COASTAL  BANCORP,  INC.
AND  SUBSIDIARIES

FINANCIAL  HIGHLIGHTS
DECEMBER  31,  1998,  1997  AND  1996

<TABLE>

<CAPTION>

                                                                   December 31,
                                                                  --------------          
(dollars in thousands, except per share data)               1998          1997         1996
-----------------------------------------------------  --------------  -----------  -----------
<S>                                                    <C>             <C>          <C>
  <C> . . . . . . . . . . . . . . . . . . . . . . . .  <C>             <C>
FOR THE YEAR ENDED
 Net interest income. . . . . . . . . . . . . . . . .  $      67,410   $   56,933   $   56,426 
 Provision for loan losses. . . . . . . . . . . . . .          3,100        1,800        1,925 
 Noninterest income . . . . . . . . . . . . . . . . .          6,872        6,384        6,091 
 SAIF insurance special assessment (1). . . . . . . .             --           --        7,455 
 Other noninterest expense. . . . . . . . . . . . . .         48,383       39,544       37,927 
 Reversal of accrued income taxes (3) . . . . . . . .          3,679           --           -- 
 Net income available to common stockholders. . . . .         16,668       11,563        6,951 
 Diluted earnings per share before the 1996 SAIF
   insurance special assessment (2) . . . . . . . . .           2.18         1.50         1.56 
 Diluted earnings per share . . . . . . . . . . . . .           2.18         1.50         0.92 
-----------------------------------------------------  --------------  -----------  -----------

AT YEAR END
 Total assets . . . . . . . . . . . . . . . . . . . .  $   2,982,161   $2,911,410   $2,875,907 
 Loans receivable . . . . . . . . . . . . . . . . . .      1,538,149    1,261,435    1,229,748 
 Mortgage-backed securities held-to-maturity. . . . .      1,154,116    1,345,090    1,344,587 
 Mortgage-backed securities available-for-sale. . . .         96,609      169,997      180,656 
 Savings deposits . . . . . . . . . . . . . . . . . .      1,705,004    1,375,060    1,310,835 
 Borrowed funds . . . . . . . . . . . . . . . . . . .      1,066,720    1,332,235    1,376,707 
 Senior Notes payable . . . . . . . . . . . . . . . .         50,000       50,000       50,000 
 Preferred Stock of the Bank. . . . . . . . . . . . .         28,750       28,750       28,750 
 Stockholders' equity . . . . . . . . . . . . . . . .        112,764      104,830       94,148 
 Book value per common share. . . . . . . . . . . . .          15.71        13.78        12.47 
 Tangible book value per common share . . . . . . . .          11.75        11.83        10.47 
-----------------------------------------------------  --------------  -----------  -----------

SIGNIFICANT RATIOS FOR THE YEAR ENDED
 Return on average assets before the 1996 SAIF
   insurance special assessment (2) . . . . . . . . .           0.64%        0.49%        0.51%
 Return on average equity before the 1996 SAIF
   insurance special assessment (2) . . . . . . . . .          14.96        11.68        12.53 
 Interest rate spread including noninterest-bearing
   savings deposits . . . . . . . . . . . . . . . . .           2.17         1.85         1.89 
 Interest rate spread . . . . . . . . . . . . . . . .           1.96         1.67         1.72 
 Net interest margin. . . . . . . . . . . . . . . . .           2.31         2.02         2.06 
 Average equity to average total assets . . . . . . .           3.71         3.41         3.30 
 Noninterest expense to average total
 assets before the 1996 SAIF insurance
 special assessment (2) . . . . . . . . . . . . . . .           1.61         1.36         1.35 
-----------------------------------------------------  --------------  -----------  -----------

ASSET QUALITY RATIOS AT YEAR END
 Nonperforming assets to total assets . . . . . . . .           0.99%        0.72%        0.60%
 Nonperforming loans to total loans receivable. . . .           1.60         1.40         1.14 
 Allowance for loan losses to nonperforming loans . .          46.28        41.90        49.02 
 Allowance for loan losses to total loans receivable.           0.74         0.59         0.56 
-----------------------------------------------------  --------------  -----------  -----------
</TABLE>


(1)     On September 30, 1996, Coastal recorded the one-time Savings Association
Insurance  Fund ("SAIF") insurance special assessment (the "special assessment")
of  $7.5  million  as  a  result of the Deposit Insurance Funds Act of 1996 (the
"Act")  being  signed  into  law.
(2)     These  ratios are calculated before the after-tax (as applicable) effect
of  the  special  assessment  of  $4.8  million  recorded on September 30, 1996.
(3)     In  March  1998,  Coastal announced that it had successfully resolved an
outstanding  tax  benefit  issue  with the Federal Deposit Insurance Corporation
("FDIC")  as  Manager  of  the  Federal  Savings  and Loan Insurance Corporation
Resolution Fund ("FRF").  The resolution of the issue resulted in a $3.7 million
reversal  of  accrued  income  taxes  during  1998.



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 49
branch  offices  in metropolitan Houston, Austin, Corpus Christi, the Rio Grande
Valley  and  small  cities  in the southeast quadrant of Texas.  At December 31,
1998,  Coastal  Banc  ssb  had  $3.0  billion  in  assets and met the regulatory
requirements to be a "well capitalized" institution according to Federal Deposit
Insurance  Corporation  ("FDIC")  guidelines.



TABLE  OF  CONTENTS

<TABLE>

<CAPTION>



<S>                                                   <C>
                                                      <C>
<C>
Letter from the Chairman and Chief Executive Officer    2

Selected Consolidated Financial and Other Data . . .    6

Management's Discussion and Analysis . . . . . . . .    9

Independent Auditors' Report . . . . . . . . . . . .   31

Consolidated Financial Statements. . . . . . . . . .   32

Notes to Consolidated Financial Statements . . . . .   38

Stock Prices and Dividends . . . . . . . . . . . . .   68

Stockholder Information. . . . . . . . . . . . . . .   69

</TABLE>



CHAIRMAN'S  LETTER

Sometimes  the  stock  market  works  in mysterious ways.  One year, a company's
annual  earnings  are disappointing and its stock price rises by a record annual
percentage.  The  next year, the same company has record high core earnings, and
its stock price drops by a record annual percentage.  Okay, so it doesn't always
work  that  way, but that's the way it worked for Coastal Banc (Coastal) in 1997
and  1998.  Coastal's common stock price was up 52% during 1997, yet during that
same  year  Coastal had no earnings growth from the prior year and earnings were
short  of  management's expectations by roughly 25 cents per share.  Conversely,
during  1998,  Coastal's  common stock dropped by approximately 25%, yet Coastal
had  record  growth in core earnings during 1998 that increased by 22% over 1997
core  earnings.  Go  figure.

But record core earnings is not the whole story for 1998.  More importantly, the
strategic  shift to commercial banking, initiated four years ago, began having a
significant  positive impact on Coastal's financial results in 1998.  During the
year,  commercial  loans  and commercial deposits grew to record levels, causing
loan  yields to increase and deposit costs to decrease.  The result was a record
net  interest  margin  that was still climbing at the end of the year and record
core  earnings  for  1998.  The strategy worked, but we're just getting started.
I'll  fill  you in on how we are executing our business strategy and how we plan
to  expand  it,  but  first  a snapshot of Coastal's financial results for 1998.

1998  EARNINGS

     Earnings  for  1998 were $16.7 million or $2.18 per share, a 44.5% increase
from  1997  earnings  of  $11.6  million or $1.50 per share.  However, for 1998,
earnings  from ongoing core operations were $14.1 million or $1.84 per share and
earnings  from  nonrecurring  items were $2.6 million or $.34 per share.  During
the  first  quarter  of  1998, Coastal resolved an outstanding tax benefit issue
with  the  Federal  Deposit  Insurance  Corporation  for $3.7 million, which was
somewhat  offset  by the recording of an additional provision for loan losses of
$1.0  million  and  a  writedown of purchased mortgage loan premium of $709,000.
Nevertheless, core earnings for 1998 increased by 21.9% over 1997 core earnings.

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.  Accordingly, all common stock
share  data  presented  have  been  adjusted  to include the effect of the stock
split.

Coastal's  two principal sources of revenue, net interest income and fee income,
grew  to  record  levels  in 1998.  Net interest income after provision for loan
losses reached $64.3 million during 1998, compared to $55.1 million in 1997, and
loan fees, service charges on deposit accounts and loan servicing income reached
$6.4  million  during  1998,  compared  to  $5.4  million  in 1997.  Noninterest
expenses  reached  $48.4 million during 1998, compared to $39.5 million in 1997.
At  December  31, 1998, Coastal had total assets of $3.0 billion, total deposits
of  $1.7  billion in 49 branch offices and common stockholders' equity of $112.8
million.

COASTAL  BANC  IS  A COMMERCIAL BANK - WE HAVE THE FINANCIAL STATEMENTS TO PROVE
IT.

In  my  letter  to  you last year I pointed out changing components in Coastal's
balance sheet that revealed tangible results of our commercial banking strategy.
Coastal's  loan  portfolio was becoming more heavily weighted towards commercial
loans,  and  transaction  accounts  had  substantially increased.  At that time,
clear  evidence of the benefits of that strategy had not yet materialized in our
net  interest  margin or core earnings, but based on balance sheet changes alone
Coastal  was  clearly  knocking  on  the  door of successful commercial banking.

In 1998, we kicked the door down (under the circumstances, I couldn't resist the
metaphor).  Net  interest margin was up to 2.31% for 1998, compared to 2.02% for
1997.  By  the  fourth  quarter  of 1998, net interest margin had reached 2.57%,
compared  to  1.95%  for  the fourth quarter of 1997.  But to really see how far
we've  come,  look  at  the  difference  in  the  mix  of  Coastal's  assets and
liabilities  between  today  and  the  end  of  1994  when we launched Coastal's
commercial  banking  strategy.

At  the  end  of  1994,  the  commercial-type  loans in Coastal's loan portfolio
(excluding  single  family  mortgage  loans  and residential construction loans)
totaled $148 million compared to $781 million at the end of 1998.  At the end of
1994,  Coastal had $40 million in noninterest-bearing demand accounts, primarily
mortgage  escrow  accounts.  At  the  end  of  1998, Coastal had $151 million in
noninterest-bearing  demand  accounts,  only  $5  million of which were mortgage
escrow  accounts.  At  the  end  of  1994,  Coastal had no business banking loan
officers.  At  the  end  of  1998,  we  had  sixteen.

Looks  like  a  commercial  bank  to  me.

WE  CHANGED  THINGS  AND  BOUGHT  THINGS  TO  PUT  US  OVER  THE  TOP

Coastal's  arrival in 1998 as a full service "commercial bank" was the result of
a  four-year  work in progress.  We launched the strategy in 1995 by acquiring a
local Houston commercial bank to serve as a platform.  Then we changed Coastal's
data  processing  system  to  a  commercially friendly system.  Over the ensuing
years we hired additional commercial loan officers and introduced a full menu of
commercial  deposit  accounts  and  cash  management  products.  Building  a new
business-banking  platform  during  a  period  of  emerging network and Internet
technology  worked  to  our  advantage.  Coastal's  Portfolio  Control  Center,
developed  in  1997,  provided  us with tools to redefine the commercial lending
process  and  establish  new  standards  in  commercial  loan  velocity.

By early 1998, business banking had achieved the momentum Coastal needed to fuel
future profitability growth.  In the meantime, retail deposits continued to be a
crucial  funding  component  of  the balance sheet.  During this period, Coastal
introduced  new  pricing strategies for certificates of deposit that resulted in
significant  reductions  in  Coastal's  cost of retail deposits.  So in order to
allow  both  business  banking  and  retail  banking  the  opportunity to pursue
separate  but  complementary  strategies,  Coastal  created  a  new  category of
branches  called  Business  Banking Centers.  These new Business Banking Centers
have  a  principally  commercial  customer  base  and  are  designed  to  better
accommodate  commercial  accounts  and  products.

Coastal's  transformation  to  commercial banking was completed in 1998 the same
way  it  started  in  1995: The acquisition of a commercial bank.  On August 14,
1998,  Coastal  completed  the  purchase  of The San Benito Bank & Trust Company
("SBBT")  from its owner, Pacific Southwest Bank.  At closing, SBBT had deposits
of  approximately  $355  million  in  twelve  branches located in the Rio Grande
Valley  of  Texas  and  approximately  $176  million  in loans.  The transaction
increased  Coastal's  profitability,  number  of  Business  Banking  Centers  to
eighteen,  lowered  the  cost  of  deposits,  and  significantly  increased  its
commercial  loan  origination capacity, all without having to raise new capital.

COASTAL  SHAKES  THINGS  UP  WITH  SPEED  AND  A  NEW  LOOK

This is just the beginning.  Now that the products and people are in place, it's
time  to  win the market.  After all these years, Texas still has only a handful
of  locally managed business banks.  Almost all of the large commercial banks in
Texas  are  managed elsewhere.  In response, Coastal's entire strategy is geared
towards  pressing  the  local  advantage  with  speed,  accuracy  and execution.
Businesses  in  Texas  demand  the  highest level of sophistication in financial
services  and  products.  But many are growing weary of dealing with non-locals.
That  may  sound  provincial,  but there's a reason for it.  Execution from afar
just  doesn't  cut  it.  Coastal will win many of these customers because it has
local  decision-makers  using  groundbreaking  delivery  systems  to execute the
customers'  needs.

Coastal  can achieve prominent presence in the local business market when we add
the only missing service on Coastal's menu: investment banking.  In my letter to
you  last  year,  I  explained  that  the traditional banking model is obsolete.
Banks  today should provide financing for the entire balance sheet, not just the
north side (loans and deposits).  Coastal's goal is soon to provide our business
banking customers investment-banking services such as capital raising mechanisms
and  alternative  financing  alongside  our  traditional  portfolio  lending and
deposit  services.

On  the  national  and  international  level,  combining  commercial banking and
investment  banking  is  the  current  trend.  But  most of the combinations are
having  difficulty  merging  the  cultures  and achieving synergies due to their
sheer size and geographical dispersion.  We believe that success can be achieved
faster and better in a geographically confined market such as Coastal's.  In the
near  future,  it  will  become more difficult to compete as a local stand-alone
investment  bank  or  a local stand-alone commercial bank.  A combination of the
two,  though,  can  win  the  local  market.  We  intend  to  do  that.

CAPITAL  MANAGEMENT

Since  Coastal was founded in 1986, acquisition of whole banks and bank branches
has  been  the  best  use  of  Coastal's  excess capital.  The industry has been
consolidating  since  the  1980's, and gaining market share has been cheaper and
faster  through  acquisitions  than  through  internal  growth.  Coastal  has
successfully  employed  a  strategy  that  combines  acquisitions  with internal
development  of  new  business lines.  As the industry continues to consolidate,
that  strategy will continue to be the foundation of Coastal's growth.  However,
from  time to time the best use of Coastal's excess capital is the repurchase of
its  own  common  stock.

During  the collapse in stock prices that occurred in the third quarter of 1998,
Coastal's  stock  price dropped to a 1998 low of $14.00 per share from a high in
the second quarter of approximately $26.50 per share.  With the stock trading at
a price below the book value per share and in the midst of a year of record core
earnings,  Coastal  announced  a  common  stock repurchase plan of approximately
500,000  shares.  The  repurchase  of 499,600 shares was completed in 1998 at an
average  price  of  $15.57  per share and the Board of Directors has granted the
authorization  to  repurchase an additional 500,000 shares, as market conditions
warrant.

During  that  same  collapse  in stock prices, Coastal was not alone.  Most bank
stock  prices  dropped  by  roughly 25% to 50%.  Since then the stock market has
recovered, but bank stocks have only partially recovered.  1999 may provide more
acquisition  opportunities  than were available when bank stocks were trading at
prohibitively high prices.  So there is a silver lining in most business cycles.
We  certainly don't like to see Coastal's stock price decline, but we do like to
buy  it  cheap  and  have  more  opportunities  to  buy  other  banks  cheap.

A  CAUTIOUS  APPROACH  TO  1999

Following  the  1998 stock market decline, Texas was hit with another challenge:
the  oil  price  collapse.  By  the  end  of  1998, crude oil had traded down to
approximately  $10  per barrel.  Since the last Texas economic recovery began in
1987, about the same time oil prices bottomed below $10 per barrel, the price of
oil  has  enjoyed a slow, steady ten-year recovery.  The Texas economy recovered
during  that  same  period  into  a  much stronger and more diversified economy.
Today we are revisiting a similar price decline.  Diversification and a stronger
consolidated  oil  industry  have  given hope that Texas will weather this storm
much  better  than  in  1987.

At  the  end  of 1998, there were few signs that the Texas economy was suffering
from  the  oil  price  decline  -  yet.  Many  Texas  economists  are cautiously
optimistic  that  Texas will make it through this crisis with only a slowdown in
job  growth,  but  not  with  the magnitude of collapse witnessed in the 1980's.
Much  will depend on the length and depth of the oil price decline.  Coastal has
already  begun  to  exercise a more cautious approach to lending in markets with
energy industry concentrations, such as Houston, until a clearer picture evolves
of  the  effects  on  the  economy  from  the  oil  price  decline.

THIS  ONE'S  FOR  YOU  -  AGAIN

In  the  first  quarter  of  1999,  we  are  launching Coastal's new "X-Banking"
campaign.  X-Banking is short for execution banking.  The promotional concept is
designed  to  inform the local Texas business community that successful business
banking  is  all about EXECUTION.  We're saying that in today's banking world of
technology  based  products, everyone sells pretty much the same products.  It's
the  delivery,  follow-up,  and  responsiveness  that  separate  the winners and
losers.  The  X-Banking  campaign is a challenge to our non-local competitors to
respond  to  local  businesses  as fast as Coastal.  We intend to win that race.

The  X-Banking  campaign  is  part  of  an  overall strategy designed to fulfill
Coastal's  Vision  and  Mission  Statement.  The vision part is what I have been
discussing  throughout  this  letter: Become a dominant Texas regional bank that
provides  commercial services - including investment banking services as well as
competitive retail products - to local business customers.  Coastal will achieve
that  vision  through  a  combined strategy of acquisitions while executing more
efficiently  and  better  than  non-locals  will.

Over  the  years,  I  have  written  to you about Coastal's successful strategic
formula  for  building  a bank from scratch: Acquire low cost deposits, maintain
low  interest  rate risk, low overhead risk, and low credit risk.  This attitude
remains  embedded  in Coastal's system and will continue to be the foundation of
our management culture.  Even though our growth strategy has evolved from simply
acquiring  low  cost  deposits  to  acquiring  whole  commercial banks, we still
approach  everything with Coastal's traditional goals of doing it as cheaply and
safely  as  possible.  In  other  words, the overall vision has changed, but the
attitude  remains  intact.

The  ultimate  mission,  however,  has not changed one bit: Maximize shareholder
return.





