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, 1998

       [     ]     Transition Report Pursuant to Section 13 or 15 (d) of
                   the Securities Exchange Act of 1934
                   For the Transition  Period from _________ to _________

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

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


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

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

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

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

                                  YES   X     NO
                                      ------     ------

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

       COMMON STOCK ISSUED AND OUTSTANDING: 7,565,913 AS OF JULY 31, 1998


<PAGE>
                     COASTAL BANCORP, INC. AND SUBSIDIARIES

                                Table of Contents



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

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

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

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

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

        Notes to Consolidated Financial Statements                                   7

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

Item 3  Quantitative and Qualitative Disclosures About Market Risk                  23
</TABLE>






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

<S>     <C>                                                  <C>
Item 1  Legal Proceedings                                    24
Item 2  Changes in Securities                                24
Item 3  Default upon Senior Securities                       24
Item 4  Submission of Matters to a Vote of Security Holders  24
Item 5  Other Information                                    25
Item 6  Exhibits and Reports on Form 8-K                     25
</TABLE>




SIGNATURES



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,
                                                                1998                       1997
                                                             ------------              ---------------
ASSETS                                                       (Unaudited)
------------------------------------------------                                              
<S>                                                        <C>           <C>             <C>
Cash and amounts due from depository institutions          $     25,824                  $   37,096
Loans receivable (note 4)                                     1,413,328                   1,261,435
Mortgage-backed securities held-to-maturity (note 3)          1,283,521                   1,345,090
Mortgage-backed securities available-for-sale, at market
 value (note 3)                                                   159,677                   169,997
Accrued interest receivable                                        15,349                    14,813
Property and equipment                                             22,513                    22,250
Stock in the Federal Home Loan Bank of Dallas (FHLB)               31,694                    27,801
Goodwill                                                           14,774                    15,717
Mortgage servicing rights                                           4,865                     5,653
Prepaid expenses and other assets                                   8,983                    11,558
                                                             ------------                ----------
                                                             $  2,980,528                $2,911,410
                                                             ============                ==========
</TABLE>


<TABLE>
<CAPTION>
     LIABILITIES  AND  STOCKHOLDERS'  EQUITY
     ---------------------------------------

<S>                                                            <C>                          <C>
Liabilities:
 Savings deposits (note 5)                                     $1,358,899                $1,375,060 
 Advances from the FHLB (note 6)                                  624,838                   540,475 
 Securities sold under agreements to repurchase (note 6)          777,712                   791,760 
 Senior notes payable (note 7)                                     50,000                    50,000 
 Advances from borrowers for taxes and insurance                    9,438                     3,975 
 Other liabilities and accrued expenses                            16,181                    16,560 
     Total liabilities                                          2,837,068                 2,777,830 
                                                               -----------               -----------

9.0% noncumulative preferred stock of Coastal Banc ssb             28,750                    28,750 

Commitments and contingencies (notes 4 and 8)

Stockholders' equity (notes 3, 9 and 10):
 Preferred stock, no par value; authorized shares 5,000,000;
   no shares issued                                                    --                        -- 
 Common stock, $.00667 par value; authorized shares
   45,000,000; 7,562,535 and 7,513,389 shares issued and
   outstanding in 1998 and 1997, respectively                          50                        50 
 Additional paid-in capital                                        33,657                    33,186 
 Retained earnings                                                 82,579                    73,868 
 Accumulated other comprehensive income (loss) -
   unrealized loss on securities available-for-sale                (1,576)                   (2,274)
     Total stockholders' equity                                   114,710                   104,830 
                                                               -----------               -----------
                                                               $2,980,528                $2,911,410 
                                                               ===========               ===========
</TABLE>

See  accompanying  Notes  to  Consolidated  Financial  Statements

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

                                                                               Six Months Ended
                                                                                   June 30,
                                                                              1998          1997
                                                                            -------      -------
                                                                                 (Unaudited)

<S>                                                                  <C>                 <C>
Interest income:
 Mortgage-backed securities                                                 $   46,198   $46,401
 Loans receivable                                                               56,027    52,430
 Federal funds sold, certificates of deposit and other investments               1,036       671
                                                                               103,261    99,502
                                                                            -----------  -------

Interest expense:
 Savings deposits                                                               30,999    30,545
 Other borrowed money                                                           23,041    27,776
 Senior notes payable                                                            2,500     2,500
 Advances from the FHLB:
   Short-term                                                                    7,579     3,712
   Long-term                                                                     7,860     6,057
                                                                            -----------  -------
                                                                                71,979    70,590
                                                                            -----------  -------

   Net interest income                                                          31,282    28,912
Provision for loan losses                                                        1,900       900
   Net interest income after provision for loan losses                          29,382    28,012
                                                                            -----------  -------

Noninterest income:
 Loan fees and service charges on deposit accounts                               2,466     1,875
 Loan servicing income, net                                                        400       764
 Writedown of purchased mortgage loan premium                                     (709)       --
 Other                                                                             543       380
                                                                                 2,700     3,019
                                                                            -----------  -------

Noninterest expense:
 Compensation, payroll taxes and other benefits                                 10,097     9,318
 Office occupancy                                                                4,031     3,264
 Insurance premiums                                                                525       545
 Data processing                                                                 1,181     1,110
 Amortization of goodwill                                                          943       882
 Real estate owned                                                                 423       482
 Other                                                                           3,718     3,850
                                                                                20,918    19,451
                                                                            -----------  -------

       Income before provision (benefit) for Federal income taxes               11,164    11,580

Provision (benefit) for Federal income taxes (note 11)                             (50)    4,229
                                                                            -----------  -------
     Net income before preferred stock dividends                                11,214     7,351
Preferred stock dividends of Coastal Banc ssb (Series A)                         1,294     1,294
                                                                            -----------  -------
     Net income available to common stockholders                            $    9,920   $ 6,057
                                                                            ===========  =======

Basic earnings per share (note 9)                                           $     1.31   $  0.81
                                                                            ===========  =======

Diluted earnings per share (note 9)                                         $     1.27   $  0.79
                                                                            ===========  =======
</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,
                                                                             1998           1997
                                                                          --------       --------
                                                                                 (Unaudited)

<S>                                                                       <C>                <C>
Interest income:
 Mortgage-backed securities                                             $   22,752        $23,209
 Loans receivable                                                           29,087         26,415
 Federal funds sold, certificates of deposit and other investments             534            274
                                                                            52,373         49,898
                                                                     -------------        -------

Interest expense:
 Savings deposits                                                           15,492         15,379
 Other borrowed money                                                       11,812         13,996
 Senior notes payable                                                        1,250          1,250
 Advances from the FHLB:
   Short-term                                                                3,624          1,856
   Long-term                                                                 3,913          3,153
                                                                     -------------        -------
                                                                            36,091         35,634
                                                                     -------------        -------

