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  March  31,  2001

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

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

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


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

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

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

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

                                  YES     X NO
                                     ------

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

           COMMON STOCK OUTSTANDING:   5,742,264 AS OF APRIL 30, 2001


<PAGE>
                     COASTAL BANCORP, INC. AND SUBSIDIARIES

                                Table of Contents



PART  I.     FINANCIAL  INFORMATION
--------     ----------------------


<TABLE>
<CAPTION>

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

        Consolidated Statements of Income for the Three-Month Periods Ended
        March 31, 2001 and 2000                                                    2

        Consolidated Statements of Comprehensive Income for the Three-Month
        Periods Ended March 31, 2001 and 2000                                      3

        Consolidated Statements of Cash Flows for the Three-Month Periods
        Ended March 31, 2001 and 2000                                              4

        Notes to Consolidated Financial Statements                                 6

Item 2  Management's Discussion and Analysis of Financial Condition and Results
        of Operations                                                             16

Item 3  Quantitative and Qualitative Disclosures About Market Risk                19
</TABLE>







PART  II.     OTHER  INFORMATION
---------     ------------------
<TABLE>
<CAPTION>
<S>     <C>                                                  <C>
Item 1  Legal Proceedings                                    20
Item 2  Changes in Securities and Use of Proceeds            20
Item 3  Default upon Senior Securities                       20
Item 4  Submission of Matters to a Vote of Security Holders  20
Item 5  Other Information                                    20
Item 6  Exhibits and Reports on Form 8-K                     20
</TABLE>



SIGNATURES

<PAGE>

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

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


                                                                March 31,    December 31,
                        ASSETS                                    2001           2000
-------------------------------------------------------------  -----------  --------------
                                                               (Unaudited)
<S>                                                            <C>          <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . .  $   40,861   $      69,730
Federal funds sold. . . . . . . . . . . . . . . . . . . . . .       8,150             869
Loans receivable (note 4) . . . . . . . . . . . . . . . . . .   1,997,286       1,896,228
Mortgage-backed securities held-to-maturity (note 3). . . . .     878,096         885,565
Mortgage-backed securities available-for-sale (note 3). . . .      93,300          94,673
U.S. Treasury securities held-to-maturity . . . . . . . . . .       1,398           1,497
Accrued interest receivable . . . . . . . . . . . . . . . . .      18,283          18,772
Property and equipment. . . . . . . . . . . . . . . . . . . .      27,196          28,086
Stock in the Federal Home Loan Bank of Dallas (FHLB). . . . .      61,729          58,005
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . .      23,909          24,611
Prepaid expenses and other assets . . . . . . . . . . . . . .      11,906          13,575
                                                               -----------  --------------
                                                               $3,162,114   $   3,091,611
                                                               ===========  ==============

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


Liabilities:
 Deposits (note 5). . . . . . . . . . . . . . . . . . . . . .  $1,697,162   $   1,674,981
 Advances from the FHLB (note 6). . . . . . . . . . . . . . .   1,218,145       1,150,305
 Senior notes payable, net (note 7) . . . . . . . . . . . . .      46,900          46,900
 Advances from borrowers for taxes and insurance. . . . . . .       6,806           5,050
 Other liabilities and accrued expenses . . . . . . . . . . .      20,542          47,154
                                                               -----------  --------------
     Total liabilities. . . . . . . . . . . . . . . . . . . .   2,989,555       2,924,390
                                                               -----------  --------------

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

Commitments and contingencies (notes 4 and 8)

Stockholders' equity (notes 1, 3, 9, 11 and 12):
 Preferred stock, no par value; authorized shares 5,000,000;
   9.12% Cumulative, Series A, 1,100,000 shares issued and
   outstanding. . . . . . . . . . . . . . . . . . . . . . . .      27,500          27,500
 Common stock, $.01 par value; authorized shares
   30,000,000; 7,737,526 shares issued and 5,737,526 shares
   outstanding at March 31, 2001; 7,677,622 shares issued
   and 5,677,622 shares outstanding at December 31, 2000. . .          77              77
 Additional paid-in capital . . . . . . . . . . . . . . . . .      34,064          33,312
 Retained earnings. . . . . . . . . . . . . . . . . . . . . .     114,773         110,794
 Accumulated other comprehensive loss -
   net unrealized loss on securities available-for-sale . . .      (1,260)         (1,867)
 Treasury stock at cost (2,000,000 shares in 2001
   and 2000). . . . . . . . . . . . . . . . . . . . . . . . .     (31,345)        (31,345)
                                                               -----------  --------------
     Total stockholders' equity . . . . . . . . . . . . . . .     143,809         138,471
                                                               -----------  --------------
                                                               $3,162,114   $   3,091,611
                                                               ===========  ==============
</TABLE>

See  accompanying  Notes  to  Consolidated  Financial  Statements


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

                                                                           Three Months Ended
                                                                               March 31,
                                                                           -----------------
                                                                             2001     2000
                                                                           --------  -------
                                                                              (Unaudited)
<S>                                                                        <C>       <C>
Interest income:
 Loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $43,001   $38,506
 Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . .   16,258    15,433
 FHLB stock, federal funds sold and other interest-earning assets . . . .      906       975
                                                                           --------  -------
                                                                            60,165    54,914
                                                                           --------  -------
Interest expense:
 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   19,921    16,533
 Advances from the FHLB . . . . . . . . . . . . . . . . . . . . . . . . .   16,763    17,095
 Senior notes payable . . . . . . . . . . . . . . . . . . . . . . . . . .    1,173     1,173
 Other borrowed money . . . . . . . . . . . . . . . . . . . . . . . . . .        3         1
                                                                           --------  -------
                                                                            37,860    34,802
                                                                           --------  -------

