COASTAL  BANCORP,  INC.
AND  SUBSIDIARIES

FINANCIAL  HIGHLIGHTS
DECEMBER  31,  2000,  1999  AND  1998

<TABLE>
<CAPTION>
                                                                     December 31,
                                                                     --------------
(Dollars in thousands, except per share data)               2000          1999         1998
-----------------------------------------------------  --------------  -----------  -----------
<S>                                                    <C>             <C>          <C>
FOR THE YEAR ENDED
 Net interest income                                   $      84,592   $   77,286   $   67,410
 Provision for loan losses (1)                                 5,790       10,575        3,100
 Noninterest income                                           11,800       10,372        6,872
 Noninterest expense                                          58,195       57,810       48,383
 Reversal of accrued income taxes (2)                             --           --        3,679
 Net income                                                   19,924       11,026       16,668
 Diluted earnings per common share                              2.87         1.42         2.18
-----------------------------------------------------  --------------  -----------  -----------

AT YEAR END
 Total assets                                          $   3,091,611   $2,947,952   $2,982,161
 Loans receivable                                          1,896,228    1,735,081    1,538,149
 Mortgage-backed securities held-to-maturity                 885,565      917,212    1,154,116
 Mortgage-backed securities available-for-sale                94,673       99,665       96,609
 Deposits                                                  1,674,981    1,624,289    1,705,004
 Borrowed funds                                            1,150,305    1,096,931    1,066,720
 Senior Notes payable                                         46,900       46,900       50,000
 Minority interest - preferred stock of Coastal
   Banc ssb                                                   28,750       28,750       28,750
 Preferred stockholders' equity                               27,500       27,500           --
 Common stockholders' equity                                 110,971      105,956      112,764
 Book value per common share                                   18.89        16.42        15.71
 Tangible book value per common share                          15.08        12.53        11.75
-----------------------------------------------------  --------------  -----------  -----------

SIGNIFICANT RATIOS FOR THE YEAR ENDED
 Return (before minority interest) on average assets            0.74%        0.47%        0.64%
 Return on average common equity                               16.51         8.83        14.96
 Net interest margin                                            2.87         2.75         2.31
 Interest rate spread including noninterest-bearing
   deposits                                                     2.72         2.65         2.17
 Interest rate spread                                           2.43         2.39         1.96
 Average common equity to average total assets                  3.47         3.66         3.71
 Noninterest expense to average total assets                    1.91         1.98         1.61
-----------------------------------------------------  --------------  -----------  -----------

ASSET QUALITY RATIOS AT YEAR END
 Nonperforming assets to total assets                           0.82%        0.73%        0.99%
 Nonperforming loans to total loans receivable                  1.12         0.99         1.60
 Allowance for loan losses to nonperforming loans              68.32        61.30        46.28
 Allowance for loan losses to total loans receivable            0.77         0.60         0.74
-----------------------------------------------------  --------------  -----------  -----------
</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,
2000,  Coastal  Banc  ssb  had  $3.1  billion  in  assets and met the regulatory
requirements  to  be  a  "well  capitalized"  institution  according  to  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                           25

Consolidated Financial Statements                      26

Notes to Consolidated Financial Statements             31

Stock Prices and Dividends                             54

Stockholder Information                                55

</TABLE>



<PAGE>

CHAIRMAN'S  LETTER

I  admit it.  I've been really looking forward to writing this year's Chairman's
letter.  Coastal  Bancorp,  Inc.  and subsidiaries ("Coastal") had its best year
ever  in  2000,  and  - here's the best part - Coastal's stock price closed at a
record year-end high.  So I'm pumped and you're going to hear about it.  Yeah, I
know  what you're thinking.  You dread having to wade through another Chairman's
endless  babble  about  the  unmatched  greatness  of  the  company  and  its
astonishingly  superb  results,  replete with the trendiest business sound bites
thrown in by an army of "PR" types, who really write many, if not most, of these
letters.

But  not  this  one.  So I promise to contain myself and stick to the facts.  On
occasion  my  excitement  about our success in 2000 will filter through, but for
the  most  part  you'll  just  get the results.  After all, a successful banking
formula  is pretty simple: Maximize net interest margin and fee income, minimize
credit risk, and minimize expenses.  Those are the components of core income for
a  bank.  When  all  of  the  components  perform  well  in  the  same year, the
successful results speak for themselves.  You don't need all the trendy business
babble,  just  the  facts.

So  here's what I'll do for you.  This is all you may need or want to know about
Coastal's  results in the year 2000: Coastal earned $2.87 a share, a record high
by  a  lot, and Coastal's stock closed at $24.00 per share on December 31, 2000,
also  a  record  high  (for  a  year-end).  Net interest margin of 2.87% and fee
income  (not including loan servicing income) of $8.0 million were also - guess?
-  record high levels for Coastal.  And for the first time in Coastal's history,
overhead  actually  decreased.

You  see?  When  bankers  stick  to doing the basics successfully, reporting the
results  is  easy  and  simple.  That  doesn't mean the business isn't changing.
Indeed,  it's changing fast and Coastal is evolving with it.  However, the basic
banking  formula  is  still  the  best way for a bank Coastal's size to maximize
earnings.  So  first  and  foremost,  we  have to get that right every year.  In
2000,  we  did  it  better  than  we  ever  have.

I  invite  and encourage you to keep reading for more details about the results.
I  will  also talk about the progress of the development of Coastal's commercial
banking business and our other plans for growth.  But if all you needed were the
record  results  for  2000  and  you don't want to risk hearing another Chairman
beating  the  company  drum,  I  thank  you in advance for being a loyal Coastal
shareholder  and  I  look  forward  to  writing  you  again  next  year.

2000  EARNINGS

Net  income  available to common shareholders for 2000 reached a record level of
$17.4  million,  an $8.0 million increase over 1999 income of $9.4 million and a
$3.5  million  increase  over  1999 income of $13.9 million before the provision
specific  to  the  MCA  loan  (a $10.0 million participation in a warehouse loan
which  was  eventually  charged  off in the fourth quarter of 1999).  On a fully
diluted earnings per common share basis, 2000 earnings of $2.87 per common share
showed  an  increase  of  102% over 1999 earnings of $1.42 per common share, and
showed  an  increase  of 38% over 1999 earnings before the provision specific to
the  MCA  loan  of  $2.08  per  common  share.

Not  only  were  2000  earnings a record for Coastal, but the increase in income
over  1999  income  before  the  provision specific to the MCA loan was a record
increase.  This  unprecedented  success  in  earnings growth was attributable to
record  levels  of  net interest income and fee income as well as a reduction in
overhead,  unprecedented  until  2000  for  Coastal.

Net  interest  income,  prior  to  the  provision for loan losses, reached $84.6
million  during  2000, compared to $77.3 million during 1999 and service charges
on  deposit  accounts reached $7.0 million during 2000, compared to $6.3 million
during  1999.  Noninterest  expense  increased  to  $58.2  million  during 2000,
compared  to  $57.8  million  during  1999.  However, excluding the $1.1 million
reversal  of  certain  accrued liabilities in 1999, noninterest expense actually
decreased  by  $756,000  in  2000.


<PAGE>
THE  PLAN  WORKED

That  means  we  spent  $756,000 less on overhead in 2000 than we spent in 1999.
Again,  I  know  what  you're  thinking; banks that grow never spend less money.
Well,  you're  right,  it's  kind  of  rare.  It  probably  should  occur  more
frequently.  Periodically,  it's  healthy  for  a  bank  to perform an objective
self-examination  and  "right  size"  the  bank.

Managers  of  public  companies  have  a  natural  aversion  to  suspending  the
introduction  of  new  ideas,  new products, new markets, and so forth - even if
it's  temporary.  After all, what would they have to talk about in their letters
to  shareholders?  To  them,  putting  the  company's  destiny on hold and doing
nothing  new  is  riskier  than  launching  new  product  lines and entering new
markets.  Sometimes  new  management is needed to perform the unglamorous job of
cleaning  things  up  and  making the company more efficient and profitable with
what  they  already  have.  We  decided  that  we  could  do  it  ourselves.

You  probably  don't  recall  this, but in my letter to you last year I told you
that  we  "don't  plan  on  spending  any  more  money than we did in 1999."  We
believed  it  was  time  to  right-size  Coastal.  By  the  end  of 1999, we had
successfully  transformed  Coastal's  core processes and culture into those of a
commercial  bank,  a  path  we  embarked  upon  in  1995.  The  result  was  an
infrastructure  that  was  capable  of  handling  significantly  more commercial
customers  plus  a  few  more  acquisitions.

But  by  the  beginning of 2000, the booming economy and an increasingly crowded
commercial  lending  market  was  causing loan margins to shrink and acquisition
prices  to  become  prohibitively  expensive.  So we concluded that this was the
time  to  right-size  and  spend  a  year  simply focusing on getting more local
business banking customers.  I concluded my letter to you last year by promising
this  simple  plan  for  2000:  "Business  banking  grows.  Expenses  don't."

The plan worked.  In fact, it worked better than we ever expected.  During 2000,
we  spent  less,  got more customers, improved Coastal's net interest margin and
fee  income,  and  made  a  lot  more  money.  We  raised the level of Coastal's
earnings  power  and  sacrificed nothing in the growth of our business.  I'll be
honest  with you, what started out to be a right-sizing project turned out to be
the  medicine Coastal needed to be more efficient and effective at the things we
do  best,  and  ultimately  much  more  profitable.  All  of  that  in  spite of
management's  original  intentions  of  simply  right-sizing.

WE'RE  NOT  MUCH  DIFFERENT  EXCEPT  FOR  THE  NUMBERS

So  at the end of 2000, Coastal's products and markets were pretty much the same
as  they  were  at  the  end  of  1999.  We just simply have more customers, and
Coastal's  financial  results  reflect  that.  Another  thing I've talked to you
about  in  previous  letters  is  Coastal's  untapped  operating  leverage.  The
breakout  earnings  that  we  had in 2000 are a direct result of that.  In other
words,  now that we have transformed Coastal's operations into those replicating
a  full  service commercial bank, it doesn't take much commercial deposit growth
and  commercial loan growth to improve Coastal's earnings power.  That's because
we're starting from a relatively low proportion of commercial loans and deposits
on  Coastal's  balance  sheet.

Here  are  some  important  changes  to  Coastal's  balance  sheet  in  2000:
-     Total  loans  increased  by  $161.1  million  to  $1.9  billion.
-     Total  commercial  loans  increased  by  $53.9  million.
-     Total  deposits  increased  by  $50.7  million.
-     Total  commercial  transaction  accounts  increased  by  $14.6  million.
-     Total  transaction  accounts  increased  by  $20.5  million.

We  were  happy  with  the  amount  of those changes which were in line with our
expectations.  But they're modest numbers relative to the size of the individual
categories.  Yet  net  interest  margin  did  increase by $7.3 million, earnings
increased  by $3.5 million, and earnings per common share increased by 38% (both
increases  over  1999  earnings  before the provision specific to the MCA loan).
That's  because  higher  yielding  commercial loans are replacing lower yielding
mortgage-backed  securities  ("MBS")  and low cost deposits are replacing higher
cost  wholesale  funds.

So  you  see  a  relatively  small  amount  of  growth  in  loans and deposits -
particularly  the  commercial  kind - has the potential of producing significant
margin  and  earnings  growth  for  Coastal.  That's  what  I  mean by Coastal's
untapped  operating  leverage.  We plan to continue the process of replacing MBS
with  loans, with an emphasis on commercial loans.  We expect this process to be
the  primary source of continued earnings growth.  Furthermore, since it doesn't
take  much  commercial  loan  growth to achieve Coastal's earnings goals, we can
continue  to  adhere  to  our  prudent  credit  standards  that  are  primarily
responsible  for  Coastal's  strong  balance  sheet.

Service  charges  on  deposit accounts increased by $675,000, or 10.7%, but loan
fees  decreased  by  $577,000.  Loan  fees decreased primarily because Coastal's
entire  servicing  rights  portfolio was sold at the end of the first quarter in
2000.  We  anticipated  the income from the servicing portfolio to decline on an
ongoing basis, so during the first quarter of 2000 we sold the rights to service
$389.1 million of mortgage loans after making the decision to only service loans
owned  by  Coastal.  In addition, $245,000 of the decrease in 2000 loan fees was
due  to  the  overall  decreased  activity  in  the  warehouse  loan  portfolio.

We  expect  service charges on deposit accounts to continue growing as they have
in  recent  years, including in 2000, and we expect noninterest income to resume
its  growth  once  servicing  income  is  no  longer  part  of  the year to year
comparisons.

THE  QUEST  CONTINUES  FOR  LOCAL  BUSINESS  CUSTOMERS

So  we've  raised  the  bar and set a new standard for Coastal's earnings power.
Can  we  set  an  even  higher  standard?  The answer is yes, as long as we keep
gaining  business  banking  market  share  in Coastal's three primary commercial
markets  -  Houston,  the  Rio  Grande Valley, and Austin - and contain overhead
growth.

We like Coastal's positioning in our primary business banking markets.  Texas is
the  land  of  many  banks,  but  it's dominated by the five largest banks - all
domiciled  outside  of Texas - who control over 40% of the deposit market share.
Those  five  banks  are  adept  at  servicing the large commercial customers and
retail  customers.  But  local  middle  market  businesses  are  an  awkward
relationship  size for the large national banks. Businesses of that size require
hands-on  service  and  prompt  execution  by decision-makers, or easy access to
decision-makers.  Only  a  handful  of  local  banks  similar in size to Coastal
operate in Coastal's primary commercial markets.  There's plenty of local middle
market  business  to go around for all of the local banks.  That's where Coastal
expects  to  derive  most  of  its  future  growth.

We plan to continue deploying available resources to local business banking.  In
2001,  or soon after, we plan to open new branches in the high growth commercial
markets  of  Brownsville  and the greater Houston area.  We will consolidate two
existing Brownsville branches, presently in less favorable locations, into a new
Brownsville  branch,  and  open  a new suburban Houston area branch in Fort Bend
County  to  complement  one  of  Coastal's  most  successful commercial branches
located  in  that  same  county.

In  2001,  we  also  plan  to  launch  a  new Business Treasury Services ("BTS")
department that will offer a full menu of cash management services for Coastal's
business  customers.  Even though Coastal has offered commercial cash management
products  for  some  time,  the  BTS  department  will  serve as a profit center
dedicated  to  managing  and  selling  those  services  and will be charged with
implementing  an  Internet  cash  management product for commercial customers to
eventually  replace  Coastal's  existing  dial-up  product.

And  finally,  in  2001,  we plan to overhaul and upgrade Coastal's Internet web
page  and  Internet  banking  product.  They  have  served us well for years and
Coastal's  retail  customers  have  been  very pleased with our Internet banking
product.  It's  time  to  give  them  both a new look and improve functionality.


<PAGE>
HOW  ABOUT  AN  ENCORE?

Okay,  one  last  time,  I  know  what  you're  thinking.  Those  three projects
scheduled for 2001 won't be free.  With costly projects, how does Coastal expect
to  continue  prospering  from  this  so-called  operating  leverage?

I've  been  saving  the  best  for last.  In 2001, for the second year in a row,
Coastal  has  a  flat  expense  budget.  We  are planning for the same amount of
overhead  as  last  year.  We  certainly  are  spending  more resources on these
projects,  but  it's  not  as  much  as  you  might  think.  Plus, we're gaining
efficiencies  in  other  areas  and some of our depreciation and amortization of
goodwill  is  diminishing.

