COASTAL  BANCORP,  INC.
AND  SUBSIDIARIES

FINANCIAL  HIGHLIGHTS
DECEMBER  31,  1999,  1998  AND  1997

<TABLE>
<CAPTION>

                                                                     December 31,
                                                                    --------------
(dollars in thousands, except per share data)               1999          1998         1997
-----------------------------------------------------  --------------  -----------  -----------
<S>                                                    <C>             <C>          <C>
FOR THE YEAR ENDED
 Net interest income                                   $      77,286   $   67,410   $   56,933
 Provision for loan losses (1)                                10,575        3,100        1,800
 Noninterest income                                           10,372        6,872        6,384
 Noninterest expense                                          57,810       48,383       39,544
 Reversal of accrued income taxes (2)                             --        3,679           --
 Net income                                                   11,026       16,668       11,563
 Diluted earnings per share                                     1.42         2.18         1.50
-----------------------------------------------------  --------------  -----------  -----------

AT YEAR END
 Total assets                                          $   2,947,952   $2,982,161   $2,911,410
 Loans receivable                                          1,735,081    1,538,149    1,261,435
 Mortgage-backed securities held-to-maturity                 917,212    1,154,116    1,345,090
 Mortgage-backed securities available-for-sale                99,665       96,609      169,997
 Deposits                                                  1,624,289    1,705,004    1,375,060
 Borrowed funds                                            1,096,931    1,066,720    1,332,235
 Senior Notes payable                                         46,900       50,000       50,000
 Minority interest - preferred stock of Coastal
   Banc ssb                                                   28,750       28,750       28,750
 Preferred stockholders' equity                               27,500           --           --
 Common stockholders' equity                                 105,956      112,764      104,830
 Book value per common share                                   16.42        15.71        13.78
 Tangible book value per common share                          12.53        11.75        11.83
-----------------------------------------------------  --------------  -----------  -----------

SIGNIFICANT RATIOS FOR THE YEAR ENDED
 Return (before minority interest) on average assets            0.47%        0.64%        0.49%
 Return on average common equity                                8.83        14.96        11.68
 Net interest margin                                            2.75         2.31         2.02
 Interest rate spread including noninterest-bearing
   deposits                                                     2.65         2.17         1.85
 Interest rate spread                                           2.39         1.96         1.67
 Average common equity to average total assets                  3.66         3.71         3.41
 Noninterest expense to average total assets                    1.98         1.61         1.36
-----------------------------------------------------  --------------  -----------  -----------

ASSET QUALITY RATIOS AT YEAR END
 Nonperforming assets to total assets                           0.73%        0.99%        0.72%
 Nonperforming loans to total loans receivable                  0.99         1.60         1.40
 Allowance for loan losses to nonperforming loans              61.30        46.28        41.90
 Allowance for loan losses to total loans receivable            0.60         0.74         0.59
-----------------------------------------------------  --------------  -----------  -----------
</TABLE>


(1)     During  1999,  Coastal recorded a $6.8 million provision for loan losses
specific  to  one  loan  to  MCA  Financial  Corp., of Southfield, Michigan, and
certain  of  its  affiliates  (collectively  "MCA").  See  further discussion in
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations  -  Net  Income."
(2)     In  March  1998,  Coastal announced that it had successfully resolved an
outstanding  tax  benefit  issue  with the Federal Deposit Insurance Corporation
("FDIC")  as  Manager  of  the  Federal  Savings  and Loan Insurance Corporation
Resolution Fund ("FRF").  The resolution of the issue resulted in a $3.7 million
reversal  of  accrued  income  taxes  during  1998.


<PAGE>


CORPORATE  PROFILE

Coastal  Bancorp, Inc., a Texas corporation, headquartered in Houston, Texas, is
the  holding company for Coastal Banc Holding Company, Inc. ("HoCo"), a Delaware
unitary  savings  bank  holding  company.  HoCo is the parent company to Coastal
Banc  ssb,  a Texas-chartered, state savings bank.  Coastal Banc ssb operates 50
branch  offices  in metropolitan Houston, Austin, Corpus Christi, the Rio Grande
Valley  and  small  cities  in the southeast quadrant of Texas.  At December 31,
1999,  Coastal  Banc  ssb  had  $2.9  billion  in  assets and met the regulatory
requirements to be a "well capitalized" institution according to Federal Deposit
Insurance  Corporation  ("FDIC")  guidelines.



TABLE  OF  CONTENTS

<TABLE>
<CAPTION>

<S>                                                   <C>

Letter from the Chairman and Chief Executive Officer   2

Selected Consolidated Financial and Other Data         6

Management's Discussion and Analysis                   9

Independent Auditors' Report                           23

Consolidated Financial Statements                      24

Notes to Consolidated Financial Statements             29

Stock Prices and Dividends                             51

Stockholder Information                                52

</TABLE>



<PAGE>

CHAIRMAN'S  LETTER

Coastal  Bancorp, Inc. ("Coastal") achieved another record year of core earnings
in  1999.  In  each  year since Coastal's strategic shift to commercial banking,
net  interest  margin  and  fee income have reached record levels.  In 1999, net
interest margin grew by 19% to 2.75% and fee income grew by 34% to $8.6 million,
both  record levels for Coastal.  Growth in these two components of earnings was
an  important  goal  of  the  1995 shift to commercial banking.  Our strategy is
working,  but  we  believe  we  have  only  scratched  the  surface.

Now  the  bad  news.  During 1999, we wrote down to zero a $8.9 million mortgage
warehouse  line  of  credit  to  MCA.  It  was  the  first significant loss on a
commercial  loan  made  by  Coastal  since  our founding in 1986.  It clouded an
otherwise  successful  year  and  prevented  us from recording net earnings that
would  have  exceeded expectations.  We learned from our mistake and we have put
it  behind  us.

Due  to  this  isolated blemish, net earnings for 1999 were a disappointment.  I
will  not  ask  you to ignore the loan loss because you shouldn't.  It's part of
the banking business and part of Coastal's overall performance.  However, I will
ask  you  to  focus  on  the  improvements  in  1999, the 13% growth in adjusted
earnings  per  share  during  1999 and the potential for continued growth in fee
income  and  net  interest  income.  I  will  discuss all of this in more detail
later,  including  the  $8.9 million writedown of the MCA loan.  But first, some
details  about  Coastal's  financial  results  in  1999.

1999  EARNINGS

Net  income  for  1999  before the provision for loan losses specific to the MCA
loan  was $15.4 million, a $1.3 million or 9.6% increase over 1998 net income of
$14.1  million before one-time charges and credits.  On a fully diluted earnings
per share basis, earnings for 1999 before the provision for loan losses specific
to  the MCA loan were $2.08 per diluted share, a 13% increase over 1998 earnings
before  one-time  charges  and credits of $1.84 per diluted share.  Earnings per
diluted  share incurred a higher percentage increase than net income in 1999 due
to  Coastal's  common stock repurchase activities during the year.  The weighted
average  common  shares  outstanding  used  in  the  diluted  earnings per share
calculations  were  6,661,308  for  1999  and  7,656,690  for  1998.

Net  income (including the provision for loan losses specific to the MCA loan in
1999  and  one-time  charges and credits in 1998) was $11.0 million for the year
ended  December 31, 1999, or $1.42 per diluted share, compared to $16.7 million,
or  $2.18  per  diluted  share,  for  the  year  ended  December  31,  1998.

Once  again,  Coastal's  two principal sources of revenue reached record levels.
Net  interest  income,  prior  to  the  provision for loan losses, reached $77.3
million  during  1999, compared to $67.4 million in 1998, and loan fees, service
charges  on  deposit  accounts,  and  loan servicing income reached $8.6 million
during 1999, compared to $6.4 million in 1998.  Noninterest expense increased to
$57.8  million  during 1999, compared to $48.4 million in 1998.  At December 31,
1999,  Coastal  had total assets of $2.9 billion, total deposits of $1.6 billion
in  50  branches,  and  common  stockholders'  equity  of  $106.0  million.

COMMERCIAL  BANKING  MOMENTUM  CONTINUES

The real story here is all about the evolution of Coastal's operations into that
like a commercial bank and the profound effect it has had on Coastal's financial
statements.  Look  at the numbers; they tell the story.  Net interest margin, as
stated previously, grew to 2.75% in 1999 and reached 2.89% by the fourth quarter
of  1999.  To get a picture of how much and how fast this key ratio is changing,
look  at  prior years' numbers: In 1998 net interest margin was 2.31% and in the
prior  year,  1997, net interest margin was only 2.02%.  Now get this.  From the
fourth  quarter  1997  to the fourth quarter 1999, Coastal's net interest margin
increased  48%!

How  and  why  has  this  happened?  The  reason, from a strategic viewpoint, is
Coastal's  switch  to  commercial  banking, which I have been discussing in this
letter  for  the  last  several  years.  The  reason, from a financial statement
viewpoint,  is  the  rapidly  changing  components  of  the  balance sheet.  For
instance,  total  loans grew by 13% in 1999 and have grown 38% over the last two
years.  Commercial  type  loans, excluding mortgage warehouse loans, grew by $65
million  in 1999.  At the same time, total assets slightly decreased in 1999 due
to  continued paydowns of lower yielding mortgage-backed securities.  The result
is  a  shift in the asset side of the balance sheet to proportionally more loans
with  higher  yields  that  are  tied  to  short-term  floating  rate  indexes.

On  the other side of the balance sheet, things also continue to change.  By the
end of 1999, total transaction accounts, which are less costly than certificates
of  deposit, comprised 33% of total deposits, as compared to 32% in 1998 and 26%
in  1997.  Moreover,  during  1999,  Coastal  completed  a  program to shift the
pricing  of  Coastal's  certificate  of  deposit base down from the high tier of
competitive  local  rates  to  the  middle tier.  As a result, Coastal's cost of
deposits  dropped  0.51%  during  1999  while  short-term  capital  market rates
increased.  All  these  changes  combined  to provide an increase during 1999 of
$9.9  million  in  Coastal's  number  one  revenue  source, net interest income.

Coastal's  number two revenue source, fee income from loan fees, service charges
on  deposit  accounts  and  loan servicing income, increased during 1999 by $2.2
million. The income from Coastal's growing commercial customer base coupled with
programs  designed  to  improve  retail  customer  fee  income  has  exceeded
expectations.  As  a result, this category is growing proportionally faster than
net interest income.  The total growth of these top two revenue sources provided
$12  million  in  additional  revenue  in  1999.

Of  course,  when  you  spend  more  money  the revenue increases don't all drop
unimpeded  to  the  bottom  line.  Noninterest expense increased by $9.4 million
during  1999.  A principal part of this increase was due to 1999 being the first
full year of additional overhead attributable to the operation of the former San
Benito  Bank  &  Trust  purchased by Coastal in August of 1998.  The rest of the
increase was simply attributable to the higher cost of commercial banking versus
the  cost  of doing business as a thrift (Coastal's former life).  The growth in
revenue was further offset by a higher overall general allowance for loan losses
necessary  due  to  Coastal's  loan  growth.

Nonetheless,  the  $12  million  growth in revenues still exceeded the growth in
expenses  and  general  allowance provisions.  The excess was enough to increase
net income before the MCA loan loss provision by almost 10% and increase diluted
earnings  per  share  before the MCA provision by 13%.  This earnings growth was
achieved  in  a year that total assets actually declined.  As the composition of
the  assets  changes,  commercial  business  grows, and the increase in expenses
slows  or stops, a larger portion of the new revenues will make their way to the
bottom  line.  I'll  discuss  how shortly, but first let's discuss the MCA loss.

MCA  IS  NOW  BEHIND  US

On  November  3,  1998,  Coastal  purchased a $10 million participation in a $25
million mortgage warehouse line of credit to MCA, originated by the lead bank in
1997.  By  December  30,  1998,  MCA was in default and in February of 1999, MCA
filed  for bankruptcy.  Since then, Coastal has worked with the lead bank, other
lenders,  and  the receiver to liquidate the underlying collateral.  By December
31, 1999, Coastal had collected only $1.1 million from liquidations.  In January
2000,  Coastal filed a lawsuit against the lead lender seeking to recover losses
incurred  as  a  result  of  acts  or  omissions  of  the  lead  bank.

Due  to  the  uncertainty  of  the  value and marketability of the remaining MCA
collateral  and the timing of any recovery from the lawsuit, we decided to write
down the entire balance of the MCA line of credit in the fourth quarter of 1999.
Unfortunately,  the writedown occurred during what would have been record fourth
quarter  earnings.  Earnings excluding the provision for loan losses specific to
the  MCA  loan  in  the  fourth  quarter  were  $.63  per  diluted  share.

We will be working hard to recover a meaningful portion of the writedown through
liquidations,  the  lawsuit,  or both.  Furthermore, we learned valuable lessons
from  this  significant credit loss that have already been incorporated into our
operating  policies.  But  beginning  in  2000,  as  far  as future earnings are
concerned, MCA is now behind us.  We enter 2000 on the heels of one of Coastal's
best ever quarters for core earnings, especially for net interest margin and fee
income.  I  will  discuss  how  we  can improve on that momentum during 2000 and
beyond,  but  first  I  want  to briefly mention capital management during 1999.


<PAGE>
CAPITAL  MANAGEMENT

Coastal  started  repurchasing  its  common  stock in the third quarter of 1998,
following a collapse in the prices of bank stocks.  During the fourth quarter of
1998,  Coastal's  stock  had  dropped to a low of $14 per share, well below book
value per share at the time.  In August of 1998, the Board of Directors approved
the  repurchase  of  500,000 shares, and as of December 31, 1998, 499,600 shares
had  been  repurchased.  Coastal's  stock  price  closed  at $17.50 per share on
December  31,  1998.

Subsequently,  the  Board  of  Directors  authorized the repurchase of 1,000,000
additional  shares,  as  market  conditions  warrant.  During  1999,  Coastal
repurchased  784,079  shares  at an average price of $16.18 per share, below the
1999 average book value per share.  We replaced the capital with the issuance of
$27.5  million of 9.12% preferred stock at an after tax cost to Coastal of below
6%.  Since the common stock has a target return on equity above 12% and could be
purchased  below  book  value, we reasoned it as a good tradeoff for 6% capital.
As  a  result of the repurchases during 1999, earnings per diluted share grew by
over  three  percentage points more than net income growth.  As of the beginning
of  2000, 216,321 shares remained to be repurchased out of the amount authorized
by  the  Board  of  Directors.

On  December  31, 1999, Coastal's stock price closed at $17.50, the same closing
price  as  the end of 1998, a year in which Coastal's stock price dropped from a
high  of  approximately  $26.50  per  share.  During  1999, bank stock prices in
general  continued  to  perform  poorly,  and  Coastal's stock was no exception.
There  was  no  stock price appreciation.  That is not acceptable performance to
us,  so  we  will  continue  to  pursue initiatives that improve the stock price
performance.  But  the  most reliable method is earnings growth.  Here's what we
have  planned.

2000  -  A  SIMPLE  YEAR

Two things are happening to the banking business today that change our near term
planning.  First, technology and deregulation have altered the banking landscape
so  that  most  traditional bank products are the domain of specialists, some of
which  are  banks  and  some aren't.  It's been happening for years, and banking
modernization legislation finally made it official in 1999.  Now, the only banks
offering  a  wide range of financial products are very large supernational banks
and some community banks serving a small, defined geographical market.  Those in
between  must specialize in a smaller menu of profitable products.  A decade ago
technology  helped improve banking profits by lowering costs, now it is reducing
product  profit margins.  Thus, specialization is becoming the business model of
choice  for  supercommunity  banks  and  small  regional  banks.

The  second  thing  that  is  happening  to the banking business today is record
setting economic expansion.  That is a principal reason why the banking business
has had several consecutive years of record profitability and insignificant loan
losses.  However,  more  and more financial services companies are crossing over
and chasing these profits, thus crowding the marketplace and lowering the profit
margins.  In  some  cases,  the  low  return  does  not  justify  the  risk.

Coastal  committed  to  local  business banking as our specialization five years
ago.  Since  then  Coastal  has succeeded in transforming our core processes and
culture to commercial banking with an infrastructure that is capable of handling
significantly  more  commercial  customers.  Acquisitions  are the best and most
economical  source  for  commercial  customer  growth  as evidenced by Coastal's
acquisition  of  San Benito Bank & Trust in 1998.  But due to price constraints,
the  acquisition  market is not expected to be a viable source for growth in the
near  future.  Sound  kind  of  dismal?

For  us it's not.  Here's the good part.  In 2000, we don't plan on spending any
more  money  than  we  did  in  1999.  That's right, you heard correctly, a flat
expense  budget during a record economic expansion.  Why are we doing this?  For
the  time  being,  while margins are tight and acquisitions expensive, Coastal's
best  operating  strategy  is to simply get better at our chosen specialization:
local business banking.  The infrastructure is there, now we'll get better at it
and  simply  get  more  customers.

Coastal  has all the necessary tools for maintaining the momentum we established
at  the end of 1999.  Remember, earnings (excluding the MCA effect) were at $.63
per  share  and net interest margin reached 2.89% in the fourth quarter of 1999.
Commercial  business is growing but expenses are not.  We have reached the point
where  the  operating  leverage  we have created over the last five years is now
expected  to  pay  off.  Continuing  growth in transaction accounts and loans is
expected  to  provide  further  increases in fee income and net interest income.
But  expenses are expected to stay about the same.  That's our plan for earnings
growth  in  2000.  It's  that  simple:  business  banking grows, expenses don't.

IT'S  ALL  ABOUT  THE  STOCK  PRICE

Coastal's  long  range  goal  to  become  a  regional bank specializing in local
business banking has not changed.  We're just softly applying the brakes in 2000
to  allow  the  business  to  catch  up  with  the  potential  of  Coastal's
infrastructure.  We  will  still  search  for acquisitions and combinations that
will  accelerate  Coastal's progress on that path.  In the meantime, we will get
better  at  both  business  and retail banking while we improve the yield on the
resources  already  committed.  The goal is to improve Coastal's earnings growth
rate  and, in turn, significantly improve the performance of the stock.  That is
what's  most  important.




/s/ Manuel  J.  Mehos
---------------------
Manuel  J.  Mehos
Chairman  of  the  Board  and
Chief  Executive  Officer



<PAGE>
COASTAL  BANCORP,  INC.  AND  SUBSIDIARIES
SELECTED  CONSOLIDATED  FINANCIAL  AND  OTHER  DATA


The  following selected consolidated summary financial and other data of Coastal
Bancorp,  Inc.  and subsidiaries ("Coastal") does not purport to be complete and
should  be  read  in  conjunction with, and is qualified in its entirety by, the
more detailed information contained in the Consolidated Financial Statements and
Notes  thereto  included  elsewhere  herein.

<TABLE>
<CAPTION>

                                                                     At December 31,
                                                            ----------------------------------------
(Dollars in thousands, except per share data)                     1999          1998         1997
                                                            -------------   ----------   -----------
<S>                                                         <C>            <C>          <C>
Balance Sheet Data
 Total assets. . . . . . . . . . . . . . . . . . . . . . .  $   2,947,952   $2,982,161   $2,911,410
 Loans receivable (1). . . . . . . . . . . . . . . . . . .      1,735,081    1,538,149    1,261,435
 Mortgage-backed securities held-to-maturity (1) . . . . .        917,212    1,154,116    1,345,090
 Mortgage-backed securities available-for-sale . . . . . .         99,665       96,609      169,997
 Deposits. . . . . . . . . . . . . . . . . . . . . . . . .      1,624,289    1,705,004    1,375,060
 Advances from the Federal Home Loan Bank of
   Dallas ("FHLB") . . . . . . . . . . . . . . . . . . . .      1,096,931      966,720      540,475
 Securities sold under agreements to repurchase. . . . . .             --      100,000      791,760
 Senior Notes payable. . . . . . . . . . . . . . . . . . .         46,900       50,000       50,000
 Minority interest - preferred stock of Coastal Banc ssb .         28,750       28,750       28,750
 Preferred stockholders' equity. . . . . . . . . . . . . .         27,500           --           --
 Common stockholders' equity . . . . . . . . . . . . . . .        105,956      112,764      104,830



(Dollars in thousands, except per share data)                  1996         1995
                                                            -----------  -----------
<S>                                                         <C>          <C>
Balance Sheet Data
 Total assets. . . . . . . . . . . . . . . . . . . . . . .  $2,875,907   $2,786,528
 Loans receivable (1). . . . . . . . . . . . . . . . . . .   1,229,748    1,098,555
 Mortgage-backed securities held-to-maturity (1) . . . . .   1,344,587    1,395,753
 Mortgage-backed securities available-for-sale . . . . . .     180,656      186,414
 Deposits. . . . . . . . . . . . . . . . . . . . . . . . .   1,310,835    1,287,084
 Advances from the Federal Home Loan Bank of
   Dallas ("FHLB") . . . . . . . . . . . . . . . . . . . .     409,720      312,186
 Securities sold under agreements to repurchase. . . . . .     966,987      993,832
 Senior Notes payable. . . . . . . . . . . . . . . . . . .      50,000       50,000
 Minority interest - preferred stock of Coastal Banc ssb .      28,750       28,750
 Preferred stockholders' equity. . . . . . . . . . . . . .          --           --
 Common stockholders' equity . . . . . . . . . . . . . . .      94,148       91,679
</TABLE>

                                                  (Footnotes appear on page 9)


<TABLE>
<CAPTION>

                                                                     For the Year Ended December 31,
                                                                 ---------------------------------
                                                                     1999         1998         1997
                                                                 ----------   ----------   ----------
<S>                                                              <C>         <C>           <C>
Operating Data
 Interest income . . . . . . . . . . . . . . . . . . . . .       $  202,943   $  210,814   $  201,356
 Interest expense. . . . . . . . . . . . . . . . . . . . .          125,657      143,404      144,423
                                                                 ----------   ----------   ----------
 Net interest income . . . . . . . . . . . . . . . . . . .           77,286       67,410       56,933
 Provision for loan losses(2). . . . . . . . . . . . . . .           10,575        3,100        1,800
                                                                 ----------   ----------   ----------
 Net interest income after provision for loan losses . . .           66,711       64,310       55,133
 Writedown of purchased mortgage loan premium. . . . . . .               --         (709)          --
 Gain (loss) on sales of mortgage-backed securities
   available-for-sale, net . . . . . . . . . . . . . . . .               --            1          237
 Gain on sale of branch office . . . . . . . . . . . . . .               --           --           --
 Other noninterest income. . . . . . . . . . . . . . . . .           10,372        7,580        6,147
 SAIF insurance special assessment (3) . . . . . . . . . .               --           --           --
 Other noninterest expense . . . . . . . . . . . . . . . .          (57,810)     (48,383)     (39,544)
                                                                 ----------   ----------   ----------
 Income before provision for Federal income taxes
   and minority interest . . . . . . . . . . . . . . . . .           19,273       22,799       21,973
 Provision for Federal income taxes (4). . . . . . . . . .           (5,659)      (3,543)      (7,822)
 Minority interest - preferred stock dividends of Coastal
   Banc ssb. . . . . . . . . . . . . . . . . . . . . . . .           (2,588)      (2,588)      (2,588)
                                                                 ----------   ----------   ----------
 Net income. . . . . . . . . . . . . . . . . . . . . . . .       $   11,026   $   16,668   $   11,563
                                                                 ==========   ==========   ===========
 Net income available to common stockholders . . . . . . .       $    9,442   $   16,668   $   11,563
                                                                 ==========   ==========   ===========
 Basic earnings per share (5). . . . . . . . . . . . . . .       $     1.45   $     2.24   $     1.55
                                                                 ==========   ==========   ===========
 Diluted earnings per share (5). . . . . . . . . . . . . .       $     1.42   $     2.18   $     1.50
                                                                 ==========   ==========   ===========
</TABLE>


<TABLE>
<CAPTION>
                                                                  1996         1995
                                                            -----------  -----------
<S>                                                        <C>           <C>
Operating Data
 Interest income . . . . . . . . . . . . . . . . . . . . .  $  194,611   $  170,286
 Interest expense. . . . . . . . . . . . . . . . . . . . .     138,185      126,354
                                                            -----------  -----------
 Net interest income . . . . . . . . . . . . . . . . . . .      56,426       43,932
 Provision for loan losses(2). . . . . . . . . . . . . . .       1,925        1,664
                                                            -----------  -----------
 Net interest income after provision for loan losses . . .      54,501       42,268
 Writedown of purchased mortgage loan premium. . . . . . .          --           --
 Gain (loss) on sales of mortgage-backed securities
   available-for-sale, net . . . . . . . . . . . . . . . .          (4)          81
 Gain on sale of branch office . . . . . . . . . . . . . .         521           --
 Other noninterest income. . . . . . . . . . . . . . . . .       5,574        5,081
 SAIF insurance special assessment (3) . . . . . . . . . .      (7,455)          --
 Other noninterest expense . . . . . . . . . . . . . . . .     (37,927)     (29,823)
                                                            -----------  -----------
 Income before provision for Federal income taxes
   and minority interest . . . . . . . . . . . . . . . . .      15,210       17,607
 Provision for Federal income taxes (4). . . . . . . . . .      (5,671)      (6,477)
 Minority interest - preferred stock dividends of Coastal
   Banc ssb. . . . . . . . . . . . . . . . . . . . . . . .      (2,588)      (2,588)
                                                            -----------  -----------
 Net income. . . . . . . . . . . . . . . . . . . . . . . .  $    6,951   $    8,542
                                                            ===========  ===========
 Net income available to common stockholders . . . . . . .  $    6,951   $    8,542
                                                            ===========  ===========
 Basic earnings per share (5). . . . . . . . . . . . . . .  $     0.93   $     1.15
                                                            ===========  ===========
 Diluted earnings per share (5). . . . . . . . . . . . . .  $     0.92   $     1.14
                                                            ===========  ===========
</TABLE>