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


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,
                                                          --------------------------------------------------------------------
(In thousands except per share data and Selected Ratios)        1998            1997         1996         1995         1994
                                                          -----------------  -----------  -----------  -----------  -----------
<S>                                                       <C>                <C>          <C>          <C>          <C>
Balance Sheet Data
 Total assets. . . . . . . . . . . . . . . . . . . . . .  $      2,982,161   $2,911,410   $2,875,907   $2,786,528   $2,299,769 
 Loans receivable (1). . . . . . . . . . . . . . . . . .         1,538,149    1,261,435    1,229,748    1,098,555      587,032 
 Mortgage-backed securities held-to-maturity (1) . . . .         1,154,116    1,345,090    1,344,587    1,395,753    1,605,839 
 Mortgage-backed securities available-for-sale . . . . .            96,609      169,997      180,656      186,414       32,249 
 Savings deposits. . . . . . . . . . . . . . . . . . . .         1,705,004    1,375,060    1,310,835    1,287,084    1,139,622 
 Advances from the Federal Home Loan Bank of
   Dallas ("FHLB") . . . . . . . . . . . . . . . . . . .           966,720      540,475      409,720      312,186      386,036 
 Securities sold under agreements to repurchase. . . . .           100,000      791,760      966,987      993,832      645,379 
 Senior Notes payable. . . . . . . . . . . . . . . . . .            50,000       50,000       50,000       50,000           -- 
 Preferred Stock of the Bank . . . . . . . . . . . . . .            28,750       28,750       28,750       28,750       28,750 
 Stockholders' equity. . . . . . . . . . . . . . . . . .           112,764      104,830       94,148       91,679       84,680 

                                                                                For the Year Ended December 31,
                                                          ---------------------------------------------------------------------
                                                                      1998         1997         1996         1995         1994 
                                                          -----------------  -----------  -----------  -----------  -----------
Operating Data (10)
 Interest income . . . . . . . . . . . . . . . . . . . .  $        210,814   $  201,356   $  194,611   $  170,286   $  129,037 
 Interest expense. . . . . . . . . . . . . . . . . . . .           143,404      144,423      138,185      126,354       88,519 
                                                          -----------------  -----------  -----------  -----------  -----------
 Net interest income . . . . . . . . . . . . . . . . . .            67,410       56,933       56,426       43,932       40,518 
 Provision for loan losses . . . . . . . . . . . . . . .             3,100        1,800        1,925        1,664          934 
                                                          -----------------  -----------  -----------  -----------  -----------
 Net interest income after provision for loan losses . .            64,310       55,133       54,501       42,268       39,584 
 Writedown of purchased mortgage loan premium. . . . . .              (709)          --           --           --           -- 
 Gain (loss) on sales of mortgage-backed securities
   available-for-sale, net . . . . . . . . . . . . . . .                 1          237           (4)          81          192 
 Gain on sale of branch office . . . . . . . . . . . . .                --           --          521           --           -- 
 Other noninterest income. . . . . . . . . . . . . . . .             7,580        6,147        5,574        5,081        6,539 
 SAIF insurance special assessment (2) . . . . . . . . .                --           --       (7,455)          --           -- 
 Other noninterest expense . . . . . . . . . . . . . . .           (48,383)     (39,544)     (37,927)     (29,823)     (25,731)
                                                          -----------------  -----------  -----------  -----------  -----------
 Income before provision for Federal income taxes
   and minority interest . . . . . . . . . . . . . . . .            22,799       21,973       15,210       17,607       20,584 
 Provision for Federal income taxes (3). . . . . . . . .            (3,543)      (7,822)      (5,671)      (6,477)      (4,333)
 Minority interest in income of consolidated
   subsidiary. . . . . . . . . . . . . . . . . . . . . .                --           --           --           --         (211)
                                                          -----------------  -----------  -----------  -----------  -----------
 Net income before preferred stock dividends . . . . . .            19,256       14,151        9,539       11,130       16,040 
 Preferred stock dividends of the Bank . . . . . . . . .            (2,588)      (2,588)      (2,588)      (2,588)      (2,588)
                                                          -----------------  -----------  -----------  -----------  -----------
 Net income available to common stockholders . . . . . .            16,668       11,563   $    6,951   $    8,542   $   13,452 
                                                          =================  ===========  ===========  ===========  ===========
 Basic earnings per share (4). . . . . . . . . . . . . .  $           2.24   $     1.55   $     0.93   $     1.15   $     1.81 
                                                          =================  ===========  ===========  ===========  ===========
 Diluted earnings per share (4). . . . . . . . . . . . .  $           2.18   $     1.50   $     0.92   $     1.14   $     1.76 
                                                          =================  ===========  ===========  ===========  ===========
</TABLE>


                                                    (Footnotes appear on page 8)
COASTAL  BANCORP,  INC.  AND  SUBSIDIARIES
SELECTED  CONSOLIDATED  FINANCIAL  AND  OTHER  DATA

<TABLE>
<CAPTION>

                                                                                     At or For the Year Ended December 31,
                                                                                     -------------------------------------- 
                                                                                                  1998      1997     1996
                                                                                                  -------  -------  -------
<S>                                                                                                <C>     <C>      <C>
Selected Ratios
Performance Ratios (5) (10):
 Return on average assets before the 1996 SAIF insurance
   special assessment (6) . . . . . . . . . . . . . . . . . . . .                                   0.64%    0.49%    0.51%
 Return on average assets after the 1996 SAIF insurance special
   assessment . . . . . . . . . . . . . . . . . . . . . . . . . .                                   0.64     0.49     0.34 
 Return on average equity before the 1996 SAIF insurance
   special assessment (6) . . . . . . . . . . . . . . . . . . . .                                  14.96    11.68    12.53 
 Return on average equity after the 1996 SAIF insurance special
   assessment . . . . . . . . . . . . . . . . . . . . . . . . . .                                  14.96    11.68     7.50 
 Dividend payout ratio before the 1996 SAIF insurance special
   assessment (6) . . . . . . . . . . . . . . . . . . . . . . . .                                  14.35    19.83    16.82 
 Dividend payout ratio after the 1996 SAIF insurance special
   assessment . . . . . . . . . . . . . . . . . . . . . . . . . .                                  14.35    19.83    28.55 
 Average equity to average total assets . . . . . . . . . . . . .                                   3.71     3.41     3.30 
 Net interest margin (7). . . . . . . . . . . . . . . . . . . . .                                   2.31     2.02     2.06 
 Interest rate spread including noninterest-bearing savings
   deposits (7) . . . . . . . . . . . . . . . . . . . . . . . . .                                   2.17     1.85     1.89 
 Interest rate spread (7) . . . . . . . . . . . . . . . . . . . .                                   1.96     1.67     1.72 
 Noninterest expense to average total assets before the 1996
   SAIF insurance special assessment (6). . . . . . . . . . . . .                                   1.61     1.36     1.35 
 Noninterest expense to average total assets after the 1996 SAIF
   insurance special assessment . . . . . . . . . . . . . . . . .                                   1.61     1.36     1.61 
 Average interest-earning assets to average interest-bearing
   liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .                                 107.33   106.72   106.75 
 Ratio of earnings to combined fixed charges and preferred
   stock dividends before the 1996 SAIF insurance special
   assessment (6):
   Excluding interest on deposits . . . . . . . . . . . . . . . .                                  1.25X    1.23X    1.25X 
   Including interest on deposits . . . . . . . . . . . . . . . .                                   1.14     1.13     1.14 
 Ratio of earnings to combined fixed charges and preferred
   stock dividends after the 1996 SAIF insurance special
   assessment:
   Excluding interest on deposits . . . . . . . . . . . . . . . .                                   1.25     1.23     1.15 
   Including interest on deposits . . . . . . . . . . . . . . . .                                   1.14     1.13     1.09 
Asset Quality Ratios:
 Nonperforming assets to total assets (8) . . . . . . . . . . . .                                   0.99%    0.72%    0.60%
 Nonperforming loans to total loans receivable. . . . . . . . . .                                   1.60     1.40     1.14 
 Allowance for loan losses to nonperforming loans . . . . . . . .                                  46.28    41.90    49.02 
 Allowance for loan losses to total loans receivable. . . . . . .                                   0.74     0.59     0.56 
Bank Regulatory Capital Ratios (9):
 Tier 1 capital to total assets . . . . . . . . . . . . . . . . .                                   5.25     5.52     5.35 
 Tier 1 risk-based capital to risk-weighted assets. . . . . . . .                                   9.54    11.46    11.77 
 Total risk-based capital to risk-weighted assets . . . . . . . .                                  10.23    11.98    12.30 
Other Data:
 Full-time employee equivalents . . . . . . . . . . . . . . . . .                                    653      451      433 
 Number of full service offices . . . . . . . . . . . . . . . . .                                     49       37       37 




                                                                    1995     1994
                                                                   -------  -------
<S>                                                                <C>      <C>
  <C> . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  <C>
Selected Ratios
Performance Ratios (5) (10):
 Return on average assets before the 1996 SAIF insurance
   special assessment (6) . . . . . . . . . . . . . . . . . . . .    0.45%    0.71%
 Return on average assets after the 1996 SAIF insurance special
   assessment . . . . . . . . . . . . . . . . . . . . . . . . . .    0.45     0.71 
 Return on average equity before the 1996 SAIF insurance
   special assessment (6) . . . . . . . . . . . . . . . . . . . .    9.71    16.57 
 Return on average equity after the 1996 SAIF insurance special
   assessment . . . . . . . . . . . . . . . . . . . . . . . . . .    9.71    16.57 
 Dividend payout ratio before the 1996 SAIF insurance special
   assessment (6) . . . . . . . . . . . . . . . . . . . . . . . .   18.56     8.83 
 Dividend payout ratio after the 1996 SAIF insurance special
   assessment . . . . . . . . . . . . . . . . . . . . . . . . . .   18.56     8.83 
 Average equity to average total assets . . . . . . . . . . . . .    3.56     3.59 
 Net interest margin (7). . . . . . . . . . . . . . . . . . . . .    1.82     1.84 
 Interest rate spread including noninterest-bearing savings
   deposits (7) . . . . . . . . . . . . . . . . . . . . . . . . .    1.61     1.68 
 Interest rate spread (7) . . . . . . . . . . . . . . . . . . . .    1.46     1.57 
 Noninterest expense to average total assets before the 1996
   SAIF insurance special assessment (6). . . . . . . . . . . . .    1.21     1.14 
 Noninterest expense to average total assets after the 1996 SAIF
   insurance special assessment . . . . . . . . . . . . . . . . .    1.21     1.14 
 Average interest-earning assets to average interest-bearing
   liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .  106.78   106.71 
 Ratio of earnings to combined fixed charges and preferred
   stock dividends before the 1996 SAIF insurance special
   assessment (6):
   Excluding interest on deposits . . . . . . . . . . . . . . . .   1.21X    1.33X 
   Including interest on deposits . . . . . . . . . . . . . . . .    1.12     1.19 
 Ratio of earnings to combined fixed charges and preferred
   stock dividends after the 1996 SAIF insurance special
   assessment:
   Excluding interest on deposits . . . . . . . . . . . . . . . .    1.21     1.33 
   Including interest on deposits . . . . . . . . . . . . . . . .    1.12     1.19 
Asset Quality Ratios:
 Nonperforming assets to total assets (8) . . . . . . . . . . . .    0.68%    0.30%
 Nonperforming loans to total loans receivable. . . . . . . . . .    1.35     1.04 
 Allowance for loan losses to nonperforming loans . . . . . . . .   38.40    35.37 
 Allowance for loan losses to total loans receivable. . . . . . .    0.52     0.37 
Bank Regulatory Capital Ratios (9):
 Tier 1 capital to total assets . . . . . . . . . . . . . . . . .    5.30     4.54 
 Tier 1 risk-based capital to risk-weighted assets. . . . . . . .   12.36    12.37 
 Total risk-based capital to risk-weighted assets . . . . . . . .   12.84    12.63 
Other Data:
 Full-time employee equivalents . . . . . . . . . . . . . . . . .     390      298 
 Number of full service offices . . . . . . . . . . . . . . . . .      40       34 
</TABLE>


                                                    (Footnotes appear on page 8)


<PAGE>
Footnotes  for  pages  6  through  7:

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

(2)     On  September  30, 1996, Coastal recorded the special assessment of $7.5
million  as a result of the Act being signed into law.  See Note 18 of the Notes
to  Consolidated  Financial  Statements.

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

(4)     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.  Accordingly, all
common  stock  share  data have been adjusted to include the effect of the stock
split.

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

(6)     These  ratios  are calculated before the after-tax effect of the special
assessment  of  $4.8 million recorded on September 30, 1996.  See Note 18 of the
Notes  to  Consolidated  Financial  Statements.

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

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

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

(10)     Certain  1997,  1996,  1995 and 1994 balances have been reclassified to
conform  to  the 1998 presentation.  Such reclassifications had no effect on net
income  or  total  stockholders'  equity.

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

GENERAL
     Coastal  Bancorp, Inc. was incorporated on March 8, 1994 in connection with
the  reorganization of Coastal Banc Savings Association (the "Association") into
the  holding  company form of organization, which 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 (the "Bank").  As a
result of the reorganization, Coastal Bancorp, Inc. ("Bancorp") became the owner
of  100%  of  the  voting stock of the Bank.  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  pursuant  to which, the Bank became a wholly-owned subsidiary of
HoCo  and  HoCo  became  a  wholly-owned  subsidiary  of  Bancorp.
     On  September  30,  1996,  Coastal  recorded the special assessment of $7.5
million  ($4.8  million  after  applicable  income taxes) as a result of the Act
being  signed  into  law.  The  special  assessment pursuant to the Act was 65.7
basis  points  on  the SAIF deposit assessment base as of March 31, 1995.  Other
provisions  of  the  Act  provided for a reduction of the SAIF deposit insurance
premium  rates  beginning  in  the  fourth  quarter  of  1996.
     On April 23, 1998, the Board of Directors declared a 3:2 stock split on the
common  stock  of Bancorp payable on June 15, 1998 to the stockholders of record
at  the  close of business on May 15, 1998.  Accordingly, all common stock share
data have been adjusted to include the effect of the stock split for all periods
presented.
     On  September  1,  1998,  Bancorp announced that the Board of Directors had
authorized  the  repurchase  of up to 6.6% (approximately 500,000 shares) of the
outstanding shares of common stock.  As of December 31, 1998, 499,600 shares had
been  repurchased at a cost of $7.8 million.  On December 21, 1998, the Board of
Directors  authorized  an additional repurchase plan for up to 500,000 shares of
the outstanding shares of common stock through an open market repurchase program
and  privately  negotiated repurchases.  The timing and volume of the repurchase
transactions  will  depend  on  market  conditions.

FINANCIAL  CONDITION
     On  August  14,  1998,  Coastal  completed  the  acquisition  of the Valley
branches  of Pacific Southwest Bank, also known as The San Benito Bank and Trust
Company,  a  unit  of  Pacific  Southwest Bank (the "Valley Acquisition").  This
acquisition  added  twelve  branches,  approximately  $176.2  million  in  loans
receivable  and  $355.4  million in deposits to Coastal's existing organization.
     Total  assets  increased  2.43%  or $70.8 million from December 31, 1997 to
December  31,  1998.  The  net  increase resulted primarily from the increase in
loans  receivable  of  $276.7  million, a $22.0 million increase in stock in the
Federal  Home  Loan  Bank  of  Dallas  ("FHLB"),  an  increase  in cash and cash
equivalents  of  $8.4  million,  a  $15.0  million  increase  in goodwill and an
increase  in  property  and  equipment  of  $10.9 million offset by decreases of
$191.0  million and $73.4 million in mortgage-backed securities held-to-maturity
and  mortgage-backed  securities available-for-sale, respectively.  The increase
in  loans  receivable  was  primarily  due  to  bulk  residential  mortgage loan
purchases  of  $293.6  million,  $176.2  million in loans acquired in the Valley
Acquisition  (net  of  the  $2.3  million  allowance for loan losses recorded at
acquisition)  and  $34.6  million  of consumer loan purchases from correspondent
lenders,  in  addition  to  an  increase  of  $74.4 million in commercial loans,
secured  by  residential  mortgage  loans  held  for sale.  These increases were
somewhat  offset by principal payments received.  The increase in FHLB stock was
due  to  the  increased  amounts required to be maintained based on the level of
FHLB advances outstanding.  The increase in goodwill was due to $17.3 million of
goodwill  recorded  due  to  the  Valley  Acquisition  offset  by  current  year
amortization.  The  increase  in property and equipment was due primarily due to
the  Valley  Acquisition.  The decrease in mortgage-backed securities was due to
principal  payments  received  and  the sale of $48.6 million of mortgage-backed
securities  available-for-sale.  At  December  31,  1998,  loans receivable as a
percentage  of  total assets increased to 51.6% as compared to 43.3% at December
31,  1997  reaching  management's  1998  goal of increasing the loans receivable
portfolio  to  approximately  50%  of  total  assets.
     Savings  deposits  increased 24.0% or $329.9 million from December 31, 1997
to  December 31, 1998.  This increase was primarily due to the $355.4 million of
deposits  acquired  in  the  Valley  Acquisition offset by decreases in existing
deposits.  Advances  from  the  FHLB  increased  by  78.9% or $426.2 million and
securities sold under agreements to repurchase decreased 87.4% or $691.8 million
from  December 31, 1997 to December 31, 1998 due to a reallocation of borrowings
to  take  advantage  of  more  favorable  interest  rates.
     Common  stockholders'  equity  increased 7.6% or $7.9 million from December
31,  1997  to  December  31,  1998  due  to  1998 net income available to common
stockholders  of  $16.7  million  and  a  $900,000 decrease in accumulated other
comprehensive  income  (loss), offset by common stock dividends declared of $2.4
million  and  treasury  stock  acquired  of  $7.8  million.

RESULTS  OF  OPERATIONS  FOR  THE  THREE  YEARS  ENDED  DECEMBER  31,  1998
     The  results of operations of Coastal Bancorp, Inc. and subsidiaries depend
primarily  on  its net interest income, which is the difference between interest
income  on  interest-earning assets and interest expense on its interest-bearing
liabilities.  Coastal's  interest-earning  assets  consist  principally of loans
receivable,  mortgage-backed  securities  and  other  investments.  Coastal's
interest-bearing  liabilities  consist  primarily  of savings deposits, advances
from  the  FHLB,  securities  sold under agreements to repurchase, federal funds
purchased  and  its Senior Notes payable.  Coastal's net income is also affected
by  its  level of noninterest income, including loan fees and service charges on
deposit  accounts,  loan servicing income, and gains on sales of assets, as well
as by its noninterest expense, including compensation and benefits and occupancy
costs  and,  in  1996,  the  special  assessment.

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

<TABLE>
<CAPTION>

<S>                                                   <C>                      <C>                             <C>         <C>
                                                      At                                  Year Ended December 31, 1998
                                                      December 31, 1998        Average                         Yield/
                                                      Yield/Rate               Balance                         Interest    Rate
                                                      -----------------------  ------------------------------  ----------  ------
                                                      (Dollars in thousands)
ASSETS
Interest-earning assets:
Loans receivable (2) . . . . . . . . . . . . . . . .                    8.55%  $         1,430,584             $ 120,281    8.41%
Mortgage-backed securities . . . . . . . . . . . . .                    6.00             1,431,105                87,596    6.12 
U.S. Treasury securities . . . . . . . . . . . . . .                    5.40                 2,141                   109    5.09 
Securities purchased under agreements to resell
 and federal funds sold. . . . . . . . . . . . . . .                      --                 7,991                   430    5.38 
FHLB stock . . . . . . . . . . . . . . . . . . . . .                    5.75                38,036                 2,251    5.92 
Interest-earning deposits in other depository
 institutions. . . . . . . . . . . . . . . . . . . .                    4.26                 3,133                   147    4.69 
                                                      -----------------------------------------------------------------------------
   Total interest-earning assets . . . . . . . . . .                    7.37             2,912,990               210,814    7.24 
                                                      -----------------------------------------------------------------------------
Noninterest-earning assets (1) . . . . . . . . . . .                                        94,857
                                                      -----------------------------------------------------------------------------
   Total assets. . . . . . . . . . . . . . . . . . .                            $        3,007,847 
                                                      =============================================================================


LIABILITIES AND  STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing savings deposits. . . . . . . . . .                    4.52%  $         1,371,078             $  66,128    4.82%
Advances from the FHLB . . . . . . . . . . . . . . .                    5.24               713,197                39,553    5.55 
Securities sold under agreements to repurchase
 and federal funds purchased . . . . . . . . . . . .                    4.93               579,711                32,723    5.64 
Senior Notes payable . . . . . . . . . . . . . . . .                   10.00                50,000                 5,000   10.00 
                                                      -----------------------------------------------------------------------------
   Total interest-bearing liabilities. . . . . . . .                    4.90             2,713,986               143,404    5.28 
                                                      -----------------------------------------------------------------------------
Noninterest-bearing liabilities. . . . . . . . . . .                                       153,663 
                                                      -----------------------------------------------------------------------------
   Total liabilities . . . . . . . . . . . . . . . .                                     2,867,649 
Preferred Stock of the Bank. . . . . . . . . . . . .                                        28,750 
Stockholders' equity . . . . . . . . . . . . . . . .                                       111,448 
                                                      -----------------------------------------------------------------------------
   Total liabilities and stockholders' equity. . . .                           $         3,007,847 
                                                      =============================================================================
Net interest income; interest rate spread. . . . . .                    2.47%                                  $  67,410   1.96%
                                                      =============================================================================

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

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

_______________

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

<PAGE>
<TABLE>
<CAPTION>

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


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

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

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

_______________

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


<PAGE>
<TABLE>

<CAPTION>

                                                                Year  Ended  December  31,  1996
<S>                                                   <C>                      <C>         <C>
                                                                    Average                Yield/
                                                                    Balance     Interest    Rate
                                                                 -------------  ----------  ------
                                                                  (Dollars in thousands)
ASSETS
Interest-earning assets:
Loans receivable (2) . . . . . . . . . . . . . . . .             $  1,156,933  $  97,935    8.47%
Mortgage-backed securities . . . . . . . . . . . . .                1,556,966     95,155    6.11 
U.S. Treasury securities . . . . . . . . . . . . . .                    1,002         54    5.39 
Securities purchased under agreements to resell
 and federal funds sold. . . . . . . . . . . . . . .                       --         --      -- 
FHLB stock . . . . . . . . . . . . . . . . . . . . .                   21,853      1,288    5.89 
Interest-earning deposits in other depository
 institutions. . . . . . . . . . . . . . . . . . . .                    4,149        179    4.31 
                                                                 --------------------------------
   Total interest-earning assets . . . . . . . . . .                2,740,903    194,611    7.10 
                                                                 --------------------------------
Noninterest-earning assets (1) . . . . . . . . . . .                   71,344
   Total assets. . . . . . . . . . . . . . . . . . .             $  2,812,247
                                                                 ================================


