

     COASTALBANC  FINANCIAL  CORP.  CoastalBanc  Financial  Corp.  ("Financial
Corp.")  was  formed  in  1986  to act as an investment advisor to other insured
financial  institutions.  The  Bank  is  the sole stockholder of Financial Corp.
Over  the  past  five years, Financial Corp. has been inactive in its investment
advisory  capacity.  Financial  Corp.  became  active during the last quarter of
1992  in  connection  with  the  sale  of  mutual  funds  through  third  party
intermediaries.  Fees  generated,  net  of expenses, resulted in a net income of
$37,000,  $51,000  and  $49,000  for the years ended December 31, 2000, 1999 and
1998,  respectively.

     COASTAL  BANC  INSURANCE  AGENCY,  INC.  In  1987, the Bank entered into an
Administrative  Services  Agreement  with  CBIA,  a  Texas  business corporation
licensed under Texas law to act as a life insurance agent.  Until June 22, 2000,
CBIA  was  wholly-owned  by a former executive officer of the Bank.  On June 22,
2000,  CBIA  became  a  subsidiary  of  the Bank.  CBIA receives fees related to
insurance and investment product sales through third party intermediaries to the
Bank's deposit and loan customers.  Fees generated, net of expenses, resulted in
net  income  of  $74,000  for  the  period  from  June  22 to December 31, 2000.

AFFILIATE  OF  THE  BANK

     COASTAL  BANC  CAPITAL  CORP.  CBCC  is  a direct subsidiary of HoCo and an
affiliate  of  the  Bank.  CBCC  is  engaged  in  the business of purchasing and
reselling  packages of whole loan assets on behalf of the Bank and institutional
investors.  The  loan  packages  acquired by CBCC are offered to the Bank on the
same  terms  and  at  the  same  time that they are offered to other prospective
purchasers.  During  2000,  CBCC  purchased  whole  loan  assets totaling $264.7
million  and  sold  whole  loans  (including  purchase premium) totalling $239.5
million to the Bank and $25.6 million to third party investors.  During the year
ended December 31, 2000, CBCC recorded gains on the sale of loans to the Bank of
$309,000  and  gains  on the sale of loans to third party investors of $157,000.
The  $309,000  gain  on the sale of loans to the Bank was recorded on the Bank's
financial statements as a premium on purchased loans and is being amortized over
the life of those loans.  All significant intercompany balances and transactions
have  been  eliminated  in  consolidation.  At  December  31,  2000,  HoCo's
unconsolidated  equity  investment  in  CBCC  was $423,000.  CBCC had net income
(loss)  (before  eliminations) of $(21,000), $592,000 and $275,000 for the years
ended  December  31,  2000,  1999  and  1998,  respectively.

     Commissions  received by CBCC from the Bank are calculated at a market rate
and  are  not greater than those paid to non-affiliates in similar transactions.
The  Bank  and  CBCC  have  entered  into  a  mortgage  warehouse revolving loan
agreement  pursuant  to which the Bank has established a $17.0 million revolving
line  of  credit  to  be  drawn  upon  from  time to time by CBCC to finance the
acquisition  of  whole loan assets and the holding of such assets until they are
sold.  The  advances  drawn  by CBCC are collateralized by such assets purchased
and  held  by CBCC.  There were no amounts outstanding on this line of credit at
December  31,  2000.  All  transactions  between  the  Bank  and CBCC are within
regulatory  guidelines.

REGULATION

     Set  forth  below  is  a  brief description of certain laws and regulations
which  relate  to  the  regulation of the Company and the Bank.  The description
does not purport to be complete and is qualified in its entirety by reference to
applicable  laws  and  regulations.  Certain  federal  banking  laws  have  been
recently  amended.  See  "Regulation  -  The  Company-Financial  Modernization."


<PAGE>
THE  COMPANY

     REGULATIONS.  The  Company and HoCo are registered unitary savings and loan
holding companies and are subject to OTS and Department regulation, examination,
supervision  and  reporting requirements. In addition, because the capital stock
of  the Company is registered under Section 12(g) of the Securities Exchange Act
of 1934, the Company is also subject to various reporting and other requirements
of  the  SEC. As a subsidiary of a savings and loan holding company, the Bank is
also  subject to certain Federal and state restrictions in its dealings with the
Company  and  affiliates  thereof.

     FEDERAL  ACTIVITIES  RESTRICTIONS.  There  are generally no restrictions on
the  activities  of  a  savings  and  loan  holding company which holds only one
subsidiary  savings  bank  provided  that  they meet the grandfather requirement
described  below.  See "The Company - Financial Modernization."  However, if the
Director  of  the  OTS determines that there is reasonable cause to believe that
the  continuation  by  a  savings  and  loan  holding  company  of  an  activity
constitutes  a  serious  risk to the financial safety, soundness or stability of
its  subsidiary  savings  institution  (i.e.,  a  savings association or savings
bank),  the Director may impose such restrictions as deemed necessary to address
such  risk,  including  limiting  (i)  payment  of  dividends  by  the  savings
institution;  (ii)  transactions  between  the  savings  institution  and  its
affiliates;  and  (iii)  any  activities  of  the savings institution that might
create  a  serious  risk  that  the  liabilities  of the holding company and its
affiliates  may  be  imposed  on  the  savings institution.  Notwithstanding the
foregoing, if the savings institution subsidiary of such a holding company fails
to  meet  the  Qualified  Thrift  Lender ("QTL") test, then such unitary holding
company  also  shall become subject to the activities restrictions applicable to
multiple  savings and loan holding companies and, unless the savings institution
requalifies  as  a QTL within one year thereafter, shall register as, and become
subject  to  the  restrictions  applicable  to,  a  bank  holding  company.  See
"Regulation  of  The  Bank  -  Qualified  Thrift  Lender  Test."

     If  the  Company  were  to  acquire control of another savings institution,
other  than  through  merger  or  other  business combination with the Bank, the
Company  would  thereupon  become  a  multiple savings and loan holding company.
Except  where such acquisition is pursuant to the authority to approve emergency
thrift  acquisitions and where each subsidiary savings institution meets the QTL
test,  as  set  forth  below,  the  activities  of  the  Company  and any of its
subsidiaries  (other  than  the  Bank  or other subsidiary savings institutions)
would  thereafter  be  subject to further restrictions.  No multiple savings and
loan  holding  company  or subsidiary thereof which is not a savings institution
shall  commence  or  continue  beyond  a limited period of time after becoming a
multiple  savings  and  loan  holding company or subsidiary thereof any business
activity,  other  than:  (i)  furnishing or performing management services for a
subsidiary  savings  institution;  (ii) conducting an insurance agency or escrow
business;  (iii)  holding,  managing, or liquidating assets owned by or acquired
from  a subsidiary savings institution; (iv) holding or managing properties used
or  occupied  by  a  subsidiary savings institution; (v) acting as trustee under
deeds  of  trust;  (vi) those activities authorized by regulation as of March 5,
1987  to  be engaged in by multiple savings and loan holding companies; or (vii)
unless the Director of the OTS by regulation prohibits or limits such activities
for  savings  and  loan  holding  companies,  those activities authorized by the
Federal  Reserve  Board  as  permissible for bank holding companies or financial
holding  companies.  The  activities  described in (i) through (vi) above may be
engaged  in  only  after giving the OTS prior notice and being informed that the
OTS does not object to such activities. In addition, the activities described in
(vii)  above  also  must  be  approved by the Director of the OTS prior to being
engaged  in  by  a  multiple  savings  and  loan  holding  company.

