SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


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

For the fiscal year ended                    September 30, 1999
                          --------------------------------------------------

                                     - 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:     (337) 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  28,  1999,  was
$26.8 million (2,062,045 shares at $13.00 per share).

         As of December  28, 1999 there were  issued and  outstanding  2,545,016
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, 1999. (Parts I, II and IV)
2.   Portions  of  the  Proxy   Statement   for  the  2000  Annual   Meeting  of
     Stockholders. (Part III)


<PAGE>


                                      INDEX
<TABLE>
<CAPTION>

PART I                                                                                                        Page
                                                                                                              ----

<S>       <C>                                                                                               <C>
Item 1.     Business.........................................................................................  1

Item 2.     Properties......................................................................................  28

Item 3.     Legal Proceedings...............................................................................  28

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......................................................................  29

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk......................................  29

Item 8.     Financial Statements and Supplementary Data.....................................................  29

Item 9.     Changes In and Disagreements with Accountants on Accounting and Financial
              Disclosure....................................................................................  29

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.................................  30

</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 twelve  branch  offices  located in Morgan City,  Bayou
Vista,  New Iberia (two offices),  Lafayette  (two  offices),  Breaux Bridge and
Houma (three offices), and Thibodeaux,  Louisiana. In the first quarter of 2000,
the Bank expects to break ground on a $3.8 million  retail  banking,  operations
and  administrative  center  in New  Iberia as well as a new  drive-thru  branch
office in Franklin.  When  completed,  the facility in New Iberia will house all
administrative  offices and consolidate  various other  departments of the Bank.
The  cost of the  facility  and the new  branch  will be  amortized  as a charge
against earnings over approximately 35 years.

         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 Louisiana at
Lafayette,  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,
                                    ------------------------------------------------------------------------------------------------
                                           1999               1998                 1997                 1996             1995
                                    ------------------   ------------------ ------------------   ------------------  -------------
                                              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.............. $294,605   82.25% $ 301,071   84.27%  $310,306     86.25%   $288,109   87.03%  $234,329   87.49%
  Construction/permanent loans.....    7,585    2.12     11,867    3.32     11,067      3.08      13,740    4.15      8,097    3.02
  Multi-family.....................    1,444     .40      1,934     .54      2,839       .79       3,006     .91      2,871    1.07
Commercial real estate loans.......    4,601    1.28      6,261    1.75      6,897      1.92       7,346    2.22      7,540    2.82
Land loans.........................    1,109     .31      1,604     .45      2,634       .73       2,844     .86      2,288     .85

Consumer loans:
  Loans on savings accounts........    5,157    1.44      5,881    1.65      5,984      1.66       5,657    1.71      6,260    2.34
  Other............................   43,690   12.20     28,643    8.02     20,049      5.57      10,343    3.12      6,441    2.41
                                    --------  ------   --------  ------   --------    ------    --------  ------   --------  ------
       Total loans.................  358,191  100.00%   357,261  100.00%   359,776    100.00%    331,045  100.00%   267,826  100.00%
                                              ======             ======               ======              ======             ======
Less:
  Allowance for loan losses........    3,537              3,515              3,355                 3,182              2,966
  Deferred loan fees, net..........      658                580                860                 1,122              1,266