LIABILITIES AND  STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing savings deposits. . . . . . . . . .             $  1,199,651  $  60,076    5.01%
Advances from the FHLB . . . . . . . . . . . . . . .                  387,296     21,749    5.62 
Securities sold under agreements to repurchase
 and federal funds purchased . . . . . . . . . . . .                  930,706     51,360    5.52 
Senior Notes payable . . . . . . . . . . . . . . . .                   50,000      5,000   10.00 
                                                                 --------------------------------
   Total interest-bearing liabilities. . . . . . . .                2,567,653    138,185    5.38 
                                                                 --------------------------------
Noninterest-bearing liabilities. . . . . . . . . . .                  123,160
                                                                 --------------------------------
   Total liabilities . . . . . . . . . . . . . . . .                2,690,813
Preferred Stock of the Bank. . . . . . . . . . . . .                   28,750
Stockholders' equity . . . . . . . . . . . . . . . .                   92,684
                                                                 --------------------------------
   Total liabilities and stockholders' equity. . . .             $  2,812,247
                                                                 ================================
Net interest income; interest rate spread. . . . . .                              56,426    1.72%
                                                                 ================================

Net interest-earning assets; net interest yield on
 interest-earning assets . . . . . . . . . . . . . .  $               173,250               2.06%
                                                      ===========================================

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



_______________

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

<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>

<S>                                                                  <C>        <C>       <C>        <C>       <C>        <C>
                                                                                    Year  Ended  December  31,
                                                                          1998  vs  1997                    1997  vs  1996
                                                                    Increase (Decrease) Due  To     Increase  (Decrease)  Due  To
                                                                     Volume     Rate     Net        Volume     Rate       Net
                                                                    --------   -------   ---------  -------   --------   ---------
                                                                                           (In  thousands)

INTEREST INCOME
 Loans receivable . . . . . . . . . . . . . . . . . . . . . . . . .  $ 12,544   $   775   $ 13,319   $10,431   $ (1,404)  $ 9,027 
 Mortgage-backed securities . . . . . . . . . . . . . . . . . . . .    (5,159)       --     (5,159)   (2,558)       158    (2,400)
 U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . .        --       109        109       (27)       (27)      (54)
 Securities purchased under
   agreements to resell and federal
   funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . .       218       (39)       179       126        125       251 
 FHLB stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .       968        (9)       959       (11)        15         4 
 Interest-earning deposits in
   other depository institutions. . . . . . . . . . . . . . . . . .        32        19         51       (70)       (13)      (83)
                                                                     ---------  --------  ---------  --------  ---------  --------

     Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . .     8,603       855      9,458     7,891     (1,146)    6,745 
                                                                     ---------  --------  ---------  --------  ---------  --------

INTEREST EXPENSE
 Interest-bearing savings deposits. . . . . . . . . . . . . . . . .     5,781    (2,565)     3,216     2,714        122     2,836 
 Securities sold under agreements to   repurchase and federal funds
   purchased
                                                                      (22,272)     (194)   (22,466)    2,484      1,345     3,829 
 Advances from the FHLB . . . . . . . . . . . . . . . . . . . . . .    19,113      (882)    18,231    (1,042)       615      (427)
                                                                     ---------  --------  ---------  --------  ---------  --------

     Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . .     2,622    (3,641)    (1,019)    4,156      2,082     6,238 
                                                                     ---------  --------  ---------  --------  ---------  --------

 Net change in net interest income. . . . . . . . . . . . . . . . .  $  5,981   $ 4,496   $ 10,477   $ 3,735   $ (3,228)  $   507 
                                                                     =========  ========  =========  ========  =========  ========
</TABLE>



NET  INCOME
     Coastal  reported  net  income  available  to  common stockholders of $16.7
million  for  the year ended December 31, 1998, $11.6 million for the year ended
December 31, 1997 and $11.8 million for the year ended December 31, 1996, before
the  after-tax  effect of the 1996 special assessment, respectively, an increase
of  $5.1 million or 44.2% in 1998 and a decrease of $234,000 or 2.0% in 1997, in
each  case  in  comparison to the prior year.  The $5.1 million increase in 1998
was  due  to  several  factors.  From  the year ended December 31, 1997 to 1998,
there  was  a  $10.5  million  increase  in  net interest income, a $1.2 million
increase  in  noninterest  income (excluding the writedown of purchased mortgage
loan  premium)  offset  by  the  $709,000  writedown  of purchased mortgage loan
premium  and  an  $8.8 million increase in noninterest expense.  The increase in
net interest income was primarily due to an increase in net interest margin from
2.02% in 1997 to 2.31% in 1998.  The increase in noninterest income was due to a
$1.7  million  increase  in  loan  fees  and service charges on deposit accounts
offset by a $236,000 decrease in the gain on sales of mortgage-backed securities
available-for-sale  and  a $764,000 decrease in loan servicing income.  The $8.8
million  increase  in  noninterest expense was primarily due to the staffing and
occupancy  increases  related  to the expansion of the loan product base and the
continuing  development of commercial business lending programs, the acquisition
of  assets  and  other expenses related to the relocation of Coastal's corporate
headquarters  in  the  third  quarter  of  1997  and  the staffing and occupancy
expenses  related  to  the  Valley  Acquisition.

     The increase in net income was also affected by nonrecurring items recorded
in  the first quarter of 1998.  In 1998, Coastal recorded a one-time benefit due
to  the  resolution of an outstanding tax benefit issue with the FDIC as Manager
of  the  Federal  Savings  and  Loan Insurance Corporation Resolution Fund.  The
resolution  of  the  issue  resulted  in Coastal recording a $3.7 million, or 48
cents  per  diluted  share, reversal of accrued income taxes.  The resolution of
the  tax  benefit issue is also contributing an ongoing quarterly tax benefit of
$226,000  or  approximately 3 cents per diluted share (as of December 31, 1998).
This  tax  benefit  is  estimated  to continue until the second quarter of 2001.
This one-time positive effect on net income was somewhat offset by the recording
of  an  additional  provision  for  loan  losses of $1.0 million (above the then
current  quarterly  provision of $450,000) and a writedown of purchased mortgage
loan  premium  of  $709,000.  The  additional  provision for loan losses of $1.0
million,  or  8  cents per diluted share after tax, was recorded to increase the
allowance for loan losses due to the continuing change in the composition of the
loans receivable portfolio as a result of management's goal to increase business
lending.  The writedown of the purchased mortgage loan premium of $709,000, or 6
cents  per diluted share after tax, was related to an adjustable rate whole loan
package  purchased  in  the  second quarter of 1997 on which Coastal experienced
high  prepayments  during  1997 and through the first quarter of 1998, resulting
from  a  comparatively  lower  current  interest  rate  environment.

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

     The  $234,000  decrease  in  net income available to common stockholders in
1997 was primarily due to a $507,000 increase in net interest income, a $125,000
decrease in the provision for loan losses and a $293,000 increase in noninterest
income  offset  by a $1.6 million increase in noninterest expense (excluding the
1996  special  assessment).  The  increase  in  noninterest  income  is due to a
$568,000  increase  in  loan  fees  and  service  charges on deposit accounts, a
$237,000  gain on sales of mortgage-backed securities available-for-sale in 1997
and  a  $164,000  increase  in  other  noninterest  income, offset by a $159,000
decrease  in loan servicing income and the $521,000 gain on the sale of a branch
office  recognized  in 1996.    The $1.6 million increase in noninterest expense
(excluding  the  1996  special  assessment)  was  primarily  due  to the overall
compensation  and  occupancy  expenses related to an increase in personnel hired
for the expansion of the loan products offered and the continuing development of
commercial  business  lending  programs.  In  addition,  occupancy expenses also
increased  due  to  the  acquisition of assets and other expenses related to the
relocation  of  Coastal's  corporate  headquarters  and  consolidation  of  its
administrative,  primary  lending  and  mortgage  servicing offices in the third
quarter  of  1997.  These  increases  were  somewhat  offset by the $1.1 million
decrease  in  insurance  premiums  (primarily  deposit  insurance premiums).  In
addition,  other  noninterest  expense  and  data  processing  expense decreased
$646,000  and  $202,000,  respectively.

NET  INTEREST  INCOME
     Net  interest  income amounted to $67.4 million in 1998, a $10.5 million or
18.4%  increase  over  1997.  The  increase in net interest income was due to an
increase in net interest margin from 2.02% in 1997 to 2.31% in 1998, an increase
in  average  net  interest-earning  assets  of $21.2 million, and an increase in
interest  rate  spread,  defined  to  exclude noninterest-bearing deposits, from
1.67%  in  1997 to 1.96% in 1998.  Management also calculates an alternative net
interest  spread  which  includes  noninterest-bearing  deposits.  Under  this
calculation,  the  net  interest spreads for 1998 and 1997 were 2.17% and 1.85%,
respectively.  Net  interest margin and net interest rate spread are affected by
the  changes  in  the  amount  and  composition  of  interest-earning assets and
interest-bearing  liabilities.  The  overall increase in net interest spread was
due  to  an  11  basis  point  increase in the average yield on interest-earning
assets  and  a decrease in the average rate paid on interest-bearing liabilities
of  18  basis points.  The decrease in the average rate paid on interest-bearing
liabilities  was  due  primarily  to  the  overall decrease in wholesale funding
costs.

     Net  interest income amounted to $56.9 million in 1997, a $507,000, or 0.9%
increase  over  1996.  The  increase  in net interest income was due to a slight
increase  in  average  net interest-earning assets of $4.6 million offset by the
overall  decrease in net interest margin from 2.06% in 1996 to 2.02% in 1997 and
in  interest  rate spread, defined to exclude noninterest-bearing deposits, from
1.72%  in  1996  to  1.67%  in  1997.  The  net  interest  spreads  including
noninterest-bearing  deposits  for  1997  and  1996  were  1.85%  and  1.89%,
respectively.  The decrease in the net interest spread in 1997 was primarily due
to  the  increase  in the average yield on interest-earning assets from 7.10% in
1996  to  7.13% in 1997, offset by the increase in the average interest rates on
interest-bearing liabilities from 5.38% in 1996 to 5.46% in 1997.   During 1997,
Coastal  experienced a tightening in net interest income due primarily to higher
borrowing  costs  and  the  anomaly that the spread between the London Interbank
Offered  Rate  ("LIBOR")  and the Treasury rate (the "TED" spread) had been much
wider  than  usual.  The  TED  spread  historically (6 year average) had been 40
basis  points,  but for 1997 was 56 basis points, which would have equated to an
additional  $1.4  million  in  net income or $0.18 per share (after tax) for the
year  had  the  spread  been  consistent  with the 6 year average.  In addition,
interest  income  for  the last six months of 1997 was reduced by the additional
amortization  of  premium  on  purchased  mortgage  loans  of approximately $1.3
million.  This  amortization  was  attributable  to  prepayments  related to the
adjustable  rate  whole  loan  package  purchased in the second quarter of 1997.

     Total  interest  income  amounted  to  $210.8  million  during 1998, a $9.5
million,  or  4.70%  increase  from 1997.  A $13.3 million, or 12.5% increase in
interest  earned on loans receivable during 1998 resulted from a $149.1 million,
or 11.6%, increase in the average balance of loans receivable and an increase of
6  basis  points in the yield earned compared to 1997.  A $5.2 million, or 5.6%,
decrease in interest earned on mortgage-backed securities during 1998 was due to
a  $83.4  million,  or  5.5%, decrease in the average balance of mortgage-backed
securities  due  to principal payments received and the sale of $48.6 million of
mortgage-backed  securities available-for-sale.  In addition, interest earned on
FHLB  stock,  federal  funds sold and other interest-earning assets increased by
$1.3  million, or 79.2%, due primarily to the increase in the average balance of
such  assets,  through  internal  growth  and  the  Valley Acquisition, of $23.2
million  during  1998.

     Total  interest  income  amounted  to  $201.4  million  during 1997, a $6.7
million,  or  3.5%  increase  from  1996.  A  $9.0 million, or 9.2%, increase in
interest  earned on loans receivable during 1997 resulted from a $124.6 million,
or  10.8%,  increase in the average balance of loans receivable offset partially
by  a  decrease of 12 basis points in the yield earned compared to 1996.  A $2.4
million,  or  2.5%,  decrease  in  interest earned on mortgage-backed securities
during 1997 was due to a $42.4 million, or 2.7%, decrease in the average balance
of mortgage-backed securities due to principal payments received and the sale of
$11.3  million  of  mortgage-backed securities available-for-sale.  In addition,
interest  earned  on  FHLB  stock, federal funds sold and other interest-earning
assets increased slightly by $118,000, or 7.8%, due primarily to the increase in
the  average  balance  of  such  assets,  through internal growth and the branch
acquisition,  of  $1.1  million  during  1997.

     Total  interest expense amounted to $143.4 million in 1998, a $1.0 million,
or  0.7%,  decrease  from  1997.  Interest expense on savings deposits increased
$3.2  million,  or  5.1%,  due  to  the $117.9 million, or 9.4%, increase in the
average  balance  of  savings  deposits offset by a decrease in the average rate
paid  of  20 basis points.  Interest expense on advances from the FHLB increased
$18.2 million, or 85.5%, due to the increase in average balance of advances from
the  FHLB of $344.3 million or 93.3%, offset by a 23 basis point decrease in the
average  rates  paid.  Interest  expense on other borrowed money decreased $22.5
million,  or  40.7%,  due  to  the $394.6 million, or 40.5%, decrease in average
balance  of  securities  sold  under  agreements to repurchase and federal funds
purchased  and  a  2  basis  point  decrease  in  the  interest  rates  paid.

     Total  interest expense amounted to $144.4 million in 1997, a $6.2 million,
or 4.5%, increase from 1996.  Interest expense on other borrowed money increased
$3.8  million,  or  7.5%,  due  to  the  $43.6 million, or 4.7%, increase in the
average  balance  of  securities sold under agreements to repurchase and federal
funds  purchased  and  a  14 basis point increase in the interest rates paid.  A
$2.8  million,  or  4.7%, increase in interest on savings deposits was primarily
due  to  a  $53.5  million,  or  4.5%,  increase  in  the  average  balance  of
interest-bearing  savings  deposits.  Interest expense on advances from the FHLB
decreased  $427,000,  or  2.0%,  due  to  the decrease in the average balance of
advances  from  the  FHLB  of $18.4 million, or 4.8%, offset by a 16 basis point
increase  in  the  average  rates  paid.

PROVISION  FOR  LOAN  LOSSES
     Management  established  provisions  for  loan losses of $3.1 million, $1.8
million  and  $1.9 million for the years ended December 31, 1998, 1997 and 1996,
respectively.  Provisions  for  loan losses are charged to earnings to bring the
total  allowance  for  loan  losses  to a level deemed appropriate by management
based  on  such  factors  as  historical loss experience, the volume and type of
lending  conducted  by  Coastal,  the  amount  of nonperforming assets, industry
standards,  regulatory  policies,  generally  accepted  accounting  principles,
general  economic  conditions,  particularly as they relate to Coastal's lending
areas,  and  other  factors  related  to  the  collectibility  of Coastal's loan
portfolio.  During the year ended December 31, 1998, the increased provision for
loan  losses was recorded due to the continuing change in the composition of the
loans  receivable  portfolio  from more traditional residential real estate type
loans  to  commercial  type loans.  At December 31, 1998, single family mortgage
and  residential  construction  loans  made  up  approximately  49% of the loans
receivable  portfolio as compared to 58% at December 31, 1997, a decrease of 9%.
This  change  is  occurring  as  a result of management's emphasis on commercial
business  lending  and  the  loans  acquired  in  the  Valley  Acquisition.

     Coastal's  asset  quality  ratios  have remained relatively consistent from
December  31, 1996 to December 31, 1998.  Nonperforming loans as a percentage of
total  loans  receivable  was 1.6%, 1.4% and 1.1% at December 31, 1998, 1997 and
1996,  respectively.  The  allowance  for  loan  losses  as  a  percentage  of
nonperforming  loans  was  46.3%, 41.9% and 49.0% at December 31, 1998, 1997 and
1996,  respectively.  The  allowance  for  loan  losses as a percentage of total
loans  receivable  was  0.7%, 0.6% and 0.6% at December 31, 1998, 1997 and 1996,
respectively.  During  1998,  the  activity  in  the  allowance  for loan losses
included  the  $2.3  million acquisition allowance adjustment as a result of the
loans  acquired  in  the  Valley  Acquisition,  of  which approximately 58% were
commercial  real  estate  and  commercial,  financial  and  industrial  loans.

     Although  no assurance can be given, Coastal's management believes that its
present  allowance for loan losses is adequate, based upon, among other factors,
the  changing  composition  of  the  loans receivable portfolio, historical loss
experience, delinquency trends and current economic conditions.  Management will
continue  to  review  its loan loss policy as Coastal's loan portfolio grows and
diversifies  to  determine  if changes to the policy and the resulting allowance
for  loan  losses  are  necessary.

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

     Total  noninterest  income  amounted  to  $6.4  million  during  1997,  an 
increase of $293,000,  or  4.8%, over 1996.  The increase in noninterest income 
is  primarily due  to  an  increase  of  $568,000  in  loan  fees  and  service 
charges on deposit accounts,  a  $237,000  gain  on  sales  of  mortgage-backed 
securities  available-for-sale   in  1997  and  a  $164,000  increase  in other 
noninterest income, offset  by  the  decrease  of  $159,000  in  loan  servicing
income, due  to  the declining  loan  servicing  portfolio,  and  the  $521,000 
gain on the sale of a branch office recorded in 1996.  The increase in loan fees
and   service   charges  on  deposit  accounts  consisted  of  an  increase  of 
$87,000 in loan  fees  and  a $481,000  increase  in service charges on deposit 
accounts, primarily due to the increase  in  transaction  type  deposit accounts
from 1996 to 1997  and the  1997  branch  acquisition  which consisted of 53.5% 
transaction type  deposit accounts.  The  gain  on the sales of mortgage-backed 
securities  available-for-sale  was the result of the sale of securities with a 
book value of $11.3 million during 1997.

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

     Total  noninterest  expense  amounted  to  $39.5  million  during  1997, an
increase  of  $1.6  million,  or  4.3%,  over 1996 before the effect of the 1996
special  assessment.  Compensation,  payroll taxes and other benefits and office
occupancy  increased  $2.2 million and $1.3 million, respectively, primarily due
to  the  overall  increase  in  personnel  hired  for  the expansion of the loan
products  offered  and  the  continuing  development  of the commercial business
lending  programs.  In  addition,  occupancy  expenses also increased due to the
acquisition  of assets and other expenses related to the relocation of Coastal's
corporate  headquarters and consolidation of its administrative, primary lending
and  mortgage  servicing  offices  in  the  third  quarter of 1997.  Of the $1.3
million increase in occupancy expenses, approximately $128,000 were nonrecurring
expenses incurred due to the relocation.  The amortization of goodwill increased
$56,000  during  1997  due  primarily  to  a  branch acquisition and the related
goodwill  recorded.  These  increases  were somewhat offset by decreases of $1.1
million, $646,000 and $202,000 in insurance premiums, other noninterest expenses
and  data  processing expense, respectively.  The decrease in insurance premiums
was  due  to  the decrease in deposit insurance premiums pursuant to the reduced
assessment  rates applicable to Coastal as a result of the passage of the Act in
1996.  The  decrease  in  data  processing  expenses  was  primarily  due to the
expenses  incurred  in  1996  related  to  the  May  1996  bank  data processing
conversion  and the conversion in June of 1996 of the five locations acquired in
1995  to  the  new  data  processing  system.

PROVISION  FOR  FEDERAL  INCOME  TAXES
     Coastal  generated  no regular Federal taxable income in 1998, 1997 or 1996
primarily  due  to the utilization of the net operating loss carryovers acquired
in  May  1988  from  the  associations  obtained  in connection with the Federal
Savings  and  Loan  Insurance  Corporation's Southwest Plan (the "Southwest Plan
Acquisition") and because payments to Coastal pursuant to the related assistance
agreement  in prior years were excludable from taxable income, which resulted in
Coastal  reporting  losses each year for tax purposes.  However, pursuant to the
terms  of  the Southwest Plan Acquisition assistance agreement, the FRF retained
all  of  the  future  tax  benefits  to  be  derived from the Federal income tax
treatment  of  the  assistance  payments  received  from  the  FRF  and from the
utilization  of  the  net operating loss carryovers acquired.  The amount of tax
benefit  to  Coastal  during  these  years  (which  corresponds to the amount of
Federal  taxes  which  Coastal  would  have  paid  in  these  years  but for the
tax-exempt nature of the assistance payments from the FRF and the utilization of
the  net  operating  loss  carryovers)  is  recorded  in  Coastal's Consolidated
Statements  of  Operations as its provision for Federal income taxes, which also
includes alternative minimum taxes paid.  The alternative minimum taxes recorded
during  these  years  will be available as credit carryforwards to reduce future
Federal  regular  income  taxes  over  an  indefinite  period.

