EXHIBIT 13


<PAGE>
                                  1996

                                 ANNUAL 

                                 REPORT



                                              TECHE HOLDING COMPANY
                                              FRANKLIN, LOUISIANA
<PAGE>
Teche Holding Company
211 Willow Street
Franklin, LA 70538

Teche Federal Savings Bank
211 Willow Street
Franklin, LA 70538
Telephone: (318) 828-3212
LA WATS (800) 256-1500
FAX (318) 828-0110

Morgan City
1001 7th St.
Morgan City, LA 70380      Table of Contents       
(504) 384-0653                                                             Page

Bayou Vista                President's Message............................     1
1003 Southeast Boulevard   
Bayou Vista, LA 70380      Selected Financial Information.................     2
(504) 395-5244
                           Business of The Company & Business of the Bank.     3
New Iberia
529 N. Lewis               Market and Dividend Information................     3
New Iberia, LA 70560
(318) 367-2516             Management's Discussion and Analysis of Financial
                           Condition and Results of Operations............     4
New Iberia
142 W. St. Peter St.       Independent Auditor's Report...................    11
New Iberia, LA 70560
(318) 364-5145             Consolidated Balance Sheets....................    12

Layayette                  Consolidated Statements of Income..............    13
1001 Johnston
Lafayette, LA 70501        Consolidated Statements of Stockholders' Equity    14
(318) 232-6463
                           Consolidated Statements of Cash Flows..........    15
Lafayette
2306 W. Pinhook            Notes to Consolidated Financial Statements.....    17
Lafayette, LA 70508
(318) 232-3419             Directors and Officers.........................    32

Breaux Bridge              General Information............................    32
601 E. Bridge St.
Breaux Bridge, LA  70517
(318) 332-2149

Houma
706 Barrow
Houma, LA 70360
(504) 868-8766

<PAGE>


                                     [LOGO]

President's Message
--------------------------------------------------------------------------------

     On behalf of our dedicated and hardworking staff, we are pleased to present
our second annual report to our shareholders.

     This report covers the first full year of operations  since the  successful
completion  of the  conversion  of Teche  Federal  Savings Bank from a federally
chartered mutual savings association to a federally chartered stock savings bank
on April 17,  1995 and the  acquisition  of all of the  issued  and  outstanding
capital stock of the Bank by Teche Holding Company.

     On September 30, 1996,  legislation was enacted to recapitalize the Savings
Association  Insurance  Fund which  requires  The Bank to pay a one time special
assessment  of $1,824,000  ($1.2  million net of income  taxes.) Due to the SAIF
special assessment the Company reported diminished earnings for fiscal 1996. Net
income for the year end would have been  $3,725,000  had the special  assessment
not  occurred.  In spite of the  short  term  effect on  earnings,  the one time
special  assessment  should  ultimately be beneficial to Teche Holding Company's
stockholders  and  depositors.  Beginning  January  1, 1997,  the Bank's  annual
deposit  insurance  costs should be  significantly  reduced,  and the  financial
integrity of the federal deposit insurance fund should be maintained.

     The year proved to be a bittersweet  one for Teche Holding  Company.  While
the  Company  made a record $97  million in loans,  we lost our friend and Board
member,  Dr. Lee J. Sonnier,  who died suddenly on October 10, 1996. We will all
greatly miss his valuable insights and his charming personality.

     Your Board of Directors  recognizes the challenge of  effectively  managing
capital  in a manner  designed  to both  maximize  value and  provide an optimal
return to the shareholders.  This year we completed stock repurchases of 691,000
shares of the Company's  common stock and we instituted a dividend  reinvestment
plan. In each of these  programs,  we purchased  shares of the Company's  common
stock in open market transactions.  This, combined with earnings, resulted in an
increase  in book value per common  share to $14.76 at fiscal  year end, up from
$14.63 a year ago. The $.50 dividend to  shareholders  offered a consistent cash
return for investors.

     As part of our  continuing  effort to  increase  customer  convenience,  in
October 1995 we opened our second New Iberia full service office at 142 West St.
Peter. We now have nine full service  locations  serving five parishes.  We will
continue to explore other areas for expansion. In August 1996 we offered 24 hour
telephone  banking  and in  November  1996 we offered the ATM Check Card and the
response has been overwhelming.  Furthermore, Teche Federal now has 17 Automated
Teller  Machines  and is on line with  Cirrus,  Pulse,  and  other  co-operating
networks,  allowing our  customers  to receive  cash from over 11,000  locations
world-wide.

     In 1996, we were again honored to receive the  prestigious  Five Star Bauer
rating, which has been awarded to the Bank for 14 consecutive quarters.

     Our goals for the coming year will focus on increased lending, particularly
in the  residential  mortgage  and  consumer  loan area,  increased  savings and
improved efficiency of operations.

     As we move further into the 1990's,  we remain  focused on  satisfying  the
financial needs of our customers and  communities,  plus growing the earnings of
the Company. To accomplish this we will employ the following strategies:

     o Continue our tradition as a leader in financing the home lending needs of
our communities

     o Help local  families  prepare  for the future by offering  and  exploring
competitive products and services

     On behalf of the Board of  Directors,  Officers and Staff of Teche  Holding
Company and Teche  Federal  Savings  Bank,  please  allow me to wish you a happy
holiday season and a prosperous and fulfilling New Year.

                                                Sincerely,



                                                /s/Patrick Little
                                                Patrick Little
                                       1
<PAGE>


SELECTED FINANCIAL AND OTHER DATA (dollars in thousands)
<TABLE>
<CAPTION>

                                        At or for the Year Ended September 30,
------------------------------------------------------------------------------------
                                     1996       1995      1994       1993      1992
<S>                               <C>        <C>       <C>        <C>       <C>     
Assets                            $379,590   $323,852  $284,570   $245,737  $226,893
Loans Receivable, Net              316,216    257,869   233,554    207,384   189,876
Securities-Available for Sale       44,496      5,413    19,866         --        --
Securities-Held to Maturity             --     44,209    16,210     25,942    20,921
Cash and cash equivalents            7,072      6,400     6,604      5,337     7,780
Savings Deposits                   254,723    233,805   236,736    212,996   211,407
FHLB Advances                       66,900     24,200    23,800     12,200        --
Shareholders' Equity                52,282     61,908    20,963     17,448    12,827

Number of:
Real Estate Loans Outstanding        6,355      5,762     5,530      5,190     4,927
Deposit Accounts                    30,440     25,466    20,435     17,928    17,987
Full Service Offices                     9          8         8          7         7

SUMMARY OF OPERATIONS
Interest Income                    $26,591   $ 23,380   $20,770    $19,985   $20,540
                                   -------   --------   -------    -------   -------
Interest Expense                    14,003     12,053     9,708      9,171    11,336
                                   -------   --------   -------    -------   -------
Net Interest Income                 12,588     11,327    11,062     10,814     9,204
Provision for Loan Losses              300        360       577        183       521
                                   -------   --------   -------    -------   -------
  Net Interest Income after
  provision for Loan Losses         12,288     10,967    10,485      10,63    18,683
Non-Interest Income                  1,852      1,029       844        992       830
SAIF Special Assessment              1,824
Other Non-Interest Expenses          8,616      6,405     5,414      4,812     4,583
                                   -------   --------   -------    -------   -------
  Income Before Losses on Sales of
  Securities and Income Taxes        3,700      5,591     5,915      6,811     4,930
Gain (Loss)on Sale of Securities        91       (819)       --         --        --
Income Tax Expense                   1,270      1,635     1,970      2,190     1,600
                                   -------   --------   -------    -------   -------
Net Income
  Actual                           $ 2,521    $ 3,137   $ 3,945    $ 4,621   $ 3,330
                                   =======   
  Before Special Assessment        $ 3,725
                                   =======
</TABLE>
<TABLE>
<CAPTION>

SELECTED FINANCIAL RATIOS
<S>                                 <C>        <C>        <C>        <C>       <C> 
Ratio of Equity to Assets              13.8%      19.1%      7.4%       7.1%      5.7%
Book Value/Common Share             $ 14.76    $ 14.63      N/A(1)    N/A(1)     N/A(1)
Dividends declared per Share        $   .50    $  0.25      N/A(1)    N/A(1)     N/A(1)
Earnings per Common Share
  Actual                            $  0.68    $  0.46      N/A(1)    N/A(1)     N/A(1)
  Before SAIF Special Assessment    $  1.00
Annualized Return on Average Assets
  Actual                               0.72%      1.04%     1.51%      1.96%     1.49%
  Before SAIF Special Assessment       1.07%
Annualized Return on Average Equity
  Actual                               4.29%      7.87%    20.19%     31.13%    30.02%
  Before SAIF Special Assessment       6.33%
Net Interest Margin                    3.68%      3.84%     4.35%      4.76%     4.28%
Other Non-Interest Expenses/Avg Assets
Actual                                 3.00%      2.12%     2.07%      2.04%     2.05%
Before SAIF Special Assessment         2.48%
Other Non-Interest Income/Avg Assets   0.53%      0.34%     0.32%      0.42%     0.87%
Non-Performing loans/Loans (2)         0.17%      0.26%      .35%       .16%      .50%
Allowance for Loan Losses/Loans (2)    1.00%      1.14%     1.18%      1.05%     1.09%
Dividend Payout Ratio
  Actual                              73.52%     54.35%
  Before SAIF Special Assessment      50.00%
</TABLE>

(1) There were no shares outstanding prior to April 17, 1995
(2) Total loans before allowance for loan losses

                                       2
<PAGE>
Business of the Bank

Teche  Federal  Savings Bank (the "Bank")  attracts  savings  deposits  from the
general  public and uses such deposits  primarily to originate  loans secured by
first mortgages on owner-occupied, one- to four-family residences in its primary
market  area.  To a lesser  extent,  the Bank  purchases  loans  and  originates
residential  construction,  multi-family  and  commercial  real estate loans and
consumer loans, and invests in mortgage-backed and investment securities.

It is the Bank's intention, subject to the Board of Directors' fiduciary duties,
to remain an independent  community savings bank serving the local banking needs
of its primary market area,  which presently  includes nine full service offices
in the  Louisiana  Parishes  of St.  Mary,  Iberia,  Lafayette,  St.  Martin and
Terrebonne. Deposits at Teche Federal are insured up to the maximum legal amount
by the FDIC.

Business of the Company

Teche Holding  Company (the "Company") is a Louisiana  corporation  organized in
December  1994 at the direction of the Board of Directors of the Bank to acquire
all of the  capital  stock that the Bank  issued  upon its  conversion  from the
mutual to stock form of organization (the "Conversion").  On April 17, 1995, the
Company  completed the sale of 4,232,000 shares of common stock,  $.10 par value
at  $10.00  per  share.  Net  proceeds  of  the  Conversion,  after  recognizing
Conversion  expenses and underwriting  costs of $1.0 million were $38.0 million.
The  Company  used $20.6  million to purchase  all of the  capital  stock of the
savings bank and $3.3 million to fund a loan for the purchase of 332,337  shares
of the Company's stock by the Employees Stock Ownership Plan.

 During fiscal 1996 the Company  completed two stock purchase  programs in which
the company purchased 413,000 shares at an average price per share of $13.38 per
share.  On August 7, 1996,  the Company  received  the  necessary  approvals  to
repurchase  382,000  shares,  or 10% of the  Company's  Common  Stock,  of which
278,000 were  purchased by September  30, 1996 at an average price of $13.00 per
share.