   Net interest income                                                      16,282         14,264
Provision for loan losses                                                      450            450
   Net interest income after provision for loan losses                      15,832         13,814
                                                                     -------------        -------

Noninterest income:
 Loan fees and service charges on deposit accounts                           1,142            981
 Loan servicing income, net                                                    160            357
 Other                                                                         351            212
                                                                             1,653          1,550
                                                                     -------------        -------

Noninterest expense:
 Compensation, payroll taxes and other benefits                              5,157          4,693
 Office occupancy                                                            2,042          1,653
 Insurance premiums                                                            260            274
 Data processing                                                               573            597
 Amortization of goodwill                                                      474            445
 Real estate owned                                                             171            243
 Other                                                                       1,906          1,989
                                                                            10,583          9,894
                                                                     -------------        -------

       Income before provision for Federal income taxes                      6,902          5,470

Provision for Federal income taxes (note 11)                                 2,276          2,004
                                                                     -------------        -------
     Net income before preferred stock dividends                             4,626          3,466
Preferred stock dividends of Coastal Banc ssb (Series A)                       647            647
                                                                     -------------        -------
     Net income available to common stockholders                     $       3,979        $ 2,819
                                                                     =============        =======

Basic earnings per share (note 9)                                    $        0.53        $  0.38
                                                                     =============        =======

Diluted earnings per share (note 9)                                  $        0.51        $  0.37
                                                                     =============        =======
</TABLE>


See  accompanying  Notes  to  Consolidated  Financial  Statements

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

                                                                                Six Months Ended
                                                                                     June 30,
                                                                               ------------------
                                                                                 1998     1997
                                                                               --------  -------
                                                                                  (Unaudited)
<S>                                                                      <C>                 <C>


Net income available to common stockholders                                  $    9,920  $6,057 

Other comprehensive income (loss), net of tax:
 Unrealized holding gains (losses) on securities available-for-sale
 arising during period                                                              698    (481)
                                                                              ---------  -------

Total comprehensive income                                                   $   10,618  $5,576 
                                                                              =========  =======

</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,
                                                                                 1998          1997
                                                                            -------------  ------------
                                                                                  (Unaudited)

<S>                                                                   <C>                 <C>
Cash flows from operating activities:
 Net income before preferred stock dividends                               $     11,214   $     7,351 
 Adjustments to reconcile net income to net cash provided
   by operating activities:
 Depreciation and amortization of property and equipment,
   mortgage servicing rights and prepaid expenses and other assets                4,087         3,397 
 Net premium amortization                                                         1,985           516 
 Provision for loan losses                                                        1,900           900 
 Amortization of goodwill                                                           943           882 
 Originations and purchases of mortgage loans held for sale                     (11,299)       (6,549)
 Sales of mortgage loans held for sale                                           11,050         6,490 
 Decrease (increase) in:
   Accrued interest receivable                                                     (536)         (428)
   Other, net                                                                     2,459         8,936 
 Stock dividends from the FHLB                                                     (882)         (644)
                                                                            ------------  ------------

   Net cash provided by operating activities                                     20,921        20,851 
                                                                            ------------  ------------

Cash flows from investing activities:
 Net increase in federal funds sold                                                  --        (6,300)
 Purchase of mortgage-backed securities held-to-maturity                             --          (257)
 Principal repayments on mortgage-backed securities held-to-maturity             61,518        21,976 
 Principal repayments on mortgage-backed securities
   available-for-sale                                                            11,392           255 
 Proceeds from maturity of U.S. Treasury security available-for-sale                 --            11 
 Purchases of loans receivable                                                 (273,600)     (113,194)
 Net decrease in loans receivable                                               116,140         1,872 
 Net purchases of property and equipment                                         (2,180)       (6,115)
 Purchase of FHLB stock                                                          (3,011)       (2,556)
 Proceeds from sales of FHLB stock                                                   --         9,000 
 Cash and cash equivalents received in business combination
   transaction                                                                       --        52,119 
                                                                             -----------  ------------

   Net cash used by investing activities                                        (89,741)      (43,189)
                                                                             -----------  ------------

                                                                                           (continued)
</TABLE>



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

                                                                                  Six Months Ended
                                                                                     June 30,
                                                                              1998             1997
                                                                       ------------------  ------------
                                                                                    (Unaudited)

<S>                                                                    <C>                 <C>
Cash flows from financing activities:
 Net decrease in savings deposits                                      $         (16,198)  $      (700)
 Advances from the FHLB                                                        1,948,839     2,087,700 
 Principal payments on advances from the FHLB                                 (1,864,476)   (2,099,484)
 Securities sold under agreements to repurchase                                3,602,376     5,192,412 
 Purchases of securities sold under agreements to repurchase                  (3,616,424)   (5,161,000)
 Exercise of stock options for purchase of common stock, net                         471            63 
 Net increase in advances from borrowers for taxes and insurance                   5,463         5,806 
 Dividends paid                                                                   (2,503)       (2,387)
                                                                       ------------------  ------------
   Net cash provided by financing activities                                      57,548        22,410 
                                                                       ------------------  ------------

   Net increase (decrease) in cash and cash equivalents                          (11,272)           72 
 Cash and cash equivalents at beginning of period                                 37,096        27,735 
                                                                       ------------------  ------------
 Cash and cash equivalents at end of period                            $          25,824   $    27,807 
                                                                       ==================  ============

 Supplemental schedule of cash flows-interest paid                     $          70,583   $    69,390 
                                                                       ==================  ============

 Supplemental schedule of noncash investing and financing activities:
   Foreclosures of loans receivable                                    $           2,020   $     3,065 
                                                                       ==================  ============


In connection with the purchase of a branch office in 1997, Coastal
recorded the following assets and liabilities:
 Savings deposits acquired                                             $              --   $    54,563 
 Goodwill                                                                             --         1,935 
 Accrued interest payable and other liabilities acquired                              --           184 
 Property and equipment acquired                                                      --           693 
                                                                       ==================  ============
</TABLE>

See  accompanying  Notes  to  Consolidated  Financial  Statements
                     COASTAL BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)  BASIS  OF  PRESENTATION

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

     Coastal  Bancorp,  Inc.  and  subsidiaries adopted the Financial Accounting
Standards  Boards  Statement No. 130 ("Statement 130"), "Reporting Comprehensive
Income"  as  of  January  1, 1998.  Statement 130 requires the disclosure of all
components  of  comprehensive  income,  which  includes  net  income  and  other
comprehensive  income.  Other comprehensive income includes all nonowner related
changes  to  stockholders'  equity,  which  is  the  unrealized  gain  (loss) on
securities  available-for-sale.    These  amounts  have  been  disclosed  on the
consolidated  statements  of comprehensive income.  Statement 130 did not change
the  current  accounting  treatment for components of other comprehensive income
(i.e.  changes  in  unrealized  gain  (loss)  on securities available-for-sale).

