TECHE HOLDING COMPANY
                               2001 ANNUAL REPORT

<PAGE>

Teche Holding Company
1120 Jefferson Terrace Boulevard
New Iberia, LA 70560
(337)560-7151
FAX (337)365-7130
LA WATS (800)256-1500

New Iberia
1120 Jefferson Terrace Boulevard
New Iberia, LA 70560
(337)365-0366
Call Center (800)897-0315

Franklin
Teche Federal Savings Bank
211 Willow Street
Franklin, LA 70538
Telephone: (337)828-3212

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

Bayou Vista
206 Arlington St.
Bayou Vista, LA 70380
(504)395-5244

New Iberia
529 N. Lewis St.
New Iberia, LA 70563
(337)364-5528

New Iberia
142 W. St. Peter St.
New Iberia, LA 70560
(337)364-5145

Lafayette
Broadmoor
5121 Johnston St.
Lafayette, LA 70503
(337)981-1887

Lafayette
Downtown
1001 Johnston St.
Lafayette, LA 70501
(337)232-6463

Lafayette
2306 W. Pinhook Rd.
Lafayette, LA 70508
(337)232-3419

Breaux Bridge
601 E. Bridge St.
Breaux Bridge, LA 70517
(337)332-2149

Houma
706 Barrow St.
Houma, LA 70360
(985)868-8766

Houma
1983 Prospect Blvd.
Houma, LA 70363
(985)857-9990

Houma
Winn Dixie Market Place
1218 St. Charles St.
Houma, LA 70360
(985)873-5799

Thibodaux
Winn Dixie Market Place
375 North Canal Blvd.
Thibodaux, LA 70301
(985)446-6707

Franklin Drive Thru
1823 Main St.
Franklin, LA 70538
(337)828-4177

                               Table of Contents
                                                                            Page

President's Message .......................................................    2
In Memoriam ...............................................................    3
Selected Financial Information ............................................    4
Business of The Company & Business of the Bank ............................    5
Market and Dividend Information ...........................................    5
Management's Discussion and Analysis of Financial
  Condition and Results of Operations .....................................    4
Independent Auditors' Report ..............................................   12
Consolidated Balance Sheets ...............................................   13
Consolidated Statements of Income .........................................   14
Consolidated Statements of Stockholders' Equity ...........................   15
Consolidated Statements of Cash Flows .....................................   16
Notes to Consolidated Financial Statements ................................   18
Directors and Officers ....................................................   31
General Information .......................................................   31
<PAGE>

                                     [LOGO]
                                 TECHE HOLDING
                                    COMPANY


President's Message
--------------------------------------------------------------------------------
Dear Fellow Shareholders,

Our strategy of SmartGrowth--growth with  profitability--once  again resulted in
record  earnings.  This year our  operating  revenue was $21.4  million with net
income of $4.4 million and  earnings per share (EPS) of $1.81  compared to $1.55
the previous year. In addition,  we have continued to pay a $.50 dividend to our
shareholders for the sixth consecutive year.

SmartGrowth  focuses our  resources  on the products and services of the Company
which give the highest return to our  shareholders as well as have  demonstrated
growth  potential.  Our four areas of focus for this strategy  are:  growing our
customer base, growing those deposits which have lower costs, growing loans with
the  potential  of higher  returns  and  growing  EPS  above  the  prior  year's
benchmark.  With the hard work and dedication of our officers and employees,  we
have again achieved our goals.

Customers--Over  1,000  customers each month open accounts at our bank. They are
attracted by our various  checking and loan  programs.  Many of these  customers
subsequently  open savings or money market  accounts and/or apply for one of our
consumer or mortgage loan products.

Deposits--Core  deposits  which  include  checking,  savings  and  money  market
accounts  grew over 48% in 2001  compared to the previous  year and now comprise
over 39% of our total  deposits.  Building a larger base of core  deposits was a
significant focus this year and we reaped excellent results.

Loans--Mortgage loans are a very important mainstay of our business; however, we
are changing our loan portfolio to mirror the loan profile of a community  bank.
Our consumer and commercial  loans increased by 20% and currently  comprise over
21% of total loans.  Consumer  loans,  which include home equity and  commercial
loans, offer our stockholders a higher return than traditional mortgage loans as
well as serving the needs of our  customer  base.  We believe that the growth in
this area is  attributable to the sales culture of our loan officers who call on
our customers  and learn about their needs first hand.  Our loan quality is also
substantially better than our peer group.