                                                  (Footnotes appear on page 9)

<PAGE>

COASTAL  BANCORP,  INC.  AND  SUBSIDIARIES
SELECTED  CONSOLIDATED  FINANCIAL  AND  OTHER  DATA
<TABLE>

<CAPTION>



                                                                 At or For the Year Ended December 31,
                                                            --------------------------------------------
                                                              1999     1998     1997     1996     1995
                                                            -------   ------  -------   ------   -------
<S>                                                       <C>        <C>      <C>      <C>      <C>
Selected Ratios
Performance Ratios (6):
 Return (before minority interest)
    on average assets . . . . . . . . . . . . . . . .         0.47%    0.64%    0.49%    0.34%    0.45%
 Return on average common equity . . . . . . . . . .          8.83    14.96    11.68     7.50     9.71
 Dividend payout ratio. . . . . . . . . . . . . . . .        22.11    14.35    19.83    28.55    18.56
 Average common equity to average total assets . . .          3.66     3.71     3.41     3.30     3.56
 Net interest margin (7). . . . . . . . . . . . . . .         2.75     2.31     2.02     2.06     1.82
 Interest rate spread including
  noninterest-bearing deposits (7). . . . . . . . . .         2.65     2.17     1.85     1.89     1.61
 Interest rate spread (7) . . . . . . . . . . . . . .         2.39     1.96     1.67     1.72     1.46
 Noninterest expense to average
   total assets . . . . . . . . . . . . . . . . . . .         1.98     1.61     1.36     1.61     1.21
 Average interest-earning assets to average
  interest-bearing liabilities. . . . . . . . . . . .       108.22   107.33   106.72   106.75   106.78
 Ratio of earnings to combined fixed charges
   and preferred stock dividends:
   Excluding interest on deposits . . . . . . . . . .        1.23X    1.25X    1.23X    1.15X    1.21X
   Including interest on deposits . . . . . . . . . .        1.11     1.14     1.13     1.09     1.12
Asset Quality Ratios:
 Nonperforming assets to total assets (8) . . . . . .        0.73%    0.99%    0.72%    0.60%    0.68%
 Nonperforming loans to total loans receivable. . . .        0.99     1.60     1.40     1.14     1.35
 Allowance for loan losses to nonperforming loans . .       61.30    46.28    41.90    49.02    38.40
 Allowance for loan losses to total loans receivable.        0.60     0.74     0.59     0.56     0.52
Bank Regulatory Capital Ratios (9):
 Tier 1 capital to total assets . . . . . . . . . . .        5.76     5.25     5.52     5.35     5.30
 Tier 1 risk-based capital to risk-weighted assets. .        9.68     9.54    11.46    11.77    12.36
 Total risk-based capital to risk-weighted assets . .       10.29    10.23    11.98    12.30    12.84
Other Data:
 Full-time employee equivalents                               666      653      451      433      390
 Number of full service offices                                50       49       37       37       40

</TABLE>


<TABLE>
<CAPTION>
                                                                 At or For the Year Ended December 31,
                                                            --------------------------------------------
                                                              1999     1998      1997     1996     1995
                                                            -------   ------   -------   ------   -------
<S>                                                       <C>        <C>      <C>      <C>      <C>
Certain Ratios and Other Data - Excluding Adjusting Items (10) (dollars in thousands, except per share data)

 Adjusted net income . . . . . . . . . . . . . . . .       $15,452   $14,099    $11,563   $11,797   $8,542
 Adjusted diluted earnings per share . . . . . . . .          2.08      1.84       1.50      1.56     1.14
 Adjusted return (before minority interest) on
   average assets. . . . . . . . . . . . . . . . . .         0.62%     0.55%       0.49%     0.51%    0.45%
 Adjusted return on average common equity. . . . . .        12.96     12.65       11.68     12.53     9.71

</TABLE>

                                                  (Footnotes appear on page 9)


<PAGE>
Footnotes  for  pages  6  through  8:

(1)     Loans  receivable  are  net  of  loans  in process, premiums, discounts,
unearned  interest  and  loan  fees  and  the  allowance  for  loan  losses.
Mortgage-backed  securities  held-to-maturity are net of premiums and discounts.


(2)     During  1999,  Coastal recorded a $6.8 million provision for loan losses
specific to one loan to MCA.  See further discussion in "Management's Discussion
and  Analysis  of  Financial Condition and Results of Operations - Net Income."

(3)     On September 30, 1996, Coastal recorded the one-time Savings Association
Insurance  Fund ("SAIF") insurance special assessment (the "special assessment")
of  $7.5  million  as  a result of the Deposit Insurance Funds Act of 1996 being
signed  into  law.

(4)     In  March  1998,  Coastal announced that it had successfully resolved an
outstanding  tax  benefit  issue  with  the  FDIC  as  Manager  of the FRF.  The
resolution  of  the  issue resulted in a $3.7 million reversal of accrued income
taxes  during  1998.

(5)     On  April  23, 1998, Coastal declared a 3:2 stock split that was paid on
June 15, 1998 to stockholders of record on May 15, 1998.  All common stock share
data  has  been  adjusted  to  include  the  effect  of  the  stock  split.

(6)     Ratio,  yield  and  rate  information  are based on year-to-date average
balances.

(7)     Net  interest  margin  represents net interest income as a percentage of
average  interest-earning  assets.  Interest  rate  spread  including
noninterest-bearing  deposits  represents  the  difference  between the weighted
average  yield  on  interest-earning  assets  and  the  weighted average rate on
interest-bearing  liabilities  and  noninterest-bearing deposits.  Interest rate
spread  represents  the  difference  between  the  weighted  average  yield  on
interest-earning  assets  and  the  weighted  average  rate  on interest-bearing
liabilities.

(8)     Nonperforming  assets consist of nonaccrual loans, loans greater than 90
days  delinquent  and  still  accruing,  real estate acquired by foreclosure and
repossessed  assets.

(9)     Current  FDIC  regulations  require  Coastal Banc ssb to maintain Tier 1
capital  equal to at least 4.0% of total assets, Tier 1 risk-based capital equal
to  at  least 4.0% of risk-weighted assets and total risk-based capital equal to
at  least  8.0%  of  risk-weighted  assets.

(10)     Adjusting  items  are  comprised  of  the  following for 1999, 1998 and
1996:
     1999  - The $4.4 million (after tax), or $0.66 per diluted share, effect of
             the  $6.8  million  provision  for  loan  losses  specific  to  the
             MCA  loan.
     1998  - The  $2.6  million  (after  tax),  or $0.34 per diluted share, net
             benefit  of  (a)  a reversal of $3.7 million in income taxes, (b) a
             $1.0  million  additional  provision  for  loan  losses, and (c) a
             $709,000 writedown of purchased mortgage  loan  premium.
     1996  -  The  SAIF  insurance  special  assessment of $7.5 million, or $4.8
              million  after  tax.
     There  were  no  adjusting  items  in  1997  or  1995.


<PAGE>
COASTAL  BANCORP,  INC.  AND  SUBSIDIARIES
MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION AND RESULTS OF
OPERATIONS

GENERAL
     Coastal  Bancorp,  Inc.  ("Bancorp")  through  its wholly-owned subsidiary,
HoCo,  owns  100  percent  of  the  voting  stock  of  Coastal  Banc  ssb,  a
Texas-chartered,  FDIC  insured,  state  savings  bank  ("the  Bank").  The
consolidated  financial  statements  included  herein  include  the  accounts of
Bancorp, HoCo, the Bank and subsidiaries of both HoCo and the Bank (collectively
known  as  "Coastal").
     On April 23, 1998, the Board of Directors declared a 3:2 stock split on the
common  stock  of  Bancorp that was paid on June 15, 1998 to the stockholders of
record  at  the  close of business on May 15, 1998.  All common stock share data
has  been  adjusted  to  include  the  effect of the stock split for all periods
presented.
     On  August  27, 1998, December 21, 1998 and February 25, 1999, the Board of
Directors  authorized  three  separate repurchase plans for up to 500,000 shares
each of the outstanding shares of common stock through an open market repurchase
program  and  privately negotiated repurchases, if any.  As of December 31, 1999
and  1998,  1,283,679 and 499,600 shares had been repurchased at a cost of $20.5
million  and  $7.8  million,  respectively.
     On  May  11,  1999,  Bancorp  issued  1,100,000  shares  of  9.12% Series A
Cumulative  Preferred  Stock,  no par value, to the public at a price of $25 per
share ("Bancorp Preferred Stock").  Dividends on the preferred stock are payable
quarterly  at  the  annual  rate  of  $2.28  per  share.  The preferred stock is
callable  on  May  15, 2003 at Bancorp's option.  The $25.9 million net proceeds
has been used for repurchases in the open market of Bancorp's outstanding common
stock  and  of  Bancorp's outstanding 10% Senior Notes, with the remaining being
invested  on  a  short-term  basis.  Pursuant to Coastal's tax benefit agreement
with  the  FDIC,  Coastal  receives a tax benefit for dividends declared on this
preferred  stock.  The ongoing quarterly benefit will be approximately $219,000,
or  3  cents  per  diluted share, and is expected to continue through the end of
2002.

FINANCIAL  CONDITION
     Total  assets  decreased  slightly by 1.2%, or $34.2 million, from December
31,  1998  to  December  31,  1999.  The  change  in  total assets was primarily
comprised  of  an increase in loans receivable of $196.9 million, a $6.9 million
increase  in  stock  in the FHLB, an increase of $3.1 million in mortgage-backed
securities  available-for-sale  and  an increase in cash and cash equivalents of
$2.6  million,  offset  by  a  decrease  of  $236.9  million  in mortgage-backed
securities  held-to-maturity  and  decreases of $3.1 million and $2.4 million in
goodwill  and property and equipment, respectively, due to 1999 amortization and
depreciation.  The increase in loans receivable was primarily due to residential
mortgage  loan  purchases  of  $365.9  million,  a  $56.6  million  increase  in
commercial  real estate loans and a $43.6 million increase in multifamily loans,
offset  by  principal  payments  received  and  a  decrease of $112.8 million in
commercial loans secured by residential mortgage loans held for sale, because of
Coastal's  decreased  emphasis  on  this  type of lending.  The increase in FHLB
stock  was  due  to the increased amounts required to be maintained based on the
level  of FHLB advances outstanding.  The increase in mortgage-backed securities
available-for-sale  was due to the purchase of $26.5 million offset by principal
payments  received.  The decrease in mortgage-backed securities held-to-maturity
was  due to principal payments received.  At December 31, 1999, loans receivable
as  a  percentage  of  total  assets  increased to 58.9% as compared to 51.6% at
December  31,  1998.
     Deposits  decreased  by  4.7%,  or $80.7 million, from December 31, 1998 to
December  31,  1999.  Advances  from  the  FHLB  increased  by  13.5%, or $130.2
million,  and  securities  sold  under  agreements  to repurchase decreased from
$100.0  million  at  December  31,  1998  to  zero at December 31, 1999 due to a
reallocation  of  borrowings to take advantage of more favorable interest rates.
During  1999,  Senior Notes payable decreased by $3.1 million due to repurchases
by  Coastal.
     Stockholders'  equity  increased 18.4%, or $20.7 million, from December 31,
1998  to  December  31,  1999  as  a result of the $25.9 million in net proceeds
received from the issuance of the Bancorp Preferred Stock and 1999 net income of
$11.0  million,  offset  by  common  stock  dividends  declared of $2.1 million,
preferred  stock  dividends  of $1.6 million, a $474,000 increase in accumulated
other  comprehensive  loss,  and  treasury  stock  acquired  of  $12.7  million.

RESULTS  OF  OPERATIONS  FOR  THE  THREE  YEARS  ENDED  DECEMBER  31,  1999
     The  results of operations of Coastal Bancorp, Inc. and subsidiaries depend
primarily  on  its net interest income, which is the difference between interest
income  on  interest-earning assets and interest expense on its interest-bearing
liabilities.  Coastal's  interest-earning  assets  consist  principally of loans
receivable,  mortgage-backed  securities  and  other  investments.  Coastal's
interest-bearing  liabilities  consist  primarily of deposits, advances from the
FHLB,  securities  sold  under agreements to repurchase, federal funds purchased
and  its  Senior  Notes  payable.  Coastal's  net income is also affected by its
level  of noninterest income, including loan fees and service charges on deposit
accounts, loan servicing income, and gains on sales of assets, as well as by its
noninterest  expense,  including  compensation and benefits and occupancy costs.

<PAGE>
     The following table sets forth, for the periods and at the dates indicated,
information  regarding  Coastal's average balance sheets.  Ratio, yield and rate
information  is  based  on  year-to-date  average  balances.

<TABLE>
<CAPTION>

<S>                                                   <C>                <C>          <C>        <C>
                                                          At                Year Ended December 31, 1999
                                                    December 31, 1999      Average                  Yield/
                                                       Yield/Rate          Balance     Interest      Rate
                                                      ---------------     ---------   ---------    --------
                                                                             (Dollars in thousands)
ASSETS
Interest-earning assets:
Loans receivable (1)                                      8.67%         $ 1,647,535    $ 136,036    8.26%
Mortgage-backed securities                                6.02            1,099,420       63,663    5.79
U.S. Treasury securities                                  5.42                1,439           78    5.42
Securities purchased under agreements to resell
 and federal funds sold                                     --                5,353          270    5.04
FHLB stock                                                5.75               51,717        2,848    5.51
Interest-earning deposits in other depository
 institutions                                             4.83                1,486           48    3.23
                                                      ---------------   ------------   ---------   ---------
   Total interest-earning assets                          7.65            2,806,950      202,943    7.23
                                                      ---------------                  ---------   ---------
Noninterest-earning assets (2)                                              113,406
                                                                        ------------
  Total assets                                                          $ 2,920,356
                                                                        ============


LIABILITIES AND  STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits                                4.37%          $ 1,490,851    $  64,701    4.34%
Advances from the FHLB                                   5.72               951,953       50,569    5.31
Securities sold under agreements to repurchase
 and federal funds purchased                               --               103,230        5,614    5.44
Senior Notes payable                                    10.00                47,658        4,773   10.00
                                                      ---------------   ------------   ---------   ---------
  Total interest-bearing liabilities                     5.02             2,593,692      125,657    4.84
                                                      ---------------                  ---------   ---------
Noninterest-bearing liabilities                                             173,990
                                                                        ------------
  Total liabilities                                                       2,767,682
Minority interest - preferred stock of Coastal
 Banc ssb                                                                    28,750
Preferred stockholders' equity                                               16,923
Common stockholders' equity                                                 107,001
                                                                        ------------
  Total liabilities and stockholders' equity                            $ 2,920,356
                                                                        ============
Net interest income; interest rate spread               2.63%                          $  77,286    2.39%
                                                      ===============                  =========   =========

Net interest-earning assets; net interest
 yield on interest-earning assets                                       $   213,258                 2.75%
                                                                        ============               =========

Ratio of average interest-earning assets
 to average interest-bearing liabilities                                     1.08x
                                                                        ============
</TABLE>

_______________

(1)     Nonaccruing  loans  are  included  in  total  loans, but are immaterial.
(2)     Includes  goodwill, accrued interest receivable, property and equipment,
        cash,  mortgage  servicing  rights, prepaid expenses and  other  assets.

<PAGE>

<TABLE>
<CAPTION>
                                                         Year  Ended  December  31,  1998
<S>                                                    <C>          <C>        <C>
                                                         Average                   Yield/
                                                         Balance      Interest      Rate
                                                      -----------    ---------     --------
                                                            (Dollars in thousands)
ASSETS
Interest-earning assets:
Loans receivable (1)                                  $  1,430,584   $  120,281     8.41%
Mortgage-backed securities                               1,431,105       87,596     6.12
U.S. Treasury securities                                     2,141          109     5.09
Securities purchased under agreements to resell
 and federal funds sold                                      7,991          430     5.38
FHLB stock                                                  38,036        2,251     5.92
Interest-earning deposits in other depository
 institutions                                                3,133          147     4.69
                                                      ------------   ----------    ------
   Total interest-earning assets                         2,912,990      210,814     7.24
                                                                     ----------    ------
Noninterest-earning assets (2)                              94,857
                                                      ------------
  Total assets                                          $3,007,847
                                                      ============

LIABILITIES AND  STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits                            $  1,371,078    $   66,128    4.82%
Advances from the FHLB                                    713,197        39,553    5.55
Securities sold under agreements to repurchase
 and federal funds purchased                              579,711        32,723    5.64
Senior Notes payable                                       50,000         5,000   10.00
                                                      ------------   ----------    ------
  Total interest-bearing liabilities                    2,713,986       143,404    5.28
                                                                     ----------    ------
Noninterest-bearing liabilities                           153,663
                                                      ------------
  Total liabilities                                     2,867,649
Minority interest - preferred stock of Coastal
 Banc ssb                                                  28,750
Preferred stockholders' equity                                 --
Common stockholders' equity                               111,448
                                                      ------------
  Total liabilities and stockholders' equity          $ 3,007,847
                                                      ============
Net interest income; interest rate spread                            $   67,410    1.96%
                                                                     ==========    ======

Net interest-earning assets; net interest yield on
 interest-earning assets                              $    199,004                 2.31%
                                                      ============                 ======

Ratio of average interest-earning assets to average
 interest-bearing liabilities                               1.07x
                                                      ============
</TABLE>

_______________

(1)     Nonaccruing  loans  are  included  in  total  loans, but are immaterial.
(2)     Includes  goodwill, accrued interest receivable, property and equipment,
        cash,  mortgage  servicing rights, prepaid expenses  and  other  assets.

<PAGE>

<TABLE>
<CAPTION>

                                                         Year  Ended  December  31,  1997
<S>                                                    <C>          <C>        <C>
                                                         Average                   Yield/
                                                         Balance      Interest      Rate
                                                      -----------    ---------     --------
                                                              (Dollars in thousands)
ASSETS
Interest-earning assets:
Loans receivable (1)                                  $  1,281,493    $ 106,962     8.35%
Mortgage-backed securities                               1,514,541       92,755     6.12
U.S. Treasury securities                                         3           --       --
Securities purchased under agreements to resell
 and federal funds sold                                      4,024          251     6.24
FHLB stock                                                  21,663        1,292     5.96
Interest-earning deposits in other depository
 institutions                                                2,416           96     3.97
                                                      ------------   ----------    ------
   Total interest-earning assets                         2,824,140      201,356     7.13
                                                                     ----------    ------
Noninterest-earning assets (2)                              81,400
                                                      ------------
  Total assets                                        $  2,905,540
                                                      ============


LIABILITIES AND  STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits                             $  1,253,142    $  62,912     5.02%
Advances from the FHLB                                     368,896       21,322     5.78
Securities sold under agreements to repurchase
 and federal funds purchased                               974,297       55,189     5.66
Senior Notes payable                                        50,000        5,000    10.00
                                                      ------------   ----------    ------
  Total interest-bearing liabilities                     2,646,335      144,423     5.46
                                                                     ----------    ------
Noninterest-bearing liabilities                            131,431
                                                      ------------
  Total liabilities                                      2,777,766
Minority interest - preferred stock of
 Coastal Banc ssb                                           28,750
Preferred stockholders' equity                                  --
Common stockholders' equity                                 99,024
                                                      ------------
  Total liabilities and stockholders' equity           $ 2,905,540
                                                      ============
Net interest income; interest rate spread                             $  56,933     1.67%
                                                                     ==========    ======

Net interest-earning assets; net interest yield on
 interest-earning assets                               $   177,805                  2.02%
                                                      ============                 ======

Ratio of average interest-earning assets to average
 interest-bearing liabilities                               1.07x
                                                      ============
</TABLE>

_______________

(1)     Nonaccruing  loans  are  included  in  total  loans, but are immaterial.
(2)     Includes  goodwill, accrued interest receivable, property and equipment,
        cash, mortgage servicing rights,  prepaid  expenses  and  other  assets.


<PAGE>
     The following table analyzes net interest income in terms of changes in the
volume  of  interest-earning assets and interest-bearing liabilities and changes
in  yields  and  rates.  The  table  reflects  the  extent  to  which changes in
Coastal's  interest  income  and interest expense are attributable to changes in
volume  (change  in  volume  multiplied  by prior year rate) and changes in rate
(changes  in rate multiplied by prior year volume).  Changes attributable to the
combined  impact  of  volume  and  rate  have  been allocated proportionately to
changes  due  to  volume  and  changes  due  to  rate.

<TABLE>
<CAPTION>
                                                     Year  Ended  December  31,
                                             1999  vs  1998                  1998  vs  1997
                                      Increase (Decrease) Due  To     Increase  (Decrease)  Due  To
                                        Volume     Rate       Net      Volume     Rate       Net
                                      ---------  --------  ---------  ---------  --------  ---------
                                                            (In  thousands)
<S>                                   <C>        <C>       <C>        <C>        <C>       <C>
INTEREST INCOME
 Loans receivable                     $ 17,937   $(2,182)  $ 15,755   $ 12,544   $   775   $ 13,319
 Mortgage-backed securities            (19,416)   (4,517)   (23,933)    (5,159)       --     (5,159)
 U.S. Treasury securities                  (38)        7        (31)        --       109        109
 Securities purchased under
   agreements to resell and federal
   funds sold                             (134)      (26)      (160)       218       (39)       179
 FHLB stock                                762      (165)       597        968        (9)       959
 Interest-earning deposits in
   other depository institutions           (62)      (37)       (99)        32        19         51
                                      ---------  --------  ---------  ---------  --------  ---------

     Total                                (951)   (6,920)    (7,871)     8,603       855      9,458
                                      ---------  --------  ---------  ---------  --------  ---------

INTEREST EXPENSE
 Interest-bearing deposits               5,484    (6,911)    (1,427)     5,781    (2,565)     3,216
 Securities sold under agreements to
   repurchase and federal funds
   purchased                           (25,988)   (1,121)   (27,109)   (22,272)     (194)   (22,466)
 Advances from the FHLB                 12,788    (1,772)    11,016     19,113      (882)    18,231
 Senior Notes payable                     (227)       --       (227)        --        --         --
                                      ---------  --------  ---------  ---------  --------  ---------

     Total                              (7,943)   (9,804)   (17,747)     2,622    (3,641)    (1,019)
                                      ---------  --------  ---------  ---------  --------  ---------

 Net change in net interest income    $  6,992   $ 2,884   $  9,876   $  5,981   $ 4,496   $ 10,477
                                      =========  ========  =========  =========  ========  =========
</TABLE>


<PAGE>
NET  INCOME
     Coastal  reported  net  income of $11.0 million for the year ended December
31,  1999,  $16.7 million for the year ended December 31, 1998 and $11.6 million
for  the  year  ended December 31, 1997, a decrease of $5.7 million, or 33.9% in
1999,  and  an  increase  of  $5.1  million,  or  44.2% in 1998, in each case in
comparison  to  the  prior  year.  1999 net income before the provision for loan
losses  specific to the MCA loan (as described below) was $15.4 million compared
to  1998  net  income before one-time charges and credits of $14.1 million.  For
the  year  ended  December  31,  1999, net income was negatively impacted by the
provision  for loan losses specific to the MCA loan (as described below) of $4.4
million  (net  of  tax  effect).  During  1999,  based  on  updated  information
received,  management  made  the  decision  to  provide  for  and charge-off the
remaining  balance  of  the $10.0 million participation in the warehouse loan to
MCA  Financial  Corp.,  of  Southfield,  Michigan, and certain of its affiliates
(collectively  "MCA").  During  January 1999, this loan was placed on nonaccrual
effective December 31, 1998, due to the fact that MCA was placed in receivership
and subsequently filed for bankruptcy.  Throughout 1999, Coastal worked with the
lead  lender and the bankruptcy trustee to determine the value of, and sell, the
underlying  collateral.  As of December 31, 1999, Coastal had received only $1.1
million  in  proceeds  from  the  MCA  loan.  In  addition, on January 12, 2000,
Coastal  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, Coastal charged-off the remaining $8.9 million balance of this loan
resulting  in  the  additional  provision  for  loan losses, net of tax, of $4.4
million during the year.  Coastal will continue to work with the lead lender and
the bankruptcy trustee to recover any funds, if possible, from the collateral or
MCA.