  Undisbursed portion of loans-
    in-process.....................   11,010              7,994              8,686                10,525              5,725
                                    --------           --------           --------             ---------           --------
        Net loans.................. $342,986           $345,172           $346,875             $ 316,216           $257,869
                                     =======            =======            =======              ========            =======
</TABLE>
         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,
                                          -------------------------------------------------------------
                                             1999         1998         1997         1996         1995
                                          ---------    ---------    ---------    ---------    ---------
                                                                  (In Thousands)
<S>                                      <C>          <C>          <C>          <C>          <C>
Total gross loans receivable
at beginning of year ..................   $ 357,261    $ 359,776    $ 331,045    $ 267,826    $ 247,263
                                          =========    =========    =========    =========    =========
Loans originated and purchased:
  One- to four-family residential .....      49,670       43,142       49,705       70,730       33,010
  Residential construction/permanent(1)      11,935       17,118       18,968       23,049       15,110
  Multi-family residential ............        --             70          167         --           --
  Land and non-residential real estate        4,122        1,901        1,271        3,579        1,970
  Consumer loans ......................      29,347       24,393       16,889       11,402       11,280
                                          ---------    ---------    ---------    ---------    ---------
      Total loans originated ..........      95,074       86,624       87,000      108,760       61,370
                                          ---------    ---------    ---------    ---------    ---------
Reductions in principal - primarily due
to loan repayments and prepayments ....     (94,144)     (89,139)     (58,269)     (45,541)     (40,807)
                                          ---------    ---------    ---------    ---------    ---------
Net loan activity .....................   $     930    $  (2,515)   $  28,731    $  63,219    $  20,563
                                          =========    =========    =========    =========    =========
Total gross loans receivable at end of
year ..................................   $ 358,191    $ 357,261    $ 359,776    $ 331,045    $ 267,826
                                          =========    =========    =========    =========    =========
</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.

                                       2
<PAGE>
         Loan Purchases.  While the Bank primarily focuses on the origination of
one- to four-family  residential mortgages,  in 1999 and 1998 the Bank purchased
$0.0 and $2.7 million of performing  fixed-rate  mortgage  loans from  financial
institutions in south Louisiana.

         Loan Maturity  Tables.  The following  table sets forth the maturity of
the Bank's loan  portfolio  at September  30,  1999.  The table does not include
prepayments or scheduled principal  repayments.  Adjustable-rate  mortgage loans
are shown as maturing based on contractual maturities.
<TABLE>
<CAPTION>
                                                          Residential                                             All
                                             One- to     Construction/                 Commercial                Other
                                           Four-Family     Permanent   Multi-Family    Real Estate   Land        Loans       Total
                                           -----------     ---------   ------------    -----------   ----     ----------     -----
                                                                                (In Thousands)
<S>                                         <C>          <C>             <C>           <C>        <C>          <C>        <C>
Amounts due:
  1 year or less.........................    $     155    $      --       $   --        $    --    $      4     $ 1,776    $   1,935
                                              --------     --------        ------        --------   -------      ------     --------
  After 1 year:
    More than 1 year to 3 years..........        1,350           --            --             397        53       4,748        6,548
    More than 3 years to 5 years.........        4,556           --            94             454       177       7,796       13,077
    More than 5 years to 10 years........       54,411           --           466             776       526       9,557       65,736
    More than 10 years to 20 years.......       90,686        2,588           138           2,876       282       1,616       98,186
    More than 20 years...................      143,447        4,997           746              98        67      23,354      172,709
                                               -------        -----         -----           -----     -----      ------      -------
      Total due after September 30,
         2000............................      294,450        7,585         1,444           4,601     1,105      47,071      356,256
                                               -------        -----         -----           -----     -----      ------      -------

      Total amount due...................     $294,605       $7,585        $1,444          $4,601    $1,109     $48,847     $358,191
                                               =======        =====         =====           =====     =====      ======      =======
</TABLE>

         The following table sets forth the dollar amount of all loans due after
September  30, 2000,  which have  pre-determined  interest  rates and which have
floating or adjustable interest rates.
<TABLE>
<CAPTION>
                                                                        Floating or
                                                           Fixed        Adjustable
                                                           Rates         Rates (1)         Total
                                                           -----         ---------         -----
                                                                      (In Thousands)

<S>                                                     <C>              <C>           <C>
One- to four-family.....................                  $152,352         $142,098      $294,450
Residential construction/permanent......                     3,775            3,810         7,585
Other...................................                    48,685            5,536        54,221
                                                            ------            -----        ------
      Total.............................                  $204,812         $151,444      $356,256
                                                           =======          =======      ========
</TABLE>

--------------------
(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."

                                       3
<PAGE>

         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.

         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
$24.4  million of ARMs during the year ended  September  30, 1999, of which $5.7
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 most of 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, 1999.

         The Bank offers  home  equity  loans on single  family  residences.  At
September 30, 1999, home equity mortgage loans totaled  $19,655  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 30 years.  A
variety of home equity loan  programs  are offered  including  combined  loan to
values up to 125.00%  of  collateral,  however,  such  loans are  generally  for
shorter  terms.  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

                                       4
<PAGE>

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.

