UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.   20549

                                    FORM 10-K

      [  X  ]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                  THE  SECURITIES  EXCHANGE  ACT  OF  1934

                  For  the  Fiscal  Year  Ended  DECEMBER  31,  1997
                    OR
      [     ]     Transition Report Pursuant to Section 13 or 15 (d)  of
                  the  Securities  Exchange  Act  of  1934
                  For  the  Transition  Period  from  _______  to  _______

                        Commission File Number:  0-24526
                        --------------------------------

                             COASTAL BANCORP, INC.
                             ---------------------
                   (Exact name of Registrant as specified in its charter)


                        Texas                     76-0428727
                 ---------------------          ------------------     
           (State  or  other  jurisdiction  of          (I.R.S.  Employer
            incorporation  or  organization)          Identification  No.)

                           5718 Westheimer, Suite 600
                                Houston, Texas 77057
                            ------------------------
                     (Address of principal executive office)

                                   (713) 435-5000
                               ------------------
                         (Registrant's telephone number)

           Securities registered pursuant to Section 12(b) of the Act:

        Title of each class     Name of each exchange on which registered
            N/A                                 N/A

           Securities registered pursuant to section 12(g) of the Act:
                     Common Stock, $0.01 par value per share
                     ---------------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
by  Section  13  or  15(d)  of  the  Securities  Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for the
past  90  days.      Yes      X  No
                          -----

Indicate  by  check mark if disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-K  is  not contained herein, and will not be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form  10-K.    [  ]

As  of  March  13,  1998,  the aggregate market value of the 3,989,317 shares of
Common  Stock  of  the Registrant issued and outstanding on such date, excluding
1,045,718  shares held by all directors and executive officers of the Registrant
as a group, was $131,647,461.  This figure is based on the closing sale price of
$33.00 per share of the Company's Common Stock on March 13, 1998, as reported in
The  Wall  Street  Journal  on  March  16,  1998.
--------------------------

Number  of  shares of Common Stock outstanding as of March 13, 1998:   5,035,035

     DOCUMENTS  INCORPORATED  BY  REFERENCE
     List  hereunder  the  following documents incorporated by reference and the
Part  of  Form  10-K  into  which  the  document  is  incorporated:
(1)          Portions  of the Registrant's Annual Report to Stockholders for the
fiscal year ended December 31, 1997, are incorporated into Part II, Items 5-8 of
this  Form  10-K.
(2)         Portions of the Registrant's definitive Proxy Statement for its 1998
Annual  Meeting  of  Stockholders are incorporated into Part III, Items 10-13 of
this  Form  10-K.


PART  I.

ITEM  1.  BUSINESS
------------------

     COASTAL  BANCORP,  INC.

     Coastal  Bancorp, Inc. (the "Company") is engaged primarily in the business
of  serving  as  the ultimate holding company for Coastal Banc ssb (the "Bank").
The  Company  was  incorporated  in  March  1994    in  connection  with  the
reorganization  of Coastal Banc Savings Association (the "Association") into the
holding company form of organization.  The reorganization occurred in July 1994.
In  addition,  in  July  1994,  the  Association  converted to a Texas-chartered
savings  bank  operating under the name Coastal Banc ssb.  On November 30, 1996,
Coastal  Banc  Holding  Company, Inc. ("HoCo") was created as a Delaware unitary
savings  bank  holding  company in accordance with the terms of an agreement and
plan of reorganization dated August 19, 1996 (the "Agreement").  Pursuant to the
terms  of  the  Agreement, the Bank became a wholly-owned subsidiary of HoCo and
HoCo  became a wholly-owned subsidiary of the Company.  The reorganizations were
treated  as  combinations  similar  to a pooling of interests.  Accordingly, the
financial information and references presented herein have been restated to give
effect where appropriate, as if the reorganizations had occurred at the earliest
date  presented.

     In  October 1997, Coastal Banc Capital  Corp.  ("CBCC")  was  formed  as  a
wholly-owned  subsidiary  of  HoCo.    CBCC,  a  registered  broker-dealer,  was
initially  formed to trade secured and unsecured whole loan assets primarily for
the  Bank  and  for  other  businesses.    At  December  31, 1997, HoCo's equity
investment  in  CBCC  was  $76,000.  CBCC had a net loss of $24,000 for the year
ended  December  31,  1997.

     On  June  30,  1995, the Company issued $50.0 million of 10.0% Senior Notes
due  June 30, 2002 (the "Senior Notes").  The Senior Notes are redeemable at the
Company'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 11.13%
Noncumulative  Preferred  Stock,  Series B, of the Bank (the "Series B Preferred
Stock")  which  is  now  owned  by  HoCo.

     At  December  31,  1997,  the Company had total consolidated assets of $2.9
billion,  total  deposits  of  $1.4 billion, $28.8 million in Series A Preferred
Stock  and  stockholders'  equity  of  $104.8  million.

     The  Company  is  subject  to  examination  and regulation by the Office of
Thrift  Supervision  (the  "OTS")  and  the  Company and the Bank are subject to
examination  and  regulation  by  the  Texas  Savings  and  Loan Department (the
"Department").    The  Company  is  also  subject to various reporting and other
requirements  of  the  Securities  and  Exchange  Commission  (the  "SEC").

     The  Company's  executive  offices  are located at Coastal Banc Plaza, 5718
Westheimer,  Suite  600, Houston, Texas 77057, and its telephone number is (713)
435-5000.

     COASTAL  BANC  SSB

     The Bank is a Texas-chartered, Federally insured state savings bank.  It is
headquartered  in  Houston,  Texas  and  operates  through  37 branch offices in
metropolitan  Houston, Austin, Corpus Christi and small cities in the south east
quadrant  of  Texas.

        The Bank was originally acquired by an investor group (which includes a
majority  of  the  Board  of  Directors  and  the present Chairman of the Board,
President  and  Chief  Executive Officer of the Company) in 1986 as a vehicle to
take advantage of the failures and consolidation in the Texas banking and thrift
industries.    The Bank has acquired deposits and branch offices in transactions
with  the  Federal  government  and  other  private institutions, in addition to
acquiring an independent national bank in 1995, as a base for the Bank's ongoing
savings  bank  business  and  shift towards commercial banking.  At February 28,
1986 (the date of change in ownership), the Bank had one full service office and
total  assets  of approximately $10.7 million.  Accordingly, although originally
organized in 1954, the Bank in its current form effectively commenced operations
with  the  1986 change in control. By December 31, 1997, the Bank's total assets
had  increased  to  $2.9  billion,  total  deposits  were  $1.4  billion  and
stockholders'  equity  totaled  $174.2  million.

     The  Bank  attempts to maximize profitability through the generation of net
interest  income  and  fee  income.    To  meet  this  objective,  the  Bank has
implemented  a  strategy  of  building its core deposit base while deploying its
funds  in  assets  which provide an attractive return with relatively low credit
risk.    In  carrying  out this strategy and to ultimately provide a respectable
return  to  the  Company's  shareholders,  the  Bank  adheres  to four operating
principles:    (i)  continuing  to  expand  its low cost core deposit base; (ii)
minimizing  interest  rate  risk;  (iii)  minimizing  credit  risk;  and  (iv)
maintaining  a  low  level  of  general  overhead expense relative to its peers.
These  operating  principles  are  briefly  discussed  below.

     CORE  DEPOSITS.    The  Bank has implemented the first operating principle,
developing and expanding a core deposit base, beginning in 1988 through a series
of  transactions  with  the  Federal  government  and  private  sector financial
institutions,  gaining  in the process entry into additional markets in Houston,
Austin,  Corpus  Christi,  San  Antonio  and  south  Texas.

     In  1988,  the  Bank became the first acquiror of failed or failing savings
institutions  under  the  Federal  government's  "Southwest  Plan."    In  this
transaction  (the  "Southwest  Plan  Acquisition"),  the  Bank acquired from the
Federal  Savings  and Loan Insurance Corporation ("FSLIC"), as receiver for four
insolvent  savings  associations  (the  "Acquired  Associations"), approximately
$543.4  million  of  assets and assumed approximately $543.4 million of deposits
and other liabilities.  The Bank acquired an aggregate of 14 branch offices from
the Acquired Associations in new and existing markets in southwest Houston, west
of  Houston along the Houston-San Antonio corridor and in the Rio Grande Valley.
See  "The  Southwest  Plan  Acquisition."

     Since  completion  of  the Southwest Plan Acquisition, the Bank has entered
into  six branch office acquisitions and one whole bank acquisition: two with an
instrumentality  of  the Federal government (acting as the receiver of insolvent
financial  institutions) and five with other private institutions.  In each, the
Bank  generally  agreed  to  acquire  certain  assets  in  consideration  of the
assumption  of  certain  deposit  and  other  liabilities  with  respect to each
institution.   In addition, in 1996 the Bank chose to exit two Texas cities, San
Antonio  and  San Angelo.  The Bank sold its San Angelo branch and exchanged its
three  San  Antonio  branches  for  one  branch  in  Bay  City,  Texas.

     In  the  first  branch  acquisition,  completed  in  1990, the Bank assumed
deposits  of  $151.1  million  in connection with the acquisition of nine branch
offices,  which  are  primarily located in the northwestern Houston metropolitan
area.  The acquisition provided the Bank with further penetration in the Houston
market.    In the second branch acquisition, completed in 1991, the Bank assumed
deposits  of  $71.4  million  in  connection  with  the acquisition of an office
located  in Victoria, Texas.  The acquisition of that office expanded the Bank's
presence in the small cities market southwest of Houston toward Port Lavaca.  In
the  third  branch  acquisition, completed in 1993, the Bank assumed deposits of
$386.4  million  in  connection with the acquisition of nine branches located in
Corpus  Christi, San Antonio, Conroe, Brenham and Sealy.  The Corpus Christi and
San  Antonio  branch acquisitions allowed the Bank to enter new markets.  In the
fourth  branch acquisition, also completed in 1993, the Bank assumed deposits of
$45.7  million  and  acquired two branches located in Harlingen and McAllen, two
small cities southwest of Houston in the Rio Grande Valley (the "Valley").  As a
result  of  this acquisition, the Bank increased its presence in the Valley.  In
the  fifth  branch  acquisition,  which was completed in December 1994, the Bank
assumed  deposits  of  $150.2 million and acquired eight branches located in San
Angelo,  Marble  Falls,  Kingsland,  Llano,  Giddings,  Buchanan  Dam, Mason and
Burnet,  which  allowed  the  Bank  to  enter  new  markets  in  central  Texas.

     In 1995, the Bank continued to expand its market presence by opening two de
novo branches in the Houston metropolitan area and by completing its first whole
bank  acquisition.  On November 1, 1995, the Bank consummated the acquisition of
all  of  the outstanding capital stock of Texas Capital Bancshares, Inc. ("Texas
Capital").  As a result of the acquisition of Texas Capital, Texas Capital Bank,
N.A.,  a  national  banking  association,  with  five branch offices, located in
Houston,  Katy,  Richmond  and  Austin  and  total assets of $170.7 million, was
merged  with  and  into  the  Bank.

     In 1996, the Bank consummated the sale of its San Angelo location which had
$14.9  million  in  deposits and was acquired in the Bank's December 1994 branch
acquisition.    In  connection with this sale, the Bank recorded a $521,000 gain
before  applicable income taxes.  On September 5, 1996, the Bank consummated the
exchange  of its three San Antonio branches having deposits of $53.8 million for
a branch in Bay City, Texas having deposits of $79.8 million.  In 1997, the Bank
completed  the  acquisition of a branch in Port Arthur, Texas having deposits of
$54.6  million.

     All of these transactions resulted in the net assumption of $1.6 billion of
deposits  and  the acquisition of 46 branch offices (after the San Angelo branch
sale and the swap of the San Antonio branches).  The Bank has also opened six de
novo  branches  since inception.  Since its first acquisition, the Bank has been
able  to  achieve  operating  economies  and  improve  efficiency  by closing an
aggregate  of  16  branch offices and transferring the deposits to other offices
located  in  the  same  market  areas.

     The  Bank  will  continue  to  pursue  acquisitions as vehicles for growth,
although  there  can  be  no assurance that the Bank will be able to continue to
grow  through  acquisitions  in  the  future.   In the absence of any available,
cost-effective  acquisitions,  management  will  continue to focus on internally
generated  earnings  growth  including  the  further  development  of the Bank's
commercial  lending  and  growth of commercial  business  deposits.

     INTEREST  RATE  RISK.    The  Bank  has  implemented  the  second operating
principle,  minimizing  interest rate risk, by matching, to the extent possible,
the repricing or maturity of its interest-earning assets to its interest-earning
liabilities  as  well  as  the basis or index (for example, the London Interbank
Offered Rate ("LIBOR") or the 11th District Federal Home Loan Bank cost of funds
index ("COFI")) upon which these assets and liabilities reprice.  Generally this
is achieved through management of the composition of its assets and liabilities.
The  Bank  also  attempts  to achieve an acceptable interest rate spread between
interest-earning  assets and interest-bearing liabilities by altering the Bank's
cost  of  funds, or, at times, the yield on certain assets in its portfolio.  To
accomplish  this,  the  Bank  has  purchased  interest rate swaps and caps.  See
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations  -  Asset  and  Liability  Management"  set  forth  in Item 7 hereof.

       The Bank will originate and purchase for retention in its portfolio only
those  loans  and investments which provide a positive interest rate spread over
funding  liabilities  matched  with  similar  maturities.  Consistent  with this
philosophy,  a  significant  portion  of the Bank's assets have been invested in
adjustable-rate  high quality mortgage-backed securities.  At December 31, 1997,
of the Bank's $1.5 billion of mortgage-backed securities, $1.3 billion or 85.9%,
were  invested  in  adjustable  rate  mortgage-backed  securities.   To a lesser
extent, the Bank has purchased first lien mortgages on single-family residences,
a  large  portion of which are adjustable rate mortgages.  At December 31, 1997,
$519.8  million, or 41.2% of the Bank's loans receivable portfolio was comprised
of  adjustable  rate  single-family  residential  mortgage  loans.

     The Bank also originates and purchases fixed and adjustable rate long-term,
single-family  residential  loans  primarily for sale into the secondary market.
Prior  to  1996, this and certain other lending functions were performed for the
Bank  by  its wholly-owned mortgage banking subsidiary, CBS Mortgage Corp. ("CBS
Mortgage").    Beginning  in 1996, the origination function was performed by the
Bank.    By originating such loans for sale and generally obtaining a commitment
for  the  purchase  of  such  loans  at  the time that the loan applications are
approved,  the  Bank  avoids  a  significant  portion  of the interest rate risk
associated  with  holding  fixed-rate  mortgage  loans.

          CREDIT RISK.  The Bank has implemented the third operating principle,
minimizing  credit risk, by (i) investing a substantial portion of its assets in
cash  and mortgage-backed securities, and (ii) taking a cautious approach to the
development  of  its  direct  lending  operations, including commercial business
lending.    At December 31, 1997, of the Company's $2.9 billion in total assets,
$1.5  billion  or  52.0% of total assets consisted of mortgage-backed securities
and  $37.1  million  or  1.3%  of  total  assets  consisted  of  cash  and  cash
equivalents.    At  December  31, 1997, the Company's total net loans receivable
portfolio  amounted to $1.3 billion or 43.3% of total assets comprised primarily
of  $688.6  million  of first lien residential mortgage loans, $178.3 million of
commercial  real  estate loans and $130.3 million of multifamily mortgage loans,
which  constituted  54.6%,  14.1%  and  10.3%,  respectively,  of  the net loans
receivable  portfolio.    The  balance of the net loans receivable portfolio, by
dollar  amount  and  percent  of  the portfolio, was comprised of the following:
$98.4  million (or 7.8%) of commercial loans to residential mortgage originators
("Warehouse  loans"), $46.2 million (or 3.7%) of residential construction loans,
$23.4  million (or 1.9%) of consumer and other loans, $23.2 million (or 1.8%) of
real  estate acquisition and development loans, $32.5 million (or 2.6%) of loans
secured  by  mortgage servicing rights ("MSR loans"), $29.7 million (or 2.4%) of
commercial,  financial  and  industrial  loans  and  $10.8  million (or 0.8%) of
commercial  construction loans.  The Company's non-accrual loans as of such date
were  $17.4  million or 1.38% of total loans receivable, and the Company's total
nonperforming assets were $20.5 million, or 0.71% of total assets.  See "Lending
Activities-General."

     NONINTEREST  EXPENSE.    The  Bank  has  implemented  the  fourth operating
principle,  maintaining  a low level of general overhead expense relative to its
peers, by operating an efficiently staffed branch office system which is able to
administer  and  deliver its products and services in an economical manner.  The
Bank  believes  that  it  has significant operating leverage, and that continued
incremental  growth  will  not  cause  its  overhead  expenses  to increase by a
corresponding  amount.    The  growth  achieved from the Bank's acquisitions has
facilitated  reduced  overhead levels as a proportion of assets and a lower cost
of  funds  from  a more meaningful market share of core deposits.  The Company's
ratio of noninterest expense to average total assets on a consolidated basis has
decreased, from 2.71% for the year ended December 31, 1988 to 1.36% for the year
ended  December  31,  1997.

     On  September  30,  1996,  the  Bank  recorded  the one-time SAIF insurance
special  assessment  (the  "Special  Assessment")  of $7.5 million ($4.8 million
after applicable income taxes) as a result of the Federal Deposit Insurance Act,
as  amended (the "FDIA") being signed into law.  The Special Assessment pursuant
to  the  FDIA  was  equal  to  65.7  basis points on the SAIF assessment base of
deposits  existing  as  of March 31, 1995.  Other provisions of the Act provided
for  a  reduction  of  the SAIF deposit insurance premium rates beginning in the
fourth  quarter  of  1996.

     The  Bank  is  subject  to  regulation by the Department, as its chartering
authority  and by the FDIC, which regulates the Bank and insures its deposits to
the  fullest  extent  provided  by  law.    The  Bank also is subject to certain
regulation by the Board of Governors of the Federal Reserve System (the "Federal
Reserve  Board")  and  is  a member of the Federal Home Loan Bank of Dallas (the
"FHLB"),  one of the 12 regional banks which comprise the Federal Home Loan Bank
System.

LENDING  ACTIVITIES

     GENERAL.    The  Bank  has taken a cautious approach to the development and
growth  of  its  direct lending operations in order to minimize credit risk.  In
order  to  avoid  incurring  undue credit risk, the Bank historically invested a
significant  percentage  of  its  assets  in  alternative financial instruments,
particularly  mortgage-backed  securities, most of which have certain repayments
guaranteed  by the government or Government Sponsored Enterprises ("GSEs").  See
"Mortgage-Backed  Securities."    The  Bank  will  originate  and  purchase  for
retention  in its portfolio only those loans determined by management to have an
acceptable  credit  risk  and which provide a positive interest rate spread over
funding  liabilities matched with similar maturities.  This strategy is designed
to  achieve  an  acceptable  risk  adjusted  rate  of  return, as determined and
continuously  evaluated  by  the  Board  of  Directors.

      In November 1995, the Bank completed the acquisition of Texas Capital and
its  $103.3  million  in  loans.  The loans acquired from Texas Capital included
first  lien  residential,  multifamily,  commercial  real  estate,  residential
construction, real estate acquisition and development, commercial, financial and
industrial and consumer loans.  Utilizing this acquisition as a springboard, the
Bank  implemented  its  strategic  shift  towards  building a commercial banking
business,  which  has  continued  through  1997.    The  Bank's  new concept for
originating,  underwriting  and  approving  all  loans  over  $1.0  million  was
implemented  during  the  fourth  quarter of 1997.  The Portfolio Control Center
("PCC")  applies  Internet  and  network computer technology to take a loan from
application  to closing in less time and incorporating more comprehensive credit
information.    The  PCC  is  also responsible for the day-to-day monitoring and
management  of  the  Bank's  assets  and  liabilities.

<PAGE>
     The  following  table  sets forth information concerning the composition of
the  Bank's  net  loans  receivable  portfolio  by  type  of  loan  at the dates
indicated.

