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  June  30,  2001

       [     ]     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:  5,766,747  AS OF JULY 31, 2001


<PAGE>
                     COASTAL BANCORP, INC. AND SUBSIDIARIES

                                Table of Contents



PART  I.     FINANCIAL  INFORMATION
--------     ----------------------
<TABLE>

<CAPTION>



<S>     <C>                                                                       <C>
Item 1  Financial Statements (unaudited)
        Consolidated Statements of Financial Condition at June 30, 2001
        and December 31, 2000                                                      1

        Consolidated Statements of Income for the Six-Month Periods Ended
        June 30, 2001 and 2000                                                     2

        Consolidated Statements of Income for the Three-Month Periods Ended
        June 30, 2001 and 2000                                                     3

        Consolidated Statements of Comprehensive Income for the Six-Month and
        Three-Month Periods Ended June 30, 2001 and 2000                           4

        Consolidated Statements of Cash Flows for the Six-Month Periods
        Ended June 30, 2001 and 2000                                               5

        Notes to Consolidated Financial Statements                                 7

Item 2  Management's Discussion and Analysis of Financial Condition and Results
        of Operations                                                             17

Item 3  Quantitative and Qualitative Disclosures About Market Risk                23

</TABLE>






PART  II.     OTHER  INFORMATION
---------     ------------------
<TABLE>

<CAPTION>



<S>     <C>                                                  <C>
Item 1  Legal Proceedings                                    24
Item 2  Changes in Securities and Use of Proceeds            24
Item 3  Default upon Senior Securities                       24
Item 4  Submission of Matters to a Vote of Security Holders  24
Item 5  Other Information                                    24
Item 6  Exhibits and Reports on Form 8-K                     24
</TABLE>




SIGNATURES

<PAGE>



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

<TABLE>

<CAPTION>

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


                                                                      June 30,               December 31,
ASSETS                                                                  2001                     2000
------------------------------------------------------               ----------              ------------
                                                                     (Unaudited)
<S>                                                     <C>          <C>         <C>           <C>
Cash and cash equivalents                                            $   37,485                $   69,730
Federal funds sold                                                        6,570                       869
Loans receivable (note 4)                                             1,990,914                 1,896,228
Mortgage-backed securities held-to-maturity (note 3)                    851,649                   885,565
Mortgage-backed securities available-for-sale (note 3)                   90,868                    94,673
U.S. Treasury securities held-to-maturity                                 1,399                     1,497
Accrued interest receivable                                              17,404                    18,772
Property and equipment                                                   27,057                    28,086
Stock in the Federal Home Loan Bank of Dallas (FHLB)                     34,898                    58,005
Goodwill                                                                 23,215                    24,611
Prepaid expenses and other assets                                        13,554                    13,575
                                                                     ----------                ----------
                                                                     $3,095,013                $3,091,611
                                                                     ==========                ==========
</TABLE>


<TABLE>

<CAPTION>

     LIABILITIES  AND  STOCKHOLDERS'  EQUITY
     ---------------------------------------


<S>                                                            <C>          <C>
Liabilities:
 Deposits (note 5). . . . . . . . . . . . . . . . . . . . .       .  $1,691,496              $1,674,981
 Advances from the FHLB (note 6). . . . . . . . . . . . . .       .     666,158               1,150,305
 Securities sold under agreements to repurchase and federal
   funds purchased (note 6) . . . . . . . . . . . . . . . . .           483,180                      --
 Senior notes payable, net (note 7) . . . . . . . . . . . . .            46,900                  46,900
 Advances from borrowers for taxes and insurance. . . . . . .            10,105                   5,050
 Other liabilities and accrued expenses . . . . . . . . . . .            18,718                  47,154
                                                                     -----------             -----------
     Total liabilities. . . . . . . . . . . . . . . . . . . .         2,916,557               2,924,390
                                                                      ----------              ----------

Minority interest - 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, 11 and 12):
 Preferred stock, no par value; authorized shares 5,000,000;
   9.12% Cumulative, Series A, 1,100,000 shares issued and
   outstanding. . . . . . . . . . . . . . . . . . . . . . . .            27,500                 27,500
 Common stock, $.01 par value; authorized shares
   30,000,000; 7,760,199 shares issued and 5,760,199 shares
   outstanding at June 30, 2001; 7,677,622 shares issued
   and 5,677,622 shares outstanding at December 31, 2000. . .                78                     77
 Additional paid-in capital . . . . . . . . . . . . . . .       . .      34,352                 33,312
 Retained earnings. . . . . . . . . . . . . . . . . . . . . .           119,445                110,794
 Accumulated other comprehensive loss -
   unrealized loss on securities available-for-sale . . . . .              (324)                (1,867)
 Treasury stock at cost (2,000,000 shares in 2001
   and 2000). . . . . . . . . . . . . . . . . . . . . . . . .           (31,345)               (31,345)
                                                                     -----------            -----------
     Total stockholders' equity . . . . . . . . . . . . . . .           149,706                138,471
                                                                     -----------            -----------
                                                                     $3,095,013             $3,091,611
                                                                    ===========             ===========
</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>


                                                                                                           Six Months Ended
                                                                                                               June 30,
                                                                                                         ------------------
                                                                                                             2001        2000
                                                                                                          --------    --------
                                                                                                                (Unaudited)
<S>                                                                                                <C>                 <C>
Interest income:
 Loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          $  84,079   $ 81,120
 Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             30,987     31,244
 FHLB stock, federal funds sold and other interest-earning assets . . . . . . . . . . . . . . . .              1,522      3,148
                                                                                                             ---------  --------
                                                                                                             116,588    115,512
                                                                                                            ----------  --------
Interest expense:
 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             38,982     33,983
 Advances from the FHLB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             25,960     36,489
 Other borrowed money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              4,578          1
 Senior notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              2,345      2,345
                                                                                                            ----------  --------
                                                                                                              71,865     72,818
                                                                                                             ---------  --------

   Net interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             44,723     42,694
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              2,100      3,990
                                                                                                             ----------  -------
   Net interest income after provision for loan losses. . . . . . . . . . . . . . . . . . . . . .             42,623     38,704
                                                                                                             -------     -------

Noninterest income:
 Service charges on deposit accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              3,621      3,453
 Loan fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                600        599
 Loan servicing income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 --        244
 Gain (loss) on derivative instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               (443)        --
 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              1,028        582
 Gain on sale of mortgage servicing rights. . . . . . . . . . . . . . . . . . . . . . . . . . . .                 --      2,172
                                                                                                             ---------  --------
                                                                                                               4,806      7,050
                                                                                                            ---------  --------
Noninterest expense:
 Compensation, payroll taxes and other benefits . . . . . . . . . . . . . . . . . . . . . . . . .             15,206     14,713
 Office occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              5,517      5,680
 Data processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              1,687      1,700
 Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              1,397      1,514
 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              5,448      5,680
                                                                                                             ---------   -------
                                                                                                              29,255     29,287
                                                                                                             ---------  --------
       Income before provision for Federal income taxes, minority
         interest and cumulative effect of accounting change. . . . . . . . . . . . . . . . . . .             18,174     16,467
Provision for Federal income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              5,606      5,040
                                                                                                             ---------  --------
       Income before minority interest and cumulative effect of
         accounting change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             12,568     11,427
Minority interest - preferred stock dividends of Coastal Banc ssb . . . . . . . . . . . . . . . .              1,294      1,294
                                                                                                             ---------  --------
       Income before cumulative effect of accounting change . . . . . . . . . . . . . . . . . . .             11,274     10,133

