SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K
(Mark One)
         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the fiscal year ended                September 30, 1998             
                          --------------------------------------------------

                                     - or -

|_|      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the transition period from                     to                         
                               -------------------    -------------------
Commission Number:  0-25538

                              TECHE HOLDING COMPANY
                      -----------------------------------
             (Exact name of Registrant as specified in its Charter)

               Louisiana                                         72-1287456  
---------------------------------------------               --------------------
(State or other jurisdiction of incorporation                (I.R.S. Employer
  or organization)                                           Identification No.)

211 Willow Street                                                   70538   
----------------------------------------                     -------------------
(Address of principal executive offices)                          Zip Code

Registrant's telephone number, including area code:     (318) 828-3212  
                                                        --------------

Securities registered pursuant to Section 12(b) of the Act:

    Title of Each Class                Name of Each Exchange on which Registered
    -------------------                -----------------------------------------

    Common Stock, par value            American Stock Exchange
    $.01 per share

Securities registered pursuant to Section 12(g) of the Act:          None    
                                                             -------------------

     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. YES  X     NO
                                              ---       ---

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,  and
will not be  contained,  to the best of  registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]

         The aggregate  market value of the voting stock held by  non-affiliates
of the Registrant,  based on the closing price of the Registrant's  Common Stock
as quoted on the American  Stock  Exchange,  Inc.,  on December  18,  1998,  was
$36,189 million (2,392,655 shares at $15.125 per share).

     As of December 18, 1998 there were issued and outstanding  3,028,480 shares
of the Registrant's Common Stock. 

                      DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions  of the Annual  Report to  Stockholders  for the Fiscal Year Ended
     September 30, 1998. (Parts I, II and IV)

2.   Portions  of  the  Proxy   Statement   for  the  1999  Annual   Meeting  of
     Stockholders. (Part III)


<PAGE>


<TABLE>
<CAPTION>

                                                       INDEX
PART I                                                                                                           Page
------                                                                                                           ----
<S>              <C>                                                                                             <C>  
Item 1.           Business.....................................................................................     1

Item 2.           Properties...................................................................................    29

Item 3.           Legal Proceedings............................................................................    29

Item 4            Submission of Matters to a Vote of Security-Holders..........................................    29

PART II

Item 5.           Market for Registrant's Common Equity and Related Stockholder Matters........................    29

Item 6            Selected Financial Data......................................................................    29

Item 7.           Management's Discussion and Analysis of Financial Condition and
                  Results of Operations........................................................................    30

Item 7A.          Quantitative and Qualitative Disclosures About Market Risk...................................    30

Item 8.           Financial Statements and Supplementary Data..................................................    30

Item 9.           Changes In and Disagreements with Accountants on Accounting and Financial
                  Disclosure...................................................................................    30

PART III

Item 10.          Directors and Executive Officers of the Registrant............................................   30

Item 11.          Executive Compensation........................................................................   30

Item 12.          Security Ownership of Certain Beneficial Owners and Management................................   30

Item 13.          Certain Relationships and Related Transactions................................................   30

PART IV

Item 14           Exhibits, Financial Statement Schedules and Reports on Form 8-K...............................   31
</TABLE>


<PAGE>



PART I

Item 1.  Business
-----------------

General

         Teche  Holding  Company  (the  "Company"  or  the  "Registrant")  is  a
Louisiana  corporation  organized  in December  1994 at the  direction  of Teche
Federal  Savings  Bank (the  "Bank" or "Teche  Federal")  to acquire  all of the
capital  stock that the Bank issued in its  conversion  from the mutual to stock
form of  ownership  (the  "Conversion").  References  to the  "Bank"  or  "Teche
Federal" herein, unless the context requires otherwise,  refer to the Company on
a consolidated basis.

         The  Bank is a  community-oriented  federal  savings  bank  offering  a
variety of  financial  services  to meet the local  banking  needs of St.  Mary,
Lafayette,  Iberia, St. Martin and Terrebonne Parishes,  Louisiana (the "Primary
Market  Area").  Teche  Federal  conducts its  business  from its main office in
Franklin,  Louisiana and eleven  branch  offices  located in Morgan City,  Bayou
Vista,  New Iberia (two offices),  Lafayette  (two  offices),  Breaux Bridge and
Houma  (three  offices),  and  Thibodeaux,  Louisiana.  A new  branch  office in
Lafayette will be completed in the first half of 1999 and a second branch office
is planned  for the  Franklin  market.  The Bank  expects to make an  additional
investment of  approximately  $2.6 million  related to the branches in Lafayette
and Franklin.

         The  Company and the Bank are  subject to  regulation  by the Office of
Thrift Supervision ("OTS"),  the Federal Deposit Insurance  Corporation ("FDIC")
and the Securities and Exchange Commission ("SEC").

Market Area/Competition

         Teche  Federal's  home office is located in Franklin,  St. Mary Parish,
Louisiana,  which is  approximately  50 miles  southeast of Lafayette,  90 miles
south of Baton Rouge and 120 miles west of New Orleans.  The limited  population
of Franklin and St. Mary Parish  (approximately 9,000 and 64,000,  respectively)
has,  over the years,  caused the Bank to expand  through the  establishment  of
branch offices in the contiguous  Parishes of Iberia, St. Martin,  Lafayette and
Terrebonne.

         The local economy is dependent to a certain  extent on the oil and gas,
seafood and agricultural (primarily sugar cane) industries. These industries are
cyclical in nature and have a direct impact on the level and  performance of the
Bank's loan portfolio.  Economic downturns in the past have caused a decrease in
loan  originations  and  an  increase  in  nonperforming  assets.  However,  the
metropolitan Lafayette area, which is the fourth largest city in Louisiana,  has
experienced  sustained  growth and is the home to the University of Southwestern
Louisiana,  several hospitals and various small-to medium-size  businesses,  and
has provided the Bank with increased lending opportunities.

         The  Bank  encounters  strong  competition  both in the  attraction  of
deposits  and  origination  of real estate and other  loans.  Competition  comes
primarily  from  other  financial  institutions  in  its  Primary  Market  Area,
including  savings  banks,  commercial  banks and savings  associations,  credit
unions and investment  and mortgage  brokers in serving its Primary Market Area.
The  Bank  also  originates  mortgage  loans  through  its  branch  offices  and
affiliations  with mortgage  originators,  secured by properties  throughout its
Primary Market Area and other locations in Louisiana.


                                        1

<PAGE>




Lending Activities

         Analysis of Loan  Portfolio.  Set forth below is selected data relating
to the composition of the Bank's loan portfolio at the dates indicated.

<TABLE>
<CAPTION>

                                                                          At September 30,
                                          1998               1997               1996                 1995                 1994
                                 -------------------- ------------------ --------------------- ------------------  ----------------
                                             Percent             Percent            Percent             Percent           Percent
                                     Amount  of Total   Amount  of Total   Amount  of Total     Amount  of Total   Amount of Total
                                     ------  -------  --------  --------   ------  --------     ------  --------   ------ --------
                                                                        (Dollars in Thousands)
<S>                               <C>        <C>     <C>         <C>    <C>         <C>      <C>         <C>    <C>        <C>   
Residential real estate
mortgage loans:
  One- to four-family............  $301,071   84.27%  $310,306    86.25% $288,109    87.03%   $234,329    87.49% $213,325   86.27%
  Construction/permanent loans...    11,867    3.32     11,067     3.08    13,740     4.15       8,097    3.02     11,676   4.72
  Multi-family...................     1,934     .54      2,839      .79     3,006      .91       2,871    1.07      2,144    .87
Commercial real estate loans.....     6,261    1.75      6,897     1.92     7,346     2.22       7,540    2.82      7,152   2.89
Land loans.......................     1,604     .45      2,634      .73     2,844      .86       2,288     .85      1,858    .75

Consumer loans:
  Loans on savings accounts......     5,881    1.65      5,984     1.66     5,657     1.71       6,260    2.34      5,312   2.15
  Other..........................    28,643    8.02     20,049     5.57    10,343     3.12       6,441    2.41      5,796   2.35
                                    -------  ------   --------   ------  --------   ------     -------  ------   -------- ------
       Total loans...............   357,261  100.00%   359,776   100.00%  331,045   100.00%    267,826  100.00%   247,263 100.00%
                                    =======  ======              ======             ======              ======            ======
Less:
  Allowance for loan losses......     3,515              3,355              3,182                2,966              2,778
  Deferred loan fees, net........       580                860              1,122                1,266              1,308
  Undisbursed portion of 
    loans-in-process.............     7,994              8,686             10,525                5,725              9,633
                                    -------           --------           --------             --------           --------
        Net loans................  $345,172           $346,875           $316,216             $257,869           $233,544
                                    =======            =======           ========              =======            =======
</TABLE>




                                        2

<PAGE>



         Origination,  Purchase and Repayment of Loans. The following table sets
forth the Bank's loan  originations and loan purchases and principal  repayments
for the periods indicated.

<TABLE>
<CAPTION>

                                                                         Year Ended September 30,
                                                 ---------------------------------------------------------------------------
                                                     1998            1997           1996             1995          1994
                                                     ----            ----           ----             ----          ----
                                                                                 (In Thousands)
<S>                                               <C>             <C>             <C>              <C>             <C>     
Total gross loans receivable at
 beginning of year..........................      $359,776        $331,045        $267,826         $247,263        $219,007
                                                   =======         =======         =======          =======         =======

Loans originated and purchased:
  One- to four-family residential...........        43,142          49,705          70,730           33,010        $ 36,702
  Residential construction/permanent(1).....        17,118          18,968          23,049           15,110          22,933
  Multi-family residential..................            70             167              --               --             268
  Land and non-residential real estate......         1,901           1,271           3,579            1,970           1,601
  Consumer loans............................        24,393          16,889          11,402           11,280           8,108
                                                    ------          ------         -------           ------           -----
      Total loans originated................        86,624          87,000         108,760           61,370          69,612
                                                    ------          ------         -------           ------          ------
Reductions in principal - primarily due
 to loan repayments and prepayments ........       (89,139)        (58,269)        (45,541)         (40,807)        (41,356)
                                                   -------         -------         -------          -------         -------

Net loan activity...........................       $(2,515)       $ 28,731        $ 63,219         $ 20,563        $ 28,256
                                                    ======         =======         =======          =======         =======

Total gross loans receivable at end of
 year.......................................      $357,261        $359,776        $331,045         $267,826        $247,263
                                                   =======         =======         =======          =======         =======
</TABLE>

---------------------------
(1)      Construction/permanent  loans are  primarily  originated  for permanent
         financing to individuals.  See "--  Residential  Construction/Permanent
         Loans."  These loans  generally do not pay off at  completion,  but are
         automatically  transferred to the one- to four-family  residential loan
         portfolio.

         Loan Purchases.  While the Bank primarily focuses on the origination of
one- to  four-family  residential  mortgages,  in 1998 the Bank  purchased  $2.7
million of performing  fixed-rate mortgage loans from financial  institutions in
south Louisiana.



                                        3

<PAGE>



         Loan Maturity  Tables.  The following  table sets forth the maturity of
the Bank's loan  portfolio  at September  30,  1998.  The table does not include
prepayments or scheduled principal  repayments.  Adjustable-rate  mortgage loans
are shown as maturing based on contractual maturities.