<TABLE>
<CAPTION>
                                                                   At December 31,
                                                  1997                    1996                   1995 
                                              ------------            ------------            ----------- 
                                          Amount      Percent     Amount      Percent     Amount       Percent
                                       ------------  --------  ------------  --------  -----------  --------
                                                                 (Dollars in thousands)
<S>                                          <C>        <C>          <C>        <C>         <C>          <C>
Real-estate mortgage loans:
 First lien residential                $   689,767     52.33%  $   791,337     61.96%  $  742,880     66.38%
 Multifamily                               131,454      9.97       139,486     10.92       95,297      8.52 
 Residential construction                   83,359      6.33        77,146      6.04       33,935      3.03 
 Acquisition and development                31,619      2.40        26,132      2.05       15,517      1.39 
 Commercial                                181,315     13.76       119,004      9.32      122,622     10.96 
 Commercial construction                    14,506      1.10         3,963      0.31           --        -- 
Commercial, warehouse                       98,679      7.49        53,573      4.19       48,822      4.36 
Commercial, MSR                             32,685      2.48        21,380      1.67       21,548      1.93 
Commercial, financial and industrial        30,877      2.34        21,965      1.72       19,860      1.77 
Loans secured by savings deposits            8,695      0.66         8,849      0.69        8,292      0.74 
Consumer and other                          15,030      1.14        14,400      1.13       10,316      0.92 
                                       ------------  --------  ------------  --------  -----------  --------

 Total loans                             1,317,986    100.00%    1,277,235    100.00%   1,119,089    100.00%
                                       ------------  ========  ------------  ========  -----------  ========

Loans in process                           (47,893)                (38,742)               (11,526)
Premium (discount) to record
 purchased loans, net                        1,680                     479                 (1,366)
Unearned interest and loan fees             (2,926)                 (2,344)                (1,939)
Allowance for loan losses                   (7,412)                 (6,880)                (5,703)
                                       -----------             -----------             -----------
 Total loans receivable, net           $ 1,261,435             $ 1,229,748             $1,098,555 
                                       ============            ============            ===========          
</TABLE>

<PAGE>
     SCHEDULED  MATURITIES.              The  following table sets forth certain
information  at  December  31,  1997  regarding  the  principal  amount of loans
maturing  in  the  Bank's  loans receivable portfolio based on their contractual
terms  to maturity.  Demand loans, loans having no stated schedule of repayments
and  no  stated  maturity  are  reported as due in one year or less.  First lien
residential  mortgage, multifamily mortgage and commercial real estate loans are
based  on  their contractual terms to maturity assuming no periodic amortization
of  principal.

<TABLE>
<CAPTION>

                                                  AT DECEMBER 31, 1997
                                             More than        More than       More than
                                  One year   one year to     three years    five years to
                                  or less    three years    to five years     ten years
                                  ---------  ------------  --------------  --------------
                                                     (In thousands)
<S>                                    <C>          <C>             <C>             <C>
First lien residential mortgage   $   2,408  $      5,366  $        9,790  $       28,934
Multifamily mortgage                 73,997        49,975           6,286           1,196
Residential construction             37,124         8,678             352             597
Real estate acquisition and
 development                          5,645        18,142              --              --
Commercial real estate               19,464        76,874          38,091          12,659
Commercial construction               8,345            --             483             819
Commercial, other                   122,000        17,928          20,439           1,873
Consumer and other                   10,785         5,814           5,036           1,096
                                  ---------  ------------  --------------  --------------

 Total loans                      $ 279,768  $    182,777  $       80,477  $       47,174
                                  =========  ============  ==============  ==============


                                           AT DECEMBER 31, 1997
                                      More than       Over
                                    ten years to     twenty
                                    twenty years      years     Total
                                    -------------   ---------  ----------
                                               (In thousands)
<S>                                       <C>          <C>       <C>
First lien residential mortgage   $     157,838     $485,431  $  689,767
Multifamily mortgage                         --           --     131,454
Residential construction                     --          --       46,751
Real estate acquisition and
 development                                 --          --       23,787
Commercial real estate                   34,228          --      181,316
Commercial construction                   1,406          --       11,053
Commercial, other                            --          --      162,240
Consumer and other                          994          --       23,725
                                  -------------    --------  -----------

 Total loans                      $     194,466    $485,431   $1,270,093
                                  =============    ========  ===========
</TABLE>

     The  average  maturity  of loans is generally substantially less than their
average  contractual  terms  because  of  prepayments  and,  in  the  case  of
conventional  mortgage loans, due-on-sale clauses, which generally give the Bank
the  right  to  declare  a  loan immediately due and payable in the event, among
other  things, that the borrower sells the real property subject to the mortgage
and  the  loan  is  not  repaid.    The  average life of mortgage loans tends to
increase when current mortgage loan rates are substantially higher than rates on
existing  mortgage  loans  and,  conversely,  decrease  when  rates  on existing
mortgages  are  substantially  lower  than  current  mortgage loan rates (due to
refinancings  or adjustable-rate and fixed-rate loans at lower rates). Under the
latter  circumstances,  the  weighted average yield on loans decreases as higher
yielding  loans  are  repaid  or  refinanced  at  lower  rates.

<PAGE>
     The following table sets forth the amounts of loans due after one year from
December  31,  1997  by  category  and  which  have  fixed  or adjustable rates.

<TABLE>
<CAPTION>
                                                     Interest-Rate
                                            Fixed      Adjustable   Total
                                          ---------  -----------  --------
                                                   (In thousands)
<S>                                           <C>        <C>          <C>
First lien residential mortgage           $ 167,357  $   520,002  $687,359

Multifamily mortgage                          9,972       47,485    57,457

Residential construction                      7,238        2,389     9,627

Real estate acquisition and development          --       18,142    18,142

Commercial real estate                       57,089      104,763   161,852

Commercial construction                       1,246        1,462     2,708

Commercial, other                            13,077       27,163    40,240

Consumer and other                           11,575        1,365    12,940
                                          ---------  -----------  --------

 Total                                    $ 267,554  $   722,771  $990,325
                                          =========  ===========  ========
</TABLE>

<PAGE>
     ORIGINATION,  PURCHASE  AND  SALE OF LOANS.  The following table sets forth
the  loan origination, purchase and sale activity of the Bank during the periods
indicated.    The  table does not reflect the activity of CBS Mortgage for other
institutions,  GSEs  or  entities  during  the periods presented.  See "Mortgage
Banking  Activities."

<TABLE>
<CAPTION>
                                                                  Year Ended December 31,
                                                               1997         1996         1995 
                                                         -----------  -----------  -----------
                                                                       (In thousands)
<S>                                                            <C>          <C>          <C>
First lien mortgage loan originations:
 Adjustable rate                                         $    1,458   $    3,542   $      985 
 Fixed rate                                                   4,849        5,471          746 
 Adjustable rate by correspondent lenders                    26,220       67,461       92,911 
 Fixed rate by correspondent lenders                            686        4,058           -- 
Residential construction and   acquisition
 and development loan originations                          145,727      154,182       61,713 
Warehouse loan originations                               1,174,639      887,252      549,628 
MSR loan originations                                        55,259       69,172       67,578 
Multifamily loan originations                                81,148       67,657       42,366 
Commercial real estate loan originations                    171,497       41,170       29,595 
Commercial construction originations                         12,222        3,806           -- 
Commercial, financial and industrial loan originations       43,497       30,080        5,100 
Consumer loan originations                                   18,679       22,256       12,429 
                                                         -----------  -----------  -----------
   Total loan originations                                1,735,881    1,356,107      863,051 
Purchase of residential mortgage loans                      108,226      115,928      298,613 
Loans acquired (net) in connection with
 acquisition and disposition   transactions                      --        1,018      103,319 
Purchase of multifamily and commercial
 real estate loans                                               --        4,604       25,045 
Purchase of consumer loans                                       70           --           -- 
                                                         -----------  -----------  -----------
   Total loan originations and purchases                  1,844,177    1,477,657    1,290,028 
                                                         -----------  -----------  -----------
Foreclosures                                                  4,226        4,363        3,394 
Principal repayments and reductions to
 principal balance                                        1,790,790    1,339,691      776,084 
Residential loans sold                                       12,855           --          679 
                                                         -----------  -----------  -----------
Total foreclosures, repayments and sales of loans         1,807,871    1,344,054      780,157 
                                                         -----------  -----------  -----------
Amortization of premiums, discounts and fees on loans        (2,819)        (485)       3,316 
Provision for loan losses                                    (1,800)      (1,925)      (1,664)
                                                         -----------  -----------  -----------
   Net increase in loans receivable                      $   31,687   $  131,193   $  511,523 
                                                         ===========  ===========  ===========
</TABLE>

<PAGE>
     The  following  table  sets forth the number of bulk loan purchases and the
amount  of  first  lien  residential mortgage loans acquired by the Bank through
bulk  purchases  for  the  periods  indicated.

<TABLE>
<CAPTION>
                                 Year Ended December 31,
                                1997      1996      1995
                             --------  --------  --------
                                 (Dollars in thousands)
<S>                          <C>       <C>       <C>
Amount purchased              $107,881  $112,395  $296,452
Number of bulk
 loan purchases                      3         9        24
</TABLE>


          Personnel  from the Bank generally analyze loan bid packages, as they
become  available,  and  the PCC reviews the information in the loan packages to
determine  whether  to bid (or make an offer) on a package and the price of such
bid  (or  offer).   The pricing with respect to such loan packages is based on a
number  of factors, including the ability to create spread income with a funding
source  of  comparable  maturity,  the  pricing  of  alternative  investments,
particularly  mortgage-backed securities, which  offer little or no credit risk,
and  the credit risk profile of the portfolio offered.  The Bank analyzes credit
risk  in  a whole loan package through its due diligence investigation, which is
designed  to provide management with basic underwriting information on each loan
or group of loans, including loan-to-value, payment history, insurance and other
documentation. Because the Bank is purchasing loans in bulk, the Bank prices the
loan  packages  that  it bids on to take into consideration, among other things,
delinquency and foreclosure assumptions based on the risk characteristics of the
loan  packages.    The Bank intends to continue to make competitive bids on loan
portfolios  that  meet  the  Bank's  purchase  criteria.

     Beginning  in  1994,  the  Bank  has  been  originating  adjustable  rate
residential  mortgage  loans  through correspondent lenders.  The correspondents
originate  and  immediately  sell  such  loans  to the Bank.  All such loans are
underwritten in accordance with the Bank's policies and procedures.  During 1997
(before  discontinuing  this  program),  loans  purchased from the correspondent
lenders  totaled  $26.9  million.

     The Bank will directly sell mortgage loans and mortgage loan servicing from
time  to time in order to replace the loans and servicing with instruments which
have higher credit quality and which generate less interest rate risk.  In 1997,
the  Bank  sold  $12.9  million  of  first  lien  residential  mortgage  loans.

     While  the  Bank  has the general authority to originate and purchase loans
secured  by  real  estate  located  anywhere  in  the United States, the largest
concentration  of  its  residential  first  lien  mortgage and construction loan
portfolios  is  secured  by  realty  located  in  Texas.

     RESIDENTIAL  CONSTRUCTION  LENDING.    The  Bank  initiated  a construction
lending  program  with local builders in the latter part of 1989 which has grown
considerably  since  its  inception.   At the time of initiation of the program,
management  of  the  Bank  surveyed  the members of the residential construction
industry  in  the  Bank's Houston market area and targeted those companies which
management  believed,  based  upon its market research, to be financially strong
and  reputable.    Loans  are  made  primarily to fund residential construction.
Construction  loans  are made on pre-sold and speculative residential homes only
in  well  located,  viable  subdivisions  and  planned  unit  developments.

     The  builders with whom the Bank does business generally apply for either a
non-binding  short-term  line of credit or for an annual line of credit (subject
to  covenants) from the Bank for a maximum amount of borrowing to be outstanding
at  any one time.  Upon approval of the line of credit, the Bank issues a letter
which  indicates to the builder the maximum amount which will be available under
the  line,  the  term  of  the line of credit (which is generally 90 days to one
year),  the  interest  rate  of the loans to be offered under the line (which is
generally set at a rate above the Wall Street Journal prime rate or LIBOR on the
outstanding  monthly  loan balance) and the loan fees payable.  When the builder
desires  to  draw upon a short-term line of credit, it must make a separate loan
application  under  the  line  for a specific loan amount.  Each loan commitment
under  a short-term line of credit is separately underwritten and approved after
the  builder's  master  file  is  updated  and  reviewed.    The Bank also funds
construction  loans  outstanding  to  builders  or  individuals under individual
construction  loans.

     The terms of the Bank's construction loans are generally for nine months or
less,  unless  extended  by  the  Bank.  If a construction loan is extended, the
borrower  is generally charged a loan fee for each 90 day extension period.  The
Bank  reserves  the right to extend any loan term, but generally does not permit
the original term and all extensions to exceed 24 months without amortization of
principal  either  in  monthly  increments  or  a  lump  sum.

     The  loan-to-value  ratio  (applied  to  the  underlying  property  that
collateralizes the loan) of any residential construction loan may not exceed 85%
or  100%  of the actual cost.  All individual loans are limited in dollar amount
based  upon  the  project  proposed by the builder.  Draws for lot purchases are
generally  limited  to  the  contracted  sales  price  of  the  lot  (to include
escalations)  not  to  exceed  100% of the lot's appraised value.  Other special
conditions  which  the  Bank  attaches  to  its  construction  loans  include  a
requirement  that limits the number and dollar amount of loans which may be made
based  upon  unsold  inventory.    The  Bank  may  also, in its sole discretion,
discontinue making any further loans if the builder's unsold inventory exceeds a
certain  level  from  all  lending  sources  or  if the builder fails to pay its
suppliers  or  subcontractors  in  a  timely  manner.

     The  Bank  provides  construction  financing  for  homes that generally are
priced  below $450,000, with most homes priced between $70,000 and $175,000.  In
this  price  range,  the Bank has experienced the shortest duration of term, the
highest  annualized  yield  and  the least likelihood of defaults because of the
generally  high  number  of  pre-completion  sales.    The  Bank  will also make
individual  construction  loans  to builders or individuals on single homes or a
panel  of  homes on substantially the same terms and conditions as loans granted
under  the  Bank's  line  of  credit  program.

     At December 31, 1997, the Bank had $46.8 million in outstanding residential
construction  loans  (net  of  loans  in  process).    Of the construction loans
outstanding  at  December 31, 1997, $38.7 million were to 22 builders originated
under  the  Bank's  line  of credit program and $8.1 million were to builders or
individuals  under individual construction loans.  At the present time, the Bank
has  approved builders in the Houston, Dallas, and Austin metropolitan areas and
is  selectively soliciting new builders for its residential construction lending
program.    The  Bank  intends  to  continue  to  do business with the companies
involved  in  its  line  of credit program and believes that it will continue to
have  construction  loan  demand from the builders with whom it currently has an
established  lending relationship.  The Bank does not otherwise actively solicit
construction  loans  directly  or  through  the  mass  media.

     Construction  financing  is generally considered to involve a higher degree
of  risk than long-term financing on improved, occupied residential real estate,
due  to  the  lender's reliance on the borrower to add to the estimated value of
the  property  through  construction  within  the  budget  set forth in the loan
application.    The  Bank  attempts  to  limit its risk exposure by, among other
things:  limiting  the  number  of  borrowers  to whom it lends and establishing
specific  qualification  requirements  for  borrowers  generally;  continually
monitoring  the general economic conditions in the market, recent housing starts
and  sales;  continually  monitoring  the  financial  position  of its borrowers
throughout  the  term of the loan through periodic builder reports and inquiries
to  the  builder's  suppliers  and  subcontractors;  continually  monitoring the
progress  of  the  development  through  site  inspections  prior  to  loan
disbursements; utilizing only qualified, approved appraisers; and requiring that
the  builder  maintain  a pre-approved ratio (generally not greater than 50%) of
speculative  to  pre-sold  homes  in  the  development.

          MULTIFAMILY  MORTGAGE  AND  COMMERCIAL REAL ESTATE LENDING.  The Bank
initiated  a  program  in  1993 to actively seek loans secured by multifamily or
commercial  properties (primarily retail shopping centers). Multifamily mortgage
and  commercial real estate loans typically involve higher principal amounts and
repayment of the loans generally is dependent, in large part, on sufficient cash
flow  being  generated  by the underlying properties to cover operating expenses
and  loan  repayments.  Market values may vary as a result of economic events or
governmental regulations which are outside the control of the borrower or lender
and  which can affect the future cash flow of the properties.  The loans are for
a short to medium term of between one to seven years, and have floating rates or
fixed  rates  based  on  a spread over similarly fixed borrowings from the FHLB.
The  properties  securing the loans originated by the Bank are generally located
in  Texas.  The Bank attempts to limit its risk exposure by, among other things:
lending  to proven developers/owners, generally only considering properties with
existing  operating  performance  which  can be analyzed, requiring conservative
debt  coverage  ratios,  and  continually  monitoring the operation and physical
condition  of  the collateral.  At December 31, 1997, multifamily mortgage loans
totaling  $131.5 million and commercial real estate loans of $181.3 million were
outstanding.    The decision to increase commercial real estate lending resulted
primarily  from  the  improvement in the local economies throughout Texas, which
was  reflected  in  improved  occupancy  in  retail  centers  together  with  an
improvement in the quality of the borrowers seeking such loans.  At December 31,
1997,  the  Bank  had  outstanding  commercial  real  estate  loans  totaling
approximately  $322,000  that  were on non-accrual status, $14,000 of which were
acquired  from  Texas  Capital.

     The  Bank began seeking multifamily and commercial real estate construction
loans  in  1996.  The Bank will generally underwrite these loans in the same way
it  currently  underwrites  its  multifamily  mortgage loans and will attempt to
manage the risk of such loans by requiring that the builders provide more equity
in  the project than is required in refinancings, lending to those builders with
strong  financial  statements and requiring that borrowers purchase, if required
by  the  movement of general market interest rates, interest rate caps for their
loans.    At  December  31,  1997,  commercial construction loans totaling $14.5
million  were  outstanding,  of  which  $900,000  was  on  non-accrual  status.

     WAREHOUSE  LENDING.    Since 1992, the Bank has provided or participates in
lines  of credit to mortgage companies generally for their origination of single
family  residential  loans  which  are  normally  sold no more than 90 days from
origination  to  the Federal National Mortgage Association (the "FNMA"), Federal
Home  Loan  Mortgage  Corporation  ("FHLMC"),  Government  National  Mortgage
Association  ("GNMA") or to private investors. The lines of credit are generally
renewable  annually.   Borrowers pay interest on funds drawn at a floating rate.
In  addition, the Bank usually receives a fee for each loan file processed.  The
Bank  holds  the  original  mortgage  loan  notes  and  other  documentation  as
collateral  until  repayment of the related lines of credit, except when a third
party  bank  is  acting  as  the  lead  bank  in  the  lending  relationship.

     Warehouse  loans  are  underwritten  in  accordance  with Bank policies and
procedures.    Interested  loan  originators who contact or are contacted by the
Bank are asked to prepare a loan application which seeks detailed information on
the  originator's  business.  After evaluating the application and independently
verifying  the  applicant's  credit  history,  if the originator appears to be a
likely  candidate  for  approval,  Bank  personnel will visit the originator and
review,  among  other  things,  its  business  organization, management, quality
control,  funding  sources,  risk  management,  loan  volume  and  historical
delinquency  rate,  financial  condition,  contingent obligations and regulatory
compliance.    The  originator pays a fee for this review to offset a portion of
the Bank's expense; this amount is deducted from the origination fee if the line
of  credit  is  approved.  If the originator meets the established criteria, its
application  is  submitted  for  approval.

     Bank  personnel  attempt to minimize the risk of making Warehouse loans by,
among  other  things,  (i)  taking  physical  possession  of  the  originator's
collateral, (ii) directly receiving payment from secondary market investors when
the loans are sold and remitting any balance to the borrower after deducting the
amount borrowed for that particular loan, (iii) visiting the originator's office
from  time to time to review its financial and other records and (iv) monitoring
each  originator:    (a)  by  periodically reviewing each originator's financial
statements,  loan  production delinquency and commitment reports; and, (b) on an
annual basis, by reviewing the originator's audited financial statements and the
auditor's  letter  to  the  originator's  board  of  directors.

     During  1997,  the  Bank originated $1.2 billion of Warehouse loans and had
such  loans  outstanding  of  $98.7  million  at  December  31,  1997.