Earnings  Per Share  (EPS)--The  Company had record EPS of $1.81 in 2001,  a 17%
increase over last year. The Company also paid a $.50  dividend.  The successful
strategy  of  SmartGrowth  as  well as the  share  repurchase  program  produced
significant value for our shareholders.

Another new development for 2001 was the opening of the Operations Center in New
Iberia  with a branch  bank  included  in the  facility.  Our new Center  brings
together  marketing,  accounting,  information  services,  lending,  operations,
deposit services, human resources,  audit and the executive management group for
greater efficiency and communication.  We are very pleased with the facility and
the results of the consolidation.

Despite the challenging  national economy and uncertainty  facing our country on
many fronts, we are confident in our nation, our customers, our employees and in
the future of Teche Federal Savings Bank.

Last  year we  stated  that we were  establishing  a  platform  for  growth  and
profitability  and our results this year indicate that we have made  outstanding
progress in that  direction.  We will continue to build that platform and pursue
our strategy of SmartGrowth. With the support of our board, officers, employees,
shareholders  and  customers,  we are going  forward  to  continue  to build our
business in the coming year.

                                            Sincerely,


                                            /s/Patrick O. Little
                                            --------------------
                                            Patrick O. Little


2
<PAGE>

                               [PICTURE OMITTED]

                                  In Memoriam
                                  -----------

This year marked the passing of the Chairman of Teche Holding  Company,  W. Ross
Little. All of us will miss his guidance and  encouragement.  We are carrying on
the  beliefs  which he made part of our  Company.  We  believe  in  serving  our
customers,  giving value to our shareholders,  creating a great work environment
for our employees and building Teche into a premier banking institution in South
Louisiana.

Joining  the bank in 1956 as the first  full time  employee,  he guided the Bank
through good times and bad. He and his team were responsible for moving the Bank
from a one-room  office to the present  office at 211 Willow Street in Franklin,
then branching into the neighboring communities. His policies helped the Bank to
be profitable and strong.

He was active in his community and received the Golden Service Award of the West
St. Mary Chamber of Commerce. He will be missed by not only his wife and family,
but also by the  customers and  employees of the Bank,  the local  community and
bankers across Louisiana.

                                                                               3
<PAGE>

<TABLE>
<CAPTION>

SELECTED FINANCIAL DATA (Dollars in thousands, except per share data)
-----------------------------------------------------------------------------------------
At or for the Year Ended September 30,
                                       2001       2000       1999       1998       1997
                                     ----------------------------------------------------
<S>                                <C>        <C>        <C>        <C>        <C>
Assets ............................  $467,531   $474,527   $434,265   $408,823   $404,097
Loans Receivable, Net .............   380,830    386,512    342,986    345,172    346,875
Securities-Available for Sale .....    41,230     54,635     63,460     36,769     37,854
Securities-Held to Maturity .......        --      2,574         --         --         --
Cash and cash equivalents .........    24,108     10,384     10,292     10,680      5,868
Deposits ..........................   342,917    309,896    303,084    279,265    280,302
FHLB Advances .....................    67,120    111,853     78,682     67,721     65,398
Stockholders' Equity ..............    52,112     48,621     48,700     52,527     54,359