<TABLE>
<CAPTION>
                                     One- to   Residential                                      All
                                      Four-    Construction/ Multi-  Commercial                Other
                                     Family     Permanent    Family  Real Estate    Land       Loans     Total
                                     ------     ---------    ------  -----------    ----       -----     -----
                                                                   (In Thousands)
<S>                                  <C>        <C>        <C>        <C>        <C>        <C>        <C>     
Amounts due:
  1 year or less ..................   $    153   $   --     $   --     $     18   $      6   $  4,073   $  4,250
                                      --------   --------   --------   --------   --------   --------   --------
  After 1 year:
    More than 1 year to 3 years ...      1,441       --         --          496         59      5,312      7,308
    More than 3 years to 5 years ..      3,992       --           95        384        264      9,016     13,751
    More than 5 years to 10 years .     46,132       --          347      1,745        637     14,620     63,481
    More than 10 years to 20 years     107,903      1,388        645      3,291        572      1,260    115,059
    More than 20 years ............    141,450     10,479        847        327         66        243    153,412
                                      --------   --------   --------   --------   --------   --------   --------

      Total due after September 30,
         1998 .....................    300,918     11,867      1,934      6,243      1,598     30,451    353,011
                                      --------   --------   --------   --------   --------   --------   --------

      Total amount due ............   $301,071   $ 11,867   $  1,934   $  6,261   $  1,604   $ 34,524   $357,261
                                      ========   ========   ========   ========   ========   ========   ========

</TABLE>

         The following table sets forth the dollar amount of all loans due after
September  30, 1998,  which have  pre-determined  interest  rates and which have
floating or adjustable interest rates.

                                                       Floating or
                                           Fixed       Adjustable
                                           Rates        Rates (1)        Total
                                           -----        ---------        -----
                                                     (In Thousands)

One- to four-family..................... $154,872        $146,045      $300,918
Residential construction/permanent......    1,880           9,987        11,867
Other...................................   34,585           5,641        40,226
                                         --------         -------       -------
      Total.............................$ 191,337        $161,674      $353,011
                                         ========         =======       =======


--------------------
(1)  Many of these  adjustable-rate  loans have initial  fixed terms of three to
     ten  years,  with  rates  adjusting  annually  thereafter.  See "-- One- to
     Four-Family Residential Loans."

         One- to Four-Family  Residential Loans. The primary lending activity of
Teche  Federal  is  the  origination  of  one-  to  four-family  owner-occupied,
residential  mortgage loans,  secured by property  located in the Bank's Primary
Market Area.


                                        4

<PAGE>



         Teche  Federal  generally   originates   single-family  owner  occupied
residential  mortgage  loans in amounts up to 80% of the lower of the  appraised
value  or  selling  price of the  property  securing  the  loan.  The Bank  also
originates  such loans in amounts up to 95% of the lower of the appraised  value
or selling  price of the  mortgaged  property,  provided  that private  mortgage
insurance  is  provided  on the  amount in  excess  of 80% of the  lesser of the
appraised value or selling price.

         The Bank  currently  offers  ARMs  with  terms  of up to 30 years  that
initially adjust on the first,  third, fifth or tenth year after origination and
annually  thereafter.  The Bank began offering ARMs in 1981. The Bank originated
$36.4  million of ARMs during the year ended  September 30, 1998, of which $21.3
million  will first  adjust  annually  after five  years.  The  initial  rate is
determined  by the Bank in  accordance  with  market  and  competitive  factors.
Historically,  the  predominant  index was based on the  monthly  median cost of
funds at all SAIF insured  financial  institutions.  For ARMs  originated  after
December 31, 1994,  the Bank uses an index based on the one-year  U.S.  Treasury
Bill rate  adjusted to constant  maturity.  The terms and  conditions of the ARM
loans held by the Bank are varied,  partially due to changing market  conditions
and  partially due to the  acquisition  by the Bank of loans of First Federal in
Breaux  Bridge  from the  RTC,  Community  Homestead  in Houma  and  other  loan
purchases.  The Bank's current ARM originations  adjust by a maximum of 2.0% per
adjustment, with a current lifetime cap of 11.875%.

         The Bank  offers  fixed-rate  mortgages  with  terms of up to 30 years,
which amortize monthly.  Interest rates charged on fixed-rate mortgage loans are
competitively  priced based on market  conditions  and the Bank's cost of funds.
The Bank  originates  and  holds  its  fixed-rate  mortgage  loans as long  term
investments. Most loans are originated in conformance with the Federal Home Loan
Mortgage  Corporation  ("FHLMC") and the Federal National  Mortgage  Association
("FNMA")  guidelines  and can therefore be sold in the  secondary  market should
management deem it necessary.  The Bank  originated  $20.9 million of fixed-rate
mortgage loans during the year ended September 30, 1998.

         The Bank offers  home  equity  loans on single  family  residences.  At
September 30, 1998, home equity mortgage loans totaled $15.6 million.  While the
Bank does offer adjustable rate home equity lines of credit, the majority of the
home  equity  portfolio  have  fixed  rates with a maximum  term of 15 years.  A
variety of home equity loan  programs  are offered  including  combined  loan to
values  up to  125.00%.  Creditworthiness,  capacity,  and loan to value are the
primary factors considered during underwriting. To offset additional credit risk
and higher  combined  loan to values,  the Bank reduces loan terms and increases
loan yields.

         Residential Construction/Permanent Loans. The Bank's construction loans
have  primarily been made to finance the  construction  of  single-family  owner
occupied residential  properties and, to a limited extent, single family housing
for sale by  contractors.  Construction/permanent  loans  generally  are made to
customers   of  the  Bank  in  its  Primary   Market   Area.   The  Bank  offers
construction/permanent  loans in amounts up to 80% of the appraised value of the
property  securing the loan.  Loan  proceeds  are  disbursed  in  increments  as
construction progresses and as inspections warrant. Construction/permanent loans
to individuals generally do not pay off at completion of the construction phase,
but are automatically  transferred to the Bank's one- to four-family residential
portfolio.  These  single-family  residential  loans are structured to allow the
borrower to pay interest only on the funds advanced for the  construction  for a
period of up to nine  months  at the end of which  time the loan  converts  to a
permanent  mortgage.  While  construction  lending is  generally  considered  to
involve  a  higher  degree  of  risk  than  financing  of  existing  residential
properties,  at  September  30,  1998,  no  construction/permanent   loans  were
delinquent.

     Multi-Family  and Commercial Real Estate Loans.  The Bank has  historically
originated a limited amount of loans secured by multi-family and commercial real
estate, including non-owner

                                        5

<PAGE>



occupied residential multi-family dwelling units (more than four units), as well
as professional office buildings and apartment complexes.

         The Bank generally  originates  multi-family and commercial real estate
loans up to 70% of the appraised  value of the property  securing the loan.  The
Bank's  philosophy to originate  commercial real estate and  multi-family  loans
only to borrowers  known to the Bank and on properties  in its market area.  The
multi-family and commercial real estate loans in the Bank's portfolio  generally
consist of fixed-rate and ARMs which were originated at prevailing  market rates
for terms up to 15 years.

         Loans secured by multi-family  and commercial real estate are generally
larger and involve a greater degree of risk than one- to four-family residential
mortgage loans.  Of primary  concern in multi-family  and commercial real estate
lending  is the  borrower's  creditworthiness,  the  feasibility  and cash  flow
potential of the project, and the outlook for successful operation or management
of the  properties.  As a result,  repayment  of such  loans may be subject to a
greater extent than residential  real estate loans to adverse  conditions in the
real estate market or the economy. In accordance with the Bank's  classification
of assets policy and procedure, the Bank requests annual financial statements on
major loans secured by multi-family and commercial real estate. At September 30,
1998 the aggregate balance of the five largest  multi-family and commercial real
estate loans totaled $2.0 million with no single loan larger than $748,000,000.

     Land Loans.  At September 30, 1998,  the Bank had $1.6 million  invested in
residential lot loans to individuals.

         Consumer Loans. The Bank also offers loans in the form of loans secured
by deposits, home equity loans, automobile loans, mobile home loans, credit card
loans and unsecured personal consumer loans.  Federal regulations allow the Bank
to make secured and unsecured consumer loans of up to 35% of the Bank's assets.

         The Bank originates  consumer loans in order to provide a wide range of
financial  services to its  customers and because the shorter terms and normally
higher  interest  rates on such loans help maintain a profitable  spread between
its average loan yield and its cost of funds.  In connection  with consumer loan
applications,  the Bank  verifies  the  borrower's  income and  reviews a credit
bureau report.  In addition,  the  relationship  of the loan to the value of the
collateral is considered.

         Loans  secured by deposits at the Bank are  typically  made for no more
than 90% of the deposit  and at an  interest  rate 2% above the rate paid on the
deposit.  At September  30, 1998,  the Bank had $5.8 million of loans secured by
deposits.

         Teche  Federal also  originates  automobile  and mobile home loans.  At
September 30, 1998,  $5.2 million and $.5 million  consisted of  automobile  and
mobile home loans, respectively.

         The  Bank  has  recently  instituted  a  credit  card  program  whereby
customers are offered  revolving credit through Teche Federal credit cards which
are serviced by a third-party  vender.  At September 30, 1998, such credit cards
had a balance of $1.6 million.

         Consumer  loans tend to be  originated  at higher  interest  rates than
conventional residential mortgage loans and for shorter terms which benefits the
Bank's interest rate risk management.  However, consumer loans generally involve
more risk than first mortgage one- to four-family residential real estate loans.
Repossessed  collateral for a defaulted loan may not provide an adequate  source
of repayment  of the  outstanding  loan  balance as a result of damage,  loss or
depreciation, and the remaining deficiency

                                        6

<PAGE>



often does not  warrant  further  substantial  collection  efforts  against  the
borrower.  In  addition,  loan  collections  are  dependent  on  the  borrower's
continuing  financial  stability,  and  thus  are more  likely  to be  adversely
affected by job loss,  divorce,  illness or personal  bankruptcy.  Further,  the
application  of various  state and  federal  laws,  including  federal and state
bankruptcy  and  insolvency  law, may limit the amount  which may be  recovered.
These loans may also give rise to defenses by the borrower  against the Bank and
a borrower may be able to assert  against the Bank claims and defenses  which it
has against the seller of the underlying  collateral.  In underwriting  consumer
loans,  the Bank considers the  borrower's  credit  history,  an analysis of the
borrower's  income  and  ability  to  repay  the  loan,  and  the  value  of the
collateral.  The Bank's risks  associated  with consumer loans have been further
limited by the modest  amount of consumer  loans made by the Bank.  At September
30, 1998, the Bank had  approximately  $0.1 million in consumer loans delinquent
more than 90 days.

         Loan Approval  Authority and  Underwriting.  All mortgage loans greater
than $227,150,  including sale & assumptions and loans to facilitate the sale of
REO, must be approved by a minimum of two members of the Senior Loan  Committee.
All mortgage  loans up to and including  $227,150 must be approved by one member
of the Loan Committee.

         Certain loan officers and members of  management  approved by the Board
are authorized to approve  consumer loans.  The amounts which any one person may
approve for a secured consumer loan range from $25,000 to $100,000. The range of
lending  authority  for unsecured  loans is $5,000 to $25,000.  Secured loans in
excess of $100,000 and unsecured  loans in excess of $25,000 must be approved by
two members of the Loan Committee.

         One-  to   four-family   residential   mortgage   loans  are  generally
underwritten  according to FHLMC and FNMA guidelines,  generally utilizing their
approved mortgage documents.  For all loans originated by the Bank, upon receipt
of a completed loan application from a prospective  borrower, a credit report is
ordered,  income and certain  other  information  is verified and, if necessary,
additional financial  information is requested.  An appraisal of the real estate
intended to secure the proposed loan is required which typically is performed by
an  independent  appraiser  designated and approved by the Board of Directors of
the Bank. The Bank makes  construction/permanent loans on individual properties.
Funds  advanced  during  the  construction  phase are held in a  loan-in-process
account and disbursed  based upon various stages of completion.  The independent
appraiser  determines the stage of completion based upon its physical inspection
of the construction.

