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,  2002

          [    ]     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:  5,226,502  AS OF AUGUST 9, 2002


<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, 2002
        and December 31, 2001                                                      1

        Consolidated Statements of Income for the Six-Month Periods Ended
        June 30, 2002 and 2001                                                     2

        Consolidated Statements of Income for the Three-Month Periods Ended
        June 30, 2002 and 2001                                                     3

        Consolidated Statements of Comprehensive Income for the Six-Month and
        Three-Month Periods Ended June 30, 2002 and 2001                           4

        Consolidated Statements of Cash Flows for the Six-Month Periods
        Ended June 30, 2002 and 2001                                               5

        Notes to Consolidated Financial Statements                                 7

Item 2  Management's Discussion and Analysis of Financial Condition and Results
        of Operations                                                             19

Item 3  Quantitative and Qualitative Disclosures About Market Risk                26

</TABLE>






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

<CAPTION>



<S>     <C>                                                  <C>
Item 1  Legal Proceedings                                    27
Item 2  Changes in Securities and Use of Proceeds            27
Item 3  Default upon Senior Securities                       27
Item 4  Submission of Matters to a Vote of Security Holders  27
Item 5  Other Information                                    27
Item 6  Exhibits and Reports on Form 8-K                     28
</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                                                                  2002                     2001
------------------------------------------------------               ----------              ------------
                                                                     (Unaudited)
<S>                                                     <C>          <C>         <C>           <C>
Cash and cash equivalents                                            $   34,023                $   41,537
Federal funds sold                                                        3,360                    16,710
Loans receivable held for sale (note 4)                                   3,814                        --
Loans receivable (note 4)                                             1,918,938                 1,863,601
Mortgage-backed securities available-for-sale (note 3)                  427,854                   514,068
Other securities available-for-sale                                       1,768                    42,827
Accrued interest receivable                                              11,509                    13,243
Property and equipment                                                   27,050                    27,461
Stock in the Federal Home Loan Bank of Dallas (FHLB)                     40,630                    40,032
Goodwill and other intangible assets (note 5)                            20,730                    21,811
Prepaid expenses and other assets                                        17,662                    16,601
                                                                     ----------                ----------
                                                                     $2,507,338                $2,597,891
                                                                     ==========                ==========
</TABLE>


<TABLE>

<CAPTION>

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


<S>                                                                <C>
Liabilities:
 Deposits (note 6)                                                   $1,650,759               $1,660,386
 Advances from the FHLB (note 7)                                        609,846                  690,877
 Company obligated mandatorily redeemable 9.0% trust preferred
     securities of Coastal Capital Trust I (note 8)                      50,000                       --
 Senior notes payable, net (note 9)                                          --                   43,875
 Advances from borrowers for taxes and insurance                          7,366                    4,259
 Other liabilities and accrued expenses                                  13,767                    12,310
                                                                     -----------              -----------
     Total liabilities                                                2,331,738                 2,411,707
                                                                     -----------              -----------
Minority interest - 9.0% noncumulative preferred stock of
 Coastal Banc ssb (note 12)                                              28,750                   28,750

Commitments and contingencies (notes 4 and 10)

Stockholders' equity (notes 1, 3, 11, 13 and 14):
 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; 7,848,806 shares issued and 5,302,847 shares
   outstanding at June 30, 2002; 7,835,178 shares issued
   and 5,835,178 shares outstanding at December 31, 2001                     78                       78
 Additional paid-in capital                                              35,448                   35,366
 Retained earnings                                                      133,101                  127,425
 Accumulated other comprehensive loss -
   unrealized loss on securities available-for-sale                      (1,526)                  (1,590)
 Treasury stock at cost (2,545,959, shares in 2002 and 2,000,000
  shares in 2001)                                                       (47,751)                 (31,345)
                                                                     -----------              -----------
     Total stockholders' equity                                         146,850                  157,434
                                                                     -----------              -----------
                                                                     $2,507,338               $2,597,891
                                                                     ===========              ===========

</TABLE>

See  accompanying  Notes  to  Consolidated  Financial  Statements.


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


                                                                                                       Six Months Ended
                                                                                                            June 30,
                                                                                                       ------------------
                                                                                                        2002         2001
                                                                                                     --------      --------
                                                                                                           (Unaudited)
<S>                                                                                                 <C>                 <C>
Interest income:
 Loans receivable                                                                                   $    60,708   $ 84,079
 Mortgage-backed securities                                                                               9,026     30,987
 FHLB stock, federal funds sold and other interest-earning assets                                           855      1,522
                                                                                                     -----------  ---------
                                                                                                         70,589    116,588
                                                                                                     -----------  ---------
Interest expense:
 Deposits                                                                                                21,243     38,982
 Advances from the FHLB                                                                                  10,359     25,960
 Other borrowed money                                                                                        --      4,578
 Senior notes payable                                                                                       378      2,345
 Company obligated mandatorily redeemable 9.0% trust preferred
   securities of Coastal Capital Trust I                                                                    163         --
                                                                                                     -----------  ---------
                                                                                                         32,143     71,865
                                                                                                     -----------  ---------

   Net interest income                                                                                   38,446     44,723
Provision for loan losses                                                                                 1,800      2,100
                                                                                                     -----------  ---------
   Net interest income after provision for loan losses                                                   36,646     42,623
                                                                                                     -----------  ---------
Noninterest income:
 Service charges on deposit accounts                                                                      4,133      3,621
 Loan fees                                                                                                  622        600
 Loss on derivative instruments                                                                             (24)      (443)
 Gain on sale of real estate owned                                                                          240         31
 Other                                                                                                      492        997
                                                                                                     -----------  ---------
                                                                                                          5,463      4,806
                                                                                                     -----------  ---------
Noninterest expense:
 Compensation, payroll taxes and other benefits                                                          15,853     15,206
 Office occupancy                                                                                         5,221      5,517
 Data processing                                                                                            822      1,687
 Amortization of goodwill and other intangible assets                                                     1,081      1,397
 Advertising                                                                                                850        715
 Postage and delivery                                                                                       795        701
 Other                                                                                                    3,994      4,032
                                                                                                     -----------  ---------
                                                                                                         28,616     29,255
                                                                                                     -----------  ---------
       Income before provision for Federal income taxes, minority
         interest and cumulative effect of accounting change                                             13,493     18,174
Provision for Federal income taxes                                                                        3,867      5,606
                                                                                                     -----------  ---------
       Income before minority interest and cumulative effect of
         accounting change                                                                                9,626     12,568
Minority interest - preferred stock dividends of Coastal Banc ssb                                         1,294      1,294
                                                                                                     -----------  ---------
       Income before cumulative effect of accounting change                                               8,332     11,274
Cumulative effect of change in accounting for derivative instruments, net of tax (note 10)                   --       (104)
                                                                                                     -----------  ---------
   Net income                                                                                        $    8,332   $ 11,170
                                                                                                     ===========  =========
   Net income available to common stockholders                                                       $    7,078   $  9,916
                                                                                                     ===========  =========
Basic earnings per share before cumulative effect of accounting change                               $     1.23   $   1.75
                                                                                                     ===========  =========
Basic earnings per share (notes 5 and 11)                                                            $     1.23   $   1.73
                                                                                                    ===========  ==========
Diluted earnings per share before cumulative effect of accounting change                             $     1.17   $   1.66
                                                                                                     ===========  =========
Diluted earnings per share (notes 5 and 11)                                                          $     1.17   $   1.64
                                                                                                     ===========  =========
</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,
                                                                         --------------------
                                                                            2002           2001
                                                                        ----------       -------
                                                                               (Unaudited)
<S>                                                                   <C>                    <C>
Interest income:
 Loans receivable                                                    $      30,741        $41,078
 Mortgage-backed securities                                                  4,062         14,729
 FHLB stock, federal funds sold and other interest-earning assets              380            616
                                                                          ---------      --------
                                                                            35,183         56,423
                                                                          ---------      --------
Interest expense:
 Deposits                                                                    10,202        19,061
 Advances from the FHLB                                                       5,091         9,197
 Other borrowed money                                                           --          4,575
 Senior notes payable                                                           --          1,172
 Company obligated mandatorily redeemable 9.0% trust preferred
   securities of Coastal Capital Trust I                                        163            --
                                                                          ---------      --------
                                                                             15,456        34,005
                                                                          ---------      --------
   Net interest income                                                       19,727        22,418
Provision for loan losses                                                       900         1,200
                                                                          ---------      --------
   Net interest income after provision for loan losses                       18,827        21,218
                                                                          ---------      --------
Noninterest income:
 Service charges on deposit accounts                                          2,138         1,860
 Loan fees                                                                      315           360
 Gain on derivative instruments                                                  --           121
 Gain on sale of real estate owned                                              218            12
 Other                                                                          283           631
                                                                          ---------      --------
                                                                              2,954         2,984
                                                                          ---------      --------
Noninterest expense:
 Compensation, payroll taxes and other benefits                               7,992         7,608
 Office occupancy                                                             2,641         2,841
 Data processing                                                                399           833
 Amortization of goodwill and other intangible assets                           547           695
 Advertising                                                                    421           359
 Postage and delivery                                                           367           351
 Other                                                                        1,999         1,886
                                                                          ---------      --------
                                                                             14,366        14,573
                                                                          ---------      --------
       Income before provision for Federal income taxes and
         minority interest                                                    7,415         9,629
Provision for Federal income taxes                                            2,169         2,992
                                                                          ---------      --------
     Income before minority interest                                          5,246         6,637
Minority interest - preferred stock dividends of Coastal Banc ssb               647           647
                                                                          ---------      --------
     Net income                                                          $    4,599       $ 5,990
                                                                          ==========     ========
     Net income available to common stockholders                         $    3,972       $ 5,363
                                                                          ==========     ========
Basic earnings per share (notes 5 and 11)                                $     0.70       $  0.93
                                                                          ==========     ========
Diluted earnings per share (notes 5 and 11)                              $     0.66       $  0.89
                                                                          ==========     ========
</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,
                                                                ----------------
                                                               2002          2001
                                                            ---------    ----------
                                                                   (Unaudited)
<S>                                                         <C>                 <C>
Net income                                               $     8,332        $11,170
Other comprehensive income, net of tax:
 Unrealized holding gains on securities available-for-sale
 arising during period                                            64          1,543
                                                            ---------    ----------
Total comprehensive income                               $     8,396        $12,713
                                                            =========    ==========
</TABLE>