Summary of Operations
Interest Income ...................  $ 35,186   $ 32,976   $ 30,275   $ 30,357   $ 29,788
Interest Expense ..................    20,505     19,098     16,356     16,712     16,681
                                     --------   --------   --------   --------   --------
Net Interest Income ...............    14,681     13,878     13,919     13,645     13,107
  Provision for Loan Losses .......        80        120        150        180        240
                                     --------   --------   --------   --------   --------
Net Interest Income after
  Provision for Loan Losses .......    14,601     13,758     13,769     13,465     12,867
Non-Interest Income ...............     6,699      5,608      4,452      3,475      2,590
Non-Interest Expense ..............    14,768     13,778     12,837     11,198      9,867
                                     --------   --------   --------   --------   --------
Income Before Gains on Sales of
  Securities and Income Taxes .....     6,532      5,588      5,384      5,742      5,590
Gains on Sales of Securities ......       123         --         14        138        274
Income Tax Expense ................     2,296      1,928      1,889      2,067      1,997
                                     --------   --------   --------   --------   --------
Net Income ........................  $  4,359   $  3,660   $  3,509   $  3,813   $  3,867
                                     ========   ========   ========   ========   ========
Selected Financial Ratios
Ratio of Equity to Assets .........      11.1%      10.2%      11.2%      12.8%      13.5%
Book Value/Common Share ...........  $  21.61   $  19.43   $   17.79 $   16.97   $  15.81
Dividends Declared per Share ......  $   0.50   $   0.50   $    0.50 $    0.50   $   0.50
Basic Income per Common Share .....  $   1.86   $   1.56   $    1.32 $    1.23   $   1.26
Diluted Income per Common Share ...  $   1.81   $   1.55   $    1.29 $    1.17   $   1.23
Annualized Return on Average Assets      0.93%      0.81%      0.84%      0.94%      0.99%
Annualized Return on Average Equity      8.71%      7.70%      6.90%      6.79%      7.34%
Net Interest Margin ...............      3.26%      3.21%      3.46%      3.45%      3.42%
Non-Interest Expense/Average Assets      3.14%      3.06%      3.06%      2.75%      2.52%
Non-Interest Income/Average Assets       1.42%      1.24%      1.06%      0.85%      0.66%
Non Performing Loans/Loans (1) ....      0.18%      0.28%      0.24%      0.21%      0.32%
Allowance for Loan Losses/Loans (1)      0.89%      0.93%      1.02%      1.01%      0.96%
Dividend Payout ...................     26.88%     32.05%     37.88%     40.65%     39.68%
</TABLE>

(1)  Total loans before allowance for loan losses

4
<PAGE>

Business of the Bank

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

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

Business of the Company

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

Summary of Quarterly Operating Results
<TABLE>
<CAPTION>
                                                  2001                                2000
                                    --------------------------------------------------------------------
                                    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 ................   $8,886   $8,870   $8,821   $8,609   $7,828   $8,043   $8,387   $8,718
Interest Expense ...............    5,483    5,278    5,093    4,651    4,358    4,529    4,906    5,305
Net interest Income ............    3,403    3,592    3,728    3,958    3,470    3,514    3,481    3,413
Provision for Loan Losses ......       15       15       15       35       30       30       30       30
Income Before Income Taxes......    1,328    1,481    1,773    2,073    1,330    1,373    1,489    1,396
Net Income .....................      870      970    1,161    1,358      864      920      962      914
Basic income per common share ..     0.37     0.41     0.50     0.58     0.36     0.40     0.41     0.39
Diluted Income per common share      0.37     0.40     0.48     0.56     0.36     0.39     0.41     0.39
</TABLE>

Market and Dividend Information

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

                                          Period      Cash
                                           End      Dividend
Quarter ended              Sales Price    Close     Declared   Date Declared
                          High     Low
December 31, 1999        $14.875  $13.00  $13.25     $0.125   November 18, 1999
March 31, 2000           $14.00   $10.625 $12.50     $0.125   February 17, 2000
June 30, 2000            $13.50   $11.875 $12.8125   $0.125   May 24, 2000
September 30, 2000       $13.625  $12.125 $13.50     $0.125   August 24, 2000
December 31, 2000        $16.25   $12.625 $16.25     $0.125   November 18, 2000
March 31, 2001           $17.47   $16.25  $17.00     $0.125   February 17, 2001
June 30, 2001            $18.50   $16.50  $18.50     $0.125   May 24, 2001
September 30, 2001       $19.69   $18.40  $19.00     $0.125   August 24, 2001

According  to the  records  of the  Company's  transfer  agent,  there  were 566
registered  stockholders  of record at November 26,  2001.  This number does not
include any persons or entities who 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 17 and 18 of notes to  Consolidated  Financial
Statements.  The Bank's total capital at September 30, 2001 exceeded the amounts
of its liquidation account and regulatory capital requirements.