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

(2)  PRINCIPLES  OF  CONSOLIDATION

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


<PAGE>
(3)  MORTGAGE-BACKED  SECURITIES

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

<TABLE>
<CAPTION>

                                            Gross       Gross
                              Amortized  Unrealized   Unrealized       Market
                                Cost        Gains       Losses         Value
                              ---------   -----------  ----------    --------- 
<S>                        <C>  <C>     <C> <C>        <C>           <C>
Held-to-Maturity:
 REMICS - Agency            $   919,630    $ 6,373    $ (13,098)    $   912,905
   REMICS - Non-agency          262,086        672       (5,090)        257,668
 FNMA certificates               63,444        132         (848)         62,728
 GNMA certificates               25,039      1,141           --          26,180
 Non-agency securities           13,311        200          (68)         13,443
 Interest-only securities            11         --           --              11
                            $ 1,283,521    $ 8,518    $ (19,104)    $ 1,272,935
                            ===========    =======    ==========    ===========

Available-for-sale:
 REMICS - Agency            $   160,190    $   186    $  (2,600)    $   157,776
 REMICS - Non-agency              1,912         --          (11)          1,901
                            -----------    -------    ----------    -----------
                            $   162,102    $   186    $  (2,611)    $   159,677
                            ===========    =======    ==========    ===========
</TABLE>




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

<TABLE>
<CAPTION>

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

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




<PAGE>
(4)  LOANS  RECEIVABLE

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

<TABLE>
<CAPTION>

                                                       June 30, 1998   December 31, 1997
                                                      ---------------  -----------------       
                                                       (Unaudited)
<S>                                                <C>              <C>                <C>
Real estate mortgage loans:
 First-lien mortgage, primarily residential            $  790,371       $  689,767 
 Commercial                                               187,245          181,315 
 Multifamily                                              121,384          131,454 
 Residential construction                                  83,778           83,359 
 Acquisition and development                               39,111           31,619 
 Commercial construction                                   14,013           14,506 
Commercial loans, secured by residential mortgage
 loans held for sale                                      141,285           98,679 
Commercial loans, secured by mortgage servicing            19,420           32,685 
 rights
Commercial, financial and industrial                       33,938           30,877 
Loans secured by savings deposits                           8,039            8,695 
Consumer and other loans                                   35,861           15,030 
                                                   ---------------      -----------
                                                        1,474,445        1,317,986 
Loans in process                                          (52,767)         (47,893)
Allowance for loan losses                                  (8,850)          (7,412)
Unearned interest and  loan fees                           (2,758)          (2,926)
Premium to record purchased loans, net                      3,258            1,680 
                                                   ---------------      -----------

                                                   $    1,413,328       $1,261,435 
                                                   ===============      ===========

Weighted average yield                                       8.37%            8.30%
                                                   ===============      ===========
</TABLE>



     At  June  30,  1998,  Coastal  had  outstanding commitments to originate or
purchase  $70.3  million  of  real  estate  mortgage  and  other  loans  and had
commitments  under  lines  of credit to originate primary construction and other
loans  of  approximately $120.4 million.  In addition, at June 30, 1998, Coastal
had  $2.4  million of outstanding letters of credit.  Management anticipates the
funding  of  these  commitments  through  normal  operations.

     At  June  30,  1998 and December 31, 1997, the carrying value of loans that
were  considered  to  be  impaired  totaled  approximately $1.7 million and $2.0
million,  respectively  (all  of  which  were  on  nonaccrual),  and the related
allowance  for loan losses on those impaired loans totaled $1.2 million and $1.1
million  at  June  30,  1998  and  December 31, 1997, respectively.  The average
recorded  investment in impaired loans during the six months ended June 30, 1998
and  1997  was  $1.7  million  and  $735,000,  respectively.


<PAGE>
     An analysis of activity in the allowance for loan losses for the six months
ended  June  30,  1998  and  1997  is  as  follows  (in  thousands):

<TABLE>
<CAPTION>

                                                          Six months ended June 30,
                                                         -------------------------- 
                                                               1998       1997
                                                           ------------  -------
                                                                  (Unaudited)
<S>                             <C>                        <C>           <C>
Balance, beginning of period                               $     7,412   $6,880 
Provision for loan losses                                        1,900      900 
Charge-offs, net of recoveries                                    (462)    (918)
                                                           ------------  -------

Balance, end of period                                     $     8,850   $6,862 
                                                           ============  =======
</TABLE>



     Coastal  services for others loans receivable which are not included in the
Consolidated  Financial  Statements. The total amounts of such loans were $595.8
million and $675.7 million at June 30, 1998 and December 31, 1997, respectively.



<PAGE>
(5)  SAVINGS  DEPOSITS

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

<TABLE>
<CAPTION>


                                      Stated Rate      June 30, 1998    December 31, 1997
                                     --------------   --------------   ------------------- 
                                                        (Unaudited)
<S>                                  <C>             <C>   <C>            <C>  <C>
Noninterest-bearing checking                  0.00%    $   38,488         $  101,782 
Interest-bearing checking            1.49  -  2.00          5,093             69,972 
Savings accounts                     2.18  -  2.75         25,806             25,555 
Money market demand accounts         0.00  -  4.60        296,674            165,986 
                                                       ----------         -----------

                                                          366,061            363,295 
                                                        ---------         -----------

Certificate accounts                 2.00  -  2.99          6,934              5,142 
                                     3.00  -  3.99          3,732              2,763 
                                     4.00  -  4.99         67,130             64,478 
                                     5.00  -  5.99        823,932            834,727 
                                     6.00  -  6.99         84,488             94,405 
                                     7.00  -  7.99          4,883              7,624 
                                     8.00  -  8.99          1,472              1,854 
                                     9.00  -  9.99            305                847 
                                                          992,876          1,011,840 
                                                        ---------         -----------
Discount to record savings deposits
at fair value, net                                           (38)                (75)
                                                        ---------         -----------

                                                      $ 1,358,899      $  $1,375,060 
                                                      ===========      ==============

Weighted average rate                                       4.58%               4.67%
                                                      ===========      ==============
</TABLE>



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

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

<TABLE>
<CAPTION>

                      June 30, 1998
                     ---------------
                       (Unaudited)
<S>               <C>
 0 to 12 months.  $       829,997
 12 to 24 months          129,368
 24 to 36 months           19,197
 36 to 48 months            6,281
 48 to 60 months            7,927
 Over 60 months.              106
                  ---------------
                  $       992,876
                  ===============
</TABLE>


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

     (a)          The  weighted  average interest rates on securities sold under
agreements  to  repurchase at June 30, 1998 and December 31, 1997 were 5.52% and
6.00%,  respectively.    The  stated  interest  rates  on  securities sold under
agreements  to  repurchase  ranged  from  4.93%  to  5.69%  at  June  30,  1998.