      MSR LENDING.  Since 1992, the Bank has loaned funds to mortgage companies
for  their  purchase  of  mortgage  servicing  rights or to finance the mortgage
companies'  ongoing  operations to originate and retain mortgage servicing.  The
mortgage  companies  receive  fees  for  servicing  mortgage loans which include
collecting and remitting loan payments to FNMA, FHLMC and other investors. Loans
of  this  nature  generally  have  terms of one to five years, and are generally
limited to 70.0% of the price paid by the mortgage company for servicing rights,
or  of  the  value of the originated servicing rights (subject to the regulatory
maximum  for  loans to one borrower).  MSR loans are made at adjustable rates of
interest  tied  to  LIBOR  or  the  Bank's  borrowing  rate  plus a spread and a
commitment  fee.    MSR  loans  are  collateralized  by  purchased or originated
mortgage  servicing  rights  to  the  remaining  cash  flows after remittance of
payments  to  FNMA,  FHLMC  or other investors on the servicing portfolio.  Bank
personnel  closely  monitor MSR borrowers on a semi-annual basis by, among other
things,  reviewing the borrower's financial condition and operations in the same
manner  as  they  do  for  Warehouse  loans  and  by  examining the value of the
borrower's  MSR  portfolio  (through evaluation of the estimated future net cash
flows from the servicing rights) in order to ensure that the loan-to-value ratio
does  not  exceed  75.0%  during  the  life  of  the  loan.    If the continuing
loan-to-value  ratio  exceeds  that  amount,  the  borrower  is asked to repay a
portion  of  the principal balance to maintain the ratio limit.  At December 31,
1997,  the  Bank  had  $32.7  million  in  outstanding  MSR  loans.

     REAL  ESTATE  ACQUISITION  AND DEVELOPMENT LENDING.  The Bank has increased
the  number  of  loans  originated  to  residential  real  estate  builders  and
developers  for  the acquisition and/or development of vacant land. The proceeds
of  the  loans  are  generally  used  to  acquire  the  land  and  make the site
improvements  necessary  to  develop  the  land  into  saleable  lots.  The Bank
generally  lends only to the major developers with good track records and strong
financial  capacity  and  on  property where substantially all of the lots to be
developed are pre-sold.  The term of the loans have generally been from 18 to 24
months  at  a spread over the prime rate, plus an origination fee.  Repayment on
the  loans is generally made as the lots are sold to builders.  Land acquisition
and  development  loans  involve  additional  risks  when  compared  to loans on
existing residential properties.  These loans typically involve relatively large
loan  balances  to  single  borrowers, and the repayment experience is dependent
upon  the  successful development of the land and the resale of the lots.  These
risks  can  be  significantly  impacted  by supply and demand conditions and the
general economic conditions in the local market area.  At December 31, 1997, the
Bank  had  $31.6  million  of  real  estate  acquisition  and  development loans
outstanding.

     COMMERCIAL  BUSINESS LENDING.  Development of a commercial business lending
program  is  a strategic goal of Bank management.  The Texas Capital acquisition
provided  the  Bank  with  an established commercial business lending program to
small  and  medium  sized  companies  primarily  in  the  Houston  and  Austin
metropolitan  areas. In 1997, management continued to develop the infrastructure
for  commercial  business  lending  in  most  of  the Bank's major markets.  The
commercial,  financial  and  industrial  loans ("Commercial Business loans") are
generally  made  to  provide  working capital financing or purchase financing to
businesses  and  are  generally secured by the borrower's working capital assets
(i.e.  accounts receivable, inventory, etc.) or assets purchased by the borrower
(i.e.  operating  assets,  equipment, etc.). Commercial Business loans generally
have  shorter  terms  (one to five years) at a spread over prime rate and are of
greater  risk  than  real estate secured loans because of the type and nature of
the  collateral.    In  addition,  Commercial Business loan collections are more
dependent  on  the  continuing  financial  stability  of the borrower.  The Bank
intends  to continue to expand the acquired commercial business lending program,
while  managing  the  associated  credit risk by monitoring borrowers' financial
position  and  underlying  collateral securing the loans.  At December 31, 1997,
Commercial  Business  loans outstanding totaled $30.9 million, of which $485,000
($336,000  acquired  from  Texas  Capital)  was  on  non-accrual  status.

     CONSUMER  LENDING.     The Bank makes available traditional consumer loans,
such  as  home  improvement,  new  and used car financing, new and used boat and
recreational  vehicle  financing  and  loans  secured  by savings deposits.  The
interest  rate  on  loans secured by savings deposits is typically set at a rate
above that paid on the underlying account and adjusts if the rate on the account
changes.    At  December  31, 1997, the Bank had $23.7 million in consumer loans
outstanding,  of  which  $8.7  million  were  savings deposit secured loans.  At
December  31,  1997, loans totaling $53,000 in this category were on non-accrual
status.

     Consumer  loans  (other  than savings deposit secured loans) generally have
shorter  terms and higher interest rates than mortgage loans but usually involve
greater  credit  risk  than mortgage loans because of the type and nature of the
collateral.    In  addition,  consumer  lending collections are dependent on the
borrower's  continuing  financial stability, and are thus likely to be adversely
affected  by job loss, marital status, illness and personal bankruptcy.  In many
cases,  repossessed collateral for a defaulted consumer loan will not provide an
adequate  source  of  repayment  of  the  outstanding  loan  balance  because of
depreciation of the underlying collateral.  The Bank believes that the generally
higher  yields earned on consumer loans compensate for the increased credit risk
associated  with such loans and that consumer loans are important to its efforts
to  serve  the  credit  needs  of  the  communities  that  it  serves.

     The  Bank's consumer loan lending territory approximates the markets served
by  its  retail  branches.    Persons  desiring  consumer  loans  are  typically
individuals  who  have  a  pre-existing  banking  relationship  with  the  Bank.

     ASSET  QUALITY.    The Bank, like all financial institutions, is exposed to
certain  credit risks related to the value of the collateral which secures loans
held  in  its portfolio and the ability of borrowers to repay their loans during
the  term  thereof.   Management of the Bank closely monitors the loan portfolio
and  the  Bank's  real  estate  acquired  as a result of foreclosure ("REO") for
potential  problems on a weekly basis and reports to the Board of Directors on a
monthly  basis.  When  a borrower fails to make a required loan payment or other
weaknesses  are  detected in a borrower's financial condition, the Bank attempts
to  determine  an  appropriate  course  of  action  by  contacting the borrower.
Delinquencies  are    cured  promptly  in  most  cases.  If the delinquency on a
mortgage  loan  exceeds  90  days  and  is  not  cured through the Bank's normal
collection  procedures,  or an acceptable arrangement is not worked out with the
borrower,  the  Bank  will  institute  measures to remedy the default, including
commencing a foreclosure action.  As a matter of policy, the Bank generally does
not  accept  from the mortgagor a voluntary deed of the secured property in lieu
of  foreclosure.    If foreclosure is effected, the property is sold at a public
auction  in  which  the  Bank  may  participate as a bidder.  If the Bank is the
successful bidder, the foreclosed real estate is then included in the Bank's REO
portfolio  until  it  is  sold.

     Upon  acquisition, REO is recorded at the lower of unpaid principal balance
adjusted for any remaining acquisition premiums or discounts less any applicable
valuation  allowance  or  estimated  fair  value,  based  on  an appraisal, less
estimated  selling  costs.    All  costs  incurred  from the date of acquisition
forward  relating to maintaining the property are recorded as a current expense.

     It  is  the Bank's general policy not to recognize interest income on loans
past  due  90  days  or  more.    When  a  loan is placed on non-accrual status,
previously  accrued  but  unpaid  interest  is reversed against current interest
income.    On  a  loan-by-loan  basis,  Bank  management  may continue to accrue
interest  on  loans that are past due more than 90 days, primarily if management
believes  that  the  individual  loan  is  in  the process of collection and the
interest  is  fully  collectible.  At December 31, 1997, 1996 and 1995, the Bank
had  the  following  loans  which  were  90  days or more delinquent and were on
accrual  status:

<PAGE>

<TABLE>
<CAPTION>
                                           At December 31,
                                        1997     1996   1995
                                       -----  -------  -----
                                       (Dollars in thousands)
<S>                                      <C>    <C>      <C>
First lien single family mortgage      $  --  $   106  $  --

Residential construction                  79       52     --

Commercial real estate                    91      881     --

Commercial, financial and industrial     120       14    231

Consumer                                  50      142     --
                                       -----  -------  -----

 Total                                 $ 340  $ 1,195  $ 231
                                       =====  =======  =====
</TABLE>

The  following  table  sets  forth  information regarding the Bank's non-accrual
loans  and  REO  as  of  the  dates  shown.

<TABLE>
<CAPTION>
                                                 At December 31,
                                     --------------------------------------
                                          1997         1996       1995
                                     -----------  -----------   -----------
                                            (Dollars in thousands)
<S>                                  <C>                <C>          <C>
Non-accrual loans:
 First lien single family
   mortgage                           $ 15,591       $12,238     $12,925 
 Residential construction                   --            --         353 
 Commercial real estate                    322            32         965 
 Commercial construction                   900            --          -- 
 Commercial, financial and
   industrial                              485           496         337 
 Consumer                                   53            73          42 
                                    ----------      --------    --------
 Total non-accrual loans                17,351        12,839      14,622 
Total REO and repossessed assets         3,198         3,161       4,216 
                                    ----------      --------    --------
Total nonperforming assets            $ 20,549       $16,000     $18,838 
                                     ==========      ========    ========
Ratio of nonperforming
 assets to total assets                   0.71%         0.56%       0.68%
                                     ==========      ========    ========
Ratio of non-accrual loans to total
 loans receivable                         1.38%         1.04%       1.33%
                                     ==========      ========    ========
</TABLE>

<PAGE>
     At  December 31, 1997, approximately $925,000 in additional interest income
would have been recorded in the year then ended on the above loans accounted for
on  a  non-accrual basis if such loans had been current in accordance with their
original  terms  and  had  been  outstanding  throughout  the  period  or  since
origination  if  held  for  part of the period.  For the year ended December 31,
1997,  $827,000  in  interest  income  was included in net income for these same
loans  prior  to  the  time  they  were  placed  on  non-accrual  status.

     At  December  31,  1997,  the  Bank had 236 first lien residential mortgage
loans  in non-accrual status, aggregating $15.6 million, with an average balance
of  approximately  $66,000.    A  total of 211 of these loans, with an aggregate
balance  of $12.9 million, were acquired through bulk loan purchases, 2 of these
loans, with an aggregate balance of $29,000, were acquired through the Southwest
Plan  Acquisition  and  2 of these loans, with an aggregate balance of $113,000,
were  acquired in the Texas Capital acquisition. Of the 211 residential mortgage
loans  acquired  through  bulk purchases, at December 31, 1997, 32 of such loans
totaling  $1.3  million  were  being  serviced  by  other  institutions,  which
constituted  3.8%  of  the  $35.6 million of aggregate loans serviced by others.

     At  December  31, 1997, nonperforming assets included REO with an aggregate
book value of $3.2 million and repossessed assets of $12,000.  At such date, the
Bank's REO consisted of 36 single family residential properties and 5 commercial
properties  (acquired  from  Texas  Capital).

     At  December  31, 1997, in addition to the loans in non-accrual status, the
Bank  had $9.8 million in loans classified as substandard, $42,000 classified as
doubtful  and  $10.7  million  of  loans  designated  as  "special  mention" for
regulatory  purposes.  Of these loans, $1.1 million of the substandard loans and
$282,000 of the "special mention" loans were acquired from Texas Capital.  Loans
designated  as "special mention" are not currently required to be classified for
regulatory  purposes  but have potential weaknesses or risk characteristics that
could  result  in  future  problems.

     On  January  1,  1995,  the Bank adopted the Financial Accounting Standards
Board's  (the  "FASB")  Statement  of  Financial  Accounting  Standards  No. 114
(Statement  114), "Accounting by Creditors for Impairment of a Loan," as amended
by Statement 118.  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.    The  Bank  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 for which foreclosure is probable.  The adoption of
Statement 114, as amended by Statement 118, had no material impact on the Bank's
consolidated  financial  statements  as  the Bank's existing policy of measuring
loan  impairment  was  generally  consistent  with  methods  prescribed in these
standards.

     The  Bank  considers  a  loan  to  be  impaired  when,  based  upon current
information  and  events, it is probable that the Bank will be unable to collect
all  amounts  due  according  to the contractual terms of the loan agreement. In
determining  impairment,  the  Bank  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.  The Bank
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.    At December 31, 1997, the
carrying  value  of loans that are considered to be impaired under Statement 114
totaled  approximately  $2.0  million (all of which were on non-accrual) and the
related  allowance for loan losses on those impaired loans totaled $1.1 million.
The  average  balance  of impaired loans during the year ended December 31, 1997
was  approximately $897,000.  For the year ended December 31, 1997, the Bank did
not  recognize  interest  income  on  loans  considered  impaired.

          The  Bank  had  loaned  $83.4 million at December 31, 1997, under its
residential  construction  lending program to multiple borrowers who are engaged
in  similar activities.  These borrowers could be similarly impacted by economic
conditions  in  Texas.    See  "Residential  Construction  Lending."  Except for
concentrations  in  its  Warehouse  lending  lines,  the  Bank had no other loan
concentrations.    At December 31, 1997, the Bank had $98.7 million of Warehouse
loans  outstanding.    See  "Warehouse  Lending."

<PAGE>
     ALLOWANCE  FOR  LOAN  LOSSES.   The Bank maintains loan loss allowances to 
absorb future  losses that may be  realized on its  loans receivable  portfolio.
The following table summarizes activity  in the Bank's allowance for loan losses
during  the  periods  indicated.

<TABLE>
<CAPTION>

                                          Year Ended December 31,
                                      ----------------------------
                                         1997      1996      1995 
                                      --------  --------  --------
                                          (Dollars in thousands)
<S>                                      <C>       <C>       <C>
Balance at beginning of year          $ 6,880   $ 5,703   $ 2,158 
Charge-offs(1)                         (1,416)     (851)     (404)
Recoveries                                148       103        17 
Provisions for loan losses              1,800     1,925     1,664 
Acquisition allowance adjustment(2)        --        --     2,268 
                                      --------  --------  --------
Balance at end of the year            $ 7,412   $ 6,880   $ 5,703 
                                      ========  ========  ========
Ratio of net charge-offs during the
period to average net loans
outstanding during the period            0.10%     0.06%     0.05%
                                      ========  ========  ========
</TABLE>

(1)In  1997,  $591,000  of  the  charge-offs  were attributable to single family
residential  loans,  $472,000 to Commercial Business loans, $349,000 to consumer
and  other  loans and $4,000 to commercial real estate loans.  In 1996, $651,000
of  the  charge-offs  were  attributable  to  single  family  residential loans,
$142,000  to  consumer and other loans and $58,000 to Commercial Business loans.
In  1995,  $359,000  of  the  charge-offs  were  attributable  to  single family
residential  loans  and  $45,000  to  consumer  and  other  loans.

(2)The  acquisition allowance adjustment in 1995 represents the amount allocated
to  the  allowance for loan losses during the year in connection with (i) a bulk
loan  package  acquired  and  (ii)  the  loans  acquired  in  the  Texas Capital
acquisition.

<PAGE>
     The  following  table  sets  forth the allocation of the allowance for loan
losses  by  type  of  loan  outstanding  at  the  dates  indicated.

<TABLE>
<CAPTION>
                                                At December 31,
                                             1997     1996     1995
                                          -------  -------  -------
                                                  (In thousands)
<S>                                          <C>      <C>      <C>
First lien residential mortgage           $ 2,566  $ 2,217  $ 2,992
Multifamily mortgage                          511      369      249
Residential construction                      251      223      307
Real estate acquisition and development       316      261      130
Commercial real estate                      1,468    1,151    1,072
Commercial construction                       203       20       --
Commercial, Warehouse and MSR                 494      361      230
Commercial, financial and industrial        1,008      985      395
Consumer and other                            233      374      177
Unallocated                                   362      919      151
                                          -------  -------  -------
                                          $ 7,412  $ 6,880  $ 5,703
                                          =======  =======  =======
</TABLE>

<PAGE>
     The  following  table sets forth the allocation of the provision (reduction
of  allowance)
for  loan  losses  by  loan  type  during  the  periods  indicated.

<TABLE>
<CAPTION>
                                               At December 31,
                                             1997      1996      1995 
                                          --------  --------  --------
                                                 (In thousands)
<S>                                         <C>       <C>       <C>
First lien residential mortgage           $   908   $  (180)  $ 1,032 
Multifamily mortgage                          142       120        23 
Residential construction                       28       (84)      (67)
Real estate acquisition and development        55       131       (25)
Commercial real estate                        321        79       479 
Commercial construction                       183        20        -- 
Commercial, Warehouse and MSR                 133       131       132 
Commercial, financial and industrial          416       618        -- 
Consumer and other                            171       322        90 
Unallocated                                  (557)      768        -- 
                                          --------  --------  --------
                                          $ 1,800   $ 1,925   $ 1,664 
                                          ========  ========  ========
</TABLE>

     Provisions  for loan losses, currently $450,000 per quarter, are charged to
earnings  to  bring  the  total  allowance  to  a  level  deemed  appropriate by
management  based  on such factors as historical experience, the volume and type
of  lending  conducted by the Bank, the amount of nonperforming assets, industry
standards,  regulatory  policies,  generally  accepted  accounting  principles,
general  economic  conditions, particularly as they relate to the Bank's lending
area,  and  other  factors  related  to  the  collectibility  of the Bank's loan
portfolio.

     The Bank periodically reviews its loan loss allowance policy, at a minimum,
annually.    As a result of a comprehensive revision of such policy in 1996, the
Bank  changed  its  method  of  assessing the adequacy of the allowance for loan
losses.    The  revised  policy provides that the Bank will annually establish a
monthly  provision  amount  to be added to the allowance for loan losses and the
resultant  allowance  will  be  "tested"  monthly  for  adequacy  based  on  the
allocation  methodology  described below.  The policy provides that any "excess"
based on this calculation will be maintained in the allowance for loan losses as
"unallocated".    The  minimum  allowance  allocation  to first lien residential
mortgage  loans greater than 90 days delinquent is a general allocation of 5% of
the  aggregate  net book value.  All other first lien residential mortgage loans
are allocated a general allowance of 0.10% of the aggregate net book value.  The
Bank generally allocates the allowance to multifamily, residential construction,
commercial  construction,  real  estate  acquisition and development, commercial
real estate, Warehouse, MSR, Commercial Business and consumer and other loans in
the  following  percentages  of  outstanding  principal  amounts:  0.25%, 0.25%,
0.50%,  1.0%,  0.50%,  0.25%,  0.50%,  1.0%  and  1.0%.   In addition, a general
allowance allocation is calculated on unfunded commitments and letters of credit
using  the general allowance percentages described above for the applicable loan
type.    Specific  allowances are established by management on specific loans as
considered  necessary.

     The  Bank's  management believes that its present allowance for loan losses
is adequate based upon, among other considerations, the factors discussed above,
its  low  level  of  nonperforming  loans  and  its  historical loss experience.
Management  continues to review its loan portfolio to determine whether its loan
loss  allowance  policy  should be altered in light of current conditions and to
make  any additional provisions which may be deemed necessary.  While management
uses  the  best  information  available  to make such determinations, additional
provisions  for  loan  losses  may  be  required to be established in the future
should economic or other conditions change substantially.  In addition, the FDIC
and  the  Department,  as  an  integral  part  of  their  examination processes,
periodically review the Bank's loan loss allowances.  These agencies may require
the Bank to establish additional loan loss allowances, based on their respective
judgments  of  the  information  available  at  the  time  of  the examinations.

MORTGAGE  BANKING  ACTIVITIES

          LOAN  ORIGINATIONS  AND SALES.  Through 1995, the Bank's wholly-owned
subsidiary,  CBS  Mortgage, originated loans for the Bank and for others secured
by  first  lien  mortgages  on  completed  single  family  residences  located
principally in the Houston metropolitan area and in geographic areas surrounding
the  Bank's  branch  locations.    Beginning on January 1, 1996, the origination
function  was performed by the Bank, with CBS Mortgage's activities then limited
to  primarily  loan  servicing.    The  Bank's present policy is to originate or
purchase  and then sell to third party investors fixed rate residential mortgage
loans  principally  to  avoid  the interest rate and credit risk associated with
holding  fixed  rate  mortgage  loans in portfolio. During the years ended 1997,
1996 and 1995, the Bank (in 1997 and 1996) and CBS Mortgage (in 1995) originated
or  purchased  with  the  intent  to  sell  $4.1 million, $11.2 million and $8.8
million, respectively, of single family residential mortgage loans and sold $4.4
million,  $11.7  million  and  $8.3  million,  respectively,  of  such  loans to
secondary  market  investors  ("SMI").  During 1997, 1996 and 1995, the Bank (in
1997  and  1996)  and  CBS Mortgage (in 1995) originated residential real estate
loans  for  portfolio  totaling  $6.3  million,  $9.0 million, and $1.7 million,
respectively.