         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 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 80% of the  appraised  value  of the  property  securing  the  loan
depending  upon the type of  collateral.  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,
1999 the aggregate balance of the five largest  multi-family and commercial real
estate loans totaled $2.0 million with no single loan larger than $745,131.

         Land Loans.  At September 30, 1999, the Bank had $5.0 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  made up to 100% of the
deposit and at an interest  rate ranging from 2 to 3% above the rate paid on the
deposit.  At September  30, 1999,  the Bank had $5.2 million of loans secured by
deposits.

         Teche  Federal also  originates  automobile  and mobile home loans.  At
September 30, 1999,  $4.2 million and $0.6 million  consisted of automobile  and
mobile home loans, respectively.

                                       5
<PAGE>

         The  Bank has 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, 1999,  such credit cards had a balance of
$1.5 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  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.

         Loan Approval  Authority and  Underwriting.  All mortgage loans greater
than $240,000,  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  $240,000 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 his 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.  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.

                                       6
<PAGE>

         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  issuance.  At
September  30,  1999,  the Bank had $15.4  million of  commitments  to originate
mortgage  loans,   including  $11.0  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 $6.6 million as of September 30, 1999.

         At  September  30,  1999,  the  Bank's  largest  lending   relationship
consisted of a $745,132  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, 1999 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, a $311,305
loan  secured by an office  building was on the Bank's watch list because of the
amount of  exposure  and  previous  delinquencies.  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

                                       7
<PAGE>

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  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,
                                                                              -------------------------------------------------
                                                                                1999     1998       1997        1996     1995
                                                                              -------   ------    ---------   -------   -------
                                                                                             (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 ........................................                      $   609   $  640    $   1,028   $   544   $   584
   All other mortgage loans ............................                         --       --           --        --          59
 Consumer ..............................................                           51       83           88        15        19
                                                                              -------   ------    ---------   -------   -------
      Total ............................................                      $   660   $  723    $   1,116   $   559   $   662
                                                                              =======   ======    =========   =======   =======

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 .............................                      $   660   $  723    $   1,116   $   559   $   662
                                                                              =======   ======    =========   =======   =======

Real estate owned ......................................                      $   178   $  331    $      33   $    46   $   253
                                                                              =======   ======    =========   =======   =======
Total non-performing assets ............................                      $   838   $1,054    $   1,149   $   605   $   915
                                                                              =======   ======    =========   =======   =======

Total non-performing loans to total loans
  outstanding before allowance .........................                          .19%     .20%         .31%      .17%      .25%
                                                                              =======   ======    =========   =======   =======
Total non-performing loans to total assets .............                          .15%     .18%         .27%      .15%      .20%
                                                                              =======   ======    =========   =======   =======
Total non-performing assets to total assets ............                          .19%     .26%         .28%      .16%      .28%
                                                                              =======   ======    =========   =======   =======
</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, 1999.


                                       8
<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, 1999:


                                                                At
                                                        September 30, 1999
                                                        ------------------
                                                          (In Thousands)

Residential mortgage loans.........................            $ 942
Non-residential real estate loans..................              --
Land loans.........................................              --
Consumer loans.....................................              600


         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,  1999,  the Bank had REO with a net
balance of $178,000.

         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.



                                       9
<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)
                              -----------------------------------------------------------------------------------------------------
                                      1999             1998                 1997                 1996                1995
                              ------------------- ------------------  --------------------- ------------------- -------------------
                                       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..........  $2,664      82.25% $2,600      84.27%   $2,558        86.25% $2,426       87.03% $2,201       87.49%
Multi-family and commercial
  real estate................     121       1.68     246       2.29       437         2.71     414        3.13     510        3.89
Construction.................      15       2.12      24       3.32        26         3.08      25        4.15      25        3.02
Consumer and other loans.....     737      13.95     645      10.12       334         7.96     317        5.69     230        5.60
                               ------     ------  ------      -----    ------       ------  ------      ------  ------      ------
Total allowance(1)...........  $3,537     100.00% $3,515     100.00%   $3,355       100.00% $3,182      100.00% $2,966      100.00%
                               ======     ======   =====     ======     =====       ======   =====      ======   =====      ======
</TABLE>

------------------------
(1)  Includes specific reserves for assets classified as loss.


