<TABLE>
<CAPTION>
<S>                                  <C>                                <C>
Teche Holding Company                  New Iberia                           Baton Rouge
1120 Jefferson Terrace Boulevard       529 N. Lewis Street                  Wal*Mart SuperCenter
New Iberia, LA  70560                  New Iberia, LA  70563                2171 O'Neal Lane
PHONE (337) 560-7151                    (337) 367-2516                      Baton Rouge, LA   70816
FAX (337) 365-7130                                                          (225) 751-0264
                                       New Iberia
New Iberia                             142 W. St. Peter Street              Breaux Bridge
1120 Jefferson Terrace Boulevard       New Iberia, LA 70560                 601 E. Bridge Street
New Iberia, LA  70560                  (337) 364-5528                       Breaux Bridge, LA 70517
(337) 365-0366 (337) 332-2149 Call Center (800) 897-0315 Lafayette
                                       Broadmoor                            Houma
Franklin                               5121 Johnston Street                 706 Barrow Street
211 Willow Street                      Lafayette, LA 70503                  Houma, LA 70360
Franklin, LA 70538                     (337) 981-1887                       (985) 868-8766
 (337) 828-3212
                                       Lafayette                            Houma
Franklin Drive-Thru                    Downtown                             1963 Prospect Boulevard
1823 Main Street                       1001 Johnston Street                 Houma, LA 70363
Franklin, LA 70538                     Lafayette, LA 70501                  (985) 857-9990
(337) 828-4177                         (337) 232-6463
                                                                            Thibodaux
Morgan City                            Lafayette                            921 Canal Boulevard
1001 7th Street                        2200 W. Pinhook Road                 Thibodaux, LA  70301
Morgan City, LA 70380                  Lafayette, LA 70508                  (985) 446-6707
(985) 384-0653                         (337) 232-3419
                                                                            Opelousas
Bayou Vista                            Baton Rouge                          428 E. Landry Street
206 Arlington Avenue                   3524 S. Sherwood Forest Boulevard    Opelousas, LA  70570
Bayou Vista, LA 70380                  Baton Rouge, LA  70816               (337) 942-5748
(985) 395-5244                         (225) 293-0954
                                                                            Eunice
Internet:                              Prairieville                         840 E. Laurel Avenue.
http//www.teche.com                    Wal*Mart SuperCenter                 Eunice, LA   70535
                                       17585 Airline Hwy.                   (337) 457-9585
                                       Prairieville, LA  70769
                                       (225) 677-8748

</TABLE>

Table of Contents                                                             1

President's Message                                                           2

Selected Financial Data                                                       4

Business of the Bank - Business of the Company                                5

Summary of Quarterly Operating Results                                        5

Market and Dividend Information                                               6

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

Report of Independent Registered Public Accounting Firm                      14

Consolidated Balance Sheets                                                  15

Consolidated Statements of Income                                            16

Consolidated Statements of Stockholders' Equity                              17

Consolidated Statements of Cash Flows                                        18

Notes to Consolidated Financial Statements                                   19

Directors and Officers                                                       43

General Information                                                          43


<PAGE>

                                     Teche
                                HOLDING COMPANY


President's Message

--------------------------------------------------------------------------------

Dear Fellow Shareholders:

Teche has been in business for over 70 years  serving the needs of our customers
in South  Louisiana  and we continue to  successfully  meet the  challenges  and
opportunities of each new year with innovation, optimism and enthusiasm. We have
met  the  challenges  of  2005  including  two  hurricanes  which  struck  South
Louisiana.  Our success is evident in continued  branch  expansion,  deposit and
loan growth and return on investment to shareholders.

Expansion in the Baton Rouge region has exceeded  expectations with a 39% growth
in deposits this year. Also this year,  deposits in St. Landry parish,  the site
of a recent  merger,  grew 27% and deposits in Lafayette  parish  increased 26%.
Overall  deposits  grew 19% with  double-digit  deposit  growth in eight of nine
parishes in which we operate. More and more customers established Teche as their
primary bank this year.

The growth trend was also evident in exceptional loan growth. SmartGrowth loans,
those with the highest  returns,  grew 18% overall with a record increase of 52%
in commercial loans from fiscal year 2004 at year-end.

Our SmartGrowth strategy generated solid shareholder returns again this year. We
have  increased  dividends  for ten  straight  quarters  and our stock price has
increased 188% over the past five years.

Teche and our people  performed very well this year. I want to highlight many of
our key achievements in this report:

              o        Record deposit growth
              o        Successful expansion to new markets
              o        Continued transition to a community bank
              o        Superior loan growth
              o        Stellar financial performance
              o        Excellent shareholder returns

Record Deposit  Growth.  During 2005 total Teche deposits grew from $432 million
in 2004 to $516 million,  an increase of $84 million or 19% from 2004.  The bulk
of this  increase  came from  time  deposits,  a net  increase  of $69  million.
SmartGrowth deposits, which comprise money market, savings, and checking account
deposits,  grew by $14 million.  SmartGrowth  deposits now comprise 44% of total
deposits. At the same time, we reduced Federal Home Loan Bank advances from $154
million to $93 million at the fiscal year end.

Successful  Expansion  into New  Markets.  During  this  fiscal  year we further
expanded  in the Baton  Rouge  market by  opening a new  branch in the  Wal-Mart
Supercenter in the community of Prairieville,  located in Ascension  parish,  on
August 24, 2005.

The Sherwood  Forest  branch in Baton Rouge has continued to be the most rapidly
growing  branch  in Teche  history;  at the end of  fiscal  year 2005 it had $28
million in deposits after 22 months of operation.

In 2004 we expanded into St. Landry  parish when Teche  Holding  Company  merged
with St. Landry  Financial  Corporation,  the holding  company for First Federal
Savings & Loan Association of Opelousas. The two new locations, one in Opelousas
and the other in Eunice,  have been highly successful in growing deposits during
2005.  Deposits in St.  Landry  parish  increased  $12 million or 28% during the
year.

Overall, when I wrote this letter two years ago we had 15 branches;  now we have
extended  our  geographic  area  into  three  more  Louisiana  parishes  and are
successfully  operating 19 branches. We have also expanded banking hours and now
have 16 branch offices which are open on Saturday.

We are  currently  scouting  for other  locations  in our  existing  markets and
continued expansion is expected.  Our market area, which is outside New Orleans,
but in South  Louisiana,  has  experienced  rapid growth due to  businesses  and
individuals displaced by Hurricane Katrina.

Teche  Continues  Transition to a Community  Bank. Our strategy of  SmartGrowth,
which  emphasizes  growth with  profitability  and  growing the most  profitable
segments of our business,  is guiding our  transition to a community  bank model
from our original thrift structure.

We have sustained excellent progress in the expansion of our customer base which
now includes  more than 60,000  people.  We continue to attract  customers  with
Totally Free Checking. We now open more than 2,250 deposit and loan accounts per
month.

Superior Loan Growth. In 2005, total loans grew by $17 million, fueled primarily
by growth in commercial  loans. Our SmartGrowth loan portfolio grew 18%, to $300
million.  SmartGrowth loans (commercial,  alternative,  home equity and consumer
loans) now represent 61% of total loans compared to 54% at year-end in 2004.

                                                                               2

<PAGE>

In 2005, we intensified our commercial lending efforts.  This effort has yielded
record growth in total  commercial  loans to $115  million,  a 52% increase over
last year. Along with significant loan growth, the Bank has maintained excellent
loan quality.  Non-performing  loans are less than 1% of total  assets.  We have
taken a  pro-active  approach to  estimate  potential  losses due to  Hurricanes
Katrina and Rita by adding an  additional  $800,000 to loan loss  reserves  this
year. While we expect a temporary  increase in  non-performing  loans in 2006 we
believe we have adequately reserved for any potential loan losses resulting from
these hurricanes. We will continue to monitor these loans.

Financial  Performance  2005 - A Stellar  Year.  We increased  our assets by $24
million  in 2005 to a year-end  record  $677  million.  Operating  revenue  (net
interest income plus non-interest income) growth continues a steady upward trend
with $31 million in 2005 compared to $27 million in 2004. The company  continued
to  repurchase  its common stock during the year and  repurchased  approximately
79,000 shares during the fiscal year.

Earnings per share,  excluding the  additional  $800,000 loan loss provision and
its tax  effect,  amounted  to $2.50 per  diluted  share,  compared to $2.48 for
fiscal  2004.  The  increase  in  provision  for loan  losses of $800,000 in the
quarter ended  September  30, 2005 was based on detailed  assessment of the loan
portfolio and hundreds of contacts with our loan customers.

TSH -  Excellent  Shareholder  Returns.  We are  proud  of the  returns  we have
provided to  shareholders.  Long-term  solid earnings  performance has fueled an
appreciation  in Teche's  stock price.  A  shareholder  who purchased a share of
Teche stock on September 29, 2000 for $13.50 would have a share valued at $38.87
on September 30, 2005, an increase of 188%. In addition,  this shareholder would
have benefited from ten consecutive  quarters of dividend  increases for a total
dividend  payout of $3.30 per share over five  years.  Dividend  growth over the
last twelve  months was 20% and Teche's  annual  payout ratio was 36% before the
loan  loss  provision  (net of tax).  Dividends  for  Teche in 2005  were $ 0.94
compared to $0.78 in 2004.

We are  committed to  continuing  the  profitability  and  superior  shareholder
returns  that  we have  generated  over  the  past  five  years.  Basically  our
SmartGrowth strategy is to increase the segments of our portfolio which generate
the highest  returns and expand into areas which have the  potential  for future
earnings and growth. We have a solid and tested strategy.

Hurricanes  Katrina and Rita. I cannot close without  mentioning the devastation
wrought on the state of Louisiana in 2005 by Hurricanes  Katrina and Rita.  Many
lives were lost and  billions of dollars in  property  were  destroyed.  Teche's
branch network footprint lay between the final landfall of the two storms. Teche
therefore suffered only minor damage to a small number of its branch facilities.
Our Operations Center was open and running  throughout both storms. Our disaster
preparedness  plans  worked  well  and  we  will  continue  to  refine  them  in
anticipation of future events.

After the storms  had passed we worked  proactively  to help those  affected  by
collecting  donations  for the  victims at all of our  branches  and by allowing
forbearance on loan payments to those Teche  customers,  comprising less than 5%
of our total loan customer base, who suffered income  interruption  and property
damage.

At our  Operations  Center  we also  hosted  the  operations  staff  of  another
financial institution located in southwest Louisiana that suffered severe damage
from Hurricane Rita.

While the impact on the New Orleans area and the state of Louisiana  was severe,
the  economic  impact  of the  historic  rebuilding  effort  in the  wake of the
hurricanes  will be positive in those parishes served by Teche all of which were
relatively  unscathed by the storms.  Many of the  residents of those areas that
were hard hit are now residing in the Teche market area. Further,  our area will
serve as staging  grounds for the  rebuilding of New Orleans and Lake Charles in
which tens of billions of federal dollars and insurance company benefits will be
expended.  The rebuilding  efforts will also benefit the Louisiana oil & gas and
sugarcane industries which are mainstays of the economy in Teche's market area.

I want to  express  my  appreciation  to the  officers  and  employees  who have
contributed to our success in 2005. Their efforts have made us the third largest
publicly traded bank  headquartered in Louisiana and one of the most successful.
We  appreciate  our  customers  who are the  engine  of our  growth  and we will
continue to provide them with superior customer service. To our shareholders, we
pledge to strive to be a good steward of your  investment.  We are  committed to
continued progress and profitability in 2006.

                                     Sincerely,

                                     /s/ Patrick Little

                                     Patrick Little
                                     Chairman and President/CEO

                                                                               3

<PAGE>

SELECTED FINANCIAL DATA (Dollars in thousands, except per share data)

<TABLE>
<CAPTION>

                                                              At or for the Year Ended September 30,

                                                 2005              2004             2003              2002             2001
<S>                                        <C>               <C>              <C>               <C>              <C>
Assets                                       $676,822          $653,034         $536,946          $514,017         $467,531
Loans Receivable, Net                         487,816           471,327          357,130           350,623          380,830
Securities-Available for Sale                  77,491            98,939           99,378            64,110           41,230
Securities-Held to Maturity                    34,259            21,636           30,269            30,897               --
Cash and Cash Equivalents                      32,674            15,362           14,439            35,375           24,108
Deposits                                      516,052           432,417          349,268           349,125          342,917
FHLB Advances                                  93,409           154,439          126,310           103,471           67,120
Stockholders' Equity                           61,338            60,287           56,996            56,366           52,112
SUMMARY OF OPERATIONS
Interest Income                               $36,068          $ 30,668         $ 29,485          $ 33,697         $ 35,186
Interest Expense                               15,674            13,076           13,672            16,345           20,505
                                             --------          --------         --------          --------         --------
Net Interest Income                            20,394            17,592           15,813            17,352           14,681
Provision for Loan Losses                         950                60               75               205               80
                                             --------          --------         --------          --------         --------
Net Interest Income after
   Provision for Loan Losses                   19,444            17,532           15,738            17,147           14,601
Non-Interest Income                            10,819             9,740            9,606             7,900            6,699
Non-Interest Expense                           22,587            18,730           16,016            15,613           14,768
                                             --------          --------         --------          --------         --------
Income Before Gains on Sales of
   Securities and Income Taxes                  7,676             8,542            9,328             9,434            6,532
Gains on Sales of Securities                       26               232               43                87              123
Income Tax Expense                              2,503             2,848            3,186             3,285            2,296
                                             --------          --------         --------          --------         --------

Net Income                                   $  5,199          $  5,926         $  6,185          $  6,236         $  4,359
                                             ========          ========         ========          ========         ========

SELECTED FINANCIAL RATIOS
Ratio of Equity to Assets                       9.06%             9.23%            10.6%             11.0%            11.1%
Book Value/Common Share                        $26.78            $26.54           $25.36            $23.80           $21.61
Dividends declared per Share                    $0.94             $0.78            $0.58             $0.50            $0.50
Basic Income per Common Share                   $2.34             $2.66            $2.73             $2.72            $1.86
Diluted Income per Common Share                 $2.26             $2.48            $2.55             $2.58            $1.81
Return on Average Assets                        0.77%             0.87%            1.19%             1.25%            0.93%
Return on Average Equity                        8.59%             9.40%           10.82%            11.56%            8.71%
Net Interest Margin                             3.24%             3.24%            3.28%             3.66%            3.26%
Non-Interest Expense/Average Assets             3.34%             3.33%            3.08%             3.13%            3.14%
Non-Interest Income/Average Assets              1.60%             1.53%            1.85%             1.58%            1.42%
Non-Performing Loans/Loans (1)                  0.98%             0.63%            0.23%             0.65%            0.18%
Allowance for Loan Losses/Loans (1)             1.04%             0.92%            0.94%             0.98%            0.89%
Dividend Payout                                40.30%            29.31%           21.02%            18.15%           26.88%
</TABLE>

(1) Total loans before allowance for loan losses

                                                                               4
<PAGE>

Business of the Bank

         Teche  Federal Bank (the "Bank")  attracts  savings  deposits  from the
general  public  and uses  such  deposits  to  originate  primarily  residential
mortgage loans, commercial mortgage loans and consumer loans. Additionally,  the
Bank invests in  mortgage-backed  and investment  securities.  (See  "Management
Strategy" on page 7)

         It is the Bank's intention to remain an independent  community  savings
bank serving the local banking needs of its primary market area, which presently
includes  nineteen  offices  in the  Louisiana  Parishes  of St.  Mary,  Iberia,
Lafayette, St. Landry, St. Martin,  Terrebonne,  Lafourche, East Baton Rouge and
Ascension. The FDIC insures deposits at the bank up to the maximum legal amount.