<TABLE>

<CAPTION>



                                                               Three Months Ended
                                                                     June 30,
                                                                 ---------------
                                                                 2002           2001
                                                               --------      ----------
                                                                     (Unaudited)
<S>                                                         <C>                   <C>
Net income                                                   $      4,599        $5,990
Other comprehensive income, net of tax:
 Unrealized holding gains on securities available-for-sale
 arising during period                                                 69           936
                                                               ----------    ----------
Total comprehensive income                                   $      4,668        $6,926
                                                               =========-    ==========
</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,
                                                                             ------------------
                                                                              2002            2001
                                                                       ------------------  ----------
                                                                                  (Unaudited)
<S>                                                                    <C>                 <C>
Cash flows from operating activities:
 Net income                                                            $           8,332   $  11,170
 Adjustments to reconcile net income
   to net cash provided (used) by operating activities:
 Depreciation and amortization of property and equipment
   and prepaid expenses and other assets                                           4,113       4,063
 Net premium amortization (discount accretion)                                     2,615      (1,332)
 Provision for loan losses                                                         1,800       2,100
 Amortization of goodwill and other intangible assets                              1,081       1,397
 Originations and purchases of mortgage loans held for sale                       (8,592)    (15,649)
 Sales of mortgage loans for held for sale                                        11,758      15,779
 Stock dividends from the FHLB                                                      (598)     (1,338)
 Loss on derivative instruments                                                       24         603
 Decrease (increase) in:
   Accrued interest receivable                                                     1,734       1,368
   Other, net                                                                      3,462     (30,009)
                                                                             -----------  -----------
   Net cash provided (used) by operating activities                               25,729     (11,848)
                                                                             -----------  -----------
Cash flows from investing activities:
 Net decrease (increase) in federal funds sold                                    13,350      (5,701)
 Purchase of other securities available-for-sale                                    (243)         --
 Principal repayments on mortgage-backed securities held-to-maturity                  --      33,839
 Principal repayments on mortgage-backed securities
   available-for-sale                                                             84,580       6,158
 Proceeds from maturity of U.S. Treasury securities held-to-maturity                  --         100
 Proceeds from maturity of other securities available-for-sale                    41,000          --
 Purchases of loans receivable                                                  (218,988)   (163,327)
 Sales of loans receivable                                                        10,111          --
 Net decrease in loans receivable                                                140,822      66,218
 Purchases of property and equipment, net                                         (1,594)     (1,294)
 Purchases of FHLB stock                                                              --      (3,986)
 Proceeds from sales of FHLB stock                                                    --      28,431
                                                                             -----------  -----------
   Net cash provided (used) by investing activities                               69,038     (39,562)
                                                                             -----------  -----------
</TABLE>

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

<CAPTION>
                                                                                       Six Months Ended
                                                                                           June 30,
                                                                                       ------------------
                                                                                       2002             2001
                                                                                ------------------  ------------
                                                                                           (Unaudited)
<S>                                                                             <C>                 <C>
Cash flows from financing activities:
 Net increase (decrease) in deposits                                            $          (9,627)  $    16,555
 Securities sold under agreements to repurchase and federal funds
  purchased                                                                                    --     1,465,852
 Purchases of securities sold under agreements to repurchase and
   federal funds purchased                                                                     --      (982,672)
 Advances from the FHLB                                                                 2,893,300     6,609,380
 Principal payments on advances from the FHLB                                          (2,974,331)   (7,093,527)
 Proceeds from issuance of trust preferred securities                                      48,125            --
 Redemption of senior notes payable                                                       (43,875)           --
 Net increase in advances from borrowers for taxes and insurance                            3,107         5,055
 Exercise of stock options for purchase of common stock, net                                   55         1,040
 Purchase of treasury stock                                                               (16,436)           --
 Issuance of treasury shares                                                                   59            --
 Dividends paid                                                                            (2,658)       (2,518)
                                                                                ------------------  ------------
   Net cash provided (used) by financing activities                                      (102,281)       19,165
                                                                                ------------------  ------------
   Net decrease in cash and cash equivalents                                               (7,514)      (32,245)
 Cash and cash equivalents at beginning of period                                          41,537        69,730
                                                                                ------------------  ------------
 Cash and cash equivalents at end of period                                     $          34,023   $    37,485
                                                                                ==================  ============

 Supplemental schedule of cash flows-interest paid                              $          33,315   $    71,862
                                                                                ==================  ============
 Supplemental schedule of noncash investing and financing activities:
   Transfer of loans to held for sale category                                  $           9,075   $        --
                                                                                ==================  ============
   Foreclosures of loans receivable                                             $           3,436   $     1,709
                                                                                ==================  ============
   Capitalization of costs related to issuance of trust preferred securities    $           1,875   $        --
                                                                                ==================  ============
</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, 2002 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,
July 27, 2000 and April 25, 2002, the Board of Directors authorized six 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.  During  June 2002, Coastal repurchased 547,800 shares of
common  stock  at  an  average  repurchase  price  of $30.00 per share.  Of that
amount,  500,000  shares  were repurchased in a privately negotiated transaction
with a director of Coastal at $30.00 per share.  As of June 30, 2002, a total of
2,547,800  shares  had  been  repurchased under the authorized repurchase plans.

     As  of  June 30, 2002, 2,545,959 shares were held in treasury at an average
price  of  $18.76  per  share for a total cost of $47.8 million.  Book value per
common  share  at  June  30,  2002  was  $21.78.

(2)     PRINCIPLES  OF  CONSOLIDATION

     The  accompanying  unaudited  Consolidated Financial Statements include the
accounts of Coastal Bancorp, Inc. ("Bancorp") and its wholly-owned subsidiaries,
Coastal  Capital Trust I and Coastal Banc Holding Company, Inc. and Coastal Banc
Holding  Company  Inc.'s  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
"Coastal").  All  significant  intercompany  balances and transactions have been
eliminated  in  consolidation.

(3)     MORTGAGE-BACKED  SECURITIES

     Mortgage-backed securities at June 30, 2002 were as follows (in thousands):
<TABLE>

<CAPTION>
                                                   Gross       Gross
                                    Amortized   Unrealized   Unrealized    Market
                                       Cost        Gains       Losses       Value
                                      ---------  -----------  ----------  -------
<S>                      <C>        <C>          <C>         <C>      <C>       <C>
Available-for-sale:
  Agency securities                $   346,512  $   284       $(2,041)     $344,755
  CMOs - Non-agency                     81,421       55          (675)       80,801
  Non-agency securities                  2,273       25            --         2,298
                                    ----------   -------       -------    ---------
                                   $   430,206  $   364       $(2,716)     $427,854
                                    ==========   =======       =======     ========

</TABLE>

<PAGE>
     Mortgage-backed  securities  at  December  31,  2001  were  as  follows (in
thousands):
<TABLE>

<CAPTION>
                                                      Gross           Gross
                                     Amortized      Unrealized      Unrealized     Market
                                       Cost          Gains            Losses        Value
                                     ---------     -----------      ----------     -------
<S>                      <C>        <C>          <C>         <C>      <C>       <C>
Available-for-sale:
  Agency securities                 $   406,437      $   319         $(2,455)      $404,301
  CMOs - Non-agency                     107,488           82            (418)       107,152
  Non-agency securities                   2,590           34              (9)         2,615
                                    ----------       ------          --------     ---------
                                    $   516,515      $   435         $(2,882)      $514,068
                                    ===========      =======         =======       ========
</TABLE>



Effective  September  30,  2001,  Coastal transferred all of its mortgage-backed
securities held-to-maturity to the available-for-sale category.  This was due to
management's  intent  to  restructure  a  portion  of  the asset base to be less
vulnerable to market interest rate fluctuations.  In late November 2001, Coastal
entered  into  a  transaction  in  which  it  sold  $844.9  million  of  its
mortgage-backed  securities.  Also  in  November,  Coastal used a portion of the
proceeds of that sale to purchase approximately $512.3 million of primarily pass
through  mortgage-backed  securities.  All  of  the securities purchased and the
remaining  securities  not  sold were placed in the available-for-sale category.

(4)     LOANS  RECEIVABLE

     Loans receivable at June 30, 2002 and December 31, 2001 were as follows (in
thousands):
<TABLE>

<CAPTION>
                                                    June 30, 2002                December 31, 2001
                                                   ---------------                -----------------
<S>                                                <C>              <C>                <C>
Real estate mortgage loans:
  First-lien mortgage, primarily residential       $      912,045                      $  880,624
  Commercial                                              336,403                         319,377
  Multifamily                                             126,372                         124,616
  Residential construction                                166,527                         136,035
  Acquisition and development                             132,451                         140,009
  Commercial construction                                 259,748                         222,026
Commercial loans, secured by residential mortgage
 loans held for sale                                        1,188                          11,508
Commercial, financial and industrial                      126,915                         116,029
Loans secured by deposits                                  19,486                          21,238
Consumer and other loans                                   36,643                          43,384
                                                        2,117,778                       2,014,846
                                                   ---------------                     -----------
Loans in process                                         (181,643)                       (131,064)
Allowance for loan losses                                 (15,233)                        (15,385)
Unearned interest and  loan fees                           (3,212)                         (2,959)
Premium (discount) on purchased loans, net                  1,248                          (1,837)
                                                   ---------------                     -----------
                                                   $    1,918,938                      $1,863,601
                                                   ===============                     ===========
Weighted average yield                                       6.37%                           6.90%
                                                   ===============                     ===========
</TABLE>




<PAGE>
     At  June  30,  2002,  Coastal  had  outstanding commitments to originate or
purchase  $24.5  million  of  real  estate  mortgage  and  other  loans  and had
commitments  under  existing lines of credit to originate primarily construction
and other loans of approximately $109.1 million.  In addition, at June 30, 2002,
Coastal  had  $14.7  million  of  outstanding  letters  of  credit.  Management
anticipates  the  funding  of  these  commitments  through  normal  operations.