   Net interest income. . . . . . . . . . . . . . . . . . . . . . . . . .   22,305    20,112
Provision for loan losses (note 4). . . . . . . . . . . . . . . . . . . .      900     2,400
                                                                           --------  -------
   Net interest income after provision for loan losses. . . . . . . . . .   21,405    17,712
                                                                           --------  -------
Noninterest income:
 Service charges on deposit accounts. . . . . . . . . . . . . . . . . . .    1,761     1,709
 Loan fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      240       348
 Loan servicing income, net . . . . . . . . . . . . . . . . . . . . . . .       --       201
 Loss on derivative instruments (note 8). . . . . . . . . . . . . . . . .     (564)       --
 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      385        96
 Gain on sale of mortgage servicing rights. . . . . . . . . . . . . . . .       --     2,172
                                                                           --------  -------
                                                                             1,822     4,526
                                                                           --------  -------
Noninterest expense:
 Compensation, payroll taxes and other benefits . . . . . . . . . . . . .    7,598     7,469
 Office occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . .    2,676     2,806
 Data processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . .      854       859
 Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . . .      702       753
 Insurance premiums . . . . . . . . . . . . . . . . . . . . . . . . . . .      154       149
 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    2,698     2,858
                                                                           --------  -------
                                                                            14,682    14,894
                                                                           --------  -------
       Income before provision for Federal income taxes, minority
         interest and cumulative effect of accounting change. . . . . . .    8,545     7,344
Provision for Federal income taxes. . . . . . . . . . . . . . . . . . . .    2,614     2,209
                                                                           --------  -------
       Income before minority interest and cumulative effect of
         accounting change. . . . . . . . . . . . . . . . . . . . . . . .    5,931     5,135
Minority interest - preferred stock dividends of Coastal Banc ssb . . . .      647       647
                                                                           --------  -------
       Income before cumulative effect of accounting change . . . . . . .    5,284     4,488
Cumulative effect of change in accounting for derivative instruments,
       net of tax (note 8). . . . . . . . . . . . . . . . . . . . . . . .     (104)       --
                                                                           ========  =======
     Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 5,180   $ 4,488
                                                                           ========  =======
     Net income available to common stockholders. . . . . . . . . . . . .  $ 4,553   $ 3,861
                                                                           ========  =======
Basic earnings per  share before cumulative effect of accounting change .  $  0.81   $  0.61
                                                                           ========  =======
Basic earnings per share (note 9) . . . . . . . . . . . . . . . . . . . .  $  0.80   $  0.61
                                                                           ========  =======
Diluted earnings per share before cumulative effect of accounting change.  $  0.78   $  0.60
                                                                           ========  =======
Diluted earnings per share (note 9) . . . . . . . . . . . . . . . . . . .  $  0.76   $  0.60
                                                                           ========  =======
</TABLE>








See  accompanying  Notes  to  Consolidated  Financial  Statements

<PAGE>
<TABLE>

<CAPTION>

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


                                                             Three Months Ended
                                                                 March 31,
                                                              ----------------
                                                               2001     2000
                                                              ------  --------
                                                                (Unaudited)
<S>                                                           <C>     <C>


Net income . . . . . . . . . . . . . . . . . . . . . . . . .  $5,180  $ 4,488

Other comprehensive income (loss), net of tax:
 Unrealized gains (losses) on securities available-for-sale
   arising during period . . . . . . . . . . . . . . . . . .     607   (1,898)
                                                              ------  --------

Total comprehensive income . . . . . . . . . . . . . . . . .  $5,787  $ 2,590
                                                              ======  ========

</TABLE>

See  accompanying  Notes  to  Consolidated  Financial  Statements


<PAGE>
<TABLE>

<CAPTION>

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


                                                                       Three  Months  Ended
                                                                             March 31,
                                                                             ---------

                                                                          2001        2000
                                                                       ----------  ----------
                                                                           (Unaudited)

<S>                                                                    <C>         <C>
Cash flows from operating activities:
 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   5,180   $   4,488
 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. .      1,979       2,305
 Net premium amortization (discount accretion). . . . . . . . . . . .       (127)        248
 Provision for loan losses. . . . . . . . . . . . . . . . . . . . . .        900       2,400
 Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . .        702         753
 Originations and purchases of mortgage loans held for sale . . . . .     (5,207)         --
 Sales of mortgage loans held for sale. . . . . . . . . . . . . . . .      5,233
 Stock dividends from the FHLB. . . . . . . . . . . . . . . . . . . .       (821)       (920)
 Gain on sale of mortgage servicing rights. . . . . . . . . . . . . .         --      (2,172)
 Loss on derivative instruments . . . . . . . . . . . . . . . . . . .        724          --
 Decrease (increase) in:
   Accrued interest receivable. . . . . . . . . . . . . . . . . . . .        489      (2,317)
   Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (26,229)      5,671
                                                                       ----------  ----------

   Net cash provided (used) by operating activities . . . . . . . . .    (17,177)     10,456
                                                                       ----------  ----------

Cash flows from investing activities:
 Net increase in federal funds sold . . . . . . . . . . . . . . . . .     (7,281)     (9,200)
 Purchase of U.S. Treasury securities . . . . . . . . . . . . . . . .         --        (692)
 Principal repayments on mortgage-backed securities held-to-maturity.      7,422       7,604
 Principal repayments on mortgage-backed securities
   available-for-sale . . . . . . . . . . . . . . . . . . . . . . . .      2,299         874
 Principal repayments on U.S. Treasury securities . . . . . . . . . .        100          --
 Purchases of loans receivable. . . . . . . . . . . . . . . . . . . .    (92,955)   (225,226)
 Net (increase) decrease in loans receivable. . . . . . . . . . . . .     (9,449)     54,847
 Net purchases of property and equipment. . . . . . . . . . . . . . .       (286)       (240)
 Purchases of FHLB stock. . . . . . . . . . . . . . . . . . . . . . .     (2,903)     (7,603)
 Proceeds from the sale of mortgage servicing rights. . . . . . . . .         --       1,127
                                                                       ----------  ----------

   Net cash used by investing activities. . . . . . . . . . . . . . .   (103,053)   (178,509)
                                                                       ----------  ----------
</TABLE>


