COASTAL  BANCORP,  INC.
AND  SUBSIDIARIES

FINANCIAL  HIGHLIGHTS
DECEMBER  31,  2001,  2000  AND  1999
<TABLE>
<CAPTION>
                                                                      December 31,
                                                                     --------------
(Dollars in thousands, except per share data)               2001          2000         1999
                                                       --------------  -----------  -----------
<S>                                                    <C>             <C>          <C>
                                                       --------------  -----------  -----------
FOR THE YEAR ENDED
 Net interest income                                   $      86,597   $   84,368   $   77,286
 Provision for loan losses (1)                                 3,900        5,790       10,575
 Noninterest income                                           11,143       12,024       10,372
 Noninterest expense                                          58,479       58,195       57,810
 Net income                                                   21,802       19,924       11,026
 Diluted earnings per common share before
   cumulative effect of accounting change                       3.19         2.87         1.42
 Diluted earnings per common share                              3.17         2.87         1.42


AT YEAR END
 Total assets (2)                                      $   2,597,891   $3,091,611   $2,947,952
 Loans receivable                                          1,863,601    1,896,228    1,735,081
 Mortgage-backed securities held-to-maturity (2)                  --      885,565      917,212
 Mortgage-backed securities available-for-sale (2)           514,068       94,673       99,665
 Deposits                                                  1,660,386    1,674,981    1,624,289
 Borrowed funds (2)                                          690,877    1,150,305    1,096,931
 Senior Notes payable (3)                                     43,875       46,900       46,900
 Minority interest - preferred stock of Coastal
   Banc ssb                                                   28,750       28,750       28,750
 Preferred stockholders' equity                               27,500       27,500       27,500
 Common stockholders' equity                                 129,934      110,971      105,956
 Book value per common share                                   21.54        18.89        16.42
 Tangible book value per common share                          18.15        15.08        12.53


SIGNIFICANT RATIOS FOR THE YEAR ENDED
 Return (before minority interest) on average assets           0.81%        0.74%        0.47%
 Return on average common equity                               15.92        16.51         8.83
 Net interest margin                                            2.97         2.87         2.75
 Interest rate spread including noninterest-bearing
   deposits                                                     2.81         2.71         2.65
 Interest rate spread                                           2.56         2.42         2.39
 Average common equity to average total assets                  4.03         3.47         3.66
 Noninterest expense to average total assets                    1.94         1.91         1.98


ASSET QUALITY RATIOS AT YEAR END
 Nonperforming assets to total assets                           1.13%        0.82%        0.73%
 Nonperforming loans to total loans receivable                  1.33         1.12         0.99
 Allowance for loan losses to nonperforming loans              62.26        68.32        61.30
 Allowance for loan losses to total loans receivable            0.83         0.77         0.60
</TABLE>

(1)     During  1999,  Coastal recorded a $6.8 million provision for loan losses
specific  to one loan to MCA Financial Corp. ("MCA").  See further discussion in
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations  -  Net  Income."
(2)     In  November  2001,  Coastal  completed  the  sale of approximately $845
million  of  its  mortgage-backed securities.  The transaction was undertaken to
strategically  restructure  a  portion  of  Coastal's  asset base.  Coastal used
approximately  $512  million  of  the  proceeds  to purchase primarily pass-thru
mortgage-backed securities with an overall shorter expected duration and reduced
borrowings  with  the  remainder.  All  of  the  securities  purchased  and  the
remaining  securities  not  sold were placed in the available-for-sale category.
See  further  discussion  in  "Management's Discussion and Analysis of Financial
Condition  and  Results  of  Operations  -  Financial  Condition."
(3)     Coastal  redeemed all of the Senior Notes payable on February 1, 2002 at
par  plus  accrued  interest.

<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,
2001,  Coastal  Banc  ssb  had  $2.6  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

Selected Consolidated Financial and Other Data

Management's Discussion and Analysis

Independent Auditors' Report

Consolidated Financial Statements

Notes to Consolidated Financial Statements

Stock Prices and Dividends

Stockholder Information

</TABLE>



<PAGE>

CHAIRMAN'S  LETTER

I  just  came  in from running ok, jogging.  I had one of those really good runs
(rare  these  days)  in  which  your brain does funny things and you seem to see
things with so much clarity.  I think it has to do with more oxygen to the brain
or  something  like that I don't really know why.  Anyway, only ten minutes have
passed  since I stopped running and I'm still sweating.  But I was determined to
immediately  record  my  thoughts  for  you, before the surplus oxygen leaves my
brain  and  takes  the  clarity  with  it.

It's  New  Year's  Eve.  I  was  thinking  about  how preposterous it would have
sounded  if  last  year  on  this  day someone said to me, "Here are three major
events  you  will  witness  in 2001.  The two tallest buildings in New York City
will  be  attacked and destroyed.   The corporation generally believed to be the
largest  and  most successful company based in Houston will collapse in a matter
of  days.  Preceded  by  those  events will be a flood that will cover Houston's
highways  under  eighteen  feet of water and cause more monetary damage than any
flood  in  U.S.  history."

Yeah, right.  The next thing you're going to tell me is "God Bless America" will
become  a  pop  chart  best  seller.

But  it  all  really  happened,  didn't  it?  This  morning's  newspapers got me
thinking  about it all again.  You know how the press fills papers on New Year's
Eve  with "The Year in Review" garbage.  Needless to say, 2001 produced a bumper
crop.  They're  trying to sell a different spin on old news. Attention was given
to  how  people are now looking for "meaning" in all these extraordinary events.
There's a lot of talk about "healing" and "making peace with what has occurred."

So  I  was  a  little  concerned  - even feeling a little guilty - that I wasn't
contemplating  those  same  things.  I guess it depends on how close you were to
the events and how directly you were affected.  I was one step removed from most
of  it,  so  I'm  not thinking about healing or making peace with anything.  I'm
thinking  more  in  terms  of  "what's  really  going  to  change?"

We  say  these  events  make us stronger and even change our whole value system.
But  strength  and  new value systems alone aren't enough of a catalyst for real
change  -  not  the  kind that makes our world a better and safer place to live.
No,  for  that  kind  of  change,  we must view the copious amount of wisdom and
awakening  knowledge as the only gift bestowed to us by these once-in-a-lifetime
calamities.  Real change is more often accomplished after staggering events such
as  these because they touch everyone; thus, that wisdom and knowledge is widely
distributed.  In other words if everyone gets it, the engine of change is fueled
by  nuclear  power.

So  during  my final mile, it suddenly occurred to my oxygen-engorged brain that
Coastal  Banc  ("Coastal")  thrives  on this sort of big change, in fact we have
relied  on  it.  Our  most  successful  tactics have been rooted in anticipating
major  change and prospering from it. So I came up with a corny little postulate
or  discipline  that  captures  what's  imbedded  in Coastal's culture, that the
highest  and  best  use  of  wisdom  and  knowledge  is  to  seek  change.

Look  to  the  past  only  for  wisdom.
Look  to  the  present  only  for  knowledge.
Look  to  the  future  only  for  change.

As an unspoken postscript to my postulate, I would suggest that if enough people
are looking in the same direction, change is a heck of lot easier to accomplish.

Standing  at the vortex of Ground Zero, standing in chest deep water on the roof
of  an eighteen wheeler following Houston's Great Flood, or standing in the dark
and  silent  former  center  of  the  energy-trading  world,  we  look  in three
directions.  Looking  back,  we  become wiser and we know what not to do, but it
doesn't  provide  answers  of substance.  Looking around us, we learn more about
our  adversaries,  weaknesses in our systems, and gain a heightened awareness of
the  world  beyond our comfort zone.  Looking to the future, we develop a vision
of  what  we  want  to  be  and  what  we  need  to  change  to  get  there.

Were  the  wake-up  calls  of  2001  disturbing  enough to manifest real change?
There's  an  awful lot of people in this country standing around with "what were
we thinking?" expressions on their faces.  Enough people to produce real change.
The  most  beneficial change may be that this newly acquired national wisdom has
knocked  a lot of the nonsense and waste out of many systems - social, economic,
and  maybe  even  political  well,  maybe  not  political.
Heck, before you know it, what we do may become more important than what we say.

We are no longer tolerant of excuses.  We no longer accept things at face value.
We  no  longer  feel safe on a plane simply because security measures exist.  We
want  to  know exactly which security measures will make it safe and how.  We no
longer  feel  safe that our houses will not flood simply because they are not in
the  100-year flood plain.  We first want to watch how our streets drain after a
big  storm before we come to that conclusion.  We no longer feel our investments
are safe simply because the companies we invest in and their accountants tell us
so in accounting language.  We want to see where the cash is going, how much new
cash  it  will  generate,  and  how  soon.

Business  managers  have  been rattled into viewing their own companies with the
same  results  oriented  mindset.  Throwing  resources at business ideas, simply
because  they  sound  like they may have intrinsic value one day, when the world
catches  up  with  the idea, is now frowned upon.  Business lines are once again
measured  by  something  arcane  like cash flow rather than "franchise value" or
"what  it  means to the company's image" or - this is a good one - "intellectual
capital."

I  suspect  by now you're wondering where I'm going with all this.  Well here it
is.  It  may  not  be readily apparent, but the banking business is experiencing
the same kind of cathartic awakening, for many of the same reasons.  In the last
three  years,  the  banking  industry  experienced  legislation  that  unwound a
sixty-five  year  old  separation  between  banking  and  investment  banking,
unprecedented  expansion  into  new  lines  of  business,  the  bursting  of the
technology  bubble,  and  a recession that got much worse on September 11, 2001.
All  of  this  followed the biggest decade of consolidation ever for the banking
industry.

Today,  the  same  no-nonsense,  prove-it  attitude  that  is changing America's
culture  has  gripped  the banking industry.  So it's time for introspection and
honest  measurement  of  the  results.  As  it  turns  out, many of the mergers,
acquisitions,  products, and business lines turned out to be disappointing.  The
ideas sounded good at the time, but execution and profits were poor.  Banks have
learned  they can't be everything to all customers everywhere.  A simplification
process  is  underway  in  the  banking industry.  And it's not just a few banks
simplifying,  it's  widespread.  Thus  the  engine  of  change is hitting on all
cylinders.

Times  of  change,  such  as  this,  are when Coastal is at its best.  Since the
mid-1980's,  the  strategic  moves that did the most to elevate Coastal to a new
level  of business and profitability occurred during uncertain times when things
were  changing  rapidly.  Armed  with  the wisdom of historical mistakes made by
others,  Coastal  learned how to build a bank with the pieces that few wanted or
needed  at  the  time.

Then,  just  a  few  years ago when all the banks were crowding into old and new
markets  with acquisitions, new businesses and new product lines, we did our own
introspection.  We  concluded that Coastal's shareholders would be better served
if  we  right-sized  with  a  two-year  flat expense budget and focused on a few
simple  things  that  would  improve profitability.  We succeeded, and Coastal's
profitability  and stock price reached record levels in 2001.  But our principal
goal  was to be lean and clean when uncertain times come again so we can do what
we  do best: take advantage of growth opportunities when others aren't or can't.

That  time has arrived.  For the first time since Coastal launched the Southwest
Plan  in  1988  with  four government-assisted acquisitions, dislocations in the
local  commercial  banking  market  have arrived.  The large national banks that
dominate the Texas market seem to be constantly re-programming the model of what
they  want  to  be.  Each  time they re-program, they drop the lines of business
that  are  cumbersome  to  execute.  Local business banking appears to be one of
those  victims.  Customers,  loan  officers,  and market share that the big guys
don't  want are available for the taking.  This is the chance we've been waiting
for.

It's  not  going  to be easy and it's going to cost us.  But this is the time to
act,  when  real uncertainty and real change are turning everything upside down.
Coastal  may  not  make  as  much  money during 2002; but just this once, record
profitability  is  not  our  goal.  Our goal this year is to plant the seeds for
growth  to  attain  a  higher  level  of earnings power and profitability in the
ensuing  years.

That's  most  of what I wanted to say in this year's letter (relieved?).  It's a
little  unconventional  for  a  Chairman's letter, even a little self-indulgent.
But Coastal has been in a holding pattern for the last several years with a sort
of  bunker mentality, squeezing out as much growth in profitability as possible.
Now  the  day has arrived for real growth opportunities and I wanted you to know
what  I'm  thinking  and  why.

However,  I'm  not  going  to  let you go until I very briefly brag a little bit
about  Coastal's  highlights  for  2001:

Highlight  #1     Coastal's  stock  traded at an all time high of $40 per share,
and  closed  on December 31, 2001 at a record year-end high of $28.90 per share,
20%  over  the  December  31,  2000  closing  price  of  $24  per  share.

Highlight  #2     Net  income  available to common stockholders reached a record
high of $19.3 million in 2001, an 11% increase over 2000 net income available to
common stockholders of $17.4 million.  Diluted earnings per common share reached
a  record  level  of  $3.17  per share in 2001, a 10% increase over 2000 diluted
earnings  per  common  share  of  $2.87.

Highlight  #3     Net  interest  margin  reached a record high of 2.97% in 2001,
compared  to  2.87%  in  2000.

Highlight #4     Fee income reached a record high of $9.1 million in 2001, a 10%
increase  over  2000  fee  income  of  $8.2  million.

Highlight  #5     Noninterest  expense  was $58.5 million during 2001, basically
unchanged  from  2000  noninterest  expense  of  $58.2  million.

For  the  second year in a row, we increased net interest income and fee income,
while  spending  the same amount of money and producing record profits.  But now
changes  have  been  and  are being made designed to elevate Coastal to a higher
level  of  profitability,  and  those  changes will likely result in a temporary
reduction  in  earnings  expectations  for  2002.

The  principal  change  that  reduced  our earnings expectations occurred in the
fourth quarter of 2001.  In November, Coastal took advantage of the low interest
rate  environment  and  restructured  a portion of its asset base.  Coastal sold
$845  million of its mortgage-backed securities ("MBS") for a slight profit.  Of
the  proceeds,  $512  million  were reinvested in pass-thru MBS that had shorter
expected  lives.  The  bulk of the portfolio that was sold had much higher price
volatility  than  the  portfolio  acquired, principally due to the long expected
life  of  the prior portfolio.  Now Coastal's balance sheet is comprised of less
than  20%  MBS,  a  level  more  closely  in  line  with  our  peers.

This  securities  transaction reduced the size of Coastal's total earning assets
enough to cause an immediate reduction in net interest income and a reduction in
earnings  estimates  for  2002.  But  since core earnings from Coastal's banking
business  were  not  affected,  our  shareholders  seem  to have approved of the
restructuring,  as  indicated  by  the nominal effect it had on our stock price.
Moreover,  a reduction in the mortgage-backed securities portfolio size freed up
capital  for  core  loan  growth.

There  are two more factors that are expected to contribute - albeit to a lesser
extent  -  to  reduced  earnings in 2002.  First, because we are in a recession,
quality  loan  production  in  our  market  is  not expected to be at the levels
Coastal typically experienced during expansion periods.  This affects the entire
banking  industry.  As a result, maintaining Coastal's earning asset size at the
year-end  2001  level  will  be  difficult to do without compromising our credit
standards,  which  of  course  we  will  not  do.

Second,  for  the  first  time  in  three years, we do not expect to have a flat
expense  budget.  The  only way to take advantage of the temporary dislocation I
talked about earlier is to spend a little more money.  Don't worry, we won't get
carried  away  and  torch our earnings.  We will be frugal, but times like these
don't come around very often.  This is our chance to hire loan officers and grab
market  share  that  the  big  guys have discarded in order to elevate Coastal's
earnings  power  to  a  new  level.

That  brings  me  to  my final and, maybe, most exciting point.  At December 31,
2001  Coastal  had only 6,083,648 common shares outstanding used for calculation
of diluted earnings per share.  Comparatively speaking, that's a small amount of
common shares for a bank Coastal's size.  You do the math.  It doesn't require a
lot  of  new market share and new earnings power to significantly boost earnings
per  share.  For  instance,  $100  million  in new loans earning last year's net
interest  margin  of 2.97% can potentially increase earnings per share by almost
50  cents on a pre-tax basis.  Now do you see why we want to spend a little more
money  this  year  for  future  growth?

