CORPORATE  PROFILE


Coastal Bancorp, Inc., 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 37 retail
banking  offices  in  metropolitan  Houston,  Corpus Christi, Austin and small
cities in central and south Texas.  At December 31, 1996, Coastal Banc ssb had
$2.9  billion  in  assets  and  was  considered  to  be  a  "well capitalized"
institution  according  to  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          7

Management's Discussion and Analysis                   10

Independent Auditors' Report                           30

Consolidated Financial Statements                      31

Notes to Consolidated Financial Statements             36

Stock Prices                                           67

Stockholder Information                                68

</TABLE>



24

FINANCIAL  HIGHLIGHTS
<TABLE>

<CAPTION>



                                                       December 31,
                                                      -------------                     
(dollars in thousands, except per share data)           1996         1995           1994
--------------------------------------------------------------------------------
<S>                                           <C>       <C>       <C>  <C>         <C>  <C>

FOR THE YEAR ENDED
 Net interest income                           $       54,634   $     43,035   $     39,534 
 Provision for loan losses                             1,925          1,664            934 
 Noninterest income                                    9,349          7,605          9,561 
 SAIF insurance special assessment (1)                 7,455             --             -- 
 Other noninterest expense                            39,393         31,369         27,577 
 Net income after preferred stock dividends            6,951          8,542         13,452 
 Net earnings per share before SAIF insurance
   special assessment (2)                               2.34           1.71           2.64 
 Net earnings per share                                 1.38           1.71           2.64 
------------------------------------------         ----------     ----------    ------------

AT YEAR END
 Total assets                                 $     2,875,907   $  2,786,528   $  2,299,769 
 Loans receivable                                   1,229,748      1,098,555        587,032 
 Mortgage-backed securities held-to-maturity        1,344,587      1,395,753      1,605,839 
 Mortgage-backed securities available-for-sale        180,656        186,414         32,249 
 Savings deposits                                   1,310,835      1,287,084      1,139,622 
 Borrowed funds                                     1,376,707      1,306,018      1,031,415 
 Senior Notes payable                                  50,000         50,000             -- 
 Preferred Stock of the Bank                           28,750         28,750         28,750 
 Stockholders' equity                                  94,148         91,679         84,680 
 Book value per common share                            18.70          18.27          16.96 
 Tangible book value per common share                   15.70          14.71          14.88 
---------------------------------------------       ----------     ----------     ----------

SIGNIFICANT RATIOS FOR THE YEAR ENDED
 Return on average assets before SAIF insurance
   special assessment (2)                               0.51%          0.45%          0.71%
 Return on average equity before SAIF insurance
   special assessment (2)                              12.53           9.71          16.57 
 Interest rate spread including noninterest-bearing
   savings deposits                                     1.82           1.57           1.63 
 Net interest rate spread                               1.65           1.42           1.52 
 Net interest margin                                    1.99           1.78           1.79 
 Average equity to average total assets                 3.30           3.56           3.59 
 Noninterest expense to average total assets before
   SAIF special assessment (2)                          1.40           1.27           1.22 
----------------------------------------           ----------     ----------     ----------

ASSET QUALITY RATIOS AT YEAR END
 Nonperforming assets to total assets                   0.56%          0.68%          0.30%
 Nonperforming loans to total loans receivable          1.04           1.33           1.04 
 Allowance for loan losses to nonperforming loans      53.59          39.00          35.37 
 Allowance for loan losses to total loans receivable    0.56           0.52           0.37 
----------------------------------------           ----------     ----------     ----------

</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.  The special assessment pursuant to
the  Act  was  65.7  basis  points on the SAIF assessment base as of March 31,
1995.

(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.

CHAIRMAN'S  LETTER

     Writing  to  you  this  year is a great deal more fun than last year.  In
last  year's  letter,  I  reported  to  you  that  Coastal  Bancorp,  Inc. and
subsidiaries  ("Coastal")  experienced  the first core earnings decline of its
ten  year history.  I told you it wasn't part of our strategic plan, we didn't
like  it,  and,  therefore,  we  must do something about it.  We did something
about  it  in  1996  and  Coastal's  earnings  reflected  our  efforts.

     In  1996,  Coastal  returned to the level of core earnings growth we have
seen  in  every  year  but  one  since 1986.  Stable short term interest rates
throughout  1996  certainly  contributed  to  the  recovery  of  Coastal's net
interest  margin from the compression experienced in 1995.  However, Coastal's
successful  expansion  of  its  existing  lending programs and introduction of
commercial business banking at the end of 1995 and throughout 1996 contributed
both  to  the  recovery  of  Coastal's net interest margin and to management's
program  to  reduce  interest  rate  risk.

     As  a  result,  in  1996,  net interest income expanded by 27.0% and core
earnings  (before  applicable income taxes) grew by 22.7% when compared to the
results  of 1995.  Management is pleased with the improvement.  The solution I
proposed  to you in last year's letter, to expand Coastal's margins and reduce
our interest rate risk through a strategic shift in our business mix, has been
implemented and is off to a good start.  Coastal's 1996 earnings, margins, and
stock  price  are  proving  that.

     However,  as  much  as  I  would  like  to tell you we have completed our
mission,  I  can't.    Not  yet,  anyway.  We will continue to work to improve
Coastal's net interest margin and continue to work to reduce the interest rate
risk  of  Coastal's balance sheet.  The margin has improved substantially, but
it's  not  quite  where  we  want  it  to  be.    The solution is a continuous
work-in-process,  and  I  will  describe  the  progress to date and the future
expectations of the solution.  But first, I will briefly summarize the results
for  1996.

1996  EARNINGS

     Earnings  before the after-tax effect of the one-time Savings Association
Insurance  Fund  ("SAIF")  special  assessment  imposed  by the FDIC ("special
assessment")  for 1996 were $14.4 million or $2.34 per share, a 29.2% increase
over  1995  earnings  of $11.1 million, or $1.71 per share.  Earnings for 1996
after  the special assessment were $9.5 million or $1.38 per share.  Per share
data  during  1996  and 1995 was based on 5.03 million and 4.99 million common
stock  equivalents  outstanding.

     The  special  assessment  was  a one time assessment charged (pursuant to
1996  legislation)  by  the  FDIC  on  September 30, 1996, to all SAIF insured
financial  institutions  at the rate of $0.657 per $100 of SAIF deposits as of
March  31,  1995.  The assessment was intended to restore the SAIF fund to its
minimum  required  level  and  eventually equalize FDIC insurance premiums for
both  Bank  Insurance  Fund and SAIF members.  As a result of the legislation,
Coastal's FDIC insurance premiums dropped to approximately $0.0648 per $100 of
deposits  from  a rate of $.23 per $100 of deposits prior to the legislation. 
Coastal's  special assessment, after taxes in 1996, was $4.8 million, or $0.96
per  share.

     Core  revenues  reached  a new record high with net interest income after
provision  for  loan  losses  reaching  $52.7 million during 1996, compared to
$41.4  million  in  1995,  and  loan fees, service charges, and loan servicing
income  reached  $8.3  million during 1996, compared to $6.9 million in 1995. 
However, noninterest expenses (excluding the special assessment) reached $39.4
million  during  1996, compared to $31.4 million during 1995.  At December 31,
1996, Coastal had total assets of $2.9 billion, total deposits of $1.3 billion
in  37  branch  offices,  and  stockholders'  equity  of  $94.1  million.

STRATEGIC  SHIFT  IMPLEMENTED  IN  1996

     In  pursuit  of  a  higher,  more  sustainable  net interest margin and a
reduction  in  interest  rate  risk,  Coastal  implemented its strategic shift
towards  building a commercial banking business in 1996.  Utilizing the fourth
quarter  1995  acquisition  of Texas Capital Bancshares, Inc. as a springboard
for  launching  Coastal's  business  banking  program,  in  1996,  management
developed  the  infrastructure for business banking in most of Coastal's major
markets.    To  facilitate this process, Coastal converted its data processing
system  to  a  state-of-the art system for handling both commercial and retail
deposit  and loan products.  By the fourth quarter of 1996, management had put
together  a  group  of seasoned business banking officers, many of whom joined
Coastal  after  leaving  banks  which had been acquired by out-of-state banks.

     At  December  31, 1996, total loans had reached $1.2 billion, compared to
$1.1 billion at December 31, 1995, representing a 11.9% increase.  Only 37% of
the  increase  in 1996 was in single family residential loans, which generally
have lower interest rates than commercial and consumer loans.  The majority of
the  remaining  63%  increase  in  total loans was in multifamily mortgage and
residential  construction  loans.    Single  family  residential  loans  as  a
percentage  of  total loans decreased from 67.2% at December 31, 1995 to 64.2%
at  December  31,  1996.    Due to this change in loan mix coupled with a less
volatile  interest  rate environment in 1996, the net interest margin for 1996
increased  to  1.99%  as  compared  to  1.78%  during  1995.

     More  hard  work,  however, will be needed for management to complete its
strategic  solution  to  reduce  Coastal's  interest  rate  risk  and increase
Coastal's  net  interest  margin.    Based  on  Coastal's  present asset size,
management  believes  that  the optimal loan mix should be a portfolio whereby
single family residential loans represent 50% or less of the total portfolio. 
At  that  level,  Coastal's  balance  sheet will be better structured to reach
management's  goal  of  a  2.25%  net  interest  margin  and sustain it during
volatile  interest  rate, economic, or credit cycles.  Reaching that goal will
not  be  an  easy  task  due to management's strict adherence to its operating
principles  of minimizing credit risk and minimizing overhead.  But management
believes  that the commercial lending platform developed in 1996 and scheduled
for  further  refinement  in  1997 is capable of producing the type of quality
loan  growth  needed  for  the  task.

PROFITABILITY  STILL  BEGINS  WITH  LOW  OVERHEAD

     Those  who  have followed Coastal's ten year history, as we grew from $10
million  in  assets  to  almost  $3  billion  in assets, are familiar with our
successful  growth  strategy.    The  core  of the strategy was growth through
acquisitions  while  minimizing  overhead,  minimizing interest rate risk, and
minimizing credit risk.  In the late 1980's and early 1990's, Coastal acquired
deposit  market  share in government assisted transactions, then turned to the
private  market  to  acquire  further  market  share from banks and thrifts in
Texas.    The  transactions were priced whereby the optimal avenue to earnings
growth  was  through  acquisitions  rather  than  building  internally.

     Following  each  acquisition,  Coastal  consolidated  operations  and
eliminated  redundant overhead in order to increase earnings.  Simultaneously,
management  internally  developed  lending  programs,  mostly  housing  and
commercial  real  estate related, which served to replace the eventual payoffs
of  the  loans  acquired  in  many of these transactions.  But throughout this
process,  the  key  to  Coastal's profitability, in a period when loans were a
relatively  small  part  of  interest-earning  assets, was management's strict
adherence to its principle of minimizing overhead.  In other words, as long as
we kept expenses significantly lower than our peers, we would not have to take
as much credit risk as our peers to earn an adequate yield to pay expenses and
earn  a  competitive  return  on  equity.

     When  compared  to  Coastal's  first  ten  years, today's environment for
growth has changed significantly.  Prices for acquisitions have increased to a
level  whereby  it  is difficult to improve earnings immediately following the
acquisition,  even  after  extensive  cost  cutting.    Although  Coastal will
continue to pursue acquisitions as vehicles for growth, management believes it
will be more difficult to consummate economic transactions for the foreseeable
future at the same pace of Coastal's first ten years.  Therefore, for the next
few  years,  or  until  acquisition  prices become more economical, management
expects  to  focus  most  of  its  resources  on internally generated earnings
growth.    This  will  be  accomplished  by  further  development of Coastal's
commercial  lending and commercial deposit business and further development of
our  deposit markets the old fashioned way:  new products, good marketing, and
new  branches  started  from  scratch.

     However,  the  success of these evolving programs will depend on the same
core  principle  that  made  the  acquisition  strategy of the first ten years
successful:    low  overhead.    Even  though  many  of  these  new programs -
particularly  business  lending  -  require  a higher level of resources to be
successful, new technology and non-traditional approaches to delivery of these
programs  will  make  it  possible for management to maintain its low overhead
philosophy.    As  long  as  we  keep  costs  down through innovative delivery
techniques,  substantially  more  credit  risk  is not required for Coastal to
achieve  its  profitability goals.   It's simple:  If we keep it cheap, we can
keep  it  safe - and still improve profitability for all economic and interest
rate  cycles.

A  MORE  FOCUSED  AND  MARKET  DRIVEN  BRANCH  SYSTEM

     Coastal  was  built on a base of core retail deposit customers in central
and  south Texas.  For our first ten years, managing Coastal's branch delivery
system was a fairly simple formula:  Offer the same competitive menu of retail
banking  products  through  all Coastal branches and allocate resources evenly
throughout the branch system.  That formula works as long as the customers are
the  same  in  each  geographical  market.

     With  the  introduction  in  1996  of commercial business banking and the
conversion  of  Coastal's  data  processing  to  a commercial friendly system,
Coastal's product menu and universe of customer types expanded significantly. 
Additional  resources would be needed to deliver each product and maintain the
personal level of service Coastal's customers expect and deserve.  But instead
of  increasing  the  overall budget for the branch system, management chose to
reallocate  the  present level of branch banking resources according to market
needs  and  limit  Coastal's  geographic  reach  beyond  our  core  markets.

     In  pursuit  of  the  latter, Coastal chose to exit two Texas cities, San
Antonio  and  San  Angelo,  where  our market presence was neither significant
enough  nor  promising  enough to justify the cost.  During 1996, Coastal sold
its  San Angelo branch for a profit and swapped three San Antonio branches for
one  Compass  Bank branch in Bay City, Texas.  The net effect:  Coastal gained
approximately  $11.1  million  in  deposits,  but  also  reduced annual branch
expenses.    Management  then  redeployed some of the savings into delivery of
commercial  deposit  products.   By the end of 1996, Coastal had condensed its
branch  system  to 37 branches in its most promising markets, Houston, Austin,
Corpus  Christi, Victoria, the Rio Grande Valley, and small cities in adjacent
markets  throughout  central  and  south  Texas.

     To properly reallocate resources without compromising service, management
chose to discontinue the practice of actively offering all Coastal products in
all  Coastal  markets.   Instead, beginning in 1997, Coastal has implemented a
plan  in  which  each of our 37 branches will be assigned, based on market and
customer  characteristics,  to one of three categories:  1. Full service "hub"
branches  with commercial and retail capacity, and commercial loan officers on
site;  2.  Full  service "spoke" branches with commercial and retail capacity,
but  without  commercial  loan officers on site; and 3. Limited service retail
branches  offering  a  full  complement  of  retail  products  only.

     This  market  driven  approach  to  product  availability  will  channel
resources  where  they  are  needed  and allow management to develop Coastal's
business  banking  programs  in our most promising commercial markets.  During
1996 and early in 1997, Coastal introduced a full menu of commercial products,
including  Small  Business  Checking,  Business  Interest  Checking,  Analysis
Checking,  and Commercial Money Market accounts as well as BusinessLINK, which
links  our  customer's PC to all of their deposit accounts at Coastal.  At the
same  time,    Coastal's  large  retail  customer  base continues to enjoy the
excellent  level  of  service and full choice of competitive products to which
they  have  grown  accustomed.

COMPETITIVE  LOAN  VELOCITY  AT  A  LOW  COST

     Rapidly  advancing  Internet  and  network  technology is revolutionizing
banking in new ways on a daily basis.  Suddenly, the world is connected to the
entire banking industry with a dizzying array of products which, when compared
from  bank  to  bank,  are  all  pretty much the same.  Price and execution of
delivery  are  the  only  things  that end up distinguishing one bank from the
next.    Products are becoming more like commodities and, therefore, price and
delivery  win.

     "Mass  Customization"  is  the  process  of custom designing standardized
products  to  fit individual customer needs.  An example of mass customization
in  banking would be a mortgage or consumer loan tailor made and executed by a
customer  on  the  Internet.    Rather  than  competing in those markets where
margins  are  thin  and  volume  is  crucial,  Coastal  chooses  to compete by
delivering  highly  customized  products  -  local  market  business loans and
commercial  real estate loans -  at the speed of standardized products.  To do
this,  Coastal  is  creatively  applying  network  technology  to the delivery
process  rather  than  to  the  product  itself.

     Coastal  is  redesigning  the  process of approving commercial loans to a
more dynamic, interactive process.  With instant access to information through
the  Internet  and  the ability to interactively process that information on a
cost  effective  basis,  Coastal  is  centralizing  the  origination  cycle of
commercial  lending.    Stated simply, the traditional banking practice of the
loan  officer compiling and processing large volumes of financial and economic
information  will become obsolete.  Most of that function will be performed by
a full time lending committee, the Portfolio Control Committee (PCC), who will
manage  the  gathering  of data, approve the loans, and manage and monitor the
entire  loan  portfolio.

     Loans will be approved through a dynamic process with better information,
and  the  committee  approving  the  loans  will  be  more  familiar  with the
information.      The  loan  officers'  time  will be better spent finding new
business  and  servicing the needs of existing customers.  And here's the best
part:    Loan velocity, the time elapsed between application and funding, will
differentiate  Coastal  in  the  highly  competitive,  customized  world  of
commercial  lending.    We  intend  to  do  it  faster  and  cheaper  than our
competitors.

INFRASTRUCTURE  WINS  AGAIN

     Now  we  have  established  our  strategy  of  winning  through  a better
infrastructure.  In 1996, we put Coastal on a path to improve our business mix
by  introducing  business  banking.  We begin 1997 with resources allocated to
the  appropriate  markets  so  we  can  offer  a full line of business banking
products  without  substantially  increasing costs.  We are launching a faster
and  more  effective  method  of  originating  and  managing a commercial loan
portfolio.    In  other  words,  in  1997,  after ten years of growing up as a
predominantly  retail  based  thrift,  Coastal is evolving into a full service
commercial  bank,  but with levels of overhead and credit risk much lower than
the  levels  typically  witnessed  in  commercial  banking.

     Assuming  that  the  economy  continues  at  its current pace, management
believes  this  new  infrastructure will generate the level of loan production
needed  to  change  Coastal's loan mix whereby single family residential loans
will represent 50% or less of total loans within 3 to 5 years.  This change in
loan  mix  is expected to increase the yield of the overall portfolio and make
it  more  responsive  to volatile market interest rates.  Management's desired
loan  mix  coupled  with  a  proportionate  increase  in  business deposits is
intended  to  increase Coastal's net interest margin to management's objective
of  at  least  2.25%.   However, due to the low cost, innovative design of the
infrastructure  built  to  achieve  that  objective,  a  significant amount of
additional credit risk will not be required to achieve a competitive return on
equity.    That way, when an economic downturn arrives - and history tells us,
it  will  arrive  -  Coastal  will be better prepared to withstand a temporary
deterioration  of  the  local  credit  market.

A  NEW  BANK....BUT  WITH  THE  SAME  SUCCESSFUL  PRINCIPLES

     In mid-1997, Coastal will consolidate all of its corporate offices into a
22-story  office building in the Southwest area of Houston.  The building will
be  re-named  Coastal  Banc  Plaza.    After  more than ten years in Coastal's
present  headquarters,  the move to a new office building, at the top of which
Coastal's  name will be seen for miles around, will be symbolic of our arrival
as  a  full  service  bank.  In 1986, Coastal was a small, retail thrift which
made  few  loans  and  offered  a  limited number of retail savings products. 
Today,  Coastal  is  an independent, publicly traded, Texas-based savings bank
offering  a  full  menu  of  commercial  and  retail  banking  products.