     At  June  30,  2002 and December 31, 2001, the carrying value of loans that
were  considered  to  be  impaired  totaled  approximately $3.6 million and $3.8
million,  respectively  and  the  related  allowance  for  loan  losses on those
impaired  loans  totaled $441,000 and $554,000 at June 30, 2002 and December 31,
2001,  respectively.  Of  the  impaired  loans  outstanding,  eight loans with a
balance  of  $832,000 at June 30, 2002 and nineteen loans with a balance of $1.3
million at December 31, 2001 did not have specific portions of the allowance for
loan  losses  allocated  to  them at each respective date.  The average recorded
investment  in impaired loans during the six months ended June 30, 2002 and 2001
was  $3.2  million  and  $4.7  million,  respectively.

     An analysis of activity in the allowance for loan losses for the six months
ended  June  30,  2002  and  2001  is  as  follows  (in  thousands):
<TABLE>

<CAPTION>
                                                     Six Months Ended June 30,
                                                     -------------------------
                                                           2002      2001
                                                         --------  --------
<S>                           <C>                        <C>       <C>
Balance, beginning of period                             $15,385   $14,507
Provision for loan losses                                  1,800     2,100
Charge-offs                                               (2,274)   (2,215)
Recoveries                                                   322       159
                                                         -------   --------
Balance, end of period                                   $15,233   $14,551
                                                        ========   ========
</TABLE>


     During the first quarter of 2002, management made the decision to liquidate
a  portion  of  its under-performing single-family mortgage loans.  On March 22,
2002,  Coastal  sold  $10.8  million  of these under-performing loans to a third
party investor.  Prior to the sale, Coastal wrote these loans down to fair value
and  recorded  a  charge-off  to  the allowance for loan losses of $761,000.  In
addition,  as  of  March  31,  2002,  Coastal  wrote  down  to  fair  value  and
reclassified $9.1 million of other under-performing single-family mortgage loans
to the held for sale category.  The loans that were reclassified to the held for
sale  category  were  written  down to fair value as of March 31, 2002 through a
charge-off  to  the  allowance  for  loan losses of $691,000.  During the second
quarter  of  2002,  a total of $3.1 million of these under-performing loans held
for  sale  were  sold  to  the  same third party investor.  As of June 30, 2002,
Coastal had a total of $3.8 million loans held for sale remaining (net of second
quarter  activity  including  sales, payoffs, foreclosures and monthly principal
payments  received).


<PAGE>
(5)     GOODWILL  AND  OTHER  INTANGIBLE  ASSETS

          On  January 1, 2002, Coastal adopted Statement of Financial Accounting
Standards  No.  141,  "Business Combinations" ("Statement 141") and Statement of
Financial  Accounting  Standards No. 142, "Goodwill and Other Intangible Assets"
("Statement  142").  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.  Statement 141 also requires,
upon  adoption  of  Statement 142, that Coastal evaluate its existing intangible
assets  and goodwill that were acquired in prior purchase business combinations,
and  make  any  necessary  reclassifications  in  order  to conform with the new
criteria  in  Statement  141 for recognition apart from goodwill.  Statement 142
changes  the  accounting  for  goodwill  from  an  amortization  method  to  an
impairment-only  approach.

     At  January  1,  2002, Coastal had unamortized goodwill that was subject to
the  transition  provisions  of  Statements  141  and  142 in the amount of $5.5
million.  Amortization  expense  related  to  this goodwill was $154,000 for the
quarter ended June 30, 2001, $306,000 for the six months ended June 30, 2001 and
$618,000  for  the year ended December 31, 2001.  The remaining $16.3 million of
goodwill  at  January  1,  2002  was reclassified to other intangible assets, as
those  amounts  were  originally  recorded  as goodwill pursuant to Statement of
Financial  Accounting  Standards No. 72, "Accounting for Certain Acquisitions of
Banking  or  Thrift  Institutions"  ("Statement  72") and are not subject to the
non-amortization  provisions  of  Statement  142.

     At June 30, 2002 and December 31, 2001, other intangible assets amounted to
$15.3 million and $16.3 million net of accumulated amortization of $12.8 million
and  $11.7  million, respectively.  The estimated aggregate amortization expense
on these other intangible assets for each of the five succeeding fiscal years is
as  follows  (dollars  in  thousands):
<TABLE>

<CAPTION>
Year ending December 31,
------------------------
<S>                       <C>
2002                      $2,291
2003                       1,790
2004                       1,431
2005                       1,270
2006                       1,270
</TABLE>


     In  connection  with  the  adoption of these statements, Coastal tested for
impairment  in  accordance with the provisions of Statement 142 during the first
quarter  of 2002 and did not recognize any transitional impairment losses as the
cumulative  effect  of  a  change  in  accounting  principle.  Pursuant  to  the
transition  provisions  of  Statement  142,  presented below are as adjusted net
income  and  earnings per share amounts to exclude the amortization expense (net
of  any tax effect) recognized in the period prior to the implementation related
to  the  goodwill  that  is  no longer being amortized (in thousands, except per
share  data).

<PAGE>

<TABLE>
<CAPTION>
                                                   Six Months Ended
                                                       June 30,
<S>                               <C>               <C>     <C>
                                                      2002     2001
                                                    ------  -------
Net income:
As reported                                         $8,332  $11,170
Add back:  goodwill amortization                        --      306
                                                    ------  -------
As adjusted                                         $8,332  $11,476
                                                    ======  =======

Basic earnings per share:
As reported                                         $ 1.23  $  1.73
Add back:  goodwill amortization                        --     0.05
                                                    ------  -------
As adjusted                                         $ 1.23  $  1.78
                                                    ======  =======

Diluted earnings per share:
As reported                                         $ 1.17  $  1.64
Add back:  goodwill amortization                        --     0.05
                                                    ------  -------
As adjusted                                         $ 1.17  $  1.69
                                                    ======  =======
</TABLE>


<TABLE>
<CAPTION>
                                                   Three Months Ended
                                                        June 30,
<S>                               <C>                 <C>     <C>
                                                        2002    2001
                                                      ------  ------
Net income:
As reported                                           $4,599    $5,990
Add back:  goodwill amortization                          --       154
                                                    --------  --------
As adjusted                                           $4,599    $6,144
                                                    ========  ========

Basic earnings per share:
As reported                                           $ 0.70    $ 0.93
Add back:  goodwill amortization                          --      0.03
                                                    --------  --------
As adjusted                                           $ 0.70    $ 0.96
                                                    ========  ========

Diluted earnings per share:
As reported                                           $ 0.66    $ 0.89
Add back:  goodwill amortization                          --      0.03
                                                    --------  --------
As adjusted                                           $ 0.66    $ 0.92
                                                    ========  ========
</TABLE>

<PAGE>
(6)     DEPOSITS

     Deposits,  their  stated  rates  and  the related weighted average interest
rates,  at June 30, 2002 and December 31, 2001, are summarized below (dollars in
thousands).  Effective  January 1, 1998, Coastal implemented a program whereby a
portion  of  the  balances  in noninterest-bearing and interest-bearing checking
accounts  is  reclassified to money market demand accounts under Federal Reserve
Regulation  D.  The  amount of such reclassification, reflected in the following
table, was approximately $249.1 million ($129.3 million from noninterest-bearing
and  $119.8  million  from interest-bearing) at June 30, 2002 and $243.3 million
($113.0  million  from  noninterest-bearing  and  $130.3  million  from
interest-bearing)  at  December  31,  2001.

<TABLE>

<CAPTION>
                                  Stated Rate                     June 30, 2002     December 31, 2001
                                ---------------                   ---------------   -----------------
<S>                             <C>              <C>            <C>                  <C>
Noninterest-bearing checking              0.00%                 $           42,550   $   47,712
Interest-bearing checking        0.50  -  1.00                              11,963       15,894
Savings accounts                 0.50  -  1.24                              47,518       45,234
Money market demand accounts     0.00  -  2.23                             529,434      505,789
                                                                -------------------  -----------
                                                                           631,465      614,629
                                                                -------------------  -----------
Certificate accounts            Less than 2.00                              53,021       29,707
                                 2.00  -  2.99                             437,939      171,523
                                 3.00  -  3.99                             266,270      263,006
                                 4.00  -  4.99                             198,545      356,314
                                 5.00  -  5.99                              50,391      155,949
                                 6.00  -  6.99                              12,944       68,979
                                 7.00  -  7.99                                 112          209
                                 8.00  -  8.99                                  72           70
                                                                -------------------  -----------
                                                                         1,019,294    1,045,757
                                                                -------------------  -----------
                                                                $        1,650,759   $1,660,386
                                                                ===================  ===========
Weighted average interest rate                                                2.44%        3.02%
                                                                ===================  ===========
</TABLE>

     Prior  to  the  reclassification  as  discussed  above, noninterest-bearing
checking  accounts,  interest-bearing  checking accounts and money market demand
accounts  were  as  follows  at  June  30,  2002  and  December  31,  2001:

<TABLE>
<CAPTION>
                                June 30, 2002                December 31, 2001
                                --------------               -----------------
<S>                           <C>             <C>                <C>
Noninterest-bearing checking  $      171,865                     $160,738
Interest-bearing checking            131,797                      146,144
Money market demand accounts         280,285                      262,513
</TABLE>

<PAGE>

     The  scheduled  maturities  of certificate accounts outstanding at June 30,
2002  were  as  follows  (dollars  in  thousands):
<TABLE>
<CAPTION>
                            June 30, 2002
                            --------------
<S>                         <C>
   0 through 12 months      $      908,597
  13 through 24 months              47,450
  25 through 36 months              38,101
  37 through 48 months               4,562
  49 through 60 months              20,537
        Over 60 months                  47
                            --------------
                            $    1,019,294
                            ==============
</TABLE>