Cumulative effect of change in accounting for derivative instruments, net of tax (note 8)                       (104)        --
                                                                                                          -----------  --------
     Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         $   11,170   $ 10,133
                                                                                                          ==========   ========
     Net income available to common stockholders. . . . . . . . . . . . . . . . . . . . . . . . .         $    9,916   $  8,879
                                                                                                          ===========  ========
Basic earnings per  share before cumulative effect of accounting change . . . . . . . . . . . . .         $     1.75   $   1.45
                                                                                                          ===========  ========
Basic earnings per common share (note 9). . . . . . . . . . . . . . . . . . . . . . . . . . . . .         $     1.73   $   1.45
                                                                                                          ===========  ========
Diluted earnings per share before cumulative effect of accounting change. . . . . . . . . . . . .         $     1.66   $   1.42
                                                                                                          ===========  ========
Diluted earnings per common share (note 9). . . . . . . . . . . . . . . . . . . . . . . . . . . .         $     1.64   $   1.42
                                                                                                          ===========  ========
</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
                                                                                 June 30,
                                                                           --------------------
                                                                                 2001       2000
                                                                              --------  -------
                                                                                  (Unaudited)

<S>                                                                 <C>                   <C>
Interest income:
 Loans receivable. . . . . . . . . . . . . . . . . . . . . . . . .             $  41,078  $42,614
 Mortgage-backed securities. . . . . . . . . . . . . . . . . . . .                14,729   15,811
 FHLB stock, federal funds sold and other interest-earning assets.                   616    2,173
                                                                                 -------  -------
                                                                                  56,423   60,598
                                                                                 -------  -------

Interest expense:
 Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . .                19,061   17,450
 Advances from the FHLB. . . . . . . . . . . . . . . . . . . . . .                 9,197   19,394
 Other borrowed money. . . . . . . . . . . . . . . . . . . . . . .                 4,575       --
 Senior notes payable. . . . . . . . . . . . . . . . . . . . . . .                 1,172    1,172
                                                                                 -------  -------
                                                                                  34,005   38,016
                                                                                 -------  -------

   Net interest income . . . . . . . . . . . . . . . . . . . . . .                22,418   22,582
Provision for loan losses. . . . . . . . . . . . . . . . . . . . .                 1,200    1,590
                                                                                 -------  -------
   Net interest income after provision for loan losses . . . . . .                21,218   20,992
                                                                                 -------  -------

Noninterest income:
 Service charges on deposit accounts . . . . . . . . . . . . . . .                 1,860    1,745
 Loan fees . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   360      250
 Loan servicing income, net. . . . . . . . . . . . . . . . . . . .                    --       43
 Gain on derivative instruments. . . . . . . . . . . . . . . . . .                   121       --
 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   643      486
                                                                                 -------  -------
                                                                                   2,984    2,524
                                                                                 -------  -------

Noninterest expense:
 Compensation, payroll taxes and other benefits. . . . . . . . . .                 7,608    7,244
 Office occupancy. . . . . . . . . . . . . . . . . . . . . . . . .                 2,841    2,874
 Data processing . . . . . . . . . . . . . . . . . . . . . . . . .                   833      841
 Amortization of goodwill. . . . . . . . . . . . . . . . . . . . .                   695      761
 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 2,596    2,673
                                                                                --------  -------
                                                                                  14,573   14,393
                                                                                --------  -------

       Income before provision for Federal income taxes and
         minority interest . . . . . . . . . . . . . . . . . . . .                 9,629    9,123

Provision for Federal income taxes . . . . . . . . . . . . . . . .                 2,992    2,831
                                                                                 -------  -------
     Income before minority interest . . . . . . . . . . . . . . .                 6,637    6,292
Minority interest - preferred stock dividends of Coastal Banc ssb.                   647      647
                                                                                 -------  -------
     Net income. . . . . . . . . . . . . . . . . . . . . . . . . .              $  5,990  $ 5,645
                                                                                ========  =======
     Net income available to common stockholders . . . . . . .           .   .  $  5,363  $ 5,018
                                                                                ========  =======

Basic earnings per common share (note 9) . . . . . . . . . . . . .              $   0.93  $  0.84
                                                                                ========  =======

Diluted earnings per common share (note 9) . . . . . . . . . . . .              $   0.89  $  0.83
                                                                                ========  =======
</TABLE>


See  accompanying  Notes  to  Consolidated  Financial  Statements.

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

<CAPTION>



                                                                             Six Months Ended
                                                                                 June 30,
                                                                           ------------------
                                                                              2001        2000
                                                                            ---------   --------
                                                                               (Unaudited)
<S>                                                                  <C>                 <C>


Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . .      .  $  11,170      $10,133

Other comprehensive income (loss), net of tax:
 Unrealized holding gains (losses) on securities available-for-sale
 arising during period. . . . . . . . . . . . . . . . . . . . . . .           1,543       (2,006)
                                                                            -----------  --------

Total comprehensive income. . . . . . . . . . . . . . . . . . . . .       $  12,713      $ 8,127
                                                                            ===========  ========
</TABLE>





<TABLE>

<CAPTION>



                                                                              Three Months Ended
                                                                                  June 30,
                                                                          --------------------
                                                                                2001        2000
                                                                             ---------    --------
                                                                                  (Unaudited)
<S>                                                                  <C>                   <C>


Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . .       $         5,990  $5,645

Other comprehensive income (loss), net of tax:
 Unrealized holding gains (losses) on securities available-for-sale
 arising during period. . . . . . . . . . . . . . . . . . . . . . .                   936    (108)
                                                                          ---------------  -------

Total comprehensive income. . . . . . . . . . . . . . . . . . . . .       $         6,926  $5,537
                                                                          ===============  =======
</TABLE>




See  accompanying  Notes  to  Consolidated  Financial  Statements.

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

<CAPTION>



                                                                              Six Months Ended
                                                                                   June 30,
                                                                            ------------------
                                                                             2001            2000
                                                                           ------------  ----------
                                                                                   (Unaudited)

<S>                                                                   <C>                 <C>
Cash flows from operating activities:
 Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $          11,170   $  10,133
 Adjustments to reconcile net income
   to net cash provided (used) by operating activities:
 Depreciation and amortization of property and equipment,
   mortgage servicing rights and prepaid expenses and other assets .              4,063       4,554
 Net (discount accretion) premium amortization . . . . . . . . . . .             (1,332)        357
 Provision for loan losses . . . . . . . . . . . . . . . . . . . . .              2,100       3,990
 Amortization of goodwill. . . . . . . . . . . . . . . . . . . . . .              1,397       1,514
 Originations and purchases of mortgage loans held for sale. . . . .            (15,649)     (2,876)
 Sales of mortgage loans for held for sale . . . . . . . . . . . . .             15,779       2,898
 Stock dividends from the FHLB . . . . . . . . . . . . . . . . . . .             (1,338)     (3,011)
 Gain on sale of mortgage servicing rights . . . . . . . . . . . . .                 --      (2,172)
 Loss on derivative instruments. . . . . . . . . . . . . . . . . . .                603          --
 Decrease (increase) in:
   Accrued interest receivable . . . . . . . . . . . . . . . . . . .              1,368      (1,815)
   Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . .            (30,009)      5,625
                                                                      ------------------  ----------

   Net cash provided (used) by operating activities. . . . . . . . .            (11,848)     19,197
                                                                      ------------------  ----------

Cash flows from investing activities:
 Net increase in federal funds sold. . . . . . . . . . . . . . . . .             (5,701)     (1,900)
 Purchases of mortgage-backed securities held-to-maturity. . . . . .                 --      (2,300)
 Purchase of U.S. Treasury securities held-to-maturity . . . . . . .                 --        (692)
 Principal repayments on mortgage-backed securities held-to-maturity             33,839      14,778
 Principal repayments on mortgage-backed securities
   available-for-sale. . . . . . . . . . . . . . . . . . . . . . . .              6,158       2,333
 Proceeds from maturity of U.S. Treasury securities held-to-maturity                100          --
 Purchases of loans receivable . . . . . . . . . . . . . . . . . . .           (163,327)   (236,394)
 Net decrease in loans receivable. . . . . . . . . . . . . . . . . .             66,218      83,842
 Purchases of property and equipment, net. . . . . . . . . . . . . .             (1,294)       (515)
 Purchases of FHLB stock . . . . . . . . . . . . . . . . . . . . . .             (3,986)     (7,603)
 Proceeds from sales of FHLB stock . . . . . . . . . . . . . . . . .             28,431          --
 Proceeds from the sale of mortgage servicing rights . . . . . . . .                 --       5,001
                                                                      ------------------  ----------