     Aside  from the impact of the provision for loan losses specific to the MCA
loan  on  net  income,  throughout 1999, Coastal experienced net interest margin
growth,  in  addition  to  record  growth  of  fee  income,  while  general  and
administrative  expenses  were  below  expectations.  Comparing  the  year ended
December  31,  1999  to  the  same period in 1998 (before the provision for loan
losses  specific  to  the  MCA  loan in 1999 and one-time charges and credits in
1998),  net  interest  income  increased  $9.9  million  and  noninterest income
increased  $2.8 million.  These increases were offset by a $1.7 million increase
in the provision for loan losses, a $9.4 million increase in noninterest expense
and  an  increase  of  $221,000  in the provision for Federal income taxes.  The
increase in net interest income was primarily due to an increase in net interest
margin  to 2.75% in 1999 from 2.31% in 1998.  The increase in noninterest income
was due primarily to a $2.1 million increase in loan fees and service charges on
deposit  accounts  and an increase in other noninterest income of $616,000.  The
increase  in the provision for loan losses was due to changes in the composition
of  and growth in Coastal's loan portfolio.  The increase in noninterest expense
was primarily due to staffing increases throughout 1998 related to the expansion
of  the  loan product base and the continuing development of commercial business
lending  programs, in addition to a full year in 1999 of staffing, occupancy and
other expenses related to the operation of the 12 branches acquired from Pacific
Southwest  Bank in August of 1998 (the "1998 Branch Acquisition").  The increase
in  the  provision  for Federal income taxes (before the effect of the provision
for  loan  losses  specific to the MCA loan in 1999 and the one-time charges and
credits  in  1998)  was  due primarily to increased income before Federal income
taxes  and  minority  interest.

     From  the  year  ended December 31, 1997 to 1998, there was a $10.5 million
increase  in  net interest income, a $1.2 million increase in noninterest income
(excluding  the  writedown  of  purchased  mortgage  loan premium) offset by the
$709,000  writedown  of  purchased  mortgage  loan  premium  and an $8.8 million
increase  in  noninterest  expense.  The  increase  in  net  interest income was
primarily  due to an increase in net interest margin from 2.02% in 1997 to 2.31%
in  1998.  The increase in noninterest income was due to a $1.7 million increase
in  loan  fees  and  service  charges  on  deposit accounts offset by a $236,000
decrease  in  the gain on sales of mortgage-backed securities available-for-sale
and  a $764,000 decrease in loan servicing income.  The $8.8 million increase in
noninterest  expense  was  primarily due to the staffing and occupancy increases
related to the expansion of the loan product base and the continuing development
of  commercial  business  lending  programs, the acquisition of assets and other
expenses  related  to  the relocation of Coastal's corporate headquarters in the
third  quarter  of  1997  and the staffing and occupancy expenses related to the
operation  of  the  12  branches  acquired  in  August  of  1998.

     The  increase in net income from 1997 to 1998 was also affected by one-time
charges  and  credits  recorded  in the first quarter of 1998.  In 1998, Coastal
recorded  a one-time benefit due to the resolution of an outstanding tax benefit
issue  with  the  FDIC  as  Manager  of  the  Federal Savings and Loan Insurance
Corporation  Resolution  Fund  ("FRF").  The resolution of the issue resulted in
Coastal  recording  a  $3.7 million, or 48 cents per diluted share, one-time tax
benefit.  The  resolution  of  the  tax  benefit  issue  is also contributing an
ongoing  quarterly  tax benefit of $226,000 or approximately 3 cents per diluted
share.  This tax benefit is estimated to continue through the end of 2002.  This
one-time  positive  effect on net income was somewhat offset by the recording of
an  additional provision for loan losses of $1.0 million (above the then current
quarterly  provision  of  $450,000)  and  a writedown of purchased mortgage loan
premium  of  $709,000.  The additional provision for loan losses was recorded to
increase  the  allowance  for  loan  losses  due to the continuing change in the
composition  of  the loans receivable portfolio as a result of management's goal
to  increase  business  lending.  The  writedown  of the purchased mortgage loan
premium  of  $709,000, or 6 cents per diluted share after tax, was related to an
adjustable  rate  whole  loan package purchased in the second quarter of 1997 on
which  Coastal  experienced  high  prepayments during 1997 and through the first
quarter  of  1998,  resulting  from  a comparatively lower current interest rate
environment.

     The  provision  for  Federal income taxes (excluding the one-time effect of
the  $3.7  million  reversal of accrued income taxes) decreased by $600,000 from
1997  to  1998  due  to  the  ongoing  quarterly benefit attributable to the tax
benefit  issue  and  the tax effect of the recording of the additional provision
for  loan  losses  and  the  writedown  of  the purchased mortgage loan premium.

NET  INTEREST  INCOME
     Net  interest  income  amounted to $77.3 million in 1999, a $9.9 million or
14.7%  increase  over  1998.  The increase in net interest income was due to the
increase in net interest margin from 2.31% in 1998 to 2.75% in 1999, an increase
in  average  net  interest-earning  assets  of  $14.3 million and an increase in
interest  rate  spread,  defined  to  exclude noninterest-bearing deposits, from
1.96%  in  1998 to 2.39% in 1999.  Management also calculates an alternative net
interest  spread  which  includes  noninterest-bearing  deposits.  Under  this
calculation,  the  net  interest spreads for 1999 and 1998 were 2.65% and 2.17%,
respectively.  Net  interest margin and net interest rate spread are affected by
the  changes  in  the  amount  and  composition  of  interest-earning assets and
interest-bearing  liabilities.  The  overall increase in net interest margin and
spread  was  primarily  due  to  an  0.44%  decrease in the average rate paid on
interest-bearing  liabilities.  The  decrease  in  the  average  rate  paid  on
interest-bearing  liabilities  was  due  primarily  to  the  lower cost deposits
acquired in the 1998 Branch Acquisition, new pricing strategies for certificates
of  deposit  that  reduced Coastal's cost of retail deposits and lower wholesale
funding  costs.

     Net  interest income amounted to $67.4 million in 1998, a $10.5 million, or
18.4%,  increase  over  1997.  The increase in net interest income was due to an
increase in net interest margin from 2.02% in 1997 to 2.31% in 1998, an increase
in  average  net  interest-earning  assets  of $21.2 million, and an increase in
interest  rate  spread,  defined  to  exclude noninterest-bearing deposits, from
1.67%  in  1997 to 1.96% in 1998.  Management also calculates an alternative net
interest  spread  which  includes  noninterest-bearing  deposits.  Under  this
calculation,  the  net  interest spreads for 1998 and 1997 were 2.17% and 1.85%,
respectively.  Net  interest margin and net interest rate spread are affected by
the  changes  in  the  amount  and  composition  of  interest-earning assets and
interest-bearing  liabilities.  The  overall increase in net interest spread was
due  to  a  0.11% increase in the average yield on interest-earning assets and a
decrease in the average rate paid on interest-bearing liabilities of 0.18%.  The
decrease  in  the  average  rate  paid  on  interest-bearing liabilities was due
primarily  to  the  overall  decrease  in  wholesale  funding  costs.

     Total  interest  income  amounted  to  $202.9  million  during 1999, a $7.9
million,  or  3.7%,  decrease from 1998.  A $15.8 million, or 13.1%, increase in
interest  earned on loans receivable during 1999 resulted from a $217.0 million,
or 15.2%, increase in the average balance of loans receivable offset by a slight
decrease  of  0.15%  in  the yield earned compared to 1998.  A $23.9 million, or
27.3%, decrease in interest earned on mortgage-backed securities during 1999 was
due  to  a  $331.7  million,  or  23.2%,  decrease  in  the  average  balance of
mortgage-backed  securities  due  primarily  to principal payments received.  In
addition,  interest  earned  on  FHLB  stock,  federal  funds  sold  and  other
interest-earning  assets  increased  by $307,000, or 10.5%, due primarily to the
increase  in  the  average  balance  of  such  assets.

     Total  interest  income  amounted  to  $210.8  million  during 1998, a $9.5
million,  or  4.7%,  increase from 1997.  A $13.3 million, or 12.5%, increase in
interest  earned on loans receivable during 1998 resulted from a $149.1 million,
or 11.6%, increase in the average balance of loans receivable and an increase of
0.06%  in  the yield earned compared to 1997.  A $5.2 million, or 5.6%, decrease
in  interest earned on mortgage-backed securities during 1998 was due to a $83.4
million,  or 5.5%, decrease in the average balance of mortgage-backed securities
due  to  principal  payments  received  and  the  sale  of  $48.6  million  of
mortgage-backed  securities available-for-sale.  In addition, interest earned on
FHLB  stock,  federal  funds sold and other interest-earning assets increased by
$1.3  million, or 79.2%, due primarily to the increase in the average balance of
such  assets,  through internal growth and the 1998 Branch Acquisition, of $23.2
million  during  1998.

     Total interest expense amounted to $125.7 million in 1999, a $17.7 million,
or  12.4%,  decrease  from  1998.  Interest  expense  on deposits decreased $1.4
million,  or  2.2%,  due  primarily  to the decrease in the average rate paid of
0.48%.  Interest  expense  on advances from the FHLB increased $11.0 million, or
27.9%,  due  to the increase in the average balance of advances from the FHLB of
$238.8  million, or 33.5%, offset by a 0.24% decrease in the average rates paid.
Interest  expense on other borrowed money decreased $27.1 million, or 82.8%, due
to  the  $476.5 million, or 82.2%, decrease in the average balance of securities
sold  under  agreements  to  repurchase  and federal funds purchased and a 0.20%
decrease  in  the interest rates paid.  Interest expense on Senior Notes payable
decreased  $227,000  due  to  a decrease in the average balance of $2.3 million.

     Total  interest expense amounted to $143.4 million in 1998, a $1.0 million,
or  0.7%,  decrease  from  1997.  Interest  expense  on  deposits increased $3.2
million,  or  5.1%,  due to the $117.9 million, or 9.4%, increase in the average
balance  of  deposits  offset  by  a decrease in the average rate paid of 0.20%.
Interest  expense  on  advances from the FHLB increased $18.2 million, or 85.5%,
due  to  the increase in the average balance of advances from the FHLB of $344.3
million  or  93.3%,  offset  by  a  0.23%  decrease  in  the average rates paid.
Interest  expense on other borrowed money decreased $22.5 million, or 40.7%, due
to  the  $394.6 million, or 40.5%, decrease in the average balance of securities
sold  under  agreements  to  repurchase  and federal funds purchased and a 0.02%
decrease  in  the  interest  rates  paid.

PROVISION  FOR  LOAN  LOSSES
     In  1999,  management  established  a  provision  for  loan losses of $10.6
million,  $6.8  million  of  which  was  specific  to  the MCA loan as discussed
earlier.  For the years ended December 31, 1998 and 1997, the provision for loan
losses  was  $3.1  million  and $1.8 million, respectively.  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 Coastal, the existing
nonperforming  assets,  industry  standards,  regulatory  policies,  generally
accepted  accounting  principles,  general  economic conditions, particularly as
they  relate  to  Coastal's  lending  areas,  and  other  factors related to the
collectibility  of  Coastal's  loan portfolio.  As discussed earlier, 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 is 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 Coastal's loan
portfolio,  including  the  commercial  type  loans  acquired in the 1998 Branch
Acquisition.  During  the  year ended December 31, 1998, the increased provision
for  loan losses was recorded due to the continuing change in the composition of
the  loans  receivable  portfolio  from more traditional residential real estate
type  loans  to  commercial  type  loans.

     Coastal's  asset quality ratios for the years ended December 31, 1999, 1998
and  1997  are  as  follows:  nonperforming loans as a percentage of total loans
receivable  were  1.0%,  1.6%  and  1.4%  at  December  31, 1999, 1998 and 1997,
respectively,  the  allowance  for  loan losses as a percentage of nonperforming
loans  was  61.3%,  46.3%  and  41.9%  at  December  31,  1999,  1998  and 1997,
respectively,  and  the allowance for loan losses as a percentage of total loans
receivable  was  0.6%,  0.7%  and  0.6%  at  December  31,  1999, 1998 and 1997,
respectively.  During  1998,  the  activity  in  the  allowance  for loan losses
included  the  $2.3  million acquisition allowance adjustment as a result of the
loans  acquired  in the 1998 Branch Acquisition, of which approximately 58% were
commercial  real  estate  and  commercial,  financial  and  industrial  loans.

     Although  no assurance can be given, Coastal's management believes that the
allowance  for  loan  losses  at  December 31, 1999 is adequate, considering the
changing  composition  of  the  loans  receivable  portfolio,  the  existing
nonperforming assets, historical loss experience, delinquency trends and current
economic conditions.  Management will continue to review its loan loss policy as
Coastal's  loan  portfolio  grows and diversifies to determine if changes to the
policy  and  the  resulting  allowance  for  loan  losses  are  necessary.

NONINTEREST  INCOME
     Total noninterest income amounted to $10.4 million during 1999, an increase
of  $2.8  million,  or  36.8%,  over  1998 (excluding the writedown of purchased
mortgage loan premium in 1998).  The increase in noninterest income is primarily
due  to  an increase of $2.1 million in loan fees and service charges on deposit
accounts  and  a $616,000 increase in other noninterest income.  The increase in
loan  fees  and  service charges on deposit accounts consisted of a $2.5 million
increase  in  the  service  charges  on  deposit accounts due to the increase in
transaction  type  deposit accounts, including those acquired in the 1998 Branch
Acquisition,  offset  somewhat  by  a  $405,000  decrease  in  loan  fees.

    Total noninterest income (excluding the writedown of purchased mortgage loan
premium)  amounted  to $7.6 million during 1998, an increase of $1.2 million, or
18.8%,  over  1997.  The  increase in noninterest income was primarily due to an
increase  of  $1.7  million in loan fees and service charges on deposit accounts
and  a $463,000 increase in other noninterest income.  The increase in loan fees
and service charges on deposit accounts consisted of a $292,000 increase in loan
fees  and  a $1.4 million increase in service charges on deposit accounts due to
the  increase  in  transaction  type deposit accounts, including the transaction
type  deposit accounts acquired in the 1998 Branch Acquisition.  These increases
were  somewhat offset by a $764,000 decrease in loan servicing income due to the
declining  loan servicing portfolio and a $236,000 decrease in the gain on sales
of mortgage-backed securities available-for-sale.  In addition, Coastal recorded
a  writedown  of  purchased  mortgage  loan  premium of $709,000 during 1998, as
discussed  previously.

NONINTEREST  EXPENSE
     Total  noninterest  expense  amounted  to  $57.8  million  during  1999, an
increase  of $9.4 million, or 19.5%, over 1998.  Compensation, payroll taxes and
other  benefits  as  well  as  office  occupancy increased $5.7 million and $2.1
million,  respectively,  primarily due to the overall staffing increases related
to  the expansion of the loan product base and the continuing development of the
commercial  business lending programs, in addition to the staffing and occupancy
expenses related to the operation of the 12 branches acquired in the 1998 Branch
Acquisition.  In  addition,  the amortization of goodwill increased $767,000 and
data  processing  expenses increased $721,000 primarily due to the effect of the
branches  added  in  the  1998  Branch  Acquisition.  Other  changes  included a
$878,000  increase  in  other  operating  expenses,  a $436,000 decrease in real
estate  owned  expenses  and  a  $304,000  decrease in insurance premiums (which
includes  deposit  insurance  premiums).

     Total  noninterest  expense  amounted  to  $48.4  million  during  1998, an
increase  of $8.8 million, or 22.4%, over 1997.  Compensation, payroll taxes and
other  benefits  increased  $4.3 million from 1997 to 1998, primarily due to the
staffing  increases  related  to  the expansion of the loan product base and the
continuing  development  of commercial business lending programs, in addition to
the  staffing expenses related to the 1998 Branch Acquisition.  Office occupancy
expense  increased  $2.0  million  from  1997  to 1998 due to the acquisition of
assets  and  other  expenses  related  to  the relocation of Coastal's corporate
headquarters in the third quarter of 1997 and the acquisition of the 12 branches
in  the  1998 Branch Acquisition.  In addition, data processing expenses and the
amortization  of  goodwill  increased  $450,000  and  $444,000,  respectively,
primarily due to the 1998 Branch Acquisition.  Other changes included a $357,000
increase in insurance premiums (which includes deposit insurance premiums) and a
$1.3  million  increase  in  other  operating  expenses.  During  the year ended
December  31,  1998,  noninterest  expense  included  approximately  $257,000 in
nonrecurring  expenses  incurred  due  to  the  1998  Branch  Acquisition.

PROVISION  FOR  FEDERAL  INCOME  TAXES
     Coastal  generated  no regular Federal taxable income in 1999, 1998 or 1997
primarily  due  to the utilization of the net operating loss carryovers acquired
in  May  1988  from  the  associations  obtained  in connection with the Federal
Savings  and  Loan  Insurance  Corporation's Southwest Plan (the "Southwest Plan
Acquisition") and because payments to Coastal pursuant to the related assistance
agreement  in prior years were excludable from taxable income, which resulted in
Coastal  reporting  losses each year for tax purposes.  However, pursuant to the
terms  of  the Southwest Plan Acquisition assistance agreement, the FRF retained
all  of  the  future  tax  benefits  to  be  derived from the Federal income tax
treatment  of  the  assistance  payments  received  from  the  FRF  and from the
utilization  of  the  net operating loss carryovers acquired.  The amount of tax
benefit  to  Coastal  during  these  years  (which  corresponds to the amount of
Federal  taxes  which  Coastal  would  have  paid  in  these  years  but for the
tax-exempt nature of the assistance payments from the FRF and the utilization of
the  net  operating  loss  carryovers)  is  recorded  in  Coastal's Consolidated
Statements  of  Operations as its provision for Federal income taxes, which also
includes alternative minimum taxes paid.  The alternative minimum taxes recorded
during  these  years  will be available as credit carryforwards to reduce future
Federal  regular  income  taxes  over  an  indefinite  period.

     As  discussed  previously, during 1998, Coastal completed the resolution of
an  outstanding  tax  benefit  issue  with  the FDIC as Manager of the FRF.  The
resolution of the issue resulted in Coastal recording a $3.7 million reversal of
accrued  income  taxes.  The  resolution  of  the  tax  benefit  issue  is  also
contributing  an ongoing quarterly tax benefit of $226,000 which is estimated to
continue  through  the  end  of  2002.  In addition, pursuant to the tax benefit
agreement with the FDIC, Coastal receives a tax benefit for the dividends on the
Bancorp  Preferred Stock issued in 1999.  The ongoing quarterly tax benefit will
be approximately $219,000, or 3 cents per diluted share, and is also expected to
continue  through  the  end  of  2002.

     The  provisions  for  Federal  income taxes were $5.7 million in 1999, $7.2
million  (excluding  the one-time effect of the $3.7 million reversal of accrued
income taxes) in 1998 and $7.8 million in 1997.  Although the termination of the
Assistance  Agreement  was  effective  March  31, 1994, the FRF will continue to
receive  the  future  Federal  income  tax  benefits  of  the net operating loss
carryforwards  acquired.

ASSET  AND  LIABILITY  MANAGEMENT
     Coastal's asset and liability management process is utilized to measure and
manage  its interest rate risk exposure, which is Coastal's primary market risk.
Interest  rate  risk  can  be  defined as the exposure of Coastal's net interest
income to adverse movements in interest rates.  The principal determinant of the
exposure  of  Coastal's  earnings to interest rate risk is the timing difference
between  the  repricing or maturity of Coastal's interest-earning assets and the
repricing or maturity of its interest-bearing liabilities.  In order to minimize
interest  rate  risk  and  achieve  an  acceptable  interest rate spread between
interest-earning  assets  and interest-bearing liabilities, Coastal endeavors to
match  the  timing  of  the  repricing  or  maturities as well as the basis (for
example,  LIBOR  or  cost  of  funds rate) of its interest-earning assets to its
interest-bearing  liabilities.  Coastal  also  uses  interest  rate swap and cap
agreements  to  aid in minimizing exposure to interest rate fluctuations.  These
strategies  are  described  below.

     Coastal's  asset  and  liability  management  strategy  is  formulated  and
monitored by the Asset/Liability Committee of the Board of Directors of the Bank
(the  "Board").  The  Board's written policies and procedures are implemented by
the  Asset/Liability  Subcommittee  (the  "Subcommittee"),  a management-staffed
committee  composed  of  the Chief Executive Officer, Chief Lending Officer, the
Senior Vice President of Retail Banking and the Treasury Manager, in addition to
members  of the Bank's Portfolio Control Center.  The Subcommittee meets monthly
to  review,  among  other  things,  the  sensitivity  of  Coastal's  assets  and
liabilities  to interest rate changes, including those transactions attributable
to  altering  the  interest  rate  risk,  the  purchase  and  sale  activity and
maturities  of  investments  and  borrowings.  In  accordance  therewith,  the
Subcommittee  reviews  Coastal's  liquidity,  cash  flow  needs,  maturities  of
investments,  deposits  and  borrowings,  interest  rate  matching, core deposit
activity,  current  market  conditions  and  interest  rates on both a local and
national  level.

     To  effectively  measure and manage interest rate risk, the Asset/Liability
Committee  of the Board and the Subcommittee regularly review interest rate risk
by  forecasting the impact of alternative interest rate scenarios on net income,
net  interest income and on Coastal's economic value of equity ("EVE"), which is
defined  as the difference between the market value of Coastal's existing assets
and  liabilities, including the effects of off-balance sheet instruments, and by
evaluating  such  impact  against  the  guidelines  established by the Board for
allowable  changes  in  net  interest  income  and  EVE.  Coastal  utilizes  the
market-value  analysis  to  address  the change in the equity value of Coastal's
balance  sheet  arising  from  movements  in interest rates by computing the net
present  value  of  Coastal's  assets,  liabilities  and  off-balance  sheet
instruments.  The  extent  to which assets have gained or lost value in relation
to  the  gains  or  losses  of  liabilities  determines  the  appreciation  or
depreciation  in  equity  on  a  market-value basis.  Economic value analysis is
intended  to evaluate the impact of immediate and sustained interest rate shifts
of  the  yield  curve  on  the  market  value  of  the  current  balance  sheet.

     From  these  analyses,  interest  rate  risk  is quantified and appropriate
strategies  are  formulated  and  implemented  on  an  ongoing  basis.  Based on
Coastal's  December  31,  1999  interest  rate  sensitivity position, management
believes  that  at  December  31,  1999 an immediate 100 basis point increase in
interest  rates  could cause a short term decrease in net interest income due to
timing  differences  but would not have a significant impact over a twelve month
period.  There  can  be no assurance that this conclusion will not change as the
assumptions  utilized  by  management to reach such conclusion change over time.

     The  following  table  presents an analysis of the sensitivity in Coastal's
net  interest  income  over  a  four-quarter  period  and  the  EVE based on the
indicated changes in interest rates at December 31, 1999 and 1998.  The interest
rate  scenarios  presented  in  the table include interest rates at December 31,
1999  and  1998 and, for the net interest income calculation, as adjusted by the
indicated  changes in interest rates over a four-quarter period, and for the EVE
calculation, as adjusted by instantaneous and parallel changes in interest rates
of  upward  and downward of up to 200 basis points.  Each rate scenario reflects
unique  prepayment  and  repricing  assumptions.
<TABLE>
<CAPTION>

                                     Estimated  Change  In
        Change          Net  Interest  Income         EVE
 In  Interest  Rates         December  31,        December  31,
 (in  basis  points)         1999     1998        1999     1998
 -------------------    ---------------------   ----------------
<S>                     <C>          <C>        <C>        <C>
        +200               (13.42)%  (8.56)%    (24.22)%  (6.41)%
        +100                (6.93)   (4.05)     (10.79)   (0.66)
           0                   --       --          --       --
        -100                 5.78     4.77        4.32    (2.09)
        -200                12.04     9.10        1.53    (5.32)
</TABLE>


     There  are  limitations  inherent  in  any methodology used to estimate the
exposure  to  changes  in interest rates.  It is not possible to fully model the
market  risk  in  instruments  with  leverage,  option,  or  prepayment  risks.
Therefore,  this  analysis is not intended to be a forecast of the actual effect
of  a  change in interest rates on Coastal.  Management of Coastal believes that
all  of  the  assumptions used in this analysis to evaluate the vulnerability of
Coastal's  operations  to changes in interest rates take into account historical
experience and considers them reasonable; however, the interest rate sensitivity
of  Coastal's  assets  and  liabilities  and the estimated effects of changes in
interest  rates  on Coastal's net interest income and EVE indicated in the above
analysis  could  vary  substantially  if  different  assumptions were used or if
actual  experience  differs  from  the  historical  experience.
     The  EVE  is  significantly  impacted by the estimated effect of prepayment
risk  on  the value of mortgage-backed securities, loans receivable and mortgage
servicing rights as market interest rates change.  Prepayment risk arises due to
the possibility that the cash flow experience of an asset may change as interest
rates  change.  When  interest  rates  increase,  mortgage-related  assets  will
generally  not  be  prepaid  and  conversely,  when  interest  rates  decrease,
prepayments  increase.  The  magnitude  of the risk that a higher yielding asset
will  prepay  is a direct function of interest rate variability over the life of
the  asset.  Prepayments  affect  Coastal's net spread and the duration match of
its  assets and liabilities.  Coastal has prepayment risk on its mortgage-backed
securities  and loans receivable held at a premium and on its mortgage servicing
rights  due  to  the  fact  that the amortization of the capitalized premiums on
those  assets  will  accelerate  when the underlying loans are prepaid.  Coastal
attempts to anticipate its prepayment risk by extrapolation from past prepayment
behavior  after  adjusting  for expected interest rate levels and other economic
factors  and utilizes these assumptions when analyzing its risk exposure.  There
is  also  a  risk  of  an inverted yield curve.  In this situation, assuming the
rates  under  one year would be inverted, Coastal's net interest income would be
negatively affected.  As assets, primarily the one-year CMT securities and whole
loans,  reprice  at  the  lower  one-year  rate,  the one-month borrowings would
reprice  at  the  higher  one-month LIBOR rate causing a decline in net interest
income.  The  magnitude  of this risk depends on which part of the curve inverts
and  the  duration  of  the  inverted  curve.
     A  more  conventional  but  limited  asset  and  liability  monitoring tool
involves analyzing the extent to which assets and liabilities are "interest rate
sensitive"  and  measuring  an  institution's  interest  rate sensitivity "gap."
While  this conventional gap measure may be useful, it is limited in its ability
to  predict  trends  in  future  earnings  and to predict the effect of changing
interest rates.  It makes no assumptions about changes in prepayment tendencies,
deposit  or  loan  maturity preferences or repricing time lags that may occur in
response to a change in the interest rate environment.  An asset or liability is
said  to  be  interest  rate  sensitive within a specific time period if it will
mature  or reprice within that time period.  The interest rate sensitivity "gap"
is  defined  as  the  difference  between  interest-earning  assets  and
interest-bearing  liabilities  maturing or repricing within a given time period.
A  gap  is considered positive when the amount of interest rate sensitive assets
exceeds  the amount of interest rate sensitive liabilities.  A gap is considered
negative when the amount of interest rate sensitive liabilities exceeds interest
rate sensitive assets.  During a period of rising interest rates, a negative gap
would  tend  to adversely affect net interest income, while a positive gap would
tend  to  result  in  an  increase  in  net interest income.  During a period of
falling  interest  rates,  a  negative  gap  would tend to increase net interest
income, while a positive gap would tend to adversely affect net interest income.
Given  Coastal's  current  position  based  on  this  "gap"  analysis,  however,
Coastal's net interest spread would benefit over time from a gradual increase in
interest  rates,  in  which  its  assets may be redeployed at higher yields.  If
interest  rates  were  to  fall,  yields  earned  on  interest  rate  sensitive
investments  would  be reduced, while longer term fixed liability costs, such as
Coastal's  certificates  of  deposit,  would not immediately change.  While this
analysis  takes into account repricing and maturities of assets and liabilities,
it  fails  to  consider  the  interest  rate  sensitivities  of  those asset and
liability  accounts.
     The  following  table  summarizes  the  contractual maturities or repricing
characteristics  of  Coastal's  interest-earning  assets  and  interest-bearing
liabilities adjusted for the effects of interest rate swaps and caps at December
31,  1999.  The  principal  balance of adjustable rate assets is included in the
period  in  which they are first scheduled to adjust or could be adjusted rather
than  in  the  period  in  which they mature.  Coastal's one-year cumulative gap
position  at  December  31,  1999  was negative $230.6 million or 7.82% of total
assets.  This  is  a  one-day  position  that  changes  frequently  and  is  not
indicative  of Coastal's position at any other time.  Other material assumptions
are  set  forth  in  the  footnotes  to  the  table.


