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

                                    FORM 10-Q


          [  X  ]          Quarterly  Report  Under  Section  13  or  15  (d) of
               the  Securities  Exchange  Act  of  1934
               For  the  Quarterly  Period  Ended  September  30,  1998

          [     ]          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)

Indicate by check mark whether the registrant (1) has filed all reports required
to  be  filed  by  Section  13  or 15 (d) of the Securities Exchange Act of 1934
during  the  preceding 12 months (or for such shorter period that the Registrant
was  required  to  file  such  reports), and (2) has been subject to such filing
requirements  for  the  past  90  days.

                                  YES     X   NO
                              ----       ----

Indicate  the  number  of  shares outstanding of each of the issuer's classes of
Common  Stock,  as  of  the  latest  practicable  date.

           COMMON STOCK OUTSTANDING: 7,107,319 AS OF OCTOBER 31, 1998


<PAGE>
                     COASTAL BANCORP, INC. AND SUBSIDIARIES

                                Table of Contents



PART  I.          FINANCIAL  INFORMATION
--------          ----------------------
<TABLE>
<CAPTION>
<S>     <C>                                                                          <C>
Item 1  Financial Statements
        Consolidated Statements of Financial Condition at September 30, 1998
        (unaudited) and December 31, 1997                                             1

        Consolidated Statements of Income for the Nine-Month Periods Ended
        September 30, 1998 and 1997 (unaudited)                                       2

        Consolidated Statements of Income for the Three-Month Periods Ended
        September 30, 1998 and 1997 (unaudited)                                       3

        Consolidated Statements of Comprehensive Income (Loss)  for the Nine-Month
        Periods Ended September 30, 1998 and 1997 (unaudited)                         4

        Consolidated Statements of Cash Flows for the Nine-Month Periods
        Ended September 30, 1998 and 1997 (unaudited)                                 5

        Notes to Consolidated Financial Statements                                    7

Item 2  Management's Discussion and Analysis of Financial Condition and Results
        of Operations                                                                18

Item 3  Quantitative and Qualitative Disclosures About Market Risk                   25
</TABLE>






PART  II.          OTHER  INFORMATION
---------          ------------------
<TABLE>
<CAPTION>
<S>     <C>                                                  <C>
Item 1  Legal Proceedings                                    26
Item 2  Changes in Securities                                26
Item 3  Default upon Senior Securities                       26
Item 4  Submission of Matters to a Vote of Security Holders  26
Item 5  Other Information                                    26
Item 6  Exhibits and Reports on Form 8-K                     27
</TABLE>




SIGNATURES



ITEM  1.          FINANCIAL  STATEMENTS
--------          ---------------------

<TABLE>
<CAPTION>

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

                                                              September 30,   December 31,
                                                                  1998            1997
                                                             ---------------  ------------       
ASSETS                                                         (Unaudited)
-----------------------------------------------------------                                      
<S>                                                          <C>            <C>   <C>
Cash and cash equivalents                                    $      56,200    $   37,096
Federal funds sold                                                   4,300            --
Loans receivable (note 4)                                        1,545,507     1,261,435
Mortgage-backed securities held-to-maturity (note 3)             1,234,840     1,345,090
Mortgage-backed securities available-for-sale, at market
 value (note 3)                                                    125,787       169,997
U.S. Treasury security available-for-sale, at market value           2,008            --
Accrued interest receivable                                         17,075        14,813
Property and equipment                                              33,452        22,250
Stock in the Federal Home Loan Bank of Dallas (FHLB)                49,107        27,801
Goodwill                                                            31,455        15,717
Mortgage servicing rights                                            4,490         5,653
Prepaid expenses and other assets                                   22,065        11,558
                                                             -------------    ----------
                                                             $   3,126,286    $2,911,410
                                                             =============    ==========
</TABLE>


<TABLE>
<CAPTION>

     LIABILITIES  AND  STOCKHOLDERS'  EQUITY
     ---------------------------------------
<S>                                                               <C>          <C>
Liabilities:
 Savings deposits (note 5)                                      $1,704,571   $1,375,060 
 Advances from the FHLB (note 6)                                   952,247      540,475 
 Securities sold under agreements to repurchase (note 6)           244,712      791,760 
 Senior notes payable (note 7)                                      50,000       50,000 
 Advances from borrowers for taxes and insurance                    11,192        3,975 
 Other liabilities and accrued expenses                             19,401       16,560 
     Total liabilities                                           2,982,123    2,777,830 
                                                                -----------  -----------

9.0% noncumulative preferred stock of Coastal Banc ssb (note 10)    28,750       28,750 

Commitments and contingencies (notes 4 and 8)

Stockholders' equity (notes 1, 3, 9 and 11):
 Preferred stock, no par value; authorized shares 5,000,000;
   no shares issued                                                     --           -- 
 Common stock, $.00667 par value; authorized shares
   45,000,000; 7,566,757 and 7,513,389 shares issued
   in 1998 and 1997, respectively                                       50           50 
 Additional paid-in capital                                         33,703       33,186 
 Retained earnings                                                  85,714       73,868 
 Accumulated other comprehensive income (loss) -
   unrealized loss on securities available-for-sale                   (783)      (2,274)
 Treasury stock at cost (205,000 shares in 1998)                    (3,271)          -- 
                                                                  ---------  -----------
     Total stockholders' equity                                    115,413      104,830 
                                                                  ---------  -----------
                                                                $3,126,286   $2,911,410 
                                                                ===========  ===========
</TABLE>

See  accompanying  Notes  to  Consolidated  Financial  Statements


<PAGE>
                     COASTAL BANCORP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>

                                                                           Nine Months Ended
                                                                             September 30,
                                                                         -------------------      
                                                                           1998            1997
                                                                        ----------       --------
                                                                       (Unaudited)
<S>                                                                        <C>              <C>
Interest income:
 Loans receivable                                                    $     87,495   $ 80,249
 Mortgage-backed securities                                                67,938     69,395
 Federal funds sold, certificates of deposit and other investments          2,007      1,109
                                                                          157,440    150,753
                                                                     ------------   --------

Interest expense:
 Savings deposits                                                          48,166     46,659
 Other borrowed money                                                      29,807     41,985
 Senior notes payable                                                       3,750      3,750
 Advances from the FHLB:
   Short-term                                                              11,567      5,798
   Long-term                                                               15,613      9,450
                                                                     -------------  --------
                                                                          108,903    107,642
                                                                     -------------  --------

   Net interest income                                                     48,537     43,111
Provision for loan losses                                                   2,350      1,350
   Net interest income after provision for loan losses                     46,187     41,761
                                                                     -------------  --------

Noninterest income:
 Loan fees and service charges on deposit accounts                          3,894      2,913
 Loan servicing income, net                                                   571      1,097
 Gain on sale of mortgage-backed securities available-for-sale                 --        237
 Writedown of purchased mortgage loan premium                                (709)        --
 Other                                                                        996        515
                                                                            4,752      4,762
                                                                     -------------  --------

Noninterest expense:
 Compensation, payroll taxes and other benefits                            16,156     14,024
 Office occupancy                                                           6,437      5,288
 Data processing                                                            1,806      1,676
 Amortization of goodwill                                                   1,517      1,361
 Insurance premiums                                                           912        819
 Real estate owned                                                            693        628
 Other                                                                      5,872      5,830
                                                                           33,393     29,626
                                                                     -------------  --------

       Income before provision for Federal income taxes                    17,546     16,897

Provision for Federal income taxes (note 12)                                1,944      6,182
                                                                     -------------  --------
     Net income before preferred stock dividends                           15,602     10,715
Preferred stock dividends of Coastal Banc ssb (Series A) (note 10)          1,941      1,941
                                                                     -------------  --------
     Net income available to common stockholders                     $     13,661   $  8,774
                                                                     =============  ========

Basic earnings per share (note 9)                                    $       1.81   $   1.18
                                                                     =============  ========

Diluted earnings per share (note 9)                                  $       1.75   $   1.14
                                                                     =============  ========
</TABLE>


See  accompanying  Notes  to  Consolidated  Financial  Statements

<PAGE>
                     COASTAL BANCORP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>

                                                                        Three Months Ended
                                                                           September 30,
                                                                        1998           1997
                                                                       ------       -------
                                                                     (Unaudited)
<S>                                                                  <C>             <C>
Interest income:
 Loans receivable                                                    $   31,468    $27,819
 Mortgage-backed securities                                              21,740     22,994
 Federal funds sold, certificates of deposit and other investments          971        438
                                                                         54,179     51,251
                                                                     ----------    -------

Interest expense:
 Savings deposits                                                        17,167     16,114
 Other borrowed money                                                     6,766     14,209
 Senior notes payable                                                     1,250      1,250
 Advances from the FHLB:
   Short-term                                                             3,988      2,086
   Long-term                                                              7,753      3,393
                                                                     ----------    -------
                                                                         36,924     37,052
                                                                     ----------    -------

   Net interest income                                                   17,255     14,199
Provision for loan losses                                                   450        450
   Net interest income after provision for loan losses                   16,805     13,749
                                                                     ----------    -------

Noninterest income:
 Loan fees and service charges on deposit accounts                        1,428      1,038
 Loan servicing income, net                                                 171        333
 Gain on sale of mortgage-backed securities available-for-sale               --        237
 Other                                                                      453        135
                                                                          2,052      1,743
                                                                     ----------    -------

Noninterest expense:
 Compensation, payroll taxes and other benefits                           6,059      4,706
 Office occupancy                                                         2,406      2,024
 Data processing                                                            625        566
 Amortization of goodwill                                                   574        479
 Insurance premiums                                                         387        274
 Real estate owned                                                          270        146
 Other                                                                    2,154      1,980
                                                                         12,475     10,175
                                                                     ----------    -------