Summary of Quarterly Operating Results
<TABLE>
<CAPTION>

                                                    1996                           1995
                                       ------------------------------  -----------------------------
                                       First   Second   Third  Fourth   First Second  Third   Fourth
                                             (Amounts in thousands, except for per share data)

<S>                                    <C>     <C>     <C>     <C>     <C>    <C>     <C>     <C>   
Net interest Income                    2,975   $3,192  $3,198  $3,223  $2,630 $2,582  $3,052  $3,063
Provision for Loan Losses                 75       75      75      75      90     90      90      90
Earnings(loss) before Income Taxes     1,388    1,332   1,515    (444)    490  1,253   1,643   1,386
Net Earnings(loss)                       910      879     990    (258)    343    827   1,066     901
Net earnings(loss) per share

Actual                                  0.23     0.23    0.27   (0.08)    N/A    N/A     .23     .23

Before Special Assessment                                        0.28

</TABLE>

Market and Dividend Information

Teche Holding Company's common stock trades on the American Stock Exchange under
the symbol "TSH". The following sets forth the high and low sale prices based on
reports from the American  Stock  Exchange,  for the common stock from April 19,
1995 (the date the common stock began trading) through September 30, 1996:
<TABLE>
<CAPTION>

Quarter ended           Sales Price     Period End Close  Date Declared      Cash Dividend Declared
                       High       Low
<S>                  <C>       <C>           <C>          <C>                         <C>        
June 30, 1995        $12.250   $11.375       $12.125      June 21, 1995               $0.125     
September 30, 1995   $14.000   $11.750       $13.875      September 21, 1995          $0.125
December 31, 1995    $14.625   $13.250       $13.500      December 20, 1995           $0.125
March 31, 1996       $14.250   $13.000       $13.625      February 22, 1996           $0.125
June 30, 1996        $13.625   $12.625       $13.125      May 15, 1996                $0.125
September 30, 1996   $13.625   $12.000       $13.500      August 28, 1996             $0.125
</TABLE>
                                                                          
According  to the  records  of the  Company's  transfer  agent,  there  were 731
registered  stockholders  of record at November 25,  1996.  This number does not
include any persons or entities who hold their stock in nominee or "street" name
through various brokerage firms.

                                       3
<PAGE>

The  Company's  ability to pay  dividends is  substantially  dependent  upon the
dividends it receives from the Bank. Under current regulations,  the Bank is not
permitted to pay  dividends if its  regulatory  capital would thereby be reduced
below (1) the amount then required for the  liquidation  account  established in
connection  with the Bank's  conversion  from mutual to stock  form,  or (2) the
regulatory  capital  requirements  imposed by the  Office of Thrift  Supervision
("OTS").  Capital distributions are also subject to certain limitations based on
the Bank's net  income.  See Notes 2 and 17 of notes to  consolidated  financial
statements. The Bank's total capital at September 30, 1996, exceeded the amounts
of its liquidation account and regulatory capital requirements.

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

General

The Company's  consolidated results of operations are primarily dependent on the
Bank's net interest income, or the difference between the interest income earned
on its loan,  mortgage-backed  securities and investment securities  portfolios,
and the interest expense paid on its savings deposits and other borrowings.  Net
interest income is affected not only by the difference between the yields earned
on   interest-earning   assets  and  the  costs  incurred  on   interest-bearing
liabilities,  but also by the relative amounts of such  interest-earning  assets
and interest-bearing liabilities.

Other components of net income include: provisions for losses on loans and other
assets;  noninterest income (primarily,  service charges on deposit accounts and
other  fees;  and  gains  and  losses on  investments  activities);  noninterest
expenses  (primarily,  compensation  and employee  benefits;  deposit  insurance
premiums;  office occupancy expense;  marketing  expense;  professional fees and
expenses associated with foreclosed real estate); and income taxes.

Earnings of the Company are significantly affected by economic, competitive, and
regulatory  conditions,  particularly  changes in interest rates, and government
policies and regulations.

References to the "Bank" herein, unless the context requires otherwise, refer to
the Company on a consolidated basis.

Management Strategy

Management's  strategy has been to maximize earnings and  profitability  through
steady growth while maintaining  asset quality.  The Bank's lending strategy has
historically  focused on the  origination  of  traditional  one- to  four-family
mortgage  loans with the primary  emphasis on single  family  residences  in the
Bank's  primary  market  area.  This focus,  because  home  mortgage  lending is
typically  considered  to be one of the safer forms of  lending,  is designed to
reduce the risk of loss on the Bank's loan portfolio. However, the relative lack
of  diversification  in its loan  portfolio  structure  does increase the Bank's
portfolio  concentration  and  interest  rate  risk by  making  the value of the
portfolio  relatively more  susceptible to changing market rates of interest and
declines in real estate  values in its market  area.  The Bank  supplements  its
lending operations with the purchase of loans,  investments and  mortgage-backed
securities.

Interest Rate Sensitivity Analysis

Net interest income,  the primary component of the Bank's net income, is derived
from the difference between the yield on interest-earning assets and the cost of
interest-bearing  liabilities.  The Bank has  sought to manage its  exposure  to
changes in interest  rates by monitoring  the effective  maturities or repricing
characteristics of its interest-earning assets and interest-bearing liabilities.
The matching of the Bank's assets and  liabilities  may be analyzed by examining
the extent to which its assets and  liabilities  are interest rate sensitive and
by monitoring the expected  effects of interest rate changes on its net interest
income and net portfolio value.

The ability to maximize net interest income is largely  dependent upon achieving
a positive  interest rate spread that can be sustained  during  fluctuations  in
prevailing interest rates. The Bank is exposed to interest rate risk as a result
of  the  difference  in  the  maturity  of   interest-bearing   liabilities  and
interest-earning assets and the volatility of interest rates. Since most deposit
accounts  react  more  quickly  to  market   interest  rate  movements  than  do
traditional mortgage loans because of their shorter terms to maturity, increases
in interest rates may have an adverse effect on the Bank's earnings. Conversely,
this same mismatch will generally  benefit the Bank's earnings during periods of
declining or stable interest rates.

                                       4
<PAGE>
Teche Federal  attempts to manage its interest  rate exposure by shortening  the
maturities  of  its  interest-earning  assets  by  emphasizing  adjustable  rate
mortgages   ("ARMs"),   originating  shorter  term  loans  such  as  residential
construction  and  consumer  loans and the  investment  of excess  liquidity  in
purchased loans, adjustable rate mortgage-backed securities and other securities
with  relatively  short terms to maturity.  Furthermore,  Teche Federal works to
manage the interest rates it pays on deposits while maintaining a stable deposit
base and providing quality services to its customers.  In recent years, the Bank
has increased its short-term  borrowings while continuing to rely primarily upon
deposits as its source of funds. As of September 30, 1996  approximately  $185.0
million of the Bank's  gross loan  portfolio  consisted  of fixed rate loans and
approximately  $146.0 million had adjustable  rates. Many of Teche Federal's ARM
loans have initial fixed terms of 3-10 years with annual  adjustments  after the
expiration of the initial  period.  At September 30, 1996, the weighted  average
term to repricing of Teche  Federal's  ARM loan and  mortgage-backed  securities
portfolio was approximately 30 months. In contrast, $101.5 million of the Bank's
certificate  accounts and $59.3 million of the Bank's regular  deposit  accounts
(e.g. NOW, money market, savings) out of $254.7 million of total deposits mature
or  reprice  within  one  year  or  less.  Based  on past  experience,  however,
management  believes  that much of the Bank's  deposits will remain at the Bank.
Furthermore,  the Bank has approximately $66.9 million in short-term  borrowings
and $26.5 million in adjustable rate mortgage-backed securities and $8.6 million
in short-term investment securities.

Management  believes that it has adequate  capital to accept a certain degree of
interest rate risk. In accepting  some interest rate risk,  the Bank was able to
increase  its net  interest  income in the low interest  rate  environment  that
existed during earlier years.  Should interest rates rise,  management  believes
the Bank's capital  position will enable it to withstand such a negative  impact
on earnings while the Bank adds higher yielding assets.

Analysis of Net Interest Income

Rate/Volume  Analysis.  The table below sets forth certain information regarding
changes in  interest  income and  interest  expense of the Bank for the  periods
indicated.  For each category of  interest-earning  assets and  interest-bearing
liabilities,  information is provided on changes  attributable to (i) changes in
volume (changes in average volume multiplied by old rate); (ii) changes in rates
(changes in rate  multiplied by old average  volume);  and (iii) the net change.
The changes  attributable  to the  combined  impact of volume and rate have been
allocated  proportionately  to the  changes due to volume and the changes due to
rate.
<TABLE>
<CAPTION>
                                                      Year Ended September 30,                         
                                             1996 vs 1995                 1995 vs 1994
                                      --------------------------------------------------------
                                      Increase (Decrease) Due to    Increase (Decrease) Due to
                                       Volume    Rate        Net    Volume     Rate       Net
                                      ------      ----    ------   ------       ---    ------ 
                                                       (Dollars in Thousands)
Interest-earning assets:              
<S>                                   <C>      <C>        <C>      <C>      <C>        <C>    
Securities(1)                         $  519      $ 75    $  594   $  931       $ 1    $  932 
Loans receivable, net                  3,089      (474)    2,615    2,150      (562)    1,588
Other interest-earning assets(2)          21       (19)        2       (2)       92        90
                                      ------      ----    ------   ------       ---    ------ 
Total Interest Earning Assets          3,629      (418)    3,211    3,079      (469)    2,610
Interest-bearing liabilities          
Deposits                                 (57)      751       694      880     1,040     1,920
FHLB advances                          1,303       (47)    1,256       37       388       425
                                      ------      ----    ------   ------       ---    ------ 
Total interest-bearing liabilities     1,246       704     1,950      917     1,428     2,345
                                      ------      ----    ------   ------       ---    ------ 

Net change in net interest in come    $2,383   $(1,122)   $1,261   $2,162   $(1,897)   $  265
                                      ======   =======    ======   ======   =======    ======
</TABLE>
                             
(1)  Includes  investment and  mortgage-backed  securities  held to maturity and
     available for sale
(2)  Includes certificates of deposit and other interest-bearing accounts.

Average  Balance  Sheet.  The  following  table sets forth  certain  information
relating to the Company's  average  balance sheet and reflects the average yield
on assets and average cost of liabilities for the periods indicated. Such yields
and costs are derived by dividing  income or expenses by the average  balance of
assets or liabilities, respectively, for the periods presented. Average balances
are derived from month-end balances. Management does not believe that the use of
month-end  balances  instead of daily  average  balances has caused any material
differences in the information presented.