     But  not  everything  has  changed.    The core of management's operating
philosophy  for maintaining earnings growth and a competitive return on equity
in all economic environments is the same as it has always been.  We start with
the principle of minimizing overhead, then we only take the amount of interest
rate  risk and credit risk needed to consistently achieve a competitive return
on  equity.    And,  we  still manage to build Coastal into one of the leading
independent  savings  banks  in  Texas.

     Coastal's  shareholders seem to agree with that philosophy as well as our
strategic  shift  into  business  banking.   In the fourth quarter of 1996 and
again  in  January  of 1997, the price of Coastal's stock reached a new high. 
That  strong  signal from our shareholders is important to management, because
it tells us that we are on the right track to fulfilling the core objective of
our  operating  philosophy:    Maximize  the return to Coastal's shareholders.



/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)                             1996           1995         1994         1993
                                        ---------  -----------  -----------  -----------
<S>                                        <C>            <C>          <C>          <C>

Balance Sheet Data
 Total assets                      $       2,875,907   $2,786,528   $2,299,769   $1,928,550 
 Mortgage-backed securities  
  held-to-maturity (1)                     1,344,587    1,395,753    1,605,839    1,324,904 
 Mortgage-backed securities 
  available-for-sale                         180,656      186,414       32,249           -- 
 Loans receivable (1)                      1,229,748    1,098,555      587,032      450,104 
 Mortgage loans held for sale                    298          731          189        2,571 
 Guaranteed Assets (2)                           --           --           --        68,928 
 Savings deposits                          1,310,835    1,287,084    1,139,622    1,023,105 
 Securities sold under agreements 
  to repurchase                              966,987      993,832      645,379           -- 
 Advances from the Federal Home Loan 
   Bank of Dallas (FHLB)                     409,720      312,186      386,036      788,867 
 Senior Notes payable                         50,000       50,000           --           -- 
 Preferred Stock of the Bank                  28,750       28,750       28,750       28,750 
 Stockholders' equity                         94,148       91,679       84,680       79,254 

                                                          For the Year Ended December 31,
                                                          --------------------------------- 
                                              1996         1995         1994         1993 
                                             ---------     --------  -----------  ---------
Operating Data
 Interest income on assets other 
   than Guaranteed Assets                  $  192,819   $  169,389   $  127,291   $  84,228 
 Interest income on Guaranteed Assets (2)         --           --          762        5,338 
                                            ---------    --------      --------      ------
 Total interest income                        192,819      169,389      128,053       89,566 
 Interest expense                             138,185      126,354       88,519       53,578 
                                            ---------    ---------     --------      -------
 Net interest income                           54,634       43,035       39,534       35,988 
 Provision for loan losses                      1,925        1,664          934        1,151 
                                             --------  -----------  -----------  -----------
 Net interest income after provision 
   for loan losses                             52,709       41,371       38,600       34,837 
 Gain on trading account securities, net          --           --           --           62 
 Gain on sales of mortgage-backed 
   securities, net                                --           --           --           -- 
 Gain (loss) on sales of 
   mortgage-backed securities 
   available-for-sale, net                        (4)          81          192           -- 
 Gain on sale of branch office                   521           --           --           -- 
 Other noninterest income                      8,832        7,524        9,369        6,825 
 SAIF insurance special assessment (3)        (7,455)          --           --           -- 
 Other noninterest expense                   (39,393)     (31,369)     (27,577)     (25,423)
                                           ----------  -----------  -----------  -----------
 Income before provision for Federal 
   income taxes, minority interest and
   cumulative effect of accounting change      15,210       17,607       20,584       16,301 
 Provision for Federal income taxes             5,671        6,477        4,333        4,925 
 Minority interest in income of consolidated
   subsidiary                                     --           --         (211)        (643)
 Cumulative effect of change in accounting 
   for income taxes (4)                           --           --           --          973 
                                             --------  -----------  -----------  -----------
 Net income before preferred stock 
   dividends                                   9,539       11,130       16,040       11,706 
 Preferred stock dividends of the Bank        (2,588)      (2,588)      (2,588)        (395)
                                            ---------  -----------  -----------  -----------
 Net income after preferred stock dividends $   6,951   $    8,542   $   13,452   $   11,311 
                                             ===============================================
 Earnings per share before cumulative 
   effect of accounting change              $    1.38   $     1.71   $     2.64   $     1.92 
                                             ===============================================
 Net earnings per share (4)                 $    1.38   $     1.71   $     2.64   $     2.10 
                                             ===============================================





(in thousands except per share data and selected ratios)     1992
                                                       -----------
<S>                                                       <C>

Balance Sheet Data
 Total assets                                             $1,111,963 
 Mortgage-backed securities held-to-maturity (1)             656,561 
 Mortgage-backed securities available-for-sale                    -- 
 Loans receivable (1)                                        293,645 
 Mortgage loans held for sale                                  1,098 
 Guaranteed Assets (2)                                       122,016 
 Savings deposits                                            590,106 
 Securities sold under agreements to repurchase              126,172 
 Advances from the Federal Home Loan Bank of
   Dallas (FHLB)                                             316,748 
 Senior Notes payable                                             -- 
 Preferred Stock of the Bank                                      -- 
 Stockholders' equity                                         69,136 



                                                                1992 
                                                          -----------
Operating Data
 Interest income on assets other than
   Guaranteed Assets                                      $   60,583 
 Interest income on Guaranteed Assets (2)                      9,462 
                                                          -----------
 Total interest income                                        70,045 
 Interest expense                                             44,288 
                                                          -----------
 Net interest income                                          25,757 
 Provision for loan losses                                        21 
                                                          -----------
 Net interest income after provision for loan losses          25,736 
 Gain on trading account securities, net                         259 
 Gain on sales of mortgage-backed securities, net                663 
 Gain (loss) on sales of mortgage-backed securities
   available-for-sale, net                                     1,837 
 Gain on sale of branch office                                    -- 
 Other noninterest income                                      4,323 
 SAIF insurance special assessment (3)                            -- 
 Other noninterest expense                                   (20,572)
                                                          -----------
 Income before provision for Federal income taxes,
   minority interest and cumulative effect of
   accounting change                                          12,246 
 Provision for Federal income taxes                            2,808 
 Minority interest in income of consolidated
   subsidiary                                                   (798)
 Cumulative effect of change in accounting for
   income taxes (4)                                               -- 
                                                          -----------
 Net income before preferred stock dividends                   8,640 
 Preferred stock dividends of the Bank                            -- 
                                                          -----------
 Net income after preferred stock dividends               $    8,640 
                                                          ===========
 Earnings per share before cumulative effect
   of accounting change                                   $     1.79 

 Net earnings per share (4)                               $     1.79 
                                                          ===========
</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,
                                                     -------------------------------------- 
                                                       1996      1995     1994     1993
                                                      ------------------------------------
<S>                                                    <C>         <C>      <C>      <C>

Selected Ratios
Performance Ratios (5):
 Return on average assets before SAIF 
   insurance special assessment (6)                    0.51%    0.45%    0.71%    0.75%
 Return on average assets after SAIF 
   insurance special assessment                        0.34     0.45     0.71     0.75 
 Return on average equity before SAIF 
   insurance special assessment (6)                   12.53     9.71    16.57    15.16 
 Return on average equity after SAIF 
   insurance special assessment                        7.50     9.71    16.57    15.16 
 Dividend payout ratio before SAIF 
   insurance special assessment (6)                   16.82    18.56     8.83       --
 Dividend payout ratio after SAIF 
   insurance special assessment                       28.55    18.56     8.83       -- 
 Average equity to average total assets                3.30     3.56     3.59     4.77 
 Net interest margin (7)                               1.99     1.78     1.79     2.39 
 Interest rate spread including 
   noninterest-bearing savings deposits (7)            1.82     1.57     1.63     2.27 
 Interest rate spread (7)                              1.65     1.42     1.52     2.18 
 Noninterest expense to average total 
   assets before SAIF insurance special 
   assessment (6)                                      1.40     1.27     1.22     1.63 
 Noninterest expense to average 
   total assets after SAIF insurance 
   special assessment                                  1.67     1.27     1.22     1.63 
 Average interest-earning assets to 
   average interest-bearing liabilities              106.75   106.78   106.71   105.91 
 Ratio of earnings to combined fixed charges 
   and preferred stock dividends before SAIF 
   insurance special assessment (6):
   Excluding interest on deposits                     1.25X    1.21X    1.33X    1.64X 
   Including interest on deposits                     1.14     1.12     1.19     1.28 
 Ratio of earnings to combined fixed 
   charges and preferred stock dividends 
   after SAIF insurance special assessment:
   Excluding interest on deposits                     1.15     1.21     1.33     1.64 
   Including interest on deposits                     1.09     1.12     1.19     1.28 
Asset Quality Ratios:
 Nonperforming assets to total assets (8)             0.56%    0.68%    0.30%    0.22%
 Nonperforming loans to total loans receivable        1.04     1.33     1.04     0.91 
 Allowance for loan losses to nonperforming loans    53.59    39.00    35.37    37.32 
 Allowance for loan losses to total loans 
   receivable                                         0.56     0.52     0.37     0.34 
Bank Regulatory Capital Ratios (9):
 Tangible capital to adjusted total 
   assets                                              N/A      N/A      N/A    5.11 
 Tier 1 capital to total assets                       5.35     5.30     4.54    5.17 
 Tier 1 risk-based capital to risk-weighted assets   11.77    12.36    12.37      N/A
 Total risk-based capital to risk-weighted assets    12.30    12.84    12.63   18.63 
Other Data:
 Full-time employee equivalents                        453      390      298     288 
 Number of full service offices                         37       40       34      26 




                                                                  1992
                                                                 -------
<S>                                                              <C>

Selected Ratios
Performance Ratios (5):
 Return on average assets before SAIF insurance special
   assessment (6)                                                  0.81%
 Return on average assets after SAIF insurance special
   assessment                                                      0.81 
 Return on average equity before SAIF insurance special
   assessment (6)                                                 15.02 
 Return on average equity after SAIF insurance special
   assessment                                                     15.02 
 Dividend payout ratio before SAIF insurance special                 -- 
   assessment (6)
 Dividend payout ratio after SAIF insurance special assessment       -- 
 Average equity to average total assets                            5.41 
 Net interest margin (7)                                           2.53 
 Interest rate spread including noninterest-bearing savings
   deposits (7)                                                    2.40 
 Interest rate spread (7)                                          2.32 
 Noninterest expense to average total assets before SAIF
   insurance special assessment (6)                                1.94 
 Noninterest expense to average total assets after SAIF
   insurance special assessment                                    1.94 
 Average interest-earning assets to average interest-bearing
   liabilities                                                   104.86 
 Ratio of earnings to combined fixed charges and preferred
   stock dividends before SAIF insurance special
   assessment (6):
   Excluding interest on deposits                                 1.69X 
   Including interest on deposits                                  1.26 
 Ratio of earnings to combined fixed charges and preferred
   stock dividends after SAIF insurance special assessment:
   Excluding interest on deposits                                  1.69 
   Including interest on deposits                                  1.26 
Asset Quality Ratios:
 Nonperforming assets to total assets (8)                          0.33%
 Nonperforming loans to total loans receivable                     0.79 
 Allowance for loan losses to nonperforming loans                 32.97 
 Allowance for loan losses to total loans receivable               0.26 
Bank Regulatory Capital Ratios (9):
 Tangible capital to adjusted total assets                         5.88 
 Tier 1 capital to total assets                                    6.03 
 Tier 1 risk-based capital to risk-weighted assets                  N/A
 Total risk-based capital to risk-weighted assets                 22.27 
Other Data:
 Full-time employee equivalents                                     194 
 Number of full service offices                                      16 
</TABLE>


                                                  (Footnotes appear on page 8)


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

(2)          Guaranteed  Assets  were  governed by the Assistance Agreement in
connection  with  the  Southwest  Plan  Acquisition.    Coastal  and  the FDIC
terminated  the  Assistance  Agreement,  effective March 31, 1994, pursuant to
which  Coastal transferred substantially all the Guaranteed Assets back to the
FDIC  in  exchange  for  cash.

(3)          On  September  30,  1996,  Coastal  recorded the one-time Savings
Association Insurance Fund ("SAIF") insurance special assessment (the "special
assessment") of $7.5 million as a result of the Deposit Insurance Funds Act of
1996  (the  "Act")  being signed into law.  The special assessment pursuant to
the  Act  was  65.7  basis  points on the SAIF assessment base as of March 31,
1995.    See  Note  21  of  the  Notes  to  Consolidated Financial Statements.

(4)       Coastal adopted the Financial Accounting Standards Board's Statement
No.  109  as  of  January  1,  1993.   The cumulative effect of this change in
accounting for income taxes of $973,000 was determined as of January 1, 1993. 
Prior years' financial statements were not restated to apply the provisions of
Statement  No.  109.

(5)        Ratio, yield and rate information are based on year-to-date average
balances in 1996, 1995, 1994 and 1993 and weighted average monthly balances in
1992.

(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 21 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 and real estate
acquired  by  foreclosure but do not include Guaranteed Assets acquired in the
Southwest  Plan  Acquisition.    See  Note  2  above.

(9)        Prior to the conversion of the Bank to a state savings bank in July
1994,  OTS regulations required the Bank to maintain tangible capital equal to
at  least  1.5% of adjusted total assets, minimum core or Tier 1 capital equal
to at least 3.0% of adjusted total assets and a minimum ratio of total capital
to risk-weighted assets of 8.0%.  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.
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 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, 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 Coastal Banc ssb and each share of the
Association's  common  stock  now  represents  one  share  of  common stock of
Bancorp.   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  9.0%  Noncumulative  Preferred  Stock,  Series  A,  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 dated August 19, 1996
(the  "Agreement").  Pursuant to the terms of the Agreement, 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  provide for a reduced SAIF deposit insurance premium
rate  beginning  in  1997.
     On  June 30, 1995, Bancorp 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.    Of  the proceeds received from the issuance of the Senior
Notes,  $44.9  million was used to purchase the 11.13% Noncumulative Preferred
Stock,  Series  B,  of  the  Bank  which  is  now  owned  by  HoCo.

FINANCIAL  CONDITION
     Total  assets  increased 3.21% or $89.4 million from December 31, 1995 to
December  31,  1996.  The net increase resulted primarily from the increase in
loans  receivable  of  $131.2  million offset by a decrease in mortgage-backed
securities  held-to-maturity  of  $51.2  million  due  to  principal  payments
received.    The increase in loans receivable consisted primarily of increases
of  $48.4  million, $44.2 million and $20.0 million, in first-lien residential
mortgage  loans, multifamily mortgage loans and residential construction loans
(net  of  loans  in  process),  respectively.   The net increase in first-lien
residential  mortgage loans was due to loan purchases of $187.4 million offset
by  principal  reductions and payoffs.  At December 31, 1996, loans receivable
as  a  percentage  of  total assets increased to 42.8% as compared to 39.4% at
December  31,  1995,  as  part  of  management's  plan  to  increase the loans
receivable portfolio to approximately 50% of total assets within three to five
years.
     Savings  deposits  increased 1.8% or $23.8 million from December 31, 1995
to  December  31,  1996.    Advances from the FHLB increased by 31.2% or $97.5
million  and  securities sold under agreements to repurchase decreased 2.7% or
$26.8  million  from December 31, 1995 to December 31, 1996.  The reallocation
of borrowings during such period was directly attributable to Coastal's change
in  funding  sources  to take advantage of more favorable interest rates.  The
net increase in advances from the FHLB and securities sold under agreements to
repurchase  was  used  to fund the increase in the loans receivable portfolio.
     Common  stockholders' equity increased 2.7% or $2.5 million from December
31,  1995  to  December 31, 1996 due to 1996 net income of $9.5 million, which
included  the  $4.8 million after-tax effect of the special assessment, offset
by  common stock dividends declared of $2.0 million, preferred stock dividends
of  the  Bank  declared  of  $2.6  million  and a $2.6 million increase in the
unrealized  loss  on  securities  available-for-sale.

RESULTS  OF  OPERATIONS  FOR  THE  THREE  YEARS  ENDED  DECEMBER  31,  1996
     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  mortgage-backed  securities,  loans  receivable  and  other
investments.    Coastal's  interest-bearing  liabilities  consist primarily of
savings  deposits, advances from the FHLB, securities sold under agreements to
repurchase and the Senior Notes.  Coastal's net income is also affected by its
level  of  noninterest  income,  including loan fees and service charges, loan
servicing  income,  asset  management and disposition fees until November 1994
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>

                                        At          Year   Ended    December  31,
                                    December  31,              1996
                                     Yield/Rate   Balance   Interest          Rate



<S>                                          <C>     <C>         <C>  <C>      <C>

Assets
Interest-earning assets:
Loans receivable, net                        8.23%   $1,156,933    $96,143   8.31%
Mortgage-backed securities                   5.98     1,556,966     95,155   6.11 
Guaranteed Assets (1)                          --            --         --     -- 
U.S. Treasury security                       5.44         1,002         54   5.39 
Securities purchased underagreements           --            --         --     -- 
 to resell
FHLB stock                                  5.85         21,853      1,288   5.89 
Interest-earning deposits in other 
   depository institutions                   5.70          4,149       179   4.31 
                                    
   Total interest-earningassets              6.97      2,740,903   192,819   7.03 
                                            --------------------------------------
 Noninterest-earning assets (2)                           71,344
   Total assets (3)                                   $2,812,247
                                                      ==========


LIABILITIES AND  STOCKHOLDERSEQUITY
Interest-bearing liabilities:
Interest-bearing savings deposits                      5.00%  $1,199,651  $   60,076   5.01%
Securities sold under agreemetns to repurchase         5.55      930,706      51,360   5.52 
Advances from the FHLB                                 5.61      387,296      21,749   5.62 
Senior Notes payable                                  10.00       50,000       5,000  10.00 
                                                      ------  ----------                    
   Total interest-bearing liabilities                  5.39    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              1.58%              $   54,634   1.65%
                                                      ======                 =======  ======

Net interest-earning assets; net interest yield on            $                        1.99%
 interest-earning assets                                         173,250
                                                              ==========                    

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




(1)         Reflects assets governed by the Assistance Agreement in connection
with the Southwest Plan Acquisition.  Effective March 31, 1994, the Assistance
Agreement  between  Coastal  and  the  FSLIC  Resolution  Fund  ("FRF"),  an
instrumentality  of  the  Federal  government,  was  terminated.
(2)          Includes  goodwill,  accrued  interest  receivable,  property and
equipment, cash, purchased loan servicing rights, capitalized excess servicing
fees  and  prepaid  expenses  and  other  assets,  including,  prior  to  the
termination  of  the  Assistance Agreement, amounts from the FRF in connection
with  the  Southwest  Plan  Acquisition.
(3)        Nonaccruing loans are included in total assets, but are immaterial.