   Net cash used by investing activities . . . . . . . . . . . . . .            (39,562)   (143,450)
                                                                      ------------------  ----------


</TABLE>



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

<CAPTION>



                                                                               Six Months Ended
                                                                                   June 30,
                                                                               ------------------
                                                                              2001             2000
                                                                       ------------------  ------------
                                                                                  (Unaudited)

<S>                                                                    <C>                 <C>
Cash flows from financing activities:
 Net increase (decrease) in deposits. . . . . . . . . . . . . . . . .  $          16,555   $    (7,972)
 Advances from the FHLB . . . . . . . . . . . . . . . . . . . . . . .          6,609,380     5,467,693
 Principal payments on advances from the FHLB . . . . . . . . . . . .         (7,093,527)   (5,339,676)
 Securities sold under agreements to repurchase and federal funds
   purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . .          1,465,852         6,400
 Purchases of securities sold under agreements to repurchase and
   federal funds purchased. . . . . . . . . . . . . . . . . . . . . .           (982,672)       (6,400)
 Net increase in advances from borrowers for taxes and insurance. . .              5,055         6,757
 Exercise of stock options for purchase of common stock, net. . . . .              1,040           229
 Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . .                 --       (10,882)
 Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . .             (2,518)       (2,252)
                                                                       ------------------  ------------
   Net cash provided by financing activities. . . . . . . . . . . . .             19,165       113,897
                                                                       ------------------  ------------

   Net decrease in cash and cash equivalents. . . . . . . . . . . . .            (32,245)      (10,356)
 Cash and cash equivalents at beginning of period . . . . . . . . . .             69,730        48,098
                                                                       ------------------  ------------
 Cash and cash equivalents at end of period . . . . . . . . . . . . .  $          37,485   $    37,742
                                                                       ==================  ============

 Supplemental schedule of cash flows-interest paid. . . . . . . . . .  $          71,862   $    71,907
                                                                       ==================  ============

 Supplemental schedule of noncash investing and financing activities:
   Foreclosures of loans receivable . . . . . . . . . . . . . . . . .  $           1,709   $     1,682
                                                                       ==================  ============


</TABLE>




See  accompanying  Notes  to  Consolidated  Financial  Statements.

<PAGE>
                     COASTAL BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)



(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
     accounting  principles  generally accepted in the United States of America.
     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
     period  ended  June  30, 2001 are not necessarily indicative of the results
     that  may  be  expected  for  the  entire  fiscal year or any other interim
     period.

     On  August  27,  1998, December 21, 1998, February 25, 1999, April 27, 2000
     and  July  27,  2000,  the  Board  of  Directors  authorized  five separate
     repurchase plans for up to 500,000 shares each of the outstanding shares of
     common  stock  through  an  open-market  repurchase  program  and privately
     negotiated  repurchases,  if any. As of June 30, 2001, 2,000,000 shares had
     been  repurchased  in  the  open  market  at an average repurchase price of
     $15.67 per share for a total cost of $31.3 million, with no shares from the
     July 27, 2000 authorization having been repurchased to date. Book value per
     common  share  at  June  30,  2001  was  $20.48.

(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  its  subsidiaries,  CoastalBanc  Financial Corp. and Coastal Banc
     Insurance Agency, Inc. (collectively, the "Bank"), and Coastal Banc Capital
     Corp.  (collectively  with  Coastal Bancorp, Inc. and the Bank, "Coastal").
     All significant intercompany balances and transactions have been eliminated
     in  consolidation.


(3)  MORTGAGE-BACKED  SECURITIES

     Mortgage-backed securities at June 30, 2001 were as follows (in thousands):
<TABLE>

<CAPTION>



                                                            Gross       Gross
                                            Amortized    Unrealized    Unrealized        Fair
                                               Cost        Gains          Losses        Value
                                            ---------   -----------    ----------        -------
<S>                          <C>          <C>           <C>            <C>            <C>
Held-to-maturity:
 REMICS - Agency                           $   621,713      $ 2,941     $ (2,843)     $ 621,811
 REMICS - Non-agency                           161,711           38       (2,005)       159,744
 FNMA certificates                              46,767          146         (330)        46,583
 GNMA certificates                              15,776          319           --         16,095
 Non-agency securities                           5,682           43         (136)         5,589
                                           -----------       -------     --------     ---------
                                           $   851,649      $ 3,487     $ (5,314)     $ 849,822
                                           ===========       =======     =========     =========

Available-for-sale:
 REMICS - Agency                           $    77,123      $   109     $   (569)     $  76,663
 GNMA certificates                              14,244            2          (41)        14,205
                                           -----------      -------     ---------     ---------
                                           $    91,367      $   111     $   (610)     $  90,868
                                            ===========      =======     =========    =========
</TABLE>





<PAGE>
     Mortgage-backed  securities  at  December  31,  2000  were  as  follows (in
     thousands):
<TABLE>

<CAPTION>



                                                 Gross       Gross
                                    Amortized  Unrealized   Unrealized   Fair
                                      Cost        Gains       Losses     Value
                                    ---------  -----------  ----------   -------
<S>                     <C>        <C>          <C>         <C>      <C>         <C>
Held-to-maturity:
 REMICS - Agency                   $   642,588    $ 1,370  $ (18,368)  $ 625,590
 REMICS - Non-agency                   168,886          9     (7,337)    161,558
 FNMA certificates                      50,128          5       (680)     49,453
 GNMA certificates                      17,681        104         --      17,785
 Non-agency securities                   6,282         --       (151)      6,131
                                   -----------     -------   --------     ------
                                   $   885,565    $ 1,488  $ (26,536)  $ 860,517
                                   ===========     =======  ==========  =========

Available-for-sale:
 REMICS - Agency                   $    77,449    $    --  $  (2,838)  $  74,611
 GNMA certificates                      20,095          2        (35)     20,062
                                   -----------    -------  ----------  ---------
                                   $    97,544    $     2  $  (2,873)  $  94,673
                                   ===========     =======  ==========  =========
</TABLE>



(4)  LOANS  RECEIVABLE

     Loans receivable at June 30, 2001 and December 31, 2000 were as follows (in
     thousands):
<TABLE>

<CAPTION>



                                                      June 30, 2001              December 31, 2000
                                                     ---------------             -----------------
<S>                                                <C>              <C>                <C>
Real estate mortgage loans:
 First-lien mortgage, primarily residential . . .  $      944,019                      $  908,841
 Commercial . . . . . . . . . . . . . . . . . . .         346,350                         347,921
 Multifamily. . . . . . . . . . . . . . . . . . .         178,477                         224,361
 Residential construction . . . . . . . . . . . .         154,159                         157,950
 Acquisition and development. . . . . . . . . . .         141,292                         133,005
 Commercial construction. . . . . . . . . . . . .         213,421                          90,256
Commercial loans, secured by residential mortgage
 loans held for sale. . . . . . . . . . . . . . .           8,306                           8,518
Commercial, financial and industrial. . . . . . .         121,705                         120,420
Loans secured by savings deposits . . . . . . . .          14,137                          13,681
Consumer and other loans. . . . . . . . . . . . .          50,302                          56,522
                                                   ---------------                     -----------
                                                        2,172,168                       2,061,475
Loans in process. . . . . . . . . . . . . . . . .        (159,975)                       (142,451)
Allowance for loan losses . . . . . . . . . . . .         (14,551)                        (14,507)
Unearned interest and loan fees . . . . . . . . .          (1,308)                         (3,864)
Discount on purchased loans, net. . . . . . . . .          (5,420)                         (4,425)
                                                   ---------------                     -----------

                                                   $    1,990,914                      $1,896,228
                                                   ===============                     ===========

Weighted average yield. . . . . . . . . . . . . .            8.18%                           9.38%
                                                   ===============                     ===========
</TABLE>




<PAGE>
     At  June  30,  2001,  Coastal  had  outstanding commitments to originate or
     purchase  $120.9  million  of  real estate mortgage and other loans and had
     commitments  under  existing  lines  of  credit  to  originate  primary
     construction  and other loans of approximately $104.9 million. In addition,
     at  June  30,  2001,  Coastal  had  $9.2  million of outstanding letters of
     credit.  Management  anticipates  the  funding of these commitments through
     normal  operations.