                                       5
<PAGE>
<TABLE>
<CAPTION>
                                                                Year Ended September 30,                                 
                                    ------------------------------------------------------------------------------------
                                                 1996                         1995                         1994
                                                         Average                        Average                     Average
                                     Average              Yield/   Average               Yield/  Average             Yield/
                                     Balance  Interest    Cost     Balance   Interest    Cost    Balance  Interest   Cost
                                                                  (Dollars in Thousands)                
Assets                                                                                 
 Interest Earning Assets                                                               
<S>                                 <C>        <C>      <C>        <C>       <C>        <C>     <C>       <C>       <C>  
   Securities, Net (1)               $53,072    $3,743    7.05%     $45,702   $3,149      6.89%   $30,822   $2,217    7.19%
   Loans receivable (3)(6)           283,962    22,702    7.99      245,567   20,087      8.18    219,393   18,499    8.43
   Other Interest-earning assets (2)   4,724       146    3.09        4,072      144      3.54      4,213       54    1.28
                                     -------   -------  ------      -------  -------    ------    -------  -------  ------   
     Total interest-earning assets   341,758   $26,591    7.78%     295,341  $23,380      7.92%   254,428  $20,770    8.16%
                                               =======                       =======                       =======
 Non-interest earning assets           6,543                          7,385                         6,830
                                    --------                       --------                      --------   
Total assets                        $348,301                       $302,726                      $261,258
                                    ========                       ========                      ========
                                                                                       
Liabilities and Equity                                                                 
 Interest-bearing Liabilities                                                          
   NOW accounts                      $20,347      $320    1.57%     $19,235     $202      1.05%   $10,096     $148    1.47%
   Statement & regular                                                                 
     savings account                  25,815       708    2.74       32,901      900      2.74     36,771    1,046    2.84
   Money funds accounts               10,615       391    3.68       12,847      479      3.73     15,963      491    3.08
   Certificates of Deposit           182,518    10,240    5.61      175,571    9,384      5.34    157,276    7,360    4.68
                                     -------   -------              -------  -------              -------  -------          
     Total Deposits                  239,295    11,659    4.87      240,554   10,965      4.56    220,106    9,045    4.11
   FHLB advances                      42,405     2,344    5.53       18,842    1,088      5.77     17,900      663    3.70
                                     -------   -------              -------  -------              -------  -------       
Total interest-bearing liabilities   281,700   $14,003    4.97      259,396  $12,053      4.65    238,006   $9,708    4.08
                                               =======                       =======                       =======  
   Non-interest-bearing liabilities    7,801                          3,493                         3,715
                                     -------                        -------                       ------- 
Total liabilities                    289,501                        262,889                       241,721
Equity                                58,800                         39,837                        19,537
                                     -------                        -------                       ------- 
                                                                                       
Total liabilities and Equity        $348,301                       $302,726                      $261,258
                                    ========                       ========                      ========
                                                                                       
 Net interest income/interest                                                          
   rate spread (4)                             $12,588    2.81%              $11,327      3.27%            $11,062    4.08%
                                               =======                       =======                       =======
 Net interest margin (5)                                  3.68%                           3.84%                       4.35%
 Interest-earning assets/                                                              
   Interest bearing liabilities                         121.32%                         113.86%                     106.90%
</TABLE>                               
                                                                
(1)  Includes securities held to maturity and securities availa ble for sale and
     unamortized discounts and premiums and FHLB stock
(2)  Amount includes certificates of deposit and other interest-bearing deposits
(3)  Amount  is  net  of  deferred  loan  fees,  loan  discounts  and  premiums,
     loans-in-process and includes non-accruing loans.
(4)  Interest rate spread represents the difference between the yield on average
     interest-earning   assets  and  the  cost  of  average   interest   bearing
     liabilities.
(5)  Net  interest  margin  represents  net interest  income  divided by average
     interest-earning assets.
(6)  Interest  income  includes  loan  fees of  approximately  $87,000  in 1996,
     $180,000 in 1995, and $295,000 in 1994.

Changes in Financial Condition From September 30, 1995 to September 30, 1996

General.  Total assets  increased  $55.7 million,  or 17.2% to $379.6 million at
September  30,  1996 from  $323.9  million at  September  30,  1995,  reflecting
increases in loans, deposits, and advances.

Investment Securities. Investment securities, including those available for sale
decreased  $5.1 million in fiscal 1996 as compared to fiscal 1995.  The decrease
was  primarily due to maturities  during the year and  management's  decision to
invest  the  proceeds  in its  loan  portfolio.  Furthermore,  in  fiscal  1996,
securities  available for sale increased $39.1 million while  securities held to
maturity  decreased  $44.2  million.  These  changes  were  primarily  due  to a
reclassification   of  securities  in  accordance  with  changes  in  accounting
policies. See Note 4 of Notes to the Consolidated Financial Statements.

                                       6
<PAGE>

Mortgage-backed Securities. The Bank's investment in mortgage-backed securities,
including  those  available  for sale,  increased  $4.0 million $28.1 million at
September 30, 1995 to $32.1  million at September 30, 1996,  due to purchases of
$12.1 million offset somewhat by repayments of $8.4 million.

Loans Receivable,  Net. The Bank's net loans receivable  increased $58.3 million
or 22.6% to $316.2  million  from  $257.9  million  at  September  30,  1995 due
primarily to  originations  of $97.3  million in fiscal 1996 caused by increased
demand for mortgage loans in Teche Federal's primary market.

Deposits. The Bank's deposits, after interest credited,  increased $20.9 million
or 8.9%,  to $254.7  million  at  September  30,  1996 from  $233.8  million  at
September  30, 1995  primarily  due to  increases in  certificates  and checking
account  balances  offset  somewhat by  decreases  in savings  and money  market
account balances.

Advances From FHLB. Advances from the Federal Home Loan Bank of Dallas increased
$42.7  million to $66.9 from $24.2  million at September  30, 1995,  in order to
fund loan demand.

Stockholders'  Equity.  Stockholders' equity decreased $9.6 million,  from $61.9
million at  September  30, 1995 to $52.3  million at  September  30,  1996,  due
primarily to stock repurchases of approximately  691,000 shares of the Company's
Common Stock.

Comparison of Operating  Results for Years Ended  September  30, 1994,  1995 and
1996

Analysis of Net Income

General.  The Bank  reported net income of $2.5  million,  $3.1 million and $3.9
million for fiscal  1996,  1995 and 1994,  respectively.  The  $616,000 or 19.6%
decrease in fiscal 1996 was primarily due to the one time special  assessment of
$1.8  million  ($1.2  million  net of income  taxes) as a result of  legislation
enacted on September 30,1996 to recapitalize the Savings  Association  Insurance
Fund ("SAIF").  The decrease of $808,000 or 20.5% during fiscal 1995 compared to
fiscal  1994 was  caused  primarily  by the loss on the  sale of  securities  of
$819,000 in December 1994.

Interest  Income.  Interest income amounted to $26.6 million,  $23.4 million and
$20.8 million for the years ended 1996,  1995 and 1994,  respectively.  The $3.2
million or 13.7%  increase in fiscal 1996 was primarily due to increased  loans.
The $2.6  million,  or 12.6%  increase in 1995 as compared to 1994 was primarily
due to a $40.9  million  increase  in the average  balance of  interest  earning
assets  primarily caused by the receipt of net proceeds from common stock in the
Conversion despite a 24 basis point decrease in the average yield due to the net
proceeds being initially invested in short term, lower yielding investments.

Interest  Expense.  Interest expense  totalled $14.0 million,  $12.1 million and
$9.7 million for the years ended September  1996,  1995 and 1994,  respectively.
Interest  expense  increased $2 million or 16.2% in fiscal 1996 due primarily to
increased  balances  and  rates  paid on  deposits  coupled  with a  significant
increase in the average  balance of advances.  Interest  expense  increased $2.3
million or 24.2% in fiscal 1995  primarily due to an increase in market rates of
interest  and a $20.4  million  increase  in the  average  balance of  deposits,
particularly higher costing certificate accounts.

Net  Interest  Income.  Net interest  income  amounted to $12.6  million,  $11.3
million and $11.1 million for the years ended September 30, 1996, 1995 and 1994,
respectively. The increase of $1.3 million or 11.1% in fiscal 1996 was primarily
due to increased  loan balances  during the year.  The increase of $265,000,  or
2.4%,  from  fiscal  1994 to fiscal 1995 was  primarily  due to the  increase in
interest  income  compared  to the lesser  increase  in  interest  expense.  The
increase in interest income was attributable to an increase in  interest-earning
assets resulting  primarily from the increase in loans and the investment of the
net proceeds of $38.0 million from the Company's  stock offering in fiscal 1995,
along with advances from the Federal Home Loan Bank.

Provision for Loan Losses.  The Bank provided $300,000,  $360,000,  and $577,000
for the  years  ended  September  30,  1996,  1995 and 1994,  respectively.  The
allowance for loan losses was  $2,966,000 at 1995 fiscal year end and $3,182,000
at 1996 fiscal year end. The decrease in the  provision  for loan losses in both
fiscal  1996 and  fiscal  1995  resulted  from  management's  evaluation  of the
adequacy of the allowance for loan losses.

                                       7
<PAGE>

While the Bank  maintains its allowance for losses at a level which it considers
to be adequate to provide for potential  losses,  there can be no assurance that
further  additions will not be made to the loss  allowances and that such losses
will not  exceed  the  estimated  amounts.  See Note 1 of Notes to  Consolidated
Financial Statements.

Non-Interest  Income.  Non-interest  income during the years ended September 30,
1996, 1995 and 1994 amounted to $1.85 million,  $1.03 million and $844,000.  The
increase  in fiscal  1996 was due to,  increased  fee  income and the sale of an
unused  branch  site.  The  increase  in fiscal  1995 was  primarily  due to new
products offered by the Bank.

Non-Interest  Expense.  Absent the one-time  SAIF special  assessment  in fiscal
1996, non-interest expense increased steadily over the three periods,  totalling
$8.6 million, $6.4 million,  $5.4 million,  during the years ended September 30,
1996,  1995 and 1994.  The  increases  in both  fiscal 1996 and 1995 were due to
continued   expansion  of  office  facilities,   increased  marketing  expenses,
increased investment in new technology and increased costs due to being a public
company and higher  compensation  expense,  including  the cost of stock benefit
plans adopted in  connection  which the Bank's  mutual to stock  conversion  and
company growth. It is expected that the ESOP will be expensed over 10 years. The
principal component of non-interest expense, compensation and employee benefits,
remained  relatively  stable  between  fiscal  1994 and  1993.  Other  operating
expenses  increased  from $1.1  million  to $1.4  million  for the  years  ended
September 30, 1995 and 1996, respectively.

The  Bank's  deposits  are  insured  up to the  legal  maximum  by the  SAIF  as
administered  by the  FDIC.  In the  past,  SAIF  members  have  paid an  annual
insurance  premium of between .23% and .31% of total deposits held. On the other
hand,  a vast  majority  of the  members  of the Bank  Insurance  Fund  ("BIF"),
primarily commercial banks, paid insurance premiums at or near the legal minimum
of $2,000 per year.  Recently passed  legislation  required the FDIC to impose a
one-time assessment on all members of the SAIF in order to recapitalize the SAIF
to its federally mandated level of 1.25%. The assessment equalled  approximately
 .65%  of an  institution's  domestic  deposits  as of  March  31,  1995  and was
approximately  $1.2 million net of taxes for the Bank.  It is  anticipated  that
future SAIF premiums will be lowered, which will reduce somewhat the competitive
advantage commercial banks have had regarding deposit insurance premiums.

Gain on Sale of Securities.  In the year ended  September 30, 1996,  gain on the
sale of  securities  amounted to $91,000.  In fiscal  1995,  the Bank sold $14.7
million  of  securities  available  for sale as part of  management's  effort to
restructure  its balance  sheet to help control the Bank's  interest  rate risk,
which sale resulted in a loss of $819,000.

Income Tax Expense.  For the years ended  September 30, 1996, 1995 and 1994, the
Bank  incurred  income  tax  expense of $1.3  million,  $1.6  million,  and $2.0
million,  respectively.  The varying amounts were caused primarily by the varied
pre-tax income of the Bank.

Liquidity and Capital Resources

The Bank is required to maintain  minimum levels of "liquid  assets," as defined
by the OTS regulations. This requirement,  which may be varied from time to time
depending upon economic conditions and deposit flows, is based upon a percentage
of deposits and short-term borrowings. The required minimum ratio is currently 5
percent.  The Bank's average  liquidity ratio was approximately 6 percent during
the month of September  1996.  The Bank manages its average  liquidity  ratio to
meet its funding needs,  including:  deposit outflows;  disbursement of payments
collected from borrowers for taxes and insurance; repayment of Federal Home Loan
Bank advances and other borrowings;  and loan principal disbursements.  The Bank
also monitors its  liquidity  position in  accordance  with its  asset/liability
management objectives.

In addition to funds provided from  operations,  the Bank's  primary  sources of
funds are: savings deposits;  principal  repayments on loans and mortgage-backed
securities;  and matured or called investment securities.  The Bank also borrows
funds from time to time from the Federal Home Loan Bank of Dallas (the "FHLB").

Scheduled loan  repayments and maturing  investment  securities are a relatively
predictable  source of funds.  However,  saving deposit flows and prepayments on
loans and mortgage-backed  securities are significantly influenced by changes in
market interest rates, economic conditions and competition.  The Bank strives to
manage the pricing of its  deposits to maintain a balanced  stream of cash flows
commensurate with its loan commitments and other predictable funding needs.