     RESTRICTIONS  ON ACQUISITIONS.  Except under limited circumstances, savings
and loan holding companies are prohibited from acquiring, without prior approval
of  the  Director  of  the  OTS, (i) control of any other savings institution or
savings and loan holding company or substantially all the assets thereof or (ii)
more  than  5%  of the voting shares of a savings institution or holding company
thereof  which  is  not  a  subsidiary.  Except  with  the prior approval of the
Director  of  the  OTS,  no  director  or  officer of a savings and loan holding
company  or  person owning or controlling by proxy or otherwise more than 25% of
such company's stock, may acquire control of any savings institution, other than
a  subsidiary  savings  institution,  or  of  any other savings and loan holding
company.

     The Director of the OTS may approve acquisitions resulting in the formation
of  a  multiple  savings  and  loan  holding  company  which  controls  savings
institutions  in  more  than one state only if (i) the multiple savings and loan
holding company involved controls a savings institution which operated a home or
branch office located in the state of the association to be acquired as of March
5,  1987;  (ii)  the  acquiror  is  authorized to acquire control of the savings
institution  pursuant  to  the  emergency  acquisition provisions of the Federal
Deposit  Insurance Act ("FDIA"), or (iii) the statutes of the state in which the
institution  to  be  acquired  is located specifically permit institutions to be
acquired  by  the  state-chartered  institutions  or  savings  and  loan holding
companies  located  in  the state where the acquiring entity is located (or by a
holding  company  that  controls  such  state-chartered  savings  institutions).

     FINANCIAL MODERNIZATION.  Under the Gramm-Leach-Bliley Act enacted into law
on  November  12,  1999,  no  company  may acquire control of a savings and loan
holding  company  after  May  4,  1999,  unless  the  company is engaged only in
activities  traditionally  permitted  to  a  multiple  savings  and loan holding
company  or newly permitted to a financial holding company under Section 4(k) of
the  Bank  Holding  Company  Act.  With limited exceptions, existing savings and
loan  holding  companies  and those formed pursuant to an application filed with
the  OTS  before May 4, 1999, may engage in any activity including non-financial
or  commercial  activities  provided  such  companies  control  only one savings
association and that savings association meets the Qualified Thrift Lender test.
Corporate  reorganizations  are  permitted,  but  the  transfer of grandfathered
unitary thrift holding company status through acquisition is not permitted.  The
Company  and  HoCo  qualify  to  engage  in  that  broader  range of activities.

     TEXAS  REGULATIONS.  Under  the  Texas  Savings  Bank  Act  ("TSBA"),  each
registered  holding  company,  such  as the Company, is required to file reports
with  the  Department  as  required  by  the Texas Savings and Loan Commissioner
("Commissioner")  and  is  subject  to  such examination as the Commissioner may
prescribe.

REGULATION  OF  THE  BANK

     The  Bank  is  required  to  file  reports with the Department and the FDIC
concerning  its  activities  and  financial  condition, in addition to obtaining
regulatory  approvals  prior  to entering into certain transactions, such as any
merger  or acquisition with another institution.  The regulatory system to which
the  Bank  is  subject  is  intended primarily for the protection of the deposit
insurance  fund and depositors, not stockholders.  The regulatory structure also
provides  the  Department and the FDIC with substantial discretion in connection
with  their  supervisory and enforcement functions.  The Department and the FDIC
conduct periodic examinations of the Bank in order to assess its compliance with
federal  and  state  regulatory requirements.  As a result of such examinations,
the  Department  and  the  FDIC  may  require  various  corrective  actions.

     Virtually  every  aspect  of  the  Bank's  business  is subject to numerous
federal  and/or  state  regulatory requirements and restrictions with respect to
such  matters  as,  for example, the nature and amounts of loans and investments
that  may  be made, the issuance of securities, the amount of reserves that must
be  established  against  deposits,  the  establishment  of  branches,  mergers,
non-banking activities and other operations.  Numerous laws and regulations also
set  forth  special restrictions and procedural requirements with respect to the
extension  of  credit,  credit  practices,  the  disclosure  of credit terms and
discrimination  in  credit  transactions.

     LIMITATIONS  ON TRANSACTIONS WITH AFFILIATES.  Transactions between savings
institutions  and  any  affiliate  are  governed  by Sections 23A and 23B of the
Federal  Reserve  Act.  An  affiliate of a savings institution is any company or
entity  which  controls,  is  controlled  by or is under common control with the
savings  institution.  In  a holding company context, the parent holding company
of  a  savings  institution  (such  as  the Company) and any companies which are
controlled  by  such  parent  holding  company  are  affiliates  of  the savings
institution.  Generally,  Section  23A  limits  the  extent to which the savings
institution  or  its  subsidiaries may engage in "covered transactions" with any
one  affiliate to an amount equal to 10% of such institution's capital stock and
surplus,  and  contain  an  aggregate  limit  on  all such transactions with all
affiliates to an amount equal to 20% of such capital stock and surplus.  Section
23B  applies to "covered transactions" as well as certain other transactions and
requires  that  all  such transactions be on terms substantially the same, or at
least  as  favorable  to  the  institution or subsidiary, as those provided to a
non-affiliate.  The  term "covered transaction" includes the making of loans to,
purchase of assets from and, issuance of a guarantee to an affiliate and similar
transactions.  Section  23B transactions also apply to the provision of services
and the sale of assets by a savings association to an affiliate.  In addition to
the restrictions imposed by Sections 23A and 23B, no savings institution may (i)
loan  or otherwise extend credit to an affiliate, except for any affiliate which
engages  only in activities which are permissible for bank holding companies, or
(ii)  purchase  or  invest  in  any  stocks, bonds, debentures, notes or similar
obligations  of  any  affiliate, except for affiliates which are subsidiaries of
the  savings  institution.

     In  addition,  Sections  22(h)  and  (g)  of  the Federal Reserve Act place
restrictions  on  loans  to  executive  officers,  directors  and  principal
stockholders.  Under  Section  22(h),  loans to a director, an executive officer
and  to  a  greater  than 10% stockholder of a savings institution (a "principal
stockholder"), and certain affiliated interests of each of them, may not exceed,
together  with  all  other  outstanding  loans  to  such  person  and affiliated
interests,  the  savings  institution's  loans  to one borrower limit (generally
equal to 15% of the institution's unimpaired capital and surplus). Section 22(h)
also  requires  that  loans  to  directors,  executive  officers  and  principal
stockholders  be  made  on terms substantially the same as offered in comparable
transactions to other persons and also requires prior Board approval for certain
loans.  In  addition,  the aggregate amount of extensions of credit by a savings
institution  to  all insiders cannot exceed the institution's unimpaired capital
and surplus.  Furthermore, Section 22(g) places additional restrictions on loans
to  executive  officers.  At  December 31, 2000, the Bank was in compliance with
the  above  restrictions.

     REGULATORY  CAPITAL  REQUIREMENTS.  Federally-insured state-chartered banks
are  required to maintain minimum levels of regulatory capital.  These standards
generally must be as stringent as the comparable capital requirements imposed on
national  banks.  The  FDIC also is authorized to impose capital requirements in
excess  of  these  standards  on  individual  banks  on  a  case-by-case  basis.

     Under  current  FDIC regulations, the Bank is required to comply with three
separate  minimum  capital  adequacy requirements:  a "Tier 1 capital ratio" and
two  "risk-based"  capital  requirements.  "Tier  1  capital" generally includes
common  stockholders'  equity  (including  retained  earnings),  qualifying
noncumulative  perpetual  preferred  stock and any related surplus, and minority
interests  in  the  equity  accounts  of  fully consolidated subsidiaries, minus
intangible  assets,  other  than  properly  valued  mortgage  servicing  assets,
nonmortgage  servicing  assets  and  purchased  credit  card relationships up to
certain  specified limits and minus net deferred tax assets in excess of certain
specified  limits.  At December 31, 2000, the Bank did not have any net deferred
tax  assets  in  excess  of  the  specified  limits.