     As  discussed  previously, during 1998, Coastal completed the resolution of
an  outstanding tax benefit issue with the Federal Deposit Insurance Corporation
as  Manager  of  the  FRF.  The  resolution  of  the  issue  resulted in Coastal
recording  a  $3.7  million reversal of accrued income taxes.  The resolution of
the  tax  benefit issue is also contributing an ongoing quarterly tax benefit of
$226,000  which  is  estimated  to  continue  until  the second quarter of 2001.

     The  provisions  for  Federal income taxes were $7.2 million (excluding the
one-time  effect  of the $3.7 million reversal of accrued income taxes) in 1998,
$7.8  million in 1997 and $5.7 million in 1996.  Although the termination of the
Assistance  Agreement  was  effective  March  31, 1994, the FRF will continue to
receive  the  future  Federal  income  tax  benefits  of  the net operating loss
carryforwards  acquired.

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

     Coastal's  asset  and  liability  management  strategy  is  formulated  and
monitored by the Asset/Liability Committee of the Board of Directors of the Bank
(the  "Board").  The  Board's written policies and procedures are implemented by
the  Asset/Liability  Subcommittee  (the  "Subcommittee"),  a management-staffed
committee  composed  of  the  Chief  Executive and Chief Lending Officers of the
Bank,  in  addition  to  members  of  the  Bank's Portfolio Control Center.  The
Subcommittee  meets  regularly 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.  A representative of
the  Subcommittee  also  meets  with  members of Coastal's banking, treasury and
marketing  areas to participate in pricing and funding decisions with respect to
Coastal's overall asset and liability composition.  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 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
using  selected interest rate scenarios.  The extent to which assets have gained
or  lost  value in relation to the gains or losses of liabilities determines the
appreciation  or depreciation in equity on a market-value basis.  Economic value
analysis  is intended to evaluate the impact of immediate and sustained interest
rate  shifts  of  the  current  yield curve upon the market value of the current
balance  sheet.

     From  these  analyses,  interest  rate  risk  is quantified and appropriate
strategies  are  formulated  and  implemented  on  an  ongoing  basis.  Based on
Coastal's  December  31,  1998  interest  rate  sensitivity position, management
believes  that  at  December  31,  1998 an immediate 100 basis point increase in
interest  rates  could cause a short term decrease in net interest income due to
timing  differences  but would not have a significant impact over a twelve month
period.  There  can  be no assurance that this conclusion will not change as the
assumptions  utilized  by  management to reach such conclusion change over time.

     The  following  table  presents an analysis of the sensitivity in Coastal's
net  interest  income  over  a  four-quarter  period  and  the  EVE based on the
indicated changes in interest rates at December 31, 1998 and 1997.  The interest
rate  scenarios  presented  in  the table include interest rates at December 31,
1998  and  1997 and, for the net interest income calculation, as adjusted by the
indicated  changes in interest rates over a four-quarter period, and for the EVE
calculation, as adjusted by instantaneous and parallel changes in interest rates
of  upward  and downward of up to 200 basis points.  Each rate scenario reflects
unique  prepayment  and  repricing  assumptions.

<TABLE>
<CAPTION>
                                   Estimated  Change  In
     Change              Net  Interest Income                  EVE
In  Interest Rates          December  31,                 December  31,
(in  basis  points)        1998       1997              1998      1997
--------------------    --------   -----------         ------   ---------
<S>                       <C>      <C>                 <C>      <C>     

+200                       (8.56)%   (7.41)%            (6.41)%  (21.07)%
+100                       (4.05).   (3.76)             (0.66)    (6.52)
   0                          --         --                --        -- 
-100                        4.77       3.52             (2.09)     0.18 
-200                        9.10       7.25             (5.32)    (6.54)
</TABLE>




     There  are  limitations  inherent  in  any methodology used to estimate the
exposure  to  changes in market interest rates.  Therefore, this analysis is not
intended  to  be  a forecast of the actual effect of a change in market 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  on  which  it  is  based.
     The  EVE  is  significantly  impacted by the estimated effect of prepayment
risk  on  the value of mortgage-backed securities, loans receivable and mortgage
servicing rights as market interest rates change.  Prepayment risk arises due to
the possibility that the cash flow experience of an asset may change as interest
rates  change.  When  interest  rates  increase,  assets  will  generally not be
prepaid and conversely, when interest rates decrease, prepayments increase.  The
magnitude  of  the  risk  that  a  higher yielding asset will prepay is a direct
function  of  interest rate variability over the life of the asset.  Prepayments
affect  Coastal's  net  spread  and  the  duration  match  of  its  assets  and
liabilities.  Coastal  has prepayment risk on its mortgage-backed securities and
loans  receivable  held at a premium and on its mortgage servicing rights due to
the  fact that the amortization of the capitalized premiums on those assets will
accelerate  when  the  underlying  loans  are  prepaid.  Coastal  attempts  to
anticipate  its  prepayment  risk by extrapolation from past prepayment behavior
after adjusting for expected interest rate levels and other economic factors and
utilizes  these  assumptions  when  analyzing  its  risk  exposure.
     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
interest-sensitivity  analysis  takes  into  account repricing and maturities of
assets  and liabilities, it fails to consider the interest rate sensitivities of
those  asset  and  liability  accounts.
     The  following  table  summarizes  the  contractual maturities or repricing
characteristics  of  Coastal's  interest-earning  assets  and  interest-bearing
liabilities adjusted for the effects of interest rate swaps and caps at December
31,  1998.  The  principal  balance of adjustable rate assets is included in the
period  in which they are first scheduled to adjust rather than in the period in
which they mature.  Other material assumptions are set forth in the footnotes to
the  table.

<TABLE>

<CAPTION>

                                                                  As of December 31, 1998

<S>                                                         <C>                      <C>             <C>
                                                           More than      More than       More than
                                                         Three months    three months    one year to
                                                           or less        to one year     three years
                                                            (Dollars in thousands)
INTEREST-SENSITIVE ASSETS
 Loans, net (1)(2):
   First lien mortgage-single family fixed rate. . . . . .  $  1,504   $       3,125   $     11,395 
   First lien mortgage-single family adjustable
     rate. . . . . . . . . . . . . . . . . . . . . . . . .    48,326         401,175         57,551 
   First lien mortgage-multifamily fixed rate. . . . . . .     5,285           1,970          5,487 
   First lien mortgage-multifamily variable rate . . . . .   101,190              --             -- 
   Construction and acquisition and
     development, net of loans in process. . . . . . . . .   117,839           2,509          1,694 
   Commercial real estate. . . . . . . . . . . . . . . . .   169,216           6,010         21,366 
   Commercial. . . . . . . . . . . . . . . . . . . . . . .   243,337           6,177          9,293 
   Consumer and other. . . . . . . . . . . . . . . . . . .     9,506          10,707         14,574 
 Mortgage-backed securities held-to-maturity(1)(2) . . . . 1,016,361              --              1 
 Securities available-for-sale (1)(2). . . . . . . . . . .    96,609           2,016             -- 
 Other interest-earning assets (3) . . . . . . . . . . . .    52,921              --             -- 
                                                          -----------  --------------  -------------
     Total interest-sensitive assets . . . . . . . . . . . 1,862,094         433,689        121,361 
                                                          -----------  --------------  -------------
 Noninterest-sensitive assets

     Total assets

INTEREST-SENSITIVE LIABILITIES:
 Savings deposits (4):
   Interest-bearing checking accounts. . . . . . . . . . . $  63,067   $          --   $         -- 
   Savings accounts. . . . . . . . . . . . . . . . . . . .    48,571              --             -- 
   Money market accounts . . . . . . . . . . . . . . . . .   283,695              --             -- 
   Certificate accounts (including premium). . . . . . . .   289,462         676,191        170,543 
 Securities sold under agreements to repurchase. . . . . .        --              --             -- 
 Advances from the FHLB. . . . . . . . . . . . . . . . . .   762,300         111,054         15,309 
 Senior Notes payable. . . . . . . . . . . . . . . . . . .        --              --             -- 
                                                         --------------  --------------  -------------
     Total interest-sensitive liabilities. . . . . . . . . 1,447,095         787,245        185,852 
                                                         --------------  --------------  -------------
 Noninterest-sensitive liabilities

     Total liabilities
 Preferred Stock of the Bank
 Common stockholders' equity
     Total liabilities and stockholders'
     equity

Gap during the period. . . . . . . . . . . . . . . . . . .  $ 414,999   $    (353,556)  $    (64,491)
Effect of interest rate swaps and caps(5). . . . . . . . .     38,005         (14,600)        (7,180)
                                                           -----------  --------------  -------------
Cumulative gap after effect of interest rate swaps
 and caps. . . . . . . . . . . . . . . . . . . . . . . . .  $ 453,004   $      84,848   $     13,177 
                                                            ==========  ==============  =============

Interest-sensitive assets as a % of interest-sensitive
 liabilities (cumulative). . . . . . . . . . . . . . . . .     128.68%         102.75%         99.87%
Interest-sensitive assets as a % of total
 assets (cumulative) . . . . . . . . . . . . . . . . . . .      62.44           76.98          81.05 
Ratio of gap after effect of interest rate swaps and caps
 to total assets . . . . . . . . . . . . . . . . . . . . .      15.19          (12.35)         (2.40)
Ratio of cumulative gap after effect of interest rate
 swaps and caps to total assets. . . . . . . . . . . . . .      15.19            2.85           0.44 


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

INTEREST-SENSITIVE ASSETS
 Loans, net (1)(2):
   First lien mortgage-single family fixed rate. . . . . .  $  29,857   $       21,762   $      55,930   $      55,282
   First lien mortgage-single family adjustable
     rate. . . . . . . . . . . . . . . . . . . . . . . . .      4,135               --              --              -- 
   First lien mortgage-multifamily fixed rate. . . . . . .      3,119            1,042             399              -- 
   First lien mortgage-multifamily variable rate . . . . .         --               --              --              -- 
   Construction and acquisition and
     development, net of loans in process. . . . . . . . .      5,523            1,002           1,177              -- 
   Commercial real estate. . . . . . . . . . . . . . . . .     19,286           11,594          26,707              -- 
   Commercial. . . . . . . . . . . . . . . . . . . . . . .      6,894              902              --              -- 
   Consumer and other. . . . . . . . . . . . . . . . . . .     28,284           12,505           3,513              -- 
 Mortgage-backed securities held-to-maturity(1)(2) . . . .         --               41           8,315         129,398 
 Securities available-for-sale (1)(2). . . . . . . . . . .         --               --              --              -- 
 Other interest-earning assets (3) . . . . . . . . . . . .         --               --              --              -- 
                                                            ----------  ---------------  --------------  --------------
     Total interest-sensitive assets . . . . . . . . . . .     97,098           48,848          96,041         184,680 
                                                            ----------  ---------------  --------------  --------------
 Noninterest-sensitive assets

     Total assets


INTEREST-SENSITIVE LIABILITIES:
 Savings deposits (4):
   Interest-bearing checking accounts. . . . . . . . . . .  $      --   $           --   $          --   $          -- 
   Savings accounts. . . . . . . . . . . . . . . . . . . .         --               --              --              -- 
   Money market accounts . . . . . . . . . . . . . . . . .         --               --              --              -- 
   Certificate accounts (including premium). . . . . . . .     22,051              145               5              90 
 Securities sold under agreements to repurchase. . . . . .         --          100,000              --              -- 
 Advances from the FHLB. . . . . . . . . . . . . . . . . .      2,834           59,914          15,309              -- 
 Senior Notes payable. . . . . . . . . . . . . . . . . . .     50,000               --              --              -- 
                                                            ----------  ---------------  --------------  --------------
     Total interest-sensitive liabilities. . . . . . . . .     74,885          160,059          15,314              90 
                                                            ----------  ---------------  --------------  --------------
 Noninterest-sensitive liabilities

     Total liabilities
 Preferred Stock of the Bank
 Common stockholders' equity
     Total liabilities and stockholders'
     equity


Gap during the period. . . . . . . . . . . . . . . . . . .  $  22,213   $     (111,211)  $      80,727   $     184,590 
Effect of interest rate swaps and caps(5). . . . . . . . .         --          (16,225)             --              -- 
                                                            ----------  ---------------  --------------  --------------  
Cumulative gap after effect of interest rate swaps
 and caps. . . . . . . . . . . . . . . . . . . . . . . . .  $  35,390   $      (92,046)  $     (11,319)  $     173,271 
                                                            ==========  ===============  ==============  ============== 

Interest-sensitive assets as a % of interest-sensitive
 liabilities (cumulative). . . . . . . . . . . . . . . . .     100.77%           96.53%          99.58%         106.49%
Interest-sensitive assets as a % of total
 assets (cumulative) . . . . . . . . . . . . . . . . . . .      84.31            85.95           89.17           95.36 
Ratio of gap after effect of interest rate swaps and caps
 to total assets . . . . . . . . . . . . . . . . . . . . .       0.74            (4.27)           2.71            6.19 
Ratio of cumulative gap after effect of interest rate
 swaps and caps to total assets. . . . . . . . . . . . . .       1.19            (3.09)          (0.38)           5.81 



<S>                                                          <C>      
                                                                      
                                                                Totals

INTEREST-SENSITIVE ASSETS
 Loans, net (1)(2):
   First lien mortgage-single family fixed rate. . . . . .  $    178,855
   First lien mortgage-single family adjustable
     rate. . . . . . . . . . . . . . . . . . . . . . . . .       511,187
   First lien mortgage-multifamily fixed rate. . . . . . .        17,302
   First lien mortgage-multifamily variable rate . . . . .       101,190
   Construction and acquisition and
     development, net of loans in process. . . . . . . . .       129,744
   Commercial real estate. . . . . . . . . . . . . . . . .       254,179
   Commercial. . . . . . . . . . . . . . . . . . . . . . .       266,603
   Consumer and other. . . . . . . . . . . . . . . . . . .        79,089
 Mortgage-backed securities held-to-maturity(1)(2) . . . .     1,154,116
 Securities available-for-sale (1)(2). . . . . . . . . . .        98,625
 Other interest-earning assets (3) . . . . . . . . . . . .        52,921
                                                             -----------
     Total interest-sensitive assets . . . . . . . . . . .     2,843,811
                                                            ------------
 Noninterest-sensitive assets. . . . . . . . . . . . . . .      138,350 
                                                            ------------
     Total assets. . . . . . . . . . . . . . . . . . . . .  $ 2,982,161 
                                                            ============


INTEREST-SENSITIVE LIABILITIES:
 Savings deposits (4):
   Interest-bearing checking accounts. . . . . . . . . . .  $     63,067
   Savings accounts. . . . . . . . . . . . . . . . . . . .        48,571
   Money market accounts . . . . . . . . . . . . . . . . .       283,695
   Certificate accounts (including premium). . . . . . . .     1,158,487
 Securities sold under agreements to repurchase. . . . . .       100,000
 Advances from the FHLB. . . . . . . . . . . . . . . . . .       966,720
 Senior Notes payable. . . . . . . . . . . . . . . . . . .        50,000
                                                            ------------
     Total interest-sensitive liabilities. . . . . . . . .     2,670,540
                                                            ------------
Non-interest-sensitive liabilities . . . . . . . . . . . .       170,107
                                                            ------------
     Total liabilities . . . . . . . . . . . . . . . . . .     2,840,647
 Preferred Stock of the Bank . . . . . . . . . . . . . . .        28,750
 Common stockholders' equity . . . . . . . . . . . . . . .       112,764
                                                            -------------
     Total liabilities and stockholders'
     equity. . . . . . . . . . . . . . . . . . . . . . . .     2,982,161
                                                            =============

</TABLE>

_______________
Footnotes:

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

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

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

     At  December 31, 1998, Coastal was a party to interest rate swap agreements
which have an aggregate notional amount of $38.0 million and expire from 1999 to
2005.  At December 31, 1998, the fair value of the interest rate swap agreements
was  estimated  to  be a loss of $1.1 million.  With respect to such agreements,
Coastal  makes  weighted-average  fixed  interest payments ranging from 6.00% to
6.93%,  and  receives payments based on the floating three-month LIBOR.  Coastal
records  net  interest  income  or  expense relating to the swap agreements on a
monthly  basis  in  interest expense on other borrowed money.  The net effect of
the  interest  rate swaps to Coastal for the years ended December 31, 1998, 1997
and  1996  was  to increase interest expense by approximately $377,000, $431,000
and  $593,000, respectively.  See Note 15 of the Notes to Consolidated Financial
Statements.

     An  interest rate cap is a guarantee given by one party, referred to as the
issuer  (the  Broker), to another party, referred to as the purchaser (Coastal),
in  exchange  for  the payment of a premium, that if interest rates rise above a
specified  rate  on  a specified interest rate index, the issuer will pay to the
purchaser  the difference between the then current market rate and the specified
rate  on  a  notional  principal  amount for a predetermined period of time.  No
funds  are  actually  borrowed  or  repaid.  The principal purpose of purchasing
these caps is to prevent the occurrence of a negative spread relating to certain
adjustable  rate  mortgage-backed  securities  and loans receivable in Coastal's
portfolio  during  a  period in which the cost of funds borrowed to acquire such
assets rises above the contractual interest rate ceiling on the asset purchased.
Interest  rate  caps  generally  decrease  the  interest  margin because Coastal
receives  no  payment from the issuer (until the rate index rises above the rate
cap)  but  continues  to  amortize  the  prepaid premium.  At December 31, 1998,
Coastal  had  interest  rate  cap  agreements,  which  expire from 1999 to 2003,
covering an aggregate notional amount of $209.5 million, of which $110.5 million
were  covering  certain  of  Coastal's  loans  receivable,  and  are  triggered,
depending on the particular contract, whenever the defined floating rate exceeds
7.0%  to  11.0%.  The  purchase  price  or  premium  of  the  interest  rate cap
agreements  paid  by Coastal is capitalized and included in prepaid expenses and
other  assets  and  is  amortized  over  the  life  of  the agreements using the
straight-line  method.  The  unamortized  portion  of  the  purchase  price  was
approximately  $115,000  at  December  31,  1998 with an estimated fair value of
$888,000.  For  the  years  ended December 31, 1998, 1997 and 1996, the interest
rate  caps  resulted  in an overall decrease in interest income of approximately
$53,000,  $218,000  and  $518,000,  respectively.  See  Note  15 of the Notes to
Consolidated  Financial  Statements.

<PAGE>
LIQUIDITY  AND  CAPITAL  RESOURCES
     Coastal's  assets  approximated  $3.0 billion at December 31, 1998 and $2.9
billion  at  December 31, 1997.  Stockholders' equity amounted to $112.8 million
at  December  31, 1998, after the treasury stock purchases during 1998 at a cost
of  $7.8  million.  The regulatory capital of Coastal's subsidiary, Coastal Banc
ssb,  exceeded  all  three  of  the  Bank's  regulatory  capital requirements at
December  31,  1998.  At  December 31, 1998, the Bank's core capital amounted to
5.25%  of adjusted total assets, compared to the requirement of 4.0%, its Tier 1
risk-based  capital amounted to 9.54% of risk-adjusted assets as compared to the
requirement  of  4.0%  and  its  total  risk-based capital amounted to 10.23% of
risk-adjusted  assets,  compared  to  a  requirement  of  8.0%.

     Coastal's  primary  sources  of  funds  consist of savings deposits bearing
market  rates  of  interest,  advances  from  the  FHLB,  securities  sold under
agreements  to repurchase and federal funds purchased and principal and interest
payments  on  loans  receivable and mortgage-backed securities.  In addition, on
August  14, 1998, Coastal completed the Valley Acquisition which resulted in the
assumption  of  $120.1  million  in  net  liabilities.  Coastal uses its funding
resources  principally to meet its ongoing commitments to fund maturing deposits
and  deposit  withdrawals,  repay  borrowings,  purchase  loans  receivable  and
mortgage-backed  securities,  fund  existing  and  continuing  loan commitments,
maintain  its  liquidity, meet operating expenses and fund acquisitions of other
banks and thrifts, either on a branch office or whole bank acquisition basis, in
addition  to  purchasing  treasury  stock.  At  December  31,  1998, Coastal had
binding commitments to originate or purchase loans totaling approximately $142.1
million  and had $99.8 million of undisbursed loans in process.  In addition, at
December  31,  1998,  Coastal had commitments under lines of credit to originate
primarily  construction  and  other  loans  of  approximately $124.0 million and
letters  of  credit  outstanding  of  $4.5  million.  Scheduled  maturities  of
certificates  of  deposit  during  the twelve months following December 31, 1998
totaled $965.4 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 generally accepted accounting principles,
which  require  the  measurement  of financial position and operating results in
terms  of  historical  dollars,  without  considering  changes  in  the relative
purchasing  power  of  money over time due to inflation.  Unlike most commercial
companies,  substantially  all  of  the  assets  and  liabilities of Coastal are
monetary  in nature.  As a result, interest rates have a more significant impact
on  Coastal's  performance  than  the  effects  of  general levels of inflation.
Interest  rates  do  not necessarily move in the same direction or with the same
magnitude  as  the  prices  of  goods  and  services.