       Income before provision for Federal income taxes                   6,382      5,317

Provision for Federal income taxes (note 12)                              1,994      1,953
                                                                     ----------    -------
     Net income before preferred stock dividends                          4,388      3,364
Preferred stock dividends of Coastal Banc ssb (Series A) (note 10)          647        647
                                                                     ----------    -------
     Net income available to common stockholders                     $    3,741    $ 2,717
                                                                     ==========    =======

Basic earnings per share (note 9)                                    $     0.50    $  0.36
                                                                     ==========    =======

Diluted earnings per share (note 9)                                  $     0.48    $  0.35
                                                                     ==========    =======
</TABLE>
See  accompanying  Notes  to  Consolidated  Financial  Statements


<PAGE>
                     COASTAL BANCORP, INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                         Nine Months Ended
                                                                            September 30,
                                                                          1998         1997
                                                                     -----------      ---------
                                                                         (Unaudited)
<S>                                                                  <C>                  <C>


Net income available to common stockholders                          $    13,661       $8,774

Other comprehensive income (loss), net of tax:
 Unrealized holding gains (losses) on securities available-for-sale
 arising during period                                                     1,491           52
                                                                     -----------       ------

Total comprehensive income                                           $    15,152       $8,826
                                                                     ===========       ======
</TABLE>

See  accompanying  Notes  to  Consolidated  Financial  Statements

<PAGE>
                     COASTAL BANCORP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                             Nine Months Ended
                                                                               September 30,
                                                                              1998         1997
                                                                        ------------   ----------
                                                                            (Unaudited)

<S>                                                                     <C>                  <C>
Cash flows from operating activities:
 Net income before preferred stock dividends                            $   15,602   $  10,715 
 Adjustments to reconcile net income before preferred stock dividends
   to net cash provided by operating activities:
 Depreciation and amortization of property and equipment,
   mortgage servicing rights and prepaid expenses and other assets           6,381       5,334 
 Net premium amortization                                                    2,352       1,458 
 Provision for loan losses                                                   2,350       1,350 
 Amortization of goodwill                                                    1,517       1,361 
 Originations and purchases of mortgage loans held for sale                (26,536)     (8,063)
 Sales of mortgage loans held for sale                                      26,287       8,361 
 Gain on sales of mortgage-backed securities available-for-sale                 --        (237)
 Stock dividends from the FHLB                                              (1,536)       (951)
 Decrease (increase) in:
   Accrued interest receivable                                                 306        (698)
   Other, net                                                               (6,056)      7,133 
                                                                         ----------  ----------

   Net cash provided by operating activities                                20,667      25,763 
                                                                         ----------  ----------

Cash flows from investing activities:
 Net increase in federal funds sold                                         (4,300)     (5,000)
 Purchase of mortgage-backed securities held-to-maturity                    (8,203)    (20,257)
 Principal repayments on mortgage-backed securities held-to-maturity       118,427      39,140 
 Principal repayments on mortgage-backed securities
   available-for-sale                                                       20,249         452 
 Proceeds from maturity of U.S. Treasury securities available-for-sale      25,000          11 
 Proceeds from sales of mortgage-backed securities available-for-sale       26,250      11,545 
 Purchases of loans receivable                                            (319,630)   (120,024)
 Net decrease in loans receivable                                          204,384      44,400 
 Net purchases of property and equipment                                    (3,477)     (9,224)
 Purchase of FHLB stock                                                    (19,770)     (2,556)
 Proceeds from sales of FHLB stock                                              --       9,000 
 Cash and cash equivalents received in business combination
   transaction                                                             120,085      52,098 
                                                                        -----------  ----------

   Net cash provided (used) by investing activities                        159,015        (415)
                                                                        -----------  ----------
</TABLE>



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

<TABLE>
<CAPTION>

                                                                            Nine Months Ended
                                                                              September 30,
                                                                            1998           1997
                                                                       -----------    -----------
                                                                           (Unaudited)

<S>                                                                    <C>                  <C>
Cash flows from financing activities:
 Net increase (decrease) in savings deposits                           $   (26,009)  $    26,744 
 Advances from the FHLB                                                  3,435,277     2,539,800 
 Principal payments on advances from the FHLB                           (3,023,505)   (2,566,518)
 Securities sold under agreements to repurchase                          3,948,611     7,722,507 
 Purchases of securities sold under agreements to repurchase            (4,495,659)   (7,741,112)
 Net increase in advances from borrowers for taxes and insurance             7,217         7,641 
 Exercise of stock options for purchase of common stock, net                   517           373 
 Purchase of Treasury Stock                                                 (3,271)           -- 
 Dividends paid                                                             (3,756)       (3,632)
                                                                       ------------  ------------
   Net cash used by financing activities                                  (160,578)      (14,197)
                                                                       ------------  ------------

   Net increase in cash and cash equivalents                                19,104        11,151 
 Cash and cash equivalents at beginning of period                           37,096        27,735 
                                                                       ------------  ------------
 Cash and cash equivalents at end of period                            $    56,200   $    38,886 
                                                                       ============  ============

 Supplemental schedule of cash flows-interest paid                     $   105,971   $   105,216 
                                                                       ============  ============

 Supplemental schedule of noncash investing and financing activities:
   Foreclosures of loans receivable                                    $     2,937   $     3,883 
                                                                       ============  ============


In connection with the branch office purchases in 1998 and 1997,
Coastal recorded the following assets and liabilities:
 Loans receivable                                                      $   176,157   $        -- 
 U.S. Treasury securities                                                   26,942            -- 
 Goodwill                                                                   17,255         1,956 
 Property and equipment                                                     10,743           693 
 Accrued interest receivable and other assets                                5,437            -- 
 Savings deposits                                                          355,425        54,563 
 Accrued interest payable and other liabilities                              1,194           184 
</TABLE>

See  accompanying  Notes  to  Consolidated  Financial  Statements



                     COASTAL BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)  BASIS  OF  PRESENTATION

     The  accompanying unaudited Consolidated Financial Statements were prepared
in accordance with the instructions for Form 10-Q and, therefore, do not include
all  disclosures  necessary  for a complete presentation of financial condition,
results  of  operations,  and  cash  flows in conformity with generally accepted
accounting principles.  All adjustments which are, in the opinion of management,
of  a  normal  recurring nature and are necessary for a fair presentation of the
interim financial statements, have been included.  The results of operations for
the  periods  ended  September  30,  1998  are not necessarily indicative of the
results  that  may  be  expected for the entire fiscal year or any other interim
period.

     COASTAL  BANCORP,  INC.  AND  SUBSIDIARIES ADOPTED THE FINANCIAL ACCOUNTING
STANDARDS  BOARDS  STATEMENT NO. 130 ("STATEMENT 130"), "REPORTING COMPREHENSIVE
INCOME"  AS  OF  JANUARY  1, 1998.  STATEMENT 130 REQUIRES THE DISCLOSURE OF ALL
COMPONENTS  OF  COMPREHENSIVE  INCOME,  WHICH  INCLUDES  NET  INCOME  AND  OTHER
COMPREHENSIVE  INCOME.  OTHER COMPREHENSIVE INCOME INCLUDES ALL NONOWNER RELATED
CHANGES  TO  STOCKHOLDERS'  EQUITY,  WHICH  IS  THE  UNREALIZED  GAIN  (LOSS) ON
SECURITIES  AVAILABLE-FOR-SALE.    THESE  AMOUNTS  HAVE  BEEN  DISCLOSED  ON THE
CONSOLIDATED  STATEMENTS  OF COMPREHENSIVE INCOME.  STATEMENT 130 DID NOT CHANGE
THE  CURRENT  ACCOUNTING  TREATMENT FOR COMPONENTS OF OTHER COMPREHENSIVE INCOME
(I.E.  CHANGES  IN  UNREALIZED  GAIN  (LOSS)  ON SECURITIES AVAILABLE-FOR-SALE).

     On April 23, 1998, the Board of Directors declared a 3:2 stock split on the
common  stock  of  Coastal  Bancorp,  Inc.  payable  on  June  15,  1998  to the
stockholders  of  record  at the close of business on May 15, 1998. Accordingly,
all  common  stock  share  data  have been adjusted to include the effect of the
stock  split  for  all  periods  presented.

     On  September  1,  1998,  Coastal announced that the Board of Directors had
authorized  the  repurchase  of up to 6.6% (approximately 500,000 shares) of the
outstanding  shares  of  common stock.  As of September 30, 1998, 205,000 shares
had  been  repurchased  at  a  cost  of $3.3 million and as of this date 460,600
shares  have  been  repurchased  at  a  total  cost  of  $7.2  million.

(2)  PRINCIPLES  OF  CONSOLIDATION

     The  accompanying  unaudited  Consolidated Financial Statements include the
accounts  of Coastal Bancorp, Inc. and its wholly-owned subsidiary, Coastal Banc
Holding  Company,  Inc.  and its wholly-owned subsidiaries, Coastal Banc ssb and
subsidiaries  and  Coastal Banc Capital Corp. (collectively, "Coastal"). Coastal
Banc ssb's subsidiaries include CoastalBanc Financial Corp., CBS Mortgage Corp.,
and  CBS  Asset  Corp.  (collectively  with  Coastal  Banc ssb, the "Bank"). All
significant  intercompany  balances  and  transactions  have  been eliminated in
consolidation.