     "Pipeline  risk,"  which is inherent in mortgage lending operations, arises
when  the  originator of a loan makes an uncovered commitment to lend funds to a
borrower  at  a  locked-in  rate  of  interest  over the period of time which is
required  for the lender to close and/or sell the loan.  The risk is that market
rates  of interest will move higher in the period between the time of commitment
and the time of funding the loan, and the lender will thereafter have difficulty
finding a buyer for such loan at a break-even or better price. Management of the
Bank  and  of CBS Mortgage believe that its loan origination strategy eliminates
to  a  large  extent any "pipeline risk." The majority of applications taken are
accepted  on  the  basis  that  rates  will be set immediately prior to closing.
Applications  that  carry a locked-in rate are covered for interest rate risk by
the  use  of  the  forward sales of mortgage-backed securities or by registering
each loan with an investor that offers loan-by-loan protection until closing and
delivery  to  the  investor.

     Through  1995,  CBS  Mortgage made available a variety of mortgage products
designed  to  respond  to  consumer needs and competitive factors.  Beginning on
January  1,  1996, with the transfer of the origination function, these mortgage
products  were  being  made  available  from  the  Bank,  although  not actively
solicited.  Conventional  conforming  loans  that  are secured by first liens on
completed residential real estate are generally originated for amounts up to 95%
of  the appraised value or selling price of the mortgaged property, whichever is
less. All loans with loan-to-value ratios in excess of 80% generally require the
borrower  to  purchase  private  mortgage  insurance  from  approved third party
insurers.    Conventional  non-conforming mortgage loans (i.e., loans for single
family  homes  with  an  original  balance in excess of the maximum loan balance
amount  set  by FNMA or FHLMC, which is presently $227,150, or loans that do not
otherwise  meet  the criteria established by FNMA or FHLMC) are also originated.
Such loans are originated based on underwriting guidelines or standards required
by  the SMI to whom such loans are intended to be sold.  During 1997, fewer than
10%  of  the  mortgage loans originated by the Bank were non-conforming mortgage
loans.

     In  addition  to  15-year  and 30-year conventional mortgages, CBS Mortgage
offered  and  now  the  Bank offers, special products designed to provide to its
customers  lower  rates  of  interest  or lower principal and interest payments.
Borrowers  may  choose from a wide variety of combinations of interest rates and
points  on many products so that its customers may elect to pay higher points at
closing  and  lower interest over the life of the loan, or pay a higher interest
rate  and  reduce the points payable at closing.  In addition, from time to time
mortgages  are  offered  in  the  following  categories:   those which allow the
borrower to make lower monthly payments for the first one, two or three years of
the  loan;  fixed  rate mortgages; and adjustable rate mortgages having interest
rate  adjustments  every  one,  five  or  seven  years  based  upon  a specified
independent  index.

     Borrower  demand  for adjustable rate mortgage loans compared to fixed rate
mortgage  loans is a function of interest rate levels, consumer expectations for
changes  in  interest  rate levels and the difference between interest rates and
loan fees offered for fixed rate mortgage loans and for adjustable rate mortgage
loans.    The Bank's and CBS Mortgage's loan origination volume has been subject
to  some  minor seasonal variations, with the heaviest demand in the late spring
and  summer  months.   Loan demand is also affected by the general interest rate
environment  and, to a large measure, by the general state of the local economy.

     During  times of relatively lower market interest rates, demand by previous
borrowers  for  refinancings  increases.   Refinancings are not solicited by CBS
Mortgage  or  the  Bank.    However, if a request for a refinancing is received,
borrowers are offered current mortgage loan products. Refinancings are processed
in  a manner identical to original originations and are charged the same fees as
charged  for  original  originations.

     LOAN  SERVICING.  CBS Mortgage services residential real estate loans owned
by  the  Bank  as  well  as  for others, including FNMA, FHLMC and other private
mortgage  investors.    Loan  servicing  includes  collecting and remitting loan
payments,  accounting  for  principal  and  interest,  making  advances to cover
delinquent  payments,  making  inspections  as  required  of mortgaged premises,
contacting  delinquent  mortgagors,  supervising  foreclosures  and  property
dispositions in the event of unremedied defaults and generally administering the
loans.  Funds  that  have been escrowed by borrowers for the payment of mortgage
related  expenses,  such  as  property  taxes  and hazard and mortgage insurance
premiums,  are  maintained  in  non-interest-bearing  accounts  at  the Bank. At
December  31, 1997, the Bank had $6.2 million deposited in such escrow accounts.

     CBS  Mortgage  receives  fees for servicing mortgage loans, which generally
range  from  0.250%  to  0.375%  per annum on the declining principal balance of
fixed  rate  mortgage loans and from 0.375% to 0.500% per annum on the declining
principal  balance  of  adjustable  rate  mortgage  loans.    Such fees serve to
compensate  CBS  Mortgage  for  the  costs of performing the servicing function.
Other  sources  of  loan  servicing  revenues  include  late  charges  and other
ancillary  fees.  For  the years ended 1997, 1996 and 1995, the Bank earned $1.4
million,  $1.6  million  and $2.0 million, respectively, in conjunction with CBS
Mortgage's  loan  servicing. Servicing fees are collected by CBS Mortgage out of
the  monthly mortgage payments made by borrowers and are net of the amortization
of  mortgage  servicing  rights.

     CBS  Mortgage's  servicing  portfolio  is  subject  to  reduction by normal
amortization, by prepayment or by foreclosure of outstanding loans.  At December
31,  1997, 1996 and 1995, CBS Mortgage had an aggregate loan servicing portfolio
of  $1.6 billion, $1.7 billion and $1.7 billion, respectively.  Of these amounts
at  such  respective dates, CBS Mortgage serviced loans for the Bank aggregating
$879.6  million,  $958.2  million  and  $824.6  million  and  loans  for  others
aggregating  $675.7 million, $776.7 million and $900.7 million.  At December 31,
1997,  56.6% of the dollar value of loans being serviced by CBS Mortgage was for
the  Bank, 14.9% was being serviced for FHLMC, 26.7% was being serviced for FNMA
and  1.8%  was  being  serviced  for  others.

     Beginning  in  1990,  in  order  to increase the size of its loan servicing
portfolio,  CBS  Mortgage  began to purchase bulk packages of mortgage servicing
rights  from  the Federal government and other institutions on a competitive bid
basis.   The purchased mortgage servicing rights which were acquired in 1990 and
1991  were  primarily  conventional  loans  secured  by real property.  The bulk
purchase  market  for  loan  servicing was attractive to purchasers in the early
1990s  due  to  the  relatively large amounts of such servicing rights that were
being  sold  by  banks  and  thrift  institutions due to the introduction of new
regulatory capital standards, and by the Resolution Trust Corporation as part of
its  liquidation function.  Prices bid on these bulk offerings ranged from 0.35%
to 1.25% of the principal balance of the underlying mortgages.  Between 1992 and
1994,  CBS  Mortgage  pursued  the  purchase  of  servicing  rights from private
institutions.    The  packages  of  servicing  rights purchased from the private
institutions  during  this  period were purchased at prices which have generally
ranged  between  0.82%  to  1.47%  on  the  principal balances of the underlying
mortgages.   No servicing rights were purchased by CBS Mortgage in 1997, 1996 or
1995.  As of December 31, 1997, an aggregate of $675.7 million of CBS Mortgage's
$1.6  billion  servicing portfolio, or 43.4%, was loans serviced for others.  At
December  31,  1997,  CBS  Mortgage  had no commitments for further purchases of
mortgage  servicing  rights.

     The amount, if any, by which purchased mortgage servicing rights exceed the
lower  of  90%  of  determinable  fair  market value, 90% of origination cost or
current  amortized  book  value  must  be  deducted  from capital in calculating
regulatory  capital.    See  "Regulation - Regulatory Capital Requirements."  At
December  31, 1997, there were no deductions from capital for purchased mortgage
servicing  rights  valuation  adjustments.

<PAGE>
     The following table sets forth certain information regarding CBS Mortgage's
servicing  portfolio  of  mortgage  loans  for  the  periods  indicated.

<TABLE>
<CAPTION>
                                       Year Ended December 31,
                                    1997         1996         1995
                                -----------  -----------  -----------
                                           (In thousands)
<S>                                  <C>          <C>          <C>
Beginning servicing portfolio   $ 1,735,089  $ 1,725,400  $ 1,511,263
                                -----------  -----------  -----------
Loans originated(1)                      --           --        8,810
Bank loan originations              140,673      104,023       68,960
Bank whole loans acquired           126,864      185,176      390,230
                                -----------  -----------  -----------
 Total servicing originated
 and acquired                       267,537      289,199      468,000
                                -----------  -----------  -----------
Loans sold servicing released            --           47        2,602
Amortization and payoffs            430,373      273,219      246,223
Foreclosures                          6,249        6,244        5,038
                                -----------  -----------  -----------
 Total servicing reductions         436,622      279,510      253,863
                                -----------  -----------  -----------
Ending servicing portfolio      $ 1,566,004  $ 1,735,089  $ 1,725,400
                                ===========  ===========  ===========
</TABLE>
________________________

(1)Loans  originated  or  purchased  for  the  Bank.


MORTGAGE-BACKED  SECURITIES

     The Bank maintains a significant portfolio of mortgage-backed securities as
a  means  of investing in housing-related mortgage instruments without the costs
associated with originating mortgage loans for portfolio retention.  At December
31,  1997,  the Company's mortgage-backed securities portfolio (including $170.0
million  of  mortgage-backed  securities available-for-sale), net of unamortized
premiums  and  unearned  discounts, amounted to $1.5 billion, or 52.0%, of total
assets.  By investing in mortgage-backed securities, management seeks to achieve
a  positive spread over the cost of funds used to purchase these securities.  At
December 31, 1997, the Company's net mortgage-backed securities had an aggregate
market  value  of  $1.5  billion.

<PAGE>
     The  following  table  sets  forth  the  composition  of  the  Company's
mortgage-backed  securities  portfolio  at  the  dates  indicated.

<TABLE>
<CAPTION>
                                                         At December 31,
                                       1997                    1996                   1995 
                            ----------------------   ---------------------  ----------------------
                                Amount     Percent    Amount       Percent    Amount       Percent
                            ------------  --------  ------------  --------  -----------  ---------
                                                   (Dollars in thousands)
<S>                             <C>           <C>         <C>        <C>       <C>          <C>
Held-to-maturity:
 REMICS                     $ 1,232,219     91.59%  $ 1,213,849     90.25%  $1,241,999     89.00%
 FNMA certificates               69,906      5.20        77,324      5.75       90,061      6.45 
 GNMA certificates               28,701      2.13        33,900      2.52       39,363      2.82 
 Non-agency certificates         14,586      1.08        19,826      1.48       24,091      1.73 
 Interest-only securities            20        --            38        --           55        -- 
                            ------------  --------  ------------  --------  -----------  --------
                              1,345,432    100.00%    1,344,937    100.00%   1,395,569    100.00%
                                          ========                ========               ========
 Unamortized premium              2,831                   3,153                  3,841 
 Unearned discount               (3,173)                 (3,503)                (3,657)
                            ------------            ------------            -----------          
Total held-to-maturity      $ 1,345,090             $ 1,344,587             $1,395,753 
                            ============            ============            ===========          

Available-for-sale:
 REMICS                     $   173,717    100.00%  $   185,651    100.00%  $  186,505     99.52%
 Non-agency certificates             --        --            --        --          908      0.48 
                            ------------  --------  ------------  --------  -----------  --------
                                173,717    100.00%      185,651    100.00%     187,413    100.00%
                                          ========                ========               ========
 Unamortized premium                 25                      33                     44 
 Unearned discount                 (247)                   (255)                  (284)
 Net unrealized loss             (3,498)                 (4,773)                  (759)
                            -----------             -----------             -----------
Total available-for-sale    $   169,997             $   180,656             $  186,414 
                            ============            ============            ===========

Total mortgage-backed
 securities                 $ 1,515,087             $ 1,525,243             $1,582,167 
                            ============            ============            ===========
</TABLE>


     The  mortgage-backed  securities  which the Bank purchases and maintains in
portfolio  can  include  FNMA,  FHLMC  and  GNMA certificates, certain privately
issued, credit-enhanced mortgage-backed securities which are rated "A" or better
by  the  national  securities  rating  agencies, certain types of collateralized
mortgage  obligations ("CMOs") and interest-only ("IO") certificates.  The FNMA,
FHLMC  and  GNMA  certificates  are  modified  pass-through  mortgage-backed
securities,  which  represent  undivided  interests  in  underlying  pools  of
fixed-rate,  or  certain  types  of  adjustable  rate, single family residential
mortgages issued by these quasi-governmental (GNMA) and private (FNMA and FHLMC)
corporations.    FNMA  and  GNMA  provide  to the certificate holder a guarantee
(which is backed by the full faith and credit of the U.S. government in the case
of  GNMA  certificates)  of  timely payments of interest and scheduled principal
payments,  whether  or not they have been collected. FHLMC guarantees the timely
payment  of  interest  and  the  full (though not necessarily timely) payment of
principal.    The  guarantees of FNMA and FHLMC are not backed by the full faith
and  credit  of the U.S. government.  The mortgage-backed securities acquired by
the  Bank  that  have  been  pooled and sold by private issuers, generally large
investment  banking  firms,  provide  for  the  timely payments of principal and
interest  either through insurance issued by a reputable insurer or the right to
receive  certain  payments  thereunder  is  subordinated  in  a  manner which is
sufficient  to  have  such  mortgage-backed  securities  generally earn a credit
rating  of  "A"  or  better  from  one or more of the national securities rating
agencies.

     A  CMO is a special type of pay-through debt obligation in which the stream
of  principal  and  interest  payments  on  the  underlying  mortgages  or
mortgage-backed  securities  is used to create classes with different maturities
and,  in  some  cases,  amortization  schedules  and a residual class of the CMO
security  being  sold,  with  each  such  class  possessing  different  risk
characteristics.  The  residual interest sold represents any residual cash flows
which  result from the excess of the monthly receipts generated by principal and
interest  payments  on  the  underlying mortgage collateral and any reinvestment
earnings  thereon,  less  the  cash  payments  to  the  CMO  holders  and  any
administrative expenses.  As a matter of policy, due to the risk associated with
residual  interests,  the  Bank  has  never  invested in, and does not intend to
invest  in,  residual  interests  in  CMOs.    CMOs  and  other  mortgage-backed
securities  may  be  structured  as  Real  Estate  Mortgage  Investment Conduits
("REMICs")  for  U.S.  Federal  income  tax  purposes.

     Mortgage-backed  securities  generally  yield  less  than  the  loans which
underlie  such  securities  because  of  their  payment  guarantees  or  credit
enhancements  which  reduce credit risk. In addition, mortgage-backed securities
are  more liquid than individual mortgage loans and may be used to collateralize
obligations  of  the  Bank.   Mortgage-backed securities issued or guaranteed by
FNMA  or  FHLMC  (except  IO  securities  or the residual interests in CMOs) are
weighted  at  no  more  than  20% for risk-based capital purposes, compared to a
weight  of  50%  to  100%  for  residential loans.  See "Regulation - Regulatory
Capital  Requirements."

     The FDIC has issued a statement of policy which states, among other things,
that mortgage derivative products (including CMOs and CMO residuals and stripped
mortgage-backed  securities  such  as  IOs)  which possess average life or price
volatility  in  excess  of  a  benchmark  fixed  rate  30  year  mortgage-backed
pass-through  security  are  "high-risk  mortgage  securities," are not suitable
investments  for  depository  institutions,  and  if  considered  "high risk" at
purchase  must be carried in the institution's trading account or as assets held
for  sale,  and  must be marked to market on a regular basis.  In addition, if a
security  was  not  considered "high risk" at purchase but was later found to be
"high  risk" based on the tests, the security may remain in the held-to-maturity
portfolio  as  long  as  the  institution  has  the  positive intent to hold the
security  to  maturity  and  has a documented plan in place to manage the higher
risk.   At December 31, 1997, the Bank had mortgage-backed securities considered
"high  risk" with a recorded booked value of approximately $16.8 million.  These
securities  were not considered "high risk" at purchase, but were later found to
be  "high  risk"  based  on the results of the required tests.  The Bank has the
positive  intent  to  hold  these  securities to maturity and has documented the
Bank's  plan  to manage the higher risk of these securities.  If the Bank should
elect  to consider a new type of security for its portfolio, the Bank intends to
ascertain  in advance that the security does not fail any of the tests that will
qualify  it  as a "high risk mortgage security."  The Bank will not purchase any
security  that  fails  such  tests  unless  it has in place a documented plan to
manage  the  higher  risk  of  that  security and has approval from the Board of
Directors.

<PAGE>
        The following table sets forth the Company's activities with respect to
mortgage-backed  securities  (including held-to-maturity and available-for-sale)
during  the  periods  indicated.
<TABLE>
<CAPTION>
                                            Year Ended December 31,
                                           1997       1996       1995 
                                       ---------  ---------  ---------
                                                (In thousands)
<S>                                         <C>        <C>        <C>
Mortgage-backed securities
 held-to-maturity purchased            $ 56,136 $     --       52,741 

Available-for-sale securities sold(1)   (11,308)      (864)   (72,298)

Amortization of premiums
 net of discount accretion                  (83)      (552)      (495)

Change in unrealized loss on
 mortgage-backed securities              
 available-for-sale                       1,275     (4,013)       (24)

Principal repayments on
 mortgage-backed securities             (56,176)   (51,495)   (35,845)
                                       ---------  ---------  ---------
Net decrease in                        
 mortgage-backed securities            $(10,156)  $(56,924)  $(55,921)
                                       =========  =========  =========
</TABLE>

(1)  Securities  sold  in  1995  after  reclassification  from held-to-maturity 
portfolio pursuant to the FASB's Special Report, "A Guide  to Implementation of 
Statement  115  on  Accounting  for  Certain  Investments  in  Debt  and Equity 
Securities."

     On  January  1,  1994,  the Company adopted the FASB Statement of Financial
Accounting  Standards  No.  115  (Statement  115),  "Accounting  for  Certain
Investments  in  Debt and Equity Securities."  In accordance with Statement 115,
the  Company  classifies  securities  as  either  held-to-maturity  or
available-for-sale.    Securities  are  classified  as held-to-maturity when the
Company has the positive intent and ability to hold such securities to maturity.
Securities  held-to-maturity are recorded at amortized cost.  Permanent declines
in  the  value  of  held-to-maturity  securities  are charged to earnings in the
periods in which the declines are determined.  Securities available-for-sale are
securities  other  than  those  held-to-maturity or for trading purposes 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,  in  1994  the  Company  transferred
approximately  $50.8  million  of  mortgage-backed  securities  to  the
available-for-sale  category.    Realized  gains  and  losses  on securities are
recorded in earnings in the year of sale based on the specific identification of
each  individual  security  sold.    Premiums  and  discounts on 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.

     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,  the  Company  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 and gave the
Company  the  opportunity to somewhat change the composition of the portfolio by
selling  certain securities if that was considered necessary.  In 1997, 1996 and
1995,  the Company sold $11.3 million, $864,000 and $72.3 million, respectively,
of  mortgage-backed  securities  available-for-sale.

INVESTMENT  ACTIVITIES

     Under  the  Texas  Savings  Bank  Act (the "Act"), the Bank is permitted to
invest  in  obligations  of,  or guaranteed as to principal and interest by, the
United  States  or  the  State  of  Texas, in the stock or in any obligations or
consolidated  obligations  of  the  FHLB,  and  in  various  other  specified
instruments.    The  Bank  holds investment securities from time to time to help
meet  its liquidity requirements and as temporary investments until funds can be
utilized  to  purchase mortgage-backed securities, residential mortgage loans or
to  originate  other  loans for the Bank's portfolio.  See Item 7, "Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results  of
Operations-Liquidity  and  Capital  Resources."