                                       10
<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,
                                               --------------------------------------------------------------------
                                                   1999          1998         1997           1996         1995
                                               -----------    ----------    ---------     ----------    -----------
                                                                      (Dollars in Thousands)

<S>                                             <C>           <C>           <C>           <C>           <C>
Total loans outstanding, net ................   $ 342,986     $ 345,172     $ 346,875     $ 316,216     $ 257,869
                                                =========     =========     =========     =========     =========
Average loans outstanding ...................     340,540     $ 349,769     $ 336,509     $ 283,962     $ 245,567
                                                =========     =========     =========     =========     =========

Allowance balances (at beginning of year) ...   $   3,515     $   3,355     $   3,182     $   2,966     $   2,778
                                                ---------     ---------     ---------     ---------     ---------
Provision ...................................         150           180           240           300           360
                                                ---------     ---------     ---------     ---------     ---------
Charge offs:
  Residential real estate mortgage loans:
    One- to four-family units ...............         (60)          (56)           (7)          (28)          (81)
  Construction loans ........................        --            --            --            --            --
  Multi-family and commercial real estate
    loans ...................................        --            --            --            --             (72)

  Land loans ................................        --            --            --            --            --
  Other .....................................        (112)           (8)          (69)          (59)          (32)
                                                ---------     ---------     ---------     ---------     ---------
      Total charge-offs .....................        (172)          (64)          (76)          (87)         (185)

Recoveries
  Residential real estate mortgage loans:
    One- to four-family units ...............          38            18             9             3            12
  Construction loans ........................        --            --            --            --            --
  Multi-family and commercial real estate
    loans ...................................        --              22          --            --            --
  Land loans ................................        --            --            --            --            --
  Other .....................................           6             4          --            --               1
                                                ---------     ---------     ---------     ---------     ---------
      Total recoveries ......................          44            44             9             3            13
                                                ---------     ---------     ---------     ---------     ---------
  Net (charge-offs) .........................        (128)          (20)          (67)          (84)         (172)
                                                ---------     ---------     ---------     ---------     ---------
Allowance balance (at end of year) ..........   $   3,537     $   3,515     $   3,355     $   3,182     $   2,966
                                                =========     =========     =========     =========     =========

Allowance for loan losses to total loans
  outstanding before allowance ..............        1.02%         1.01%          .96%         1.00%         1.14%
Net loans charged off as a percent of average
  loans outstanding before allowance ........         .04%          .01%          .02%          .03%          .07%
</TABLE>


                                       11


<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,
                                  --------------------------------------------
                                  1999     1998     1997     1996      1995
                                  -----    -----    -----    -----     -----

                                            (Dollars in Thousands)

Total real estate owned, net ..   $ 178    $ 331    $  33    $  46     $ 253
                                  =====    =====    =====    =====     =====

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

Provision .....................      35     --          4     --        --

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

Allowance - ending ............   $ 147    $ 112    $ 112    $ 108     $ 131
                                  =====    =====    =====    =====     =====

Allowance for losses on
  real estate owned to real
  estate owned before allowance      45%      25%      77%      70%       34%

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, 1999 the Bank's regulatory liquidity was 10.0% is
in excess of 4% required by OTS  regulations.  See  "Regulation -- Regulation of
the Bank -- Federal Home Loan Bank System."


                                       12
<PAGE>


         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 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.  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,
                                          ---------------------------
                                            1999      1998      1997
                                          -------   -------   -------
                                                (In Thousands)

Investment securities issued by U.S.
  Government agencies and corporations... $ 4,375   $ 4,478   $ 7,312
FHLB Stock ..............................   4,229     3,884     3,927
Mortgage-backed securities ..............  26,277    26,526    30,378
CMO's ...................................  32,042     4,694      --
Common stock and municipal obligations...     766     1,071       164
                                          -------   -------   -------
   Total investment and mortgage-backed
      securities ........................  67,689    40,653    41,781
Interest-bearing deposits ...............   1,829     5,260     4,510
                                          -------   -------   -------
   Total investments .................... $69,518   $45,913   $46,291
                                          =======   =======   =======


                                       13
<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.