Okay,  I've said enough.  I hope you're still with me.  If so, I appreciate your
patience  with  my  amateur  philosophies.  We are in the midst of a very unique
time  for  our  country  and  our company.  There is much uncertainty and chaos.
And,  ultimately, there will be changes big changes.  Big changes that result in
big  opportunities.  This  is  an environment in which Coastal thrives.  We have
the wisdom of what can be accomplished from our experience in 1988.  We have the
knowledge  of  the  market share that is being discarded and up for grabs in the
Texas  market.  And,  most  importantly, we can use this wisdom and knowledge to
prosper  from the thing Coastal loves most: change.  Therein lie opportunity and
the  road to a higher level of earnings power.  And since there's relatively few
of  you,  every  shareholder gets a big share of those new earnings and, thus, a
higher  stock  price.  In  the  end,  that's  what  this  is  all  about, right?



/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)                    2001           2000        1999        1998        1997
                                                           ----------------  ----------  ----------  ----------  ----------
<S>                                                        <C>               <C>         <C>         <C>         <C>
Balance Sheet Data
 Total assets (2)                                          $      2,597,891  $3,091,611  $2,947,952  $2,982,161  $2,911,410
 Loans receivable (1)                                             1,863,601   1,896,228   1,735,081   1,538,149   1,261,435
 Mortgage-backed securities held-to-maturity (1) (2)                     --     885,565     917,212   1,154,116   1,345,090
 Mortgage-backed securities available-for-sale (2)                  514,068      94,673      99,665      96,609     169,997
 Deposits                                                         1,660,386   1,674,981   1,624,289   1,705,004   1,375,060
 Advances from the Federal Home Loan Bank of
   Dallas ("FHLB") (2)                                              690,877   1,150,305   1,096,931     966,720     540,475
 Securities sold under agreements to repurchase                          --          --          --     100,000     791,760
 Senior Notes payable (3)                                            43,875      46,900      46,900      50,000      50,000
 Minority interest - preferred stock of Coastal Banc ssb             28,750      28,750      28,750      28,750      28,750
 Preferred stockholders' equity                                      27,500      27,500      27,500          --          --
 Common stockholders' equity                                        129,934     110,971     105,956     112,764     104,830

</TABLE>

<TABLE>
<CAPTION>
                                                                                For the Year Ended December 31,
                                                                   2001        2000         1999       1998         1997
                                                                 --------    --------    ---------    --------    ---------
<S>                                                          <C>           <C>        <C>        <C>                  <C>
Operating Data
 Interest income                                                 $210,612    $237,273     $202,943    $210,814    $201,356
 Interest expense                                                 124,015     152,905      125,657     143,404     144,423
                                                                 --------    -------     ---------    --------     -------
 Net interest income                                               86,597      84,368       77,286      67,410      56,933
 Provision for loan losses (4)                                      3,900       5,790       10,575       3,100       1,800
                                                                 --------    -------     ---------    --------     -------
 Net interest income after provision for loan losses               82,697      78,578       66,711      64,310      55,133
                                                                 --------    -------     ---------    --------     -------
 Gain on sale of mortgage servicing rights                             --       2,172           --          --          --
 Writedown of purchased mortgage loan premium                          --          --           --        (709)         --
 Gain on sales of mortgage-backed securities
   available-for-sale, net                                            169          --           --           1         237
 Loss on derivative instruments                                      (422)         --           --          --          --
 Other noninterest income                                          11,396      9,852        10,372       7,580       6,147
 Other noninterest expense                                        (58,479)   (58,195)      (57,810)    (48,383)    (39,544)
                                                                 --------    -------     ---------    --------     -------
 Income before provision for Federal income taxes,
   minority interest and cumulative effect of accounting
   change                                                          35,361     32,407        19,273      22,799      21,973
 Provision for Federal income taxes (5)                           (10,867)    (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)     (2,588)
 Cumulative effect of change in accounting for
   derivative instruments, net of tax (6)                            (104)        --            --          --          --
                                                                 --------    -------      ---------    --------     ------
 Net income                                                      $ 21,802   $ 19,924      $ 11,026    $ 16,668    $ 11,563
                                                                 ========   ========      ========    ========    =========
 Net income available to common stockholders                     $ 19,294   $ 17,416      $  9,442    $ 16,668    $ 11,563
                                                                 ========   ========      ========    ========    =========
 Basic earnings per common share before cumulative
   effect of accounting change (6)                               $   3.36   $   2.94      $   1.45    $   2.24    $   1.55
                                                                 ========   ========      ========    ========    =========
 Basic earnings per common share (7)                             $   3.34   $   2.94      $   1.45    $   2.24    $   1.55
                                                                 ========   ========      ========    ========    =========
 Diluted earnings per common share before cumulative
   effect of accounting change (6)                               $   3.19   $   2.87      $   1.42    $   2.18    $   1.50
                                                                 ========   ========      ========    ========    =========
 Diluted earnings per common share (7)                           $   3.17   $   2.87      $   1.42    $   2.18    $   1.50
                                                                 ========   ========      ========    ========    =========

</TABLE>


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

<CAPTION>



                                                                        At or For the Year Ended December 31,
                                                                       =======================================
                                                                   2001      2000       1999       1998      1997
                                                                  -------   --------   -------   -------   -------
<S>                                                      <C>              <C>        <C>         <C>           <C>
Selected Ratios
Performance Ratios (8):
 Return (before minority interest) on average assets                 0.81%      0.74%    0.47%     0.64%     0.49%
 Return on average common equity                                    15.92     16.51      8.83     14.96     11.68
 Dividend payout ratio                                              13.80     12.23     22.11     14.35     19.83
 Average common equity to average total assets                       4.03      3.47      3.66.     3.71      3.41
 Net interest margin (9)                                             2.97      2.87      2.75      2.31      2.02
 Interest rate spread including noninterest-bearing deposits (9)     2.81      2.71      2.65      2.17      1.85
 Interest rate spread (9)                                            2.56      2.42      2.39      1.96      1.67
 Noninterest expense to average total assets                         1.94      1.91      1.98      1.61      1.36
 Average interest-earning assets to average interest-bearing
  liabilities                                                      109.63    108.52    108.22    107.33    106.72
 Ratio of earnings to combined fixed charges and preferred
   stock dividends:
   Excluding interest on deposits                                    1.50X     1.32X     1.23X    1.25X     1.23X
   Including interest on deposits                                     1.23      1.17      1.11     1.14      1.13
Asset Quality Ratios:
 Nonperforming assets to total assets (10)                            1.13%     0.82%     0.73%    0.99%     0.72%
 Nonperforming loans to total loans receivable                        1.33      1.12      0.99     1.60      1.40
 Allowance for loan losses to nonperforming loans                    62.26     68.32     61.30    46.28     41.90
 Allowance for loan losses to total loans receivable                  0.83      0.77      0.60     0.74      0.59
Bank Regulatory Capital Ratios (11):
 Tier 1 capital to total assets                                       7.27      6.22      5.76     5.25      5.52
 Tier 1 risk-based capital to risk-weighted assets                   11.90      9.94      9.68     9.54     11.46
 Total risk-based capital to risk-weighted assets                    12.79     10.72     10.29    10.23     11.98
Other Data:
 Full-time employee equivalents                                        681       661       666      653       451
 Number of full service offices                                         50        50        50       49        37

Certain Ratios and Other Data - Excluding Adjusting Items (12)
 Adjusted net income                                            $   22,180   $19,924   $15,452  $14,099   $11,563
 Adjusted diluted earnings per common share                           3.24      2.87      2.08     1.84      1.50
 Adjusted return (before minority interest) on average assets         0.82%     0.74%     0.62%    0.55%     0.49%
 Adjusted return on average common equity                            16.23     16.51     12.96    12.65     11.68
</TABLE>

<PAGE>
Footnotes for Selected Consolidated Financial and Other Data:

(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)     In  November  2001,  Coastal  completed  the  sale of approximately $845
million  of  its  mortgage-backed securities.  The transaction was undertaken to
strategically  restructure  a  portion  of  Coastal's  asset base.  Coastal used
approximately  $512  million  of  the  proceeds  to purchase primarily pass-thru
mortgage-backed securities with an overall shorter expected duration and reduced
borrowings  with  the  remainder.  All  of  the  securities  purchased  and  the
remaining  securities  not  sold were placed in the available-for-sale category.
See  further  discussion  in  "Management's Discussion and Analysis of Financial
Condition  and  Results  of  Operations  -  Financial  Condition."

(3)     Coastal  redeemed all of the Senior Notes payable on February 1, 2002 at
par  plus  accrued  interest.

(4)     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."

(5)     On March 9, 1998, Coastal announced that it had successfully resolved an
outstanding  tax  benefit  issue  with  the  FDIC.  The  resolution of the issue
resulted  in  a  $3.7  million  reversal  of  accrued income taxes during 1998.

(6)     Effective  January  1,  2001,  Coastal  adopted  Statement  of Financial
Accounting  Standards  No.  133,  "Accounting for Derivative Instruments and for
Hedging  Activities"  ("Statement 133").  On January 1, 2001, Coastal recorded a
transition  adjustment  loss  of $160,000, or $104,000 net of the tax effect, to
record  its  derivative  instruments  at  fair  value.

(7)     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.

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

(9)     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.

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

(11)     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.

(12)     Adjusting  items  are  comprised  of  the following for 2001, 1999, and
1998:
2001  - The $104,000 (after tax), or $0.02 per diluted share, effect of the
$160,000  cumulative  effect  of accounting change for the adoption of Statement
133  and  the  $274,000  (after  tax), or $0.05 per diluted share, effect of the
$422,000  loss  on  derivative  instruments  under  Statement  133.
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.
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 (the "Bank"), a
Texas-chartered,  FDIC  insured, state savings 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  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, 2001, 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
were  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,  which  is expected to continue into 2003.

FINANCIAL  CONDITION
     In  late November 2001, to strategically restructure a portion of its asset
base  to  make  it less vulnerable to market interest rate fluctuations, Coastal
completed  the  sale  of  approximately  $845  million  of  its  mortgage-backed
securities  and  recorded  a gain of $169,000.  Coastal decided to undertake the
sale  as  the  market  environment  presented  an  opportunity to sell its large
mortgage-backed  securities portfolio.  The majority of the securities sold were
Collateralized Mortgage Obligations ("CMOs") tied to the FHLB 11th District Cost
of  Funds  Index ("COFI") and contained extension risk which caused, on average,
higher  levels of price volatility.  Also in November, Coastal used a portion of
the  proceeds  of  the  sale to purchase approximately $512 million of primarily
pass-thru  mortgage-backed securities with an overall shorter expected duration.
Coastal  reduced  borrowings  with  the remainder of the proceeds from the sale.
All  the  securities purchased and the remaining securities not sold were placed
in  the available-for-sale category.  A consequence of this 2001 securities sale
is  that  any  securities  purchased  by Coastal for approximately two years are
required  to be placed in either the available-for-sale or trading category.  As
a  result  of  these  transactions and other activity, total assets decreased by
16.0%,  or  $493.7  million,  from  December  31,  2000  to  December  31, 2001.
Mortgage-backed  securities  held-to-maturity  and  available-for-sale decreased
$466.1  million  in  total  from  December  31, 2000 to December 31, 2001.  This
decrease  was  due  to  the  restructuring  mentioned  previously  and principal
payments  received.  In  addition,  cash  and  cash  equivalents decreased $28.2
million,  loans  receivable  decreased  $32.6  million  and  stock  in  the FHLB
decreased  $18.0  million.  Other  changes in assets included a decrease of $5.5
million  in  accrued  interest  receivable,  a $625,000 decrease in property and
equipment  and  a $2.8 million decrease in goodwill and other intangible assets.
These  decreases  were  somewhat  offset  by  a  $41.3  million increase in U.S.
Treasury  securities,  a $15.8 million increase in federal funds sold and a $3.0
million  increase  in  prepaid  expenses  and  other  assets.
     Deposits  decreased  by  0.9%,  or $14.6 million, from December 31, 2000 to
December 31, 2001 and advances from the FHLB decreased 39.9%, or $459.4 million,
primarily  due  to  the  repayment  of  borrowings as a result of the securities
transaction  mentioned  previously.  Other liabilities and accrued expenses also
decreased  $34.8  million  from December 31, 2000 to December 31, 2001.  This is
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.  Other changes in
liabilities  included  a  decrease of $3.0 million in Senior Notes payable and a
$791,000  decrease  in  advances  from  borrowers  for  taxes  and  insurance.
     Stockholders'  equity  increased 13.7%, or $19.0 million, from December 31,
2000  to  December  31, 2001 as a result of 2001 net income of $21.8 million and
common stock issued of $2.1 million due to the exercise of stock options, offset
by common stock dividends declared of $2.7 million, preferred stock dividends of
$2.5  million  and  a $277,000 decrease in accumulated other comprehensive loss.

RESULTS  OF  OPERATIONS  FOR  THE  THREE  YEARS  ENDED  DECEMBER  31,  2001
     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  the provision for loan
losses,  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  consolidated statements of financial
condition.  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, 2001
                                            December 31, 2001                  Average                       Yield/
                                                Yield/Rate                     Balance             Interest   Rate
                                            ----------------------  -----------------------------  ---------  -------
                                                                                    (Dollars in thousands)
ASSETS
Interest-earning assets:
Loans receivable (1)                                         6.90%  $                   1,942,701  $ 155,214    7.99%
Mortgage-backed securities                                   5.41                         905,441     52,873    5.84
U.S. Treasury securities                                     1.85                           6,690        176    2.63
Federal funds sold                                           1.75                           7,776        266    3.42
FHLB stock (2)                                               3.00                          45,700      1,960    4.29
Other                                                        2.17                           3,017        123    4.08
                                            ----------------------  -----------------------------   --------  -------
  Total interest-earning assets                              6.40                       2,911,325    210,612    7.23
                                            ----------------------                                  --------  -------
Noninterest-earning assets (3)                                                             98,487
                                                                    -----------------------------
  Total assets                                                      $                   3,009,812
                                                                    =============================


LIABILITIES AND  STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits                                    3.35%  $                   1,531,004  $  69,828    4.56%
Advances from the FHLB                                       3.46                         795,009     38,917    4.90
Securities sold under agreements to repurchase
 and federal funds purchased                                   --                         283,622     10,682    3.77
Senior Notes payable                                        10.00                          45,868      4,588   10.00
                                            ---------------------- ------------------------------   --------  -------
  Total interest-bearing liabilities                         3.51                       2,655,503    124,015    4.67
                                            ----------------------                                  --------  -------
Noninterest-bearing liabilities                                                           176,861
                                                                   ------------------------------
  Total liabilities                                                                     2,832,364
Minority interest - preferred stock of Coastal
 Banc ssb                                                                                  28,750
Preferred stockholders' equity                                                             27,500
Common stockholders' equity                                                               121,198
                                                                    -----------------------------
  Total liabilities and stockholders' equity                        $                   3,009,812
                                                                    ==============================
Net interest income; interest rate spread                    2.89%                                 $  86,597    2.56%
                                                             =====                                 =========    =====
Net interest-earning assets; net interest yield on
 interest-earning assets                                            $                     255,822               2.97%
                                                                    =============================               =====
Ratio of average interest-earning assets to average
 interest-bearing liabilities                                                               1.10x
                                                                                            =====
</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  and  other  intangible  assets,  accrued  interest
receivable,  property and equipment, cash, mortgage servicing rights in 2000 and
1999,  prepaid  expenses  and  other  assets.