     TIER  1  CAPITAL RATIO.  FDIC regulations establish a minimum 3.0% ratio of
Tier  1  capital  to  total  assets  for  the most highly-rated state-chartered,
FDIC-supervised  banks and for all other state-chartered, FDIC-supervised banks,
the  minimum  Tier  1  capital  ratio  shall  not be less than 4.0%.  Under FDIC
regulations,  highly-rated  banks  are  those  that  the FDIC determines are not
anticipating  or experiencing significant growth and have well diversified risk,
including  no  undue  interest rate risk exposure, excellent asset quality, high
liquidity  and  good earnings.  At December 31, 2000, the minimum Tier 1 capital
ratio  for capital adequacy purposes for the Bank was 4.0% and its actual Tier 1
capital  ratio  was  6.22%.

     RISK-BASED  CAPITAL  REQUIREMENTS.  The  risk-based  capital  requirements
contained  in  FDIC regulations generally require the Bank to maintain a minimum
ratio of Tier 1 capital to risk-weighted assets of at least 4.00% and a ratio of
total  risk-based  capital  to  risk-weighted  assets  of  at  least  8.00%.  To
calculate  the  amount  of  capital  required,  assets are placed in one of four
categories  and  given  a  percentage weight (0%, 20%, 50% or 100%) based on the
relative  risk  of  the  category.  For  example,  U.S.  Treasury Bills and GNMA
securities  are  placed  in the 0% risk category.  FNMA and FHLMC securities are
placed in the 20% risk category, loans secured by one-to-four family residential
properties and certain privately-issued mortgage-backed securities are generally
placed  in  the  50%  risk  category and commercial and consumer loans and other
assets  are  generally  placed  in the 100% risk category.  In addition, certain
off-balance sheet items are converted to balance sheet credit equivalent amounts
and  each  amount  is  then  assigned  to  one  of  the  four  categories.

     For  purposes of the risk-based capital requirements, "total capital" means
Tier  1  capital  plus supplementary or Tier 2 capital, so long as the amount of
supplementary or Tier 2 capital that is used to satisfy the requirement does not
exceed  the amount of Tier 1 capital.  Supplementary or Tier 2 capital includes,
among other things, so-called permanent capital instruments (cumulative or other
perpetual preferred stock, mandatory convertible subordinated debt and perpetual
subordinated  debt),  so-called  maturing  capital  instruments  (mandatorily
redeemable  preferred  stock,  intermediate-term  preferred  stock,  mandatory
convertible  subordinated  debt and subordinated debt), and a certain portion of
the  allowance for loan losses up to a maximum of 1.25% of risk-weighted assets.

     At  December  31,  2000,  the Bank's Tier 1 capital to risk-weighted assets
ratio  was  9.94% and its total risk-based capital to risk weighted assets ratio
was  10.72%.


<PAGE>
     The  following  table  sets  forth  information with respect to each of the
Bank's  minimum  capital  adequacy  requirements  at  the  dates  shown.

<TABLE>
<CAPTION>
                                                       At  December  31,
                                      2000                  1999                  1998
                                     -------               -------               -------

                                Actual   Required(1)  Actual   Required(1)  Actual   Required(1)
                                -------  -----------  -------  -----------  -------  -----------
<S>                             <C>      <C>          <C>      <C>          <C>      <C>
Tier 1 capital to total assets    6.22%        4.00%    5.76%        4.00%    5.25%        4.00%
Tier 1 risk-based capital
 to risk weighted assets          9.94         4.00     9.68         4.00     9.54         4.00
Total risk-based capital
 risk to risk weighted assets    10.72         8.00    10.29         8.00    10.23         8.00
</TABLE>


(1)Minimum  required  ratio  for  capital  adequacy  purposes.

     The  following  table  sets  forth  a  reconciliation  between  the  Bank's
stockholders'  equity  and  each  of  its  three  minimum  regulatory  capital
requirements  at  December  31,  2000.

<TABLE>
<CAPTION>
<S>                                       <C>            <C>           <C>
                                                         Tier 1        Total
                                          Tier 1         Risk-based    Risk-based
                                          Capital        Capital       Capital
                                          -----------  ------------  ------------
                                                    (Dollars in thousands)
Total stockholders' equity                $   209,034   $   209,034   $   209,034
Unrealized loss on securities
 available-for-sale                             1,867         1,867         1,867
Less nonallowable goodwill                    (24,611)      (24,611)      (24,611)
Plus allowance for loan losses                     --            --        14,507
                                          ------------  ------------  ------------
Total regulatory capital                      186,290       186,290       200,797
Minimum required capital                      119,862        74,957       149,913
                                          ------------  ------------  ------------
Excess regulatory capital                 $    66,428   $   111,333   $    50,884
                                          ============  ============  ============

Bank's regulatory capital percentage (1)        6.22%         9.94%        10.72%

Minimum regulatory capital
 adequacy required percentage                   4.00%         4.00%         8.00%
                                          ------------  ------------  ------------

Bank's regulatory capital percentage in
 excess of minimum requirement                  2.22%         5.94%         2.72%
                                          ============  ============  ============
</TABLE>


________________________

(1)Tier  1  capital is computed as a percentage of adjusted average total assets
of  $3.0  billion.  Risk-based  capital  is computed as a percentage of adjusted
risk-weighted  assets  of  $1.9  billion.


<PAGE>
     FDIC  INSURANCE  PREMIUMS.  The  deposits  of  the  Bank are insured to the
maximum  extent  permitted  by the SAIF and the Bank Insurance Fund (the "BIF"),
both of which are administered by the FDIC, and are backed by the full faith and
credit  of  the  U.S.  government.  As  the  insurer,  the FDIC is authorized to
conduct examinations of, and to require reporting by, FDIC-insured institutions.
It  also may prohibit any FDIC-insured institution from engaging in any activity
the FDIC determines by regulation or order to pose a serious threat to the FDIC.
The  FDIC also has the authority to initiate enforcement actions against savings
institutions.

     The  Bank  currently pays deposit insurance premiums to the FDIC based on a
risk-based  assessment  system  established  by the FDIC for all bank and thrift
institutions.  Under applicable regulations, institutions are assigned to one of
three  capital  groups  based  solely on the level of an institution's capital -
"well  capitalized," "adequately capitalized" and "undercapitalized" - which are
defined in the same manner as the regulations establishing the prompt corrective
action system under Section 38 of the FDIA.  These three groups are then divided
into  three  subgroups which reflect varying levels of supervisory concern, from
those  which are considered to be healthy to those which are considered to be of
substantial  supervisory  concern.  The  matrix  so  created  results  in  nine
assessment  risk  classifications.

     On  September  30,  1996, amendments to the FDIA were signed into law.  The
FDIA  and  implementing  regulations  provided that all SAIF-member institutions
would  pay  a  special  one  time  assessment  of  65.7 basis points on the SAIF
assessment  base  as  of  March  31, 1995 to recapitalize the SAIF, which in the
aggregate,  would  be sufficient to bring the reserve ratio in the SAIF to 1.25%
of  insured  deposits.  The  Bank's  special assessment amounted to $7.5 million
($4.8  million after applicable income taxes) pursuant to the FDIA.  In addition
to  the  recapitalization  provisions,  the FDIA equalized the rate schedule for
SAIF  and  BIF  institutions with the rates ranging from zero to 27 basis points
beginning  October  1,  1996.  At December 31, 2000, the Bank was categorized as
well  capitalized.