YEAR  2000
     Many  existing  computer  programs, including many utilized by Coastal, use
only  two  digits  to  identify  a  year in the date field.  These programs were
designed  and developed without considering the impact of the upcoming change in
the  century.  Because of the year 2000 implications, Coastal formally initiated
a  project  during  the first quarter of 1997 to ensure that its operational and
financial systems will not be adversely affected by year 2000 software problems.
The  year  2000  project  team,  which  includes  all  levels  of management, is
identifying  the  computer  applications  which  could  fail or create erroneous
results  because  of  the  year 2000, and is developing alternate ("contingent")
operating systems for these applications.  Coastal has included in its year 2000
project  the  following  phases:
     inventory  and  assessment;
     renovation,  which  includes  the  repair  or  replacement;
     validation,  which  includes  the testing of computer systems and Coastal's
connections  with  other  computer  systems  and  service  bureaus;
     due  diligence  of  third-party  servicers;
     development  of  contingency  plans.
Regular  year  2000  progress  reports have been and will continue to be made to
Coastal's  Board  of  Directors.

     An inventory of all core systems and products that could be affected by the
year 2000 date change has been developed by Coastal.  The software for Coastal's
systems  is  primarily provided through third party service bureaus and software
vendors.  Coastal  is  requiring  its  third  party  service  bureaus,  software
providers  and  vendors  to demonstrate and represent that the products provided
are  or will be year 2000 compliant.  Coastal has an internal compliance testing
program  in  place  for  testing  with  the  external  service bureaus and other
software  providers,  as well as testing other internally used systems.  Coastal
expects  to  complete  its  testing  and  remediation  by  June  1999.

     While  Coastal  does  not  believe  that the process of making its computer
systems  year  2000  ready  will  result  in  an  adverse material impact on its
operations  or  liquidity, a substantial amount of management and staff time has
been and will continue to be devoted to the year 2000 project.  The direct costs
associated with the year 2000 issues are estimated not to exceed $300,000 in the
aggregate.  A portion of such costs representing hardware and software purchases
will  be  capitalized and amortized over an estimated three to five year period.

     Planning  and testing will not ensure that any organization will be able to
conduct  business  around and after the year 2000.  Testing does not ensure that
our customers and other business partners will be able to conduct business.  The
failure of Coastal, its customers and its other business partners to address the
year  2000  software  problems could have a material adverse effect on Coastal's
financial  condition, results of operations or liquidity.  Coastal is performing
due diligence on its customers and other business partners by the implementation
and  continuous  monitoring  of  processes  for  evaluating  its  customers' and
business  partners'  readiness  for  the  year  2000.

     Coastal  has  implemented  procedures and continues to refine its processes
for  evaluating  its  business  readiness  in addition to developing contingency
plans  to  ensure that alternate operating systems are available in the event of
unforeseen  problems.  The  effect of many business disruptions at the same time
may  impact  Coastal.  Coastal  will continue to review its contingency plans to
reasonably  address  these incidents.  While Coastal will have contingency plans
in  place  to  address  a  temporary  disruption  in  services,  there can be no
assurance  that any disruption or failure will be only temporary, that Coastal's
contingency  plans  will  function  as  anticipated,  or  that  the  results  of
operations,  financial  condition, or liquidity of Coastal will not be adversely
affected  in  the  event  of  a  prolonged  disruption  or  failure.

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.


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

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


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

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


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


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


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


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
Executive  Vice  President,  Chief  Financial  Officer  and  Treasurer

LINDA  B.  FRAZIER
Senior  Vice  President  and  Secretary


CORPORATE  OFFICERS  OF  COASTAL  BANC  HOLDING  COMPANY,  INC.

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

CATHERINE  N.  WYLIE
Director,  Executive  Vice  President,  Chief  Financial  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

JOHN  D.  BIRD
Executive  Vice  President  -  Chief  Administrative  Officer

GARY  R.  GARRETT
Executive  Vice  President  -  Chief  Lending  Officer

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

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

CATHERINE  N.  WYLIE
Executive  Vice  President  -  Chief  Financial  Officer
                                     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  1998,  Coastal  entered  into  seven  branch
acquisitions and one whole bank acquisition:  two with an instrumentality of the
Federal  government  and  six  with  private institutions.  In each transaction,
Coastal  agreed  to acquire certain assets in consideration of the assumption of
certain  deposit liabilities with respect to each institution.  In 1996, Coastal
also  exchanged  three  branches  for one resulting in a net deposit increase of
$26.0  million  and  sold  one  branch  in  separate transactions.  All of these
transactions  resulted in the net assumption of $1.9 billion of deposits and the
net  acquisition  of  58  branch  offices.  Coastal  has also opened six 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,  1998,  Coastal  had  total  assets of approximately $3.0
billion  and total deposits of approximately $1.7 billion with 49 branch offices
in metropolitan Houston, Austin, Corpus Christi, the Rio Grande Valley and small
cities  in  the  southeast  quadrant  of  Texas.














                          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, 1998 and
1997  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,  1998.  These  consolidated  financial
statements  are  the  responsibility  of  the  Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements  based  on  our  audits.

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

     In  our  opinion,  the  consolidated financial statements referred to above
present  fairly,  in  all  material respects, the financial condition of Coastal
Bancorp,  Inc. and subsidiaries at December 31, 1998 and 1997 and the results of
their  operations  and  their cash flows for each of the years in the three-year
period  ended December 31, 1998 in conformity with generally accepted accounting
principles.




/s/  KPMG  LLP
--------------
January  19,  1999,  except  as  to  Note  6,  which  is as of February 11, 1999
Houston,  Texas


<TABLE>
<CAPTION>

                          COASTAL BANCORP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                DECEMBER 31, 1998 AND 1997
                            (IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS                                                                1998        1997
-----------------------------------------------------------------  ----------  ----------
<S>                                                                <C>         <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . .  $   45,453  $   37,096
Loans receivable (Notes 6 and 11) . . . . . . . . . . . . . . . .   1,538,149   1,261,435
Mortgage-backed securities held-to-maturity (market value of
 $1,145,369 in 1998 and $1,324,968 in 1997)
 (Notes 5, 11, 12, 14 and 15) . . . . . . . . . . . . . . . . . .   1,154,116   1,345,090
Mortgage-backed securities available-for-sale, at market value
 (Notes 5, 11, 12, 14 and 15) . . . . . . . . . . . . . . . . . .      96,609     169,997
U.S. Treasury security available-for-sale, at market value. . . .       2,016          --
Accrued interest receivable (Note 7). . . . . . . . . . . . . . .      15,518      14,813
Property and equipment (net of accumulated depreciation and
 amortization of $11,925 in 1998 and $8,100 in 1997). . . . . . .      33,116      22,250
Stock in the Federal Home Loan Bank of Dallas ("FHLB"). . . . . .      49,819      27,801
Goodwill (net of accumulated amortization of $13,554 in 1998 and
 $11,270 in 1997) . . . . . . . . . . . . . . . . . . . . . . . .      30,687      15,717
Mortgage servicing rights (Note 8). . . . . . . . . . . . . . . .       4,049       5,653
Prepaid expenses and other assets (Notes 9, 15 and 17). . . . . .      12,629      11,558
                                                                   ----------  ----------
                                                                   $2,982,161  $2,911,410
                                                                   ==========  ==========
</TABLE>


<TABLE>
<CAPTION>

     LIABILITIES  AND  STOCKHOLDERS'  EQUITY
     ---------------------------------------
<S>                                                               <C>          <C>
Liabilities:
 Savings deposits (Note 10). . . . . . . . . . . . . . . . . . .  $1,705,004   $1,375,060 
 Advances from the FHLB (Note 11). . . . . . . . . . . . . . . .     966,720      540,475 
 Securities sold under agreements to repurchase (Note 12). . . .     100,000      791,760 
 Senior Notes payable (Note 13). . . . . . . . . . . . . . . . .      50,000       50,000 
 Advances from borrowers for taxes and insurance . . . . . . . .       3,340        3,975 
 Other liabilities and accrued expenses. . . . . . . . . . . . .      15,583       16,560 
   Total liabilities . . . . . . . . . . . . . . . . . . . . . .   2,840,647    2,777,830 
                                                                  -----------  -----------

9.0% noncumulative preferred stock of Coastal Banc ssb
 (Note 21) . . . . . . . . . . . . . . . . . . . . . . . . . . .      28,750       28,750 

Commitments and contingencies (Notes 6, 15, 19 and 24)

Stockholders' equity (Notes 5, 19, 22 and 23):
 Preferred Stock, no par value; authorized shares 5,000,000;
   no shares issued. . . . . . . . . . . . . . . . . . . . . . .          --           -- 
 Common Stock, $.00667 par value; authorized shares 45,000,000;
   7,568,255 and 7,513,389 shares issued in 1998 and 1997. . . .          50           50 
 Additional paid-in capital. . . . . . . . . . . . . . . . . . .      33,722       33,186 
 Retained earnings . . . . . . . . . . . . . . . . . . . . . . .      88,144       73,868 
 Accumulated other comprehensive loss -
   unrealized loss on securities available-for-sale. . . . . . .      (1,374)      (2,274)
 Treasury stock, at cost (499,600 shares in 1998). . . . . . . .      (7,778)          -- 
                                                                  -----------  -----------
   Total stockholders' equity. . . . . . . . . . . . . . . . . .     112,764      104,830 
                                                                  -----------  -----------
                                                                  $2,982,161   $2,911,410 
                                                                  ===========  ===========
</TABLE>


See  accompanying  notes  to  Consolidated  Financial  Statements.

<TABLE>
<CAPTION>

                              COASTAL BANCORP, INC. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF OPERATIONS
                           YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                               (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                                       <C>       <C>        <C>
<S>                                                                 <C>        <C>       <C>
                                                                        1998       1997      1996 
                                                                    ---------  --------  ---------
Interest income:
 Loans receivable. . . . . . . . . . . . . . . . . . . . . . . . .  $120,281   $106,962  $ 97,935 
 Mortgage-backed securities. . . . . . . . . . . . . . . . . . . .    87,596     92,755    95,155 
 FHLB stock, federal funds sold and other interest-earning assets.     2,937      1,639     1,521 
                                                                     210,814    201,356   194,611 
                                                                    ---------  --------  ---------

Interest expense:
 Savings deposits. . . . . . . . . . . . . . . . . . . . . . . . .    66,128     62,912    60,076 
 Other borrowed money. . . . . . . . . . . . . . . . . . . . . . .    32,723     55,189    51,360 
 Senior Notes payable. . . . . . . . . . . . . . . . . . . . . . .     5,000      5,000     5,000 
 Advances from the FHLB:
   Short-term. . . . . . . . . . . . . . . . . . . . . . . . . . .    16,042      8,562     6,622 
   Long-term . . . . . . . . . . . . . . . . . . . . . . . . . . .    23,511     12,760    15,127 
                                                                    ---------  --------  ---------
                                                                     143,404    144,423   138,185 
                                                                    ---------  --------  ---------

   Net interest income . . . . . . . . . . . . . . . . . . . . . .    67,410     56,933    56,426 
Provision for loan losses (Note 6) . . . . . . . . . . . . . . . .     3,100      1,800     1,925 
   Net interest income after provision for loan losses . . . . . .    64,310     55,133    54,501 
                                                                    ---------  --------  ---------

Noninterest income:
 Loan fees and service charges on deposit accounts . . . . . . . .     5,752      4,018     3,450 
 Loan servicing income, net. . . . . . . . . . . . . . . . . . . .       642      1,406     1,565 
 Gain on sale of branch office (Note 3). . . . . . . . . . . . . .        --         --       521 
 Gain (loss) on sales of mortgage-backed securities
   available-for-sale, net . . . . . . . . . . . . . . . . . . . .         1        237        (4)
 Writedown of purchased mortgage loan premium. . . . . . . . . . .      (709)        --        -- 
 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,186        723       559 
                                                                    ---------  --------  ---------
                                                                       6,872      6,384     6,091 
                                                                    ---------  --------  ---------

Noninterest expense:
 Compensation, payroll taxes and other benefits. . . . . . . . . .    23,072     18,754    16,547 
 Office occupancy. . . . . . . . . . . . . . . . . . . . . . . . .     9,320      7,312     6,002 
 Data processing . . . . . . . . . . . . . . . . . . . . . . . . .     2,695      2,245     2,447 
 Amortization of goodwill. . . . . . . . . . . . . . . . . . . . .     2,284      1,840     1,784 
 Insurance premiums. . . . . . . . . . . . . . . . . . . . . . . .     1,448      1,091     2,199 
 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     9,564      8,302     8,948 
 SAIF insurance special assessment (Note 18) . . . . . . . . . . .        --         --     7,455 
                                                                    ---------  --------  ---------
                                                                      48,383     39,544    45,382 
                                                                    ---------  --------  ---------

     Income before provision for Federal income taxes. . . . . . .    22,799     21,973    15,210 

Provision for Federal income taxes (Note 17) . . . . . . . . . . .     3,543      7,822     5,671 
                                                                    ---------  --------  ---------
     Net income before preferred stock dividends . . . . . . . . .    19,256     14,151     9,539 

Preferred stock dividends of Coastal Banc ssb. . . . . . . . . . .     2,588      2,588     2,588 
                                                                    ---------  --------  ---------
     Net income available to common stockholders . . . . . . . . .  $ 16,668   $ 11,563  $  6,951 
                                                                    =========  ========  =========
Basic earnings per share (Note 23) . . . . . . . . . . . . . . . .  $   2.24   $   1.55  $   0.93 
                                                                    =========  ========  =========
Diluted earnings per share (Note 23) . . . . . . . . . . . . . . .  $   2.18   $   1.50  $   0.92 
                                                                    =========  ========  =========
</TABLE>


See  accompanying  notes  to  Consolidated  Financial  Statements.

<PAGE>
                     COASTAL BANCORP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

<S>                                                   <C>      <C>      <C>
                                                         1998     1997     1996 
                                                      -------  -------  --------
Net income available to common stockholders. . . . .  $16,668  $11,563  $ 6,951 

Other comprehensive income (loss), net of tax:
 Unrealized holding gains (losses) on securities
   available-for-sale arising during period (Note 5)      900      829   (2,609)
                                                      -------  -------  --------
Comprehensive income . . . . . . . . . . . . . . . .  $17,568  $12,392  $ 4,342 
                                                      =======  =======  ========
</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, 1998, 1997 AND 1996
                                                          (IN THOUSANDS)
<S>                                                     <C>           <C>       <C>         <C>              <C>         <C>
                                                                                            Accumulated
                                                                     Additional             other
                                                        Common        paid-in   Retained    comprehensive    Treasury
                                                        Stock         capital   earnings    loss             stock       Total
                                                        ------------  --------  ----------  ---------------  ----------  ---------
Balance - December 31, 1995. . . . . . . . . . . . . .  $         50  $ 32,492  $  59,631   $       (494)  $      --   $ 91,679 
Dividends on Common Stock. . . . . . . . . . . . . . .            --        --     (1,985)            --          --     (1,985)
Exercise of stock options
 (Note 19) . . . . . . . . . . . . . . . . . . . . . .            --       112         --             --          --        112 
Change in net unrealized holding
 gain (loss) on securities available-for-sale (Note 5)
                                                                  --        --         --         (2,609)         --     (2,609)
Net income for 1996. . . . . . . . . . . . . . . . . .            --        --      6,951             --          --      6,951 
                                                        ------------  --------  ----------  -------------  ----------  ---------

Balance - December 31, 1996. . . . . . . . . . . . . .            50    32,604     64,597         (3,103)         --     94,148 
Dividends on Common Stock. . . . . . . . . . . . . . .            --        --     (2,292)            --          --     (2,292)
Exercise of stock options
 (Note 19) . . . . . . . . . . . . . . . . . . . . . .            --       582         --             --          --        582 
Change in net unrealized holding
 gain (loss) on securities available-for-sale (Note 5)
                                                                  --        --         --            829          --        829 
Net income for 1997. . . . . . . . . . . . . . . . . .            --        --     11,563             --          --     11,563 
                                                        ------------  --------  ----------  -------------  ----------  ---------

Balance - December 31, 1997. . . . . . . . . . . . . .            50    33,186     73,868         (2,274)         --    104,830 
Dividends on Common Stock. . . . . . . . . . . . . . .            --        --     (2,392)            --          --     (2,392)
Exercise of stock options
 (Note 19) . . . . . . . . . . . . . . . . . . . . . .            --       536         --             --          --        536 
Purchase of treasury stock at cost . . . . . . . . . .            --        --         --             --      (7,778)    (7,778)
Change in net unrealized holding
 gain (loss) on securities available-for-sale (Note 5)
                                                                  --        --         --            900          --        900 
Net income for 1998. . . . . . . . . . . . . . . . . .            --        --     16,668             --          --     16,668 
                                                        ------------  --------  ----------  -------------  ----------  ---------

Balance - December 31, 1998. . . . . . . . . . . . . .  $         50  $ 33,722  $  88,144   $     (1,374)  $  (7,778)  $112,764 
                                                        ============  ========  ==========  =============  ==========  =========

</TABLE>



See  accompanying  notes  to  Consolidated  Financial  Statements.