<PAGE>
(3)  MORTGAGE-BACKED  SECURITIES

     Mortgage-backed  securities  at  September  30,  1998  (unaudited)  were as
follows  (dollars  in  thousands):

<TABLE>
<CAPTION>

                                              Gross         Gross
                              Amortized    Unrealized     Unrealized     Market
                                Cost          Gains         Losses        Value
                              ---------    -----------    ----------     -------  
<S>                             <C>           <C>            <C>           <C>    
Held-to-Maturity:
 REMICS - Agency             $   882,871    $ 4,759       $ (5,584)    $   882,046
   REMICS - Non-agency           249,567      1,193         (2,392)        248,368
 FNMA certificates                66,978        261           (604)         66,635
 GNMA certificates                23,301        335             --          23,636
 Non-agency securities            12,117        170            (64)         12,223
 Interest-only securities              6         --             --               6
                             $ 1,234,840    $ 6,718       $ (8,644)    $ 1,232,914
                             ===========    =======       =========    ===========

Available-for-sale:
 REMICS - Agency             $   125,408    $    16       $ (1,213)    $   124,211
 REMICS - Non-agency               1,584         --             (8)          1,576
                             -----------    -------       ---------    -----------
                             $   126,992    $    16       $ (1,221)    $   125,787
                             ===========    =======       =========    ===========
</TABLE>



     Proceeds  from  sales  of mortgage-backed securities available-for-sale for
the  nine  months  ended  September  30,  1998 were approximately $26.3 million.
These  securities  were  sold  at  amortized cost, therefore no gain or loss was
recorded.

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


<TABLE>
<CAPTION>

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

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




<PAGE>
(4)  LOANS  RECEIVABLE

     Loans  receivable  at  September  30,  1998  and  December 31, 1997 were as
follows  (dollars  in  thousands):

<TABLE>
<CAPTION>

                                                    September 30, 1998   December 31, 1997
                                                   --------------------  -----------------       
                                                       (Unaudited)
<S>                                                <C>                   <C>                <C>
Real estate mortgage loans:
 First-lien mortgage, primarily residential            $  765,109         $  689,767 
 Commercial                                               242,170            181,315 
 Multifamily                                              127,477            131,454 
 Residential construction                                 113,341             83,359 
 Acquisition and development                               59,447             31,619 
 Commercial construction                                   27,079             14,506 
Commercial loans, secured by residential mortgage
 loans held for sale                                      122,799             98,679 
Commercial loans, secured by mortgage servicing
 rights                                                    19,263             32,685 
Commercial, financial and industrial                       89,235             30,877 
Loans secured by savings deposits                          14,865              8,695 
Consumer and other loans                                   59,502             15,030 
                                                   ---------------        -----------
                                                        1,640,287          1,317,986 
Loans in process                                          (84,795)           (47,893)
Allowance for loan losses                                 (11,043)            (7,412)
Unearned interest and  loan fees                           (3,398)            (2,926)
Premium to record purchased loans, net                      4,456              1,680 
                                                   ---------------        -----------

                                                   $    1,545,507         $1,261,435 
                                                   ===============        ===========

Weighted average yield                                       8.35%              8.30%
                                                   ===============        ===========
</TABLE>



     At  September 30, 1998, Coastal had outstanding commitments to originate or
purchase  $124.1  million  of  real  estate  mortgage  and  other  loans and had
commitments  under  lines  of credit to originate primary construction and other
loans  of  approximately  $132.8  million.   In addition, at September 30, 1998,
Coastal  had  $3.9  million  of  outstanding  letters  of  credit.    Management
anticipates  the  funding  of  these  commitments  through  normal  operations.

     At  September  30,  1998 and December 31, 1997, the carrying value of loans
that  were  considered to be impaired totaled approximately $2.0 million and the
related  allowance  for loan losses on those impaired loans totaled $950,000 and
$1.1  million  at  September  30, 1998 and December 31, 1997, respectively.  The
average  recorded  investment  in  impaired  loans  during the nine months ended
September  30,  1998  and  1997  was  $1.8  million  and $770,000, respectively.


<PAGE>
     Coastal  services for others loans receivable which are not included in the
Consolidated  Financial  Statements. The total amounts of such loans were $567.2
million  and  $675.7  million  at  September  30,  1998  and  December 31, 1997,
respectively.

     An  analysis  of  activity  in  the  allowance for loan losses for the nine
months  ended  September  30,  1998  and  1997  is  as  follows  (in thousands):

<TABLE>
<CAPTION>

                                  Nine Months Ended September 30,
                                  -------------------------------   
                                             1998        1997
                                         ------------  --------
                                          (Unaudited)
<S>                               <C>         <C>           <C>
Balance, beginning of period            $     7,412   $ 6,880 
Acquisition allowance adjustment              2,257        -- 
Provision for loan losses                     2,350     1,350 
Charge-offs, net of recoveries                 (976)   (1,148)
                                        ------------  --------

Balance, end of period                   $    11,043   $ 7,082 
                                        ============  ========
</TABLE>



     The  acquisition  allowance  adjustment of $2.3 million was recorded during
the nine months ended September 30, 1998 in connection with the recording of the
loans  receivable  acquired  in the branch purchase on August 14, 1998 (see note
14).




<PAGE>
(5)          SAVINGS  DEPOSITS

     Savings  deposits,  their  stated  rates  and  the related weighted average
interest  rates  at  September  30, 1998 and December 31, 1997 are summarized as
follows  (dollars  in  thousands):

<TABLE>
<CAPTION>


                                         Stated Rate    September 30, 1998    December 31, 1997
                                        --------------  -------------------  -------------------       
                                                            (Unaudited)
<S>                                     <C>             <C>                  <C>                  <C>
Noninterest-bearing checking                     0.00%   $      86,537     $  101,782 
Interest-bearing checking               1.49  -  2.00           51,266         69,972 
Savings accounts                        2.18  -  2.75           48,904         25,555 
Money market demand accounts            0.00  -  4.60          335,016        165,986 
                                                             ---------     -----------

                                                               521,723        363,295 
                                                             ---------     -----------

Certificate accounts                    2.00  -  2.99            7,407          5,142 
                                        3.00  -  3.99            5,526          2,763 
                                        4.00  -  4.99          118,971         64,478 
                                        5.00  -  5.99          949,210        834,727 
                                        6.00  -  6.99           90,871         94,405 
                                        7.00  -  7.99            8,903          7,624 
                                        8.00  -  8.99            1,063          1,854 
                                        9.00  -  9.99              305            847 
                                        over  10.00                 16             -- 
                                                            ----------     -----------
                                                             1,182,272      1,011,840 
                                                            ----------     -----------
Premium (discount) to record purchased
 savings deposits, net                                             576            (75)
                                                            ----------     -----------

                                                       $     1,704,571     $1,375,060 
                                                            ==========     ===========

Weighted average rate                                            4.35%        4.67%
                                                            ==========  ===========
</TABLE>



     Effective  January 1, 1998, Coastal implemented a program whereby a portion
of  the  balances  in noninterest-bearing and interest-bearing checking accounts
are  reclassified  to  money  market  demand  accounts  under  Federal  Reserve
Regulation  D.

     The  scheduled  maturities of certificate accounts outstanding at September
30,  1998  were  as  follows  (dollars  in  thousands):
<TABLE>

<CAPTION>



                   September 30, 1998
                  --------------------
                      (Unaudited)
<S>               <C>
 0 to 12 months   $            993,744
 12 to 24 months               139,592
 24 to 36 months                26,219
 36 to 48 months                 9,860
 48 to 60 months                12,575
 Over 60 months                    282
                  --------------------
                  $          1,182,272
                  ====================
</TABLE>


(6)  SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND ADVANCES FROM THE FHLB

     The  weighted average interest rates on securities sold under agreements to
repurchase  at  September  30,  1998 and December 31, 1997 were 5.28% and 6.00%,
respectively.   The stated interest rates on securities sold under agreements to
repurchase  ranged  from  4.93%  to  5.63%  at  September  30,  1998.

     The  weighted average interest rates on advances from the FHLB at September
30,  1998  and  December  31,  1997  were  5.44%  and  5.95%, respectively.  The
scheduled  maturities  and  related  weighted average interest rates on advances
from  the  FHLB  at  September  30,  1998  are summarized as follows (dollars in
thousands)  (unaudited):

<TABLE>
<CAPTION>

Due during the year       Weighted Average
 ended December 31,        Interest Rate       Amount
-------------------     ----------------  -----------------
<S>                     <C>                <C>     <C>
1998                           5.30%          $378,100
1999                           5.57            416,638
2000                           5.93              6,845
2001                           6.21              8,595
2002                           5.52             69,673
2003                           5.52                111
2004                           6.48              2,699
2005                           5.57                129
2006                           6.85              3,213
2007                           6.64              1,176
2008                           4.70             51,336
2009                           8.15              4,472
2010                           5.66                187
2011                           6.63              1,441
2012                           5.68                217
2013                           5.71              6,871
2018                           6.00                544
                                              --------

                                              $952,247
                                              ========
</TABLE>



Advances  from  the  FHLB  are  secured by certain first-lien mortgage loans and
mortgage-backed  securities  owned  by  Coastal.

(7)  SENIOR  NOTES  PAYABLE

     On  June  30,  1995, Coastal issued $50.0 million of 10.0% Senior Notes due
June 30, 2002.  The Senior Notes are redeemable at Coastal's option, in whole or
in  part,  on  or  after  June  30,  2000,  at par, plus accrued interest to the
redemption  date.    Interest  on  the  Senior  Notes  is  payable  quarterly.


