Coastal Bancorp, Inc. Sells Mortgage-Backed Securities to Restructure Balance Sheet

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Coastal Bancorp, Inc. Sells Mortgage-Backed Securities to Restructure Balance Sheet

		COASTAL BANCORP LOGO Coastal Bancorp. logo. (PRNewsFoto)[DM] HOUSTON, TX USA

    HOUSTON, Nov. 14 /PRNewswire/ -- Coastal Bancorp, Inc. (Nasdaq: CBSA)
today reported that it has entered into an agreement to sell approximately
$850 million of its mortgage-backed securities to a New York Stock Exchange-
traded company.  As a result, Coastal expects to recognize a gain of
approximately $175,000.  "This transaction was undertaken to strategically
restructure a portion of Coastal's balance sheet to make the Company less
vulnerable to market interest rate fluctuations," said Manuel J. Mehos,
Chairman and Chief Executive Officer.  "This current low interest rate
environment has provided Coastal with a rare window of opportunity to engage
in this major transaction without incurring a charge to earnings."
    Management will use a portion of the proceeds of this sale to immediately
purchase approximately $280 million of pass-through mortgage-backed
securities.  Coastal intends to purchase up to an additional $220 million in
other mortgage-backed securities which, together with those concurrently
purchased with the sale, are expected to be less volatile in times of interest
rate fluctuations and should lessen the extension risk that was presented by
the securities sold, which were predominately securities tied to the 11th
District Cost of Funds Index.  Coastal will place any purchased mortgage-
backed securities in the available-for-sale category on its balance sheet.
The Company further intends to use the remainder of the proceeds to acquire
approximately $350 million of single-family mortgage loans through bulk loan
purchases.  It is anticipated that the sales proceeds will be fully reinvested
by the end of the first quarter of 2002.
    "Coastal's restructuring actions are intended to improve the stability and
quality of future earnings, although, in the short-term, earnings could be
negatively impacted depending on the Company's ability to replace the assets
sold in a timely manner," said Mehos.  The sales agreement, along with the
purchase of the $280 million in pass-through securities, is scheduled to close
on November 26, 2001.  Coastal's ability to complete the intended purchases of
the securities or loans is not certain and cannot be guaranteed.  Coastal
intends to report the transaction on a Form 8-K as required by the Securities
Exchange Act of 1934, as amended, and the rules of the SEC, and will provide
further information relating to the effect of the transactions on its balance
sheet and future earnings at that time.
    Management of Coastal will host a conference call to discuss this press
release on Thursday, November 15, 2001 at 10:00 am (CST).  In addition, a
further conference call will be held on November 28, 2001 at 2:00 pm (CST) to
discuss the impact of the completed transactions to date on the Company's
future financial statements.  To participate in the conference call, phone
1-800-937-1654 and select access code # 4355312.

    The Company
    At September 30, 2001, Coastal had total assets of approximately
$3.0 billion, deposits of approximately $1.7 billion, preferred stock
(Series A) of Coastal Banc ssb of approximately $28.8 million, Series A
Cumulative Preferred Stock of $27.5 million and common stockholders' equity of
approximately $127.5 million.
    Coastal Bancorp, Inc. owns, through its wholly-owned subsidiary, Coastal
Banc Holding Company, Inc., 100 percent of the voting stock of Coastal Banc
ssb, a Texas-chartered FDIC insured, state savings bank headquartered in
Houston.  Coastal Banc ssb operates 50 branch offices in metropolitan Houston,
Austin, Corpus Christi, the Rio Grande Valley and small cities in the
southeast quadrant of Texas.  You can visit the Company's website at
http://www.coastalbanc.com (which is not part of this release).
    "Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995:  The statements contained in this release which are not historical
facts contain forward looking statements with respect to plans, projections or
future performance of the Company, the occurrence of which involve certain
risks and uncertainties.  Additional information concerning factors that could
cause actual results to materially differ from those in the forward looking
statements is contained in Coastal Bancorp Inc.'s Securities and Exchange
Commission filings.  Investors are cautioned that any such forward looking
statements are not guarantees of future performance and that actual results or
developments may differ materially from those projected in the forward looking
statements.  Furthermore, Coastal does not intend (and is not obligated) to
update publicly any forward looking statement.

SOURCE Coastal Bancorp, Inc.

http://www.coastalbanc.com
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CONTACT:
Manuel J. Mehos, CEO, or Catherine N. Wylie,
CFO, both of Coastal Bancorp, Inc., +1-713-435-5327, or fax,
+1-713-435-5106