<PAGE>
<TABLE>

<CAPTION>

           Year  Ended  December  31,
                    1995
                                                   Balance          Interest          Rate



<S>                                                   <C>  <C>        <C>  <C>      <C>

Assets
Interest-earning assets:
Loans receivable, net                                 $    765,404  $   65,508   8.56%
Mortgage-backed securities                               1,625,044     102,194   6.29 
Guaranteed Assets (1)                                           --          --     -- 
U.S. Treasury security                                         667          39   5.85 
Securities purchased underagreements                            --          --     -- 
 to resell
FHLB stock                                                  20,297       1,318   6.49 
Interest-earning deposits in other depository                3,958         330   8.34 
 institutions
   Total interest-earningassets                          2,415,370     169,389   7.01 
                                                                       -------  ------
Noninterest-earning assets (2)                              56,370
   Total assets (3)                                   $  2,471,740
                                                         =========                    


LIABILITIES AND  STOCKHOLDERSEQUITY
Interest-bearing liabilities:
Interest-bearing savings deposits                     $  1,116,788  $   56,716   5.08%
Securities sold under agreemetns to repurchase             752,427      45,022   5.98 
Advances from the FHLB                                     367,895      22,116   6.01 
Senior Notes payable                                        25,000       2,500  10.00 
                                                         ---------                    
   Total interest-bearing liabilities                    2,262,110     126,354   5.59 
                                                                       -------  ------
Noninterest-bearing liabilities                             92,919
                                                         ---------                    
   Total liabilities                                     2,355,029
Preferred Stock of the Bank                                 28,750
Stockholders' equity                                        87,961
                                                         ---------                    
   Total liabilities and stockholders' equity         $  2,471,740
                                                         =========                    
Net interest income; interest rate spread                           $   43,035   1.42%
                                                                       =======  ======

Net interest-earning assets; net interest yield on    $    153,260               1.78%
 interest-earning assets

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




(1)         Reflects assets governed by the Assistance Agreement in connection
with the Southwest Plan Acquisition.  Effective March 31, 1994, the Assistance
Agreement  between  Coastal  and  the  FSLIC  Resolution  Fund  ("FRF"),  an
instrumentality  of  the  Federal  government,  was  terminated.
(2)          Includes  goodwill,  accrued  interest  receivable,  property and
equipment, cash, purchased loan servicing rights, capitalized excess servicing
fees  and  prepaid  expenses  and  other  assets,  including,  prior  to  the
termination  of  the  Assistance Agreement, amounts from the FRF in connection
with  the  Southwest  Plan  Acquisition.
(3)        Nonaccruing loans are included in total assets, but are immaterial.

<PAGE>
<TABLE>

<CAPTION>

     Year  Ended  December  31,
     1994
                                                 Balance          Interest          Rate



<S>                                              <C>  <C>        <C>  <C>      <C>

Assets
Interest-earning assets:
Loans receivable, net                           $    526,725  $   42,403  8.05%
Mortgage-backed securities                         1,602,619      82,065  5.12 
Guaranteed Assets (1)                                 12,575         762  6.06 
U.S. Treasury security                                    --          --    -- 
Securities purchased underagreements                  32,634       1,279  3.92 
 to resell
FHLB stock                                            27,460       1,252  4.56 
Interest-earning deposits in other depository          4,891         292  5.97 
 institutions
   Total interest-earningassets                    2,206,904     128,053  5.80 
                                                   ----------------------------
Noninterest-earning assets (2)                       52,413
   Total assets (3)                            $  2,259,317
                                                   ========= 


LIABILITIES AND  STOCKHOLDERSEQUITY
Interest-bearing liabilities:
Interest-bearing savings deposits                     $    963,659  $   38,127  3.96%
Securities sold under agreemetns to repurchase             593,054      27,589  4.65 
Advances from the FHLB                                     511,407      22,803  4.46 
Senior Notes payable                                            --          --    -- 
                                                         ---------                   
   Total interest-bearing liabilities                    2,068,120      88,519  4.28 
                                                                       -------  -----
Noninterest-bearing liabilities                             81,281
                                                         ---------                   
   Total liabilities                                     2,149,401
Preferred Stock of the Bank                                 28,750
Stockholders' equity                                        81,166
                                                         ---------                   
   Total liabilities and stockholders' equity         $  2,259,317
                                                         =========                   
Net interest income; interest rate spread                           $   39,534  1.52%
                                                                       =======  =====

Net interest-earning assets; net interest yield on    $    138,784              1.79%
 interest-earning assets

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



(1)         Reflects assets governed by the Assistance Agreement in connection
with the Southwest Plan Acquisition.  Effective March 31, 1994, the Assistance
Agreement  between  Coastal  and  the  FSLIC  Resolution  Fund  ("FRF"),  an
instrumentality  of  the  Federal  government,  was  terminated.
(2)          Includes  goodwill,  accrued  interest  receivable,  property and
equipment, cash, purchased loan servicing rights, capitalized excess servicing
fees  and  prepaid  expenses  and  other  assets,  including,  prior  to  the
termination  of  the  Assistance Agreement, amounts from the FRF in connection
with  the  Southwest  Plan  Acquisition.
(3)        Nonaccruing loans are included in total assets, 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>

                                          Year  Ended  December  31,
                               1996  vs  1995                       1995  vs  1994
                      Increase  (Decrease)  Due  To          Increase  (Decrease)  Due  To
                              Volume     Rate       Net       Volume       Rate         Net
                                           (dollars  in  thousands)

<S>                               <C>        <C>       <C>        <C>        <C>        <C>

INTEREST INCOME
 Loans receivable             $ 32,601   $(1,966)  $ 30,635   $ 20,271   $  2,834   $23,105 
 Mortgage-backed securities     (4,182)   (2,857)    (7,039)     1,161     18,968    20,129 
 Guaranteed Assets (1)              --        --         --       (381)      (381)     (762)
 U.S. Treasury security             18        (3)        15         20         19        39 
 Securities purchased
   under agreements to resell       --        --         --       (640)      (639)   (1,279)
 FHLB stock                         97      (127)       (30)      (379)       445        66 
 Interest-earning deposits in
   other depository institutions    15      (166)      (151)       (63)       101        38 
                                  ----------------------------------------------------------

     Total                        28,549    (5,119)    23,430     19,989   21,347    41,336 
                                ------------------------------------------------------------

INTEREST EXPENSE
 Interest-bearing savings 
   deposits                      4,152      (792)     3,360      6,687     11,902    18,589 
 Securities sold under 
   agreements to repurchase     10,010    (3,672)     6,338      8,445      8,988    17,433 
 Advances from the FHLB          1,122    (1,489)      (367)    (7,389)     6,702      (687)
 Senior Notes payable            2,500        --      2,500      1,250      1,250     2,500 
                              --------------------------------------------------------------

     Total                      17,784    (5,953)    11,831      8,993     28,842    37,835 
                              --------------------------------------------------------------

 Net change in net 
   interest income            $ 10,765   $   834   $ 11,599   $ 10,996   $ (7,495)  $ 3,501 
                              =============================================================
</TABLE>







(1)          Reflects  assets guaranteed by the FRF governed by the Assistance
Agreement  in connection with the Southwest Plan Acquisition.  Effective March
31, 1994, the Assistance Agreement between Coastal and the FRF was terminated.


NET  INCOME
     Coastal  reported  net income before preferred stock dividends and before
the  $4.8  million after-tax effect of the special assessment of $14.4 million
for  the  year  ended  December 31, 1996 and net income before preferred stock
dividends  of $11.1 million and $16.0 million for the years ended December 31,
1995  and 1994, respectively, an increase of $3.3 million or 29.2% in 1996 and
a  decrease of $4.9 million or 30.6% in 1995 in each case in comparison to the
prior  year.    The $3.3 million increase in 1996 was primarily due to a $11.6
million  increase  in  net  interest  income,  a  $1.7  million  increase  in
noninterest  income,  offset by a $8.0 million increase in noninterest expense
before  the  $7.5  million  special  assessment.   The increase in noninterest
income  was  primarily  a result of increased loan fees and service charges of
$1.8  million,  the  $521,000  gain  on the sale of a branch office, partially
offset  by  a  decrease in loan servicing income of $471,000.  The increase in
noninterest  expense  before the $7.5 million special assessment was primarily
due  to  increased  operating  expenses  as  a  result  of  the  Texas Capital
Bancshares,  Inc.  ("Texas  Capital")  acquisition  on  November 1, 1995.  The
increased  noninterest expense was also due to overall expenses related to the
expansion  of the loan product base being offered by Coastal to its customers,
primarily  the continuing development of commercial business lending programs,
the  May  1996 bank data processing conversion and the June 1996 conversion of
the  five  former  Texas Capital locations to the new data processing system. 
The increased noninterest expense related to the expansion of the loan product
base  and  the  continuing  development  of  the  commercial  business lending
programs  has  primarily  been  due to staffing increases and will continue to
increase  into 1997, as management's goal is to expand its commercial business
lending  into  select markets and to increase commercial business loans to 15%
of  total assets within three to five years.  Coastal engaged in the bank data
processing system conversion to a PC based client server technology throughout
its  branch  network  to  enable  the  branch offices to offer a more expanded
product  base  (including  loan  and deposit products) to its customers and to
automate  and  upgrade  the  work flow in the customer contact areas, allowing
branch  office  employees  a better opportunity to serve their customers.  The
cost  during  the  period  related  to  the  data  processing  conversion  was
approximately $360,000.  Net income before preferred stock dividends and after
the  after-tax  effect of the special assessment was $9.5 million for the year
ended  December  31,  1996.

     The  decrease  in  net  income  during  1995  was  primarily due to three
factors:  a $2.0 million non-recurring reversal of an accrual for income taxes
(previously  provided for) in 1994 due to the settlement of certain tax issues
with  the  FDIC,  a $1.7 million reduction in asset management and disposition
fees  from a nonbanking subsidiary sold in 1994 and an increase in noninterest
expense  of  $3.8 million due primarily to the operation of the eight branches
acquired  from  Texas  Trust Savings Bank, FSB ("Texas Trust") on December 30,
1994, the five offices acquired from Texas Capital on November 1, 1995 and the
two  de  novo  branches  opened by the Bank in the first quarter of 1995.  The
decreases  were  partially  offset  by a $3.5 million increase in net interest
income  in  1995.

NET  INTEREST  INCOME
     Net  interest income amounted to $54.6 million in 1996, an $11.6 million,
or  27.0% increase over 1995.  This increase in net interest income was due to
an  increase  in  average  net interest-earning assets of $20.0 million and an
increase  in  interest  rate  spread,  defined  to exclude noninterest-bearing
deposits,  from 1.42% in 1995 to 1.65% in 1996.  Management also calculates an
alternative  net interest spread which includes noninterest-bearing deposits. 
Under  this  calculation,  the net interest spread for 1996 and 1995 was 1.82%
and  1.57%, respectively.  Net interest rate spread is affected by the changes
in  the amount and composition of interest-earning assets and interest-bearing
liabilities  and  their  concomitant  interest rates.  The increase in the net
interest  spread  in  1996  was  primarily  due to the decrease in the average
interest  rates on interest-bearing liabilities from 5.59% in 1995 to 5.38% in
1996  and  a  slight  increase in the average yield on interest-earning assets
from  7.01%  in  1995  to  7.03%  in  1996.

     Net interest income amounted to $43.0 million in 1995, a $3.5 million, or
8.9%  increase  over 1994.  During 1995, an increase of $37.8 million in total
interest  expense  was  more  than offset by a $41.3 million increase in total
interest  income.  This increase in net interest income was due to an increase
in  average  net interest-earning assets of $14.5 million offset by a decrease
in  interest rate spread from 1.52% in 1994 to 1.42% in 1995.  The decrease in
the  net  interest  spread  was  primarily  due to the increase in the average
interest  rates on interest-bearing liabilities from 4.28% in 1994 to 5.59% in
1995,  which  was only partially offset by an increase in the average yield on
interest-earning  assets  from  5.80%  in  1994  to  7.01%  in  1995.

     Total  interest  income  amounted  to $192.8 million during 1996, a $23.4
million, or 13.8%, increase from 1995.  A $30.6 million, or 46.8%, increase in
interest  earned  on  loans  receivable  during 1996 resulted primarily from a
$391.5  million, or 51.2%, increase in the average balance of loans receivable
offset partially by a decrease in the yield earned of 25 basis points compared
to  1995.    A  $7.0  million,  or  6.9%,  decrease  in  interest  earned  on
mortgage-backed  securities  during  1996 was due to a $68.1 million, or 4.2%,
decrease in the average balance of mortgage-backed securities due to principal
payments  received  and a decrease in the yield earned of 18 basis points.  In
addition,  interest  earned  on  investment  securities, certificates and time
deposits  and  other investments decreased $166,000, or 9.8%, due to the lower
average  yield  earned  during  1996.

     Total  interest  income  amounted  to $169.4 million during 1995, a $41.3
million, or 32.3%, increase from 1994.  A $23.1 million, or 54.5%, increase in
interest  earned  on  loans  receivable  during 1995 resulted primarily from a
$238.7  million  or 45.3%, increase in the average balance of loans receivable
and  an  increase  in the yield earned of 51 basis points compared to 1994.  A
$20.1  million,  or  24.5%,  increase  in  interest  earned on mortgage-backed
securities  during  1995  was due to a $22.4 million, or 1.4%, increase in the
average  balance  of  mortgage-backed  securities and an increase in the yield
earned of 117 basis points.  These increases were more than enough to offset a
$762,000  decrease  in  interest earned on Guaranteed Assets, due to the early
termination  of  the Assistance Agreement effective March 31, 1994, and a $1.1
million,  or  40.2%  decrease  in interest earned on investment securities and
other interest-earning assets primarily due to a $40.1 million decrease in the
average  balance.

     Total  interest  expense  amounted  to  $138.2  million in 1996, an $11.8
million,  or  9.4%, increase from 1995.  A $6.3 million, or 14.1%, increase in
interest  paid on other borrowed money was due to a $178.3 million increase in
the  average  balance of securities sold under agreements to repurchase offset
by  a 46 basis point decrease in interest rates paid.  A $3.4 million, or 5.9%
increase  in  interest paid on savings deposits was due to a $82.9 million, or
7.4%, increase in the average balance of interest-bearing deposits offset by a
7  basis  point decrease in interest rates paid.  The interest expense of $5.0
million  on  the Senior Notes payable in 1996 was due to the issuance of $50.0
million  of  the  10.0%  Senior  Notes on June 30, 1995.  These increases were
somewhat offset by the $367,000 decrease in interest paid on advances from the
FHLB.  The decrease in interest paid on advances from the FHLB was due to a 39
basis point decrease in interest rates paid offset by a $19.4 million increase
in  the  average  balance.

     Total  interest  expense  amounted  to  $126.4  million  in 1995, a $37.8
million, or 42.7%, increase from 1994.  A $18.6 million, or 48.8%, increase in
interest  paid  on  savings  deposits  was  due to a $153.1 million, or 15.9%,
increase in the average balance of interest-bearing savings deposits and a 112
basis  point  increase  in  interest  rates  paid.  A $17.4 million, or 63.2%,
increase in interest paid on other borrowed money was due to a $159.4 million,
or  26.9% increase  in the average balance of securities sold under agreements
to  repurchase  and  a  133  basis point increase in interest rates paid.  The
interest  expense  of  $2.5 million on the Senior Notes payable was due to the
issuance  of  $50.0 million of the 10.0% Senior Notes on June 30, 1995.  These
increases  were  more  than enough to offset the $687,000 decrease in interest
paid  on  advances  from  the FHLB.  The decrease in interest paid on advances
from  the  FHLB was due to a $143.5 million, or 28.1%, decrease in the average
balance  offset  by  a  155  basis  point  increase  in  interest  rates paid.

PROVISION  FOR  LOAN  LOSSES
     Management  established  provisions for loan losses of $1.9 million, $1.7
million  and  $934,000  for  the years ended December 31, 1996, 1995 and 1994,
respectively.   The increase in the provision for loan losses for 1996 was due
to  the  change  in  the composition of the loans receivable portfolio and the
increase  in the loans receivable balance to $1.2 billion at December 31, 1996
as compared to $1.1 billion at December 31, 1995.  Commercial loans (including
real  estate  related  and  business  loans)  increased $7.0 million to $219.9
million  from  December  31,  1995 to December 31, 1996.  The 1995 increase of
$730,000  from the prior year's provision for loan losses was primarily due to
the  $511.5 million increase in net loans receivable from December 31, 1994 to
December  31,  1995.    Provisions  for  loan  losses,  currently $450,000 per
quarter,  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  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.  Coastal's asset
quality  ratios  have remained relatively consistent from December 31, 1994 to
December  31,  1996.    Nonperforming  loans  as  a  percentage of total loans
receivable,  net, was 1.0%, 1.3% and 1.0% at December 31, 1996, 1995 and 1994,
respectively.   The allowance for loan losses as a percentage of nonperforming
loans  was  53.6%,  39.0%  and  35.4%  at  December  31,  1996, 1995 and 1994,
respectively.    The  allowance for loan losses as a percentage of total loans
receivable,  net, was 0.6%, 0.5% and 0.4% at December 31, 1996, 1995 and 1994,
respectively.

     Coastal's  management believes that its present allowance for loan losses
is  adequate,  based upon, among other factors, its low level of nonperforming
assets  and  minimal  loss experience.  Management will continue to review its
loan  loss  policy  as  Coastal's  loan  portfolio  grows  and  diversifies to
determine  if  changes  to  the  policy  are  necessary.

NONINTEREST  INCOME
     Total  noninterest  income  amounted  to  $9.3  million  during  1996, an
increase  of  $1.7  million, or 22.9%, over 1995.  The increase in noninterest
income  was  primarily  due  to  an  increase of $1.8 million in loan fees and
service  charges  and  a  $521,000  gain recorded as a result of the sale of a
branch  office  in May 1996 offset by a decrease of $471,000 in loan servicing
income  in  1996  from  1995.    The increase in loan fees and service charges
consisted  of  a  $941,000  increase in loan fees resulting primarily from the
increased  origination  activity  of primarily residential construction loans,
commercial  loans  secured  by  residential  mortgage  loans  held  for  sale,
multifamily  and  commercial  real  estate  loans  and  a $906,000 increase in
service  charges  on  deposit  accounts  primarily  due  to  the Texas Capital
acquisition.  Coastal also experienced slight decreases of $85,000 and $68,000
in  the  gain (loss) on sales of mortgage-backed securities available-for-sale
and  other  noninterest  income,  respectively.

     Total noninterest income amounted to $7.6 million during 1995, a decrease
of  $2.0  million,  or  20.5%  compared  to 1994.  The decrease in noninterest
income was primarily due to the $1.7 million reduction in asset management and
disposition  fees  received  in 1994 from a nonbanking subsidiary of the Bank,
CBS  Asset  Corp.   CBS Asset Corp. owned 63% of Coastal Realty Partners until
the  sale  of  its  interest  in  the  partnership effective November 1, 1994.
Coastal  also  experienced slight decreases of $14,000, $201,000, and $111,000
in  loan  fees and service charges, loan servicing income and gain on sales of
mortgage-backed securities available-for-sale, net, respectively during 1995. 
These  decreases  were  somewhat  offset  by  a  $101,000  increase  in  other
noninterest  income.