                                                                               5
<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  which could cause actual results
to differ materially from those projected. Those risks and uncertainties include
changes in  interest  rate  risks  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  which  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;  noninterest income (primarily,  service charges on deposit accounts and
other fees, net rental income,  and gains and losses on investment  activities);
noninterest  expenses  (primarily,  compensation and employee benefits,  federal
insurance  premiums,  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.

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.  Management  recently  adopted its  "SmartGrowth"
strategy which  emphasizes the  origination  of consumer loans  (primarily  home
equity  loans) and  commercial  real estate loans for retention in the Company's
loan  portfolio.  Consumer and commercial  loans generally have shorter terms to
maturity and higher yields than  residential  real estate loans.  While consumer
and  commercial  loans have  greater  credit risk than  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 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 yield on
interest-earning assets and the cost of interest-bearing  liabilities.  The Bank
has sought to manage its exposure to changes in interest rates by monitoring the
effective maturities or repricing characteristics of its interest-earning assets
and  interest-bearing  liabilities.  The  matching  of  the  Bank's  assets  and
liabilities  may be  analyzed  by  examining  the extent to which its assets and
liabilities  are interest rate sensitive and by monitoring the expected  effects
of interest rate changes on its net interest income and net portfolio value.

The ability to maximize net interest income is largely  dependent upon achieving
a positive  interest rate spread that can be sustained  during  fluctuations  in
prevailing interest rates. The Bank is exposed to interest rate risk as a result

6
<PAGE>

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 because of their shorter terms to maturity, increases
in interest rates may have an adverse effect on the Bank's earnings. Conversely,
this same mismatch will generally  benefit the Bank's earnings during periods of
declining or stable interest rates.

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, 2001,  the weighted  average
term  to  repricing  of the  Bank's  ARM  loan  and  mortgage-backed  securities
portfolio  was  approximately  25 months.  In contrast,  at September  30, 2001,
$130.8  million of the Bank's  certificate  accounts  and $111.1  million of the
Bank's regular deposit accounts (e.g. demand, NOW, money market,  savings),  out
of $342.9 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 further,  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,
                                                          2001 vs 2000                2000 vs 1999
                                                 --------------------------     ---------------------------
                                                   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)                               $  (745)   $ (169)    $ (914)   $  832   $  257     $1,089
   Loans receivable, net                          2,067       821      2,888     1,840      170      2,010
   Other interest-earning assets (2)                216        20        236      (335)     (63)      (398)
                                                 ------   -------     ------    ------   ------     ------
Total Interest-Earning Assets                     1,538       672      2,210     2,337      364      2,701
                                                 ------   -------     ------    ------   ------     ------
Interest-bearing liabilities:
   Deposits                                         532       619      1,151       683      (55)       628
   FHLB advances and other borrowings              (102)      358        256     1,507      607      2,114
                                                 ------   -------     ------    ------   ------     ------
   Total Interest-Bearing liabilities               430       977      1,407     2,190      552      2,742
                                                 ------   -------     ------    ------   ------     ------
      Net change in net interest income          $1,108   $  (305)    $  803    $  147   $ (188)    $  (41)
                                                 ======   =======     ======    ======   ======     ======
</TABLE>