So,  can  Coastal  repeat the earnings growth performance of 2000?  Hard to say,
but in 2001 we certainly plan to do the kinds of things we did in 2000 that gave
us unprecedented results.  And, we are upgrading Coastal's delivery platform for
commercial  products  and  working  very  hard on simply getting more commercial
customers.  If  we  are  successful,  the  growth  will  follow.

Thank  you  for  taking the time to allow me to revel in Coastal's unprecedented
results for 2000.  If you continued reading and made it this far, there's a good
chance  you're a shareholder and you might be reveling with me.  Nevertheless, I
am  certain  that  as  owners  of  this  company,  we  are  both reveling in the
performance  of  our  stock  price in 2000.  At the end of 1999, Coastal's stock
closed  at  $17.50  per common share, unchanged from the prior year.  I told you
then  that I was disappointed in the price performance and promised to work hard
to  improve  it.  We  succeeded  and  the  stock closed 37% higher at $24.00 per
common share on December 31, 2000.  That's our most important achievement and it
will  always  be  our  most  important  goal.






/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)                    2000           1999        1998
                                                           ----------------  ----------  ----------
<S>                                                        <C>               <C>         <C>
Balance Sheet Data
 Total assets . . . . . . . . . . . . . . . . . . . . . .  $      3,091,611  $2,947,952  $2,982,161
 Loans receivable (1) . . . . . . . . . . . . . . . . . .         1,896,228   1,735,081   1,538,149
 Mortgage-backed securities held-to-maturity (1). . . . .           885,565     917,212   1,154,116
 Mortgage-backed securities available-for-sale. . . . . .            94,673      99,665      96,609
 Deposits . . . . . . . . . . . . . . . . . . . . . . . .         1,674,981   1,624,289   1,705,004
 Advances from the Federal Home Loan Bank of
   Dallas ("FHLB"). . . . . . . . . . . . . . . . . . . .         1,150,305   1,096,931     966,720
 Securities sold under agreements to repurchase . . . . .                --          --     100,000
 Senior Notes payable . . . . . . . . . . . . . . . . . .            46,900      46,900      50,000
 Minority interest - preferred stock of Coastal Banc ssb.            28,750      28,750      28,750
 Preferred stockholders' equity . . . . . . . . . . . . .            27,500      27,500          --
 Common stockholders' equity. . . . . . . . . . . . . . .           110,971     105,956     112,764


                                                                 At December 31,
                                                               ----------------
(Dollars in thousands, except per share data)                   1997        1996
                                                             ----------  ----------
<S>                                                         <C>         <C>
Balance Sheet Data
 Total assets . . . . . . . . . . . . . . . . . . . . . .   $2,911,410  $2,875,907
 Loans receivable (1) . . . . . . . . . . . . . . . . . .    1,261,435   1,229,748
 Mortgage-backed securities held-to-maturity (1). . . . .    1,345,090   1,344,587
 Mortgage-backed securities available-for-sale. . . . . .      169,997     180,656
 Deposits . . . . . . . . . . . . . . . . . . . . . . . .    1,375,060   1,310,835
 Advances from the Federal Home Loan Bank of
   Dallas ("FHLB"). . . . . . . . . . . . . . . . . . . .      540,475     409,720
 Securities sold under agreements to repurchase . . . . .      791,760     966,987
 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. . . . . . . . . . . . . . .      104,830      94,148
</TABLE>


<TABLE>
<CAPTION>
                                                                        For the Year Ended December 31,
                                                                       ---------------------------------
                                                                       2000       1999       1998       1997
                                                                     ---------  ---------  ---------  ---------
<S>                                                                <C>          <C>        <C>        <C>
Operating Data
 Interest income . . . . . . . . . . . . . . . . . . . . . . . . . $  237,497   $202,943   $210,814   $201,356
 Interest expense. . . . . . . . . . . . . . . . . . . . . . . . .    152,905    125,657    143,404    144,423
                                                                    ----------  ---------  ---------  ---------
 Net interest income . . . . . . . . . . . . . . . . . . . . . . .     84,592     77,286     67,410     56,933
 Provision for loan losses(2). . . . . . . . . . . . . . . . . . .      5,790     10,575      3,100      1,800
                                                                    ----------  ---------  ---------  ---------
 Net interest income after provision for loan losses . . . . . . .     78,802     66,711     64,310     55,133
 Gain on sale of mortgage servicing rights . . . . . . . . . . . .      2,172         --         --         --
 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. . . . . . . . . . . . . . . . . . . . .      9,628     10,372      7,580      6,147
 SAIF insurance special assessment (3) . . . . . . . . . . . . . .         --         --         --         --
 Other noninterest expense . . . . . . . . . . . . . . . . . . . .    (58,195)   (57,810)   (48,383)   (39,544)
                                                                    ----------  ---------  ---------  ---------
 Income before provision for Federal income taxes
   and minority interest . . . . . . . . . . . . . . . . . . . . .     32,407     19,273     22,799     21,973
 Provision for Federal income taxes (4). . . . . . . . . . . . . .     (9,895)    (5,659)    (3,543)    (7,822)
 Minority interest - preferred stock dividends of Coastal
   Banc ssb. . . . . . . . . . . . . . . . . . . . . . . . . . . .     (2,588)    (2,588)    (2,588)    (2,588)
                                                                    ----------  ---------  ---------  ---------
 Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  19,924   $ 11,026   $ 16,668   $ 11,563
                                                                    ==========  =========  =========  =========
 Net income available to common stockholders . . . . . . . . . . .  $  17,416   $  9,442   $ 16,668   $ 11,563
                                                                    ==========  =========  =========  =========
 Basic earnings per common share (5) . . . . . . . . . . . . . . .  $    2.94   $   1.45   $   2.24   $   1.55
                                                                    ==========  =========  =========  =========
 Diluted earnings per common share (5) . . . . . . . . . . . . . .  $    2.87   $   1.42   $   2.18   $   1.50
                                                                    ==========  =========  =========  =========



                                                              1996
                                                            ---------
<S>                                                         <C>
Operating Data
 Interest income . . . . . . . . . . . . . . . . . . . . .  $194,611
 Interest expense. . . . . . . . . . . . . . . . . . . . .   138,185
                                                            ---------
 Net interest income . . . . . . . . . . . . . . . . . . .    56,426
 Provision for loan losses(2). . . . . . . . . . . . . . .     1,925
                                                            ---------
 Net interest income after provision for loan losses . . .    54,501
 Gain on sale of mortgage servicing rights . . . . . . . .        --
 Writedown of purchased mortgage loan premium. . . . . . .        --
 Gain (loss) on sales of mortgage-backed securities
   available-for-sale, net . . . . . . . . . . . . . . . .        (4)
 Gain on sale of branch office . . . . . . . . . . . . . .       521
 Other noninterest income. . . . . . . . . . . . . . . . .     5,574
 SAIF insurance special assessment (3) . . . . . . . . . .    (7,455)
 Other noninterest expense . . . . . . . . . . . . . . . .   (37,927)
                                                            ---------
 Income before provision for Federal income taxes
   and minority interest . . . . . . . . . . . . . . . . .    15,210
 Provision for Federal income taxes (4). . . . . . . . . .    (5,671)
 Minority interest - preferred stock dividends of Coastal
   Banc ssb. . . . . . . . . . . . . . . . . . . . . . . .    (2,588)
                                                            ---------
 Net income. . . . . . . . . . . . . . . . . . . . . . . .  $  6,951
                                                            =========
 Net income available to common stockholders . . . . . . .  $  6,951
                                                            =========
 Basic earnings per common share (5) . . . . . . . . . . .  $   0.93
                                                            =========
 Diluted earnings per common share (5) . . . . . . . . . .  $   0.92
                                                            =========
</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,
                                                                 ---------------------------------------
                                                                      2000          1999          1998
                                                                  ----------     --------      --------
<S>                                                               <C>          <C>            <C>
Selected Ratios
Performance Ratios (6):
 Return (before minority interest) on average assets . . . . . .       0.74%        0.47%        0.64%
 Return on average common equity . . . . . . . . . . . . . . . .      16.51         8.83        14.96
 Dividend payout ratio . . . . . . . . . . . . . . . . . . . . .      12.23        22.11        14.35
 Average common equity to average total assets . . . . . . . . .       3.47         3.66         3.71
 Net interest margin (7) . . . . . . . . . . . . . . . . . . . .       2.87         2.75         2.31
 Interest rate spread including noninterest-bearing deposits (7)       2.72         2.65         2.17
 Interest rate spread (7). . . . . . . . . . . . . . . . . . . .       2.43         2.39         1.96
 Noninterest expense to average total assets . . . . . . . . . .       1.91         1.98         1.61
 Average interest-earning assets to average interest-bearing
  liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .     108.52       108.22       107.33
 Ratio of earnings to combined fixed charges and preferred
   stock dividends:
   Excluding interest on deposits. . . . . . . . . . . . . . . .      1.32X        1.23X        1.25X
   Including interest on deposits. . . . . . . . . . . . . . . .      1.17         1.11         1.14
Asset Quality Ratios:
 Nonperforming assets to total assets (8). . . . . . . . . . . .      0.82%        0.73%        0.99%
 Nonperforming loans to total loans receivable . . . . . . . . .      1.12         0.99         1.60
 Allowance for loan losses to nonperforming loans. . . . . . . .     68.32        61.30        46.28
 Allowance for loan losses to total loans receivable . . . . . .      0.77         0.60         0.74
Bank Regulatory Capital Ratios (9):
 Tier 1 capital to total assets. . . . . . . . . . . . . . . . .      6.22         5.76         5.25
 Tier 1 risk-based capital to risk-weighted assets . . . . . . .      9.94         9.68         9.54
 Total risk-based capital to risk-weighted assets. . . . . . . .     10.72        10.29        10.23
Other Data:
 Full-time employee equivalents                                        661          666          653
 Number of full service offices                                         50           50           49

Certain Ratios and Other Data - Excluding Adjusting Items (10)
 Adjusted net income                                              $ 19,924      $15,452      $14,099
 Adjusted diluted earnings per common share. . . . . . . . . . .      2.87         2.08         1.84
 Adjusted return (before minority interest) on average assets. .      0.74%        0.62%        0.55%
 Adjusted return on average common equity. . . . . . . . . . . .     16.51        12.96        12.65



                                                                     1997         1996
                                                                  --------     --------
<S>                                                               <C>          <C>
Selected Ratios
Performance Ratios (6):
 Return (before minority interest) on average assets . . . . . .     0.49%        0.34%
 Return on average common equity . . . . . . . . . . . . . . . .    11.68         7.50
 Dividend payout ratio . . . . . . . . . . . . . . . . . . . . .    19.83        28.55
 Average common equity to average total assets . . . . . . . . .     3.41         3.30
 Net interest margin (7) . . . . . . . . . . . . . . . . . . . .     2.02         2.06
 Interest rate spread including noninterest-bearing deposits (7)     1.85         1.89
 Interest rate spread (7). . . . . . . . . . . . . . . . . . . .     1.67         1.72
 Noninterest expense to average total assets . . . . . . . . . .     1.36         1.61
 Average interest-earning assets to average interest-bearing
  liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .   106.72       106.75
 Ratio of earnings to combined fixed charges and preferred
   stock dividends:
   Excluding interest on deposits. . . . . . . . . . . . . . . .    1.23X        1.15X
   Including interest on deposits. . . . . . . . . . . . . . . .     1.13         1.09
Asset Quality Ratios:
 Nonperforming assets to total assets (8). . . . . . . . . . . .     0.72%        0.60%
 Nonperforming loans to total loans receivable . . . . . . . . .     1.40         1.14
 Allowance for loan losses to nonperforming loans. . . . . . . .    41.90        49.02
 Allowance for loan losses to total loans receivable . . . . . .     0.59         0.56
Bank Regulatory Capital Ratios (9):
 Tier 1 capital to total assets. . . . . . . . . . . . . . . . .     5.52         5.35
 Tier 1 risk-based capital to risk-weighted assets . . . . . . .    11.46        11.77
 Total risk-based capital to risk-weighted assets. . . . . . . .    11.98        12.30
Other Data:
 Full-time employee equivalents                                       451          433
 Number of full service offices                                        37           37

Certain Ratios and Other Data - Excluding Adjusting Items (10)
 Adjusted net income                                              $11,563      $11,797
 Adjusted diluted earnings per common share. . . . . . . . . . .     1.50         1.56
 Adjusted return (before minority interest) on average assets. .     0.49%        0.51%
 Adjusted return on average common equity. . . . . . . . . . . .    11.68        12.53
</TABLE>

                                                    (Footnotes appear on page 9)


<PAGE>
Footnotes  for  pages  7  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)     On March 9, 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.  See Note 22 of
the  Notes  to  Consolidated  Financial  Statements.

(6)     Ratio,  yield  and rate information is based on average balances for the
year.

(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  capital  adequacy  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  2000  or  1997.


<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, February 25, 1999, April 27, 2000
and  July  27,  2000, the Board of Directors authorized five 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, 2000, 2,000,000 shares had been repurchased at an
average  repurchase price of $15.67 per share for a total cost of $31.3 million,
with  no  shares from the July 27, 2000 authorization having been repurchased to
date.
     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.  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 4 cents per diluted share (as of December 31, 2000),
and  is  expected  to  continue  through  the  end  of  2002.

FINANCIAL  CONDITION
     Total  assets  increased by 4.9%, or $143.7 million, from December 31, 1999
to  December 31, 2000.  The change in total assets was primarily comprised of an
increase  in loans receivable of $161.1 million and an increase of $21.6 million
in  cash  and  cash  equivalents.  These  increases were only slightly offset by
decreases  of  $31.6  million in mortgage-backed securities held-to-maturity and
$5.0  million in mortgage-backed securities available-for-sale.  The increase in
loans  receivable  was  primarily  due to residential mortgage loan purchases of
$236.4  million,  new  loans originated in other categories, offset by principal
payments received and a decrease of $51.9 million in commercial loans secured by
residential  mortgage  loans  held  for  sale,  because  of  Coastal's decreased
emphasis  on  this  type of lending.  The decrease in mortgage-backed securities
was  primarily  due to principal payments received.  At December 31, 2000, loans
receivable  as  a  percentage  of total assets increased to 61.3% as compared to
58.9%  at  December  31,  1999.
     Deposits  increased  by  3.1%,  or $50.7 million, from December 31, 1999 to
December  31,  2000 and advances from the FHLB increased 4.9%, or $53.4 million,
primarily  to  fund  the  overall  increase in total assets.  In addition, other
liabilities  and  accrued  expenses  increased  $33.4 million primarily due to a
payable  to  a broker of $31.3 million as of December 31, 2000 awaiting delivery
of  a  security  from  a  matured reverse repurchase agreement transaction.  The
security  was  delivered  to  Coastal  on  January  4,  2001.
     Stockholders'  equity  increased  3.8%,  or $5.0 million, from December 31,
1999  to  December  31,  2000  as  a result of 2000 net income of $19.9 million,
offset  by  common  stock  dividends  declared  of $2.1 million, preferred stock
dividends of $2.5 million, a $19,000 increase in accumulated other comprehensive
loss  and  treasury  stock  acquired  of  $10.9  million.

RESULTS  OF  OPERATIONS  FOR  THE  THREE  YEARS  ENDED  DECEMBER  31,  2000
     The  results  of operations of Coastal depend primarily on its net interest
income,  which  is  the  difference  between interest income on interest-earning
assets  and  interest  expense  on  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  the level of noninterest income,
including  service charges on deposit accounts, loan fees, 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  average  balances  for  the  year.