         The  Bank  generally  requires  title  insurance  for  its  1-4  family
residential  loans with loan amounts of $150,000 or greater.  Title insurance is
required  for all  construction  loans,  regardless  of loan  amount.  The  Bank
requires  that  fire  and  extended   coverage   casualty   insurance  (and,  if
appropriate,  flood  insurance) be maintained in an amount at least equal to the
outstanding loan balance.

         It is the Bank's  policy to  require  borrowers  to advance  funds on a
monthly basis  together with each payment of principal and interest to an escrow
account  from which the Bank makes  disbursements  for items such as real estate
taxes and hazard insurance premiums.

         Mortgage  loans  originated by the Bank generally  include  due-on-sale
clauses  which  provide  the Bank  with the  contractual  right to deem the loan
immediately due and payable in the event that the borrower  transfers  ownership
of the property without the Bank's consent.

     Loan  Commitments.  Teche Federal  issues  written,  formal  commitments to
prospective borrowers on all real estate approved loans. The commitment requires
acceptance  within 30 days of the date of  issuance.  Commitments  for  consumer
loans, which are not given in writing, expire 30 days after

                                        7

<PAGE>



issuance.  At September 30, 1998,  the Bank had $13.9 million of  commitments to
originate mortgage loans,  including $8.0 million of the undisbursed  portion of
loans-in-process.

         Loans-to-One  Borrower.  Savings  associations cannot make any loans to
one  borrower  in an amount  that  exceeds in the  aggregate  15% of  unimpaired
capital and retained income on an unsecured basis and an additional amount equal
to 10% of  unimpaired  capital  and  retained  income if the loan is  secured by
readily  marketable  collateral  (generally,  financial  instruments,  not  real
estate) or  $500,000,  whichever  is  higher.  The  Bank's  maximum  loan-to-one
borrower limit was approximately $5.6 million as of September 30, 1998.

         At  September  30,  1998,  the  Bank's  largest  lending   relationship
consisted of a $747,800  construction/permanent loan to a non-profit corporation
for the  construction  of a 60-apartment  complex for the elderly and low income
families in Alexandria,  Louisiana.  This project was funded with a $1.2 million
grant from the Affordable  Housing  Program of the FHLB of Dallas and a $755,000
loan from the Bank which is fully  guaranteed by the U.S.  Department of Housing
and Urban  Development  ("HUD").  The project is currently in use. The next five
largest  lending  relationships  at September  30, 1998 ranged from  $286,000 to
$342,000  and were  secured  primarily by  apartment  complexes  and  commercial
properties  located in the Bank's Primary Market Area. Of these loans,  $300,000
is  classified  as  substandard.  See  "--  Non-performing  and  Problem  Assets
--Classified Assets."

Non-Performing and Problem Assets

         General. Teche Federal's Primary Market Area is dependent, to a certain
extent,  on the oil and gas,  seafood and  agricultural  (primarily  sugar cane)
industries.  These industries are cyclical in nature and have a direct impact on
the level and performance of the Bank's loan portfolio. In the mid-1980s,  after
sharp  increases in interest  rates,  oil prices fell,  causing severe  economic
problems in Louisiana and the Bank's Primary Market Area.  During this time, the
Bank experienced a sharp increase in non-performing assets and real estate owned
("REO").  The Bank's Primary Market Area has, to a certain  extent,  diversified
somewhat since the mid-1980's, however, management continues to monitor its loan
portfolio  and has  instituted  various  underwriting  standards  to address any
future economic downturns.

         Non-Performing Assets and Delinquencies.  When a borrower fails to make
a required  payment on a loan and does not cure the  delinquency  promptly,  the
loan is classified as delinquent.  In this event, the normal procedure  followed
by the Bank is to make contact with the borrower at  prescribed  intervals in an
effort to bring the loan to a current status.  In most cases,  delinquencies are
cured promptly. If a delinquency is not cured, the Bank normally, subject to any
required prior notice to the borrower,  commences  foreclosure  proceedings,  in
which the property may be sold. In foreclosure  sale, the Bank may acquire title
to the property through  foreclosure,  in which case the property so acquired is
offered for sale and may be financed by a loan involving terms more favorable to
the borrower than those normally  offered.  Any property acquired as a result of
foreclosure or by deed in lieu of foreclosure is classified as real estate owned
until such time as it is sold or  otherwise  disposed  of by the Bank to recover
its  investment.  Any real estate  acquired in  settlement of loans is initially
recorded  at  the  estimated  fair  value  at the  time  of  acquisition  and is
subsequently  reduced by additional  allowances which are charged to earnings if
the  estimated  fair value of the  property  declines  below its initial  value.
Subsequent  costs directly  relating to development  and improvement of property
are  capitalized  (not to exceed fair value),  whereas  costs related to holding
property are expensed.

         The Bank's general policy is to place a loan on nonaccrual  status when
the loan becomes 90 days  delinquent  or otherwise  demonstrates  other risks of
collectibility. Interest on loans that are contractually

                                        8

<PAGE>



90 days or more past due is reserved through an allowance account. The allowance
is established by a charge to interest  income equal to all interest  previously
accrued,  and  interest  is  subsequently  recognized  only to the  extent  cash
payments are received until, in management's judgment, the borrower's ability to
make periodic  interest and principal  payments is back to normal, in which case
the loan is returned to accrual status.

         The following table sets forth information regarding non-accrual loans,
real estate owned ("REO"),  and loans that are 90 days or more delinquent but on
which the Bank was accruing  interest at the dates  indicated  and  restructured
loans. There are no restructured loans other than those included in the table.

<TABLE>
<CAPTION>
                                                                                      At September 30,
                                                                  ---------------------------------------------------
                                                                      1998       1997      1996       1995    1994
                                                                      ----       ----      ----       ----    ----
                                                                                   (Dollars in thousands)
<S>                                                               <C>         <C>        <C>       <C>        <C> 
Loans accounted for on a non-accrual basis:
 Mortgage loans:
   Permanent loans secured by one- to four-family
     residences ................................................   $    640    $ 1,028    $  544    $   584    $578
   All other mortgage loans ....................................       --         --        --           59     198
 Consumer ......................................................         83         88        15         19      50
                                                                   --------    -------    ------    -------    ----
      Total ....................................................   $    723    $ 1,116    $  559    $   662    $826
                                                                   ========    =======    ======    =======    ====

Accruing loans which are contractually past due 90 days or more:
 Mortgage loans:
   Permanent loans secured by one- to four-family
     residences ................................................       --         --        --         --       --
   All other mortgage loans ....................................       --         --        --         --       --
 Consumer ......................................................       --         --        --         --       --
                                                                   --------    -------    ------    -------    ----
      Total ....................................................   $   --      $  --      $ --      $  --      $--
                                                                   ========    =======    ======    =======    ====
Total non-performing loans .....................................   $    723    $ 1,116    $  559    $   662    $826
                                                                   ========    =======    ======    =======    ====

Real estate owned ..............................................   $    331    $    33    $   46    $   253    $ 99
                                                                   ========    =======    ======    =======    ====
Total non-performing assets ....................................   $  1,054    $ 1,149    $  605    $   915    $925
                                                                   ========    =======    ======    =======    ====

Total non-performing loans to total loans
  outstanding before allowance .................................        .20%       .31%      .17%       .25%    .35%
                                                                   ========    =======    ======    =======    ====
Total non-performing loans to total assets .....................        .18%       .27%      .15%       .20%    .29%
                                                                   ========    =======    ======    =======    ====
Total non-performing assets to total assets ....................        .26%       .28%      .16%       .28%    .33%
                                                                   ========    =======    ======    =======    ====

</TABLE>


         Interest income that would have been recorded on loans accounted for on
a non-accrual  basis under the original terms of such loans was not  significant
for the year ended September 30, 1998.



                                        9

<PAGE>



         The  following  table sets  forth the types and  dollar  amounts of the
Bank's loans which were more than 60 days delinquent as of September 30, 1998:

                                                             At
                                                        September 30,
                                                            1998
                                                       --------------
                                                       (In Thousands)
Residential mortgage loans.......................           $1,420
Non-residential real estate loans................               --
Land loans.......................................               --
Consumer loans...................................              104


         Real Estate  Owned.  Real estate  acquired by the Bank as the result of
foreclosure or by deed in lieu of foreclosure is classified as real estate owned
until it is sold.  When property is acquired it is recorded at the fair value at
the date of  foreclosure.  At September  30,  1998,  the Bank had REO with a net
balance of $331,000.

         Allowances  for Loan Losses and Real Estate Owned.  It is  management's
policy to provide for losses on loans in its loan portfolio and foreclosed  REO.
A  provision  for loan  losses is charged to  operations  based on  management's
evaluation of the losses that may be incurred in the Bank's loan portfolio. Such
evaluation, which includes a review of all loans of which full collectibility of
interest and  principal may not be reasonably  assured,  considers,  among other
matters, the estimated net realizable value of the underlying collateral.

         Management  will  continue  to review  the  entire  loan  portfolio  to
determine the extent, if any, to which further additional loss provisions may be
deemed  necessary.  There can be no assurance that the allowance for losses will
be adequate to cover losses which may in fact be realized in the future and that
additional provisions for losses will not be required.



                                       10

<PAGE>



         Allocation of Allowance for Loan Losses. The following table sets forth
the allocation of the Bank's  allowance for loan losses by loan category and the
percent  of loans  in each  category  to total  loans  receivable  at the  dates
indicated.  The  portion  of the loan  loss  allowance  allocated  to each  loan
category  does not  represent  the total  available  for losses  which may occur
within the loan  category  since the total loan loss  allowance  is a  valuation
reserve applicable to the entire loan portfolio.

<TABLE>
<CAPTION>
                                                                       At September 30,(1)
                            --------------------------------------------------------------------------------------------------------
                                  1998                   1997               1996                 1995                 1994
                            --------------------  -------------------- ------------------ ---------------------- -------------------
                                     Percent of            Percent of         Percent of            Percent of           Percent of
                                      Loans to              Loans to           Loans to              Loans to             Loans to
                             Amount  Total Loans   Amount  Total Loans Amount Total Loans  Amount   Total Loans  Amount  Total Loans
                             ------  -----------   ------  ----------- ------ -----------  ------   -----------  ------  -----------
                                                                      (Dollars in Thousands)
<S>                         <C>         <C>       <C>       <C>       <C>      <C>         <C>       <C>        <C>         <C>   
At end of year                                                                            
allocated to:                                                                             
One- to four-family......... $2,600       84.27%   $2,558     86.25%   $2,426    87.03%     $2,201     87.49%    $2,050       86.27%
Multi-family and                                                                                               
  commercialreal estate.....    246        2.29       437      2.71       414     3.13         510      3.89        494        3.76
Construction................     24        3.32        26      3.08        25     4.15          25      3.02         25        4.72
Consumer and other loans....    645       10.12       334      7.96       317     5.69         230      5.60        209        5.25
                              -----     -------      ----    ------     -----   ------       -----    ------      -----      ------
Total allowance(1).......... $3,515      100.00%   $3,355    100.00%   $3,182   100.00%     $2,966    100.00%    $2,778      100.00%
                              =====      ======     =====    ======     =====   ======       =====    ======      =====      ======
                                                                                                                  
</TABLE>                                                               
                                                                         
------------------------                             
(1)      Includes specific reserves for assets classified as loss.    