SOURCES  OF  FUNDS

     GENERAL.    Advances  from  the  FHLB,  deposits, sales of securities under
agreements  to  repurchase  and maturities and principal repayments on loans and
mortgage-backed  securities  have been the major sources of funds for use in the
Bank's  lending  and  investments,  and  for  other  general  business purposes.
Management  of the Bank closely monitors rates and terms of competing sources of
funds  on at least a weekly basis and utilizes the source which is the more cost
effective.

     DEPOSITS.    The  Bank's  market  for  deposits  is  competitive, which has
necessitated  the  Bank's  emphasis on primarily short term certificate accounts
that  are  more  responsive to market interest rates than savings accounts.  The
Bank  offers  a  traditional  line  of deposit products which currently includes
savings,  interest-bearing  checking, noninterest-bearing checking, money market
demand  accounts and certificates of deposit which generally range in terms from
three  to  60  months.    Included  among  these deposit products are individual
retirement  account certificates.  During 1996 and early in 1997, the Bank began
to  offer a range of products for commercial businesses including Small Business
Checking,  Business  Interest  Checking,  Analysis Checking and Commercial Money
Market  Accounts,  the  amounts  of which, in 1997 or 1996, are not material for
separate  presentation.

<PAGE>
     The following table shows the distribution of and certain other information
relating  to  the  Company's  deposits  by  type  as  of  the  dates  indicated.

<TABLE>
<CAPTION>
                                                                     At December 31,
                                                          --------------------------------------
                                                 1997(1)                 1996(2)                   1995(3)
                                                      Percent                 Percent                   Percent
                                                      of                      of                        of
                                           Amount     Deposits     Amount     Deposits     Amount       Deposits
                                         -----------  ---------  -----------  ---------  -----------  ---------
<S>                                      <C>            <C>         <C>          <C>         <C>          <C>
                                                                   (Dollars in Thousands)
Demand deposit accounts:
 Noninterest-bearing checking            $  101,782       7.40%  $   85,259       6.50%  $   81,207       6.31%
 Interest-bearing checking                   69,972       5.09       56,862       4.34       47,476       3.69 
 Savings                                     25,555       1.86       22,135       1.69       22,374       1.74 
 Money market demand                        165,986      12.07      151,046      11.52      165,214      12.83 
                                         -----------  ---------  -----------  ---------  -----------  ---------
   Total demand deposit accounts            363,295      26.42      315,302      24.05      316,271      24.57 
                                         -----------  ---------  -----------  ---------  -----------  ---------
Certificate accounts:
 Within 1 year                              781,455      56.83      772,690      58.94      704,966      54.76 
 1-2 years                                  186,734      13.58      158,583      12.10      188,400      14.63 
 2-3 years                                   30,028       2.18       40,961       3.12       32,556       2.53 
 3-4 years                                    7,292       0.53       18,268       1.39       29,717       2.31 
 4-5 years                                    6,153       0.45        5,064       0.39       15,210       1.18 
 Over 5 years                                   178       0.01          165       0.01          319       0.02 
                                         -----------  ---------  -----------  ---------  -----------  ---------
     Total certificate accounts           1,011,840      73.58      995,731      75.95      971,168      75.43 
                                         -----------  ---------  -----------  ---------  -----------   --------
                                          1,375,135     100.00%   1,311,033     100.00%   1,287,439     100.00%
                                                       ========                 =======                ========
 Discount to record
   savings deposits at fair value, net.         (75)                   (198)                   (355)
                                         -----------             -----------             -----------           
     Total                               $1,375,060              $1,310,835              $1,287,084 
                                         ===========             ===========             ===========           
</TABLE>
_______________

(1)In  1997,  the  Bank  assumed  approximately  $54.6  million  in  deposits in
connection  with  the  acquisition  of  one  branch  office of another financial
institution.
(2)In  1996,  the  Bank  assumed  approximately $11.1 million in net deposits in
connection  with  the  exchange  of three branch offices for one and the sale of
another  branch  office.
(3)In  1995,  the  Bank  assumed  approximately  $157.2  million  in deposits in
connection  with  the  acquisition  of  five branch offices of another financial
institution.

<PAGE>
     The following table sets forth the average balance of each deposit type and
the  average  rate  paid  on  each  deposit  type  for  the  periods  indicated.

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                           1997                   1996                     1995
                                       -----------              -----------              -----------  
                                                            (Dollars in Thousands)
                                    Average    Average      Average      Average      Average      Average
                                    Balance   Rate Paid     Balance     Rate Paid     Balance     Rate Paid
                                -----------  ----------  -----------   ----------  -----------    ---------
  <S>                             <C>          <C>         <C>          <C>         <C>             <C>
Demand deposit accounts:
 Noninterest-bearing checking   $    91,293         --%  $    85,469         --%  $    62,164         --%
 Interest-bearing checking           61,392       1.78        49,181       2.07        29,904       2.06 
 Savings                             23,912       2.29        22,104       2.32        20,162       2.52 
 Money market demand                158,993       3.63       157,933       3.64       156,730       3.61 
Certificate accounts              1,008,845       5.50       970,433       5.42       909,992       5.49 
                                -----------  ----------  -----------  ----------    ---------      ------
 Total deposits                 $ 1,344,435       4.68%  $ 1,285,120       4.66%  $ 1,178,952       4.81%
                                ===========  ==========  ===========  ==========  ===========  ==========
</TABLE>

     The  following  table  presents  by  various  interest  rate categories the
amounts  of  certificate  accounts  at  the  dates  indicated and the amounts of
certificate  accounts  at  December  31,  1997,  which mature during the periods
indicated.

<TABLE>
<CAPTION>
                                                          Amounts at December 31, 1997 Maturing
                                                                  (In thousands)

                              Amounts  at  December  31,          One Year
                                  1997          1996               or Less
                             --------------------------            --------
<S>                               <C>          <C>                    <C>
                                   (In thousands)
Certificate accounts:
2.00% to 3.99%                $    7,905      $ 14,835           $   7,422
4.00% to 5.99%                   899,205       871,852             743,317
6.00 to 7.99%                    102,029       104,092              28,900
8.00 to 9.99%                      2,701         4,686               1,816
10.00% to 11.99%                      --           266                  --
                              ----------      --------            --------
Total                         $1,011,840      $995,731            $781,455
                              ==========      ========            ========


                                Amounts at December 31, 1997 Maturing
                                           (In thousands)

                                                                Greater  than
                              Two  Years         Three Years     Three Years
                              ----------         ----------     -------------
<S>                              <C>                  <C>             <C>
Certificate accounts:
2.00% to 3.99%                $    351            $    46          $    86
4.00% to 5.99%                 132,851             11,759           11,278
6.00 to 7.99%                   52,746             18,223            2,160
8.00 to 9.99%                      786                 --               99
10.00% to 11.99%                    --                 --               --
                              --------            -------          -------
Total                         $186,734            $30,028          $13,623
                              ========            =======          =======
</TABLE>

<PAGE>
     Certificates  maturing  within  one year consist primarily of six month and
one year certificates. Historically, a majority of such certificate holders roll
over  their balances into new certificates with similar terms at the Bank's then
current  interest  rates.  The Bank believes that its pricing strategy will help
the  Bank  to  achieve  balance  levels  deemed  appropriate  by management on a
continuing  basis.

     The following table sets forth the net deposit flows of the Bank during the
periods  indicated.

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                  1997      1996       1995
                                               --------  ---------  ---------
                                                       (In thousands)
<S>                                                <C>       <C>         <C>
Net increase (decrease) before interest
 credited(1)                                   $  2,383  $(34,707)  $  91,052
Interest credited                                61,842    58,458      56,410
                                               --------  --------   ---------
Net deposit increase                           $ 64,225  $ 23,751   $ 147,462
                                               ========  =========  =========
</TABLE>

(1) For the years ended December 31, 1997, 1996 and 1995, reflects the effect of
the assumption of $54.6 million, $11.1 million and $157.2 million of net deposit
liabilities  in  connection  with  branch office transactions in each respective
year.    The net deposit outflow in 1997 and 1996 (net of acquired deposits) was
primarily  due  to  financial  disintermediation  as  described  below.

     The  following  table  sets  forth the amount of the Bank's certificates of
deposits  which  are  $100,000  or  more  by time remaining until maturity as of
December  31,  1997.

<TABLE>
<CAPTION>

                              At December 31, 1997
                          -------------------------
                           Number of        Deposit
                           accounts          Amount
                          ---------       ---------
                            (Dollars in thousands)
<S>                           <C>     <C>    <C>
Three months or less            273       $  29,844
Over three through six
 months                         217          23,106
Over six through twelve
 months                         349          38,383
Over twelve months              293          31,260
                          ---------       ---------
   Total                      1,132       $ 122,593
                          =========       =========
</TABLE>


     The  Bank's  deposits  are  obtained  primarily  from residents of Houston,
Austin,  Corpus  Christi  and  small cities in the south east quadrant of Texas.
Currently,  the principal methods used by the Bank to attract and retain deposit
accounts  include  competitive  interest  rates,  having  branch  locations  in
under-served  markets  and  offering  a  variety  of  services  for  the  Bank's
customers.  The Bank uses traditional marketing methods to attract new customers
and  savings  deposits, including newspaper advertising.  Through 1997, the Bank
has  not  solicited  brokered  deposit accounts and generally has not negotiated
rates  on  larger  denomination (i.e., jumbo) certificates of deposit.  The Bank
did,  however,  acquire deposits, classified on the books and records of a prior
entity  as  brokered,  through  the branch acquisition in 1994.  In addition, in
early  1997,  the  Bank has begun the solicitation of deposit accounts through a
"money  desk."    Money  desk  rates are only offered to institutions (primarily
credit  unions and municipal utility districts) and are generally up to 50 basis
points  higher  than  on  regular  certificate  of  deposit  accounts.

     Management  of the Bank intensified its deposit product marketing beginning
in  1993 in order to increase its share of core deposits in the markets in which
it  operates.    Management  believes  that  the combination of the new packaged
deposit  products  (which generally have higher minimum balance requirements and
which provide value-added incentives to the customer, such as, for example, free
traveler's  checks,  reduced  or  waived  monthly service charges and free money
orders)  plus  increased  advertising,  sales  training,  branch  promotion  and
cross-selling  of  products will help maintain the volume of the Bank's deposits
and  strengthen  customer  relationships without requiring the Bank to alter its
deposit pricing strategy.  The Bank's management also believes that such efforts
will  assist  the  Bank  in maintaining deposits, particularly during periods of
relatively  low deposit rates, which might otherwise flow out of the institution
due  to  disintermediation (the movement of funds away from savings institutions
and  into direct investment vehicles such as government and corporate securities
and mutual funds). Notwithstanding this plan, the ability of the Bank to attract
and  maintain deposits and the Bank's cost of funds have been, and will continue
to  be,  significantly  affected  by  general  money  market  conditions.

     The  Bank  also  provides  its  customers with the opportunity to invest in
mutual  funds,  including  government bond funds, tax-free municipal bond funds,
growth  funds,  income  growth  funds, and sector funds specific to an industry,
which are provided through a third party arrangement with another company, which
maintains  representatives  at  the  Bank's branch offices. The Bank earns a fee
after  the  payment  of  all  expenses,  which  was  not  material to the Bank's
financial  condition.

<PAGE>
     BORROWINGS.    The following table sets forth certain information regarding
the  borrowings  of  the  Bank  at  or  for  the  dates  indicated.

<TABLE>
<CAPTION>

                                              At or For the Year
                                              Ended December 31,
                                          1997         1996       1995 
                                       ---------  -----------  ---------
                                            (Dollars in thousands)
<S>                                        <C>          <C>          <C>
FHLB advances:

 Average balance outstanding          $  368,896   $  387,296   $367,895 

 Maximum amount outstanding
   at any month-end during the
   period                                540,475      491,930    405,016 

 Balance outstanding at end of
   period                                540,475      409,720    312,186 

 Average interest rate during the
   period                                   5.78%        5.62%      6.01%

 Average interest rate at end of
   period                                   5.95%        5.61%      5.88%

Securities sold under agreements
 to repurchase:

 Average balance outstanding          $  974,136   $  930,706   $752,427 

 Maximum amount outstanding
   at any month-end during the
   period                              1,035,576    1,022,085    993,832 

 Balance outstanding at end of
   period                                791,760      966,987    993,832 

 Average interest rate during the
   period                                   5.66%        5.52%      5.98%

 Average interest rate at end of
   period                                   6.00%        5.55%      5.78%
</TABLE>


     Federal  funds  purchased  averaged  approximately $161,000 during the year
ended  December  31,  1997  with  an  average interest rate during the period of
5.59%.    There  were  no  federal  funds purchased outstanding at any month-end
during  1997  and  there  were no federal funds purchased outstanding during the
years  ended  December  31,  1996  or  1995.

     The  Bank  obtains  long  term,  fixed  rate  and short term, variable rate
advances  from  the  FHLB  upon the security of certain of its residential first
mortgage  loans  and  mortgage-backed  securities,  provided  certain  standards
related  to  creditworthiness  of  the  Bank  have  been  met. FHLB advances are
generally  available  for  general  business  purposes  to  expand  lending  and
investing  activities.  Borrowings have generally been used to fund the purchase
of  loans  receivable  and  mortgage-backed  securities.

     Advances  from  the  FHLB  are  made  pursuant  to several different credit
programs,  each of which has its own interest rate and range of maturities.  The
programs of the FHLB currently utilized by the Bank include a variable rate line
of  credit,  various short-term, variable rate advances and long term, fixed and
variable-rate  advances.  At December 31, 1997, the Bank had total FHLB advances
of  $540.5  million  at  a  weighted  average  interest  rate  of  5.95%.

     The  Bank  also  obtains  funds  from the sales of securities to investment
dealers  under agreements to repurchase ("reverse repurchase agreements").  In a
reverse  repurchase  agreement  transaction,  the  Bank  will  generally  sell a
mortgage-backed  security  agreeing  to  repurchase  either  the  same  or  a
substantially identical security on a specified later date  at a price less than
the  original  sales price.  The difference in the sale price and purchase price
is  the  cost  of  the  use  of  the  proceeds.   The mortgage-backed securities
underlying  the  agreements  are  delivered  to  the  dealers  who  arrange  the
transactions.    For  agreements  in  which  the  Bank  has agreed to repurchase
substantially  identical  securities,  the  dealers  may sell, loan or otherwise
dispose  of  the  Bank's  securities  in  the normal course of their operations;
however,  such  dealers or third party custodians safe-keep the securities which
are  to  be specifically repurchased by the Bank.  Reverse repurchase agreements
represent  a  competitive cost funding source for the Bank; however, the Bank is
subject  to  the risk that the lender may default at maturity and not return the
collateral.  In  order to minimize this potential risk, the Bank only deals with
large,  established  investment  brokerage  firms  when  entering  into  these
transactions.    At December 31, 1997, the Bank had $791.8 million in borrowings
under  reverse  repurchase  agreements  at  a  weighted average interest rate of
6.00%.    At December 31, 1997, the Bank 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 $12.8 million with an average maturity of
344  days  at  December  31,  1997.  The amount at risk with Credit Suisse First
Boston  Corporation  was  $16.6  million  with an average maturity of 27 days at
December  31,  1997.    The  amount  at risk with Goldman, Sachs & Co. was $23.7
million  with  an  average  maturity  of  8  days  at  December  31,  1997.

     To  a  lesser  extent,  beginning  in 1997, the Bank utilizes federal funds
purchased  from  a  correspondent  bank  for  overnight  borrowing  purposes.

     The Asset/Liability Subcommittee of the Bank attempts to match the maturity
of  reverse  repurchase  agreements  with  particular repricing dates of certain
assets  in  order to maintain a pre-determined interest rate spread.  The Bank's
objective  is  to  minimize the increase or decrease in the interest rate spread
during periods of fluctuating interest rates from that which was contemplated at
the  time  the  assets  and liabilities were first put on the Bank's books.  The
Bank  attempts  to  alter  the  interest  rate  risk associated with the reverse
repurchase  agreements  through the use of interest rate swaps and interest rate
caps  purchased  from  the  FHLB  and  certain  large  securities  dealers.  See
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations  -  Asset  and  Liability  Management"  in  Item  7  hereof.

SUBSIDIARIES  OF  THE  BANK

     GENERAL.  The Bank is permitted to invest in the capital stock, obligations
and  other  securities of its service corporations in an aggregate amount not to
exceed  10.0%  of  the Bank's assets.  In addition, the Bank may make conforming
loans in an amount not exceeding 50% of the Bank's regulatory capital to service
corporations of which the Bank owns more than 10% of the stock.  At December 31,
1997,  the  Bank  was  authorized  to have a maximum investment of approximately
$291.0  million  in  its  subsidiaries.

     At  December  31,  1997, the Bank had two active wholly-owned subsidiaries,
the  activities  of which are described below.  At December 31, 1997, the Bank's
aggregate  equity investment in all of its subsidiaries was $8.4 million and the
Bank  had  a  net  payable  to  such  subsidiaries  totalling  $87,000.

     CBS  MORTGAGE  CORP.    The Bank is the sole stockholder of CBS Mortgage, a
Texas  corporation  formed  in  1989  to  engage in the business of originating,
purchasing,  selling  and  servicing  loans  secured  by first lien mortgages on
completed  one-to four-family dwelling units.  Beginning on January 1, 1996, the
origination,  purchasing and selling functions of CBS Mortgage were performed by
the  Bank,  with  CBS  Mortgage's  activities  then  limited  to  primarily loan
servicing.  For a detailed discussion of CBS Mortgage's business operations, see
"Mortgage  Banking  Activities."

     The  Bank  and CBS Mortgage have entered into a ten year mortgage warehouse
revolving  loan  agreement  pursuant  to  which the Bank has established a $15.0
million  revolving  line  of  credit  to  be drawn upon from time to time by CBS
Mortgage  to finance the acquisition of servicing rights and, prior to 1996, the
origination or acquisition of mortgage loans and the holding of such loans until
they  were  sold,  delivered  or  pledged  to  secondary  market  investors.

     The advances drawn by CBS Mortgage are secured by a promissory note payable
upon  demand.  Interest  on the funds advanced by the Bank is payable monthly at
the local prime rate plus 1% per annum. The promissory note between the Bank and
CBS Mortgage provides that CBS Mortgage is credited an amount equal to the local
prime  rate  less  1%  per  annum on the average monthly balance of all escrowed
funds held by the Bank.  The credit is limited in amount to the interest charged
by the Bank.  As a result of such credit, CBS Mortgage made no interest payments
to  the  Bank  under  this loan for the year ended December 31, 1997.  Principal
balances  under the loan are generally repaid through servicing income generated
from  servicing  rights.   At December 31, 1997, the Bank's equity investment in
CBS Mortgage was $8.3 million and had an intercompany payable to CBS Mortgage in
the  amount  of  $106,000.    CBS  Mortgage had net income of $2.3 million, $2.3
million  and  $1.3 million for the years ended December 31, 1997, 1996 and 1995,
respectively.

     COASTALBANC  FINANCIAL  CORP.    CoastalBanc  Financial  Corp.  ("Financial
Corp.")  was  formed  in  1986  to act as an investment advisor to other insured
financial  institutions.    The  Bank is the sole stockholder of Financial Corp.
Over  the  past  four years, Financial Corp. has been inactive in its investment
advisory  capacity.    Financial  Corp. became active during the last quarter of
1992  in  connection  with  the  sale  of  mutual  funds  through  a third party
intermediary.    Fees  generated  net  of  expenses, resulted in a net income of
$35,000,  $40,000  and  $34,000  for the years ended December 31, 1997, 1996 and
1995,  respectively.

THE  SOUTHWEST  PLAN  ACQUISITION

     During  the  latter  half  of  the  1980's,  severely  depressed  economic
conditions  prevailed  in  the  southwestern  United  States,  and  in  Texas in
particular, which seriously impaired the operating results of many corporations.
A  large  number of savings institutions suffered significant losses, which were
attributable  to  the  economic deterioration in the region, as well as, in some
instances,  to  improper or fraudulent practices by persons affiliated with such
institutions.    In  an  attempt  to  address the problems of a record number of
savings  institution failures, in February 1988 the Federal Home Loan Bank Board
as  operating  head  of the FSLIC, announced the establishment of its "Southwest
Plan,"  which was designed to consolidate failed or failing savings institutions
located  in  the  southwestern  United States with healthy savings institutions,
shrink  the  number  of  savings  institutions  in the Southwest and promote the
infusion  of  additional  capital  into  the  savings industry through financial
assistance  and  other  incentives.