<TABLE>
<CAPTION>
<S>                                                   <C>                     <C>         <C>        <C>
                                                           At                    Year Ended December 31, 2000
                                                      December 31, 2000         Average                    Yield/
                                                          Yield/Rate            Balance       Interest      Rate
                                                     ------------------    --------------    ----------   --------
                                                                              (Dollars in thousands)
ASSETS
Interest-earning assets:
Loans receivable (1)                                         9.38%          $  1,881,124     $ 168,329     8.95%
Mortgage-backed securities                                   6.79              1,002,055        64,246     6.41
U.S. Treasury securities                                     6.42                  1,000            63     6.30
Securities purchased under agreements to resell
 and federal funds sold                                      6.50                  3,042           194     6.38
FHLB stock (2)                                               6.52                 55,810         4,612     8.26
Interest-earning deposits in other depository
 institutions                                               10.46                    895            53     5.92
                                                     ------------------    --------------    ----------   --------
   Total interest-earning assets                             8.48              2,943,926       237,497     8.07
                                                     ------------------                      ----------   --------
Noninterest-earning assets (3)                                                   100,626
                                                                           --------------
                                                                            $  3,044,552
                                                     ==================    ==============    ==========   ========

LIABILITIES AND  STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits                                    5.29%          $  1,489,479     $  73,216     4.92%
Advances from the FHLB                                       6.48                926,659        58,328     6.29
Securities sold under agreements to repurchase
 and federal funds purchased                                   --                249,673        16,671     6.68
Senior Notes payable                                        10.00                 46,900         4,690    10.00
                                                     ------------------    --------------    ----------   --------
  Total interest-bearing liabilities                         5.86              2,712,711       152,905     5.64
                                                     ------------------    --------------    ----------   --------
Noninterest-bearing liabilities                                                  170,083
                                                                           --------------
  Total liabilities                                                            2,882,794
Minority interest - preferred stock of Coastal
 Banc ssb                                                                         28,750
Preferred stockholders' equity                                                    27,500
Common stockholders' equity                                                      105,508
                                                                           --------------
  Total liabilities and stockholders' equity                                $  3,044,552
                                                                           --------------
Net interest income; interest rate spread                    2.62%                           $  84,592     2.43%
                                                     ==================                      ==========   ========

Net interest-earning assets; net interest yield on
 interest-earning assets                                                    $    231,215                   2.87%
                                                                           ==============                =========

Ratio of average interest-earning assets to average
 interest-bearing liabilities                                                      1.09x
                                                                           ==============
</TABLE>

_______________

(1)     Nonaccruing  loans  are  included  in  total  loans, but are immaterial.
(2)     In 2000, includes a $1.1 million special dividend received.  See further
discussion  in  "Management's Discussion and Analysis of Financial Condition and
Results  of  Operations  -  Net  Income."
(3)     Includes  goodwill, accrued interest receivable, property and equipment,
cash,  mortgage  servicing  rights,  prepaid  expenses  and  other  assets.

<PAGE>
<TABLE>
<CAPTION>

<S>                                                   <C>              <C>         <C>
                                                             Year Ended December 31, 1999
                                                           Average                  Yield/
                                                           Balance     Interest      Rate
                                                      -------------   ---------    -------
                                                             (Dollars in Thousands)
ASSETS
Interest-earning assets:
Loans receivable (1)                                  $   1,647,535    $ 136,036    8.26%
Mortgage-backed securities                                1,099,420       63,663    5.79
U.S. Treasury securities                                      1,439           78    5.42
Securities purchased under agreements to resell
 and federal funds sold                                       5,353          270    5.04
FHLB stock                                                   51,717        2,848    5.51
Interest-earning deposits in other depository
 institutions                                                 1,486           48    3.23
                                                      -------------    ---------   -------
   Total interest-earning assets                          2,806,950      202,943    7.23
                                                                       ---------   -------
Noninterest-earning assets (3)                              113,406
                                                      --------------
  Total assets                                        $   2,920,356
                                                      ==============


LIABILITIES AND  STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits                             $   1,490,851    $  64,701    4.34%
Advances from the FHLB                                      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                                         47,658        4,773   10.00
                                                      -------------    ---------   -------
  Total interest-bearing liabilities                      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                              $  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)     In 2000, includes a $1.1 million special dividend received.  See further
discussion  in  "Management's Discussion and Analysis of Financial Condition and
Results  of  Operations  -  Net  Income."
(3)     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 (3)                              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)     In 2000, includes a $1.1 million special dividend received.  See further
discussion  in  "Management's Discussion and Analysis of Financial Condition and
Results  of  Operations  -  Net  Income."
(3)     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,
                                                      2000  vs  1999                          1999  vs  1998
                                              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                            $20,320      $11,973     $32,293      $ 17,937      $(2,182)     $ 15,755
 Mortgage-backed securities                   (5,907)       6,490         583       (19,416)      (4,517)      (23,933)
 U.S. Treasury securities                        (27)          12         (15)          (38)           7           (31)
 Securities purchased under
   agreements to resell and federal
   funds sold                                   (136)          60         (76)         (134)         (26)         (160)
 FHLB stock                                      242        1,522       1,764           762         (165)          597
 Interest-earning deposits in
   other depository institutions                 (24)          29           5           (62)         (37)          (99)
                                            ---------     --------    -------      --------      --------     ---------

     Total. . . . . . . . . . . . . . . . .   14,468       20,086      34,554          (951)      (6,920)       (7,871)
                                            ---------     --------    -------      --------      --------     ---------

INTEREST EXPENSE
 Interest-bearing deposits                       (60)       8,575       8,515         5,484       (6,911)       (1,427)

 Securities sold under agreements to
   repurchase and federal funds
   purchased                                   9,526        1,531      11,057       (25,988)      (1,121)      (27,109)
 Advances from the FHLB                       (1,372)       9,131       7,759        12,788       (1,772)       11,016
 Senior Notes payable                            (83)          --         (83)         (227)          --          (227)
                                            ---------     --------    -------      --------      --------     ---------

     Total. . . . . . . . . . . . . . . . .    8,011       19,237      27,248        (7,943)      (9,804)      (17,747)
                                            ---------     --------    -------      --------      --------     ---------

 Net change in net interest income           $ 6,457      $   849     $ 7,306      $  6,992      $ 2,884      $  9,876
                                            =========     ========    =======      ========      ========     =========

</TABLE>


<PAGE>
NET  INCOME
     Coastal  reported  net  income of $19.9 million for the year ended December
31,  2000,  $11.0 million for the year ended December 31, 1999 and $16.7 million
for  the year ended December 31, 1998, an increase of $8.9 million, or 80.7%, in
2000,  and  a decrease of $5.7 million, or 33.9%, in 1999, each in comparison to
the prior year.  The increase in net income for the year ended December 31, 2000
was comprised of the following:  a $7.3 million increase in net interest income,
a $1.4 million increase in noninterest income and a $4.8 million decrease in the
provision  for  loan  losses,  partially  offset  by  a  $385,000  increase  in
noninterest  expense  (although it would have been a $756,000 decrease excluding
the  $1.1  million  reversal  of certain accrued liabilities in 1999) and a $4.2
million increase in the provision for Federal income taxes.  The increase in net
interest  income  was  due  primarily  to the increase in net interest margin to
2.87%  for  the  year ended December 31, 2000 from 2.75% for 1999.  Net interest
margin  for 2000 includes the effect of a $1.1 million special dividend recorded
in  the  second quarter.  The special dividend was declared by the FHLB equal to
1.625%  of  each  members'  FHLB  stock  held as of March 31, 2000 (the "special
dividend").  The  special  dividend  was paid in the form of FHLB stock on April
28,  2000.  The  increase  in  noninterest  income was primarily due to the $2.2
million  gain on the sale of Coastal's mortgage servicing rights recorded during
the  first  quarter  of  2000,  as  discussed below.  This increase was somewhat
offset  by the corresponding decrease of $436,000 in loan servicing income and a
$406,000  decrease  in  other noninterest income.  The decrease in the provision
for  loan losses was primarily due to the $6.8 million provision for loan losses
specific  to  the  MCA  loan  (as  described  below) recorded in 1999, offset by
provisions  recorded  in  2000  due  to  Coastal's plan to continue to build the
allowance  for loan losses to a benchmark of approximately 100% of nonperforming
loans.  The  increase  in  noninterest  expense  was  primarily  because  of the
reversal  of  certain accrued liabilities totaling $1.1 million during the first
quarter of 1999 and a $416,000 increase in compensation, payroll taxes and other
benefits.  These  increases  were  somewhat  offset by a decrease of $545,000 in
insurance  premiums,  primarily due to a decrease in deposit insurance rates, in
addition  to  small  changes  in  other expense categories.  The increase in the
provision  for  Federal  income  taxes was primarily due to the increased income
before  Federal  income  taxes  and  minority  interest.

     Net  income  before  the provision for loan losses specific to the MCA loan
(as  described  below)  in 1999 was $15.4 million compared to 1998 net income of
$14.1  million before one-time charges and credits.  For the year ended December
31,  1999,  net  income was negatively impacted by the provision for loan losses
specific  to  the  MCA  loan  of  $4.4  million (net of the tax effect).  During
January  1999, the MCA 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  and, as of December 31, 1999, Coastal had only received $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,  in  the fourth quarter of 1999, the remaining $8.9 million balance
of  this loan resulting in the additional provision for loan losses, net of tax,
of  $4.4  million  for  1999.


<PAGE>
     Coastal  is  continuing  to  work  with  the lead lender and the bankruptcy
trustee  to  recover any funds, if possible, from the collateral or MCA.  During
the year ended December 31, 2000, Coastal received $180,000 in proceeds from the
MCA  loan  which  was  recorded  as  a recovery in the allowance for loan losses
during  the  period.  In  addition,  the  lawsuit  filed  on January 12, 2000 is
currently scheduled for trial in late June of 2001, or as soon thereafter as the
court's  docket  will  permit.

     Aside  from the impact of the provision for loan losses specific to the MCA
loan  on  net  income,  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 in 1999.  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 $2.5 million increase in service charges on deposit accounts and
an  increase  in  other  noninterest  income  of  $616,000, somewhat offset by a
$405,000  decrease  in loan fees.  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 commercial 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.

NET  INTEREST  INCOME
     Net  interest  income amounted to $84.6  million in 2000, a $7.3 million or
9.45%  increase  over  1999.  The increase in net interest income was due to the
increase  in  net  interest  margin  to 2.87% (2.84% excluding the effect of the
special  dividend)  in  2000  from  2.75%  in  1999,  an increase in average net
interest-earning  assets  of  $18.0  million  and  an  increase in interest rate
spread,  defined  to  exclude  noninterest-bearing  deposits,  to  2.43%  (2.39%
excluding  the  effect  of  the  special  dividend)  in 2000 from 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  2000  and  1999  were  2.72%  (2.68%  excluding  the  effect of the special
dividend)  and  2.65%,  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 the 0.84% (0.80%
excluding  the  effect of the special dividend) increase in the average yield on
interest-earning assets.  This increase in the average yield on interest-earning
assets  was  largely  offset  by  a  0.80%  increase  in  the  average  rate  on
interest-bearing  liabilities.

     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 to 2.75% in 1999 from 2.31% in 1998, 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, to 2.39%
in  1999  from  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 1999 and 1998 were 2.65% and 2.17%,
respectively.  The  overall  increase  in  net  interest  margin  and spread was
primarily  due  to a 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.

     Total  interest  income  amounted  to  $237.5  million during 2000, a $34.6
million,  or  17.0%, increase from 1999.  The increase was due to an increase in
average interest-earning assets of $137.0 million and an increase in the average
yield  to  8.07% (8.03% excluding the effect of the special dividend) from 7.23%
for  1999.  A  $32.3  million,  or  23.7%,  increase in interest earned on loans
receivable during 2000 resulted from a $233.6 million, or 14.2%, increase in the
average  balance  of  loans receivable and a 0.69% increase in the average yield
compared  to  1999.  A  $583,000  or  0.92%  increase  in  interest  earned  on
mortgage-backed  securities  during  2000 was due to the increase in the average
yield  to  6.41% for 2000 compared to 5.79% for 1999, which was partially offset
by  the  $97.4 million decrease in the average balance due to principal payments
received.  In  addition,  interest  income on FHLB stock, federal funds sold and
other  interest-earning  assets  increased  $1.7 million in 2000, as compared to
1999.  The  increase  was due to the $752,000 increase in the average balance of
such  assets and to the $1.1 million special dividend from the FHLB as discussed
earlier.

     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 expense amounted to $152.9 million in 2000, a $27.2 million,
or  21.7%,  increase  from 1999.  The increase in interest expense was due to an
increase  in  the average rate paid on interest-bearing liabilities to 5.64% for
2000  from 4.84% in 1999 due to higher wholesale funding costs and a higher cost
of  deposits,  in  addition  to  an  increase  in  the  average  balance  of
interest-bearing liabilities outstanding of $119.0 million.  Interest expense on
deposits  increased $8.5 million, or 13.2%, due primarily to the increase in the
average  rate  paid  of  0.58%.  Interest  expense  on  advances  from  the FHLB
increased  $7.8  million,  or  15.3%, primarily due to the 0.98% increase in the
average  rate  paid.  Interest  expense  on other borrowed money increased $11.1
million, due to the $146.4 million increase in the average balance of securities
sold  under  agreements  to  repurchase  and federal funds purchased and a 1.24%
increase  in  the  average  rate paid.  Interest expense on Senior Notes payable
decreased  $83,000  due to the decrease in the average balance of $758,000, as a
result  of  open  market  repurchases.

     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, as
a  result  of  open  market  repurchases.

PROVISION  FOR  LOAN  LOSSES
     For  the  year  ended  December 31, 2000, the provision for loan losses was
$5.8  million.  In  1999,  the provision for loan losses was $10.6 million, $6.8
million  of  which  was  specific to the MCA loan as discussed earlier.  For the
year  ended  December  31, 1998, the provision for loan losses was $3.1 million.
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,  accounting  principles  generally  accepted  in  the United States of
America,  general  economic conditions, particularly as they relate to Coastal's
lending  areas and other factors related to the collectibility of Coastal's loan
portfolio.  Overall  during  2000,  Coastal's  lending  continued  to  focus  on
increasing  the  size  of Coastal's commercial loan portfolio.  As such, Coastal
continued  to  execute  on  its  plan to eventually build the allowance for loan
losses  to  a  benchmark  of  approximately  100%  of  nonperforming  loans.  As
discussed  earlier, during the year ended December 31, 1999, $6.8 million of the
increase  from  1998  in  the  provision for loan losses was specific to the MCA
loan.  The  remainder  of  the  increase  in  1999  was due to the charge-off of
$990,000  on  another  warehouse  borrower  due  to  bankruptcy.