<PAGE>

<TABLE>
<CAPTION>




<S>                                                   <C>                             <C>        <C>
                                                                       Year Ended December 31, 2000
                                                                         Average                  Yield/
                                                                         Balance       Interest    Rate
                                                                   -------------------  ---------  -------
                                                                         (Dollars in Thousands)
ASSETS
Interest-earning assets:
Loans receivable (1)                                                    $  1,881,124  $ 168,105    8.94%
Mortgage-backed securities                                                 1,002,055     64,246    6.41
U.S. Treasury securities                                                       1,000         63    6.30
Federal funds sold                                                             3,042        194    6.38
FHLB stock (2)                                                                55,810      4,612    8.26
Other                                                                            895         53    5.92
                                                                        ------------    -------    -----
   Total interest-earning assets                                           2,943,926    237,273    8.06
Noninterest-earning assets (3)                                               100,626    -------    -----
                                                                       -------------
  Total assets                                                          $  3,044,552
                                                                        ============


LIABILITIES AND  STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits                                              $   1,489,479  $  73,216    4.92%
Advances from the FHLB                                                       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                                                          46,900      4,690   10.00
                                                                       -------------  ---------  -------
  Total interest-bearing liabilities                                       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                                             $  84,368    2.42%
                                                                                      =========    =====
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  and  other  intangible  assets,  accrued  interest
receivable,  property and equipment, cash, mortgage servicing rights in 2000 and
1999,  prepaid  expenses  and  other  assets.


<PAGE>


<TABLE>
<CAPTION>
                                                    Year  Ended  December  31,  1999
<S>                                                   <C>        <C>          <C>
                                                      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
Federal funds sold                                        5,353        270    5.04
FHLB stock                                               51,717      2,848    5.51
Other                                                     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  and  other  intangible  assets,  accrued  interest
receivable,  property and equipment, cash, mortgage servicing rights in 2000 and
1999,  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,
                                                                            2001  vs  2000                2000  vs  1999
                                                                   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                                                     $ 5,381   $(18,272)  $(12,891)  $20,320   $11,749  $32,069
 Mortgage-backed securities                                            (5,916)    (5,457)   (11,373)   (5,907)    6,490      583
 U.S. Treasury securities                                                 169        (56)       113       (27)       12      (15)
 Federal funds sold                                                       194       (122)        72      (136)       60      (76)
 FHLB stock (1)                                                          (726)    (1,926)    (2,652)      242     1,522    1,764
 Other                                                                    102        (32)        70       (24)       29        5
                                                                      --------  ---------  ---------  --------  -------  --------
     Total                                                               (796)   (25,865)   (26,661)   14,468    19,862   34,330
                                                                      --------  ---------  ---------  --------  -------  --------

INTEREST EXPENSE
 Interest-bearing deposits                                              2,024     (5,412)    (3,388)      (60)    8,575    8,515
 Securities sold under agreements to repurchase and federal funds
   purchased                                                            2,032     (8,021)    (5,989)    9,526     1,531   11,057
 Advances from the FHLB                                                (7,596)   (11,815)   (19,411)   (1,372)    9,131    7,759
 Senior Notes payable                                                    (102)        --       (102)      (83)       --      (83)
                                                                      --------  ---------  ---------  --------  -------  --------
     Total                                                             (3,642)   (25,248)   (28,890)    8,011    19,237   27,248
                                                                      --------  ---------  ---------  --------  -------  --------
 Net change in net interest income                                    $ 2,846   $   (617)  $  2,229   $ 6,457   $   625  $ 7,082
                                                                      ========  =========  =========  ========  =======  ========
</TABLE>
_______________

(1)      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."

<PAGE>
NET  INCOME
     Coastal  reported  net  income of $21.8 million for the year ended December
31,  2001,  $19.9 million for the year ended December 31, 2000 and $11.0 million
for  the  year ended December 31, 1999, an increase of $1.9 million, or 9.4%, in
2001,  and an increase of $8.9 million, or 80.7%, in 2000, each in comparison to
the prior year.  The increase in net income for the year ended December 31, 2001
was comprised of the following compared to 2000:  a $2.2 million increase in net
interest  income,  a  $1.9  million  decrease  in the provision for loan losses,
somewhat  offset  by  a  $881,000  decrease  in  noninterest  income, a $284,000
increase  in  noninterest  expense  and a $972,000 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 2.97% for the year ended December 31,
2001 from 2.87% for 2000, which included a FHLB special dividend of $1.1 million
in  2000.  Net  interest  margin, excluding the FHLB special dividend, was 2.83%
for  the  year  ended December 31, 2000.  The decrease in the provision for loan
losses  when comparing 2001 to 2000 was due to management's quarterly evaluation
of the allowance for loan losses throughout 2001 and a belief that the allowance
at  December  31,  2001  was  adequate  considering the composition of the loans
receivable  portfolio,  the  existing  nonperforming  loans, historical and peer
group  loss experience, delinquency trends and current economic conditions.  The
decrease  in  noninterest  income  was  primarily  due  to the $2.2 million gain
recorded on the sale of Coastal's mortgage servicing rights in 2000, offset by a
$838,000 increase in service charges on deposit accounts, a $621,000 increase in
the  gain  on  the  sale of real estate owned, in addition to smaller changes in
other categories of noninterest income.  The increase in noninterest expense was
due  to  a  $1.6  million  increase  in  compensation,  payroll  taxes and other
benefits,  partially  offset  by  a  decrease  of $84,000 in office occupancy, a
$317,000 decrease in data processing, a $225,000 decrease in the amortization of
goodwill  and  other  intangible  assets  and  a  decrease  of $688,000 in other
noninterest expense.  The increase in the provision for Federal income taxes was
due  to  the increased income before Federal income taxes, minority interest and
cumulative  effect  of  accounting  change.

     When  comparing  net income for 2000 to 1999, the increase was comprised of
the  following:  a  $7.1 million increase in net interest income, a $1.6 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 member's
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.
This  increase  and the $675,000 increase in service charges on deposit accounts
was  somewhat offset by the corresponding decrease of $436,000 in loan servicing
income  and a $353,000 decrease in loan fees.  The decrease in the provision for
loan  losses  was  primarily  due  to the $6.8 million provision for loan losses
specific  to  one  loan,  the  MCA  loan, recorded in 1999, offset by provisions
recorded  in 2000.  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 $425,000 decrease in
office  occupancy,  in  addition to smaller 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  INTEREST  INCOME
     Net  interest  income amounted to $86.6 million in 2001, a $2.2 million, or
2.6%, increase over 2000.  The increase in net interest income was primarily due
to  the  increase in net interest margin to 2.97% in 2001 from 2.87% in 2000 and
an  increase  in  interest  rate  spread, defined to exclude noninterest-bearing
deposits,  to  2.56%  in  2001  from  2.42%  in  2000.  In  addition,  net
interest-earning  assets  increased  by  $24.6  million  in  2001  from  2000.
Management  also  calculates  an alternative interest rate spread which includes
noninterest-bearing deposits.  Under this calculation, the interest rate spreads
for  2001  and 2000 were 2.81% and 2.71%, respectively.  Net interest margin and
interest  rate  spread are affected by the changes in the amount and composition
of  interest-earning  assets  and  interest-bearing  liabilities, in addition to
changes  in  the applicable interest rates on those assets and liabilities.  The
overall  increase  in  net  interest  margin and spread was primarily due to the
0.97%  decrease  in  the average rate paid on interest-bearing liabilities, only
partially  offset  by  a  0.83%  decrease  in  the  average  rate  received  on
interest-earning  assets.

     Net  interest  income amounted to $84.4  million in 2000, a $7.1 million or
9.2%  increase  over  1999.  The  increase in net interest income was due to the
increase  in  net  interest  margin  to 2.87% (2.83% 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  2.42%  (2.38%
excluding  the  effect  of  the  special  dividend)  in 2000 from 2.39% in 1999.
Management  also  calculates  an alternative interest rate spread which includes
noninterest-bearing deposits.  Under this calculation, the interest rate spreads
for  2000  and  1999  were  2.71%  (2.67%  excluding  the  effect of the special
dividend) and 2.65%, respectively.  Net interest margin and interest rate spread
are  affected  by  the changes in the amount and composition of interest-earning
assets  and  interest-bearing  liabilities,  in  addition  to  changes  in  the
applicable interest rates on those assets and liabilities.  The overall increase
in  net  interest  margin  and  spread  was  primarily  due  to the 0.83% (0.79%
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.

     Total  interest  income  amounted  to  $210.6  million during 2001, a $26.7
million,  or  11.2%, decrease from 2000 (which includes the $1.1 million special
dividend  received  in  2000).  The  decrease  was  due to a decrease in average
interest-earning  assets of $32.6 million and a decrease in the average yield of
0.83%.  The decrease in average interest-earning assets was due, in part, to the
decrease  in  Coastal's asset size as a result of the restructuring of Coastal's
asset  base  in  late November 2001 as previously described.  When comparing the
two  periods,  the average balance of mortgage-backed securities decreased $96.6
million  due  to  the  restructuring  and principal payments received throughout
2001.  In  addition,  the  average balance of FHLB stock decreased $10.1 million
due  to  the  decreased amounts required to be maintained based on the decreased
level  of FHLB advances outstanding.  These decreases were partially offset by a
$61.6  million  increase  in the average balance of loans receivable and smaller
increases  in  other  interest-earning  asset  categories.  The average yield on
loans  receivable  decreased  0.95%  and  the  average  yield on mortgage-backed
securities  decreased  0.57%  when comparing the year ended December 31, 2001 to
December  31,  2000.  The  decrease  in the overall average yield was due to the
declining  market  rates  during  2001.

<PAGE>
     Total  interest  income  amounted  to  $237.3  million during 2000, a $34.3
million,  or  16.9%, 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  8.06% (8.02% excluding the effect of the special dividend) from 7.23%
for  1999.  A  $32.1  million,  or  23.6%,  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 0.68% 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 expense amounted to $124.0 million in 2001, a $28.9 million,
or  18.9%,  decrease  from  2000.  The  decrease  in  interest  expense  was due
primarily  to  a  0.97%  decrease  in  the average rate paid on interest-bearing
liabilities  and  a  slight decrease in the average balance of those liabilities
during  2001  when  compared  to 2000.  The overall decrease in the average rate
paid  on  interest-bearing  liabilities  was  due to lower wholesale funding and
deposit costs because of the decline in market interest rates during 2001.  When
comparing  2001 to 2000, average FHLB advances decreased $131.7 million with the
average  rate  decreasing  by 1.39%, average interest-bearing deposits increased
$41.5  million  and  the  average  rate on those deposits decreased by 0.36% and
average  securities  sold  under  agreements  to  repurchase  and  federal funds
purchased  increased  $34.0 million with the average rate decreasing 2.91%.  The
decrease in interest expense on Senior Notes payable was due to the $1.0 million
decrease  in  the  average  balance  as  a  result  of  repurchases.

     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  repurchases.

PROVISION  FOR  LOAN  LOSSES
     For  the  years  ended  December  31, 2001 and 2000, the provision for loan
losses  was $3.9 million and $5.8 million, respectively.  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.  The decrease in the provision for loan losses, when
comparing  2001  and 2000, was due to management's evaluation of and belief that
the  allowance  for  loan  losses  throughout  2001 and at December 31, 2001 was
adequate.

<PAGE>
          As  shown  in  the following table, although total nonperforming loans
have  increased  from  December 31, 1999 to December 31, 2001, the percentage of
those loans that are first lien residential ("single family") mortgage loans has
also  increased.  Nonperforming  loans  are  those loans on nonaccrual status as
well  as those loans greater than ninety (90) days delinquent and still accruing
interest.  The  percentage  of  nonperforming  single  family  loans  to  total
nonperforming  loans  was  88.2%  at  December  31, 2001 as compared to 77.9% at
December  31,  2000  and  84.6%  at  December  31,  1999.  Coastal evaluates the
allowance for loan losses needed for single family loans, which typically have a
lower  credit  risk  than  other  types  of  loans, using (among other things) a
five-year  historical  loss  analysis.  Based  on  these  analyses,  Coastal's
allowance  allocation  methodology related to these single family loans has been
and  is considered adequate by management.  At December 31, 2001, 2000 and 1999,
Coastal  had  nonperforming  loans  as  follows:

<TABLE>
<CAPTION>
<S>                                              <C>              <C>      <C>
                                                               December 31,
                                                              ---------------
                                                       2001        2000     1999
                                                 ---------------  -------  -------
                                                               (In thousands)
Nonaccrual loans receivable:
 First lien residential                          $        21,744  $16,062  $13,344
 Residential construction                                    218      390      184
 Multifamily real estate                                      82       --       --
 Commercial real estate                                    1,174    1,134      104
 Acquisition and development                                   6       --       --
 Commercial, financial and industrial                        499    1,152      694
 Consumer and other                                          141      496      340
                                                  --------------   ------   ------
                                                          23,864   19,234   14,666
                                                  --------------   ------   ------
Loans greater than 90 days delinquent and still
 accruing interest:
 First lien residential                                       62      475    1,137
 Residential construction                                    755       --       --
 Commercial real estate                                       --      736      690
 Commercial, financial and industrial                         31      634      531
 Consumer and other                                            1      153       94
                                                  --------------   ------   ------
                                                             849    1,998    2,452
                                                  --------------   ------   ------
 Total nonperforming loans                       $        24,713  $21,232  $17,118
                                                  ==============  =======  =======
</TABLE>
Of  the  nonperforming  loans  at December 31, 2001, $21.8 million, or 88%, were
single  family  mortgage  loans,  of  which  86%  were  purchased  and  14% were
originated  by  Coastal.

     Coastal's  asset  quality  ratios  are  as  follows:

<TABLE>
<CAPTION>
<S>                                                  <C>            <C>     <C>
                                                               December 31,
                                                              -------------
                                                             2001    2000    1999
                                                           -------  ------  ------
Nonperforming loans to total loans receivable                1.33%   1.12%   0.99%

Allowance for loan losses to nonperforming loans            62.26   68.32   61.30

Allowance for loan losses to total loans receivable          0.83    0.77    0.60
</TABLE>

     The  allowance for loan losses is maintained at a level considered adequate
to  cover  probable  losses on loans.  The adequacy of the allowance is based on
management's  quarterly  evaluation  of the loan portfolio.  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 and
peer group loss experience, the volume and type of lending conducted by Coastal,
the  existing  nonperforming assets and the underlying collateral value on those
loans,  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.

     Although  no assurance can be given, Coastal's management believes that the
allowance  for  loan  losses  at  December 31, 2001 is adequate, considering the
changing  composition  of  the  loans  receivable  portfolio,  the  existing
nonperforming  loans  and  the  underlying  collateral  value  on  those  loans,
historical  and  peer  group  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.  While
management  uses  the  best  information  available to make such determinations,
additional  provisions  may  be  required to be established in the future should
economic  or  other  conditions  change  substantially.

NONINTEREST  INCOME
     Total  noninterest  income decreased $881,000, or 7.3%, to $11.1 million in
2001,  compared  to  $12.0 million for 2000.  The decrease in noninterest income
was  primarily  due  to  the $2.2 million gain recorded on the sale of Coastal's
mortgage servicing rights during the first quarter of 2000 (as described below),
the  related  $244,000  decrease  in  loan servicing income in 2001 and the fair
value  loss  on  derivative instruments of $422,000 recorded in 2001 pursuant to
the  adoption  of Statement 133 on January 1, 2001.  The net fair value loss for
the  year  ended  December  31,  2001  was  primarily  attributable to Coastal's
interest  rate  swap  positions,  which  were  liquidated  in  June 2001.  As of
December  31,  2001, interest rate cap agreements were Coastal's only derivative
instruments.  These  decreases  in  noninterest  income,  when comparing 2001 to
2000,  were  somewhat  offset  by the $169,000 gain that Coastal recorded on the
sale  of  mortgage-backed  securities  mentioned previously.  In addition, there
were  increases  of $838,000 in service charges on deposit accounts, $621,000 in
the  gain on sale of real estate owned and $328,000 in other noninterest income,
comparing 2001 to 2000.  The increase in service charges on deposit accounts was
due  to  Coastal's  continuing focus on increasing transaction type accounts and
the  related  fee  income.  The  increase in the gain on the sale of real estate
owned  was primarily due to a $603,000 gain on the sale of one real estate owned
commercial  property  during  the  third quarter of 2001.  The increase in other
noninterest  income was primarily due to $300,000 in insurance proceeds received
in  2001  for  reimbursement of certain deposit account losses incurred in prior
years.