Business of the Company

         Teche  Holding  Company  (the  "Company")  is a  Louisiana  corporation
organized  in December  1994 at the  direction  of the Board of Directors of the
Bank to  acquire  all of the  capital  stock  that  the  Bank  issued  upon  its
conversion from the mutual to stock form of organization.

Summary of Quarterly Operating Results

<TABLE>
<CAPTION>
                                                         2005                                             2004
                                         First     Second    Third     Fourth             First     Second    Third    Fourth
                                                         (Amounts in thousands, except for per share data)
<S>                                    <C>        <C>      <C>        <C>               <C>        <C>      <C>       <C>
Interest Income                         $8,601     $9,086   $9,268     $9,113            $7,260     $7,524   $7,536    $8,348
Interest Expense                         3,706      3,960    4,047      3,961             3,168      3,171    3,215     3,522
Net Interest Income                      4,895      5,126    5,221      5,152             4,092      4,353    4,321     4,826
Provision for Loan Losses                   30         30       45        845                15         15       15        15
Income Before Income Taxes               2,144      2,283    2,230      1,045             2,404      2,188    2,121     2,061
Net Income                               1,448      1,540    1,505        706             1,635      1,488    1,421     1,382
Basic Income per Common Share             0.65       0.69     0.68       0.32              0.74       0.67     0.64      0.62
Diluted Income per Common Share           0.62       0.66     0.65       0.31              0.68       0.62     0.60      0.58
</TABLE>


                                                                               5
<PAGE>

Market and Dividend Information

         Teche  Holding  Company's  common stock  trades on the  American  Stock
Exchange  under the symbol "TSH." The following sets forth the high and low sale
prices and cash dividends  declared for the common stock for the last two fiscal
years.

<TABLE>
<CAPTION>
===============================================================================================
Quarter ended            Sales Price             Period End Close Cash       Date Declared
                                                                  Dividend
                                                                  Declared
                       -----------------------
                           High          Low
-----------------------------------------------------------------------------------------------
<S>                     <C>           <C>             <C>           <C>     <C>
December 31, 2003        $36.74        $34.25          $36.28        $0.18   November 25, 2003
-----------------------------------------------------------------------------------------------
March 31, 2004           $41.50        $35.10          $35.50        $0.19   February 19, 2004
-----------------------------------------------------------------------------------------------
June 30, 2004            $38.00        $34.35          $38.00        $0.20   May 19, 2004
-----------------------------------------------------------------------------------------------
September 30, 2004       $40.00        $37.00          $40.00        $0.21   August 17, 2004
-----------------------------------------------------------------------------------------------
December 31, 2004        $41.75        $38.00          $38.25        $0.22   November 17, 2004
-----------------------------------------------------------------------------------------------
March 31, 2005           $38.02        $35.75          $36.75        $0.23   February 16, 2005
-----------------------------------------------------------------------------------------------
June 30, 2005            $37.00        $35.75          $36.25        $0.24   May 18, 2005
-----------------------------------------------------------------------------------------------
September 30, 2005       $39.21        $35.51          $38.87        $0.25   August 24, 2005
===============================================================================================
</TABLE>

       According to the records of the Company's  transfer agent, there were 495
registered  stockholders  of record at November 30,  2005.  This number does not
include  any  persons or  entities  that hold their stock in nominee or "street"
name through various brokerage firms.

       The Company's  ability to pay dividends is  substantially  dependent upon
the dividends it receives from the Bank. Under current regulations,  the Bank is
not  permitted  to pay  dividends if its  regulatory  capital  would  thereby be
reduced  below  (1)  the  amount  then  required  for  the  liquidation  account
established in connection with the Bank's  conversion from mutual to stock form,
or (2) the  regulatory  capital  requirements  imposed  by the  Office of Thrift
Supervision  ("OTS").   Capital   distributions  are  also  subject  to  certain
limitations  based on the  Bank's  net  income.  See Notes 19 and 20 of Notes to
Consolidated  Financial  Statements.  The Bank's total  capital at September 30,
2005  exceeded the amounts of its  liquidation  account and  regulatory  capital
requirements.

                                                                               6
<PAGE>

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

General

         The Private  Securities  Litigation  Reform act of 1995  contains  safe
harbor  provisions  regarding  forward-looking  statements.  When  used  in this
discussion, the words "believe", "anticipates",  "contemplates",  "expects", and
similar expressions are intended to identify  forward-looking  statements.  Such
statements  are  subject to certain  risks and  uncertainties  that could  cause
actual  results to differ  materially  from  those  projected.  Those  risks and
uncertainties include changes in interest rates, risk associated with the effect
of opening new branches,  the ability to control costs and expenses, and general
economic  conditions.  The Company  undertakes no obligation to publicly release
the results of any  revisions to those  forward-looking  statements  that may be
made to reflect events or circumstances  after the date hereof or to reflect the
occurrences of unanticipated events.

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

         Other components of net income include:  provisions for losses on loans
and other assets,  non-interest  income  (primarily,  service charges on deposit
accounts and other fees), and non-interest expenses (primarily, compensation and
employee  benefits,  office occupancy  expense,  marketing  expense and expenses
associated with foreclosed real estate) and income taxes.

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

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

Overview

         The Company's  assets grew $23.8 million to $676.8  million  reflecting
increases in cash and loans  receivable.  Net income decreased  $727,000 to $5.2
million  this past fiscal  year  primarily  due to a  provision  for loan losses
recorded in September  for likely  losses from  hurricanes  Katrina and Rita. We
have provided details of the reasons for these changes in the following pages.

Management Strategy

         Management's  strategy has been to maximize  earnings and profitability
through  steady  growth while  maintaining  asset  quality.  The Bank's  lending
strategy has  historically  focused on the  origination of  traditional  one- to
four-family mortgage loans with the primary emphasis on single-family residences
in the  Bank's  primary  market  area.  Additionally,  management  emphasizes  a
"SmartGrowth"  strategy  that  focuses  on the  origination  of  consumer  loans
(primarily home equity loans),  alternative mortgage loans, commercial loans and
commercial  real estate loans for  retention in the  Company's  loan  portfolio.
Alternative  mortgage loans  originated by the Bank are residential  real estate
loans that do not meet all of the Bank's  standard loan  underwriting  criteria.
Consumer loans,  commercial  loans and commercial  real estate loans,  generally
have shorter  terms to maturity and higher yields than  residential  real estate
loans. While alternative mortgage loans,  consumer loans,  commercial loans, and
commercial   real  estate  loans  have  greater  credit  risk  than   conforming
residential  real estate loans,  the Company  believes its SmartGrowth  strategy
will have a favorable  impact on the Company's net interest  margin,  as well as
assist in interest rate risk management.  SmartGrowth also emphasizes  growth in
core deposits (primarily transaction  accounts),  which include demand deposits,
NOW accounts, money market deposit accounts and savings accounts.

Asset and Liability Management

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

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

                                                                               7
<PAGE>

         The Bank  attempts to manage its interest  rate  exposure by shortening
the maturities of its  interest-earning  assets by emphasizing  adjustable  rate
mortgages   ("ARMs"),   originating  shorter  term  loans  such  as  residential
construction,  consumer,  and home  equity  loans and the  investment  of excess
liquidity in purchased  loans,  adjustable rate  mortgage-backed  securities and
other securities with relatively short terms to maturity.  Furthermore, the Bank
works to manage the  interest  rates it pays on  deposits  while  maintaining  a
stable deposit base and providing  quality services to its customers.  In recent
years,  the Bank has used  borrowings  while  continuing to rely  primarily upon
deposits as its source of funds.  At September  30, 2005,  the weighted  average
term to  repricing  of the  Bank's ARM loan and ARM  mortgage-backed  securities
portfolio  was  approximately  21 months.  In contrast,  at September  30, 2005,
$158.1  million of the Bank's  certificate  accounts  and $224.6  million of the
Bank's regular deposit accounts (e.g. demand, NOW, money market,  savings),  out
of $516.1 million of total deposits,  were scheduled to mature or reprice within
one year or sooner. Based on past experience,  however, management believes that
much of the Bank's deposits will remain at the Bank.

         Management  believes  that it has adequate  capital to accept a certain
degree of interest rate risk. Should interest rates rise management believes the
Bank's  capital  position  will enable it to withstand  the  negative  impact on
earnings.

         Rate/Volume  Analysis.  The table below sets forth certain  information
regarding  changes in interest  income and interest  expense of the Bank for the
periods   indicated.   For  each   category  of   interest-earning   assets  and
interest-bearing liabilities, information is provided on changes attributable to
(i) changes in volume (changes in average volume  multiplied by old rate);  (ii)
changes in rates (changes in rate multiplied by old average  volume);  and (iii)
the net change.  The changes  attributable  to the combined impact of volume and
rate have been  allocated  proportionately  to the changes due to volume and the
changes due to rate.

<TABLE>
<CAPTION>
                                                                                 Year Ended September 30,
                                                                --------------------------------------------------------------
                                                                       2005 vs. 2004                 2004 vs. 2003
                                                                -----------------------------    -----------------------------
                                                                 Increase (Decrease) Due to       Increase (Decrease) Due to
                                                                -----------------------------    -----------------------------
                                                                 Volume       Rate      Net       Volume      Rate        Net
                                                                -------    -------    -------    -------    -------    -------
                                                                       (Dollars in Thousands)
<S>                                                            <C>        <C>        <C>        <C>        <C>        <C>
Interest-Earning Assets:
Securities (1)                                                  $  (323)   $   409    $    86    $   805    $   207    $ 1,012
Loans Receivable, Net                                             6,017       (791)     5,226      3,990     (3,578)       412
Other Interest-Earning Assets                                        27         61         88       (242)         1       (241)
                                                                -------    -------    -------    -------    -------    -------
Total Interest-Earning Assets                                     5,721       (321)     5,400      4,553     (3,370)     1,183
                                                                -------    -------    -------    -------    -------    -------
Interest-Bearing
Liabilities

Deposits                                                          1,934        903      2,837        440     (1,582)    (1,142)

FHLB Advances and Other Borrowings                                 (689)       450       (239)     2,567     (2,021)       546
                                                                -------    -------    -------    -------    -------    -------
Total Interest-Bearing Liabilities                                1,245      1,353      2,598      3,007     (3,603)      (596)
                                                                -------    -------    -------    -------    -------    -------
   Net Change in Net Interest Income                            $ 4,476    ($1,674)   $ 2,802    $ 1,546    $   233    $ 1,779
                                                                =======    =======    =======    =======    =======    =======
</TABLE>

(1) Includes investment securities and FHLB stock.
(2) Includes certificates of deposit and other interest-bearing accounts.

                                                                               8

<PAGE>

         Average   Balance  Sheet.   The  following  table  sets  forth  certain
   information  relating to the Company's  actual and average  balance sheet and
   reflects  the actual and average  yield on assets and actual and average cost
   of liabilities for the periods  indicated.  Such yields and costs are derived
   by  dividing  income  or  expenses  by  the  average  balance  of  assets  or
   liabilities,  respectively,  for the periods presented.  Average balances are
   derived from daily average balances.

<TABLE>
<CAPTION>
                                                                                Year Ended September 30,
                                                        2005                            2004                         2003
                                           -------------------------------  ---------------------------  ---------------------------
                                                                  Average                       Average                      Average
                                             Average              Yield/    Average             Yield/   Average             Yield/
                                             Balance  Interest     Cost     Balance   Interest   Cost    Balance   Interest   Cost
                                             -------  -------- ----------   -------   -------- --------  -------   -------- --------
                                                                  (Dollars in Thousands)
<S>                                        <C>        <C>        <C>      <C>         <C>       <C>    <C>         <C>        <C>
 Assets
    Interest-Earning Assets
    Securities (1)                          $127,909   $ 4,793    3.75%    $137,290    $ 4,707   3.43%  $112,718    $ 3,695    3.28%
    Loans Receivable (2) (3)                 498,193    31,162    6.26%     404,379     25,936   6.41%   349,716     25,524    7.30%
    Other Interest-Earning Assets (4)          3,820       113    2.96%       1,798         25   1.39%    20,095        266    1.32%
                                            --------   -------             --------    -------          --------    -------
    Total Interest-Earning Assets            629,922   $36,068    5.73%     543,467    $30,668   5.64%   482,529    $29,485    6.11%
                                                       =======                         =======                      ========
    Non-Interest Earning Assets               46,518                         38,502                       37,106
                                            --------                       --------                     --------
 Total Assets                               $676,440                       $581,969                     $519,635
                                            ========                       ========                     ========
 Liabilities and Stockholders'  Equity
    Interest-Bearing Liabilities
    NOW Accounts                            $ 60,202      $169    0.28%    $ 56,979        144   0.25%  $ 51,291      $ 137    0.27%
    Statement & Regular Savings Accounts      40,408       176    0.44%      33,060         80   0.24%    28,655        182    0.64%
    Money Funds Accounts                      89,631     1,387    1.55%      65,866        530   0.80%    67,105        720    1.07%
    Certificates of Deposit                  255,907     7,697    3.00%     189,023      5,838   3.08%   179,318      6,695    3.73%
                                            --------   -------             --------    -------          --------      -----
          Total Deposits                     446,148     9,429    2.11%     344,928      6,592   1.91%   326,369      7,734    2.37%
    FHLB Advances and Other Borrowings       131,260     6,245    4.76%     146,878      6,484   4.41%   102,546      5,938    5.79%
                                            --------   -------             --------    -------          --------      -----
    Total Interest-Bearing Liabilities       577,408   $15,674    2.71%     491,806    $13,076   2.66%   428,915   $13,672     3.19%
                                                       =======                         =======                     ========
    Non-Interest-Bearing Liabilities          38,479                         32,167                       33,469
                                            --------                         ------                     --------

          Total Liabilities                  615,887                        523,973                      462,384
 Stockholders' Equity                         60,553                         57,996                       57,251
                                            --------                       --------                     --------
 Total Liabilities and Stockholders' Equity $676,440                       $581,969                     $519,635
                                            ========                       ========                     ========
 Net Interest Income/Interest Rate
   Spread (5)                                          $20,394    3.02%               $17,592    2.98%             $15,813     2.92%
                                                       =======                        =======                      ========
 Net Interest Margin (6)                                          3.24%                          3.24%                         3.28%
 Interest-Earning Assets/
 Interest-Bearing Liabilities                                   109.10%                        110.50%                       112.50%
</TABLE>

(1)  Includes securities and Federal Home Loan Bank (" FHLB") stock.
(2)  Amount is net of  deferred  loan fees,  loan  discounts  and  premiums  and
     loans-in-process and includes non-accruing loans.
(3)  Interest  income  includes  loan fees of  approximately  $425,000  in 2005,
     $410,000 in 2004 and $676,000 in 2003.
(4)  Amount  includes   certificates  of  deposit  and  other   interest-bearing
     deposits.
(5)  Interest rate spread represents the difference between the yield on average
     interest-earning   assets   and  the  cost  of   average   interest-bearing
     liabilities.
(6)  Net  interest  margin  represents  net interest  income  divided by average
     interest-earning assets.