     Nonperforming  loans  are those loans on nonaccrual status as well as those
loans  greater  than  ninety  (90)  days delinquent and still accruing interest.
Coastal  had  nonperforming  loans  as  follows:

<TABLE>
<CAPTION>
<S>                                              <C>         <C>      <C>
                                                           December 31,
                                                 ---------------------------------
                                                     2000       1999       1998
                                                 ---------------------------------
                                                         (In thousands)
Nonaccrual loans receivable:
 First lien residential                          $  16,062    $13,344    $11,883
 Residential construction                              390        184        192
 Commercial real estate                              1,134        104        149
 Commercial, warehouse                                  --         --     10,042
 Commercial, financial and industrial                1,152        694        496
 Consumer and other                                    496        340         75
                                                 ---------    -------    -------
                                                    19,234     14,666     22,837
                                                 ---------    -------    -------

Loans greater than 90 days delinquent
 and still accruing interest:
 First lien residential                               475      1,137        189
 Multifamily mortgage                                  --         --        190
 Commercial real estate                               736        690        293
 Commercial, financial and industrial                 634        531        808
 Consumer and other                                   153         94        224
                                                 ---------    -------    -------
                                                    1,998      2,452      1,704
                                                 ---------   --------    -------

 Total nonperforming loans                       $ 21,232    $17,118    $24,541
                                                 =========   =======    =======
</TABLE>



Of  the  nonperforming  loans  at December 31, 2000, $16.1 million, or 76%, were
first  lien  residential  (single  family)  mortgage  loans,  of  which 86% were
purchased  and  14%  were  originated  by  Coastal.


<PAGE>
     Coastal's  asset  quality  ratios  are  as  follows:

<TABLE>
<CAPTION>
<S>                                                  <C>            <C>     <C>
                                                                 December 31,
                                                            ----------------------
                                                             2000    1999    1998
                                                            ------  ------  ------


Nonperforming loans to total loans receivable                1.12%   0.99%   1.60%

Allowance for loan losses to nonperforming loans            68.32   61.30   46.28

Allowance for loan losses to total loans receivable          0.77    0.60    0.74
</TABLE>



     Although  no assurance can be given, Coastal's management believes that the
allowance  for  loan  losses  at  December 31, 2000 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 increased $1.4 million, or 13.8%, to $11.8 million
in  2000,  compared  to  $10.4  million  for 1999.  As mentioned previously, the
increase in noninterest income was primarily due to the $2.2 million gain on the
sale of Coastal's mortgage servicing rights recorded during the first quarter of
2000.  Due  to  the  declining servicing portfolio (with an average loan life of
approximately  seven  years), management decided to take the opportunity to sell
Coastal's  rights  to  service $389.1 million of loans for third party investors
(Coastal's  entire  portfolio of loans serviced for others) based on the current
market  conditions  for  loan servicing rights and the expected declining income
benefits  of  that servicing portfolio on an ongoing basis.  In addition to this
gain,  other changes in noninterest income were as follows:  a $675,000 increase
in  service  charges  on deposit accounts, offset by a $577,000 decrease in loan
fees,  a  $436,000  decrease in loan servicing income and a $406,000 decrease in
other  noninterest  income.  The increase in service charges on deposit accounts
was  due  to  Coastal's  continued  focus on increasing transaction type deposit
accounts  and  the  related  fee  income.  The  decreases  in loan fees and loan
servicing income were primarily the result of the servicing sale, in addition to
a  $245,000  reduction in loan fees due to the overall decreased activity in the
warehouse  loan  portfolio.  The  decrease  in  other  noninterest  income  was
primarily  due  to  the  decreased  net gain on the sale of real estate owned of
$595,000  offset  by  a  $122,000  increase  in  fees  related  to insurance and
investment  product  sales  and  a  $100,000 increase in the gain on the sale of
loans  held  for  sale.

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 was primarily due to
an  increase  of  $2.5  million  in  service  charges  on deposit accounts and a
$616,000  increase  in  other  noninterest income, offset somewhat by a $405,000
decrease  in  loan  fees.

NONINTEREST  EXPENSE
     Total  noninterest  expense  amounted  to  $58.2  million  during  2000, an
increase of $385,000, or 0.7%, over 1999 (although it would have been a $756,000
decrease  excluding  the  $1.1  million reduction of certain accrued liabilities
during  the  first  quarter  of  1999).  Overall changes included an increase in
compensation,  payroll taxes and other benefits of $416,000, a $545,000 decrease
in  insurance  premiums,  a  $597,000 increase in other noninterest expenses, in
addition  to  smaller  changes  in  other  expense  categories.  The decrease in
insurance  premiums  was primarily due to a decrease in deposit insurance rates.
The  increase  in  other noninterest expense was due to the reduction of certain
accrued  liabilities  in  1999  as  mentioned  above.

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 1998.  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
1998.  Other  changes included an $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).

PROVISION  FOR  FEDERAL  INCOME  TAXES
     Coastal  incurred  no  regular  Federal  income taxes in 2000, 1999 or 1998
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  are  available  as  credit  carryforwards to reduce future
Federal  regular  income  taxes  over  an indefinite period.  During 2000, these
alternative  minimum tax credit carryforwards are beginning to be used to offset
regular  income  taxes.

     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  4  cents per diluted share (as of December 31,
2000),  and  is  also  expected  to  continue  through  the  end  of  2002.

     The  provisions  for  Federal  income taxes were $9.9 million in 2000, $5.7
million  in  1999  and  $7.2  million (excluding the one-time effect of the $3.7
million  reversal of accrued income taxes) in 1998.  Although the termination of
the  agreement  with the FRF 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,  the  London Interbank Offered Rate ("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 changes in interest
rates  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.

     The  following  table  presents an analysis of the sensitivity in Coastal's
annual  net  interest  income and EVE based on the indicated changes in interest
rates  at  December 31, 2000 and 1999.  The interest rate scenarios presented in
the  table include interest rates at December 31, 2000 and 1999 and, for the net
interest  income  calculation,  interest  rates  are  adjusted  by the indicated
changes  over  a four-quarter period with net interest income being measured for
the  following  calendar  year,  and  for the EVE calculation, the interest rate
adjustments  consist  of  instantaneous and parallel changes in the yield curve.
Each  rate  scenario  reflects  assumptions  relating to the estimated effect of
prepayments  and  repricing  of  applicable  assets  and  liabilities.

<TABLE>
<CAPTION>
                                  Estimated  Change  In
       Change            Net  Interest  Income            EVE
In  Interest  Rates         December  31,            December  31,
(in  basis  points)         2000     1999            2000     1999
     --------------         ----     ----            ----     ----
<S>                         <C>       <C>          <C>       <C>
+200                        (8.48)%  (13.42)%      (15.97)%  (24.22)%
+100                        (4.20)    (6.93)        (6.59)   (10.79)
   0                           --        --            --        --
-100                         4.26      5.78          5.73      4.32
-200                         8.59     12.04          6.64      1.53
</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 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 treasury 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,  2000.  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,  2000  was negative $187.1 million or 6.05% of total
assets.  This  is  a  snapshot  of  the  position as of such date.  The position
changes  frequently and may not be 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,  2000
<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             $    2,089   $       5,503   $     25,275
   First lien mortgage-single family adjustable
     rate                                                      186,328         319,418         61,667
   First lien mortgage-multifamily fixed rate                    6,458             842          3,232
   First lien mortgage-multifamily variable rate               208,264              --             --
   Construction and acquisition and
     development, net of loans in process                      222,497           2,744          5,156
   Commercial real estate                                      259,376           9,090         20,434
   Commercial                                                   91,528           5,142         17,367
   Consumer and other                                            8,214          10,026         21,162
 Mortgage-backed securities held-to-maturity(1)(2)             798,553          12,943             --
 Securities available-for-sale (1)(2)                           74,611          20,062             --
 U.S. Treasury securities held-to-maturity                         100           1,397             --
 Other interest-earning assets (3)                              90,764              --             --
                                                            -----------   --------------  ------------

     Total interest-sensitive assets                         1,948,782         387,167        154,293
                                                            -----------   --------------  ------------
 Noninterest-sensitive assets

     Total assets


INTEREST-SENSITIVE LIABILITIES:
 Interest-bearing deposits (4):
   Interest-bearing checking accounts                       $   61,046   $          --   $         --
   Savings accounts                                             43,891              --             --
   Money market demand accounts                                306,106              --             --
   Certificate accounts (including premium)                    264,289         774,246         67,098
 Advances from the FHLB                                      1,086,412           7,443         22,967
 Senior Notes payable                                               --              --         46,900
                                                            -----------  --------------  -------------

     Total interest-sensitive liabilities                    1,761,744         781,689        136,965
                                                            -----------  --------------  -------------
 Noninterest-sensitive liabilities

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


Gap during the period                                       $  187,038   $    (394,522)  $     17,328
Effect of interest rate swaps and caps(5)                       20,376              --         (5,523)
                                                            -----------  --------------  -------------
Cumulative gap after effect of interest rate swaps
 and caps                                                   $  207,414   $    (187,108)  $   (175,303)
                                                            ===========  ==============  =============

Interest-sensitive assets as a % of interest-sensitive
 liabilities (cumulative)                                       110.62%          91.84%         92.91%
Interest-sensitive assets as a % of total
 assets (cumulative)                                             63.03           75.56          80.55
Ratio of gap after effect of interest rate swaps and caps
 to total assets                                                  6.71          (12.76)          0.38
Ratio of cumulative gap after effect of interest rate
 swaps and caps to total assets                                   6.71           (6.05)         (5.67)



<S>                                                        <C>               <C>              <C>
                                                           More than        More than        More than
                                                           three years to   five years to    ten years to
                                                           five years       ten years        twenty years
INTEREST-SENSITIVE ASSETS
 Loans, net (1)(2):
   First lien mortgage-single family fixed rate             $40,565          $36,499         $88,167
   First lien mortgage-single family adjustable
     rate                                                     1,409              432              80
   First lien mortgage-multifamily fixed rate                 3,339              410             379
   First lien mortgage-multifamily variable rate                 --               --              --
   Construction and acquisition and
     development, net of loans in process                       536              703           2,022
   Commercial real estate                                    31,061           14,030          10,102
   Commercial                                                13,661              959              --
   Consumer and other                                        16,020            5,479           4,696
 Mortgage-backed securities held-to-maturity(1)(2)               --               53          11,011
 Securities available-for-sale (1)(2)                            --               --              --
 U.S. Treasury securities held-to-maturity                       --               --              --
 Other interest-earning assets (3)                               --               --              --

                                                          ----------       ----------       ---------
     Total interest-sensitive assets                        106,591           58,565         116,457
                                                          ----------       ----------       ---------
 Noninterest-sensitive assets

     Total assets


INTEREST-SENSITIVE LIABILITIES:
 Interest-bearing deposits (4):
   Interest-bearing checking accounts                     $      --   $           --   $          --
   Savings accounts                                              --               --              --
   Money market demand accounts                                  --               --              --
   Certificate accounts (including premium)                   9,029              202              29
 Advances from the FHLB                                       5,934           10,790          16,759
 Senior Notes payable                                            --               --              --

                                                          ----------       ----------       ---------
     Total interest-sensitive liabilities                    14,963           10,992          16,788
                                                          ----------       ----------       ---------
 Noninterest-sensitive liabilities

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


Gap during the period                                       $    91,628   $    47,573    $   99,669
Effect of interest rate swaps and caps(5)                        (3,758)      (11,095)           --
                                                            ------------  ------------   -----------
Cumulative gap after effect of interest rate swaps
 and caps                                                   $   (87,433)  $   (50,955)   $   48,714
                                                            ============  ============   ===========

Interest-sensitive assets as a % of interest-sensitive
 liabilities (cumulative)                                         96.34%        98.12%       101.79%
Interest-sensitive assets as a % of total
 assets (cumulative)                                              84.00         85.89         89.66
Ratio of gap after effect of interest rate swaps and caps
 to total assets                                                   2.84          1.18          3.22
Ratio of cumulative gap after effect of interest rate
 swaps and caps to total assets                                   (2.83)        (1.65)         1.58



                                                              Over
                                                          twenty years    Totals

INTEREST-SENSITIVE ASSETS
 Loans, net (1)(2):
   First lien mortgage-single family fixed rate             $133,867     $331,965
   First lien mortgage-single family adjustable
     rate                                                         --      569,334
   First lien mortgage-multifamily fixed rate                     --       14,660
   First lien mortgage-multifamily variable rate                  --      208,264
   Construction and acquisition and
     development, net of loans in process                         --      233,658
   Commercial real estate                                         --      344,093
   Commercial                                                     --      128,657
   Consumer and other                                             --       65,597
 Mortgage-backed securities held-to-maturity(1)(2)            63,005      885,565
 Securities available-for-sale (1)(2)                             --       94,673
 U.S. Treasury securities held-to-maturity                        --        1,497
 Other interest-earning assets (3)                                --       90,764
                                                           ---------   ----------
     Total interest-sensitive assets                         196,872    2,968,727
                                                           ---------  -----------
 Noninterest-sensitive assets                                             122,884
                                                                      -----------
     Total assets                                                      $3,091,611
                                                                       ==========

INTEREST-SENSITIVE LIABILITIES:
 Interest-bearing deposits (4):
   Interest-bearing checking accounts                            --   $   61,046
   Savings accounts                                              --       43,891
   Money market demand accounts                                  --      306,106
   Certificate accounts (including premium)                      92    1,114,985
 Advances from the FHLB                                          --    1,150,305
 Senior Notes payable                                            --       46,900
                                                         ----------   ----------
     Total interest-sensitive liabilities                        92    2,723,233
                                                         ----------
 Noninterest-sensitive liabilities                                       201,157
                                                                      ----------
     Total liabilities                                                 2,924,390
 Minority interest-preferred stock of
   Coastal Banc ssb                                                       28,750
 Stockholders' equity                                                    138,471
                                                                       ----------
     Total liabilities and stockholders' equity                       $3,091,611
                                                                       ==========

Gap during the period                                      196,780
Effect of interest rate swaps and caps(5)                       --
                                                        ----------
Cumulative gap after effect of interest rate swaps
 and caps                                               $ 245,494
                                                        ==========

Interest-sensitive assets as a % of interest-
sensitive liabilities (cumulative)                         109.01%
Interest-sensitive assets as a % of total
 assets (cumulative)                                        96.03
Ratio of gap after effect of interest rate swaps
 and caps to total assets                                    6.36
Ratio of cumulative gap after effect of interest rate
 swaps and caps to total assets                              7.94

</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 first
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, 2000, Coastal was a party to interest rate swap agreements
which have an aggregate notional amount of $20.4 million and expire from 2003 to
2005.  At December 31, 2000, the fair value of the interest rate swap agreements
was  estimated  to  be  a  loss  of  $133,000.  With respect to such agreements,
Coastal  makes  weighted-average  fixed  interest payments ranging from 5.35% 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.  The net effect of the interest rate
swaps  to Coastal for the year ended December 31, 2000, was to decrease interest
expense  by approximately $212,000 and for the years ended December 31, 1999 and
1998,  the effect was to increase interest expense by approximately $483,000 and
$377,000,  respectively.  See  Notes  15  and  27  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, 2000,
Coastal  had  interest  rate  cap  agreements,  which  expire from 2001 to 2003,
covering  an  aggregate  notional  amount  of $134.1 million, and are triggered,
depending on the particular contract, whenever the defined floating rate exceeds
7.5% to 9.0%.  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 $65,000 at
December  31, 2000 with an estimated fair value of $38,000.  For the years ended
December  31, 2000, 1999 and 1998, the interest rate caps resulted in an overall
decrease  in  interest  income  of  approximately  $25,000, $25,000 and $53,000,
respectively.  See  Notes  15  and  27  of  the  notes to Consolidated Financial
Statements.