     (b)        The weighted average interest rates on advances from the FHLB at
June  30,  1998  and  December 31, 1997 were 5.57% and 5.95%, respectively.  The
scheduled  maturities  and  related  weighted average interest rates on advances
from  the FHLB at June 30, 1998 are summarized as follows (dollars in thousands)
(unaudited):

<TABLE>
<CAPTION>

Due during the year ended December 31,      Weighted Average
                                             Interest Rate           Amount
--------------------------------------       -----------------      ---------
<S>                                     <C>                <C>     <C>
1998                                                5.56%          $360,261
1999                                                5.73            115,038
2000                                                5.93              6,831
2001                                                6.22              8,552
2002                                                5.59             69,610
2004                                                6.52              2,672
2006                                                6.91              3,088
2007                                                6.79              1,041
2008                                                4.70             51,189
2009                                                8.25              4,356
2011                                                6.78              1,253
2013                                                6.05                399
2018                                                6.00                548
                                                                   --------
                                                                   $624,838
                                                                   ========
</TABLE>



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

(7)  SENIOR  NOTES  PAYABLE

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


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

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

     Coastal  utilizes  interest  rate  swap and interest rate cap agreements to
reduce  exposure  to  floating  interest  rates  by  altering  the interest rate
sensitivity  of  a  portion of its variable-rate assets and borrowings.  At June
30,  1998,  Coastal  had  interest  rate swap and cap agreements having notional
principal  amounts  totaling  $45.8  million  and  $173.3 million, respectively.

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

<TABLE>
<CAPTION>

                                                           Floating Rate     Fair Value at
                       Notional       LIBOR        Fixed         at         End of Period
Maturity                Amount        Index        Rate    End of Period      gain (loss)
---------------------  ---------    -----------    ------  -------------- --------------
<S>                    <C>          <C>            <C>     <C>             <C>
At June 30, 1998:
1998                   $   4,400    Three-month    6.709%     5.699%  $        (14)
1999                      14,600    Three-month    6.926      5.699           (205)
2000                       4,800    Three-month    6.170      5.688           (116)
                           2,450    Three-month    6.000      5.688             (9)
2005                      19,527    Three-month    6.500      5.688           (382)
                       ---------                                                   
                       $  45,777                                      $       (726)
                       =========                                        ===========

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


     The  interest  rate  swap  agreements  provide for Coastal to make weighted
average  fixed  interest payments and receive payments based on a floating LIBOR
index,  as  defined  in  each  agreement.  The weighted average interest rate of
payments  received on all of the interest rate swap agreements was approximately
5.79% and the weighted average interest payment rate on all of the interest rate
swap  agreements was approximately 6.60% for the six months ended June 30, 1998.
Payments  on  the  interest  rate  swap  agreements  are  based  on the notional
principal amount of the agreements; no funds were actually borrowed or are to be
repaid.    The interest rate swap agreements are used to alter the interest rate
sensitivity  of  a  portion  of  Coastal's  variable-rate  borrowings.  As such,
Coastal  records net interest expense or income related to these agreements on a
monthly  basis in "interest expense on other borrowed money" in the accompanying
consolidated  statements  of  income.  The net interest expense related to these
agreements was approximately $185,000 for the six months ended June 30, 1998 and
approximately  $246,000  for  the  six  months ended June 30, 1997.  Coastal had
pledged  approximately $548,000 of mortgage-backed securities to secure interest
rate  swap  agreements  at  June  30,  1998.

     Coastal  has  interest  rate  cap  agreements  with  third  parties.    The
agreements  provide for the third parties to make payments to Coastal whenever a
defined floating rate exceeds rates ranging from 5.0% to 12.5%, depending on the
agreement.    Payments  on  the  interest  rate  cap agreements are based on the
notional  principal amount of the agreements; no funds were actually borrowed or
are  to  be repaid.  The purchase prices of the interest rate cap agreements are
capitalized  and  included  in  "prepaid  expenses  and  other  assets"  in  the
accompanying  consolidated  statements  of financial condition and are amortized
over the life of the agreements using the straight-line method.  The unamortized
portion  of  the  purchase  price  of  the  interest  rate  cap  agreements  was
approximately  $113,000  and  $286,000  at  June 30, 1998 and December 31, 1997,
respectively, with the estimated fair value of the agreements being $124,000 and
$300,000  at  June  30,  1998 and December 31, 1997, respectively.  The interest
rate cap agreements are used to alter the interest rate sensitivity of a portion
of  Coastal's  mortgage-backed  securities,  loans  receivable and their related
funding  sources.  As  such, the amortization of the purchase price and interest
income from the interest rate cap agreements are recorded in "interest income on
mortgage-backed  securities  or  loans  receivable,"  as  appropriate,  in  the
accompanying  consolidated  statements  of income.  The net decrease in interest
income related to the interest rate cap agreements was approximately $30,000 and
$201,000  for  the  six  months  ended  June  30,  1998  and 1997, respectively.

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

<TABLE>
<CAPTION>


Year of       Strike rate    Notional
expiration       range        amount
----------  ---------------  ---------
<S>         <C>              <C>
1998        5.00  -  12.50%  $  73,200
1999        7.25  -  11.00      63,564
2000         8.50  -  9.50      11,620
2001         7.00  -  9.00      24,915
                             ---------
                             $ 173,299
                             =========
</TABLE>



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

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

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

<PAGE>

(9)  EARNINGS  PER  SHARE

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

<TABLE>
<CAPTION>


                                                                   Six Months Ended
                                                                        June 30,
                                                                   ----------------  
<S>                                           <C>               <C>         <C>
                                                                      1998        1997
                                                                ----------  ----------

Net income available to common stockholders                     $    9,920  $    6,057
                                                                ==========  ==========
Weighted average number of common shares
 outstanding used in basic EPS calculation                       7,550,276   7,454,151
Add assumed exercise of outstanding stock
 options as adjusted for dilutive securities                       265,364     221,312
                                                                ----------  ----------
Weighted average number of common shares
 outstanding used in diluted EPS calculation                     7,815,640   7,675,463
                                                                ==========  ==========
Basic EPS                                                       $     1.31  $     0.81
                                                                ==========  ==========
Diluted EPS                                                     $     1.27  $     0.79
                                                                ==========  ==========
</TABLE>


<TABLE>
<CAPTION>

                                                                    Three Months Ended
                                                                         June 30,
<S>                                           <C>                 <C>         <C>
                                                                        1998        1997
                                                                  ----------  ----------

Net income available to common stockholders                       $    3,979  $    2,819
                                                                  ==========  ==========
Weighted average number of common shares
 outstanding used in basic EPS calculation                         7,559,922   7,456,092
Add assumed exercise of outstanding stock
 options as adjusted for dilutive securities                         277,562     232,749
                                                                  ----------  ----------
Weighted average number of common shares
 outstanding used in diluted EPS calculation                       7,837,484   7,688,841
                                                                  ==========  ==========
Basic EPS                                                         $     0.53  $     0.38
                                                                  ==========  ==========
Diluted EPS                                                       $     0.51  $     0.37
                                                                  ==========  ==========
</TABLE>



(10) 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%.