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


                                                                            Three Months Ended
                                                                                 March 31,
                                                                        --------------------------
                                                                            2001          2000
                                                                        ------------  ------------
                                                                                (Unaudited)

<S>                                                                     <C>           <C>
Cash flows from financing activities:
 Net increase in deposits. . . . . . . . . . . . . . . . . . . . . . .  $    22,214   $    12,233
 Advances from the FHLB. . . . . . . . . . . . . . . . . . . . . . . .    3,516,099     2,655,303
 Principal payments on advances from the FHLB. . . . . . . . . . . . .   (3,448,259)   (2,511,653)
 Net increase in advances from borrowers for taxes and insurance . . .        1,756         1,857
 Exercise of stock options for purchase of common stock, net . . . . .          752           229
 Dividends paid. . . . . . . . . . . . . . . . . . . . . . . . . . . .       (1,201)       (1,135)
                                                                        ------------  ------------
   Net cash provided by financing activities . . . . . . . . . . . . .       91,361       156,834
                                                                        ------------  ------------

   Net decrease in cash and cash equivalents . . . . . . . . . . . . .      (28,869)      (11,219)
 Cash and cash equivalents at beginning of period. . . . . . . . . . .       69,730        48,098
                                                                        ------------  ------------
 Cash and cash equivalents at end of period. . . . . . . . . . . . . .  $    40,861   $    36,879
                                                                        ============  ============

 Supplemental schedule of cash flows-interest paid . . . . . . . . . .  $    35,821   $    34,003
                                                                        ============  ============

 Supplemental schedule of noncash investing and financing activities:
   Foreclosures of loans receivable. . . . . . . . . . . . . . . . . .  $       593   $       814
                                                                        ============  ============
</TABLE>

See  accompanying  Notes  to  Consolidated  Financial  Statements


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


(1)  BASIS OF PRESENTATION

     The  accompanying unaudited Consolidated Financial Statements were prepared
     in  accordance  with  the instructions for Form 10-Q and, therefore, do not
     include  all disclosures necessary for a complete presentation of financial
     condition,  results  of  operations  and  cash  flows  in  conformity  with
     accounting  principles  generally accepted in the Untied States of America.
     All  adjustments  which  are,  in  the  opinion  of management, of a normal
     recurring  nature  and are necessary for a fair presentation of the interim
     financial statements, have been included. The results of operations for the
     period  ended  March 31, 2001 are not necessarily indicative of the results
     that  may  be  expected  for  the  entire  fiscal year or any other interim
     period.

     On  August  27,  1998, December 21, 1998, February 25, 1999, April 27, 2000
     and  July  27,  2000,  the  Board  of  Directors  authorized  five separate
     repurchase plans for up to 500,000 shares each of the outstanding shares of
     common  stock  through  an  open-market  repurchase  program  and privately
     negotiated  repurchases, if any. As of March 31, 2001, 2,000,000 shares had
     been  repurchased  in  the  open  market  at an average repurchase price of
     $15.67 per share for a total cost of $31.3 million, with no shares from the
     July 27, 2000 authorization having been repurchased to date. Book value per
     common  share  at  March  31,  2001  was  $19.60.


(2)  PRINCIPLES OF CONSOLIDATION

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


<PAGE>


(3)  MORTGAGE-BACKED SECURITIES

     Mortgage-backed  securities  at  March 31, 2001 were as follows (dollars in
     thousands):

<TABLE>
<CAPTION>
                                       Gross         Gross
                        Amortized   Unrealized    Unrealized    Market
                           Cost        Gains        Losses       Value
                        ----------  -----------  ------------  ---------
<S>                     <C>         <C>          <C>           <C>
Held-to-maturity:
 REMICS - Agency . . .  $  640,326  $     2,135  $    (8,301)  $ 634,160
 REMICS - Non-agency       166,184           34       (2,418)    163,800
 FNMA certificates . .      48,714           45          (22)     48,737
 GNMA certificates . .      16,855          200           --      17,055
 Non-agency securities       6,017           26         (140)      5,903
                        ----------  -----------  ------------  ---------
                        $  878,096  $     2,440  $   (10,881)  $ 869,655
                        ==========  ===========  ============  =========

Available-for-sale:
 REMICS - Agency . . .  $   77,421  $        --  $    (1,979)  $  75,442
 GNMA certificates . .      17,817           41           --      17,858
                        ----------  -----------  ------------  ---------
                        $   95,238  $        41  $    (1,979)  $  93,300
                        ==========  ===========  ============  =========
</TABLE>

     Mortgage-backed securities at December 31, 2000 were as follows (dollars in
     thousands):

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

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


<PAGE>

(4)  LOANS RECEIVABLE

     Loans  receivable  at  March 31, 2001 and December 31, 2000 were as follows
     (dollars  in  thousands):

<TABLE>
<CAPTION>
                                                    March 31, 2001    December 31, 2000
                                                   ----------------  -------------------
<S>                                                <C>               <C>
Real estate mortgage loans:
 First-lien mortgage, primarily residential . . .  $       955,929   $          908,841
 Commercial . . . . . . . . . . . . . . . . . . .          381,444              347,921
 Multifamily. . . . . . . . . . . . . . . . . . .          216,770              224,361
 Residential construction . . . . . . . . . . . .          170,082              157,950
 Acquisition and development. . . . . . . . . . .          143,649              133,005
 Commercial construction. . . . . . . . . . . . .           97,325               90,256
Commercial loans, secured by residential mortgage
 loans held for sale. . . . . . . . . . . . . . .            9,114                8,518
Commercial, financial and industrial. . . . . . .          124,684              120,420
Loans secured by savings deposits . . . . . . . .           14,174               13,681
Consumer and other loans. . . . . . . . . . . . .           52,162               56,522
                                                   ----------------  -------------------
                                                         2,165,333            2,061,475
Loans in process. . . . . . . . . . . . . . . . .         (146,357)            (142,451)
Allowance for loan losses . . . . . . . . . . . .          (14,182)             (14,507)
Unearned interest and  loan fees. . . . . . . . .           (3,716)              (3,864)
Discount on purchased loans, net. . . . . . . . .           (3,792)              (4,425)
                                                   ----------------  -------------------