     At  June  30,  2001 and December 31, 2000, the carrying value of loans that
     were  considered to be impaired totaled approximately $3.8 million and $4.4
     million,  respectively  and  the related allowance for loan losses on those
     impaired  loans  totaled  $741,000  and  $1.6  million at June 30, 2001 and
     December  31, 2000, respectively. At June 30, 2001, all loans considered to
     be  impaired  were  allocated  a specific portion of the allowance for loan
     losses.  At  December  31,  2000, one loan considered to be impaired with a
     balance  of $650,000 did not have an allocated portion of the allowance for
     loan  losses.  The average recorded investment in impaired loans during the
     six  months ended June 30, 2001 and 2000 was $4.7 million and $3.0 million,
     respectively.

     An analysis of activity in the allowance for loan losses for the six months
     ended  June  30,  2001  and  2000  is  as  follows  (in  thousands):
<TABLE>

<CAPTION>



                                                     Six Months Ended June 30,
                                                     -------------------------
                                                           2001      2000
                                                         --------  --------
<S>                           <C>                        <C>       <C>
Balance, beginning of period                             $14,507   $10,493
Provision for loan losses                                  2,100     3,990
Charge-offs                                               (2,215)   (1,012)
Recoveries                                                   159       311
                                                         --------  --------

Balance, end of period                                   $14,551   $13,782
                                                         ========  ========
</TABLE>




     During  the  six  months  ended  June  30,  2001,  charge-offs  include the
     charge-off  of  an  $821,000  unsecured  commercial overdraft loan that was
     determined  to be uncollectible, in addition to $709,000 in smaller balance
     consumer  loans.

     Effective  March 31, 2000, Coastal sold its rights to service approximately
     $389.1  million  of mortgage loans for third party investors and recorded a
     nonrecurring  gain  of $2.2 million. Coastal continues to service the loans
     in  its  own  loans  receivable  portfolio.


<PAGE>
(5)  DEPOSITS

     Deposits,  their  stated  rates  and  the related weighted average interest
     rates,  at  June  30, 2001 and December 31, 2000, are summarized as follows
     (dollars  in  thousands):
<TABLE>

<CAPTION>



                                 Stated Rate          June 30, 2001           December 31, 2000
                                --------------        -------------          ------------------
<S>                             <C>                   <C>            <C>                  <C>
Noninterest-bearing checking .           0.00    $           80,641                 $   80,849
Interest-bearing checking. . .  0.75  -  2.00                60,186                     61,046
Savings accounts . . . . . . .  1.49  -  3.00                45,131                     43,891
Money market demand accounts .  0.00  -  6.31               387,236                    374,210
                                                      --------------                -----------
                                                            573,194                    559,996
                                                      --------------                -----------

Certificate accounts . . . . .  2.00  -  2.99                 1,172                        111
                                3.00  -  3.99                53,288                        475
                                4.00  -  4.99               268,894                     39,930
                                5.00  -  5.99               255,403                    261,398
                                6.00  -  6.99               536,009                    807,684
                                7.00  -  7.99                 3,452                      5,166
                                8.00  -  8.99                    69                         67
                                9.00  -  9.99                    --                         99
                                                       -------------                -----------
                                                          1,118,287                  1,114,930
                                                       -------------                -----------
Premium on purchased deposits                                    15                         55
                                                       -------------                -----------
                                                 $        1,691,496                 $1,674,981
                                                       =============                ===========

Weighted average interest rate                                 4.38%                      4.83%
                                                       =============                ===========
</TABLE>




     The  scheduled  maturities  of certificate accounts outstanding at June 30,
     2001  were  as  follows  (in  thousands):
<TABLE>

<CAPTION>



                       June 30, 2001
                       --------------
<S>                    <C>
 0 through 12 months.  $    1,044,741
 13 through 24 months          52,100
 25 through 36 months          12,263
 37 through 48 months           5,634
 49 through 60 months           3,389
 Over 60 months . . .             160
                       --------------
                       $    1,118,287
                       ==============
</TABLE>




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

     (A)  The  weighted average interest rates on advances from the FHLB at June
     30,  2001  and  December  31,  2000 were 4.95% and 6.48%, respectively. The
     scheduled  maturities  and  related  weighted  average  interest  rates  on
     advances  from the FHLB at June 30, 2001 are summarized as follows (dollars
     in  thousands):
<TABLE>

<CAPTION>




                                         Weighted Average
Due during the year ending December 31,    Interest Rate             Amount
---------------------------------------  -----------------          --------
<S>                                      <C>                <C>     <C>
2001. . . . . . . . . . . . . . . . . .              4.02%          $213,743
2002. . . . . . . . . . . . . . . . . .              5.32            389,492
2003. . . . . . . . . . . . . . . . . .              5.62             11,956
2004. . . . . . . . . . . . . . . . . .              5.48             11,047
2005. . . . . . . . . . . . . . . . . .              5.10             12,564
2006. . . . . . . . . . . . . . . . . .              6.81              3,366
2007. . . . . . . . . . . . . . . . . .              6.64              1,268
2008. . . . . . . . . . . . . . . . . .              5.63              2,150
2009. . . . . . . . . . . . . . . . . .              8.04              3,972
2010. . . . . . . . . . . . . . . . . .              6.73                987
2011. . . . . . . . . . . . . . . . . .              6.56              1,361
2012. . . . . . . . . . . . . . . . . .              5.76                292
2013. . . . . . . . . . . . . . . . . .              5.75              7,713
2014. . . . . . . . . . . . . . . . . .              5.44              2,977
2015. . . . . . . . . . . . . . . . . .              6.67              1,734
2018. . . . . . . . . . . . . . . . . .              5.05              1,536
                                                                    --------
                                                     4.95%          $666,158
                                                   =======          ========
</TABLE>



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

     (B)  The weighted average interest rate on securities sold under agreements
     to  repurchase  at  June  30, 2001 was 3.87% with the stated interest rates
     ranging  from  3.85%  to  4.02%.

(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.
     During 1999, Coastal, after receipt of unsolicited offers, repurchased $3.1
     million  of  the  Senior  Notes  outstanding  at  par.


<PAGE>
(8)  DERIVATIVE  INSTRUMENTS

     Coastal  is  a  party  to  derivative  instruments  in the normal course of
     business  to  reduce  its exposure to fluctuations in interest rates. These
     derivative  instruments  have  included interest rate swap agreements where
     Coastal  makes  fixed  interest  payments  and receives payments based on a
     floating  index  and, currently, interest rate cap agreements, as described
     below.  Effective  January  1, 2001, Coastal adopted Statement of Financial
     Accounting  Standards  No.  133, "Accounting for Derivative Instruments and
     for Hedging Activities" ("Statement 133"). Statement 133 requires companies
     to  recognize  all  derivatives  as  either  assets  or  liabilities in the
     statement of financial condition and measure all derivatives at fair value.
     The  interest  rate swap and cap agreements held by Coastal on December 31,
     2000  were  determined  to  not  qualify for hedge accounting, therefore on
     implementation  of  Statement 133, Coastal recorded a transition adjustment
     to  record  these derivative instruments at fair value. On January 1, 2001,
     Coastal  recorded a transition adjustment loss of $160,000, or $104,000 net
     of the tax effect, as the cumulative effect of the change in accounting for
     derivative  instruments  to  record  the fair value of Coastal's derivative
     instruments  in  the  consolidated statements of income. For the six months
     ended  June  30,  2001,  Coastal  recorded an additional fair value loss on
     these  derivative  instruments  of  $443,000. The fair value changes in the
     derivative instruments during 2001 were primarily attributable to Coastal's
     interest  rate swap agreements, which were totally liquidated in June 2001.
     As  of  June 30, 2001, Coastal's interest rate cap agreements were the only
     derivative  instruments  recorded  at fair value pursuant to Statement 133.