Total  noninterest  income increased $1.7 million, or 15.9%, to $12.0 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.
During 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 and a $189,000 increase in other
noninterest  income,  offset  by  a  $353,000  decrease in loan fees, a $436,000
decrease in loan servicing income and a $595,000 decrease in the gain on sale of
real  estate owned.  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 increase in other noninterest income was primarily
due  to  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,
offset  by  changes  in  other  categories.  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.

NONINTEREST  EXPENSE
     Total  noninterest  expense  amounted  to  $58.5  million  during  2001, an
increase  of  $284,000, or 0.5%, over 2000.  The increase in noninterest expense
was  due to a $1.6 million, or 5.5%, increase in compensation, payroll taxes and
other benefits, partially offset by a decrease of $84,000 in office occupancy, a
$317,000 decrease in data processing, a $225,000 decrease in the amortization of
goodwill  and  other  intangible  assets  and  a  decrease  of $688,000 in other
noninterest  expense.  The  increase  in  compensation,  payroll taxes and other
benefits  was  primarily  due  to  normal merit increases for existing staff, in
addition  to  the  staff  increases  for  the  item processing functions brought
in-house  during  the  third  quarter of 2001 and additional personnel needed to
continue  Coastal's  focus  on  commercial  business  products and lending.  The
decrease  in data processing expense was due to the conversion to a new mortgage
loan data processing system in the second quarter of 2001, the conversion of the
branches  in  the  Rio  Grande Valley to Coastal's primary deposit and loan data
processing  system  during  the  third  quarter  of 2001 and the item processing
functions  brought  in-house  during the third quarter of 2001.  The decrease in
the  amortization  of  goodwill  and  other intangible assets was due to certain
goodwill  amounts  becoming  fully amortized during 2001.  The decrease in other
noninterest  expense  was  due  to  a decrease of $428,000 related to the Senior
Notes  payable  debt  issuance  costs  becoming  fully amortized in 2001 and the
$401,000  reversal  of  an  accrued franchise tax liability determined not to be
payable,  offset  by  other  smaller  changes  in  various  categories.

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  a  $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 $511,000 increase in other
noninterest  expenses  partially  offset  by  a  $425,000  increase  in  office
occupancy,  in  addition  to  smaller  changes in other expense categories.  The
increase  in  other  noninterest  expense  was  due  to the reduction of certain
accrued  liabilities  in  1999  as  mentioned  above  and  a decrease in deposit
insurance  premiums  due  to  a  decrease  in  rates  applicable  to  Coastal.

PROVISION  FOR  FEDERAL  INCOME  TAXES
     Coastal  incurred  no  regular  Federal  income taxes in 2001, 2000 or 1999
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  FSLIC
Resolution  Fund  ("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 regular Federal income taxes over an indefinite period.  Beginning
in  2000, these alternative minimum tax credit carryforwards were used to offset
regular  income  taxes.

     The  provisions  for  Federal income taxes were $10.9 million in 2001, $9.9
million  in  2000  and  $5.7  million in 1999 with the effective tax rates being
30.7%, 30.5% and 29.4%, respectively.  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,  which  are  expected  to  continue  into  2003.

ASSET  AND  LIABILITY  MANAGEMENT
     During 2001, as previously mentioned, Coastal entered into a transaction to
strategically restructure a portion of its asset base to make it less vulnerable
to  market interest rate fluctuations.  In late November 2001, Coastal completed
the  sale  of approximately $845 million of its mortgage-backed securities.  The
majority  of  the securities sold were CMOs tied to the COFI index and contained
extension  risk  which  caused,  on  average, higher levels of price volatility.
Coastal  replaced  approximately $512 million of these securities with primarily
pass-thru  securities  with  an  overall  shorter  expected  duration.  This
restructuring  was  undertaken  to  improve  the stability and quality of future
earnings.

     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
may  use  interest rate swap and cap agreements to aid in minimizing exposure to
interest  rate  fluctuations.

     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, 2001 and 2000.  The interest rate scenarios presented in
the  table include interest rates at December 31, 2001 and 2000 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)        2001     2000       2001     2000
-------------------     --------------------   -------------
<C>                       <S>       <C>      <C>      <C>
+200                       (6.20)%  (8.48)%  (0.74)%  (15.97)%
+100                       (3.11)   (4.20)    0.89     (6.59)
   0                          --       --       --        --
-100                       (0.70)     4.26   (3.90)     5.73
-200                       (2.51).    8.59   (6.42)     6.64
</TABLE>

     As  noted  in  the  table  above,  the restructuring of the mortgage-backed
securities  portfolio  that  occurred in 2001 helped to "flatten" the effects of
interest  rate  fluctuations  on  Coastal's  net  interest  income and EVE, when
comparing  the sensitivity analysis results at December 31, 2001 to December 31,
2000.

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 and loans receivable 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  the steepness of the inversion, 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  all  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  at  December  31,  2001.  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, 2001 was negative $62.0 million
or  2.39%  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,  2001
<S>                                                      <C>                      <C>             <C>            <C>
                                                                                  More than       More than      More than
                                                         Three months             three months    one year to    three years to
                                                         or less                  to one year     three years    five years
                                                                                   (Dollars in thousands)
INTEREST-SENSITIVE ASSETS
 Loans, net (1)(2):
   First lien mortgage-single family fixed rate          $                2,546   $       9,573   $     27,061   $        41,703
   First lien mortgage-single family adjustable
     Rate                                                                15,609         440,598        101,029             3,511
   First lien mortgage-multifamily fixed rate                               459             284          2,710             1,964
   First lien mortgage-multifamily variable rate                        116,122             128             --                --
   Construction and acquisition and
     development, net of loans in process                               350,138           4,512          1,942               958
   Commercial real estate                                               247,777           2,430         21,892            13,375
   Commercial                                                           102,504           6,785         18,822             6,051
   Consumer and other                                                     7,302           7,812         16,753            10,273
 Mortgage-backed securities available-for-sale(1)(2)                    501,859              --             --                --
 U.S. Treasury securities available-for-sale                             41,288           1,539             --                --
 Other interest-earning assets (3)                                       57,804              --             --                --
                                                         ----------------------   -------------   -------------  ----------------
     Total interest-sensitive assets.                                 1,443,408         473,661        190,209            77,835
                                                         -----------------------  --------------  -------------  ----------------
 Noninterest-sensitive assets
     Total assets


INTEREST-SENSITIVE LIABILITIES:
 Interest-bearing deposits (4):
   Interest-bearing checking accounts                    $               15,894   $          --   $         --   $            --
   Savings accounts                                                      45,234              --             --                --
   Money market demand accounts                                         392,763              --             --                --
   Certificate accounts                                                 286,477         664,350         85,640             9,239
 Advances from the FHLB                                                 460,922          69,566        107,917            28,670
 Senior Notes payable                                                    43,875              --             --                --
                                                         ----------------------  --------------  -------------   ----------------
     Total interest-sensitive liabilities                             1,245,165         733,916        193,557            37,909
                                                         -----------------------  --------------  -------------  ----------------
 Noninterest-sensitive liabilities
     Total liabilities

 Minority interest-preferred stock of
   Coastal Banc ssb

 Stockholders' equity
     Total liabilities and stockholders' equity


Gap during the period                                    $              198,243   $    (260,255)  $     (3,348)  $        39,926
Cumulative gap                                           $              198,243   $     (62,012)  $    (65,360)  $       (25,434)

Interest-sensitive assets as a % of interest-sensitive
 liabilities (cumulative)                                                115.92%          96.87%         96.99%            98.85%
Interest-sensitive assets as a % of total
 assets (cumulative)                                                      55.56           73.79          81.11             84.11
Ratio of gap to total assets                                               7.63          (10.02)         (0.13)             1.54
Ratio of cumulative gap to  total assets                                   7.63           (2.39)         (2.52)            (0.98)


<S>                                                      <C>              <C>             <C>             <C>
                                                         More than        More than
                                                         five years to    ten years to    Over
                                                         ten years        twenty years    twenty years    Totals

INTEREST-SENSITIVE ASSETS
 Loans, net (1)(2):
   First lien mortgage-single family fixed rate          $       34,673   $      86,150   $     108,756   $  310,462
   First lien mortgage-single family adjustable
     Rate                                                         4,056              --              --      564,803
   First lien mortgage-multifamily fixed rate                       253           1,953              --        7,623
   First lien mortgage-multifamily variable rate                     --              --              --      116,250
   Construction and acquisition and
     development, net of loans in process                           992           1,974              --      360,516
   Commercial real estate                                        13,429          16,239              --      315,142
   Commercial                                                       725             331              --      135,218
   Consumer and other                                             5,728           5,553             166       53,587
 Mortgage-backed securities available-for-sale(1)(2                  --          10,543           1,666      514,068
 U.S. Treasury securities available-for-sale                         --              --              --       42,827
 Other interest-earning assets (3)                                   --              --              --       57,804
                                                         ---------------  --------------  -------------  -----------
     Total interest-sensitive assets                             59,856         122,743         110,588    2,478,300
                                                         ---------------  --------------  --------------
 Noninterest-sensitive assets                                                                                119,591
                                                                                                          ----------
     Total assets                                                                                         $2,597,891
                                                                                                          ==========

INTEREST-SENSITIVE LIABILITIES:
 Interest-bearing deposits (4):
   Interest-bearing checking accounts                    $           --   $          --   $          --   $   15,894
   Savings accounts                                                  --              --              --       45,234
   Money market demand accounts                                      --              --              --      392,763
   Certificate accounts                                              51              --              --    1,045,757
 Advances from the FHLB                                           9,678          14,124              --      690,877
 Senior Notes payable                                                --              --              --       43,875
                                                         --------------   --------------  --------------  ----------
     Total interest-sensitive liabilities                         9,729          14,124              --    2,234,400
                                                         ---------------  --------------  --------------
 Noninterest-sensitive liabilities                                                                           177,307
                                                                                                           ---------
     Total liabilities                                                                                     2,411,707
                                                                                                          ----------
 Minority interest-preferred stock of
   Coastal Banc ssb                                                                                           28,750
 Stockholders' equity                                                                                        157,434
                                                                                                          ----------
     Total liabilities and stockholders' equity                                                           $2,597,891
                                                                                                          ==========

Gap during the period                                    $       50,127   $     108,619   $     110,588
Cumulative gap                                           $       24,693   $     133,312   $     243,900

Interest-sensitive assets as a % of interest-sensitive
 liabilities (cumulative)                                        101.11%         105.97%         110.92%
Interest-sensitive assets as a % of total
 assets (cumulative)                                              86.42           91.14           95.40
Ratio of gap to total assets                                       1.93            4.18            4.26
Ratio of cumulative gap to  total assets                           0.95            5.13            9.39
</TABLE>

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.


DERIVATIVE  INSTRUMENTS
     Coastal  is  a  party  to  derivative  instruments  in the normal course of
business  to  reduce  its  exposure  to  fluctuations  in interest rates.  These
derivative instruments have included interest rate swap agreements where Coastal
makes  fixed  interest  payments and receives payments based on a floating index
and,  currently,  interest  rate  cap agreements, as described below.  Effective
January  1,  2001,  Coastal  adopted  Statement 133, which requires companies to
recognize  all  derivatives  as either assets or liabilities in the consolidated
statement of financial condition and measure all derivatives at fair value.  The
interest  rate swap and cap agreements held by Coastal on December 31, 2000 were
determined  to  not qualify for hedge accounting, therefore on implementation of
Statement  133,  Coastal  recorded  a  transition  adjustment  to  record  these
derivative  instruments  at  fair value.  On January 1, 2001, Coastal recorded a
transition  adjustment  loss  of $160,000, or $104,000 net of the tax effect, as
the  cumulative effect of the change in accounting for derivative instruments to
record  the  fair  value of Coastal's derivative instruments in the consolidated
statements  of  operations.  For  the  year  ended  December  31,  2001, Coastal
recorded  an  additional  fair  value  loss  on  these derivative instruments of
$422,000.  The fair value changes in the derivative instruments during 2001 were
primarily  attributable  to  Coastal's interest rate swap agreements, which were
totally  liquidated  in  June  2001.  As of December 31, 2001, interest rate cap
agreements  were  Coastal's  only  derivative  instruments.

     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 8.0% to 9.0%, depending on the
agreement.  Payments  on  the  interest  rate  cap  agreements  are based on the
notional  principal amount of the agreements; no funds were actually borrowed or
are  to  be  repaid.  The  fair  value  of  the interest rate cap agreements was
$37,000  at  December  31,  2001,  which  is  the  recorded  book  value of such
agreements  due  to  the implementation of Statement 133.  The interest rate cap
agreements  are  used  to  alter  the  interest rate sensitivity of a portion of
Coastal's  mortgage-backed  securities  and  loans  receivable.  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 for each of the years ended December
31,  2001,  2000  and 1999.  No payments were made to Coastal under the interest
rate  cap  agreements  during  the  years ended December 31, 2001, 2000 or 1999.

     Coastal  totally  liquidated  its  interest  rate swap positions in June of
2001.  The interest rate swap agreements previously held by Coastal provided for
Coastal to make fixed interest payments and receive payments based on a floating
LIBOR  index, as defined in each agreement.  The net effect of the interest rate
swaps  to Coastal was to increase interest expense by $35,000 for the year ended
December  31,  2001,  decrease  interest  expense by $212,000 for the year ended
December  31,  2000 and increase interest expense by $483,000 for the year ended
December  31,  1999.  See  Note  14  of  the  Notes  to  Consolidated  Financial
Statements.

LIQUIDITY  AND  CAPITAL  RESOURCES
     Coastal's  total  assets approximated $2.6 billion at December 31, 2001 and
$3.1  billion  at December 31, 2000.  Preferred stockholders' equity amounted to
$27.5 million and common stockholders' equity was $129.9 million at December 31,
2001.  The  regulatory  capital  of  Coastal's  subsidiary,  Coastal  Banc  ssb,
exceeded  all  three  of  the Bank's regulatory capital adequacy requirements at
December  31,  2001.  At  December 31, 2001, the Bank's core capital amounted to
7.27%  of adjusted total assets, compared to the requirement of 4.0%, its Tier 1
risk-based capital amounted to 11.90% of risk-adjusted assets as compared to the
requirement  of  4.0%  and  its  total  risk-based capital amounted to 12.79% 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 and repurchasing Senior Notes payable.  At
December  31,  2001,  Coastal  had  binding commitments to originate or purchase
loans totaling approximately $29.3 million and had $131.1 million of undisbursed
loans  in  process.  In  addition, at December 31, 2001, Coastal had commitments
under  lines  of credit to originate loans, primarily construction and other, of
approximately  $94.9 million and letters of credit outstanding of $12.8 million.
Scheduled  maturities  of  certificates  of  deposit  during  the  twelve months
following  December  31,  2001 totaled $950.8 million.  Management believes that
Coastal  has  adequate  resources  to  fund  all  its  commitments.

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  Note  2  to  the
Consolidated  Financial  Statements.

FORWARD-LOOKING  INFORMATION
     "Safe  Harbor" Statement under the Private Securities Litigation Reform Act
of  1995:  The  statements contained in this Annual Report to stockholders which
are  not  historical  facts  contain forward looking information with respect to
plans,  projections  or  future  performance of Coastal, the occurrence of which
involve  certain  risks and uncertainties detailed in Coastal's filings with the
Securities  and  Exchange  Commission  ("SEC").
     The  above  discussion  should  be read in conjunction with the information
contained  in  the Consolidated Financial Statements and the Notes thereto.  The
above  information  contains  "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), and are
subject  to  the  safe  harbor created by the Reform Act.  The words "estimate,"
"project,"  "anticipate,"  "expect,"  "intend,"  "believe," "plans," and similar
expressions  are  intended to identify forward-looking statements.  Because such
forward-looking  statements involve risks and uncertainties, there are important
factors  that  could  cause  actual  results  to  differ  materially  from those
expressed  or implied by such forward-looking statements.  Factors, all of which
are  difficult  to  predict and many of which are beyond the control of Coastal,
that  could  cause  actual  results  to  differ  materially include, but are not
limited to:  risks related to Coastal's acquisition strategy, including risks of
adversely changing results of operations and factors affecting Coastal's ability
to  consummate  further  acquisitions;  risks  involved  in Coastal's ability to
quickly and efficiently integrate the operations of acquired entities with those
of  Coastal;  changes  in  general economic and business conditions; competition
from  other financial services companies in our markets; changes in the interest
rate environment; 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  potential  changes  in  credit  quality;  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
(Effective  January  1,  2002, Mr. Garrett relinquished his position at the Bank
and  became  the  Co-Chairman  of  Coastal  Banc  Capital  Corp.)