     The  FDIA provided for Financing Corporation ("FICO") debt sharing by banks
and  thrifts  with  proration  sharing in the year 2000. Prior to the year 2000,
SAIF  insured  institutions  paid approximately 6.5 basis points for FICO, while
BIF  insured  institutions  paid  approximately  1.3  basis  points.  The  FICO
provisions  of the FDIA also prohibit deposit migration strategies to avoid SAIF
premiums.  Starting  in  the  year 2000, BIF and SAIF institutions began sharing
the  FICO burden on a pro rata basis until termination of the FICO obligation in
2017.

     SAFETY  AND SOUNDNESS STANDARDS. Each Federal banking agency is required to
prescribe,  for all insured depository institutions and their holding companies,
standards  relating to internal controls, information systems and internal audit
systems,  loan documentation, credit underwriting, interest rate exposure, asset
growth,  compensation,  fees  and  benefits  and  such  other  operational  and
managerial  standards  as  the  agency  deems  appropriate.  The  compensation
standards would prohibit employment contracts or other compensatory arrangements
that  provide  excess  compensation,  fees or benefits or could lead to material
financial  loss  to  the  institution.  In addition, each Federal banking agency
also  is  required  to  adopt  for all insured depository institutions and their
holding  companies  standards  that  specify  (i)  a maximum ratio of classified
assets  to  capital,  (ii)  minimum earnings sufficient to absorb losses without
impairing capital, (iii) to the extent feasible, a minimum ratio of market value
to  book value for publicly-traded shares of the institution or holding company,
and  (iv) such other standards relating to asset quality, earnings and valuation
as  the  agency  deems  appropriate.  On  July  10,  1995,  the  Federal banking
agencies,  including  the  FDIC,  adopted  final  rules  and proposed guidelines
concerning  safety  and  soundness  required  to  be  prescribed  by regulations
pursuant  to  Section  39  of  the  FDIA.  In  general,  the standards relate to
operational and managerial matters, asset quality and earnings and compensation.
The operational and managerial standards cover internal controls and information
systems,  internal  audit  systems,  loan  documentation,  credit  underwriting,
interest  rate  exposure,  asset  growth,  and  compensation, fees and benefits.
Under  the  asset  quality  and  earnings  standards,  which were adopted by the
Federal  banking agencies in October 1996, the Bank is required to establish and
maintain  systems  to identify problem assets and prevent deterioration in those
assets  and evaluate and monitor earnings to ensure that earnings are sufficient
to  maintain adequate capital reserves.  If an insured institution fails to meet
any  of  the standards promulgated by the regulators, then such institution will
be  required  to  submit  a plan within 30 days to the FDIC specifying the steps
that  it  will  take  to  correct  the deficiency.  In the event that an insured
institution  fails  to  submit  or  fails in any material respect to implement a
compliance  plan  within  the  time  allowed by the FDIC, Section 39 of the FDIA
provides  that the FDIC must order the institution to correct the deficiency and
may restrict asset growth, require the savings institution to increase its ratio
of  tangible  equity  to  assets,  restrict  the  rates  of  interest  that  the
institution  may  pay  or  take any other action that would better carry out the
purpose  of prompt corrective action.  The Bank believes that it has been and at
December 31, 2000 was in compliance with each of the standards as they have been
adopted  by  the  FDIC.

     Finally,  in  connection  with  standards  for  employment  contracts  and
compensation, in February 1996, the FDIC adopted final regulations regarding the
payment  of  severance  and  indemnification  to  management officials and other
affiliates  of  insured institutions (institution affiliated parties or "IAPs").
The  limitations on severance or "golden parachute" payments apply to "troubled"
institutions  which  seek to enter into contracts with IAPs.  A golden parachute
payment  is generally considered to be any payment to an IAP which is contingent
on  the termination of that person's employment and is received when the insured
institution  is  in  a  troubled  condition.  The definition of golden parachute
payment  does  not  include  payment  pursuant  to  qualified  retirement plans,
non-qualified bona fide deferred compensation plans, nondiscriminatory severance
pay  plans,  other  types  of  common  benefit  plans,  state statutes and death
benefits.  Certain  limited  exceptions  to  the  golden  parachute  payment
prohibition  are provided in cases involving the hiring of an outside executive,
unassisted  changes  of  control  and where the FDIC gives written permission to
make  such  payment.  The  limitations  on indemnification payments apply to all
insured  institutions,  their  subsidiaries  and  affiliated  holding companies.
Generally,  this  provision prohibits such entities from indemnifying an IAP for
that  portion  of  the  costs sustained with regard to a civil or administrative
enforcement  action  commenced  by any Federal banking agency which results in a
final order or settlement pursuant to which the IAP is assessed a civil monetary
penalty, removed from office, prohibited from participating in the affairs of an
insured  institution  or  required  to  cease  and  desist  from  taking certain
affirmative  actions.  Nevertheless,  institutions  or  holding  companies  may
purchase  commercial  insurance  to cover such expenses (except for judgments or
penalties) and the institutions or holding company may advance legal expenses to
the  IAP  if  its board of directors makes certain specific findings and the IAP
agrees  in  writing  to reimburse the institution if it is ultimately determined
that  the  IAP  violated  a  law,  regulation  or  other  fiduciary  duty.

     ACTIVITIES AND INVESTMENTS OF INSURED STATE-CHARTERED BANKS. The activities
and  equity  investments  of  FDIC-insured, state-chartered banks are limited by
Federal  law to those that are permissible for national banks.  An insured state
bank  generally may not acquire or retain any equity investment of a type, or in
an  amount,  that is not permissible for a national bank.  An insured state bank
is  not  prohibited  from,  among  other  things,  (i)  acquiring or retaining a
majority  interest  in  a  subsidiary,  (ii) investing as a limited partner in a
partnership  the  sole  purpose of which is direct or indirect investment in the
acquisition,  rehabilitation or new construction of a qualified housing project,
provided  that  such  limited  partnership  investments may not exceed 2% of the
bank's  assets,  (iii) acquiring up to 10% of the voting stock of a company that
solely  provides  or reinsures directors' and officers' liability insurance, and
(iv)  acquiring  or  retaining  the voting shares of a depository institution if
certain  requirements  are  met.

     COMMUNITY  REINVESTMENT ACT.  Under the Community Reinvestment Act ("CRA"),
as implemented by FDIC regulations, a financial institution has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the  credit  needs  of  its  entire community, including low and moderate income
neighborhoods.  The  CRA  does  not  establish  specific lending requirements or
programs  for  financial  institutions  nor  does  it  limit  an  institution's
discretion  to  develop  the types of products and services that it believes are
best  suited  to  its  particular  community,  consistent  with the CRA. The CRA
requires  the  FDIC,  in  connection  with  its  examination  of  a  financial
institution,  to  assess the institution's record of meeting the credit needs of
its  community and to take such record into account in its evaluation of certain
applications  by such institution.  As of the date of its most recent regulatory
examination,  the  Bank  was  rated  "satisfactory"  with  respect  to  its  CRA
compliance.

     In  May 1995, the FDIC and other Federal banking agencies promulgated final
revisions  to  their  regulations  concerning  the CRA.  The revised regulations
generally  are intended to provide clearer guidance to financial institutions on
the  nature  and  extent  of  their obligations under the CRA and the methods by
which  the  obligations  will be assessed and enforced.  Among other things, the
revised  regulations substitute for the current process-based assessment factors
a  new  evaluation  system  that  rates  institutions  based  on  their  actual
performance  in  meeting  community  credit  needs.  In  particular, the revised
system  evaluates  the  degree to which an institution is performing under tests
and  standards  judged  in the context of information about the institution, its
community,  its  competitors  and  its  peers  with respect to (i) lending, (ii)
service  delivery  systems  and  (iii)  community  development.  The  revised
regulations  also  specify  that  an  institution's  CRA  performance  will  be
considered  in an institution's expansion (e.g., branching) proposals and may be
the basis for approving, denying or conditioning the approval of an application.
Management  of  the  Bank  is  unable  to predict the effects of the current CRA
regulations.