LIQUIDITY  AND  CAPITAL  RESOURCES
Coastal's  assets  were approximately $3.1 billion at December 31, 2000 and $2.9
billion  at December 31, 1999.  Preferred stockholders' equity amounted to $27.5
million and common stockholders' equity was $111.0 million at December 31, 2000,
after  treasury  stock  purchased  of  $31.3 million.  The regulatory capital of
Coastal's  subsidiary,  Coastal  Banc  ssb,  exceeded  all  three  of the Bank's
regulatory  capital adequacy requirements at December 31, 2000.  At December 31,
2000,  the  Bank's  core  capital  amounted  to  6.22% of adjusted total assets,
compared  to  the requirement of 4.0%, its Tier 1 risk-based capital amounted to
9.94%  of  risk-adjusted  assets  as compared to the requirement of 4.0% and its
total risk-based capital amounted to 10.72% 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, 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,  2000, Coastal had
binding commitments to originate or purchase loans totaling approximately $136.8
million and had $142.5 million of undisbursed loans in process.  In addition, at
December  31,  2000,  Coastal had commitments under lines of credit to originate
loans,  primarily  construction  and  other,  of approximately $97.7 million and
letters  of  credit  outstanding  of  $9.8  million.  Scheduled  maturities  of
certificates  of  deposit  during  the twelve months following December 31, 2000
totaled  $1.0  billion.  Management believes that Coastal has adequate resources
to  fund  all  its  commitments.

YEAR  2000
Coastal  has  not  experienced  any  significant disruptions to our financial or
operating  activities  caused  by  failure of our computerized systems resulting
from  Year  2000  issues.

INFLATION  AND  CHANGING  PRICES
The  Consolidated  Financial  Statements  and related data presented herein have
been prepared in accordance with accounting principles generally accepted in the
United  States  of  America, which require the measurement of financial position
and  operating  results,  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 Notes 2 and 27 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
and  warehouse  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 SUBSIDIARIES
(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
Self  employed  consultant  who  provides  management  consulting  services  to
non-profit  organizations,  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, and Director
and  Vice  Chairman of the Board of New Covenant Trust Company, a National Trust
Company

DENNIS  S.  FRANK
Chief  Executive  Officer  and  President  of  Silvergate Capital Corporation, a
financial  institution  holding  company  controlling Silvergate Bank, La Jolla,
California;  Chairman  of  eClosure, Inc,. a San Diego based mortgage technology
firm;  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,  and  a  Director  of  Stewart  Information  Services Corp., which is the
holding  company  for  Stewart  Title  Company

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,  Secretary  and  General  Counsel


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

DAVID  R.  GRAHAM
Executive  Vice  President  -  Commercial  Real  Estate



<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  2000,  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.  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,  2000,  Coastal  had  total  assets of approximately $3.1
billion  and total deposits of approximately $1.7 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, 2000 and
1999  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,  2000.  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 auditing standards generally
accepted  in the United States of America.  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, 2000 and 1999 and the results of
their  operations  and  their cash flows for each of the years in the three-year
period  ended  December  31,  2000  in  conformity  with  accounting  principles
generally  accepted  in  the  United  States  of  America.




/s/  KPMG  LLP
--------------
January  16,  2001
Houston,  Texas

<PAGE>

<TABLE>
<CAPTION>
                          COASTAL BANCORP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                DECEMBER 31, 2000 AND 1999
                            (IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS                                                                2000        1999
-----------------------------------------------------------------  ----------  ----------
<S>                                                                <C>         <C>
Cash and cash equivalents                                          $   69,730  $   48,098
Federal funds sold (Note 4)                                               869          --
Loans receivable (Notes 6 and 11)                                   1,896,228   1,735,081
Mortgage-backed securities held-to-maturity (market value of
 $860,517 in 2000 and $899,934 in 1999)
 (Notes 5, 11, 12, 14 and 15)                                         885,565     917,212
Mortgage-backed securities available-for-sale, at market value
 (Notes 5, 11, 12, 14 and 15)                                          94,673      99,665
U.S. Treasury securities held-to-maturity                               1,497         299
Accrued interest receivable (Note 7)                                   18,772      16,150
Property and equipment (net of accumulated depreciation and
 amortization of $20,622 in 2000 and $16,251 in 1999)                  28,086      30,708
Stock in the Federal Home Loan Bank of Dallas ("FHLB")                 58,005      56,753
Goodwill (net of accumulated amortization of $19,630 in 2000 and
 $16,605 in 1999)                                                      24,611      27,636
Mortgage servicing rights (Note 8)                                         --       3,035
Prepaid expenses and other assets (Notes 9, 15 and 17)                 13,575      13,315
                                                                   ----------  ----------
   Total assets                                                    $3,091,611  $2,947,952
                                                                   ==========  ==========
</TABLE>


<TABLE>
<CAPTION>

     LIABILITIES  AND  STOCKHOLDERS'  EQUITY
     ---------------------------------------
<S>                                                                      <C>          <C>
Liabilities:
 Deposits (Note 10)                                                      $1,674,981   $1,624,289
 Advances from the FHLB (Note 11)                                         1,150,305    1,096,931
 Senior Notes payable (Note 13)                                              46,900       46,900
 Advances from borrowers for taxes and insurance                              5,050        3,852
 Other liabilities and accrued expenses                                      47,154       13,774
                                                                         -----------  -----------
   Total liabilities                                                      2,924,390    2,785,746
                                                                         -----------  -----------

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                                                               27,500       27,500
 Common Stock, $.01 par value; authorized shares 30,000,000;
   7,677,622 shares issued and 5,677,622 shares outstanding at
   December 31, 2000; 7,616,227 shares issued and 6,332,548
   shares outstanding at December 31, 1999                                       77           76
 Additional paid-in capital                                                  33,312       32,683
 Retained earnings                                                          110,794       95,508
 Accumulated other comprehensive loss -
   net unrealized loss on securities available-for-sale                      (1,867)      (1,848)
 Treasury stock at cost (2,000,000 shares in 2000 and
   1,283,679 shares in 1999)                                                (31,345)     (20,463)
                                                                         -----------  -----------
   Total stockholders' equity                                               138,471      133,456
                                                                         -----------  -----------
   Total liabilities and stockholders' equity                            $3,091,611   $2,947,952
                                                                         ===========  ===========
</TABLE>


See  accompanying  notes  to  Consolidated  Financial  Statements.

<PAGE>
<TABLE>
<CAPTION>

                              COASTAL BANCORP, INC. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF OPERATIONS
                           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                               (IN THOUSANDS, EXCEPT PER SHARE DATA)

<S>                                                                  <C>       <C>       <C>
                                                                         2000      1999      1998
                                                                     --------  --------  ---------
Interest income:
 Loans receivable                                                    $168,329  $136,036  $120,281
 Mortgage-backed securities                                            64,246    63,663    87,596
 FHLB stock, federal funds sold and other interest-earning assets       4,922     3,244     2,937
                                                                     --------  --------  ---------
                                                                      237,497   202,943   210,814
                                                                     --------  --------  ---------

Interest expense:
 Deposits                                                              73,216    64,701    66,128
 Advances from the FHLB                                                58,328    50,569    39,553
 Other borrowed money                                                  16,671     5,614    32,723
 Senior Notes payable                                                   4,690     4,773     5,000
                                                                     --------  --------  ---------
                                                                      152,905   125,657   143,404
                                                                     --------  --------  ---------

   Net interest income                                                 84,592    77,286    67,410
Provision for loan losses (Note 6)                                      5,790    10,575     3,100
                                                                     --------  --------  ---------
   Net interest income after provision for loan losses                 78,802    66,711    64,310
                                                                     --------  --------  ---------

Noninterest income:
 Service charges on deposit accounts                                    6,965     6,290     3,747
 Loan fees                                                              1,023     1,600     2,005
 Loan servicing income, net                                               244       680       642
 Gain on sale of mortgage servicing rights                              2,172        --        --
 Writedown of purchased mortgage loan premium                              --        --      (709)
 Other                                                                  1,396     1,802     1,187
                                                                     --------  --------  ---------
                                                                       11,800    10,372     6,872
                                                                     --------  --------  ---------

Noninterest expense:
 Compensation, payroll taxes and other benefits                        29,187    28,771    23,072
 Office occupancy                                                      11,456    11,422     9,320
 Data processing                                                        3,325     3,416     2,695
 Amortization of goodwill                                               3,025     3,051     2,284
 Insurance premiums                                                       599     1,144     1,448
 Other                                                                 10,603    10,006     9,564
                                                                     --------  --------  ---------
                                                                       58,195    57,810    48,383
                                                                     --------  --------  ---------

     Income before provision for Federal income taxes and minority
       interest                                                        32,407    19,273    22,799

Provision for Federal income taxes (Note 17)                            9,895     5,659     3,543
                                                                     --------  --------  ---------
     Income before minority interest                                   22,512    13,614    19,256

Minority interest - preferred stock dividends of Coastal Banc ssb
 (Note 20)                                                              2,588     2,588     2,588
                                                                     --------  --------  ---------
     Net income                                                      $ 19,924  $ 11,026  $ 16,668
                                                                     ========  ========  =========
     Net income available to common stockholders                     $ 17,416  $  9,442  $ 16,668
                                                                     ========  ========  =========
Basic earnings per common share (Note 22)                            $   2.94  $   1.45  $   2.24
                                                                     ========  ========  =========
Diluted earnings per common share (Note 22)                          $   2.87  $   1.42  $   2.18
                                                                     ========  ========  =========
</TABLE>



See  accompanying  notes  to  Consolidated  Financial  Statements.

<PAGE>
                     COASTAL BANCORP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

<S>                                                           <C>       <C>       <C>
                                                                 2000      1999      1998
                                                              --------  --------  -------

Net income                                                    $19,924   $11,026   $16,668

Other comprehensive income (loss), net of tax:
 Unrealized gains (losses) on securities available-for-sale
   arising during period (Note 5)                                 (19)     (474)      900
                                                              --------  --------  -------

Comprehensive income                                          $19,905   $10,552   $17,568
                                                              ========  ========  =======
</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, 2000, 1999 AND 1998
                                                     (IN THOUSANDS)



<S>                                           <C>         <C>      <C>           <C>         <C>              <C>
                                                                                             Accumulated
                                                                   Additional                other
                                              Preferred   Common   paid-in       Retained    comprehensive    Treasury
                                              Stock       Stock    capital       earnings    loss             stock
                                              ----------  -------  ------------  ----------  ---------------  ----------

Balance - December 31, 1997                   $       --  $    76  $    33,160   $  73,868   $       (2,274)  $      --
Dividends on Common Stock (Note 21)                   --       --           --      (2,392)              --          --
Exercise of stock options (Note 18)                   --       --          536          --               --          --
Purchase of treasury stock at cost (Note 21)          --       --           --          --               --      (7,778)
Change in net unrealized loss on securities
 available-for-sale (Note 5)                          --       --           --          --              900          --
Net income for 1998                                   --       --           --      16,668               --          --
                                              ----------  -------  ------------  ----------  ---------------  ----------

Balance - December 31, 1998                           --       76       33,696      88,144           (1,374)     (7,778)
Dividends on Preferred Stock                          --       --           --      (1,584)              --          --
Dividends on Common Stock (Note 21)                   --       --           --      (2,078)              --          --
Issuance of Preferred Stock (net) (Note 21)       27,500       --       (1,558)         --               --          --
Exercise of stock options (Note 18)                   --       --          545          --               --          --
Purchase of treasury stock at cost (Note 21)          --       --           --          --               --     (12,685)
Change in net unrealized loss on
 securities available-for-sale (Note 5)               --       --           --          --             (474)         --
Net income for 1999                                   --       --           --      11,026               --          --
                                              ----------  -------  ------------  ----------  ---------------  ----------

Balance - December 31, 1999                       27,500       76       32,683      95,508           (1,848)    (20,463)
Dividends on Preferred Stock                          --       --           --      (2,508)              --          --
Dividends on Common Stock (Note 21)                   --       --           --      (2,130)              --          --
Exercise of stock options (Note 18)                   --        1          629          --               --          --
Purchase of treasury stock at cost (Note 21)          --       --           --          --               --     (10,882)
Change in net unrealized loss on
 securities available-for-sale (Note 5)               --       --           --          --              (19)         --
Net income for 2000                                   --       --           --      19,924               --          --
                                              ----------  -------  ------------  ----------  ---------------  ----------

Balance - December 31, 2000                   $   27,500  $    77  $    33,312   $ 110,794   $       (1,867)  $ (31,345)
                                              ==========  =======  ===========   =========   ===============  ==========



<S>                                           <C>

                                              Total
                                              ---------

Balance - December 31, 1997                   $104,830
Dividends on Common Stock (Note 21)             (2,392)
Exercise of stock options (Note 18)                536
Purchase of treasury stock at cost (Note 21)    (7,778)
Change in net unrealized loss on securities
 available-for-sale (Note 5)                       900
Net income for 1998                             16,668
                                              ---------

Balance - December 31, 1998                    112,764
Dividends on Preferred Stock                    (1,584)
Dividends on Common Stock (Note 21)             (2,078)
Issuance of Preferred Stock (net) (Note 21)     25,942
Exercise of stock options (Note 18)                545
Purchase of treasury stock at cost (Note 21)   (12,685)
Change in net unrealized loss on
 securities available-for-sale (Note 5)           (474)
Net income for 1999                             11,026
                                              ---------

Balance - December 31, 1999                    133,456
Dividends on Preferred Stock                    (2,508)
Dividends on Common Stock (Note 21)             (2,130)
Exercise of stock options (Note 18)                630
Purchase of treasury stock at cost (Note 21)   (10,882)
Change in net unrealized loss on
 securities available-for-sale (Note 5)            (19)
Net income for 2000                             19,924
                                              ---------

Balance - December 31, 2000                   $138,471
                                              =========

</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, 2000, 1999 AND 1998
                                         (IN THOUSANDS)

<S>                                                          <C>         <C>         <C>
                                                                  2000        1999        1998
                                                             ----------  ----------  ----------
Cash flows from operating activities:
 Net income                                                  $  19,924   $  11,026   $  16,668
 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                                              9,601       9,916       9,099
 Net premium amortization                                          349       1,435       3,101
 Provision for loan losses                                       5,790      10,575       3,100
 Amortization of goodwill                                        3,025       3,051       2,284
 Originations and purchases of mortgage loans held for sale    (25,461)     (8,543)    (26,536)
 Sales of mortgage loans held for sale                          25,618       8,190      26,287
 Gain on sale of mortgage servicing rights                      (2,172)         --          --
 Decrease (increase) in:
   Accrued interest receivable                                  (2,622)       (632)      1,863
   Other, net                                                   32,212      (1,661)        103
 Stock dividends from the FHLB                                  (4,603)     (2,847)     (2,247)
                                                             ----------  ----------  ----------

   Net cash provided by operating activities                    61,661      30,510      33,722
                                                             ----------  ----------  ----------

Cash flows from investing activities:
 Net change in federal funds sold                                 (869)         --          --
 Purchases of mortgage-backed securities held-to-maturity       (4,815)     (3,080)     (8,203)
 Purchase of mortgage-backed securities available-for-sale          --     (26,489)         --
 Purchase of U.S. Treasury securities held-to-maturity          (1,493)       (299)         --
 Principal repayments on mortgage-backed securities
   held-to-maturity                                             36,326     240,417     199,052
 Principal repayments on mortgage-backed securities
   available-for-sale                                            4,940      22,711      26,206
 Proceeds from maturity of U.S. Treasury securities
   held-to-maturity                                                300          --          --
 Proceeds from maturity of U.S. Treasury securities
   available-for-sale                                               --       2,000      25,000
 Proceeds from sales of mortgage-backed securities
   available-for-sale                                               --          --      48,551
 Purchases of loans receivable                                (236,970)   (387,204)   (329,058)
 Other changes in loans receivable                              66,032     173,582     218,357
 Purchases of property and equipment, net                       (2,340)     (2,674)     (4,401)
 Purchase of FHLB stock                                        (35,649)     (5,779)    (19,771)
 Proceeds from sales of FHLB stock                              39,000       1,692          --
 Proceeds from sale of mortgage servicing rights                 5,001          --          --
 Cash and cash equivalents received in business combination
   transactions                                                     --          --     120,085
                                                             ----------  ----------  ----------