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

<TABLE>
<CAPTION>

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

 Tier 1 (core)         $  169,875    5.78%     $117,636   4.00%      $147,016   5.00%
 Tier 1 risk-based        169,875   11.30        60,127   4.00         90,191   6.00 
 Total risk-based         178,725   11.89       120,255   8.00        150,319  10.00 

</TABLE>



     As  of June 30, 1998, the most recent notification from the Federal Deposit
Insurance  Corporation  ("FDIC")  categorized the Bank as well capitalized under
the  regulatory framework for prompt corrective action.  There are no conditions
or  events  since  that  notification  that management believes have changed the
institution's  category.

(11) FEDERAL  INCOME  TAXES

     In  March  1998,  Coastal  announced  that  it had successfully resolved an
outstanding  tax  benefit  issue with the FDIC as Manager of the Federal Savings
and  Loan  Insurance  Corporation  Resolution Fund.  The resolution of the issue
resulted  in  Coastal  recording  a $3.7 million, or 47 cents per diluted share,
reversal  of  accrued  income  taxes  during the six months ended June 30, 1998;
resulting  in  a  one-time positive effect on net income.  The resolution of the
tax  benefit issue also contributes an ongoing quarterly tax benefit of $226,000
or  approximately  3  cents  per  diluted  share, as of June 30, 1998.  This tax
benefit  is  expected  to  continue  for  approximately  3  to  4  years.

(12) RECENT  ACCOUNTING  STANDARDS

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

(13) PENDING  BRANCH  PURCHASE

     On  May  4, 1998, Coastal announced the execution of a definitive agreement
to  purchase  the  Valley  Branches of Pacific Southwest Bank, also known as San
Benito  Bank  and  Trust  Company,  a  unit  of  Pacific Southwest Bank.  Twelve
branches  located  in  Harlingen,  San  Benito,  Mission,  Pharr,  Edinburg,
Brownsville, McAllen and South Padre with deposits of approximately $357 million
and  loans  of approximately $175 million, will be acquired in this transaction.
The  acquisition  is  expected  to  close  in  the  third  quarter  of  1998.





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

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

     Total assets increased 2.4% or $69.1 million from December 31, 1997 to June
30,  1998.    The  net  increase  resulted  primarily  from an increase in loans
receivable of $151.9 million and a $3.9 million increase in Stock in the Federal
Home  Loan  Bank  of Dallas, offset by decreases of $61.6 million, $11.3 million
and  $10.3  million  in  mortgage-backed  securities  held-to-maturity, cash and
amounts  due  from  depository  institutions  and  mortgage-backed  securities
available-for-sale,  respectively.    The  increase  in  loans  receivable  was
primarily  due to bulk residential mortgage loan purchases of $258.0 million and
$15.5 million of consumer loan purchases from correspondent lenders, in addition
to  an  increase  of  $42.6  million in commercial loans, secured by residential
mortgage  loans held for sale, during the six months ended June 30, 1998.  These
increases  were somewhat offset by principal payments received.  The decrease in
mortgage-backed  securities  was  due  to  principal  payments  received.

     Savings  deposits decreased slightly by 1.2% or $16.2 million from December
31,  1997  to June 30, 1998. Securities sold under agreements to repurchase also
decreased  1.8%  or  $14.0 million and advances from the FHLB increased 15.6% or
$84.4  million  from  December  31, 1997 to June 30, 1998.  Stockholders' equity
increased  9.4%  or  $9.9  million  from December 31, 1997 to June 30, 1998 as a
result  primarily  of  net  income  and a $698,000 decrease in accumulated other
comprehensive  income  (loss)  offset  by  dividends  declared.

Results  of  Operations  for  the  Six  Months  Ended  June  30,  1998  and 1997
--------------------------------------------------------------------------------

General
-------

     For  the  six months ended June 30, 1998, net income before preferred stock
dividends  was  $11.2  million compared to $7.4 million for the six months ended
June  30,  1997.  The increase in net income in the first six months of 1998 was
primarily  due  to  the  resolution of an outstanding tax benefit issue with the
Federal Deposit Insurance Corporation as Manager of the Federal Savings and Loan
Insurance  Corporation Resolution Fund.  The resolution of the issue resulted in
Coastal  recording  a  $3.7  million, or 47 cents per diluted share, reversal of
accrued  income  taxes;  resulting  in a one-time positive effect on net income.
The  resolution  of  the  tax  benefit  issue  will  also  contribute an ongoing
quarterly tax benefit of $226,000 or approximately 3 cents per diluted share (as
of June 30, 1998).  This tax benefit is expected to continue for approximately 3
to  4  years.

     The positive effect of the tax benefit issue resolution was somewhat offset
by  the recording in the first six months of 1998 of an additional provision for
loan  losses  of $1.0 million and a writedown of purchased mortgage loan premium
of  $709,000.    The  additional provision for loan losses of $1.0 million, or 8
cents  per  diluted  share after tax, was recorded to increase the allowance for
loan  losses  due  to  the  continuing  change  in  the composition of the loans
receivable  portfolio.    This  change  is occurring as a result of management's
emphasis  on  business  lending.    The writedown of the purchased mortgage loan
premium  of  $709,000, or 6 cents per diluted share after tax, was related to an
adjustable  rate  whole loan package purchased in the second quarter of 1997, on
which Coastal experienced high prepayments during 1997 and continuing into 1998,
resulting  from  a  comparatively  lower  current  interest  rate  environment.

     The  net  benefit  of recording the resolution of the tax issue after these
adjustments  (net  of  their  applicable  income  tax  effects) amounted to $2.6
million  or approximately 33 cents per diluted share.  Excluding the net benefit
from  these  nonrecurring  items  recorded  during the six months ended June 30,
1998,  net  income available to common stockholders from ongoing core operations
was  $7.4  million  or  94  cents  per  diluted  share  (as  of  June 30, 1998).