<PAGE>
(8)  FINANCIAL  INSTRUMENTS  WITH  OFF-BALANCE  SHEET  RISK

     Coastal  is a party to financial instruments with off-balance sheet risk in
the  normal  course  of  business  to reduce its own exposure to fluctuations in
interest  rates.    These  financial  instruments  include  interest  rate  swap
agreements  and  interest  rate  cap  agreements.

     Coastal  utilizes  interest  rate  swap and interest rate cap agreements to
reduce  exposure  to  floating  interest  rates  by  altering  the interest rate
sensitivity  of  a  portion  of  its  variable-rate  assets  and borrowings.  At
September  30,  1998,  Coastal  had interest rate swap and cap agreements having
notional  principal  amounts  totaling  $45.7  million  and  $255.3  million,
respectively.

     The terms of the interest rate swap agreements outstanding at September 30,
1998  (unaudited)  and  December  31, 1997 are summarized as follows (dollars in
thousands):

<TABLE>
<CAPTION>

                                                                        
                                                        Floating Rate     Fair Value at
                        Notional      LIBOR     Fixed         at          End of Period
Maturity                 Amount       Index      Rate   End of Period     (gain (loss))
----------------------  ---------  -----------  ------  --------------    --------------
<S>                     <C>        <C>          <C>     <C>             <C>
At September 30, 1998:
1998                    $   4,400  Three-month  6.709%     5.688%         $    (5)
1999                       14,600  Three-month  6.926      5.688             (302)
2000                        4,800  Three-month  6.170      5.500             (126)
2000                        2,415  Three-month  6.000      5.313              (57)
2005                       19,527  Three-month  6.500      5.688           (1,212)
                        ---------                                                 
                        $  45,742                                         $(1,702)
                        =========                                         ========

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




     The  interest  rate  swap  agreements  provide for Coastal to make weighted
average  fixed  interest payments and receive payments based on a floating LIBOR
index,  as  defined  in  each  agreement.  The weighted average interest rate of
payments  received on all of the interest rate swap agreements was approximately
5.80% and the weighted average interest payment rate on all of the interest rate
swap  agreements was approximately 6.61% for the nine months ended September 30,
1998.    Payments on the interest rate swap agreements are based on the notional
principal amount of the agreements; no funds were actually borrowed or are to be
repaid.    The interest rate swap agreements are used to alter the interest rate
sensitivity  of  a  portion  of  Coastal's  variable-rate  borrowings.  As such,
Coastal  records net interest expense or income related to these agreements on a
monthly  basis in "interest expense on other borrowed money" in the accompanying
consolidated  statements  of  income.  The net interest expense related to these
agreements  was  approximately  $278,000 for the nine months ended September 30,
1998  and  approximately  $338,000 for the nine months ended September 30, 1997.
Coastal  had pledged approximately $6.8 million of mortgage-backed securities to
secure  interest  rate  swap  agreements  at  September  30,  1998.

     Coastal  has  interest  rate  cap  agreements  with  third  parties.    The
agreements  provide for the third parties to make payments to Coastal whenever a
defined floating rate exceeds rates ranging from 5.0% to 11.0%, depending on the
agreement.    Payments  on  the  interest  rate  cap agreements are based on the
notional  principal amount of the agreements; no funds were actually borrowed or
are  to  be repaid.  The purchase prices of the interest rate cap agreements are
capitalized  and  included  in  "prepaid  expenses  and  other  assets"  in  the
accompanying  consolidated  statements  of financial condition and are amortized
over the life of the agreements using the straight-line method.  The unamortized
portion  of  the  purchase  price  of  the  interest  rate  cap  agreements  was
approximately $165,000 and $286,000 at September 30, 1998 and December 31, 1997,
respectively,  with the estimated fair value of the agreements being $88,000 and
$300,000  at  September  30,  1998  and  December  31,  1997, respectively.  The
interest  rate cap agreements are used to alter the interest rate sensitivity of
a  portion  of  Coastal's mortgage-backed securities, loans receivable and their
related  funding  sources.  As  such, the amortization of the purchase price and
interest  income from the interest rate cap agreements are recorded in "interest
income  on  mortgage-backed  securities or loans receivable," as appropriate, in
the  accompanying  consolidated  statements  of  income.    The  net decrease in
interest  income  related  to the interest rate cap agreements was approximately
$38,000  and  $202,000  for  the  nine months ended September 30, 1998 and 1997,
respectively.

     Interest  rate cap agreements outstanding at September 30, 1998 (unaudited)
expire  as  follows  (dollars  in  thousands):

<TABLE>
<CAPTION>

Year of       Strike rate    Notional
expiration       Range        amount
----------  ---------------  ---------
<S>         <C>              <C>
1998        5.00  -  11.00%  $  54,300
1999        7.25  -  11.00      63,564
2000         8.50  -  9.50      11,620
2001         7.00  -  9.00      26,792
2003         8.00  -  8.50      99,000
                             ---------
                             $ 255,276
                             =========
</TABLE>



     Market risk, or the risk of loss due to movement in market prices or rates,
is  quantified by Coastal through a risk monitoring process of marking to market
the portfolio to expected market level changes in an instantaneous shock of plus
and  minus  200  basis  points on a quarterly basis.  This process discloses the
effects  on  market  values  of the assets and liabilities, unrealized gains and
losses,  including  off-balance sheet items, as well as potential changes in net
interest  income.

     The fluctuation in the market value, however, has no effect on the level of
earnings of Coastal because the securities are categorized as "held-to-maturity"
or  "available-for-sale."

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

<PAGE>
(9)  EARNINGS  PER  SHARE

     The  following  summarizes  information related to the computation of basic
and  diluted  earnings  per share ("EPS") for the nine- and three- month periods
ended  September 30, 1998 and 1997 (dollars in thousands, except per share data)
(unaudited):

<TABLE>
<CAPTION>

                                                 Nine Months Ended
                                                  September 30,
                                                  -----------------     
<S>                                           <C>             <C>
                                                   1998        1997
                                                ----------  ----------

Net income available to common stockholders    $   13,661  $    8,774
                                                ==========  ==========
Weighted average number of common shares
 outstanding used in basic EPS calculation      7,534,947   7,463,546
Add assumed exercise of outstanding stock
 options as adjusted for dilutive securities      252,887     242,664
                                               ----------  ----------
Weighted average number of common shares
 outstanding used in diluted EPS calculation    7,787,834   7,706,210
                                               ==========  ==========
Basic EPS                                      $     1.81  $     1.18
                                               ==========  ==========
Diluted EPS                                    $     1.75  $     1.14
                                               ==========  ==========
</TABLE>





<TABLE>
<CAPTION>
                                                  Three Months Ended
                                                    September 30,
                                                   ------------------   
<S>                                           <C>                 <C>         <C>
                                                    1998        1997
                                                 ----------  ----------

Net income available to common stockholders     $    3,741  $    2,717
                                                ==========  ==========
Weighted average number of common shares
 outstanding used in basic EPS calculation       7,499,625   7,482,030
Add assumed exercise of outstanding stock
 options as adjusted for dilutive securities       226,704     284,675
                                                ----------  ----------
Weighted average number of common shares
 outstanding used in diluted EPS calculation     7,726,329   7,766,705
                                                ==========  ==========
Basic EPS                                       $     0.50  $     0.36
                                                ==========  ==========
Diluted EPS                                     $     0.48  $     0.35
                                                ==========  ==========
</TABLE>



(10) COASTAL  BANC  SSB  PREFERRED  STOCK

     On October 21, 1993, the Bank issued 1,150,000 shares of 9.0% Noncumulative
Preferred  Stock,  no  par  Series A, at a price of $25 per share to the public.
Dividends  on  the  Preferred  Stock are payable quarterly at the annual rate of
$2.25 per share, when, as and if declared by the Board of Directors of the Bank.
At  any  time on or after December 15, 1998, the Preferred Stock may be redeemed
in  whole  or  in  part  only  at the Bank's option at $25 per share plus unpaid
dividends  (whether  or  not  earned  or declared) for the then current dividend
period  to  the  date  fixed  for  redemption.


<PAGE>
(11) STATUTORY  CAPITAL  REQUIREMENTS

     The  applicable  regulations  require federally insured institutions, which
are not the highest rated, to have a minimum regulatory tier 1 (core) capital to
total  assets  ratio  equal to a minimum of 4.0%, a tier 1 risk-based capital to
risk-weighted assets ratio of 4.0% and total risk-based capital to risk-weighted
assets  ratio  of  8.0%.

     At  September  30,  1998,  the  Bank's  regulatory  capital  (unaudited) in
relation  to  its  existing regulatory capital requirements for capital adequacy
purposes  were  as  follows  (dollars  in  thousands):

<TABLE>
<CAPTION>
                                                  Minimum For Capital   Well-Capitalized
                               Actual               Adequacy Purposes   Requirements
<S>                        <C>          <C>        <C>        <C>       <C>     <C> 
Capital Requirement       Amount       Ratio      Amount      Ratio     Amount    Ratio
-------------------   -----------   ---------    --------    ------    --------  ------

 Tier 1 (core)         $  155,777       5.10%    $122,066   4.00%      $152,583   5.00%
 Tier 1 risk-based        155,777       9.29       67,049   4.00        100,574   6.00 
 Total risk-based         166,820       9.95      134,098   8.00        167,623  10.00 
</TABLE>



     As  of  September  30,  1998, the most recent notification from the Federal
Deposit  Insurance Corporation ("FDIC") categorized the Bank as well capitalized
under  the  regulatory  framework  for  prompt  corrective  action.   Due to the
acquisition  completed  during  the  third  quarter  of  1998,  the Bank's total
risk-based  capital  as of September 30, 1998, as reported, has fallen below the
Well-Capitalized  Requirement.    Management  believes  that this is a temporary
situation  and  anticipates  meeting  the  total  risk-based  Well-Capitalized
Requirement  as  of  December  31,  1998.