   Net cash provided by (used in) investing activities        (130,537)     14,877     275,818
                                                             ----------  ----------  ----------
</TABLE>




<PAGE>
<TABLE>
<CAPTION>

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

<S>                                                                    <C>           <C>           <C>
                                                                              2000          1999          1998
                                                                       ------------  ------------  ------------
Cash flows from financing activities:
 Net change in deposits                                                $    50,826   $   (80,505)  $   (25,399)
 Advances from the FHLB                                                  9,567,857     8,079,744     4,297,136
 Principal payments on advances from the FHLB                           (9,514,483)   (7,949,533)   (3,870,891)
 Proceeds from securities sold under agreements to repurchase
   and   federal funds purchased                                         2,418,869       319,340     3,958,111
 Repayments of securities sold under agreements to repurchase
   and federal funds purchased                                          (2,418,869)     (419,340)   (4,649,871)
 Proceeds from issuance of Bancorp Preferred Stock, net                         --        25,942            --
 Exercise of stock options for purchase of Common Stock                        630           545           536
 Purchase of treasury stock                                                (10,882)      (12,685)       (7,778)
 Dividends paid                                                             (4,638)       (3,662)       (2,392)
 Repurchase of Senior Notes payable                                             --        (3,100)           --
 Net increase (decrease) in advances from borrowers for taxes
   and insurance                                                             1,198           512          (635)
                                                                       ------------  ------------  ------------
   Net cash provided by (used in) financing activities                      90,508       (42,742)     (301,183)
                                                                       ------------  ------------  ------------

   Net increase in cash and cash equivalents                                21,632         2,645         8,357
 Cash and cash equivalents at beginning of year                             48,098        45,453        37,096
                                                                       ------------  ------------  ------------
 Cash and cash equivalents at end of year                              $    69,730   $    48,098   $    45,453
                                                                       ============  ============  ============

 Supplemental schedule of cash flows:
   Interest paid                                                       $   153,413   $   126,069   $   140,620
   Income taxes paid                                                         5,392         7,812         6,980
                                                                       ============  ============  ============

 Supplemental schedule of noncash investing and financing activities:
   Real estate owned acquired through foreclosure of loans
     receivable                                                        $     3,672   $     4,398   $     4,178
                                                                       ============  ============  ============

</TABLE>


See  accompanying  notes  to  Consolidated  Financial  Statements.

<PAGE>

                     COASTAL BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999

(1)          ORGANIZATION  AND  BACKGROUND
Coastal Banc Savings Association (the "Association") 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.  The Association acquired deposits
in  transactions with the federal government and other private institutions as a
base  for  developing an ongoing thrift and banking business.  The Association'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  Bancorp,  Inc.  was  incorporated  on  March  8,  1994  as a first-tier
subsidiary  of 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., a savings and
loan  holding  company, ("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 became the owners of 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 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.

Coastal  Banc  ssb is a broad-based financial services provider to consumers and
businesses.  At  December  31, 2000, 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>
                     COASTAL BANCORP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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 its subsidiaries, CoastalBanc Financial Corp. and Coastal
Banc Insurance Agency, Inc. (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  as  previously  reported.

USE  OF  ESTIMATES

The  preparation  of  the  consolidated  financial statements in conformity with
accounting  principles  generally  accepted  in  the  United  States  of America
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 with original
maturities  of  three  months  or  less.

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.  However,  other  factors  may cause
management  to continue to accrue interest on such loans.  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 that
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.

Larger  groups  of  smaller balance homogeneous loans are collectively evaluated
for  impairment.  Accordingly,  Coastal  does not separately identify individual
consumer  and  residential  loans  for  impairment  disclosures.


<PAGE>
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 the net sales
proceeds  and  the  net  book  value  of  the  loans  sold.

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, 2000 or
1999.

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 2-10 years for furniture and equipment) 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.

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,  0.3%  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
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.

Effective  March  31,  2000,  Coastal  sold its entire mortgage servicing rights
portfolio  and  currently  only  services  loans  for  itself.

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.

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.  See  Note  18.

EARNINGS  PER  COMMON  SHARE
Basic  earnings  per  common  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 common 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  with  original maturities of three
months  or  less.

RECENT  ACCOUNTING  PRONOUNCEMENTS
Statement  of  Financial  Accounting  Standards  No.  140  ("Statement  140"),
"Accounting  for Transfers and Servicing of Financial Assets and Extinguishments
of  Liabilities,"  replaces  Statement of Financial Accounting Standards No. 125
("Statement  125"),  "Accounting for Transfers and Servicing of Financial Assets
and  Extinguishments  of  Liabilities," but carries over most of Statement 125's
provisions  without  change.  Statement  140  elaborates  on  the qualifications
necessary  for  a special-purpose entity, clarifies sales accounting criteria in
certain  circumstances,  refines  accounting for collateral and adds disclosures
for  collateral,  securitizations  and retained interests in securitized assets.
Statement  140 should be applied prospectively and is effective for transactions
occurring  after  March  31, 2001.  Disclosure requirements of Statement 140 and
any  changes  in accounting for collateral are effective for fiscal years ending
after  December  15,  2000,  such requirements did not have a material impact on
Coastal  as  of  December  31,  2000.  Coastal is evaluating the impact, if any,
Statement  140  may  have  on  its  future  Consolidated  Financial  Statements.

Coastal  adopted Statement of Financial Accounting Standards No. 133 ("Statement
133")  "Accounting for Derivative Instruments and Hedging Activities," effective
January  1,  2001.  See  Note  27.

In  September 1999, the Financial Accounting Standards Board issued the Exposure
Draft, "Business Combinations and Intangible Assets," as a result of its project
on  business  combinations  to  reconsider  the APB's Opinions No. 16, "Business
Combinations,"  and  No.  17,  "Intangible  Assets."  The  Financial  Accounting
Standards Board plans to issue for public comment its tentative decisions on the
accounting  for goodwill in mid-February 2001 through a revised limited exposure
draft  and  plans  to  issue a final statement in June 2001.  Although decisions
made  to  date are tentative and are subject to change, the following summarizes
those  tentative  decisions  that  would  have  the  most  significant impact on
Coastal:

-     All business combinations would be accounted for using the purchase method
of  accounting;  use  of  the  pooling  method  would  be  prohibited.
-     Goodwill  would  not  be  amortized.  Goodwill  would  be  evaluated  for
impairment.
-     Goodwill  would  be considered impaired if the fair value of the reporting
unit's  goodwill  is  less  than  its  carrying  amount.

Based  on  the  tentative  decisions  noted  above,  going  forward,  business
combinations would be accounted for using the purchase method of accounting.  In
addition, goodwill would no longer be amortized, including the existing goodwill
recorded  on  Coastal's  balance  sheet.  In  2000, the amortization of goodwill
recorded by Coastal was $2.2 million (after tax), or $0.36 per diluted share (as
of  December 31, 2000), and is expected to be $2.0 million (after tax), or $0.33
per  diluted  share  (as of December 31, 2000), for the year 2001, excluding the
effect  of  any  new  business  combinations  (prior  to  the  proposal becoming
effective)  or  impairment of goodwill issues.  Coastal will continue to monitor
the status of these proposed changes in accounting for business combinations and
intangible  assets  and  their  possible  effects  on  its  future  Consolidated
Financial  Statements.

     (3)     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>



The  acquisition  described  above  has  been  accounted  for as a purchase and,
accordingly,  all  assets and liabilities acquired were adjusted to and recorded
at  estimated  fair  values  as  of  the  acquisition  date.


<PAGE>
     (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, 2000, 1999
and  1998  is  as  follows  (dollars  in  thousands):

<TABLE>
<CAPTION>

<S>                                     <C>       <C>       <C>
                                           2000      1999      1998
                                        --------  --------  --------
Repurchase agreements:
  Balance outstanding at December 31,   $    --   $    --   $    --
  Maximum outstanding at any month-end       --        --        --
  Average balance outstanding                --        --       671
  Average interest rate                      --%       --%     5.66%

Federal funds sold:
  Balance outstanding at December 31,   $   869   $    --   $    --
  Maximum outstanding at any month-end   10,000    18,500    28,500
  Average balance outstanding             3,042     5,353     7,320
  Average interest rate                    6.38%     5.04%     5.36%
</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.

     (5)     MORTGAGE-BACKED  SECURITIES

     Mortgage-backed  securities  at  December  31,  2000  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        $  642,588  $     1,370  $   (18,368)  $625,590
REMICS - Non-agency       168,886            9       (7,337)   161,558
FNMA certificates          50,128            5         (680)    49,453
GNMA certificates          17,681          104           --     17,785
Non-agency securities       6,282           --         (151)     6,131
                       ----------  -----------  ------------  --------
                       $  885,565  $     1,488  $   (26,536)  $860,517
                       ==========  ===========  ============  ========
</TABLE>


<TABLE>
<CAPTION>
<S>                    <C>        <C>          <C>           <C>
Available-for-sale:
REMICS - Agency        $   77,449  $        --  $    (2,838)  $ 74,611
GNMA certificates          20,095            2          (35)    20,062
                       ----------  -----------  ------------  --------
                       $   97,544  $         2  $    (2,873)  $ 94,673
                       ==========  ===========  ============  ========
</TABLE>





<PAGE>
     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>




Proceeds from sales of mortgage-backed securities available-for-sale during 1998
were  $48.6  million.  Gross  gains  of $26,000 and gross losses of $25,000 were
realized  on  those  sales  in  1998.  There  were  no  sales of mortgage-backed
securities  available-for-sale  during  2000  or  1999.

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


<PAGE>
     (6)     LOANS  RECEIVABLE
     Loans  receivable  at  December  31,  2000  and  1999  are  as  follows (in
thousands):

<TABLE>
<CAPTION>

<S>                                                <C>          <C>
                                                         2000         1999
                                                   -----------  -----------
Real estate mortgage loans:
 First lien mortgage, primarily residential        $  908,841   $  836,005
 Commercial                                           347,921      314,292
 Multifamily                                          224,361      163,059
 Residential construction                             157,950      136,675
 Acquisition and development                          133,005      103,357
 Commercial construction                               90,256       65,934
Commercial loans, secured by residential mortgage
 loans held for sale                                    8,518       60,372
Commercial, financial and industrial                  120,420      100,195
Loans secured by deposits                              13,681       13,094
Consumer and other loans                               56,522       63,383
                                                   -----------  -----------
                                                    2,061,475    1,856,366

Loans in process                                     (142,451)    (108,561)
Allowance for loan losses                             (14,507)     (10,493)
Unearned interest and loan fees                        (3,864)      (2,947)
(Discount) premium on purchased loans, net             (4,425)         716
                                                   -----------  -----------

                                                   $1,896,228   $1,735,081
                                                   ===========  ===========

Weighted average yield                                   9.38%        8.67%
                                                   ===========  ===========
</TABLE>



In  the  normal  course  of  business,  Coastal enters into various transactions
which, in accordance with accounting principles generally accepted in the United
States  of  America, 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,  2000,  Coastal  had  outstanding  commitments to originate or
purchase approximately $136.8 million of first lien mortgage and other loans and
had  commitments  under  lines of credit to originate primarily construction and
other  loans of approximately $97.7 million.  In addition, at December 31, 2000,
Coastal  had  letters  of  credit  of  approximately  $9.8  million outstanding.

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

Included  in  loans  receivable at December 31, 2000 and 1999 are loans totaling
approximately  $19.2  million  and  $14.7  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,  2000, 1999 and 1998, Coastal recognized interest income on these nonaccrual
loans (outstanding as of the period end) of approximately $706,000, $571,000 and
$480,000,  respectively,  whereas  approximately  $1.2  million,  $778,000  and
$835,000,  respectively,  in additional interest income would have been recorded
if  such  loans  had  been  performing  in accordance with their original terms.

At  December  31,  2000  and  1999,  the  carrying  value  of impaired loans was
approximately  $4.4  million  and  $2.0  million,  respectively, and the related
allowance  for  loan  losses  on  those  impaired loans totaled $1.6 million and
$778,000,  respectively.  Of  the  impaired  loans  outstanding, one loan with a
balance of $650,000 at December 31, 2000 and one loan with a balance of $184,000
at  December  31,  1999 did not have specific portions of the allowance for loan
losses  allocated  to  them  at  each  respective  date.  The  average  recorded
investment  in impaired loans during the years ended December 31, 2000, 1999 and
1998  was  approximately  $3.5  million,  $10.6  million  and  $1.7  million,
respectively.  For the years ended December 31, 2000, 1999 and 1998, 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>
                                   2000       1999      1998
                                --------  ---------  --------
Balance, beginning of year      $10,493   $ 11,358   $ 7,412
Provision for loan losses         5,790     10,575     3,100
Charge-offs                      (2,174)   (11,830)   (1,693)
Recoveries                          398        390       282
Allowance of acquired entities       --         --     2,257
                                --------  ---------  --------

Balance, end of year            $14,507   $ 10,493   $11,358
                                ========  =========  ========
</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 is continuing to work with the
Lead  Lender  and the bankruptcy trustee to recover any funds, if possible, from
the  collateral  or  MCA.  During  the  year  ended  December  31, 2000, Coastal
received $180,000 in proceeds from the MCA loan which was recorded as a recovery
in  the  allowance  for loan losses during the period.  In addition, the lawsuit
filed on January 12, 2000 is currently scheduled for trial in late June of 2001,
or  as  soon  thereafter  as  the  court's  docket  will  permit.

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, 2000 and 1999 is as follows (in
thousands):

<TABLE>
<CAPTION>

<S>                                       <C>      <C>
                                             2000     1999
                                          -------  -------
Loans receivable                          $14,054  $11,831
Mortgage-backed securities                  4,679    4,305
FHLB stock, federal funds sold and other
  interest-earning assets                      39       14
                                          -------  -------

                                          $18,772  $16,150
                                          =======  =======
</TABLE>


     (8)     MORTGAGE  SERVICING  RIGHTS
Effective  March  31, 2000, Coastal sold its mortgage servicing rights portfolio
and  recorded  a  nonrecurring gain of $2.2 million.  Pursuant to a purchase and
sale  agreement, Coastal sold its rights to service approximately $389.1 million
of  mortgage  loans for third party investors.  Coastal will continue to service
the  loans  in  its  own  loans  receivable  portfolio.

Prior  to  the sale, Coastal serviced loans receivable for others which were not
included  in  the  consolidated  statements  of  financial condition.  The total
amounts  of  such  loans were approximately $407.9 million and $519.2 million at
December  31,  1999  and  1998,  respectively.

An  analysis  of  activity  of  mortgage  servicing  rights  for the years ended
December  31,  2000,  1999  and  1998  is  as  follows  (in  thousands):
<TABLE>

<CAPTION>

                               Years ended December 31,


<S>                         <C>       <C>       <C>
                               2000      1999      1998
                            --------  --------  --------
Balance, beginning of year  $ 3,035   $ 4,049   $ 5,653
Amortization                   (167)   (1,014)   (1,604)
Sales                        (2,868)       --        --
                            --------  --------  --------
Balance, end of year        $    --   $ 3,035   $ 4,049
                            ========  ========  ========
</TABLE>



     (9)     REAL  ESTATE  OWNED
Included  in  prepaid expenses and other assets is real estate owned at December
31,  2000 and 1999 of approximately $4.0 million and $4.3 million, respectively.