                                       11

<PAGE>



         Analysis of the  Allowance for Loan Losses.  The  following  table sets
forth  information  with respect to the Bank's allowance for loan losses for the
periods indicated:

<TABLE>
<CAPTION>
                                                                         At September 30,
                                                -----------------------------------------------------------------
                                                   1998         1997          1996         1995          1994
                                                ---------    ---------     ---------     ---------     ----------
                                                                      (Dollars in Thousands)
<S>                                            <C>           <C>           <C>           <C>           <C>      
Total loans outstanding, net ................   $ 345,172     $ 346,875     $ 316,216     $ 257,869     $ 233,554
                                                =========     =========     =========     =========     =========
Average loans outstanding ...................   $ 349,769     $ 336,509     $ 283,962     $ 245,567     $ 219,393
                                                =========     =========     =========     =========     =========


Allowance balances (at beginning of year) ...   $   3,355     $   3,182     $   2,966     $   2,778     $   2,193
                                                ---------     ---------     ---------     ---------     ---------

Provision ...................................         180           240           300           360           577
                                                ---------     ---------     ---------     ---------     ---------
Effect of pooling ...........................        --            --            --            --
Charge offs:
  Residential real estate mortgage loans:
    One- to four-family units ...............         (56)           (7)          (28)          (81)          (63)
  Construction loans ........................        --            --            --            --            --
  Multi-family and commercial real estate
    loans ...................................        --            --            --             (72)         --

  Land loans ................................        --            --            --            --            --
  Other .....................................          (8)          (69)          (59)          (32)          (34)
                                                ---------     ---------     ---------     ---------     ---------
      Total charge-offs .....................         (64)          (76)          (87)         (185)          (97)
Recoveries
  Residential real estate mortgage loans ....        --            --               3          --            --
    One- to four-family units ...............          18             9          --              12           105
  Construction loans ........................        --            --            --            --            --
  Multi-family and commercial real estate
    loans ...................................          22          --            --            --            --
  Land loans ................................        --            --            --            --            --
  Other .....................................           4          --            --               1          --
                                                ---------     ---------     ---------     ---------     ---------
      Total recoveries ......................          44             9             3            13           105
                                                ---------     ---------     ---------     ---------     ---------
  Net (charge-offs) recoveries ..............         (20)          (67)          (84)         (172)            8
                                                ---------     ---------     ---------     ---------     ---------
Allowance balance (at end of year) ..........   $   3,515     $   3,355     $   3,182     $   2,966     $   2,778
                                                =========     =========     =========     =========     =========


Allowance for loan losses to total loans
  outstanding before allowance ..............        1.01%          .96%         1.00%         1.14%         1.18%
Net loans charged off as a percent of average
  loans outstanding before allowance ........         .01%          .02%          .03%          .07%          --%

</TABLE>




                                       12

<PAGE>



         Analysis  of the  Allowance  for  Losses  on  Real  Estate  Owned.  The
following table sets forth  information with respect to the Bank's allowance for
losses on real estate owned at the dates indicated.

                                                At September 30,
                                  ----------------------------------------------
                                   1998     1997     1996      1995      1994
                                  -----    -----    -----     -----     -----
                                             (Dollars in Thousands)

Total real estate owned, net ..   $ 331    $  33    $  46     $ 253     $  99
                                  =====    =====    =====     =====     =====

Allowance - beginning .........     112      108      131     $ 163     $ 186

Provision .....................    --          4     --        --        --

Charge-offs ...................    --       --        (23)      (32)      (23)
                                  -----    -----    -----     -----     -----

Allowance - ending ............   $ 112    $ 112    $ 108     $ 131     $ 163
                                  =====    =====    =====     =====     =====


Allowance for losses on
  real estate owned to real
  estate owned before allowance      25%      77%      70%       34%       62%



Investment Activities

         General.  To supplement  lending  activities,  Teche Federal invests in
residential    mortgage-backed    securities,    investment    securities    and
interest-bearing  deposits.  These  investments have  historically  consisted of
investment  securities issued by U.S. Government  agencies.  Such securities can
serve as collateral for borrowings and, through repayments and maturities,  as a
source of liquidity. Teche Federal anticipates having the ability to fund all of
its  investing  activities  from  funds  held on  deposit  at  FHLB  of  Dallas,
maturities, loan repayments and the Bank's borrowing capacity.

         Federally  chartered savings  institutions have the authority to invest
in various types of assets,  including U.S. Treasury obligations,  securities of
various federal agencies and of state and municipal governments, deposits at the
FHLB of  Dallas,  certificates  of deposit of  federally  insured  institutions,
certain bankers' acceptances and federal funds. Subject to various restrictions,
such  institutions  also have the authority to invest a portion of its assets in
commercial  paper,  corporate debt securities and ARM funds, the assets of which
conform to the investments  that federally  chartered  savings  institutions are
otherwise authorized to make directly. Savings institutions are also required to
maintain  minimum levels of liquid assets which vary from time to time. The Bank
may decide to increase its liquidity  above the required  levels  depending upon
the  availability of funds and comparative  yields on investments in relation to
return on loans.

         The Bank is required  under federal  regulations  to maintain a minimum
amount of liquid assets and is also  permitted to make certain other  securities
investments.  At September  30, 1998 the Bank's  regulatory  liquidity was 7.49%
which is in  excess  of 5%  required  by OTS  regulations.  See  "Regulation  --
Regulation  of the Bank --  Federal  Home Loan Bank  System"  and  "Management's
Discussion  and Analysis of Financial  Condition  and Results of  Operations  --
Liquidity and Capital Resources."

         The Boards of Directors of the Bank and the Company maintain Investment
Committees which are authorized to establish and implement  investment  policies
and to supervise the Bank's or the

                                       13

<PAGE>



Company's  investment  activities.  Pursuant  to its  delegated  authority,  the
Investment Committees have established permissible types of investments, quality
criteria,  portfolio limits,  procedures,  controls and committee and individual
investment  authorities.  The  investment  policies  consider the Bank's and the
Company's business plan, growth plans, current economic  environments,  range of
reasonably foreseeable economic environments, the types of securities to be held
and other safety and soundness considerations.

         Before being  purchased,  each  investment is analyzed as to investment
intent. The Bank  distinguishes  between  investment  activities  undertaken for
investment,  for sale or for trading.  Such activities are differentiated  based
upon the Bank's desire to earn an interest yield (held to maturity),  to realize
a holding gain from assets held for  indefinite  periods of time  (available for
sale) or to earn a dealer's  spread  between the bid and asked  prices (held for
trading).  The Bank  attempts to earn an acceptable  spread  between the cost of
funds used to purchase an investment  and the return on that  investment.  Under
circumstances  when  credit  risk,  interest  rate  risk or  prepayment  risk is
significantly reduced, a lesser return may be considered acceptable.

         Securities which are classified as "held to maturity" are accounted for
based on  historical  cost  adjusted for  amortization  of premiums or discounts
using  the  level  yield  method.  The  "held to  maturity"  portfolio  consists
primarily of U.S.  Government  obligations  and  securities  of various  federal
agencies,  municipal debt securities and mortgage-backed and related securities.
Securities  that are  classified  as  "available  for sale" are accounted for at
their market  value,  with  unrealized  gains and losses  reported as a separate
component of capital.  Securities  that are classified as "held for trading" are
accounted  for at their fair  market  value,  with  unrealized  gains and losses
included in earnings.

         The  following  table sets forth the  carrying  value of the  Company's
investment  portfolio,  short-term  investments  and  FHLB  stock  at the  dates
indicated.

                                                         At September 30,
                                                  ------------------------------
                                                    1998      1997        1996
                                                    ----      ----        ----
                                                            (In Thousands)

Investment securities issued by U.S.
  Government agencies and corporations (1)......  $ 4,478   $ 7,312   $  11,462
FHLB Stock......................................    3,884     3,927       3,703
Mortgage-backed securities (1)..................   31,220    30,378      32,099
Common stock and municipal obligations..........    1,071       164         935
                                                   ------   -------    --------
   Total investment and mortgage-backed
      securities................................   40,653    41,781      48,199
Interest-bearing deposits.......................    5,260     4,510       6,064
                                                  -------    ------    --------
   Total investments............................ $ 45,913   $46,291   $  54,263
                                                  =======    ======    ========


--------------------
(1)      Investment  and  mortgage-backed  securities  "available  for sale" are
         carried at fair market  value,  while  investment  and  mortgage-backed
         securities "held to maturity" are carried at cost.


                                       14

<PAGE>



         Mortgage-backed and Investment Securities.  Mortgage-backed  securities
represent a participation  interest in a pool of  single-family  or multi-family
mortgages,  the  principal  and  interest  payments on which are passed from the
mortgage  originators,   through  intermediaries  (generally  quasi-governmental
agencies)  that pool and  repackage the  participation  interests in the form of
securities,  to investors such as the Bank.  Such  quasi-governmental  agencies,
which  guarantee the payment of principal  and interest to investors,  primarily
include FHLMC, FNMA and Government National Mortgage Association ("GNMA").

         Mortgage-backed  securities  typically are issued with stated principal
amounts,  and the  securities  are backed by pools of mortgages  that have loans
with  interest  rates that are within a range and have varying  maturities.  The
underlying pool of mortgages can be composed of either  fixed-rate  mortgages or
adjustable-rate  mortgage  loans.   Mortgage-backed   securities  are  generally
referred to as mortgage participation certificates or pass-through certificates.
As a result,  the interest rate risk  characteristics  of the underlying pool of
mortgages,  i.e., fixed rate or adjustable rate, as well as prepayment risk, are
passed on to the certificate holder. The life of a mortgage-backed  pass-through
security  is  equal  to the life of the  underlying  mortgages.  Mortgage-backed
securities  issued  by  FHLMC,  FNMA,  and  GNMA  make  up  a  majority  of  the
pass-through   certificates   market.  At  September  30,  1998,  the  Bank  had
mortgage-backed  securities  available for sale with an amortized  cost of $30.9
million and an estimated market value of $31.2 million.

         At  September  30, 1998,  Teche  Federal had an  investment  securities
portfolio  with an amortized  cost of  approximately  $4.3  million,  consisting
primarily of  obligations  of U.S.  government  corporations  and  agencies,  as
permitted by the OTS regulations.  The market value of investment  securities at
September 30, 1998 (excluding  FHLB stock and  interest-bearing  accounts),  was
$4.5 million.  Teche Federal will continue to seek high quality investments with
short to intermediate maturities.

     Interest-Bearing   Accounts  Held  at  Other  Financial  Institutions.   At
September 30, 1998, the Bank held $5.3 million in the FHLB and  interest-bearing
deposits in other financial  institutions.  The Bank maintains these accounts in
order to maintain liquidity.