     Net  interest  income  increased $2.4 million for the six months ended June
30,  1998  as compared to the six months ended June 30, 1997. Noninterest income
(excluding  the  writedown  of purchased mortgage loan premium) increased during
such  period by $390,000.  Noninterest expense increased by $1.5 million and the
provision  (benefit)  for federal income taxes (excluding the one-time effect of
the  $3.7  million  reversal of accrued income taxes) decreased by $600,000 from
the  1997  to  the  1998  six  month period due to the ongoing quarterly benefit
attributable to the tax benefit issue and the tax effect of the recording of the
additional provision for loan losses and the writedown of the purchased mortgage
loan  premium  during  the  first  six  months  of  1998.

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

     Interest  income  for  the  six  months  ended June 30, 1998 increased $3.8
million  or  3.8%  from  the  six  months ended June 30, 1997.  The increase was
primarily  due  to  an  increase  of  $3.6  million  in interest earned on loans
receivable over the prior comparable period.  The increase in interest income on
loans  receivable  was due to a $98.1 million increase in the average balance of
loans  receivable  offset  by a decrease in the average yield from 8.44% for the
six  months ended June 30, 1997 to 8.35% for the six months ended June 30, 1998.
The  decrease  in  the  average  yield  on loans receivable was primarily due to
$749,000  (or 6 cents per diluted share after tax) of additional amortization of
purchased mortgage loan premium during the six months ended June 30, 1998.  This
amortization was attributable to an adjustable rate whole loan package purchased
in  the  second  quarter  of 1997, on which Coastal experienced high prepayments
during  1997  and  through  the first quarter of 1998.  As discussed previously,
Coastal  recorded a $709,000 writedown of the purchased mortgage loan premium on
this  package  in  March  1998,  which has positively impacted the average yield
since  March  31,  1998.

     Interest  income  on  federal funds sold, certificates of deposit and other
investments  increased $365,000 which was somewhat offset by a $203,000 decrease
in interest income on mortgage-backed securities.  Total interest-earning assets
for the six months ended June 30, 1998 averaged $2.9 billion as compared to $2.8
billion  for  the  six  months  ended  June  30,  1997.

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

     Interest  expense on interest-bearing liabilities was $72.0 million for the
six months ended June 30, 1998, as compared to $70.6 million for the same period
in  1997.   The increase in interest expense was due to a $54.9 million increase
in the average balance of interest-bearing liabilities during such period offset
by  a  slight  decrease in the average rate paid on interest-bearing liabilities
from  5.38%  for  the six months ended June 30, 1997 to 5.37% for the six months
ended  June  30,  1998.    The  increase in average interest-bearing liabilities
consisted  of  a  $204.7  million  increase  in  FHLB  advances, a $32.3 million
increase  in  interest-bearing  savings  deposits,  offset  by  a $182.0 million
decrease  in  securities  sold  under  agreements  to  repurchase.

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

     Net  interest  income  was  $31.3 million for the six months ended June 30,
1998  and  $28.9  million  for  the  same  period  in 1997.  Net interest margin
("Margin")  was  2.18%  for the six months ended June 30, 1998 compared to 2.07%
for  the  same  period  in  1997.    Margin  represents net interest income as a
percentage  of average interest-earning assets.  Net interest spread ("Spread"),
defined  to  exclude  noninterest-bearing deposits, increased from 1.75% for the
six  months ended June 30, 1997 to 1.82% for the six months ended June 30, 1998.
Management  also  calculates  an  alternative  Spread  which  includes
noninterest-bearing  deposits.   Under this calculation, the alternative Spreads
for  the  six  months  ended  June  30,  1998  and  1997  were  2.00% and 1.91%,
respectively.    Margin and Spread are affected by the changes in the amount and
composition  of  interest-earning  assets and interest-bearing liabilities.  The
overall  increase in net interest spread was primarily due to an increase in the
average yield on interest-earning assets of 6 basis points and a decrease in the
average rate paid on interest-bearing liabilities of 1 basis point.  The average
balance  of  loans  receivable increased $98.1 million from the six months ended
June  30,  1997  to  the six months ended June 30, 1998, while the average yield
decreased  from  8.44%  to  8.35%.    The  average  balance  of  mortgage-backed
securities  decreased  $29.0  million from the six months ended June 30, 1997 to
the six months ended June 30, 1998, while the average yield increased from 6.09%
to 6.19%.  The decrease in the average rate paid on interest-bearing liabilities
was  due  primarily  to  the  overall  decrease  in wholesale funding costs.  In
addition,  average  net interest-earning assets increased $26.4 million from the
six  months  ended  June  30,  1997  to  the  six  months  ended  June 30, 1998.

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

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

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

     The  provision  for  loan  losses was $1.9 million for the six months ended
June  30,  1998 and $900,000 for the six months ended June 30, 1997.  During the
six  months  ended  June  30, 1998, Coastal recorded an additional provision for
loan losses of $1.0 million to increase the allowance for loan losses due to the
continuing  change  in  the composition of the loans receivable portfolio.  This
change  is  occurring  as a result of management's emphasis on business lending.
The  allowance  for loan losses as a percentage of total loans was 0.63% at June
30,  1998  and  0.51%  at  June  30,  1997.  Although no assurance can be given,
management  believes  that  the  present  allowance  for loan losses is adequate
considering  the  changing  composition  of  the  loans  receivable  portfolio,
historical  loss experience, delinquency trends and current economic conditions.
Management  will  continue to review its loan loss allowance policy as Coastal's
loan  portfolio  grows and diversifies to determine if changes to the policy and
resulting  allowance  for  loan  losses  are  necessary.

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

     For  the  six months ended June 30, 1998, noninterest income (excluding the
writedown  of  purchased  mortgage  loan premium) increased $390,000 or 12.9% to
$3.4  million,  compared to $3.0 million for the six months ended June 30, 1997.
The  increase in noninterest income was primarily due to an increase of $591,000
in  loan fees and service charges on deposit accounts and a $163,000 increase in
other  noninterest  income.    The  increase in loan fees and service charges on
deposit  accounts  consisted  of a $189,000 increase in loan fees and a $402,000
increase  in  service  charges  on  deposit  accounts  due  to  the  increase in
transaction  type  deposit  accounts.  These increases were somewhat offset by a
$364,000  decrease  in  loan  servicing  income  due  to  the reducing servicing
portfolio.    In  addition, as discussed previously, during the six months ended
June  30,  1998, Coastal recorded a writedown of purchased mortgage loan premium
of  $709,000.