         The Bank also purchases  mortgage-backed  securities and CMOs issued by
government agencies,  private issuers and financial institutions,  some of which
are  qualified  under  the  Code as Real  Estate  Mortgage  Investment  Conduits
("REMICs").  CMOs and REMICs (collectively CMOs) have been developed in response
to investor concerns regarding the uncertainty of cash flows associated with the
prepayment  option  of the  underlying  mortgagor  and are  typically  issued by
governmental  agencies,  governmental  sponsored enterprises and special purpose
entities, such as trusts, corporations or partnerships, established by financial
institutions or other similar  institutions.  Some CMO and REMIC instruments are
most like  traditional  debt  instruments  because  they have  stated  principal
amounts and traditionally  defined  interest-rate  terms.  Purchasers of certain
other CMO and REMIC  instruments  are  entitled  to the  excess,  if any, of the
issuer's cash inflows,  including reinvestment earnings,  over the cash outflows
for debt service and administrative expenses. These mortgage related instruments
may include  instruments  designated as residual  interests,  which represent an
equity  ownership  interest in the underlying  collateral,  subject to the first
lien of the  investors  in the other  classes of the CMO.  Certain  residual CMO
interests may be riskier than many regular CMO interests to the extent that they
could result in the loss of a portion of the original investment. Moreover, cash
flows from  residual  interests are very  sensitive to  prepayments  and,  thus,
contain a high degree of interest-rate risk.

         At September 30, 1999,  all of the Bank's  investment in CMOs consisted
of regular interests.  As of September 30, 1999, the Bank's CMOs did not include
any residual interest or interest-only or principal-only securities. As a matter
of  policy,  the  Bank  does  not  invest  in  residual  interests  of  CMOs  or
interest-only  and  principal-only  securities.  The CMOs and REMICs held by the
Bank at September 30, 1999  consisted of floating rate and fixed rate  tranches.
The interest rate of a majority of the Bank's  floating-rate  securities adjusts
monthly and provides the institution  with net interest margin  protection in an
increasing  market  interest rate  environment.  The  securities  are- backed by
mortgages on one- to four-family  residential  real estate and have  contractual
maturities up to 30 years.  The  securities are primarily PACs and TACs (Planned
and Targeted  Amortization Classes) are designed to provide a specific principal
and interest cash-flow.

         Private  issued CMOs tend to have  greater  prepayment  and credit risk
than those issued by  government  agencies or government  sponsored  enterprises
(e.g.,  FHLMC,  FNMA and GNMA) generally because they often are secured by jumbo
loans (currently,  loans with an aggregate  outstanding balances

                                       14
<PAGE>

of greater  than  $203,150).  At September  30, 1999,  the Bank had CMOs with an
aggregate  estimated market value of $32.0 million,  of which $22.7 million,  or
70.9% were  privately  issued.  At September 30, 1999 the amortized  cost of the
CMO's was  approximately  $33.3 million.  To minimize the risk of private issued
CMOs, the Bank only purchases those CMOs rated AA or better by one of the rating
agencies.

         At  September  30,  1999,  the  Bank  had  mortgage-backed   securities
available  for sale with an  amortized  cost of $26.4  million and an  estimated
market value of $26.3 million.

         At  September  30, 1999,  Teche  Federal had an  investment  securities
portfolio  with an amortized  cost of  approximately  $4.4  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, 1999 (excluding  FHLB stock and  interest-bearing  accounts),  was
$4.4 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, 1999, the Bank held $1.8 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, 1999.