(7)     ADVANCES  FROM  THE  FHLB

     The  weighted  average interest rates on advances from the FHLB at June 30,
2002  and  December  31, 2001 were 3.18% and 3.46%, respectively.  The scheduled
maturities and related weighted average interest rates on advances from the FHLB
at  June  30,  2002  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>
2002                                                 2.68%          $195,717
2003                                                 3.62            133,644
2004                                                 2.57            139,741
2005                                                 3.48            109,558
2006                                                 5.65              7,808
2007                                                 6.66              1,191
2008                                                 5.52              2,256
2009                                                 8.02              3,665
2010                                                 6.73                987
2011                                                 6.55              1,287
2012                                                 5.76                292
2013                                                 5.75              7,612
2014                                                 5.45              2,931
2015                                                 6.67              1,677
2018                                                 5.05              1,480
                                                                    --------
                                                     3.18%          $609,846
                                                                    ========
</TABLE>

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


<PAGE>
(8)     COMPANY OBLIGATED MANDATORILY REDEEMABLE 9.0% TRUST PREFERRED SECURITIES

     On  June 18, 2002, Coastal, through Coastal Capital Trust I (a consolidated
trust  subsidiary) (the "Trust"), issued 2,000,000 in trust preferred securities
("Trust  Preferred  Securities")  with  a  liquidation  preference  of  $25  per
security.  The  Trust  Preferred  Securities  represent an interest in Bancorp's
junior  subordinated  debentures,  which  were  purchased  by  the  Trust.  The
debentures  have  the  same  payment  terms  as  the Trust Preferred Securities.
Distributions on the securities are payable quarterly at the annual rate of 9.0%
and  are  included in interest expense in the consolidated statements of income.

     The  Trust  Preferred Securities are subject to mandatory redemption at the
liquidation  preference,  in  whole  or  in  part,  upon repayment of the junior
subordinated  debentures  at  maturity  or their earlier redemption.  The junior
subordinated  debentures  are  redeemable prior to the maturity date of June 30,
2032,  at  the option of Bancorp on or after June 30, 2007, in whole at any time
or  in  part  from  time  to  time.  The junior subordinated debentures are also
redeemable  at  any  time,  in  whole,  but  not in part, upon the occurrence of
specific  events  defined within the trust indenture.  Bancorp has the option to
defer  distributions on the junior subordinated debentures from time to time for
a  period  not  to  exceed  20  consecutive  quarters.

     A  portion  of  the  proceeds  from  the  issuance  of  the Trust Preferred
Securities  were  used  to  repurchase  500,000 shares of common stock for $15.0
million  from  a  director in June 2002.  In addition, the proceeds were used on
July  15, 2002, to redeem the Bank's 9.0% Series A Noncumulative Preferred Stock
(Nasdaq:CBSAO)  for  $28.8  million.  The remainder of the proceeds were used to
contribute  additional  capital  to  the  Bank.

(9)     SENIOR  NOTES  PAYABLE

     On  June  30,  1995, Coastal issued $50.0 million of 10.0% Senior Notes due
June 30, 2002.  The Senior Notes became redeemable at Coastal's option, in whole
or  in  part,  on June 30, 2000, at par, plus accrued interest to the redemption
date.  Interest  on  the  Senior  Notes  was payable quarterly.  During 2001 and
1999,  Coastal  repurchased  in  the  open  market  $3.0  and  $3.1  million,
respectively,  of  the  Senior  Notes  outstanding at par.  On February 1, 2002,
Coastal  redeemed  all of the remaining Senior Notes outstanding ($43.9 million)
at  par  plus  accrued  interest  to  the  redemption  date.

(10)     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,
as  well as 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 did 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, 2002 and
2001,  Coastal  recorded  an  additional  fair  value  loss  on these derivative
instruments  of  $24,000  and  $443,000, respectively.  The decrease in the fair
value  of  derivatives  during  2001  was  primarily  due  to interest rate swap
agreements,  which  were  liquidated  in  June  2001.  As  of  June 30, 2002 and
December  31,  2001, interest rate cap agreements were Coastal's only derivative
instruments  and  were  recorded  at  fair  value  pursuant  to  Statement  133.

     The  interest  rate  cap agreements provide for applicable 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 $1,000 at June 30, 2002, 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  any  purchase  price  and interest income from the
interest  rate cap agreements is recorded in interest income in the accompanying
consolidated  statements of income, as applicable.  The net decrease in interest
income related to the interest rate cap agreements was approximately $13,000 for
the  six  months  ended  June 30, 2002 and 2001, respectively.  No payments were
made  to  Coastal under the interest rate cap agreements during the three months
ended  June  30,  2002  or  2001.

     Interest rate cap agreements outstanding at June 30, 2002 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      107,627
                            ---------
                            $ 124,227
                            =========
</TABLE>



     Market risk, or the risk of loss due to movement in market prices or rates,
is  quantified by Coastal through a risk monitoring process of marking to market
its  assets and liabilities 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,  as  well  as  potential  changes  in  net  interest income.

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

<PAGE>

(11)     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,  2002 and 2001 (dollars in thousands, except per share
data):

<TABLE>
<CAPTION>
                                                                     Six Months Ended
                                                                        June 30,
<S>                                           <C>               <C>          <C>
                                                                      2002         2001
                                                                -----------  -----------
Net income                                                      $    8,332   $   11,170
Preferred stock dividends                                           (1,254)      (1,254)
                                                                -----------  -----------
Net income available to common stockholders                     $    7,078   $    9,916
                                                                ===========  ===========
Weighted average number of common shares
 outstanding used in basic EPS calculation                       5,768,001    5,732,270
Add assumed exercise of outstanding stock
 options as adjusted for dilutive securities                       269,078      299,472
                                                                -----------  -----------
Weighted average number of common shares
 outstanding used in diluted EPS calculation                     6,037,079    6,031,742
                                                                ===========  ===========
Basic EPS                                                       $     1.23   $     1.73
                                                                ===========  ===========
Diluted EPS                                                     $     1.17   $     1.64
                                                                ===========  ===========
</TABLE>

<TABLE>
<CAPTION>

                                                                    Three Months Ended
                                                                         June 30,
<S>                                           <C>                 <C>          <C>
                                                                        2002         2001
                                                                  -----------  -----------
Net income                                                        $    4,599   $    5,990
Preferred stock dividends                                               (627)        (627)
                                                                  -----------  -----------
Net income available to common stockholders                       $    3,972   $    5,363
                                                                  ===========  ===========
Weighted average number of common shares
 outstanding used in basic EPS calculation                         5,715,222    5,748,708
Add assumed exercise of outstanding stock
 options as adjusted for dilutive securities                         269,214      310,298
                                                                  -----------  -----------
Weighted average number of common shares
 outstanding used in diluted EPS calculation                       5,984,436    6,059,006
                                                                  ===========  ===========
Basic EPS                                                         $     0.70   $     0.93
                                                                  ===========  ===========
Diluted EPS                                                       $     0.66   $     0.89
                                                                  ===========  ===========
</TABLE>


     The  weighted  average number of common shares outstanding has been reduced
by  the  treasury  stock held by Coastal.  As of June 30, 2002 and 2001, Coastal
had  2,545,959  and  2,000,000  common  shares  in  treasury,  respectively.

<PAGE>
(12)     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 were 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 could 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  (but not including) the date fixed for
redemption.

     With  a  portion  of  the proceeds from the issuance of the Trust Preferred
Securities,  the  Bank  redeemed from the stockholders of record all of the 9.0%
Series  A  Noncumulative  Preferred  Stock  on  July 15, 2002 (see note 8).  The
redemption  price  was  $25.185 per share, which represented the stated value of
the  Preferred  Stock,  plus  accrued  and  unpaid  dividends.

(13)     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, 2002, 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)                      168,078        6.69%      $100,513       4.00%      $125,641      5.00%
 Tier 1 risk-based                  168,078        9.66         69,616       4.00        104,424      6.00
 Total risk-based                   183,311       10.53        139,232       8.00        174,040     10.00
</TABLE>



     As  of June 30, 2002, 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.

(14)     COASTAL  BANCORP,  INC.  PREFERRED  STOCK

     On  May  11,  1999,  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>

(15)     RECENT  ACCOUNTING  STANDARDS

     In  August  2001,  Statement  of  Financial  Accounting  Standards No. 144,
"Accounting  for  the  Impairment  or Disposal of Long-Lived Assets" ("Statement
144")  was  issued.  Statement  144 addresses financial accounting and reporting
for  the  impairment  or  disposal of long-lived assets.  Statement 144 requires
that  long-lived assets be reviewed for impairment whenever events or changes in
circumstances  indicate  that  the  carrying  amount  of  an  asset  may  not be
recoverable.  Recoverability  of  assets  to  be  held and used is measured by a
comparison  of the carrying amount of an asset to future net cash flows expected
to  be  generated  by the asset.  If the carrying amount of an asset exceeds its
estimated future cash flows, an impairment charge is recognized by the amount by
which  the  carrying  amount  of  the asset exceeds the fair value of the asset.
Statement  144  requires  companies to separately report discontinued operations
and  extends  that  reporting  to  a component of an entity that either has been
disposed  of  (by  sale,  abandonment,  or  in  a  distribution to owners) or is
classified as held for sale.  Assets to be disposed of are reported at the lower
of  the  carrying  amount  or  fair value less costs to sell.  Statement 144 was
adopted  by  Coastal  on  January 1, 2002, and did not have a material effect on
Coastal's  Consolidated  Financial  Statements.