<PAGE>
<TABLE>

<CAPTION>

                             COASTAL BANCORP, INC. AND SUBSIDIARIES
                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                          YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                                         (IN THOUSANDS)

<S>                                                          <C>         <C>         <C>
                                                                  1998        1997        1996 
                                                             ----------  ----------  ----------
Cash flows from operating activities:
 Net income available to common stockholders. . . . . . . .  $  16,668   $  11,563   $   6,951 
 Adjustments to reconcile net income to net cash provided
   by operating activities:
 Depreciation and amortization of property and equipment,
   mortgage servicing rights and prepaid expenses
   and other assets . . . . . . . . . . . . . . . . . . . .      9,099       7,485       6,098 
 Net premium amortization . . . . . . . . . . . . . . . . .      3,101       3,025       1,146 
 Provision for loan losses. . . . . . . . . . . . . . . . .      3,100       1,800       1,925 
 Amortization of goodwill . . . . . . . . . . . . . . . . .      2,284       1,840       1,784 
 Originations and purchases of mortgage loans held for sale    (26,536)     (8,063)    (19,739)
 Sales of mortgage loans held for sale. . . . . . . . . . .     26,287       8,361      20,158 
 (Gain) loss on sales of mortgage-backed securities
   available-for-sale . . . . . . . . . . . . . . . . . . .         (1)       (237)          4 
 Gain on sale of branch office. . . . . . . . . . . . . . .         --          --        (521)
 Decrease (increase) in:
   Accrued interest receivable. . . . . . . . . . . . . . .      1,863        (123)        853 
   Other, net . . . . . . . . . . . . . . . . . . . . . . .        104       9,668      (3,024)
 Stock dividends from the FHLB. . . . . . . . . . . . . . .     (2,247)     (1,287)     (1,288)
                                                             ----------  ----------  ----------

   Net cash provided by operating activities. . . . . . . .     33,722      34,032      14,347 
                                                             ----------  ----------  ----------

Cash flows from investing activities:
 Purchases of mortgage-backed securities held-to-maturity .     (8,203)    (56,136)         -- 
 Purchase of U.S. Treasury security available-for-sale. . .         --          --         (11)
 Principal repayments on mortgage-backed securities . . . .    199,052      55,549      50,616 
   held-to-maturity
 Principal repayments on mortgage-backed securities
   available-for-sale . . . . . . . . . . . . . . . . . . .     26,206         627         879 
 Proceeds from maturity of U.S. Treasury securities . . . .     25,000          11       4,000 
   available-for-sale
 Proceeds from sales of mortgage-backed securities. . . . .     48,551      11,545         860 
   available-for-sale
 Purchases of loans receivable. . . . . . . . . . . . . . .   (329,058)   (135,202)   (190,612)
 Net decrease in loans receivable . . . . . . . . . . . . .    218,357      94,670      53,678 
 Purchases of property and equipment, net . . . . . . . . .     (4,401)     (9,825)     (4,273)
 Purchase of FHLB stock . . . . . . . . . . . . . . . . . .    (19,771)     (9,543)     (7,924)
 Proceeds from sales of FHLB stock. . . . . . . . . . . . .         --       9,000       5,000 
 Capitalization of mortgage servicing rights. . . . . . . .         --        (116)         -- 
 Cash and cash equivalents received in business combination
   transactions, net of disposition transaction in 1996 . .    120,085      52,093      11,652 
                                                             ----------  ----------  ----------

   Net cash provided (used) by investing activities . . . .    275,818      12,673     (76,135)
                                                             ----------  ----------  ----------
</TABLE>



<PAGE>

<TABLE>
<CAPTION>

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

<S>                                                                    <C>           <C>            <C>
                                                                              1998           1997          1996 
                                                                       ------------  -------------  ------------
Cash flows from financing activities:
 Net decrease (increase) in savings deposits. . . . . . . . . . . . .  $   (25,399)  $      9,539   $    12,497 
 Advances from the FHLB . . . . . . . . . . . . . . . . . . . . . . .    4,297,136      3,560,603     3,629,022 
 Principal payments on advances from the FHLB . . . . . . . . . . . .   (3,870,891)    (3,429,848)   (3,531,488)
 Proceeds from securities sold under agreements to repurchase
   and   federal funds purchased. . . . . . . . . . . . . . . . . . .    3,958,111      9,834,639     9,276,713 
 Repayments of securities sold under agreements to repurchase
   and federal funds purchased. . . . . . . . . . . . . . . . . . . .   (4,649,871)   (10,009,866)   (9,303,558)
 Exercise of stock options for purchase of common stock, net. . . . .          536            582           112 
 Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . .       (7,778)            --            -- 
 Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . .       (2,392)        (2,292)       (1,985)
 Net decrease in advances from borrowers for taxes and insurance. . .         (635)          (701)       (1,834)
   Net cash provided (used) by financing activities . . . . . . . . .     (301,183)       (37,344)       79,479 
                                                                       ------------  -------------  ------------

   Net increase in cash and cash equivalents. . . . . . . . . . . . .        8,357          9,361        17,691 
 Cash and cash equivalents at beginning of year . . . . . . . . . . .       37,096         27,735        10,044 
                                                                       ------------  -------------  ------------
 Cash and cash equivalents at end of year . . . . . . . . . . . . . .  $    45,453   $     37,096   $    27,735 
                                                                       ============  =============  ============

 Supplemental schedule of cash flows:
   Interest paid. . . . . . . . . . . . . . . . . . . . . . . . . . .  $   140,620   $    142,532   $   139,926 
   Income taxes paid. . . . . . . . . . . . . . . . . . . . . . . . .        6,980          2,466         6,451 
                                                                       ============  =============  ============

 Supplemental schedule of noncash investing and financing activities:
   Foreclosures of loans receivable . . . . . . . . . . . . . . . . .  $     4,178   $      4,226   $     4,363 
                                                                       ============  =============  ============

</TABLE>


See  accompanying  notes  to  Consolidated  Financial  Statements.

                     COASTAL BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1998 and 1997

(1)     ORGANIZATION  AND  BACKGROUND

ORGANIZATION

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

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

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

BACKGROUND

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

Coastal  Banc  ssb is a broad-based financial services provider to consumers and
businesses.  At  December  31, 1998, Coastal Banc ssb operated 49 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  consolidated  financial  statements.

BASIS  OF  CONSOLIDATED  FINANCIAL  STATEMENTS

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

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

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

USE  OF  ESTIMATES

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

CASH  AND  CASH  EQUIVALENTS

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

LOANS  RECEIVABLE

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

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

Coastal considers a loan to be impaired when, based upon current information and
events,  it  is  probable that Coastal will be unable to collect all amounts due
according  to  the  contractual  terms  of  the  loan agreement.  In determining
impairment,  Coastal  considers, among other things, large non-homogeneous loans
which  may  include  nonaccrual  loans  or  troubled  debt  restructurings,  and
performing  loans which exhibit, among other characteristics, high loan-to-value
ratios,  low  debt  coverage  ratios,  or  indications  that  the  borrowers are
experiencing  increased  levels  of  financial  difficulty.  Coastal  bases  the
measurements  of  collateral-dependent impaired loans on the fair value of their
collateral.  The amount by which the recorded investment in the loan exceeds the
measure  of  the fair value of the collateral securing the loan is recognized by
recording  a  valuation  allowance.

ALLOWANCE  FOR  LOAN  LOSSES

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

SALES  OF  LOANS  RECEIVABLE

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

MORTGAGE  LOANS  HELD  FOR  SALE

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

LOAN  FEES

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

INVESTMENT  AND  MORTGAGE-BACKED  SECURITIES

Coastal  classifies securities as either held-to-maturity, available-for-sale or
trading.  Securities  are  classified  as  held-to-maturity when Coastal has the
positive  intent  and  ability  to hold such securities to maturity.  Securities
held-to-maturity  are recorded at amortized cost.  Securities available-for-sale
are  securities other than those held-to-maturity or trading and are recorded at
fair value, with unrealized gains and losses excluded from earnings and recorded
net  of  tax  as other comprehensive income (loss) in stockholders' equity until
realized.  Realized  gains  and  losses  on  securities  classified  as
available-for-sale  are  recorded  in  earnings in the year of sale based on the
specific  identification  of  each  individual  security  sold.

Coastal records investment and mortgage-backed securities transactions as of the
settlement  date.  There were no pending transactions as of December 31, 1998 or
1997.

Premiums  and  discounts  on  investment  and  mortgage-backed  securities  are
amortized  or  accreted  as  a  yield adjustment over the life of the securities
using  the  interest  method,  with the amortization or accretion being adjusted
when  the  prepayments  are  received.

PROPERTY  AND  EQUIPMENT

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

<PAGE>

STOCK  IN  THE  FEDERAL  HOME  LOAN  BANK  OF  DALLAS

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

GOODWILL

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

MORTGAGE  SERVICING  RIGHTS

Coastal  adopted  the  Financial  Accounting Standards Board's Statement No. 122
("Statement  122"), "Accounting for Mortgage Servicing Rights -- an amendment of
FASB  Statement No. 65" effective January 1, 1996.  Statement 122 eliminated the
accounting  distinction between rights to service mortgage loans for others that
are  acquired  through  loan  origination  activities and those acquired through
purchase transactions.  On January 1, 1997, Coastal adopted Financial Accounting
Standards  Board's Statement No. 125, "Accounting for Transfers and Servicing of
Financial  Assets and Extinguishment of Liabilities," which supersedes Statement
122, and requires, among other things, that the book value of loans be allocated
between  mortgage servicing rights and the related loans at the time of the loan
sale  or  securitization,  if  servicing  is  retained.

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

REAL  ESTATE  OWNED

Real  estate  owned  represents  real estate acquired through foreclosure and is
initially  recorded  at  the  lower of unpaid principal balance adjusted for any
acquisition  premiums  or  discounts  remaining  less  any  applicable valuation
allowance  or  estimated fair value less estimated selling costs.  Subsequent to
foreclosure,  real estate owned is carried at the lower of the new cost basis or
fair  value,  with  any  further  declines  in fair value charged to operations.

FEDERAL  INCOME  TAXES

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

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

OFF-BALANCE  SHEET  INSTRUMENTS  USED  FOR  INTEREST  RATE  RISK  MANAGEMENT

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

STOCK  OPTIONS

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

EARNINGS  PER  SHARE

Statement  of  Financial  Accounting  Standards  No.  128,  "Earnings per Share"
("Statement  128")  was  issued  in  February  1997.  Statement  128 establishes
standards  for  computing and presenting earnings per share ("EPS") and replaces
the presentation of primary EPS with a presentation of basic EPS.  Statement 128
also  requires  dual  presentation  of  basic  and diluted EPS for entities with
complex  capital  structures  as  well  as  a  reconciliation  of  the basic EPS
computation  to  the  diluted  EPS  computation.  Statement 128 is effective for
financial  statements  issued  for  periods  ending  after  December  15,  1997,
including  interim periods.  Coastal adopted Statement 128 in 1997, accordingly,
all  prior  period EPS data presented in the accompanying consolidated financial
statements  has  been  restated to conform to the requirements of Statement 128.

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

CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS

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

RECENT  ACCOUNTING  PRONOUNCEMENTS

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

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

The  Financial Accounting Standards Board's Statement No. 133 ("Statement 133"),
"Accounting  for  Derivative Instruments and for Hedging Activities," was issued
in  June 1998.  Statement 133 requires companies to recognize all derivatives as
either assets or liabilities in the statement of financial condition and measure
those  instruments  at  fair value.  Statement 133 requires that changes in fair
value  of a derivative be recognized currently in earnings unless specific hedge
accounting  criteria  are  met.  Statement  133  is  effective  for fiscal years
beginning  after  June 15, 1999.  Coastal is evaluating the impact Statement 133
may  have  on  its  future  consolidated  financial  statements.

(3)     ACQUISITION  AND  DISPOSITION  TRANSACTIONS
VALLEY  BRANCH  ACQUISITION

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

<TABLE>
<CAPTION>

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

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





<PAGE>
PORT  ARTHUR  BRANCH  ACQUISITION

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

<TABLE>
<CAPTION>

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

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



BRANCH  SWAP

On  September  5,  1996,  Coastal  consummated  the  exchange  of certain branch
locations with Compass Bank.  Coastal sold its three San Antonio branches having
deposits  of  approximately  $53.8  million  to  Compass  Bank and purchased the
Compass  Bay  City  branch  having  deposits  of  approximately  $79.8  million.
Summarized  below  are  the net assets and liabilities recorded at fair value at
the  date  of  the  swap  (in  thousands):

<TABLE>
<CAPTION>

<S>                                     <C>
Cash and cash equivalents. . . . . . .  $25,274 
Loans receivable . . . . . . . . . . .    1,173 
Goodwill . . . . . . . . . . . . . . .       72 
Property and equipment . . . . . . . .     (103)
Other assets . . . . . . . . . . . . .        5 
                                        --------
  Total assets . . . . . . . . . . . .  $26,421 
                                        ========

Savings deposits . . . . . . . . . . .   25,992 
Other liabilities and accrued expenses      429 
                                        --------
  Total liabilities. . . . . . . . . .  $26,421 
                                        ========
</TABLE>



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


<PAGE>
SAN  ANGELO  BRANCH  SALE

On  May 24, 1996, Coastal consummated the sale of its San Angelo location, which
had  approximately  $14.9  million  in  deposits,  to  First State Bank, N.A., a
subsidiary of Independent Bankshares, Inc., headquartered in Abilene, Texas.  As
a result of this sale, Coastal recorded a $521,000 gain before applicable income
taxes.  Coastal  acquired  this  location in the 1994 acquisition of Texas Trust
Savings  Bank,  FSB.  In connection with the sale of this branch office, Coastal
recorded  the  following  reductions  of  assets and liabilities (in thousands):

<TABLE>
<CAPTION>

<S>                                          <C>
Savings deposits sold . . . . . . . . . . .  $14,850
Other liabilities and accrued expenses sold       69
Loans receivable sold . . . . . . . . . . .      155
Property and equipment sold . . . . . . . .      438
Reduction of goodwill . . . . . . . . . . .      179
</TABLE>



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

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

<TABLE>
<CAPTION>

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

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



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

There  were  no  repurchase  agreements or federal funds sold outstanding during
1996.


<PAGE>
(5)     MORTGAGE-BACKED  SECURITIES
     Mortgage-backed  securities  at  December  31,  1998  are  as  follows  (in
thousands):

<TABLE>
<CAPTION>

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



<TABLE>
<CAPTION>

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




     Mortgage-backed  securities  at  December  31,  1997  are  as  follows  (in
thousands):

<TABLE>
<CAPTION>

<S>                       <C>         <C>          <C>           <C>
                                      Gross        Gross
                          Amortized   Unrealized   Unrealized    Market
                          Cost        Gains        Losses        Value
                          ----------  -----------  ------------  ----------
Held-to-maturity:
REMICS - Agency. . . . .  $  950,689  $     5,022  $   (20,478)  $  935,233
REMICS - Non-agency. . .     279,131          701       (5,610)     274,222
FNMA certificates. . . .      71,887          144         (683)      71,348
GNMA certificates. . . .      28,808          566           --       29,374
Non-agency securities. .      14,555          239          (23)      14,771
Interest-only securities          20           --           --           20
                          ----------  -----------  ------------  ----------
                          $1,345,090  $     6,672  $   (26,794)  $1,324,968
                          ==========  ===========  ============  ==========
</TABLE>



<TABLE>
<CAPTION>

<S>                       <C>         <C>          <C>           <C>
Available-for-sale:

REMICS - Agency . .         $171,167         $579      $(4,044)  $  167,702
REMICS - Non-agency            2,328           --          (33)       2,295
                          ----------  -----------  ------------  ----------
                            $173,495         $579      $(4,077)    $169,997
                          ==========  ===========  ============  ==========
</TABLE>



Proceeds  from  sales  of  mortgage-backed  securities available-for-sale during
1998,  1997  and  1996  were  approximately  $48.6  million,  $11.5  million and
$860,000,  respectively.  Gross gains of approximately $26,000 and $237,000 were
realized  on  these  sales  in  1998  and 1997 and gross losses of approximately
$25,000  and  $4,000  were  realized  on  these  sales  in  1998  and  1996.


<PAGE>
(6)     LOANS  RECEIVABLE
     Loans  receivable  at  December  31,  1998  and  1997  are  as  follows (in
thousands):

<TABLE>
<CAPTION>

<S>                                                     <C>          <C>
                                                              1998         1997 
                                                        -----------  -----------
Real estate mortgage loans:
 First lien mortgage, primarily residential. . . . . .  $  690,510   $  689,767 
 Multifamily . . . . . . . . . . . . . . . . . . . . .     119,447      131,454 
 Residential construction. . . . . . . . . . . . . . .     115,714       83,359 
 Acquisition and development . . . . . . . . . . . . .      75,932       31,619 
 Commercial. . . . . . . . . . . . . . . . . . . . . .     257,723      181,315 
 Commercial construction . . . . . . . . . . . . . . .      40,344       14,506 
Commercial loans, secured by residential mortgage
 loans held for sale . . . . . . . . . . . . . . . . .     173,124       98,679 
Commercial loans, secured by mortgage servicing rights       3,867       32,685 
Commercial, financial and industrial . . . . . . . . .      92,218       30,877 
Loans secured by savings deposits. . . . . . . . . . .      13,164        8,695 
Consumer and other loans . . . . . . . . . . . . . . .      66,989       15,030 
                                                        -----------  -----------
                                                         1,649,032    1,317,986 

Loans in process . . . . . . . . . . . . . . . . . . .     (99,790)     (47,893)
Allowance for loan losses. . . . . . . . . . . . . . .     (11,358)      (7,412)
Unearned interest and loan fees. . . . . . . . . . . .      (3,493)      (2,926)
Premium on purchased loans, net. . . . . . . . . . . .       3,758        1,680 
                                                        -----------  -----------

                                                        $1,538,149   $1,261,435 
                                                        ===========  ===========

Weighted average yield . . . . . . . . . . . . . . . .        8.55%        8.30%
                                                        ===========  ===========
</TABLE>



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

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

At  December  31,  1998,  Coastal  had  outstanding  commitments to originate or
purchase approximately $142.1 million of first lien mortgage and other loans and
had  commitments  under  lines of credit to originate primarily construction and
other loans of approximately $124.0 million.  In addition, at December 31, 1998,
Coastal  had  letters  of  credit  of  approximately  $4.5  million outstanding.

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

Included  in  loans  receivable at December 31, 1998 and 1997 are loans totaling
approximately  $22.8  million  and  $17.4  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,  1998, 1997 and 1996, Coastal recognized interest income on these nonaccrual
loans  (outstanding  as  of the period end) of approximately $480,000, $827,000,
and  $507,000,  respectively,  whereas  approximately  $835,000,  $925,000,  and
$816,000,  respectively,  in additional interest income would have been recorded
if  such  loans  had  been  performing  in accordance with their original terms.

At  December  31,  1998  and  1997,  the  carrying  value  of impaired loans was
approximately  $1.7  million  and  $2.0  million,  respectively, and the related
allowance  for  loan  losses  on  those impaired loans totaled $880,000 and $1.1
million, respectively.  The average recorded investment in impaired loans during
the years ended December 31, 1998, 1997 and 1996 was approximately $1.7 million,
$897,000,  and  $846,000,  respectively.  For the years ended December 31, 1998,
1997  and  1996,  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>
                                   1998      1997     1996 
                                --------  --------  -------
Balance, beginning of year . .  $ 7,412   $ 6,880   $5,703 
Provision for loan losses. . .    3,100     1,800    1,925 
Charge-offs. . . . . . . . . .   (1,693)   (1,416)    (851)
Recoveries . . . . . . . . . .      282       148      103 
Allowance of acquired entities    2,257        --       -- 
                                --------  --------  -------

Balance, end of year . . . . .  $11,358   $ 7,412   $6,880 
                                ========  ========  =======
</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 the
"Mortgage Banker").  The lead lender ("Lead Lender") in this facility is a major
commercial  bank and the loan is secured by subprime residential loans.  In late
January  1999, due to a lack of liquidity, the Mortgage Banker ceased operations
and  shortly  thereafter  was  seized  by  the  Michigan  Bureau  of  Financial
Institutions.  A  conservator  was  appointed  to  take  control of the Mortgage
Banker's  books and records, marshal that company's 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  the  Mortgage  Banker  on  or about February 11, 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  the  Mortgage  Banker.

Coastal  has  hired special bankruptcy counsel to represent it in this situation
and  has  been involved in discussions with the Lead Lender regarding the status
of  the  loan.  Although  Coastal  has  been  informed  by  the Lead Lender that
Coastal's  loan  is collateralized by residential loans, Coastal, as of the date
hereof, has been unable to verify the extent to which the collateral, if any, is
sufficient  to  prevent  Coastal  from incurring a loss.  Effective December 31,
1998,  Coastal  put  this  loan  on nonaccrual and allocated $1.5 million of the
general  reserve of $1.5 million to this loan.  Coastal is continuing to monitor
this  situation and will make additions to the overall allowance for loan losses
as  considered necessary based on its existing policy.  At this time, Coastal is
unable  to  determine  the  timing, probability, or the amount of any loss which
might  result  from  the  default  by  the  Mortgage  Banker.

(7)     ACCRUED  INTEREST  RECEIVABLE
Accrued  interest  receivable  at  December  31, 1998 and 1997 is as follows (in
thousands):

<TABLE>

<CAPTION>

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

Loans receivable. . . . . . . . . . . .  $10,088  $ 8,124
Mortgage-backed securities. . . . . . .    5,383    6,684
FHLB stock, federal fund sold and other
  interest-earning assets . . . . . . .       47        5
                                         -------  -------

                                         $15,518  $14,813
                                         =======  =======
</TABLE>



(8)     MORTGAGE  SERVICING  RIGHTS
Coastal  services  loans  receivable  for  others  which are not included in the
consolidated  financial  statements.  The  total  amounts  of  such  loans  were
approximately  $519.2 million, $675.7 million and $776.7 million at December 31,
1998,  1997  and  1996,  respectively.  At  December  31, 1998 and 1997, Coastal
serviced  approximately  $1.4  million  and  $2.2  million  of  loans  sold with
recourse,  respectively.


<PAGE>
An  analysis  of  activity  of  mortgage  servicing  rights  for the years ended
December  31,  1998,  1997  and  1996  is  as  follows  (in  thousands):

<TABLE>
<CAPTION>

     Years  ended  December  31,

<S>                         <C>       <C>       <C>
                               1998      1997      1996 
                            --------  --------  --------
Balance, beginning of year  $ 5,653   $ 6,810   $ 8,323 
Additions. . . . . . . . .       --       116        -- 
Amortization . . . . . . .   (1,604)   (1,273)   (1,513)
                            --------  --------  --------
Balance, end of year . . .  $ 4,049   $ 5,653   $ 6,810 
                            ========  ========  ========
</TABLE>



At  December 31, 1998, the estimated fair value of Coastal's recognized mortgage
servicing  rights was $5.1 million and no valuation allowance for impairment was
considered  necessary.

(9)     REAL  ESTATE  OWNED
Included  in  prepaid expenses and other assets is real estate owned at December
31,  1998 and 1997 of approximately $4.9 million and $3.2 million, respectively.