                                                                               9
<PAGE>

Changes in Financial Condition From September 30, 2004 to September 30, 2005

         General.  Total  assets  increased  $23.8  million,  or 3.6% to  $676.8
million at  September  30,  2005 from  $653.0  million at  September  30,  2004,
primarily as a result of growth in deposits and loans receivable.

         Cash and Cash  Equivalents.  Cash  increased  $17.3  million from $15.4
million at  September  30, 2004 to $32.7  million at  September  30,  2005.  The
increase resulted from growth in deposits.

         Securities   Available-for-Sale   and  Held  to  Maturity.   Securities
available-for-sale  decreased  $21.4 million from $98.9 million at September 30,
2004 to $77.5 million at September  30, 2005 due primarily to payments  received
on  mortgage-backed  securities.  Securities  held-to-maturity  increased  $12.6
million to $34.3 million primarily due to the purchase of agency mortgage backed
securities during the fiscal year.

         Loans Receivable,  Net. The Bank's net loans receivable increased $16.5
million or 3.5% to $487.8  million from $471.3 million at September 30, 2004 due
primarily to net loan originations.  These increases are reflected  primarily in
the Bank's portfolio of multi-family and non-residential  real estate loans. The
one-to-four  family  mortgage  loan  portfolio  decreased  during  the  year due
primarily  to the sale of  approximately  $15  million  of long term  fixed rate
loans.  (See Note 5 of the Consolidated  Financial  Statements for a comparative
breakdown of the Bank's loan portfolio.)

         Deposits.  The  Bank's  deposits  increased  $83.6  million or 19.3% to
$516.1 million at September 30, 2005, from $432.4 million at September 30, 2004.
These  increases  resulted  from  growth  in the  Bank's  transaction  accounts,
certificates of deposit and savings  accounts;  offset somewhat by a decrease in
money fund accounts.  (See Note 8 of the Consolidated Financial Statements for a
comparative breakdown of the Bank's deposit portfolio.)

         Advances from FHLB.  Advances from the Federal Home Loan Bank of Dallas
decreased  $61.0  million,  or 39.5% to $93.4  million  from  $154.4  million at
September  30,  2004.  The decrease was due  primarily to funds  available  from
deposit growth during the year and from proceeds from sales of loans.

         Stockholders'  Equity.  Stockholders' equity increased $1.1 million, or
1.7% from $60.3 million at September 30, 2004, to $61.3 million at September 30,
2005.  The  increase was due  primarily  to net income and to proceeds  from the
exercise of stock options, less dividends and stock repurchases.

Comparison of Operating  Results for Years Ended  September  30, 2005,  2004 and
2003

Analysis of Net Income

         General.  The Company had net income of $5.2 million,  $5.9 million and
$6.2 million for the years ended 2005, 2004 and 2003. The $0.7 million  decrease
and $0.3  decrease  during  fiscal  2005  and  2004,  respectively,  were due to
increased  operating  expenses  resulting  from  expansion into new market areas
offset somewhat by increases in net interest income and non-interest income.

         Interest  Income.  Interest  income  amounted to $36.1  million,  $30.7
million and $29.5 million for the years ended 2005, 2004 and 2003, respectively.
The $5.4  million  increase  during  fiscal  2005  compared  to fiscal  2004 was
primarily due to an increase in the average balance of loans outstanding  during
fiscal 2005 as a result of the acquisition of St. Landry Financial  Corporation,
offset somewhat by a decrease in the average  interest rates earned on loans and
a decrease in the  average  balance of  securities.  The $1.2  million  increase
during fiscal 2004 was  primarily  due to an increase in the average  balance of
loans and securities,  offset somewhat by an decrease in the aggregate  interest
rates  earned on loans as average  market  interest  rates  declined  during the
fiscal years ended 2004 and 2003.

         The average  balance of loans  increased  during fiscal 2005 and fiscal
2004 by  approximately  $94  million,  or  23.2%  and  $55  million,  or  15.6%,
respectively.  During  2005 and 2004  average  interest  rates  earned  on loans
decreased primarily as a result of declining market interest rates during 2004.

         Interest Expense. Interest expense totaled $15.7 million, $13.1 million
and $13.7  million for the years ended  September 30, 2005,  2004 and 2003.  The
$2.6 million or 19.8% increase from fiscal 2004 to fiscal 2005 was due primarily
to an increase in the average balance of deposit accounts coupled with increases
in average rates paid on deposits and advances, offset somewhat by a decrease in
the  average  balance of  advances.  The average  balance of deposits  increased
$101.2  million  and $18.6  million in fiscal 2005 and 2004,  respectively.  The
growth in interest expense in 2005 was enhanced by the acquisition of St. Landry
Financial Corporation in July of 2004. During fiscal 2005 average interest rates
paid on deposits and advances  increased to 2.11% and 4.76% from 1.91% and 4.41%
respectively, as short-term market interest rates increased during the year.

                                                                              10
<PAGE>

         Interest  expense  decreased  $0.6  million or 4.4% during  fiscal 2004
compared to fiscal 2003 due to a decrease in market  interest  rates  during the
year.  The average rates paid on deposits and advances  decreased in fiscal 2004
compared to fiscal 2003 to 1.91% and 4.41% from 2.37% and 5.79%, respectively.

         Net Interest  Income.  Net interest  income  increased  $2.8 million to
$20.4  million  during the year ended  September  30, 2005  primarily  due to an
increase  in interest  income on loans and to a decrease in interest  expense on
advances, offset somewhat by an increase in interest expense on deposits.

         Net interest  income  during fiscal 2004  increased  compared to fiscal
2003 by $1.8 million due to increased  interest  income on loans and  securities
coupled  with a decrease in interest  expense on  deposits.  The increase in net
interest  income was offset  somewhat  by an  increase  in  interest  expense on
advances.

         Provision  for Loan Losses.  The Bank  provided  $950,000,  $60,000 and
$75,000 to the allowance for loan losses for the years ended September 30, 2005,
2004 and 2003  respectively.  The  allowance for loan losses was $5.1 million at
September  30,  2005,  $4.4  million at 2004 fiscal year end and $3.4 million at
2003 fiscal year end. The increase in the 2005 allowance for loan losses was due
primarily to an $800,000  provision recorded during the fourth quarter for loans
affected by the  hurricanes  that struck the Gulf Coast in August and  September
2005.

         The hurricanes that struck the South Louisiana  coastal areas in August
and  September  impacted  some  of  the  Bank's  borrowers  and  the  underlying
collateral.  An  assessment  of the  effects  of these  hurricanes  is  ongoing.
Management has contacted its borrowers in the affected areas to determine  their
need for possible forbearance,  which the Bank offers to its affected borrowers.
Forbearance  generally  includes  postponing  loan  payments for initially up to
three (3) months and may result in an extension of loan  maturities  as a result
of these efforts.  The full impact of potential losses is not expected to become
known until later periods.

         Management  periodically  estimates  the  likely  level  of  losses  to
determine  whether the allowance for loan losses is adequate to absorb  probable
losses inherent in the existing portfolio.  Based on these estimates,  an amount
is charged or credited to the  provision for loan losses and credited or charged
to the  allowance  for loan losses in order to adjust the  allowance  to a level
determined to adequately  absorb probable  inherent losses.  These estimates are
made at least  quarterly and there has been no significant  change in the Bank's
estimation methods during the current year.

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

         Non-Interest  Income.   Non-interest  income  during  the  years  ended
September 30, 2005,  2004 and 2003 amounted to $10.9  million,  $9.7 million and
$9.7 million respectively.  The increase in 2005 was due primarily to fee income
resulting  from an increase in deposit  related fees.  In fiscal 2003,  the Bank
recognized  a gain  on  sale  of  loans  in the  amount  of  $655,000,  with  no
significant gains or losses in fiscal 2005 and 2004.

         Non-Interest Expense. Non-interest expense totaled $22.6 million, $18.7
million and  $16.1million  during the years ended  September 30, 2005,  2004 and
2003,  respectively.  The  $3.9  million  increase  during  fiscal  2005 was due
primarily to branch  expansion in fiscal 2004 and 2005. The Company acquired the
two branches of St. Landry  Financial  Corporation  in July of 2004 and opened a
new  branch  in  the  Baton  Rouge,   Louisiana  market  area  in  fiscal  2005.
Additionally,  professional  fees  increased this year as a result of compliance
with the requirements of the Sarbanes-Oxley Act.

         The $2.7  million  increase  in  non-interest  expense  in fiscal  2004
compared to fiscal 2003 was primarily due to the merger with St Landry Financial
Corporation and to four new branch offices opened during fiscal 2004.

         The Bank is subject to the Louisiana  Shares Tax,  which amounted to an
expense of $568,000,  $594,000 and $596,000 in the fiscal years ended  September
30, 2005, 2004 and 2003, respectively.

         Gain on Sale of Securities. In the years ended September 30, 2005, 2004
and 2003,  gains on the sale of  securities  amounted to $26,000,  $232,000  and
$43,000, respectively.

         Income Tax Expense.  For the years ended  September 30, 2005,  2004 and
2003, the Company incurred income tax expense of $2.5 million,  $2.8 million and
$3.2 million,  respectively.  The varying  amounts were caused  primarily by the
varied pretax income of the Bank as the Company's  overall  effective income tax
rate approximated the statutory rate.

                                                                              11
<PAGE>

Liquidity and Capital Resources

         The  Bank's  average  liquidity  ratio  is based  on  deposits  and was
approximately  16% percent during  September  2005. The Bank manages its average
liquidity  ratio  to  meet  its  funding  needs,  including:  deposit  outflows;
disbursement  of payments  collected  from  borrowers  for taxes and  insurance;
repayment of Federal  Home Loan Bank  advances  and other  borrowings;  and loan
principal  disbursements.  The Bank also  monitors  its  liquidity  position  in
accordance with its asset/liability management objectives.

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

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

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

         The Bank has other sources of liquidity if a need for additional  funds
arises,  such as FHLB of Dallas  advances  and the  ability  to  borrow  against
mortgage-backed and other securities.  At September 30, 2005, the Bank had total
FHLB borrowings of $93.4 million,  or 13.8% of the Bank's assets.  Approximately
$15.9  million is due in the year ending  September  30,  2006.  The Bank has an
additional $109.9 million available under a line of credit with the FHLB.

         Management believes the Bank has sufficient resources available to meet
its  foreseeable  funding  requirements.  At September  30,  2005,  the Bank had
outstanding  loan  commitments of $27.5  million,  and  certificates  of deposit
scheduled to mature within one year of  $158.1million,  much of which management
expects, based on past experience, will remain with the Bank upon maturity.

         Regulations  of the OTS  require  the  Bank to  meet  or  exceed  three
separate  standards of capital  adequacy.  These  regulations  require financial
institutions  to have  minimum  tangible  capital  equal to 1.5 percent of total
adjusted  assets;  minimum core capital  equal to 4.0 percent of total  adjusted
assets;  and  risk-based  capital  equal to 8.0  percent of total  risk-weighted
assets.  At  September  30,  2005,  the Bank  exceeded  all  regulatory  capital
requirements. See Note 19 to the Consolidated Financial Statements.

Contractual Obligations

         The Company has various contractual  obligations related to borrowings,
deposits  and  operating  lease  payments.  These  obligations  are  outlined in
footnotes 7, 8 and 9 in the consolidated financial statements of the Company.

Recent Accounting Pronouncements

         In  December  2004,  the FASB issued SFAS No.  123(R),  Accounting  for
Stock-Based  Compensation  (SFAS  No.  123(R)).  SFAS  No.  123 (R)  establishes
standards for the accounting for  transactions in which any entity exchanges its
equity  instruments for goods or services.  This Statement  focuses primarily on
accounting  for  transactions  in which an entity obtains  employee  services in
share-based payment  transactions.  SFAS No. 123(R) requires that the fair value
of such  equity  instruments  be  recognized  as an  expense  in the  historical
financial  statements as services are performed.  Prior to SFAS No. 123(R), only
certain pro forma  disclosures  of fair value were  required.  The provisions of
this  Statement  are  effective for the first fiscal year that begins after June
15, 2005. Accordingly,  we will adopt SFAS No. 123(R) commencing with our fiscal
year  beginning  October 1, 2005. The adoption of SFAS No. 123(R) is expected to
have a material effect on our consolidated financial statements.