                                       15

<PAGE>



         Investment Portfolio Maturities. The following table sets forth certain
information regarding the amortized cost, carrying value, market value, weighted
average  yields and  maturities  of the Bank's  investment  and  mortgage-backed
securities portfolio at September 30, 1998.
<TABLE>
<CAPTION>
                                                                      As of September 30, 1998
                          ----------------------------------------------------------------------------------------------------------
                          One Year or Less  One to Five Years Five to Ten Years More than Ten Years         Total Investments
                          ----------------- ----------------- ----------------- ------------------- --------------------------------
                          Amortized Average Amortized Average Amortized Average Amortized  Average Amortized Average Carrying Market
                            Cost     Yield    Cost     Yield     Cost    Yield    Cost      Yield     Cost    Yield   Value   Value
                           ------   -------  ------   -------   ------  -------  ------    -------   ------  -------  -----   ------
                                                                       (Dollars in Thousands)
<S>                      <C>         <C>    <C>        <C>     <C>      <C>     <C>          <C>    <C>       <C>   <C>      <C>
Investment Securities
 available for sale.......$    --      N/A%  $4,332     6.5%   $   --     N/A%  $    --       N/A%   $4,332   6.51%  $4,478   $4,478
Mortgage-backed Securities                                                                                                        
  available for sale(1)...     --      N/A   12,295    6.27       243    8.61    18,364      6.84    30.902   6.63   31,220   31,220
FHLB Stock................     --      N/A       --     N/A        --     N/A        --       N/A     3,884   5.95    3,884    3,884
Municipal Obligations.....     20     5.48      226    5.09        --     N/A        --       N/A       246   5.12      246      246
Equity Securities.........     --      N/A      N/A     N/A        --     N/A        --       N/A       757    N/A      825      825
      Total...............$    20     5.48% $16,853     6.4%   $  243    8.61%  $18,364      6.84%  $40,121   6.42% $40,653  $40,653
                           ======            ======             =====            ======              ======          ======   ======
</TABLE>

------------------------------
(1)      Does not assume prepayments.


                                       16

<PAGE>



Sources of Funds

         General.  Deposits are the major source of the Bank's funds for lending
and  other   investment   purposes.   Teche  Federal  also  derives  funds  from
amortization and prepayment of loans and mortgage-backed securities,  maturities
of investment  securities and operations.  Scheduled loan principal and interest
payments are a relatively  stable  source of funds,  while  deposit  inflows and
outflows and loan prepayments are  significantly  influenced by general interest
rates and market conditions.  Teche Federal also utilizes advances from the FHLB
of Dallas.

         Deposits.  Consumer and commercial  deposits are attracted  principally
from  within the Bank's  Primary  Market Area  through  the  offering of a broad
selection  of deposit  instruments  including  regular  savings,  demand and NOW
accounts and  certificates  of deposit.  Deposit account terms vary according to
the minimum balance  required,  the time period the funds must remain on deposit
and the interest rate, among other factors.

         The interest rates paid by the Bank on deposits can be set daily at the
direction of senior management.  Senior management  determines the interest rate
to offer the public on new and maturing accounts.  Senior management obtains the
interest rates being offered by other financial  institutions  within its market
area.  This data along with a report showing the dollar value of certificates of
deposit maturing is reviewed and interest rates are determined.

         Regular  savings  accounts,  money  market  accounts  and NOW  accounts
constituted $71.5 million, or 25.6% of the Bank's deposit portfolio at September
30, 1998.  Certificates  of deposit  constituted  $207.8 million or 74.4% of the
deposit portfolio, including $46.5 million of which had balances of $100,000 and
over. As of September 30, 1998, the Bank had no brokered deposits.

         Time Deposits by Rate. The following  table  presents,  by various rate
categories,  the  amount  of  certificate  accounts  outstanding  at  the  dates
indicated and the periods to maturity of the certificate accounts outstanding at
September 30, 1998.

                              Period to Maturity from September 30, 1998
                            ----------------------------------------------
                            Less than     One to      Two to    Over Three
                             One Year    Two Years  Three Years   Years
                             --------    ---------  -----------   -----
                                             (In Thousands)
Certificate accounts:
  3.00 to 3.99%......      $   1,514   $      --    $      --   $      2
  4.00 to 4.99%......         33,065       6,943          441         --
  5.00 to 5.99%......         62,287      44,653        7,265      5,769
  6.00 to 6.99%......         13,306      16,344        5,924      7,841
  7.00 to 7.99%......             --       2,233           --        173
                            --------    --------     --------    -------
      Total..........      $ 110,172   $  70,173    $  13,630   $ 13,785
                            ========    ========     ========    =======


         Certificate  Accounts of $100,000 and Above.  Teche Federal maintains a
policy of offering higher interest rates on certificates  with larger  balances.
For example,  for  certificates  with terms of 12 months which were purchased on
September 30, 1998,  those with  balances of $500 would yield 4.75%,  those with
balances of $40,000  would yield  5.00%,  those with  balances of $75,000  would
yield 5.10% and those with balances of $99,000  would yield 5.20%.  As a result,
to some extent, Teche Federal customers tend to consolidate accounts to earn the
highest possible interest.  This enables the Bank to effectively  compete in the
marketplace,  reduce the number of accounts and associated  costs, and increase,
to some extent the number of accounts with  balances of $100,000.  The following
table indicates the

                                       17

<PAGE>



amount  of the  Bank's  certificates  of  deposit  of  $100,000  or more by time
remaining until maturity as of September 30, 1998.
                              Certificates        Weighted
                               of Deposit      Interest Rate
                               ----------      -------------
                             (In Thousands)
Maturity Period:
3 months or less...........     $   8,772          5.29%
Over 3 through 6 months....         7,622          5.28
Over 6 through 12 months...         9,547          5.55
Over 12 months.............        20,523          5.84
                                  -------         -----
Totals.....................      $ 46,464          5.59
                                  =======


     Savings  Deposit  Activity.  The  following  table sets  forth the  savings
activities of the Bank for the periods indicated:

                                                      At September 30,
                                          -------------------------------------
                                                1998        1997       1996
                                            ----------    ---------- ---------
                                                        (In Thousands)

Beginning balance.........................  $ 280,302      $254,723   $233,805
Net deposits (withdrawals)................    (13,949)       12,545      9,259
Interest credited on deposits.............     12,912        13,034     11,659
                                              -------       -------   --------
Ending balance............................    279,265       280,302   $254,723
                                             ========       =======    =======
Total increase (decrease) in deposits....   $  (1,037)     $ 25,579   $ 20,918
                                             ========       =======    =======
Percentage increase (decrease)............       (.37)%       10.04%      8.95%


Borrowings

         Deposits  are the  primary  source of funds of the Bank's  lending  and
investment activities and for its general business purposes. The Bank may obtain
advances  from the FHLB of Dallas to  supplement  its supply of lendable  funds.
Advances from the FHLB of Dallas are typically secured by a pledge of the Bank's
stock in the FHLB of Dallas and a portion of the Bank's first mortgage loans and
certain other assets.  The Bank, if the need arises, may also access the Federal
Reserve Bank discount  window to supplement  its supply of lendable funds and to
meet deposit withdrawal  requirements.  At September 30, 1998, Teche Federal had
$67.7 million in advances outstanding from the FHLB of Dallas.


                                       18

<PAGE>



         The following table sets forth certain information regarding the Bank's
borrowed funds at or for the years ended on the dates indicated:

<TABLE>
<CAPTION>
                                                     At or For the Year Ended September 30,
                                                     --------------------------------------
                                                            1998       1997     1996    
                                                            ----       ----     ----
                                                             (Dollars in Thousands)
<S>                                                      <C>        <C>       <C>    
FHLB advances:                                            
  Average balance outstanding....................         $68,306    $64,685   $42,405
  Maximum amount outstanding at any                                
 month-end during the year.......................          77,335     72,684    72,500
  Balance outstanding at end of year.............          67,721     65,398    66,900
  Weighted average interest rate during the year.            5.56%      5.64%     5.53%
  Weighted average interest rate at end of year..            5.34%      5.73%     5.39%
</TABLE>
                                                 

Subsidiary Activity

         The only subsidiary of the Company is Teche Federal.

     As of September 30, 1998, the Bank had one  subsidiary:  Family  Investment
Services,  Inc.  ("FISI")  and the net book  value of the Bank's  investment  in
stock,  unsecured  loans and  conforming  loans in its service  corporation  was
$111,000. FISI was inactive at September 30, 1998.

         Teche  Federal  is  permitted  to invest up to 2% of its  assets in the
capital  stock of, or secured or unsecured  loans to,  subsidiary  corporations,
with an additional investment of 1% of assets when such additional investment is
utilized primarily for community development  purposes.  Under such limitations,
as of  September  30,  1998,  Teche  Federal  was  authorized  to  invest  up to
approximately  $8.1 million in the stock of, or loans to,  service  corporations
(based upon the 2% limitation).

Personnel

         As of September  30, 1998,  the Bank had 138 full-time and 59 part-time
employees.  None  of  the  Bank's  employees  is  represented  by  a  collective
bargaining  group. The Bank believes that its relationship with its employees is
good.

Regulation

         Set  forth  below  is a brief  description  of all  materials  laws and
regulations  which relate to the  regulation  of the Bank and the  Company.  The
description  does not purport to be complete and is qualified in its entirety by
reference to applicable laws and regulations.


                                       19

<PAGE>



Holding Company Regulation

         General.  The  Company is a unitary  savings and loan  holding  company
subject to regulatory  oversight by the OTS. As such, the Company is required to
register  and  file  reports  with  the OTS and is  subject  to  regulation  and
examination by the OTS. In addition,  the OTS has enforcement authority over the
Company and its non-savings association  subsidiaries,  should such subsidiaries
be formed,  which also permits the OTS to restrict or prohibit  activities  that
are determined to be a serious risk to the subsidiary savings association.  This
regulation  and  oversight  is  intended  primarily  for the  protection  of the
depositors of the Bank and not for the benefit of  stockholders  of the Company.
The Company is also required to file certain reports with, and otherwise  comply
with, the rules and regulations of the OTS and the SEC.

         Qualified  Thrift  Lender Test.  As a unitary  savings and loan holding
company, the Company generally is not subject to activity restrictions, provided
the Bank  satisfies  the Qualified  Thrift  Lender  ("QTL") test. If the Company
acquires  control of another savings  association as a separate  subsidiary,  it
would become a multiple savings and loan holding company,  and the activities of
the  Company  and any of its  subsidiaries  (other  than the  Bank or any  other
SAIF-insured   savings   association)   would  become  subject  to  restrictions
applicable to bank holding  companies unless such other  associations  each also
qualify as a QTL and were acquired in a supervisory acquisition. See "Regulation
of the Bank -- Qualified Thrift Lender Test."

         Restrictions on Acquisitions. The Company must obtain approval from the
OTS  before  acquiring  control  of any  other  SAIF-insured  association.  Such
acquisitions  are generally  prohibited if they result in a multiple savings and
loan holding company  controlling  savings  associations in more than one state.
However,  such  interstate  acquisitions  are permitted  based on specific state
authorization or in a supervisory acquisition of a failing savings association.

         Federal law  generally  provides that no "person,"  acting  directly or
indirectly or through or in concert with one or more other persons,  may acquire
"control," as that term is defined in OTS  regulations,  of a federally  insured
savings  institution  without giving at least 60 days' written notice to the OTS
and providing the OTS an opportunity to disapprove the proposed acquisition.  In
addition,  no company may acquire  control of such an institution  without prior
OTS approval.

         Federal  Securities Law. The Company is subject to filing and reporting
requirements  by  virtue  of  having  its  common  stock  registered  under  the
Securities Exchange Act of 1934. Furthermore,  Company stock held by persons who
are affiliates (generally officers, directors and principal stockholders) of the
Company may not be resold without registration or unless sold in accordance with
certain  resale  restrictions.  If the Company meets  specified  current  public
information  requirements,  each affiliate of the Company is able to sell in the
public  market,  without  registration,  a  limited  number  of  shares  in  any
three-month period.

Regulation of the Bank

         General. As a federally  chartered,  SAIF-insured  savings association,
the Bank is subject to  extensive  regulation  by the OTS and the FDIC.  Lending
activities and other  investments must comply with various federal statutory and
regulatory   requirements.   The  Bank  is  also  subject  to  certain   reserve
requirements promulgated by the Federal Reserve Board.