     QUALIFIED  THRIFT  LENDER  TEST.  All  savings  institutions, including the
Bank,  are required to meet a QTL test set forth under Section 10(m) of the Home
Owners'  Loan  Act,  as amended, ("HOLA") to avoid certain restrictions on their
operations  and  those  of  their  holding  company.  Under  Section 2303 of the
Economic  Growth  and  Regulatory  Paperwork  Reduction  Act  of 1996, a savings
institution  has the option of complying with the QTL test set forth in the HOLA
and  implementing  regulations  or by qualifying as a domestic building and loan
association  as  defined  in  Section 7701(a)(19) of the Code.  The QTL test set
forth  in  HOLA requires that a depository institution must have at least 65% of
its portfolio assets (which consist of total assets less intangibles, properties
used  to  conduct  the  savings  institution's  business  and  liquid assets not
exceeding  20%  of  total  assets)  in qualified thrift investments on a monthly
average  basis in nine of every 12 months.  Loans and mortgage-backed securities
secured  by  domestic residential housing, as well as certain obligations of the
FDIC  and  certain  other  related entities may be included in qualifying thrift
investments  without  limit.  Certain  other housing-related and non-residential
real  estate loans and investments, including loans to develop churches, nursing
homes, hospitals and schools, and consumer loans and investments in subsidiaries
engaged  in  housing-related  activities may also be included. Qualifying assets
for the QTL test include investments related to domestic residential real estate
or  manufactured  housing,  the book value of property used by an institution or
its  subsidiaries  for  the  conduct  of  its business, an amount of residential
mortgage  loans  that the institution or its subsidiaries sold within 90 days of
origination,  shares  of  stock issued by any FHLB and shares of stock issued by
the  FHLMC  or  the  FNMA.  The  Bank  was in compliance with the QTL test as of
December  31,  2000,  with  81.5%  of  its  assets  invested in qualified thrift
investments.

     RESTRICTIONS  ON CAPITAL DISTRIBUTIONS.  The Bank is required to provide to
the OTS not less than 30 days' advance notice of the proposed declaration by its
board  of directors of any dividend on its capital stock.  The OTS may object to
the payment of the dividend on safety and soundness grounds.  The FDIA prohibits
an  insured depository institution from paying dividends on its capital stock or
interest  on its capital notes or debentures (if such interest is required to be
paid  only  out of net profits) or distribute any of its capital assets while it
remains  in  default  in  the payment of any assessment due the FDIC.  Texas law
permits  the  Bank to pay dividends out of current or retained income in cash or
additional  stock.

     LEGISLATIVE  AND  REGULATORY  PROPOSALS.  Proposals  to change the laws and
regulations  governing  the  operations  and  taxation of, and federal insurance
premiums  paid  by, savings banks and other financial institutions and companies
that  control  such  institutions  are  frequently  raised  in  Congress,  state
legislatures  and  before  the  FDIC and other bank regulatory authorities.  The
likelihood  of any major changes in the future and the impact such changes might
have  on  the  Bank are impossible to determine.  Similarly, proposals to change
the  accounting  treatment  applicable  to  savings  banks  and other depository
institutions  are  frequently  raised  by  the  SEC, the FDIC, the IRS and other
appropriate  authorities,  including,  among  others, proposals relating to fair
market  value  accounting  for  certain  classes of assets and liabilities.  The
likelihood  and  impact of any additional future accounting rule changes and the
impact  such  changes  might  have  on  the  Bank  are  impossible to determine.

     FEDERAL HOME LOAN BANK SYSTEM.  The Bank is a member of the FHLB of Dallas,
which  is  one  of  12  regional FHLBs that administer the home financing credit
function  of  savings  institutions and commercial banks.  Each FHLB serves as a
source  of  liquidity  for its members within its assigned region.  It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB  System.  It  makes  loans  to  members (i.e., advances) in accordance with
policies  and  procedures established by its Board of Directors.  As of December
31,  2000,  the Bank's advances from the FHLB of Dallas amounted to $1.2 billion
or  37.2%  of  its  total  assets.

     As  a  member,  the  Bank is required to purchase and maintain stock in the
FHLB  of  Dallas in an amount equal to the greater of 1% of its aggregate unpaid
residential  mortgage  loans,  home purchase contracts or similar obligations at
the  beginning  of each year or 5% of total advances.  At December 31, 2000, the
Bank  had  $58.0  million  in  FHLB  stock,  which  was  in compliance with this
requirement.

     The  FHLBs  are  required  to  provide funds for the resolution of troubled
savings  associations  and  to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community investment
and  low-  and  moderate-income  housing  projects.  These  contributions  have
adversely  affected the level of FHLB dividends paid and could continue to do so
in  the  future.  These  contributions  also could have an adverse effect on the
value  of  FHLB  stock  in  the  future.  For  the year ended December 31, 2000,
dividends  paid  by  the FHLB of Dallas to the Bank totaled $4.6 million.   Such
dividends included a $1.1 million special dividend declared by the FHLB equal to
1.625%  of  each  members'  FHLB  stock  held  as  of  March  31,  2000.

     FEDERAL  RESERVE SYSTEM.  The Federal Reserve Board requires all depository
institutions  to maintain reserves against their transaction accounts (primarily
checking  accounts)  and  non-personal time deposits.  At December 31, 2000, the
Bank  was  in  compliance  with  such  requirements.

     The  balances  maintained  to  meet the reserve requirements imposed by the
Federal  Reserve Board may be used to satisfy applicable liquidity requirements.
Because  required  reserves  must  be  maintained in the form of vault cash or a
noninterest-bearing  account  at  a  Federal  Reserve  Bank,  the effect of this
reserve  requirement  is to reduce a bank's earning assets.  The amount of funds
necessary  to  satisfy  this  requirement  has  not had a material affect on the
Bank's  operations.

     TEXAS  SAVINGS  BANK  LAW.  As  a Texas chartered savings bank, the Bank is
subject  to  regulation  and  supervision by the Department under the TSBA.  The
TSBA  contains provisions governing the incorporation and organization, location
of offices, rights and responsibilities of directors and officers as well as the
corporate  powers,  savings,  lending,  capital  and investment requirements and
other aspects of the Bank and its affairs.  In addition, the Department is given
extensive  rulemaking  power  and  administrative  discretion  under  the  TSBA,
including  authority  to  enact  and  enforce  rules  and  regulations.

     The  Bank  is  required  under  the  TSBA  to  comply  with certain capital
requirements  established by the Department.  The TSBA also restricts the amount
the  Bank can lend to one borrower to that permitted to national banks, which is
generally  not  more  than  15%  of the Bank's unimpaired capital and unimpaired
surplus  and,  if such loans are fully secured by readily marketable collateral,
an  additional 10% of unimpaired capital and unimpaired surplus.  The Department
generally  examines the Bank once every year and the current practice is for the
Department  to  conduct  a  joint  examination  with  the  FDIC.  The Department
monitors  the  extraordinary  activities  of the Bank by requiring that the Bank
seek  the  Department's  approval  for  certain  transactions  such  as  the
establishment  of  additional  offices, a reorganization, merger or purchase and
assumption  transaction,  changes  of  control,  or  the  issuance  of  capital
obligations.  The  Department  may intervene in the affairs of a savings bank if
the  savings  bank, or its director, officer or agent has:  engaged in an unsafe
and  unsound  practice,  violated  the savings bank's articles of incorporation,
violated  a  statute  or  regulation,  filed  materially  false  or  misleading
information,  committed  a criminal act or a breach of fiduciary duty, or if the
savings  bank  is,  or  is  in  imminent  danger  of  becoming,  insolvent.