(12) FEDERAL  INCOME  TAXES

     In  March  1998,  Coastal  announced  that  it had successfully resolved an
outstanding  tax  benefit  issue with the FDIC as Manager of the Federal Savings
and  Loan  Insurance  Corporation  Resolution Fund.  The resolution of the issue
resulted  in  Coastal  recording  a $3.7 million, or 47 cents per diluted share,
reversal  of  accrued  income  taxes  during the nine months ended September 30,
1998;  resulting  in a one-time positive effect on net income. The resolution of
the  tax  benefit  issue  also  contributes  an ongoing quarterly tax benefit of
$226,000  or  approximately 3 cents per diluted share, as of September 30, 1998.
This  tax  benefit  is  expected  to  continue  for  approximately  3  years.

(13) RECENT  ACCOUNTING  STANDARDS

     The  Financial  Accounting  Standards Board's Statement No. 131 ("Statement
131"),  "Disclosure  about  Segments  of an Enterprise and Related Information,"
requires  public  companies  to report certain information about their operating
segments  in  their  annual financial statements and quarterly reports issued to
stockholders  for years after implementation.  It also requires public companies
to  report certain information about their products and services, the geographic
areas  in  which  they  operate,  and  their  major customers.  Statement 131 is
effective  for  fiscal  years  beginning  after  December  15,  1997.    Coastal
anticipates implementing Statement 131 for its fiscal 1998 Annual Report on Form
10-K.    Implementation  of  Statement  131  should  have  no material effect on
Coastal's  Consolidated  Financial  Statements.

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

(14) BRANCH  PURCHASE

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

<TABLE>
<CAPTION>

<S>                            <C>  <C>
                               <C>  <C>
Assets:
Cash                           $120,085
Loans receivable                176,157
U.S. Treasury securities         26,942
Goodwill                         17,255
Property and equipment           10,743
Other assets                      5,437
                               --------
  Total assets                 $356,619
                               ========

Liabilities:
Deposits                       $355,425
Other liabilities                 1,194
                               --------
  Total liabilities            $356,619
                               ========
</TABLE>



ITEM  2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS  OF  OPERATIONS
            ---------------------------------------------------------------

Financial  Condition
--------------------

     On  August  14,  1998,  Coastal  completed  the  acquisition  of the Valley
branches  of  Pacific  Southwest  Bank,  also known as San Benito Bank and Trust
Company,  a  unit  of  Pacific  Southwest Bank (the "Valley Acquisition").  This
acquisition  added  twelve  branches,  approximately  $176.2  million  in  loans
receivable  and  $355.4  in  deposits  to  Coastal's  existing  organization.

     Total  assets  increased  7.4%  or $214.9 million from December 31, 1997 to
September  30,  1998.    The net increase resulted primarily from an increase in
loans  receivable  of  $284.1  million, a $21.3 million increase in stock in the
Federal  Home Loan Bank of Dallas ("FHLB"), a $19.1 million increase in cash and
cash  equivalents,  a  $15.7  million  increase in goodwill and an $11.2 million
increase  in  property  and equipment, offset by decreases of $110.3 million and
$44.2 million in mortgage-backed securities held-to-maturity and mortgage-backed
securities  available-for-sale,  respectively.  The increase in loans receivable
was primarily due to bulk residential mortgage loan purchases of $294.0 million,
$176.2 million loans acquired in the Valley Acquisition (net of the $2.3 million
allowance for loan losses recorded at acquisition) and $25.6 million of consumer
loan  purchases  from correspondent lenders, in addition to an increase of $24.1
million  in  commercial  loans,  secured  by residential mortgage loans held for
sale,  during  the  nine  months ended September 30, 1998.  These increases were
somewhat  offset  by  principal payments received.  The increase in stock in the
FHLB  was  due  to  the increased amounts required to be maintained based on the
level  of  FHLB advances outstanding.  The increase in goodwill was due to $17.3
million  of  goodwill  recorded  due to the Valley Acquisition offset by current
year  amortization.    The increase in property and equipment was also primarily
due  to  the Valley Acquisition.  The decrease in mortgage-backed securities was
due  to  principal  payments  received  and  the  sale  of  $26.3  million  of
mortgage-backed  securities  available-for-sale.

     Savings  deposits  increased $329.5 million or 24.0% from December 31, 1997
to  September  30,  1998  due  to the $355.4 million of deposits acquired in the
Valley  Acquisition  offset  by  decreases in existing deposits. Securities sold
under  agreements  to  repurchase decreased 69.1% or $547.0 million and advances
from  the  FHLB  increased  76.2%  or  $411.8  million from December 31, 1997 to
September 30, 1998 due to a reallocation of borrowings to take advantage of more
favorable interest rates.  Stockholders' equity increased 10.1% or $10.6 million
from December 31, 1997 to September 30, 1998 as a result primarily of net income
and  a  $1.5  million  decrease in accumulated other comprehensive income (loss)
offset  by  dividends  declared  and  treasury  stock  acquired of $3.3 million.

Results  of  Operations  for  the  Nine Months Ended September 30, 1998 and 1997
--------------------------------------------------------------------------------

     General
     -------

     For  the  nine months ended September 30, 1998, net income before preferred
stock  dividends was $15.6 million compared to $10.7 million for the nine months
ended  September  30, 1997.  The increase in net income in the first nine months
of  1998 was primarily due to the resolution of an outstanding tax benefit issue
with the Federal Deposit Insurance Corporation as Manager of the Federal Savings
and  Loan  Insurance  Corporation  Resolution Fund.  The resolution of the issue
resulted  in  Coastal  recording  a $3.7 million, or 47 cents per diluted share,
reversal of accrued income taxes; resulting in a one-time positive effect on net
income.  The resolution of the tax benefit issue will also contribute an ongoing
quarterly tax benefit of $226,000 or approximately 3 cents per diluted share (as
of  September  30,  1998).    This  tax  benefit  is  expected  to  continue for
approximately  3  years.

     Net  income  for the first three months of 1998 also included an additional
provision for loan losses of $1.0 million (above the current quarterly provision
of  $450,000)  and  a  writedown of purchased mortgage loan premium of $709,000.
The additional provision for loan losses of $1.0 million, or 8 cents per diluted
share  after  tax, was recorded to increase the allowance for loan losses due to
the  continuing change in the composition of  the loans receivable  portfolio as
a  result  of  management's  emphasis  on business lending. The writedown of the
purchased  mortgage loan premium of $709,000, or 6 cents per diluted share after
tax,  was  related  to  an  adjustable  rate whole loan package purchased in the
second  quarter  of  1997,  on which Coastal experienced high prepayments during
1997 and through the first quarter of 1998, resulting from a comparatively lower
current  interest  rate  environment.

     Net  interest  income  increased  $5.4  million  for  the nine months ended
September  30,  1998  as  compared  to the nine months ended September 30, 1997.
Noninterest  income (excluding the writedown of purchased mortgage loan premium)
increased during such period by $699,000.  Noninterest expense increased by $3.8
million  and  the  provision  for  federal  income taxes (excluding the one-time
effect  of  the  $3.7  million  reversal  of  accrued income taxes) decreased by
$559,000  from  the  1997  to  the  1998  nine  month  period due to the ongoing
quarterly  benefit  attributable  to the tax benefit issue and the tax effect of
the  recording  of the additional provision for loan losses and the writedown of
the  purchased  mortgage  loan  premium  during  the  first nine months of 1998.

     Interest  Income
     ----------------

     Interest income for the nine months ended September 30, 1998 increased $6.7
million or 4.4% from the nine months ended September 30, 1997.  The increase was
primarily  due  to  an  increase  of  $7.2  million  in interest earned on loans
receivable over the prior comparable period.  The increase in interest income on
loans  receivable was due to a $158.0 million increase in the average balance of
loans  receivable  offset  by a decrease in the average yield from 8.68% for the
nine  months  ended  September  30,  1997  to  8.39%  for  the nine months ended
September  30,  1998.  The decrease in the average yield on loans receivable was
due  in  part to $749,000 (or 6 cents per diluted share after tax) of additional
amortization  of  purchased  mortgage  loan premium during the nine months ended
September  30,  1998.   This amortization was attributable to an adjustable rate
whole  loan  package  purchased  in the second quarter of 1997, on which Coastal
experienced  high prepayments during 1997 and through the first quarter of 1998.
As  discussed previously, Coastal recorded a $709,000 writedown of the purchased
mortgage  loan  premium  on  this  package  in  March 1998, which has positively
impacted  the  average  yield  since  March  31,  1998.

     Interest  income  on  federal funds sold, certificates of deposit and other
investments  increased  $898,000  which was offset by a $1.5 million decrease in
interest  income  on  mortgage-backed securities.  Total interest-earning assets
for  the  nine months ended September 30, 1998 averaged $2.9 billion as compared
to  $2.8  billion  for  the  nine  months  ended  September  30,  1997.