<PAGE>

<TABLE>
<CAPTION>
                                                                    As  of  December  31,  1999
<S>                                                         <C>                      <C>             <C>
                                                                                 More than       More than
                                                            Three months        three months    one year to
                                                              or less           to one year     three years
                                                            ------------        ------------    -------------
                                                                           (Dollars in thousands)
INTEREST-SENSITIVE ASSETS
 Loans, net (1)(2):
   First lien mortgage-single family fixed rate              $  1,049         $     3,682     $     21,052
   First lien mortgage-single family adjustable
     rate                                                      84,073             327,011           58,409
   First lien mortgage-multifamily fixed rate                      --               1,778            7,772
   First lien mortgage-multifamily variable rate              145,866                  --               --
   Construction and acquisition and
     development, net of loans in process                     182,206               3,422            4,901
   Commercial real estate                                     222,262               9,159           14,627
   Commercial                                                 125,366               7,623            9,752
   Consumer and other                                           8,734              10,222           15,103
 Mortgage-backed securities held-to-maturity(1)(2)            809,531              16,129               --
 Securities available-for-sale (1)(2)                          75,312              24,353               --
 U.S. Treasury securities held-to-maturity                         --                 299               --
 Other interest-earning assets (3)                             57,379                  --               --
                                                           ------------        ------------    -------------
     Total interest-sensitive assets                        1,711,778             403,678          131,616
                                                           ------------        ------------    -------------
 Noninterest-sensitive assets

     Total assets


INTEREST-SENSITIVE LIABILITIES:
 Interest-bearing deposits (4):
   Interest-bearing checking accounts                      $   65,229         $          --   $         --
   Savings accounts                                            46,011                    --             --
   Money market demand accounts                               274,763                    --             --
   Certificate accounts (including premium)                   264,900               704,072         99,780
 Advances from the FHLB                                       884,821               142,876         38,242
 Senior Notes payable                                              --                    --         46,900
                                                           ------------        ------------    -------------
     Total interest-sensitive liabilities                   1,535,724               846,948        184,922
                                                           ------------        ------------    -------------
 Noninterest-sensitive liabilities

     Total liabilities
 Minority interest-preferred stock of
   Coastal Banc ssb
 Stockholders' equity
     Total liabilities and stockholders' equity


Gap during the period                                      $   176,054       $    (443,270)    $  (53,306)
Effect of interest rate swaps and caps(5)                       43,612              (7,040)            --
                                                           ------------        ------------    -------------
Cumulative gap after effect of interest rate swaps
 and caps                                                  $   219,666       $    (230,644)    $ (283,950)
                                                             ===========        ============    ==============

Interest-sensitive assets as a % of interest-sensitive
 liabilities (cumulative)                                      111.46%               88.79%         87.52%
Interest-sensitive assets as a % of total
 assets (cumulative)                                            58.07                71.76          76.22
Ratio of gap after effect of interest rate swaps and caps
 to total assets                                                 7.45               (15.28)         (1.81)
Ratio of cumulative gap after effect of interest rate
 swaps and caps to total assets                                  7.45                (7.82)         (9.63)



                                                                    As  of  December  31,  1999
<S>                                                  <C>               <C>              <C>             <C>             <C>
                                                        More than         More than        More than
                                                      three years to    five years to     ten years to       Over
                                                       five years        ten years        twenty years    twenty years    Totals
                                                   -----------------    --------------    -------------   ------------  -----------

INTEREST-SENSITIVE ASSETS
 Loans, net (1)(2):
   First lien mortgage-single family fixed rate       $   36,268        $   48,818        $  98,867      $  138,985    $   348,721
   First lien mortgage-single family adjustable
     rate                                                  3,264               196           12,564              --        485,517
   First lien mortgage-multifamily fixed rate              5,124             1,058              388              --         16,120
   First lien mortgage-multifamily variable rate              --                --               --              --        145,866
   Construction and acquisition and
     development, net of loans in process                    820             1,061            1,404              --        193,814
   Commercial real estate                                 31,401            11,419           22,285              --        311,153
   Commercial                                             17,256             1,193               --              --        161,190
   Consumer and other                                     29,977             5,454            3,210              --         72,700
 Mortgage-backed securities held-to-maturity(1)(2)            --                27           11,229          80,296        917,212
 Securities available-for-sale (1)(2)                         --                --               --              --         99,665
 U.S. Treasury securities held-to-maturity                    --                --               --              --            299
 Other interest-earning assets (3)                            --                --               --              --         57,379
                                                   -----------------    --------------    -------------   ------------  -----------
     Total interest-sensitive assets                     124,110            69,226          149,947         219,281      2,809,636
                                                   -----------------    --------------    -------------   ------------
 Noninterest-sensitive assets                                                                                              138,316
                                                                                                                        -----------
     Total assets                                                                                                       $2,947,952
                                                                                                                        ==========

INTEREST-SENSITIVE LIABILITIES:
 Interest-bearing deposits (4):
   Interest-bearing checking accounts               $        --         $     --         $       --      $      --   $      65,229
   Savings accounts                                          --               --                 --             --          46,011
   Money market demand accounts                              --               --                 --             --         274,763
   Certificate accounts (including premium)              15,689              189                 29            162       1,084,821
 Advances from the FHLB                                   6,575           10,314             14,103             --       1,096,931
 Senior Notes payable                                        --               --                 --             --          46,900
                                                   -----------------    --------------    -------------   ------------  -----------
     Total interest-sensitive liabilities                22,264           10,503             14,132            162       2,614,655
                                                   -----------------    --------------    -------------   ------------
 Noninterest-sensitive liabilities                                                                                         171,091
                                                                                                                        -----------
     Total liabilities                                                                                                   2,785,746
 Minority interest-preferred stock of
   Coastal Banc ssb                                                                                                         28,750
 Stockholders' equity                                                                                                      133,456
                                                                                                                        -----------
     Total liabilities and stockholders' equity                                                                         $2,947,952
                                                                                                                        ==========

Gap during the period                              $   101,846         $ 58,723         $ 135,815      $ 219,119
Effect of interest rate swaps and caps(5)              (23,132)         (13,440)               --             --
                                                   -----------------   --------------   -------------   ------------
Cumulative gap after effect of interest
 rate swaps and caps                               $  (205,236)       $(159,953)        $ (24,138)      $ 194,981
                                                   ================   ===============  ==============  ==============

Interest-sensitive assets as a % of
 interest-sensitive liabilities (cumulative)             91.56%           93.85%          99.08%         107.46%
Interest-sensitive assets as a % of total
 assets (cumulative)                                     80.43            82.78           87.87           95.31
Ratio of gap after effect of interest rate
 swaps and caps to total assets                           2.67             1.54            4.61            7.43
Ratio of cumulative gap after effect of
 interest rate swaps and caps to total assets            (6.96)           (5.43)          (0.82)           6.61
</TABLE>

_______________

<PAGE>
Footnotes:

(1)     Fixed-rate  mortgage loans, consumer loans and fixed-rate securities are
based  on  contractual  maturities  (assuming  no  periodic  amortization).
(2)     Variable  and  adjustable  rate  mortgage  loans  and  adjustable  rate
mortgage-backed  securities  are  included  in the period in which they  reprice
(assuming  no  periodic  amortization).
(3)     Includes  FHLB  stock,  federal  funds  sold  and other interest-earning
investments.
(4)     Includes  checking  accounts, savings accounts and money market accounts
that  are  interest-bearing.  Effective  January  1, 1998, Coastal implemented a
program  whereby  a  portion  of  the  balances  in  noninterest-bearing  and
interest-bearing  checking  accounts  is  reclassified  to  money  market demand
accounts  under  Federal  Reserve Regulation D.  Fixed-rate certificate accounts
are  based  on  contractual  maturities.
(5)     Amounts  represent  the  notional  principal amount of the interest rate
swaps  and  certain  interest  rate cap agreements which are designed to protect
Coastal  against  rising  interest  rates,  which  are currently "in the money."


INTEREST  RATE  RISK  MANAGEMENT
Coastal  enters  into  interest  rate swap and interest rate cap agreements with
selected  broker/dealers  who  are  primarily  government  securities  dealers
("Brokers")  to  reduce  its exposure to floating interest rates on a portion of
its  adjustable  rate  liabilities.

     An  interest  rate swap is an agreement where one party (generally Coastal)
agrees  to  pay  a  fixed  rate  of interest on a notional principal amount to a
second  party  (generally  the Broker) in exchange for receiving from the second
party  a  variable  rate  of  interest  on  the  same  notional  amount  for  a
predetermined  period of time.  No actual assets are exchanged in a swap of this
type  and interest payments are generally netted.  Coastal enters into this type
of transaction in order to maintain a spread position between certain assets and
liabilities  in the event that interest rates increase.  If Coastal pays a fixed
rate  and  receives a variable rate, the variable rate to be received by Coastal
will  reprice  at the same time and at a similar rate as the funding liabilities
which  are  altered  by  the  swap and will thereby offset, to a certain degree,
increases  in  funding  costs.  Under any other interest rate scenario, the swap
will  have  a  negative  impact  on  net  interest  income.

     At  December 31, 1999, Coastal was a party to interest rate swap agreements
which have an aggregate notional amount of $43.6 million and expire from 2000 to
2005.  At December 31, 1999, the fair value of the interest rate swap agreements
was  estimated  to  be $563,000.  With respect to such agreements, Coastal makes
weighted-average  fixed  interest  payments  ranging  from  6.00%  to 6.50%, and
receives  payments  based  on  the  floating one- or three-month LIBOR.  Coastal
records  net  interest  income  or  expense relating to the swap agreements on a
monthly  basis  in  interest expense on other borrowed money.  The net effect of
the  interest  rate swaps to Coastal for the years ended December 31, 1999, 1998
and  1997  was  to increase interest expense by approximately $483,000, $377,000
and  $431,000, respectively.  See Note 15 of the Notes to Consolidated Financial
Statements.

     An  interest rate cap is a guarantee given by one party, referred to as the
issuer  (the  Broker), to another party, referred to as the purchaser (Coastal),
in  exchange  for  the payment of a premium, that if interest rates rise above a
specified  rate  on  a specified interest rate index, the issuer will pay to the
purchaser  the difference between the then current market rate and the specified
rate  on  a  notional  principal  amount for a predetermined period of time.  No
funds  are  actually  borrowed  or  repaid.  The principal purpose of purchasing
these caps is to prevent the occurrence of a negative spread relating to certain
adjustable  rate  mortgage-backed  securities  and loans receivable in Coastal's
portfolio  during  a  period in which the cost of funds borrowed to acquire such
assets rises above the contractual interest rate ceiling on the asset purchased.
Interest  rate  caps  generally  decrease  the  interest  margin because Coastal
receives  no  payment from the issuer (until the rate index rises above the rate
cap)  but  continues  to  amortize  the  prepaid premium.  At December 31, 1999,
Coastal  had  interest  rate  cap  agreements,  which  expire from 2000 to 2003,
covering  an aggregate notional amount of $163.5 million, of which $74.5 million
were  covering  certain  of  Coastal's  loans  receivable,  and  are  triggered,
depending on the particular contract, whenever the defined floating rate exceeds
7.0% to 9.5%.  The purchase price or premium of the interest rate cap agreements
paid by Coastal is capitalized and included in prepaid expenses and other assets
and is amortized over the life of the agreements using the straight-line method.
The  unamortized  portion  of  the  purchase  price was approximately $90,000 at
December 31, 1999 with an estimated fair value of $750,000.  For the years ended
December  31, 1999, 1998 and 1997, the interest rate caps resulted in an overall
decrease  in  interest  income  of  approximately $25,000, $53,000 and $218,000,
respectively.  See  Note  15  of the notes to Consolidated Financial Statements.

LIQUIDITY  AND  CAPITAL  RESOURCES
Coastal's assets approximated $2.9 billion at December 31, 1999 and $3.0 billion
at  December 31, 1998.  Preferred stockholders' equity amounted to $27.5 million
and  common  stockholders' equity was $106.0 million at December 31, 1999, after
treasury  stock purchased of $20.5 million.  The regulatory capital of Coastal's
subsidiary,  Coastal  Banc  ssb,  exceeded  all  three  of the Bank's regulatory
capital  requirements  at  December  31, 1999.  At December 31, 1999, the Bank's
core  capital  amounted  to  5.76%  of  adjusted  total  assets, compared to the
requirement  of  4.0%,  its  Tier  1  risk-based  capital  amounted  to 9.68% of
risk-adjusted  assets  as  compared  to  the  requirement  of 4.0% and its total
risk-based  capital  amounted  to  10.29% of risk-adjusted assets, compared to a
requirement  of  8.0%.

     Coastal's primary sources of funds consist of deposits bearing market rates
of  interest,  advances  from  the  FHLB,  securities  sold  under agreements to
repurchase  and  federal  funds purchased and principal and interest payments on
loans  receivable  and  mortgage-backed  securities.  Coastal  uses  its funding
resources  principally to meet its ongoing commitments to fund maturing deposits
and  deposit  withdrawals,  repay  borrowings,  purchase  loans  receivable  and
mortgage-backed  securities,  fund  existing  and  continuing  loan commitments,
maintain  its  liquidity, meet operating expenses and fund acquisitions of other
banks and thrifts, either on a branch office or whole bank acquisition basis, in
addition  to  purchasing  treasury  stock.  At  December  31,  1999, Coastal had
binding commitments to originate or purchase loans totaling approximately $106.6
million and had $108.6 million of undisbursed loans in process.  In addition, at
December  31,  1999,  Coastal had commitments under lines of credit to originate
primarily  construction  and  other  loans  of  approximately $146.6 million and
letters  of  credit  outstanding  of  $7.2  million.  Scheduled  maturities  of
certificates  of  deposit  during  the twelve months following December 31, 1999
totaled $968.8 million.  Management believes that Coastal has adequate resources
to  fund  all  its  commitments.

YEAR  2000
We  have  not  experienced  any  significant  disruptions  to  our  financial or
operating  activities  caused  by  failure of our computerized systems resulting
from  Year  2000  issues.  Management does not expect Year 2000 issues to have a
material  adverse  effect  on Coastal's operations or financial results in 2000.

INFLATION  AND  CHANGING  PRICES
The  Consolidated  Financial  Statements  and related data presented herein have
been prepared in accordance with generally accepted accounting principles, which
require  the measurement of financial position and operating results in terms of
historical dollars, without considering changes in the relative purchasing power
of  money  over  time  due  to  inflation.  Unlike  most  commercial  companies,
substantially  all  of  the  assets  and  liabilities of Coastal are monetary in
nature.  As a result, interest rates have a more significant impact on Coastal's
performance  than the effects of general levels of inflation.  Interest rates do
not  necessarily  move  in  the same direction or with the same magnitude as the
prices  of  goods  and  services.

RECENT  ACCOUNTING  STANDARDS
A  discussion  of  recently issued accounting pronouncements and their impact on
the  Consolidated Financial Statements is provided in Note 2 to the Consolidated
Financial  Statements.

FORWARD-LOOKING  INFORMATION
"Safe  Harbor"  Statement  under the Private Securities Litigation Reform Act of
1995:  The  statements contained in this Annual Report to stockholders which are
not  historical facts contain forward looking information with respect to plans,
projections  or  future  performance of Coastal, the occurrence of which involve
certain  risks  and  uncertainties  detailed  in  Coastal's  filings  with  the
Securities  and  Exchange  Commission  ("SEC").
     The  above  discussion  should  be read in conjunction with the information
contained  in  the Consolidated Financial Statements and the Notes thereto.  The
above  information  contains  "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), and are
subject  to  the  safe  harbor created by the Reform Act.  The words "estimate,"
"project,"  "anticipate,"  "expect,"  "intend,"  "believe," "plans," and similar
expressions  are  intended to identify forward-looking statements.  Because such
forward-looking  statements involve risks and uncertainties, there are important
factors  that  could  cause  actual  results  to  differ  materially  from those
expressed  or implied by such forward-looking statements.  Factors, all of which
are  difficult  to  predict and many of which are beyond the control of Coastal,
that  could  cause  actual  results  to  differ  materially include, but are not
limited to:  risks related to Coastal's acquisition strategy, including risks of
adversely changing results of operations and factors affecting Coastal's ability
to  consummate  further  acquisitions;  risks  involved  in Coastal's ability to
quickly and efficiently integrate the operations of acquired entities with those
of  Coastal;  changes  in  general  economic and business conditions; changes in
market  rates  of  interest;  changes  in the laws and regulations applicable to
Coastal;  the  risks  associated  with the Bank's non-traditional lending (loans
other  than  single-family  residential mortgage loans such as multifamily, real
estate acquisition and development, commercial real estate, commercial business,
warehouse  and  mortgage  servicing  rights  loans);  and  changes  in  business
strategies  and  other  factors  as  discussed  herein.

<PAGE>

<PAGE>
Coastal  Bancorp,  Inc.  and  Subsidiaries
DIRECTORS  AND  OFFICERS


BOARD OF DIRECTORS OF COASTAL BANCORP, INC., COASTAL BANC SSB AND SUBSIDIARY (AS
NOTED)

MANUEL  J.  MEHOS
Chairman of the Board, President and Chief Executive Officer of Coastal Bancorp,
Inc.;  Chairman  of  the Board, President and Chief Executive Officer of Coastal
Banc Holding Company, Inc.; Chairman of the Board of Coastal Banc Capital Corp.,
a wholly-owned subsidiary of Coastal Banc Holding Company, Inc.; Chairman of the
Board,  President  and  Chief  Executive  Officer  of  the  Bank, a wholly-owned
subsidiary of Coastal Banc Holding Company, Inc.; and Chief Executive Officer of
CoastalBanc  Financial  Corp.,  a  wholly-owned subsidiary of the Bank, Houston,
Texas

R.  EDWIN  ALLDAY
Consultant  for  The  Dini Partners, Inc., a company that provides counseling in
philanthropy  and  non-profit  management,  Houston,  Texas

D.  FORT  FLOWERS,  JR.
President  of  Sentinel  Trust  Company,  a  Texas  Limited Banking Association,
providing  fiduciary  and  investment  management services to affluent families,
their  closely  held  corporations  and  foundations,  Houston,  Texas

DENNIS  S.  FRANK
     Chief  Executive  Officer and President of Silvergate Bancorp, a thrift and
loan  holding  company,  and of Silvergate Thrift and Loan, La Mesa, California,
and  President  and  Chief  Executive Officer of DSF Management Corp., a private
investment  company,  Houston,  Texas

PAUL  W.  HOBBY
Chairman  and  Chief  Executive officer of Hobby Media Services, Inc., a Houston
based  corporation which invests in traditional and new media services, Houston,
Texas.

ROBERT  E.  JOHNSON,  JR.
Partner,  law  firm  of  Johnson  &  Johnson,  Austin,  Texas

JAMES  C.  NIVER
Retired,  former  President  of  Century Land Company, a residential real estate
development  company,  Houston,  Texas

CORPORATE  OFFICERS  OF  COASTAL  BANCORP,  INC.

MANUEL  J.  MEHOS
Chairman  of  the  Board,  President  and  Chief  Executive  Officer

CATHERINE  N.  WYLIE
Senior  Executive  Vice  President,  Chief  Financial  Officer, Chief Operations
Officer  and  Treasurer

LINDA  B.  FRAZIER
Senior  Vice  President  and  Secretary


CORPORATE  OFFICERS  OF  COASTAL  BANC  HOLDING  COMPANY,  INC.

MANUEL  J.  MEHOS
Chairman  of  the  Board,  President  and  Chief  Executive  Officer

CATHERINE  N.  WYLIE
Director,  Senior  Executive  Vice  President,  Chief  Financial  Officer, Chief
Operations  Officer  and  Treasurer

LINDA  B.  FRAZIER
Director,  Senior  Vice  President  and  Secretary

LINDA  S.  BUBACZ
Director,  Assistant  Treasurer  and  Assistant  Secretary



<PAGE>
CORPORATE  OFFICERS  OF  COASTAL  BANC  SSB

MANUEL  J.  MEHOS
President  and  Chief  Executive  Officer

GARY  R.  GARRETT
Senior  Executive  Vice  President  -  Chief  Lending  Officer

CATHERINE  N.  WYLIE
Senior  Executive  Vice President - Chief Financial Officer and Chief Operations
Officer

JOHN  D.  BIRD
Executive  Vice  President - Chief Administrative Officer (retired as of January
31,  2000)

DAVID  R.  GRAHAM
Executive  Vice  President  -  Real  Estate  Lending  Group

NANCY  S.  VADASZ
Executive  Vice  President  -  Market  and  Product  Strategies


<PAGE>
                                     COASTAL

                             A HISTORICAL VIEWPOINT

     Coastal  was  acquired  by  an  investor group in 1986 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 the change in ownership), Coastal
had  one  full  service  office and total assets of approximately $10.7 million.

     In May 1988, Coastal became the first acquirer of failed or failing savings
institutions  under  the  Federal  government's  "Southwest  Plan."  In  this
transaction,  Coastal  acquired  from  the  Federal  Savings  and Loan Insurance
Corporation,  as receiver for four insolvent savings associations, 14 additional
branch  offices  and  approximately  $543.4 million of assets and assumed $543.4
million  in  deposits  and other liabilities.  Since completion of the Southwest
Plan  acquisition  and  through  1999,  Coastal  entered  into  seven  branch
acquisitions and one whole bank acquisition:  two with an instrumentality of the
Federal  government  and  six  with  private institutions.  In each transaction,
Coastal  agreed  to acquire certain assets in consideration of the assumption of
certain  deposit liabilities with respect to each institution.  In 1996, Coastal
also  exchanged  three  branches  for one resulting in a net deposit increase of
$26.0  million  and  sold  one  branch  in  separate transactions.  All of these
transactions  resulted in the net assumption of $1.9 billion of deposits and the
net  acquisition  of  58  branch offices.  Coastal has also opened seven de novo
branches  since inception.  Coastal has been able to achieve operating economies
and  improve  efficiency  by  closing  an  aggregate  of  16  branch offices and
transferring  the  deposits  to  other  offices located in the same market area.

     At  December  31,  1999,  Coastal  had  total  assets of approximately $2.9
billion  and total deposits of approximately $1.6 billion with 50 branch offices
in metropolitan Houston, Austin, Corpus Christi, the Rio Grande Valley and small
cities  in  the  southeast  quadrant  of  Texas.

<PAGE>



                          Independent Auditors' Report
                          ----------------------------

The  Board  of  Directors
Coastal  Bancorp,  Inc.:


     We  have  audited  the  accompanying  consolidated  statements of financial
condition  of Coastal Bancorp, Inc. and subsidiaries as of December 31, 1999 and
1998  and  the  related  consolidated  statements  of  operations, comprehensive
income,  stockholders'  equity  and  cash  flows  for  each  of the years in the
three-year  period  ended  December  31,  1999.  These  consolidated  financial
statements  are  the  responsibility  of  the  Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements  based  on  our  audits.