TAXATION

     FEDERAL  TAXATION.  The  Company  and  its subsidiaries, which includes the
Bank,  file  a  consolidated  Federal income tax return on a calendar year basis
using  the  accrual method.  Savings banks are subject to provisions of the Code
in  the  same  general  manner  as  other corporations.  However, prior to 1996,
institutions  such  as  the  Bank which met certain definitional tests and other
conditions  prescribed  by the Code, benefited from certain favorable provisions
regarding their deductions from taxable income for annual additions to their bad
debt  reserve.  In years prior to 1996, the Bank was permitted under the Code to
deduct  an  annual  addition to the reserve for bad debts in determining taxable
income  based  on  the  experience  method  or  the percentage of taxable income
method.  Due  to  1996  legislation,  the  Bank  no  longer is able to utilize a
reserve  method for determining the bad debt deduction, but is allowed to deduct
actual  net  charge-offs.  Further, the Bank's post-1987 tax bad debt reserve is
being  recaptured into income over a six year period.  At December 31, 2000, the
Bank  had  approximately  $1.9  million  of post-1987 tax bad debt reserves, for
which  deferred  taxes  have  been  provided.

     The  Bank  is  not required to provide deferred taxes on its pre-1988 (base
year)  tax  bad  debt  reserve  of  approximately $900,000.  This reserve may be
included  in  taxable  income in future years if the Bank makes distributions to
stockholders (including distributions in redemption, dissolution or liquidation)
that  are considered to result in withdrawals from that excess bad debt reserve,
then  the  amounts  considered  withdrawn will be included in the savings bank's
taxable  income.  The  amount  that would be deemed withdrawn from such reserves
upon  such  distribution  and  which would be subject to taxation at the savings
bank level at the normal corporate tax rate would be an amount that, after taxes
on  such  amount,  would  equal  the amount actually distributed plus the amount
necessary  to pay the tax with respect to the withdrawal.  Dividends paid out of
a  savings  bank's current or accumulated earnings and profits as calculated for
Federal  income  tax  purposes,  however,  will  not  be considered to result in
withdrawals  from  its  bad  debt  reserves  to  the extent of such earnings and
profits,  but shall be regarded as taken from such reserves only upon exhaustion
of  the  earnings  and profits accounts; however, distributions in redemption of
stock,  and  distributions  in partial or complete liquidation of a savings bank
will  be  considered  to  come  first  from  its loss reserve.  The Bank has not
conducted  a  study  to  determine  with certainty the amount of its accumulated
earnings  and  profits  for  Federal  income  tax  purposes.

     In  addition  to  regular  income  taxes,  corporations  are  subject to an
alternative  minimum  tax which is generally equal to 20% of alternative minimum
taxable  income  (taxable income, increased by tax preference items and adjusted
for  certain  regular tax items).  Payment of alternative minimum tax gives rise
to  alternative  minimum  tax  credit  carryovers  which  may be carried forward
indefinitely.  These  credits may be used to offset future regular tax liability
to  the extent the regular tax liability exceeds future alternative minimum tax.

     In  connection  with  the  Southwest Plan Acquisition, the FSLIC Resolution
Fund ("FRF") retained all of the future federal income tax benefits (as defined)
derived  from  the federal income tax treatment of certain items, in addition to
net  operating loss carryforwards, related to the Southwest Plan Acquisition for
which the Bank agreed to pay the FRF when actually realized.  The provisions for
federal  income  taxes  recorded for the years ended December 31, 2000, 1999 and
1998,  represent  the  gross  tax  liability  computed  under  these tax sharing
provisions  before  reduction  for  actual  federal  taxes  paid to the Internal
Revenue  Service.  Alternative  minimum  taxes  paid  with the federal return in
2000,  1999  and  1998  are  available as credit carryforwards to reduce regular
federal  tax  liabilities  in  future  years, over an indefinite period and were
partially  utilized  in 2000.  To the extent these credits were generated due to
the  utilization  of  other  tax benefits retained by the FRF, they will also be
treated  as  tax  benefit  items.  Although  the  termination  of the assistance
agreement  related  to  the  Southwest  Plan Acquisition was effective March 31,
1994,  the  FRF  will continue to receive the related future net tax benefits as
defined.

     The  Company's  Federal income tax returns have not yet been audited by the
United  States  Internal  Revenue  Service.  Generally,  the  tax returns of the
Company  since  1997  are  subject  to  review  by the Internal Revenue Service.

STATE  TAXATION

     The  Company,  the  Bank,  CBCC, Financial Corp and CBIA each pay an annual
franchise  tax  equal  to  the  greater  of  $2.50 per $1,000 of taxable capital
apportioned  to  Texas,  or  $4.50  per  $100  of  net  taxable  earned  surplus
apportioned to Texas. Taxable earned surplus is the applicable entities' Federal
taxable  income  with  certain  modifications, such as the exclusion of interest
earned  on  Federal  obligations.


<PAGE>
ITEM  2.     PROPERTIES
             ----------

     The  Company's  business  is  conducted  from  50  offices  in  Texas.  The
following  table  sets forth the location of the offices of the Company, as well
as  certain  additional information relating to these offices as of December 31,
2000.