<PAGE>


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

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

     Total assets decreased 3.5% or $90.6 million from December 31, 2001 to June
30,  2002.  The net decrease resulted primarily from decreases of $86.2 million,
$41.1  million,  $13.4  million  and  $7.5 million in mortgage-backed securities
available-for-sale,  other  investment  securities  available-for-sale,  federal
funds  sold  and  cash and cash equivalents, respectively.  These decreases were
somewhat offset by an increase of $55.3 million in loans receivable.  There were
also smaller changes in other asset categories.  The decrease in mortgage-backed
securities  available-for-sale  was due to significant prepayments received (35%
on  an  annualized  basis)  resulting  from  a  continuing  low  interest  rate
environment,  which is encouraging refinancings of mortgage loans.  The decrease
in other investment securities available-for-sale was due to the maturity of one
security  during  the  period.  The increase in loans receivable was due to loan
purchases  of  $219.7  million,  somewhat  reduced  by  significant  prepayments
received on the single-family mortgage loan portfolio, the sale of $10.8 million
of  under-performing  mortgage  loans,  the  reclassification of $9.1 million of
other  under-performing  loans  to  the  held for sale category and decreases in
other  loan  categories.

     Deposits  decreased $9.6 million or 0.6% from December 31, 2001 to June 30,
2002  and advances from the FHLB decreased 11.7% or $81.0 million.  In addition,
during the six months ended June 30, 2002, Coastal redeemed the remaining Senior
Notes  payable  outstanding  of  $43.9  million at par plus accrued interest and
issued  $50.0 million in Trust Preferred Securities through a consolidated trust
subsidiary  (see note 8 to the Consolidated Financial Statements).  Coastal used
part  of  the  proceeds  from  the issuance of the Trust Preferred Securities to
repurchase  treasury  stock.   Stockholders'  equity  decreased  6.7%  or  $10.6
million  from  December  31,  2001 to June 30, 2002 primarily as a result of the
repurchase  of  547,800 shares of common stock at an average repurchase price of
$30.00  per  share.  This decrease was only partially offset by the net increase
in  stockholders'  equity  due  to net income, a $64,000 decrease in accumulated
other  comprehensive  loss  and  dividends  declared.

Results  of  Operations  for  the  Six  Months  Ended  June  30,  2002  and 2001
--------------------------------------------------------------------------------

General
-------

     For  the  six  months  ended  June  30,  2002,  net income was $8.3 million
compared  to $11.2 million for the six months ended June 30, 2001.  The decrease
was  primarily due to a $6.3 million decrease in net interest income as a result
of Coastal's overall smaller asset size, overall lower interest rates and higher
than  expected  prepayments  on  Coastal's  mortgage-backed  securities
available-for-sale  and  loans  receivable  (35%  on  an  annualized  basis  for
mortgage-backed  securities  and  40%  for  single-family mortgage loans).  This
decrease  was  somewhat  offset by a $300,000 decrease in the provision for loan
losses, a $657,000 increase in noninterest income (primarily due to the $443,000
fair  value  loss  on  derivative  instruments  recorded  in 2001, compared to a
$24,000  loss recorded during the first six months of 2002), a $639,000 decrease
in  noninterest  expense,  a  $1.7 million decrease in the provision for Federal
income  taxes,  and  the  $104,000 (net of tax) cumulative transition adjustment
loss  due  to  the  change  in accounting for derivative instruments recorded in
2001.

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

     Due  to  Coastal's  overall  smaller asset size, the overall lower interest
rate  environment  and higher than expected prepayments, interest income for the
six  months  ended  June  30, 2002 decreased $46.0 million or 39.5% from the six
months  ended  June  30,  2001.  The  decrease  was comprised of a $23.4 million
decrease  in  interest  income  on loans receivable, a $22.0 million decrease in
interest  income  on  mortgage-backed  securities  and  a  $667,000  decrease in
interest  income  on  FHLB  stock, federal funds sold and other interest-earning
assets.

     When  comparing  the two periods, average interest-earning assets decreased
$568.5 million and the average yield decreased 1.95% from 7.78% in 2001 to 5.83%
in  2002.  The  $568.5  million  decrease  in  average  interest-earning  assets
consisted  primarily  of  a  $494.0  million  decrease in the average balance of
mortgage-backed  securities and a $82.2 million decrease in the average balances
of  loans  receivable.  The  decrease  in average mortgage-backed securities was
largely  due  to  the  sale  of  those  securities  in  late  November 2001.  To
strategically restructure a portion of its asset base to make it less vulnerable
to  market  interest rate and price fluctuations, Coastal sold $844.9 million of
mortgage-backed  securities  and  purchased  $512.3  million  of  primarily pass
through  securities at a premium.  This transaction had the effect of shortening
the  duration of the mortgage-backed securities portfolio, thereby lessening the
extension  risk  to  Coastal.

     In  addition  to  the  reduction  in  Coastal's  asset  size  due  to  the
restructuring,  during  the  first six months of 2002, due to the continuing low
interest  rate  environment,  Coastal experienced higher than expected principal
repayments  of  $84.6  million  (or  35%  on  an  annualized  basis)  on  its
mortgage-backed securities portfolio and $154.5 million (or 40% on an annualized
basis)  on  its single-family mortgage loan portfolio, which resulted in greater
premium  amortization  on  those  assets  that  were  purchased  at  a  premium.

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

     Interest  expense on interest-bearing liabilities was $32.1 million for the
six months ended June 30, 2002, as compared to $71.9 million for the same period
in  2001.  The  decrease  in interest expense was again due to Coastal's overall
smaller  asset  size  and  the  lower  overall  interest rate environment.  When
comparing the two periods, the average rate paid on interest-bearing liabilities
decreased  to  3.01%  for  2002 from 5.23% for 2001 and average interest-bearing
liabilities  decreased  $600.6  million.  The 2.22% decrease in the average rate
paid  on  interest-bearing liabilities was due to the 2.17% decrease in the rate
paid  on  interest-bearing  deposits,  a  2.28%  decrease  in  the rates paid on
advances from the FHLB and 4.40% decrease in the rates paid on other borrowings.
The  decrease  in  average interest-bearing liabilities consisted primarily of a
$57.6  million  decrease  in average interest-bearing deposits, a $299.2 million
decrease  in average advances from the FHLB and a $208.0 million decrease in the
average balance of other borrowings.  The large decrease in the average balances
in  FHLB  advances  and  other borrowings was due primarily to Coastal's smaller
asset  size  because  of the restructuring mentioned previously, which permitted
Coastal  to  reduce  these borrowings.  In addition, during the six months ended
June  30,  2002, Coastal redeemed the remaining Senior Notes payable outstanding
of  $43.9 million at par plus accrued interest and issued $50.0 million in Trust
Preferred Securities, through a consolidated trust subsidiary (see note 8 to the
Consolidated  Financial  Statements).

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

     Net  interest  income  was  $38.4 million for the six months ended June 30,
2002  and  $44.7  million  for the same period in 2001.  As discussed above, the
decrease  was  due to Coastal's overall smaller asset size and the overall lower
interest  rate  environment.  When  comparing  the  two  periods,  average
interest-earning  assets  decreased  $568.5 million and average interest-bearing
liabilities  decreased $600.6 million due to the restructuring and the principal
repayments  discussed  above.  Net  interest margin ("Margin") was 3.17% for the
six  months  ended June 30, 2002 compared to 2.99% for the six months ended June
30,  2001.  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 2.82% for the six months ended June
30,  2002  from  2.55%  for the six months ended June 30, 2001.  Management also
calculates  an  alternative  Spread which includes noninterest-bearing deposits.
Under  this  calculation,  the alternative Spreads for the six months ended June
30,  2002  and  2001  were 3.04% and 2.82%, respectively.  Margin and Spread are
affected by the changes in the amount and composition of interest-earning assets
and  interest-bearing  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  and  the Allowance for Loan Losses - Critical
---------------------------------------------------------------------------
   Accounting  Policy
   --- --------------

     The  provision  for  loan  losses was $1.8 million for the six months ended
June  30, 2002 and $2.1 million for the six months ended June 30, 2001.  At June
30,  2002,  Coastal  had  nonperforming loans totaling $13.8 million, which is a
decrease  of  $10.9  million,  or  44%,  when  compared  to  December  31, 2001.
Nonperforming  loans are those loans on nonaccrual status as well as those loans
greater  than  ninety days delinquent and still accruing interest.  The decrease
in  nonperforming  loans  is  mainly  due  to  Coastal's decision to liquidate a
portion  of  its  under-performing single-family mortgage loans during the first
quarter  of  2002.  On  March  22,  2002,  Coastal  sold  $10.8 million of these
under-performing  loans  to  a third party investor.  Prior to the sale, Coastal
wrote  these  loans to fair value and recorded a charge-off to the allowance for
loan  losses  of  $761,000.

     In  addition,  as  of March 31, 2002, Coastal also wrote down to fair value
and  reclassified  $9.1 million of other under-performing single-family mortgage
loans  to  the  held for sale category.  The loans that were reclassified to the
held  for  sale category were written down to fair value through a charge-off to
the allowance for loan losses of $691,000.  During the second quarter of 2002, a
total  of  $3.1  million of these loans held for sale were sold.  As of June 30,
2002,  Coastal  had  $3.8  million  loans held for sale remaining (net of second
quarter  activity  including, sales, payoffs, foreclosures and monthly principal
payments  received).

     The  ratio  of  nonperforming  assets to total assets was 0.73% at June 30,
2002,  compared  to  1.13%  as  of  December  31,  2001.  At  June 30, 2002, the
allowance  for  loan  losses  as  a percentage of nonperforming loans (excluding
nonperforming  loans  held  for  sale which are recorded at the lower of cost or
fair  value)  was  128.3%  compared  to  62.3%  at  December  31,  2001.

     Although  no assurance can be given, management believes that the allowance
for  loan  losses  at  June  30,  2002  is adequate considering the size and the
changing  composition  of  the  loans  receivable portfolio, historical and peer
group  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 the
resulting  allowance  for  loan  losses  are  necessary.