     We  conducted  our  audits  in  accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance  about  whether  the consolidated financial statements are
free  of  material  misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit  also  includes  assessing  the accounting principles used and significant
estimates  made  by  management,  as  well  as  evaluating the overall financial
statement  presentation.  We  believe that our audits provide a reasonable basis
for  our  opinion.

     In  our  opinion,  the  consolidated financial statements referred to above
present  fairly,  in  all  material respects, the financial condition of Coastal
Bancorp,  Inc. and subsidiaries at December 31, 1999 and 1998 and the results of
their  operations  and  their cash flows for each of the years in the three-year
period  ended December 31, 1999 in conformity with generally accepted accounting
principles.




/s/  KPMG  LLP
--------------
January  18,  2000
Houston,  Texas

<PAGE>


<TABLE>
<CAPTION>

                          COASTAL BANCORP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                DECEMBER 31, 1999 AND 1998
                            (IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS                                                                1999        1998
-----------------------------------------------------------------  ----------  ----------
<S>                                                                <C>         <C>
Cash and cash equivalents                                          $   48,098  $   45,453
Loans receivable (Notes 6 and 11)                                   1,735,081   1,538,149
Mortgage-backed securities held-to-maturity (market value of
 $899,934 in 1999 and $1,145,369 in 1998)
 (Notes 5, 11, 12, 14 and 15)                                         917,212   1,154,116
Mortgage-backed securities available-for-sale, at market value
 (Notes 5, 11, 12, 14 and 15)                                          99,665      96,609
U.S. Treasury security held-to-maturity                                   299          --
U.S. Treasury security available-for-sale, at market value                 --       2,016
Accrued interest receivable (Note 7)                                   16,150      15,518
Property and equipment (net of accumulated depreciation and
 amortization of $16,251 in 1999 and $11,925 in 1998)                  30,708      33,116
Stock in the Federal Home Loan Bank of Dallas ("FHLB")                 56,753      49,819
Goodwill (net of accumulated amortization of $16,605 in 1999 and
 $13,554 in 1998)                                                      27,636      30,687
Mortgage servicing rights (Note 8)                                      3,035       4,049
Prepaid expenses and other assets (Notes 9, 15 and 17)                 13,315      12,629
                                                                   ----------  ----------
                                                                   $2,947,952  $2,982,161
                                                                   ==========  ==========
</TABLE>


<TABLE>
<CAPTION>

     LIABILITIES  AND  STOCKHOLDERS'  EQUITY
     ---------------------------------------

<S>                                                                      <C>          <C>
Liabilities:
 Deposits (Note 10)                                                      $1,624,289   $1,705,004
 Advances from the FHLB (Note 11)                                         1,096,931      966,720
 Securities sold under agreements to repurchase (Note 12)                        --      100,000
 Senior Notes payable (Note 13)                                              46,900       50,000
 Advances from borrowers for taxes and insurance                              3,852        3,340
 Other liabilities and accrued expenses                                      13,774       15,583
                                                                         -----------  -----------
   Total liabilities                                                      2,785,746    2,840,647
                                                                         -----------  -----------

Minority interest - 9.0% noncumulative preferred stock of
 Coastal Banc ssb (Note 20)                                                  28,750       28,750

Commitments and contingencies (Notes 6, 15, 18 and 23)

Stockholders' equity (Notes 5, 18, 21 and 22):
 Preferred Stock, no par value; authorized shares 5,000,000;
   9.12% Cumulative, Series A, 1,100,000 shares issued and
   outstanding in 1999                                                       27,500           --
 Common Stock, $.01 par value; authorized shares 30,000,000;
   7,616,227 and 7,568,255 shares issued in 1999 and 1998                        76           76
 Additional paid-in capital                                                  32,683       33,696
 Retained earnings                                                           95,508       88,144
 Accumulated other comprehensive loss -
   net unrealized loss on securities available-for-sale                      (1,848)      (1,374)
 Treasury stock at cost (1,283,679 and 499,600 shares in 1999
   and 1998)                                                                (20,463)      (7,778)
                                                                         -----------  -----------
   Total stockholders' equity                                               133,456      112,764
                                                                         -----------  -----------
                                                                         $2,947,952   $2,982,161
                                                                         ===========  ===========
</TABLE>


See  accompanying  notes  to  Consolidated  Financial  Statements.

<PAGE>

<TABLE>
<CAPTION>
                               COASTAL BANCORP, INC. AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF OPERATIONS
                            YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                (IN THOUSANDS, EXCEPT PER SHARE DATA)

<S>                                                                    <C>       <C>        <C>
                                                                           1999      1998       1997
                                                                       --------  ---------  --------
Interest income:
 Loans receivable                                                      $136,036  $120,281   $106,962
 Mortgage-backed securities                                              63,663    87,596     92,755
 FHLB stock, federal funds sold and other interest-earning assets         3,244     2,937      1,639
                                                                       --------  ---------  --------
                                                                        202,943   210,814    201,356
                                                                       --------  ---------  --------

Interest expense:
 Deposits                                                                64,701    66,128     62,912
 Advances from the FHLB:
   Short-term                                                            15,560    16,042      8,562
   Long-term                                                             35,009    23,511     12,760
 Other borrowed money                                                     5,614    32,723     55,189
 Senior Notes payable                                                     4,773     5,000      5,000
                                                                       --------  ---------  --------
                                                                        125,657   143,404    144,423
                                                                       --------  ---------  --------

   Net interest income                                                   77,286    67,410     56,933
Provision for loan losses (Note 6)                                       10,575     3,100      1,800
                                                                       --------  ---------  --------
   Net interest income after provision for loan losses                   66,711    64,310     55,133
                                                                       --------  ---------  --------

Noninterest income:
 Loan fees and service charges on deposit accounts                        7,890     5,752      4,018
 Loan servicing income, net                                                 680       642      1,406
 Gain on sales of mortgage-backed securities available-for-sale, net         --         1        237
 Writedown of purchased mortgage loan premium                                --      (709)        --
 Other                                                                    1,802     1,186        723
                                                                       --------  ---------  --------
                                                                         10,372     6,872      6,384
                                                                       --------  ---------  --------

Noninterest expense:
 Compensation, payroll taxes and other benefits                          28,771    23,072     18,754
 Office occupancy                                                        11,422     9,320      7,312
 Data processing                                                          3,416     2,695      2,245
 Amortization of goodwill                                                 3,051     2,284      1,840
 Insurance premiums                                                       1,144     1,448      1,091
 Other                                                                   10,006     9,564      8,302
                                                                       --------  ---------  --------
                                                                         57,810    48,383     39,544
                                                                       --------  ---------  --------

     Income before provision for Federal income taxes and minority
       interest                                                          19,273    22,799     21,973

Provision for Federal income taxes (Note 17)                              5,659     3,543      7,822
                                                                       --------  ---------  --------
     Income before minority interest                                     13,614    19,256     14,151

Minority interest - preferred stock dividends of Coastal Banc ssb
 (Note 20)                                                                2,588     2,588      2,588
                                                                       --------  ---------  --------
     Net income                                                        $ 11,026  $ 16,668   $ 11,563
                                                                       ========  =========  ========
     Net income available to common stockholders                       $  9,442  $ 16,668   $ 11,563
                                                                       ========  =========  ========
Basic earnings per share (Note 22)                                     $   1.45  $   2.24   $   1.55
                                                                       ========  =========  ========
Diluted earnings per share (Note 22)                                   $   1.42  $   2.18   $   1.50
                                                                       ========  =========  ========
</TABLE>



See  accompanying  notes  to  Consolidated  Financial  Statements.

<PAGE>
                     COASTAL BANCORP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

<S>                                                           <C>       <C>      <C>
                                                                 1999      1998     1997
                                                              --------  -------  -------

Net income                                                    $11,026   $16,668  $11,563

Other comprehensive income (loss), net of tax:
 Unrealized gains (losses) on securities available-for-sale
   arising during period (Note 5)                                (474)      900      829
                                                              --------  -------  -------

Comprehensive income                                          $10,552   $17,568  $12,392
                                                              ========  =======  =======
</TABLE>



See  accompanying  notes  to  Consolidated  Financial  Statements.


<PAGE>

<TABLE>
<CAPTION>

                                          COASTAL BANCORP, INC. AND SUBSIDIARIES
                                      CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                       YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                                      (IN THOUSANDS)
<S>                                  <C>         <C>      <C>           <C>         <C>              <C>         <C>
                                                                                     Accumulated
                                                          Additional                   other
                                     Preferred   Common    paid-in       Retained    comprehensive    Treasury
                                       Stock      Stock    capital       earnings       loss            stock       Total
                                     ----------  -------  ------------  ----------  ---------------  ----------  ---------

Balance - December 31, 1996          $       --  $    76  $    32,578   $  64,597   $       (3,103)  $      --   $ 94,148
Dividends on Common Stock                    --       --           --      (2,292)              --          --     (2,292)
Exercise of stock options
 (Note 18)                                   --       --          582          --               --          --        582
Change in net unrealized loss
 on securities available-for-sale
 (Note 5)                                    --       --           --          --              829          --        829
Net income for 1997                          --       --           --      11,563               --          --     11,563
                                     ----------  -------  ------------  ----------  ---------------  ----------  ---------

Balance - December 31, 1997                  --       76       33,160      73,868           (2,274)         --    104,830
Dividends on Common Stock                    --       --           --      (2,392)              --          --     (2,392)
Exercise of stock options
 (Note 18)                                   --       --          536          --               --          --        536
Purchase of treasury stock at cost           --       --           --          --               --      (7,778)    (7,778)
Change in net unrealized loss
 on securities available-for-sale
 (Note 5)                                    --       --           --          --              900          --        900
Net income for 1998                          --       --           --      16,668               --          --     16,668
                                     ----------  -------  ------------  ----------  ---------------  ----------  ---------

Balance - December 31, 1998                  --       76       33,696      88,144           (1,374)     (7,778)   112,764
Dividends on Preferred Stock                 --       --           --      (1,584)              --          --     (1,584)
Dividends on Common Stock                    --       --           --      (2,078)              --          --     (2,078)
Issuance of Preferred Stock
 (net) (Note 21)                         27,500       --       (1,558)         --               --          --     25,942
Exercise of stock options
 (Note 18)                                   --       --          545          --               --          --        545
Purchase of treasury stock at cost           --       --           --          --               --     (12,685)   (12,685)
Change in net unrealized loss on
 securities available-for-sale
 (Note 5)                                    --       --           --          --             (474)         --       (474)
Net income for 1999                          --       --           --      11,026               --          --     11,026
                                     ----------  -------  ------------  ----------  ---------------  ----------  ---------
Balance - December 31, 1999          $   27,500  $    76  $    32,683   $  95,508   $       (1,848)  $ (20,463)  $133,456
                                     ==========  =======  ============  ==========  ===============  ==========  =========
</TABLE>



See  accompanying  notes  to  Consolidated  Financial  Statements.


<PAGE>

<TABLE>
<CAPTION>
                             COASTAL BANCORP, INC. AND SUBSIDIARIES
                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                         (IN THOUSANDS)



<S>                                                          <C>         <C>         <C>
                                                                  1999        1998        1997
                                                             ----------  ----------  ----------
Cash flows from operating activities:
 Net income                                                  $  11,026   $  16,668   $  11,563
 Adjustments to reconcile net income to net cash provided
   by operating activities:
 Depreciation and amortization of property and equipment,
   mortgage servicing rights and prepaid expenses
   and other assets                                              9,916       9,099       7,485
 Net premium amortization                                        1,435       3,101       3,025
 Provision for loan losses                                      10,575       3,100       1,800
 Amortization of goodwill                                        3,051       2,284       1,840
 Originations and purchases of mortgage loans held for sale     (8,543)    (26,536)     (8,063)
 Sales of mortgage loans held for sale                           8,190      26,287       8,361
 Gain on sales of mortgage-backed securities
   available-for-sale                                               --          (1)       (237)
 Decrease (increase) in:
   Accrued interest receivable                                    (632)      1,863        (123)
   Other, net                                                   (1,661)        104       9,668
 Stock dividends from the FHLB                                  (2,847)     (2,247)     (1,287)
                                                             ----------  ----------  ----------

   Net cash provided by operating activities                    30,510      33,722      34,032
                                                             ----------  ----------  ----------

Cash flows from investing activities:
 Purchases of mortgage-backed securities held-to-maturity       (3,080)     (8,203)    (56,136)
 Purchase of mortgage-backed securities available-for-sale     (26,489)         --          --
 Purchase of U.S. Treasury security held-to-maturity              (299)         --          --
 Principal repayments on mortgage-backed securities
   held-to-maturity                                            240,417     199,052      55,549
 Principal repayments on mortgage-backed securities
   available-for-sale                                           22,711      26,206         627
 Proceeds from maturity of U.S. Treasury securities
   available-for-sale                                            2,000      25,000          11
 Proceeds from sales of mortgage-backed securities
   available-for-sale                                               --      48,551      11,545
 Purchases of loans receivable                                (387,204)   (329,058)   (135,202)
 Net decrease in loans receivable                              173,582     218,357      94,670
 Purchases of property and equipment, net                       (2,674)     (4,401)     (9,825)
 Purchase of FHLB stock                                         (5,779)    (19,771)     (9,543)
 Proceeds from sales of FHLB stock                               1,692          --       9,000
 Capitalization of mortgage servicing rights                        --          --        (116)
 Cash and cash equivalents received in business combination
   transactions                                                     --     120,085      52,093
                                                             ----------  ----------  ----------
   Net cash provided by investing activities                    14,877     275,818      12,673
                                                             ----------  ----------  ----------
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                     COASTAL BANCORP, INC. AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
                                                 (IN THOUSANDS)

<S>                                                                    <C>           <C>           <C>
                                                                              1999          1998           1997
                                                                       ------------  ------------  -------------
Cash flows from financing activities:
 Net decrease (increase) in deposits                                   $   (80,505)  $   (25,399)  $      9,539
 Advances from the FHLB                                                  8,079,744     4,297,136      3,560,603
 Principal payments on advances from the FHLB                           (7,949,533)   (3,870,891)    (3,429,848)
 Proceeds from securities sold under agreements to repurchase
   and   federal funds purchased                                           319,340     3,958,111      9,834,639
 Repayments of securities sold under agreements to repurchase
   and federal funds purchased                                            (419,340)   (4,649,871)   (10,009,866)
 Proceeds from issuance of Preferred Stock, net                             25,942            --             --
 Exercise of stock options for purchase of Common Stock                        545           536            582
 Purchase of treasury stock                                                (12,685)       (7,778)            --
 Dividends paid                                                             (3,662)       (2,392)        (2,292)
 Repurchase of Senior Notes payable                                         (3,100)           --             --
 Net increase (decrease) in advances from borrowers for taxes
   and insurance                                                               512          (635)          (701)
                                                                       ------------  ------------  -------------
   Net cash used in financing activities                                   (42,742)     (301,183)       (37,344)
                                                                       ------------  ------------  -------------

   Net increase in cash and cash equivalents                                 2,645         8,357          9,361
 Cash and cash equivalents at beginning of year                             45,453        37,096         27,735
                                                                       ------------  ------------  -------------
 Cash and cash equivalents at end of year                              $    48,098   $    45,453   $     37,096
                                                                       ============  ============  =============

 Supplemental schedule of cash flows:
   Interest paid                                                       $   126,069   $   140,620   $    142,532
   Income taxes paid                                                         7,812         6,980          2,466
                                                                       ============  ============  =============

 Supplemental schedule of noncash investing and financing activities:
   Foreclosures of loans receivable                                    $     4,398   $     4,178   $      4,226
                                                                       ============  ============  =============

</TABLE>


See  accompanying  notes  to  Consolidated  Financial  Statements.

<PAGE>

                     COASTAL BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998

(1)          ORGANIZATION  AND  BACKGROUND

ORGANIZATION

Coastal  Bancorp,  Inc.  was  incorporated  on  March  8,  1994  as a first-tier
subsidiary of Coastal Banc Savings Association (the "Association") in connection
with  the  proposed  reorganization  of the Association into the holding company
form  of  organization.  The  reorganization of the Association into the holding
company  form of organization occurred on July 29, 1994.  In addition, effective
July 29, 1994, the Association converted to a Texas-chartered savings bank known
as  Coastal  Banc ssb.  As a result of the reorganization, Coastal Bancorp, Inc.
("Bancorp")  became  the  owner of 100% of the voting stock of Coastal Banc ssb.
The  holders  of the 9.0% Noncumulative Preferred Stock, Series A, of the former
Coastal  Banc  Savings Association now own an equal number of shares of the 9.0%
Noncumulative  Preferred  Stock,  Series  A,  of  Coastal  Banc  ssb.

On November 30, 1996, Coastal Banc Holding Company, Inc. ("HoCo") was created as
a  Delaware unitary savings bank holding company in accordance with the terms of
an agreement and plan of reorganization dated August 19, 1996 (the "Agreement").
Pursuant  to  the terms of the Agreement, Coastal Banc ssb became a wholly-owned
subsidiary  of  HoCo  and  HoCo  became  a  wholly-owned  subsidiary of Bancorp.

The  reorganizations  were  accounted  for  in  a  manner  similar  to  that  in
pooling-of-interests  accounting  and  all  financial  statements  issued  after
consummation of the reorganization reflect the consolidated operations as if the
reorganization had taken place prior to the periods covered by such consolidated
financial  statements.

BACKGROUND

Coastal  Banc ssb was acquired by an investor group in 1986 as a vehicle to take
advantage  of  the  failures  and  consolidation in the Texas banking and thrift
industries.  Coastal Banc ssb acquired deposits in transactions with the federal
government  and  other  private institutions as a base for developing an ongoing
thrift  and  banking business.  Coastal Banc ssb's first acquisition was in 1988
under  the  Federal Savings and Loan Insurance Corporation's ("FSLIC") Southwest
Plan,  whereby  the  FSLIC  provided  financial and other forms of assistance in
connection  with  the  acquisition  of insolvent FSLIC-insured institutions (the
"Acquired  Associations").

Coastal  Banc  ssb is a broad-based financial services provider to consumers and
businesses.  At  December  31, 1999, Coastal Banc ssb operated 50 branch offices
in metropolitan Houston, Austin, Corpus Christi, the Rio Grande Valley and small
cities  in  the  southeast  quadrant  of  Texas.

(2)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  AND  BASIS  OF  PRESENTATION

The  following  significant  accounting  policies, together with those disclosed
elsewhere  in  the  Consolidated  Financial  Statements  or  notes  thereto, are
followed  by  Coastal Bancorp, Inc. and subsidiaries in preparing and presenting
the  consol-idated  financial  statements.


<PAGE>

BASIS  OF  CONSOLIDATED  FINANCIAL  STATEMENTS
The  consolidated  financial statements include the accounts of Coastal Bancorp,
Inc.,  its  wholly-owned  subsidiary,  HoCo  and  its wholly-owned subsidiaries,
Coastal  Banc ssb and subsidiary, CoastalBanc Financial Corp. (collectively, the
"Bank"),  and  Coastal  Banc  Capital  Corp.  (collectively,  "Coastal").  All
significant  intercompany  balances  and  transactions  have  been eliminated in
consolidation.

On  April 23, 1998, Coastal declared a 3:2 stock split that was paid on June 15,
1998 to stockholders of record on May 15, 1998.  All common stock share data has
been  adjusted  to  include  the  effect  of  the  stock  split.

Certain  amounts  within  the accompanying consolidated financial statements and
the  related  notes  have  been  reclassified  to  conform  to  the current year
presentation.  Such  reclassifications  had  no  effect  on  net income or total
stockholders'  equity.

USE  OF  ESTIMATES

The  preparation  of  the  consolidated  financial statements in conformity with
generally  accepted  accounting principles requires management to make estimates
and  assumptions  that affect the reported amounts of assets and liabilities and
disclosure  of contingent assets and liabilities at the date of the consolidated
financial  statements and the reported amounts of income and expenses during the
reporting  period.  Actual  results  may  differ  from  those  estimates.

CASH  AND  CASH  EQUIVALENTS

Cash  and  cash  equivalents  are  comprised  primarily  of  cash  on  hand  and
interest-earning  and  noninterest-earning  deposits  in  other  banks.

LOANS  RECEIVABLE

Loans  receivable  are  stated at the principal balance outstanding adjusted for
loans in process, the allowance for loan losses, unearned interest and loan fees
and  the  premium on purchased loans.  Interest on loans receivable is primarily
computed  on the outstanding principal balance at appropriate rates of interest.
The  net  premium  on  purchased  loans is being amortized using the level yield
method,  adjusted  for  prepayments.

It  is  the general policy of Coastal to stop accruing interest income and place
the  recognition of interest on a cash basis when any loan is past due more than
90  days as to principal and interest.  When a loan is placed on nonaccrual, any
interest  previously  accrued  but  not  collected  is  reversed against current
interest  income.

Coastal considers a loan to be impaired when, based upon current information and
events,  it  is  probable that Coastal will be unable to collect all amounts due
according  to  the  contractual  terms  of  the  loan agreement.  In determining
impairment,  Coastal  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.  Coastal  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.

ALLOWANCE  FOR  LOAN  LOSSES

The allowance for loan losses is maintained at a level determined to be adequate
by  management  to  absorb probable losses on loans receivable.  The adequacy of
the  allowance  is  based  on  management's  evaluation  of the loans receivable
portfolio  and  its consideration of such factors as historical loss experience,
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 and the estimated net realizable value of
the  underlying  collateral.  While  management  uses  available  information to
estimate  losses  on  loans receivable, future additions to the allowance may be
necessary  based  on  changes  in  economic  conditions.  In  addition,  various
regulatory  agencies,  as  an  integral  part  of  their  examination  process,
periodically  review  Coastal's  allowance  for  loan losses.  Such agencies may
require Coastal to recognize additions to the allowance based on their judgments
about  information  available  to  them  at  the  time  of  their  examination.

SALES  OF  LOANS  RECEIVABLE

Loans  are  sold  periodically  to  institutional  and  private investors.  When
Coastal sells whole mortgage loans, gains or losses on such sales are recognized
at  the  time  of  sale  and  are determined by the difference between net sales
proceeds  and  the  unpaid principal balance of the loans sold, adjusted for any
yield  differential,  servicing  fees  and  servicing costs applicable to future
years.   Coastal  continues to collect loan payments and provide normal services
to  the  borrower  under  loan  servicing agreements with the investors on those
loans  sold  with  servicing  retained.  The  investor  is paid its share of the
principal  and  interest  collected,  net  of a service fee retained by Coastal.

MORTGAGE  LOANS  HELD  FOR  SALE

Mortgage  loans  held  for  sale  are  carried at the lower of cost or market as
determined  by outstanding commitments from investors or current investor market
yield  requirements  calculated  on  the  aggregate  loan  basis.

LOAN  FEES

Loan origination and commitment fees, as well as certain direct loan origination
and  commitment  costs, are deferred and amortized into income over the lives of
the  related  loans using the level yield method.  When the loans receivable are
paid  off  or  sold,  the  remaining  loan fees are recognized as income in that
period.

INVESTMENT  AND  MORTGAGE-BACKED  SECURITIES

Coastal  classifies securities as either held-to-maturity, available-for-sale or
trading.  Securities  are  classified  as  held-to-maturity when Coastal has the
positive  intent  and  ability  to hold such securities to maturity.  Securities
held-to-maturity  are recorded at amortized cost.  Securities available-for-sale
are  securities other than those held-to-maturity or trading 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  classified  as
available-for-sale  are  recorded  in  earnings in the year of sale based on the
specific  identification  of  each  individual  security  sold.

Coastal records investment and mortgage-backed securities transactions as of the
settlement  date.  There were no pending transactions as of December 31, 1999 or
1998.

Premiums  and  discounts  on  investment  and  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.

PROPERTY  AND  EQUIPMENT

Property  and  equipment  are recorded at cost less accumulated depreciation and
amortiza-tion.  Coastal  computes  depreciation  and  amortization  on  a
straight-line  basis  over the estimated useful lives (15-30 years for buildings
and  3-10  years  for  furniture  and  equip-ment)  of  the  respective  assets.
Leasehold improvements are amortized on a straight-line basis over the lesser of
the  terms  of the respective lease or the estimated useful lives of the related
assets.

<PAGE>

STOCK  IN  THE  FEDERAL  HOME  LOAN  BANK  OF  DALLAS

As  a  member  of  the FHLB System, Coastal is required to purchase and maintain
stock  in  the  FHLB  in  an  amount equal to the greater of 1% of the aggregate
unpaid balance of loans and securities secured by single family and multi-family
properties,  .3%  of  total assets, or 5% of total FHLB advances.  FHLB stock is
redeemable  at  par  value  at  the  discretion  of  the  FHLB.

GOODWILL

Goodwill  resulting from acquisitions is amortized on a straight-line basis over
the estimated period of benefit, not to exceed fifteen years.  Coastal evaluates
the  recorded  goodwill  amounts for impairment on an ongoing basis to determine
whether  events  and  circumstances  have developed that warrant revision of the
estimated  benefit  periods.