<TABLE>
<CAPTION>
                                                                  As of September 30, 1999
                       -------------------------------------------------------------------------------------------------------------
                        One Year or Less  One to Five Years  Five to Ten Years More than Ten Years       Total Investements
                       ------------------ ----------------- ------------------ ----------------- -----------------------------------
                       Amortized  Average Amortized Average Amortized  Average Amortized Average Amortized Average  Carrying  Market
                          Cost     Yield    Cost     Yield    Cost      Yield     Cost    Yield    Cost     Yield    Value    Value
                       ---------  ------   ------    ------  -------   ------  -------   ------- -------   -------  -------   ------
<S>                    <C>        <C>    <C>         <C>    <C>      <C>       <C>       <C>   <C>          <C>    <C>       <C>
                                                                                             (Dollars in Thousands)
Investment Securities
available for sale..... $ 1,000    7.45%  $ 3,362     5.35%  $    --    N/A%    $   --     N/A% $ 4,362      6.51%  $ 4,375  $ 4,375
Mortgage-backed
Securities available
for sale(1)............    --       N/A     8,382     6.06       151   8.26      17,904   5.82   26,437      5.91    26,277   26,277
CMO's (1) .............    --       --        555     6.85        --    N/A      32,738   6.56   33,293      6.56    32,042   32,042
FHLB Stock ............    --       N/A        --      N/A        --    N/A         --     N/A    4,227      5.50     4,229    4,229
Municipal Obligations .      34    4.72       167     5.30        --    N/A         --     N/A      201      5.20       201      201
Equity Securities .....    --       N/A       N/A      N/A        --    N/A         --     N/A      539       N/A       565      565
                        -------           -------            -------           -------          -------             -------  -------
      Total ........... $ 1,034    7.37%  $12,466     5.84%  $   151   8.26%   $50,642   6.30%  $69,061      6.24%  $67,689  $67,689
                        =======    ====   =======     ====   =======   ====    =======   ====   =======      ====   =======  =======
</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 $80.7 million, or 26.6% of the Bank's deposit portfolio at September
30, 1999.  Certificates  of deposit  constituted  $222.3 million or 73.4% of the
deposit portfolio, including $48.9 million of which had balances of $100,000 and
over. As of September 30, 1999, 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, 1999.

<TABLE>
<CAPTION>
                                            Period to Maturity from September 30, 1999
                               --------------------------------------------------------------------------
                                Less than          One to         Two to       Over Three
                                 One Year         Two Years     Three Years       Years          Total
                                 --------         ---------     -----------       -----          -----
                                                               (In Thousands)
<S>                             <C>              <C>             <C>           <C>            <C>
Certificate accounts:
  2.00 to 2.99%.............     $    830         $     --        $     --      $     --       $     830
  3.00 to 3.99%.............       19,819            2,291              --             2          22,112
  4.00 to 4.99%.............       47,295            9,737           1,282           831          59,145
  5.00 to 5.99%.............       62,817           28,274           5,552         9,558         106,201
  6.00 to 6.99%.............       17,014            6,241           6,752         1,160          31,167
  7.00 to 7.99%.............        2,442              100             351            --           2,893
                                  -------         --------        --------      --------       ---------
      Total                      $150,217         $ 46,643        $ 13,937      $ 11,551       $ 222,348
                                  =======           ======          ======        ======         =======
</TABLE>

         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,  1999,  those with  balances of $100 would yield 4.00% those with
balances of $25,000 would yield 4.25% those with balances of $99,000 would yield
4.45%. 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

                                       17
<PAGE>

$100,000. The following table indicates the amount of the Bank's certificates of
deposit of $100,000 or more by time remaining until maturity as of September 30,
1999.

                              Certificates               Weighted
                               of Deposit             Interest Rate
                               ----------             -------------
                               (In Thousands)
Maturity Period:
3 months or less .......          $10,165                  5.15%
Over 3 through 6 months            12,799                  5.28
Over 6 through 12 months           11,894                  5.17
Over 12 months .........           14,012                  5.49
                                  -------
Totals .................          $48,870                  5.29%
                                  =======

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

                                                 At September 30,
                                        ------------------------------------
                                           1999         1998          1997
                                        ---------    ---------     ---------

                                                  (In Thousands)

Beginning balance ..................... $ 279,265    $ 280,302     $ 254,723
Net deposits (withdrawals)  ...........    11,251      (13,949)       12,545
Interest credited on deposits .........    12.568       12,912        13,034
                                        ---------    ---------     ---------
Ending balance ........................ $ 303,084    $ 279,265     $ 280,302
                                                     =========     =========
Total increase (decrease) in deposits.. $  23,819    $  (1,037)    $  25,579
                                        =========    =========     =========
Percentage increase (decrease) ........      8.53%        (.37)%       10.04%