     Coastal has interest rate cap agreements with third parties. The agreements
     provide  for  the  third  parties  to  make  payments to Coastal whenever a
     defined floating rate exceeds rates ranging from 8.0% to 9.0%, depending on
     the  agreement.  Payments  on the interest rate cap agreements are based on
     the  notional  principal  amount  of the agreements; no funds were actually
     borrowed  or  are  to  be  repaid.  The fair value of the interest rate cap
     agreements  was  $28,000 at June 30, 2001, which is the recorded book value
     of such agreements due to the implementation of Statement 133. The interest
     rate  cap  agreements  are used to alter the interest rate sensitivity of a
     portion  of  Coastal's  mortgage-backed securities and loans receivable. As
     such,  the  amortization of the purchase price and interest income from the
     interest  rate  cap  agreements  are  recorded  in  "interest  income  on
     mortgage-backed  securities  or  loans  receivable," as appropriate, in the
     accompanying  consolidated  statements  of  income.  The  net  decrease  in
     interest  income  related  to  the  interest  rate  cap  agreements  was
     approximately  $13,000  for the six months ended June 30, 2001 and 2000. No
     payments were made to Coastal under the interest rate cap agreements during
     the  six  months  ended  June  30,  2001  or  2000.

     Interest rate cap agreements outstanding at June 30, 2001 expire as follows
     (dollars  in  thousands):
<TABLE>

<CAPTION>



Year of      Strike Rate    Notional
Expiration      Range        Amount
----------  --------------  ---------
<S>         <C>             <C>
2002 . . .  8.75  -  9.00%  $  16,600
2003 . . .  8.00  -  9.00     107,676
                            ---------
                            $ 124,276
                            =========
</TABLE>






<PAGE>
     The  terms of the interest rate swap agreements outstanding at December 31,
     2000  are  summarized  as  follows  (dollars  in  thousands):
<TABLE>

<CAPTION>



                                                                        Fair Value at
                                                       Floating Rate       End of
                       Notional      LIBOR     Fixed         at            Period
Maturity                Amount       Index      Rate   End of Period    (gain (loss))
---------------------  ---------  -----------  ------  --------------  ---------------
<S>                    <C>        <C>          <C>     <C>             <C>
At December 31, 2000:
2003. . . . . . . . .  $   5,523  One-month    5.345%          6.821%  $           32
2004. . . . . . . . .      3,758  One-month    5.635           6.710               11
2005. . . . . . . . .     11,095  Three-month  6.500           6.736             (176)
                       ---------                                       ---------------
                       $  20,376                                       $         (133)
                       =========                                       ===============
</TABLE>




     Coastal  totally  liquidated  its  interest  rate swap positions in June of
     2001. The interest rate swap agreements previously held by Coastal provided
     for Coastal to make fixed interest payments and receive payments based on a
     floating  LIBOR  index,  as  defined  in  each  agreement.

     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 attempts to control 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 common share ("EPS") for the six-and three-month
     periods  ended  June  30,  2001  and 2000 (dollars in thousands, except per
     share  data):

<TABLE>
<CAPTION>



                                                                   Six Months Ended
                                                                       June 30,
                                                                    ----------------
<S>                                           <C>               <C>          <C>
                                                                      2001         2000
                                                                -----------  -----------

Net income                                                      $   11,170   $   10,133
Preferred stock dividends                                           (1,254)      (1,254)
                                                                -----------  -----------
Net income available to common stockholders                     $    9,916   $    8,879
                                                                ===========  ===========
Weighted average number of common shares
 outstanding used in basic EPS calculation                       5,732,270    6,139,175
Add assumed exercise of outstanding stock
 options as adjusted for dilutive securities                       299,472      108,624
                                                                -----------  -----------
Weighted average number of common shares
 outstanding used in diluted EPS calculation                     6,031,742    6,247,799
                                                                ===========  ===========
Basic EPS                                                       $     1.73   $     1.45
                                                                ===========  ===========
Diluted EPS                                                     $     1.64   $     1.42
                                                                ===========  ===========
</TABLE>




<TABLE>
<CAPTION>



                                                                    Three Months Ended
                                                                         June 30,
                                                                      ----------------
<S>                                           <C>                 <C>          <C>
                                                                        2001         2000
                                                                  -----------  -----------

Net income                                                        $    5,990   $    5,645
Preferred stock dividends                                               (627)        (627)
                                                                  -----------  -----------
Net income available to common stockholders                       $    5,363   $    5,018
                                                                  ===========  ===========
Weighted average number of common shares
 outstanding used in basic EPS calculation                         5,748,708    5,989,330
Add assumed exercise of outstanding stock
 options as adjusted for dilutive securities                         310,298       89,880
                                                                  -----------  -----------
Weighted average number of common shares
 outstanding used in diluted EPS calculation                       6,059,006    6,079,210
                                                                  ===========  ===========
Basic EPS                                                         $     0.93   $     0.84
                                                                  ===========  ===========
Diluted EPS                                                       $     0.89   $     0.83
                                                                  ===========  ===========
</TABLE>



     The  weighted  average number of common shares outstanding has been reduced
     by  the  treasury  stock  held  by  Coastal.  As of June 30, 2001 and 2000,
     Coastal  had  2,000,000  common  shares  in  treasury.


<PAGE>
(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 value, Series A, at a price of $25 per share to the
     public  ("Preferred  Stock").  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.

(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 June 30, 2001, the Bank's regulatory capital in relation to its existing
     regulatory  capital  requirements  for  capital  adequacy  purposes  was as
     follows  (dollars  in  thousands):
<TABLE>
<CAPTION>



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

 Tier 1 (core)                             $          196,242          6.38%  $123,035   4.00%  $153,794   5.00%
 Tier 1 risk-based                                    196,242         10.30     76,232   4.00    114,348   6.00
 Total risk-based                                     210,793         11.06    152,464   8.00    190,580  10.00
</TABLE>



     As  of June 30, 2001, 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.  To  be
     categorized  as  well  capitalized,  the  Bank must maintain minimum Tier 1
     (core),  Tier  1 risk-based and total risk-based ratios as set forth in the
     table above. There are no conditions or events since that notification that
     management  believes  have  changed  the  institution's  category.

(12) COASTAL  BANCORP,  INC.  PREFERRED  STOCK

     On  May 11, 1999, Coastal Bancorp, Inc. ("Bancorp") issued 1,100,000 shares
     of  9.12%  Series A Cumulative Preferred Stock, no par value, at a price of
     $25  per  share to the public ("Bancorp Preferred Stock"). Dividends on the
     Bancorp  Preferred  Stock are payable quarterly at the annual rate of $2.28
     per  share.  The  Bancorp  Preferred  Stock  is callable on May 15, 2003 at
     Bancorp's  option.  The $26.0 million net proceeds was used for repurchases
     in  the  open market of Bancorp's outstanding common stock and of Bancorp's
     outstanding  10%  Senior Notes. Pursuant to Coastal's tax benefit agreement
     with  the  FDIC,  Coastal  receives a tax benefit for dividends paid on the
     Bancorp  Preferred  Stock.