<PAGE>
     (10)     DEPOSITS
Deposits  and  the  related weighted average interest rates at December 31, 2000
and  1999  are  summarized  as  follows  (dollars  in  thousands):
<TABLE>
<CAPTION>

                                            2000                    1999
                                        --------------           -----------
                                Stated Rate      Amount      Stated Rate      Amount
                               --------------  -----------  --------------  -----------
<S>                            <C>             <C>          <C>             <C>
Noninterest-bearing checking            0.00%  $   80,849            0.00%  $   97,146
Interest-bearing checking      0.75  -  2.00       61,046   0.75  -  1.75       65,229
Savings accounts               1.49  -  3.00       43,891   1.49  -  2.75       46,011
Money market demand accounts   0.00  -  6.31      374,210   0.00  -  4.65      331,082
                                               -----------                  -----------

                                                  559,996                      539,468
                                               -----------                  -----------

Certificate accounts           2.00  -  2.99          111   2.00  -  2.99          461
                               3.00  -  3.99          475   3.00  -  3.99       23,288
                               4.00  -  4.99       39,930   4.00  -  4.99      446,746
                               5.00  -  5.99      261,398   5.00  -  5.99      543,980
                               6.00  -  6.99      807,684   6.00  -  6.99       62,363
                               7.00  -  7.99        5,166   7.00  -  7.99        7,580
                               8.00  -  8.99           67   8.00  -  8.99          103
                               9.00  -  9.99           99   9.00  -  9.99           99
                               over 10.00              --   over 10.00              12
                                               -----------                  -----------
                                                1,114,930                    1,084,632
                                               -----------                  -----------

Premium on purchased deposits                          55                          189
                                               -----------                  -----------

                                               $1,674,981                   $1,624,289
                                               ===========                  ===========

Weighted average rate                                4.83%                        3.96%
                                               ===========                  ===========
</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 $136.6 million and $117.7
million  at  December  31,  2000  and  1999,  respectively.

     The  scheduled  maturities  of certificate accounts outstanding at December
31,  2000  were  as  follows  (in  thousands):

<TABLE>
<CAPTION>

Year Ended December 31,
-----------------------
<S>                      <C>
 2001                    $1,038,522
 2002                        53,378
 2003                        13,678
 2004                         4,284
 2005                         4,745
Subsequent years                323
                         ----------
                         $1,114,930
                         ==========
</TABLE>



     The  aggregate  amount of certificate accounts with balances of $100,000 or
more  was  approximately  $239.2 million and $201.3 million at December 31, 2000
and  1999,  respectively.

     (11)     ADVANCES  FROM  THE  FEDERAL  HOME  LOAN  BANK  OF  DALLAS
Advances  from the FHLB for the years ended December 31, 2000, 1999 and 1998 are
summarized  as  follows  (dollars  in  thousands):
<TABLE>
<CAPTION>



<S>                                    <C>          <C>          <C>
                                             2000         1999       1998
                                       -----------  -----------  ---------
Balance outstanding at end of year     $1,150,305   $1,096,931   $966,720
Average balance outstanding               926,659      951,953    713,197
Maximum outstanding at any month-end    1,275,541    1,115,713    969,036
Average interest rate during the year        6.29%        5.31%      5.55%
Average interest rate at end of year         6.48%        5.72%      5.24%
</TABLE>



The scheduled maturities and related weighted average interest rates on advances
from  the  FHLB  at  December  31,  2000  are  summarized as follows (dollars in
thousands):

<TABLE>
<CAPTION>

Due during the year  Weighted Average
ended December 31,     Interest Rate      Amount
-------------------  -----------------  ----------
<S>                  <C>                <C>
2001                             6.45%  $  831,255
2002                             6.59      279,586
2003                             6.94        5,981
2004                             5.80        5,470
2005                             6.20          464
2006                             6.81        3,400
2007                             6.63        1,305
2008                             5.63        1,969
2009                             8.04        4,116
2010                             6.73          987
2011                             6.56        1,396
2012                             5.76          292
2013                             5.76        7,761
2014                             5.44        2,999
2015                             6.68        1,760
2018                             5.05        1,564
                     -----------------  ----------

                                 6.48%  $1,150,305
                     =================  ==========
</TABLE>




At December 31, 2000, Coastal had a $50.0 million unused line of credit with the
FHLB.  The  FHLB  advances  are  secured  by  certain first lien and multifamily
mortgage  loans  and mortgage-backed securities with an aggregate carrying value
of  approximately  $1.2  billion  at  December  31,  2000.


<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,  2000  or  1999.

Securities  sold  under  agreements  to repurchase averaged approximately $249.7
million,  $103.2  million  and  $579.6  million  during  2000,  1999  and  1998,
respectively,  and the maximum outstanding amounts at any month-end during 2000,
1999  and  1998  were  approximately  $605.2  million, $271.1 million and $874.8
million,  respectively.

Federal  funds  purchased  averaged  approximately $18,000, $19,000 and $149,000
during  the  years  ended December 31, 2000, 1999 and 1998, respectively.  There
were  no  federal funds purchased outstanding at any month-end during 2000, 1999
or  1998.

(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.

(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, 2000, Coastal had interest
rate  swap  and  cap  agreements  on notional amounts totaling $20.4 million and
$134.1  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 6.50% in 2000, 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 5.94% in 2000, 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 income increase or
(decrease)  related  to  these agreements was approximately $212,000, $(483,000)
and  $(377,000),  for  the  years  ended  December  31,  2000,  1999  and  1998,
respectively.  Coastal  had  pledged  approximately  $896,000  and  $963,000  of
mortgage-backed  securities  to secure interest rate swap agreements at December
31,  2000  and  1999,  respectively.

The  terms of the interest rate swap agreements outstanding at December 31, 2000
and  1999  are  summarized  as  follows  (dollars  in  thousands):

<TABLE>
<CAPTION>

                                                       Floating Rate    Fair Value at
                       Notional      LIBOR     Fixed         at          End of Year
Maturity                Amount       Index      Rate   End of Period    (gain/(loss))
---------------------  ---------  -----------  ------  --------------  ---------------
<S>                    <C>        <C>          <C>     <C>             <C>
At December 31, 2000:
2003. . . . . . . . .  $   5,523  One-month    5.345%          6.821%  $           32
2004. . . . . . . . .      3,758  One-month    5.635           6.710               11
2005. . . . . . . . .     11,095  Three-month  6.500           6.736             (176)
                       ---------                                       ---------------
                       $  20,376                                       $         (133)
                       =========                                       ===============

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
                       =========                                       ===============

</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  7.50%  to 9.00%.  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 $65,000 and $90,000 at December 31, 2000 and 1999,
respectively,  with the estimated fair value of the agreements being $38,000 and
$750,000  at  December  31,  2000 and 1999, 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,  $25,000  and  $53,000  for the years ended December 31, 2000, 1999 and
1998,  respectively.


<PAGE>
     Interest  rate  cap  agreements  outstanding at December 31, 2000 expire as
follows  (dollars  in  thousands):
<TABLE>
<CAPTION>



Year of      Strike rate    Notional
expiration      range        amount
----------  --------------  ---------
<S>         <C>             <C>
2001        7.50  -  9.00%  $   9,815
2002        8.75  -  9.00      16,600
2003        8.00  -  9.00     107,700
                            ---------
                            $ 134,115
                            =========
</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 majority of Coastal's securities are categorized
as  "held-to-maturity"  and  are  carried  at  amortized cost as 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 $499,000 and
$563,000  at  December 31, 2000 and 1999, respectively.  The amortization of the
contract  losses on closed positions for the years ended December 31, 2000, 1999
and  1998  was  approximately  $64,000,  $204,000  and  $440,000,  respectively.


<PAGE>
     (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,
2000  and  1999.  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):
<TABLE>
<CAPTION>

                                                 At                                 At
                                          December 31, 2000                  December 31, 1999
                                          ------------------                -------------------
                                     Carrying              Fair           Carrying      Fair
                                      Value                Value           Value       Value
                                ------------------  -------------------  ----------  ----------
<S>                             <C>                 <C>                  <C>         <C>
Financial assets:
 Cash and cash equivalents      $           69,730  $           69,730   $   48,098  $   48,098
 Federal funds sold                            869                 869           --          --
 Loans receivable                        1,896,228           1,922,849    1,735,081   1,740,500
 Mortgage-backed securities
   held-to-maturity                        885,565             860,517      917,212     899,934
 U.S. Treasury securities
   held-to-maturity                          1,497               1,505          299         298
 Mortgage-backed securities
   available-for-sale                       94,673              94,673       99,665      99,665
 Stock in the FHLB                          58,005              58,005       56,753      56,753
 Interest rate cap agreements                   65                  38           90         750
 Accrued interest receivable                18,772              18,772       16,150      16,150
Financial liabilities:
 Deposits                                1,674,981           1,675,329    1,624,289   1,622,219
 Advances from the FHLB                  1,150,305           1,150,465    1,096,931   1,095,295
 Senior Notes payable                       46,900              45,630       46,900      46,666
 Accrued interest payable                    8,765               8,765        9,272       9,272
Off-balance sheet instruments:
 Interest rate swap agreements                  --                (133)          --         563
 Commitments to extend credit                   --             244,298           --     260,454
</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.

          FEDERAL  FUNDS  SOLD
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.


<PAGE>
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 because it
is  redeemable  at  its  par  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.

          ACCRUED  INTEREST  RECEIVABLE
Carrying  value  approximates  fair  value.

          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,
2000  and  1999.  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

The  fair  value  of  advances from the FHLB is 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.

          ACCRUED  INTEREST  PAYABLE
Carrying  value  approximates  fair  value.

          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,  2000,  1999  and 1998, represent the gross tax
liability  computed  under  these  tax  sharing  provisions before reduction for
actual  federal taxes paid to the Internal Revenue Service.  Alternative minimum
taxes  paid  with  the  federal  return  in 2000, 1999 and 1998 are available as
credit  carryforwards to reduce regular federal tax liabilities in future years,
over  an  indefinite  period and were partially utilized in 2000.  To the extent
these  credits  were  generated  due  to  the  utilization of other tax benefits
retained  by  the FRF, they will also be treated as tax benefit items.  Although
the  termination of the agreement with the FRF 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 Federal Deposit Insurance Corporation
("FDIC") as Manager of the FRF.  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.

The components of the provision for federal income tax expense (benefit) for the
years  ended  December  31,  2000,  1999 and 1998 are as follows (in thousands):
<TABLE>
<CAPTION>



            2000     1999     1998
          --------  -------  ------
<S>       <C>       <C>      <C>
Current   $13,141   $6,023   $3,046
Deferred   (3,246)    (364)     497
          --------  -------  ------

          $ 9,895   $5,659   $3,543
          ========  =======  ======
</TABLE>



A reconciliation of the expected federal income taxes using a corporate tax rate
of  35%  for  the years ended December 31, 2000, 1999 and 1998 is as follows (in
thousands):

<TABLE>
<CAPTION>



                                                      2000      1999      1998
                                                    --------  --------  --------
<S>                                                 <C>       <C>       <C>
Computed expected tax provision                     $11,343   $ 6,746   $ 7,980
Reversal of accrued income taxes due to resolution
 of tax benefit issue with FDIC                          --        --    (3,679)
FDIC tax benefit of preferred stock dividends        (1,784)   (1,460)     (906)
Net purchase accounting adjustments                     282       282       282
Other, net                                               54        91      (134)
                                                    --------  --------  --------
                                                    $ 9,895   $ 5,659   $ 3,543
                                                    ========  ========  ========
</TABLE>




<PAGE>
Significant  temporary differences that give rise to the deferred tax assets and
liabilities  as  of  December  31,  2000 and 1999 are as follows (in thousands):
<TABLE>
<CAPTION>



                                                                   2000    1999
                                                                  ------  ------
<S>                                                               <C>     <C>
Deferred tax assets:
  Loans receivable, principally due to allowance for loan losses  $4,032  $2,164
  Unrealized loss on securities available-for-sale                 1,005     995
  Goodwill                                                           726     612
  Property and equipment                                           1,212     620
  Real estate owned, principally due to unrealized writedowns        255     244
  Other                                                              258     221
                                                                  ------  ------
                                                                   7,488   4,856
                                                                  ------  ------

Deferred tax liabilities:
  FHLB stock                                                       1,832   2,417
  Mortgage-backed securities, principally
   due to deferred hedging losses                                    175     197
  Other                                                               --      17
                                                                  ------  ------

                                                                   2,007   2,631
                                                                  ------  ------

Net deferred tax asset                                            $5,481  $2,225
                                                                  ======  ======
</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 is no longer able to utilize a
reserve  method  for determining the bad debt deduction but is allowed to deduct
actual  charge-offs.  Further,  Coastal's post-1987 tax bad debt reserve will be
recaptured into income.  The reserve is being recaptured over a six-year period.
At  December  31, 2000, Coastal had approximately $1.9 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 of Directors
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,
                                ----------------------------------
                                    2000        1999        1998
                                ---------     --------    --------
<S>                             <C>            <C>         <C>
Net income available to common
 stockholders (in thousands):
  As reported                   $  17,416      $9,442      $16,668
  Pro forma                     $  16,790      $8,823      $16,193
Diluted earnings per share:
  As reported                   $    2.87      $ 1.42      $  2.18
  Pro forma                     $    2.77      $ 1.32      $  2.11
</TABLE>



Pro  forma  net income available to common stockholders and diluted earnings per
share  reflect  only  options  granted  during  the  years  1995  through  2000.
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 four
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  2000,  1999  and  1998:

<TABLE>
<CAPTION>


                                 2000          1999          1998
                             ------------  ------------  ------------
<S>                          <C>           <C>           <C>
Assumptions:
  Expected annual dividends  $0.36/share   $0.32/share   $0.32/share
  Expected volatility              37.21%        36.16%        25.49%
  Risk-free interest rate           6.40%         5.63%         5.47%
  Expected life in years              10            10            10

</TABLE>




<PAGE>
A  summary  of the status of the stock options as of December 31, 2000, 1999 and
1998  and  changes  during  the  years  then  ended  is  as  follows:

<TABLE>
<CAPTION>


                                   2000                  1999                    1998
                                ---------             ----------               ---------
                                      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                    722,412   $   13.726   597,919   $   12.910   619,345   $        11.706
Granted                     132,000       14.750   184,800       16.000    47,500            25.125
Exercised                   (61,395)      10.253   (47,971)      11.362   (54,885)            9.792
Forfeited/cancelled         (26,038)      17.653   (12,336)      17.373   (14,041)           13.313
                           ---------              ---------              ---------
Outstanding at end
 of year                    766,979   $   14.047   722,412   $   13.726   597,919   $        12.910
                           =========              =========              =========

Options exercisable at
 end of year                578,340                522,056                430,569
                           =========              =========              =========

Weighted-average fair
 value of options
 granted during the year
 (per share)               $  6.356               $  8.116               $ 11.388
                           =========              =========              =========
</TABLE>




<PAGE>
     The  following table summarizes information about stock options outstanding
at  December  31,  2000:

<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                 71,102       2.1 years           $  7.936           71,102      $    7.936
10.333 to $11.417              209,264       4.7 years           $ 11.014          209,264      $   11.014
12.500 to $16.000              426,613       8.0 years           $ 15.258          250,060      $   15.213
19.500 to $25.125               60,000       7.2 years           $ 23.260           47,914      $   22.978
                           ------------------------------------------------------------------------------------
                                766,979      6.5 years           $ 14.047          578,340      $   13.442
                           ====================================================================================
</TABLE>



     (19)     EMPLOYEE  BENEFITS
Coastal maintains a 401(k) profit sharing plan.  Coastal's contributions to this
plan  were  approximately  $518,000,  $509,000  and $309,000 for the years ended
December  31,  2000,  1999  and  1998,  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  4  cents  per  diluted  share  (as of December 31, 2000), 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.  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  4  cents  per  diluted  share  (as  of December 31, 2000), and is
expected  to  continue  through  the  end  of  2002.