MORTGAGE  SERVICING  RIGHTS

On  January  1,  1997,  Coastal  adopted  Financial Accounting Standards Board's
Statement  No.  125, "Accounting for Transfers and Servicing of Financial Assets
and  Extinguishment of Liabilities" which requires, among other things, that the
book  value  of  loans  be  allocated  between mortgage servicing rights and the
related  loans  at  the time of the loan sale or securitization, if servicing is
retained.

The  amount  capitalized as mortgage servicing rights is amortized in proportion
to,  and  over  the  period  of,  estimated  net  servicing  revenues.  Coastal
periodically  evaluates  the carrying value of the mortgage servicing rights for
impairment  based on the fair value of those rights.  The fair value of mortgage
servicing rights is determined by discounting the present value of the estimated
future  net servicing revenues using a discount rate commensurate with the risks
involved  based  on  management's  best  estimate of remaining loan lives.  This
method  of valuation incorporates assumptions that market participants would use
in  their estimate of future servicing income and expense, including assumptions
about  prepayments,  defaults  and  interest  rates.  For  purposes of measuring
impairment, the loans underlying the mortgage servicing rights are stratified on
the  basis  of  interest  rate  and  type  (fixed or adjustable).  The amount of
impairment  is  the  amount  by  which  the  mortgage  servicing  rights, net of
accumulated  amortization,  exceed  their  fair value by strata.  Impairment, if
any,  is  recognized  through  a  valuation  allowance  and  a charge to current
operations.

REAL  ESTATE  OWNED

Real  estate  owned  represents  real estate acquired through foreclosure and is
initially  recorded  at  the  lower of unpaid principal balance adjusted for any
acquisition  premiums  or  discounts  remaining  less  any  applicable valuation
allowance  or  estimated fair value 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.

FEDERAL  INCOME  TAXES

Bancorp  files  a consolidated federal income tax return with HoCo, Coastal Banc
Capital  Corp. and the Bank.  Federal income taxes are allocated on the basis of
each  entity's  contribution  to  consolidated  taxable  income.

Income  taxes  are accounted for under the asset and liability method.  Deferred
tax  assets  and  liabilities  are  recognized  for  the future tax consequences
attributable  to differences between the financial statement carrying amounts of
existing  assets  and  liabilities and their respective tax bases.  Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.  The effect on deferred tax assets and liabilities of a
change  in  tax  rates  is  recognized in income in the period that includes the
enactment  date.


<PAGE>
OFF-BALANCE  SHEET  INSTRUMENTS  USED  FOR  INTEREST  RATE  RISK  MANAGEMENT

Coastal  enters  into  interest  rate  swap  and  cap  agreements  to manage its
sensitivity  to  interest rate risk.  For interest rate risk management swap and
cap agreements, interest income or interest expense is accrued over the terms of
the  agreements  and  transaction  fees  are  deferred and amortized to interest
income or expense over the terms of the agreements.  The fair values of interest
rate  swap  and  cap  agreements  used for interest rate risk management are not
recognized  in  the  consolidated  financial  statements.

STOCK  OPTIONS

Prior  to January 1, 1996, Coastal accounted for its stock compensation programs
in accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current  market  price  of the underlying stock exceeded the exercise price.  On
January  1,  1996,  Coastal  adopted  the Financial Accounting Standards Board's
Statement  No. 123 ("Statement 123"), "Accounting for Stock-Based Compensation,"
which  permits entities to recognize as expense over the vesting period the fair
value  on the date of grant of all stock-based awards.  Alternatively, Statement
123  also allows entities to continue to apply the provisions of APB Opinion No.
25 and provide pro forma net income and pro forma earnings per share disclosures
for  employee  stock  option  grants  made  in  1995  and future years as if the
fair-value  based method defined in Statement 123 had been applied.  Coastal has
elected  to  continue  to apply the provisions of APB Opinion No. 25 and provide
the  pro  forma  disclosure  provisions  of  Statement  123.

EARNINGS  PER  SHARE

Basic  earnings per share ("EPS") is calculated by dividing net income available
to  common  stockholders,  by  the  weighted  average  number  of  common shares
outstanding  during  the  period.  The  computation  of  diluted EPS assumes the
issuance  of  common shares for all dilutive-potential common shares outstanding
during the reporting period.  The dilutive effect of stock options is considered
in earnings per share calculations if dilutive, using the treasury stock method.

CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS

For purposes of reporting cash flows, cash and cash equivalents include cash and
amounts  due  from  depository  institutions.

RECENT  ACCOUNTING  PRONOUNCEMENTS

As  of  January  1,  1998,  Coastal  adopted  Statement  of Financial Accounting
Standards  No.  130,  "Reporting  Comprehensive  Income" ("Statement 130") which
requires  that  all  components  of comprehensive income and total comprehensive
income  be  reported  on one of the following:  (1) the statement of operations,
(2)  the  statement  of  stockholders'  equity,  or  (3) a separate statement of
comprehensive  income.  Comprehensive  income is comprised of net income and all
changes  to  stockholders'  equity,  except  those  due to investments by owners
(changes  in  paid-in  capital)  and distributions to owners (dividends).  These
amounts  have  been  disclosed  on  the consolidated statements of comprehensive
income.  Statement  130  did  not  change  the  current accounting treatment for
components of other comprehensive income (i.e. changes in unrealized gain (loss)
on  securities  available-for-sale).

As  of  January  1,  1998,  Coastal  adopted  Statement  of Financial Accounting
Standards  No.  131,  "Disclosure  About  Segments  of an Enterprise and Related
Information" ("Statement 131") which requires public companies to report certain
information  about their operating segments in their annual financial statements
and quarterly reports issued to shareholders.  It also requires public companies
to  report certain information about their products and services, the geographic
areas  in  which they operate, and their major customers.  The implementation of
Statement 131 did not have a material effect on Coastal's Consolidated Financial
Statements.  Coastal did not identify any reportable operating segments based on
the  requirements  of  Statement  131.

     The  Financial  Accounting  Standards  Board  ("FASB")  Statement  No. 137,
"Accounting  for Derivative Instruments and Hedging Activities - Deferral of the
Effective  Date  of  FASB  Statement No. 133, an Amendment of FASB Statement No.
133"  ("Statement  137")  was  issued  in  June  1999.  Statement 137 defers the
effective date of FASB Statement 133, "Accounting for Derivative Instruments and
Hedging  Activities" ("Statement 133") for one year.  Statement 133, as amended,
is  now  effective  for  all fiscal quarters of all fiscal years beginning after
June  15,  2000.  Statement  133 generally requires that derivatives embedded in
hybrid  instruments  be separated from their host contracts and be accounted for
separately  as  derivative  contracts.  For  instruments existing at the date of
adoption,  Statement  133  provides  an  entity  the option of not applying this
provision to such hybrid instruments entered into before January 1, 1998 and not
substantially  modified  thereafter.  Consistent  with  the  deferral  of  the
effective  date for one year, Statement 137 provides an entity the option of not
applying  this  provision  to  hybrid instruments entered into before January 1,
1998  or 1999 and not substantially modified thereafter.  Upon implementation of
Statement  133,  hedging  relationships  may  be  redesignated  and  securities
held-to-maturity  may  be transferred to available-for-sale or trading.  Coastal
is  evaluating  the  impact,  if  any,  Statement  133  may  have  on its future
consolidated  financial  statements.


(3)     ACQUISITION  TRANSACTIONS

1998  BRANCH  ACQUISITION

     On  August  14,  1998,  Coastal  completed  the  acquisition  of the Valley
branches  of Pacific Southwest Bank, also known as The San Benito Bank and Trust
Company, a unit of Pacific Southwest Bank. Twelve branches located in Harlingen,
San  Benito,  Mission,  Pharr,  Edinburg,  Brownsville,  McAllen and South Padre
Island  were  acquired in this transaction.  Summarized below are the assets and
liabilities  recorded  at  fair value at the date of acquisition (in thousands):

<TABLE>
<CAPTION>

<S>                                          <C>
Cash and cash equivalents                    $120,085
Loans receivable                              176,157
U.S. Treasury securities available-for-sale    26,942
Goodwill                                       17,254
Property and equipment                         10,743
Other assets                                    5,438
                                             --------
  Total assets                               $356,619
                                             ========

Deposits                                     $355,425
Other liabilities and accrued expenses          1,194
                                             --------
  Total liabilities                          $356,619
                                             ========
</TABLE>





<PAGE>
PORT  ARTHUR  BRANCH  ACQUISITION

On  June  21,  1997,  Coastal consummated the purchase of the Port Arthur, Texas
branch  of  Wells  Fargo  Bank  (Texas).  Summarized  below  are  the assets and
liabilities  recorded  at  fair  value  at  the  date  of  the  acquisition  (in
thousands):

<TABLE>
<CAPTION>

<S>                                     <C>
Cash and cash equivalents               $52,093
Goodwill                                  1,961
Property and equipment                      693
                                        -------
  Total assets                          $54,747
                                        =======

Deposits                                $54,563
Other liabilities and accrued expenses      184
                                        -------
  Total liabilities                     $54,747
                                        =======
</TABLE>



The  acquisitions  described  above  have  been  accounted for as purchases and,
accordingly,  all  assets and liabilities acquired were adjusted to and recorded
at  estimated  fair  values  as  of  the  acquisition  dates.

The  transactions described above are not material to the consolidated financial
position or results of operations of Coastal; therefore pro forma information is
not  presented.

(4)     SECURITIES  PURCHASED  UNDER AGREEMENTS TO RESELL AND FEDERAL FUNDS SOLD
An  analysis  of  securities  purchased  under agreements to resell ("repurchase
agreements")  and federal funds sold for the years ended December 31, 1999, 1998
and  1997  is  as  follows  (dollars  in  thousands):

<TABLE>
<CAPTION>

<S>                                     <C>       <C>       <C>
                                           1999      1998      1997
                                        --------  --------  --------
Repurchase agreements:
  Balance outstanding at December 31,   $    --   $    --   $    --
  Maximum outstanding at any month-end       --        --        --
  Average balance outstanding                --       671     1,973
  Average interest rate                      --%     5.66%     6.89%

Federal funds sold:
  Balance outstanding at December 31,   $    --   $    --   $    --
  Maximum outstanding at any month-end   18,500    28,500    10,500
  Average balance outstanding             5,353     7,320     2,051
  Average interest rate                    5.04%     5.36%     5.61%
</TABLE>


The  securities underlying the repurchase agreements are delivered by entry into
Coastal's  account  maintained  at a third-party custodian designated by Coastal
under  a  written  custodial  agreement  that  explicitly  recognizes  Coastal's
interest  in  the  securities.


<PAGE>
(5)     MORTGAGE-BACKED  SECURITIES

     Mortgage-backed  securities  at  December  31,  1999  are  as  follows  (in
thousands):

<TABLE>
<CAPTION>

<S>                    <C>         <C>          <C>           <C>
                                   Gross        Gross
                       Amortized   Unrealized   Unrealized    Market
                       Cost        Gains        Losses        Value
                       ----------  -----------  ------------  --------
Held-to-maturity:
REMICS - Agency        $  657,305  $     2,560  $   (13,224)  $646,641
REMICS - Non-agency       180,163           41       (4,094)   176,110
FNMA certificates          56,068            9       (2,306)    53,771
GNMA certificates          16,129           --          (89)    16,040
Non-agency securities       7,547           --         (175)     7,372
                       ----------  -----------  ------------  --------
                       $  917,212  $     2,610  $   (19,888)  $899,934
                       ==========  ===========  ============  ========
</TABLE>



<TABLE>
<CAPTION>

<S>                  <C>       <C>  <C>       <C>
Available-for-sale:
REMICS - Agency          $ 77,343          $--      $(2,400)   $74,943
REMICS - Non-agency           372           --           (4)       368
GNMA certificates          24,792           --         (438)    24,354
                         --------   ----------      --------   -------
                         $102,507          $--      $(2,842)   $99,665
                         ========   ==========      ========   =======
</TABLE>


     Mortgage-backed  securities  at  December  31,  1998  are  as  follows  (in
thousands):

<TABLE>
<CAPTION>

<S>                       <C>         <C>          <C>           <C>
                                      Gross        Gross
                          Amortized   Unrealized   Unrealized    Market
                          Cost        Gains        Losses        Value
                          ----------  -----------  ------------  ----------
Held-to-maturity:
REMICS - Agency           $  839,593  $     3,770  $   (10,349)  $  833,014
REMICS - Non-agency          218,500          598       (2,186)     216,912
FNMA certificates             63,199          147         (810)      62,536
GNMA certificates             21,311           16          (23)      21,304
Non-agency securities         11,512          113          (23)      11,602
Interest-only securities           1           --           --            1
                          ----------  -----------  ------------  ----------
                          $1,154,116  $     4,644  $   (13,391)  $1,145,369
                          ==========  ===========  ============  ==========
</TABLE>



<TABLE>
<CAPTION>

<S>                         <C>       <C>         <C>            <C>
Available-for-sale:
REMICS - Agency              $97,695          $--      $(2,115)     $95,580
REMICS - Non-agency            1,037           --           (8)       1,029
                          ----------  -----------  ------------  ----------
                             $98,732          $--      $(2,123)     $96,609
                          ==========  ===========  ============  ==========
</TABLE>


Proceeds from sales of mortgage-backed securities available-for-sale during 1998
and  1997  were  $48.6  million and $11.5 million, respectively.  Gross gains of
$26,000  and  $237,000  were  realized on these sales in 1998 and 1997 and gross
losses  of  approximately  $25,000  were realized on these sales in 1998.  There
were  no  sales  of  mortgage-backed  securities available-for-sale during 1999.

A  portion  of  Coastal's  mortgage-backed  securities  portfolio  is pledged as
collateral  to  secure  advances  from  the  FHLB  (Note  11).


<PAGE>
(6)     LOANS  RECEIVABLE

     Loans  receivable  at  December  31,  1999  and  1998  are  as  follows (in
thousands):

<TABLE>
<CAPTION>

<S>                                                     <C>          <C>
                                                            1999         1998
                                                        -----------  -----------
Real estate mortgage loans:
 First lien mortgage, primarily residential             $  836,005   $  690,510
 Multifamily                                               163,059      119,447
 Residential construction                                  136,675      115,714
 Acquisition and development                               103,357       75,932
 Commercial                                                314,292      257,723
 Commercial construction                                    65,934       40,344
Commercial loans, secured by residential mortgage
 loans held for sale                                        60,372      173,124
Commercial loans, secured by mortgage servicing rights          --        3,867
Commercial, financial and industrial                       100,195       92,218
Loans secured by savings deposits                           13,094       13,164
Consumer and other loans                                    63,383       66,989
                                                        -----------  -----------
                                                         1,856,366    1,649,032
Loans in process                                          (108,561)     (99,790)
Allowance for loan losses                                  (10,493)     (11,358)
Unearned interest and loan fees                             (2,947)      (3,493)
Premium on purchased loans, net                                716        3,758
                                                        -----------  -----------
                                                        $1,735,081   $1,538,149
                                                        ===========  ===========
Weighted average yield                                        8.67%        8.55%
                                                        ===========  ===========
</TABLE>



In  the  normal  course  of  business,  Coastal enters into various transactions
which,  in  accordance  with  generally  accepted accounting principles, are not
included  on  the  balance  sheets.  These  transactions  are  referred  to  as
"off-balance sheet commitments."  Coastal enters into these transactions to meet
the financing needs of its customers.  These transactions include commitments to
extend  credit  which  involve  elements of credit risk in excess of the amounts
recognized  in the balance sheets.  Coastal minimizes its exposure to loss under
these  commitments  by  subjecting  them  to  credit  approval  and  monitoring
procedures.

Coastal  enters  into  contractual  commitments  to extend credit, normally with
fixed  expiration  dates  or  termination  clauses,  at  specified rates and for
specific  purposes.  Customers  use credit commitments to ensure that funds will
be  available  for  working  capital  purposes,  for capital expenditures and to
ensure  access to funds under specified terms and conditions.  Substantially all
of  Coastal's  commitments  to  extend  credit  are  contingent  upon  customers
maintaining  specific  credit standards at the time of loan funding.  Management
assesses the credit risk associated with certain commitments to extend credit in
determining  the  level  of  the  allowance  for  loan  losses.

At  December  31,  1999,  Coastal  had  outstanding  commitments to originate or
purchase approximately $106.6 million of first lien mortgage and other loans and
had  commitments  under  lines of credit to originate primarily construction and
other loans of approximately $146.6 million.  In addition, at December 31, 1999,
Coastal  had  letters  of  credit  of  approximately  $7.2  million outstanding.

A  portion  of  Coastal's  first  lien  mortgage  loan  portfolio  is pledged as
collateral  to  secure  advances  from  the  FHLB  (Note  11).

Included  in  loans  receivable at December 31, 1999 and 1998 are loans totaling
approximately  $14.7  million  and  $22.8  million,  respectively,  which are on
nonaccrual  (loans  which  are  90  days  or  more  delinquent  or  on which the
collection of interest is considered doubtful).  During the years ended December
31,  1999, 1998 and 1997, Coastal recognized interest income on these nonaccrual
loans (outstanding as of the period end) of approximately $571,000, $480,000 and
$827,000,  respectively,  whereas approximately $778,000, $835,000 and $925,000,
respectively,  in  additional  interest  income would have been recorded if such
loans  had  been  performing  in  accordance  with  their  original  terms.

At  December  31,  1999  and  1998,  the  carrying  value  of impaired loans was
approximately  $2.0  million  and  $1.7  million,  respectively, and the related
allowance for loan losses on those impaired loans totaled $778,000 and $880,000,
respectively.  The  average  recorded  investment  in  impaired loans during the
years  ended  December  31, 1999, 1998 and 1997 was approximately $10.6 million,
$1.7 million and $897,000, respectively.  For the years ended December 31, 1999,
1998  and  1997,  Coastal  did not recognize interest income on loans considered
impaired.

An  analysis  of  activity  in  the  allowance for loan losses is as follows (in
thousands):

<TABLE>
<CAPTION>
                                   Years ended December 31,

<S>                             <C>        <C>       <C>
                                    1999      1998      1997
                                ---------  --------  --------
Balance, beginning of year      $ 11,358   $ 7,412   $ 6,880
Provision for loan losses         10,575     3,100     1,800
Charge-offs                      (11,830)   (1,693)   (1,416)
Recoveries                           390       282       148
Allowance of acquired entities        --     2,257        --
                                ---------  --------  --------

Balance, end of year            $ 10,493   $11,358   $ 7,412
                                =========  ========  ========
</TABLE>



On  August  11,  1998,  Coastal  approved  the  purchase  of  a  $10.0  million
participation  in  a  warehouse  loan aggregating $25.0 million to MCA Financial
Corp.,  and  certain  of  its  affiliates, of Southfield, Michigan (collectively
"MCA").  The  lead lender ("Lead Lender") in this facility is a major commercial
bank  and  the  loan  is secured by subprime residential loans.  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,  who  has  been  appointed the "debtor-in-possession," to allow the
conservator time to develop a plan of reorganization while protecting the assets
of  MCA.

Effective  December  31,  1998,  Coastal  placed this loan on nonaccrual and had
allocated  $1.5  million  of  the  general allowance to this loan.  During 1999,
based  on  updated information received, management made the decision to provide
for  and charge-off the remaining balance of the loan.  Throughout 1999, Coastal
worked with the Lead Lender and the bankruptcy trustee to determine the value of
and  sell  the  underlying  collateral.  As  of  December  31, 1999, Coastal had
received  only  $1.1  million  in  proceeds  from the MCA loan.  In addition, on
January  12,  2000,  Coastal  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,  Coastal charged-off the remaining $8.9
million  balance  of  this loan in 1999.  Coastal will continue to work with the
Lead  Lender  and the bankruptcy trustee to recover any funds, if possible, from
the  collateral  or  MCA.

During  1999,  Coastal  purchased  approximately $10.1 million of the underlying
loans  securing  a  $13.2 million warehouse and servicing rights line of credit.
Coastal  is currently servicing the purchased loans and has recorded these loans
as  part  of the loans receivable portfolio at December 31, 1999.  The remaining
balance  on this warehouse and servicing rights line of $990,000 was charged-off
in  1999.

(7)     ACCRUED  INTEREST  RECEIVABLE

Accrued  interest  receivable  at  December  31, 1999 and 1998 is as follows (in
thousands):

<TABLE>
<CAPTION>

<S>                                      <C>      <C>
                                            1999     1998
                                         -------  -------
Loans receivable                         $11,831  $10,088
Mortgage-backed securities                 4,305    5,383
FHLB stock, federal fund sold and other
  interest-earning assets                     14       47
                                         -------  -------

                                         $16,150  $15,518
                                         =======  =======
</TABLE>



(8)     MORTGAGE  SERVICING  RIGHTS

Coastal  services  loans  receivable  for  others  which are not included in the
consolidated  financial  statements.  The  total  amounts  of  such  loans  were
approximately  $407.9 million, $519.2 million and $675.7 million at December 31,
1999,  1998  and  1997,  respectively.  At  December  31, 1999 and 1998, Coastal
serviced  approximately  $988,000  and $1.4 million of loans sold with recourse,
respectively.

An  analysis  of  activity  of  mortgage  servicing  rights  for the years ended
December  31,  1999,  1998  and  1997  is  as  follows  (in  thousands):

<TABLE>
<CAPTION>

                               Years ended December 31,
<S>                         <C>       <C>       <C>
                               1999      1998      1997
                            --------  --------  --------
Balance, beginning of year  $ 4,049   $ 5,653   $ 6,810
Additions                        --        --       116
Amortization                 (1,014)   (1,604)   (1,273)
                            --------  --------  --------
Balance, end of year        $ 3,035   $ 4,049   $ 5,653
                            ========  ========  ========
</TABLE>



At  December 31, 1999, the estimated fair value of Coastal's recognized mortgage
servicing  rights was $5.5 million and no valuation allowance for impairment was
considered  necessary.

(9)     REAL  ESTATE  OWNED

Included  in  prepaid expenses and other assets is real estate owned at December
31,  1999 and 1998 of approximately $4.3 million and $4.9 million, respectively.


<PAGE>
(10)     DEPOSITS

Deposits  and  the  related weighted average interest rates at December 31, 1999
and  1998  are  summarized  as  follows  (dollars  in  thousands):

<TABLE>
<CAPTION>
                                            1999                        1998
                               ---------------------------  ---------------------------
                                Stated Rate      Amount      Stated Rate      Amount
                               --------------  -----------  --------------  -----------
<S>                            <C>             <C>          <C>             <C>
Noninterest-bearing checking            0.00%  $   97,146            0.00%  $   95,398
Interest-bearing checking      0.75  -  1.75       65,229   1.00  -  2.00       63,067
Savings accounts               1.49  -  2.75       46,011   1.98  -  2.75       48,571
Money market demand accounts   0.00  -  4.65      331,082   0.00  -  4.51      339,481
                                               -----------                  -----------
                                                  539,468                      546,517
                                               -----------                  -----------
Certificate accounts           2.00  -  2.99          461   2.00  -  2.99        6,538
                               3.00  -  3.99       23,288   3.00  -  3.99       38,614
                               4.00  -  4.99      446,746   4.00  -  4.99      272,325
                               5.00  -  5.99      543,980   5.00  -  5.99      747,585
                               6.00  -  6.99       62,363   6.00  -  6.99       83,277
                               7.00  -  7.99        7,580   7.00  -  7.99        8,727
                               8.00  -  8.99          103   8.00  -  8.99          699
                               9.00  -  9.99           99   9.00  -  9.99          305
                               over 10.00              12   over 10.00              18
                                               -----------                  -----------
                                                1,084,632                    1,158,088
                                               -----------                  -----------
Premium on purchased deposits                         189                          399
                                               -----------                  -----------
                                               $1,624,289                   $1,705,004
                                               ===========                  ===========
Weighted average rate                                3.96%                        4.11%
                                               ===========                  ===========
</TABLE>


     Effective  January 1, 1998, Coastal implemented a program whereby a portion
of the balances in noninterest-bearing and interest-bearing checking accounts is
reclassified to money market demand accounts under Federal Reserve Regulation D.
The  amount of such reclassification was approximately $117.7 million and $126.0
million  at  December  31,  1999  and  1998,  respectively.

     The  scheduled  maturities  of certificate accounts outstanding at December
31,  1999  were  as  follows  (in  thousands):

<TABLE>
<CAPTION>

Year Ended December 31,
-----------------------
<S>                      <C>
 2000                    $  968,838
 2001                        82,705
 2002                        17,020
 2003                        10,772
 2004                         4,917
Subsequent years                380
                         ----------
                         $1,084,632
                         ==========
</TABLE>



     The  aggregate  amount of certificate accounts with balances of $100,000 or
more  was  approximately  $201.3 million and $199.0 million at December 31, 1999
and  1998,  respectively.