NONINTEREST  EXPENSE
     Total  noninterest expense, excluding the $7.5 million special assessment
(before  applicable  income  taxes), amounted to $39.4 million during 1996, an
increase  of  $8.0  million, or 25.6%, over 1995.  Compensation, payroll taxes
and  other  benefits  and  office occupancy expense increased $4.5 million and
$1.4 million to $16.5 million and $6.0 million, respectively, primarily due to
the  operation  of the five offices acquired from Texas Capital on November 1,
1995, two de novo branches opened in March 1995 and staffing increases related
to  the  expansion  of  the  loan  product  base  available  to  customers and
continuing  development of the commercial business lending programs and to the
overtime  and contract labor utilized for the data processing conversion.  The
amortization of goodwill increased by $511,000 also due primarily to the Texas
Capital  acquisition.   Data processing expenses increased $443,000 due to the
Texas  Capital  acquisition,  the May 1996 Bank data processing conversion and
the  conversion  in  June  1996  of  the  five  former Texas Capital locations
acquired  in 1995 to the new data processing system.  Expenses related to real
estate  owned increased by $484,000 and other expenses (including advertising)
increased  $1.8  million,  or  27.5%, over the prior year.  Insurance premiums
decreased  $1.0  million,  or  32.2%, due to the $636,000 refund of the fourth
quarter  1996  SAIF assessment payment as a result of the re-capitalization of
SAIF pursuant to the Act and an overall decrease in assessment rate applicable
in  1996  as  compared  to  the  rate  applicable  in  1995.

     Total  noninterest  expense  amounted  to  $31.4  million during 1995, an
increase  of  $3.8  million, or 13.8%, over 1994.  Compensation, payroll taxes
and other benefits and office occupancy increased $1.0 million and $955,000 to
$12.0  million  and $4.6 million, respectively, primarily due to the operation
in  1995 of the eight branches acquired from Texas Trust in December 1994, the
two  de novo branches opened in the first quarter of 1995 and the five offices
acquired  from  Texas  Capital  on November 1, 1995.  Insurance premiums, data
processing  and  the  amortization  of goodwill also increased by $343,000, or
11.8%,  $225,000,  or  14.6%, and $177,000, or 16.2%, respectively, due to the
acquisitions  in  December  1994  of  Texas  Trust  and November 1995 of Texas
Capital.   Expenses related to real estate owned increased by $261,000, due to
the  increase  in  the  real estate owned portfolio, while the amortization of
purchased  loan servicing rights decreased $300,000 due to the decrease in the
underlying  loans  serviced.  Other expenses (including advertising) increased
$1.1  million,  or  20.4%,  over  the  prior  year.


<PAGE>
PROVISION  FOR  FEDERAL  INCOME  TAXES
     Coastal generated no regular Federal taxable income in 1994, 1995 or 1996
primarily due to the utilization of the net operating loss carryovers acquired
from  the  associations  obtained  in  connection  with  the  Southwest  Plan
Acquisition  and  because  payments  to  Coastal  pursuant  to  the Assistance
Agreement  were  excludable  from  taxable  income,  which resulted in Coastal
reporting  losses  each year for tax purposes.  However, pursuant to the terms
of  the  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  such  instrumentality  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 such instrumentality 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.

     The  provisions  for Federal income taxes were $5.7 million in 1996, $6.5
million  in  1995  and  $4.3  million in 1994.  The 1994 provision for Federal
income  taxes  was  affected  by  a  reversal of approximately $2.0 million of
accrued  income  taxes  due  to  the settlement of certain tax issues with the
FDIC.    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
     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 to
lock in an acceptable interest rate spread between interest-earning assets and
interest-bearing  liabilities,  Coastal  endeavors  to match the timing of the
repricing  or  maturities  as  well  as  the  basis  (for  example, the London
Interbank  Offered  Rate  ("LIBOR")  or  cost  of  funds  rate)  of  its
interest-earning  assets  to  its  interest-bearing liabilities.  Coastal also
uses  interest  rate  swap and cap agreements to aid in minimizing exposure to
interest  rate  fluctuations.    These  strategies  are  described  below.

     Coastal's  asset  and  liability  management  strategy  is formulated and
monitored  by the Securities Investment Committee of the Board of Directors of
the  Bank  (the  "Board").    The  Board's written policies and procedures are
implemented  by  the  Management  Securities  Investment  Subcommittee  (the
"Subcommittee"),  a  management-staffed  committee  composed  of  the  Chief
Executive  Officer, the Chief Investment Officer and the Chief Lending Officer
of  the  Bank.   The Subcommittee meets at least weekly 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  book and market values of assets and liabilities, unrealized
gains and losses, the past week's purchase and sale activity and maturities of
investments  and  borrowings.    The  Subcommittee  also meets with members of
Coastal's  banking  and  operations  divisions  to  make  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, core deposit
activity,  current  market  conditions  and interest rates on both a local and
national  level.

     The Securities Investment Committee of the Board of Directors of the Bank
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  market  value of portfolio equity ("MVPE"), which is defined as the
net  present  value  of  an  institution's  existing  assets,  liabilities and
off-balance  sheet  instruments,  and  by  evaluating  such impact against the
maximum  potential  changes in net interest income and MVPE that is authorized
by  the  Board  of  Directors  of Coastal.  Coastal also utilizes market-value
analysis which addresses the change in equity value of Coastal's balance sheet
arising  from  movements  in  interest  rates.   The market value of equity is
estimated  by  valuing  Coastal's assets and liabilities.  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.  Market 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.  Based on Coastal's
December 31, 1996 interest rate sensitivity position, management believes that
at  December  31, 1996 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  sets  forth  at  December  31,  1996  and 1995 the
estimated  percentage  change  in  Coastal's  net  interest  income  over  a
four-quarter period and MVPE based on the indicated changes in interest rates.
<TABLE>

<CAPTION>

          Estimated  Change  In
     Change          Net  Interest  Income          MVPE
     In  Interest  Rates          December  31,          December  31,
     (in  basis  points)  (1)          1996          1995        1996     1995


<S>               <C>     <C>       <C>       <C>


+300                                    0.58%  (19.68)%  (55.68)%  (17.54)%
+200                                    0.96    (10.88)   (36.81)   (11.08)
+100                                   (0.35)    (3.33)   (17.02)    (3.45)
0                                          --        --        --        -- 
-100                                     1.57      8.17      7.02      1.64 
-200                                     1.37     35.63      3.78     (2.73)
-300                                     5.34     59.56     (1.62)    (7.37)
</TABLE>



     (1)    Assumes  an  instantaneous uniform-change in interest rates at all
maturities.


     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  approximate  actual 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  MVPE  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 assumptions used in this
analysis  do  not  reflect  the  repricing  lag  relating  to  Coastal's
mortgage-backed  securities  discussed  below.
     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 assets.  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 purchased loan 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.
     Due  principally  to the rapidly rising interest rate environment in 1994
coupled  with the fact that a majority of Coastal's mortgage-backed securities
portfolio  was  indexed  to  the  11th District Federal Home Loan Bank cost of
funds  index  ("COFI"),  an  index in which changes in general market rates of
interest,  particularly LIBOR, are not immediately reflected, the market value
of  Coastal's  mortgage-backed securities portfolio had a temporary unrealized
net  loss  of  approximately  $135.3  million  at December 31, 1994.  However,
during  1995,  the  COFI  continued to increase while other short term indexes
such  as  LIBOR  generally  remained constant, resulting in an increase in the
market  value  of  COFI  indexed  mortgage-backed securities.  In addition, in
November  1995, the FASB issued the Special Report, "A Guide to Implementation
of  Statement  115  on  Accounting  for Certain Investments in Debt and Equity
Securities."    Provisions  in  this  Special  Report  granted  all entities a
one-time  opportunity,  until no later than December 31, 1995, to reassess the
appropriateness  of  the classifications of all securities held and to account
for any resulting reclassifications at fair value in accordance with Statement
115.    The  provisions  of  the  Special  Report  also  directed  that  any
reclassifications  as  a  result  of this one-time reassessment would not call
into  question  the  intent  to  hold other debt securities to maturity in the
future.  In accordance with this Special Report, on November 20, 1995, Coastal
reclassified approximately $226.6 million of mortgage-backed securities to the
available-for-sale category.  These mortgage-backed securities reclassified to
the  available-for-sale  category were primarily COFI securities.  At December
31,  1996,  the  mortgage-backed  securities  held-to-maturity portfolio had a
temporary  unrealized  net  loss  of  approximately  $36.0  million  and  the
mortgage-backed  securities  available-for-sale  portfolio  had  a  temporary
unrealized  net loss of approximately $4.8 million.  The changes in the market
value  of  these  securities  does  not have an effect on net interest income.
     A  more  conventional  but  limited  asset  and liability monitoring tool
involves analyzing of 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,
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  deposits, 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.  Management of
Coastal  does  not  view  the  current  mismatched  assets  and liabilities as
presenting  high  risk  potential,  although  no  assurance  can be given that
Coastal  is  not  at  risk  from  interest  rate  increases.
     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,  1996.    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.
(dollars  in  thousands)


<TABLE>

<CAPTION>

              More  than      More  than     More  than      More  than   More  than
Three months  three months   one year to  three years to  five years to ten years to Over
or  less   to  one  year  three years   five years    ten years    twenty years    twenty
                                                                               years Totals
     (Dollars  in  thousands)



<S>                                <C> <C>      <C> <C>       <C> <C>       <C> <C>  <C> <C>

INTEREST-SENSITIVE ASSETS
 Loans, net (1)(2):
   First lien mortgage-single 
     family fixed rate               $1,226       $1,631       $5,154     $5,560     $22,679 
   First lien mortgage-single 
     family adjustable rate          46,097      411,029       106,270    22,685       5,266 
   First lien mortgage-multifamily
      fixed rate                         75       12,415         9,880    7,563          505 
   First lien mortgage-multifamily 
      variable rate                 105,529           --            --       --           -- 
   Construction and acquisition 
     and development, net of 
     loans in process                58,306          331         8,553       --           -- 
   Commercial real estate            60,923        3,318         9,787     8,124      10,384 
   Commercial                        91,004          426         2,134     1,625         192 
   Consumer and other                 6,944        4,436         5,502     4,148         829 
 Mortgage-backed securities 
    held-to-maturity(1)(2)         1,104,042         --             --         2         -- 
 Mortgage-backed securities 
    available-for-sale               180,656           --            --        --         -- 
   (1)(2)
 Investment securities and other
   interest-earning assets (3)        30,552           11            --        --         -- 
                                   ---------------------------------------------------------
     Total interest-sensitive 
   assets                          1,685,354      433,597       147,280    49,707     39,855 
                                   =========================================================
 Noninterest-sensitive assets                                                                  

     Total assets                                                                              


INTEREST-SENSITIVE LIABILITIES:
 Savings deposits (4):
   NOW accounts          $     56,862   $       --   $        --   $        --   $        -- 
   Savings accounts            22,135           --            --            --            -- 
   Money market accounts      151,046           --            --            --            -- 
   Certificate accounts 
    (including discount)      281,090      491,477       199,469        23,332           165 
 Securities sold under 
    agreements to repurchase  822,275           --       144,712            --            -- 
 Advances from the FHLB       175,292       13,835       190,545        17,174         6,369 
 Senior Notes payable             --           --            --            --        50,000 

     Total interest-sensitive 
   liabilities              1,508,700      505,312       534,726        40,506        56,534 
                           =================================================================
 Noninterest-sensitive 
liabilities                                            

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

Gap during the period     $  176,654   $  (71,715)  $  (387,446)  $     9,201   $   (16,679)
Effect of interest rate 
swaps and caps(5)            142,902      (54,000)      (58,000)       (7,460)      (23,442)
                            ---------------------------------------------------------------
Cumulative gap after 
  effect of interest rate 
   swaps and caps          $ 319,556    $ 193,841    $ (251,605)     (249,864)     (289,985)
                            ================================================================

Interest-sensitive assets as a % of 
   interest-sensitive liabilities 
   (cumulative)               111.71%      105.21%        88.92%        89.44%        89.04%
Interest-sensitive assets 
   as a % of total assets
   (cumulative)                58.60        73.68         78.80         80.53         81.91 
Ratio of gap after 
   effect of interest rate 
   swaps and caps total asets   11.11       (4.37)       (15.49)         0.06         (1.40)
Ratio of cumulative gap after 
   effect of interest rate 
 swaps and caps to total assets 11.11        6.74         (8.75)        (8.69)       (10.08)


<S>                                             <C>  <C>        <C>  <C>      <C>  <C>

INTEREST-SENSITIVE ASSETS
 Loans, net (1)(2):
   First lien mortgage-single 
    family fixed rate                         $    79,915   $   81,688  $     197,853
   First lien mortgage-single family 
     adjustable rate                                   --           --        591,347
   First lien mortgage-multifamily 
     fixed rate                                     2,438           --         32,876
   First lien mortgage-multifamily 
     variable rate                                     --           --        105,529
   Construction and acquisition and
     development, net of loans in process              393           --         67,583
   Commercial real estate                           24,294           --        116,830
   Commercial                                          --           --         95,381
   Consumer and other                                  788           --         22,647
 Mortgage-backed securities 
    held-to-maturity(1)(2)                              --      240,543      1,344,587
 Mortgage-backed securities available-for-sale          --           --        180,656
   (1)(2)
 Investment securities and other
   interest-earning assets (3)                          --           --         30,563
                                                 --------------------------------------
     Total interest-sensitive assets                107,828      322,231      2,785,852
                                                  =====================================
 Noninterest-sensitive assets                                                    90,055
                                                                             ----------
     Total assets                                                            $2,875,907
                                                                             ==========

INTEREST-SENSITIVE LIABILITIES:
 Savings deposits (4):
   NOW accounts                             $        --   $       --  $        56,862
   Savings accounts                                  --           --           22,135
   Money market accounts                             --           --          151,046
   Certificate accounts (including discount)         --           --          995,533
 Securities sold under agreements to repurchase      --           --          966,987
 Advances from the FHLB                            6,505           --         409,720
 Senior Notes payable                                --           --           50,000
                                                                           ----------
     Total interest-sensitive liabilities           6,505           --      2,652,283
                                                 ====================================
 Noninterest-sensitive liabilities                                            100,726
                                                                           ----------
     Total liabilities                                                      2,753,009
 Preferred Stock of the Bank                                                   28,750
 Common stockholders' equity                                                   94,148
     Total liabilities and stockholders'                                $   2,875,907
     equity

Gap during the period                         $   101,323   $  322,231
Effect of interest rate swaps and caps(5)             --           --
                                                ---------     -------
Cumulative gap after effect of interest \
rate swaps and caps                          $   (188,662) $  133,569
                                               ======================

Interest-sensitive assets as a % of interest-sensitive                        
 liabilities (cululative)                           92.89%      105.04
Interest-sensitive assets as a % of total           
assets (cumulative)                                 85.66       96.87
Ratio of gap after effect of interest rate 
swaps and caps                                      
 to tal asets                                       3.52        11.20
Ratio of cumulative gap after effect of 
    interest rate swaps and caps to total assets    (6.56)       4.64
</TABLE>


(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 U.S. Treasury security available-for-sale, certificates and
time  deposits,  interest-bearing  deposit  accounts  and  FHLB  stock.
(4)          NOW  accounts, savings accounts and money market accounts are all
assumed  to  be  interest-rate sensitive.  Fixed-rate certificate accounts are
based  on  contractual  maturities.   Adjustable-rate certificate accounts are
included  in  the  period  in  which  they  reprice.
(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")  and  with  the  FHLB  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 FHLB or 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,  1996,  Coastal  was  a  party  to  interest  rate swap
agreements which have an aggregate notional amount of $60.9 million and expire
from  1997  to  2005.    With  respect  to  such  agreements,  Coastal  makes
weighted-average  fixed  interest  payments  ranging  from  4.99 to 6.93%, and
receives  payments  based on the floating one- and 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 year ended December 31, 1996 was to
increase interest expense by approximately $593,000.  See Note 18 of the Notes
to  Consolidated  Financial  Statements.

     An  interest  rate  cap is a guarantee given by one party, referred to as
the  issuer  (the  FHLB  or  a  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 pre
determined  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  assets 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,
1996,  Coastal  had  interest  rate  cap agreements, which expire from 1997 to
2000,  covering  an  aggregate  notional  amount  of  $386.6  million  and are
triggered, depending on the particular contract, whenever the defined floating
rate  exceeds  5.0%  to  12.5%.  The purchase price or premium of the interest
rate  cap  agreements  paid  by Coastal is capitalized and included in prepaid
expenses  and  other  assets  and is amortized over the life of the agreements
using  the  straight-line  method.   For the year ended December 31, 1996, the
interest  rate  caps  resulted  in  an  overall decrease in interest income of
approximately  $518,000.    See Note 18 of the Notes to Consolidated Financial
Statements.

<PAGE>
LIQUIDITY  AND  CAPITAL  RESOURCES
     Coastal's assets increased from $2.8 billion at December 31, 1995 to $2.9
billion at December 31, 1996.  Stockholders' equity amounted to $94.1 million,
or  $18.95  per  share,  at  December  31,  1996.    The regulatory capital of
Coastal's  subsidiary,  Coastal  Banc  ssb,  exceeded  all three of the Bank's
regulatory  capital  requirements at December 31, 1996.  At December 31, 1996,
the  Bank's  core capital amounted to 5.35% of adjusted total assets, compared
to  the  requirement of 4.0%, its Tier 1 risk-based capital amounted to 11.77%
of  risk-adjusted  assets as compared to the requirement of 4.0% and its total
risk-based  capital  amounted to 12.30% 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,  securities  sold under agreements to repurchase,
advances from the FHLB and principal and interest payments on loans receivable
and  mortgage-backed securities.  On December 30, 1994, Coastal acquired eight
branches  from  Texas Trust which resulted in the assumption of $150.2 million
in  savings deposits.  On November 1, 1995, Coastal acquired all of the issued
and  outstanding  common  stock  of  Texas  Capital  for  a  purchase price of
approximately  $21.1  million.    In connection with this acquisition, Coastal
acquired  approximately $159.1 million in assets (net of the purchase price). 
Coastal uses its funding resources principally to meet its ongoing commitments
to  fund maturing deposits and deposit withdrawals, repay borrowings, purchase
mortgage-backed  securities and loans receivable, fund existing and continuing
loan  commitments,  maintain  its  liquidity, meet operating expenses and fund
acquisitions.    At  December  31,  1996,  Coastal  had binding commitments to
originate or purchase loans totaling approximately $29.6 million and had $38.7
million  of  undisbursed loans in process.  In addition, at December 31, 1996,
Coastal  had  commitments  under  lines  of  credit  to  originate  primarily
construction  and  other  loans of approximately $103.7 million and letters of
credit  outstanding  of $1.4 million.  Scheduled maturities of certificates of
deposit  during  the  twelve months following December 31, 1996 totaled $772.7
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.
FORWARD-LOOKING  INFORMATION
     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  that  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; 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,  warehouse  and  PMSR  loans); and
changes  in  business  strategies  and other factors as discussed in Coastal's
Annual  Report  on  Form  10-K  as  filed  with  the  Securities  and Exchange
Commission.

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


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

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


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.
Chairman  of  the  Board  of  DIFCO,  Inc.,  a  railroad  car  engineering and
manufacturing company, Houston, Texas, and Director of The Ohio Bank, Findlay,
Ohio


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


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

CLAYTON  T.  STONE
Executive  Vice  President  of  Hines  Interests  Limited  Partnership, Aspen,
Colorado



CORPORATE  OFFICERS  OF  COASTAL  BANCORP,  INC.