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

     For  the  six  months  ended  June  30,  2002, noninterest income increased
$657,000 to $5.5 million, compared to $4.8 million for the six months ended June
30,  2001.  The increase in noninterest income was primarily due to the $512,000
increase  in  service charges on deposits accounts, 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 (compared to a $24,000 loss in 2002), in
addition  to  a  $209,000  increase  in the gain on the sale of real estate when
comparing  the two periods.   These increases were somewhat offset by a $505,000
decrease  in  other  noninterest  income, due primarily to $300,000 in insurance
proceeds  received  in  2001  for  the  reimbursement  of certain deposit losses
incurred  in prior years and a $90,000 decrease in the gain on the sale of loans
held  for  sale.  The increase in service charges on deposit accounts was due to
Coastal's  continuing  focus  on  increasing  transaction  type accounts and the
related  fee  income.  The  fair value loss recorded during the six months ended
June  30,  2001  was  primarily  attributable  to  Coastal's  interest rate swap
positions,  which  were  liquidated in June 2001.  As of June 30, 2002, interest
rate cap agreements were Coastal's only derivative instruments and were recorded
at  fair  value  on  Coastal's  consolidated  statement  of financial condition.

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

     For  the  six  months  ended  June  30, 2002, noninterest expense decreased
$639,000  from  the  six  months  ended June 30, 2001.  The $639,000 decrease in
noninterest  expense  was  primarily  due  to  decreases  of  $865,000, $316,00,
$296,000  and $38,000 in data processing, the amortization of goodwill and other
intangible  assets, office occupancy and other noninterest income, respectively,
partially offset by a $647,000 increase in compensation, payroll taxes and other
benefit,  a  $135,000  increase in advertising and a $94,000 increase in postage
and  delivery  expenses.  The decrease in data processing expense was due to the
conversion  to  a new mortgage loan data processing system in the second quarter
of  2001,  the  conversion  of  the  Valley Region branches to Coastal's primary
deposit and loan data processing system during the third quarter of 2001 and the
item  processing  functions  brought  in-house during the third quarter of 2001.
The decrease in the amortization of goodwill and other intangible assets was due
to  the  implementation  of  FASB Statements 141 and 142 on January 1, 2002 (see
note  5  to  the  Consolidated  Financial  Statements).  The  decrease in office
occupancy  was primarily due to certain assets becoming fully depreciated during
2001.  The increase in compensation, payroll taxes and other benefits was due to
normal  merit  increases  for existing staff, in addition to the staff increases
for  the  item processing functions brought in-house during the third quarter of
2001  and  additional personnel needed to continue Coastal's focus on commercial
banking  products  and lending, including Coastal Banc Capital Corp. staff.  The
increase  in advertising and postage and delivery expenses were primarily due to
Coastal's  continued  focus  on  commercial  banking  products  and  lending.

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

     The  provision  for  Federal income taxes for the six months ended June 30,
2002 was $3.9 million compared to $5.6 million for the six months ended June 30,
2001.  The decrease was due to the decreased income before provision for federal
income  taxes,  minority  interest and cumulative effect of accounting change in
2001,  with  the  effective tax rate for the periods being approximately 29% for
six  months  ended  June  30,  2002  and  31%  for the same period in 2001.  The
decrease  in the effective tax rate when comparing the two periods is due to the
elimination  of  the  goodwill  amortization.

Results  of  Operations  for  the  Three  Months  Ended  June  30, 2002 and 2001
--------------------------------------------------------------------------------

General
-------

     For  the  three  months  ended  June  30, 2002, net income was $4.6 million
compared to $6.0 million for the three months ended June 30, 2001.  The decrease
was primarily due to a $2.7 million decrease in net interest income, as a result
of Coastal's overall smaller asset size, overall lower interest rates and higher
than  expected  principal  repayments  on  Coastal's  mortgage-backed securities
available-for-sale  and  loans  receivable  (35%  on  an  annualized  basis  for
mortgage-backed  securities  and  40%  for  single-family mortgage loans).  This
decrease  was  somewhat  offset by a $300,000 decrease in the provision for loan
losses,  a  $207,000  decrease in noninterest expense and a $823,000 decrease in
the  provision  for  Federal  income  taxes.  In  addition,  noninterest  income
decreased  slightly  by  $30,000.

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

     As  noted  previously,  due  to  Coastal's  overall smaller asset size, the
overall  lower  interest  rate  environment  and  higher than expected principal
repayments,  interest  income for the three months ended June 30, 2002 decreased
$21.2  million or 37.6% from the three months ended June 30, 2001.  The decrease
was  comprised  of  a  $10.3  million  decrease  in  interest  income  on  loans
receivable,  a  $10.7  million  decrease  in  interest income on mortgage-backed
securities  and  a  $236,000  decrease in interest income on FHLB stock, federal
funds  sold  and  other  interest-earning  assets.

     When  comparing  the two periods, average interest-earning assets decreased
$557.3 million and the average yield decreased 1.76% from 7.52% in 2001 to 5.76%
in  2002.  The  $557.3  million  decrease  in  average  interest-earning  assets
consisted  primarily  of  a  $507.2  million  decrease in the average balance of
mortgage-backed  securities and a $51.8 million decrease in the average balances
of  loans  receivable.  The  decrease  in average mortgage-backed securities was
largely  due  to  the  restructuring  discussed  previously.

     In  addition  to  the  reduction  in  Coastal's  asset  size  due  to  the
restructuring,  during  the  three  months  ended  June  30,  2002,  due  to the
continuing  low  interest  rate  environment,  Coastal  experienced  higher than
expected  principal  repayments of $39.9 million (or 35% on an annualized basis)
on  its  mortgage-backed  securities  portfolio  and $75.8 million (or 40% on an
annualized  basis)  on its single-family mortgage loan portfolio, which resulted
in  greater  premium  amortization  on  those  assets  that  were purchased at a
premium.

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

     Interest  expense on interest-bearing liabilities was $15.5 million for the
three  months  ended  June  30,  2002, as compared to $34.0 million for the same
period  in  2001.  As discussed previously, the decrease in interest expense was
due  to Coastal's overall smaller asset size and the lower overall interest rate
environment.  When  comparing  the  two  periods,  the  average  rate  paid  on
interest-bearing liabilities decreased to 2.87% for 2002 from 4.94% for 2001 and
average  interest-bearing  liabilities  decreased  $587.6  million.  The  2.07%
decrease in the average rate paid on interest-bearing liabilities was due to the
2.19%  decrease  in the rate paid on interest-bearing deposits, a 1.88% decrease
in  the  rates  paid on advances from the FHLB and a 4.38% decrease in the rates
paid  on other borrowings.  The decrease in average interest-bearing liabilities
consisted  primarily  of  a  $63.7  million decrease in average interest-bearing
deposits,  a  $70.5 million decrease in average advances from the FHLB, a $413.7
million  decrease in the average balance of other borrowings and a $46.9 million
decrease  in the average balance of Senior Notes payable.  The large decrease in
the  average balances in FHLB advances and other borrowings was due primarily to
Coastal's  repayment  of  such borrowings as a part of the restructuring done in
late  2001.  The  decrease in the balance of the Senior Notes payable was due to
their redemption during the first quarter of 2002.  During the second quarter of
2002,  Coastal  issued  $50.0  million  in  Trust Preferred Securities through a
consolidated  trust  subsidiary  (see  note  8  to  the  Consolidated  Financial
Statements).

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

     Net  interest  income was $19.7 million for the three months ended June 30,
2002  and  $22.4  million  for the same period in 2001.  As discussed above, the
decrease  was  due to Coastal's overall smaller asset size and the overall lower
interest  rate  environment.  When  comparing  the  two  periods,  average
interest-earning  assets  decreased  $557.3 million and average interest-bearing
liabilities  decreased  $587.6  million  due  to  the  restructuring  and  the
prepayments  discussed  above.  Net interest margin ("Margin") was 3.23% for the
three  months  ended  June 30, 2002 compared to 2.99% for the three months ended
June 30, 2001.  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 2.89% for the three months ended June
30,  2002  from 2.58% for the three months ended June 30, 2001.  Management also
calculates  an  alternative  Spread which includes noninterest-bearing deposits.
Under  this calculation, the alternative Spreads for the three months ended June
30,  2002  and  2001  were 3.10% and 2.84%, respectively.  Margin and Spread are
affected by the changes in the amount and composition of interest-earning assets
and  interest-bearing  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  and  the Allowance for Loan Losses - Critical
---------------------------------------------------------------------------
   Accounting  Policy
   ------------------

     The  provision for loan losses was $900,000 for the three months ended June
30,  2002 compared to $1.2 million for the three months ended June 30, 2001.  At
June  30, 2002, Coastal had nonperforming loans totaling $13.8 million, which is
a  decrease  of  $10.9 million, or 44%, when compared to December 31, 2001.  See
previous  discussion  under "Results of Operations for the Six Months Ended June
30,  2002  and  2001  -  Provision  for  Loan  Losses and the Allowance for Loan
Losses."

     Although  no assurance can be given, management believes that the allowance
for  loan  losses  at  June  30,  2002  is adequate considering the size and the
changing  composition  of  the  loans  receivable portfolio, historical and peer
group  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 the
resulting  allowance  for  loan  losses  are  necessary.

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

     Noninterest income decreased slightly by $30,000 for the quarter ended June
30,  2002  compared  to  the  quarter  ended  June  30, 2001.  This decrease was
comprised  of  a  $348,000  decrease  in  other  noninterest  income, a $121,000
decrease  in  the  fair value gain on derivative instruments (interest rate swap
and  cap  agreements) and a $45,000 decrease in loan fees.  These decreases were
substantially  offset  by  the  $278,000  increase in service charges on deposit
accounts  and a $206,000 increase in the gain on sale of real estate owned.  The
decrease  in other noninterest income was primarily due to $300,000 in insurance
proceeds  received  in  2001 for reimbursement of certain deposit account losses
incurred  in prior years.  The fair value gain recorded during the quarter ended
June  30,  2001  was  primarily  attributable  to  Coastal's  interest rate swap
positions,  which  were  liquidated in June 2001.  As of June 30, 2002, interest
rate cap agreements were Coastal's only derivative instruments and were recorded
at  fair  value on Coastal's consolidated statement of financial condition.  The
increase  in service charges on deposit accounts was due to Coastal's continuing
focus  on  increasing  transaction  type  accounts  and  the related fee income.