                                       8
<PAGE>

The Bank  usually  maintains  a portion of its cash on hand in  interest-bearing
demand  deposits with the FHLB to meet  immediate  loan  commitment  and savings
withdrawal funding  requirements.  When applicable,  cash in excess of immediate
funding  needs is  invested  into  longer-term  investment  and  mortgage-backed
securities,  some of which may also qualify as liquid  investments under current
OTS regulations.

The Bank has other sources of liquidity if a need for  additional  funds arises,
such  as  FHLB  of  Dallas   advances   and  the   ability  to  borrow   against
mortgage-backed and other securities.  On September 30, 1996, the Bank had total
FHLB borrowings of $66.9 million, or 17.6% of the Bank's assets.

Management  believes  the Bank has  sufficient  resources  available to meet its
foreseeable  funding   requirements.   At  September  30,  1996,  the  Bank  had
outstanding  loan  commitments of $18.7  million,  and  certificates  of deposit
scheduled  to mature  within one year of $101.5  million,  substantially  all of
which management expects, based on past experience, will remain with the Bank.

Regulations  of the OTS  require  the  Bank to meet  or  exceed  three  separate
standards of capital adequacy. These regulations require savings institutions to
have minimum  tangible  capital equal to 1.50 percent of total adjusted  assets;
minimum  core  capital  equal to 3.00  percent  of total  adjusted  assets;  and
risk-based  capital  equal to 8.00  percent of total  risk-weighted  assets.  At
September 30, 1996, Teche Federal exceeded all regulatory capital  requirements.
See Note 17 of Notes to Consolidated Financial Statements.

Impact of Inflation and Changing Prices

The  consolidated  financial  statements  of  the  Company  and  notes  thereto,
presented  elsewhere  herein,  have been prepared in accordance  with  Generally
Accepted  Accounting  Principles,  which  require the  measurement  of financial
position  and  operating   results  in  terms  of  historical   dollars  without
considering the change in the relative  purchasing  power of money over time and
due to inflation.  The impact of inflation is reflected in the increased cost of
the Bank's operations.  Unlike most industrial companies,  nearly all the assets
and  liabilities of the Bank are financial.  As a result,  interest rates have a
greater impact on the Bank's  performance  than do the effects of general levels
of inflation. Interest rates do not necessarily move in the same direction or to
the same extent as the prices of goods and services.

                                       9

<PAGE>
                                       10

<PAGE>
Deloite &       
Touche LLP
----------             ---------------------------------------------------------
      [LOGO]           Suite 3700                        Telephone:(504)581-2727
                       One Shell Square                  Facsimile:(504)561-7293
                       701 Polydras Street
                       New Orleans, Louisiana 70139-3700


INDEPENDENT AUDITORS' REPORT


Board of Directors and Shareholders
Teche Holding Company
Franklin, Louisiana

We have audited the  accompanying  consolidated  balance sheets of Teche Holding
Company  and  subsidiary  as of  September  30,  1996 and 1995,  and the related
consolidated statements of income,  stockholders' equity and cash flows for each
of the three years in the period  ended  September  30,  1996.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,   the  financial  position  of  Teche  Holding  Company  and
subsidiary  as of  September  30,  1996  and  1995,  and the  results  of  their
operations  and their cash flows for each of the three years in the period ended
September 30, 1996 in conformity with generally accepted accounting principles.



/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP

New Orleans, Louisiana
October 31, 1996



---------------
Deloitte Touche
Tohmatsu
International
-------------

                                       11
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS                                                              1996          1995
                                                                 ---------    ---------
<S>                                                              <C>          <C>      
Cash and cash equivalents                                        $   7,072    $   6,400
Certificates of deposit                                                914          590
Securities available-for-sale, at estimated market
  value (amortized cost of $43,960 in 1996 and $5,310 in 1995)      44,496        5,413
Securities held-to-maturity (estimated
  market value of $45,312 in 1995)                                    --         44,209
Loans receivable, net of allowance for loan losses of
  $3,182 in 1996 and $2,966 in 1995                                316,216      257,869
Accrued interest receivable                                          1,868        1,752
Investment in Federal Home Loan Bank stock, at cost                  3,703        2,671
Real estate owned, net                                                  46          253
Prepaid expenses and other assets                                      783          560
Premises and equipment, at cost less accumulated depreciation        4,492        4,135
                                                                 ---------    ---------

TOTAL ASSETS                                                     $ 379,590    $ 323,852
                                                                 =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                         $ 254,723    $ 233,805
Advances from Federal Home Loan Bank                                66,900       24,200
Advance payments by borrowers for taxes and insurance                1,923        1,935
Accrued interest payable                                               283          327
Accounts payable and other liabilities                               1,595          736
SAIF special assessment                                              1,824         --
Deferred income taxes                                                   60          454
Dividends payable                                                     --            487
                                                                 ---------    ---------

      Total liabilities                                            327,308      261,944

COMMITMENTS AND CONTINGENCIES                                         --           --

STOCKHOLDERS' EQUITY:
  Common stock, $.01 par value, 10,000,000 shares authorized;
     4,232,000 shares issued                                            42           42
  Preferred stock, 5,000,000 shares authorized, none issued           --           --
  Additional paid-in capital                                        41,436       41,324
  Retained earnings                                                 24,250       23,555
  Unearned ESOP shares                                              (2,751)      (3,083)
  Unearned Compensation (MSP)                                       (1,900)        --
  Treasury stock - 691,000 shares, at cost                          (9,149)        --
  Unrealized gain on securities available-for-sale, net
    of deferred income taxes                                           354           70

      Total stockholders' equity                                    52,282       61,908
                                                                 ---------    ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                       $ 379,590    $ 323,852
                                                                 =========    =========
</TABLE>


See notes to consolidated financial statements.

                                       12
<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                         1996          1995           1994
                                                     -----------   -----------    -----------
INTEREST INCOME:
<S>                                                  <C>           <C>            <C>        
  Interest and fees on loans                         $    22,702   $    20,087    $    18,499
  Interest and dividends on investment securities          1,699         1,814          1,746
  Interest on mortgage backed securities                   2,044         1,335            471
  Other interest income                                      146           144             54
                                                     -----------   -----------    -----------
                                                          26,591        23,380         20,770
                                                     -----------   -----------    -----------
INTEREST EXPENSE:
  Deposits                                                11,659        10,965          9,045
  Advances from Federal Home Loan Bank                     2,344         1,088            663
                                                     -----------   -----------    -----------
                                                          14,003        12,053          9,708
                                                     -----------   -----------    -----------
NET INTEREST INCOME                                       12,588        11,327         11,062

PROVISION FOR LOAN LOSSES                                    300           360            577
                                                     -----------   -----------    -----------
NET INTEREST INCOME AFTER PROVISION
  FOR LOAN LOSSES                                         12,288        10,967         10,485
                                                     -----------   -----------    -----------
NON-INTEREST INCOME:
  Service charges                                          1,477           895            535
  Gain on sale of real estate owned                           19            37            158
  Other income                                               356            97            151
                                                     -----------   -----------    -----------
    Total non-interest income                              1,852         1,029            844
                                                     -----------   -----------    -----------
GAIN (LOSS) ON SALE OF SECURITIES                             91          (819)          --   
                                                     -----------   -----------    -----------
NON-INTEREST EXPENSE:
  Compensation and employee benefits                       4,272         3,261          2,501
  Occupancy, equipment and data processing expense         1,477         1,141            978
  Marketing                                                  580           403            344
  SAIF deposit insurance premiums                            543           532            494
  SAIF special assessment                                  1,824          --             --
  Louisiana shares tax                                       387          --             --
  Other operating expenses                                 1,357         1,068          1,097
                                                     -----------   -----------    -----------
    Total non-interest expense                            10,440         6,405          5,414
                                                     -----------   -----------    -----------
INCOME BEFORE INCOME TAXES                                 3,791         4,772          5,915

INCOME TAXES                                               1,270         1,635          1,970
                                                     -----------   -----------    -----------

NET INCOME                                           $     2,521   $     3,137    $     3,945
                                                     ===========   ===========    ===========
EARNINGS PER COMMON SHARE SINCE
  CONVERSION                                         $       .68   $       .46            N/A
                                                     ===========   ===========               
AVERAGE COMMON SHARES OUTSTANDING
  SINCE CONVERSION                                     3,730,000     3,910,000            N/A
                                                       =========     =========               
</TABLE>

See notes to consolidated financial statements.

                                       13
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994 (DOLLARS IN THOUSANDS, 
EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                                                 
                                                                                                                                 
                                                                                                                                 
                                                                                                  Additional                     
                                                                                       Common       Paid-In        Retained      
                                                                                       Stock        Capital        Earnings      
                                                                                     -------------  --------------   ------------
<S>                                                                                  <C>            <C>              <C>         
BALANCE, October 1, 1993                                                                  $   -       $       -      $  17,448   

Net income                                                                                                               3,945   

Unrealized loss on securities available-for-sale, net                                                                            
                                                                                     -------------  --------------   ------------

BALANCE, September 30, 1994                                                                                             21,393   

Issuance of common stock                                                                     42          41,258                  

Contribution to ESOP                                                                                         66                 

Dividends declared - $.25 per share                                                                                       (975)  

Net income                                                                                                               3,137   

Unrealized gain on securities available-for-sale, net                                                                            
                                                                                     -------------  --------------   ------------
BALANCE, September 30, 1995                                                                  42          41,324         23,555   

Contribution to ESOP                                                                                        112                  

Purchase of stock for Management Stock Plan ("MSP")                                                                              

Amortization of MSP                                                                                                              

Purchase of common stock for treasury                                                                                            

Dividends declared - $.50 per share                                                                                     (1,826)  

Net income                                                                                                               2,521   

Unrealized gain on securities available-for-sale, net                                                                            
                                                                                     -------------  --------------   ------------
              
BALANCE, September 30, 1996                                                             $    42     $    41,436      $  24,250   
                                                                                     =============  ==============   ============
</TABLE>

<TABLE>
<CAPTION>
                                                                                                            Unrealized
                                                                                                              Gain
                                                                                                           (Loss) on
                                                      Unearned         Unearned                             Securities
                                                      ESOP              Compensation       Treasury        Available-
                                                      hares              (MSP)              Stock          for-Sale, net     Total
                                                      -----------    ---------------    ----------------  --------------  ----------
<S>                                                   <C>            <C>                <C>               <C>             <C>
BALANCE, October 1, 1993                                $     -            $     -             $     -           $   -       17,448

Net income                                                                                                                    3,945

Unrealized loss on securities available-for-sale, net                                                             (430)        (430)
                                                      -----------    ---------------    ----------------  --------------  ----------

BALANCE, September 30, 1994                                                                                       (430)      20,963

Issuance of common stock                                 (3,323)                                                             37,977

Contribution to ESOP                                        240                                                                 306

Dividends declared - $.25 per share                                                                                            (975)

Net income                                                                                                                    3,137

Unrealized gain on securities available-for-sale, net                                                              500          500
                                                      -----------    ---------------    ----------------  --------------  ----------
BALANCE, September 30, 1995                              (3,083)                                                    70       61,908

Contribution to ESOP                                        332                                                                 444

Purchase of stock for Management Stock Plan ("MSP")                         (2,320)                                          (2,320)

Amortization of MSP                                                            420                                              420

Purchase of common stock for treasury                                                           (9,149)                      (9,149)

Dividends declared - $.50 per share                                                                                          (1,826)

Net income                                                                                                                    2,521

Unrealized gain on securities available-for-sale, net                                                              284          284
                                                      -----------    ---------------    ----------------  --------------  ----------
              
BALANCE, September 30, 1996                           $  (2,751)         $  (1,900)          $  (9,149)        $   354    $  52,282 
                                                      ===========    ===============    ================  ==============  ==========
</TABLE>

See notes to consolidated financial statements.