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

DAVID  R.  GRAHAM
Executive  Vice  President  -  Commercial  Real  Estate

H.  EDWARD  SELKE,  JR.
Executive  Vice  President  -  Portfolio  Control  Center


<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  2001,  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,  2001,  Coastal  had  total  assets of approximately $2.6
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, 2001 and
2000  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,  2001.  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, 2001 and 2000 and the results of
their  operations  and  their cash flows for each of the years in the three-year
period  ended  December  31,  2001  in  conformity  with  accounting  principles
generally  accepted  in  the  United  States  of  America.




/s/  KPMG  LLP
--------------
January  15,  2002
Houston,  Texas

<PAGE>

<TABLE>
<CAPTION>
                              COASTAL BANCORP, INC. AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                    DECEMBER 31, 2001 AND 2000
                                (IN THOUSANDS, EXCEPT SHARE DATA)



ASSETS                                                                        2001        2000
-------------------------------------------------------------------------  ----------  ----------
<S>                                                                        <C>         <C>
Cash and cash equivalents                                                  $   41,537  $   69,730
Federal funds sold (Note 3)                                                    16,710         869
Loans receivable (Notes 5 and 10)                                           1,863,601   1,896,228
Mortgage-backed securities held-to-maturity (market value of
 $860,517 in 2000) (Notes 4, 10, 11, 13 and 14)                                    --     885,565
Mortgage-backed securities available-for-sale, at market value
 (Notes 4, 10, 11, 13 and 14)                                                 514,068      94,673
U.S. Treasury securities held-to-maturity                                          --       1,497
U.S. Treasury securities available-for-sale, at market value                   42,827          --
Accrued interest receivable (Note 6)                                           13,243      18,772
Property and equipment (net of accumulated depreciation and
 amortization of $23,779 in 2001 and $20,622 in 2000)                          27,461      28,086
Stock in the Federal Home Loan Bank of Dallas ("FHLB")                         40,032      58,005
Goodwill and other intangible assets (net of accumulated amortization of
 $15,560 in 2001 and $14,774 in 2000)                                          21,811      24,611
Prepaid expenses and other assets (Notes 8, 14 and 16)                         16,601      13,575
                                                                           ----------  ----------
   Total assets                                                            $2,597,891  $3,091,611
                                                                           ==========  ==========
</TABLE>


<TABLE>
<CAPTION>
     LIABILITIES  AND  STOCKHOLDERS'  EQUITY
     ---------------------------------------
<S>                                                                      <C>          <C>
Liabilities:
 Deposits (Note 9)                                                       $1,660,386   $1,674,981
 Advances from the FHLB (Note 10)                                           690,877    1,150,305
 Senior Notes payable (Note 12)                                              43,875       46,900
 Advances from borrowers for taxes and insurance                              4,259        5,050
 Other liabilities and accrued expenses                                      12,310       47,154
                                                                         ----------   -----------
   Total liabilities                                                      2,411,707    2,924,390
                                                                         ----------   -----------
Minority interest - 9.0% noncumulative preferred stock of Coastal Banc
 ssb (Note 19)                                                               28,750       28,750

Commitments and contingencies (Notes 5, 14, 17 and 22)

Stockholders' equity (Notes 4, 19, 20 and 21):
 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;
   7,835,178 shares issued and 5,835,178 shares outstanding at
   December 31, 2001; 7,677,622 shares issued and 5,677,622
   shares outstanding at December 31, 2000                                       78           77
 Additional paid-in capital                                                  35,366       33,312
 Retained earnings                                                          127,425      110,794
 Accumulated other comprehensive loss -
   net unrealized loss on securities available-for-sale                      (1,590)      (1,867)
 Treasury stock at cost (2,000,000 shares in 2001 and 2000)                 (31,345)     (31,345)
                                                                         ----------   -----------
   Total stockholders' equity                                               157,434      138,471
                                                                         -----------  -----------
   Total liabilities and stockholders' equity                            $2,597,891   $3,091,611
                                                                         ==========   ===========
</TABLE>

See  accompanying  notes  to  Consolidated  Financial  Statements.

<PAGE>
<TABLE>
<CAPTION>
                                COASTAL BANCORP, INC. AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                             YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)


<S>                                                                      <C>        <C>       <C>
                                                                             2001       2000      1999
                                                                         ---------  --------  --------
Interest income:
 Loans receivable                                                        $155,214   $168,105  $136,036
 Mortgage-backed securities                                                52,873     64,246    63,663
 FHLB stock, federal funds sold and other interest-earning assets           2,525      4,922     3,244
                                                                         ---------  --------  --------
                                                                          210,612    237,273   202,943
                                                                         ---------  --------  --------

Interest expense:
 Deposits                                                                  69,828     73,216    64,701
 Advances from the FHLB                                                    38,917     58,328    50,569
 Other borrowed money                                                      10,682     16,671     5,614
 Senior Notes payable                                                       4,588      4,690     4,773
                                                                         ---------  --------  --------
                                                                          124,015    152,905   125,657
                                                                         ---------  --------  --------

   Net interest income                                                     86,597     84,368    77,286
Provision for loan losses (Note 5)                                          3,900      5,790    10,575
                                                                         ---------  --------  --------
   Net interest income after provision for loan losses                     82,697     78,578    66,711
                                                                         ---------  --------  --------

Noninterest income:
 Service charges on deposit accounts                                        7,803      6,965     6,290
 Loan fees                                                                  1,248      1,247     1,600
 Loan servicing income, net                                                    --        244       680
 Gain on sale of mortgage servicing rights                                     --      2,172        --
 Gain on sale of mortgage-backed securities available-for-sale                169         --        --
    Loss on derivative instruments                                           (422)        --        --
    Gain on sale of real estate owned, net                                    819        198       793
 Other                                                                      1,526      1,198     1,009
                                                                         ---------  --------  --------
                                                                           11,143     12,024    10,372
                                                                         ---------  --------  --------

Noninterest expense:
 Compensation, payroll taxes and other benefits                            30,785     29,187    28,771
 Office occupancy                                                          10,913     10,997    11,422
 Data processing                                                            3,008      3,325     3,416
 Amortization of goodwill and other intangible assets                       2,800      3,025     3,051
 Other                                                                     10,973     11,661    11,150
                                                                         ---------  --------  --------
                                                                           58,479     58,195    57,810
                                                                         ---------  --------  --------
     Income before provision for Federal income taxes, minority
       interest and cumulative effect of accounting change                 35,361     32,407    19,273
Provision for Federal income taxes (Note 16)                               10,867      9,895     5,659
                                                                         ---------  --------  --------
     Income before minority interest and cumulative effect of
       accounting change                                                   24,494     22,512    13,614
Minority interest - preferred stock dividends of Coastal Banc ssb
 (Note 19)                                                                  2,588      2,588     2,588
                                                                         ---------  --------  --------
     Income before cumulative effect of accounting change                  21,906     19,924    11,026
Cumulative effect of accounting for derivative instruments
 (Note 14)                                                                   (104)        --        --
                                                                         ---------  --------  --------
     Net income                                                          $ 21,802   $ 19,924  $ 11,026
                                                                         ========   ========  ========
     Net income available to common stockholders                         $ 19,294   $ 17,416  $  9,442
                                                                         =========  ========  ========
Basic earnings per common share before cumulative effect of accounting
 Change                                                                  $   3.36   $   2.94  $   1.45
                                                                         =========  ========  ========
Basic earnings per common share (Note 21)                                $   3.34   $   2.94  $   1.45
                                                                         =========  ========  ========
Diluted earnings per common share before cumulative effect of
 accounting change                                                       $   3.19   $   2.87  $   1.42
                                                                         =========  ========  ========
Diluted earnings per common share (Note 21)                              $   3.17   $   2.87  $   1.42
                                                                         =========  ========  ========
</TABLE>

See  accompanying  notes  to  Consolidated  Financial  Statements.


                     COASTAL BANCORP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

<S>                                                                     <C>      <C>       <C>
                                                                           2001     2000      1999
                                                                        -------  --------  --------

Net income                                                              $21,802  $19,924   $11,026

Other comprehensive income (loss), net of tax:
 Change in net unrealized gains (losses) on securities available-for-
   sale, net of reclassification adjustment and tax effects (Note 4)        277      (19)     (474)
                                                                        -------  --------  --------
Comprehensive income                                                    $22,079  $19,905   $10,552
                                                                        =======  =======   ========
</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, 2001, 2000 AND 1999
                                                       (IN THOUSANDS)



<S>                                                                                       <C>         <C>      <C>
                                                                                                                 Additional
                                                                                          Preferred   Common      paid-in
                                                                                          Stock       Stock       capital
                                                                                          ----------  -------  ------------

Balance - December 31, 1998                                                               $       --  $    76  $    33,696
Dividends on Preferred Stock (Note 20)                                                            --       --           --
Dividends on Common Stock (Note 20)                                                               --       --           --
Issuance of Preferred Stock (net) (Note 20)                                                   27,500       --       (1,558)
Exercise of stock options (Note 17)                                                               --       --          545
Purchase of treasury stock at cost (Note 20)                                                      --       --           --
Change in net unrealized loss on
 securities available-for-sale (Note 4)                                                           --       --           --
Net income for 1999                                                                               --       --           --
                                                                                        ------------  -------  ------------
Balance - December 31, 1999                                                                   27,500       76       32,683
Dividends on Preferred Stock (Note 20)                                                            --       --           --
Dividends on Common Stock (Note 20                                                                --       --           --
Exercise of stock options (Note 17)                                                               --        1          629
Purchase of treasury stock at cost (Note 20)                                                      --       --           --
Change in net unrealized loss on
 securities available-for-sale (Note 4)                                                           --       --           --
Net income for 2000                                                                               --       --           --
                                                                                        ------------  -------  ------------
Balance - December 31, 2000                                                                   27,500       77       33,312
Dividends on Preferred Stock (Note 20)                                                            --       --           --
Dividends on Common Stock (Note 20)                                                               --       --           --
Exercise of stock options (Note 17)                                                               --        1        2,054
Change in net unrealized loss on securities
  available-for-sale, net of reclassification
 adjustment and tax effects (Note 4)                                                              --       --           --
Net income for 2001                                                                               --       --           --
                                                                                        ------------  -------  ------------
Balance - December 31, 2001                                                               $   27,500  $    78  $    35,366
                                                                                        ============  =======  ============

<S>                                                                            <C>         <C>              <C>         <C>
                                                                                                Accumulated
                                                                                                   other
                                                                                   Retained    comprehensive   Treasury
                                                                                   earnings         loss        stock      Total
                                                                                 ----------  ---------------  ----------  --------

Balance - December 31, 1998                                                      $  88,144   $     (1,374)   $  (7,778)  $112,764
Dividends on Preferred Stock (Note 20)                                              (1,584)             --          --     (1,584)
Dividends on Common Stock (Note 20)                                                 (2,078)             --          --     (2,078)
Issuance of Preferred Stock (net) (Note 20)                                             --              --          --     25,942
Exercise of stock options (Note 17)                                                     --              --          --        545
Purchase of treasury stock at cost (Note 20)                                            --              --     (12,685)   (12,685)
Change in net unrealized loss on
 securities available-for-sale (Note 4)                                                --             (474)         --       (474)
Net income for 1999                                                                 11,026              --          --     11,026
                                                                                 ---------     ------------   ---------    -------
Balance - December 31, 1999                                                         95,508          (1,848)    (20,463)   133,456
Dividends on Preferred Stock (Note 20)                                              (2,508)             --          --     (2,508)
Dividends on Common Stock (Note 20)                                                 (2,130)             --          --     (2,130)
Exercise of stock options (Note 17)                                                     --              --          --        630
Purchase of treasury stock at cost (Note 20)                                            --              --     (10,882)   (10,882)
Change in net unrealized loss on
 securities available-for-sale (Note 4)                                                 --             (19)         --        (19)
Net income for 2000                                                                 19,924              --          --     19,924
                                                                                 ---------     ------------   ---------    -------
Balance - December 31, 2000                                                        110,794          (1,867)    (31,345)   138,471
Dividends on Preferred Stock (Note 20)                                              (2,508)             --          --     (2,508)
Dividends on Common Stock (Note 20)                                                 (2,663)             --          --     (2,663)
Exercise of stock options (Note 17)                                                    --              --          --       2,055
Change in net unrealized loss on securities
 available-for-sale, net of reclassification
 adjustment and tax effects (Note 4)                                                   --             277          --         277
Net income for 2001                                                                21,802              --          --      21,802
                                                                                 ---------     ------------   ---------    -------
Balance - December 31, 2001                                                       $ 127,425  $     (1,590)   $ (31,345)  $157,434
                                                                                 ==========  =============    =========  =========
</TABLE>

See  accompanying  notes  to  Consolidated  Financial  Statements.

<TABLE>
<CAPTION>

<PAGE>
                               COASTAL BANCORP, INC. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                            YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
                                           (IN THOUSANDS)

<S>                                                              <C>         <C>         <C>
                                                                    2001        2000        1999
                                                                 ----------  ----------  ----------
Cash flows from operating activities:
 Net income                                                      $  21,802   $  19,924   $  11,026
 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                                                  8,325       9,601       9,916
 Net premium amortization (discount accretion)                      (3,115)        349       1,435
 Provision for loan losses                                           3,900       5,790      10,575
 Amortization of goodwill and other intangible assets                2,800       3,025       3,051
 Originations and purchases of mortgage loans held for sale        (20,550)    (25,461)     (8,543)
 Sales of mortgage loans held for sale                              20,723      25,618       8,190
 Gain on sale of mortgage servicing rights                              --      (2,172)         --
 Loss on derivative instruments                                        582          --          --
 Gain on sale of mortgage-backed securities available-for-sale        (169)         --          --
 Decrease (increase) in:
   Accrued interest receivable                                       5,529      (2,622)       (632)
   Other, net                                                      (37,242)     32,212      (1,661)
 Stock dividends from the FHLB                                      (1,973)     (4,603)     (2,847)
                                                                -----------  ----------   ---------
   Net cash provided by operating activities                           612      61,661      30,510
                                                                -----------  ----------   ---------
Cash flows from investing activities:
 Net change in federal funds sold                                  (15,841)       (869)         --
 Purchases of mortgage-backed securities held-to-maturity               --      (4,815)     (3,080)
 Purchase of mortgage-backed securities available-for-sale        (512,267)         --     (26,489)
 Purchase of U.S. Treasury securities held-to-maturity                  --      (1,493)       (299)
 Purchase of U.S. Treasury securities available-for-sale           (43,064)         --          --
 Principal repayments on mortgage-backed securities
   held-to-maturity                                           .     73,725      36,326     240,417
 Principal repayments on mortgage-backed securities
   available-for-sale                                               59,986       4,940      22,711
 Proceeds from maturity of U.S. Treasury securities
   held-to-maturity                                                  1,500         300          --
 Proceeds from maturity of U.S. Treasury securities
   available-for-sale                                                   --          --       2,000
 Proceeds from sales of mortgage-backed securities
   available-for-sale                                              844,918          --          --
 Purchases of loans receivable                                    (250,945)   (236,970)   (387,204)
 Other changes in loans receivable                                 277,918      66,032     173,582
 Purchases of property and equipment, net                           (3,781)     (2,340)     (2,674)
 Purchase of FHLB stock                                            (28,485)    (35,649)     (5,779)
 Proceeds from sales of FHLB stock                                  48,431      39,000       1,692
 Proceeds from sale of mortgage servicing rights                        --       5,001          --
                                                                -----------  ----------   ---------
   Net cash provided by (used in) investing activities             452,095    (130,537)     14,877
                                                                -----------  ----------   ---------
</TABLE>