Critical Accounting Policies

         Certain  critical  accounting  policies  affect  the  more  significant
judgments and estimates used in the  preparation of the  consolidated  financial
statements. The Company's most critical accounting policies are as follows:

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

                                                                              12

<PAGE>

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

         The hurricanes that struck the South Louisiana  coastal areas in August
and  September  impacted  some  of  the  Bank's  borrowers  and  the  underlying
collateral.  An  assessment  of the  effects  of these  hurricanes  is  ongoing.
Management has contacted the borrowers in the affected areas to determine  their
need for possible forbearance, which the Bank offers, to its affected borrowers.
Forbearance  generally includes postponing loan payments for initially up to the
three (3) months and may result in an extension of loan  maturities  as a result
of these efforts.

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

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

         Goodwill - Goodwill does not require  amortization but is subject to at
least an annual assessment for impairment unless interim events or circumstances
make it more likely than not that an impairment loss has occurred. Impairment is
defined at that amount by which the implied  fair value of the  goodwill is less
than the  goodwill's  carrying  value.  Impairment  losses  would be  charged to
operating expense. Goodwill is not deductible for income tax purposes.

Impact of Off-Balances Sheet Instruments

         The Company has certain  off-balance-sheet  instruments  in the form of
contractual  commitments  to extend credit to customers.  These legally  binding
commitments have set expiration  dates and are at predetermined  interest rates.
The underwriting criteria for these commitments are the same as for loans in our
loan portfolio.  Collateral is also obtained, if necessary,  based on the credit
evaluation  of each  borrower.  Although  many of the  commitments  will  expire
unused,  management  believes that we have the necessary resources to fund these
commitments.

                                                                              13


<PAGE>
                                                        [LOGO]
                                                    DIXON HUGHES PLLC
                                       Certified Public Accountants and Advisors



             Report of Independent Registered Public Accounting Firm
             -------------------------------------------------------


To the Board of Directors and Stockholders
Teche Holding Company, Inc.
Franklin, Louisiana


We have audited the  accompanying  consolidated  balance  sheet of Teche Holding
Company,  Inc. and subsidiary  (hereinafter  referred to as the "Company") as of
September  30,  2005,  and  the  related  consolidated   statements  of  income,
stockholders'  equity and cash flows for the year then ended. These consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit. The  consolidated  financial  statements of Teche
Holding Company,  Inc. and subsidiary as of September 30, 2004 and for the years
ended  September 30, 2004,  and 2003 were audited by other auditors whose report
dated December 15, 2004 expressed an unqualified opinion on those statements.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  are free of material  misstatement.  The Company is not  required to
have,  nor were we engaged to perform,  an audit of its  internal  control  over
financial reporting.  Our audit included  consideration of internal control over
financial  reporting  as  a  basis  for  designing  audit  procedures  that  are
appropriate  in the  circumstances,  but not for the  purpose of  expressing  an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a  test  basis,  evidence  supporting  the  amounts  and  disclosures  in the
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial statement  presentation.  We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of Teche  Holding
Company,  Inc. and subsidiary as of September 30, 2005, and the results of their
operations  and their cash flows for the year then  ended,  in  conformity  with
accounting principles generally accepted in the United States of America.

/s/Dixon Hughes PLLC

Asheville, North Carolina
December 19, 2005

         500 Ridgefield Court, PO Box 3049              MRI
                  Asheville, NC 28802-3049  A Member of
         Ph. 828.254.2254 Fx. 828.254.6859  Moores Rowland International
                      www.dixon-hughes.com
                                            An association of Independent
                                            accounting firms throught the world.

                                       14
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 2005 and 2004

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------

                                                                                  2005                  2004
                                                                           ------------------    -------------------
                                                                                       (Amounts in thousands,
                                                                                  except share and per share data)
<S>                                                                       <C>                   <C>
ASSETS

Cash and due from banks                                                    $           14,008    $           12,980
Interest-bearing deposits                                                              18,666                 2,382
Securities available-for-sale - at estimated fair value
   (amortized cost of $79,612 in 2005 and $99,741 in 2004)                             77,491                98,939
Securities held-to-maturity--at amortized cost (estimated fair
   value of $33,608 in 2005 and $21,812 in 2004)                                       34,259                21,636
Loans receivable--net of allowance for loan losses of
   $5,151 in 2005 and $4,365 in 2004                                                  487,816               471,327
Accrued interest receivable                                                             2,604                 2,507
Investment in Federal Home Loan Bank stock, at cost                                     6,567                 8,561
Real estate owned, net                                                                    270                   194
Prepaid expenses and other assets                                                       2,218                 1,844
Goodwill                                                                                3,647                 3,529
Life insurance contracts                                                               10,357                 9,832
Premises and equipment - at cost, less accumulated depreciation                        18,919                19,303
                                                                           ------------------    ------------------

                                                           TOTAL ASSETS    $          676,822    $          653,034
                                                                           ==================    ==================

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                   $          516,052    $          432,417
Advances from Federal Home Loan Bank                                                   93,409               154,439
Advance payments by borrowers for taxes and insurance                                   1,468                 1,578
Accrued interest payable                                                                  843                   748
Accounts payable and other liabilities                                                  3,712                 3,565
                                                                           ------------------    ------------------

                                                      TOTAL LIABILITIES               615,484               592,747

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Common stock, $.01 par value, 10,000,000 shares authorized;
   4,577,723 and 4,479,979 shares issued                                                   46                    45
  Preferred stock, 5,000,000 shares authorized, none issued                                 -                     -
  Additional paid-in capital                                                           48,458                46,785
  Retained earnings                                                                    53,893                50,789
  Unearned ESOP shares                                                                   (143)                 (283)
  Treasury stock - 2,287,328 and 2,208,828 shares - at cost                           (39,537)              (36,527)
  Accumulated other comprehensive loss                                                 (1,379)                 (522)
                                                                           -------------------   ------------------

                                             TOTAL STOCKHOLDERS' EQUITY                61,338                60,287
                                                                           ------------------    ------------------

                             TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $          676,822    $          653,034
                                                                           ==================    ==================
</TABLE>

See notes to consolidated financial statements.

                                       15
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended September 30, 2005, 2004 and 2003

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------

                                                                   2005               2004                2003
                                                              --------------     ---------------     --------------
                                                                 (Dollars in thousands, except per share amounts)
<S>                                                          <C>                <C>                 <C>
INTEREST INCOME:
   Interest and fees on loans                                 $       31,162     $        25,936     $       25,524
   Interest and dividends on securities                                4,793               4,707              3,695
   Other interest income                                                 113                  25                266
                                                              --------------     ---------------     --------------

                                     TOTAL INTEREST INCOME            36,068              30,668             29,485
                                                              --------------     ---------------     --------------

INTEREST EXPENSE:
   Deposits                                                            9,429               6,592              7,734
   Advances from Federal Home Loan Bank                                6,245               6,484              5,938
                                                              --------------     ---------------     --------------

                                    TOTAL INTEREST EXPENSE            15,674              13,076             13,672
                                                              --------------     ---------------     --------------

                                       NET INTEREST INCOME            20,394              17,592             15,813

PROVISION FOR LOAN LOSSES                                                950                  60                 75
                                                              --------------     ---------------     --------------

                                 NET INTEREST INCOME AFTER
                                 PROVISION FOR LOAN LOSSES            19,444              17,532             15,738
                                                              --------------     ---------------     --------------

NON-INTEREST INCOME:
   Service charges                                                     9,661               8,813              8,230
   Other income                                                        1,158                 902              1,424
                                                              --------------     ---------------     --------------

                                 TOTAL NON-INTEREST INCOME            10,819               9,715              9,654
                                                              --------------     ---------------     --------------


GAIN ON SALE OF SECURITIES                                                26                 232                 43
                                                              --------------     ---------------     --------------

NON-INTEREST EXPENSE:
   Compensation and employee benefits                                 10,949               9,264              7,727
   Occupancy, equipment and data processing expense                    4,653               4,038              3,535
   Marketing and professional                                          3,275               2,335              2,006
   SAIF deposit insurance premiums                                        66                  54                 59
   Louisiana shares tax                                                  568                 594                596
   Other operating expenses                                            3,076               2,420              2,141
                                                              --------------     ---------------     --------------

                                TOTAL NON-INTEREST EXPENSE            22,587              18,705             16,064
                                                              --------------     ---------------     --------------

                                INCOME BEFORE INCOME TAXES             7,702               8,774              9,371

INCOME TAXES                                                           2,503               2,848              3,186
                                                              --------------     ---------------     --------------

                                                NET INCOME    $        5,199     $         5,926     $        6,185
                                                              ==============     ===============     ==============

BASIC INCOME PER COMMON SHARE                                 $         2.34     $          2.66     $         2.73
                                                              ==============     ===============     ==============

DILUTED INCOME PER COMMON SHARE                               $         2.26     $          2.48     $         2.55
                                                              ==============     ===============     ==============

DIVIDENDS PER SHARE                                           $          .94     $           .78     $          .58
                                                              ==============     ===============     ==============
</TABLE>

See notes to consolidated financial statements.

                                       16

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended September 30, 2005, 2004 and 2003
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------

                                                                                                     Accumulated
                                                        Additional             Unearned                 other
                                               Common     paid-in   Retained    ESOP       Treasury  comprehensive
                                               stock      capital   earnings    shares      stock        loss       Total
                                               -----      -------   --------    ------      -----        ----       -----
                                                                          (Dollars in thousands, except per share amounts)

<S>                                         <C>        <C>        <C>         <C>         <C>         <C>         <C>
BALANCE - September 30, 2002                 $     44   $ 44,618   $ 41,713    $   (757)   $(29,968)   $    716    $ 56,366
ESOP compensation                                   -        689          -         333           -           -       1,022
Exercise of stock options                           -        394          -           -           -           -         394
Purchase of common stock
   for treasury                                     -          -          -           -      (4,354)          -      (4,354)
Dividends declared - $.58 per share                 -          -     (1,300)          -           -           -      (1,300)
Comprehensive income:
   Net income                                       -          -      6,185           -           -           -       6,185
   Change in unrealized loss
     on securities available-for-sale, net          -          -          -           -           -      (1,317)     (1,317)
                                                                                                                   --------
       Total comprehensive income                                                                                     4,868
                                             --------   --------   --------    --------    --------    --------    --------
BALANCE - September 30, 2003                       44     45,701     46,598        (424)    (34,322)       (601)     56,996
ESOP compensation                                   -        379          -         141           -           -         520
Exercise of stock options                           1        705          -           -           -           -         706
Purchase of common stock for treasury               -          -          -           -      (2,205)          -      (2,205)
Dividends declared - $.78 per share                 -          -     (1,735)          -           -           -      (1,735)
Comprehensive income:
   Net income                                       -          -      5,926           -           -           -       5,926
   Change in unrealized gain
     on securities available-for-sale, net          -          -          -           -           -          79          79
                                                                                                                   --------
       Total comprehensive income                                                                                     6,005
                                             --------   --------   --------    --------    --------    --------    --------
BALANCE - September 30, 2004                       45     46,785     50,789        (283)    (36,527)       (522)     60,287
ESOP compensation                                   -        347          -         140           -           -         487
Exercise of stock options,
  including tax benefit                             1      1,166          -           -           -           -       1,167
MSP shares issued                                   -        160          -           -           -           -         160
Purchase of common stock for treasury               -          -          -           -      (3,010)          -      (3,010)
Dividends declared - $0.94 per share                -          -     (2,095)          -           -           -      (2,095)
Comprehensive income:
   Net income                                       -          -      5,199           -           -           -       5,199
   Change in unrealized loss
     on securities available-for-sale, net          -          -          -           -           -          (857)     (857)
                                                                                                                   --------
       Total comprehensive income                                                                                     4,342
                                             --------   --------   --------    --------    --------    --------    --------
BALANCE - September 30, 2005                 $     46   $ 48,458   $ 53,893    $   (143)   $(39,537)   $ (1,379)   $ 61,338
                                             ========   ========   ========    ========    ========    ========    ========
</TABLE>

See notes to consolidated financial statements.

                                       17
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended September 30, 2005, 2004 and 2003

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                                                   2005               2004                2003
                                                              --------------     ---------------     --------------
                                                                              (Dollars in thousands)
<S>                                                         <C>                <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                  $        5,199     $         5,926     $        6,185
  Adjustments to reconcile net income
     to net cash provided by operating activities:
      Accretion of discount and amortization of premium
       on investments and mortgage-backed securities                     390                 612              1,210
      Provision for loan losses                                          950                  60                 75
      ESOP expense                                                       487                 417                846
      MSP expense                                                        160                   -                  -
      Deferred income tax credit                                        (461)               (150)              (100)
      Gains on sale of loans and credit card portfolio                   (55)                  -               (655)
      Gains on sale of securities                                        (26)               (232)               (43)
      (Gain) loss on sale of real estate owned                           (79)                (25)                48
      Depreciation                                                     1,220               1,076                893
      Change in accrued interest receivable                              (97)                (24)               250
      Change in accrued interest payable                                  95                  93                (78)
      Other, net                                                        (185)                 96               (164)
                                                              ---------------    ---------------     ---------------

                 NET CASH PROVIDED BY OPERATING ACTIVITIES             7,598               7,849              8,467
                                                              --------------     ---------------     --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sales of investment securities
     available-for-sale                                                  142                 859                192
  Purchase of securities available-for-sale                             (512)            (20,655)           (80,386)
  Principal repayments on securities available-for-sale               20,159              25,907             41,734
  Purchase of securities held-to-maturity                            (19,392)                  -            (19,985)
  Principal repayments on securities held-to-maturity                  6,702               8,633             20,613
  Collection of receivable from sale of securities                         -               6,104                  -
  Net loan originations                                              (14,685)            (44,161)            (8,740)
  Purchase of loans                                                  (16,833)            (18,342)           (12,363)
  Proceeds from sales of loans                                        14,418                   -             15,236
  Investment in FHLB stock, net                                        1,994              (1,361)            (1,266)
  Purchase of premises and equipment                                  (1,214)             (2,882)            (2,193)
  Proceeds from sale of land                                             378                   -                  -
  Net cash used in acquisition                                             -              (9,169)                 -
                                                              --------------     ---------------     --------------

                     NET CASH USED IN INVESTING ACTIVITIES            (8,843)            (55,067)           (47,158)
                                                              ---------------    ---------------     --------------
</TABLE>

See notes to consolidated financial statements.