                                       20

<PAGE>



         The OTS, in conjunction with the FDIC,  regularly examines the Bank and
prepares  reports for the  consideration of the Bank's Board of Directors on any
deficiencies that they find in the Bank's  operations.  The Bank's  relationship
with its depositors and borrowers is also regulated to a great extent by federal
law,  especially  in such matters as the  ownership of savings  accounts and the
form and content of the Bank's mortgage documents.

         The Bank must file  reports  with the OTS and the FDIC  concerning  its
activities  and  financial  condition,   in  addition  to  obtaining  regulatory
approvals  prior to entering into certain  transactions  such as mergers with or
acquisitions  of other savings  institutions.  This  regulation and  supervision
establishes a comprehensive  framework of activities in which an institution can
engage and is intended  primarily for the protection of the SAIF and depositors.
The  regulatory  structure  also  gives  the  regulatory  authorities  extensive
discretion in connection with their  supervisory and enforcement  activities and
examination  policies,  including policies with respect to the classification of
assets and the  establishment  of adequate  loan loss  reserves  for  regulatory
purposes.  Any change in such  regulations,  whether by the OTS, the FDIC or the
Congress could have a material adverse impact on the Company, the Bank and their
operations.

         Insurance of Deposit Accounts.  The Bank's deposit accounts are insured
by the SAIF to a maximum of $100,000 for each insured  member (as defined by law
and regulation).  The FDIC has the authority,  should it initiate proceedings to
terminate an institution's  deposit  insurance,  to suspend the insurance of any
such institution without tangible capital. However, if a savings association has
positive capital when it includes qualifying  intangible assets, the FDIC cannot
suspend deposit  insurance unless capital declines  materially,  the institution
fails to enter into and remain in  compliance  with an approved  capital plan or
the institution is operating in an unsafe or unsound manner.

         Regardless of an institution's capital level, insurance of deposits may
be  terminated  by the FDIC upon a finding that the  institution  has engaged in
unsafe or unsound  practices,  is in an unsafe or unsound  condition to continue
operations  or has violated  any  applicable  law,  regulation,  rule,  order or
condition imposed by the FDIC or the institution's primary regulator.

         The FDIC  charges an annual  assessment  for the  insurance of deposits
based on the risk a particular  institution poses to its deposit insurance fund.
Under this system, a bank or thrift pays within a range of six cents to 31 cents
per  $100  of  domestic   deposits,   depending  upon  the  institution's   risk
classification.  This risk  classification is based on an institution's  capital
group and supervisory subgroup assignment.  In addition,  the FDIC is authorized
to  increase  such  deposit  insurance  rates,  on a  semi-annual  basis,  if it
determines  that such  action is  necessary  to cause the balance in the SAIF to
reach the designated  reserve ratio of 1.25% of  SAIF-insured  deposits within a
reasonable period of time. The FDIC also may impose special  assessments on SAIF
members to repay amounts borrowed from the U.S. Treasury or for any other reason
deemed  necessary by the FDIC.  The Bank's  federal  deposit  insurance  premium
expense for the fiscal year ended September 30, 1998,  amounted to approximately
$172,000.

         Examination  Fees. In addition to federal deposit  insurance  premiums,
savings  institutions  like the  Bank are  required  by OTS  regulations  to pay
assessments to the OTS to fund the operations of the OTS. The general assessment
is paid on a  semi-annual  basis and is  computed  based on total  assets of the
institution,  including subsidiaries.  The Bank's OTS assessment expense for the
fiscal year ended September 30, 1998 totalled approximately $89,828.

     Regulatory Capital  Requirements.  OTS capital  regulations require savings
institutions to meet three capital standards: (1) tangible capital equal to 1.5%
of total adjusted assets, (2) a leverage ratio

                                       21

<PAGE>



(core  capital)  equal  to at  least  3% of  total  adjusted  assets,  and (3) a
risk-based capital requirement equal to 8.0% of total risk-weighted assets.

         Savings  associations  with a greater than  "normal"  level of interest
rate  exposure  will,  in the future,  be subject to a deduction for an interest
rate risk ("IRR")  component  may be from  capital for  purposes of  calculating
their risk-based capital requirement. See "-- Net Portfolio Value Analysis."

         As shown  below,  the Bank's  regulatory  capital  exceeded all minimum
regulatory capital requirements applicable to it as of September 30, 1998:

                                                              Percent of
                                                               Adjusted
                                            Amount              Assets
                                            ------              ------
                                                (Dollars in Thousands)
Tangible Capital:
Actual capital.........................    $ 53,415              13.1%
Regulatory requirement.................       6,100               1.5
                                             ------             -----
Excess.................................    $ 47,315              11.6%
                                            =======             =====

Core Capital:
Actual capital.........................    $ 53,415              13.1%
Regulatory requirement.................      16,268               3.0
                                             ------             -----
Excess.................................    $ 37,147               9.1%
                                             ======            ======

Risk-Based Capital:
Actual capital.........................    $ 56,195              25.3%
Regulatory requirement.................      17,748               8.0
                                            -------             -----
Excess.................................    $ 38,447              17.3%
                                            =======            ======




         The Bank is not under any agreement with regulatory  authorities nor is
it aware of any current  recommendations by the regulatory authorities which, if
they were to be implemented,  would have a material effect on liquidity, capital
resources or operations of the Bank or the Company.

         Net Portfolio  Value Analysis - Interest Rate Risk. The Bank is subject
to  interest  rate risk to the  degree  that its  interest-bearing  liabilities,
primarily deposits with short- and medium-term maturities,  mature or reprice at
different rates than our  interest-earning  assets.  Although having liabilities
that mature or reprice less frequently on average than assets will be beneficial
in times of rising interest rates, such an asset/liability structure will result
in lower net income during periods of declining interest rates, unless offset by
other factors.

         The Bank  believes it is critical  to manage the  relationship  between
interest rates and the effect on its net portfolio value ("NPV").  This approach
calculates the difference  between the present value of expected cash flows from
assets and the present  value of expected cash flows from assets and the present
value of  expected  cash  flows  from  liabilities,  as well as cash  flows from
off-balance sheet contracts.  The Bank manages assets and liabilities within the
context of the marketplace,  regulatory limitations and within its limits on the
amount of change in NPV which is acceptable given certain interest rate changes.

                                       22

<PAGE>




         The OTS requires all  regulated  thrift  institutions  to calculate the
estimated change in the institution's NPV assuming instantaneous parallel shifts
in the Treasury  yield curve of 100 to 400 basis points either up or down in 100
basis point increments. The NPV is defined as the present value of expected cash
flows from  existing  assets less the present  value of expected cash flows from
existing  liabilities  plus the present  value of net expected cash inflows from
existing off-balance sheet contracts.

         The OTS provides  all  institutions  that file a schedule  entitled the
Consolidated  Maturity  & Rate  Schedule  ("CMR")  as a part of their  quarterly
Thrift Financial Report with an interest rate sensitivity report of NPV. The OTS
simulation  model  uses a  discounted  cash flow  analysis  and an  option-based
pricing  approach to measuring  the interest  rate  sensitivity  of NPV. The OTS
model  estimates  the  economic  value of each  type of  asset,  liability,  and
off-balance  sheet contract  under the assumption  that the Treasury yield curve
shifts  instantaneous  and  parallel up and down 100 to 400 basis  points in 100
basis  points  increments.  The OTS allows  thrifts  under $500 million in total
assets to use the results of their  interest rate  sensitivity  model,  which is
based on information provided by the institution, to estimate the sensitivity of
NPV.

         The OTS model utilizes an option-based pricing approach to estimate the
sensitivity of mortgage  loans.  The most  significant  embedded option in these
types of assets is the prepayment  option of the  borrowers.  The OTS model uses
various price indications and prepayment  assumptions to estimate sensitivity of
mortgage loans.

         In the OTS model,  the value of deposit  accounts  appears on the asset
and liability side of the NPV analysis.  In estimating the value of certificates
of deposit  accounts ("CD"),  the liability  portion of the CD is represented by
the implied  value when  comparing the  difference  between the CD face rate and
available  wholesale  CD rates.  On the asset side of the NPV  calculation,  the
value of the "customer  relationship"  due to the rollover of retail CD deposits
represents an intangible asset in the NPV calculation.

         Other  deposit  accounts  such as NOW  accounts,  money  market  demand
accounts, passbook accounts, and non-interest-bearing accounts also are included
on the asset and liability side of the NPV  calculation in the OTS model.  These
accounts are valued at 100% of the respective  account balances on the liability
side.  On  the  asset  side  of  the  analysis,   the  value  of  the  "customer
relationship" of the various types of deposit accounts is reflected as a deposit
intangible.

         The NPV  sensitivity  of borrowed  funds is  estimated by the OTS model
based on a discounted cash flow approach.

         The OTS uses, as a critical  point, a change of plus or minus 200 basis
points in order to set its "normal"  institutional results and peer comparisons.
A resulting  change in NPV of more than 2% of the estimated  market value of its
assets  will  require  the  institution  to deduct  from its capital 50% of that
excess  change.  The rules provide that the OTS will calculate the IRR component
quarterly for each institution. The greater the change, positive or negative, in
NPV, the more interest rate risk is assumed to exist with the  institution.  The
following  table lists the Bank's  latest  percentage  change in NPV assuming an
immediate  change of plus or minus 100,  200,  300 and 400 basis points from the
level of interest rates at September 30, 1998.

                                       23

<PAGE>






                                                     NPV as % of PV
         Net Portfolio Value                           of Assets
-------------------------------------     ----------------------------------
Change                                                 NPV
in Rates      $ Amount     $Change(1)     %Change(2)  Ratio(3)     Change(4)
--------      --------     ----------     ----------  --------     ---------
                           (Dollars in Thousands)

   +400 bp     38,165       -23,881        -38%         9.95%       -489 bp

   +300 bp     45,488       -16,558        -27%        11.56%       -328 bp

   +200 bp     52,391        -9,654        -16%        13.00%       -184 bp

   +100 bp     58,190        -3,855         -6%        14.14%        -70 bp

      0 bp     62,046                                  14.84%

   -100 bp     63,562         1,516         +2%        15.04%        +20 bp

   -200 bp     65,262         3,216         +5%        15.27%        +43 bp

   -300 bp     67,866         5,820         +9%        15.67%        +84 bp

   -400 bp     70,828         8,783        +14%        16.13%       +129 bp



(1)  Represents  the excess  (deficiency)  of the  estimated  NPV  assuming  the
     indicated  change in interest  rates minus the  estimated  NPV  assuming no
     change in interest rates.
(2)  Calculated  as the  amount of change in the  estimated  NPV  divided by the
     estimated NPV assuming no change in interest rates.
(3)  Calculated as the estimated NPV divided by average total assets.
(4)  Calculated  as the  excess  (deficiency)  of the  NPV  ratio  assuming  the
     indicated change in interest rates over the estimated NPV ratio assuming no
     change in interest rates.