<PAGE>

(13) RECENT  ACCOUNTING  STANDARDS

     In  July  2001,  Statement  of  Financial  Accounting  Standards  No.  141,
     "Business  Combinations"  ("Statement  141")  was  issued.  Statement  141
     eliminates  the  pooling  of  interests  method  of accounting for business
     combinations  and  requires  that the purchase method of accounting be used
     for  all business combinations. Goodwill and certain intangible assets will
     remain  on  the  consolidated  statement  of financial condition and not be
     amortized.  On  an  annual  basis, and when there is reason to suspect that
     their  values have been diminished or impaired, these assets must be tested
     for  impairment,  and  write-downs  may  be  necessary.  Statement  141  is
     effective  for  business  combinations  initiated  after  July  1,  2001.

     In  July  2001,  Statement  of  Financial  Accounting  Standards  No.  142,
     "Goodwill  and  Other  Intangible  Assets"  ("Statement  142")  was issued.
     Statement  142  changes  the  accounting  for goodwill from an amortization
     method  to an impairment-only approach. Amortization of goodwill, including
     goodwill  recorded  in  past  business  combinations,  will  cease upon the
     adoption  of  Statement 142. Coastal is required to implement Statement 142
     on  January  1,  2002. Based on acquisitions completed as of June 30, 2001,
     application  of  the goodwill non-amortization provisions of these rules is
     expected  to  result  in  an  increase  in net income of approximately $2.0
     million  (or $0.33 per diluted share) for fiscal 2002. During 2002, Coastal
     will  begin to test goodwill for impairment under the new rules, applying a
     fair-value-based  test,  and has not yet determined what the effect of this
     testing  will  be  on  the  earnings and consolidated financial position of
     Coastal.



<PAGE>



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

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

     Total  assets  increased slightly by $3.4 million from December 31, 2000 to
     June  30,  2001.  The  net  increase resulted primarily from an increase of
     $94.7  million  in  loans  receivable,  in  addition to an increase of $5.7
     million  in  federal  funds  sold.  These increases were somewhat offset by
     decreases  of  $32.2 million, $33.9 million, $3.8 million and $23.1 million
     in  cash and cash equivalents, mortgage-backed securities held-to-maturity,
     mortgage-backed  securities  available-for-sale  and  stock  in  the  FHLB,
     respectively,  and other small changes in other categories. The increase in
     loans  receivable  was  primarily  due  to  bulk  residential mortgage loan
     purchases  of  $163.3  million  which  was  partially  offset  by principal
     payments  received.  The  decrease in mortgage-backed securities was due to
     principal  payments  received and the decrease in stock in the FHLB was due
     to  the  decreased amounts required to be maintained based on the decreased
     level  of  FHLB  advances  outstanding.

     Deposits increased $16.5 million or 1.0% from December 31, 2000 to June 30,
     2001  and  securities sold under agreements to repurchase and federal funds
     purchased  increased  100.0%  or  $483.2  million.  Advances  from the FHLB
     decreased  $484.1  million or 42.1% during the period due to a reallocation
     of  borrowings  to securities sold under agreements to repurchase with more
     favorable  market  rates.  Stockholders'  equity  increased  8.11% or $11.2
     million  from  December 31, 2000 to June 30, 2001 as a result of net income
     and a $1.5 million decrease in accumulated other comprehensive loss, offset
     somewhat  by  dividends  declared.


Results  of  Operations  for  the  Six  Months  Ended  June  30,  2001  and 2000
--------------------------------------------------------------------------------

General
-------

     For  the  six  months  ended  June  30,  2001, net income was $11.2 million
     compared  to  $10.1  million  for  the  six months ended June 30, 2000. The
     increase in net income for the six months ended June 30, 2001 was comprised
     of  the  following  compared  to  the  same  period in 2000: a $2.0 million
     increase  in  net interest income, a $1.9 million decrease in the provision
     for  loan  losses  and  a  slight decrease in noninterest expense, somewhat
     offset  by  a $2.2 million decrease in noninterest income (which includes a
     $443,000  fair  value loss on derivative instruments due to the adoption of
     Statement  133) and a $566,000 increase in the provision for Federal income
     taxes.  Net interest income for the six months ended June 30, 2000 includes
     a  $1.1  million  special  stock  dividend  declared by the FHLB (the "FHLB
     special  dividend").  The increase in net interest income was due primarily
     to  the  increase  in net interest margin to 2.99% for the six months ended
     June  30,  2001  from 2.90% for the same period in 2000, which includes the
     FHLB  special  dividend.  Net interest margin, excluding the FHLB dividend,
     was  2.83%  for  the  six  months  ended  June  30,  2000.  The decrease in
     noninterest  income  was primarily due to the $2.2 million gain recorded on
     the sale of Coastal's mortgage servicing rights during the first quarter of
     2000,  the  related  $244,000 decrease in loan servicing income in 2001 and
     the  fair value loss on derivative instruments of $443,000 recorded in 2001
     pursuant  to  Statement  133. In addition, there were increases of $168,000
     and  $446,000  in service charges on deposit accounts and other noninterest
     income,  respectively.



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

     Interest  income  for  the  six  months  ended June 30, 2001 increased $1.1
     million  or  1.0% from the six months ended June 30, 2000. The increase was
     due  to  an  increase  in  average interest-earning assets of $50.8 million
     offset  by  a  slight  decrease  in  the average yield to 7.78% for the six
     months  ended  June  30,  2001 from 7.84% for the six months ended June 30,
     2000,  which  includes  the FHLB special dividend. Interest income on loans
     receivable  increased  $3.0  million due to a $99.0 million increase in the
     average  balance,  partially  offset  by a decrease in the average yield to
     8.56% for the six months ended June 30, 2001 from 8.70% for the same period
     in  2000. Interest income on mortgage-backed securities decreased $257,000,
     or  0.8%,  due to a $41.4 million decrease in the average balance which was
     partially  offset  by an increase in the average yield to 6.39% for the six
     months  ended  June  30,  2001  from  6.18%  for  the  same period in 2000.

     In  addition,  interest  income on FHLB stock, federal funds sold and other
     interest-earning  assets decreased $1.6 million during the six months ended
     June 30, 2001, as compared to the same period in 2000. The decrease was due
     to the $6.8 million decrease in the average balance and to the FHLB special
     dividend  recorded  in  the  second  quarter  of  2000.

     Total  interest-earning  assets  for  the  six  months  ended June 30, 2001
     averaged  $3.0  billion  compared  to $2.9 billion for the six months ended
     June  30,  2000.

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

     Interest  expense on interest-bearing liabilities was $71.9 million for the
     six  months  ended June 30, 2001, as compared to $72.8 million for the same
     period  in  2000,  which  represents  a  decrease of $953,000, or 1.3%. The
     decrease  in  interest  expense  was  primarily  due to the decrease in the
     average  rate  paid  on  interest-bearing  liabilities to 5.23% for the six
     months  ended  June  30,  2001 from 5.35% for the same period in 2000. This
     decrease  was  somewhat  offset  by  the  increase  of $30.1 million in the
     average  balance  of  interest-bearing liabilities. The increase in average
     interest-bearing  liabilities  consisted  primarily  of  a  $207.9  million
     increase  in  average  securities  sold  under agreements to repurchase and
     federal  funds  purchased,  a  $61.6  million  increase  in  average
     interest-bearing  deposits,  offset by a $239.4 million decrease in average
     FHLB  advances.