                                       18

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended September 30, 2005, 2004 and 2003

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------

                                                                   2005               2004                2003
                                                              --------------     ---------------     --------------
                                                                              (Dollars in thousands)
<S>                                                         <C>                <C>                 <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Dividends paid                                              $       (2,095)    $        (1,735)    $       (1,300)
  Net increase in deposits                                            83,635              35,362                143
  Proceeds of long-term FHLB advances                                 10,000              15,000             15,000
  Repayment of long-term FHLB advances                               (29,636)            (10,243)            (6,361)
  Net increase (decrease) in short-term FHLB advances                (41,394)             11,500             14,200
  Cash paid for purchase of common stock for treasury                 (3,010)             (2,205)            (4,354)
  Proceeds from exercise of stock options                              1,167                 356                394
  Change in advance payments by
     borrowers for taxes and insurance                                  (110)                106                 33
                                                              ---------------    ---------------     --------------



                 NET CASH PROVIDED BY FINANCING ACTIVITIES            18,557              48,141             17,755
                                                              --------------     ---------------     --------------

                                NET INCREASE (DECREASE) IN
                                 CASH AND CASH EQUIVALENTS            17,312                 923            (20,936)

CASH AND CASH EQUIVALENTS
  Beginning of year                                                   15,362              14,439             35,375
                                                              --------------     ---------------     --------------

CASH AND CASH EQUIVALENTS
  End of year                                                 $       32,674     $        15,362     $       14,439
                                                              ==============     ===============     ==============

SUPPLEMENTAL DISCLOSURE OF CASH
    FLOW INFORMATION:
  Cash paid for interest                                      $       15,579     $        12,983     $       13,750
                                                              ==============     ===============     ==============

  Income taxes paid                                           $        1,700     $         2,815     $        3,120
                                                              ==============     ===============     ==============

SUPPLEMENTAL SCHEDULE OF NON-CASH
    INVESTING ACTIVITIES:
  Accumulated other comprehensive income (loss)               $         (857)    $            79     $       (1,317)
                                                              ==============     ===============     ==============
</TABLE>

See notes to consolidated statements.

                                       19

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------


1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies of the Company are described below.

Principles of Consolidation - The consolidated  financial statements include the
accounts of Teche Holding Company and its wholly-owned subsidiary, Teche Federal
Savings Bank (collectively "the Company"). All significant intercompany balances
and  transactions  have been eliminated in  consolidation.  The Company operates
principally  in the community  savings bank segment by attracting  deposits from
the general public and using such deposits  primarily to originate loans.  These
loans  include  those  secured  by first  mortgages  on  owner-occupied,  family
residences as well as home  improvement  and other consumer  loans.  The Company
also makes commercial mortgage loans.

Concentrations of Credit Risk - The Company makes loans to individuals and small
businesses  located  primarily in southern  Louisiana  for various  personal and
commercial  purposes.  The  Company has a  diversified  loan  portfolio  and the
borrowers'  ability to repay  their  loans is not  dependent  upon any  specific
economic sector.  The Company will from time to time purchase loans from outside
our market area.

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

Cash and Cash Equivalents - Cash and cash  equivalents  comprise of cash on hand
and  non-interest  bearing  and  interest  bearing  demand  deposits  with other
financial  institutions.  The  Company is  required  to  maintain  certain  cash
reserves  relating to its deposit  liabilities.  This  requirement is ordinarily
satisfied by cash on hand.

Securities   -   Securities    are    classified    as    held-to-maturity    or
available-for-sale.  Management determines the classification of securities when
they  are  purchased  and  reevaluates  this   classification   periodically  as
conditions change that could require reclassification.

Securities which the Company both positively intends and has the ability to hold
to maturity are  classified  as securities  held-to-maturity  and are carried at
amortized cost.  Intent and ability to hold are not considered  satisfied when a
security is  available  to be sold in  response  to changes in  interest  rates,
prepayment  rates,  liquidity  needs  or  other  reasons  as part of an  overall
asset/liability management strategy.

Securities   not  meeting  the   criteria  to  be   classified   as   securities
held-to-maturity  are classified as  available-for-sale  and are carried at fair
value.  Net unrealized  holding gains or losses are excluded from net income and
are  recognized,  net of income  taxes,  in other  comprehensive  income  and in
accumulated other  comprehensive  income, a separate  component of stockholders'
equity.

                                       20

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

Premiums and  discounts on  securities,  both those  held-to-maturity  and those
available-for-sale, are amortized and accreted to income as an adjustment to the
securities'  yields  using the  interest  method.  Realized  gains and losses on
securities,  including declines in value judged to be other than temporary,  are
reported as a component of income.  The cost of securities  sold is specifically
identified for use in calculating realized gains and losses.

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

When  doubt  exists  as to  collectability  of a loan,  the  loan is  placed  on
non-accrual  status.  When a loan is  placed  on  non-accrual  status,  interest
accrued (typically 90 days delinquent) prior to the judgment of uncollectibility
is charged to income.  Loans are returned to an accruing status only as payments
are received and when  collection  of all principal and interest is no longer in
doubt.  If doubt exists,  any payments  received on such  non-accrual  loans are
applied  first  to  outstanding  loan  amounts  and  next  to  the  recovery  of
charged-off loan amounts. Any excess is treated as recovery of lost interest.

The Company considers a loan to be impaired when, based upon current information
and  events,  it believes  it is  probable  that the  Company  will be unable to
collect  all  amounts  due  according  to the  contractual  terms  of  the  loan
agreement.  The Company's  impaired loans include troubled debt  restructurings,
and performing and non-performing major loans in which full payment of principal
or interest is not  expected.  The Company  calculates  a reserve  required  for
impaired  loans  based  on the  present  value of  expected  future  cash  flows
discounted  at the loan's  effective  interest  rate,  or the loan's  observable
market price or the fair value of its collateral.

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

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

The  hurricanes  that  struck the South  Louisiana  coastal  areas in August and
September  2005  impacted some of the  Company's  borrowers  and the  underlying
collateral.  An  assessment  of the  effects  of these  hurricanes  is  ongoing.
Management has contacted its borrowers in the affected areas to determine  their
need for  possible  forbearance,  which the  Company  offers,  to certain of its
affected borrowers.  Forbearance generally includes postponing loan payments for
initially  up to  three  (3)  months  and may  result  in an  extension  of loan
maturities as a result of these efforts.

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

                                       21

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

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

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

Federal  Home Loan Bank Stock - Federal Home Loan Bank stock is recorded at cost
and is periodically reviewed for impairment. Cost approximates fair market value
based upon the redemption  requirements  of the Federal Home Loan Bank. Cash and
stock dividends on this stock are reported as income.

Goodwill - Goodwill does not require  amortization but is subject to at least an
annual assessment for impairment, unless interim events or circumstances make it
more likely than not that an impairment loss has occurred. Impairment is defined
as that amount by which the implied  fair value of the goodwill is less than the
goodwill's  carrying  value.  Impairment  losses  would be charged to  operating
expense. Goodwill is not deductible for income tax purposes.

Core Deposit  Intangible - The core deposit  intangible  with a cost of $520 and
accumulated  amortization  of $188 is  included  in prepaid  expenses  and other
assets on the  consolidated  balance  sheet at  September  30,  2005.  This core
deposit intangible relates to the acquisition of St. Landry Bank in 2004.

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

Real Estate Owned - Real estate acquired through,  or in lieu of, foreclosure is
initially recorded at the fair value at the time of foreclosure,  less estimated
cost to dispose,  and any related writedown is charged to the allowance for loan
losses.  Valuations are periodically  performed by management and provisions for
estimated  losses  on real  estate  owned are  charged  to  operations  when any
significant and permanent  decline reduces the fair value,  less sales costs, to
less than the carrying value. The ability of the Company to recover the carrying
value of real estate is based upon future  sales of the real estate  owned.  The
ability to effect such sales is subject to market  conditions and other factors,
many of which  are  beyond  the  Company's  control.  Operating  income  of such
properties,  net of related expenses,  and gains and losses on their disposition
are included in the accompanying consolidated statements of income.

Life Insurance  Contracts - Life insurance  contracts  represent  single premium
life insurance  contracts on the lives of certain  officers of the Company.  The
Company is the  beneficiary of these  policies.  These contracts are reported at
their cash surrender  value and changes in the cash surrender value are included
in other non-interest income.

Retirement Plan - The expense of the multi-employer retirement plan in which the
Company participates equals the amount of contributions required by the Company.

                                       22

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

Income Taxes -The Company follows the practice of filing a consolidated  federal
return and separate state returns. Income taxes are allocated to each company as
if filed separately for federal purposes and based on the separate returns filed
for state purposes.

Certain  items of income and  expense for  financial  reporting  are  recognized
differently for income tax purposes  (principally  the provision for loan losses
and depreciation). Provisions for deferred taxes are made in recognition of such
temporary  differences  as required  under SFAS No. 109,  Accounting  for Income
Taxes using the liability  method.  Current  income taxes are recorded  based on
amounts  due with the  current  income  tax  returns.  The need for a  valuation
allowance  is  considered  when it is  determined  more  likely  than not that a
deferred tax asset will not be realized.

Income Per Share - Basic  income per common  share (EPS) is computed by dividing
net income by the  weighted-average  number of common shares outstanding for the
period.  The Company  accounts for the shares acquired by the ESOP in accordance
with Statement of Position 93-6 and,  therefore,  shares  controlled by the ESOP
are not considered in the weighted average shares  outstanding  until the shares
are committed for allocation to an employee's  individual  account.  Diluted EPS
reflects  the  potential  dilution  that  could  occur  if  securities  or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the  issuance of common  stock that then shared in the net income of
the Company.  Diluted EPS is computed by dividing net income by the total of the
weighted-average  number of shares  outstanding  plus the effect of  outstanding
options and Management  Stock Plan ("MSP") grants.  The dilution effect of stock
options is determined using the treasury stock method.

Comprehensive  Income -  Comprehensive  income  includes  net  income  and other
comprehensive  income or loss which,  in the case of the Company,  includes only
unrealized gains and losses on securities available-for-sale.

Stock   Options  -  The   Company   applies  APB  Opinion  No.  25  and  related
interpretations   in  accounting   for  its  stock  options.   Accordingly,   no
compensation cost has been recognized.  The Financial Accounting Standards Board
requires disclosure of the compensation cost for stock-based  incentives granted
by the Company  based on the fair value at grant date for awards.  The  weighted
average fair value of options  granted during the years ended September 30, 2005
and 2003 was $8.96 and $6.10, respectively.  No options were granted in the year
ended  September  30, 2004.  Applying SFAS No. 123 would result in pro forma net
income and income per share amounts as follows (in  thousands,  except per share
amounts):

                                 2005          2004         2003
                              ---------     ---------     ---------

Net income (in thousands):
  As reported                 $   5,199     $   5,926     $   6,185
  Pro forma                       4,274         5,713         6,050

Basic income per share:
  As reported                 $    2.34     $    2.66     $    2.73
  Pro forma                        1.92          2.56          2.67

Diluted income per share
  As reported                 $    2.26     $    2.48     $    2.55
  Pro forma                        1.86          2.39          2.49

                                       23
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

The only  difference  between net income as reported  and proforma net income is
the fair value of stock options, less the related tax benefits.

The fair value of the 2003 options were  estimated on the date of grant using an
option-pricing  model with the following  weighted-average  assumptions used for
grants:  dividend  yield  of  approximately  2%;  expected  volatility  of 35 %;
risk-free interest rate of 4.5 %; and expected life of 8 years.

The fair value of the 2005 options were  estimated on the date of grant using an
option-pricing  model with the following  weighted-average  assumptions used for
grants:  dividend  yield of  approximately  2.5%;  expected  volatility  of 22%;
risk-free interest rate of 4.20%; and expected life of 8 years.

2.    INTEREST RATE RISK

The Company is engaged  principally in providing  first mortgage and other types
of loans to individuals and  businesses.  At September 30, 2005, the Company had
interest and dividend-earning  assets of approximately  $621,000,  most of which
will not  mature  or be  repriced  until  after  five  years.  Interest  bearing
liabilities totaled approximately  $569,000, most of which will mature or can be
repriced  within  two  years.   The  shorter   duration  of   interest-sensitive
liabilities  indicates that in a rising rate  environment the Company is exposed
to interest  rate risk because  liabilities  may be  repricing  faster at higher
interest rates,  thereby  reducing the market value of long-term  assets and net
interest  income.  In a falling rate  environment  the market value of long-term
assets and net interest income may be increased.

3.    ACQUISITION

On July 2, 2004,  the Company  acquired  100% of the common stock of St.  Landry
Financial  Corporation  ("St.  Landry").  St.  Landry was then  merged  into the
Company.  The acquisition was accounted for as a purchase and the results of St.
Landry's operations are included in the consolidated financial statements of the
Company from the date of acquisition. St. Landry operated two banking offices in
southern  Louisiana.  The  Company  acquired  St.  Landry in order to expand the
geographic area in which its services are offered.  The aggregate purchase price
was approximately $10.1 million.

The following unaudited pro forma consolidated results of operations give effect
to the  acquisition  of St.  Landry as though it had occurred on October 1, 2002
(in thousands, except per share data):

                                                        Year Ended September 30,
                                                        ------------------------
                                                          2004          2003
                                                        --------      --------

Interest income                                         $ 33,180      $ 33,457
Interest expense                                          14,208        15,418
Provision for loan losses                                    670           120
Net interest income after provision for loan losses       18,302        17,919
Net income                                                 5,078         6,509
Basic income per common share                               2.28          2.87
Diluted income per common share                             2.13          2.68

                                       24
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

The unaudited pro forma  information  is not  necessarily  indicative  either of
results of operations  that would have occurred had the purchase been made as of
October 1, 2002, or of future results of operations of the combined companies.

The following table summarizes the estimated fair values,  in thousands,  of the
assets acquired and liabilities assumed at the date of acquisition:

Cash and cash equivalents                                        $      973
Securities                                                            5,930
Loans                                                                51,646
Premises and equipment                                                  964
Core deposit intangible                                                 520
Goodwill                                                              3,529
Receivable from sale of securities                                    6,104
Other                                                                 1,074
                                                                 ----------

           Total assets acquired                                     70,740

Deposits                                                             47,787
Advances from Federal Home Loan Bank                                 11,872
Other liabilities                                                       939
                                                                 ----------

           Total liabilities assumed                                 60,598
                                                                 ----------

Net assets acquired                                              $   10,142
                                                                 ==========

The core deposit  intangible  has an estimated  weighted  life of  approximately
seven years.  Amortization  of the core deposit  intangible is computed using an
accelerated method and amounted to approximately  $145 in 2005.  Amortization is
estimated to be  approximately  $100 in 2006,  $70 in 2007,  $55 in 2008, $41 in
2009, $28 in 2010 and the remainder of $40 thereafter.