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

     For  the six months ended June 30, 1998, noninterest expense increased $1.5
million  from  the  six months ended June 30, 1997.  Compensation, payroll taxes
and  other  benefits  as well as office occupancy expense increased $779,000 and
$767,000,  respectively,  from  the  six  months  ended June 30, 1997 to the six
months  ended  June 30, 1998, primarily due to the staffing increases related to
the  expansion  of  the  loan  product  base  and  the continuing development of
commercial  business  lending  programs.    In addition, occupancy expenses also
increased  due  to  the  acquisition of assets and other expenses related to the
relocation of Coastal's corporate headquarters in the third quarter of 1997.  In
addition,  data  processing  expenses and the amortization of goodwill increased
$71,000 and $61,000, respectively.  Other changes included a $59,000 decrease in
real  estate  owned  expenses,  a  $20,000 decrease in insurance premiums (which
includes  deposit insurance premiums) and a $132,000 decrease in other operating
expenses.

Provision  (Benefit)  for  Federal  Income  Taxes
-------------------------------------------------

     For the six months ended June 30, 1998, the provision (benefit) for federal
income  taxes  (excluding  the  one-time  effect of the $3.7 million reversal of
accrued  income  taxes)  was  $3.6  million compared to $4.2 million for the six
months ended June 30, 1997.  The decrease from 1997 to 1998 was due primarily to
the  ongoing quarterly benefit attributable to the tax benefit issue and the tax
benefit  effect of the recording of the additional provision for loan losses and
the writedown of the purchased mortgage loan premium during the first six months
of  1998.

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

General
-------

     For the three months ended June 30, 1998, net income before preferred stock
dividends  was  $4.6 million compared to $3.5 million for the three months ended
June  30,  1997.   The increase  was primarily due to a $2.0 million increase in
net  interest income for the three months ended June 30, 1998 as compared to the
three  months  ended  June  30,  1997.  Noninterest income increased during such
period by $103,000.  Noninterest expense increased by $689,000 and the provision
for  federal  income taxes increased by $272,000 from the 1997 to the 1998 three
month  period.

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

     Interest  income  for  the  three months ended June 30, 1998 increased $2.5
million  or  5.0%  from  the three months ended June 30, 1997.  The increase was
primarily  due  to  an  increase  of  $2.7  million  in interest earned on loans
receivable  over  the prior comparable quarter.  The increase in interest income
on  loans receivable was due to a $121.5 million increase in the average balance
of  loans  receivable  and  an  increase in the average yield from 8.47% for the
three  months  ended  June 30, 1997 to 8.50% for the three months ended June 30,
1998.

     In addition, interest income on federal funds sold, certificates of deposit
and  other  investments  increased  $260,000  while  interest  income  on
mortgage-backed  securities  decreased  $457,000 due to a lower average balance.
Total  interest-earning assets for the three months ended June 30, 1998 averaged
$2.9  billion  as  compared  to $2.8 billion for the three months ended June 30,
1997.

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

     Interest  expense on interest-bearing liabilities was $36.1 million for the
three  months  ended  June  30,  1998, as compared to $35.6 million for the same
period  in  1997.    The increase in interest expense was due to a $70.3 million
increase  in  the  average  balance  of interest-bearing liabilities during such
period  offset  somewhat  by  a  decrease  in  the  average  rate  paid  on
interest-bearing liabilities from 5.45% for the three months ended June 30, 1997
to  5.35%  for  the  three  months ended June 30, 1998.  The increase in average
interest-bearing  liabilities  consisted  of  a  $189.0 million increase in FHLB
advances,  a $30.5 million increase in interest-bearing savings deposits, offset
by  a $148.8 million decrease in securities sold under agreements to repurchase.

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

     Net  interest  income was $16.3 million for the three months ended June 30,
1998  and  $14.3  million  for  the  same  period  in 1997.  Net interest margin
("Margin")  was 2.26% for the three months ended June 30, 1998 compared to 2.05%
for the three months ended June 30, 1997.  Margin represents net interest income
as  a  percentage  of  average  interest-earning  assets.    Net interest spread
("Spread"),  defined  to  exclude  noninterest-bearing  deposits, increased from
1.71%  for  the  three  months ended June 30, 1997 to 1.92% for the three months
ended  June  30,  1998.   Management also calculates an alternative Spread which
includes  noninterest-bearing deposits.  Under this calculation, the alternative
Spreads  for the three months ended June 30, 1998 and 1997 were 2.08% and 1.88%,
respectively.    Margin and Spread are affected by the changes in the amount and
composition  of  interest-earning  assets and interest-bearing liabilities.  The
overall  increase in net interest spread was primarily due to an increase in the
average  yield  on  interest-earning assets of 11 basis points and a decrease in
the  average  rate paid on interest-bearing liabilities of 10 basis points.  The
average  balance  of  loans  receivable  increased $121.5 million from the three
months  ended  June  30, 1997 to the three months ended June 30, 1998, while the
average  yield  increased  from  8.47%  to  8.50%.    The  average  balance  of
mortgage-backed  securities  decreased $42.0 million from the three months ended
June  30,  1997 to the three months ended June 30, 1998, while the average yield
increased  from  6.11%  to  6.16%.    The  decrease  in the average rate paid on
interest-bearing  liabilities  was  due  primarily  to  the  overall decrease in
wholesale  funding  costs.    In  addition,  average net interest-earning assets
increased  $25.1  million from the three months ended June 30, 1997 to the three
months  ended  June  30,  1998.

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

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

     The  provision for loan losses was $450,000 for the three months ended June
30,  1998  and for the three months ended June 30, 1997.  The allowance for loan
losses  as  a  percentage of total loans was 0.63% at June 30, 1998 and 0.51% at
June 30, 1997.  Although no assurance can be given, management believes that the
present  allowance  for  loan  losses  is  adequate  considering  the  changing
composition  of  the  loans  receivable  portfolio,  historical loss experience,
delinquency  trends and current economic conditions. Management will continue to
review  its  loan  loss  allowance  policy as Coastal's loan portfolio grows and
diversifies  to  determine  if changes to the policy and resulting allowance for
loan  losses  are  necessary.

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

     For  the  three  months  ended  June 30, 1998, noninterest income increased
$103,000  or 6.7% to $1.7 million, compared to $1.6 million for the three months
ended June 30, 1997.  The increase in noninterest income was primarily due to an
increase  of $161,000 in loan fees and service charges on deposit accounts and a
$139,000  increase  in  other noninterest income.  These increases were somewhat
offset  by  a  $197,000  decrease  in  loan  servicing  income.

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

     For  the  three  months  ended June 30, 1998, noninterest expense increased
$689,000 from the three months ended June 30, 1997.  Compensation, payroll taxes
and  other  benefits  as well as office occupancy expense increased $464,000 and
$389,000,  respectively,  from the three months ended June 30, 1997 to the three
months  ended  June 30, 1998, primarily due to the staffing increases related to
the  expansion  of  the  loan  product  base  and  the continuing development of
commercial  business  lending  programs.    In addition, occupancy expenses also
increased  due  to  the  acquisition of assets and other expenses related to the
relocation of Coastal's corporate headquarters in the third quarter of 1997.  In
addition,  the  amortization  of  goodwill  increased  $29,000.    Other changes
included a $72,000 decrease in real estate owned expenses, a $24,000 decrease in
data  processing expense, a $14,000 decrease in insurance premiums and a $83,000
decrease  in  other  operating  expenses.