     During  this period, the Bank developed a business strategy oriented toward
growth  and  increasing  profitability  through  prudent  acquisitions,  with
assistance  from  the  Federal government.  The strategy was designed to utilize
the deposits obtained in such transactions as an inexpensive source of funds for
growth, which would facilitate reduced overhead levels as a proportion of assets
from  economies  of  scale and lower cost of funds from a more meaningful market
share  of  core deposits.  In order to implement this strategy, the Bank decided
to  participate  in  the Southwest Plan and on May 13, 1988, the Bank became the
first  acquiror  of  failed  or  failing  savings institutions under the FSLIC's
Southwest  Plan.  The Southwest Plan Acquisition was implemented pursuant to the
terms  of  an Assistance Agreement, entered into by the FSLIC and the Bank.  The
Southwest  Plan  Acquisition  significantly  increased the total size and market
penetration  of  the  Bank.

     The  FSLIC  agreed  in  the  Assistance  Agreement to provide the Bank with
certain  forms  of  financial  assistance,  including a guaranteed yield on, and
reimbursement  for  losses incurred or write-downs directed by the government or
provided  by the Bank with respect to, certain assets acquired from the Acquired
Associations (the "Guaranteed Assets") and certain additional forms of financial
assistance.

     On April 15, 1994, the Bank and the FDIC announced the early termination of
the  Assistance  Agreement,  effective  March  31, 1994.  Under the terms of the
agreement,  the  Bank  transferred substantially all of its remaining Guaranteed
Assets  to the FDIC in exchange for cash of $37.4 million and also received cash
of  $12.7  million  for the remaining receivable from the government in order to
record  acquired  assets  at  fair value.  In addition, the Bank repurchased for
$5.9  million  a  warrant to purchase Bank common stock that had been granted to
the  Federal  government.  The  Federal  government will continue to receive the
future  federal  income  tax  benefits  of  the net operating loss carryforwards
acquired  from  the  Acquired Associations.  See "Taxation-Federal Taxation" and
Note  17  of  the  Notes  to  the  Consolidated  Financial  Statements.

REGULATION

     Set  forth  below  is  a  brief description of certain laws and regulations
which  relate  to  the  regulation of the Company and the Bank.  The description
does not purport to be complete and is qualified in its entirety by reference to
applicable  laws  and  regulations.

THE  COMPANY

     REGULATIONS.   The Company and HoCo are registered unitary savings and loan
holding companies and are subject to OTS and Department regulation, examination,
supervision  and  reporting requirements. In addition, because the capital stock
of  the Company is registered under Section 12(g) of the Securities Exchange Act
of 1934, the Company is also subject to various reporting and other requirements
of  the  SEC. As a subsidiary of a savings and loan holding company, the Bank is
also  subject to certain Federal and state restrictions in its dealings with the
Company  and  affiliates  thereof.

     FEDERAL  ACTIVITIES  RESTRICTIONS.   There are generally no restrictions on
the  activities  of  a  savings  and  loan  holding company which holds only one
subsidiary  savings  bank.  However,  if the Director of the OTS determines that
there is reasonable cause to believe that the continuation by a savings and loan
holding  company  of  an  activity  constitutes  a serious risk to the financial
safety,  soundness  or  stability of its subsidiary savings institution (i.e., a
savings  association or savings bank), the Director may impose such restrictions
as  deemed  necessary  to  address  such risk, including limiting (i) payment of
dividends  by  the  savings  institution;  (ii) transactions between the savings
institution  and  its  affiliates;  and  (iii)  any  activities  of  the savings
institution that might create a serious risk that the liabilities of the holding
company  and  its  affiliates  may  be  imposed  on  the  savings  institution.
Notwithstanding  the  foregoing, if the savings institution subsidiary of such a
holding  company  fails  to  meet the Qualified Thrift Lender ("QTL") test, then
such  unitary  holding  company  also  shall  become  subject  to the activities
restrictions  applicable  to  multiple  savings  and loan holding companies and,
unless  the savings institution requalifies as a QTL within one year thereafter,
shall  register as, and become subject to the restrictions applicable to, a bank
holding company.  See "- Regulation of The Bank - Qualified Thrift Lender Test."

     If  the  Company  were  to  acquire control of another savings institution,
other  than  through  merger  or  other  business combination with the Bank, the
Company  would  thereupon  become  a  multiple savings and loan holding company.
Except  where such acquisition is pursuant to the authority to approve emergency
thrift  acquisitions and where each subsidiary savings institution meets the QTL
test,  as  set  forth  below,  the  activities  of  the  Company  and any of its
subsidiaries  (other  than  the  Bank  or other subsidiary savings institutions)
would  thereafter  be  subject to further restrictions.  No multiple savings and
loan  holding  company  or subsidiary thereof which is not a savings institution
shall  commence  or  continue  beyond  a limited period of time after becoming a
multiple  savings  and  loan  holding company or subsidiary thereof any business
activity,  other  than:  (i)  furnishing or performing management services for a
subsidiary  savings  institution;  (ii) conducting an insurance agency or escrow
business;  (iii)  holding,  managing, or liquidating assets owned by or acquired
from  a subsidiary savings institution; (iv) holding or managing properties used
or  occupied  by  a  subsidiary savings institution; (v) acting as trustee under
deeds  of  trust;  (vi) those activities authorized by regulation as of March 5,
1987  to  be engaged in by multiple savings and loan holding companies; or (vii)
unless the Director of the OTS by regulation prohibits or limits such activities
for  savings  and  loan  holding  companies,  those activities authorized by the
Federal Reserve Board as permissible for bank holding companies.  The activities
described  in (i) through (vi) above may be engaged in only after giving the OTS
prior notice and being informed that the OTS does not object to such activities.
In  addition,  the  activities described in (vii) above also must be approved by
the Director of the OTS prior to being engaged in by a multiple savings and loan
holding  company.

     RESTRICTIONS  ON ACQUISITIONS.  Except under limited circumstances, savings
and loan holding companies are prohibited from acquiring, without prior approval
of  the  Director  of  the  OTS, (i) control of any other savings institution or
savings and loan holding company or substantially all the assets thereof or (ii)
more  than  5%  of the voting shares of a savings institution or holding company
thereof  which  is  not  a  subsidiary.    Except with the prior approval of the
Director  of  the  OTS,  no  director  or  officer of a savings and loan holding
company  or  person owning or controlling by proxy or otherwise more than 25% of
such company's stock, may acquire control of any savings institution, other than
a  subsidiary  savings  institution,  or  of  any other savings and loan holding
company.

     The Director of the OTS may approve acquisitions resulting in the formation
of  a  multiple  savings  and  loan  holding  company  which  controls  savings
institutions  in  more  than one state only if (i) the multiple savings and loan
holding company involved controls a savings institution which operated a home or
branch office located in the state of the association to be acquired as of March
5,  1987;  (ii)  the  acquiror  is  authorized to acquire control of the savings
institution  pursuant  to  the  emergency acquisition provisions of the FDIA, or
(iii)  the  statutes  of  the  state  in which the institution to be acquired is
located  specifically  permit institutions to be acquired by the state-chartered
institutions  or  savings  and loan holding companies located in the state where
the  acquiring  entity  is  located  (or by a holding company that controls such
state-chartered  savings  institutions).

     TEXAS  REGULATIONS.    Under  the  Texas  Savings  Bank  Act ("TSBA"), each
registered  holding  company,  such  as the Company, is required to file reports
with  the  Department  as  required  by  the Texas Savings and Loan Commissioner
("Commissioner")  and  is  subject  to  such examination as the Commissioner may
prescribe.

REGULATION  OF  THE  BANK

     The  Bank  is  required  to  file  reports with the Department and the FDIC
concerning  its  activities  and  financial  condition, in addition to obtaining
regulatory  approvals  prior  to entering into certain transactions, such as any
merger  or acquisition with another institution.  The regulatory system to which
the  Bank  is  subject  is  intended primarily for the protection of the deposit
insurance  fund and depositors, not stockholders.  The regulatory structure also
provides  the  Department and the FDIC with substantial discretion in connection
with  their  supervisory and enforcement functions.  The Department and the FDIC
conduct periodic examinations of the Bank in order to assess its compliance with
federal  and  state  regulatory requirements.  As a result of such examinations,
the  Department  and  the  FDIC  may  require  various  corrective  actions.

     Virtually  every  aspect  of  the  Bank's  business  is subject to numerous
federal  and/or  state  regulatory requirements and restrictions with respect to
such  matters  as,  for example, the nature and amounts of loans and investments
that  may  be made, the issuance of securities, the amount of reserves that must
be  established  against  deposits,  the  establishment  of  branches,  mergers,
non-banking activities and other operations.  Numerous laws and regulations also
set  forth  special restrictions and procedural requirements with respect to the
extension  of  credit,  credit  practices,  the  disclosure  of credit terms and
discrimination  in  credit  transactions.

     The  description  of  statutory  provisions  and  regulations applicable to
savings  banks  set  forth  in  this Form 10-K does not purport to be a complete
description  of  such  statutes  and  regulations and their effects on the Bank.
Moreover,  because some of the provisions of the FDIA, as amended by the FDICIA,
have  not  yet been fully implemented through the adoption of regulations by the
various federal banking agencies, the Bank cannot yet fully assess the impact of
these  provisions  on  its  operations.

     In  particular,  the  Bank  cannot predict whether it will be in compliance
with  such  new regulations at the time they become effective.  Furthermore, the
Bank  cannot  predict what other new regulatory requirements might be imposed in
the  future.

     LIMITATIONS  ON TRANSACTIONS WITH AFFILIATES.  Transactions between savings
institutions  and  any  affiliate  are  governed  by Sections 23A and 23B of the
Federal  Reserve  Act.   An affiliate of a savings institution is any company or
entity  which  controls,  is  controlled  by or is under common control with the
savings  institution.   In a holding company context, the parent holding company
of  a  savings  institution  (such  as  the Company) and any companies which are
controlled  by  such  parent  holding  company  are  affiliates  of  the savings
institution.   Generally, Sections 23A and 23B (i) limit the extent to which the
savings  institution  or  its  subsidiaries may engage in "covered transactions"
with  any  one affiliate to an amount equal to 10% of such institution's capital
stock  and surplus, and contain an aggregate limit on all such transactions with
all  affiliates  to an amount equal to 20% of such capital stock and surplus and
(ii)  require  that all such transactions be on terms substantially the same, or
at  least  as favorable to the institution or subsidiary, as those provided to a
non-affiliate.    The  term  "covered transaction" includes the making of loans,
purchase  of  assets,  issuance  of  a  guarantee  and similar transactions.  In
addition  to  the  restrictions  imposed  by  Sections  23A  and 23B, no savings
institution  may (i) loan or otherwise extend credit to an affiliate, except for
any  affiliate  which  engages only in activities which are permissible for bank
holding  companies, or (ii) purchase or invest in any stocks, bonds, debentures,
notes  or  similar obligations of any affiliate, except for affiliates which are
subsidiaries  of  the  savings  institution.

     In  addition,  Sections  22(h)  and  (g)  of  the Federal Reserve Act place
restrictions  on  loans  to  executive  officers,  directors  and  principal
stockholders.    Under  Section 22(h), loans to a director, an executive officer
and  to  a  greater  than 10% stockholder of a savings institution (a "principal
stockholder"), and certain affiliated interests of each of them, may not exceed,
together  with  all  other  outstanding  loans  to  such  person  and affiliated
interests,  the  savings  institution's  loans  to one borrower limit (generally
equal to 15% of the institution's unimpaired capital and surplus). Section 22(h)
also  requires  that  loans  to  directors,  executive  officers  and  principal
stockholders  be  made  on terms substantially the same as offered in comparable
transactions to other persons and also requires prior board approval for certain
loans.    In addition, the aggregate amount of extensions of credit by a savings
institution  to  all insiders cannot exceed the institution's unimpaired capital
and surplus.  Furthermore, Section 22(g) places additional restrictions on loans
to  executive  officers.   At December 31, 1997, the Bank was in compliance with
the  above  restrictions.

     REGULATORY  CAPITAL  REQUIREMENTS.  Federally-insured state-chartered banks
are  required to maintain minimum levels of regulatory capital.  These standards
generally must be as stringent as the comparable capital requirements imposed on
national  banks.   The FDIC also is authorized to impose capital requirements in
excess  of  these  standards  on  individual  banks  on  a  case-by-case  basis.

     Under  current  FDIC regulations, the Bank is required to comply with three
separate  minimum  capital  requirements:    a  "Tier  1  capital ratio" and two
"risk-based"  capital  requirements.  "Tier 1 capital" generally includes common
stockholders'  equity  (including  retained  earnings), qualifying noncumulative
perpetual preferred stock and any related surplus, and minority interests in the
equity  accounts  of  fully  consolidated subsidiaries, minus intangible assets,
other  than  properly  valued  mortgage servicing rights up to certain specified
limits  and minus net deferred tax assets in excess of certain specified limits.
At  December  31,  1997,  the  Bank  did not have any net deferred tax assets in
excess  of  the  specified  limits.

     TIER  1  CAPITAL RATIO.  FDIC regulations establish a minimum 3.0% ratio of
Tier  1  capital  to  total  assets  for  the most highly-rated state-chartered,
FDIC-supervised  banks,  with an additional cushion of at least 100 to 200 basis
points  for  all other state-chartered, FDIC-supervised banks, which effectively
imposes  a  minimum Tier 1 capital ratio for such other banks of between 4.0% to
5.0%.    Under  FDIC  regulations,  highly-rated  banks  are those that the FDIC
determines are not anticipating or experiencing significant growth and have well
diversified  risk,  including  no  undue  interest rate risk exposure, excellent
asset  quality,  high  liquidity  and  good earnings.  At December 31, 1997, the
required  Tier  1  capital  ratio  for  the  Bank was 4.0% and its actual Tier 1
capital  ratio  was  5.52%.

     RISK-BASED  CAPITAL  REQUIREMENTS.    The  risk-based  capital requirements
contained  in FDIC regulations generally require the Bank to maintain a ratio of
Tier  1  capital  to risk-weighted assets of at least 4.00% and a ratio of total
risk-based  capital to risk-weighted assets of at least 8.00%.  To calculate the
amount  of  capital  required,  assets  are placed in one of four categories and
given  a  percentage weight (0%, 20%, 50% or 100%) based on the relative risk of
the  category.   For example, U.S. Treasury Bills and GNMA securities are placed
in  the  0% risk category.  FNMA and FHLMC securities are placed in the 20% risk
category, loans secured by one-to-four family residential properties and certain
privately-issued mortgage-backed securities are generally placed in the 50% risk
category and commercial and consumer loans and other assets are generally placed
in  the  100%  risk  category.  In addition, certain off-balance sheet items are
converted  to  balance  sheet  credit equivalent amounts and each amount is then
assigned  to  one  of  the  four  categories.

     For  purposes of the risk-based capital requirements, "total capital" means
Tier  1  capital  plus supplementary or Tier 2 capital, so long as the amount of
supplementary or Tier 2 capital that is used to satisfy the requirement does not
exceed  the amount of Tier 1 capital.  Supplementary or Tier 2 capital includes,
among other things, so-called permanent capital instruments (cumulative or other
perpetual preferred stock, mandatory convertible subordinated debt and perpetual
subordinated  debt),  so-called  maturing  capital  instruments  (mandatorily
redeemable  preferred  stock,  intermediate-term  preferred  stock,  mandatory
convertible  subordinated  debt and subordinated debt), and a certain portion of
the  allowance for loan losses up to a maximum of 1.25% of risk-weighted assets.

     At  December  31,  1997,  the Bank's Tier 1 capital to risk-weighted assets
ratio  was 11.46% and its total risk-based capital to risk weighted assets ratio
was  11.98%.

     The  following  table  sets  forth  information with respect to each of the
Bank's  capital  requirements  as  of  the  dates  shown.

<TABLE>
<CAPTION>

                                                        As of December 31,
                                           1997                1996                1995
                                          -------             -------             -------      
                                     Actual   Required   Actual   Required   Actual   Required
                                     -------  ---------  -------  ---------  -------  ---------
<S>                                  <C>      <C>        <C>      <C>        <C>      <C>
Tier 1 capital to total assets         5.52%      4.00%    5.35%      4.00%    5.30%      4.00%
Tier 1 risk-based capital
 to risk weighted assets              11.46       4.00    11.77       4.00    12.36       4.00 
Total risk-based capital
 risk to risk weighted assets         11.98       8.00    12.30       8.00    12.84       8.00 
</TABLE>


<PAGE>
     The  following  table  sets  forth  a  reconciliation  between  the  Bank's
stockholders'  equity  and  each of its three regulatory capital requirements at
December  31,  1997.

<TABLE>
<CAPTION>

                                              Tier 1         Total
                                 Tier 1     Risk-based     Risk-based
                                Capital       Capital        Capital
                                ---------  ------------  ------------
                                       (Dollars in thousands)
<S>                                <C>          <C>              <C>
Total stockholders' equity      $174,224   $   174,224   $   174,224 
Unrealized loss on securities
 available-for-sale                2,274         2,274         2,274 
Less nonallowable assets:
 Goodwill                        (15,717)      (15,717)      (15,717)
Plus allowances for loan
 and lease losses                     --            --         7,412 
                                ---------  ------------  ------------
Total regulatory capital         160,781       160,781       168,193 
Minimum required capital         116,570        56,136       112,271 
                                ---------  ------------  ------------
Excess regulatory capital       $ 44,211   $   104,645   $    55,922 
                                =========  ============  ============

Bank's regulatory capital
 percentage (1)                     5.52%        11.46%        11.98%

Minimum regulatory capital
 required percentage                4.00%         4.00%         8.00%
                                ---------  ------------  ------------

Bank's regulatory capital
 percentage in excess of
   requirement                      1.52%         7.46%         3.98%
                                =========  ============  ============
</TABLE>
_______________


(1) Tier 1  capital is computed as a percentage of total assets of $2.9 billion.
Risk-based  capital is computed as a percentage of adjusted risk-weighted assets
of  $1.4  billion.


     FDIC  INSURANCE  PREMIUMS.    The  deposits  of the Bank are insured to the
maximum  extent  permitted  by the SAIF and the Bank Insurance Fund (the "BIF"),
both of which are administered by the FDIC, and are backed by the full faith and
credit  of  the  U.S.  Government.    As  the insurer, the FDIC is authorized to
conduct examinations of, and to require reporting by, FDIC-insured institutions.
It  also may prohibit any FDIC-insured institution from engaging in any activity
the FDIC determines by regulation or order to pose a serious threat to the FDIC.
The  FDIC also has the authority to initiate enforcement actions against savings
institutions.

<PAGE>
      The Bank currently pays deposit insurance premiums to the FDIC based on a
risk-based  assessment  system  established  by  the  FDIC  for  all SAIF-member
institutions.    In  addition,  because  the  Bank  acquired approximately $54.6
million  in  deposits  as a result of the Port Arthur branch acquisition on June
21,  1997,  $79.8  million  in  deposits  as  a  result  of  the Bay City branch
acquisition  on  September  5,  1996  and  $157.2 million in deposits from Texas
Capital  as  of November 1, 1995, the Bank became responsible for paying deposit
insurance  premiums  on such deposits at the BIF premium rate.  Under applicable
regulations,  institutions  are  assigned  to  one of three capital groups based
solely  on  the  level  of  an  institution's  capital  -  "well  capitalized,"
"adequately  capitalized" and "undercapitalized" - which are defined in the same
manner as the regulations establishing the prompt corrective action system under
Section  38  of  the  FDIA.    These  three  groups  are then divided into three
subgroups  which reflect varying levels of supervisory concern, from those which
are  considered to be healthy to those which are considered to be of substantial
supervisory  concern.    The  matrix  so created results in nine assessment risk
classifications,  with  rates,  prior to the FDIA, as amended, being signed into
law, ranging from .23% for well capitalized, healthy SAIF-member institutions to
 .31%  for undercapitalized SAIF-member institutions with substantial supervisory
concerns.  On November 14, 1995, the FDIC adopted a new assessment rate schedule
of  zero  to  27  basis points (subject to a $2,000 minimum) for BIF members (or
institutions,  like  the Bank, having BIF deposits) while retaining the existing
assessment  rate  schedule  for  SAIF-member  institutions.