Goodwill  increased after the acquisition  date by approximately  $118.  Changes
related primarily to accrued liabilities and tax adjustments.

                                       25

<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

4.       SECURITIES

The amortized  cost and estimated  fair values of securities  available-for-sale
are as follows (in thousands):
<TABLE>
<CAPTION>
                                                                       September 30, 2005
                                               --------------------------------------------------------------------
                                                                      Gross             Gross           Estimated
                                                 Amortized         Unrealized        Unrealized           Fair
                                                   Cost               Gains            Losses             Value
                                               -------------     -------------     -------------     --------------
<S>                                           <C>               <C>               <C>               <C>
Investment securities:
  Federal Farm Credit Bank                     $       3,275     $           -     $         (97)    $        3,178
  Municipal obligations                                   38                 -                 -                 38
                                               -------------     -------------     -------------     --------------
                                                       3,313                 -               (97)             3,216
                                               -------------     -------------     --------------    --------------
Mortgage-backed securities:
  Government National Mortgage
   Association                                        12,545                16              (178)            12,383
  Federal Home Loan Mortgage
   Corporation                                        26,412                17              (794)            25,635
  Federal National Mortgage Association               12,573                18              (536)            12,055
                                               -------------     -------------     --------------    --------------
                                                      51,530                51            (1,508)            50,073
                                               -------------     -------------     --------------    --------------
ARM Mutual Funds                                      15,873                 -              (313)            15,560
Collateralized mortgage obligations
   ("CMOs")                                            7,364                 -              (181)             7,183
Equity securities                                      1,532                71              (144)             1,459
                                               -------------     -------------     --------------    --------------

                                               $      79,612     $         122     $      (2,243)    $       77,491
                                               =============     =============     ==============    ==============
</TABLE>
<TABLE>
<CAPTION>
                                                                       September 30, 2004
                                               --------------------------------------------------------------------
                                                                      Gross             Gross           Estimated
                                                 Amortized         Unrealized        Unrealized           Fair
                                                   Cost               Gains            Losses             Value
                                               -------------     -------------     -------------     --------------
<S>                                           <C>               <C>               <C>               <C>
Investment securities:
  Federal Farm Credit Bank                     $       3,275     $           -     $         (51)    $        3,224
  Municipal obligations                                   38                 -                 -                 38
                                               -------------     -------------     -------------     --------------
                                                       3,313                 -               (51)             3,262
                                               -------------     -------------     -------------     --------------
Mortgage-backed securities:
  Government National Mortgage
   Association                                        19,148                26              (297)            18,877
  Federal Home Loan Mortgage
   Corporation                                        35,779               181              (331)            35,629
  Federal National Mortgage Association               15,494                22              (404)            15,112
                                               -------------     -------------     -------------     --------------
                                                      70,421               229            (1,032)            69,618
                                               -------------     -------------     --------------    --------------
ARM Mutual Funds                                      15,388                 -              (123)            15,265
Collateralized mortgage obligations
   ("CMOs")                                            9,457                 -               (15)             9,442
Equity securities                                      1,162               195                (5)             1,352
                                               -------------     -------------     -------------     --------------

                                               $      99,741     $         424     $      (1,226)    $       98,939
                                               =============     =============     =============     ==============
</TABLE>

                                       26

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

The amortized cost and estimated fair values of securities  held-to-maturity are
as follows:

<TABLE>
<CAPTION>
                                                                       September 30, 2005
                                               --------------------------------------------------------------------
                                                                      Gross             Gross           Estimated
                                                 Amortized         Unrealized        Unrealized           Fair
                                                   Cost               Gains            Losses             Value
                                               -------------     -------------     -------------     --------------
<S>                                           <C>               <C>               <C>               <C>
Mortgaged-backed securities:
  Federal National Mortgage Association        $      34,259     $           -     $        (651)    $       33,608
                                               -------------     -------------     --------------    --------------

                                               $      34,259     $           -     $        (651)    $       33,608
                                               =============     =============     ==============    ==============
</TABLE>

<TABLE>
<CAPTION>

                                                                       September 30, 2004
                                               --------------------------------------------------------------------
                                                                      Gross             Gross           Estimated
                                                 Amortized         Unrealized        Unrealized           Fair
                                                   Cost               Gains            Losses             Value
                                               -------------     -------------     -------------     --------------
<S>                                           <C>               <C>               <C>               <C>
Mortgaged-backed securities:
  Federal National Mortgage Association        $      20,523     $         253     $         (43)    $       20,733
  Other                                                1,113                 -               (34)             1,079
                                               -------------     -------------     -------------     --------------

                                               $      21,636     $         253     $         (77)    $       21,812
                                               =============     =============     =============     ==============
</TABLE>

Details  concerning  securities with unrealized  losses as of September 30, 2005
are as follows:

<TABLE>
<CAPTION>
                              Securities with losses        Securities with losses
                                  under 12 months               over 12 months                     Total
                           ---------------------------   ---------------------------   ----------------------------
                                              Gross                         Gross                          Gross
                               Fair        unrealized        Fair        unrealized         Fair        unrealized
                               value         losses          value         losses           value         losses
                           ------------   ------------   ------------   ------------   -------------   ------------
<S>                       <C>            <C>            <C>            <C>            <C>             <C>
Available-for-Sale
Investment securities:
  Federal Farm Credit Bank $          -   $          -   $      3,178   $        (97)  $       3,178   $        (97)

Mortgage-backed securities:
  Government National
   Mortgage Assoc.                    -              -         11,116           (178)         11,116           (178)
  Federal Home Loan Mortgage
   Corporation                    9,120           (206)        13,628           (588)         22,748           (794)
  Federal National Mortgage
   Association                       -               -         11,006           (536)         11,006           (536)
                           -----------    ------------   ------------   -------------  -------------   -------------
                                  9,120           (206)        35,750         (1,302)         44,870         (1,508)

ARM Mutual Funds                      -              -         15,560           (313)         15,560           (313)
CMOs                                  -              -          7,183           (181)          7,183           (181)
Equity securities                   111             (3)           875           (141)            986           (144)
                           ------------   -------------  ------------   -------------  -------------   -------------

                           $      9,231   $       (209)  $     62,546   $     (2,034)  $      71,777   $     (2,243)
                           ============   =============  ============   =============  =============   =============

Held-to-Maturity
Federal National Mortgage
   Association             $     32,646   $       (604)  $        961   $        (47)  $      33,607   $       (651)
Other                                 -              -              -              -               -              -
                           ------------   ------------   ------------   ------------   -------------   ------------

                           $     32,646   $       (604)  $        961   $        (47)  $      33,607   $       (651)
                           ============   =============  ============   =============  =============   =============

</TABLE>

                                       27
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

The Company has 44  investments at September 30, 2005 of which 22 had unrealized
losses.  These unrealized  losses  generally result from securities,  which were
purchased at a premium in  anticipation  of a continuing  stable  interest  rate
environment.  As  interest  rates  increased,  the  market  value of  securities
declined.  The temporary  impairment of the equity securities over twelve months
is related to one  security.  This is not a result of the  deterioration  of the
financial  position of the related  Company,  but temporary  regulatory  issues.
These  issues  are  deemed to be  short-term  and have not  created a  permanent
impairment.

Details  concerning  securities with unrealized  losses as of September 30, 2004
are as follows:

<TABLE>
<CAPTION>
                              Securities with losses        Securities with losses
                                  under 12 months               over 12 months                     Total
                           ---------------------------   ---------------------------   ----------------------------
                                              Gross                         Gross                          Gross
                               Fair        unrealized        Fair        unrealized         Fair        unrealized
                               value         losses          value         losses           value         losses
                           ------------   ------------   ------------   ------------   -------------   ------------
<S>                       <C>            <C>            <C>            <C>            <C>             <C>
Available-for-Sale
Investment securities:
  Federal Farm Credit Bank $          -   $          -   $      3,224   $        (51)  $       3,224   $        (51)

Mortgage-backed securities:
  Government National
   Mortgage Assoc.                    -              -         17,004           (297)         17,004           (297)
  Federal Home Loan Mortgage
   Corporation                        -              -         17,374           (331)         17,374           (331)
  Federal National Mortgage
   Association                      946             (2)        13,393           (402)         14,339           (404)
                           ------------   ------------   ------------   ------------   -------------   ------------
                                    946             (2)        47,771         (1,030)         48,717         (1,032)

ARM Mutual Funds                  5,152            (40)        10,113            (83)         15,265           (123)
CMO's                             9,442            (15)             -              -           9,442            (15)
Equity securities                 1,011             (5)             -              -           1,011             (5)
                           ------------   ------------   ------------   ------------   -------------   ------------

                           $     16,551   $        (62)  $     61,108   $     (1,164)  $      77,659   $     (1,226)
                           ============   ============   ============   ============   =============   ============

Held-to-Maturity
Federal National Mortgage
   Association             $      1,550   $        (43)  $          -   $          -   $       1,550   $        (43)
Other                                 -              -          1,079            (34)          1,079            (34)
                           ------------   ------------   ------------   ------------   -------------   ------------

                           $      1,550   $        (43)  $      1,079   $        (34)  $       2,629   $        (77)
                           ============   ============   ============   ============   =============   ============
</TABLE>

The Company has 38  investments at September 30, 2004 of which 16 had unrealized
losses.  These unrealized  losses  generally result from securities,  which were
purchased at a premium in  anticipation  of a continuing  stable  interest  rate
environment.  As interest  rates  declined,  prepayments  of certain  securities
increased  which  resulted  in the  decline  in the fair  value  of the  related
securities.

Gross gains of $26,  $232 and $43 were  realized on sales of  securities  in the
years ended  September  30, 2005,  2004 and 2003,  respectively.  No losses were
realized on sales of securities in the years ended  September 30, 2005,  2004 or
2003.

                                       28
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

At September 30, 2005 and 2004,  securities with a cost of approximately $17,275
and $16,600 were pledged to secure  deposits and advances  from the Federal Home
Loan Bank as required or permitted by law.

5.    LOANS RECEIVABLE

Loans receivable are summarized as follows:

<TABLE>
<CAPTION>
                                                                                        September 30,
                                                                                  2005                  2004
                                                                           ------------------    ------------------
<S>                                                                       <C>                   <C>
Residential real estate mortgage loans:
  One-to-four family units - Conforming                                    $          190,727    $          213,184
  One-to-four family units - Commercial                                                21,969                16,955
  One-to-four family units - Alternative                                               85,533                83,036
  Multi-family                                                                         19,636                 7,503
Land loans                                                                             13,991                11,758
Construction loans                                                                     13,308                16,713
Non-residential real estate loans (primarily commercial)                               46,877                32,342
Commercial non-real estate loans                                                       10,607                 7,756
Home improvement and home equity loans                                                 49,348                45,259
Loans on savings accounts                                                               5,111                 4,184
Auto loans                                                                              7,436                11,410
Mobile home loans                                                                      25,439                22,528
Other secured and unsecured                                                             3,331                 3,503
                                                                           ------------------    ------------------
                                                                                      493,313               476,131
Less:
  Allowance for loan losses                                                             5,151                 4,365
  Deferred loan fees                                                                      346                   439
                                                                           ------------------    ------------------

                                                                           $          487,816    $          471,327
                                                                           ==================    ==================
</TABLE>

Alternative  one-to-four family mortgages  represent those loans not meeting all
of the Banks' standard loan underwriting criteria.

Changes in the allowance for loan losses are as follows:

<TABLE>
<CAPTION>

                                                                            Year Ended September 30,
                                                              -----------------------------------------------------
                                                                   2005               2004                2003
                                                              --------------     ---------------     --------------
<S>                                                         <C>                <C>                 <C>
Beginning balance - October 1                                 $        4,365     $         3,397     $        3,459
Provision charged to operating expense                                   950                  60                 75
Acquisition                                                                -                 973                  -
Recoveries                                                                13                  50                178
Loans charged off                                                       (177)               (115)              (315)
                                                              ---------------    ---------------     --------------

Ending balance - September 30                                 $        5,151     $         4,365     $        3,397
                                                              ==============     ===============     ==============
</TABLE>


                                       29
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

The amount of nonaccrual loans at September 30, 2005 and 2004 was  approximately
$3.9 million and $2.5  million,  respectively.  The amount of impaired  loans at
September 30, 2005 was approximately $1.3 million, and at September 30, 2004 was
not  material.   The  amount  of  allowance  allocated  to  impaired  loans  was
approximately  $47 at September 30, 2005.  The amount of interest not accrued on
these loans was approximately $143, $43 and $20, respectively.

The Company has collateralized its advances from the Federal Home Loan Bank with
a blanket-floating lien on its first mortgage loans.

6.    REAL ESTATE OWNED
Real estate owned consisted of the following:

<TABLE>
<CAPTION>
                                                                                        September 30,
                                                                                  2005                  2004
                                                                           ------------------    ------------------
<S>                                                                       <C>                   <C>
Real estate acquired through foreclosure                                   $              276    $              239
Less allowance for losses                                                                  (6)                  (45)
                                                                           -------------------   ------------------

Real estate owned - net                                                    $              270    $              194
                                                                           ==================    ==================
</TABLE>


7.    PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows:

<TABLE>
<CAPTION>

                                                                                        September 30,
                                                                                  2005                  2004
                                                                           ------------------    ------------------
<S>                                                                       <C>                   <C>
Land                                                                       $            5,560    $            5,938
Buildings and improvements                                                             14,454                14,181
Furniture, fixtures and equipment                                                       8,490                 7,884
                                                                           ------------------    ------------------
                                                                                       28,504                28,003
Less accumulated depreciation                                                          (9,585)               (8,700)
                                                                           -------------------   ------------------

                                                                           $           18,919    $           19,303
                                                                           ==================    ==================
</TABLE>

Pursuant to the terms of non-cancelable  lease agreements in effect at September
30, 2005,  pertaining to banking  premises and  equipment,  future  minimum rent
commitments under various operating leases are as follows:

                           2006                                 $        102
                           2007                                           82
                           2008                                           82
                           2009                                           67
                           2010                                           35
                           Thereafter                                      -
                                                                ------------
                                                                $        368
                                                                ============

                                       30

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

All leases contain options to extend for periods from three to five years. Total
rent expense for the years ended September 30, 2005,  2004, and 2003 amounted to
$160,000, $91,000 and $80,000 respectively.