                                                   $     1,997,286   $        1,896,228
                                                   ================  ===================

Weighted average yield. . . . . . . . . . . . . .             8.81%                9.38%
                                                   ================  ===================
</TABLE>


     At  March  31,  2001,  Coastal  had outstanding commitments to originate or
     purchase  $132.6  million  of  real estate mortgage and other loans and had
     commitments  under  lines  of  credit to originate primary construction and
     other loans of approximately $97.1 million. In addition, at March 31, 2001,
     Coastal  had  $8.7  million  of  outstanding  letters of credit. Management
     anticipates  the  funding  of  these commitments through normal operations.

     At  March  31, 2001 and December 31, 2000, the carrying value of loans that
     were  considered to be impaired totaled approximately $4.9 million and $4.4
     million,  respectively  and  the related allowance for loan losses on those
     impaired  loans  totaled  $914,000  and  $1.6 million at March 31, 2001 and
     December  31,  2000,  respectively.  Of the impaired loans outstanding, one
     loan with a balance of $625,000 at March 31, 2001 and a balance of $650,000
     at  December  31, 2000 did not have a specific portion of the allowance for
     loan  losses  allocated to it at each respective date. The average recorded
     investment  in  impaired loans during the three months ended March 31, 2001
     and  2000  was  $4.9  million  and  $2.7  million,  respectively.


<PAGE>
     An  analysis  of  activity  in  the allowance for loan losses for the three
     months  ended  March  31,  2001  and  2000  is  as  follows (in thousands):



                               Three Months Ended March 31,
                              ----------------------------
                                     2001      2000
                                   --------  --------
     Balance, beginning of period  $14,507   $10,493
     Provision for loan losses. .      900     2,400
     Charge-offs. . . . . . . . .   (1,260)     (283)
     Recoveries . . . . . . . . .       35       284
                                   --------  --------

     Balance, end of period . . .  $14,182   $12,894
                                   ========  ========


     During  the  three  months  ended  March  31, 2001, charge-offs include the
     charge-off  of  an  $821,000  unsecured  commercial overdraft loan that was
     determined  to  be  uncollectible.

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


<PAGE>
(5)  DEPOSITS

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

<TABLE>
<CAPTION>
                                 Stated Rate     March 31, 2001    December 31, 2000
                                --------------  ----------------  -------------------
<S>                             <C>             <C>               <C>
Noninterest-bearing checking .           0.00%  $        85,264   $           80,849
Interest-bearing checking. . .  0.75  -  2.00            66,016               61,046
Savings accounts . . . . . . .  1.49  -  3.00            45,978               43,891
Money market demand accounts .  0.00  -  6.31           370,193              374,210
                                                ----------------  -------------------

                                                        567,451              559,996
                                                ----------------  -------------------

Certificate accounts . . . . .  2.00  -  2.99               216                  111
                                3.00  -  3.99             2,901                  475
                                4.00  -  4.99            99,133               39,930
                                5.00  -  5.99           301,978              261,398
                                6.00  -  6.99           720,113              807,684
                                7.00  -  7.99             5,181                5,166
                                8.00  -  8.99                68                   67
                                9.00  -  9.99                99                   99
                                                ----------------  -------------------
                                                      1,129,689            1,114,930
                                                ----------------  -------------------

Premium on purchased deposits                                22                   55
                                                ----------------  -------------------

                                                $     1,697,162   $        1,674,981
                                                ================  ===================

Weighted average interest rate                             4.77%                4.83%
                                                ================  ===================
</TABLE>

     The  scheduled  maturities of certificate accounts outstanding at March 31,
     2001  were  as  follows  (dollars  in  thousands):


                           March 31, 2001
                           ---------------

   0 through 12 months. .  $     1,054,023
 13 through 24 months . .           52,790
 25 through 36 months . .           13,119
 37 through 48 months . .            5,552
 49 through 60 months . .            3,914
           Over 60 months              291
                           ---------------
                           $     1,129,689
                           ===============


<PAGE>
(6)  ADVANCES FROM THE FHLB

     The  weighted average interest rates on advances from the FHLB at March 31,
     2001  and  December  31,  2000  were  5.21%  and  6.48%,  respectively. The
     scheduled  maturities  and  related  weighted  average  interest  rates  on
     advances from the FHLB at March 31, 2001 are summarized as follows (dollars
     in  thousands):

<TABLE>

<CAPTION>



                          Weighted
Due during the year       Average
ending December 31,    Interest Rate            Amount
-------------------    --------------           ------
<S>                  <C>             <C>
2001. . . . . . . .           5.10%          $  789,416
2002. . . . . . . .           5.32              389,539
2003. . . . . . . .           6.94                5,969
2004. . . . . . . .           5.80                5,409
2005. . . . . . . .           6.20                  464
2006. . . . . . . .           6.81                3,383
2007. . . . . . . .           6.64                1,287
2008. . . . . . . .           5.63                1,953
2009. . . . . . . .           8.04                4,045
2010. . . . . . . .           6.73                  987
2011. . . . . . . .           6.56                1,379
2012. . . . . . . .           5.76                  292
2013. . . . . . . .           5.76                7,737
2014. . . . . . . .           5.44                2,988
2015. . . . . . . .           6.68                1,747
2018. . . . . . . .           5.05                1,550
                     --------------          ----------

                              5.21%          $1,218,145
                     ==============          ==========
</TABLE>

     Advances  from  the  FHLB  are  secured  by certain first-lien mortgage and
     multifamily  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 became redeemable at Coastal's option, in
     whole  or  in  part, on June 30, 2000, at par, plus accrued interest to the
     redemption  date. Interest on the Senior Notes is payable quarterly. During
     1999,  Coastal,  after  receipt  of  unsolicited  offers,  repurchased $3.1
     million  of  the  Senior  Notes  outstanding  at  par.