<PAGE>
COMMON  STOCK  DIVIDENDS

On January 28 and April 28, 2000, Coastal declared a dividend of $0.08 per share
of  Common  Stock  outstanding for the stockholders of record of February 15 and
May 15, 2000, respectively.  On July 28 and October 27, 2000, Coastal declared a
dividend  of $0.10 per share on Common Stock outstanding for the stockholders of
record  as  of  August  15  and  November  15,  2000,  respectively.

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.

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, February 25, 1999, April 27, 2000 and
July  27, 2000, the Board of Directors authorized five 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,  2000  and  1999,  2,000,000 and 1,283,679 shares had been
repurchased  at  a  cost  of  $31.3  million  and  $20.5  million, respectively.

     (22)     EARNINGS  PER  COMMON  SHARE
The  following  summarizes  information  related to the computation of basic and
diluted  EPS  for  the  years ended December 31, 2000, 1999 and 1998 (dollars in
thousands,  except  per  share  data):

<TABLE>
<CAPTION>



<S>                                                                  <C>          <C>          <C>
                                                                        2000         1999         1998
                                                                    -----------  -----------  ----------
Net income                                                          $   19,924   $   11,026   $   16,668
Preferred Stock dividends                                              (2,508)      (1,584)           --
                                                                   -----------  -----------   ----------
Net income available to common
 stockholders                                                       $   17,416   $    9,442   $   16,668
                                                                   ===========  ===========   ==========

Weighted average number of common shares
 outstanding used in basic EPS calculation                           5,917,845    6,494,330    7,432,598
Add assumed exercise of outstanding stock
 options as adjustments for dilutive securities                        140,316      166,978      224,092
                                                                   -----------  -----------   ----------

Weighted average number of common shares
 outstanding used in diluted EPS calculation                        6,058,161    6,661,308    7,656,690
                                                                   ===========  ==========   ==========
Basic EPS                                                          $     2.94   $     1.45   $     2.24
                                                                   ===========  ==========   ==========
Diluted EPS                                                        $     2.87   $     1.42   $     2.18
                                                                   ===========  ===========  ==========
</TABLE>



The weighted average number of common shares outstanding has been reduced by the
treasury  stock  held by Coastal.  As of December 31, 2000 and 1999, Coastal had
2,000,000  and  1,283,679  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,  2000,  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>
2001                 $ 2,809
2002                   2,675
2003                   2,236
2004                   1,870
2005 and thereafter   13,052
</TABLE>



Rent  expense  for  the years ended December 31, 2000, 1999 and 1998 amounted to
approximately  $3.0  million,  $2.9  million  and  $2.6  million,  respectively.

     (24)     REGULATORY  MATTERS
The  Bank  is subject to various regulatory capital requirements administered by
the  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, 2000, that the
Bank  met  capital  adequacy  requirements  to  which  it  is  subject.

As  of December 31, 2000, 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.


<PAGE>
The  Bank's  regulatory  capital amounts and ratios, as of December 31, 2000 and
1999,  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
                           -----------------------     --------------------       --------------------
                            Amount          Ratio          Amount   Ratio          Amount    Ratio
                           --------  -------------     -------------------        -----------------
<S>                        <C>       <C>                   <C>      <C>            <C>       <C>
As of December 31, 2000:
 Tier 1 (core)             $186,290         6.22%       $  119,862   4.00%        $149,827   5.00%
 Tier 1 risk-based          186,290         9.94            74,957   4.00          112,435   6.00
 Total risk-based           200,797        10.72           149,913   8.00          187,391  10.00

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

</TABLE>



     (25)     PARENT  COMPANY  FINANCIAL  INFORMATION
Condensed  financial  information  for  Coastal  Bancorp, Inc. is as follows (in
thousands):

                              Coastal Bancorp, Inc.
                   Condensed Statements of Financial Condition
                   -------------------------------------------
<TABLE>
<CAPTION>
                                                    December 31,
                                               ------------------------
                                                   2000         1999
                                               -------------  --------
<S>                                            <C>            <C>
Assets:
  Cash and cash equivalents                    $          29  $    453
  Investment in subsidiary                           179,750   165,067
  Receivable from the Bank                             2,394    11,193
  Mortgage-backed securities held-to-maturity            791       986
  Other assets                                         2,928     3,175
                                               -------------  --------
                                               $     185,892  $180,874
                                               =============  ========

Liabilities and stockholders' equity:
  Senior Notes payable                         $      46,900  $ 46,900
  Other liabilities                                      521       518
                                               -------------  --------
        Total liabilities                             47,421    47,418
        Total stockholders' equity                   138,471   133,456
                                               -------------  --------
                                               $     185,892  $180,874
                                               =============  ========
</TABLE>


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

                                               Years ended December 31,
                                              ---------------------------
                                                2000     1999     1998
                                               -------  -------  -------
<S>                                          <C>       <C>      <C>
Income:
  Dividends from subsidiary                $    7,132  $ 7,239  $ 7,593
  Equity in undistributed earnings of
   subsidiary, net of income tax               15,200    6,367   12,724
  Interest income                                 507      707      103
                                               22,839   14,313   20,420
                                               -------  -------  -------
Expense:
  Interest expense                              4,690    5,058    5,000
  Noninterest expense                             872      471      717
                                                5,562    5,529    5,717
                                               -------  -------  -------

  Federal income tax benefit                    2,647    2,242    1,965
                                               -------  -------  -------

        Net income                         $   19,924  $11,026  $16,668
                                               =======  ======  ========
</TABLE>



                              Coastal Bancorp, Inc.
                       Condensed Statements of Cash Flows
                       ----------------------------------

<TABLE>
<CAPTION>



                                                                      Years ended December 31,
                                                                     --------------------------
                                                                         2000       1999       1998
                                                                     ----------   --------   --------
<S>                                                                  <C>        <C>        <C>
Cash flows from operating activities:
  Net income                                                         $  19,924   $ 11,026   $ 16,668
  Adjustments to reconcile net income to net
    cash provided by (used in) operating activities:
      Equity in undistributed earnings of subsidiary                   (15,200)    (6,367)   (12,724)
      Net (increase) decrease in other assets and other liabilities      9,547    (11,585)     3,684
                                                                     ----------   --------   --------

          Net cash provided by (used in) operating activities           14,271     (6,926)     7,628
                                                                     ----------   --------   --------

Cash flows from investing activities:
  Net decrease in mortgage-backed securities                               195        317        458
                                                                     ----------   --------   --------
          Net cash provided by investing activities                        195        317        458
                                                                     ----------   --------   --------

Cash flows from financing activities:
  Proceeds from issuance of Bancorp Preferred Stock, net                    --     25,942         --
  Exercise of stock options for purchase of Common Stock                   630        545        536
  Purchase of treasury stock                                           (10,882)   (12,685)    (7,778)
  Repurchase of Senior Notes                                                --     (3,100)        --
  Dividends paid                                                        (4,638)    (3,662)    (2,392)
        Net cash provided by (used in) financing activities            (14,890)     7,040     (9,634)
                                                                     ----------   --------   --------

          Net increase (decrease) in cash and cash equivalents            (424)       431     (1,548)
Cash and cash equivalents at beginning of year                             453         22      1,570
                                                                     ----------   --------   --------
Cash and cash equivalents at end of year                             $      29   $    453   $     22
                                                                     ==========  =========  =========
</TABLE>



<PAGE>
     (26)     SELECTED  QUARTERLY  FINANCIAL  DATA
Selected  quarterly  financial data is presented in the following tables for the
years  ended  December  31, 2000 and 1999 (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                         2000 Quarter Ended (unaudited)
                                                        -------------------------------
                                           March 31,       June 30,   September 30,   December 31,
                                     -------------------  ---------  --------------  -------------
<S>                                  <C>                  <C>         <C>             <C>
Interest income                      $      54,914       $  60,598  $       60,755  $      61,230
Interest expense                            34,802          38,016          40,132         39,955
                                     -------------------  ---------  --------------  -------------
Net interest income                         20,112          22,582          20,623         21,275
Provision for loan losses                    2,400           1,590             900            900
Noninterest income                           4,526           2,524           2,365          2,385
Noninterest expense                         14,894          14,393          14,373         14,535
                                     -----------------    ---------  --------------  -------------
Income before provision
 for Federal income taxes and
 minority interest                           7,344           9,123           7,715          8,225
Provision for Federal income taxes           2,209           2,831           2,338          2,517
Minority interest - preferred stock
 dividends of Coastal Banc ssb                 647             647             647            647
                                     -----------------    ---------  --------------  -------------
Net income                           $       4,488       $   5,645  $        4,730  $       5,061
                                     =================    =========  ==============  =============

Basic earnings per common share      $        0.61       $    0.84  $         0.73  $        0.78
                                     =================    =========  ==============  =============
Diluted earnings per common share    $        0.60       $    0.83  $         0.71  $        0.76
                                     =================    =========  ==============  =============
</TABLE>




<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 common share      $      0.40       $    0.47      $   0.50       $   0.08
                                     =============     ==========   ==============  =============
Diluted earnings per common share    $      0.40       $    0.46      $   0.48       $   0.08
                                     =============     ==========   ==============  =============
</TABLE>




<PAGE>
     (27)     ADOPTION  OF  STATEMENT  133
Statement  133,  "Accounting  for  Derivative  Instruments  and  for  Hedging
Activities," requires companies to recognize all derivatives as either assets or
liabilities  in the statement of financial condition and measure all derivatives
at  fair  value.  Changes  in  the  fair  value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, depending
on the type of hedge transaction.  For fair value hedge transactions in which an
entity  is  hedging  changes  in  the fair value of an asset, liability, or firm
commitment,  changes in the derivative instrument's fair value will generally be
offset  in  the  statement  of  operations  by changes in the hedged item's fair
value.  For  cash  flow  hedge  transactions  in  which an entity is hedging the
variability  of  cash  flows  related  to a variable-rate asset, liability, or a
forecasted  transaction,  changes in the fair value of the derivative instrument
will  be  reported  in  other comprehensive income.  The gains and losses on the
derivative  instrument  that  are reported in other comprehensive income will be
reclassified  to  earnings  in the periods in which earnings are impacted by the
variability  of  the  cash flows of the hedged item.  The ineffective portion of
all  hedges  will  be  recognized  in  current  period  earnings.  Statement  of
Financial  Accounting  Standards No. 137, "Accounting for Derivative Instruments
and  Hedging  Activities  --  Deferral  of the Effective Date of Statement 133,"
deferred  the  effective date of Statement 133 to all fiscal quarters for fiscal
years  beginning  after  June  15,  2000.  Statement  of  Financial  Accounting
Standards  No.  138,  "Accounting for Certain Derivative Instruments and Certain
Hedging  Activities,"  amended  the accounting and reporting under Statement 133
for certain derivative instruments, hedging activities and decisions made by the
Derivatives  Implementation  Group ("DIG").  Coastal adopted these statements on
January  1,  2001.

The  implementation of Statement 133 on January 1, 2001 caused Coastal to record
a transition adjustment loss of $160,000 during the first quarter of 2001.  This
loss  represents  the  impact  of  Coastal's  derivative  contracts that did not
qualify  for  hedge accounting.  Coastal anticipates that ongoing accounting for
derivatives  under  Statement  133  could  increase  the  volatility of reported
earnings  and  stockholders'  equity.  In  addition, the DIG is still addressing
certain  issues  that  could  change  the  on-going  impact  of  Statement  133.


<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, 2000 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>

                            2000                        1999
                          -------                      -------
                 High      Low    Dividends    High      Low    Dividends
                -------  -------  ----------  -------  -------  ----------
<S>             <C>      <C>      <C>         <C>      <C>      <C>
First Quarter   $18.125  $14.375  $    0.080  $19.500  $15.500  $    0.080
Second Quarter   17.125   14.000       0.080   18.500   16.000       0.080
Third Quarter    18.563   14.063       0.100   18.875   15.500       0.080
Fourth Quarter   24.000   16.750       0.100   20.125   17.250       0.080
</TABLE>





COASTAL  BANCORP,  INC.  CUMULATIVE  PREFERRED  STOCK,  SERIES  A  ("CBSAO"):

<TABLE>
<CAPTION>

                            2000                        1999
                          -------                      -------
                 High      Low    Dividends    High      Low    Dividends
                -------  -------  ----------  -------  -------  ----------
<S>             <C>      <C>      <C>         <C>      <C>      <C>
First Quarter   $19.750  $17.500  $    0.570       --       --          --
Second Quarter   20.000   17.750       0.570  $25.375  $24.750  $    0.300
Third Quarter    21.063   19.625       0.570   25.000   23.125       0.570
Fourth Quarter   22.125   20.750       0.570   23.750   17.750       0.570
</TABLE>





COASTAL  BANC  SSB  NONCUMULATIVE  PREFERRED  STOCK,  SERIES  A  ("CBSAP"):

<TABLE>
<CAPTION>


                            2000                        1999
                          -------                      -------
                 High      Low    Dividends    High      Low    Dividends
                -------  -------  ----------  -------  -------  ----------
<S>             <C>      <C>      <C>         <C>      <C>      <C>
First Quarter   $20.500  $19.938  $    0.563  $25.250  $24.625  $    0.563
Second Quarter   20.375   18.500       0.563   25.063   24.500       0.563
Third Quarter    20.563   19.125       0.563   24.750   23.375       0.563
Fourth Quarter   23.000   19.625       0.563   23.375   20.750       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 26, 2001 at 12:00 noon.


TRANSFER  AGENT  AND  REGISTRAR

Mellon  Investor  Services
Overpeck  Centre
85  Challenger  Road
Ridgefield  Park,  New  Jersey  07660
(800)  851-9677
www.mellon-investor.com


INDEPENDENT  PUBLIC  ACCOUNTANTS

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  AT  NO  CHARGE  UPON  WRITTEN  REQUEST)

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. ("Bancorp") is quoted on The
Nasdaq  Stock  Market  under  the symbol "CBSA."  As of February 27, 2001, there
were  5,737,376 shares of Common Stock of Bancorp issued and outstanding and the
approximate number of registered stockholders was 37, representing approximately
1,078  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 Bancorp 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 27, 2001, there were 1,150,000 shares of Preferred Stock issued
and  outstanding  and  held  by  approximately  141  registered  stockholders,
representing  approximately  1,800  beneficial stockholders at such record date.

     On  May  11,  1999,  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 27, 2001, 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.

     Bancorp  declared  dividends  on  the  Common  Stock  payable  during 2000.
Quarterly  dividends  in the amount of $0.08 per share were paid on March 15 and
June  15,  2000,  and  quarterly dividends in the amount of $0.10 per share were
paid  on  September 15 and December 15, 2000.  On March 15, 2001, Bancorp paid a
quarterly  dividend  in  the  amount  of  $0.10  per  share on its Common Stock.
Bancorp  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, Bancorp 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.