                                       14
<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994 (DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                   1996            1995           1994
                                                                                --------       --------        --------  
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                             <C>            <C>             <C>     
  Net income                                                                    $  2,521       $  3,137        $  3,945
  Adjustments to reconcile net income
    to net cash provided by operating activities:
      Accretion of discount and amortization of premium
        on investments and mortgage-backed securities                               (657)          (667)           (574)
      Provision for loan losses                                                      300            360             577
      ESOP expense                                                                   432            306               -
      MSP expense                                                                    420              -               -
      Write-down of land                                                               -              -             282
      Deferred income taxes                                                         (394)           628            (200)
      (Gain) loss on sale of securities                                              (91)           819               -
      Gain on sale of real estate owned                                              (19)           (37)           (158)
      Gain on sale of other real estate                                             (149)             -               -
      Depreciation                                                                   404            280             204
      Accretion of deferred loan fees and other                                      (87)          (179)           (295)
      Accretion of discount on loans                                                (194)          (319)           (450)
      Change in accrued interest receivable                                         (116)          (100)           (319)
      Change in prepaid expenses and other assets                                   (264)            35              71
      Change in accrued interest payable                                             (44)            80              83
      Change in accounts payable and other liabilities                               859           (255)           (196)
      SAIF special assessment payable                                              1,824              -               -
      Other - net                                                                   (137)             -               -       
                                                                                --------       --------        --------  
                                                                          
        Net cash provided by operating activities                                  4,608          4,088           2,970  
                                                                                --------       --------        --------  

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from maturities of investment securities
     available-for-sale                                                           10,300              -               -
  Proceeds from maturities of investment securities
     held-to-maturity                                                                  -          1,000               -
  Proceeds from sale of investment securities
     available-for-sale                                                            1,100         12,458               -
  Proceeds from sale of mortgage-backed securities
     available-for-sale                                                                -          1,406               -
  Purchase of investment securities available-for-sale                            (1,377)          (200)              -
  Purchase of mortgage-backed securities
     available-for-sale                                                          (12,075)             -               -
  Purchase of investment securities held-to-maturity                                   -         (7,865)         (5,800)
  Purchase of mortgage-backed securities held-to-maturity                              -        (22,028)         (6,015)
  Principal repayments on mortgaged-backed securities
     available-for-sale                                                            6,385            923               -
  Principal repayments on mortgage backed securities
     held-to-maturity                                                              1,966          1,364           1,603
  Net increase in certificates of deposit                                           (324)             -            (590)
  Loans originated, net of repayments                                            (58,366)       (24,350)        (25,808)
  Investment in FHLB stock                                                        (1,032)          (559)           (169)
  Proceeds from sale of real estate                                                  424             56              27
  Purchase of premises and equipment                                                (761)        (1,557)           (487) 
                                                                                --------       --------        --------  

        Net cash used in investing activities                                    (53,760)       (39,352)        (37,239) 
                                                                                --------       --------        --------  

</TABLE>
                                                                    (Continued)

                                       15
<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994 (DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                1996        1995       1994
<S>                                                          <C>         <C>         <C>     
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from public offering                              --        37,977        --
  Dividends paid                                               (2,313)       (488)       --
  Net increase (decrease) in deposits                          20,918      (2,931)     23,740
  Net increase in FHLB advances                                42,700         400      11,600
  Purchase of common stock for MSP                             (2,320)       --          --
  Purchase of common stock for treasury                        (9,149)       --          --
  (Decrease) increase in advance payments by borrowers
    for taxes and insurance                                       (12)        102         196
                                                             --------    --------    --------
      Net cash provided by financing activities                49,824      35,060      35,536
                                                             --------    --------    --------
NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                                            672        (204)      1,267

CASH AND CASH EQUIVALENTS,
  BEGINNING OF YEAR                                             6,400       6,604       5,337
                                                             --------    --------    --------

CASH AND CASH EQUIVALENTS,
  END OF YEAR                                                $  7,072    $  6,400    $  6,604
                                                             ========    ========    ========


SUPPLEMENTAL DISCLOSURE OF CASH
  FLOW INFORMATION:
  Cash paid for interest                                     $ 14,047    $ 11,973    $  9,625
                                                             ========    ========    ========

  Income taxes paid                                          $  1,690     $ 1,135    $  1,919
                                                             ========     =======    ========

  Investing activities not requiring the outflow
    of cash:
      Additions to real estate owned                         $     51     $   233    $     46
                                                             ========     =======    ========

      Reclassification of securities from held-to-maturity
        to available-for-sale                                $ 42,000     $   --     $ 20,519
                                                             ========     =======    ========

</TABLE>
                                       16
See notes to consolidated financial statements.
                                                                    (Concluded)
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
--------------------------------------------------------------------------------

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The significant accounting policies of the Company are described below.

     Principles of Consolidation - The consolidated financial statements include
     the  accounts of Teche  Holding  Company and its  wholly-owned  subsidiary,
     Teche Federal Savings Bank  (collectively  "the Company").  All significant
     intercompany   balances   and   transactions   have  been   eliminated   in
     consolidation. The Company is a retail savings bank which attracts deposits
     from the general public and uses such deposits primarily to originate loans
     secured by first mortgages on owner-occupied, family residences.

     Use of Estimates - The  preparation  of financial  statements in conformity
     with generally accepted  accounting  principles requires management to make
     estimates and  assumptions  that affect the reported  amounts of assets and
     liabilities and disclosure of contingent assets and liabilities at the date
     of the  financial  statements  and the  reported  amounts of  revenues  and
     expenses  during the  reporting  period.  Actual  results could differ from
     those estimates.

     Cash and Cash  Equivalents  - Cash and cash  equivalents  comprise cash and
     non-interest  bearing  demand  deposits with other  financial  institutions
     (approximating  $1,922,000  and  $1,697,000 at September 30, 1996 and 1995,
     respectively),  and interest  bearing demand  deposits with other financial
     institutions (approximating $5,150,000 and $4,703,000 at September 30, 1996
     and 1995, respectively).

     Securities - Securities  designated as held-to-maturity  are stated at cost
     adjusted  for  amortization  of  the  related  premiums  and  accretion  of
     discounts,  computed  using the level  yield  method.  The  Company has the
     positive intent and ability to hold these securities to maturity.

     Securities designated as available-for-sale  are stated at estimated market
     value.  Unrealized  gains and  losses  are  aggregated  and  reported  as a
     separate  component of stockholders'  equity, net of deferred income taxes.
     These securities are acquired with the intent to hold them to maturity, but
     they are available for disposal in the event of unforeseen liquidity needs.

     Gains and losses on security  transactions  are  determined on the specific
     identification   method.  The  related  income  tax  expense  (benefit)  on
     securities  gains  (losses)  was $7,000 and  ($280,000)  in the years ended
     September 30, 1996 and 1995, respectively.

     Loans  Receivable  - Loans  receivable  are stated at the unpaid  principal
     balances,  less the  allowance  for loan losses and net deferred loan fees,
     and unearned discount. Unearned discount relates principally to installment
     loans.  Interest on loans is credited to operations  based on the principal
     amount outstanding using the interest method.

     When the payment of  principal or interest on a loan is  delinquent  for 90
     days, or earlier in some cases,  the loan is placed on non-accrual  status.
     When a loan is placed on non-accrual  status,  interest  accrued during the
     current  year  prior to the  judgment  of  uncollectibility  is  charged to
     operations.  Interest  accrued  during  prior  periods  is  charged  to the
     allowance for loan losses. Loans are returned to an accruing status only as

                                       17
<PAGE>

     payments are received and if  collection  of all  principal and interest is
     not in doubt. If doubt exists,  any payments  received on such  non-accrual
     loans  are  applied  first  to  outstanding  loan  amounts  and next to the
     recovery of charged-off loan amounts.  Any excess is treated as recovery of
     lost interest.

     Allowance  for Loan Losses - The  allowance  for loan losses is a valuation
     allowance available for losses incurred on loans. Any losses are charged to
     the  allowance  for loan  losses  when the loss  actually  occurs or when a
     determination  is made  that a loss is  likely  to  occur.  Recoveries  are
     credited to the allowance at the time of recovery.

     Periodically  during the year  management  estimates  the  likely  level of
     losses to determine  whether the  allowance  for loan losses is adequate to
     absorb possible losses in the existing portfolio. Based on these estimates,
     an amount is charged to the  provision  for loan losses and credited to the
     allowance  for loan  losses in order to  adjust  the  allowance  to a level
     determined to be adequate to absorb such losses.

     Management's  judgment as to the level of losses on existing loans involves
     the consideration of current and anticipated  economic conditions and their
     potential  effects on specific  borrowers;  an  evaluation  of the existing
     relationships  among loans, known and inherent risks in the loan portfolio,
     and the present level of the allowance;  results of examination of the loan
     portfolio by regulatory agencies;  and management's  internal review of the
     loan  portfolio.  In  determining  the  collectibility  of  certain  loans,
     management also considers the fair value of any underlying collateral.

     It should be understood  that  estimates of loan losses involve an exercise
     of judgment.  While it is possible that in  particular  periods the Company
     may sustain losses which are substantial relative to the allowance for loan
     losses, it is the judgment of management that the allowance for loan losses
     reflected in the consolidated balance sheets is adequate to absorb possible
     losses in the existing loan portfolio.

     Loan Fees,  Loan  Costs,  Discounts  and  Premiums - Loan  origination  and
     commitment fees, and certain direct loan origination costs are deferred and
     amortized as an adjustment  to the related  loan's yield using the interest
     method over the contractual life of the loan.

     Discounts   received  in  connection  with  mortgage  loans  purchased  are
     amortized  to  income  over  the  contractual  term of the loan  using  the
     interest  method.  These discounts have been deducted from the related loan
     balances.

     Premises and Equipment - The Company computes depreciation generally on the
     straight-line  method for both  financial  reporting and federal income tax
     purposes.  The  estimated  useful lives used to compute  depreciation  are:
     buildings and improvements,  twenty to forty years; and furniture, fixtures
     and equipment, three to ten years.

     Real  Estate  Owned  -  Real  estate  acquired  through,  or  in  lieu  of,
     foreclosure  is  initially  recorded  at the  fair  value  at the  time  of
     foreclosure,  less estimated cost to dispose,  and any related writedown is
     charged to the allowance for loan losses. The fair values have not exceeded
     the balances of the related loans. Valuations are periodically performed by
     management  and  provisions  for estimated  losses on real estate owned are
     charged to operations when any  significant  and permanent  decline reduces
     the fair value,  less sales  costs,  to less than the carrying  value.  The
     ability of the  Company to recover  the  carrying  value of real  estate is
     based upon  future  sales of the real estate  owned.  The ability to effect
     such sales is subject to market conditions and other factors, many of which
     are beyond the Company's control.  Operating income of such properties, net
     of related expenses, and gains and losses on their disposition are included
     in the accompanying consolidated statements of income.

     Income Taxes - Income taxes were  accounted for using the liability  method
     in 1996 and 1995. In prior years, income taxes were accounted for using the
     deferred method.

                                       18
<PAGE>



     Earnings  Per Share - Earnings per share for the year ended  September  30,
     1996 was  calculated  by dividing  net earnings for the year by the average
     shares  outstanding  during the year net of treasury  shares.  Earnings per
     share for the year ended  September 30, 1995 was calculated by dividing the
     net  earnings  for the period from April 17, 1995 (date of  conversion)  to
     September 30, 1995 of $1,791,000 by the average shares  outstanding  during
     that same period of 3,910,000  shares.  The Company accounts for the shares
     acquired by the ESOP in  accordance  with  Statement of Position  93-6 and,
     therefore, shares controlled by the ESOP are not considered in the weighted
     average shares outstanding until the shares are committed for allocation to
     an employee's  individual  account.  The effect of the assumed  exercise of
     stock options was not significant.

     Reclassifications - Certain  reclassifications  have been made to the prior
     years  finanical  statements  in order to  conform  to the  classifications
     adopted for reporting in 1996.