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, 1999, Teche Federal had
$78.7 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,
                                                  --------------------------------------
                                                      1999       1998       1997
                                                      ----       ----       ----

                                                         (Dollars in Thousands)

<S>                                                 <C>        <C>        <C>
FHLB advances:
  Average balance outstanding ....................   $68,988    $68,306    $64,685
  Maximum amount outstanding at any
month-end during the year ........................    78,682     77,335     72,684
  Balance outstanding at end of year .............    78,682     67,721     65,398
  Weighted average interest rate during the year..      5.33%      5.56%      5.64%
  Weighted average interest rate at end of year...      5.35%      5.34%      5.73%
</TABLE>

Subsidiary Activity

         The only subsidiary of the Company is Teche Federal.

         As  of  September  30,  1999,  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 $113,000. FISI was inactive at September 30, 1999.

         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,  1999,  Teche  Federal  was  authorized  to  invest  up to
approximately  $8.7 million in the stock of, or loans to,  service  corporations
(based upon the 2% limitation).

Personnel

         As of September  30, 1999,  the Bank had 153 full-time and 60 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.

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


                                       19
<PAGE>

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.

         Recent Developments -- Financial  Modernization.  On November 12, 1999,
President Clinton signed into law the  Gramm-Leach-Bliley  Act (the "Act") which
will,  effective March 11, 2000,  permit  qualifying  bank holding  companies to
become financial  holding  companies and thereby affiliate with securities firms
and  insurance  companies and engage in other  activities  that are financial in
nature.   The  Act  defines   "financial   in  nature"  to  include   securities
underwriting,  dealing and market making; sponsoring mutual funds and investment
companies;  insurance underwriting and agency; merchant banking activities;  and
activities  that the Board has  determined to be closely  related to banking.  A
qualifying national bank also may engage,  subject to limitations on investment,
in activities that are financial in nature,  other than insurance  underwriting,
insurance company portfolio investment, real estate development, and real estate
investment, through a financial subsidiary of the bank.

         The Act also  prohibits  new  unitary  thrift  holding  companies  from
engaging in  nonfinancial  activities or from  affiliating  with a  nonfinancial
entity.  As a  grandfathered  unitary thrift holding  company,  the Company will
retain its authority to engage in nonfinancial activities.

         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.

                                       20
<PAGE>

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.

         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, 1999,  amounted to approximately
$168,428.

         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


                                       21
<PAGE>

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,  1999  totaled
approximately $85,171.

         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 (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.  The Bank's capital levels can be
found at Note 18 to the Consolidated Financial Statements included as Exhibit 13
to this report.

         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."

         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.

         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 300 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 300 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

                                       22
<PAGE>

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, and 300 basis points from the level
of interest rates at September 30, 1999.
<TABLE>
<CAPTION>

                                                                                  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)
<S>                 <C>              <C>                   <C>              <C>               <C>
 +300 bp             21,457            -26,327               -55%              5.30%            -559 bp
 +200 bp             30,872            -16,912               -35%              7.41%            -348 bp
 +100 bp             39,972             -7,812               -16%              9.33%            -156 bp
    0 bp             47,784                                                   10.89%
 -100 bp             52,868              5,085               +11%             11.84%             +95 bp
 -200 bp             55,091              7,307               +15%             12.20%            +131 bp
 -300 bp             56,874              9,091               +19%             12.47%            +157 bp
</TABLE>

---------------
(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.

                                       23
<PAGE>

                                                  September 30, September 30,
                                                     1999           1998
                                                  ------------- -------------

*** RISK MEASURES: 200 BP RATE SHOCK ***
Pre-Shock NPV Ratio: NPV as % of PV of Assets...    10.89%         14.84%
Exposure Measure: Post-Shock NPV Ratio .........     7.41%         13.00%
Sensitivity Measure: Change in NPV Ratio .......    -3.48 bp       -184 bp
*** CALCULATION OF CAPITAL COMPONENT ***
Change in NPV as % of PV of Assets .............     3.86%          2.31%
Interest Rate Risk Capital Component ($000).....   $    0         $    0

         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.  (The Bank's NPV  decreases by 3.5% 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

                                       24
<PAGE>

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.  The OTS imposes
various  restrictions or requirements on the ability of savings  institutions to
capital distributions including cash dividends.