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

     Net  interest  income  was  $44.7 million for the six months ended June 30,
     2001  and  $42.7  million  for the same period in 2000. Net interest margin
     ("margin")  was  2.99%  for  the six months ended June 30, 2001 compared to
     2.90% (2.83% excluding the effect of the FHLB special dividend) for the six
     months  ended  June  30,  2000.  Margin represents net interest income as a
     percentage  of  average  interest-earning  assets.  Net  interest  spread
     ("spread"),  defined  to exclude noninterest-bearing deposits, increased to
     2.55%  for  the  six months ended June 30, 2001 from 2.49% (2.42% excluding
     the  effect of the FHLB special Dividend) for the six months ended June 30,
     2000.  Management  also  calculates  an  alternative  spread which includes
     noninterest-bearing  deposits  to  show a spread that considers the cost of
     all  deposits as part of the overall cost of funds. Under this calculation,
     the  alternative  spreads  for  the six months ended June 30, 2001 and 2000
     were  2.82%  and  2.76%  (2.69%  excluding  the  effect of the FHLB special
     dividend),  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 Margin and Spread was primarily due to
     the 0.12% decrease in the average rate paid on interest-bearing liabilities
     during  the six months ended June 30, 2001 compared to the first six months
     of  2000. This decrease in the average rate on interest bearing liabilities
     was  somewhat  offset  by  a  0.06%  decrease  in  the  average  yield  on
     interest-earning  assets.  Average  net  interest-earning  assets increased
     $20.7  million  for  the six months ended June 30, 2001 from the six months
     ended  June  30,  2000.

<PAGE>

     During 2001, Coastal's net interest income has benefited from the reduction
     in  overall  market  interest rates. This benefit is due to the fact that a
     large  portion  of  Coastal's  borrowings  are short term in nature and are
     repricing  with  the  changes  in  the  market  interest  rates  on  these
     liabilities.

     Management's  overall  goal  is  to continue to improve the asset/liability
     composition  to  be  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  retail  deposits.

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

     The  provision  for  loan  losses was $2.1 million for the six months ended
     June  30,  2001  compared to $4.0 million for the six months ended June 30,
     2000.  At  June  30,  2001, Coastal had nonperforming loans totalling $23.0
     million.  Nonperforming  loans are those loans on nonaccrual status as well
     as those loans greater than ninety (90) days delinquent and still accruing.
     Of  these nonperforming loans at June 30, 2001, $19.3 million, or 84%, were
     first  lien  residential  (single family) mortgage loans, $1.5 million were
     commercial  real  estate loans, $1.1 million were commercial, financial and
     industrial  loans,  with  the  balance  in the residential construction and
     consumer  and  other  categories. At December 31, 2000, nonperforming loans
     totalled  $21.2  million,  of  which $16.5 million, or 78%, were first lien
     residential mortgage loans. At June 30, 2001, the allowance for loan losses
     as  a  percentage  of  nonperforming  loans  was 63.3% compared to 68.3% at
     December  31,  2000.

     Although  no assurance can be given, management believes that the allowance
     for  loan  losses  at  June  30,  2001 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  diversifies  to determine if changes to the policy and resulting
     allowance  for  loan  losses  are  necessary.

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

     For  the  six months ended June 30, 2001, noninterest income decreased $2.2
     million  to $4.8 million, compared to $7.0 million for the six months ended
     June  30, 2000. The decrease in noninterest income was primarily due to the
     $2.2  million non-recurring gain recorded on the sale of Coastal's mortgage
     servicing  rights  during the first quarter of 2000 and the related loss of
     the  servicing  income  and  loan fees during the periods subsequent to the
     sale.  In  addition  to the effect of the servicing sale, the effect of the
     fair  value  loss on derivative instruments of $443,000 recorded during the
     six  months  ended  June 30, 2001 pursuant to Statement 133 was a factor in
     the  decrease  in  total  noninterest income. The fair value changes in the
     derivative  instruments  were  primarily attributable to Coastal's interest
     rate  swap  positions,  which  were  totally  liquidated  in  June 2001. In
     addition  to  these  items, comparing the six months ended June 30, 2001 to
     the  same  period  in  2000,  service charges on deposit accounts increased
     $168,000  and  other noninterest income increased $446,000. The increase in
     service charges on deposit accounts was due to Coastal's continued focus on
     increasing  transaction  type  deposit accounts and the related fee income.
     The  increase  in other noninterest income was due to $300,000 in insurance
     claim  proceeds  received  in  2001  for  reimbursement  of certain deposit
     account  losses incurred in prior years and a $108,000 increase in the gain
     on  the  sale  of  loans  held  for  sale.

<PAGE>

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

     For  the  six  months  ended  June  30, 2001, noninterest expense decreased
     $32,000  from  the  six months ended June 30, 2000. The overall decrease in
     noninterest expense was due to decreases of $163,000, $13,000, $117,000 and
     $232,000 in office occupancy, data processing, the amortization of goodwill
     and other noninterest expense, respectively. These decreases were offset by
     a  $493,000  increase  in  compensation,  payroll taxes and other benefits.

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

     The  provision  for  Federal income taxes for the six months ended June 30,
     2001  was  $5.6  million compared to the provision for Federal income taxes
     for  the  six  months ended June 30, 2000 of $5.0 million. The increase was
     due  to  the  increased  income  before provision for Federal income taxes,
     minority  interest and cumulative effect of accounting change in 2001, with
     the  effective  tax  rate  for  both  periods  being  approximately  31%.


Results  of  Operations  for  the  Three  Months  Ended  June  30, 2001 and 2000
--------------------------------------------------------------------------------

General
-------

     For  the  three  months  ended  June  30, 2001, net income was $6.0 million
     compared  to  $5.6  million  for  the  three  months  ended  June 30, 2000.
     Comparing  the  second  quarter  of 2001 to the second quarter of 2000, the
     following  were  the  changes in the components of net income: net interest
     income decreased $164,000 (but if the $1.1 million FHLB special dividend is
     excluded,  2001  net interest income would have increased by $897,000), the
     provision  for loan losses decreased $390,000, noninterest income increased
     $460,000  (which  includes  a  $121,000  fair  value  gain  on  derivative
     instruments  pursuant  to  Statement  133),  noninterest  expense increased
     $180,000  and  the  provision  for Federal income taxes increased $161,000.

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

     Interest  income  for  the  three months ended June 30, 2001 decreased $4.2
     million or 6.9% from the three months ended June 30, 2000. The decrease was
     due  to a decrease in the average yield on interest-earning assets of 0.58%
     to  7.52% for the three months ended June 30, 2001 from 8.10% for the three
     months  ended  June 30, 2000. Interest income on loans receivable decreased
     $1.5  million  due  to  a decrease in the average yield of 0.62% during the
     three  months  ended  June  30,  2001  from the same period in 2000, offset
     somewhat  by  an increase of $68.5 million in the average balances of loans
     receivable.  Interest  income  on mortgage-backed securities decreased $1.1
     million  due  to  a  decrease  in  the average yield of 0.14% for the three
     months  ended  June 30, 2001 from the same period in 2000 and a decrease in
     the  average  balance  of $46.1 million due to principal payments received.

     In  addition,  interest  income on FHLB stock, federal funds sold and other
     interest-earning  assets  decreased  $1.6  million.  The  majority  of  the
     decrease  was due to the $1.1 million FHLB special dividend recorded during
     the three months ended June 30, 2000. The remainder of the decrease was due
     to  the decrease in the average balance of other interest-earning assets of
     $15.2  million. Total interest-earning assets averaged $3.0 billion for the
     three  months ended June 30, 2001 and the three months ended June 30, 2000.

<PAGE>

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

     Interest  expense on interest-bearing liabilities was $34.0 million for the
     three months ended June 30, 2001, as compared to $38.0 million for the same
     period  in  2000. The decrease in interest expense was due to a decrease in
     the  average  rate  paid  on  interest-bearing liabilities to 4.94% for the
     three months ended June 30, 2001 from 5.48% for the three months ended June
     30,  2000  and  a  $16.3  million  decrease  in  the  average  balance  of
     interest-bearing  liabilities.  The 0.54% decrease in the average rate paid
     on  interest-bearing  liabilities  was  due  primarily  to lower market and
     wholesale  funding  costs,  somewhat  offset  by  higher deposit costs. The
     decrease  in  average interest-bearing liabilities consisted primarily of a
     $497.6  million  decrease  in  average  advances from the FHLB, offset by a
     $413.7  million  increase  in  average  securities sold under agreements to
     repurchase  and  a  $67.6  million  increase  in  average  interest-bearing
     deposits.