<PAGE>
<TABLE>

<CAPTION>

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



<S>                                                                    <C>           <C>           <C>
                                                                            2001          2000          1999
                                                                       ------------  ------------  ------------
Cash flows from financing activities:
 Net change in deposits                                                $   (14,540)  $    50,826   $   (80,505)
 Advances from the FHLB                                                  8,031,619     9,567,857     8,079,744
 Principal payments on advances from the FHLB                           (8,491,047)   (9,514,483)   (7,949,533)
 Proceeds from securities sold under agreements to repurchase
   and federal funds purchased                                           3,591,744     2,418,869       319,340
 Repayments of securities sold under agreements to repurchase
   and federal funds purchased                                          (3,591,744)   (2,418,869)     (419,340)
 Repurchase of Senior Notes payable                                         (3,025)           --        (3,100)
 Net increase (decrease) in advances from borrowers for taxes
   and insurance                                                              (791)        1,198           512
 Proceeds from issuance of Bancorp Preferred Stock, net                         --            --        25,942
 Exercise of stock options for purchase of Common Stock                      2,055           630           545
 Purchase of treasury stock                                                     --       (10,882)      (12,685)
 Dividends paid                                                             (5,171)       (4,638)       (3,662)
                                                                      -------------  ------------  ------------
   Net cash provided by (used in) financing activities                    (480,900)       90,508       (42,742)
                                                                      -------------  ------------  ------------
   Net increase (decrease) in cash and cash equivalents                    (28,193)       21,632         2,645
 Cash and cash equivalents at beginning of year                             69,730        48,098        45,453
                                                                      -------------  ------------  ------------
 Cash and cash equivalents at end of year                              $    41,537   $    69,730   $    48,098
                                                                      =============  ===========   ============

 Supplemental schedule of cash flows:
   Interest paid                                                       $   126,730   $   153,413   $   126,069
   Income taxes paid                                                        13,113         5,392         7,812
                                                                      =============  ===========   ============
 Supplemental schedule of noncash investing and financing activities:
   Real estate owned acquired through foreclosure of loans
     receivable                                                        $     5,450   $     3,672   $     4,398
   Transfer of mortgage-backed securities to available-for-sale
     category                                                              811,748            --            --
                                                                      =============  ===========   ============
</TABLE>


See  accompanying  notes  to  Consolidated  Financial  Statements.
<PAGE>
                     COASTAL BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000


(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 financial services provider to consumers and businesses.
At  December  31,  2001,  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.

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.

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.

<PAGE>

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  discount  on  purchased  loans is being accreted 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.

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 and peer group
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.

<PAGE>

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.  There were no
mortgage  loans  held  for  sale  at  December  31,  2001  or  2000.

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  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  and  trading  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, 2001 or
2000.

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  AND  OTHER  INTANGIBLE  ASSETS
Goodwill and other intangible assets 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 and other intangible
asset amounts for impairment on an ongoing basis to determine whether events and
circumstances  have  developed  that  warrant  revision of the estimated benefit
periods.

<PAGE>

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.

DERIVATIVE  INSTRUMENTS  USED  FOR  INTEREST  RATE  RISK  MANAGEMENT
Coastal is a party to derivative instruments in the normal course of business to
reduce  its  exposure  to  fluctuations  in  interest  rates.  These  derivative
instruments  have  included  interest rate swap agreements and interest rate cap
agreements.

Effective  January  1,  2001,  Coastal adopted Statement of Financial Accounting
Standards  No.  133,  "Accounting  for  Derivative  Instruments  and for Hedging
Activities"  ("Statement  133").  Statement  133 requires companies to recognize
all  derivatives  as  either assets or liabilities in the statement of financial
condition and measure all derivatives at fair value.  The interest rate swap and
cap  agreements  held  by  Coastal  on  December 31, 2000 were determined to not
qualify  for  hedge  accounting,  therefore  on implementation of Statement 133,
Coastal  recorded a transition adjustment to record these derivative instruments
at  fair  value.  See Note 14.  Prior to the adoption of Statement 133 (in years
2000  and  prior),  the  fair  values  of  any  derivative  instruments were not
recognized  in  the  consolidated  financial  statements.

STOCK  OPTIONS
Coastal  accounts  for  its  stock  compensation programs in accordance with the
provisions  of  Accounting  Principles Board ("APB") Opinion No. 25, "Accounting
for  Stock  Issued  to Employees." Under this method, no compensation expense is
recognized  for  stock  options when the exercise price equals fair value on the
date of grant.  As required, Coastal provides pro forma net income and pro forma
earnings  per  share  disclosures  pursuant  to  the  provisions  of  Financial
Accounting  Standards  Board  Statement  No.  123  "Accounting  for  Stock-Based
Compensation"  ("Statement  123")  for  employee  stock option grants, as if the
fair-value  based  method  had  been  applied.  See  Note  17.

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.

<PAGE>

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,"  replaced  Statement of Financial Accounting Standards No. 125
("Statement  125"),  "Accounting for Transfers and Servicing of Financial Assets
and  Extinguishments  of  Liabilities," but carried 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  was  effective  for transactions occurring after March 31, 2001.
The  adoption  of  Statement  140  did  not  have  a material impact on Coastal.

          In  July  2001,  Statement  of Financial Accounting Standards No. 141,
"Business  Combinations" ("Statement 141") and Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("Statement 142") were
issued.  Statement  141,  which is effective for business combinations initiated
or  completed after June 30, 2001, eliminates the pooling of interests method of
accounting  for  business  combinations and requires that the purchase method of
accounting  be used for all business combinations.  Statement 141 also requires,
upon  adoption  of  Statement 142, that Coastal evaluate its existing intangible
assets and goodwill that were acquired in a prior purchase business combination,
and  make  any  necessary  reclassifications  in  order  to conform with the new
criteria  in  Statement  141 for recognition apart from goodwill.  Statement 142
changes  the  accounting  for  goodwill  from  an  amortization  method  to  an
impairment-only approach.  Amortization of goodwill, including goodwill recorded
in  past  business  combinations, will cease upon the adoption of Statement 142.
Coastal  is  required to implement Statement 142 on January 1, 2002 and test for
impairment  in  accordance with the provisions of Statement 142 within the first
interim  period of 2002.  Any impairment loss will be measured as of the date of
adoption  and  recognized  as  the  cumulative  effect of a change in accounting
principle  in  that  first  interim  period.

     At  January  1, 2002, Coastal had unamortized goodwill that will be subject
to  the  transition  provisions  of Statements 141 and 142 in the amount of $5.5
million.  Amortization  expense  related  to  this  goodwill  was  $618,000  (or
approximately  $0.10  per  diluted  share) for the year ended December 31, 2001.
The remaining $16.3 million of goodwill will be reclassified to other intangible
assets,  as  those  amounts  were  originally  recorded  as goodwill pursuant to
Statement  of  Financial  Accounting  Standards  No. 72, "Accounting for Certain
Acquisitions of Banking or Thrift Institutions" ("Statement 72") and not subject
to  the  non-amortization  provisions  of  Statement  142.  Based on preliminary
assessments,  it  does  not  appear  Coastal  will  recognize  any  transitional
impairment  losses as the cumulative effect of a change in accounting principle.

     In  August  2001,  Statement  of  Financial  Accounting  Standards No. 144,
"Accounting  for  the  Impairment  or Disposal of Long-Lived Assets" ("Statement
144")  was  issued.  Statement  144 addresses financial accounting and reporting
for  the  impairment  or  disposal of long-lived assets.  Statement 144 requires
that  long-lived assets be reviewed for impairment whenever events or changes in
circumstances  indicate  that  the  carrying  amount  of  an  asset  may  not be
recoverable.  Recoverability  of  assets  to  be  held and used is measured by a
comparison  of the carrying amount of an asset to future net cash flows expected
to  be  generated  by the asset.  If the carrying amount of an asset exceeds its
estimated future cash flows, an impairment charge is recognized by the amount by
which  the  carrying  amount  of  the asset exceeds the fair value of the asset.
Statement  144  requires  companies to separately report discontinued operations
and  extends  that  reporting  to  a component of an entity that either has been
disposed  of  (by  sale,  abandonment,  or  in  a  distribution to owners) or is
classified as held for sale.  Assets to be disposed of are reported at the lower
of  the  carrying  amount  or  fair  value less costs to sell.  Statement 144 is
required  to be adopted by Coastal as of January 1, 2002, and is not expected to
have  a  material  effect on Coastal's future Consolidated Financial Statements.

     (3)     FEDERAL  FUNDS  SOLD
An  analysis  of  federal funds sold for the years ended December 31, 2001, 2000
and  1999  is  as  follows  (dollars  in  thousands):
<TABLE>

<CAPTION>



<S>                                     <C>       <C>       <C>
                                           2001      2000      1999
                                        --------  --------  --------
Federal funds sold:
  Balance outstanding at December 31,   $16,710   $   869   $    --
  Maximum outstanding at any month-end   17,011    10,000    18,500
  Average balance outstanding             7,776     3,042     5,353
  Average interest rate                    3.42%     6.38%     5.04%
</TABLE>

<PAGE>

     (4)     MORTGAGE-BACKED  SECURITIES

     Effective  September  30,  2001,  Coastal  transferred  all  of  its
mortgage-backed  securities held-to-maturity to the available-for-sale category.
This  was  due to management's intent to restructure a portion of the asset base
to  be  less  vulnerable to market interest rate fluctuations.  In late November
2001,  Coastal  entered  into  a  transaction  and  sold  $845  million  of  its
mortgage-backed  securities.  Also  in  November,  Coastal used a portion of the
proceeds  of  the  sale  to  purchase  approximately  $512  million of primarily
pass-thru  mortgage-backed  securities.  All of the securities purchased and the
remaining  securities  not  sold were placed in the available-for-sale category.

     Mortgage-backed  securities  at  December  31,  2001  are  as  follows  (in
thousands):

<TABLE>
<CAPTION>
<S>                    <C>         <C>          <C>           <C>
                                     Gross        Gross
                       Amortized   Unrealized   Unrealized    Market
                          Cost        Gains        Losses      Value
                       ----------  -----------  ------------  --------
Available-for-sale:
Agency securities      $  406,437  $       319  $    (2,455)  $404,301
CMOs - Non-agency         107,488           82         (418)   107,152
Non-agency securities       2,590           34           (9)     2,615
                       ----------  -----------  -----------  ---------
                       $  516,515  $       435  $    (2,882)  $514,068
                       ==========  ===========  ============  ========
</TABLE>

     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:
CMOs - Agency          $  642,588  $     1,370  $   (18,368)  $625,590
CMOs - Non-agency         168,886            9       (7,337)   161,558
Agency securities          67,809          109         (680)    67,238
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:
CMOs - Agency             $77,449  $       --   $    (2,838)   $74,611
Agency securities          20,095           2           (35)    20,062
                       ----------  ----------  -------------  --------
                          $97,544  $        2       $(2,873)   $94,673
                       ==========  ==========  =============   =======
</TABLE>

Proceeds from sales of mortgage-backed securities available-for-sale during 2001
were  $844.9  million.  Gross  gains  of  $2.5  million and gross losses of $2.3
million  were  realized  on  those  sales  in  2001.  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  10.

<PAGE>

     (5)     LOANS  RECEIVABLE
     Loans  receivable  at  December  31,  2001  and  2000  are  as  follows (in
thousands):
<TABLE>
<CAPTION>
<S>                                                <C>          <C>
                                                       2001         2000
                                                   -----------  -----------
Real estate mortgage loans:
 First lien mortgage, primarily residential        $  880,624   $  908,841
 Commercial                                           319,377      347,921
 Multifamily                                          124,616      224,361
 Residential construction                             136,035      157,950
 Acquisition and development                          140,009      133,005
 Commercial construction                              222,026       90,256
Commercial loans, secured by residential mortgage
 loans held for sale                                   11,508        8,518
Commercial, financial and industrial                  116,029      120,420
Loans secured by deposits                              21,238       13,681
Consumer and other loans                               43,384       56,522
                                                   -----------  -----------
                                                    2,014,846    2,061,475
Loans in process                                     (131,064)    (142,451)
Allowance for loan losses                             (15,385)     (14,507)
Unearned interest and loan fees                        (2,959)      (3,864)
Discount on purchased loans, net                       (1,837)      (4,425)
                                                   -----------  -----------
                                                   $1,863,601   $1,896,228
                                                   ==========   ==========
Weighted average yield                                   6.90%        9.38%
                                                   ==========   ==========
</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,  2001,  Coastal  had  outstanding  commitments to originate or
purchase  approximately $29.3 million of first lien mortgage and other loans and
had  commitments  under  lines of credit to originate primarily construction and
other  loans of approximately $94.9 million.  In addition, at December 31, 2001,
Coastal  had  letters  of  credit  of  approximately  $12.8 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  10.

Included  in  loans  receivable at December 31, 2001 and 2000 are loans totaling
approximately  $23.9  million  and  $19.2  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,  2001, 2000 and 1999, Coastal recognized interest income on these nonaccrual
loans (outstanding as of the period end) of approximately $811,000, $706,000 and
$571,000,  respectively,  whereas  approximately  $1.4 million, $1.2 million and
$778,000,  respectively,  in additional interest income would have been recorded
if  such  loans  had  been  performing  in accordance with their original terms.

At  December  31,  2001  and  2000,  the  carrying  value  of impaired loans was
approximately  $3.8  million  and  $4.4  million,  respectively, and the related
allowance  for  loan  losses  on  those impaired loans totaled $554,000 and $1.6
million, respectively.  Of the impaired loans outstanding, nineteen loans with a
balance  of  $1.3  million  at  December 31, 2001 and one loan with a balance of
$650,000  at  December  31, 2000 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, 2001, 2000 and
1999  was  approximately  $4.4  million,  $3.5  million  and  $10.6  million,
respectively.  For the years ended December 31, 2001, 2000 and 1999, 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>
                              2001      2000       1999
                            --------  --------  ---------
Balance, beginning of year  $14,507   $10,493   $ 11,358
Provision for loan losses     3,900     5,790     10,575
Charge-offs                  (4,073)   (2,174)   (11,830)
Recoveries                    1,051       398        390
                            -------   -------   --------
Balance, end of year        $15,385   $14,507   $ 10,493
                            =======   =======   ========
</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 was 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  years  ended December 31, 2001 and 2000,
Coastal  received  $267,000 and $180,000, respectively, in proceeds from the MCA
loan  which  was  recorded as a recovery in the allowance for loan losses during
the  period  received.  In  September  2001,  the  trial  court granted the Lead
Lender's  motion for summary judgment against Coastal.  That motion was based on
the  argument of the Lead Lender that there was no evidence to support Coastal's
claims  against  the  Lead  Lender.  Coastal  has  filed  an appeal of the trial
court's  order granting summary judgment.  At present, the date has not been set
for  the  hearing  on  Coastal's  appeal.

     (6)     ACCRUED  INTEREST  RECEIVABLE
Accrued  interest  receivable  at  December  31, 2001 and 2000 is as follows (in
thousands):

<TABLE>
<CAPTION>
<S>                                       <C>      <C>
                                           2001     2000
                                          -------  -------
Loans receivable                          $ 9,894  $14,054
Mortgage-backed securities                  2,474    4,679
FHLB stock, federal funds sold and other
   interest-earning assets                    875       39
                                          -------  -------
                                          $13,243  $18,772
                                          =======  =======
</TABLE>

     (7)     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 continues to service only
the  loans  in  its  own  loans  receivable  portfolio.