2.   CONVERSION  FROM MUTUAL SAVINGS BANK TO STOCK SAVINGS BANK AND FORMATION OF
     TECHE HOLDING COMPANY

     On April  17,  1995,  the  Teche  Federal  Savings  Bank  converted  from a
     federally chartered mutual savings bank to a stock savings bank pursuant to
     a Plan of Conversion (the  "Conversion")  via the issuance of common stock.
     In connection  with the  Conversion,  Teche Holding  Company sold 4,232,000
     shares of common stock which,  after giving effect to offering  expenses of
     $1.0 million and 332,337 shares issued to the Employee Stock Ownership Plan
     ("ESOP"),  resulted  in net  proceeds  of $38.0  million.  Pursuant  to the
     Conversion,  Teche Federal Savings Bank  transferred all of its outstanding
     shares to Teche Holding Company, in exchange for 50% of the net proceeds.

     This business  combination  has been accounted for at historical  cost in a
     manner similar to the accounting method known as the "pooling of interests"
     method.

     At the time of  Conversion,  Teche  Federal  Savings  Bank  segregated  and
     restricted approximately $23,000,000 of retained earnings, in a liquidation
     account  for the  benefit of  eligible  account  holders  who  continue  to
     maintain  their  deposit  accounts  in Teche  Federal  Savings  Bank  after
     conversion. In the event of a complete liquidation of Teche Federal Savings
     Bank (and only in such an  event),  eligible  depositors  who  continue  to
     maintain  accounts  shall be  entitled to receive a  distribution  from the
     liquidation  account in an amount  proportionate  to the  current  adjusted
     balances of all qualifying deposits then held. The liquidation account will
     be reduced  annually  to the extent  that  eligible  account  holders  have
     reduced their qualifying deposits.

     Subsequent to the Conversion, the Company or Teche Federal Savings Bank may
     not declare or pay a cash  dividend on any of its shares of common stock if
     the  effect  would  reduce  stockholders'  equity  below  either the amount
     required for the  liquidation  account  discussed  above or the  applicable
     regulatory capital  requirements,  or if such declaration and payment would
     otherwise violate regulatory requirements.

3.   INTEREST RATE RISK

     The Company is engaged  principally  in providing  first  mortgage loans to
     individuals.  At September 30, 1996 the Company had interest earning assets
     of approximately $370,000,000, most of which will not mature or be repriced
     until after five years.  Interest bearing liabilities totaled approximately
     $322,000,000, most of which will mature or can be repriced within one year.
     The shorter duration of interest-sensitive  liabilities indicates that in a
     rising  rate  environment  the  Company is exposed  to  interest  rate risk
     because  liabilities  may be  repricing  faster at higher  interest  rates,
     thereby  reducing  the market  value of  long-term  assets and net interest
     income.  In a falling rate environment the market value of long-term assets
     and net interest income may be increased.

                                       19
<PAGE>
4.   SECURITIES

     Beginning  September 30, 1994, in  accordance  with  Statement of Financial
     Accounting  Standard No. 115 ("FAS No. 115"), the Company began designating
     as available-for-sale  certain securities that might be sold prior to their
     contractual  maturity.  These  securities are reported at fair value in the
     consolidated  balance sheets with  unrealized  gains and losses listed as a
     separate  component of stockholders'  equity, net of deferred income taxes.
     At  September  30,  1994,  the  Company  reclassified  securities  with  an
     unamortized  cost of  approximately  $20,519,000  and an unrealized loss of
     approximately  $653,000  ($430,000  net of income  taxes)  from  securities
     held-to-maturity to securities available-for-sale.

     The   amortized   cost  and   estimated   market   values   of   securities
     available-for-sale are as follows (in thousands):

<TABLE>
<CAPTION>

                                                 September 30, 1996
                                 ---------------------------------------------------
                                                  Gross       Gross        Estimated 
                                 Amortized     Unrealized    Unrealized     Market
                                    Cost          Gains       Losses         Value
                                                                          
Investment securities:                                                    
<S>                                <C>          <C>          <C>          <C>    
  Common stock                     $   568      $   101      $  --        $   669
  Obligations of U.S. government                                          
    corporations and obligations    11,266          196         --         11,462
  Municipal obligations                264            2         --            266
                                   -------      -------      -------      -------
                                    12,098          299         --         12,397
                                   -------      -------      -------      -------
                                                                          
Mortgage-backed securities:                                               
  Government National Mortgage                                            
    Corporation                      1,389           80         --          1,469      
  Federal Home Loan Mortgage                                              
    Corporation                      9,891          111           50        9,952
  Federal National Mortgage                                               
    Association                     20,582          259          163       20,678
                                   -------      -------      -------      -------
                                    31,862          450          213       32,099
                                   -------      -------      -------      ------- 
                                   $43,960      $   749      $   213      $44,496
                                   =======      =======      =======      =======
                                                                          
</TABLE>

<TABLE>
<CAPTION>                                                                
                                               September 30, 1995
                               -------------------------------------------------------
                                             Gross          Gross            Estimated
                               Amortized   Unrealized    Unrealized            Market
                                  Cost         Gains        Losses             Value
 
Investment securities:
<S>                            <C>             <C>             <C>             <C>   
  Common stock                 $  200          $ --            $ --            $  200
Mortgage-backed securities:                                                 
  Federal Home Loan Mortgage                                                
    Corporation                 5,110             103            --             5,213
                               ------          ------          ----            ------
                                                                            
                               $5,310          $  103          $ --            $5,413
                               ======          ======          ====            ======
                                                                     
</TABLE>

                                       20
<PAGE>
     The   amortized   cost  and   estimated   market   values   of   securities
     available-for-sale are as follows (in thousands):

                                                               Estimated
                                               Amortized         Market
                                                 Cost            Value
                                                               
Investment securities:                                         
                                                               
  Due in one year or less                       $ 8,354         $ 8,570
  Due after one year through five years           3,744           3,827
                                                               
Mortgage-backed securities                       31,862          32,099
                                                -------         -------
                                                               
                                                $43,960         $44,496
                                                =======         =======

     The   amortized   cost  and   estimated   market   values   of   securities
     held-to-maturity are as follows (in thousands):

                                                         
<TABLE>
<CAPTION>
                                                 September 30, 1995
                                  -----------------------------------------------
                                                Gross        Gross      Estimated
                                  Amortized   Unrealized   Unrealized    Market
                                     Cost       Gains        Losses       Value

<S>                                <C>          <C>          <C>          <C>     
Investment securities:
  Obligations of U.S. government
    corporations and agencies      $20,927      $ 1,204      $   683      $21,448 
  Municipal obligations                372         --           --            372
                                   -------      -------      -------      -------
                                    21,299        1,204          683       21,820
                                   -------      -------      -------      -------
Mortgage-backed securities:                                             
  Government National Mortgage                                          
    Corporation                      1,740          104         --          1,844
  Federal Home Loan Mortgage                                            
    Corporation                      2,435           13            3        2,445
  Federal National Mortgage                                             
    Association                     18,735          518           50       19,203
                                   -------      -------      -------      -------
                                    22,910          635           53       23,492
                                   -------      -------      -------      -------
                                   $44,209      $ 1,839      $   736      $45,312
                                   =======      =======      =======      =======
</TABLE>
     Gross gains of $91,000  were  realized on sales of  securities  in the year
     ended September 30, 1996.

     Gross gains of $25,000 and gross losses of $844,000  were realized on sales
     of securities in the year ended September 30, 1995.

     At September 30, 1996 securities with a cost of  approximately  $40,000,000
     were pledged to secure  deposits  and  advances  from the Federal Home Loan
     Bank as required or permitted by law.

     On November 15,  1995,  the  Financial  Accounting  Standards  Board issued
     implementation  guidance with respect to FAS No. 115. This guidance allowed
     a company to reassess its  designation  of securities  as  held-to-maturity
     and,  if  deemed   appropriate,   make  a  one  time   reclassification  of
     held-to-maturity  securities  between  November  15, 1995 and  December 31,
     1995.  During  this  period the  Company  reclassified  securities  with an
     amortized  cost of  approximately  $42,000,000  and an  unrealized  gain of
     approximately  $1,018,000  ($672,000 net of income  taxes) from  securities
     held-to-maturity to securities available-for-sale.
                                                                     
                                       21

<PAGE>
5.   LOANS RECEIVABLE

     Loans receivable are summarized as follows (in thousands):


                                                         September 30,     
                                                     --------------------
                                                       1996        1995
                                                  
Residential real estate mortgage loans:           
  One-to-four family units                           $288,109   $234,329
  Multi-family                                          3,006      2,871
Land loans                                              2,844      2,288
Construction loans                                     13,740      8,097
Non-residential real estate loans                       7,346      7,540
Loans on savings accounts                               5,657      6,260
Other                                                  10,343      6,441
                                                     --------   --------
                                                      331,045    267,826
Less:                                             
  Allowance for loan losses                             3,182      2,966
  Deferred loan fees                                    1,122      1,266
  Undisbursed portion of loans in process              10,525      5,725
                                                     --------   --------
                                                     $316,216   $257,869
                                                     ========   ========
                                                  
     Changes in the allowance for loan losses are as follows (in thousands):
                                                      Year Ended
                                                     September 30,          
                                             ------------------------------
                                               1996       1995       1994
                                           
Beginning balance, October 1                 $ 2,966    $ 2,778    $ 2,193
Provision charged to operating expense           300        360        577
Recoveries                                         3         13        105
Loans charged off                                (87)      (185)       (97)
                                             -------    -------    -------  
Ending balance, September 30                 $ 3,182    $ 2,966    $ 2,778
                                             =======    =======    =======

     Substantially  all of the Company's loans  receivable are with customers in
     southern Louisiana.

     At September  30, 1996 and 1995 there were  unamortized  discounts on loans
     purchased of approximately $1,400,000 and $1,590,000,  respectively.  These
     unamortized  discounts have been deducted from the related loan balances in
     the table above.

     The  amount of  nonaccrual  loans at  September  30,  1996 and 1995 was not
     significant. The amount of interest not accrued on these loans did not have
     a significant effect on net income in 1996, 1995 or 1994.
                                        
                                       22
<PAGE>
     The  Financial  Accounting  Standards  Board issued  Statement of Financial
     Accounting  Standards No. 114,  Accounting  by Creditors for  Impairment of
     Certain  Loans,  which  requires that the present value of expected  future
     cash flows of impaired loans be discounted at the loan's effective interest
     rate. The Financial Accounting Standards Board has also issued Statement of
     Financial  Accounting  Standards  No.  118,  Accounting  by  Creditors  for
     Impairment of a Loan-Income  Recognition  and  Disclosures,  which allows a
     creditor  to use  existing  methods  for  recognizing  interest  income  on
     impaired  loans.  The adoption of these  Statements  in 1996 did not have a
     significant  effect on the  Company's  financial  condition  or  results of
     operations.

6.   REAL ESTATE OWNED

     Real estate owned consisted of the following (in thousands):

                                                            September 30,  
                                                           ---------------
                                                            1996     1995
                                                          
Real estate acquired through foreclosure                   $ 154    $ 384
Less allowance for losses                                   (108)    (131)
                                                           -----    -----
                                                          
Real estate owned, net                                     $  46    $ 253
                                                           =====    =====
                                          

     Changes in the allowance for losses on real estate owned are as follows (in
     thousands):

                                                       Year Ended
                                                      September 30,       
                                                ------------------------
                                                 1996     1995     1994
                                              
Beginning balance, October 1                    $ 131    $ 163    $ 186
Provision charged to operating expense             --       --       --
Allowance related to real estate sold             (23)     (32)     (23)
                                                -----    -----    -----
                                              
Ending balance, September 30                    $ 108    $ 131    $ 163
                                                =====    =====    =====
                                              
7.   PREMISES AND EQUIPMENT

     Premises and equipment are summarized as follows (in thousands):

                                                        September 30,
                                                     ------------------
                                                       1996       1995
                                              
Land                                                 $ 1,119    $ 1,003
Buildings and improvements                             3,124      3,046
Furniture, fixtures and equipment                      3,142      2,615
                                                     -------    -------
                                                       7,385      6,664
Less accumulated depreciation                         (2,893)    (2,529)
                                                     -------    -------
                                              
                                                     $ 4,492    $ 4,135
                                                     =======    =======

                                       23
<PAGE>
8.   DEPOSITS

     Deposits are summarized as follows (in thousands):

                                                   September 30,
                                               -------------------
                                                  1996       1995
                                              
NOW accounts                                   $ 24,222   $ 18,374
Passbook and                                  
  regular savings                                25,306     26,723
Money funds accounts                              9,746     10,483
Certificates of deposit                         195,449    178,225
                                               --------   --------
                                              
                                               $254,723   $233,805
                                               ========   ========

     Certificates  of deposit of $100,000 and over amounted to  $46,600,000  and
     $41,000,000 at September 30, 1996 and 1995, respectively.