                                                September 30,    September 30,
                                                     1998             1997
                                                -------------    -------------


*** RISK MEASURES: 200 BP RATE SHOCK ***

Pre-Shock NPV Ratio: NPV as % of PV of Assets...    14.84%           14.11%

Exposure Measure: Post-Shock NPV Ratio..........    13.00%           10.91%

Sensitivity Measure: Change in NPV Ratio........     -184 bp          -320 bp


*** CALCULATION OF CAPITAL COMPONENT ***

Change in NPV as % of PV of Assets..............     2.31%            3.76 %

Interest Rate Risk Capital Component ($000).....   $    0           $3,643



                                       24

<PAGE>



         As the table  shows,  increases  in interest  rates would result in net
decreases in the Bank's NPV,  while  decreases in interest  rates will result in
smaller  net  increases  in  the  Bank's  NPV.   Based  on  these  specific  OTS
regulations,  the Bank  would be  required  to deduct  $3.7  million  from total
capital for purposes of calculating the Bank's risk-based  capital  requirement.
(The  Bank's NPV  decreases  by 3.2% if  interest  rates  increase  by 200 basis
points.) Certain  shortcomings are inherent in the methodology used in the above
table.  Modeling changes in NPV requires the making of certain  assumptions that
may tend to oversimplify  the manner in which actual yields and costs respond to
changes in market interest rates.  First, the models assume that the composition
of  the  Bank's  interest  sensitive  assets  and  liabilities  existing  at the
beginning of a period remains  constant over the period being measured.  Second,
the models  assume  that a  particular  change in  interest  rates is  reflected
uniformly  across the yield  curve  regardless  of the  duration  to maturity or
repricing  of specific  assets and  liabilities.  Accordingly,  although the NPV
measurements  do provide an indication of the Bank's interest rate risk exposure
at a particular  point in time, such  measurements are not intended to provide a
precise forecast of the effect of changes in market interest rates on the Bank's
net interest income.

         In times of decreasing  interest rates, the value of fixed-rate  assets
could  increase in value and the lag in  repricing  of interest  rate  sensitive
assets could be expected to have a positive effect on the Bank.

         Prompt  Corrective  Action.  The FDICIA  also  established  a system of
prompt   corrective   action  to  resolve  the   problems  of   undercapitalized
institutions.  Under this system,  the banking  regulators  are required to take
certain supervisory actions against undercapitalized  institutions, the severity
of which depends upon the institution's degree of capitalization.  Under the OTS
final rule implementing the prompt corrective action provisions,  an institution
shall be deemed to be (i) "well  capitalized" if it has total risk-based capital
of  10.0% or more,  has a Tier I  risk-based  capital  ratio  (core or  leverage
capital to risk-weighted assets) of 6.0% or more, has a leverage capital of 5.0%
or more and is not subject to any order or final  capital  directive to meet and
maintain a specific  capital  level for any capital  measure,  (ii)  "adequately
capitalized" if it has a total risk-based  capital ratio of 8.0% or more, a Tier
I  risked-based  ratio of 4.0% or more and a leverage  capital  ratio of 4.0% or
more (3.0% under  certain  circumstances)  and does not meet the  definition  of
"well  capitalized,"  (iii)  "undercapitalized"  if it  has a  total  risk-based
capital ratio that is less than 6.0%, a Tier I risk-based  capital ratio that is
less than  4.0% or a  leverage  capital  ratio  that is less than 4.0%  (3.0% in
certain circumstances),  (iv) "significantly undercapitalized" if it has a total
risk-based  capital  ratio that is less than 6.0%, a Tier I  risk-based  capital
ratio that is less than 3.0% or a leverage  capital ratio that is less than 3.0%
and (v)  "critically  undercapitalized"  if it has a ratio of tangible equity to
total  assets that is equal to or less than 2.0%.  In  addition,  under  certain
circumstances,  a federal  banking  agency  may  reclassify  a well  capitalized
institution as adequately  capitalized and may require an adequately capitalized
institution  or an  undercapitalized  institution  to  comply  with  supervisory
actions as if it were in the next lower  category  (except that the FDIC may not
reclassify  a   significantly   undercapitalized   institution   as   critically
undercapitalized).  Immediately upon becoming  undercapitalized,  an institution
shall become subject to various  restrictions and could be subject to additional
supervisory actions.

           The Bank is currently a "well capitalized  institution" as defined in
the  prompt  corrective  action  regulations  and as such is not  subject to any
prompt corrective action measures.

         Dividend and Other Capital  Distribution  Limitations.  OTS regulations
require  the  Bank to give  the OTS 30  days'  advance  notice  of any  proposed
declaration of dividends to the Company, and the OTS has the authority under its
supervisory  powers to prohibit  the payment of  dividends  to the  Company.  In
addition,  the Bank may not declare or pay a cash  dividend on its capital stock
if the  effect  thereof  would be to reduce the  regulatory  capital of the Bank
below the amount  required  for the  liquidation  account to be  established  in
connection with the Conversion.

                                       25

<PAGE>




         OTS regulations  impose  limitations upon all capital  distributions by
savings  institutions,  such  as  cash  dividends,  payments  to  repurchase  or
otherwise acquire its shares, payments to shareholders of another institution in
a cash-out  merger and other  distributions  charged against  capital.  The rule
establishes  three tiers of  institutions,  based primarily on an  institution's
capital  level.  An  institution  that  exceeds  all  fully  phased-in   capital
requirements  before  and  after  a  proposed  capital   distribution  ("Tier  1
institution")  and has not  been  advised  by the OTS that it is in need of more
than the normal  supervision can, after prior notice but without the approval of
the OTS, make capital  distributions during a calendar year equal to the greater
of (i) 100% of its net income to date during the  calendar  year plus the amount
that would reduce by one-half its "surplus  capital  ratio" (the excess  capital
over its fully phased-in capital  requirements) at the beginning of the calendar
year,  or (ii) 75% of its net income over the most recent four  quarter  period.
Any additional capital  distributions  require prior regulatory approval.  As of
September 30, 1998, the Bank was a Tier 1  institution.  In the event the Bank's
capital fell below its fully  phased-in  requirement or the OTS notified it that
it was in need of more than  normal  supervision,  the  Bank's  ability  to make
capital distributions could be restricted. In addition, the OTS could prohibit a
proposed  capital  distribution  by any  institution,  which would  otherwise be
permitted by the regulation,  if the OTS determines that such distribution would
constitute an unsafe or unsound practice.

         Finally,  under the FDICIA,  a savings  association is prohibited  from
making a capital  distribution  if, after making the  distribution,  the savings
association  would  be  "undercapitalized"  (not  meet  any  one of its  minimum
regulatory capital requirements).

         Qualified  Thrift Lender Test.  The Home Owners' Loan Act ("HOLA"),  as
amended, requires savings institutions to meet a QTL test. If the Bank maintains
an appropriate  level of Qualified  Thrift  Investments  (primarily  residential
mortgages and related investments, including certain mortgage-backed securities)
("QTIs")  and  otherwise  qualifies  as a QTL,  it will  continue  to enjoy full
borrowing privileges from the FHLB of Dallas. The required percentage of QTIs is
65% of portfolio assets (defined as all assets minus intangible assets, property
used by the  institution  in conducting  its business and liquid assets equal to
10% of total assets).  Certain assets are subject to a percentage  limitation of
20% of portfolio assets. In addition, savings associations may include shares of
stock of the FHLBs,  FNMA and FHLMC as qualifying  QTIs. The FDICIA also amended
the method for measuring  compliance  with the QTL test to be on a monthly basis
in nine out of every 12 months,  as  opposed to on a daily or weekly  average of
QTIs.  As of  September  30,  1998,  the  Bank  was in  compliance  with its QTL
requirement with 99.04% of its assets invested in QTIs.

         A savings association that does not meet a QTL test must either convert
to a bank charter or comply with the following  restrictions  on its operations:
(i) the savings  association  may not engage in any new activity or make any new
investment,  directly or  indirectly,  unless such  activity  or  investment  is
permissible  for a  national  bank;  (ii) the  branching  powers of the  savings
association  shall be restricted to those of a national bank;  (iii) the savings
association shall not be eligible to obtain any advances from its FHLB; and (iv)
payment of  dividends by the savings  association  shall be subject to the rules
regarding  payment of dividends by a national bank. Upon the expiration of three
years from the date the  savings  association  ceases to be a QTL, it must cease
any activity and not retain any investment not  permissible  for a national bank
and  immediately  repay any  outstanding  FHLB  advances  (subject to safety and
soundness considerations).

     Loans-to-One  Borrower. See "Business -- Lending Activities -- Loans-to-One
Borrower."

     Community  Reinvestment.  Under the Community  Reinvestment Act ("CRA"), as
implemented  by OTS  regulations,  a savings  association  has a continuing  and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire community, including low and

                                       26

<PAGE>



moderate  income  neighborhoods.  The CRA does not  establish  specific  lending
requirements  or  programs  for  financial  institutions  nor  does it  limit an
institution's  discretion  to develop the types of products and services that it
believes are best suited to its particular  community,  consistent with the CRA.
The CRA  requires  the OTS,  in  connection  with its  examination  of a savings
institution,  to assess the institution's  record of meeting the credit needs of
its community and to take such record into account in its  evaluation of certain
applications by such  institution.  Current law requires public disclosure of an
institution's CRA rating and requires the OTS to provide a written evaluation of
an  institution's  CRA performance  utilizing a four-tiered  descriptive  rating
system in lieu of the existing  five-tiered  numerical  rating  system.  The OTS
reported  that Teche  Federal had a  "satisfactory  record of meeting  community
credit  needs," in its last  examination  dated January 5, 1998. The OTS further
stated that "an institution in this group has an outstanding record of, and is a
leader in,  ascertaining  and  helping  to meet the  credit  needs of its entire
delineated  community,  including low- and moderate-income  neighborhoods,  in a
manner consistent with its resources and capabilities."

         Transactions With Affiliates.  Generally,  restrictions on transactions
with affiliates require that transactions  between a savings  association or its
subsidiaries  and  its  affiliates  be on  terms  as  favorable  to the  Bank as
comparable  transactions  with  non-affiliates.  In  addition,  certain of these
transactions  are restricted to an aggregate  percentage of the Bank's  capital;
collateral  in  specified  amounts  must  usually be provided by  affiliates  to
receive loans from the Bank.  Affiliates of the Bank include the Company and any
company  which would be under  common  control  with the Bank.  In  addition,  a
savings  association  may not lend to any affiliate  engaged in  activities  not
permissible  for a  bank  holding  company  or  acquire  the  securities  of any
affiliate  which  is not a  subsidiary.  The  OTS has the  discretion  to  treat
subsidiaries of savings associations as affiliates on a case-by-case basis.

         The Bank's  authority to extend credit to its  officers,  directors and
10% shareholders,  as well as to entities that such persons control is currently
governed by Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O
promulgated by the Federal Reserve Board. Among other things,  these regulations
require such loans to be made on terms substantially similar to those offered to
unaffiliated individuals,  place limits on the amount of loans the Bank may make
to such persons  based,  in part, on the Bank's  capital  position,  and require
certain  approval  procedures  to  be  followed.  OTS  regulations,  with  minor
variation, apply Regulation O to savings associations.

         Branching by Federal  Savings  Banks.  Effective May 11, 1992,  the OTS
amended its Policy  Statement on Branching by Federal  Savings  Associations  to
permit  interstate  branching to the full extent  permitted by statute (which is
essentially  unlimited).  This  permits  savings  associations  with  interstate
networks to  diversify  their loan  portfolios  and lines of  business.  The OTS
authority  preempts any state law  purporting  to regulate  branching by federal
associations.  However, the OTS will evaluate a branching  applicant's record of
compliance  with the CRA.  A poor CRA  record  may be the basis for  denial of a
branching application.

         Liquidity  Requirements.  All  savings  associations  are  required  to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity  requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings  associations.  At the present  time,  the required  liquid
asset ratio is 4%. At September 30, 1998, the Bank's liquidity ratio was 7.49%.