<PAGE>
(8)  DERIVATIVE INSTRUMENTS

     Coastal  is  a  party  to  derivative  instruments  in the normal course of
     business  to  reduce  its exposure to fluctuations in interest rates. These
     derivative  instruments include interest rate swap agreements where Coastal
     makes  fixed  interest  payments  and receives payments based on a floating
     index  and  interest  rate  cap  agreements,  as  described  below. Coastal
     utilizes  interest rate swap and interest rate cap agreements to reduce its
     exposure  to  floating  interest  rates  by  altering  the  interest  rate
     sensitivity  of  a  portion  of  its  variable-rate  assets and borrowings.
     Effective  January  1,  2001,  Coastal  adopted  Statement  of  Financial
     Accounting  Standards  No.  133, "Accounting for Derivative Instruments and
     for Hedging Activities" ("Statement 133.") Statement 133 requires companies
     to  recognize  all  derivatives  as  either  assets  or  liabilities in the
     statement of financial condition and measure all derivatives at fair value.
     The  interest  rate swap and cap agreements held by Coastal were determined
     to  not  qualify  for  hedge  accounting,  therefore  on  implementation of
     Statement  133,  Coastal  recorded  a transition adjustment to record these
     derivative  instruments at fair value. On January 1, 2001, Coastal recorded
     a  transition  adjustment  loss  of  $160,000,  or  $104,000 net of the tax
     effect, as the cumulative effect of the change in accounting for derivative
     instruments to record the fair value of Coastal's derivative instruments in
     the  consolidated  statements  of  income.  For the quarter ended March 31,
     2001,  Coastal  recorded  an additional fair value loss on these derivative
     instruments  of  $564,000.  The  decrease in the fair value of the interest
     rate  swap  and  cap agreements during the first quarter of 2001 was due to
     the  decrease  in  overall  market  interest  rates  during  the  period.

     At March 31, 2001, Coastal had interest rate swap and cap agreements having
     notional  principal  amounts  totaling  $19.7  million  and $127.6 million,
     respectively. The terms of the interest rate swap agreements outstanding at
     March  31, 2001 and December 31, 2000 are summarized as follows (dollars in
     thousands):
<TABLE>

<CAPTION>



                                                                                Fair Value at
                                                      Floating Rate                End of
                       Notional      LIBOR     Fixed       at                   Period (asset
Maturity                Amount       Index     Rate   End of Period            or (liability))
---------------------  ---------  -----------  -----  -------------  -----------------------------------
<S>                    <C>        <C>          <C>    <C>            <C>
At March 31, 2001:
2003. . . . . . . . .  $   4,890  One-month    5.345          5.218  $                              (38)
2004. . . . . . . . .      3,735  One-month    5.635          5.164                                 (74)
2005. . . . . . . . .     11,095  Three-month  6.500          5.104                                (587)
                       ---------                                     -----------------------------------
                       $  19,720                                     $                             (699)
                       =========                                     ===================================

                                                                       Fair Value at End of Period (gain
                                                                                 or (loss))
                                                                     -----------------------------------
At December 31, 2000:
2003. . . . . . . . .  $   5,523  One-month    5.345          6.821  $                               32
2004. . . . . . . . .      3,758  One-month    5.635          6.710                                  11
2005. . . . . . . . .     11,095  Three-month  6.500          6.736                                (176)
                       ---------                                     -----------------------------------
                       $  20,376                                     $                             (133)
                       =========                                     ===================================
</TABLE>


     The  interest  rate  swap  agreements  provide  for  Coastal  to make 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
     6.10% and the weighted average interest payment rate on all of the interest
     rate  swap  agreements  was  approximately 6.13% for the three months ended
     March  31, 2001. 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  in the
     accompanying  consolidated  statements  of income. The net interest expense
     related to these agreements was $1,000 for the three months ended March 31,
     2001  and  the  net reduction in interest expense was $19,000 for the three
     months  ended March 31, 2000. Coastal had pledged approximately $802,000 of
     mortgage-backed securities to secure interest rate swap agreements at March
     31,  2001.


     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 7.5% to 9.0%, depending on
     the  agreement.  Payments  on the interest rate cap agreements are based on
     the  notional  principal  amount  of the agreements; no funds were actually
     borrowed  or  are  to  be  repaid.  The fair value of the interest rate cap
     agreements  was $34,000 at March 31, 2001, which is the recorded book value
     of such agreements due to the implementation of Statement 133. The interest
     rate  cap  agreements  are used to alter the interest rate sensitivity of a
     portion  of  Coastal's  mortgage-backed securities and loans receivable. As
     such,  the  amortization of any purchase price and interest income from the
     interest  rate  cap  agreements  is  recorded  in  interest  income  in the
     accompanying  consolidated  statements  of  income,  as applicable. The net
     decrease in interest income related to the interest rate cap agreements was
     approximately  $6,000  for  the three months ended March 31, 2001 and 2000,
     respectively.  No payments were made to Coastal under the interest rate cap
     agreements  during  the  three  months  ended  March  31,  2001  or  2000.