<TABLE>
<CAPTION>
                                                                    Net Book
                                                                    Value of
                                           Owned/Leased             Property
                                            (with Lease                or                        Percent of
                                            Expiration              Leasehold                       Total
Location                                       Date)              Improvements        Deposits    Deposits
---------------------------------       -------------------  -----------------------  ---------  -----------
                                                             (Dollars in thousands)
<S>                                     <C>                  <C>                      <C>        <C>
BRANCH OFFICES:
---------------------------------
1329 North Virginia
Port Lavaca, Texas  77979               Owned                $         135           $  24,695        1.47%
---------------------------------
3207 Westpark Drive
Houston, Texas  77005                   Owned                        2,412              31,159        1.86
---------------------------------
8 Braeswood Square                      Leased;
Houston, Texas  77096                   December 31, 2006              330              66,021        3.94
---------------------------------
408 Walnut
Columbus, Texas  78934                  Owned                          201              52,677        3.14
---------------------------------
870 S. Mason, #100                      Leased;
Katy, Texas  77450                      August 31, 2003                 17              27,965        1.67
---------------------------------
602 Lyons
Schulenburg, Texas  78956               Owned                           72              29,237        1.75
---------------------------------
325 Meyer Street
Sealy, Texas  77474                     Owned                          480              44,141        2.64
---------------------------------
116 E. Post Office
Weimar, Texas  78962                    Owned                           38              24,758        1.48
---------------------------------
323 Boling Road
Wharton, Texas  77488                   Owned                          105              41,565        2.48
---------------------------------
1621 Pine Drive                         Leased;
Dickinson, Texas  77539                 September 30, 2000              --              38,545        2.30
---------------------------------
300 S. Cage
Pharr, Texas 78577                      Owned                          169              14,385        0.86
---------------------------------
295 West Highway 77
San Benito, Texas  78586                Owned                          237              19,157        1.14
---------------------------------
1260 Blalock, Suite 100                 Leased;
Houston, Texas  77055                   January 20, 2004                --              55,293        3.30
---------------------------------
14011 Park Drive, Suite 115             Leased;
Tomball, Texas  77375                   March 14, 2004                   7              25,492        1.52
---------------------------------
915-H North Shepherd                    Leased;
Houston, Texas  77008                   October 31, 2001                40              37,407        2.23
---------------------------------
16000 Stuebner Airline Road, Suite 100  Leased;
Spring, Texas  77379                    September 30, 2005               9              30,213        1.80
---------------------------------
7602 N. Navarro
Victoria, Texas  77904                  Owned                          618              69,212        4.13
---------------------------------
1410 Ed Carey
Harlingen, Texas   78550                Owned                        1,438              11,694        0.70
---------------------------------
4900 N. 10th St., G-1                   Leased;
McAllen, Texas   78504                  August 14, 2001                 30              16,026        0.96
---------------------------------
10838 Leopard Street, Suite A           Leased;
Corpus Christi, Texas   78410           December 31, 2002                7              34,463        2.06
---------------------------------
                                                                                                (continued)
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
(continued from previous page)
                                                               Net Book
                                                               Value of
                                       Owned/Leased            Property
                                       (with Lease                or                        Percent of
                                        Expiration             Leasehold                       Total
Location                                  Date)              Improvements        Deposits    Deposits
----------------------------------  ------------------  -----------------------  ---------  -----------
                                                        (Dollars in thousands)
<S>                                 <C>                 <C>                      <C>        <C>
---------------------------------
4060 Weber Road                     Leased;
Corpus Christi, Texas   78411       April 30, 2004      $           1           $  50,675        3.03%
----------------------------------
301 E. Main Street
Brenham, Texas   77833              Owned                         132              62,904        3.76
---------------------------------
1192 W. Dallas                      Leased;
Conroe, Texas   77301               December 31, 2003              --              37,292        2.23
----------------------------------
2353 Town Center Dr.                Owned
Sugar Land, Texas   77478                                       1,050              29,874        1.78
---------------------------------
1629 S. Voss                        Owned
Houston, Texas   77057                                          1,407              24,142        1.44
---------------------------------
531-A Highway 1431                  Leased;
Kingsland, Texas   78639            December 31, 2003              --              18,945        1.13
---------------------------------
204 Westmoreland                    Owned
Mason, Texas   76856                                               57              20,485        1.22
---------------------------------
904 Highway 281 North
Marble Falls, Texas   78654         Owned                         160              10,465        0.62
---------------------------------
101 East Polk
Burnet, Texas   78611               Owned                          93              20,960        1.25
---------------------------------
907 Ford
Llano, Texas   78643                Owned                         164              17,853        1.07
---------------------------------
708 East Austin
Giddings, Texas   78942             Owned                         273              28,299        1.69
---------------------------------
5718 Westheimer, Suite 100          Leased;
Houston, Texas 77057                July 31, 2012                  65              66,893        3.99
---------------------------------
8080 Parkwood Circle Drive          Owned
Houston, Texas 77036                                              249              10,070        0.60
---------------------------------
1250 Pin Oak Road
Katy, Texas 77494                   Owned                       1,183              16,012        0.96
---------------------------------
2120 Thompson Highway
Richmond, Texas 77469               Owned                         482              58,999        3.52
---------------------------------
7200 North Mopac                    Leased;
Austin, Texas 78731                 December 31, 2002               8              51,362        3.07
---------------------------------
1112 Seventh Street                 Leased;
Bay City, Texas 77414               April 30, 2002                 --              60,257        3.60
---------------------------------
441 Austin Avenue
Port Arthur, Texas 77640            Owned                         494              33,444        2.00
---------------------------------
1114  Lost Creek Blvd., Suite 100   Leased;
Austin, Texas 78746                 December 31, 2003              19               6,024        0.36
---------------------------------
3302 Boca Chica                     Leased;
Brownsville, Texas 78521            December 31, 2004              --              10,046        0.60
---------------------------------
744 S. East Elizabeth               Leased;
Brownsville, Texas 78520            March 31, 2003                156              18,644        1.11
---------------------------------
1603 Price Road                     Owned
Brownsville, Texas 78521                                          277              17,732        1.06
---------------------------------
700 Padre Blvd., Suite A            Leased;
South Padre Island, Texas 78597     May 31, 2002                   --               7,147        0.43
---------------------------------
2000 N. Conway
Mission, Texas 78572                Owned                       1,106              21,049        1.26
---------------------------------
                                                                                            (continued)
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
(continued from previous page)

                                                               Net Book
                                                               Value of
                                      Owned/Leased             Property
                                       (with Lease                or                         Percent of
                                       Expiration              Leasehold                        Total
Location                                  Date)              Improvements         Deposits    Deposits
---------------------------------  -------------------  -----------------------  ----------  -----------
                                                        (Dollars in thousands)
<S>                                <C>                  <C>                      <C>         <C>
---------------------------------
509 South Main                     Leased;
McAllen, Texas 78501               December 22, 2002    $           4           $   38,736        2.31%
---------------------------------
198 South Sam Houston
San Benito, Texas 78586            Owned                        1,017               74,859        4.47
---------------------------------
502 S. Dixieland Road
Harlingen, Texas 78552             Owned                          318               16,304        0.97
---------------------------------
200 Sugar Road
Edinburg, Texas 78539              Owned                          152                7,554        0.45
---------------------------------
300 S. Closner
Edinburg, Texas 78539              Owned                          790               35,581        2.12
---------------------------------
221 East Van Buren
Harlingen, Texas 78550             Owned                        3,591               77,530        4.63
---------------------------------
Corner of Highway 36 and Walenta   Owned -
Rosenberg, Texas                   Under Construction             380                   --          --
---------------------------------
1075 Paredes Line Road             Owned -
Brownsville, Texas 78521           Under Construction             531                   --          --
ADMINISTRATIVE OFFICE(1)
---------------------------------
Coastal Banc Plaza
5718 Westheimer, Suite 600         Leased;
Houston, Texas 77057               July 31, 2012                2,539               30,739        1.84
---------------------------------
STORAGE SITE:
---------------------------------
227 Meyer St.
Sealy, Texas   77474               Owned                           58                   --          --
                                                        -------------           ----------  -----------
     Total                                              $      23,101           $1,674,981      100.00%
                                                        ==============          ==========  ===========
</TABLE>


______________________

(1)Includes  location  of administrative, primary lending and mortgage servicing
offices.

<PAGE>
The net book value of the Company's investment in premises and equipment totaled
$28.1 million at December 31, 2000.  At December 31, 2000, the net book value of
the  Company's electronic data processing equipment, which includes its in-house
computer  system, local area network and twenty-eight automatic teller machines,
was  $1.8  million.

ITEM  3.     LEGAL  PROCEEDINGS
             ------------------

     In  January  2000,  the  Company, through its subsidiary, the Bank, filed a
lawsuit  against  the  lead  lender  on  a  $25.0 million loan in which the Bank
purchased a 40% participation interest.  Such lawsuit is described more fully in
the  Company's  Current Report on Form 8-K (No. 000-24526) filed with the SEC on
January  12,  2000,  which  is incorporated herein by reference.  The lawsuit is
currently scheduled for trial in late June of 2001, or as soon thereafter as the
court's  docket  will  permit.

     In  addition  to  the  above,  the Company is involved from time to time in
routine legal proceedings occurring in the ordinary course of business which, in
the  aggregate,  are  believed  by  management to be immaterial to the financial
condition  of  the  Company.

ITEM  4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS
             -----------------------------------------------------------

             Not  applicable.

PART  II
--------

ITEM  5.     MARKET  FOR  REGISTRANT'S  COMMON  EQUITY  AND  RELATED STOCKHOLDER
             -------------------------------------------------------------------
             MATTERS
            --------

     The  information  required herein is incorporated by reference from page 54
of  the Company's printed Annual Report to Stockholders for fiscal 2000 ("Annual
Report"),  which  is  included  herein  as  Exhibit  13.