MANUEL  J.  MEHOS
President  and  Chief  Executive  Officer

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

LINDA  B.  FRAZIER
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
Executive  Vice  President,  Chief  Financial  Officer  and Director/Treasurer

LINDA  B.  FRAZIER
Vice  President  and  Director/Secretary

BARBARA  A.  STEEN
Assistant  Treasurer  and  Director/Assistant  Secretary


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

SANDRA  S.  ORR
Executive  Vice  President  -  Chief  Investment  Officer

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 1996, Coastal entered into five
branch  acquisitions  and  one  whole  bank  acquisition:    two  with  an
instrumentality of the Federal government and four 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
$1.5  billion  of  deposits  and  the  net  acquisition of 45 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 15 branch offices and transferring the deposits to other offices
located  in  the  same  market  area.

     At  December  31,  1996,  Coastal  had total assets of approximately $2.9
billion  and  total  deposits  of  approximately  $1.3  billion with 37 branch
offices  in  metropolitan  Houston, Corpus Christi, Austin and small cities in
central  and  south  Texas.


71











                        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, 1996
and  1995 and the related consolidated statements of operations, stockholders'
equity  and  cash  flows  for each of the years in the three-year period ended
December  31,  1996.    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, 1996 and 1995 and the results
of  their  operations  and  their  cash  flows  for  each  of the years in the
three-year  period  ended  December  31,  1996  in  conformity  with generally
accepted  accounting  principles.

     As  discussed  in Notes 2 and 8 to the consolidated financial statements,
the  Company  changed  its method of accounting for certain debt securities in
1994  to  adopt  the  provisions of the Financial Accounting Standards Board's
Statement  No.  115,  "Accounting  for  Certain Investments in Debt and Equity
Securities."




January  15,  1997
Houston,  Texas

<TABLE>

<CAPTION>

                        COASTAL BANCORP, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                              DECEMBER 31, 1996 AND 1995
                           (IN THOUSANDS, EXCEPT SHARE DATA)



ASSETS                                                              1996        1995
---------------------------------------------------------------  ----------  ----------
<S>                                                              <C>         <C>

Cash and amounts due from depository institutions                $   27,735  $    9,870
Certificates and time deposits                                           --         174
                                                                 ----------  ----------

 Cash and cash equivalents                                           27,735      10,044
Loans receivable (Notes 9 and 14)                                 1,229,748   1,098,555
Mortgage-backed securities held-to-maturity (market value of
 $1,308,598 in 1996 and $1,381,650 in 1995) (Notes 8, 14,
 15, 17 and 18)                                                   1,344,587   1,395,753
Mortgage-backed securities available-for-sale, at market value
 (Notes 8, 14 and 15)                                               180,656     186,414
U.S. Treasury security available-for-sale, at market value
 (Note 6)                                                                11       3,997
Mortgage loans held for sale                                            298         731
Accrued interest receivable (Note 10)                                14,690      15,538
Property and equipment (net of accumulated depreciation and
 amortization of $7,009 in 1996 and $5,439 in 1995)                  14,987      13,439
Stock in the Federal Home Loan Bank of Dallas ("FHLB")               25,971      21,759
Goodwill (net of accumulated amortization of $9,430 in
 1996 and $7,646 in 1995)                                            15,596      17,972
Purchased loan servicing rights (Note 11)                             6,674       8,140
Capitalized excess servicing fees (Note 11)                             136         183
Prepaid expenses and other assets (Notes 12, 18 and 20)              14,818      14,003
                                                                 ----------  ----------
                                                                 $2,875,907  $2,786,528
                                                                 ==========  ==========
</TABLE>


<TABLE>

<CAPTION>

     LIABILITIES  AND  STOCKHOLDERS'  EQUITY


<S>                                                                <C>          <C>

Liabilities:
 Savings deposits (Note 13)                                        $1,310,835   $1,287,084 
 Advances from the FHLB (Note 14)                                     409,720      312,186 
 Securities sold under agreements to repurchase (Note 15)             966,987      993,832 
 Senior Notes payable (Note 16)                                        50,000       50,000 
 Advances from borrowers for taxes and insurance                        4,676        6,510 
 Other liabilities and accrued expenses                                10,791       16,487 
   Total liabilities                                                2,753,009    2,666,099 
                                                                   -----------  -----------

9.0% noncumulative preferred stock of Coastal Banc ssb
 (Note 24)                                                             28,750       28,750 

Commitments and contingencies (Notes 3, 5, 9, 18, 22 and 25)

Stockholders' equity (Notes 3, 8, 22 and 26)
 Preferred Stock, no par value; authorized shares 5,000,000;
   no shares issued                                                        --           -- 
 Common Stock, $.01 par value; authorized shares 30,000,000;
   4,966,941 and 4,957,870 shares issued and outstanding in
   1996 and 1995                                                           50           50 
 Additional paid-in capital                                            32,604       32,492 
 Retained earnings                                                     64,597       59,631 
 Unrealized gain (loss) on securities available-for-sale (Note 8)      (3,103)        (494)
   Total stockholders' equity                                          94,148       91,679 
                                                                   -----------  -----------
                                                                   $2,875,907   $2,786,528 
                                                                   ===========  ===========
</TABLE>


See  accompanying  notes  to  Consolidated  Financial  Statements.
<TABLE>

<CAPTION>

                                    COASTAL BANCORP, INC. AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                          1996         1995       1994
                                                        ---------------------------
<S>                                                        <C>         <C>       <C>

Interest income:
 Mortgage-backed securities                              $  95,155   $102,194  $ 82,065
 Loans receivable                                           96,143     65,508    42,403
 Covered Assets (Note 4)                                       --         --       762
 Investment securities, certificates, time 
   deposits and other investments                            1,521      1,687     2,823
                                                           192,819    169,389   128,053
                                                         ------------------------------

Interest expense:
 Savings deposits                                           60,076     56,716    38,127
 Other borrowed money                                       51,360     45,022    27,589
 Senior Notes payable                                        5,000      2,500        --
 Advances from the FHLB:
   Short-term                                                6,622      1,703     7,565
   Long-term                                                15,127     20,413    15,238
                                                           ----------------------------
                                                           138,185    126,354    88,519
                                                          ------------------------------

   Net interest income                                      54,634     43,035    39,534
Provision for loan losses (Note 9)                           1,925      1,664       934
   Net interest income after provision for loan losses      52,709     41,371    38,600
                                                        ---------------------------------

Noninterest income:
 Loan fees and service charges                               5,242      3,395     3,409
 Loan servicing income                                       3,031      3,502     3,703
 Asset management and disposition fees                          --         --     1,731
 Gain on sale of branch office (Note 6)                        521         --        --
 Gain (loss) on sales of mortgage-backed securities
   available-for-sale, net                                     (4)        81       192
 Other                                                        559        627       526
                                                            9,349      7,605     9,561
                                                          ------------------------------

Noninterest expense:
 Compensation, payroll taxes and other benefits            16,547     12,029    10,995
 Office occupancy                                           6,002      4,590     3,635
 Insurance premiums                                         2,199      3,244     2,901
 Amortization of purchased loan servicing rights            1,466      1,546     1,846
 Data processing                                            2,212      1,769     1,544
 Amortization of goodwill                                   1,784      1,273     1,096
 Other                                                      9,183      6,918     5,560
 SAIF insurance special assessment (Note 21)                7,455         --        --
                                                         ------------------------------
                                                           46,848     31,369    27,577
                                                         ------------------------------

       Income before provision for federal income taxes and minority interest
                                                           15,210     17,607    20,584

Provision for Federal income taxes (Note 20)                5,671      6,477     4,333
Minority interest in income of consolidated subsidiary        --         --       211
                                                         ------------------------------
     Net income before preferred stock dividends            9,539     11,130    16,040

Preferred stock dividends of Coastal Banc ssb               2,588      2,588     2,588
                                                         ----------            --------
     Net income after preferred stock dividends         $   6,951   $  8,542  $ 13,452
                                                         ==========            ========
Net earnings per share                                  $    1.38   $   1.71  $   2.64
                                                         ==========  ========  ========
</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, 1996, 1995 AND 1994
                                               (IN THOUSANDS)

                                                                        Unrealized
     Warrant  to                                                           loss on
     purchase                    Additional                             securities
     Common          Common          paid-in          Retained          available-for-
     Stock          Stock          capital          earnings             sale          Total


<S>                               <C>       <C>  <C>      <C>       <C>       <C>


Balance - December 31, 1993             $ 1,228   $49  $32,405  $45,572   $    --   $79,254 
Repurchase of warrant (Note 3)           (1,228)   --       --   (5,162)       --    (6,390)
Dividends on preferred stock
 of Coastal Banc ssb                         --    --       --   (2,588)       --    (2,588)
Dividends on Common Stock                    --    --       --   (1,188)       --    (1,188)
Exercise of stock options
 (Note 22)                                   --     1       29       --        --        30 
Unrealized gain on securities
 available-for-sale on
 January 1, 1994 (Note 8)                    --    --       --       --       264       264 
Change in net unrealized
 holding gain (loss) on
 securities available-for-sale               --    --       --       --      (742)     (742)
Net income for 1994                          --    --       --   16,040        --    16,040 
                                           -----  ---  -------  --------  --------  --------

Balance - December 31, 1994                  --    50   32,434   52,674      (478)   84,680 
Dividends on preferred stock
 of Coastal Banc ssb                         --    --       --   (2,588)       --    (2,588)
Dividends on Common Stock                    --    --       --   (1,585)       --    (1,585)
Exercise of stock options
 (Note 22)                                   --    --       58       --        --        58 
Unrealized loss on securities                --
 transferred to available-for-
 sale (Note 8)                                --    --               --    (1,556)   (1,556)
Change in net unrealized holding              --
 gain (loss) on securities available-for-sale (Note 8)
                                              --    --                --     1,540     1,540 
Net income for 1995                           --    --       --   11,130        --    11,130 
                                        --------  ---  -------  --------  --------  --------

Balance - December 31, 1995                   --    50   32,492   59,631      (494)   91,679 
Dividends on preferred stock
 of Coastal Banc ssb                         --    --       --   (2,588)       --    (2,588)
Dividends on Common Stock                    --    --       --   (1,985)       --    (1,985)
Exercise of stock options
 (Note 22)                                   --    --      112       --        --       112 
Change in net unrealized holding
 gain (loss) on securities available-for-sale (Note 8)
                                            --    --       --       --    (2,609)   (2,609)
Net income for 1996                         --    --       --    9,539        --     9,539 
                                       --------  ---  -------  --------  --------  --------

Balance - December 31, 1996             $    --   $50  $32,604  $64,597   $(3,103)  $94,148 
                                        ===================================================
</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, 1996, 1995 AND 1994
                                              (IN THOUSANDS)
                                                  1996          1995          1994


<S>                                               <C>           <C>           <C>

Cash flows from operating activities:
 Net income before preferred stock dividends    $ 9,539     $ 11,130   $ 16,040 
 Adjustments to reconcile net income to 
   net cash provided by operating activities:
 Depreciation and amortization of property and 
   equipment, purchased loans servicing rights, 
   capitalized excess servicing fees and prepaid 
   expenses and other assets                       6,098       5,191       4,947 
 Net premium amortization 
   (discount accretion)                            1,146      (2,236)       (238)
 Provision for loan losses                         1,925       1,664         934 
 Amortization of goodwill                          1,784       1,273       1,096 
 Originations and purchases of mortgage 
  loans held for sale                            (19,739)     (8,812)     (7,858)
 Sales of mortgage loans held for sale            20,158       8,268      10,240 
 (Gain) loss on sales of mortgage-backed 
  securities available-for-sale                        4         (81)       (192)
 Gain on sale of branch office                      (521)         --          -- 
 Net change in minority interest of 
   consolidated subsidiary                            --          --        (474)
 Decrease (increase) in:
   Accrued interest receivable                       853      (4,852)     (2,471)
   Other, net                                     (3,024)      6,003       7,425 
 Stock dividends from the FHLB                    (1,288)     (1,318)     (1,256)
                                               ----------  ----------  ----------

   Net cash provided by operating activities      16,935      16,230      28,193 
                                              ----------  ----------  ----------

Cash flows from investing activities:
 Purchases of mortgage-backed securities              --     (52,741)   (511,847)
 Purchase of U.S. Treasury security 
   available-for-sale                                (11)         --          -- 
 Principal repayments on mortgage-backed 
    securities                                    50,616      35,742     178,523 
 Principal repayments on mortgage-backed 
   securities available-for-sale                    879         103      17,022 
 Proceeds from maturity of U.S. Treasury 
   security available-for-sale                    4,000          --          -- 
 Proceeds from sales of mortgage-backed 
   securities available-for-sale                    860      72,379         986 
 Purchases of loans receivable                 (190,612)   (416,569)   (149,608)
 Net decrease in loans receivable                53,678       6,623      19,502 
 Net decrease in FSLIC Resolution Fund 
   guaranteed assets                                 --          --      55,549 
 Purchases of property and equipment, net        (4,273)     (3,579)     (4,114)
 Purchase of FHLB stock                          (7,924)     (2,984)    (17,900)
 Proceeds from sales of FHLB stock                5,000       3,245      34,195 
 Purchase of loan servicing rights                   --          --      (3,655)
 Cash and cash equivalents received in 
   business combination transactions, net 
   of disposition transaction                     11,652      34,311     144,974
                                              ----------  ----------  ----------

   Net cash used by investing activities         (76,135)   (323,470)   (236,373)
                                               ----------  ----------  ----------

</TABLE>



<PAGE>
<TABLE>

<CAPTION>

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


                                                     1996          1995          1994


<S>                                                   <C>           <C>           <C>


Cash flows from financing activities:
 Net decrease (increase) in savings deposits     $    12,497   $   (10,336)  $   (33,382)
 Advances from the FHLB                            3,629,022       746,899     1,868,720 
 Principal payments on advances from the FHLB     (3,531,488)     (820,749)   (2,271,551)
 Securities sold under agreements to repurchase    9,276,713     8,648,728     9,316,043 
 Purchases of securities sold under agreements 
   to repurchase                                  (9,303,558)   (8,300,275)   (8,670,664)
 Proceeds from issuance of Senior Notes 
   payable, net                                          --        47,635            -- 
 Exercise of stock options for purchase of 
   common stock, net                                     112            58            30 
 Net increase (decrease) in advances from 
   borrowers for taxes and insurance                  (1,834)        3,109           940 
 Dividends paid                                       (4,573)       (4,173)       (3,776)
   Net cash provided by financing activities          76,891       310,896       206,360 
                                                 ------------  ------------  ------------

   Net increase (decrease) in cash and cash 
   equivalents                                         17,691         3,656        (1,820)
 Cash and cash equivalents at beginning of 
   year                                                10,044         6,388         8,208 
                                                  ------------  ------------  ------------
 Cash and cash equivalents at end of year         $    27,735   $    10,044   $     6,388 
                                                  ============  ============  ============

 Supplemental schedule of cash flows--
   interest paid                                  $   139,926   $   123,030   $    87,867 
                                                  ============  ============  ============

 Supplemental schedule of noncash investing 
   and financing activities:
     Transfer of mortgage-backed securities 
     to available-for-sale   category           $        --   $   226,591   $    50,802 
                                                 ============  ============  ============
   Foreclosures of loans receivable             $     4,363   $     3,394   $     2,386 
                                                 ============  ============  ============

   Covered Assets retained at termination 
    of Assistance Agreement:
     Loans receivable                           $        --   $        --   $     6,671 
     Property and equipment                              --            --           823 
                                                 ============  ============  ============

   Repurchase of warrant from FSLIC Resolution Fund:
     Reduction of goodwill                      $        --   $        --   $       505 
     Reduction of receivable                             --            --         5,885 
     Reduction of retained earnings                      --            --         5,162 
                                                 ============  ============  ============
</TABLE>


See  accompanying  notes  to  Consolidated  Financial  Statements.

                    COASTAL BANCORP, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 1996 and 1995

(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 (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 dated August 19, 1996 (the
"Agreement").    Pursuant  to  the  terms  of the Agreement, the Bank 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

The  Bank  was  acquired  by  an  investor  group in 1986 as a vehicle to take
advantage  of  the  failures and consolidation in the Texas banking and thrift
industries.    The  Bank  acquired  deposits  in transactions with the federal
government  and other private institutions as a base for developing an ongoing
thrift  and  banking  business.    The  Bank's first acquisition was 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.

As  more  fully  described  in  notes  3  and  5 to the consolidated financial
statements,  in  con-junction  with the FSLIC assisted acquisition of Alliance
Savings  and  Loan  Association,  Cameron County Savings Association, Security
Savings  and  Loan  Association  and  Colorado County Federal Savings and Loan
Association  (the  "Acquired  Associations"),  the  Bank  received significant
financial  assistance, including the purchase of cumulative preferred stock by
the  FSLIC.


                    COASTAL BANCORP, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

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

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

CBS  Asset  Corp.  accounted  for  its  63%  ownership interest in the assets,
liabilities,  revenues  and  expenses  of  Coastal  Realty  Partners,  an
unincorporated  venture, using the consolidation method of accounting with the
outside investor's interest in Coastal Realty Partners reflected as a minority
interest.   Coastal Realty Partners was formed for the purpose of managing and
liquidating  loans  and  real  property on a contract basis for the Resolution
Trust  Corporation  ("RTC"),  the  FDIC  and  other  financial  institutions. 
Effective November 1, 1994, CBS Asset Corp. sold its 63% ownership interest in
Coastal  Realty  Partners  for  its  recorded  book  value.

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.

          INVESTMENT  AND  MORTGAGE-BACKED  SECURITIES
On January 1, 1994, Coastal adopted the Financial Accounting Standards Board's
Statement  of  Financial  Accounting  Standards  No.  115  ("Statement  115"),
"Accounting  for  Certain  Investments  in  Debt  and  Equity Securities."  In
accordance  with  Statement  115,  Coastal  classifies  securities  as  either
held-to-maturity  or  available-for-sale.    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 as a separate component
of  stockholders'  equity.

In  connection  with the adoption of Statement 115 on January 1, 1994, Coastal
transferred  approximately  $50,802,000  of  mortgage-backed securities to the
available-for-sale  category  and recorded an unrealized gain of approximately
$264,000  in  stockholders'  equity.

In  November 1995, the Financial Accounting Standards Board issued the Special
Report,  "A Guide to Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities."  Provisions in this Special Report
granted  all entities a one-time opportunity, until no later than December 31,
1995, to reassess the appropriateness of the classifications of all securities
held  and  to  account  for  any  resulting reclassifications at fair value in
accordance  with  Statement  115.    The provisions of the Special Report also
directed  that any reclassifications as a result of this one-time reassessment
would  not  call  into  question  the  intent to hold other debt securities to
maturity  in  the future.  In accordance with this Special Report, on November
20,  1995,  Coastal reclassified approximately $226,591,000 of mortgage-backed
securities  to the available-for-sale category and recorded an unrealized loss
of  approximately  $1,556,000  in  stockholders'  equity.

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,
1996  or  1995.

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.

          TRADING  ACCOUNT  SECURITIES
Trading  account securities are recorded at market value; however, at December
31,  1996  and  1995, there were no trading account securities held.  Gains or
losses  on  the revaluation or sale of trading account securities are included
in  noninterest  income.

LOANS  RECEIVABLE

Loans  receivable are stated at the principal balance outstanding net of 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 (discount) 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 as to
principal  and  interest  more  than  90  days.    When  a  loan  is placed on
nonaccrual,  any  interest  previously  accrued  but not collected is reversed
against  current  interest  income.