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

     For  the  three  months  ended June 30, 2002, noninterest expense decreased
$207,000  from  the  three months ended June 30, 2001.  The $207,000 decrease in
noninterest  expense  was  primarily  due to decreases of $434,000, $148,000 and
$200,000  in  data processing, the amortization of goodwill and other intangible
assets  and  office  occupancy,  respectively,  partially  offset  by a $384,000
increase  in  compensation, payroll taxes and other benefits, a $62,000 increase
in advertising, a $16,000 increase in postage and delivery expenses, in addition
to  a  $113,000  increase  in  other  noninterest expense.  The decrease in data
processing  expense  was  due  to  the  conversion  to  a new mortgage loan data
processing  system  in  the second quarter of 2001, the conversion of the Valley
Region  branches  to  Coastal's  primary deposit and loan data processing system
during  the  third  quarter  of  2001  and the item processing functions brought
in-house  during the third quarter of 2001.  The decrease in the amortization of
goodwill  and  other  intangible  assets  was  due to the implementation of FASB
Statements  141  and  142  on  January  1,  2002 (see note 5 to the Consolidated
Financial  Statements).  The  decrease  in office occupancy was primarily due to
certain  assets  becoming  fully  depreciated  during  2001.  The  increase  in
compensation, payroll taxes and other benefits was due to normal merit increases
for  existing  staff, in addition to the staff increases for the item processing
functions  brought  in-house  during  the  third  quarter of 2001 and additional
personnel  needed to continue Coastal's focus on commercial banking products and
lending,  including  Coastal  Banc  Capital  Corp.  staff.  The  increase  in
advertising  and  postage  and delivery expenses were primarily due to Coastal's
continued  focus  on  commercial  banking products and lending.  The increase in
other  noninterest  expense  was due to smaller changes in various categories of
expenses.

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

     The  provision for Federal income taxes for the three months ended June 30,
2002  was  $2.2 million compared to $3.0 million for the three months ended June
30,  2001.  The  decrease  was  due to the decreased income before provision for
Federal  income taxes and minority interest in 2001, with the effective tax rate
for the periods being approximately 29% for three months ended June 30, 2002 and
31%  for  the  same period in 2001.  The decrease in the effective tax rate when
comparing  the  two  periods  is  due  to  the  elimination  of  the  goodwill
amortization.

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, 2002, Coastal had binding commitments
to  originate  or  purchase  loans  totaling approximately $24.5 million and had
$181.6  million  of  undisbursed  loans  in  process.  Scheduled  maturities  of
certificates  of  deposit  during  the 12 months following June 30, 2002 totaled
$908.6  million at June 30, 2002.  Management believes that Coastal has adequate
resources  to  fund  all  of  its  commitments.

     As  of  June  30, 2002, Coastal operated 49 retail banking offices in Texas
cities,  including  Houston,  Austin,  Corpus Christi, the Rio Grande Valley and
small  cities  in the southeast quadrant of Texas.  Management's overall goal is
to  continue  to  improve  the  asset/liability composition of Coastal's balance
sheet  to  be  less  vulnerable  to  market  interest  rate  fluctuations.

<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 changes in market rates of interest, changes in
our  loan  portfolio,  including  the  risks associated with our non-traditional
lending  (loans  other  than  single-family  residential  mortgage loans such as
multifamily,  real  estate  acquisition and development, commercial real estate,
commercial  business,  commercial  construction  and  warehouse  loans),  the
possibility  that  Coastal's  allowance for loan losses proves to be inadequate,
Coastal's  ability to attract core deposits, the concentration of Coastal's loan
portfolio  in  Texas  and  California  to the extent that the economies of those
states  experience  problems, 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  business  strategies, changes in general economic and
business  conditions  and  changes  in  the  laws  and regulations applicable to
Coastal;  and other factors as discussed in Coastal's Annual Report on Form 10-K
for  the  year ended December 31, 2001, as filed with the SEC on March 26, 2002,
and  a  filed  in  Exhibit  99.3,  attached  hereto.

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, 2001. Coastal's principal market risk exposure is to
interest  rates.  See note 10 of the Notes to Consolidated Financial Statements.


<PAGE>
PART  II  -  OTHER  INFORMATION

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

     We  are,  and  have  been  involved,  from time to time, in various claims,
complaints,  proceedings  and litigation relating to activities arising from the
normal  course of our operations.  Based on the facts currently available to us,
we  believe that the matters pending at June 30, 2002 are without merit, or will
be  covered  by  insurance,  any  other  matters are of such amounts, which upon
resolution, are not likely to have a material adverse effect on our consolidated
financial  condition,  results  of  operations  or  cash  flows.

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  25,  2002,  at the Annual Meeting of Stockholders of Coastal Bancorp,
Inc.  (the  "Company"), the stockholders voted upon and approved the election of
one  director  and  the  ratification  of  the  appointment  of  KPMG LLP as the
Company's independent public accountants for the fiscal year ending December 31,
2002.

With  respect  to  such  matters,  the  results  of  the  votes were as follows:
  1)     Election  of  director:
                                              Number  of  Votes
                                              -----------------
                                             In  favor   Withheld
                                             ---------   --------
     Robert  E.  Johnson,  Jr.               5,189,151     78,405

  2) Ratification  of KPMG LLP as the Company's independent public accountants
     for  the  fiscal  year  ending  December  31,  2002:
     Number  of  votes  in  favor:               5,212,756
     Number  of  votes  against:                    52,050
     Number  of  votes  abstaining                   2,750

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

             Not  applicable.


<PAGE>
Item  6.     Exhibits  and  Reports  on  Form  8-K
             -------------------------------------

     Reports  on  Form  8-K.
1)     Form 8-K filed with the SEC on April 26, 2002 concerning the announcement
that  the  Company.  had  entered  into  a  transaction  that would complete its
previously authorized stock repurchase plan, by repurchasing 500,000 shares from
a  director  for  $30.00  per  share.

2)     Form  8-K  filed with the SEC on June 6, 2002 concerning the announcement
that the Board of Directors of Coastal Banc ssb (the "Bank") had voted to redeem
all  of  the  issued  and  outstanding  shares  of the Bank's 9.0% Noncumulative
Preferred  Stock,  Series  A  (Nasdaq:CBSAP),  subject  to  certain  regulatory
approvals.

Exhibits.
99.1     Certification  of the Chairman of the Board and Chief Executive Officer
pursuant  to  18  U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley  Act  of  2002.

99.1     Certification  of  the  Chief  Financial  Officer pursuant to 18 U.S.C.
Section  1350,  as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

99.3     Statement  of Factors Under Private Securities Litigation Reform Act of
1995.

<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:     8/13/02                                   By     /s/  Manuel J. Mehos
           -------                                          --------------------
                                                               Manuel  J.  Mehos
                                                       Chief  Executive  Officer








Dated:     8/13/02                              By     /s/  Catherine  N. Wylie
           -------                                     ------------------------
                                                           Catherine  N.  Wylie
                                                      Chief  Financial  Officer

<PAGE>



                                  EXHIBIT 99.1


                            CERTIFICATION PURSUANT TO
                             18 U.S.C SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


     In  connection  with  the  Quarterly  Report  of Coastal Bancorp, Inc. (the
"Company")  on  Form  10-Q  for the period ended June 30, 2002 as filed with the
Securities  and  Exchange Commission on August 13, 2002 (the "Report"), I Manuel
J.  Mehos,  Chairman  of  the  Board and Chief Executive Officer of the Company,
certify,  pursuant  to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley  Act  of  2002,  that:

     (1)     The Report fully complies with the requirements of section 13(a)
of  the  Securities  Exchange  Act  of  1934;  and

     (2)     The  information  contained  in  the Report fairly presents, in all
material  respects,  the  financial  condition  and results of operations of the
Company.


Dated:     8/13/02                                   By     /s/  Manuel J. Mehos
           -------                                          --------------------
                                                               Manuel  J.  Mehos
                                             Chairman  of  the  Board  and Chief
                                                              Executive  Officer


<PAGE>


                                  EXHIBIT 99.2


                            CERTIFICATION PURSUANT TO
                             18 U.S.C SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


     In  connection  with  the  Quarterly  Report  of Coastal Bancorp, Inc. (the
"Company")  on  Form  10-Q  for the period ended June 30, 2002 as filed with the
Securities  and  Exchange  Commission  on  August  13,  2002  (the  "Report"), I
Catherine N. Wylie, Chief Financial Officer of the Company, certify, pursuant to
18  U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002,  that:

     (1)     The Report fully complies with the requirements of section 13(a)
of  the  Securities  Exchange  Act  of  1934;  and

     (2)     The  information  contained  in  the Report fairly presents, in all
material  respects,  the  financial  condition  and results of operations of the
Company.