         A  savings  association  that is a  subsidiary  of a  savings  and loan
holding company, such as the Bank, must file an application or a notice with the
OTS at least 30 days before making a capital distribution.  Savings associations
are not  required  to file  an  application  for  permission  to make a  capital
distribution  and need only file a notice if the following  conditions  are met:
(1) they are eligible for expedited  treatment under OTS  regulations,  (2) they
would  remain  adequately  capitalized  after the  distribution,  (3) the annual
amount of capital  distribution does not exceed net income for that year to date
added to retained net income for the two  preceding  years,  and (4) the capital
distribution  would not violate any  agreements  between the OTS and the savings
association  or any OTS  regulations.  Any  other  situation  would  require  an
application to the OTS.

         In addition, the OTS could prohibit a proposed capital distribution if,
after making the  distribution,  by any  institution,  which would  otherwise be
permitted by the regulation,  if the OTS determines that the distribution  would
constitute an unsafe or unsound practice.

         A federal  savings  institutions  is  prohibited  from making a capital
distribution if, after making the distribution the savings  institution would be
unable to meet any one of its minimum regulatory capital requirements.  Further,
a federal  savings  institution  cannot  distribute  regulatory  capital that is
needed for its liquidation account.

         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,  1999,  the  Bank  was in  compliance  with its QTL
requirement with 89.6% of its assets invested in QTIs.


                                       25
<PAGE>

         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  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

                                       26
<PAGE>

Bank's capital position, and require certain approval procedures to be followed.
OTS  regulations,   with  minor   variation,   apply  Regulation  O  to  savings
associations.

         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, 1999, the Bank's liquidity ratio was 14.0%.

         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 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, 1999, the Bank had $78.7 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, 1999,  the Bank had $4.2 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, 1999,  dividends paid by
the FHLB of Dallas to the Bank totaled $220,021.


                                       27
<PAGE>

         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, 1999,  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, 1999.

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 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  $441,889 (net of taxes) for the
year ended September 30, 1999.

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 $15.3  million with a net book value of $10.3
million at September 30, 1999.  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.

                                       28
<PAGE>

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, 1999 ("Annual  Report") on page 3, and is  incorporated  herein by
reference.

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

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

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  29 and are  incorporated  herein by
reference.

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

         None.


                                       29
<PAGE>
                                    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 3 to 8 of the Registrant's definitive proxy statement for the
Registrant's  Annual Meeting of Stockholders to be held on January 19, 2000 (the
"Proxy Statement"), which was filed with the Commission on December 10, 1999 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 2 through 5.

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 pages
12 and 13.

                                     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, 1999 and 1998   12
Consolidated Statements of Income For the Years Ended
  September 30, 1999, 1998 and 1997 .........................   13
Consolidated Statements of Stockholders' Equity
  for the Years Ended September 30, 1999, 1998 and 1997 .....   14
Consolidated Statements of Cash Flows for the Years Ended
  September 30, 1999, 1998 and 1997 .........................   15-16
Notes to Consolidated Financial Statements ..................   17-29


                                       30
<PAGE>

         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
<TABLE>
<CAPTION>
<S>    <C>       <C>
                  (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**
         10.3     Employment Agreement with Patrick O. Little
         11.0     Statement regarding computation of earnings per share
                  (see Note 14 to the Notes to Consolidated Financial Statements
                  in the Annual Report)
         13.0     Annual Report to Stockholders  for the fiscal year ended September 30,  1999
         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.

                  On August 20, 1999, the Company filed a Current Report on Form
                  8-K with the Commission announcing the adoption of a 10% stock
                  repurchase plan.
</TABLE>
-----------------
*        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.


<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, 1999                  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, 1999.
<TABLE>
<CAPTION>

<S>                                                    <C>
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

</TABLE>