     Certificates  of  deposits at  September  30,  1996,  mature as follows (in
     thousands):

Less than one year                                          $101,464
1-2 years                                                     58,504
2-3 years                                                     14,390
3-4 years                                                     11,271
4-5 years                                                      7,828
over 5 years                                                   1,992
                                                            --------
                                                           
TOTAL                                                       $195,449
                                                            ========

9.   ADVANCES FROM FEDERAL HOME LOAN BANK AND CASH RESERVE
     REQUIREMENTS

     At  September  30, 1996 the Company was  indebted to the Federal  Home Loan
     Bank (FHLB) for $64,510,000 of advances bearing interest at an average rate
     of 5.39% which were due October 4, 1996 and $2,390,000 of advances  bearing
     interest at an average rate of 5.36% which were due between October 1, 1996
     and October 8, 1996. These advances were renewed upon maturity.

     At September 30, 1995,  the Company was indebted to the FHLB for $7,200,000
     and $500,000  advances due October 2, 1995 bearing  interest rates of 5.57%
     and 5.83%,  respectively,  and  $15,000,000  and  $1,500,000  advances  due
     October 3, 1995  bearing  interest  rates of 5.7% and 5.76%,  respectively.
     These advances were renewed upon maturity.

     The Company is required to maintain  certain cash reserves  relating to its
     deposit  liabilities.  This requirement is ordinarily  satisfied by cash on
     hand.

                                       24    
                                                           
<PAGE>                                       
10.  INCOME TAXES

     The  Company is  permitted  under the  Internal  Revenue  Code to deduct an
     annual  addition  to an  allowance  for bad  debts in  determining  taxable
     income, subject to certain limitations.  The Company has generally used the
     percentage  of taxable  income  method to  calculate  this  addition.  This
     addition differs from the bad debt experience used for financial accounting
     purposes.  Bad debt  deductions  for income tax  purposes  are  included in
     taxable  income  of  later  years  only if the  bad  debt  reserve  is used
     subsequently for purposes other than to absorb bad debt losses. Because the
     Company  does not  intend to use the  reserve  for  purposes  other than to
     absorb bad debt losses, no deferred income taxes have been provided on that
     portion  which  existed as of September  30, 1988.  At September  30, 1996,
     retained earnings included approximately  $4,200,000  representing such bad
     debt deductions for which no deferred income taxes have been provided.

     During the year ended  September  30, 1996  legislation  was enacted  which
     eliminates  the use of the percentage of taxable income method to calculate
     the addition to the allowance  for bad debts for income tax purposes.  This
     is effective  October 1, 1996 with respect to the Company.  In addition the
     legislation  requires  that the  Company  include  in  taxable  income  the
     allowance  established  subsequent  to September 30, 1988.  This  allowance
     amounted to  approximately  $2,800,000  at  September  30, 1996 and will be
     included in taxable income in annual installments of approximately $470,000
     beginning  October 1, 1998. As the taxes with respect to this allowance are
     paid they will be added to deferred tax assets and, therefore,  the payment
     of these taxes should have no significant effect upon the Company's results
     of operations.

     Deferred income taxes reflect the net tax effects of temporary  differences
     between  the  carrying  amounts of assets  and  liabilities  for  financial
     reporting   purposes  and  the  amounts  used  for  income  tax   purposes.
     Significant components of the Company's deferred tax assets and liabilities
     as of September 30, 1996 and 1995 are as follows (in thousands):

                                                           1996    1995    
                                                      
Deferred tax assets:                                  
  SAIF special assessment-deductible in 1997              $ 620    $--
  MSP expense-deductible in 1997                            143     --
  Allowance for loan losses                                --         23
  Deferred loan fees and costs, net                        --         36
  Other                                                      65       90
                                                          -----    ----- 
                                                      
         Total deferred tax assets                          828      149
                                                          -----    ----- 
Deferred tax liabilities:                             
  Deferred loan fees and costs, net                         136     --
  Allowance for loan losses                                   6     --
  Tax over book depreciation                                114       74
  Dividends on FHLB stock                                   281      220
  Unrealized gain on securities available-for-sale          182       35
  Other                                                     169      274
                                                          -----    ----- 
         Total deferred tax liabilities                     888      603
                                                          -----    ----- 
                                                      
         Net deferred tax liabilities                     $ (60)   $(454)
                                                          =====    ===== 
                                       25        

<PAGE>
     The components of income taxes are as follows (in thousands):

                                                     Year Ended 
                                                    September 30,    
                                           ------------------------------
                                              1996       1995      1994
                                          
Currently payable                          $ 1,664    $ 1,044   $ 2,170
Deferred                                      (394)       591      (200)
                                           -------    -------   -------
                                          
                                           $ 1,270    $ 1,635   $ 1,970
                                           =======    =======   =======
                   
     Income taxes differ from the amounts  computed by applying the U.S. Federal
     income tax rate of 34% to earnings  before  income  taxes.  The reasons for
     these differences are as follows (in thousands):
                                                        
                                                       Year Ended
                                                      September 30,        
                                            -----------------------------
                                               1996       1995      1994
                                         
Taxes computed at statutory rates           $ 1,289    $ 1,622   $ 2,011
Increase (decrease) in taxes due to      
  miscellaneous items                           (19)        13       (41)
                                            -------    -------   -------
                                         
                                            $ 1,270    $ 1,635   $ 1,970
                                            =======    =======   =======
                                         
Actual tax rate                                34 %       34 %      33 %
                                               ==         ==        ==  

11.  NON-INTEREST EXPENSE

     Occupancy,   equipment  and  data  processing  expenses  consisted  of  the
     following:

                                                             Year Ended
                                                            September 30,
                                                     ---------------------------
                                                       1996     1995     1994

Occupancy, including depreciation, insurance,
   rent, utilities, etc                              $  571   $  425   $  368
Equipment, including depreciation, telephone, etc       523      396      358
Data processing                                         383      320      252
                                                     ------   ------   ------

                                                     $1,477   $1,141   $  978
                                                     ======   ======   ======

     Other operating expenses consisted of the following (in thousands):
                                 
                                                       Year Ended
                                                      September 30,
                                               ------------------------
                                                 1996     1995     1994
                                              
Stationary, printing and postage               $  392   $  331   $  223
Write-down of land                               --       --        282
Other                                             965      737      592
                                               ------   ------   ------
                                              
                                               $1,357   $1,068   $1,097
                                               ======   ======   ======
                                              
                                       26
<PAGE>                                        
                                  
12.  RETIREMENT PLAN

     The Company  participates  in a defined benefit  multi-employer  retirement
     plan which covers substantially all employees.  The plan is administered by
     the Financial Institutions Retirement Fund. Charges to operations under the
     plan  include  normal  cost.  There were no required  payments in the years
     ended September 30, 1996, 1995 and 1994. The market value of the net assets
     of the  retirement  fund  exceeds the  liability  of the  present  value of
     accrued benefits.  No separate information regarding the Company's share of
     the assets and liabilities of this plan is available.

13.  EMPLOYEE STOCK PLANS

     The  Company  maintains  an ESOP for the benefit of Teche  Federal  Savings
     Bank's employees who meet certain eligibility requirements.  The ESOP Trust
     acquired  332,337  shares of common stock in the Company's  initial  public
     offering with proceeds from a loan from the Company.  Teche Federal Savings
     Bank makes cash  contributions  to the ESOP on a basis sufficient to enable
     the ESOP to make the required loan payments to the Company.

     The note  payable  referred  to above  bears  interest  at the  prime  rate
     adjusted quarterly with interest payable quarterly and principal payable in
     annual installments of at least $332,337. The loan is secured by the shares
     of the stock purchased.

     As the debt is repaid, shares are released from collateral and allocated to
     qualified  employees based on the proportion of principal paid in the year.
     The Company  accounts for its ESOP in accordance with Statement of Position
     93-6.  Accordingly,  the shares  pledged as  collateral  are  reported as a
     reduction of stockholders'  equity in the consolidated  balance sheets.  As
     shares are  released  from  collateral,  the Company  reports  compensation
     expense  equal to the current  market  price of the shares,  and the shares
     become  outstanding  for  earnings  per share  computations.  Dividends  on
     allocated ESOP shares are recorded as a reduction of retained  earnings and
     dividends on unallocated ESOP shares are recorded as a reduction of debt.

     Compensation  expense related to the ESOP was $432,000 and $306,000 for the
     years ended  September  30,  1996 and 1995,  respectively.  Following  is a
     summary of shares held in the ESOP Trust as of September 30, 1996:

Shares released for allocation or committed to be released       57,234

Unreleased shares                                               275,103

Total ESOP shares                                               332,337
                                                             ----------

Market value of unreleased shares at September 30, 1996      $4,487,000
                                                             ==========

     On October 25, 1995,  the  stockholders  of the Company  approved the Teche
     Holding  Company 1995 Stock Option Plan (the "Plan") under which options to
     purchase  423,200  common  shares were granted to executive  employees  and
     directors of Teche Federal Savings Bank. The exercise price is equal to the
     market  price  ($13.875  per  share)  on the date of  grant  and 20% of the
     options are  exercisable  on the first  anniversary  date after the date of
     grant and 20% annually thereafter. All unexercised options expire ten years
     from the date of grant.  All such options are  outstanding at September 30,
     1996.

     On  October  25,  1995,  the  stockholders  of  the  Company  approved  the
     Management  Stock Plan  ("MSP")  under which  restricted  grants of 169,280
     shares were made to executive  employees  and  directors  of Teche  Federal
     Savings Bank.  Teche Federal  Savings Bank acquired the Company's  stock on
     the open market for the benefit of the recipients.  The recipients vest 20%
     annually beginning October 25, 1995 as long as

                                       27

<PAGE>
     they remain as Teche Federal Savings Bank directors or employees. The Board
     of  Directors  could  terminate  the MSP at anytime,  and if it did so, any
     nonvested  shares  would  revert to the  Company.  The  Company  recognizes
     compensation  expense  ratably  over  the  vesting  period  and the cost of
     unvested  shares is  reported as unearned  compensation  as a reduction  of
     stockholders'  equity.  All such grants are  outstanding  at September  30,
     1996.

14.  FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

     In the  normal  course of  business  the  Company  is a party to  financial
     instruments with off-balance  sheet risk to meet the financing needs of its
     customers.  The financial  instruments include commitments to extend credit
     and  commitments  to sell  loans.  Those  instruments  involve,  to varying
     degrees, elements of credit risk in excess of the amounts recognized in the
     consolidated  balance  sheets.  The contract  amounts of those  instruments
     reflect the extent of the involvement the Company has in particular classes
     of financial instruments.

     As of September  30,  1996,  the Company had made  various  commitments  to
     extend credit totalling approximately  $18,700,000 including $10,525,000 of
     the undisbursed portion of loans in process.  Most of these commitments are
     at fixed rates. The rates on fixed rate loan  commitments  range from 6.50%
     to 9.25% at September 30, 1996. The rates on variable rate loan commitments
     range from 5.875% to 8.625% at  September  30, 1996.  As of  September  30,
     1995,  such  commitments   totaled   approximately   $8,800,000   including
     $5,725,000 of the  undisbursed  portion of loans in process.  The Company's
     management  does not anticipate any material losses or gains as a result of
     these transactions.