8.    DEPOSITS

Deposits are summarized as follows:

<TABLE>
<CAPTION>

                                                                                        September 30,
                                                                                  2005                  2004
                                                                           ------------------    ------------------

<S>                                                                       <C>                   <C>
Non-interest bearing demand accounts                                       $           39,761    $           29,387
Interest bearing:
  NOW accounts                                                                         64,591                56,249
  Passbook and regular savings                                                         54,907                38,897
  Money funds accounts                                                                 65,352                85,635
  Certificates of deposit                                                             291,441               222,249
                                                                           ------------------    ------------------

                                                                           $          516,052    $          432,417
                                                                           ==================    ==================
</TABLE>

Certificates  of  deposit  of over $100  amounted  to  $61,978  and  $46,280  at
September 30, 2005 and 2004, respectively.

Certificates of deposits at September 30, 2005 mature as follows:

<TABLE>
<CAPTION>

<S>                                                                                             <C>
Less than one year                                                                               $          158,099
1-2 years                                                                                                    88,145
2-3 years                                                                                                    29,087
3-4 years                                                                                                     8,689
4-5 years                                                                                                     3,068
Over 5 years                                                                                                  4,353
                                                                                                 ------------------

TOTAL                                                                                            $          291,441
                                                                                                 ==================
</TABLE>


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

At  September  30,  2005,  the Company  was  indebted to the FHLB for $93,409 of
advances bearing interest at a weighted average rate of 4.954%, which are due as
follows:

<TABLE>
<CAPTION>

<S>                                                                                             <C>
 Year Ended
September 30,
-------------
   2006                                                                                          $           15,962
   2007                                                                                                       5,276
   2008                                                                                                       5,543
   Thereafter                                                                                                66,628
                                                                                                 ------------------

                                                                                                 $           93,409
                                                                                                 ==================
</TABLE>

                                       31
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

These advances are  collateralized by a  blanket-floating  lien on the Company's
first mortgage loans.

At September  30,  2004,  the Company was indebted to the Federal Home Loan Bank
for $154,439 of advances bearing  interest at an average rate of 4.54%,  $58,189
of which were due or callable in the year ended  September  30, 2005,  $5,806 in
2006,  $5,121 in 2007, $5,121 in 2008 and the balance  thereafter.  At September
30, 2005,  the Company had an additional  $109,901  available  under its line of
credit with the FHLB.

10.   OTHER NON-INTEREST INCOME

Included in other non-interest  income for the year ended September 30, 2005 and
2003 was approximately $55 and $655 of gains on sales of loans and the Company's
credit card  portfolio.  No sales occurred  during 2004. Also included is income
from the increase in life  insurance  contracts of $525,  $508, and $552 for the
years ended 2005, 2004, and 2003, respectively.

11.   INCOME TAXES

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's  deferred tax assets and  liabilities as of September 30, 2005 and
2004 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                  Year Ended September 30,
                                                                                  2005                  2004
                                                                           ------------------    ------------------
<S>                                                                       <C>                   <C>
Deferred tax assets:
  Allowance for loan losses                                                $            1,393    $            1,156
  Unrealized loss on securities available-for-sale                                        742                   280
  Liabilities related to acquisition                                                      407                   233
  Other                                                                                    20                   292
                                                                           ------------------    ------------------
         Total deferred tax assets                                                      2,562                 1,961
                                                                           ------------------    ------------------
Deferred tax liabilities:
  Deferred loan fees and costs - net                                                      233                   253
  Basis differences on securities available-for-sale                                      309                   309
  Tax over book depreciation                                                              467                   217
  Dividends on FHLB stock                                                                 616                   745
  Other                                                                                    77                   305
                                                                           ------------------    ------------------
         Total deferred tax liabilities                                                 1,702                 1,829
                                                                           ------------------    ------------------

         Net deferred tax assets                                           $              860    $              132
                                                                           ==================    ==================
</TABLE>

The components of income tax expense are as follows:

<TABLE>
<CAPTION>
                                                                            Year Ended September 30,
                                                              -----------------------------------------------------
                                                                   2005               2004                2003
                                                              --------------     ---------------     --------------
<S>                                                          <C>                <C>                 <C>
Currently payable                                             $        2,964     $         2,998     $        3,286
Deferred                                                                (461)               (150)              (100)
                                                              ---------------    ---------------     --------------

                                                              $        2,503     $         2,848     $        3,186
                                                              ==============     ===============     ==============
</TABLE>


                                       32
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

Income  taxes  differ from the amounts  computed  by applying  the U.S.  Federal
income tax rate of 34% to earnings  before income  taxes.  The reasons for these
differences are as follows:

<TABLE>
<CAPTION>
                                                                            Year Ended September 30,
                                                              -----------------------------------------------------
                                                                   2005               2004                2003
                                                              --------------     ---------------     --------------

<S>                                                          <C>                <C>                 <C>
Taxes computed at statutory rates                             $        2,619     $         2,983     $        3,186
Decrease in taxes due to miscellaneous items                            (116)               (135)                 -
                                                              ---------------    ---------------     --------------

                                                              $        2,503     $         2,848     $        3,186
                                                              ==============     ===============     ==============

Actual tax rate                                                        32.5%               32.5%              34.0%
                                                              ==============     ===============     ==============
</TABLE>

Generally accepted  accounting  principles does not require that deferred income
taxes be provided  on certain  portions  of the  allowance  for loan losses that
existed as of September  30,  1988.  At September  30, 2005,  retained  earnings
includes approximately $4,400 representing such allowances for which no deferred
income taxes have been provided.

12.   NON-INTEREST EXPENSE

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

<TABLE>
<CAPTION>
                                                                            Year Ended September 30,
                                                              -----------------------------------------------------
                                                                   2005               2004                2003
                                                              --------------     ---------------     --------------
<S>                                                          <C>                <C>                 <C>
Occupancy, including depreciation, insurance,
  rent, utilities, etc.                                       $        1,691     $         1,469     $        1,189
Equipment, including depreciation, telephone, etc.                     1,968               1,688              1,502
Data processing                                                          994                 881                844
                                                              --------------     ---------------     --------------

                                                              $        4,653     $         4,038     $        3,535
                                                              ==============     ===============     ==============
</TABLE>

Other operating expenses consisted of the following:

<TABLE>
<CAPTION>
                                                                            Year Ended September 30,
                                                              -----------------------------------------------------
                                                                   2005               2004                2003
                                                              --------------     ---------------     --------------

<S>                                                          <C>                <C>                 <C>
Stationery, printing and postage                              $          952     $           781     $          730
Debit card expense                                                       478                 436                339
Other                                                                  1,646               1,203              1,072
                                                              --------------     ---------------     --------------

                                                              $        3,076     $         2,420     $        2,141
                                                              ==============     ===============     ==============
</TABLE>

                                       33

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

13.   OTHER COMPREHENSIVE INCOME (LOSS)

The adjustment to determine other comprehensive income (loss) as included in the
consolidated  statements  of changes in  stockholders'  equity  consists  of the
following for the years ended September 30, 2005, 2004 and 2003:

<TABLE>
<CAPTION>
                                                                                       Tax               Net of
                                                                Before-tax          (expense)              tax
                                                                  amount             credit              amount
                                                              --------------     ---------------     --------------
<S>                                                          <C>                <C>                 <C>
2005
----
  Gross change in unrealized gain (loss) on securities
    available-for-sale                                        $       (1,310)    $           470     $         (840)
  Less reclassification for gain included in net income                  (26)                  9                (17)
                                                              --------------     ---------------     --------------
  Net change in unrealized gain (loss) on securities
    available-for-sale                                        $       (1,336)    $           479     $         (857)
                                                              ===============    ===============     ===============

2004
----
  Gross change in unrealized gain (loss) on securities
    available-for-sale                                        $          354     $          (124)    $          230
  Less reclassification for gain included in net income                 (232)                 81               (151)
                                                              --------------     ---------------     --------------
  Net change in unrealized gain (loss) on securities
    available-for-sale                                        $          122     $           (43)    $           79
                                                              ==============     ===============     ==============

2003
----
  Gross change in unrealized gain (loss) on securities
    available-for-sale                                        $       (1,982)    $           693     $       (1,289)
  Less reclassification for gain included in net income                  (43)                 15                (28)
                                                              --------------     ---------------     --------------
  Net change in unrealized gain (loss) on securities
    available-for-sale                                        $       (2,025)    $           708     $       (1,317)
                                                              ==============     ===============     ===============
</TABLE>

14.   RETIREMENT PLANS

The Company  participates in a defined benefit  multi-employer  retirement plan,
which  covers  substantially  all  employees.  The plan is  administered  by the
Financial  Institutions  Retirement  Fund.  The Company froze the benefits under
this plan during the year ended September 30, 2004. The expense relating to this
plan amounted to $66, $166 and $75 in the years ended  September 30, 2005,  2004
and 2003, respectively, and are the amounts of the required payments relating to
these years.  The market value of the net assets of the retirement  fund exceeds
the  liability  of the present  value of accrued  benefits as of the most recent
valuation  date. No separate  information  regarding the Company's  share of the
assets and liabilities of this plan is available.

                                       34

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

The  Corporation  has  a  401  (k)  Plan  whereby  substantially  all  employees
participate  in the Plan.  Employees  may  contribute  up to 50 percent of their
compensation   subject  to  certain  limits  based  on  federal  tax  laws.  The
Corporation  makes  matching  contributions  equal to 50  percent of the first 4
percent  of  an  employee's  compensation  contributed  to  the  Plan.  Matching
contributions  vest to the  employee  equally over a five-year  period.  For the
years ended September 30, 2005, 2004, and 2003, expense attributable to the Plan
amounted to approximately $41, $20, and $0, respectively.

15.   INCOME PER SHARE

Following is a summary of the  information  used in the computation of basic and
diluted income per common share for the years ended September 30, 2005, 2004 and
2003:

<TABLE>
<CAPTION>
                                                                            Year Ended September 30,
                                                              -----------------------------------------------------
                                                                   2005               2004                2003
                                                              --------------     ---------------     --------------
<S>                                                                  <C>                 <C>                <C>
Weighted average number of common shares
  outstanding - used in computation of basic
  income per common share                                              2,227               2,230              2,264
Effect of dilutive securities:
  Stock options                                                           70                 156                163
  MSP stock grants                                                         4                   3                  1
                                                              --------------     ---------------     --------------
Weighted  average  number of common shares
  outstanding  plus effect of dilutive
  securities - used in computation of diluted income per
  common share                                                         2,301               2,389              2,428
                                                              ==============     ===============     ==============
</TABLE>

16.   EMPLOYEE STOCK PLANS

The Company  maintains an ESOP for the benefit of Teche Federal  Savings  Bank's
employees who meet certain  eligibility  requirements.  The ESOP Trust  acquired
332,337 shares of common stock in the Company's  initial public offering in 1995
with  proceeds  from a loan from the  Company.  Teche  Federal  Bank  makes cash
contributions  to the ESOP on a basis  sufficient to enable the ESOP to make the
required loan payments to the Company.

The note  payable  referred to above bears  interest at the prime rate  adjusted
quarterly with interest payable  quarterly and with future principal  payable in
annual installments of approximately $143 in 2006. The loan is collateralized by
the unreleased shares of the stock purchased.

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

                                       35

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

Compensation  expense  related to the ESOP was $489, $417 and $846 for the years
ended   September  30,  2005,  2004  and  2003,   respectively.   The  ESOP  has
approximately  14,000  of  unreleased  shares  at  September  30,  2005  with an
approximate market value of $545.

Under the  Company's  eight stock option and benefit  plans (the  "Plans"),  the
Corporation may grant options or restricted stock to its directors, officers and
employees for up to 951,878 shares of common stock. Approximately 220,000 of the
common stock  instruments  have not been granted.  Both incentive stock options,
non-qualified  stock  options,   restricted  referred  to  as  MSP  shares)  and
performance  shares may be granted under the Plans.  The exercise  price of each
option equals the market price of the  Company's  stock on the date of the grant
and option's maximum term is ten years at which time the option expires. Vesting
for options is determined at the time of grant and ranges from immediate to five
years. The grants in 2005 were immediately vested.

The following table summarizes activity related to the Plans:

                                                                     Weighted
                                                  Options             average
                                                outstanding            price
                                              ---------------     --------------

Balance--September 30, 2002                           346,039     $        15.43
  Exercised                                           (24,800)             18.36
  Granted                                              62,100              28.04
  Expired and other                                      (929)             21.07
                                              ---------------     --------------
Balance--September 30, 2003                           382,410              17.30
  Exercised                                          (123,397)             14.32
  Expired and other                                      (400)             34.85
                                              ---------------     --------------

Balance--September 30, 2004                           258,613              19.01
  Exercised                                          (116,417)             14.49
  Granted                                             104,400              36.91
  Expired and other                                    (1,700)             38.02
                                              ---------------     --------------

Balance--September 30, 2005                           244,896     $        28.73
                                               ===============    ==============

Exercisable at September 30, 2004                     186,407     $        16.23
                                              ===============     ==============
Exercisable at September 30, 2005                     199,809     $        28.98
                                              ===============     ==============

                                       36

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

Information concerning outstanding options at September 30 follows:

                                                             Average
                                                            remaining
     Exercise                                              contractual
       price          Outstanding         Exercisable     life in years
-----------------    --------------   -----------------  ------------------
      $13.94               12,696            12,696             1
       19.88                  900               900             2
       16.34               30,682            30,682             4
       18.50               22,971            17,228             6
       25.70               12,696             7,618             7
       23.27               31,875            15,938             7
       34.85               29,976            11,647             8
       39.00               30,200            30,200             9
       36.00               72,900            72,900            10
                      -----------        ----------

                          244,896           199,809
                      ===========        ==========

The Company  issues  restricted  stock grants  (MSP's) from its stock option and
benefit plans. When the awards vest, the stock is awarded out of authorized, but
unissued shares or treasury shares. The fair value of the restricted stock grant
is expensed  over the vesting  period which is typically  20% per year.  For the
years ended 2005, 2004, and 2003, restricted stock awards of 6,000, 0, and 1,400
were  granted.  For the years ended 2005,  2004 and 2003,  compensation  expense
related to the vesting of the restricted stock awards was approximately $76,000,
$21,000, and $21,000, respectively.

The Company  issues  performance  stock awards from its stock option and benefit
plans when certain performance criteria are met. When the awards vest, the stock
is awarded out of authorized,  but unissued shares or treasury shares.  The fair
value of the performance share grant is expensed over the vesting period,  which
is typically 33% per year. For the years ended 2005, 2004, and 2003, performance
stock awards of 3,400, 3,500, and 3,400 were granted.  For the years ended 2005,
2004, and 2003,  compensation  expense related to the vesting of the performance
stock awards was approximately $138,000, $86,000, and $40,000, respectively.