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

                                                                               7
<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,
                                   --------------------------------------------------------------------------------------
                                              2001                          2000                       1999
                                   --------------------------------------------------------------------------------------
                                                    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, Net (1)             $ 55,283  $ 3,451    6.24%   $ 67,113     $ 4,365    6.50%  $ 54,139   $ 3,276    6.05%
  Loans receivable (2) (3)         389,963   31,437    8.06%    364,237      28,549    7.84%   340,540    26,539    7.79%
  Other interest-earning
    assets (4)                       4,868      298    6.12%      1,210          62    5.12%     7,527       460    6.11%
                                  --------  -------            --------     -------           --------   -------
  Total interest-earning assets    450,114  $35,186    7.82%    432,560     $32,976    7.62%   402,206   $30,275    7.53%
                                            =======                         =======                      =======
  Non-interest earning assets       20,881                       18,268                         17,232
                                  --------                     --------                        --------
Total Assets                      $470,995                     $450,828                       $419,438
                                  ========                     ========                       ========
Liabilities and Stockholders
  Equity
  Interest-bearing Liabilities
  NOW accounts                      38,325      642    1.62%   $ 38,747     $   784    2.02%  $ 25,198   $   473    1.88%
  Statement & regular
    savings accounts                22,637      397    1.75%     23,357         444    1.90%    26,553       582    2.19%
  Money funds accounts              28,618    1,194    4.17%     11,424         435    3.81%     8,343       307    3.68%
  Certificates of Deposit          212,135   12,114    5.71%    216,694      11,533    5.32%   215,517    11,206    5.21%
                                  --------  -------            --------     -------           --------   -------
      Total Deposits               301,715   14,347    4.76%    290,222      13,196    4.55%   275,251    12,568    4.57%
  FHLB advances and
    other borrowings                94,089    6,158    6.54%     95,753       5,902    6.16%    70,401     3,788    5.38%
                                  --------  -------            --------     -------           --------   -------
  Total interest-bearing
    liabilities                    395,804  $20,505    5.18%    385,975     $19,098    4.95%    345,652  $16,356    4.73%
                                            =======                         =======                      =======
  Non-interest-bearing
    liabilities                     25,172                       17,311                          22,954
                                  --------                     --------                        --------
      Total liabilities            420,976                      403,286                         368,606
Stockholders' Equity                50,019                       47,542                          50,832
                                  --------                     --------                        --------
Total Liabilities and
  Stockholders' Equity            $470,995                     $450,828                        $419,438
                                  ========                     ========                        ========
Net interest income/interest
  rate spread (5)                           $14,681    2.64%                $13,878    2.67%             $13,919    2.80%
                                            =======                         =======                      =======
Net interest margin (6)                                3.26%                           3.21%                        3.46%
Interest-earning assets/
Interest bearing liabilities                         113.72%                         112.07%                      116.36%
</TABLE>

(1)  Includes securities and 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  $117,000  in 2001,
     $141,000 in 2000 and $40,000 in 1999.
(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.

8
<PAGE>

Changes in Financial Condition From September 30, 2000 to September 30, 2001

General.  Total assets  decreased  $7.0  million,  or 1.5% to $467.5  million at
September  30, 2001 from $474.5  million at September  30, 2000,  primarily as a
result of loan and security repayments.

Cash and Cash Equivalents.  Cash increased $13.7 million from $10.4 at September
30, 2000 to $24.1 million at September 30, 2001. Increases were due primarily to
an  increase  in  deposits  and  to  principal  repayments  on  mortgaged-backed
securities and loans.

Securities  Available-for-Sale.  Securities  available-for-sale  decreased $13.4
million from $54.6 million at September 30, 2000 to $41.2 at September 30, 2001.
This  reduction  was due primarily to principal  repayments  on  mortgage-backed
securities.

Loans Receivable, Net. The Bank's net loans receivable decreased $5.7 million or
1.5% to $380.8  million from $386.5  million at September 30, 2000 due primarily
to repayments due to lower interest rates.  Of all real estate loans  originated
in fiscal 2001, 45.3% had adjustable rates.

Deposits. The Bank's deposits increased $33.0 million or 10.6% to $342.9 million
from $309.9  million at September  30,  2000.  Increases  were due  primarily to
growth in money  market  accounts  and  demand  deposit  accounts.  Management's
deposit strategy is focused on growing these core deposits.

Advances From FHLB. Advances from the Federal Home Loan Bank of Dallas decreased
$44.8  million,  or 40.0% to $67.1 million from $111.9  million at September 30,
2000, as the funds  available from deposit  growth were used to partially  repay
advances as loan demand slackened in the Company's market area.

Stockholders' Equity.  Stockholders' equity increased $3.5 million, or 7.2% from
$48.6 million at September 30, 2000, to $52.1 million at September 30, 2001, due
primarily to net income and the proceeds from the exercise of stock options less
dividends and the repurchase of common stock for the treasury.

Comparison of Operating  Results for Years ended  September  30, 2001,  2000 and
1999

Analysis of Net Income

General.  The  Company  had net income of $4.4  million,  $3.7  million and $3.5
million for fiscal 2001,  2000 and 1999. The $699,000 or 19.1%  increase  during
fiscal  2001  compared to fiscal  2000 was  primarily  due to an increase in net
interest income and service charge income. The $151,000, or 4.3% increase during
2000  compared to fiscal 1999 was  primarily  due to  increased  service  charge
income offset somewhat by increased non-interest expense.