Coastal  adopted  Statement  of  Financial  Accounting  Standards  No.  114
("Statement  114"),  "Accounting  by  Creditors  for Impairment of a Loan," as
amended  by  Statement 118, effective January 1, 1995.  Under Statement 114, a
loan  is  impaired  when  it  is  "probable" that a creditor will be unable to
collect  all  amounts due (i.e., both principal and interest) according to the
contractual  terms  of  the  loan  agreement.  Statement 114 requires that the
measurement  of  impaired  loans  be  based  on  (i)  the present value of the
expected  future  cash flows discounted at the loan's effective interest rate,
(ii) the loan's observable market price, or (iii) the fair value of the loan's
collateral.    Statement 114 does not apply to large groups of smaller balance
homogeneous  loans  that  are  collectively evaluated for impairment.  Coastal
collectively  reviews  all  first-lien  residential  loans under $500,000 as a
group  and  all  consumer and other loans as a group for impairment, excluding
loans  in  which  foreclosure  is probable.  The adoption of Statement 114, as
amended  by  Statement  118,  had no material impact on Coastal's consolidated
financial statements as Coastal's existing policy of measuring loan impairment
was  generally  consistent  with  methods  prescribed  in  these  standards.

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 loan
receivable portfolio and considers such factors as historical loss experience,
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  sold, the remaining loan fees are recognized as income in the
period  of  the  sale.
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.


<PAGE>
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.

          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 eliminates
the accounting distinction between rights to service mortgage loans for others
that  are  acquired  through  loan  origination  activities and those acquired
through  purchase  transactions.    Under  Statement  122, if Coastal sells or
securitizes  loans  and  retains  the  mortgage  servicing  rights, Coastal is
required  to  allocate  a  portion  of  the  cost of the mortgage loans to the
mortgage  servicing  rights  and  recognize  the  cost allocated as a separate
asset.    The  adoption  of  Statement 122 had no material impact on Coastal's
consolidated  financial  statements  for  the  year  ended  December 31, 1996.

Purchased  loan servicing rights are capitalized at the date of acquisition at
the  lower  of  cost  or  the  present value of the excess of estimated future
servicing  income  over estimated future servicing costs assuming an estimated
prepayment  rate.    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.

          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
Coastal files a consolidated federal income tax return with HoCo, the Bank and
all  of  its wholly-owned subsidiaries.  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 of all stock-based awards on
the  date  of  grant.    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.

          NET  EARNINGS  PER  SHARE
Earnings per share is calculated by dividing net income, reduced for dividends
paid  on  the Bank's preferred stock, by the weighted average number of common
shares  and  common  stock  equivalents.    Stock  options  and the warrant to
purchase  common  stock  (until  the  warrant was repurchased) are regarded as
common  stock  equivalents  and are therefore considered in earnings per share
calculations  if  dilutive.    Common stock equivalents are computed using the
treasury  stock  method.    The weighted average numbers of shares used in the
computation  of  earnings per share are 5,031,238, 4,991,373 and 5,090,289, at
December  31,  1996,  1995  and  1994,  respectively.

          CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
For  purposes  of reporting cash flows, cash and cash equivalents include cash
and  amounts  due from depository institutions, certificates and time deposits
and  securities purchased under agreements to resell with an original maturity
of  three  months  or  less.

ACCOUNTING  PRONOUNCEMENTS
Coastal  adopted  Statement  of  Financial  Accounting  Standards  No.  121
("Statement 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived  Assets  to  Be Disposed Of," effective January 1, 1996.  Statement
121 requires that long-lived assets and certain identifiable intangible assets
to be held and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be  recoverable.   In addition, Statement 121 requires that certain long-lived
assets  and  certain  identifiable  intangible  assets  to  be  disposed of be
reported  at  the  lower of carrying amount or fair value less costs to sell. 
The  adoption  of  Statement  121  did not have a material impact on Coastal's
financial  position,  results  of  operations  or liquidity for the year ended
December  31,  1996.

In  June  1996,  the Financial Accounting Standards Board issued Statement No.
125  ("Statement  125"),  "Accounting for Transfers and Servicing of Financial
Assets  and  Extinguishments  of Liabilities".  Statement 125 is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring  after  December  31,  1996  and  is  to  be applied prospectively. 
Statement  125  provides  accounting and reporting standards for transfers and
servicing  of  financial  assets  and  extinguishments of liabilities based on
consistent  application  of  a  financial-components  approach that focuses on
control.    It distinguishes transfers of financial assets that are sales from
transfers  that are secured borrowings.  Management of Coastal does not expect
that  the  adoption  of Statement 125 will have a material impact on Coastal's
financial  position,  results  of  operations,  or  liquidity.


<PAGE>
     (3)          ACQUISITION  AND  FSLIC  ASSISTANCE
On  May  13,  1988  ("date  of  acquisition"),   Coastal acquired the Acquired
Associations. These institutions were insured by the FSLIC and the acquisition
was  deemed  by  the  FSLIC  to  be  an acquisition instituted for supervisory
reasons.  In connection with these acquisitions, the FSLIC agreed, in the form
of  four  substantially  similar  acquisition  agreements  and  an  assistance
agreement  ("Assistance  Agreement"),  to  provide  financial  assistance  and
indemni-fication  to  Coastal.

On April 15, 1994, Coastal and the FDIC announced the early termination of the
Assistance Agreement with the FSLIC Resolution Fund effective March 31, 1994. 
Under  the  terms  of the agreement, Coastal transferred substantially all the
Covered Assets (as defined) (Note 4) back to the FDIC in exchange for cash and
also  received cash of $12,733,000 for the remaining receivable from the FSLIC
Resolution  Fund  for the adjustment to record acquired assets at fair value. 
Discussed  below  are  the significant provisions of the Assistance Agreement.

On  the  date  of  the  acquisition,  the  FSLIC  as receiver for the Acquired
Associations transferred substantially all of the assets and substantially all
of  the  secured  and  deposit  liabilities  of  Alliance  Savings  and  Loan
Association, Cameron County Savings Association, and Security Savings and Loan
Association,  and  substantially all of the assets and liabilities of Colorado
County Federal Savings and Loan Association to Coastal.  The FSLIC delivered a
promissory  note  to  Coastal in the amount representing the combined Negative
Capital (as defined) of the Acquired Associations at the date of acquisition. 
On  March  6,  1991,  the  promissory  note  was  prepaid in full by the FSLIC
Resolution  Fund.    Approximately  90  days  after  the effective date of the
Assistance  Agreement  and  following  the  $3,300,000  capital  investment by
Coastal  required  by the Assistance Agreement, the Bank issued 125,302 shares
of cumulative Series A Preferred Stock (Preferred Stock) to the FSLIC for cash
received  of $12,530,000 and Coastal issued to the FSLIC a warrant to purchase
that  whole number of shares of Common Stock of Coastal, which shall equal 15%
of  the shares of Common Stock, determined after giving effect to the exercise
of the warrant.  The warrant was recorded at $2.88 per share which represented
management's  estimate  of  the  fair  value  of  such  warrant at the date of
issuance.

In  1990,  Coastal  repurchased  all  of  the outstanding Preferred Stock at a
discount.    The  repurchase  resulted  in  an  increase in additional paid-in
capital  of  $2,353,000, the difference between the recorded book value of the
Preferred  Stock  and the repurchase price of $10,177,000.  On April 15, 1994,
in  connection  with  the  termination  of  the  Assistance Agreement, Coastal
repurchased the warrant to purchase common stock from the FDIC for $5,885,000.
 The  repurchase  resulted  in a reduction of retained earnings of $5,162,000.

Certain  loans  and  real estate and other assets of the Acquired Associations
were  covered  by  FSLIC  Resolution  Fund  assistance  and were designated as
Covered  Assets.    These  assets  were  subject to both capital loss coverage
(Coastal  was  reimbursed  for losses on Covered Assets) and yield maintenance
(Coastal  received  a guaranteed yield on Covered Assets) from the date of the
acquisition  for a period of ten years.  The guaranteed yield specified in the
Assistance  Agreement was considered a market rate for purposes of determining
the  fair value of the Covered Assets acquired.  The designated Covered Assets
were  treated  as interest-bearing assets and the fair value was calculated as
the  expected  future  collection  of  principal  pursuant to the capital loss
coverage  of  the  Assistance  Agreement.

These  acquisitions  under  the  Assistance  Agreement  were  accounted for as
purchases.    As  a  result  of  the purchase, a receivable of $29,173,715 was
recorded  at  the  acquisi-tion  date  representing  an  amount  equal  to the
difference  between  the  recorded  book  values  and  fair  values  of assets
acquired.    In  accordance  with the Assistance Agreement, the adjustment was
recoverable  from  the  FSLIC  Resolution  Fund over a ten-year period and was
included  in  receivable from the FSLIC Resolution Fund rather than goodwill. 
In  assigning  values  to  Covered  Assets (Note 4), the FSLIC Resolution Fund
guaranteed  values  (the recorded historical cost values of such assets on the
books  of the Acquired Associations at acquisition date) were used.  Also as a
result  of  the  purchase,  goodwill  of  $4,617,200 was recorded equal to the
difference  between  the  recorded  book values and fair values of liabilities
assumed  and  the  fair  value  of  the  warrant  issued  to  the  FSLIC.

     (4)          FSLIC  RESOLUTION  FUND  GUARANTEED  ASSETS
In  connection with the acquisition of the Acquired Associations (see Note 3),
during  the  period  covered  by the Assistance Agreement the FSLIC Resolution
Fund reimbursed Coastal for all losses realized on the sales of Covered Assets
or  on approved write-downs of such assets.  Coastal retained 10% of the gains
realized  over  the  FSLIC  Resolution  Fund guaranteed value for the first $2
million of aggregate gain with increments of 2% for each additional $2 million
of  gain  realized up to 20% of gains.  The FSLIC Resolution Fund received the
remaining  percentage  of  gains.

Covered  Assets  were  defined  as:
     Each  asset  acquired  by  Coastal  pursuant  to the Assistance Agreement
(except  as  noted  below);
     A  loan  contract,  or  investment  made by Coastal pursuant to a legally
binding  commitment  of one of the Acquired Associations in effect immediately
prior  to  the  acquisition  date;
     A  loan  contract,  or  investment made by Coastal in connection with the
sale  of,  or to salvage, a Covered Asset, or any property or interest therein
received  in  exchange  for  a  Covered  Asset  if  approved  by the FDIC; and
     The  debit balance of Special Reserve Account I (as defined) treated as a
Covered  Asset  for  yield  maintenance  purposes.

Covered  Assets  did  not  include:
     One-to-four  residential  mortgage  loans  performing  according  to
contractual terms on the date of acquisition and continuing to perform for two
years;
     Leasehold  improvements,  office  furniture,  fixtures and equipment that
were  being  used  on  May  13,  1989;  and
     Any asset that was owned by or was claimed to be owned by a subsidiary of
the  Acquired  Associations.

During  the  period  covered by the Assistance Agreement, the FSLIC Resolution
Fund  paid  to  Coastal  the  difference  between the actual yield received on
remaining  Covered  Assets  and  the product of the average book value for all
Covered  Assets  multiplied  by  the Texas Cost of Funds (as defined) plus 225
basis  points for the first five quarters after the date of acquisition.  Such
spread  over  the  Texas  Cost of Funds was reduced periodically thereafter by
terms  of  the  Assistance  Agreement.

As  discussed  in  Note  3,  the Assistance Agreement was terminated effective
March  31,  1994  with  substantially all the Covered Assets being transferred
back  to the FSLIC Resolution Fund in exchange for cash.  In addition, Coastal
received  $12,733,000  in  cash  for  the  remaining receivable from the FSLIC
Resolution  Fund  for  the adjustment to record acquired assets at fair value.

Interest  income  recorded  on  Covered Assets for the year ended December 31,
1994  was  as  follows  (in  thousands):

<TABLE>

<CAPTION>



<S>               <C>

Real estate       $122
Loans receivable   587
Other assets        53
                  ----
                  $762
                  ====
</TABLE>



<PAGE>
     (5)          INDEMNIFICATIONS
Coastal  was  involved  in  various  claims  and  lawsuits  arising  from  the
acquisition of the Acquired Associations.  In accordance with the terms of the
Assistance  Agreement,  the  FSLIC  Resolution  Fund   indemnified Coastal for
amounts  incurred  and  paid  in  connection  with satisfaction, settlement or
compromise  of  challenges  to  the acquisitions, and the reasonable costs and
expenses  related thereto.  The FSLIC Resolution Fund also indemnified Coastal
for  any claims based upon an action or failure to act of Coastal prior to the
date  of  consummation  of the acquisitions.  Indemnification occurred whether
the  claim  was  filed before or after such date, to the extent that there was
not  an  adequate reserve or provision for such claim on the books and records
of  the  Acquired  Associations  prior  to  the  date  of  consummation of the
acquisitions.    Indemnification  was  made  to the extent the claims were not
reimbursable  under any insurance policy or from another third party.  Amounts
received  under the indemnification prior to the termination of the Assistance
Agreement  was  approximately  $186,000  for the year ended December 31, 1994.

     (6)          ACQUISITION  AND  DISPOSITION  TRANSACTIONS
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 
                           $26,421 
                           ========

Deposits                    25,992 
Other liabilities              429 
                           --------
                           $26,421 
                           ========
</TABLE>



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
Accrued interest payable and other liabilities sold       69
Loans receivable sold                                    155
Property and equipment sold                              438
Reduction of goodwill                                    179
</TABLE>



<PAGE>
TEXAS  CAPITAL  BANCSHARES,  INC.  ACQUISITION

On November 1, 1995, Coastal consummated the acquisition of all the issued and
outstanding  common  stock of Texas Capital Bancshares, Inc. ("Texas Capital")
for  a  purchase price of approximately $21,101,000.  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, net of purchase price  $ 34,311
Loans receivable                                   103,319
Goodwill                                             9,769
U.S. Treasury security available-for-sale            3,993
Property and equipment                               2,782
Real estate owned                                    2,430
Other assets                                         2,471
                                                  --------

 Total assets                                     $159,075
                                                  ========

Deposits                                           157,209
Other liabilities                                    1,866
                                                  --------

 Total liabilities                                $159,075
                                                  ========
</TABLE>



TEXAS  TRUST  SAVINGS  BANK,  FSB  ACQUISITION

On  December  30,  1994, Coastal consummated the acquisition of eight branches
from  Texas  Trust  Savings  Bank,  FSB.   Summarized below are the assets and
liabilities  recorded  at  fair  value  at  the  date  of  the acquisition (in
thousands):

<TABLE>

<CAPTION>



<S>                       <C>

Cash                      $144,974
Deposit account loans        1,952
Goodwill                     1,822
Property and equipment       1,504
Other assets                    22
                          --------

 Total assets             $150,274
                          ========

Deposits                   150,207
Accrued interest payable        66
Other liabilities                1
                          --------

 Total liabilities        $150,274
                          ========
</TABLE>



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

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

     (7)          SECURITIES  PURCHASED  UNDER  AGREEMENTS  TO  RESELL
Coastal  purchases  securities  under  agreements  to  resell  ("repurchase
agreements").    The  amounts  advanced  under  these  agreements  represent
short-term  loans  and  are  reflected  as  a  receivable  in the accompanying
consolidated  statements of financial condition.  The securities 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 securities
purchased  under  agreements  to  resell  outstanding  during 1996, 1995 or at
December  31,  1994.  Securities purchased under agreements to resell averaged
approximately  $32,634,000  during  1994 and the maximum amount outstanding at
any  month-end  during  1994  was  approximately  $74,164,000.

     (8)          MORTGAGE-BACKED  SECURITIES
     Mortgage-backed  securities  held-to-maturity at December 31, 1996 are as
follows  (in  thousands):
<TABLE>

<CAPTION>

                                         Gross          Gross
                           Amortized   Unrealized   Unrealized          Market
                             Cost         Gains          Losses          Value


<S>                       <C>  <C>        <C>  <C>    <C>  <C>       <C>  <C>

REMICS - Agency           $    932,488  $  4,730  $  (31,142)  $    906,076
REMICS - Non-agency            278,612       834      (9,958)       269,488
FNMA certificates               79,628        72      (1,072)        78,628
GNMA certificates               34,031       282          --         34,313
Non-agency securities           19,790       363         (95)        20,058
Interest-only securities            38        --          (3)            35
                                                                  ---------
                          $  1,344,587  $  6,281  $  (42,270)  $  1,308,598
                             =========     =====     ========     =========
</TABLE>



     Mortgage-backed  securities  held-to-maturity at December 31, 1995 are as
follows  (in  thousands):
<TABLE>

<CAPTION>

                                          Gross          Gross
                            Amortized   Unrealized    Unrealized          Market
                              Cost          Gains          Losses          Value


<S>                       <C>  <C>        <C>  <C>    <C>  <C>       <C>  <C>

REMICS - Agency           $    948,027  $  4,298  $  (13,430)  $    938,895
REMICS - Non-agency            291,124     1,039      (6,641)       285,522
FNMA certificates               92,977        44        (232)        92,789
GNMA certificates               39,520       618          --         40,138
Non-agency securities           24,049       300         (93)        24,256
Interest-only securities            56        --          (6)            50
                                                                  ---------
                          $  1,395,753  $  6,299  $  (20,402)  $  1,381,650
                             =========     =====     ========     =========
</TABLE>



As  discussed  in Note 2 to the Consolidated Financial Statements, pursuant to
the  Financial  Accounting  Standards  Board's  Special  Report,  "A  Guide to
Implementation  of Statement 115 on Accounting for Certain Investments in Debt
and  Equity  Securities,"  Coastal  reclassified  in  1995  approximately
$226,591,000  of mortgage-backed securities to the available-for-sale category
and  recorded  an unrealized loss of approximately $1,556,000 in stockholders'
equity.   Proceeds from sales of mortgage-backed securities available-for-sale
during  1996  and  1995  were  approximately  $860,000  and  $72,379,000,
respectively.    Gross  losses  of approximately $4,000 were realized on these
sales  in  1996.    Gross gains and gross losses of approximately $209,000 and
$128,000, respectively, were realized on these sales in 1995.  At December 31,
1996  and  1995, mortgage-backed securities available-for-sale of $180,656,000
and  $186,414,000  are recorded at market value, net of gross unrealized gains
of  $1,207,000  and  $1,216,000  and gross unrealized losses of $5,980,000 and
$1,975,000,  respectively.

In  connection  with the adoption of Statement 115 on January 1, 1994, Coastal
transferred  approximately  $50,802,000  of  mortgage-backed securities to the
available-for-sale  category  and recorded an unrealized gain of approximately
$264,000  in  stockholders'  equity.    Proceeds from sales of mortgage-backed
securities  available-for-sale during 1994 were approximately $986,000.  Gross
gains  and  gross  losses of approximately $220,000 and $28,000, respectively,
were  realized  on these sales in 1994.  At December 31, 1994, mortgage-backed
securities  available-for-sale  are  recorded  at  market  value, net of gross
unrealized  losses  of  $735,000.