     On  September  30,  1996, amendments to the FDIA were signed into law.  The
FDIA  and  implementing  regulations  provided that all SAIF-member institutions
would  pay  a  special  one  time  assessment  of  65.7 basis points on the SAIF
assessment  base  as  of  March  31, 1995 to recapitalize the SAIF, which in the
aggregate,  would  be sufficient to bring the reserve ratio in the SAIF to 1.25%
of  insured  deposits.    The Bank's special assessment amounted to $7.5 million
($4.8  million after applicable income taxes) pursuant to the FDIA.  In addition
to  the  recapitalization  provisions,  the FDIA equalized the rate schedule for
SAIF  and  BIF  institutions with the rates ranging from zero to 27 basis points
beginning  October  1,  1996.  At December 31, 1997, the Bank was categorized as
well  capitalized.

     The FDIA provided for FICO debt sharing by banks and thrifts with proration
sharing in the year 2000. Prior to the year 2000, SAIF insured institutions will
pay approximately 6.5 basis points for FICO, while BIF insured institutions will
pay  approximately  1.3  basis  points.    The  FICO provisions of the FDIA also
prohibit  deposit  migration  strategies  to avoid SAIF premiums.  The FDIA also
provided  for  the  merger of the BIF and the SAIF on January 1, 1999, with such
merger  being  conditioned  upon  the  prior  elimination  of the federal thrift
charter.

     Under Section 593 of the Internal Revenue Code, thrift institutions such as
the  Bank,  which  meet  certain  definitional tests primarily relating to their
assets  and  the  nature  of  their  business,  are permitted to establish a tax
reserve for bad debts and to make annual additions thereto, which additions may,
within  specified  limitations, be deducted in arriving at their taxable income.
The  Bank's  deduction  with  respect  to "qualifying loans" which are generally
loans  secured  by  certain  interests in real property, prior to 1996, could be
computed  using  an  amount  based  on  the  Bank's  actual loss experience (the
"experience  method") or a percentage of taxable income, computed without regard
to  this  deduction, and with additional modifications and reduced by the amount
of  any permitted addition to the non-qualifying reserve.  See "Taxation-Federal
Taxation."

     Effective  January 1, 1996, the Bank is unable to make additions to its tax
bad  debt  reserve,  is  permitted to deduct bad debts only as they occur and is
additionally  required  to  recapture (i.e. take into taxable income) over a six
year  period,  the  excess of the balance of its bad debt reserve as of December
31,  1995  over  the  balance  of  such  reserve  as of December 31, 1987.  Such
recapture requirements can be suspended for each of two successive taxable years
beginning  January  1,  1996,  in  which the Bank originates a minimum amount of
certain  residential  loans  based  upon the average of the principal amounts of
such  loans  made  by  the Bank during its six taxable years preceding 1996.  At
December  31, 1997, the Bank had approximately $3.9 million of post-1987 tax bad
debt  reserves,  for  which  deferred  taxes  have  been  provided.

     REGULATORY  CAPITAL  REQUIREMENTS.    The FDIA requires the Federal banking
agencies  to  revise their risk-based capital guidelines to, among other things,
take  adequate  account  of  interest  rate  risk.  The Federal banking agencies
continue  to  consider  modification  of  the capital requirements applicable to
banking  organizations.    In  August 1995, the Federal banking agencies amended
their  risk-based  capital  guidelines to provide that the banking agencies will
include  in  their evaluations of a bank's capital adequacy an assessment of the
bank's  exposure  to declines in the economic value of the bank's capital due to
changes in interest rates.  The agencies also issued a proposed policy statement
that  describes the process that the agencies will use to measure and assess the
exposure  of a bank's capital to changes in interest rates.  The agencies stated
that  after  they  and  the banking industry gain sufficient experience with the
measurement  process,  the  agencies  would  issue  proposed  regulations  for
establishing explicit charges against capital to account for interest rate risk.

     The  FDIA  also requires the FDIC and the other Federal banking agencies to
revise their risk-based capital standards, with appropriate transition rules, to
ensure that they take into account concentration of credit risk and the risks of
non-traditional activities and to ensure that such standards reflect the "actual
performance  and  expected  risk of loss of multifamily mortgages," of which the
Bank  had  $131.5  million  at  December  31,  1997.    See  "Business - Lending
Activities."   In December 1995, the FDIC and the other Federal banking agencies
promulgated final amendments to their respective risk-based capital requirements
which  would  explicitly identify concentration of credit risk and certain risks
arising  from  nontraditional  activities,  and  the management of such risks as
important  factors  to  consider  in  assessing an institution's overall capital
adequacy.  The  FDIC  may  now  require  higher  minimum capital ratios based on
certain  circumstances,  including  where  the institution has significant risks
from  concentration  of  credit  or  certain  risks arising from non-traditional
activities.

     The  Federal  banking agencies have agreed to adopt for regulatory purposes
Statement  115,  which,  among  other  things,  generally  adds a new element to
stockholders' equity under generally accepted accounting principles by including
net  unrealized  gains  and losses on certain securities.  In December 1994, the
FDIC  issued final amendments to its regulatory capital requirements which would
require  that the net amount of unrealized losses from available-for-sale equity
securities  with  readily  determinable  fair values be deducted for purposes of
calculating  the  Tier  1 capital ratio.  All other net unrealized holding gains
(losses)  on  available-for-sale  securities are excluded from the definition of
Tier 1 capital.  At December 31, 1997, the Bank had $173.5 million of securities
available-for-sale with $3.5 million of aggregate net unrealized losses thereon.

     SAFETY  AND SOUNDNESS STANDARDS. Each Federal banking agency is required to
prescribe,  for all insured depository institutions and their holding companies,
standards  relating to internal controls, information systems and internal audit
systems,  loan documentation, credit underwriting, interest rate exposure, asset
growth,  compensation,  fees  and  benefits  and  such  other  operational  and
managerial  standards  as  the  agency  deems  appropriate.    The  compensation
standards would prohibit employment contracts or other compensatory arrangements
that  provide  excess  compensation,  fees or benefits or could lead to material
financial  loss  to  the  institution.  In addition, each Federal banking agency
also  is  required  to  adopt  for all insured depository institutions and their
holding  companies  standards  that  specify  (i)  a maximum ratio of classified
assets  to  capital,  (ii)  minimum earnings sufficient to absorb losses without
impairing capital, (iii) to the extent feasible, a minimum ratio of market value
to  book value for publicly-traded shares of the institution or holding company,
and  (iv) such other standards relating to asset quality, earnings and valuation
as  the  agency  deems  appropriate.    On  July  10,  1995, the Federal banking
agencies,  including  the  FDIC,  adopted  final  rules  and proposed guidelines
concerning  safety  and  soundness  required  to  be  prescribed  by regulations
pursuant  to  Section  39  of  the  FDIA.    In general, the standards relate to
operational and managerial matters, asset quality and earnings and compensation.
The operational and managerial standards cover internal controls and information
systems,  internal  audit  systems,  loan  documentation,  credit  underwriting,
interest  rate  exposure,  asset  growth,  and  compensation, fees and benefits.
Under  the  asset  quality  and  earnings  standards,  which were adopted by the
Federal  Banking  agencies  in  October  1996,  the  Bank  would  be required to
establish  and  maintain  systems  to  identify  problem  assets  and  prevent
deterioration  in  those assets and evaluate and monitor earnings to ensure that
earnings  are  sufficient  to maintain adequate capital reserves.  If an insured
institution  fails  to  meet any of the standards promulgated by the regulators,
then  such  institution  will be required to submit a plan within 30 days to the
FDIC  specifying  the steps that it will take to correct the deficiency.  In the
event  that  an  insured  institution  fails  to submit or fails in any material
respect  to  implement  a  compliance  plan within the time allowed by the FDIC,
Section  39  of  the  FDIA  provides that the FDIC must order the institution to
correct  the  deficiency  and  may  restrict  asset  growth, require the savings
institution  to  increase  its  ratio of tangible equity to assets, restrict the
rates  of  interest  that  the institution may pay or take any other action that
would  better  carry  out  the  purpose  of  prompt corrective action.  The Bank
believes that it has been and will continue to be in compliance with each of the
standards  as  they  have  been  adopted  by  the  FDIC.

     Finally, each Federal banking agency is required to prescribe standards for
the  employment  contracts  and  other  compensation  arrangements  of executive
officers,  employees, directors and principal stockholders of insured depository
institutions that would prohibit compensation and benefits and arrangements that
are  excessive  or  that  could  lead  to  a  material  financial  loss  for the
institution.  In February 1996, the FDIC adopted final regulations regarding the
payment  of  severance  and  indemnification  to  management officials and other
affiliates  of  insured institutions (institution affiliated parties or "IAPs").
The  limitations on severance or "golden parachute" payments apply to "troubled"
institutions  which  seek to enter into contracts with IAPs.  A golden parachute
payment  is generally considered to be any payment to an IAP which is contingent
on  the termination of that person's employment and is received when the insured
institution  is  in  a  troubled  condition.  The definition of golden parachute
payment  does  not  include  payment  pursuant  to  qualified  retirement plans,
non-qualified bona fide deferred compensation plans, nondiscriminatory severance
pay  plans,  other  types  of  common  benefit  plans,  state statutes and death
benefits.    Certain  limited  exceptions  to  the  golden  parachute  payment
prohibition  are  provided  for  in  cases  involving  the  hiring of an outside
executive,  unassisted  changes  of  control and where the FDIC provides written
permission  to  make  such payment.  The limitations on indemnification payments
apply  to  all  insured  institutions, their subsidiaries and affiliated holding
companies.   Generally, this provision prohibits such entities from indemnifying
an  IAP  for  that  portion  of  the  costs  sustained with regard to a civil or
administrative  enforcement action commenced by any Federal banking agency which
results  in  a final order or settlement pursuant to which the IAP is assessed a
civil  monetary  penalty,  removed from office, prohibited from participating in
the  affairs  of  an  insured  institution  or required to cease and desist from
taking  certain  affirmative  actions.    Nevertheless,  institutions or holding
companies  may  purchase commercial insurance to cover such expenses (except for
judgments  or  penalties)  and  the  institutions or holding company may advance
legal  expenses  to  the  IAP  if  its board of directors makes certain specific
findings  and  the  IAP  agrees in writing to reimburse the institution if it is
ultimately determined that the IAP violated a law, regulation or other fiduciary
duty.

     ACTIVITIES AND INVESTMENTS OF INSURED STATE-CHARTERED BANKS. The activities
and  equity  investments  of  FDIC-insured, state-chartered banks are limited by
Federal  law to those that are permissible for national banks.  An insured state
bank  generally may not acquire or retain any equity investment of a type, or in
an  amount,  that is not permissible for a national bank.  An insured state bank
is  not  prohibited  from,  among  other  things,  (i)  acquiring or retaining a
majority  interest  in  a  subsidiary,  (ii) investing as a limited partner in a
partnership  the  sole  purpose of which is direct or indirect investment in the
acquisition,  rehabilitation or new construction of a qualified housing project,
provided  that  such  limited  partnership  investments may not exceed 2% of the
bank's  assets,  (iii) acquiring up to 10% of the voting stock of a company that
solely  provides  or reinsures directors' and officers' liability insurance, and
(iv)  acquiring  or  retaining  the voting shares of a depository institution if
certain  requirements  are  met.

     COMMUNITY  REINVESTMENT ACT.  Under the Community Reinvestment Act ("CRA"),
as  implemented  by FDIC regulations, a savings institution has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the  credit  needs  of  its  entire community, including low and moderate income
neighborhoods.    The  CRA  does  not establish specific lending requirements or
programs  for  financial  institutions  nor  does  it  limit  an  institution's
discretion  to  develop  the types of products and services that it believes are
best  suited  to  its  particular  community,  consistent  with the CRA. The CRA
requires  the FDIC, in connection with its examination of a savings institution,
to  assess the institution's record of meeting the credit needs of its community
and  to  take such record into account in its evaluation of certain applications
by  such institution.  As of the date of its most recent regulatory examination,
the  Bank  was  rated  "satisfactory"  with  respect  to  its  CRA  compliance.

     In  May 1995, the FDIC and other Federal banking agencies promulgated final
revisions  to  their  regulations  concerning  the CRA.  The revised regulations
generally  are intended to provide clearer guidance to financial institutions on
the  nature  and  extent  of  their obligations under the CRA and the methods by
which  the  obligations  will be assessed and enforced.  Among other things, the
revised  regulations substitute for the current process-based assessment factors
a  new  evaluation  system  that  would  rate institutions based on their actual
performance  in  meeting  community  credit  needs.   In particular, the revised
system  will  evaluate  the  degree  to which an institution is performing under
tests  and standards judged in the context of information about the institution,
its  community,  its competitors and its peers with respect to (i) lending, (ii)
service  delivery  systems  and  (iii)  community  development.    The  revised
regulations  also  specify  that  an  institution's  CRA  performance  will  be
considered  in an institution's expansion (e.g., branching) proposals and may be
the basis for approving, denying or conditioning the approval of an application.
Management  of  the  Bank  currently  is  unable  to  predict the effects of the
regulations  under  the  CRA  as  recently  adopted.

     QUALIFIED  THRIFT  LENDER  TEST.    All savings institutions, including the
Bank,  are required to meet a QTL test set forth under Section 10(m) of the Home
Owners  Loan  Act,  as  amended, ("HOLA") to avoid certain restrictions on their
operations.   Under Section 2303 of the Economic Growth and Regulatory Paperwork
Reduction  Act  of  1996, a savings institution can comply with the QTL test set
forth  in  the  HOLA and implementing regulations or by qualifying as a domestic
building  and  loan  association  as defined in Section 7701(a)(19) of the Code.
The  QTL test set forth in HOLA requires that a depository institution must have
at  least  65%  of  its  portfolio  assets  (which  consist of total assets less
intangibles,  properties  used to conduct the savings institution's business and
liquid assets not exceeding 20% of total assets) in qualified thrift investments
on  a  monthly  average  basis  in  nine  of  every  12  months.    Loans  and
mortgage-backed  securities  secured by domestic residential housing, as well as
certain  obligations  of  the  FDIC  and  certain  other related entities may be
included  in  qualifying  thrift  investments  without  limit.  Certain  other
housing-related and non-residential real estate loans and investments, including
loans  to  develop  churches, nursing homes, hospitals and schools, and consumer
loans  and investments in subsidiaries engaged in housing-related activities may
also be included. Qualifying assets for the QTL test include investments related
to  domestic  residential real estate or manufactured housing, the book value of
property  used  by  an  institution  or  its subsidiaries for the conduct of its
business,  an  amount  of residential mortgage loans that the institution or its
subsidiaries  sold  within 90 days of origination, shares of stock issued by any
FHLB  and  shares  of  stock  issued  by the FHLMC or the FNMA.  The Bank was in
compliance  with  the QTL test as of December 31, 1997, with 86.9% of its assets
invested  in  qualified  thrift  investments.

     RESTRICTIONS  ON CAPITAL DISTRIBUTIONS.  The Bank is required to provide to
the OTS not less than 30 days' advance notice of the proposed declaration by its
board  of directors of any dividend on its capital stock.  The OTS may object to
the payment of the dividend on safety and soundness grounds.  The FDIA prohibits
an  insured depository institution from paying dividends on its capital stock or
interest  on its capital notes or debentures (if such interest is required to be
paid  only  out of net profits) or distribute any of its capital assets while it
remains  in  default  in  the payment of any assessment due the FDIC.  Texas law
permits  the  Bank to pay dividends out of current or retained income in cash or
additional  stock.

     LEGISLATIVE  AND  REGULATORY  PROPOSALS.   Proposals to change the laws and
regulations  governing  the  operations  and  taxation of, and federal insurance
premiums  paid  by, savings banks and other financial institutions and companies
that  control  such  institutions  are  frequently  raised  in  Congress,  state
legislatures  and  before  the  FDIC and other bank regulatory authorities.  The
likelihood  of any major changes in the future and the impact such changes might
have  on  the  Bank are impossible to determine.  Similarly, proposals to change
the  accounting  treatment  applicable  to  savings  banks  and other depository
institutions  are  frequently  raised  by  the  SEC, the FDIC, the IRS and other
appropriate  authorities,  including,  among  others, proposals relating to fair
market  value  accounting  for  certain  classes of assets and liabilities.  The
likelihood  and  impact of any additional future accounting rule changes and the
impact  such  changes  might  have  on  the  Bank  are  impossible to determine.

     FEDERAL HOME LOAN BANK SYSTEM.  The Bank is a member of the FHLB of Dallas,
which  is  one  of  12  regional FHLBs that administer the home financing credit
function  of  savings  institutions and commercial banks.  Each FHLB serves as a
source  of  liquidity  for its members within its assigned region.  It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB  System.    It  makes  loans to members (i.e., advances) in accordance with
policies  and  procedures established by its Board of Directors.  As of December
31, 1997, the Bank's advances from the FHLB of Dallas amounted to $540.5 million
or  18.6%  of  its  total  assets.

     As  a  member,  the  Bank is required to purchase and maintain stock in the
FHLB  of  Dallas in an amount equal to the greater of 1% of its aggregate unpaid
residential  mortgage  loans,  home purchase contracts or similar obligations at
the  beginning  of each year or 5% of total advances.  At December 31, 1997, the
Bank  had  $27.8  million  in  FHLB  stock,  which  was  in compliance with this
requirement.

     The  FHLBs  are  required  to  provide funds for the resolution of troubled
savings  associations  and  to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community investment
and  low-  and  moderate-income  housing  projects.  These  contributions  have
adversely  affected the level of FHLB dividends paid and could continue to do so
in  the  future.    These contributions also could have an adverse effect on the
value  of  FHLB  stock  in  the  future.   For the year ended December 31, 1997,
dividends  paid  by  the  FHLB  of  Dallas  to  the  Bank  totaled $1.3 million.

     FEDERAL  RESERVE SYSTEM.  The Federal Reserve Board requires all depository
institutions  to maintain reserves against their transaction accounts (primarily
checking  accounts)  and  non-personal time deposits.  At December 31, 1997, the
Bank  was  in  compliance  with  such  requirements.

     The  balances  maintained  to  meet the reserve requirements imposed by the
Federal  Reserve Board may be used to satisfy applicable liquidity requirements.
Because  required  reserves  must  be  maintained in the form of vault cash or a
noninterest-bearing  account  at  a  Federal  Reserve  Bank,  the effect of this
reserve  requirement  is to reduce a bank's earning assets.  The amount of funds
necessary  to  satisfy  this  requirement  has  not had a material affect on the
Bank's  operations.

     TEXAS  SAVINGS  BANK  LAW.   As a Texas chartered savings bank, the Bank is
subject  to  regulation  and  supervision by the Department under the TSBA.  The
TSBA  contains provisions governing the incorporation and organization, location
of  offices,  rights  and responsibilities of directors, officers and members as
well  as  the  corporate  powers,  savings,  lending,  capital  and  investment
requirements  and  other  aspects of the Bank and its affairs.  In addition, the
Department  is  given  extensive  rulemaking power and administrative discretion
under  the TSBA, including authority to enact and enforce rules and regulations.

     The  Bank  is  required  under  the  TSBA  to  comply  with certain capital
requirements  established by the Department.  The TSBA also restricts the amount
the  Bank can lend to one borrower to that permitted to national banks, which is
generally  not  more  than  15%  of the Bank's unimpaired capital and unimpaired
surplus  and,  if such loans are fully secured by readily marketable collateral,
an  additional 10% of unimpaired capital and unimpaired surplus.  The Department
generally  examines the Bank once every year and the current practice is for the
Department  to  conduct  a  joint  examination  with  the  FDIC.  The Department
monitors  the  extraordinary  activities  of the Bank by requiring that the Bank
seek  the  Department's  approval  for  certain  transactions  such  as  the
establishment  of  additional  offices, a reorganization, merger or purchase and
assumption  transaction,  changes  of  control,  or  the  issuance  of  capital
obligations.    The Department may intervene in the affairs of a savings bank if
the  savings  bank, or its director, officer or agent has:  engaged in an unsafe
and  unsound  practice,  violated  the savings bank's articles of incorporation,
violated  a  statute  or  regulation,  filed  materially  false  or  misleading
information,  committed  a criminal act or a breach of fiduciary duty, or if the
savings  bank  is,  or  is  in  imminent  danger  of  becoming,  insolvent.