(11)     ADVANCES  FROM  THE  FEDERAL  HOME  LOAN  BANK  OF  DALLAS

Advances  from the FHLB for the years ended December 31, 1999, 1998 and 1997 are
summarized  as  follows  (dollars  in  thousands):

<TABLE>
<CAPTION>

<S>                                    <C>          <C>        <C>
                                             1999       1998       1997
                                       -----------  ---------  ---------
Balance outstanding at end of year     $1,096,931   $966,720   $540,475
Average balance outstanding               951,953    713,197    368,896
Maximum outstanding at any month-end    1,115,713    969,036    540,475
Average interest rate during the year        5.31%      5.55%      5.78%
Average interest rate at end of year         5.72%      5.24%      5.95%
</TABLE>


The scheduled maturities and related weighted average interest rates on advances
from  the  FHLB  at  December  31,  1999  are  summarized as follows (dollars in
thousands):

<TABLE>
<CAPTION>

Due during the year      Weighted Average
ended December 31,         Interest Rate      Amount
-------------------      -----------------  ----------
<S>                  <C>                <C>
2000                             5.55%      $  765,096
2001                             6.05           32,154
2002                             6.11          268,689
2003                             5.54            1,295
2004                             5.75            5,280
2005                             5.57              129
2006                             6.85            3,139
2007                             6.66            1,095
2008                             5.51            1,789
2009                             8.14            4,162
2010                             5.66              187
2011                             6.62            1,363
2012                             5.68              217
2013                             5.76            7,753
2014                             5.43            2,967
2018                             5.05            1,616
                     -----------------     ------------

                                 5.72%       $1,096,931
                     =================     ============
</TABLE>


At December 31, 1999, Coastal had a $50.0 million unused line of credit with the
FHLB.  The  FHLB  advances  are secured by certain first lien mortgage loans and
mortgage-backed  securities  with  an  aggregate carrying value of approximately
$1.1  billion  at  December  31,  1999.


<PAGE>
(12)     SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND
         FEDERAL FUNDS PURCHASED

Coastal enters into sales of securities under agreements to repurchase ("reverse
repurchase  agreements"). Fixed coupon reverse repurchase agreements are treated
as financing arrangements, and the obligations to repurchase securities sold are
reflected  as a liability in the consolidated statements of financial condition.
The  dollar  amounts of securities underlying the agreements are recorded in the
respective  asset  accounts.

Coastal  did  not  have  any  securities  sold under agreements to repurchase at
December  31,  1999.  At  December 31, 1998, securities sold under agreements to
repurchase  were  as  follows  (dollars  in  thousands):

<TABLE>
<CAPTION>

<S>                              <C>
Book value of mortgage-backed
 securities sold                 $   115,951
Market value of mortgage-backed
 securities sold                     115,747
Repurchase liability                 100,000
Weighted average interest rate          4.93%
Weighted average maturity         3,295 days

</TABLE>



At December 31, 1998, the agreements outstanding relating to the mortgage-backed
securities  were  agreements  to repurchase the same securities.  The securities
sold  under  agreements  to  repurchase  at  December  31,  1998  were  with one
individual counterparty, Salomon Smith Barney Inc., and were scheduled to mature
in  2008,  but were called prior to maturity during 1999.  Securities sold under
agreements  to  repurchase averaged approximately $103.2 million, $579.6 million
and  $974.1  million  during  1999, 1998 and 1997, respectively, and the maximum
outstanding  amounts  at  any  month-end  during  1999,  1998  and  1997  were
approximately  $271.1  million,  $874.8  million and $1.0 billion, respectively.

Federal  funds  purchased  averaged approximately $19,000, $149,000 and $161,000
during  the  years  ended December 31, 1999, 1998 and 1997, respectively.  There
were  no  federal funds purchased outstanding at any month-end during 1999, 1998
or  1997.

(13)     SENIOR  NOTES  PAYABLE

     On  June  30,  1995, Coastal issued $50.0 million of 10.0% Senior Notes due
June 30, 2002.  The Senior Notes are redeemable at Coastal's option, in whole or
in  part,  on  or  after  June  30,  2000,  at par, plus accrued interest to the
redemption date.  Interest on the Senior Notes is payable quarterly.  On January
28,  1999,  the  Board of Directors authorized the repurchase, on an unsolicited
basis, of the Senior Notes in an amount and on such terms considered appropriate
by  management.  During  1999,  Coastal,  after  receipt  of unsolicited offers,
repurchased  $3.1  million  of  the  Senior  Notes  outstanding  at  par.

(14)      INTEREST  RATE  RISK  MANAGEMENT

     Coastal's  strategy  to  manage  interest  rate  risk  is  to minimize
interest  rate  risk  rather  than  hedge  market  values.  Generally,  Coastal
minimizes  its  exposure  to  interest  rate fluctuations by the origination and
purchase  of  adjustable-rate  mortgage  loans,  adjustable-rate mortgage-backed
securities  and  the use of interest rate swap and interest rate cap agreements.
Coastal's  goal  is  to minimize the timing differences between the repricing or
maturity of its assets and the repricing or maturity of its liabilities, without
speculation  of  interest rates, to alter interest rate risk as much as possible
to  withstand  interest rate changes.  Coastal's approach to minimizing interest
rate  risk is through the structure of its balance sheet whereby asset purchases
are  closely  matched  with  funding sources that have similar rate movement and
repricing  terms.


<PAGE>
(15)      FINANCIAL  INSTRUMENTS  WITH  OFF-BALANCE  SHEET  RISK

Coastal  is  a party to financial instruments with off-balance sheet risk in the
normal course of business to reduce its own exposure to fluctuations in interest
rates.  These  financial  instruments  include  interest  rate  swap agreements,
interest  rate  cap  agreements  and  financial  futures  contracts.

INTEREST  RATE  AGREEMENTS

Coastal  is  a  party  to interest rate swap and interest rate cap agreements in
order  to  reduce  its  exposure  to floating interest rates on a portion of its
variable rate assets and borrowings.  At December 31, 1999, Coastal had interest
rate  swap  and  cap  agreements  on notional amounts totaling $43.6 million and
$163.5  million,  respectively.

Coastal  has  entered into interest rate swap agreements with various investment
companies.  The  agreements  provide for Coastal to make fixed interest payments
and  receive  payments  based  on  a  floating  LIBOR  index, as defined in each
agreement.

The  weighted  average interest rate of payments received on all of the interest
rate  swap  agreements  was  approximately 5.32% in 1999 and 5.77% in 1998.  The
weighted average interest rate of payments made on all of the interest rate swap
agreements  was  approximately 6.20% in 1999 and 6.60% in 1998.  Payments on the
interest  rate swap agreements are based on the notional principal amount of the
agreements; no funds were actually borrowed or are to be repaid. Coastal records
net interest expense or income related to these agreements on a monthly basis in
interest expense in the accompanying consolidated statements of operations.  The
net  interest  expense  related  to these agreements was approximately $483,000,
$377,000  and  $431,000,  for  the years ended December 31, 1999, 1998 and 1997,
respectively.  Coastal  had  pledged  approximately $963,000 and $6.6 million of
mortgage-backed  securities  to secure interest rate swap agreements at December
31,  1999  and  1998,  respectively.


<PAGE>
The  terms of the interest rate swap agreements outstanding at December 31, 1999
and  1998  are  summarized  as  follows  (dollars  in  thousands):

<TABLE>
<CAPTION>

                                                          Floating Rate    Fair Value at
                       Notional      LIBOR        Fixed         at         End of Period
Maturity                Amount       Index         Rate   End of Period    (gain (loss))
---------------------  ---------  -----------     ------  --------------  ---------------
<S>                    <C>        <C>             <C>     <C>             <C>
At December 31, 1999:
2000. . . . . . . . .  $   4,800  Three-month     6.170%          6.140%  $          (70)
2000. . . . . . . . .      2,240  Three-month     6.000           6.184               10
2003. . . . . . . . .     19,290  One-month       5.345           6.476              248
2004. . . . . . . . .      3,842  One-month       5.635           6.463              160
2005. . . . . . . . .     13,440  Three-month     6.500           6.110              215
                       ---------                                          ---------------
                       $  43,612                                          $          563
                       =========                                          ===============

At December 31, 1998:
1999. . . . . . . . .  $  14,600  Three-month     6.926%          5.399%  $         (218)
2000. . . . . . . . .      4,800  Three-month     6.170           5.226             (164)
2000. . . . . . . . .      2,380  Three-month     6.000           5.281              (38)
2005. . . . . . . . .     16,225  Three-month     6.500           5.261             (707)
                       ---------                                          ---------------
                       $  38,005                                          $       (1,127)
                       =========                                          ===============
</TABLE>



Coastal  has  interest  rate  cap agreements with third parties.  The agreements
provide  for  the  third  parties to make payments to Coastal whenever a defined
floating  rate  exceeds  rates  ranging  from  7.00%  to 9.50%, depending on the
agreement.  Payments  on  the  interest  rate  cap  agreements  are based on the
notional  principal amount of the agreements; no funds were actually borrowed or
are  to  be repaid.  The purchase prices of the interest rate cap agreements are
capitalized  and  included  in  "prepaid  expenses  and  other  assets"  in  the
accompanying  consolidated  statements  of financial condition and are amortized
over the life of the agreements using the straight-line method.  The unamortized
portion  of  the  interest  rate  cap  agreements  was approximately $90,000 and
$115,000  at  December  31, 1999 and 1998, respectively, with the estimated fair
value  of  the  agreements  being $750,000 and $888,000 at December 31, 1999 and
1998,  respectively.  The  interest  rate  cap  agreements are used to alter the
interest  rate sensitivity of a portion of Coastal's mortgage-backed securities,
loans  receivable  and their related funding sources.  As such, the amortization
of  the purchase price and interest income from the interest rate cap agreements
are  recorded  in  interest  income  on  mortgage-backed  securities  or  loans
receivable,  as  appropriate,  in  the  accompanying  consolidated statements of
operations.  The  net  decrease  in interest income related to the interest rate
cap  agreements  was  approximately  $25,000, $53,000 and $218,000 for the years
ended  December  31,  1999,  1998,  and  1997,  respectively.


<PAGE>
     Interest  rate  cap  agreements  outstanding at December 31, 1999 expire as
follows  (dollars  in  thousands):

<TABLE>
<CAPTION>

Year of       Strike rate     Notional
expiration       range         amount
----------  ----------------  ---------
<S>         <C>               <C>
2000        8.50  -    9.50%  $  11,620
2001        7.00  -    9.00      34,239
2002        8.75  -    9.00      18,625
2003        8.00  -    8.50      99,000
                              ---------
                              $ 163,484
                              =========
</TABLE>



Market  risk,  or  the risk of loss due to movement in market prices or rates is
quantified by Coastal through a risk monitoring process of marking to market the
portfolio to expected market level changes in an instantaneous shock of plus and
minus 200 basis points on a quarterly basis.  This process discloses the effects
on  market  values  of  the assets and liabilities, unrealized gains and losses,
including  off-balance sheet items, as well as potential changes in net interest
income.

The  fluctuation  in  the  market  value, however, has no effect on the level of
earnings of Coastal because the securities are categorized as "held-to-maturity"
and  Coastal  has  the  positive  intent  and ability to hold these to maturity.

Coastal  is  exposed  to  credit  loss  in  the  event  of nonperformance by the
counterparty to the swap or cap and controls this risk through credit monitoring
procedures.  The notional principal amount does not represent Coastal's exposure
to  credit  loss.

FINANCIAL  FUTURES
Coastal  has  used financial futures contracts in its asset/liability management
function  to  alter  the  interest  rate  sensitivity  of Coastal's net interest
income.  In  1992,  Coastal  discontinued  this  hedging  strategy.  The  net
unamortized  contract losses on closed positions were approximately $563,000 and
$767,000  at  December 31, 1999 and 1998, respectively.  The amortization of the
contract  losses on closed positions for the years ended December 31, 1999, 1998
and  1997  was  approximately  $204,000,  $440,000  and  $203,000, respectively.

     (16)     FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS
Statement  of  Financial  Accounting  Standards No. 107, "Disclosures about Fair
Value  of  Financial Instruments", requires that Coastal disclose estimated fair
values for its financial instruments.  The fair value estimates presented herein
are  based  on  relevant  information available to management as of December 31,
1999  and  1998.  Because  the  reporting requirements exclude certain financial
instruments  and  all nonfinancial instruments, the aggregate fair value amounts
presented  herein do not represent management's estimate of the underlying value
of  Coastal.  The  fair  value  estimates,  methods and assumptions used are set
forth  below  for  Coastal's  financial  instruments  (in  thousands):

<PAGE>
<TABLE>
<CAPTION>

                                                     At                              At
                                             December 31, 1999                December 31, 1998
                                             ------------------               ------------------
                                        Carrying              Fair          Carrying      Fair
                                         Value               Value           Value        Value
                                   ------------------  ------------------  ----------  -----------
<S>                                <C>                 <C>                 <C>         <C>
Financial assets:
 Cash and cash equivalents         $           48,098  $    48,098         $   45,453  $   45,453
 Loans receivable                           1,735,081    1,740,500          1,538,149   1,557,654
 Mortgage-backed securities
   held-to-maturity                           917,212      899,934          1,154,116   1,145,369
 U.S. Treasury securities
   held-to-maturity                               299          298                 --          --
 Securities available-for-sale                 99,665       99,665             98,625      98,625
 Stock in the FHLB                             56,753       56,753             49,819      49,819
 Interest rate cap agreements                      90          750                115         888
Financial liabilities:
 Deposits                                   1,624,289    1,622,219          1,705,004   1,711,699
 Advances from the FHLB                     1,096,931    1,095,295            966,720     970,638
 Securities sold under agreements
   to repurchase                                   --           --            100,000     106,148
 Senior Notes payable                          46,900       46,666             50,000      51,007
Off-balance sheet instruments:
 Interest rate swap agreements                     --          563                 --      (1,127)
 Commitments to extend credit                      --      260,454                 --     270,602

</TABLE>


CASH  AND  CASH  EQUIVALENTS

Carrying  value  approximates  fair value because of the short maturity of these
instruments  and  absence  of  any  anticipated  credit  concerns.

LOANS  RECEIVABLE

The  fair  values  of loans receivable are estimated for segregated groupings of
loans with similar financial characteristics.  Loans are segregated by type such
as  residential  mortgage,  commercial and consumer.  Residential mortgage loans
are  further  subdivided  into  fixed and adjustable rate loans including single
family,  multifamily  and  construction.

The  fair value of single family residential loans is estimated based on current
investor  market  prices  and yields for mortgage-backed securities with similar
maturities,  interest  rate  indexes  and  prepayment characteristics.  The fair
value  of  multifamily  residential, construction, commercial and consumer loans
are  estimated  using  factors that reflect the credit and interest rate risk in
these  loans.

MORTGAGE-BACKED  SECURITIES  HELD-TO-MATURITY  AND  SECURITIES
AVAILABLE-FOR-SALE

The  fair  values of mortgage-backed and other securities are estimated based on
published  market prices or market prices from investment dealers and companies.
If  a quoted market price is not available, fair value is estimated using quoted
market  prices  for  similar  securities.

STOCK  IN  THE  FHLB

The  carrying  amount  of  the  stock  in  the  FHLB  approximates  fair  value.

INTEREST  RATE  CAP  AND  SWAP  AGREEMENTS

The  fair  values  of  interest  rate  cap  and swap agreements are based on the
discounted  value  of  the  differences  between  contractual interest rates and
current  market  rates  for  similar  agreements.

DEPOSITS

The  fair  value  of  deposits  with  short-term  or no stated maturity, such as
noninterest-bearing  checking,  interest-bearing  checking, savings accounts and
money  market demand accounts is equal to the amounts payable as of December 31,
1999  and  1998.  The  fair  value  of  certificate  accounts  is  based  on the
discounted  value  of  contractual  cash  flows.  The discount rate is estimated
using  the rates currently offered for deposits of similar remaining maturities.

ADVANCES FROM  THE FHLB AND SECURITIES  SOLD  UNDER  AGREEMENTS  TO  REPURCHASE

The  fair  values  of  advances  from  the  Federal Home Loan Bank of Dallas and
securities  sold  under  agreements  to repurchase are estimated based on quoted
market  prices  for  similar  agreements or current rates offered to Coastal for
borrowings  with  similar  remaining  maturities.

SENIOR  NOTES  PAYABLE

The  fair  value  of  Senior  Notes payable is based on quoted market prices for
similar  securities.

COMMITMENTS  TO  EXTEND  CREDIT

The  fair  value  of  commitments  to  extend  credit is estimated using current
interest  rates  and  committed  interest  rates.

(17)     FEDERAL  INCOME  TAXES

The acquisition of the Acquired Associations under the FSLIC's Southwest Plan on
May  13,  1988  qualified  for  tax-free  reorganization  status  under  Section
368(a)(3)(D)  of  the  Internal  Revenue  Code  of  1986  as  amended  ("IRC").
Accordingly,  the  tax bases of assets of the Acquired Associations carried over
to  Coastal.  In  connection  with  this  acquisition, the FSLIC Resolution Fund
("FRF")  retained all of the future federal income tax benefits derived from the
federal income tax treatment of certain items, in addition to net operating loss
carryforwards related to the acquisition for which Coastal agreed to pay the FRF
when  actually  realized.  The  provisions for federal income taxes recorded for
the  years  ended  December  31,  1999,  1998  and 1997, 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 1999, 1998 and 1997 will be available as
credit  carryforwards to reduce regular federal tax liabilities in future years,
over  an  indefinite  period.  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  was  effective  March  31, 1994, the FRF will continue to receive the
future  federal  income  tax  benefits from the net operating loss carryforwards
acquired  from  the  Acquired  Associations.

In  March  1998,  Coastal  announced  that  it  had  successfully  resolved  an
outstanding  tax  benefit  issue with the FDIC as Manager of the Federal Savings
and  Loan  Insurance  Corporation  Resolution Fund.  The resolution of the issue
resulted  in  Coastal  recording a $3.7 million reversal of accrued income taxes
during the year ended December 31, 1998; resulting in a one-time positive effect
on  net  income.


<PAGE>
The components of the provision for federal income tax expense (benefit) for the
years  ended  December  31,  1999,  1998 and 1997 are as follows (in thousands):

<TABLE>
<CAPTION>

           1999     1998    1997
          -------  ------  -------
<S>       <C>      <C>     <C>
Current   $6,023   $3,046  $7,831
Deferred    (364)     497      (9)
          -------  ------  -------

          $5,659   $3,543  $7,822
          =======  ======  =======
</TABLE>


A reconciliation of the expected federal income taxes using a corporate tax rate
of  35%  for  the years ended December 31, 1999, 1998 and 1997 is as follows (in
thousands):

<TABLE>
<CAPTION>

                                                      1999      1998     1997
                                                    --------  --------  -------
<S>                                                 <C>       <C>       <C>
Computed expected tax provision                     $ 6,746   $ 7,980   $7,691
Reversal of accrued income taxes due to resolution
 of tax benefit issue with FDIC                          --    (3,679)      --
FDIC tax benefit of preferred stock dividends        (1,460)     (906)      --
Net purchase accounting adjustments                     282       282      282
Other, net                                               91      (134)    (151)
                                                    --------  --------  -------
                                                    $ 5,659   $ 3,543   $7,822
                                                    ========  ========  =======
</TABLE>


Significant  temporary differences that give rise to the deferred tax assets and
liabilities  as  of  December  31,  1999 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>

                                                                   1999    1998
                                                                  ------  ------
<S>                                                               <C>     <C>
Deferred tax assets:
  Loans receivable, principally due to allowance for loan losses  $2,164  $2,050
  Unrealized loss on securities available-for-sale                   995     740
  Goodwill                                                           612     497
  Property and equipment                                             620     297
  Real estate owned, principally due to unrealized writedowns        244     276
  Other                                                              221     256
                                                                  ------  ------
                                                                   4,856   4,116
                                                                  ------  ------

Deferred tax liabilities:
  FHLB stock                                                       2,417   1,490
  Mortgage-backed securities, principally
   due to deferred hedging losses                                    197     268
  Other                                                               17      24
                                                                  ------  ------

                                                                   2,631   1,782
                                                                  ------  ------

Net deferred tax asset                                            $2,225  $2,334
                                                                  ======  ======
</TABLE>



No valuation allowance on deferred tax assets has been established as management
believes  that it is more likely than not that the existing deductible temporary
differences  will  reverse during periods in which Coastal generates net taxable
income.

In  years prior to 1996, Coastal was permitted under the IRC to deduct an annual
addition  to  a  reserve  for  bad  debts  in  determining taxable income.  This
addition  differs  from  the  provision  for loan losses for financial reporting
purposes.  Due to enacted legislation, Coastal will no longer be able to utilize
a  reserve  method for determining the bad debt deduction but will be allowed to
deduct  actual  charge-offs.  Further,  Coastal's post-1987 tax bad debt reserve
will  be recaptured into income.  The reserve will be recaptured over a six year
period.  At  December 31, 1999, Coastal had approximately $2.5 million post-1987
tax  bad  debt  reserves,  for  which  deferred  taxes  have  been  provided.

Coastal  is  not  required to provide deferred taxes on its pre-1988 (base year)
tax  bad  debt  reserve  of  $928,000.  This  reserve may be included in taxable
income  in  future years if the Bank pays dividends in excess of its accumulated
earnings  and  profits (as defined in the IRC) or in the event of a distribution
in  partial  or  complete  liquidation  of  the  Bank.

(18)     STOCK  COMPENSATION  PROGRAMS

In  December  1991,  the  Board of Directors adopted the 1991 Stock Compensation
Program  ("the 1991 Program") for the benefit of officers and other selected key
employees of Coastal.  The 1991 Program was approved by stockholders in December
1991.  Four  kinds of rights, evidenced by four plans, are contained in the 1991
Program  and  are  available  for  grant:  incentive stock options, compensatory
stock  options,  stock  appreciation  rights  and performance share awards.  The
maximum  aggregate  number  of  shares of Common Stock available pursuant to the
1991  Program  was  equal  to  10% of Coastal's issued and outstanding shares of
Common  Stock at the date of adoption of the 1991 Program.  Coastal reserved the
shares  for  future  issuance  under  the  1991 Program.  The stock options were
granted at a price not less than the fair market value on the date of the grant,
are  exercisable  ratably  over  a four year period and may be outstanding for a
period  up  to ten years from the date of grant.  Generally, no stock option may
be  exercised  until  the  employee has remained in the continuous employment of
Coastal  for  six  months  after  the  option  was  granted.

On  March  23,  1995 and March 25, 1999, the Board of Directors adopted the 1995
and  1999  Stock Compensation Programs, respectively, ("the New Programs").  The
New  Programs are substantially similar to the 1991 Program and were approved by
stockholders  in  April  1995  and April 1999, respectively.  The Board reserved
382,891 and 340,000, respectively, shares of Common Stock for issuance under the
New  Programs.

Coastal applies APB Opinion No. 25 and related interpretations in accounting for
its  stock  compensation  programs.  Accordingly,  no compensation cost has been
recognized  for  its  stock  option rights.  Had Coastal determined compensation
cost  based  on  the  fair  value  at the grant date for its stock options under
Statement 123, Coastal's net income available to common stockholders and diluted
earnings  per  share  would have been reduced to the pro forma amounts indicated
below.

<TABLE>
<CAPTION>

                                         Years ended December 31,
                                        -------------------------
                                          1999     1998     1997
                                      ---------  -------  -------
<S>                                   <C>        <C>      <C>
Net income available to common
 stockholders (in thousands):
  As reported                          $  9,442  $16,668  $11,563
  Pro forma                            $  8,823  $16,193  $11,169
Diluted earnings per share:
  As reported                          $   1.42  $  2.18  $  1.50
  Pro forma                            $   1.32  $  2.11  $  1.45
</TABLE>



Pro  forma  net income available to common stockholders and diluted earnings per
share  reflect  only  options  granted  during  the  years  1995  through  1999.
Therefore,  the  full  impact of calculating compensation cost for stock options
under  Statement  123  is not reflected in the pro forma net income available to
common  stockholders  or  diluted  earnings  per  share  amounts presented above
because  compensation  cost  is  reflected over the options' vesting period of 4
years  and compensation cost for options granted prior to January 1, 1995 is not
considered.