         Liquid assets for purposes of this ratio include  specified  short-term
assets (e.g.,  cash,  certain time deposits,  certain  banker's  acceptances and
short-term  U.S.  Government  obligations),  and long-term  assets  (e.g.,  U.S.
Government  obligations  of more  than one and less  than  five  years and state
agency obligations

                                       27

<PAGE>



with  a  minimum  term  of  18  months).  The  regulations  governing  liquidity
requirements  include as liquid  assets  debt  securities  hedged  with  forward
commitments  obtained from, or debt securities subject to repurchase  agreements
with,  members  of the Bank of  Primary  Dealers  in  United  States  Government
Securities  or banks whose  accounts  are insured by the FDIC,  debt  securities
directly hedged with a short financial future position, and debt securities that
provide the holder with a right to redeem the security at par value,  regardless
of the stated  maturities of the  securities.  FIRREA also authorized the OTS to
designate as liquid assets certain  mortgage-related  securities  with less than
one year to maturity.  Short- term liquid assets  currently  must  constitute at
least 1% of an association's  average daily balance of net withdrawable  deposit
accounts  and  current  borrowings.  Monetary  penalties  may  be  imposed  upon
associations for violations of liquidity requirements.

         Federal  Home  Loan  Bank  System.  The Bank is a member of the FHLB of
Dallas,  which is one of 12 regional  FHLBs that  administer  the home financing
credit  function  of  savings  associations.  Each FHLB  serves as a reserve  or
central bank for its members within its assigned region.  It is funded primarily
from  proceeds  derived from the sale of  consolidated  obligations  of the FHLB
System.  It makes loans to members (i.e.,  advances) in accordance with policies
and  procedures  established  by the  Board  of  Directors  of the  FHLB.  As of
September 30, 1998, the Bank had $67.7 million  borrowed from the FHLB of Dallas
to  fund  operations;  however,  there  can  be no  assurances  that  additional
borrowings will not be made in the future.

         As a member, the Bank is required to purchase and maintain stock in the
FHLB of  Dallas  in an  amount  equal  to at least  1% of its  aggregate  unpaid
residential  mortgage loans, home purchase contracts,  or similar obligations at
the beginning of each year. As of September 30, 1998,  the Bank had $3.9 million
in FHLB stock, which was in compliance with this requirement.

         The FHLBs are required to provide funds for the  resolution of troubled
savings  associations  and to contribute to affordable  housing programs through
direct loans or interest subsidies on advances targeted for community investment
and  low-  and  moderate-income  housing  projects.   These  contributions  have
adversely  affected the level of FHLB dividends paid and could continue to do so
in the future.  For the fiscal year ended September 30, 1998,  dividends paid by
the FHLB of Dallas to the Bank totalled $232,419.

         Federal  Reserve  System.   The  Federal  Reserve  Board  requires  all
depository  institutions to maintain  non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW and Super NOW
checking  accounts) and non-personal time deposits.  The balances  maintained to
meet the reserve  requirements  imposed by the Federal Reserve Board may be used
to satisfy the liquidity  requirements that are imposed by the OTS. At September
30, 1998,  the Bank's total  transaction  accounts were in  compliance  with the
Federal Reserve Board requirements.

         Savings  associations have authority to borrow from the Federal Reserve
Bank "discount  window," but Federal Reserve policy  generally  requires savings
associations  to exhaust  all OTS  sources  before  borrowing  from the  Federal
Reserve System. The Bank had no such borrowings at September 30, 1998.

State Taxation

         The Louisiana Corporation Income Tax Act provides for an exemption from
the Louisiana  Corporation  Income Tax for mutual  savings banks and for banking
corporations,  which includes stock associations (e.g., the Bank). However, this
exemption  does not extend to  non-banking  entities  such as the  Company.  The
non-banking subsidiaries of the Bank (as well as the Company) are subject to the
Louisiana  Corporate Income Tax based on their Louisiana taxable income, as well
as franchise  taxes. The Louisiana  Corporation  Income Tax applies at graduated
rates from 4% upon the first $25,000 of

                                       28

<PAGE>



Louisiana  taxable  income to 8% on all  Louisiana  taxable  income in excess of
$200,000. For these purposes,  "Louisiana taxable income" means net income which
is earned within or derived from sources  within the State of  Louisiana,  after
adjustments  permitted  under  Louisiana  law  including  a federal  income  tax
deduction and an allowance for net operating losses,  if any.  Beginning January
1,  1996,  the  Company  became  subject  to the  Louisiana  Shares  Tax and the
Louisiana  Franchise  Tax. The  Louisiana  Shares Tax is imposed on the assessed
value of the Bank's  stock.  The formula for deriving  the assessed  value is to
calculate  15% of the sum of (i) 20% of a  corporation's  capitalized  earnings,
plus (ii) 80% of a corporation's  taxable  stockholders' equity, and to subtract
from that amount 50% of a corporation's  real and personal property  assessment.
Other  various  items may also be  subtracted  in  calculating  a  corporation's
capitalized  earnings.  The Louisiana Shares Tax and the Louisiana Franchise Tax
was approximately $541,653 (net of taxes) for the year ended September 30, 1998.

Item  2.  Description of Properties
-----------------------------------

Properties

         The Bank  operates from its main office  located at 211 Willow  Street,
Franklin,  Louisiana and eight branch  offices.  The Bank's total  investment in
office  property and  equipment  is $12.8  million with a net book value of $8.8
million at September 30, 1998.  The Bank  currently  operates  automated  teller
machines at most of its branch offices.

Item 3.  Legal Proceedings
--------------------------

         Neither the Company nor its  subsidiaries  are  involved in any pending
legal  proceedings,  other than routine legal matters  occurring in the ordinary
course of business, which in the aggregate involve amounts which are believed by
management to be immaterial to the consolidated  financial  condition or results
of operations of the Company.

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

         None.

                                     PART II


Item 5.  Market for Common Equity and Related Stockholder Matters
-----------------------------------------------------------------

         Information  relating to the market for Registrant's  common equity and
related stockholder  matters appears under "Market and Dividend  Information" in
the  Registrant's  Annual  Report to  Stockholders  for the  fiscal  year  ended
September 30, 1998 ("Annual  Report") on page 3, and is  incorporated  herein by
reference.

Item 6.  Selected Financial Data
--------------------------------

         The  above-captioned  information appears under "Selected Financial and
Other  Data" in the  Annual  Report  on page 2, and is  incorporated  herein  by
reference.


                                       29

<PAGE>



Item 7. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
--------------------------------------------------------------------------------

         The above-captioned  information appears under Management's  Discussion
and  Analysis of Financial  Condition  and Results of  Operations  in the Annual
Report on pages 4 through 10 and is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------

         See Net Portfolio Value Analysis on pages 22 through 24.

Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------

         The  Consolidated   Financial  Statements  of  Teche  Holding  and  its
subsidiaries, together with the report thereon by Deloitte & Touche, LLP appears
in the  Annual  Report on pages 11  through  30 and are  incorporated  herein by
reference.

Item  9.  Changes  In and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure
--------------------------------------------------------------------------------

         None.

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------

         The information contained under the section captioned "Information with
Respect to Nominees for Director,  Directors Continuing in Office, and Executive
Officers" at pages 4 to 8 of the Registrant's definitive proxy statement for the
Registrant's  Annual Meeting of Stockholders to be held on January 20, 1999 (the
"Proxy Statement"), which was filed with the Commission on December 17, 1998 and
incorporated  herein by  reference.  See also "Item 1.  Business  of the Bank --
Personnel" included herein.

Item 11.  Executive Compensation
--------------------------------

         The  information  relating to executive  compensation  is  incorporated
herein by reference to the Proxy Statement at pages 8 through 12.

Item 12.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

         The information  relating to security  ownership of certain  beneficial
owners and management is incorporated herein by reference to the Proxy Statement
at pages 1 through 3.

Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------

         The  information   relating  to  certain   relationships   and  related
transactions is incorporated  herein by reference to the Proxy Statement on page
14.



                                       30

<PAGE>



                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K
-------------------------------------------------------------------------

(a)      The following documents are filed as a part of this report:

(1)  Financial  Statements of the Company are  incorporated  by reference to the
following indicated pages of the Annual Report.

                                                                  PAGE      
                                                                  ----   
Independent Auditors' Report...................................... 11
Consolidated Balance Sheets as of September 30, 1998 and 1997..... 12
Consolidated Statements of Income For the Years Ended
  September 30, 1998, 1997 and 1996............................... 13
Consolidated Statements of Stockholders' Equity
  for the Years Ended September 30, 1998, 1997 and 1996........... 14
Consolidated Statements of Cash Flows for the Years Ended
  September 30, 1998, 1997 and 1996............................... 15
Notes to Consolidated Financial Statements........................ 17


         The remaining  information appearing in the Annual Report is not deemed
to be filed as part of this report, except as expressly provided herein.

         (2)  All  schedules  are  omitted  because  they  are not  required  or
applicable,  or the required information is shown in the consolidated  financial
statements or the notes thereto.

         (3)      Exhibits

                  (a)   The following exhibits are filed as part of this report.

               3.1  Articles of Incorporation of Teche Holding Company*
               3.2  Bylaws of Teche Holding Company*
               4.0  Stock Certificate of Teche Holding Company*
               10.1 Form of Teche Federal Savings Bank Management Stock Plan**
               10.2 Form of Teche Holding Company 1995 Stock Option Plan**
               11.0 Statement  regarding  computation of earnings per share (see
                    Note 1 to the Notes to Consolidated  Financial Statements in
                    the Annual Report)
               13.0 Annual  Report to  Stockholders  for the  fiscal  year ended
                    September 30, 1998
               21.0 Subsidiary of the Registrant  (see  "Item  1  Business  -
                    Subsidiary Activity" herein)
               23.0 Independent Auditors' Consent  
               27.0 Financial Data Schedule***

                  (b)   Reports on Form 8-K.

                  None
-----------------------------
*        Incorporated  herein by reference  into this document from the Exhibits
         to  Form  S-1,  Registration   Statement,   initially  filed  with  the
         Commission on December 16, 1994, Registration No. 33-87486.
**       Incorporated  herein by reference  into this document from the Exhibits
         to the  Registrant's  Form 10-K for the fiscal year ended September 30,
         1995, filed with the Commission.
***      Only in electronic filing.



                                       31

<PAGE>



                                                    SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                       TECHE HOLDING COMPANY

Dated:  December 29, 1998          By:  /s/Patrick O. Little     
                                        ---------------------------------------
                                        Patrick O. Little
                                        President, Chief Executive
                                        Officer and Director
                                        (Duly Authorized Representative)

         Pursuant to the  requirement  of the  Securities  Exchange Act of 1934,
this  Report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on December 29, 1998.


By:   /s/Patrick O. Little                    By: /s/J. L. Chauvin   
      ----------------------------------         -------------------------------
      Patrick O. Little                           J. L. Chauvin
      President, Chief Executive Officer          Vice President and Treasurer
        and Director                              (Principal Financial Officer)
      (Principal Executive Officer)


By:   /s/W. Ross Little                       By:                           
      ----------------------------------         -------------------------------
      W. Ross Little                              Robert Earl Mouton
      Chairman of the Board                       Director


By:   /s/Mary Coon Biggs                      By: /s/Christian L. Olivier    
      ----------------------------------         -------------------------------
      Mary Coon Biggs                             Christian L. Olivier
      Director                                    Director


By:   /s/Virginia Kyle Hine                   By:            
      ----------------------------------         -------------------------------
      Virginia Kyle Hine                          W. Ross Little, Jr.
      Director                                    Director and Secretary


By:   /s/Henry L. Friedman                    By:                         
      ----------------------------------         -------------------------------
      Henry L. Friedman                           Thomas F. Kramer, M.D.
      Director                                    Director


By:   /s/Donelson T. Caffery, Jr.        
      ----------------------------------     
      Donelson T. Caffery, Jr.
      Director