Interest  Income.  Interest income amounted to $35.2 million,  $33.0 million and
$30.3 million for the years ended 2001,  2000 and 1999,  respectively.  The $2.2
million  or 6.7%  increase  during  fiscal  2001  compared  to  fiscal  2000 was
primarily due to increased  interest on loans,  offset somewhat by a decrease in
interest on securities.  The average rates earned on loans receivable  increased
from 7.84% in fiscal  2000 to 8.06% in fiscal  2001.  The average  rates  earned
increased  from 7.98% in the first quarter of fiscal 2001 to 8.11% in the fourth
quarter of fiscal 2001 even though rates in the general economy  decreased.  The
increase was due to an increase in the  percentage of consumer type loans in the
portfolio. Consumer type loans generally carry a higher interest rate than first
mortgage  loans.  The $2.7 million or 8.9% increase in fiscal 2000 was primarily
due to  increased  yields and higher  average  balances of loans and  securities
during the annual periods.

Interest  Expense.  Interest  expense  totaled $20.5 million,  $19.1 million and
$16.4 million for the years ended September  2001, 2000 and 1999,  respectively.
The $1.4 million or 7.3% increase during fiscal 2001 compared to fiscal 2000 was
primarily  due to an increase in average  deposit  balances and rates during the
year. The average rates paid on interest bearing  deposits  increased from 4.55%
in  fiscal  2000 to 4.76% in  fiscal  2001.  However,  the  average  rates  paid
decreased  from 4.92% in the first quarter of fiscal 2001 to 4.43% in the fourth
quarter of fiscal 2001 as the rates in the general economy  decreased.  The $2.7
million or 16.5%  increase in fiscal 2000 was  primarily  due to a $15.0 million
increase in the average balance of deposits and a $23.3 million  increase in the
average  balance of advances  and a 78 basis point  increase in the average rate
paid on advances.

Net  Interest  Income.  Net interest  income  amounted to $14.7  million,  $13.9
million and $13.9 million for the years ended September 30, 2001, 2000 and 1999.
The interest rate margin was 3.21% in fiscal 2000 and 3.26% in fiscal 2001.  The
margin  increased from 2.99% in the first quarter of fiscal 2001 to 3.58% in the
fourth  quarter  of  fiscal

                                                                               9
<PAGE>

2001 as rates paid on deposits,  which are more sensitive to short term interest
rate changes, decreased,  whereas the overall rates earned on the loan portfolio
increased.  As discussed  earlier,  the increase in the rates earned on the loan
portfolio was primarily due to a shift to more consumer type loans.

Provision for Loan Losses.  The Bank provided $80,000,  $120,000 and $150,000 to
the allowance for loan losses for the years ended  September 30, 2001,  2000 and
1999  respectively.  The  allowance for loan losses was $3,436,00 at 2001 fiscal
year end,  $3,630,000 at 2000 fiscal year end and $3,537,000 at 1999 fiscal year
end.

Management  periodically  estimates  the  likely  level of losses  to  determine
whether the allowance for loan losses is adequate to absorb  possible  losses in
the  existing  portfolio.  Based on these  estimates,  an amount is  charged  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 be adequate to absorb anticipated future losses.  These estimates are made at
least every  quarter and there has been no  significant  change in the company's
estimation methods during the current period.

While the Bank  maintains its allowance for losses at a level which 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  Consolidated  Financial
Statements.

Non-Interest  Income.  Non-interest  income during the years ended September 30,
2001,  2000 and 1999  amounted to $6.7  million,  $5.6  million and $4.5 million
respectively.  The increases in both fiscal 2001 and fiscal 2000 were  primarily
due to  increased  fee  income  primarily  due to an  increase  in the number of
transaction accounts.