The  fair value of each option grant is estimated on the date of grant using the
Black-Scholes  option-pricing  model  with  the  following  weighted  average
assumptions  used  for  grants  in  1999,  1998  and  1997:

<TABLE>
<CAPTION>

                                 1999          1998          1997
                             ------------  ------------  ------------
<S>                          <C>           <C>           <C>
Assumptions:
  Expected annual dividends  $0.32/share   $0.32/share   $0.32/share
  Expected volatility              36.16%        25.49%        22.30%
  Risk-free interest rate           5.63%         5.47%         6.87%
  Expected life                 10 years      10 years      10 years

</TABLE>



A  summary  of the status of the stock options as of December 31, 1999, 1998 and
1997  and  changes  during  the  years  then  ended  is  as  follows:

<TABLE>
<CAPTION>

                                   1999                  1998                   1997
                           ---------------------  ---------------------   ------------------------
                                      Weighted-              Weighted-
                            Number     Average     Number     Average     Number       Weighted-
                              of       Exercise      of       Exercise      of          Average
                            Shares      Price      Shares      Price      Shares    Exercise Price
                           ---------  ----------  ---------  ----------  ---------  ---------------
<S>                        <C>        <C>         <C>        <C>         <C>        <C>
Outstanding at beginning
 of year                    597,919   $   12.910   619,345   $   11.706   510,130   $         9.993
Granted                     184,800       16.000    47,500       25.125   188,100            15.684
Exercised                   (47,971)      11.362   (54,885)       9.792   (62,978)            9.246
Forfeited/cancelled         (12,336)      17.373   (14,041)      13.313   (15,907)           13.527
                           ---------              ---------              ---------
Outstanding at end
 of year                    722,412   $   13.726   597,919   $   12.910   619,345   $        11.706
                           =========              =========              =========
Options exercisable at
 end of year                522,056                430,569                380,791
                           =========              =========              =========
Weighted-average fair
 value of options
 granted during the year
 (per share)               $  8.116               $ 11.388               $  6.187
                           =========              =========              =========
</TABLE>



     The  following table summarizes information about stock options outstanding
at  December  31,  1999:

<TABLE>
<CAPTION>

<S>                        <C>                  <C>                  <C>                <C>          <C>
                                                Options outstanding                        Options exercisable
                           ------------------------------------------------------------------------------------------
                                                Weighted-Average
                           Number               Remaining            Weighted-Average   Number       Weighted-Average
Range of Exercise Prices   Outstanding          Contractual Life     Exercise Price     Exercisable  Exercise Price
-------------------------  -------------------  -------------------  -----------------  -----------  -----------------

7.083 to $8.583                        99,355            3.0 years  $           7.757       99,355  $           7.757
10.333 to $12.500                     247,169            5.7 years  $          11.119      247,056  $          11.119
15.167 to $25.125                     375,888            8.4 years  $          13.449      175,645  $          14.330
                           -------------------                                          -----------
                                      722,412            6.8 years  $          13.726      522,056  $          12.448
                           ===================                                          ===========
</TABLE>



(19)     EMPLOYEE  BENEFITS

Coastal maintains a 401(k) profit sharing plan.  Coastal's contributions to this
plan  were  approximately  $509,000,  $309,000  and $157,000 for the years ended
December  31,  1999,  1998  and  1997,  respectively.  Pursuant  to  this  plan,
employees  can  contribute  up  to 15% of their qualifying compensation into the
plan.  Beginning  January  1,  1990,  Coastal  matched  25%  of  the  employee
contributions  up  to  15%  of their qualifying compensation.  Beginning July 1,
1998,  Coastal  has  matched 50% of the employee contributions up to 6% of their
qualifying  compensation and 25% of the employee contributions from 7% to 15% of
their  qualifying  compensation.

(20)     COASTAL  BANC  SSB  PREFERRED  STOCK

On  October  21,  1993,  the  Bank issued 1,150,000 shares of 9.0% Noncumulative
Preferred  Stock,  no  par  Series A, at a price of $25 per share to the public.
Dividends  on  this  preferred stock are payable quarterly at the annual rate of
$2.25 per share, when, as and if declared by the Board of Directors of the Bank.
At  any time on or after December 15, 1998, this preferred stock may be redeemed
in  whole  or  in  part  only  at the Bank's option at $25 per share plus unpaid
dividends  (whether  or  not  earned  or declared) for the then current dividend
period  to  the  date  fixed for redemption.   Pursuant to Coastal's tax benefit
agreement  with  the  FDIC, Coastal receives a tax benefit for dividends on this
preferred  stock.  The ongoing quarterly benefit will be approximately $226,000,
or  3  cents  per  diluted share, and is expected to continue through the end of
2002.

(21)     STOCKHOLDERS'  EQUITY

COASTAL  BANCORP,  INC.  PREFERRED  STOCK

On  May  11,  1999, Bancorp issued 1,100,000 shares of 9.12% Series A Cumulative
Preferred  Stock,  no  par  value,  to  the  public  at a price of $25 per share
("Bancorp  Preferred  Stock").  Dividends  on  the  preferred  stock are payable
quarterly  at  the  annual  rate  of  $2.28  per  share.  The preferred stock is
callable  on  May  15, 2003 at Bancorp's option.  The $26.0 million net proceeds
has been used for repurchases in the open market of Bancorp's outstanding common
stock  and  of  Bancorp's outstanding 10% Senior Notes, with the remaining being
invested  on  a  short-term  basis.  Pursuant to Coastal's tax benefit agreement
with  the  FDIC,  Coastal receives a tax benefit for dividends on this preferred
stock.  The ongoing quarterly benefit will be approximately $219,000, or 3 cents
per  diluted  share,  and  is  expected  to  continue  through  the end of 2002.

COMMON  STOCK  DIVIDENDS

On  January  28,  April  22,  July  22  and October 28, 1999, Coastal declared a
dividend  of $0.08 per share of Common Stock outstanding for the stockholders of
record  of  February  15, May 15, August 15 and November 15, 1999, respectively.

On  January  22,  April  23,  July  23  and October 22, 1998, Coastal declared a
dividend  of $0.08 per share of Common Stock outstanding for the stockholders of
record  of  February  15, May 15, August 15 and November 15, 1998, respectively.

On  April 24, July 24 and October 23, 1997, Coastal declared a dividend of $0.08
per  share of Common Stock outstanding for the stockholders of record of May 15,
August  15,  and  November  15,  1997,  respectively.  Prior  to April 24, 1997,
Coastal  declared a dividend of $0.067 per share of Common Stock outstanding for
the  stockholders  of  record  of  February  15,  1997.

STOCK  SPLIT

On  April 23, 1998, Coastal declared a 3:2 stock split that was paid on June 15,
1998 to stockholders of record on May 15, 1998.  All common stock share data has
been  adjusted  to  include  the  effect  of  the  stock  split.

TREASURY  STOCK

On  August  27,  1998,  December  21,  1998  and February 25, 1999, the Board of
Directors  authorized  three  separate repurchase plans for up to 500,000 shares
each of the outstanding shares of common stock through an open-market repurchase
program  and  privately negotiated repurchases, if any.  As of December 31, 1999
and  1998,  1,283,679 and 499,600 shares had been repurchased at a cost of $20.5
million  and  $7.8  million,  respectively.

(22)     EARNINGS  PER  SHARE

The  following  summarizes  information  related to the computation of basic and
diluted  EPS  for  the  years ended December 31, 1999, 1998 and 1997 (dollars in
thousands,  except  per  share  data):

<TABLE>
<CAPTION>
<S>                                                      <C>          <C>         <C>
                                                         1999         1998        1997
                                                     -----------  ----------  ----------
Net income                                           $   11,026   $   16,668  $   11,563
Preferred Stock dividends                                (1,584)          --          --
                                                     -----------  ----------  -----------
Net income available to common
 stockholders                                        $    9,442   $   16,668  $   11,563
                                                    ===========  ==========  ===========

Weighted average number of common shares
 outstanding used in basic EPS calculation            6,494,330    7,432,598   7,475,991
Add assumed exercise of outstanding stock
 options as adjustments for dilutive securities         166,978      224,092     246,654
                                                    -----------   ----------  -----------

Weighted average number of common shares
 outstanding used in diluted EPS calculation          6,661,308    7,656,690   7,722,645
                                                    ===========   ==========   =========
Basic EPS                                           $     1.45   $     2.24  $     1.55
                                                    ===========   ==========   =========
Diluted EPS                                         $     1.42   $     2.18  $     1.50
                                                    ===========   ==========   =========
</TABLE>



The weighted average number of common shares outstanding has been reduced by the
treasury  stock  held by Coastal.  As of December 31, 1999 and 1998, Coastal had
1,283,679  and  499,600  common  shares  in  treasury,  respectively.

(23)     COMMITMENTS  AND  CONTINGENCIES

Coastal is involved in various litigation arising from acquired entities as well
as in the normal course of business.  In the opinion of management, the ultimate
liability, if any, from these actions should not be material to the consolidated
financial  statements.

At  December  31,  1999,  the minimum rental commitments under all noncancelable
operating  leases  with initial or remaining terms of more than one year were as
follows  (in  thousands):

<TABLE>
<CAPTION>

Year ending
December 31,         Amount
-------------------  -------
<S>                  <C>
2000                 $ 2,752
2001                   2,675
2002                   2,560
2003                   2,140
2004 and thereafter   14,795
</TABLE>



Rent  expense  for  the years ended December 31, 1999, 1998 and 1997 amounted to
approximately  $2.9  million,  $2.6  million  and  $2.3  million,  respectively.

(24)     REGULATORY  MATTERS

The  Bank  is subject to various regulatory capital requirements administered by
the  Federal  Deposit  Insurance  Corporation ("FDIC").  Failure to meet minimum
capital  requirements  can  initiate  certain mandatory--and possibly additional
discretionary--actions  by  regulators  that, if undertaken, could have a direct
material  effect  on  the  Bank's  financial statements.  Under capital adequacy
guidelines  and  the regulatory framework for prompt corrective action, the Bank
must  meet specific capital guidelines that involve quantitative measures of the
Bank's  assets,  liabilities,  and certain off-balance-sheet items as calculated
under  regulatory  accounting  practices.  The  Bank's  capital  amounts  and
classification are also subject to qualitative judgments by the regulators about
components,  risk  weightings,  and  other  factors.

Quantitative  measures  established  by  regulation  to  ensure capital adequacy
require  the  Bank  to  maintain  minimum  amounts and ratios (as defined in the
applicable  regulations)  of  Tier  1  (core)  capital  to  total assets, Tier 1
risk-based  capital  to  risk  weighted  assets  and total risk-based capital to
risk-weighted  assets.  Management  believes,  as of December 31, 1999, that the
Bank  met  capital  adequacy  requirements  to  which  it  is  subject.

As  of December 31, 1999, the most recent notification from the FDIC categorized
the  Bank  as  well  capitalized  under  the  regulatory  framework  for  prompt
corrective action.  To be categorized as well capitalized the Bank must maintain
minimum  Tier  1  (core),  Tier  1 risk-based and total risk-based ratios as set
forth  in  the  table  below.  There  are  no  conditions  or  events since that
notification  that  management believes have changed the institution's category.

The  Bank's  regulatory  capital amounts and ratios, as of December 31, 1999 and
1998,  in  relation  to its existing regulatory capital requirements for capital
adequacy  purposes  as  of  such  dates  are  as follows (dollars in thousands):

<TABLE>
<CAPTION>

                                                         Minimum For Capital       Well-Capitalized
                                     Actual               Adequacy Purposes         Requirements
                           -------------------------   -----------------------  ----------------------
Capital Requirement         Amount          Ratio          Amount        Ratio      Amount   Ratio
-------------------------  --------  ---------------  -----------------  ------    --------  ------
<S>                        <C>       <C>              <C>                <C>       <C>       <C>
As of December 31, 1999:
 Tier 1 (core)             $168,162          5.76%      $ 116,762        4.00%    $145,952   5.00%
 Tier 1 risk-based          168,162          9.68          69,482        4.00      104,222   6.00
 Total risk-based           178,655         10.29         138,963        8.00      173,704  10.00

As of December 31, 1998:
 Tier 1 (core)             $158,606          5.25%      $ 120,935        4.00%    $151,169   5.00%
 Tier 1 risk-based          158,606          9.54          66,467        4.00       99,701   6.00
 Total risk-based           169,964         10.23         132,935        8.00      166,169  10.00

</TABLE>




<PAGE>
(25)     PARENT  COMPANY  FINANCIAL  INFORMATION

Condensed  financial  information  for  Coastal  Bancorp, Inc. is as follows (in
thousands):

                              Coastal Bancorp, Inc.
                        Statements of Financial Condition
                        ---------------------------------
<TABLE>
<CAPTION>
                                                     December 31,
                                               ------------------------
                                                   1999         1998
                                               -------------  --------
<S>                                            <C>            <C>
Assets:
  Cash and cash equivalents                    $         453  $     22
  Investment in subsidiary                           165,067   159,174
  Receivable from the Bank                            11,193        --
  Mortgage-backed securities held-to-maturity            986     1,303
  Other assets                                         3,175     3,345
                                               -------------  --------
                                               $     180,874  $163,844
                                               =============  ========

Liabilities and stockholders' equity:
  Senior Notes payable                         $      46,900  $ 50,000
  Other liabilities                                      518     1,080
                                               -------------  --------
        Total liabilities                             47,418    51,080
        Total stockholders' equity                   133,456   112,764
                                               -------------  --------
                                               $     180,874  $163,844
                                               =============  ========
</TABLE>




                              Coastal Bancorp, Inc.
                            Statements of Operations
                            ------------------------
<TABLE>
<CAPTION>

                                              Years ended December 31,
                                             -------------------------
                                                1999    1998     1997
                                               ------  ------   -------
<S>                                          <C>       <C>      <C>
Income:
  Dividends from subsidiary                 $  7,239   $ 7,593  $ 7,293
  Equity in undistributed earnings of
   subsidiary, net of income tax               6,367    12,724    7,946
  Interest income                                707       103      131
                                            ---------  -------  --------
                                              14,313    20,420   15,370
                                            ---------  -------  --------
Expense:
  Interest expense                             5,058     5,000    5,000
  Noninterest expense                            471       717      786
                                            ---------  -------  --------
                                               5,529     5,717    5,786
                                            ---------  -------  --------

  Federal income tax benefit                   2,242     1,965    1,979
                                            ---------  -------  --------

        Net income                          $ 11,026   $16,668  $11,563
                                            =========  =======  =======
</TABLE>


<PAGE>
                              Coastal Bancorp, Inc.
                            Statements of Cash Flows
                            ------------------------
<TABLE>
<CAPTION>
                                                                            Years ended December 31,
                                                                     -------------------------------------
                                                                          1999          1998       1997
                                                                     -----------     ----------   --------
<S>                                                                  <C>                         <C>        <C>
Cash flows from operating activities:
  Net income                                                         $   11,026       $ 16,668   $11,563
  Adjustments to reconcile net income to net
    cash provided  by operating activities:
      Equity in undistributed earnings of subsidiary                     (6,367)       (12,724)     (7,946)
      Net (increase) decrease in other assets and other liabilities     (11,585)         3,684      (1,426)
                                                                     ------------     ----------   --------

          Net cash provided (used) by operating activities               (6,926)         7,628       2,191
                                                                     ------------     ----------   --------

Cash flows from investing activities:
  Net decrease in mortgage-backed securities                                317            458         318
  Investment in subsidiary                                                   --             --        (100)
                                                                     ------------     ----------   --------
          Net cash provided by investing activities                         317            458         218
                                                                     ------------     ----------   --------

Cash flows from financing activities:
  Proceeds from issuance of Preferred Stock, net                         25,942             --          --
  Exercise of stock options for purchase of Common Stock                    545            536         582
  Purchase of treasury stock                                            (12,685)        (7,778)         --
  Repurchase of Senior Notes                                             (3,100)            --          --
  Dividends paid                                                         (3,662)        (2,392)     (2,292)
                                                                     ------------     ----------   --------
        Net cash provided (used) by financing activities                  7,040         (9,634)     (1,710)
                                                                     ------------     ----------   --------

          Net increase (decrease) in cash and cash equivalents              431         (1,548)        699
Cash and cash equivalents at beginning of year                               22          1,570         871
                                                                     ------------     ----------   --------
Cash and cash equivalents at end of year                             $      453       $     22    $  1,570
                                                                     ============     ==========  =========
</TABLE>



<PAGE>
(26)     SELECTED  QUARTERLY  FINANCIAL  DATA

Selected  quarterly  financial data is presented in the following tables for the
years  ended  December  31, 1999 and 1998 (in thousands, except per share data):

<TABLE>
<CAPTION>

                                                 1999 Quarter Ended (unaudited)
                                     ----------------------------------------------------------
                                        March 31,    June 30,   September 30,   December 31,
                                     ------------  ----------   -------------   ------------
<S>                                  <C>          <C>            <C>             <C>
Interest income                      $    49,526   $  49,351       $  50,870     $   53,196
Interest expense                          31,110      30,504          31,309         32,734
                                     -----------   ----------    ------------    ------------
Net interest income                       18,416      18,847          19,561         20,462
Provision for loan losses                  2,331         675           1,360          6,209
Noninterest income                         2,440       2,413           2,570          2,949
Noninterest expense                       13,480      14,818          14,536         14,976
                                     -----------   ----------    ------------    ------------
Income before provision
 for Federal income taxes and
 minority interest                         5,045       5,767           6,235          2,226
Provision for Federal income taxes         1,626       1,773           1,843            417
Minority interest - preferred stock
 dividends of Coastal Banc ssb               647         647             647            647
                                     -----------   ----------    ------------    ------------
Net income                           $     2,772   $   3,347        $  3,745     $    1,162
                                     ===========   ==========    ============    ============
Basic earnings per share             $      0.40   $    0.47        $   0.50     $     0.08
                                     ===========   ==========    ============    ============
Diluted earnings per share           $      0.40   $    0.46        $   0.48     $     0.08
                                     ===========   ==========    ============    ============
</TABLE>


<TABLE>
<CAPTION>

                                                  1998 Quarter Ended (unaudited)
                                     ----------------------------------------------------------
                                        March 31,    June 30,   September 30,   December 31,
                                     ------------  ----------   -------------   ------------
<S>                                  <C>          <C>            <C>             <C>
Interest income                      $   50,888    $ 52,373     $    54,179     $   53,374
Interest expense                         35,888      36,091          36,924         34,501
                                     ------------  ----------   -------------   ------------
Net interest income                      15,000      16,282          17,255         18,873
Provision for loan losses                 1,450         450             450            750
Writedown of purchased mortgage
 loan premium                              (709)         --              --             --
Other noninterest income                  1,756       1,653           2,052          2,120
Noninterest expense                      10,335      10,583          12,475         14,990
                                     ------------  ----------   -------------   ------------
Income before provision
 for Federal income taxes and
 minority interest                        4,262       6,902           6,382          5,253
Provision (benefit) for Federal
 income taxes                            (2,326)      2,276           1,994          1,599
Minority interest - preferred stock
 dividends of Coastal Banc ssb              647         647             647            647
                                     ------------  ----------   -------------   ------------
Net income                           $    5,941   $   3,979  $        3,741  $       3,007
                                     ============  ==========   =============   ============

Basic earnings per share             $     0.79   $    0.53  $         0.50  $        0.42
                                     ============  ==========   =============   ============
Diluted earnings per share           $     0.76   $    0.51  $         0.48  $        0.41
                                     ============  ==========   =============   ============
</TABLE>


<PAGE>
                     COASTAL BANCORP, INC. AND SUBSIDIARIES

STOCK  PRICES  AND  DIVIDENDS

The  following  table  sets  forth the high and low price range and dividends by
quarter for the two years ended December 31, 1999 of the Common Stock of Bancorp
("CBSA"), Preferred Stock of Bancorp, ("CBSAO") and the Series A Preferred Stock
of  the  Bank  ("CBSAP")  as  listed  and  quoted  on  The Nasdaq Stock Market :


COASTAL  BANCORP,  INC.  COMMON  STOCK:

<TABLE>
<CAPTION>

                           1999                            1998
                ----------------------------------------------------------
                 High      Low    Dividends       High      Low    Dividends
                -------  -------  ----------     -------  -------  ----------
<S>             <C>      <C>      <C>            <C>      <C>      <C>
First Quarter   $19.500  $15.500  $    0.080     $23.672  $20.422  $    0.080
Second Quarter   18.500   16.000       0.080      26.672   22.578       0.080
Third Quarter    18.875   15.500       0.080      25.750   15.000       0.080
Fourth Quarter   20.125   17.250       0.080      20.500   14.000       0.080
</TABLE>


COASTAL  BANCORP,  INC.  PREFERRED  STOCK,  SERIES  A:

<TABLE>
<CAPTION>
                           1999                         1998
                -------  ---------------------------------------------
                 High      Low    Dividends       High  Low  Dividends
                -------  -------  ----------      ----  ---  ---------
<S>             <C>      <C>      <C>             <C>   <C>  <C>
First Quarter        --       --          --        --   --         --
Second Quarter  $25.375  $24.750  $    0.300        --   --         --
Third Quarter    25.000   23.125       0.570        --   --         --
Fourth Quarter   23.750   17.750       0.570        --   --         --
</TABLE>


COASTAL  BANC  SSB  PREFERRED  STOCK,  SERIES  A:

<TABLE>
<CAPTION>
                          1999                              1998
                -------------------------------------------------------------
                 High      Low    Dividends        High      Low    Dividends
                -------  -------  ----------      -------  -------  ----------
<S>             <C>      <C>      <C>             <C>      <C>      <C>
First Quarter   $25.250  $24.625  $    0.563      $26.000  $25.250  $    0.563
Second Quarter   25.063   24.500       0.563       25.625   25.000       0.563
Third Quarter    24.750   23.375       0.563       25.375   24.938       0.563
Fourth Quarter   23.375   20.750       0.563       25.250   24.625       0.563
</TABLE>

<PAGE>

Coastal  Bancorp,  Inc.
STOCKHOLDER  INFORMATION

ANNUAL  MEETING

The  Annual Meeting of Stockholders of Coastal Bancorp, Inc. will be held at the
corporate offices of Coastal Bancorp, Inc. at 5718 Westheimer, Houston, Texas in
the  Coastal  Banc  auditorium,  Suite  1101,  on  April  27, 2000 at 11:00 a.m.


TRANSFER  AGENT  AND  REGISTRAR

ChaseMellon  Shareholder  Services,  L.L.C.
Overpeck  Centre
85  Challenger  Road
Ridgefield  Park,  New  Jersey  07660
(800)  851-9677
www.chasemellon.com


INDEPENDENT  AUDITORS

KPMG  LLP
700  Louisiana  Street
Houston,  Texas   77002


SPECIAL  COUNSEL

Elias,  Matz,  Tiernan  &  Herrick  L.L.P.
734  15th  Street,  N.W.
Washington,  D.C.   20005


INQUIRIES,  PUBLICATIONS  AND  FINANCIAL  INFORMATION  (INCLUDING  COPIES OF THE
ANNUAL  REPORT  AND  FORM  10-K)

Manuel  J.  Mehos
Chairman  of  the  Board
   and  Chief  Executive  Officer
or
Catherine  N.  Wylie
Senior  Executive  Vice  President
   and  Chief  Financial  Officer

Coastal  Bancorp,  Inc.
Coastal  Banc  Plaza
5718  Westheimer,  Suite  600
Houston,  Texas  77057
(713)  435-5000
www.coastalbanc.com

<PAGE>

STOCK  LISTING  AND  OTHER  INFORMATION

     The common stock of Coastal Bancorp, Inc. is listed on the over-the-counter
market  and  quoted  on The Nasdaq Stock Market  under the symbol "CBSA."  As of
February  29,  2000,  there  were  6,354,187  shares  of Common Stock of Coastal
Bancorp,  Inc.  issued  and outstanding and the approximate number of registered
stockholders was 35, representing approximately 1,100 beneficial stockholders at
such  record  date.

     On  March  25,  1992,  Coastal Banc Savings Association (the "Association")
issued 3,092,076 shares of Common Stock at $8.33 per share in its initial public
offering.  As  of  such  date,  the  Common  Stock  of  the  Association  became
registered  under the Securities Exchange Act of 1934 and also became listed for
quotation  on  The  Nasdaq  Stock  Market  .  The  Common  Stock  issued  by the
Association  became  the Common Stock of Coastal Bancorp, Inc. on July 29, 1994,
as  a  result  of  the  holding  company  reorganization  of  the  Association.

     On  October  21,  1993,  the  Association  issued  1,150,000 shares of 9.0%
Noncumulative  Preferred Stock, Series A, at $25.00 per share.  As of such date,
the  Preferred  Stock  of the Association became registered under the Securities
Exchange  Act  of 1934.  After the reorganization into a holding company form of
ownership  and  conversion of the Association to a Texas-chartered savings bank,
the  Preferred  Stock  of  the Association became the Preferred Stock of Coastal
Banc  ssb.  The  Preferred  Stock is redeemable at any time on or after December
15,  1998,  only at the option of the Bank, in whole or in part, at a redemption
price  of  $25.00  per  share  plus accrued and unpaid dividends.  The Preferred
Stock is listed and quoted on The Nasdaq Stock Market  under the symbol "CBSAP."
As  of  February 29, 2000, there were 1,150,000 shares of Preferred Stock issued
and  outstanding  and  held  by  approximately  152  registered  stockholders,
representing  approximately  1,900  beneficial stockholders at such record date.

     On  May 11, 1999, Coastal Bancorp, Inc. ("Bancorp") issued 1,100,000 shares
of  9.12%  Series  A Cumulative Preferred Stock, no par value, at $25 per share.
As  of  such  date,  the  Preferred Stock of Bancorp became registered under the
Securities  Act  of  1934.  The  preferred  stock is callable on May 15, 2003 at
Bancorp's  option.  The  Bancorp  Preferred  Stock  is  listed and quoted on The
Nasdaq  Stock  Market  under the symbol "CBSAO".  As of February 29, 2000, there
were  1,100,000  shares  of  Preferred  Stock issued and outstanding and held by
approximately  1  registered  stockholder,  representing  approximately  1,300
beneficial  stockholders  at  such  record  date.

     Coastal  declared  dividends  on  the  Common  Stock  payable  during 1999.
Quarterly dividends in the amount of $0.08 per share were paid on March 15, June
15,  September  15  and  December  15,  1999.  On March 15, 2000, Coastal paid a
quarterly  dividend  in  the  amount  of  $0.08  per  share on its Common Stock.
Coastal  will  continue  to  review its dividend policy in view of the operating
performance  of  the  Bank, and may declare dividends on the Common Stock in the
future if such payments are deemed appropriate and in compliance with applicable
law and regulations.  Prior to the declaration of dividends, Coastal must notify
the  Office  of  Thrift  Supervision,  the  holding  company's  primary  federal
regulator,  which  may  object  to  the  dividends  on  the  basis of safety and
soundness.