17.   FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

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

As of September  30, 2005,  the Company had made various  commitments  to extend
credit totaling  approximately  $27,500.  Most of these commitments are at fixed
rates. As of September 30, 2004, such commitments totaled approximately $32,000.

                                       37

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

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

18.   DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of a financial  instrument  is the  current  amount that would be
exchanged  between willing  parties,  other than in a forced  liquidation.  Fair
value is best  determined  based upon quoted  market  prices.  However,  in many
instances, there are no quoted market prices for the Company's various financial
instruments.  In cases where quoted market prices are not available, fair values
are based on estimates using present value or other valuation techniques.  Those
techniques are  significantly  affected by the assumptions  used,  including the
discount  rate and estimates of future cash flows.  Accordingly,  the fair value
estimates may not be realized in an immediate settlement of the instrument. SFAS
107 excludes certain  financial  instruments and all  non-financial  instruments
from its disclosure requirements.  Accordingly, the aggregate fair value amounts
presented  may not  necessarily  represent  the  underlying  fair  value  of the
Company.

The  following  methods and  assumptions  were used by the Company in estimating
fair value disclosures for financial instruments:

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

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

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

Federal  Home Loan Bank Stock - The  carrying  value of  Federal  Home Loan Bank
stock approximates fair value based on the redemption  provisions of the Federal
Home Loan Bank.

Accrued  Interest - The carrying  amounts of accrued  interest  approximate fair
value.

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

Advances  from  Federal Home Loan Bank - The fair value of advances is estimated
using rates currently available for advances of similar remaining maturities.

Commitments  -  The  fair  value  of   commitments  to  extend  credit  was  not
significant.

                                       38

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

The estimated fair values of the Company's significant financial instruments are
as follows at September 30, 2005 and 2004:

<TABLE>
<CAPTION>
                                                    2005                                       2004
                                    ------------------------------------      -------------------------------------
                                       Carrying              Estimated            Carrying             Estimated
                                        amount              fair value             amount             fair value
                                    ---------------      ---------------      ---------------      ----------------
<S>                                <C>                  <C>                  <C>                  <C>
Financial assets:
  Cash and cash equivalents         $        32,674      $        32,674      $        15,362      $         15,362
  Investment securities                     111,750              111,099              120,575               120,751
   FHLB stock                                 6,567                6,567                8,561                 8,561
   Accrued interest receivable                2,604                2,604                2,507                 2,507

  Loans                                     492,967              502,164              475,692               487,000
  Less allowance for loan losses              5,151                5,151                4,365                 4,365
                                    ---------------      ---------------      ---------------      ----------------
  Loans-net of allowance                    487,816              497,013              471,327               482,635
                                    ---------------      ---------------      ---------------      ----------------

Financial liabilities:
  Deposits                                  516,052              518,630              432,417               434,000
  Advances from Federal Home
     Loan Bank                               93,409               94,250              154,439               162,000
   Accrued interest payable                     843                  843                  748                   748
</TABLE>


19.   REGULATORY CAPITAL

The Bank's actual capital and its statutorily  required  capital levels based on
the consolidated financial statements accompanying these notes were as follows:

<TABLE>
<CAPTION>
                                                                       2005
                               ------------------------------------------------------------------------------------
                                                                                                 To be well
                                                                                              capitalized under
                                                                    For capital               prompt corrective
                                                                 adequacy purposes            action provisions
                               -------------------------    --------------------------   --------------------------
                                        Actual                       Required                     Required
                               -------------------------    --------------------------   --------------------------
                                 Amount            %           Amount           %           Amount           %
                               -----------    ----------    -----------    -----------   -----------    -----------

<S>                         <C>                  <C>     <C>                   <C>    <C>                  <C>
Core capital                   $    51,307          7.6%    $    26,887           4.0%   $    33,608          5.0 %

Tangible capital               $    51,307          7.6%    $    10,082           1.5%           N/A            N/A

Total Risk based capital       $    56,055         13.7%    $    32,673           8.0%   $    40,841         10.0 %

Tier 1 Risk based capital      $    51,307         12.6%            N/A            N/A   $    24,505          6.0 %

</TABLE>

                                       39

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                       2004
                               ------------------------------------------------------------------------------------
                                                                                                 To be well
                                                                                              capitalized under
                                                                    For capital               prompt corrective
                                                                 adequacy purposes            action provisions
                               -------------------------    --------------------------   --------------------------
                                        Actual                       Required                     Required
                               -------------------------    --------------------------   --------------------------
                                 Amount            %           Amount           %           Amount           %
                               -----------    ----------    -----------    -----------   -----------    -----------

<S>                         <C>                 <C>      <C>                   <C>    <C>                  <C>
Core capital                   $    53,360         8.2 %    $    25,899           4.0%   $    32,373          5.0 %

Tangible capital               $    53,360         8.2 %    $     9,712           1.5%           N/A            N/A

Total Risk based capital       $    57,481        14.6 %    $    31,445           8.0%   $    39,306         10.0 %

Tier 1 Risk based capital      $    53,360        13.6 %            N/A            N/A   $    23,584          6.0 %
</TABLE>

The Bank is subject to various regulatory capital  requirements  administered by
the federal banking agencies.  Failure to meet minimum capital  requirements can
initiate  certain  mandatory and possibly  additional  discretionary  actions by
regulators  that,  if  undertaken,  could have a direct  material  effect on the
Company's and Bank's financial statements. Under capital adequacy guidelines and
the  regulatory  framework  for  prompt  corrective  action,  the Bank must meet
specific capital guidelines that involve quantitative  measures of their assets,
liabilities and certain  off-balance-sheet  items as calculated under regulatory
accounting practices. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components,  risk weightings,  and
other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require  the Bank to  maintain  minimum  amounts  and  ratios  (set forth in the
following  table) of total Tier 1 capital  (as  defined in the  regulations)  to
risk-weighted  assets (as defined) and of Tier 1 capital (as defined) to average
assets (as defined).  Management  believes,  as of September 30, 2005, and 2004,
that the Bank meets all capital adequacy requirements to which they are subject.

As of  September  30, 2005,  the most recent  notification  from its  regulators
categorized  the Bank as well  capitalized  under the  regulatory  framework for
prompt corrective action. To be categorized as well capitalized,  an institution
must maintain minimum total risk-based,  Tier 1 core capital and Tier 1 leverage
ratios as set forth in the following  tables.  There are no conditions or events
since  the  notification  that  management  believes  have  changed  the  Bank's
category.  The Bank's actual capital amounts and ratios as of September 30, 2005
and 2004 are also presented in the table.

                                       40

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

20.  SUMMARIZED  FINANCIAL  INFORMATION OF TECHE HOLDING COMPANY (PARENT COMPANY
ONLY) (IN THOUSANDS)

<TABLE>
<CAPTION>
                                 Balance Sheets

                                                                                  2005                  2004
                                                                           ------------------    ------------------
<S>                                                                       <C>                   <C>
Assets:
  Investment in subsidiary                                                 $           54,528    $           56,920
  Cash and cash equivalents                                                             5,090                 1,375
  Due from ESOP                                                                           143                   283
  Other                                                                                 1,577                 1,709
                                                                           ------------------    ------------------

          Total assets                                                     $           61,338    $           60,287
                                                                           ==================    ==================

Stockholders' equity                                                       $           61,338    $           60,287
                                                                           ==================    ==================
</TABLE>

<TABLE>
<CAPTION>
                             Statements of Earnings

                                                                            Year ended September 30,
                                                              ----------------------------------------------
                                                                   2005               2004                2003
                                                              --------------     ---------------     --------------

<S>                                                          <C>                <C>                 <C>
Dividends received from subsidiary                            $        8,200     $         9,000     $        3,700
Equity in earnings of subsidiary (less than) greater
  than dividends received                                             (2,691)             (3,011)             2,635
Interest income from subsidiary                                           15                  57                 86
Management fees and other expenses allocated to
  the Parent                                                             (77)                (77)               (77)
Other expenses-net                                                      (248)                (43)              (159)
                                                              ---------------    ---------------     --------------

Net income                                                    $        5,199     $         5,926     $        6,185
                                                              ==============     ===============     ==============
</TABLE>

                                       41

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2005, 2004 and 2003
(in thousands except share and per share data)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                            Statements of Cash Flows

                                                                            Year ended September 30,
                                                              ----------------------------------------------
                                                                   2005               2004                2003
                                                              --------------     ---------------     --------------

<S>                                                          <C>                 <C>                <C>
Cash flows from operating activities                          $        7,774      $       10,252     $        3,493

Cash flows from investing activities:
  Repayment of loan by subsidiary                                        140                 141                333
  Cash used in acquisition                                                 -             (10,062)
                                                              --------------      --------------     --------------

     Net cash (used in) provided by investing activities                 140              (9,921)               333
                                                              --------------      --------------     --------------

Cash flows from financing activities:
  Dividends paid                                                      (2,095)             (1,735)            (1,300)
  Proceeds from exercise of stock options                                906                 356                394
  Cash paid for purchase of common stock for treasury                 (3,010)             (2,205)            (4,354)
                                                              --------------      --------------     --------------

     Net cash used in financing activities                            (4,199)             (3,584)            (5,260)
                                                              --------------      --------------     --------------

Net increase (decrease) in cash and cash equivalents                   3,715              (3,253)            (1,434)

Cash and cash equivalents - beginning of year                          1,375               4,628              6,062
                                                              --------------      --------------     --------------

Cash and cash equivalents - end of year                       $        5,090      $        1,375     $        4,628
                                                              ==============      ==============     ==============
</TABLE>

Cash  dividends of $8,200,  $9,000 and $3,700 were paid by Teche Federal Bank to
Teche  Holding  Company in the years ended  September  30, 2005,  2004 and 2003,
respectively.

Federal and state banking  regulations  place certain  restrictions on dividends
paid. The total amount of dividends, which may be paid at any date, is generally
limited to the  retained  earnings  of the Bank.  The  Company's  ability to pay
dividends is dependent upon  dividends  received from the Bank. At September 30,
2005, the Bank's  retained  earnings  available for the payment of dividends was
approximately  $15.1 million.  The bank is required to file an application  with
the OTS prior to paying dividends to the Company. In addition, dividends paid by
the Bank to the Company would be  prohibited  if the effect  thereof would cause
the Bank's capital to be reduced below applicable minimum capital requirements.


                                     ******

                                       42
<PAGE>

                       DIRECTORS OF TECHE HOLDING COMPANY
                                       AND
                               TECHE FEDERAL BANK

                           Patrick O. Little, Chairman
                                 Mary Coon Biggs
                            Donelson T. Caffery, Jr.
                                  J. L. Chauvin
                                Henry L. Friedman
                              Robert J. Judice, Jr.
                              Dr. Thomas F. Kramer
                               W. Ross Little, Jr.
                                Robert E. Mouton
                            Christian L. Olivier, Jr.
                          Maunette B. Risher - Advisory

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                         OFFICERS OF TECHE FEDERAL BANK
<S>                     <C>                                         <C>                         <C>
Patrick O. Little          Chairman, President/CEO                     Irma Nell Bourque          Assistant Vice President
Scott Sutton               Senior Vice President/Operations            Karen Verret               Assistant Vice President
J. L. Chauvin              Senior Vice President/Treasurer             Darryl Charles             Assistant Vice President
                           Chief Financial Officer                     Elaine G. Gussman          Assistant Vice President
Darryl Broussard           Senior Vice President                       Genevieve Bihm             Assistant Vice President
                           Chief Lending Officer                       Judy Breaux                Assistant Vice President
W. Ross Little, Jr.        Senior Vice President, Secretary            Ruby Langley               Assistant Vice President
                           Sales & Marketing                           Jutta Codori               Assistant Vice President
Russell Gauthier           Baton Rouge Regional President              Gerald Emon                Assistant Vice President
Eddie LeBlanc              Vice President, Internal Auditor            Susan Leonard              Assistant Vice President
D. Ross Landry             Vice President                              Andrew Myers               Assistant Vice President
Angela Badeaux             Vice President                              Sean Riecke                Assistant Vice President
Glen Brown                 Vice President                              Bart Boyer                 Assistant Vice President
Kevin Caswell              Vice President                              Terry Albarado             Assistant Vice President
Bill Babineaux             Vice President                              Lesley Schexnayder         Assistant Vice President
Lynn Blanchard             Vice President                              Constance Harris           Assistant Vice President
Carol Nini                 Vice President                              Jeanette Charles           Assistant Vice President
Belinda Cavazos            Vice President                              Patricia Begnaud           Assistant Vice President
Susan Simoneaux            Vice President
F. William Ball            Vice President                              ST. LANDRY ADVISORY BOARD
Mary Beth Brady            Vice President
Gwen Doucet                Vice President                              Wayne M. Gilmore, Chairman
Tina Vidrine               Vice President                              H. Kent Aguillard
Peggy Romero               Vice President                              Anna Lee Dunbar
S. Mike Comeaux            Vice President                              Lynette Young Feucht
Lavergne Boutte            Assistant Vice President                    Patrick Fontenot
Carl W. Tritschler         Assistant Vice President                    Simon Howard Fournier
Beverly Adams              Assistant Vice President                    Morgan J. Goudeau, III
Debbie Stevens             Assistant Vice President                    Martin A. Roy, Jr.
Dalie Eldridge             Assistant Vice President                    Randy Tomlinson
Pauline Belley             Assistant Vice President                    Marvin Schwartzenburg
Cynthia Cutrera            Assistant Vice President                    Robert J. Wolfe, Jr.
Stephanie Dandry           Assistant Vice President                    J. Nilas Young
Georgia Boudreaux          Assistant Vice President
Angelina Mire              Assistant Vice President
                                                                       SPECIAL COUNSEL
INDEPENDENT AUDITORS                                                   Malizia Spidi & Fisch, PC
Dixon Hughes PLLC                                                      1100 New York, Avenue, N.W., Suite 340 West
500 Ridgefield Court                                                   Washington, D.C.  20005
Asheville, NC  28803


LEGAL COUNSEL                                                          REGISTRAR AND STOCK  TRANSFER AGENT
Biggs, Supple, Cremaldi and Curet, LLP                                 Registrar and Transfer Company
Lawless Building                                                       10 Commerce Drive
Willow Street                                                          Cranford, NJ 07016-3572
Franklin, LA 70538                                                     (800) 525-7686
                                                                       Fax (908) 272-1006
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