          Interest  rate  cap agreements outstanding at March 31, 2001 expire as
          follows  (dollars  in  thousands):
<TABLE>

<CAPTION>



Year of       Strike Rate    Notional
Expiration       Range        Amount
-----------  --------------  ---------
<S>          <C>             <C>
2001. . . .           7.50%  $   3,265
2002. . . .  8.75  -  9.00      16,600
2003. . . .  8.00  -  9.00     107,687
                            ----------
                               127,552
                            ===========
</TABLE>



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

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

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

<PAGE>
(9)  EARNINGS PER SHARE

     The  following  summarizes  information related to the computation of basic
     and  diluted  earnings  per share ("EPS") for the three-month periods ended
     March  31,  2001  and  2000  (dollars in thousands, except per share data):
<TABLE>
<CAPTION>
                                                                   Three Months Ended
                                                                        March 31,
                                                                     ------------------
<S>                                           <C>                 <C>         <C>
                                                                        2001        2000
                                                                  ----------  ----------

Net income                                                        $    5,180  $    4,488
Preferred stock dividends                                                627         627
                                                                  ----------  ----------
Net income available to common stockholders                       $    4,553  $    3,861
                                                                  ==========  ==========
Weighted average number of common shares
 outstanding used in basic EPS calculation                         5,717,043   6,345,075
Add assumed exercise of outstanding stock
 options as adjusted for dilutive securities                         284,778     130,726
                                                                  ----------  ----------
Weighted average number of common shares
 outstanding used in diluted EPS calculation                       6,001,821   6,475,801
                                                                  ==========  ==========
Basic EPS                                                         $     0.80  $     0.61
                                                                  ==========  ==========
Diluted EPS                                                       $     0.76  $     0.60
                                                                  ==========  ==========
</TABLE>


     The  weighted  average number of common shares outstanding has been reduced
     by  the  treasury  stock  held  by  Coastal. As of March 31, 2001 and 2000,
     Coastal  had  2,000,000  and  1,283,679  common  shares  in  treasury,
     respectively.

(10) COASTAL BANC SSB PREFERRED STOCK

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


<PAGE>
(11) STATUTORY CAPITAL REQUIREMENTS

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

     At  March  31,  2001,  the  Bank's  regulatory  capital  in relation to its
     existing  regulatory capital requirements for capital adequacy purposes was
     as  follows  (dollars  in  thousands):
<TABLE>
<CAPTION>
                                                                           Minimum For Capital   Well-Capitalized
                                                           Actual           Adequacy Purposes      Requirements
                                                     -------------------  ------------------      -------------
<S>                   <C>                  <C>                 <C>            <C>       <C>     <C>       <C>
Capital Requirement                                  Amount          Ratio    Amount    Ratio    Amount    Ratio
--------------------                       ------------------  -------------  --------  ------  --------  ------

 Tier 1 (core)                             $          191,005          6.22%  $122,762   4.00%  $153,453   5.00%
 Tier 1 risk-based                                    191,005          9.86     77,486   4.00    116,229   6.00
 Total risk-based                                     205,187         10.59    154,972   8.00    193,715  10.00
</TABLE>

     As of March 31, 2001, the most recent notification from the Federal Deposit
     Insurance  Corporation  ("FDIC")  categorized  the Bank as well capitalized
     under  the  regulatory  framework  for  prompt  corrective  action.  To  be
     categorized  as  well  capitalized,  the  Bank must maintain minimum Tier 1
     (core),  Tier  1 risk-based and total risk-based ratios as set forth in the
     table above. There are no conditions or events since that notification that
     management  believes  have  changed  the  institution's  category.

(12) COASTAL BANCORP, INC. PREFERRED STOCK

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



<PAGE>



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

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

     Total  assets  increased  2.3%  or  $70.5 million from December 31, 2000 to
     March  31,  2001.  The  net increase resulted primarily from an increase of
     $101.1  million  in  loans  receivable,  in  addition  to increases of $7.3
     million  and  $3.7  million  in  federal  funds sold and stock in the FHLB,
     respectively.  These  increases  were  only slightly offset by decreases of
     $28.9  million, $7.5 million and $1.4 million in cash and cash equivalents,
     mortgage-backed  securities held-to-maturity and mortgage-backed securities
     available-for-sale,  respectively,  and  other  small  changes  in  other
     categories.  The  increase  in  loans  receivable was primarily due to bulk
     residential  mortgage  loan  purchases  of  $93.4  million  and  new  loan
     originations,  offset  by  principal  payments  received.  The  decrease in
     mortgaged-backed  securities  was  due  to  principal  payments  received.

     Deposits  increased  $22.2  million or 1.3% from December 31, 2000 to March
     31,  2001  and  advances  from  the  FHLB  increased 5.9% or $67.8 million.
     Stockholders'  equity increased 3.9% or $5.3 million from December 31, 2000
     to  March  31,  2001  as  a result of net income and a $607,000 decrease in
     accumulated  other  comprehensive  loss,  offset  by  dividends  declared.


Results of Operations for the Three Months Ended March 31, 2001 and 2000
------------------------------------------------------------------------

General
-------

     For  the  three  months  ended  March 31, 2001, net income was $5.2 million
     compared  to  $4.5  million  for the three months ended March 31, 2000. The
     increase  was  primarily  due  to  a  $2.2 million increase in net interest
     income,  a  $1.5  million  decrease  in the provision for loan losses and a
     $212,000  decrease  in  noninterest  expense.  These  changes were somewhat
     offset  by  a $2.7 million decrease in noninterest income (which includes a
     $564,000  fair  value loss on derivative instruments due to the adoption of
     Statement 133), a $405,000 increase in the provision for income taxes and a
     $104,000 (net of tax) cumulative transition adjustment loss also due to the
     adoption of Statement 133. The decrease in noninterest income was primarily
     due  to  a $2.2 million nonrecurring gain recorded on the sale of Coastal's
     mortgage  servicing  rights  in  2000 and the Statement 133 effect as noted
     above.


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

     Interest  income  for  the three months ended March 31, 2001 increased $5.3
     million  or  9.6%  from the three months ended March 31, 2000. The increase
     was  due to an increase in average interest-earning assets of $94.3 million
     and an increase in the average yield of 0.46% to 8.04% for the three months
     ended  March  31,  2001. Interest income on loans receivable increased $4.5
     million  due  to  a  $129.3  million increase in the average balance and an
     increase in the average yield to 8.83% for the three months ended March 31,
     2001  from  8.47%  for  the  same  period  in  2000.  Interest  income  on
     mortgage-backed  securities  increased  $825,000  due to an increase in the
     average yield to 6.64% for the three months ended March 31, 2001 from 6.08%
     for the same period in 2000, offset by a decrease in the average balance of
     $36.6  million.