     (9)          LOANS  RECEIVABLE
     Loans  receivable  at  December  31,  1996  and  1995  are as follows (in
thousands):
<TABLE>

<CAPTION>

                                                                   1996          1995


<S>                                                              <C>  <C>         <C>  <C>


Real estate mortgage loans:
 First lien mortgage, primarily residential                   $    791,337   $    742,880 
 Multifamily                                                       139,486         95,297 
 Residential construction                                           77,146         33,935 
 Acquisition and development                                        26,132         15,517 
 Commercial                                                        119,004        122,622 
 Commercial construction                                             3,963             -- 
Commercial loans, secured by residential mortgage loans held
 for sale                                                           53,573         48,822 
Commercial loans, secured by purchased loan servicing rights        21,380         21,548 
Commercial, financial and industrial                                21,965         19,860 
Loans secured by savings deposits                                    8,849          8,292 
Consumer and other loans                                            14,400         10,316 
                                                                 ----------     ----------
                                                                 1,277,235      1,119,089 

Loans in process                                                   (38,742)       (11,526)
Allowance for loan losses                                           (6,880)        (5,703)
Unearned loan fees                                                  (2,344)        (1,939)
Premium (discount) to record purchased loans, net                      479         (1,366)
                                                                 ----------     ----------

                                                              $  1,229,748   $  1,098,555 
                                                                 ==========     ==========

Weighted average yield                                                8.23%          8.52%
                                                                 ==========     ==========

</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.


<PAGE>
At  December  31,  1996,  Coastal  had outstanding commitments to originate or
purchase  approximately $29,600,000 of first lien mortgage and other loans and
had  commitments under lines of credit to originate primarily construction and
other loans of approximately $103,726,000.  In addition, at December 31, 1996,
Coastal  had  letters  of  credit  of  approximately  $1,372,000  outstanding.

Coastal  services  for  others  loans receivable which are not included in the
consolidated  financial  statements.  The  total  amounts  of  such loans were
approximately  $776,694,000,  $900,702,000, and $1,029,268,000 at December 31,
1996,  1995  and  1994,  respectively.   At December 31, 1996 and December 31,
1995,  Coastal  serviced approximately $2,750,000 and $3,361,000 of loans sold
with  recourse,  respectively.

A  portion  of  Coastal's  first  lien  mortgage  loan portfolio is pledged as
collateral  to  secure  advances  from  the  FHLB  (Note  14).

Included  in loans receivable at December 31, 1996 and 1995 are loans totaling
approximately  $12,839,000  and  $14,622,000,  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, 1996, 1995 and 1994, Coastal recognized interest income on these
nonaccrual loans (outstanding as of the period end) of approximately $507,000,
$303,000  and $285,000, respectively, whereas approximately $816,000, $499,000
and  $208,000,  respectively,  in  additional  interest income would have been
recorded  if  such loans had been performing in accordance with their original
terms.

At December 31, 1996 and 1995, the carrying value of loans that are considered
to  be  impaired  under  Statement  114  totaled  approximately  $725,000  and
$1,983,000,  respectively,  (all  of  which are on nonaccrual) and the related
allowance  for  loan  losses  on  those  impaired  loans  totaled $524,000 and
$674,000,  respectively.    The  average recorded investment in impaired loans
during  the  years ended December 31, 1996 and 1995 was approximately $846,000
and  $311,000,  respectively.  For the years ended December 31, 1996 and 1995,
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,
                               1996          1995          1994


<S>                               <C>      <C>      <C>

Balance, beginning of year        $5,703   $2,158   $1,527 
Provision for loan losses          1,925    1,664      934 
Charge-offs, net of recoveries      (748)    (387)    (303)
Acquisition allowance adjustment      --    2,268       -- 
                                  -------  -------  -------

Balance, end of year              $6,880   $5,703   $2,158 
                                  =======  =======  =======
                                </TABLE>




The adoption of Statement 114, as amended by Statement 118, effective January
1,  1995,  did  not result in additional provisions for loan losses during the
years  ended  December  31,  1996  or  1995.


<PAGE>
     (10)          ACCRUED  INTEREST  RECEIVABLE
Accrued  interest  receivable  at December 31, 1996 and 1995 is as follows (in
thousands):

<TABLE>

<CAPTION>



                                               1996     1995
                                              -------  -------
<S>                                           <C>      <C>


Mortgage-backed securities                    $ 6,606  $ 7,295
Loans receivable                                8,084    8,191
Investment securities, certificates and time
 deposits and other investments                    --       52
                                              -------  -------

                                              $14,690  $15,538
                                              =======  =======
</TABLE>



     (11)          MORTGAGE  SERVICING  RIGHTS
An  analysis  of  activity  of purchased loan servicing rights and capitalized
excess  servicing  fees  is  as  follows  (in  thousands):

<TABLE>

<CAPTION>

                             Purchased  Loan          Capitalized  Excess
                             Servicing  Rights          Servicing  Fees


<S>                                <C>  <C>              <C>  <C>


Balance, December 31, 1993      $   7,882                $   343 
Additions                           3,655                     -- 
Amortization                       (1,846)                  (109)
                                   -------                  -----
Balance, December 31, 1994          9,691                    234 
Adjustments                            (5)                    -- 
Amortization                       (1,546)                   (51)
                                   -------                  -----
Balance, December 31, 1995          8,140                    183 
Amortization                       (1,466)                   (47)
                                   -------                  -----
Balance, December 31, 1996      $   6,674                $   136 
                                  =======                   =====
</TABLE>



     (12)          REAL  ESTATE  OWNED
Included in prepaid expenses and other assets is real estate owned at December
31,  1996  and  1995 of approximately $3,161,000 and $4,216,000, respectively.


<PAGE>
     (13)          SAVINGS  DEPOSITS
Savings  deposits  and the related weighted average interest rates at December
31,  1996  and  1995  are  summarized  as  follows  (dollars  in  thousands):
<TABLE>

<CAPTION>



                                           1996                        1995
                                     ----------------             -------------------
                                       Stated Rate     Amount   Stated Rate        Amount
                                     ----------------  -------  ------------  ----------------          
<S>                                  <C>               <C> <C>       <C>      <C>  <C>

Noninterest-bearing checking    0.00%  $             85,259              0.00%  $    81,207 
NOW accounts                    2.00                 56,862     1.50  -  2.00        47,476 
Savings accounts                2.28  -  2.75        22,135     2.50  -  2.75        22,374 
Money market demand accounts    3.15  -  4.51       151,046     2.90  -  4.89       165,214 
                                                   --------                       ----------

                                                    315,302                         316,271 
                                                  ------------                    ----------

Certificate accounts            2.00  -  2.99        12,930     2.00  -  2.99         10,915 
                                3.00  -  3.99         1,905     3.00  -  3.99          3,472 
                                4.00  -  4.99        95,087     4.00  -  4.99        108,845 
                                5.00  -  5.99       776,765     5.00  -  5.99        613,098 
                                6.00  -  6.99        91,128     6.00  -  6.99        214,534 
                                7.00  -  7.99        12,964     7.00  -  7.99          8,776 
                                8.00  -  8.99         3,515     8.00  -  8.99          4,893 
                                9.00  -  9.99         1,171     9.00  -  9.99          1,620 
                              10.00  -  10.99           249   10.00  -  10.99          1,297 
                              11.00  -  11.99            17   11.00  -  11.99          3,718 
                                                    995,731                          971,168 
                                                ------------                      ----------
Discount to record savings deposits
 at fair value, net                                    (198)                          (355)
                                                 ------------                     ----------

                                        $          1,310,835                   $  1,287,084 
                                                 ============                     ==========

Weighted average rate                                   4.67%                          4.82%
                                                 ============                     ==========
</TABLE>



     The  scheduled maturities of certificate accounts outstanding at December
31,  1996  were  as  follows  (in  thousands):
<TABLE>

<CAPTION>



Year Ended December 31,
-----------------------        
<S>                      <C>  <C>

 1997                    $  772,690
 1998                       158,583
 1999                        40,961
 2000                        18,268
 2001                         5,064
Subsequent years                165
                            -------
                         $  995,731
                            =======
</TABLE>



     The aggregate amount of certificate accounts with balances of $100,000 or
more  was  approximately $109,371,000 and $91,190,000 at December 31, 1996 and
1995,  respectively.


<PAGE>
     (14)          ADVANCES  FROM  THE  FEDERAL  HOME  LOAN  BANK  OF  DALLAS
The  weighted average interest rates on advances from the FHLB at December 31,
1996  and  1995  were  5.61%  and  5.88%,  respectively.  Advances and related
interest  rates and maturities at December 31, 1996 and 1995 are summarized as
follows  (dollars  in  thousands):


<TABLE>

<CAPTION>



Due during the year
ended December 31,   Interest rates       1996        1995
-------------------  ---------------     -------     -------
<S>                  <C>              <C>  <C>      <C>  <C>

1996                  4.23  -  8.71%  $       --  $  225,445
1997                  4.93  -  8.31      189,127      24,293
1998                 5.25   -  6.96       19,674      16,221
1999                  4.95  -  8.11      170,871      19,916
2000                  5.57  -  7.76        8,320       8,614
2001                  6.03  -  6.46        8,854       9,025
2004                           6.52        3,201       3,526
2006                           6.91        3,167          --
2007                  6.80  -  7.94          488         270
2009                           8.25        4,681       4,876
2011                  6.35  -  7.24        1,337          --
                                         -------     -------

                                      $  409,720  $  312,186
                                         =======     =======
</TABLE>




At  December 31, 1996, Coastal had a $5,000,000 unused line of credit with the
FHLB.    The  FHLB  advances  are  secured  by  first  lien mortgage loans and
mortgage-backed  securities  with an aggregate carrying value of approximately
$409,800,000  at  December  31,  1996.


<PAGE>
     (15)          SECURITIES  SOLD  UNDER  AGREEMENTS  TO  REPURCHASE
Securities  sold  under agreements to repurchase at December 31, 1996 and 1995
are  as  follows  (dollars  in  thousands):

<TABLE>

<CAPTION>



                                 Repurchase        Repurchase           Repurchase
                                 Liability         Liability            Liability
                                 Maturing in       Maturing in          Maturing in
                                 in up to 30 days  in 30 to 90 days     Over 90 days   Total
                                 -----------------------------------------------------------
<S>                                   <C>              <C>                     <C>       <C>


December 31, 1996:
-------------------------------                                                         
Book value of mortgage-backed
 securities sold                 $   755,512  $      138,720       $156,987     $1,051,219 
Market value of mortgage-backed
 securities sold                     738,861         136,188        152,233      1,027,282 
Repurchase liability                 695,132         127,143        144,712        966,987 

Weighted average interest rate                                                        5.55%
Weighted average maturity                                                         126 days 

December 31, 1995:
-------------------------------                                               
Book value of mortgage-backed
 securities sold                 $ 740,342  $       143,897         $193,043     $1,077,282 
Market value of mortgage-backed
 securities sold                  734,218           143,860          189,220      1,067,298 
Repurchase liability              714,574           134,546          144,712        993,832 

Weighted average interest rate                                                        5.78%
Weighted average maturity                                                         176 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, 1996 and 1995, $940,320,000 and $993,832,000, respectively, of
the  agreements  relating to the mortgage-backed securities were agreements to
repurchase  the  same  securities,  while  $26,667,000  of  the  agreements at
December  31,  1996,  were  agreements  to  repurchase substantially identical
securities.    Securities  sold under agreements to repurchase at December 31,
1996,  mature  as  follows:    $822,275,000 in 1997 and $144,712,000 in 1998. 
Securities  sold  under  agreements  to  repurchase  averaged  approximately
$930,706,000  and  $752,427,000  during  1996  and 1995, respectively, and the
maximum  outstanding  amounts  at  any  month-end  during  1996  and 1995 were
approximately  $1,022,085,000  and  $993,832,000,  respectively.

At  December  31,  1996,  Coastal  had  amounts  of  securities  at risk under
securities  sold  under  agreements  to  repurchase  with  three  individual
counterparties which exceeded ten percent of stockholders' equity.  The amount
at risk with Salomon Brothers Inc. was $12,275,000 with an average maturity of
708  days  at  December 31, 1996.  The amount at risk with Credit Suisse First
Boston  Corporation  was  $33,594,000  with  an average maturity of 20 days at
December 31, 1996.  The amount at risk with Goldman Sachs was $38,263,000 with
an  average  maturity  of  27  days  at  December  31,  1996.


<PAGE>
(16)          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.

(17)                    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.

(18)                    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, 1996, Coastal had
interest rate swap and cap agreements on notional amounts totaling $60,902,000
and  $386,612,000,  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 5.56% in 1996 and 6.12% in 1995.  The
weighted  average  interest  rate of payments made on all of the interest rate
swap  agreements  was approximately 6.35% in 1996 and 5.99% in 1995.  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 interest expense
related  to these agreements was approximately $593,000, $24,000 and $888,000,
for  the  years ended December 31, 1996, 1995 and 1994, respectively.  Coastal
had  pledged  approximately  $6,123,000  and  $6,324,000  of  mortgage-backed
securities  to  secure  interest rate swap agreements at December 31, 1996 and
1995,  respectively.


<PAGE>
The  terms  of  the  interest rate swap agreements outstanding at December 31,
1996  and  1995  are  summarized  as  follows  (dollars  in  thousands):
<TABLE>

<CAPTION>



                                                                          Fair Value at
                                                                          End of Period
                                                         Floating Rate     gain (loss)
                                                                         ---------------
                          Notional     LIBOR     Fixed         at
Maturity                   Amount      Index      Rate   End of Period
---------------------     --------  -----------  ------  --------------         
                                                                           (unaudited)
<S>                    <C>  <C>       <C>          <C>     <C>             <C>

At December 31, 1996:
1997                   $     5,000  One-month    4.990%          5.633%  $            6 
                             6,000  Three-month  6.493           5.500              (65)
1998                         4,400  Three-month  6.709           5.500             (111)
1999                        14,600  Three-month  6.926           5.500             (619)
2000                         4,800  Three-month  6.170           5.543              (64)
                             2,660  Three-month  6.000           5.617               24 
2005                        23,442  Three-month  6.500           5.500              (15)
                          --------                                                      
                       $    60,902                                       $         (844)
                          ========                                       ===============

At December 31, 1995:
1996                   $     7,300  Three-month  6.130%          5.875%  $          (46)
                             2,750  Six-month    5.630           5.676               (7)
1997                         5,000  One-month    4.990           5.938               26 
                             6,000  Three-month  6.493           5.875             (124)
1998                         4,400  Three-month  6.709           5.875             (150)
1999                        14,600  Three-month  6.926           5.875             (696)
2000                         4,800  Three-month  6.170           5.813             (104)
                             2,800  Three-month  6.000           5.938              (40)
2005                        28,077  Three-month  6.500           5.938           (1,106)
                          --------                                       ---------------
                       $    75,727                                       $       (2,247)
                          ========                                       ===============
</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 5.00% to 12.50%, depending on the
agreement.    Payments  on  the  interest rate cap agreements are based on the
notional  principal  amount of the agreements; no funds were actually borrowed
or  are to be repaid.  The purchase prices of the interest rate cap agreements
are  capitalized  and  included  in "prepaid expenses and other assets" in the
accompanying  consolidated statements of financial condition and are amortized
over  the  life  of  the  agreements  using  the  straight-line  method.   The
unamortized  portion  of  the  purchase price was approximately $1,070,000 and
$2,457,000 at December 31, 1996 and 1995 respectively, with the estimated fair
value of the agreements being $639,000 and $1,641,000 at December 31, 1996 and
1995,  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 increase (decrease) in interest income
related  to  the  interest  rate  cap agreements was approximately $(518,000),
$681,000  and  ($1,464,000)  for  the years ended December 31, 1996, 1995, and
1994,  respectively.


<PAGE>
     Interest  rate  cap agreements outstanding at December 31, 1996 expire as
follows  (dollars  in  thousands):
<TABLE>

<CAPTION>



Year of       Strike rate     Notional
expiration       range         amount
----------  ----------------  ---------
<S>         <C>               <C>

1997            5.0  -  9.0%  $ 195,650
1998           5.0  -  12.5     156,400
1999        7.25  -    11.0      31,562
2000                    9.5       3,000
                              ---------
                              $ 386,612
                              =========
</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  300  basis  points.    This process is performed monthly and
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 $1,410,000
and  $1,819,000  at  December  31,  1996  and  1995,  respectively.

     (19)          FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS
Statement  of  Financial Accounting Standards No. 107, "Disclosures about Fair
Value  of  Financial  Instruments"  ("Statement  107"),  requires that Coastal
disclose  estimated fair values for its financial instruments.  The fair value
estimates,  methods  and  assumptions  used  are set forth below for Coastal's
financial  instruments  (in  thousands):

<TABLE>

<CAPTION>



                                           At                 At
                                   December 31, 1996   December 31, 1995
                                   ------------------  -----------------           
                                 Carrying      Fair            Carrying          Fair
                                   Value      Value             Value          Value
                                 ------------------------------------------------------
<S>                          <C>  <C>       <C> <C>         <C> <C>           <C>  <C>

Financial assets:
 Cash and cash equivalents   $  27,735       $ 27,735       $  10,044       $10,044
 Loans receivable            1,229,748      1,247,527       1,098,555        1,113,542
 Mortgage-backed securities
   held-to-maturity          1,344,587      1,308,598        1,395,753       1,381,650
 Securities available-
   for-sale                    180,667        180,667          190,411         190,411
 Mortgage loans held for sale      298            301              731             731
 Stock in the FHLB              25,971         25,971           21,759          21,759
 Interest rate cap agreements    1,070            639            2,457           1,641
Financial liabilities:
 Savings deposits            1,310,835      1,313,385        1,287,084      1,288,208
 Advances from the FHLB        409,720        409,478          312,186        314,106
 Securities sold under 
   agreements to repurchase    966,987        966,881          993,832        994,226
 Senior Notes payable           50,000         51,000           50,000         50,000
Off-balance sheet instruments:
 Interest rate swap agreements     --           (844)              --          (2,247)
 Commitments to extend credit      --        134,698               --         141,815


</TABLE>



          CASH  AND  CASH  EQUIVALENTS
Carrying  value approximates fair value because of the short maturity of these
instruments  and  no  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 securities are estimated based on quoted
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.

          MORTGAGE  LOANS  HELD  FOR  SALE
The  fair  value  of  mortgage  loans  held  for  sale  is  estimated based on
outstanding  commitments  from  investors  or  current  investor market yields
calculated  on  an  aggregate  loan  basis.


<PAGE>
          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,  NOW  accounts,  savings accounts, money market
demand accounts and certificate accounts with maturities less than one year is
equal to the amounts payable as of December 31, 1996 and 1995.  The fair value
of  certificate accounts with maturities in excess of one year 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.

     (20)          FEDERAL  INCOME  TAXES
The  acquisition  of  the  Acquired Associations on May 13, 1988 qualified for
tax-free  reorganization  status  under  Section  368(a)(3)(D) of the Internal
Revenue  Code  of  1986  ("IRC").  Accordingly, the tax bases of assets of the
Acquired  Associations  carried  over  to  Coastal.    In  connection with the
acquisition  of the Acquired Associations, as discussed in Note 3 and pursuant
to  the  Assistance  Agreement  discussed  therein,  the FSLIC Resolution Fund
retained  all  of  the  future  federal  income  tax benefits derived from the
federal income tax treatment of the payments of yield maintenance, interest on
the  FSLIC Resolution Fund note receivable, built-in losses on Covered Assets,
and net operating loss carryovers.  Coastal agreed to pay the FSLIC Resolution
Fund for these tax benefits when actually realized by Coastal.  The provisions
for  federal income taxes recorded for the years ended December 31, 1996, 1995
and  1994,  represent  the  gross tax liability computed under the tax sharing
provisions  of  the Assistance Agreement with the FSLIC Resolution Fund before
reduction  for  actual  federal  taxes  paid to the Internal Revenue Service. 
Alternative  minimum taxes paid with the federal return in 1996, 1995 and 1994
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  FSLIC Resolution Fund they will also be treated as tax benefit items.