     Interest  Expense
     -----------------

     Interest expense on interest-bearing liabilities was $108.9 million for the
nine months ended September 30, 1998, as compared to $107.6 million for the same
period  in  1997.    The increase in interest expense was due to a $58.6 million
increase  in  the  average  balance  of interest-bearing liabilities during such
period  offset  by  a  decrease  in  the  average  rate paid on interest-bearing
liabilities from 5.42% for the nine months ended September 30, 1997 to 5.36% for
the  nine  months  ended  September  30,  1998.    The  increase  in  average
interest-bearing  liabilities  consisted  of  a  $288.8 million increase in FHLB
advances,  a $63.5 million increase in interest-bearing savings deposits, offset
by  a  $293.7 million decrease in securities sold under agreements to repurchase
and  federal  funds  purchased.   The reallocation of the borrowings outstanding
during  the  nine month periods was directly attributable to Coastal's change in
funding  sources  to  take  advantage  of  more  favorable  interest  rates.

<PAGE>
     Net  Interest  Income
     ---------------------

     Net  interest  income was $48.5 million for the nine months ended Setpember
30,  1998  and  $43.1  million for the same period in 1997.  Net interest margin
("Margin")  was  2.23%  for the nine months ended September 30, 1998 compared to
2.07%  for the same  period in 1997.  Margin represents net interest income as a
percentage  of average interest-earning assets.  Net interest spread ("Spread"),
defined  to  exclude  noninterest-bearing deposits, increased from 1.83% for the
nine  months  ended  September  30,  1997  to  1.86%  for  the nine months ended
September  30,  1998.    Management  also calculates an alternative spread which
includes  noninterest-bearing deposits.  Under this calculation, the alternative
spreads  for  the  nine  months ended September 30, 1998 and 1997 were 2.05% and
2.00%,  respectively.    Margin  and  spread  are affected by the changes in the
amount  and  composition  of  interest-earning  assets  and  interest-bearing
liabilities.    The overall increase in net interest spread was primarily due to
the decrease in the average rate paid on interest-bearing liabilities of 6 basis
points.    The decrease in the average rate paid on interest-bearing liabilities
was  due  primarily  to  the  overall  decrease  in wholesale funding costs.  In
addition,  the average balance of loans receivable increased $158.0 million from
the  nine months ended September 30, 1997 to the nine months ended September 30,
1998,  while  the  average  yield  decreased from 8.68% to 8.39% and the average
balance  of  mortgage-backed  securities  decreased  $46.3 million from the nine
months  ended  September  30,  1997 to the nine months ended September 30, 1998,
while  the  average  yield  increased  from  6.10%  to  6.16%.    Average  net
interest-earning  assets  increased  $73.7  million  from  the nine months ended
September  30,  1997  to  the  nine  months  ended September  30, 1998. 

     Spread  for  the  nine  months ended September 30, 1998 was also negatively
affected  by  the  additional amortization of purchased mortgage loan premium as
discussed  previously.    The  writedown  of the purchased mortgage loan premium
recorded  in  March  1998  has  decreased  the  ongoing  amortization  effect of
prepayments  related  to  the  adjustable  rate  whole  loan  package.

     Management's  goal  is  to  achieve  a  more  desirable  asset/liability
composition  which  is  less  vulnerable  to  market interest rate fluctuations,
primarily through the addition of loans tied to variable rates such as LIBOR and
local  and  regional  prime rates and through the efforts to replace LIBOR based
borrowings  with  lower  cost  deposits.    In  addition,  management intends to
gradually  increase  commercial  business  loans  to  approximately 15% of total
assets  and  commercial business (noninterest-bearing) deposits to approximately
10%  of  total  deposits  within  three  to  five  years.

     Provision  for  Loan  Losses
     ----------------------------

     The  provision  for  loan losses was $2.4 million for the nine months ended
September  30,  1998  and  $1.4  million for the nine months ended September 30,
1997.  During the nine months ended September 30, 1998, the increased provision,
above  the current quarterly provision of $450,000, was recorded to increase the
allowance for loan losses due to the continuing change in the composition of the
loans  receivable  portfolio.    This  change  is  occurring  as  a  result  of
management's  emphasis  on business lending.  The allowance for loan losses as a
percentage of total loans was 0.71% at September 30, 1998 and 0.55% at September
30,  1997.    At  September 30, 1998, the allowance for loan losses included the
$2.3  million acquisition allowance adjustment as a result of the loans acquired
in  the  Valley  Acquisition,  of  which  approximately 58% were commercial real
estate  and  commercial,  financial and industrial loans.  Although no assurance
can  be given, management believes that the present allowance for loan losses is
adequate considering the changing composition of the loans receivable portfolio,
historical  loss experience, delinquency trends and current economic conditions.
Management  will  continue to review its loan loss allowance policy as Coastal's
loan  portfolio  grows and diversifies to determine if changes to the policy and
resulting  allowance  for  loan  losses  are  necessary.


<PAGE>
     Noninterest  Income
     -------------------

     For the nine months ended September 30, 1998, noninterest income (excluding
the writedown of purchased mortgage loan premium) increased $699,000 or 14.7% to
$5.5  million,  compared to $4.8 million for the nine months ended September 30,
1997.    The  increase in noninterest income was primarily due to an increase of
$981,000  in  loan  fees  and service charges on deposit accounts and a $481,000
increase  in  other  noninterest  income.  The increase in loan fees and service
charges  on deposit accounts consisted of a $250,000 increase in loan fees and a
$731,000  increase in service charges on deposit accounts due to the increase in
transaction  type  deposit  accounts,  including  the  transaction  type deposit
accounts  acquired  in  the  Valley  Acquisition.  These increases were somewhat
offset  by  a  $526,000  decrease  in  loan servicing income due to the reducing
servicing  portfolio.    In  addition,  as discussed previously, during the nine
months  ended  September  30,  1998,  Coastal  recorded a writedown of purchased
mortgage  loan  premium  of  $709,000.

     Noninterest  Expense
     --------------------

     For the nine months ended September 30, 1998, noninterest expense increased
$3.8  million  from  the  nine  months  ended September 30, 1997.  Compensation,
payroll  taxes  and other benefits as well as office occupancy expense increased
$2.1  million  and  $1.1  million,  respectively,  from  the  nine  months ended
September 30, 1997 to the nine months ended September 30, 1998, primarily due to
the staffing increases related to the expansion of the loan product base and the
continuing  development  of commercial business lending programs, in addition to
the  staffing  expenses  related  to the Valley Acquisition.  Occupancy expenses
also  increased  due  to the acquisition of assets and other expenses related to
the  relocation of Coastal's corporate headquarters in the third quarter of 1997
and  the  acquisition  of  the  twelve  branches  in the Valley Acquisition.  In
addition,  data  processing  expenses and the amortization of goodwill increased
$130,000  and  $156,000,  respectively, primarily due to the Valley Acquisition.
Other  changes  included  a  $65,000  increase  in real estate owned expenses, a
$93,000  increase  in  insurance  premiums  (which  includes  deposit  insurance
premiums)  and  a $42,000 increase in other operating expenses.  During the nine
months  ended  September  30,  1998,  noninterest expense included approximately
$120,000  in  nonrecurring  expenses  incurred  due  to  the Valley Acquisition.

     Provision  for  Federal  Income  Taxes
     --------------------------------------

     For  the  nine  months  ended September 30, 1998, the provision for federal
income  taxes  (excluding  the  one-time  effect of the $3.7 million reversal of
accrued  income  taxes)  was  $5.6 million compared to $6.2 million for the nine
months  ended  September  30,  1997.    The  decrease  from 1997 to 1998 was due
primarily to the ongoing quarterly benefit attributable to the tax benefit issue
(a  benefit of approximately $226,000 per quarter) and the tax benefit effect of
the  recording  of the additional provision for loan losses and the writedown of
the  purchased  mortgage  loan  premium  during  the  first nine months of 1998.

Results  of  Operations  for  the Three Months Ended September 30, 1998 and 1997
--------------------------------------------------------------------------------

     General
     -------

     For  the three months ended September 30, 1998, net income before preferred
stock  dividends  was $4.4 million compared to $3.4 million for the three months
ended  September  30,  1997.   The increase  was primarily due to a $3.1 million
increase in net interest income for the three months ended September 30, 1998 as
compared  to  the  three  months  ended  September  30, 1997. Noninterest income
increased  during such period by $309,000. Noninterest expense increased by $2.3
million and the provision for federal income taxes increased by $41,000 from the
1997  to  the  1998  three  month  period.


<PAGE>
     Interest  Income
     ----------------

     Interest  income  for  the  three months ended September 30, 1998 increased
$2.9  million  or  5.7%  from  the  three  months ended September 30, 1997.  The
increase  was primarily due to an increase of $3.6 million in interest earned on
loans  receivable  over  the prior comparable quarter.  The increase in interest
income  on  loans receivable was due to a $142.5 million increase in the average
balance  of loans receivable and an increase in the average yield from 8.28% for
the  three  months  ended September 30, 1997 to 8.47% for the three months ended
September  30,  1998.

     In addition, interest income on federal funds sold, certificates of deposit
and  other  investments  increased  $533,000  while  interest  income  on
mortgage-backed  securities  decreased  $1.3  million  due  to  a  lower average
balance.  Total interest-earning assets for the three months ended September 30,
1998  averaged  $3.0  billion  as  compared to $2.9 billion for the three months
ended  September  30,  1997.

     Interest  Expense
     -----------------

     Interest  expense on interest-bearing liabilities was $36.9 million for the
three months ended September 30, 1998, as compared to $37.1 million for the same
period  in  1997.  The decrease in interest expense was due to a decrease in the
average  rate  paid  on  interest-bearing  liabilities  from 5.47% for the three
months  ended  September  30, 1997 to 5.33% for the three months ended September
30,  1998  offset somewhat by a $74.8 million increase in the average balance of
interest-bearing  liabilities.    The  increase  in  average  interest-bearing
liabilities  consisted  of  a $454.2 million increase in FHLB advances, a $133.9
million  increase  in  interest-bearing  savings  deposits,  offset  by a $513.3
million  decrease  in  securities  sold  under  agreements  to  repurchase.  The
reallocation  of  the  borrowings outstanding during the three month periods was
directly  attributable  to Coastal's change in funding sources to take advantage
of  more  favorable  interest  rates.