(10)     SAVINGS  DEPOSITS
Savings deposits and the related weighted average interest rates at December 31,
1998  and  1997  are  summarized  as  follows  (dollars  in  thousands):

<TABLE>
<CAPTION>

                                              1998                           1997
                                 ------------------------------  ---------------------------
                                   Stated Rate        Amount      Stated Rate       Amount
-------------------------------  ---------------  -------------  --------------  ----------- 
<S>                              <C>              <C>            <C>             <C>
Noninterest-bearing checking. .            0.00%  $     95,398            0.00%  $101,782
Interest-bearing checking . . .   1.00  -  2.00         63,067   1.49  -  2.00     69,972
Savings accounts. . . . . . . .   1.98  -  2.75         48,571   2.18  -  2.75     25,555
Money market demand accounts. .   0.00  -  4.51        339,481   2.96  -  4.51    165,986
                                                  -------------                  --------

                                                       546,517                   363,295 
                                                  -------------                  --------

Certificate accounts. . . . . .   2.00  -  2.99          6,538   2.00  -  2.99      5,142
                                  3.00  -  3.99         38,614   3.00  -  3.99      2,763
                                  4.00  -  4.99        272,325   4.00  -  4.99     64,478
                                  5.00  -  5.99        747,585   5.00  -  5.99    834,727
                                  6.00  -  6.99         83,277   6.00  -  6.99     94,405
                                  7.00  -  7.99          8,727   7.00  -  7.99      7,624
                                  8.00  -  8.99            699   8.00  -  8.99      1,854
                                  9.00  -  9.99            305   9.00  -  9.99        847
                                     over 10.00             18      over 10.00         --
                                                  -------------                 ---------
                                                     1,158,088                  1,011,840
                                                  -------------                 ---------
Premium (discount) on purchased
 savings deposits, net. . . . .                            399                        (75)
                                                  -------------                 ---------

                                                  $  1,705,004               $  1,375,060
                                                  =============                 =========

Weighted average rate . . . . .                           4.11%                     4.67%
                                                  =============                 =========
</TABLE>



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

     The  scheduled  maturities  of certificate accounts outstanding at December
31,  1998  were  as  follows  (in  thousands):

<TABLE>
<CAPTION>

Year Ended December 31,
------------------------      
<S>                       <C>
 1999. . . . . . . . . .  $965,443
 2000. . . . . . . . . .   148,049
 2001. . . . . . . . . .    22,347
 2002. . . . . . . . . .    11,833
 2003. . . . . . . . . .    10,176
Subsequent years . . . .       240
                          --------
                         1,158,088
                          =========
</TABLE>



     The  aggregate  amount of certificate accounts with balances of $100,000 or
more  was  approximately  $199.0 million and $122.6 million at December 31, 1998
and  1997,  respectively.

(11)     ADVANCES  FROM  THE  FEDERAL  HOME  LOAN  BANK  OF  DALLAS
Advances  from the FHLB for the years ended December 31, 1998, 1997 and 1996 are
summarized  as  follows  (dollars  in  thousands):

<TABLE>
<CAPTION>

<S>                                    <C>        <C>        <C>        <C>
                                          1998       1997       1996
                                       ---------  ---------  --------
Balance outstanding at end of year. . $ 966,720   $540,475   $409,720
Average balance outstanding . . . . .   713,197    368,896    387,296 
Maximum outstanding at any month-end.   969,036    540,475    491,930 
Average interest rate during the year      5.55%      5.78%      5.62%
Average interest rate at end of year.      5.24%      5.95%      5.61%
</TABLE>





<PAGE>
The scheduled maturities and related weighted average interest rates on advances
from  the  FHLB  at  December  31,  1998  are  summarized as follows (dollars in
thousands):

<TABLE>
<CAPTION>


Due during the year    Weighted Average
ended December 31,      Interest Rate      Amount
--------------------  ------------------  --------
<S>                   <C>                 <C>
1999 . . . . . . . .               5.21%   $805,753
2000 . . . . . . . .               5.93       6,768
2001 . . . . . . . .               6.22       8,541
2002 . . . . . . . .               5.49      69,633
2003 . . . . . . . .               5.22         801
2004 . . . . . . . .               6.48       2,604
2005 . . . . . . . .               5.57         129
2006 . . . . . . . .               6.85       3,199
2007 . . . . . . . .               6.65       1,160
2008 . . . . . . . .               4.72      52,822
2009 . . . . . . . .               8.15       4,413
2010 . . . . . . . .               5.66         187
2011 . . . . . . . .               6.63       1,426
2012 . . . . . . . .               5.68         217
2013 . . . . . . . .               5.71       6,861
2018 . . . . . . . .               5.28       2,206
                      ------------------  ----------

                                   5.24%  $ 966,720 
                      ==================  ==========
</TABLE>




At December 31, 1998, Coastal had a $50.0 million unused line of credit with the
FHLB.  The  FHLB  advances  are secured by certain first lien mortgage loans and
mortgage-backed  securities  with  an  aggregate carrying value of approximately
$966.7  million  at  December  31,  1998.


<PAGE>
(12)     SECURITIES  SOLD  UNDER AGREEMENTS TO REPURCHASE AND FEDERAL FUNDS
PURCHASED
Securities sold under agreements to repurchase at December 31, 1998 and 1997 are
as  follows  (dollars  in  thousands):

<TABLE>
<CAPTION>


                                     Repurchase         Repurchase       Repurchase
                                     Liability           Liability        Liability
                                      Maturing           Maturing        Maturing in
                                  in up to 30 days   in 30 to 90 days   over 90 days    Total
                                 ------------------  -----------------  -------------  --------
<S>                              <C>                 <C>                <C>            <C>
December 31, 1998:
-------------------------------                                                                
Book value of mortgage-backed
 securities sold. . . . . . . .  $              --   $              --  $     115,951  $115,951
Market value of mortgage-backed
 securities sold. . . . . . . .                 --                  --        115,747   115,747
Repurchase liability. . . . . .                 --                  --        100,000   100,000

Weighted average interest rate.                                                           4.93%
Weighted average maturity . . .                                                      3,295 days

December 31, 1997:
-------------------------------                                                                
Book value of mortgage-backed
 securities sold. . . . . . . .  $         693,058   $              --  $     157,530  $850,588
Market value of mortgage-backed
 securities sold. . . . . . . .            682,669                  --        154,427   837,096
Repurchase liability. . . . . .            647,048                  --        144,712   791,760

Weighted average interest rate.                                                           6.00%
Weighted average maturity . . .                                                         75 days

</TABLE>



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.

At  December  31,  1998  and  1997,  the  agreements outstanding relating to the
mortgage-backed  securities  were  agreements to repurchase the same securities.
The  securities  sold  under  agreements to repurchase at December 31, 1998 were
with one individual counterparty, Salomon Smith Barney Inc., and mature in 2008.
Securities  sold  under  agreements  to repurchase averaged approximately $579.6
million,  $974.1  million  and  $930.7  million  during  1998,  1997  and  1996,
respectively,  and the maximum outstanding amounts at any month-end during 1998,
1997  and 1996 were approximately $874.8 million, $1.0 billion and $1.0 billion,
respectively.

Federal  funds purchased averaged approximately $149,000 and $161,000 during the
years  ended  December  31,  1998 and 1997, respectively.  There were no federal
funds  purchased outstanding at any month-end during 1998 or 1997 and there were
no  federal funds purchased outstanding during the year ended December 31, 1996.

<PAGE>

(13)     SENIOR  NOTES  PAYABLE

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

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

(15)          FINANCIAL  INSTRUMENTS  WITH  OFF-BALANCE  SHEET  RISK
Coastal  is  a party to financial instruments with off-balance sheet risk in the
normal course of business to reduce its own exposure to fluctuations in interest
rates.  These  financial  instruments  include  interest  rate  swap agreements,
interest  rate  cap  agreements  and  financial  futures  contracts.

     INTEREST  RATE  AGREEMENTS
Coastal  is  a  party  to interest rate swap and interest rate cap agreements in
order  to  reduce  its  exposure  to floating interest rates on a portion of its
variable rate assets and borrowings.  At December 31, 1998, Coastal had interest
rate  swap  and  cap  agreements  on notional amounts totaling $38.0 million and
$209.5  million,  respectively.

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

The  weighted  average interest rate of payments received on all of the interest
rate  swap  agreements  was  approximately 5.77% in 1998 and 5.76% in 1997.  The
weighted average interest rate of payments made on all of the interest rate swap
agreements  was  approximately 6.60% in 1998 and 6.51% in 1997.  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  on  other  borrowed  money" in the accompanying consolidated
statements  of operations.  The net interest expense related to these agreements
was  approximately $377,000, $431,000 and $593,000, for the years ended December
31,  1998,  1997 and 1996, respectively.  Coastal had pledged approximately $6.6
million  and  $6.4 million of mortgage-backed securities to secure interest rate
swap  agreements  at  December  31,  1998  and  1997,  respectively.


<PAGE>
The  terms of the interest rate swap agreements outstanding at December 31, 1998
and  1997  are  summarized  as  follows  (dollars  in  thousands):


<TABLE>
<CAPTION>

                                                                        Floating Rate        Fair Value at
                             Notional       LIBOR              Fixed         at              End of Period
Maturity                      Amount        Index               Rate     End of Period       gain (loss)
----------------------  ---------------  ---------------------  ------   --------------    ------------   
<S>                     <C>              <C>                    <C>     <C>             <C>
At December 31, 1998:
1999 . . . . . . . . .  $       14,600   Three-month            6.926%          5.399%  $      (218)
2000 . . . . . . . . .           4,800   Three-month            6.170           5.226          (164)
2000 . . . . . . . . .           2,380   Three-month            6.000           5.281           (38)
2005 . . . . . . . . .          16,225   Three-month            6.500           5.261          (707)
                        ---------------                                                 ------------
                                38,005                                                  $    (1,127)
                        ==============                                                  ============

                                         At December 31, 1997:
1998 . . . . . . . . .  $        4,400   Three-month            6.709%          5.875%  $       (28)
1999 . . . . . . . . .          14,600   Three-month            6.926           5.875          (239)
2000 . . . . . . . . .           4,800   Three-month            6.170           5.906           (99)
2000 . . . . . . . . .           2,520   Three-month            6.000           5.906            -- 
2005 . . . . . . . . .          19,527   Three-month            6.500           5.879          (230)
                        ---------------                                                 ------------
                        $       45,847                                                  $      (596)
                        ==============                                                  ============
</TABLE>



Coastal  has  interest  rate  cap agreements with third parties.  The agreements
provide  for  the  third  parties to make payments to Coastal whenever a defined
floating  rate  exceeds  rates  ranging  from  7.00% to 11.00%, depending on the
agreement.  Payments  on  the  interest  rate  cap  agreements  are based on the
notional  principal amount of the agreements; no funds were actually borrowed or
are  to  be repaid.  The purchase prices of the interest rate cap agreements are
capitalized  and  included  in  "prepaid  expenses  and  other  assets"  in  the
accompanying  consolidated  statements  of financial condition and are amortized
over the life of the agreements using the straight-line method.  The unamortized
portion  of  the  interest  rate  cap  agreements was approximately $115,000 and
$286,000  at  December  31, 1998 and 1997, respectively, with the estimated fair
value  of  the  agreements  being $888,000 and $300,000 at December 31, 1998 and
1997,  respectively.  The  interest  rate  cap  agreements are used to alter the
interest  rate sensitivity of a portion of Coastal's mortgage-backed securities,
loans  receivable  and their related funding sources.  As such, the amortization
of  the purchase price and interest income from the interest rate cap agreements
are  recorded  in  "interest  income  on  mortgage-backed  securities  or  loans
receivable,"  as  appropriate,  in  the  accompanying consolidated statements of
operations.  The  net  decrease  in interest income related to the interest rate
cap  agreements  was  approximately $53,000, $218,000 and $518,000 for the years
ended  December  31,  1998,  1997,  and  1996,  respectively.


<PAGE>
     Interest  rate  cap  agreements  outstanding at December 31, 1998 expire as
follows  (dollars  in  thousands):
<TABLE>

<CAPTION>



Year of         Strike rate     Notional
expiration         range         amount
-----------  -----------------  ---------
<S>          <C>                <C>
1999. . . .  7.25  -    11.00%  $  63,564
2000. . . .   8.50  -    9.50      11,620
2001. . . .   7.00  -    9.00      35,322
2003. . . .   8.00  -    8.50      99,000
                                ---------
                                  209,506
                                =========
</TABLE>

Market  risk,  or  the risk of loss due to movement in market prices or rates is
quantified by Coastal through a risk monitoring process of marking to market the
portfolio to expected market level changes in an instantaneous shock of plus and
minus 200 basis points on a quarterly basis.  This process discloses the effects
on  market  values  of  the assets and liabilities, unrealized gains and losses,
including  off-balance sheet items, as well as potential changes in net interest
income.
The  fluctuation  in  the  market  value, however, has no effect on the level of
earnings of Coastal because the securities are categorized as "held-to-maturity"
and  Coastal  has  the  positive  intent  and ability to hold these to maturity.

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

FINANCIAL  FUTURES
Coastal  has  used financial futures contracts in its asset/liability management
function  to  alter  the  interest  rate  sensitivity  of Coastal's net interest
income.  In  1992,  Coastal  discontinued  this  hedging  strategy.  The  net
unamortized  contract losses on closed positions were approximately $767,000 and
$1.2  million  at December 31, 1998 and 1997, respectively.  The amortization of
the  contract  losses on closed positions for the years ended December 31, 1998,
1997  and  1996 was approximately $440,000, $203,000 and $409,000, respectively.

(16)     FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS
Statement  of  Financial  Accounting  Standards No. 107, "Disclosures about Fair
Value  of  Financial Instruments", requires that Coastal disclose estimated fair
values for its financial instruments.  The fair value estimates presented herein
are  based  on  relevant  information available to management as of December 31,
1998  and  1997.  Because  the  reporting requirements exclude certain financial
instruments  and  all nonfinancial instruments, the aggregate fair value amounts
presented  herein do not represent management's estimate of the underlying value
of  Coastal.  The  fair  value  estimates,  methods and assumptions used are set
forth  below  for  Coastal's  financial  instruments  (in  thousands):

<PAGE>
<TABLE>
<CAPTION>

                                                          At                               At
                                               December 31, 1998                   December 31, 1997
                                   --------------------------------------   ---------------------------------
                                        Carrying              Fair           Carrying            Fair
                                         Value                Value           Value             Value
                                   ------------------  -------------------  ----------  ----------------------
<S>                                <C>                 <C>                  <C>         <C>
Financial assets:
 Cash and cash equivalents. . . .  $           45,453  $           45,453   $   37,096  $              37,096 
 Loans receivable . . . . . . . .           1,538,149           1,557,654    1,261,435              1,283,023 
 Mortgage-backed securities
   held-to-maturity . . . . . . .           1,154,116           1,145,369    1,345,090              1,324,968 
 Securities available-for-sale. .              98,625              98,625      169,997                169,997 
 Stock in the FHLB. . . . . . . .              49,819              49,819       27,801                 27,801 
 Interest rate cap agreements . .                 115                 888          286                    300 
Financial liabilities:
 Savings deposits . . . . . . . .           1,705,004           1,711,699    1,375,060              1,377,431 
 Advances from the FHLB . . . . .             966,720             970,638      540,475                541,645 
 Securities sold under agreements
   to repurchase. . . . . . . . .             100,000             106,148      791,760                791,742 
 Senior Notes payable . . . . . .              50,000              51,007       50,000                 50,750 
Off-balance sheet instruments:
 Interest rate swap agreements. .                  --              (1,127)          --                   (596)
 Commitments to extend credit . .                  --             270,602           --                171,193 
</TABLE>



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

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

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

MORTGAGE-BACKED  SECURITIES  HELD-TO-MATURITY  AND  SECURITIES
AVAILABLE-FOR-SALE
The  fair  values of mortgage-backed and other securities are estimated based on
published  market prices or market prices from investment dealers and companies.
If  a quoted market price is not available, fair value is estimated using quoted
market  prices  for  similar  securities.

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

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

SAVINGS  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,
1998  and  1997.  The  fair  value  of  certificate  accounts  is  based  on the
discounted  value  of  contractual  cash  flows.  The discount rate is estimated
using  the rates currently offered for deposits of similar remaining maturities.

ADVANCES  FROM  THE  FHLB  AND
SECURITIES  SOLD  UNDER  AGREEMENTS  TO  REPURCHASE

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

SENIOR  NOTES  PAYABLE

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

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

(17)     FEDERAL  INCOME  TAXES
The acquisition of the Acquired Associations under the FSLIC's Southwest Plan on
May  13,  1988  qualified  for  tax-free  reorganization  status  under  Section
368(a)(3)(D)  of  the  Internal  Revenue  Code  of  1986  as  amended  ("IRC").
Accordingly,  the  tax bases of assets of the Acquired Associations carried over
to  Coastal.  In  connection  with  this  acquisition, the FSLIC Resolution Fund
("FRF")  retained all of the future federal income tax benefits derived from the
federal income tax treatment of certain items, in addition to net operating loss
carryforwards related to the acquisition for which Coastal agreed to pay the FRF
when  actually  realized.  The  provisions for federal income taxes recorded for
the  years  ended  December  31,  1998,  1997  and 1996, 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 1998, 1997 and 1996 will be available as
credit  carryforwards to reduce regular federal tax liabilities in future years,
over  an  indefinite  period.  To the extent these credits were generated due to
the  utilization  of  other  tax benefits retained by the FRF, they will also be
treated  as  tax  benefit  items.  Although  the  termination  of the Assistance
Agreement  was  effective  March  31, 1994, the FRF will continue to receive the
future  federal  income  tax  benefits from the net operating loss carryforwards
acquired  from  the  Acquired  Associations.

In  March  1998,  Coastal  announced  that  it  had  successfully  resolved  an
outstanding  tax  benefit  issue with the FDIC as Manager of the Federal Savings
and  Loan  Insurance  Corporation  Resolution Fund.  The resolution of the issue
resulted  in  Coastal  recording a $3.7 million reversal of accrued income taxes
during the year ended December 31, 1998; resulting in a one-time positive effect
on  net  income.  The  resolution  of  the tax benefit issue also contributes an
ongoing  quarterly  tax  benefit of $226,000, as of December 31, 1998.  This tax
benefit  is  estimated  to  continue  until  the  second  quarter  of  2001.


<PAGE>
The components of the provision for federal income tax expense (benefit) for the
years  ended  December  31,  1998,  1997 and 1996 are as follows (in thousands):

<TABLE>
<CAPTION>

                1998    1997     1996
               ------  -------  -------
<S>            <C>     <C>      <C>

Current        $3,046  $7,831   $5,920 
Deferred          497      (9)    (249)
               ------  -------  -------

               $3,543  $7,822   $5,671 
               ======  =======  =======
</TABLE>



A reconciliation of the expected federal income taxes using a corporate tax rate
of  35%  for  the years ended December 31, 1998, 1997 and 1996 is as follows (in
thousands):

<TABLE>
<CAPTION>

                                                      1998     1997     1996
                                                    --------  -------  ------
<S>                                                 <C>       <C>      <C>

Computed expected tax provision. . . . . . . . . .  $ 7,980   $7,691   $5,324
Reversal of accrued income taxes due to resolution
 of tax benefit issue with FDIC. . . . . . . . . .   (3,679)      --       --
FDIC tax benefit . . . . . . . . . . . . . . . . .     (906)      --       --
Net purchase accounting adjustments. . . . . . . .      282      282      287
Other, net . . . . . . . . . . . . . . . . . . . .     (134)    (151)      60
                                                    --------  -------  ------
                                                    $ 3,543   $7,822   $5,671
                                                    ========  =======  ======
</TABLE>


Significant  temporary differences that give rise to the deferred tax assets and
liabilities  as  of  December  31,  1998 and 1997 are as follows (in thousands):

<TABLE>
<CAPTION>

                                                                1998    1997
                                                               ------  ------
<S>                                                            <C>     <C>
Deferred tax assets:
  Loans receivable, principally due to purchase accounting
   discount and allowance for loan losses . . . . . . . . . .  $2,050  $1,277
  Unrealized loss on securities available-for-sale. . . . . .     740   1,224
  Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . .     497     383
  Property and equipment. . . . . . . . . . . . . . . . . . .     297     134
  Real estate owned, principally due to unrealized writedowns     276     331
  Other . . . . . . . . . . . . . . . . . . . . . . . . . . .     256     208
                                                                4,116   3,557
                                                               ------  ------

Deferred tax liabilities:
  FHLB stock. . . . . . . . . . . . . . . . . . . . . . . . .   1,490     703
  Mortgage-backed securities, principally
   due to deferred hedging losses . . . . . . . . . . . . . .     268     422
  Other . . . . . . . . . . . . . . . . . . . . . . . . . . .      24     111
                                                               ------  ------

                                                                1,782   1,236
                                                               ------  ------

Net deferred tax asset. . . . . . . . . . . . . . . . . . . .  $2,334  $2,321
                                                               ======  ======
</TABLE>



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

In  years prior to 1996, Coastal was permitted under the IRC to deduct an annual
addition  to  a  reserve  for  bad  debts  in  determining taxable income.  This
addition  differs  from  the  provision  for loan losses for financial reporting
purposes.  Due to enacted legislation, Coastal will no longer be able to utilize
a  reserve  method for determining the bad debt deduction but will be allowed to
deduct  actual  charge-offs.  Further,  Coastal's post-1987 tax bad debt reserve
will  be recaptured into income.  The reserve will be recaptured over a six year
period.  At  December 31, 1998, Coastal had approximately $3.1 million post-1987
tax  bad  debt  reserves,  for  which  deferred  taxes  have  been  provided.