IRC  Section 382 imposes limitations on the availability of net operating loss
carryovers  from  taxable  years prior to a tax-free reorganization to taxable
years  after  such  reorganization.    At  December  31, 1996, Coastal had net
operating  loss  carryforwards acquired from the Acquired Associations.  Under
the  Assistance Agreement, the FSLIC Resolution Fund retained the tax benefits
of  these  net  operating  loss  carryovers.    When  the  losses are actually
utilized,  Coastal  is required to make a payment to the FSLIC Resolution Fund
in  lieu  of  federal  income  taxes.  Coastal therefore receives no benefit. 
Although  the  termination of the Assistance Agreement was effective March 31,
1994,  the  FSLIC  Resolution Fund will continue to receive the future federal
income  tax benefits of the net operating loss carryforwards acquired from the
Acquired  Associations.

In  the  first  quarter  of 1994, Coastal recorded a reversal of approximately
$2,023,000  of  accrued  federal income taxes due to the settlement of certain
tax  issues  with  the  FDIC.    The reversal of this accrual reduced the 1994
provision  for  federal  income  taxes.

The  components  of the provision for federal income tax expense (benefit) for
the  years  ended  December  31,  1996,  1995  and  1994  are  as  follows (in
thousands):

<TABLE>

<CAPTION>



                                       1996            1995   1994
                                  ----------  ----               
<S>                               <C>         <C>      <C>      <C>


Current                           $   5,920         $6,665   $ 5,181 
Deferred                               (249)          (188)    1,175 
Reversal of accrued income taxes
 due to settlement with the FDIC         --             --    (2,023)
                                  ----------        -------  --------

                                  $   5,671         $6,477   $ 4,333 
                                  ==========        =======  ========
</TABLE>



A  reconciliation  of  the expected federal income taxes using a corporate tax
rate of 35% for the years ended December 31, 1996, 1995 and 1994 is as follows
(in  thousands):

<TABLE>

<CAPTION>



                                         1996            1995        1994
                                         ---------  ----              
<S>                                      <C>        <C>   <C>       <C>


Computed expected tax provision          $   5,324        $6,162  $ 7,131 
Reversal of accrued income taxes
 due to settlement with the FDIC                --            --   (2,023)
Change in estimate related to various
 Assistance Agreement tax benefit items         --            --     (620)
Net purchase accounting adjustments            287           104       77 
Other, net                                      60           211     (232)
                                         ---------        ------  --------
                                         $   5,671        $6,477  $ 4,333 
                                         =========        ======  ========
</TABLE>



<PAGE>
Significant  temporary  differences  that give rise to the deferred tax assets
and  liabilities  as  of  December  31,  1996  and  1995  are  as  follows (in
thousands):

<TABLE>

<CAPTION>



                                                              1996       1995
                                                              ----------------
<S>                                                           <C>        <C>


Deferred tax assets:
 Loans receivable, principally due to purchase accounting
   discount and allowance for loan losses                     $   1,247  $  997
 Property and equipment                                             100     144
 Real estate owned, principally due to unrealized writedowns        320     342
 Unrealized loss on securities available-for-sale                 1,670     266
 Goodwill                                                           268     236
 Other                                                              163     290
                                                                  3,768   2,275
                                                              ---------  ------

Deferred tax liabilities:
 Mortgage-backed securities, principally
   due to deferred hedging losses                                   494     637
 Other                                                               47      64
                                                              ---------  ------

                                                                    541     701
                                                              ---------  ------

Net deferred tax asset                                        $   3,227  $1,574
                                                              =========  ======
</TABLE>



No  valuation  allowance  on  deferred  tax  assets  has  been  established as
management  believes  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  recently 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 required to be recaptured
into income beginning with fiscal 1996.  The reserve will be recaptured over a
six  year period with the opportunity to defer recapture by up to two years if
certain  residential loan requirements are met.  At December 31, 1996, Coastal
had  approximately  $3,950,000  of  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.

     (21)        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 $7,455,000 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.  Other provisions of the Act
provide  for  a  future  reduction of the SAIF insurance premium rate from the
current  rate  of 23 basis points to approximately 6.48 basis points beginning
in  1997.

<PAGE>
     (22)          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.  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.  The Board reserved 255,261 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  after preferred stock
dividends  and net earnings per share would have been reduced to the pro forma
amounts  indicated  below.

<TABLE>

<CAPTION>



                                                            Years ended December 31,
                                                            -------------------------     
                                                                  1996      1995
                                                            -------------------------     
<S>                                                         <C>             <C>


Net income after preferred stock dividends (in thousands):
 As reported                                                $      6,951  $8,542
 Pro forma                                                  $      6,739  $8,446
Net earnings per share:
 As reported                                                $       1.38  $ 1.71
 Pro forma                                                  $       1.34  $ 1.69
</TABLE>



Pro  forma  net income and net earnings per share reflect only options granted
in 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 net 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  1996  and  1995:

<TABLE>

<CAPTION>



                                1996          1995
                            ------------  ------------
<S>                                <C>           <C>


Assumptions:
 Expected annual dividends  $0.40/share   $0.32/share 
 Expected volatility              20.97%        23.24%
 Risk-free interest rate           6.46%         6.38%
 Expected life                 10 years      10 years 

</TABLE>



<PAGE>
A summary of the status of the stock options as of December 31, 1996, 1995 and
1994  and  changes  during  the  years  then  ended  is  as  follows:

<TABLE>

<CAPTION>



                             1996                    1995                         1994
                            ---------              ----------                    --------   
                            Weighted-              Weighted-                       Weighted-
                   Number     Average     Number     Average      Number           Average
                   of       Exercise      of       Exercise       of              Exercise 
                   Shares    Price      Shares      Price         Shares
                           ---------  ----------  ---------  ----------  ---------------         
<S>                   <C>        <C>         <C>        <C>         <C>              <C>


Outstanding at 
 beginning of year   242,907   $   13.828   178,611   $   13.084       132,182   $  11.488
Granted              112,000       17.383    77,446       15.500        51,236      17.125
Exercised             (9,071)      12.372    (5,249)      11.088        (2,732)     10.810
Forfeited             (5,749)      16.733    (7,901)      15.214        (2,075)     14.175
Outstanding at end
 of year             340,087   $   14.989   242,907   $   13.828         178,611   $  13.084
                    ========================================================================

Options exercisable at
 end of year         209,999                151,141                      96,025
                     =======================================================================

Weighted-Average fair
 value of options
 granted during the year                  
 (per share)               $   6.56               $   7.83               not applicable
                           =========              =========         
</TABLE>



     The  following  table  summarizes  information  about  stock  options
outstanding  at  December  31,  1996:

<TABLE>

<CAPTION>



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


10.625 to $12.875    112,690         6.0 years  $    11.501      112,690  $     11.501
15.500 to $18.750    227,397         8.7 years  $    16.717       97,309  $     16.585
                     340,087         7.8 years  $     14.989      209,999  $    13.857
===============================================================================
</TABLE>



     (23)          EMPLOYEE  BENEFITS
Coastal  maintains  a  401(k) profit sharing plan.  Coastal's contributions to
this plan were approximately $105,000, $94,000 and $77,000 for the years ended
December  31,  1996,  1995  and  1994,  respectively.   Pursuant to this plan,
employees  can  contribute up to 15% of their qualifying compensation into the
plan.    Beginning  January  1,  1990, Coastal has matched 25% of the employee
contributions  up  to  15%  of  qualifying  compensation.

     (24)          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.


<PAGE>
     (25)          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 will not be material to the
consolidated  financial  statements.

At  December  31, 1996, 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,
-------------------       
<S>                  <C>  <C>


1997                 $  1,462
1998                      882
1999                      756
2000                      600
2001                      562
2002 and thereafter     1,200
</TABLE>



Rent  expense for the years ended December 31, 1996, 1995 and 1994 amounted to
approximately  $2,000,000,  $1,465,000  and  $1,339,000,  respectively.

     (26)          STOCKHOLDERS'  EQUITY
On  January  25,  April  25, July 25, and October 24, 1996, Coastal declared a
dividend  of  $0.10 per share of Common Stock outstanding for the stockholders
of  record  of  February  15,  May  15,  August  15,  and  November  15, 1996,
respectively.

On  January  26,  April  27, July 27, and October 26, 1995, Coastal declared a
dividend  of  $0.08 per share of Common Stock outstanding for the stockholders
of  record  on  February  21,  May  15,  August  15,  and  November  15, 1995,
respectively.

On  April  28,  July  28  and October 27, 1994, Coastal declared a dividend of
$0.08  per share of Common Stock outstanding for the stockholders of record on
May  18,  August  18,  and  November  15,  1994,  respectively.

     (27)          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, 1996, that the
Bank  met  capital  adequacy  requirements  to  which  it  is  subject.

As  of  December  31,  1996,  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, 1996 and
1995,  in relation to its existing regulatory capital requirements for capital
adequacy  purposes  as  of  such  date  are as follows (dollars in thousands):

<TABLE>

<CAPTION>



                             Minimum For Capital
                           ActualAdequacy Purposes
                           ------------------------                              
Capital Requirement                       Amount          Ratio       Amount  Ratio
-------------------------  ------------------------  ------  ------              
<S>                        <C>                 <C>     <C>     <C>       <C>


As of December 31, 1996:
 Tier 1 (core)             $                152,932           5.35%  $114,377  4.00%
 Tier 1 risk-based                          152,932          11.77     51,970  4.00 
 Total risk-based                           159,812          12.30    103,940  8.00 

As of December 31, 1995:
 Tier 1 (core)                              146,869           5.30    110,892  4.00 
 Tier 1 risk-based                          146,869          12.36     47,514  4.00 
 Total risk-based                           152,572          12.84     95,027  8.00 

</TABLE>



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

                     Statements of Financial Condition
<TABLE>

<CAPTION>



                                                1996      1995
                                              --------  --------
<S>                                           <C>       <C>

Assets:
 Cash and cash equivalents                    $    871  $    405
 Investment in subsidiary                      136,675   135,597
 Mortgage-backed securities held-to-maturity     2,079     2,415
 Other assets                                    5,125     3,262
                                              --------  --------

Total assets                                  $144,750  $141,679
                                              ========  ========

Liabilities and stockholders' equity:
 Senior Notes payable                         $ 50,000  $ 50,000
 Other liabilities                                 602        --
                                              --------  --------
       Total liabilities                        50,602    50,000
 Total stockholders' equity                     94,148    91,679
                                              --------  --------

Total liabilities and stockholders' equity    $144,750  $141,679
                                              ========  ========
</TABLE>



                          Statements of Operations
<TABLE>

<CAPTION>



                                      Years ended December 31,
                                      -------------------------                
                                                1996             1995       1994
                                      -------------------------  ---------     
<S>                                   <C>                        <C>        <C>

Income:
 Dividends from subsidiary            $                   7,001  $   4,093  $ 1,492
 Equity in undistributed earnings of
   subsidiary, net of income tax                          6,274      8,920   14,552
 Interest income                                            143         66       --
       Total income                                      13,418     13,079   16,044
                                      -------------------------  ---------  -------
Expense:
 Interest expense                                         5,000      2,500       --
 Noninterest expense                                        891        464        4
       Total expense                                      5,891      2,964        4
                                      -------------------------  ---------  -------

       Federal income tax benefit                         2,012      1,015       --
                                      -------------------------  ---------  -------

           Net income                 $                   9,539  $  11,130  $16,040
                                      =========================  =========  =======
</TABLE>



                                      
<PAGE>
                         Statements of Cash Flows

<TABLE>

<CAPTION>



                                                        Years ended December 31,
                                                      --------------------------                  
                                                   1996              1995        1994
                                                           --------------------------  ----------      

<S>                                                <C>                <C>         <C>

Cash flows from operating activities:
 Net income                                       $  9,539       $  11,130   $ 16,040 
 Adjustments to reconcile net income to net
   cash provided  by operating activities:
     Equity in undistributed earnings of 
     subsidiary                                     (6,274)     (8,920)   (14,552)
     Net increase in other assets                   (1,262)       (890)        (8)
                                          -------------------------------------------------

         Net cash provided by operating 
            activities                               2,003       1,320      1,480 
                                          -------------------------------------------------

Cash flows from investing activities:
 Transfer of mortgage-backed securities
   from subsidiary                                      --      (2,517)        -- 
 Net decrease in mortgage-backed securities            336         102         -- 
  Investment in subsidiary                             --     (44,930)         -- 
                                             ----------------------------------------------
         Net cash provided (used) by 
          investing activities                        336     (47,345)         -- 
                                             -----------------------------------------------

Cash flows from financing activities:
 Exercise of stock options for purchase of
   common stock                                       112          58         30 
 Issuance of Senior Notes payable, net                --      47,635         -- 
 Dividends paid                                   (1,985)     (1,585)    (1,188)
         Net cash provided (used) by financing
         activities                               (1,873)     46,108     (1,158)
                                            ------------------------------------------------

         Net increase in cash and cash 
                 equivalents                         466          83        322 

Cash and cash equivalents at beginning of year       405         322         -- 
                                              ----------------------------------------------

Cash and cash equivalents at end of year    $        871   $     405   $    322 
                                                ============================================
</TABLE>


                                                                             

<PAGE>
     (29)          SELECTED  QUARTERLY  FINANCIAL  DATA
Selected quarterly financial data is presented in the following tables for the
years  ended December 31, 1996 and 1995 (in thousands, except per share data):

<TABLE>

<CAPTION>



                                    1996 Quarter Ended (unaudited)
                                    -------------------------------        
                               March 31,        June 30,         September 30,  December 31,
                          -----------------------------------------------------------------    

<S>                         <C>  <C>            <C> <C>     <C>  <C>             <C>  <C>

Interest income             $ 48,118          $  47,763      $  47,777          $  49,161
Interest expense              34,707             33,902         34,228            35,348
                            ---------------------------------------------------------------

Net interest income           13,411             13,861         13,549            13,813
Provision for loan losses        575                450            450               450
Gain on sale of branch            --                521             --                --
Noninterest income             2,141              2,130          2,223             2,334
Noninterest expense            9,550             10,301          9,932             9,610
SAIF insurance special 
  assessment                     --                 --           7,455                --
                             -------------------------------------------------------------

Income (loss) before provision
 for federal income taxes     5,427               5,761         (2,065)             6,087
Federal income taxes          1,987               2,103           (636)             2,217
                             --------------------------------------------------------------

Net income (loss)          $  3,440             $ 3,658      $  (1,429)          $   3,870
                            ==============================================================

Net earnings (loss) per share $0.56             $  0.60      $   (0.42)          $    0.64
                            ===============================================================
</TABLE>




<TABLE>

<CAPTION>



                                  1995 Quarter Ended (unaudited)
                                  -------------------------------                           
                               March 31,     June 30,   September 30,  December 31,
                               -----------------------------------------------------------  
<S>                               <C>   <C>    <C> <C>     <C>  <C>     <C>  <C>


Interest income             $ 38,197       $   41,192  $  43,296         $ 46,704
Interest expense              28,719           31,020     32,859           33,756
                      --------------------------------------------------------------------

Net interest income           9,478            10,172     10,437           12,948
Provision for loan losses       262               468        237              697
Gain on sales of mortgage-backed
 securities available-for-sale   --                --         --               81
Noninterest income            1,854             1,738      1,816            2,116
Noninterest expense           7,084             7,491      7,800            8,994
                       ---------------------------------------------------------------------

Income before provision
 for federal income taxes     3,986             3,951      4,216             5,454
Federal income taxes          1,556             1,429      1,521             1,971
                        --------------------------------------------------------------------

Net income             $      2,430        $     2,522  $   2,695         $   3,483
                        ====================================================================

Net earnings per share $       0.36        $      0.37  $    0.41              0.57
                        ====================================================================
</TABLE>




STOCK  PRICES  AND  DIVIDENDS


The following table sets forth the high and low price range by quarter for the
two  years ended December 31, 1996 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>



                 1996                1995
                -------           ----------                         
                 High      Low    Dividends    High      Low    Dividends
                -------  -------  ----------  -------  -------  ----------
<S>             <C>      <C>      <C>         <C>      <C>      <C>


First Quarter   $18.750  $16.625  $    0.100  $15.750  $14.000  $    0.080
Second Quarter   18.875   17.000       0.100   16.500   14.250       0.080
Third Quarter    20.375   16.500       0.100   17.250   15.500       0.080
Fourth Quarter   24.750   19.875       0.100   17.500   15.875       0.080
</TABLE>





COASTAL  BANC  SSB  PREFERRED  STOCK,  SERIES  A:

<TABLE>

<CAPTION>



                 1996                1995
                -------           ----------                         
                 High      Low    Dividends    High      Low    Dividends
                -------  -------  ----------  -------  -------  ----------
<S>             <C>      <C>      <C>         <C>      <C>      <C>


First Quarter   $25.750  $24.750  $    0.563  $24.625  $22.750  $    0.563
Second Quarter   24.875   24.500       0.563   25.000   23.750       0.563
Third Quarter    25.250   24.625       0.563   25.125   23.500       0.563
Fourth Quarter   25.250   24.875       0.563   25.500   24.625       0.563
</TABLE>







Coastal  Bancorp,  Inc.
STOCKHOLDER  INFORMATION

ANNUAL  MEETING

The  Annual  Meeting  of Stockholders of Coastal Bancorp, Inc. will be held at
the  Renaissance  Houston  Hotel at 6 Greenway Plaza East, Plaza III, Houston,
Texas,  77046  on  April  24,  1997  at  11:00  a.m.


TRANSFER  AGENT  AND  REGISTRAR

ChaseMellon  Shareholder  Services
450  West  33rd  St.,  15th  Floor
New  York,  NY  10001


INDEPENDENT  AUDITORS

KPMG  Peat  Marwick  LLP
700  Louisiana  Street,  Suite  2700
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  Tower
8  Greenway  Plaza,  Suite  1500
Houston,  Texas      77046
(713)  623-2600
email:    cwylie@coastalbanc.com

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 27, 1997, there were 4,968,591 shares of
Common  Stock  of  Coastal  Bancorp,  Inc.  issued  and  outstanding  and  the
approximate  number  of  stockholders  of  record  was  58.

     On  March  25, 1992, Coastal Banc Savings Association (the "Association")
issued  2,061,384  shares  of  Common Stock at $12.50 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 "Bank").  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 27,
1997,  there  were  1,150,000 shares of Preferred Stock issued and outstanding
and  held  by  approximately  234  stockholders  of  record.

     Coastal  declared  dividends  on  the  Common Stock payable during 1996. 
Quarterly  dividends  in  the  amount of $.10 per share were paid on March 15,
1996,  June  15,  1996,  September  15, 1996, December 15, 1996.  On March 15,
1997, Coastal paid a quarterly dividend in the amount of $.10 per share on its
Common  Stock.  Coastal  Bancorp,  Inc.  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.