     In  addition,  interest  income on FHLB stock, federal funds sold and other
     interest-earning  assets  decreased  $69,000. Total interest-earning assets
     for the three months ended March 31, 2001 averaged $3.0 billion as compared
     to  $2.9  billion  for  the  three  months  ended  March  31,  2000.


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

     Interest  expense on interest-bearing liabilities was $37.9 million for the
     three  months  ended  March  31, 2001, as compared to $34.8 million for the
     same  period  in  2000.  The  increase  in  interest  expense was due to an
     increase  in the average rate paid on interest-bearing liabilities to 5.54%
     for  the  three months ended March 31, 2001 from 5.18% for the three months
     ended March 31, 2000 and a $76.6 million increase in the average balance of
     interest-bearing  liabilities.  The 0.36% increase in the average rate paid
     on  interest-bearing  liabilities  was  due primarily to the increased rate
     paid  on  interest-bearing  deposits  of  0.79%, somewhat offset by a 0.15%
     decrease in the rates paid on advances from the FHLB due to the decrease in
     overall  wholesale  funding  costs  in  2001.  The  increase  in  average
     interest-bearing  liabilities  consisted  primarily  of  a  $55.5  million
     increase  in average interest-bearing deposits and a $21.2 million increase
     in  average  advances  from  the  FHLB.


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

     Net  interest income was $22.3 million for the three months ended March 31,
     2001  and  $20.1  million  for  the  same period in 2000. This increase was
     primarily  due  to the increase in net interest margin. Net interest margin
     ("Margin")  was 2.98% for the three months ended March 31, 2001 compared to
     2.78%  for  the  three  months  ended March 31, 2000. Margin represents net
     interest  income  as  a  percentage of average interest-earning assets. Net
     interest  spread  ("Spread"),  defined  to  exclude  noninterest-bearing
     deposits, increased to 2.50% for the three months ended March 31, 2001 from
     2.40% for the three months ended March 31, 2000. Management also calculates
     an  alternative  Spread  which includes noninterest-bearing deposits. Under
     this  calculation, the alternative Spreads for the three months ended March
     31, 2001 and 2000 were 2.77% and 2.68%, respectively. Margin and Spread are
     affected  by  the changes in the amount and composition of interest-earning
     assets and interest-bearing liabilities. The overall increase in Margin and
     Spread  was  primarily  due  to  the 0.46% increase in the average yield on
     interest-earning  assets,  primarily on loans receivable, offset by a 0.36%
     increase  in the average rate paid on interest-bearing liabilities. Average
     net  interest-earning  assets increased $17.7 million from the three months
     ended  March  31,  2000  to  the  three  months  ended  March  31,  2001.


     During the three months ended March 31, 2001, Coastal's net interest income
     has  benefited  from  the  reduction in overall market interest rates. This
     benefit  has  been  due  to  the  timing  difference experienced by Coastal
     because  of the fact that a large portion of Coastal's borrowings are short
     term  in  nature  and reprice more rapidly than the assets held by Coastal.






     Management's  overall  goal  is  to continue to improve the asset/liability
     composition  to  be  less  vulnerable to market interest rate fluctuations,
     primarily  through  the  addition  of  loans tied to variable rates such as
     LIBOR and local and regional prime rates and through the efforts to replace
     LIBOR  based  borrowings  with  lower  cost  retail  deposits.


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

     The provision for loan losses was $900,000 for the three months ended March
     31,  2001  compared  to  $2.4  million for the three months ended March 31,
     2000. During 2000 and into 2001, Coastal is focusing on increasing the size
     of  Coastal's  commercial  loan  portfolio.  As  such, Coastal continues to
     execute  on its plan to eventually build the allowance for loan losses to a
     benchmark of approximately 100% of nonperforming loans. Nonperforming loans
     are  those  loans  on nonaccrual status as well as those loans greater than
     ninety (90) days delinquent and still accruing interest. At March 31, 2001,
     Coastal  had  nonperforming  loans  totaling  $22.0  million.  Of  these
     nonperforming  loans,  $17.1  million,  or 78%, were first lien residential
     (single  family)  mortgage  loans, $2.7 million were commercial real estate
     loans,  $1.3  million  were commercial, financial and industrial loans with
     the  balance  in  the  residential  construction  and  consumer  and  other
     categories.  At  March  31,  2001,  the  allowance  for  loan  losses  as a
     percentage  of  nonperforming loans was 64.4% compared to 68.3% at December
     31,  2000.


     Although  no assurance can be given, management believes that the allowance
     for  loan  losses  at  March  31, 2001 is adequate considering the changing
     composition  of the loans receivable portfolio, historical loss experience,
     delinquency  trends  and  current  economic  conditions.  Management  will
     continue  to  review  its  loan  loss  allowance  policy  as Coastal's loan
     portfolio  diversifies  to  determine  if  changes  to  the  policy and the
     resulting  allowance  for  loan  losses  are  necessary.


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

     For  the  three  months  ended March 31, 2001, noninterest income decreased
     $2.7 million to $1.8 million, compared to $4.5 million for the three months
     ended  March 31, 2000. The decrease in noninterest income was primarily due
     to  the  $2.2  million non-recurring gain recorded on the sale of Coastal's
     mortgage  servicing rights during the three months ended March 31, 2000 and
     the  related  loss of the servicing income and loan fees during the periods
     subsequent  to  the  sale. In addition to the servicing sale, the effect of
     the  fair  value loss on derivative instruments of $564,000 recorded during
     the  three  months  ended  March  31,  2001 pursuant to Statement 133 was a
     factor  in  the  decrease in total noninterest income. In addition to these
     items,  comparing  the  first quarter in 2001 to the first quarter in 2000,
     service charges on deposit accounts increased $52,000 and other noninterest
     income  increased  $289,000.