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

     For  the  three  months ended June 30, 2001, net interest income (excluding
     the  FHLB  special  dividend)  increased  $897,000 as compared to the three
     months  ended  June  30,  2000.  The  increase  in  net interest income was
     primarily due to the increase in Margin to 2.99% for the three months ended
     June  30,  2001  from  2.88%  for  the  three  months  ended  June 30, 2000
     (excluding  the  FHLB special dividend). Margin (including the FHLB special
     dividend)  for  the  three  months  ended  June  30, 2000 was 3.02%. Spread
     (excluding  the  FHLB  special dividend in 2000) increased to 2.58% for the
     three months ended June 30, 2001 from 2.48% for the three months ended June
     30,  2000.  Spread  including  the  FHLB special dividend was 2.62% for the
     three months ended June 30, 2000. Management also calculates an alternative
     spread which includes noninterest-bearing deposits. Under this calculation,
     the  alternative  spreads for the three months ended June 30, 2001 and 2000
     were  2.84%  and 2.76% (excluding the FHLB special dividend), respectively.
     Margin and Spread are affected by the changes in the amount and composition
     of  interest-earning  assets  and interest-bearing liabilities. The overall
     increases  in  Margin  and  Spread  (excluding the FHLB special dividend in
     2000)  were primarily due to the 0.54% decrease in the average rate paid on
     interest-bearing  liabilities,  offset by the decrease in the average yield
     on interest-earning assets (excluding the FHLB special dividend in 2000) of
     0.44%.  Average net interest-earning assets increased $23.6 million for the
     three months ended June 30, 2001 from the three months ended June 30, 2000.

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

     The  provision  for loan losses was $1.2 million for the three months ended
     June  30, 2001 compared to $1.6 million for the three months ended June 30,
     2000.  At  June  30,  2001, Coastal had nonperforming loans totalling $23.0
     million.  Nonperforming  loans are those loans on nonaccrual status as well
     as those loans greater than ninety (90) days delinquent and still accruing.
     Of  these nonperforming loans at June 30, 2001, $19.3 million, or 84%, were
     first  lien  residential  (single family) mortgage loans, $1.5 million were
     commercial  real  estate loans, $1.1 million were commercial, financial and
     industrial  loans,  with  the  balance  in the residential construction and
     consumer  and  other  categories. At December 31, 2000, nonperforming loans
     totalled  $21.2  million,  of  which $16.5 million, or 78%, were first lien
     residential mortgage loans. At June 30, 2001, the allowance for loan losses
     as  a  percentage  of  nonperforming  loans  was 63.3% compared to 68.3% at
     December  31,  2000.

     Although  no assurance can be given, management believes that the allowance
     for  loan  losses  at  June  30,  2001 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  diversifies  to determine if changes to the policy and resulting
     allowance  for  loan  losses  are  necessary.

<PAGE>

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

     For  the  three months ended June 30, 2001, noninterest income increased by
     $460,000  to  $3.0  million,  compared to $2.5 million for the three months
     ended  June  30,  2000. The increase in noninterest income was comprised of
     the  $121,000 fair value gain on derivative instruments recorded during the
     quarter  on  Coastal's  interest  rate  swap and cap agreements, a $115,000
     increase  in  service  charges  on deposit accounts, a $110,000 increase in
     loan  fees  and  a  $157,000  increase  in other noninterest income, offset
     slightly  by  a  $43,000  decrease  in  servicing income due to the sale of
     Coastal's  loan  servicing portfolio in 2000. The fair value changes in the
     derivative  instruments  were  primarily attributable to Coastal's interest
     rate  swap  positions,  which  were  totally  liquidated  in  June  2001.

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

     For  the  three  months  ended June 30, 2001, noninterest expense increased
     $180,000  from  the  three  months  ended  June  30, 2000. This increase in
     noninterest  expense  was  primarily  due  to  the  $364,000  increase  in
     compensation, payroll taxes and other benefits, offset by smaller decreases
     in  the  other  noninterest  expense  categories.

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

     The  provision for Federal income taxes for the three months ended June 30,
     2001  was  $3.0 million compared to $2.8 million for the three months ended
     June  30,  2000.  The  increase  was  due  to  the  increased income before
     provision  for Federal income taxes and minority interest in 2001, with the
     effective  tax  rate  for  both  periods  being  approximately  31%.

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

     Coastal's primary sources of funds consist of deposits bearing market rates
     of  interest,  advances  from the FHLB, securities sold under agreements to
     repurchase,  federal  funds  purchased  and  principal  payments  on  loans
     receivable  and  mortgage-backed  securities.  Coastal  uses  its  funding
     resources  principally  to  meet  its  ongoing commitments to fund maturing
     deposits  and  deposit  withdrawals,  repay  borrowings,  purchase  loans
     receivable  and  mortgage-backed  securities,  fund existing and continuing
     loan  commitments, maintain its liquidity, meet operating expenses and fund
     acquisitions of other banks and thrifts, either on a branch office or whole
     bank  acquisition  basis, in addition to purchasing treasury stock. At June
     30,  2001,  Coastal  had binding commitments to originate or purchase loans
     totaling approximately $120.9 million and had $160.0 million of undisbursed
     loans  in  process.  Scheduled maturities of certificates of deposit during
     the  12  months  following  June  30, 2001 totaled $1.0 billion at June 30,
     2001.  Management  believes that Coastal has adequate resources to fund all
     of  its  commitments.

     As  of  June  30, 2001, Coastal operated 50 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.

<PAGE>

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

     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.

     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 Coastal, the occurrence of
     which involve certain risks and uncertainties detailed in Coastal's filings
     with  the  Securities  and  Exchange  Commission  ("SEC").  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  and  warehouse  and  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, 2000, as filed with the
     SEC  on  March  27,  2001.

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, 2000. 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  to the financial condition of Coastal.

Item  2. Changes  in  Securities  and  Use  of  Proceeds
         -----------------------------------------------

          Not  applicable.

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

          Not  applicable.

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

          On  April  26,  2001, at the Annual Meeting of Stockholders of Coastal
          Bancorp,  Inc. (the Company), the stockholders voted upon and approved
          the  election  of  three  directors  and  the  ratification  of  the
          appointment  of  KPMG  LLP  as  the  Company's  independent  public
          accountants  for  the  fiscal  year  ending  December  31,  2001.

          With  respect  to  such  matters,  the  results  of  the votes were as
          follows:

     1)   Election  of  Directors:
                                                Number  of  Votes
                                                -----------------
                                             In  Favor     Withheld
                                             ---------     --------
          R.  Edwin  Allday                  4,993,051      308,283
          D.  Fort  Flowers,  Jr.            5,217,677       83,657
          Dennis  S.  Frank                  4,993,051      308,283

     2)   Ratification  of  KPMG  LLP  as  the  Company's  independent  public
          accountants  for  the  fiscal  year  ending  December  31,  2001:

          Number  of  votes  in  favor:                  5,254,947
          Number  of  votes  against:                       44,700
          Number  of  votes  abstaining                      1,687

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

          Not  Applicable.

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

          Form  8K  filed  on  May  2, 2001 concerning the announcement that the
          Board  of Directors voted to increase the first quarter of 2001 common
          stock  dividend  to  $0.12  per  share.

<PAGE>


                                   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:     8/14/01                                 By       /s/  Manuel J. Mehos
           -------                                          --------------------
                                                               Manuel  J.  Mehos
                                                       Chief  Executive  Officer









Dated:     8/14/01                                By   /s/  Catherine  N. Wylie
           -------                                         --------------------
                                                           Catherine  N.  Wylie
                                                      Chief  Financial  Officer