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

<CAPTION>

                         Years ended December 31,
<S>                         <C>       <C>
                              2000      1999
                            --------  --------
Balance, beginning of year  $ 3,035   $ 4,049
Amortization                   (167)   (1,014)
Sales                        (2,868)       --
                            --------  --------
Balance, end of year        $    --   $ 3,035
                            ========  ========
</TABLE>

     (8)     REAL  ESTATE  OWNED
Included  in  prepaid expenses and other assets is real estate owned at December
31,  2001 and 2000 of approximately $4.4 million and $4.0 million, respectively.

<PAGE>

     (9)     DEPOSITS
Deposits,  their stated rates and the related weighted average interest rates at
December  31,  2001  and  2000  are  summarized  below  (dollars  in thousands).
Effective  January  1,  1998, Coastal implemented a program whereby a portion of
the  balance  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,  reflected  in the following table, was
approximately $243.3 million ($113.0 million from noninterest-bearing and $130.3
million  from  interest-bearing)  at December 31, 2001 and $136.6 million ($68.1
million  from  noninterest-bearing  and  $68.5 million from interest-bearing) at
December  31,  2000.

<TABLE>
<CAPTION>



                                                                2001                          2000
                                                   ---------------------------    -------------------------
                                                    Stated Rate      Amount       Stated Rate     Amount
                                                   --------------   ----------    -------------  ----------
<S>                                                    <C>              <C>          <C>
Noninterest-bearing checking                                 0.00%  $   47,712             0.00%  $ 80,849
Interest-bearing checking                           0.50  -  1.00       15,894    0.75  -  2.00     61,046
Savings accounts                                    0.50  -  1.24       45,234    1.49  -  3.00     43,891
Money market demand accounts
(including amounts reclassified
from noninterest and interest-
bearing checking)                                   0.00  -  2.23      505,789    0.00  -  6.31    374,210
                                                                    -----------                  ---------
                                                                       614,629                     559,996
                                                                    -----------                  ---------
Certificate accounts                               Less than 2.00       29,707   Less than 2.00         --
                                                    2.00  -  2.99      171,523    2.00  -  2.99        111
                                                    3.00  -  3.99      263,006    3.00  -  3.99        475
                                                    4.00  -  4.99      356,314    4.00  -  4.99     39,930
                                                    5.00  -  5.99      155,949    5.00  -  5.99    261,398
                                                    6.00  -  6.99       68,979    6.00  -  6.99    807,684
                                                    7.00  -  7.99          209    7.00  -  7.99      5,166
                                                    8.00  -  8.99           70    8.00  -  8.99         67
                                                    9.00  -  9.99           --    9.00  -  9.99         99
                                                                    -----------                  ---------
                                                                     1,045,757                   1,114,930
                                                                    -----------                  ---------
Premium on purchased deposits                                               --                          55
                                                                    -----------                  ---------
                                                                    $1,660,386                  $1,674,981
                                                                    ==========                  ==========
Weighted average rate                                                     3.02%                      4.83%
                                                                    ==========                  ==========
</TABLE>



     Prior  to  the  reclassification  as  discussed  above, noninterest-bearing
checking  accounts,  interest-bearing  checking accounts and money market demand
accounts  were  as  follows  at  December  31,  2001  and  2000:
<TABLE>
<CAPTION>
                              December 31, 2001   December 31, 2000
                              ------------------  ------------------
<S>                           <C>                 <C>
Noninterest-bearing checking  $          160,738  $          148,953
Interest-bearing checking                146,144             129,497
Money market demand accounts             262,513             237,655
</TABLE>

<PAGE>
     The  scheduled  maturities  of certificate accounts outstanding at December
31,  2001  were  as  follows  (in  thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
<S>                      <C>
 2002                    $  950,827
 2003                        61,933
 2004                        23,707
 2005                         5,830
 2006                         3,409
Subsequent years                 51
                         ----------
                         $1,045,757
                         ==========
</TABLE>

     The  aggregate  amount of certificate accounts with balances of $100,000 or
more  was  approximately  $248.0 million and $239.2 million at December 31, 2001
and  2000,  respectively.

     (10)     ADVANCES  FROM  THE  FEDERAL  HOME  LOAN  BANK  OF  DALLAS
Advances  from the FHLB for the years ended December 31, 2001, 2000 and 1999 are
summarized  as  follows  (dollars  in  thousands):
<TABLE>
<CAPTION>



<S>                                    <C>          <C>          <C>
                                           2001         2000         1999
                                       -----------  -----------  -----------
Balance outstanding at end of year     $  690,877   $1,150,305   $1,096,931
Average balance outstanding               795,009      926,659      951,953
Maximum outstanding at any month-end    1,218,145    1,275,541    1,115,713
Average interest rate during the year        4.90%        6.29%        5.31%
Average interest rate at end of year         3.46%        6.48%        5.72%
</TABLE>

The scheduled maturities and related weighted average interest rates on advances
from  the  FHLB  at  December  31,  2001  are  summarized as follows (dollars in
thousands):

<TABLE>
<CAPTION>

Due during the year  Weighted Average
ended December 31,     Interest Rate       Amount
-------------------  -----------------  --------
<S>                  <C>                  <C>
2002                             3.06%    $530,488
2003                             4.29       92,096
2004                             5.03       15,821
2005                             4.88       20,719
2006                             5.64        7,951
2007                             6.65        1,230
2008                             5.51        2,315
2009                             8.03        3,822
2010                             6.73          987
2011                             6.55        1,324
2012                             5.76          292
2013                             5.75        7,663
2014                             5.44        2,954
2015                             6.67        1,706
2018                             5.05        1,509
                                          --------
                                 3.46%    $690,877
                               =======    ========
</TABLE>

The  FHLB  advances  are  secured by certain first lien and multifamily mortgage
loans  and  mortgage-backed  securities  with  an  aggregate  carrying  value of
approximately  $700.0  million  at  December  31,  2001.

(11)     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,  2001  or  2000.  However,  securities  sold  under  agreements to
repurchase  averaged  approximately  $283.6  million,  $249.7 million and $103.2
million  during  2001,  2000 and 1999, respectively, and the maximum outstanding
amounts  at  any  month-end during 2001, 2000 and 1999 were approximately $493.0
million,  $605.2  million  and  $271.1  million,  respectively.

Federal  funds  purchased  averaged approximately $18,000 and $19,000 during the
years  ended  December  31,  2000 and 1999, respectively.  There were no Federal
funds  purchased  outstanding at any time during 2001 or at any month-end during
2000  and  1999.

(12)     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  2001  and  1999, Coastal repurchased $3.0 and $3.1 million,
respectively,  of  the  Senior  Notes  outstanding  at  par.

Coastal  has  notified  the  Trustee that it will redeem all of its 10.0% Senior
Notes ($43.9 million currently outstanding) on February 1, 2002 (the "Redemption
Date").  The  redemption  price  is  par plus accrued interest to the Redemption
Date.

(13)          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 and adjustable-rate mortgage-backed
securities.  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.

(14)          DERIVATIVE  INSTRUMENTS
Coastal is a party to derivative instruments in the normal course of business to
reduce  its  exposure  to  fluctuations  in  interest  rates.  These  derivative
instruments  have  included  interest  rate  swap agreements where Coastal makes
fixed  interest  payments  and  receives  payments based on a floating index and
interest  rate  cap  agreements, as described below.  Effective January 1, 2001,
Coastal  adopted  Statement  133 as discussed in Note 2.  Statement 133 requires
companies  to  recognize  all derivatives as either assets or liabilities in the
consolidated  statement  of  financial  condition and measure all derivatives at
fair  value.  The  interest  rate  swap  and  cap  agreements held by Coastal on
December 31, 2000 were determined to not qualify for hedge accounting, therefore
on  implementation of Statement 133, Coastal recorded a transition adjustment to
record  these derivative instruments at fair value.  On January 1, 2001, Coastal
recorded  a  transition  adjustment loss of $160,000, or $104,000 net of the tax
effect,  as  the  cumulative  effect  of the change in accounting for derivative
instruments  to record the fair value of Coastal's derivative instruments in the
consolidated  statements  of  income.  For  the  year  ended  December 31, 2001,
Coastal  recorded  an additional fair value loss on these derivative instruments
of  $422,000.  The  fair value changes in the derivative instruments during 2001
were  primarily  attributable  to Coastal's interest rate swap agreements, which
were  totally  liquidated  in June 2001.  As of December 31, 2001, interest rate
cap  agreements  were Coastal's only derivative instruments and were recorded at
fair  value  pursuant  to  Statement  133.

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  8.0%  to  9.0%,  depending on the
agreement.  Payments  on  the  interest  rate  cap  agreements  are based on the
notional  principal amount of the agreements; no funds were actually borrowed or
are  to  be  repaid.  The  fair  value  of  the interest rate cap agreements was
$37,000  at  December  31,  2001,  which  is  the  recorded  book  value of such
agreements  due  to  the implementation of Statement 133.  The interest rate cap
agreements  are  used  to  alter  the  interest rate sensitivity of a portion of
Coastal's  mortgage-backed  securities  and  loans  receivable.  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.  The net decrease in interest income related
to  interest rate cap agreements was approximately $25,000 for each of the years
ended  December 31, 2001, 2000 and 1999.  No payments were made to Coastal under
the  interest rate cap agreements during the years ended December 31, 2001, 2000
or  1999.

Interest  rate cap agreements outstanding at December 31, 2001 expire as follows
(dollars  in  thousands):

<TABLE>
<CAPTION>
<S>                 <C>                 <C>
Year of Expiration  Strike Rate Range   Notional Amount
------------------  ------------------  ----------------
2002                    8.75  -  9.00%  $         16,600
2003                    8.00  -  9.00%           107,653
                                        ----------------
                                        $        124,253
                                        ================
</TABLE>

Coastal  totally  liquidated  its  interest rate swap positions in June of 2001.
The  interest  rate  swap  agreements  previously  held  by Coastal provided for
Coastal to make fixed interest payments and receive payments based on a floating
LIBOR  index, as defined in each agreement.  The terms of the interest rate swap
agreements  outstanding  at December 31, 2000 are summarized as follows (dollars
in  thousands):

<TABLE>
<CAPTION>
<S>                    <C>        <C>          <C>       <C>             <C>

                                                         Floating Rate               Fair Value
                       Notional   LIBOR        Fixed          at                  at End of Period
Maturity                Amount     Index        Rate      End of Period              (gain (loss))
---------------------  ---------  -----------  ------    --------------          -------------------

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)
                       =========                                                  ==================
</TABLE>

The  weighted  average interest rate of payments received on all of the interest
rate swap agreements was approximately 4.84% in 2001, 6.50% in 2000 and 5.32% in
1999.  The  weighted  average  interest  rate  of  payments  made  on all of the
interest rate swap agreements was approximately 5.21% in 2001, 5.94% in 2000 and
6.20%  in  1999.  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 ($35,000), $212,000 and
$(483,000),  for the years ended December 31, 2001, 2000 and 1999, respectively.

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.

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.

     (15)     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,
2001  and  2000.  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, 2001                December 31, 2000
                                             ------------------------------------     ------------------------
                                                  Carrying                  Fair         Carrying      Fair
                                                   Value                   Value          Value        Value
                                             ------------------  -----------------     ----------  -----------
<S>                                          <C>                 <C>                         <C>         <C>
Financial assets:
 Cash and cash equivalents                   $           41,537  $          41,537     $   69,730  $   69,730
 Federal funds sold                                      16,710             16,710            869         869
 Loans receivable                                     1,863,601          1,892,609      1,896,228   1,922,849
 Mortgage-backed securities
   held-to-maturity                                          --                 --        885,565     860,517
 U.S. Treasury securities
   held-to-maturity                                          --                 --          1,497       1,505
 Mortgage-backed securities
   available-for-sale                                   514,068            514,068         94,673      94,673
U.S. Treasury securities available-for-sale              42,827             42,827             --          --
 Stock in the FHLB                                       40,032             40,032         58,005      58,005
 Interest rate cap agreements                                37                 37             65          38
 Accrued interest receivable                             13,243             13,243         18,772      18,772
Financial liabilities:
 Deposits                                             1,660,386          1,671,265      1,674,981   1,675,329
 Advances from the FHLB                                 690,877            693,654      1,150,305   1,150,465
 Senior Notes payable                                    43,875             43,875         46,900      45,630
 Accrued interest payable                                 6,050              6,050          8,765       8,765
Off-balance sheet instruments:
 Interest rate swap agreements                               --                 --             --        (133)
 Commitments to extend credit                                --            255,301             --     244,298
</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.

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,
2001  and  2000.  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.

<PAGE>


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

(16)     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,  2001,  2000  and 1999, 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 2001, 2000 and 1999 are available as
credit  carryforwards to reduce regular federal tax liabilities in future years,
over  an indefinite period and were partially utilized in 2000 and 2001.  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.

The components of the provision for federal income tax expense (benefit) for the
years  ended  December  31,  2001,  2000 and 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
            2001      2000     1999
          --------  --------  -------
<S>       <C>       <C>       <C>
Current   $13,153   $13,141   $6,023
Deferred   (2,286)   (3,246)    (364)
          --------  --------  -------
          $10,867   $ 9,895   $5,659
          =======   ========  =======
</TABLE>

A reconciliation of the expected federal income taxes using a corporate tax rate
of  35%  for  the years ended December 31, 2001, 2000 and 1999 is as follows (in
thousands):

<TABLE>
<CAPTION>

                                                 2001      2000      1999
                                               --------  --------  --------
<S>                                            <C>       <C>       <C>
Computed expected tax provision                $12,376   $11,343   $ 6,746
FDIC tax benefit of preferred stock dividends   (1,784)   (1,784)   (1,460)
Net purchase accounting adjustments                222       282       282
Other, net.                                         53        54        91
                                               -------   -------   --------
                                               $10,867   $ 9,895   $ 5,659
                                               =======   =======   =======
</TABLE>

<PAGE>

Significant  temporary differences that give rise to the deferred tax assets and
liabilities  as  of  December  31,  2001 and 2000 are as follows (in thousands):
<TABLE>
<CAPTION>

                                                                   2001    2000
                                                                  ------  ------
<S>                                                               <C>     <C>
Deferred tax assets:
  Loans receivable, principally due to allowance for loan losses  $4,811  $4,032
  Unrealized loss on securities available-for-sale                   855   1,005
  Goodwill and other intangible assets                               841     726
  Property and equipment                                           1,683   1,212
  Real estate owned, principally due to unrealized writedowns          4     255
  Other                                                              126     258
                                                                  ------  ------
                                                                   8,320   7,488
                                                                  ------  ------
Deferred tax liabilities:
  FHLB stock                                                         703   1,832
  Mortgage-backed securities, principally
   due to deferred hedging losses                                     --     175
                                                                  ------  ------
                                                                     703   2,007
                                                                  ------  ------
Net deferred tax asset                                            $7,617  $5,481
                                                                  ======  ======
</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, 2001, Coastal had approximately $1.3 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.