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

     For  the  three  months ended March 31, 2001, noninterest expense decreased
     $212,000  from  the  three  months  ended  March  31, 2000. The decrease in
     noninterest expense was primarily due to decreases of $160,000 and $130,000
     in  other noninterest expense and office occupancy, respectively, partially
     offset  by  a  $129,000  increase  in compensation, payroll taxes and other
     benefits,  in  addition  to  small  changes  in  other  categories.


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

     The provision for Federal income taxes for the three months ended March 31,
     2001  was  $2.6 million compared to $2.2 million for the three months ended
     March  31,  2000.  The  increase  was  due  to  the increased income before
     provision for federal income taxes, minority interest and cumulative effect
     of  accounting change in 2001, with the effective tax rate for both periods
     being  approximately  30%.


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

     Coastal's primary sources of funds consist of deposits bearing market rates
     of  interest,  advances  from the FHLB, securities sold under agreements to
     repurchase,  federal  funds  purchased  and  principal  payments  on  loans
     receivable  and  mortgage-backed  securities.  Coastal  uses  its  funding
     resources  principally  to  meet  its  ongoing commitments to fund maturing
     deposits  and  deposit  withdrawals,  repay  borrowings,  purchase  loans
     receivable  and  mortgage-backed  securities,  fund existing and continuing
     loan  commitments, maintain its liquidity, meet operating expenses and fund
     acquisitions of other banks and thrifts, either on a branch office or whole
     bank  acquisition basis, in addition to purchasing treasury stock. At March
     31,  2001,  Coastal  had binding commitments to originate or purchase loans
     totaling approximately $132.6 million and had $146.4 million of undisbursed
     loans  in  process.  Scheduled maturities of certificates of deposit during
     the  12  months  following  March 31, 2001 totaled $1.1 billion. Management
     believes  that  Coastal  has  adequate  resources  to  fund  all  of  its
     commitments.


     As  of  March 31, 2001, Coastal operated 50 retail banking offices in Texas
     cities,  including  Houston,  Austin, Corpus Christi, the Rio Grande Valley
     and small cities in the southeast quadrant of Texas. Management's five year
     goal  is  to  have  over $5 billion in assets, over $3 billion in deposits,
     $2.5  billion  in  loans  and  80 branches in cities throughout central and
     south  Texas,  although  there  can  be  no assurance that this goal can be
     accomplished  through  growth  or  acquisitions.


<PAGE>
Forward-Looking  Information
----------------------------

     The Management's Discussion and Analysis of Financial Condition and Results
     of Operations set forth in the Form 10-Q should be read in conjunction with
     the  information contained in the Consolidated Financial Statements and the
     Notes  thereto.


     The  statements  contained  in this Quarterly Report on Form 10-Q which are
     not  historical  facts  contain forward looking information with respect to
     plans,  projections  or  future  performance  of Coastal, the occurrence of
     which involve certain risks and uncertainties detailed in Coastal's filings
     with  the  Securities  and  Exchange  Commission  ("SEC").  Such discussion
     contains  "forward-looking  statements"  within  the meaning of the Private
     Securities Litigation Reform Act of 1995 (the "Reform Act"), and is subject
     to  the  safe  harbor  created  by  that  Reform Act. The words "estimate,"
     "project,"  "anticipate,"  "expect,"  "intend,"  "believe,"  "plans,"  and
     similar  expressions  are  intended to identify forward-looking statements.
     Because  such  forward-looking  statements involve risks and uncertainties,
     there  are  important  factors  that  could  cause actual results to differ
     materially  from  those  expressed  or  implied  by  such  forward-looking
     statements.  Factors,  all  of  which  are difficult to predict and many of
     which are beyond the control of Coastal, that could cause actual results to
     differ  materially  include,  but  are  not  limited  to:  risks related to
     Coastal's  acquisition  strategy,  including  risks  of  adversely changing
     results of operations and factors affecting Coastal's ability to consummate
     further  acquisitions;  risks  involved in Coastal's ability to quickly and
     efficiently  integrate  the  operations  of acquired entities with those of
     Coastal;  changes  in  general economic and business conditions; changes in
     market rates of interest; changes in the laws and regulations applicable to
     Coastal;  the  risks  associated  with  the  Bank's non-traditional lending
     (loans  other  than  single-family  residential  mortgage  loans  such  as
     multifamily,  real  estate  acquisition  and  development,  commercial real
     estate,  commercial  business  and  warehouse  and  loans);  and changes in
     business  strategies  and  other  factors  as discussed in Coastal's Annual
     Report on Form 10-K for the year ended December 31, 2000, as filed with the
     SEC  on  March  27,  2001.


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

There  have  been  no  material changes in Coastal's interest rate risk position
since December 31, 2000. Coastal's principal market risk exposure is to interest
rates.  See  note  8  of  the  Notes  to  Consolidated  Financial  Statements.



<PAGE>
PART  II  -  OTHER  INFORMATION

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


In  January  2000,  Coastal,  through  its subsidiary, the Bank, filed a lawsuit
against  the  lead  lender on a $25.0 million loan in which the Bank purchased a
40%  participation  interest.  Such lawsuit is described more fully in Coastal's
Current  Report  on Form 8-K filed on January 12, 2000. The lawsuit is currently
scheduled  for  trial  in the fall of 2001, or as soon thereafter as the court's
docket  will  permit.

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


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

     Not  applicable.

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

     Not  applicable.

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

     Not  applicable.

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

     Not  applicable.

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

     Not  applicable.



<PAGE>


                                   SIGNATURES


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





Dated:     5/15/01                                   By     /s/  Manuel J. Mehos
           -------                                          --------------------
                                                               Manuel  J.  Mehos
                                                        Chairman  of  the  Board
                                                       Chief  Executive  Officer









Dated:     5/15/01                           By     /s/  Catherine  N.Wylie
           -------                                       ------------------
                                                       Catherine  N.  Wylie
                                                  Chief  Financial  Officer