Dated:     8/13/02                             By     /s/  Catherine  N. Wylie
           -------                                    ------------------------
                                                          Catherine  N.  Wylie
                                                     Chief  Financial  Officer

<PAGE>

                                  EXHIBIT 99.3


   STATEMENT OF FACTORS UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

     From  time  to  time, Coastal Bancorp, Inc. ("Coastal" or "we," "us," "our"
and  other  terms  referring  to Coastal Bancorp, Inc. and Coastal Banc ssb) has
made  and  will  make  forward-looking  statements.  These  statements  can  be
identified by the fact that they do not relate strictly to historical or current
facts.  Forward-looking  statements  often  use  words  such  as  "anticipate,"
"target,"  "expect,"  "estimate,"  "intend,"  "plan," "goal," "believe" or other
words  of  similar  meaning.  Forward-looking  statements give Coastal's current
expectations  or  forecasts  of  future  events,  circumstances or results.  Our
disclosure  in  this  report,  including  in  the Section entitled "Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results of Operations"
("MD&A"),  contains forward-looking statements. We also may make forward-looking
statements  in  its  other  documents  filed  with  the  Securities and Exchange
Commission  (the  "SEC")  and in other written materials. In addition, Coastal's
senior  management  may  make  forward-looking  statements  orally  to analysts,
investors,  representatives  of  the  media  and  others.  Any  forward-looking
statements  made  by  or on behalf of Coastal speak only as of the date they are
made.  We  do  not undertake to update forward-looking statements to reflect the
impact  of circumstances or events that arise after the date the forward-looking
statement  was made. The reader should, however, consult any further disclosures
of  a forward-looking nature we may make in our Annual Reports on Form 10-K, its
Quarterly  Reports  on  Form  10-Q  and  our  Current  Reports  on Form 8-K. All
forward-looking  statements,  by  their  nature,  are  subject  to  risks  and
uncertainties.  Coastal's actual future results may differ materially from those
set forth in our forward-looking statements. Factors that might cause our future
financial  performance  to  vary  from  that  described  in  our forward-looking
statements include the credit, market, operational, liquidity, interest rate and
other  risks  discussed in the MD&A section of this report and in other periodic
reports  filed  with  the  SEC. In addition, the following discussion sets forth
certain  risks  and  uncertainties that we believe could cause our actual future
results  to  differ  materially  from  expected  results. However, other factors
besides  those  listed  below  or discussed in Coastal's reports to the SEC also
could  adversely affect our results, and the reader should not consider any such
list  of  factors  to be a complete set of all potential risks or uncertainties.
This  discussion  is  provided as permitted by the Private Securities Litigation
Reform  Act  of  1995.

WE  ARE  VULNERABLE  TO  CHANGES  IN  INTEREST  RATES.

     Our  ability  to  make  a profit, like that of most financial institutions,
substantially  depends  upon  our  net  interest income, which is the difference
between  the  interest  income  we  earn on our interest-earning assets, such as
loans  and  investment  securities,  and  the  interest  expense  we  pay on our
interest-bearing  liabilities,  such  as deposits and borrowings. Certain assets
and  liabilities,  however,  may react in different degrees to changes in market
interest rates.  Further, interest rates on some types of assets and liabilities
may  fluctuate prior to changes in broader market interest rates, while rates on
other  types  may  lag  behind.  Additionally,  some  of  our  assets,  such  as
adjustable rate mortgages, have features, including payment and rate caps, which
restrict  changes  in  their  interest  rates.

     Factors  such  as inflation, recession, unemployment, money supply, acts of
terrorism,  international  disorders,  instability  in  domestic  and  foreign
financial  markets,  and  other  factors  beyond our control may affect interest
rates.  Changes in market interest rates will also affect the level of voluntary
prepayments  on  our  loans  and  the receipt of payments on our mortgage-backed
securities  resulting  in  the  receipt  of proceeds that may be reinvested at a
lower rate than the loan or mortgage-backed security being prepaid.  Although we
pursue  an  asset-liability  management  strategy  designed  to  manage our risk
resulting  from  changes in market interest rates, changes in interest rates can
still  have  a  material  adverse  effect  on  our  profitability.

OUR  EXPOSURE TO CREDIT RISK WILL INCREASE AS WE INCREASE OUR COMMERCIAL BANKING
ACTIVITIES.

     As  we  increase  our  focus  on commercial business banking and attempt to
increase  our net interest margin, a gradual increase in our consolidated credit
risk  is  likely  to  occur.  One  of  our  main  strategies  is  to  replace
lower-yielding  first  lien  single-family  residential  mortgage  loans  and
mortgage-backed  securities  with  commercial  and  consumer  loans.  Generally,
commercial  loans  (including commercial and multi-family real estate loans) are
considered  to  be  riskier  than  first  lien,  single-family residential loans
because  they  have  larger  balances  to  a single borrower or group of related
borrowers  and  because  their  repayment generally relies on the success of the
borrowing  enterprise.  In  addition,  consumer  loans  are  usually  secured by
depreciating  assets  (such  as cars and boats) and collections are dependent on
the  borrower's  continuing  financial  stability,  which  is  more likely to be
adversely  affected  by  job  loss,  divorce,  illness  and personal bankruptcy.
Accordingly,  we  expect higher loan losses on this type of lending.  If we have
to  provide  for loan losses that are higher than our historical experience, our
results  of  operations  and  financial  condition  could be adversely affected.

OUR  ALLOWANCE  FOR  LOAN  LOSSES  MAY  BE  INADEQUATE  TO COVER LOSSES ACTUALLY
INCURRED,  WHICH  COULD  AFFECT  OUR ABILITY TO MAKE PAYMENTS ON THE DEBENTURES.

     We maintain an allowance for loan losses in an amount management believe is
sufficient to provide for known and inherent risks in our loan portfolio.  If we
incur actual losses on our loans in excess of our allowance for loan losses, our
profitability may be adversely affected and we may be unable to make payments on
the  debentures.

THE  CONCENTRATION  OF OUR LOAN PORTFOLIO IN TEXAS AND CALIFORNIA SUBJECTS US TO
RISK  TO  THE  EXTENT  THE  CALIFORNIA  AND TEXAS ECONOMIES EXPERIENCE PROBLEMS.

     A substantial portion of the loans we originate and purchase are secured by
properties  located  in  Texas  and  California  or are made to businesses which
operate  in  those states.  As a result, the number of borrowers unable to repay
their  loans  may  be  affected  by  changes  in  those  economic  conditions.

The  Texas  economy  has  been  historically  sensitive  to  business  cycles,
particularly those in the oil and gas industry.  Unfavorable economic conditions
in  Texas  could significantly increase the number of borrowers which are unable
to  pay  their  loans  on a timely basis and cause a decline in the value of the
properties  securing our loans which could have an adverse effect on our results
of  operations  and  financial  condition.

 The California economy had a slowdown in 2001 due to its current energy crisis.
The  expected  hike  in  energy  rates  could impede growth by reducing business
investment  and  consumer  spending  within  the  state.  Economic conditions in
California  are  subject  to  various  uncertainties at this time, including the
long-term  impact of the energy crisis and the decline in the technology sector.
If  economic  conditions  in  California continue to decline, we expect that our
level  of  problem  assets  could  increase  accordingly.

WE  MAY  FAIL  TO  IDENTIFY  OR  CONSUMMATE  ADDITIONAL  ACQUISITIONS.

     Our business strategy has historically relied, in part, upon our ability to
obtain  low  cost  deposits, expand into new markets and enhance our presence in
existing  markets  by  identifying  and  acquiring  branches  of other financial
institutions  or  whole  banks  that  meet our acquisition criteria. In pursuing
these  opportunities,  we compete with other financial institutions with similar
acquisition  strategies,  many  of which are larger than we are and have greater
financial  and  other  resources  than  we  have.  We will compete for potential
acquisitions  based  on  a  number  of  factors,  including  price,  terms  and
conditions,  size,  access  to  capital  and our ability to offer cash, stock or
other forms of consideration. We cannot assure investors that we will be able to
identify  suitable  acquisition  candidates  or,  once  a  suitable  acquisition
candidate  is  identified, that we will be able to consummate the acquisition on
terms  and  conditions  acceptable  to  us.

WE  MAY  FAIL  TO  INTEGRATE  OUR  ACQUISITIONS  SUCCESSFULLY.

     We  have  grown  through  the  acquisition  of  branches of other financial
institutions  or of whole banks. To a certain extent, our success is tied to our
ability  to  integrate  the operations, management, products and services of the
entities  we  acquire.  After  each  acquisition,  we  must  expend  substantial
managerial,  operating,  financial  and  other  resources  to  integrate  these
entities.  In  particular,  we must install and standardize adequate operational
and  control  systems,  deploy  or modify certain equipment, implement marketing
efforts  in  new as well as existing locations and employ and maintain qualified
personnel.  Our  operating  results  may  be  adversely  affected  if we fail to
properly  integrate  companies  we  acquire.

COMPETITION  WITH  OTHER  FINANCIAL  INSTITUTIONS  COULD  ADVERSELY  AFFECT  OUR
PROFITABILITY.

     We  face substantial competition in purchasing and originating loans and in
attracting  deposits. This competition in purchasing and originating loans comes
principally  from  banks, other savings institutions, mortgage banking companies
and  other  lenders  and  purchasers  of  loans.  Many  of our competitors enjoy
competitive advantages including greater financial resources, a wider geographic
presence  or  more  accessible  branch  office  locations,  the ability to offer
additional services or more favorable pricing alternatives and lower origination
and  operating  costs.  This  competition  could  result  in a decrease in loans
originated  or  purchased  by  us  that  could  adversely  affect our results of
operations,  and  financial  condition.

     In  attracting  deposits,  we  compete with insured depository institutions
such  as  savings institutions, credit unions and banks, as well as institutions
offering  uninsured  investment alternatives including money market funds. These
competitors  may  offer  higher interest rates than we do, which could result in
either  our  attracting  fewer deposits or in our being required to increase our
rates in order to attract deposits. Increased deposit competition could increase
our  cost  of  funds  and  adversely  affect  our  ability to generate the funds
necessary for our lending operations, thereby adversely affecting our results of
operations  and  financial  condition.

CHANGES  IN  STATUTES  AND  REGULATIONS  COULD  ADVERSELY  AFFECT  US.

     We are subject to extensive regulation and supervision by federal and state
authorities.  Such  supervision  and  regulation  establish  a  comprehensive
framework  of  activities  in  which an institution may engage, and are intended
primarily  for  the  protection  of  the  federal deposit insurance fund and our
depositors.  This  regulatory  structure  also  provides  our  regulators  with
significant  discretion  in the performance of their supervisory and enforcement
duties.  Any change in such regulation, whether by our regulators or as a result
of  legislation subsequently enacted by the Congress of the United States or the
Texas  legislature,  could  have  a substantial impact on our operations and us.
Additional  legislation  and regulations may be enacted or adopted in the future
that  could  significantly  affect  our  powers, authority and operations, which
could  have  a  material  adverse  effect  on  our  operations.