     Net  Interest  Income
     ---------------------

     Net  interest income was $17.3 million for the three months ended September
30,  1998  and  $14.2  million for the same period in 1997.  Net interest margin
("Margin")  was  2.32% for the three months ended September 30, 1998 compared to
1.98%  for  the  three  months  ended September 30, 1997.  Margin represents net
interest  income  as  a  percentage  of  average  interest-earning  assets.  Net
interest  spread  ("Spread"),  defined  to exclude noninterest-bearing deposits,
increased  from 1.66% for the three months ended September 30, 1997 to 1.95% for
the  three  months  ended  September  30,  1998.   Management also calculates an
alternative  spread  which  includes  noninterest-bearing  deposits.  Under this
calculation,  the  alternative  spreads for the three months ended September 30,
1998  and  1997  were  2.16%  and  1.86%,  respectively.   Margin and spread are
affected by the changes in the amount and composition of interest-earning assets
and  interest-bearing  liabilities.  The overall increase in net interest spread
was primarily due to an increase in the average yield on interest-earning assets
of  15  basis points and a decrease in the average rate paid on interest-bearing
liabilities  of  14  basis  points.    The  average  balance of loans receivable
increased  $142.5  million from the three months ended September 30, 1997 to the
three  months  ended  September 30, 1998, while the average yield increased from
8.28%  to  8.47%.    The average balance of mortgage-backed securities decreased
$80.3 million from the three months ended September 30, 1997 to the three months
ended  September  30,  1998,  while  the  average  yield remained at 6.12%.  The
decrease  in  the  average  rate  paid  on  interest-bearing liabilities was due
primarily  to  the  overall  decrease  in  wholesale funding costs.  Average net
interest-earning  assets  increased  $24.6  million  from the three months ended
September  30,  1997  to  the  three  months  ended  September  30,  1998.


<PAGE>
     Management's  goal  is  to  achieve  a  more  desirable  asset/liability
composition  which  is  less  vulnerable  to  market interest rate fluctuations,
primarily through the addition of loans tied to variable rates such as LIBOR and
local  and  regional  prime rates and through the efforts to replace LIBOR based
borrowings  with  lower  cost  deposits.    In  addition,  management intends to
gradually  increase  commercial  business  loans  to  approximately 15% of total
assets  and  commercial business (noninterest-bearing) deposits to approximately
10%  of  total  deposits  within  three  to  five  years.

     Provision  for  Loan  Losses
     ----------------------------

     The  provision for loan losses was $450,000 for both the three months ended
September 30, 1998 and the three months ended September 30, 1997.  The allowance
for  loan  losses as a percentage of total loans was 0.71% at September 30, 1998
and  0.55% at September 30, 1997.  At September 30, 1998, the allowance for loan
losses included the $2.3 million acquisition allowance adjustment as a result of
the  loans  acquired  in the Valley Acquisition, of which approximately 58% were
commercial real estate and commercial, financial and industrial loans.  Although
no  assurance  can  be given, management believes that the present allowance for
loan  losses  is  adequate  considering  the  changing  composition of the loans
receivable portfolio, historical loss experience, delinquency trends and current
economic  conditions. Management will continue to review its loan loss allowance
policy as Coastal's loan portfolio grows and diversifies to determine if changes
to  the  policy  and  resulting  allowance  for  loan  losses  are  necessary.

     Noninterest  Income
     -------------------

     For the three months ended September 30, 1998, noninterest income increased
$309,000 or 17.7% to $2.1 million, compared to $1.7 million for the three months
ended  September 30, 1997.  The increase in noninterest income was primarily due
to  an increase of $390,000 in loan fees and service charges on deposit accounts
and  a $318,000 increase in other noninterest income.  The increase in loan fees
and  service  charges  on  deposit  accounts consisted of a $330,000 increase in
service  charges on deposit accounts and a $60,000 increase in loan fees.  These
increases  were  somewhat offset by a $162,000 decrease in loan servicing income
and  a  $237,000  decrease  in  the  gain on sales of mortgage-backed securities
available-for-sale.

     Noninterest  Expense
     --------------------

     For  the  three  months  ended  September  30,  1998,  noninterest  expense
increased  $2.3  million  from  the  three  months  ended  September  30,  1997.
Compensation,  payroll  taxes  and  other  benefits  as well as office occupancy
expense increased $1.4 million and $382,000, respectively, from the three months
ended September 30, 1997 to the three months ended September 30, 1998, primarily
due  to the staffing increases related to the expansion of the loan product base
and  the  continuing  development  of  commercial  business lending programs, in
addition  to the staffing expenses related to the Valley Acquisition.  Occupancy
expenses  also  increased  due  to  the acquisition of assets and other expenses
related  to  the  relocation  of  Coastal's  corporate headquarters in the third
quarter  of  1997  and  the  acquisition  of  the  twelve branches in the Valley
Acquisition.    In  addition, the amortization of goodwill increased $95,000 and
insurance  premiums  increased $113,000 primarily due to the Valley Acquisition.
Other  changes  included  a  $124,000  increase in real estate owned expenses, a
$59,000  increase  in  data  processing expense and a $174,000 increase in other
operating  expenses.    During  the  three  months  ended  September  30,  1998,
noninterest  expense  included  approximately  $120,000 in nonrecurring expenses
incurred  due  to  the  Valley  Acquisition.

     Provision  for  Federal  Income  Taxes
     --------------------------------------

     For  the  three months ended September 30, 1998 and 1997, the provision for
federal  income  taxes  was  $2.0  million.   The provision in 1998 includes the
ongoing  quarterly benefit attributable to the tax benefit issue resolved in the
first  quarter  of  the  year (a benefit of approximately $226,000 per quarter).

     Liquidity  and  Capital  Resources
     ----------------------------------

     Coastal's  primary  sources  of  funds  consist of savings deposits bearing
market  rates  of  interest,  securities  sold  under  agreements to repurchase,
advances  from the FHLB, federal funds purchased and principal payments on loans
receivable  and  mortgage-backed securities.  Coastal uses its funding resources
principally  to  meet  its  ongoing  commitments  to  fund maturing deposits and
deposit  withdrawals,  repay  borrowings,  purchase  loans  receivable  and
mortgage-backed  securities,  fund  existing  and  continuing  loan commitments,
maintain  its  liquidity, meet operating expenses and fund acquisitions of other
banks and thrifts, either on a branch office or whole bank acquisition basis. At
September  30,  1998,  Coastal  had binding commitments to originate or purchase
loans totaling approximately $124.1 million and had $84.8 million of undisbursed
loans  in process. Scheduled maturities of certificates of deposit during the 12
months  following  September  30,  1998  totaled $993.7 million at September 30,
1998.    Management  believes that Coastal has adequate resources to fund all of
its  commitments.  In addition, Coastal has historically experienced a retention
rate  of  maturing certificates of deposit of $5,000 or greater of approximately
80%.

     As  of  September  30,  1998, Coastal operated 49 retail banking offices in
Texas  cities,  including Houston, Austin, Corpus Christi, the Rio Grande Valley
and small cities in the southeast quadrant of Texas. Management's five year goal
is  to have over $5 billion in assets, over $3 billion in deposits, $2.5 billion
in  loans and 80 branches in cities throughout central and south Texas, although
there  can  be no assurance that this goal can be accomplished through growth or
acquisitions.

     The  Year  2000
     ---------------

     Many  existing  computer  programs, including many utilized by Coastal, use
only  two  digits  to  identify  a  year in the date field.  These programs were
designed  and developed without considering the impact of the upcoming change in
the  century.  Because of the year 2000 implications, Coastal formally initiated
a  project  during  the first quarter of 1997 to ensure that its operational and
financial systems will not be adversely affected by year 2000 software problems.
The  year  2000  project  team,  which  includes  all  levels  of management, is
identifying  its  computer  applications  which  could  fail or create erroneous
results  because  of  the  year 2000, and is developing alternate ("contingent")
operating  systems  for  these  applications.

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

     The  costs associated with the year 2000 issues are estimated not to exceed
$300,000 in the aggregate.  Such costs will be capitalized and amortized over an
estimated  three  to  five  year  period.

     Planning  and testing will not ensure that any organization will be able to
conduct  business  around and after the year 2000.  Testing does not ensure that
our  customers  and  other  business  partners will be able to conduct business.
Coastal is performing due diligence on our customers and other business partners
by  the  implementation  of processes for evaluating our customers' and business
partners' readiness  for  the  year  2000  which will be continuously monitored.

     Coastal  has  implemented  procedures and continues to refine its processes
for  evaluating  its  business  readiness  in addition to developing contingency
plans  to  ensure that alternate operating systems are available in the event of
unforeseen  problems.   The effect of many business disruptions at the same time
may  impact  Coastal.  Coastal will continue  to review its contingency plans to
reasonably  address  these  incidents.

     Forward-Looking  Information
     ----------------------------

     "Safe  Harbor" Statement under the Private Securities Litigation Reform Act
of  1995:   The statements contained in this Quarterly Report on Form 10-Q which
are  not  historical  facts  contain forward looking information with respect to
plans, projections or future performance of the Company, the occurrence of which
involve  certain  risks and uncertainties detailed in the Company's filings with
the  Securities  and  Exchange  Commission  ("SEC").