(17)     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,
                                   2001      2000        1999
                                 --------  ---------  ---------
<S>                             <C>        <C>         <C>
Net income available to common
 stockholders (in thousands):
  As reported                     $19,294    $17,416    $9,442
  Pro forma                       $18,831    $16,790    $8,823
Diluted earnings per share:
  As reported                     $  3.17    $  2.87    $ 1.42
  Pro forma                       $  3.10    $  2.77    $ 1.32
</TABLE>


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  2001,  2000  and  1999:
<TABLE>
<CAPTION>


                                 2001          2000          1999
                             ------------  ------------  ------------
<S>                          <C>           <C>           <C>
Assumptions:
  Expected annual dividends  $0.48/share   $0.36/share   $0.32/share
  Expected volatility              37.20%        37.21%        36.16%
  Risk-free interest rate           4.30%         6.40%         5.63%
  Expected life in years              10            10            10
</TABLE>


A  summary  of the status of the stock options as of December 31, 2001, 2000 and
1999  and  changes  during  the  years  then  ended  is  as  follows:
<TABLE>
<CAPTION>


                                                2001                   2000                     1999
                                                    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       766,979   $   14.047   722,412   $   13.726   597,919   $        12.910
Granted                                    10,000       28.900   132,000       14.750   184,800            16.000
Exercised                                (157,556)      13.048   (61,395)      10.253   (47,971)           11.362
Forfeited/cancelled                       (14,524)      15.579   (26,038)      17.653   (12,336)           17.373
                                        ----------              ---------              ----------
Outstanding at end
 of year                                  604,899   $   14.516   766,979   $   14.047   722,412   $        13.726
                                        ==========              =========              =========
Options exercisable at
 end of year                              502,337                578,340                522,056
                                        ==========              =========              =========
Weighted-average fair
 value of options
 granted during the year (per share)    $  12.622               $  6.356               $  8.116
                                        ==========              =========              =========
</TABLE>

<PAGE>

The  following table summarizes information about stock options outstanding
at  December  31,  2001:
<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                        48,474            1.3 years  $           8.180       48,474  $           8.180
10.333 to $11.417                     166,594            3.7 years  $          11.045      166,594  $          11.045
12.500 to $16.000                     324,456            7.2 years  $          15.336      231,894  $          15.372
19.500 to $28.900                      65,375            6.7 years  $          23.991       55,375  $          23.105
                           -------------------  -------------------  -----------------  -----------  ----------------
                                      604,899            5.7 years  $          14.516      502,337  $          14.095
                           ==================                                          ===========
</TABLE>

(18)     EMPLOYEE  BENEFITS
Coastal maintains a 401(k) profit sharing plan.  Coastal's contributions to this
plan  were  approximately  $566,000,  $518,000  and $509,000 for the years ended
December  31,  2001,  2000  and  1999,  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.

(19)     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  FRF,  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, 2001), and is expected to
continue  into  2003.

(20)     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 FRF, Coastal receives a tax benefit for dividends on
this  preferred  stock.  The  ongoing  quarterly  benefit  will be approximately
$219,000,  or  3  cents  per  diluted  share  (as  of December 31, 2001), and is
expected  to  continue  into  2003.

COMMON  STOCK  DIVIDENDS

On  January  25,  2001, Coastal declared a dividend of $0.10 per share of Common
Stock  outstanding  for  the stockholders of record as of February 15, 2001.  On
April 26, July 26 and October 25, 2001, Coastal declared a dividend of $0.12 per
share  on Common Stock outstanding for the stockholders of record as of  May 15,
August  15  and  November  15,  2001,  respectively.

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 as 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.

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,  2001 and 2000, 2,000,000 shares had been repurchased at a
cost  of  $31.3  million.

(21)     EARNINGS  PER  COMMON  SHARE
The  following  summarizes  information  related to the computation of basic and
diluted  EPS  for  the  years ended December 31, 2001, 2000 and 1999 (dollars in
thousands,  except  per  share  data):

<TABLE>
<CAPTION>

<S>                                                                                     <C>          <C>          <C>
                                                                                            2001         2000         1999
                                                                                        -----------  -----------  -----------
Net income                                                                              $   21,802   $   19,924   $   11,026
Preferred stock dividends                                                                   (2,508)      (2,508)      (1,584)
                                                                                        -----------  -----------  -----------
Net income available to common
 Stockholders                                                                           $   19,294   $   17,416   $    9,442
                                                                                       ===========  ===========  ===========

Weighted average number of common shares
 outstanding used in basic EPS calculation                                               5,773,313    5,917,845    6,494,330
Add assumed exercise of outstanding stock
 options as adjustments for dilutive securities                                            305,021      140,316      166,978
                                                                                        -----------  -----------  -----------
Weighted average number of common shares outstanding used in diluted EPS calculation     6,078,334    6,058,161    6,661,308
                                                                                       ===========  ===========  ===========
Basic EPS before cumulative effect of
 accounting change                                                                      $     3.36   $     2.94   $     1.45
                                                                                       ===========  ===========  ===========
Basic EPS                                                                               $     3.34   $     2.94   $     1.45
                                                                                       ===========  ===========  ===========
Diluted EPS before cumulative effect of
 accounting change                                                                      $     3.19   $     2.87   $     1.42
                                                                                       ===========  ===========  ===========
Diluted EPS                                                                             $     3.17   $     2.87   $     1.42
                                                                                       ============  ===========  ==========
</TABLE>

The weighted average number of common shares outstanding has been reduced by the
treasury  stock  held by Coastal.  As of December 31, 2001 and 2000, Coastal had
2,000,000  common  shares  in  treasury.

(22)     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,  2001,  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>
2002                 $ 2,848
2003                   2,409
2004                   2,038
2005                   1,991
2006 and thereafter   11,349
</TABLE>

Rent  expense  for  the years ended December 31, 2001, 2000 and 1999 amounted to
approximately  $3.2  million,  $3.0  million  and  $2.9  million,  respectively.

(23)     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, 2001, that the
Bank  met  capital  adequacy  requirements  to  which  it  is  subject.

As  of December 31, 2001, the most recent notification from the FDIC categorized
the  Bank  as  well  capitalized  under  the  regulatory  framework  for  prompt
corrective action.  To be categorized as well capitalized the Bank must maintain
minimum  Tier  1  (core),  Tier  1 risk-based and total risk-based ratios as set
forth  in  the  table  below.  There  are  no  conditions  or  events since that
notification  that  management believes have changed the institution's category.

The  Bank's  regulatory  capital amounts and ratios, as of December 31, 2001 and
2000,  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, 2001:
 Tier 1 (core)             $205,021         7.27%          $112,834   4.00%      $141,043   5.00%
 Tier 1 risk-based          205,021        11.90             68,921   4.00        103,381   6.00
 Total risk-based           220,406        12.79            137,841   8.00        172,302  10.00

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
</TABLE>

<PAGE>

(24)     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,
                                                   2001         2000
                                               -------------  --------
<S>                                            <C>            <C>
Assets:
  Cash and cash equivalents                    $       2,751  $     29
  Investment in subsidiary                           196,156   179,750
  Receivable from the Bank                                --     2,394
  Mortgage-backed securities held-to-maturity             --       791
Mortgage-backed securities available-for-sale            445        --
  Other assets                                         2,524     2,928
                                               -------------  --------
                                               $     201,876  $185,892
                                               =============  ========

Liabilities and stockholders' equity:
  Senior notes payable                         $      43,875  $ 46,900
  Payable to the Bank                                    447        --
  Other liabilities                                      120       521
                                               -------------  --------
        Total liabilities                             44,442    47,421
        Total stockholders' equity                   157,434   138,471
                                               -------------  --------
                                               $     201,876  $185,892
                                               =============  ========
</TABLE>

                              Coastal Bancorp, Inc.
                       Condensed Statements of Operations
                       ----------------------------------
<TABLE>
<CAPTION>
                                                  Years ended December 31,
                                                 2001       2000         1999
                                             ---------     -------      ------
<S>                                    <C>                        <C>      <C>
Income:
  Dividends from subsidiary                    $ 7,664     $ 7,132     $ 7,239
  Equity in undistributed earnings of
   subsidiary, net of income tax                16,128      15,200       6,367
  Interest and other income                        184         507         707
                                             ---------     -------      ------
                                                23,976      22,839      14,313
                                             ---------     -------      ------
Expense:
  Interest expense                               4,590       4,690       5,058
  Noninterest expense                                6         872         471
                                             ---------     -------      ------
                                                 4,596       5,562       5,529
                                             ---------     -------      ------
  Federal income tax benefit                     2,422       2,647       2,242
                                             ---------     -------      ------
        Net income                             $21,802     $19,924     $11,026
                                             =========     =======     =======
</TABLE>

<PAGE>

                              Coastal Bancorp, Inc.
                       Condensed Statements of Cash Flows
                       ----------------------------------
<TABLE>
<CAPTION>
                                                                               Years ended December 31,
                                                                              2001        2000       1999
                                                                            --------   ---------  ---------
<S>                                                                  <C>            <C>            <C>
Cash flows from operating activities:
  Net income                                                                $ 21,802   $ 19,924   $ 11,026
  Adjustments to reconcile net income to net
    cash provided by (used in) operating activities:
      Equity in undistributed earnings of subsidiary                         (16,128)   (15,200)    (6,367)
      Net (increase) decrease in other assets and other liabilities            2,843      9,547    (11,585)
                                                                            --------   ---------  ---------
          Net cash provided by (used in) operating activities                  8,517     14,271     (6,926)
                                                                            --------   ---------  ---------
Cash flows from investing activities:
  Net decrease in mortgage-backed securities                                     346        195        317
                                                                            --------   ---------  ---------
          Net cash provided by investing activities                              346        195        317
                                                                            --------   ---------  ---------
Cash flows from financing activities:
  Repurchase of Senior notes payable                                          (3,025)        --     (3,100)
  Proceeds from issuance of Bancorp Preferred Stock, net                          --         --     25,942
  Exercise of stock options for purchase of Common Stock                       2,055        630        545
  Purchase of treasury stock                                                      --    (10,882)   (12,685)
  Dividends paid                                                              (5,171)    (4,638)    (3,662)
                                                                            --------   ---------  ---------
        Net cash provided by (used in) financing activities                   (6,141)   (14,890)     7,040
                                                                            --------   ---------  ---------
          Net increase (decrease) in cash and cash equivalents                 2,722       (424)       431
Cash and cash equivalents at beginning of year                                    29        453         22
                                                                            --------   ---------  ---------
Cash and cash equivalents at end of year                                    $  2,751   $     29   $    453
                                                                            ========   ========   ========
</TABLE>

<PAGE>
(25)     SELECTED  QUARTERLY  FINANCIAL  DATA
Selected  quarterly financial data is presented in the following tables for
the  years  ended  December  31,  2001  and 2000 (in thousands, except per share
data):

<TABLE>
<CAPTION>
                                                                       2001 Quarter Ended (unaudited)
                                                           March 31,   June 30,   September 30,   December 31,
                                                        ------------  ---------  --------------  -------------
<S>                                  <C>                              <C>        <C>             <C>
Interest income                                          $   60,165   $  56,423  $       50,850  $      43,174
Interest expense                                             37,860      34,005          29,341         22,809
                                                         ----------   ---------   -------------   ------------
Net interest income                                          22,305      22,418          21,509         20,365
Provision for loan losses                                       900       1,200             900            900
Noninterest income                                            1,822       2,984           3,477          2,860
Noninterest expense                                          14,682      14,573          14,904         14,320
                                                         ----------   ---------   -------------   ------------
Income before provision
 for federal income taxes, minority
 interest and cumulative effect of
 accounting change                                            8,545       9,629           9,182          8,005
Provision for Federal income taxes                            2,614       2,992           2,836          2,425
Minority interest - preferred stock
 dividends of Coastal Banc ssb                                  647         647             647            647
Cumulative effect of change in
    accounting for derivative
    instruments                                                (104)         --              --             --
                                                         ----------   ---------   -------------   ------------
Net income.                                               $   5,180   $   5,990  $        5,699  $       4,933
                                                         ==========   =========  ==============  =============

Basic earnings per common share                           $    0.80   $    0.93  $         0.88  $        0.74
                                                         ==========   =========  ==============  =============
Diluted earnings per common share                         $    0.76   $    0.89  $         0.83  $        0.70
                                                         ==========   =========  ==============  =============
</TABLE>

<TABLE>
<CAPTION>

                                                                     2000 Quarter Ended (unaudited)
                                                           March 31,    June 30,   September 30,  December 31,
                                                          ----------  ---------  --------------  -------------
<S>                                  <C>                              <C>        <C>             <C>
Interest income                                           $   54,858  $  60,542  $       60,699  $      61,174
Interest expense                                              34,802     38,016          40,132         39,955
                                                          ----------  ---------  --------------   ------------
Net interest income                                           20,056     22,526          20,567         21,219
Provision for loan losses                                      2,400      1,590             900            900
Noninterest income                                             4,582      2,580           2,421          2,441
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>

<PAGE>

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, 2001 of the Common Stock of Bancorp
(Nasdaq:  CBSA),  Preferred  Stock  of Bancorp, (Nasdaq: CBSAO) and the Series A
Preferred  Stock  of the Bank (Nasdaq: CBSAP) as listed and quoted on The Nasdaq
Stock  Market(R):


COASTAL  BANCORP,  INC.  COMMON  STOCK  ("CBSA"):

<TABLE>
<CAPTION>
                           2001                              2000
                  High      Low    Dividends        High      Low    Dividends
                -------           ----------      -------  -------  ----------
<S>             <C>      <C>      <C>             <C>      <C>      <C>
First Quarter     $28.063  $23.000  $    0.100      $18.125  $14.375  $    0.080
Second Quarter     32.150   26.000       0.120       17.125   14.000       0.080
Third Quarter      39.410   31.890       0.120       18.563   14.063       0.100
Fourth Quarter     37.000   26.600       0.120       24.000   16.750       0.100
</TABLE>

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

<TABLE>
<CAPTION>
                             2001                             2000
                   High      Low    Dividends        High      Low    Dividends
                  -------           ----------      -------  -------  ----------
<S>               <C>      <C>      <C>             <C>      <C>      <C>
First Quarter     $25.125  $21.625  $    0.570      $19.750  $17.500  $    0.570
Second Quarter     25.220   24.100       0.570       20.000   17.750       0.570
Third Quarter.     25.250   24.850       0.570       21.063   19.625       0.570
Fourth Quarter     25.150   24.400       0.570       22.125   20.750       0.570
</TABLE>

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

<TABLE>
<CAPTION>
                           2001                                2000
                  High      Low    Dividends         High      Low    Dividends
                 -------           ----------      -------  -------  ----------
<S>             <C>      <C>      <C>             <C>      <C>      <C>
First Quarter     $25.000  $22.000  $    0.563      $20.500  $19.938  $    0.563
Second Quarter     25.000   23.850       0.563       20.375   18.500       0.563
Third Quarter      25.250   24.530       0.563       20.563   19.125       0.563
Fourth Quarter     25.150   24.380       0.563       23.000   19.625       0.563
</TABLE>

<PAGE>

Coastal  Bancorp,  Inc.
STOCKHOLDER  INFORMATION

ANNUAL  MEETING

The  Annual Meeting of Stockholders of Coastal Bancorp, Inc. will be held at the
corporate offices of Coastal Bancorp, Inc. at 5718 Westheimer, Houston, Texas in
the  Coastal  Banc  auditorium,  Suite  1101,  on  April 25, 2002 at 12:00 noon.


TRANSFER  AGENT  AND  REGISTRAR

Mellon  Investor  Services  LLC
Overpeck  Centre
85  Challenger  Road
Ridgefield  Park,  New  Jersey  07660-2104
(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

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STOCK  LISTING  AND  OTHER  INFORMATION

     The  common  stock  of  Coastal  Bancorp, Inc. ("Bancorp") is quoted on The
Nasdaq  Stock Market(R) under the symbol "CBSA."  As of February 28, 2002, there
were  5,848,167 shares of Common Stock of Bancorp issued and outstanding and the
approximate number of registered stockholders was 48, representing approximately
1,638  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 was registered
under  the  Securities Exchange Act of 1934 (the "Exchange Act") and also became
listed  for quotation on The Nasdaq Stock Market(R).  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 was registered under the Exchange Act.
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(R)  under  the  symbol "CBSAP."  As of February  28, 2002,
there  were  1,150,000 shares of Preferred Stock issued and outstanding and held
by  approximately  124 registered stockholders, representing approximately 1,505
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  was  registered under the Exchange Act.  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(R) under the
symbol  "CBSAO".  As  of  February  28,  2002,  there  were  1,100,000 shares of
Preferred  Stock  issued  and outstanding and held by approximately 1 registered
stockholder,  representing  approximately  1,748 beneficial stockholders at such
record  date.

     Bancorp  declared  dividends  on  the  Common Stock payable during 2001.  A
quarterly  dividend  in  the amount of $0.10 per share was paid on March 15, and
quarterly  dividends  in  the  amount  of  $0.12 per share were paid on June 15,
September 15 and December 15, 2001.  On March 15, 2002, Bancorp paid a quarterly
dividend  in  the  amount  of $0.12 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.