ITEM  6.     SELECTED  FINANCIAL  DATA
             -------------------------

     The  information  required herein is incorporated by reference from pages 6
through  8  of  the  Annual  Report.

ITEM  7.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL CONDITION AND
             -------------------------------------------------------------------
             RESULTS  OF  OPERATIONS
             -------------------

     The  information  required  herein  is incorporated by reference on pages 9
through  23  of  the  Annual  Report.

ITEM  7A.     QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK
              ----------------------------------------------------------------

     The  information required herein is incorporated by reference from pages 17
through  22  of the Annual Report.  The Company's principal market risk exposure
is  to  interest  rates.


<PAGE>
ITEM  8.     FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA
             -----------------------------------------------

     The  financial  statements  and  supplementary  data  required  herein  are
incorporated  by  reference  from  pages  25  through  53  of the Annual Report.

ITEM  9.     CHANGES  IN  AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
             -------------------------------------------------------------------
             FINANCIAL  DISCLOSURE
             -----------------

             Not  applicable.

PART  III
---------

ITEM  10.     DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT
              --------------------------------------------------------

     The  information  required  herein  is  incorporated  by reference from the
definitive  Proxy  Statement filed with the SEC.  Otherwise, the requirements of
this  Item  10  are  not  applicable.

ITEM  11.     EXECUTIVE  COMPENSATION
              -----------------------

     The  information  required  herein  is  incorporated  by reference from the
definitive  Proxy  Statement  filed  with  the  SEC.

ITEM  12.     SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT
              ------------------------------------------------------------------

     The  information  required  herein  is  incorporated  by reference from the
definitive  Proxy  Statement  filed  with  the  SEC.

ITEM  13.     CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS
              --------------------------------------------------

     The  information  required  herein  is  incorporated  by reference from the
definitive  Proxy  Statement  filed  with  the  SEC.

<PAGE>

PART  IV
--------

ITEM  14.     EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES AND REPORTS ON FORM 8-K
              ------------------------------------------------------------------

     (a)(1)    The  following  financial  statements are incorporated herein by
               reference  from  pages  23  through  53  of  the  Annual  Report.

               Report  of  Independent  Certified  Public  Accountants.

              Consolidated Statements of Financial Condition as of December 31,
              2000  and  1999.

              Consolidated  Statements  of  Operations  for each of the years
              in the three-year  period  ended  December  31,  2000.

              Consolidated  Statements  of Comprehensive Income for each of the
              years  in  the  three-year  period  ended  December  31,  2000.

              Consolidated  Statements of Stockholders' Equity for each of the
              years in  the  three-year  period  ended  December  31,  2000.

              Consolidated  Statements  of  Cash  Flows for each of the years
              in the three-year  period  ended  December  31,  2000.

              Notes  to  Consolidated  Financial  Statements.

    (a)(2)    There  are no financial statement schedules filed herewith.

    (a)(3)    The  following  exhibits  are filed as part of this report.

Exhibit  No.
------------

     3.1     Articles of Incorporation of the Company (Incorporated by reference
             to  the  Company's  Registration  Statement  on Form S-4 (No. 33-
             75952) filed on March  2,  1994).
     3.2     Bylaws  of  Company  (Incorporated  by  reference  to the Company's
             Registration  Statement  on  Form  S-4  (No.  33-75952) filed on
             March 2, 1994).
     4       Form of Company common stock certificate (Incorporated by reference
             to  the  Company's  Registration  Statement  on Form S-4 (No. 33-
             75952) filed on March  2,  1994).
     4.1     Form  of  Indenture  dated as of June 30, 1995, with respect to the
             Company's  10%  Notes,  due  2002  (Incorporated  by  reference to
             the Company's Registration  Statement  on  Amendment No. 6 to Form
             S-1 (No. 33-91206) filed on June  16,  1995).
     4.2     Certificate  of  Designations,  9.12% Series A Cumulative Preferred
             Stock (Incorporated by reference to the Company's Registration
             Statement on Form S-3  (No. 333-75983)  filed  on  April  9, 1999).
     10.1    1991  Stock Compensation Program (Incorporated by reference to the
             Company's Registration  Statement  on Form S-4 (No. 33-75952) filed
             on March 2, 1994).
     10.2    1995  Stock Compensation Program (Incorporated by reference to the
             Company's  Registration  Statement  Form  S-1  (No. 33-91206) filed
             on April 14, 1995).
     10.3    1999  Stock Compensation Program (Incorporated by reference to the
             Company's Registration  Statement on Form S-8 (No. 333-80877) filed
             on June 17, 1999).
     10.4    Change-In-Control  Severance Agreements (Incorporated by reference
             to  the Company's 1998 Annual Report on Form 10-K (No. 000-24526)
             filed on March 23,  1999).
     10.5    Form  of Amendment No. 1 to Change-In-Control Severance Agreements
             (Incorporated by reference to the Company's 1999 Annual Report on
             Form 10-K (No. 000-24526)  filed  on  March  28,  2000).
     10.6    Change-In-Control  Severance  Agreement
     12      Ratio of earnings  to  combined  fixed charges and preferred stock
             dividends  (See  Exhibit  13)
     13      Annual  Report  to  Stockholders
     28      Form  of  proxy  mailed  to  stockholders  of  the  Company
     99      Forward-Looking  Information

__________________

          (b)     The  Company  filed  no  reports  on  Form 8-K during the last
                  quarter  of  fiscal  2000.

          (c)     See  (a)(3)  above for all exhibits filed herewith and Exhibit
                  Index.

          (d)     All  schedules  are omitted as the required information is not
                  applicable  or  the  information  is  presented  in  the
                  consolidated financial statements  or  related  notes.


<PAGE>

     SIGNATURES


     Pursuant  to  the  requirements  of  Section  13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its  behalf  by  the  undersigned,  thereunto  duly  authorized.

                              COASTAL  BANCORP,  INC.


Date:  March  27,  2001                 By:  /s/  Manuel  J.  Mehos
                                            ----------------------
                                            Manuel  J.  Mehos,
                                            Chairman  of  the  Board  and  Chief
                                            Executive  Officer


     Pursuant  to  the requirements of the Securities Exchange Act of 1934, this
report  is signed below by the following persons on behalf of the Registrant and
in  the  capacities  and  on  the  dates  indicated.



/s/  Manuel  J.  Mehos                                   Date:  March  27,  2001
----------------------
Manuel  J.  Mehos,  Chairman  of  the
  Board  and  Chief  Executive  Officer



/s/  R.  Edwin  Allday                                   Date:  March  27,  2001
----------------------
R.  Edwin  Allday,  Director



/s/  D. Fort Flowers, Jr.                                Date:  March 27, 2001
-------------------------
D.  Fort  Flowers,  Jr.,  Director



/s/  Dennis  S.  Frank                                   Date:  March  27,  2001
----------------------
Dennis  S.  Frank,  Director



/s/  Paul  W.  Hobby                                     Date:  March  27,  2001
--------------------
Paul  W.  Hobby,  Director



/s/  Robert  E.  Johnson,  Jr.                           Date:  March 27, 2001
-----------------------------
Robert  E.  Johnson,  Jr.,  Director



/s/  James  C.  Niver                                    Date:  March  27,  2001
---------------------
James  C.  Niver,  Director



/s/  Catherine  N.  Wylie                                Date:  March 27, 2001
-------------------------
Catherine  N.  Wylie,  Chief  Financial
  Officer  (principal  financial  and
  accounting  officer)