     The Management's Discussion and Analysis of Financial Condition and Results
of  Operations set forth in the Form 10-Q should be read in conjunction with the
information  contained  in  the  Consolidated Financial Statements and the Notes
thereto.    Such  discussion  contains  "forward-looking  statements" within the
meaning  of  the  Private  Securities Litigation Reform Act of 1995 (the "Reform
Act"),  and is subject to the safe harbor created by that Reform Act.  The words
"estimate," "project," "anticipate," "expect," "intend," "believe," "plans," and
similar expressions are intended to identify forward-looking statements. Because
such  forward-looking  statements  involve  risks  and  uncertainties, there are
important  factors  that  could  cause  actual results to differ materially from
those  expressed  or implied by such forward-looking statements. Factors, all of
which  are  difficult  to  predict  and  many of which are beyond the control of
Coastal,  that  could cause actual results to differ materially include, but are
not  limited  to:    risks  related to Coastal's acquisition strategy, including
risks  of  adversely  changing  results  of  operations  and  factors  affecting
Coastal's  ability  to  consummate  further  acquisitions;  risks  involved  in
Coastal's  ability  to  quickly  and  efficiently  integrate  the  operations of
acquired  entities  with  those  of  Coastal;  changes  in  general economic and
business  conditions;  changes  in market rates of interest; changes in the laws
and  regulations  applicable  to  Coastal;  the risks associated with the Bank's
non-traditional  lending  (loans  other  than single-family residential mortgage
loans  such  as multifamily, real estate acquisition and development, commercial
real  estate,  commercial  business,  warehouse  and  mortgage  servicing rights
loans);  and  changes  in  business strategies and other factors as discussed in
Coastal's  Annual  Report  on Form 10-K for the year ended December 31, 1997, as
filed  with  the  SEC  on  March  24,  1998.

ITEM  3.          QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT MARKET RISK
                  --------------------------------------------------------------

     There  have  been  no  material  changes  in  Coastal's  interest rate risk
position since December 31, 1997. Coastal's principal market risk exposure is to
interest  rates.   See note 8 of the Notes to Consolidated Financial Statements.


<PAGE>
     PART  II  -  OTHER  INFORMATION

Item  1.          Legal  Proceedings
                  ------------------

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

Item  2.          Changes  in  Securities
                  -----------------------

             a)   Not  applicable.
             b)   Not  applicable.

Item  3.          Default  Upon  Senior  Securities
                  ---------------------------------

                  Not  applicable.

Item  4.          Submission  of  Matters  to  a  Vote  of  Security  Holders
                  -----------------------------------------------------------

     Not  applicable.

Item  5.          Other  Information
                  ------------------

     Important  Dates  Relating  to  Stockholder  Proposals  for the 1999 Annual
     Meeting  of  Shareholders.
     ---------------------------------------------------------------------------

     As noted in the Company's definitive Proxy Statement for the Annual Meeting
of  Stockholders  to  be  held  April  23,  1998  under the caption "Stockholder
Proposals,"  any  proposal  which  a  stockholder  of the Company wishes to have
included  in the Company's proxy solicitation materials to be used in connection
with  the Company's 1999 Annual Meeting of Shareholders, must be received at the
principal executive offices of the Company, Coastal Banc Plaza, 5718 Westheimer,
Suite  600,  Houston, Texas 77057, Attention:  Secretary, no later than November
24,  1998.

     If the notice of such proposal is received after November 24, 1998, it will
not be considered timely pursuant to Proxy Rule 14a-8 and such proposal will not
be  included  in  the  Company's  proxy  soliciting  materials.

     STOCKHOLDER  PROPOSALS  WHICH  ARE  NOT  SUBMITTED  FOR  INCLUSION  IN  THE
COMPANY'S  PROXY  MATERIALS PURSUANT TO RULE 14A-8 UNDER THE SECURITIES EXCHANGE
ACT  OF  1934  MAY BE BROUGHT BEFORE AN ANNUAL MEETING PURSUANT TO THE COMPANY'S
ARTICLES  OF INCORPORATION, WHICH PROVIDE THAT BUSINESS MUST BE PROPERLY BROUGHT
BEFORE  THE  MEETING  BY  OR  AT  THE  DIRECTION  OF  THE BOARD OF DIRECTORS, OR
OTHERWISE PROPERLY BROUGHT BEFORE THE MEETING BY A STOCKHOLDER.  FOR BUSINESS TO
BE  PROPERLY  BROUGHT BEFORE AN ANNUAL MEETING BY A STOCKHOLDER, THE STOCKHOLDER
MUST  HAVE  GIVEN  TIMELY  NOTICE  THEREOF  IN  WRITING  TO THE SECRETARY OF THE
COMPANY.    TO BE TIMELY, A STOCKHOLDER'S NOTICE MUST BE DELIVERED TO, OR MAILED
AND  RECEIVED  AT,  THE  PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY ON OR BEFORE
JANUARY 23, 1999.*  A STOCKHOLDER'S NOTICE SHALL SET FORTH AS TO EACH MATTER THE
STOCKHOLDER  PROPOSES  TO  BRING  BEFORE  AN ANNUAL MEETING FOR SUCH INFORMATION
REQUIRED  BY  THE  COMPANY'S  ARTICLES OF INCORPORATION.  IF THE PROPOSAL IS NOT
MADE  IN  ACCORDANCE  WITH  THE  TERMS  OF  THE  ARTICLES OF INCORPORATION, SUCH
PROPOSAL  WILL  NOT  BE  ACTED  UPON  AT  THE  1999  ANNUAL  MEETING.


______________
*[WHICH IS THE DATE WHICH IS NOT LESS THAN 60 DAYS PRIOR TO THE ANNIVERSARY DATE
OF  THE  MAILING  OF  PROXY  MATERIALS  BY  THE  COMPANY  IN CONNECTION WITH THE
IMMEDIATELY  PRECEDING  ANNUAL  MEETING  OF  STOCKHOLDERS.]


Item  6.          Exhibits  and  Reports  on  Form  8-K
                  -------------------------------------

     (a)          The  following  exhibits  are  filed  as  part of this report:
          Exhibit  27  -  Financial  Data  Schedule
          Exhibit  99  -  Forward-Looking  Information
(b)          Form  8-K filed on August 25, 1998 concerning the announcement that
Coastal  had  completed  the  acquisition  of  the  Valley  Branches  of Pacific
Southwest  Bank  also  known  as  San  Benito  Bank and Trust, a Unit of Pacific
Southwest  Bank.
(c)        Form 8-K filed on September 14, 1998 concerning the announcement that
the  Board  of  Directors  had  authorized  the  repurchase  of  up  to  6.6%
(approximately  500,000  shares)  of  the  outstanding  shares  of common stock.




                                   SIGNATURES


     Pursuant  to  the  requirement  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.




Dated:      11/13/98                         By/s/     Manuel J. Mehos
            --------                              ----------------------
                                                   Manuel  J.  Mehos
                                                   Chairman  of  the  Board
                                                   Chief  Executive  Officer









Dated:         11/13/98                      By/s/     Catherine N. Wylie
               --------                           -----------------------
                                                  Catherine  N.  Wylie
                                                  Chief  Financial  Officer



                                   Exhibit 27


                             Financial Data Schedule





                                   Exhibit 99


                           Forward-Looking Information





                                   EXHIBIT 99

     Forward-Looking  Information

     "Safe  Harbor" Statement under the Private Securities Litigation Reform Act
of  1995:   The statements contained in this Quarterly Report on Form 10-Q which
are  not  historical  facts  contain forward looking information with respect to
plans, projections or future performance of the Company, the occurrence of which
involve  certain  risks and uncertainties detailed in the Company's filings with
the  Securities  and  Exchange  Commission  ("SEC").

     The Management's Discussion and Analysis of Financial Condition and Results
of  Operations set forth in the Form 10-Q should be read in conjunction with the
information  contained  in  the  Consolidated Financial Statements and the Notes
thereto.    Such  discussion  contains  "forward-looking  statements" within the
meaning  of  the  Private  Securities Litigation Reform Act of 1995 (the "Reform
Act"),  and is subject to the safe harbor created by that Reform Act.  The words
"estimate," "project," "anticipate," "expect," "intend," "believe," "plans," and
similar expressions are intended to identify forward-looking statements. Because
such  forward-looking  statements  involve  risks  and  uncertainties, there are
important  factors  that  could  cause  actual results to differ materially from
those  expressed  or implied by such forward-looking statements. Factors, all of
which  are  difficult  to  predict  and  many of which are beyond the control of
Coastal,  that  could cause actual results to differ materially include, but are
not  limited  to:    risks  related to Coastal's acquisition strategy, including
risks  of  adversely  changing  results  of  operations  and  factors  affecting
Coastal's  ability  to  consummate  further  acquisitions;  risks  involved  in
Coastal's  ability  to  quickly  and  efficiently  integrate  the  operations of
acquired  entities  with  those  of  Coastal;  changes  in  general economic and
business  conditions;  changes  in market rates of interest; changes in the laws
and  regulations  applicable  to  Coastal;  the risks associated with the Bank's
non-traditional  lending  (loans  other  than single-family residential mortgage
loans  such  as multifamily, real estate acquisition and development, commercial
real  estate,  commercial  business,  warehouse  and  mortgage  servicing rights
loans);  and  changes  in  business strategies and other factors as discussed in
Coastal's  Annual  Report  on Form 10-K for the year ended December 31, 1997, as
filed  with  the    SEC  on  March  24,  1998.



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