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

(18)     SAVINGS  ASSOCIATION  INSURANCE  FUND  ("SAIF")  INSURANCE SPECIAL
         ASSESSMENT
          On  September  30,  1996, Coastal recorded the one-time SAIF insurance
special assessment (the "special assessment") of $7.5 million as a result of the
Deposit  Insurance  Funds  Act  of  1996 (the "Act") being signed into law.  The
special assessment pursuant to the Act was 65.7 basis points on the SAIF deposit
assessment  base  as  of  March  31,  1995.

(19)     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
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
Program  was  equal  to 10% of Coastal's issued and outstanding shares of Common
Stock.  Coastal  reserved the shares for future issuance under the 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
employ  of  Coastal  for  six  months  after  the  option  was  granted.

On  March  23,  1995, the Board of Directors adopted the 1995 Stock Compensation
Program  ("the  New  Program").  The New Program is substantially similar to the
1991 Program and was approved by stockholders in April 1995.  The Board reserved
382,892  shares  of  Common  Stock  for  issuance  under  the  New  Program.

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.


<PAGE>

<TABLE>
<CAPTION>

                                         Years ended December 31,
                                -------------------------------------------
                                          1998         1997          1996
                                --------------      ---------      --------
<S>                             <C>                        <C>      <C>
Net income available to common
 stockholders (in thousands):
  As reported. . . . . . . . .  $       16,668       $11,563       $6,951
  Pro forma. . . . . . . . . .  $       16,193       $11,169       $6,739
Diluted earnings per share:
  As reported. . . . . . . . .  $         2.18       $  1.50       $ 0.92
  Pro forma. . . . . . . . . .  $         2.11       $  1.45       $ 0.89
</TABLE>



Pro forma net income and diluted earnings per share reflect only options granted
in  1998,  1997,  1996  and  1995.  Therefore,  the  full  impact of calculating
compensation  cost for stock options under Statement 123 is not reflected in the
pro  forma  net  income  or  diluted  earnings per share amounts presented above
because  compensation  cost  is  reflected over the options' vesting period of 4
years  and compensation cost for options granted prior to January 1, 1995 is not
considered.

The  fair value of each option grant is estimated on the date of grant using the
Black-Scholes  option-pricing  model  with  the  following  weighted  average
assumptions  used  for  grants  in  1998,  1997  and  1996:

<TABLE>
<CAPTION>

                                           1998             1997               1996
                                       ------------     ------------      --------------
<S>                          <C>        <C>             <C>               <C>   
Assumptions:
  Expected annual dividends             $0.32/share     $0.32/share       $0.27/share 
  Expected volatility                     25.49%            22.30%           20.97%
  Risk-free interest rate                  5.47%             6.87%            6.46%
  Expected life . . . . . .               10 years        10 years          10 years 

</TABLE>




<PAGE>
A  summary  of the status of the stock options as of December 31, 1998, 1997 and
1996  and  changes  during  the  years  then  ended  is  as  follows:

<TABLE>
<CAPTION>

                                      1998                  1997                      1996
                            ----------------------  ---------------------     ----------------------
                                         Weighted-              Weighted-                Weighted-
                             Number       Average     Number     Average       Number    Average
                               of        Exercise       of       Exercise        of      Exercise 
                             Shares       Price       Shares      Price        Shares      Price
-------------------------  -----------  ----------  ----------  ---------      --------  ----------
<S>                        <C>          <C>         <C>         <C>      <C>              <C>

Outstanding at beginning
 of year. . . . . . . . .     619,345   $   11.706    510,130   $ 9.993         364,360   $ 9.219
Granted . . . . . . . . .      47,500       25.125    188,100    15.684         168,000    11.589
Exercised . . . . . . . .     (54,885)       9.792    (62,978)    9.246         (13,607)    8.248
Forfeited/cancelled . . .     (14,041)      13.313    (15,907)   13.527          (8,623)   11.155
Outstanding at end
 of year. . . . . . . . .     597,919   $   12.910    619,345   $11.706         510,130   $ 9.993
                           ===========              ==========           ===============         

Options exercisable at
 end of year. . . . . . .     430,569                 380,791                    314,998 
                           ===========              ==========           ===============    

Weighted-Average fair
 value of options
 granted during the year
 (per share). . . . . . .  $   11.388              $    6.187                  $   4.373 
                           ===========              ==========           ===============  
</TABLE>



     The  following table summarizes information about stock options outstanding
at  December  31,  1998:

<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. . . . .              109,943            4.0 years  $     7.755            109,943     $ 7.755
10.333 to $12.500. . . .              273,600            6.7 years  $    11.129            233,254     $11.059
15.167 to $25.125. . . .              214,376            8.7 years  $    17.827             87,372     $16.872
                           -------------------                                          -------------            
                                      597,919            6.9 years  $    12.910            430,569     $11.395
                           ===================                                          ==============         
</TABLE>



(20)     EMPLOYEE  BENEFITS
Coastal maintains a 401(k) profit sharing plan.  Coastal's contributions to this
plan  were  approximately  $309,000,  $157,000  and $105,000 for the years ended
December  31,  1998,  1997  and  1996,  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.


<PAGE>
(21)     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  the  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, the 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.

(22)     STOCKHOLDERS'  EQUITY

DIVIDENDS

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

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

On  January  25,  April  25,  July  25, and October 24, 1996, Coastal declared a
dividend of $0.067 per share of Common Stock outstanding for the stockholders of
record  of  February 15, May 15, August 15, and November 15, 1996, respectively.

STOCK  SPLIT

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

TREASURY  STOCK

On  September  1,  1998,  Coastal  announced  that  the  Board  of Directors had
authorized  the  repurchase  of  up  to 6.6% of the outstanding shares of common
stock.  As  of  December 31, 1998, 499,600 shares had been repurchased at a cost
of  $7.8  million  under  this  plan.

On December 21, 1998, the Board of Directors authorized an additional repurchase
plan  for up to 500,000 shares of the outstanding shares of common stock through
an  open-market repurchase program and privately negotiated repurchases, if any.
The  timing  and  volume  of  the  repurchase transactions will depend on market
conditions.  As  of  December  31,  1998,  there have been no shares repurchased
under  this  additional  plan.


<PAGE>
(23)     EARNINGS  PER  SHARE
The  following  summarizes  information  related to the computation of basic and
diluted  EPS  for  the  years ended December 31, 1998, 1997 and 1996 (dollars in
thousands,  except  per  share  data).

<TABLE>
<CAPTION>

<S>                                                                                     <C>         <C>         <C>
                                                                                              1998        1997        1996
                                                                                        ----------  ----------  ----------
Net income available to common stockholders. . . . . . . . . . . . . . . . . . . . . .  $   16,668  $   11,563  $    6,951
                                                                                        ==========  ==========  ==========

Weighted average number of common shares
 outstanding used in basic EPS calculation . . . . . . . . . . . . . . . . . . . . . .   7,432,598   7,475,991   7,443,684
Add assumed exercise of outstanding stock
 options as adjustments for dilutive securities. . . . . . . . . . . . . . . . . . . .     224,092     246,654     113,192
                                                                                        ----------  ----------  ----------
Weighted average number of common shares   outstanding used in diluted EPS calculation
                                                                                         7,656,690   7,722,645   7,556,876
                                                                                        ==========  ==========  ==========
Basic EPS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $     2.24  $     1.55  $     0.93
                                                                                        ==========  ==========  ==========
Diluted EPS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $     2.18  $     1.50  $     0.92
                                                                                        ==========  ==========  ==========
</TABLE>



(24)     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,  1998,  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>

1999. . . . . . . .  $ 2,658
2000. . . . . . . .    2,595
2001. . . . . . . .    2,519
2002. . . . . . . .    2,406
2003 and thereafter   16,604
</TABLE>



Rent  expense  for  the years ended December 31, 1998, 1997 and 1996 amounted to
approximately  $2.6  million,  $2.3  million  and  $2.0  million,  respectively.

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

Quantitative  measures  established  by  regulation  to  ensure capital adequacy
require  the  Bank  to  maintain  minimum  amounts and ratios (as defined in the
applicable  regulations)  of  Tier  1  (core)  capital  to  total assets, Tier 1
risk-based  capital  to  risk  weighted  assets  and total risk-based capital to
risk-weighted  assets.  Management  believes,  as of December 31, 1998, that the
Bank  met  capital  adequacy  requirements  to  which  it  is  subject.

As  of December 31, 1998, 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, 1998 and
1997,  in  relation  to its existing regulatory capital requirements for capital
adequacy  purposes  as  of  such  dates  are  as follows (dollars in thousands):


<TABLE>
<CAPTION>

                                                                          Minimum For Capital    Well-Capitalized
                                                  Actual                  Adequacy Purposes        Requirements
Capital Requirement                     Amount              Ratio          Amount    Ratio        Amount   Ratio
-------------------------      --------------------  ------------------  ----------  ------      --------  ------
<S>                        <C>                   <C>                 <C>            <C>          <C>       <C>
As of December 31, 1998:
 Tier 1 (core). . . . . .  $            158,606               5.25%  $     120,935   4.00%       $151,169   5.00%
 Tier 1 risk-based. . . .               158,606               9.54          66,467   4.00          99,701   6.00 
 Total risk-based . . . .               169,964              10.23         132,935   8.00         166,169  10.00 

As of December 31, 1997:
 Tier 1 (core). . . . . .  $            160,781               5.52%  $     116,570   4.00%       $145,713   5.00%
 Tier 1 risk-based. . . .               160,781              11.46          56,136   4.00          84,204   6.00 
 Total risk-based . . . .               168,193              11.98         112,271   8.00         140,339  10.00 

</TABLE>




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

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

                                                        December 31,
                                              ---------------- ------------- 
                                                   1998              1997
                                               -------------       --------
<S>                                            <C>                 <C>
Assets:
  Cash and cash equivalents . . . . . . . . .  $          22       $  1,570
  Investment in subsidiary. . . . . . . . . .        159,174        145,550
  Mortgage-backed securities held-to-maturity          1,303          1,761
  Other assets. . . . . . . . . . . . . . . .          3,345          6,731
                                               -------------       --------

                                               $     163,844       $155,612
                                               =============       ========

Liabilities and stockholders' equity:
  Senior Notes payable. . . . . . . . . . . .  $      50,000       $ 50,000
  Other liabilities . . . . . . . . . . . . .          1,080            782
                                               -------------       --------
        Total liabilities . . . . . . . . . .         51,080         50,782
        Total stockholders' equity. . . . . .        112,764        104,830
                                               -------------       --------

                                               $     163,844       $155,612
                                               =============       ========
</TABLE>




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


                                                            Years ended December 31,
                                                            ------------------------- 
                                                               1998           1997       1996
                                                     ----------------      -------      -------
<S>                                                  <C>                        <C>      <C>
Income:
  Dividends from subsidiary . . . . . . . . . . . .  $         7,593       $ 7,293       $ 7,001
  Equity in undistributed earnings of
   subsidiary, net of income tax. . . . . . . . . .           12,724         7,946         3,686
  Interest income . . . . . . . . . . . . . . . . .              103           131           143
                                                     ---------------       -------       -------
                                                              20,420        15,370        10,830
                                                     ---------------       -------       -------
Expense:
  Interest expense. . . . . . . . . . . . . . . . .            5,000         5,000         5,000
  Noninterest expense . . . . . . . . . . . . . . .              717           786           891
                                                     ---------------       -------       -------
                                                               5,717         5,786         5,891
                                                     ---------------       -------       -------

  Federal income tax benefit. . . . . . . . . . . .            1,965         1,979        2,012
                                                     ---------------       -------       -------

        Net income available to common stockholders  $        16,668       $11,563       $ 6,951
                                                     ===============       =======       =======
</TABLE>




<PAGE>
                              Coastal Bancorp, Inc.
                            Statements of Cash Flows
                            ------------------------

<TABLE>
<CAPTION>

                                                                                 Years ended December 31,
                                                                               --------------------------     
                                                                                1998             1997        1996
                                                                     -----------------       --------       --------
<S>                                                                  <C>                         <C>            <C>
Cash flows from operating activities:
  Net income available to common stockholders . . . . . . . . . . .  $         16,668        $11,563       $ 6,951 
  Adjustments to reconcile net income to net
    cash provided  by operating activities:
      Equity in undistributed earnings of subsidiary. . . . . . . .           (12,724)        (7,946)        (3,686)
      Net (increase) decrease in other assets and other liabilities             3,684         (1,426)        (1,262)
                                                                     ----------------       --------       --------

          Net cash provided by operating activities . . . . . . . .             7,628          2,191          2,003 
                                                                     ----------------       --------       --------

Cash flows from investing activities:
  Net decrease in mortgage-backed securities. . . . . . . . . . . .               458            318            336 
  Investment in subsidiary. . . . . . . . . . . . . . . . . . . . .                --           (100)            -- 
                                                                     ----------------       --------       --------
          Net cash provided by investing activities . . . . . . . .               458            218            336 
                                                                     ----------------       --------       --------

Cash flows from financing activities:
  Exercise of stock options for purchase of
    common stock. . . . . . . . . . . . . . . . . . . . . . . . . .               536            582            112 
  Purchase of treasury stock. . . . . . . . . . . . . . . . . . . .            (7,778)            --             -- 
  Dividends paid. . . . . . . . . . . . . . . . . . . . . . . . . .            (2,392)        (2,292)        (1,985)
          Net cash used by financing activities . . . . . . . . . .            (9,634)        (1,710)        (1,873)
                                                                     -----------------      --------       --------

          Net increase (decrease) in cash and cash equivalents. . .            (1,548)           699            466 
Cash and cash equivalents at beginning of year. . . . . . . . . . .             1,570            871            405 
                                                                     -----------------      --------       --------
Cash and cash equivalents at end of year. . . . . . . . . . . . . .  $             22        $ 1,570        $   871 
                                                                     =================      ========       ========
</TABLE>



<PAGE>
(27)     SELECTED  QUARTERLY  FINANCIAL  DATA
Selected  quarterly  financial data is presented in the following tables for the
years  ended  December  31, 1998 and 1997 (in thousands, except per share data):

<TABLE>
<CAPTION>

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

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




<TABLE>
<CAPTION>

                                                    1997 Quarter Ended (unaudited)
                                                  -----------------------------------     
                                      March 31,     June 30,    September 30,   December 31,
-----------------------------------  ---------  --------------  -------------   ------------ 
<S>                                  <C>        <C>             <C>            <C>
Interest income . . . . . . . . . .  $  49,604  $       49,898  $      51,251       $50,603
Interest expense. . . . . . . . . .     34,956          35,634         37,052        36,781
                                     ---------  --------------  -------------   -----------
Net interest income . . . . . . . .     14,648          14,264         14,199        13,822
Provision for loan losses . . . . .        450             450            450           450
Gain on sales of mortgage-backed
 securities available-for-sale. . .         --              --            237            --
Noninterest income. . . . . . . . .      1,469           1,550          1,506         1,622
Noninterest expense . . . . . . . .      9,557           9,894         10,175         9,918
                                     ---------  --------------  -------------   -----------
Income before provision
 for Federal income taxes . . . . .      6,110           5,470          5,317         5,076
Provision for Federal income taxes.      2,225           2,004          1,953         1,640
Preferred stock dividends of
 Coastal Banc ssb . . . . . . . . .        647             647            647           647
                                     ---------  --------------  -------------   -----------
Net income available to common
 stockholders . . . . . . . . . . .  $   3,238  $        2,819  $       2,717       $ 2,789
                                     =========  ==============  =============   ===========

Basic earnings per share. . . . . .  $    0.43  $         0.38  $        0.36       $  0.37
                                     =========  ==============  =============   ===========
Diluted earnings per share. . . . .  $    0.42  $         0.37  $        0.35       $  0.36
                                     =========  ==============  =============   ===========
</TABLE>



                     COASTAL BANCORP, INC. AND SUBSIDIARIES






STOCK  PRICES  AND  DIVIDENDS

The  following  table  sets  forth the high and low price range and dividends by
quarter for the two years ended December 31, 1998 of the Common Stock of Bancorp
("CBSA")  and  the  Series A Preferred Stock of the Bank ("CBSAP") as listed and
quoted  on  the  NASDAQ  National  Market  System.


COASTAL  BANCORP,  INC.  COMMON  STOCK:

<TABLE>
<CAPTION>

                                       1998                                            1997
                     ----------------------------------------        -----------------------------------------
                       High            Low         Dividends           High             Low        Dividends
                     -------        ----------     --------          ---------      ----------       ---------
<S>                  <C>           <C>              <C>               <C>           <C>              <C>
First Quarter        $23.672       $   20.422       $0.080            $18.833       $   14.917       $0.067
Second Quarter        26.672           22.578        0.080             19.833           15.167        0.080
Third Quarter         25.750           15.000        0.080             22.167           19.333        0.080
Fourth Quarter        20.500           14.000        0.080             23.333           18.750        0.080
</TABLE>





COASTAL  BANC  SSB  PREFERRED  STOCK,  SERIES  A:

<TABLE>
<CAPTION>

                                       1998                                             1997
                     -------------------------------------           -------------------------------------- 
                     High              Low         Dividends              High          Low         Dividends
                    --------       ----------      ---------          --------      ----------      -----------  
<S>                  <C>           <C>              <C>               <C>           <C>              <C>
First Quarter        $26.000       $   25.250       $0.563            $25.500       $   25.000       $0.563
Second Quarter        25.625           25.000        0.563             25.500           24.875        0.563
Third Quarter         25.375           24.938        0.563             26.000           25.125        0.563
Fourth Quarter        25.250           24.625        0.563             25.625           25.000        0.563
</TABLE>







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  22, 1999 at 11:00 a.m.


TRANSFER  AGENT  AND  REGISTRAR

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


INDEPENDENT  AUDITORS

KPMG  LLP
700  Louisiana  Street
Houston,  Texas   77002


SPECIAL  COUNSEL

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


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

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

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

<PAGE>

STOCK  LISTING  AND  OTHER  INFORMATION
     The common stock of Coastal Bancorp, Inc. is listed on the over-the-counter
market  and quoted on the NASDAQ National Market System under the symbol "CBSA."
As  of February 25, 1999, there were 6,880,964 shares of Common Stock of Coastal
Bancorp,  Inc.  issued  and outstanding and the approximate number of registered
stockholders was 45, representing approximately 1,400 beneficial stockholders at
such  record  date.

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

     On  October  21,  1993,  the  Association  issued  1,150,000 shares of 9.0%
Noncumulative  Preferred Stock, Series A, at $25.00 per share.  As of such date,
the  Preferred  Stock  of the Association became registered under the Securities
Exchange  Act  of 1934.  After the reorganization into a holding company form of
ownership  and  conversion of the Association to a Texas-chartered savings bank,
the  Preferred  Stock  of  the Association became the Preferred Stock of Coastal
Banc  ssb.  The  Preferred  Stock is redeemable at any time on or after December
15,  1998,  only at the option of the Bank, in whole or in part, at a redemption
price  of  $25.00  per  share  plus accrued and unpaid dividends.  The Preferred
Stock is listed and quoted on the NASDAQ National Market System under the symbol
"CBSAP."  As  of  February  25,  1999,  there were 1,150,000 shares of Preferred
Stock  issued  and  outstanding  and  held  by  approximately  164  registered
stockholders,  representing  approximately 1,800 beneficial stockholders at such
record  date.

     Coastal  declared  dividends  on  the  Common  Stock  payable  during 1998.
Quarterly dividends in the amount of $0.08 per share were paid on March 15, June
15,  September  15  and  December  15,  1998.  On March 15, 1999, Coastal paid a
quarterly  dividend  in  the  amount  of  $0.08  per  share on its Common Stock.
Coastal  will  continue  to  review its dividend policy in view of the operating
performance  of  the  Bank, and may declare dividends on the Common Stock in the
future if such payments are deemed appropriate and in compliance with applicable
law and regulations.  Prior to the declaration of dividends, Coastal must notify
the  Office  of  Thrift  Supervision,  the  holding  company's  primary  federal
regulator,  which  may  object  to  the  dividends  on  the  basis of safety and
soundness.