     Commitments  to extend credit are  agreements to lend to a customer as long
     as there is no  violation of any  condition  established  in the  contract.
     Commitments  generally  have fixed  expiration  dates or other  termination
     clauses and may require payment of a fee. Since some of the commitments are
     expected to expire  without  being fully drawn upon,  the total  commitment
     amount   disclosed  above  does  not  necessarily   represent  future  cash
     requirements.  The Company evaluates each customer's credit worthiness on a
     case-by-case  basis.  The  amount of  collateral  obtained,  if  considered
     necessary by the Company upon extension of credit, is based on management's
     credit evaluation of the customer.

15.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following  methods and assumptions were used to estimate the fair value
     of each  class of  financial  instruments  for which it is  practicable  to
     estimate that value:

     Cash  -  For  those  short-term  instruments,  the  carrying  amount  is  a
     reasonable estimate of fair value.

     Investment and Mortgage-Backed Securities - For investment securities, fair
     value equals quoted market price, if available. If a quoted market price is
     not  available,  fair value is  estimated  using quoted  market  prices for
     similar securities.

     Loans - The fair value of loans is estimated by discounting the future cash
     flows  using the  current  rates at which  similar  loans  would be made to
     borrowers for the same remaining maturities.

     Deposits - The fair value of demand deposits, savings accounts, and certain
     money  market  deposits  is the amount  payable on demand at the  reporting
     date.  The fair  value  of  fixed-maturities  certificates  of  deposit  is
     estimated  using  the rates  currently  offered  for  deposits  of  similar
     remaining maturities.

     Advances from Federal Home Loan Bank - The face value of these  advances is
     a reasonable estimate of fair value.

                                       28
<PAGE>
     Commitments  - The fair  value of  commitments  to  extend  credit  was not
     significant.

     The estimated  fair values of the Company's  financial  instruments  are as
     follows at September 30, 1996 and 1995 (in thousands):

                                             1996                 1995
                                     --------------------  ---------------------
                                                Estimated             Estimated
                                      Carrying     Fair     Carrying    Fair
                                       Amount     Value      Amount     Value
Financial assets:
  Cash and certificates of deposit   $  7,986   $  7,986   $  6,990   $  6,990
  Investment and mortgaged-backed
    securities                         44,496     44,496     49,622     50,725

  Loans                               319,398    316,000    260,835    265,500
  Less: allowance for loan losses       3,182      3,182      2,966      2,966
                                     --------   --------   --------   --------
  Loans, net of allowance             316,216    312,818    257,869    262,534
                                     --------   --------   --------   --------

Financial liabilities:
  Deposits                            254,723    254,900    233,805    234,900
  Advances from Federal Home
     Loan Bank                         66,900     66,900     24,200     24,200

16.  RELATED PARTY TRANSACTIONS

     In the  ordinary  course of  business,  the Company  has  granted  loans to
     executive  officers and directors.  These loans were made on  substantially
     the  same  terms,  including  interest  rates  and  collateral,   as  those
     prevailing at the time for comparable  transactions with other persons. The
     amounts of these loans were not significant at September 30, 1996 or 1995.

     The Company has an  employment  agreement  with an executive  officer under
     which  the  Company  has  agreed  to  pay  the  executive   officer  annual
     compensation of $130,000 through December 31, 1997.

     The Company has severance agreements with the executive officer referred to
     above and  certain  other  executive  officers  under which the Company has
     agreed  to  aggregate  payments  of  approximately  $870,000  in the  event
     services of the executives  are terminated  following a "change in control"
     of the Company.

17.  SAIF SPECIAL ASSESSMENT AND REGULATORY CAPITAL

     On September  30, 1996  legislation  was enacted  which  requires  that the
     Company pay a SAIF special  assessment  based upon its deposits as of March
     31, 1995. The $1,824,000 cost of this special assessment was recorded as of
     September  30,  1996.  It is expected  that the  assessment  rate on future
     regular SAIF insurance premiums will be reduced.

     Teche Federal Savings Bank ("Bank") is required by law to maintain (i) core
     capital equal to 3% of adjusted total assets,  (ii) tangible  capital equal
     to 1.5% of adjusted total assets,  and (iii) total capital equal to 8.0% of
     risk-weighted assets.

                                       29
<PAGE>
     At  September  30,  1996,  the Bank's  actual  capital and its  statutorily
     required capital levels was as follows (in thousands):



                           Actual            Required             Excess
                     ----------------   -----------------   -----------------  
                      Amount       %      Amount      %      Amount       %  
                                                           
Core capital         $42,816     11.3    $11,360     3.0    $31,456      8.3
                                                           
Tangible capital     $42,816     11.3    $ 5,680     1.5    $37,136      9.8
                                                           
Risk based capital   $45,186     21.9    $16,498     8.0    $28,688     13.9
                                                     
     The Bank's core and tangible capital equal the amount of its  stockholders'
     equity ($43,103,000) less unrealized gains on securities available-for-sale
     ($287,000).  The  Bank's  risk-based  capital  equals  the  amount  of  its
     stockholder's equity ($43,103,000) plus a portion of its allowance for loan
     losses    ($2,578,000)    and   less   unrealized   gains   on   securities
     available-for-sale ($287,000) and certain assets ($208,000).

     The Company's management believes that, under the current regulations,  the
     Bank  will  continue  to  meet  its  minimum  capital  requirements  in the
     foreseeable future. However, events beyond the control of the Company, such
     as increased  interest  rates or a downturn in the economy in the Company's
     area could adversely affect future earnings and, consequently,  the ability
     of the Bank to continue to exceed its future minimum capital requirements.

     The  Federal  Deposit  Insurance   Corporation   Improvement  Act  of  1991
     ("FDICIA")  required  each  federal  banking  agency  to  implement  prompt
     corrective actions for institutions that it regulates.  In response to this
     requirement,  OTS adopted  final rules,  based upon  FDICIA's  five capital
     tiers.  The rules provide that a savings bank is "well  capitalized" if its
     total  risk-based  capital  ratio is 10% or greater,  its Tier 1 risk-based
     capital  ratio is 6% or  greater,  its  leverage  is 5% or greater  and the
     institution is not subject to a capital  directive.  Under this regulation,
     the Bank is deemed to be "well capitalized" as of September 30, 1996.

18.  SUMMARIZED  FINANCIAL  INFORMATION OF TECHE HOLDING COMPANY (PARENT COMPANY
     ONLY)

                              Balance Sheets

                                                1996           1995
Assets:
  Investment in subsidiary                   $43,103*        $41,948*  
  Due from subsidiary                          5,250*         15,597*
  Due from ESOP                                2,750*          3,128*
  Other                                        1,242           1,775
                                             -------         -------
                                                           
                                             $52,345         $62,448
                                             =======         =======
                                                            
Liabilities and stockholders' equity:                       
  Accrued expenses                           $    63         $   540
  Stockholders' equity                        52,282          61,908
                                             -------         -------
                                                            
                                             $52,345         $62,448
                                             =======         =======
                                                  

                                      30
<PAGE>

                             Statements of Earnings

                                             Year Ended September 30
                                             1996                1995

Equity in earnings of subsidiary            $2,194 *           $ 2,817*
Interest income from subsidiary                937 *               499*
Management fee to subsidiary                  (373)*              --
Other income                                   (62)                  7*
Income tax expense                            (175)               (186)
                                           -------             -------
                                                            
Net earnings                               $ 2,521             $ 3,137
                                           =======             =======
                                            

                            Statements of Cash Flows
<TABLE>
<CAPTION>
 
                                                                 Year Ended September 30


<S>                                                              <C>          <C>     
Cash Flows from Operating Activities                             $    200     $    239

Cash Flows from Investing Activities:
  Investment in subsidiary                                           --        (20,733)*
  Loan to subsidiary                                                 --        (15,500)*
  Repayment of loan by subsidiary                                  10,250*        --   
                                                                 --------     --------
           Net cash provided by (used in) investing activities     10,250      (36,233)
                                                                 --------     --------

Cash Flows from Financing Activities:
  Sale of common stock                                               --         37,977
  Dividends paid                                                   (2,313)        (488)
  Purchase of common stock for treasury                            (9,149)        --   
                                                                 --------     --------
           Net cash provided by (used in) financing activities    (11,462)      37,489
                                                                 --------     --------

Net increase (decrease) in cash and cash equivalents               (1,012)       1,495

Cash and cash equivalents, beginning of year                        1,495         --   
                                                                 --------     --------
Cash and cash equivalents, end of year                           $    483     $  1,495
                                                                 ========     ========
</TABLE>


*Eliminated in consolidation

                                   * * * * * *

                                       31


<PAGE>
<TABLE>
<CAPTION>



<S>                                        <C>
Directors of Teche Holding Company         INDEPENDENT AUDITORS
and/or Teche Federal Savings Bank          ----------------------------------------
-----------------------------------------     Deloitte and Touche LLP
    W. Ross Little, Chairman                  One Shell Square
    Patrick O. Little, President              701 Poydras Street
    Mrs. Mary Coon Biggs                      New Orleans, LA  70139
    Donelson T. Caffery, Jr.
    Henry L. Friedman                      LEGAL COUNSEL
    Mrs. Virginia Kyle Hine                ----------------------------------------
    Dr. Thomas F. Kramer                      Biggs Trowbridge, Supple and Cremaldi
    W. Ross Little, Jr.                       Lawless Building
    Robert E. Mouton                          Willow Street
    Christian L. Olivier, Jr.                 Franklin, LA  70538

                                           SPECIAL COUNSEL
Advisory Directors of                      ---------------------------------------
Teche Federal Savings Bank                    Malizia, Spidi, Sloane & Fisch, P.C.
----------------------------------            One Franklin Square
                                              1301 K. Street, N.W., Suite 700 East
    Michel H. Claudet                         Washington, D.C. 20005
    Charles H. Davidson
    Nelson D. Henry                        REGISTRAR AND STOCK
    H. Chris Ibert                         TRANSFER AGENT
    Robert Judice, Jr.                     ---------------------------------------
    W. Ross Little, Jr.                       Registrar and Transfer Company
    Maunette B. Risher                        10 Commerce Drive
                                              Cranford, NJ  07016-3572
                                              (800) 525-7686
                                              Fax (908) 272-1006
</TABLE>

<TABLE>
<CAPTION>

Officers of Teche Federal Savings Bank
--------------------------------------------------------------------------------
<S>                                     <C>
    W. Ross Little ...................  Chairman
    Patrick O. Little ................  President/CEO
    Robert E. Mouton .................  Executive Vice President, Lafayette area Manager
    Faye L. Ibert ....................  Senior Vice-President
    J.L. Chauvin .....................  Vice-President, Chief Financial Officer
    Stanley Plessela .................  Vice-President, St Mary-Terrebonne Area Manager
    Van E. Clements, III .............  Vice President, Morgan City Manager
    D. Ross Landry ...................  Vice-President, New Iberia Manager
    Darryl Broussard .................  Vice-President, Lending
    James P. Hamilton ................  Assistant Vice-President, Breaux Bridge Manager
    Eddie LeBlanc ....................  Internal Auditor
    Angela Badeaux ...................  Assistant Vice-President
    Elaine G. Cockerham ..............  Assistant Vice-President
    Lydia B. Hebert ..................  Assistant Vice-President
    Brenda Henson ....................  Assistant Vice-President
    Carol Nini .......................  Assistant Vice-President
    Nancy Terrell ....................  Assistant Vice-President
    Karen G. Verret ..................  Assistant Vice-President
    W. Ross Little, Jr. ..............  Marketing Director, Secretary

                                       32
</TABLE>