TAXATION

          FEDERAL  TAXATION.  The Company, the Bank and its subsidiaries file a
consolidated  Federal  income  tax  return  on  a  calendar year basis using the
accrual method.  Savings banks are subject to provisions of the Internal Revenue
Code  ("Code") in the same general manner as other corporations.  However, prior
to  1996, institutions such as the Bank which met certain definitional tests and
other  conditions  prescribed  by  the  Code,  benefited  from certain favorable
provisions  regarding  their deductions from taxable income for annual additions
to their bad debt reserve.  In years prior to 1996, the Bank was permitted under
the  Code  to  deduct  an  annual  addition  to  the  reserve  for  bad debts in
determining  taxable  income based on the experience method or the percentage of
taxable  income  method.   Due to recently enacted legislation, the Bank will no
longer  be  able  to  utilize  a  reserve  method  for  determining the bad debt
deduction,  but  will be allowed to deduct actual net charge-offs.  Further, the
legislation requires the Bank to recapture, into taxable income, over a six year
period,  the  excess  of  the balance of its bad debt reserve as of December 31,
1995  over the balance of such reserve as of December 31, 1987.  At December 31,
1997,  the  Bank  had  approximately  $3.9  million  of  post-1987  tax bad debt
reserves,  for  which  deferred  taxes  have  been  provided.

     The  Bank  is  not required to provide deferred taxes on its pre-1988 (base
year)  tax  bad  debt  reserve  of  approximately $900,000.  This reserve may be
included  in  taxable  income in future years if the Bank makes distributions to
stockholders (including distributions in redemption, dissolution or liquidation)
that  are considered to result in withdrawals from that excess bad debt reserve,
then  the  amounts  considered  withdrawn will be included in the savings bank's
taxable  income.    The amount that would be deemed withdrawn from such reserves
upon  such  distribution  and  which would be subject to taxation at the savings
bank level at the normal corporate tax rate would be an amount that, after taxes
on  such  amount,  would  equal  the amount actually distributed plus the amount
necessary  to pay the tax with respect to the withdrawal.  Dividends paid out of
a  savings  bank's current or accumulated earnings and profits as calculated for
Federal  income  tax  purposes,  however,  will  not  be considered to result in
withdrawals  from  its  bad  debt  reserves  to  the extent of such earnings and
profits,  but shall be regarded as taken from such reserves only upon exhaustion
of  the  earnings  and profits accounts; however, distributions in redemption of
stock,  and  distributions  in partial or complete liquidation of a savings bank
will  be  considered  to  come  first  from  its loss reserve.  The Bank has not
conducted  a  study  to  determine  with certainty the amount of its accumulated
earnings  and  profits  for  Federal  income  tax  purposes.

     In  addition  to  regular  income  taxes,  corporations  are  subject to an
alternative  minimum  tax which is generally equal to 20% of alternative minimum
taxable  income  (taxable income, increased by tax preference items and adjusted
for  certain  regular  tax items).  The preference items generally applicable to
savings  banks include (i) prior to 1996, 100% of the excess of a savings bank's
bad  debt  deduction  computed  under  the  percentage of income method over the
amount  that  would  have been allowable under the experience method and (ii) an
amount  equal  to  75%  of the amount by which a savings bank's adjusted current
earnings  (alternative  minimum  taxable  income computed without regard to this
preference,  adjusted for certain items) exceeds its alternative minimum taxable
income  without  regard  to  this  preference.  The amounts received by the Bank
pursuant  to  the  Assistance  Agreement  were  included in its adjusted current
earnings.   Payment of alternative minimum tax gives rise to alternative minimum
tax  credit carryovers which may be carried forward indefinitely.  These credits
may be used to offset future regular tax liability to the extent the regular tax
liability  exceeds  future  alternative  minimum  tax.

     In  connection  with  the  Assistance  Agreement, an instrumentality of the
Federal  government  was obligated to provide the Bank with financial assistance
in  connection  with  various matters that arose under the Assistance Agreement.
Payments  to  the Bank pursuant to the Assistance Agreement were taxed under the
applicable  provisions  of  the  Code  which  were  in  effect  in  1988.  These
provisions of the Code provide generally that payments from such instrumentality
to the Bank pursuant to the Assistance Agreement were not included in the Bank's
income  and  the  Bank  was  not  required to reduce its basis in the Guaranteed
Assets by the amount of such financial assistance. Accordingly, the Bank was not
required  to  pay  Federal  income  taxes  with  respect  to  any  amount of the
assistance  payments  it  received  pursuant  to  the  Assistance  Agreement.

     The  Assistance Agreement did, however, require the Bank, in effect, to pay
to  such  instrumentality  100%  of the Federal and state "net tax benefits," as
defined,  which  are  realized  by  the  Bank from excluding from its income the
payments received pursuant to the Assistance Agreement on a tax-free basis.  The
amount of assistance payments from that governmental instrumentality was reduced
by  the  amount  of  tax  benefit  realized  by the Bank by excluding assistance
payments from its taxable income.  Accordingly, the Bank, in effect, was passing
back  to  that  governmental instrumentality the entire tax benefit derived from
the  tax exemption provided by the Code provisions which were in effect in 1988.

     Further,  the  tax  laws  in  1988  which  applied  to  the  Southwest Plan
Acquisition  provided that generally applicable limitations on the ability of an
acquiring  corporation  to  utilize  the  net  operating loss carryforwards, and
built-in losses, as defined, of acquired financial institutions did not apply in
the  case  of  the  acquisition  of  assets  from  insolvent  savings  and  loan
associations.    The  generally applicable rules limit the rate at which the net
operating loss carryforwards and built-in (i.e., previously unrecognized) losses
of an acquired corporation may be used by a corporation which acquires "control"
of  the  corporation  which generated the loss. Pursuant to this exception which
existed  in 1988 to the generally applicable law, the Bank is allowed to use the
net  operating  losses  and  built-in losses of all of the Acquired Associations
except for one without limitation.  The net operating loss of one association is
not available to the Bank because such association's deposits at the time of its
acquisition  did  not  represent  at  least 20% of the Bank's total deposits and
equity  as  required  by  the  applicable  provisions  of  the  Code  in  1988.

     The  Assistance Agreement required that the tax benefit derived by the Bank
from  utilizing net operating loss carryforwards acquired from three of the four
Acquired  Associations  also  be  applied  to  reduce  the  amount of assistance
payments  payable  to  the  Bank  by the government instrumentality.  The Bank's
Consolidated  Statements  of  Operations,  therefore,  includes  a provision for
Federal  income  taxes  which  includes  amounts  credited  to that governmental
instrumentality  in  lieu  of  Federal income taxes paid to the Internal Revenue
Service  with  certain  adjustments.  Although the termination of the Assistance
Agreement  was  effective March 31, 1994, that governmental instrumentality will
continue  to receive the future federal income tax benefits of the net operating
loss  carryforwards  acquired  from  the  Acquired  Associations.

     The  Company's  Federal income tax returns have not yet been audited by the
United States Internal Revenue Service.  The tax returns of the Company (and the
Acquired  Associations) since 1988 are subject to review by the Internal Revenue
Service.

STATE  TAXATION

     The  Company pays an annual franchise tax equal to the greater of $2.50 per
$1,000 of taxable capital apportioned to Texas, or $4.50 per $100 of net taxable
earned  surplus  apportioned  to  Texas. Taxable earned surplus is the Company's
Federal  taxable  income  with  certain  modifications, such as the exclusion of
interest  earned  on  Federal  obligations.

ITEM  2.          PROPERTIES
                  ----------

     The  Company's  business  is  conducted  from  37  offices  in  Texas.  The
following  table  sets forth the location of the offices of the Company, as well
as  certain  additional information relating to these offices as of December 31,
1997.

<TABLE>
<CAPTION>

                                                             Net Book
                                                             Value of
                                                             Property
                                    Owned/Leased                or                   Percent of
                               (with Lease Expiration        Leasehold                  Total
Location                                Date)              Improvements   Deposits    Deposits
------------------------        ----------------------     ------------   --------    ---------
                                                                  (Dollars in thousands)
<S>                            <C>                              <C>         <C>        <C>
BRANCH OFFICES:
-----------------------------                                                                
1329 North Virginia            Owned
Port Lavaca, Texas  77979                                    $    174    $  30,537        2.21%
8 Greenway Plaza, Suite 100    Leased;
Houston, Texas  77046          November 1, 1998                    21       20,151        1.46 
8 Braeswood Square             Leased;
Houston, Texas  77096          December 31, 2006                  497       63,055        4.57 
408 Walnut                     Owned
Columbus, Texas  78934                                            301       57,271        4.15 
870 S. Mason, #100             Leased;
Katy, Texas  77450             August 31, 2003                     51       24,277        1.76 
602 Lyons                      Owned
Schulenburg, Texas  78956                                          91       32,657        2.37 
325 Meyer Street               Owned
Sealy, Texas  77474                                               599       41,499        3.01 
116 E. Post Office             Owned
Weimar, Texas  78962                                               42       26,257        1.90 
323 Boling Road                Owned
Wharton, Texas  77488                                             134       47,084        3.41 
1621 Pine Drive                Leased;
Dickinson, Texas  77539        September 30, 1998                  --       43,773        3.17 
295 West Highway 77            Owned
San Benito, Texas  78586                                          240       21,094        1.53 
1260 Blalock, Suite 100        Leased;
Houston, Texas  77055          January 20, 1999                    50       57,372        4.16 
620 W. Main                    Owned
Tomball, Texas  77375                                             133       27,628        2.00 
915-H North Shepherd           Leased;
Houston, Texas  77008          October 31, 2001                   182       32,592        2.36 
6810 FM 1960 West              Leased;
Houston, Texas  77069          September 30, 2000                  --       31,313        2.27 
7602 N. Navarro                Owned
Victoria, Texas  77904                                            192       83,485        6.06 
2308 So. 77 Sunshine Strip     Leased;
Harlingen, Texas   78550       October 31, 1998                   622       19,238        1.39 
4900 N. 10th St., G-1          Leased;
McAllen, Texas   78504         August 14, 2001                    161       16,291        1.18 
10838 Leopard Street, Suite B  Leased;
Corpus Christi, Texas   78410  December 31, 1998                    2       42,358        3.07 
4060 Weber Road                Leased;
Corpus Christi, Texas   78411  April 30, 1999                       4       61,508        4.47 
301 E. Main Street              Owned
Brenham, Texas   77833                                            181       63,089        4.57 
1192 W. Dallas                  Leased;
Conroe, Texas   77301           December 31, 1999                  --       51,148        3.71 
2353 Town Center Dr.            Owned
Sugar Land, Texas   77478                                       1,112       18,223        1.32 
1629 S. Voss                    Owned
Houston, Texas   77057                                          1,472       21,671        1.57 
531-A Highway 1431              Leased;
Kingsland, Texas   78639        December 31, 1999                  --       20,122        1.46 
209 W. Moreland                 Owned
Mason, Texas   76856                                               53       17,104        1.24 
904 Highway 281 North           Owned
Marble Falls, Texas   78654                                       180       11,329        0.82 
101 East Polk                   Owned
Burnet, Texas   78611                                             100       19,643        1.42 
907 Ford                        Owned
Llano, Texas   78643                                              174       16,138        1.17 
708 East Austin                 Owned
Giddings, Texas   78942                                           280       24,741        1.79 
5718 Westheimer, Suite 100      Leased;
Houston, Texas 77057            July 31, 2012                     135       38,553        2.80 
7909 Parkwood Circle Drive      Owned
Houston, Texas 77036                                              244       11,166        0.81 
1250 Pin Oak Road               Owned
Katy, Texas 77494                                               1,185       17,128        1.24 
2120 Thompson Highway           Owned
Richmond, Texas 77469                                             492       41,785        3.03 
7200 North Mopac                Leased;
Austin, Texas 78731             December 31, 2002                   8       36,766        2.67 
1112 Seventh Street             Leased;
Bay City, Texas 77414           April 30, 2002                     --       76,595        5.56 
441 Austin Avenue               Owned
Port Arthur, Texas 77640                                          669       50,052        3.63 
13695 Research Blvd             Under Construction
Austin, Texas 78750                                               446           --          -- 
ADMINISTRATIVE OFFICE(1)
------------------------------                                                                 
Coastal Banc Plaza              Leased;
5718 Westheimer, Suite 600      July 31, 2012                   3,093       64,642        4.69 
Houston, Texas 77057
RECORDS & RETENTION  OFFICE:
------------------------------                                                                 
227 Meyer St                    Owned
Sealy, Texas   77474                                               63           --           - 
                                                        -------------   ---------   -----------
     Total                                              $      13,383   $1,379,335      100.00%
                                                        =============   ==========  ===========
</TABLE>
______________________


(1)Includes  location  of administrative, primary lending and mortgage servicing
offices.

     The  net  book  value of the Company's investment in premises and equipment
totaled  $22.3 million at December 31, 1997.  At December 31, 1997, the net book
value  of the Company's electronic data processing equipment, which includes its
in-house  computer  system,  local  area  network  and  fifteen automatic teller
machines,  was  $3.9  million.


ITEM  3.          LEGAL  PROCEEDINGS
                  ------------------

     The  Company  is  involved  in  routine  legal proceedings occurring in the
ordinary  course of business which, in the aggregate, are believed by management
to  be  immaterial  to  the  financial  condition  of  the  Company.


ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS
          -----------------------------------------------------------

     Not  applicable.

PART  II
--------

ITEM  5.  MARKET  FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
          ----------------------------------------------------------------------

     The  information  required herein is incorporated by reference from page 53
of  the Company's printed Annual Report to Stockholders for fiscal 1997 ("Annual
Report"),  which  is  included  herein  as  Exhibit  13.

ITEM  6.  SELECTED  FINANCIAL  DATA
          -------------------------

     The  information  required herein is incorporated by reference from pages 8
through  11  of  the  Annual  Report.

ITEM  7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS  OF  OPERATIONS
          ---------------------------------------------------------------

     The  information  required  herein is incorporated by reference on pages 11
through  23  of  the  Annual  Report.

ITEM  7A.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES ABOUT MARKET RISK
           -------------------------------------------------------------

     The  information required herein is incorporated by reference from pages 18
through  19  of the Annual Report.  The Company's principal market risk exposure
is  to  interest  rates.

ITEM  8.   FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA
           -----------------------------------------------

     The  financial  statements  and  supplementary  data  required  herein  are
incorporated  by  reference  from  pages  25  through  52  of the Annual Report.


<PAGE>
ITEM  9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL  DISCLOSURE
           ---------------------------------------------------------------

     Not  applicable.

PART  III
---------

ITEM  10.  DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT
           --------------------------------------------------------

     The  information  required  herein  is  incorporated  by reference from the
definitive  Proxy  Statement  filed with the Securities and Exchange Commission.
Otherwise,  the  requirements  of  this  Item  10  are  not  applicable.

ITEM  11.  EXECUTIVE  COMPENSATION
           -----------------------

     The  information  required  herein  is  incorporated  by reference from the
definitive  Proxy  Statement  filed with the Securities and Exchange Commission.

ITEM  12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
           --------------------------------------------------------------

     The  information  required  herein  is  incorporated  by reference from the
definitive  Proxy  Statement  filed with the Securities and Exchange Commission.

ITEM  13.   CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS
            --------------------------------------------------

     The  information  required  herein  is  incorporated  by reference from the
definitive  Proxy  Statement  filed with the Securities and Exchange Commission.

PART  IV
--------

ITEM  14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
           ---------------------------------------------------------------

     (a)(1)        The following financial statements are incorporated herein by
reference  from  pages  25  through  52  of  the  Annual  Report.

     Report  of  Independent  Certified  Public  Accountants.

     Consolidated  Statements of Financial Condition as of December 31, 1997 and
1996.

     Consolidated  Statements  of  Operations  for  each  of  the  years  in the
three-year  period  ended  December  31,  1997.

     Consolidated  Statements  of  Stockholders' Equity for each of the years in
the  three-year  period  ended  December  31,  1997.

     Consolidated  Statements  of  Cash  Flows  for  each  of  the  years in the
three-year  period  ended  December  31,  1997.

          Notes  to  Consolidated  Financial  Statements.

          (a)(2)      There are no financial statement schedules filed herewith.

          (a)(3)      The following exhibits are filed as part of this report.


<TABLE>
<CAPTION>

Exhibit No.                                                                        Page
-----------                                                                      -------
<C>          <S>                                                                    <C>
        3.1  Articles of Incorporation of the Company . . . . . . . . .                *
        3.2  Bylaws of Company. . . . . . . . . . . . . . . . . . . . .                *
          4  Form of Company common stock certificate . . . . . . . . .                *
        4.1  Form of Indenture dated as of June 30, 1995, with respect
             to the Company's 10% Notes, due 2002 . . . . . . . . . . .               **
       10.1  1991 Stock Compensation Program. . . . . . . . . . . . . .                *
       10.2  1995 Stock Compensation Program. . . . . . . . . . . . . .              ***
       10.3  Change-In-Control Severance Agreements . . . . . . . . . .              E-1
         12  Ratio of earnings to combined fixed charges and preferred
             stock dividends (See Exhibit 13)
         13  Annual Report to Stockholders. . . . . . . . . . . . . . .            E -13
         27  Financial Data Schedule (electronically filed)
         28  Form of proxy to be mailed to stockholders of the Company.            E -73
</TABLE>

     __________________
     *      Incorporated by reference to the Company's Registration Statement on
Form  S-4  (No.  33-75952)  filed  on  March  2,  1994.
     **     Incorporated by reference to the Company's Registration Statement on
Amendment  No.  6  to  Form  S-1  (No.  33-91206)  filed  on  June  16,  1995.
     ***       Incorporated by reference to the Company's Registration Statement
on  Form  S-1  (No.  33-91206)  filed  on  April  14,  1995.

     (b)(1)          Form 8-K filed by the Company on May 5, 1997 concerning the
declaration  of  dividends  for  the  first  quarter  of  1997.

     (b)(2)     Form 8-K filed by the Company on October 21, 1997 concerning the
formation  of  Coastal  Banc Capital Corp., a wholly-owned subsidiary of Coastal
Banc  Holding  Company,  Inc.

     (b)(3)       Form 8-K filed by the Company on March 11, 1998 concerning the
resolution  of  an  outstanding  tax  benefit  issue  with  the  Federal Deposit
Insurance  Corporation.

     (c)     See (a)(3) above for all exhibits filed herewith and Exhibit Index.

     (d)          All  schedules  are omitted as the required information is not
applicable  or  the  information  is  presented  in  the  consolidated financial
statements  or  related  notes.


     SIGNATURES

     Pursuant  to  the  requirements  of  Section  13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its  behalf  by  the  undersigned,  thereunto  duly  authorized.

                              COASTAL  BANCORP,  INC.



Date:    March  24,  1998                   By:     /s/ Manuel J. Mehos
                                            -------------------------------
                                            Manuel  J.  Mehos,
                                            Chairman  of  the  Board  and  Chief
                                            Executive  Officer


     Pursuant  to  the requirements of the Securities Exchange Act of 1934, this
report  is signed below by the following persons on behalf of the Registrant and
in  the  capacities  and  on  the  dates  indicated.



/s/  Manuel  J.  Mehos                                      Date: March 24, 1998
-----------------------------
Manuel  J.  Mehos,  Chairman  of  the
  Board  and  Chief  Executive  Officer



/s/  R.  Edwin  Allday                                      Date: March 24, 1998
----------------------------
R.  Edwin  Allday,  Director



/s/  D. Fort Flowers, Jr.                                   Date: March 24, 1998
----------------------------
D.  Fort  Flowers,  Jr.,  Director



/s/  Dennis  S.  Frank                                      Date: March 24, 1998
----------------------------
Dennis  S.  Frank,  Director



/s/  Robert  E.  Johnson,  Jr.                              Date: March 24, 1998
----------------------------
Robert  E.  Johnson,  Jr.,  Director



/s/  James  C.  Niver                                       Date: March 24, 1998
-----------------------------
James  C.  Niver,  Director



/s/  Clayton  T.  Stone                                     Date: March 24, 1998
-----------------------
Clayton  T.  Stone,  Director



/s/  Catherine  N.  Wylie                                   Date: March 24, 1998
-------------------------
Catherine  N.  Wylie,  Chief  Financial
  Officer  (principal  financial  and
  accounting  officer)