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

     For  the three months ended June 30, 1998, the provision for federal income
taxes  was $2.3 million compared to $2.0 million for the three months ended June
30,  1997.

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

     Coastal's  primary  sources  of  funds  consist of savings deposits bearing
market  rates  of  interest,  securities  sold  under  agreements to repurchase,
advances  from the FHLB, federal funds purchased and principal payments on loans
receivable  and  mortgage-backed securities.  Coastal uses its funding resources
principally  to  meet  its  ongoing  commitments  to  fund maturing deposits and
deposit  withdrawals,  repay  borrowings,  purchase  loans  receivable  and
mortgage-backed  securities,  fund  existing  and  continuing  loan commitments,
maintain  its  liquidity, meet operating expenses and fund acquisitions of other
banks and thrifts, either on a branch office or whole bank acquisition basis. At
June  30,  1998,  Coastal had binding commitments to originate or purchase loans
totaling  approximately $70.3 million and had $52.8 million of undisbursed loans
in process. Scheduled maturities of certificates of deposit during the 12 months
following  June  30,  1998  totaled $830.0 million at June 30, 1998.  Management
believes that Coastal has adequate resources to fund all of its commitments.  In
addition,  Coastal  has  historically  experienced  a retention rate of maturing
certificates  of  deposit  of  $5,000  or  greater  of  approximately  80%.

     As  of  June  30, 1998, Coastal operated 37 retail banking offices in Texas
cities,  including  Houston,  Austin,  Corpus  Christi  and  small cities in the
southeast  quadrant  of  Texas.   Management's five year goal is to have over $5
billion  in  assets,  over  $3 billion in deposits, $2.5 billion in loans and 80
branches  in cities throughout central and south Texas, although there can be no
assurance  that  this  goal  can be accomplished through growth or acquisitions.

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

     Many existing computer programs, such as many utilized by Coastal, use only
two  digits  to identify a year in the date field.  These programs were designed
and  developed  without  considering  the  impact  of the upcoming change in the
century.    Because  of  the  year 2000 implications, Coastal is identifying its
computer  applications  which  could fail or create erroneous results because of
the  year 2000, and is developing alternate ("contingent") operating systems for
these  applications.

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

     The costs associated with the year 2000 issues are estimated to approximate
$75,000  to  $100,000.    Such  costs  will be capitalized and amortized over an
estimated  three  to  five  year  period.

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

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

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

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

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


<PAGE>
     PART  II  -  OTHER  INFORMATION

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

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

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

                   a)  Not  applicable.
                   b)  Not  applicable.

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

                  Not  applicable.

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

     On  April  23,  1998,  at  the  Annual  Meeting  of Stockholders of Coastal
Bancorp,  Inc.  (the  Company),  the  stockholders  voted  upon and approved the
election of three directors and the ratification of the appointment of KPMG Peat
Marwick  LLP  as  the  Company's independent auditors for the fiscal year ending
December  31, 1998.  With respect to such matters, the results of the votes were
as  follows  (retroactively  adjusted  for  the  effect  of  the  stock  split):

     1)          Election  of  directors:

<TABLE>
<CAPTION>

                             Number of Votes
                             ---------------      
                            In favor      Withheld
                            ---------     --------
<S>                   <C>                   <C>
R. Edwin Allday. . .        5,648,337      131,172
D. Fort Flowers, Jr.        5,649,237      130,272
Dennis S. Frank. . .        5,649,087      130,422
</TABLE>



     2)       Ratification of KPMG Peat Marwick LLP as the Company's independent
auditors  for  the  year  ended  December  31,  1998:



<TABLE>
<CAPTION>

<S>                              <C>
Number of votes in favor     5,753,532
Number of votes against         24,740
Number of votes abstaining       1,237
</TABLE>




<PAGE>
Item  5.          Other  Information
                  ------------------

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

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

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

     Stockholder  proposals  which  are  not  submitted  for  inclusion  in  the
Company's  proxy  materials pursuant to Rule 14a-8 under the Securities Exchange
Act  of  1934  may be brought before an annual meeting pursuant to the Company's
Articles  of Incorporation, which provide that business must be properly brought
before  the  meeting  by  or  at  the  direction  of  the Board of Directors, or
otherwise properly brought before the meeting by a stockholder.  For business to
be  properly  brought before an annual meeting by a stockholder, the stockholder
must  have  given  timely  notice  thereof  in  writing  to the Secretary of the
Company.    To be timely, a stockholder's notice must be delivered to, or mailed
and  received  at,  the  principal executive offices of the Company on or before
January 23, 1999.*  A stockholder's notice shall set forth as to each matter the
stockholder  proposes  to  bring  before  an annual meeting for such information
required  by  the  Company's  Articles of Incorporation.  If the proposal is not
made  in  accordance  with  the  terms  of  the  Articles of Incorporation, such
proposal  will  not  be  acted  upon  at  the  1999  Annual  Meeting.


______________
*[Which is the date which is not less than 60 days prior to the anniversary date
of  the  mailing  of  proxy  materials  by  the  Company  in connection with the
immediate  preceding  annual  meeting  of  stockholders.]


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

(a)       The  following  exhibits  are  filed  as  part of this report:
          Exhibit  27  -  Financial  Data  Schedule
          Exhibit  99  -  Forward-Looking  Information
(b)       Form 8-K filed on April 28, 1998 concerning the declaration of a 3:2
stock split to be paid on June 15, 1998  to stockholders of  record on May 15,
1998.
(c)       Form 8-K filed on May 6, 1998 concerning the announcement that Coastal
had  executed  a definitive agreement to purchase the Valley Branches of Pacific
Southwest  Bank  also  known  as  San  Benito  Bank and Trust, a Unit of Pacific
Southwest  Bank.




                                   SIGNATURES


     Pursuant  to  the  requirement  of the Securities Exchange Act of 1934, the
Registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned  thereunto  duly  authorized.




Dated:       8/14/98                         By/s/     Manuel J. Mehos
             -------                              ----------------------------
                                             Manuel  J.  Mehos
                                             Chairman  of  the  Board
                                             Chief  Executive  Officer









Dated:          8/14/98                       By/s/     Catherine N. Wylie
                -------                            --------------------------
                                             Catherine  N.  Wylie
                                             Chief  Financial  Officer



                                   Exhibit 27


                             Financial Data Schedule





                                   Exhibit 99


                           Forward-Looking Information

<PAGE>


     Forward-Looking  Information

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

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