Non-Interest  Expense.  Non-interest  expense increased  steadily over the three
periods,  totaling  $14.8  million,  $13.8 million and $12.8 million  during the
years ended September 30, 2001, 2000 and 1999. The increases in both fiscal 2001
and  2000  were due to  continued  expansion  of  office  facilities,  increased
marketing  expenses and increased  investment in new  technology.  The principal
component of non-interest expense, compensation and employee benefits, increased
from $6.0  million in fiscal 1999 to $6.7  million in fiscal 2000 and  decreased
slightly to $6.6 million in fiscal 2001. A $308,000  decrease in the cost of the
Management  Incentive  Plan from fiscal 2000 to fiscal 2001 offset  increases in
other areas of  compensation  and employee  benefit  expenses.  Other  operating
expenses  increased  from  $2.2  million  in both  fiscal  1999 and 2000 to $2.6
million in fiscal 2001.

The Company is subject to the Louisiana  Shares Tax. This amounted to an expense
of $605,000,  $669,000 and $680,000 in the years ended  September 30, 2001, 2000
and 1999, respectively.

Gain on Sale of  Securities.  In the years ended  September  30, 2001,  2000 and
1999,  gains on the sale of  securities  amounted to  $123,000,  $0 and $14,000,
respectively.  The  increase in 2001 was  primarily  due to the  increase in the
market value of certain  financial  institutions  which the Company had invested
in.

Income Tax Expense.  For the years ended  September 30, 2001, 2000 and 1999, the
Bank incurred income tax expense of $2.3 million, $1.9 million and $1.9 million,
respectively.  The varying  amounts were caused  primarily by the varied pre-tax
income  of the  Bank as the  company's  overall  effective  income  tax rate was
approximately 35% for all three years.

Liquidity and Capital Resources

The Bank's  average  liquidity  ratio is based on a  percentage  of deposits and
short term borrowings and was approximately 12.1% percent during September 2001.
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; 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

10
<PAGE>

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.  On September 30, 2001, the Bank had total
FHLB borrowings of $67.1 million, or 14.4% of the Bank's assets.

Management  believes  the Bank has  sufficient  resources  available to meet its
foreseeable  funding   requirements.   At  September  30,  2001,  the  Bank  had
outstanding  loan  commitments  of $7.2  million,  and  certificates  of deposit
scheduled  to mature  within one year of $130.8  million,  substantially  all of
which management expects, based on past experience, will remain with the Bank.

Regulations  of the OTS  require  the  Bank to meet  or  exceed  three  separate
standards of capital adequacy.  These regulations require 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, 2001, Teche Federal exceeded all regulatory capital  requirements.
See Note 17 to the Consolidated Financial Statements.

Impact of Inflation and Changing Prices

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

                                                                              11

<PAGE>

Deloitte & Touche LLp
701 Poydras Street
Suite 3700
New Orleans, Louisiana 70139

Tel:    504-581-2727
Fax:    504-561-7293
www.us.deloitte.com

                                                                        Deloitte
                                                                        & Touche


                          INDEPENDENT AUDITORS' REPORT


Board of Directors and Shareholders
Teche Holding Company
Franklin, Louisiana

We have audited the  accompanying  consolidated  balance sheets of Teche Holding
Company  and  subsidiary  as of  September  30,  2001 and 2000,  and the related
consolidated statements of income,  stockholders' equity and cash flows for each
of the three years in the period  ended  September  30,  2001.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,   the  financial  position  of  Teche  Holding  Company  and
subsidiary  as of  September  30,  2001  and  2000,  and the  results  of  their
operations  and their cash flows for each of the three years in the period ended
September 30, 2001 in conformity with accounting  principles  generally accepted
in the United States of America.



/s/DELOITTE & TOUCHE LLP
------------------------
DELOITTE & TOUCHE LLP
November 16, 2001



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

12
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2001 AND 2000
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)

<TABLE>
<CAPTION>
                                                                             2001                2000
                                                                          --------            --------
<S>                                                                     <C>                 <C>
ASSETS
Cash and cash equivalents                                                 $ 24,108            $ 10,384
Securities available-for-sale, at estimated market value
  (amortized cost of $40,164 in 2001 and $56,097 in 2000)                   41,230              54,635
Securities held-to-maturity, at cost (estimated market value of $2,607)         --               2,574
Loans receivable, net of allowance for loan losses of
  $3,436 in 2001 and $3,630 in 2000                                        380,830             386,512
Accrued interest receivable                                                  2,387               2,404
Investment in Federal Home Loan Bank stock, at cost                          4,776               5,781
Real estate owned, net                                                         282                 232
Prepaid expenses and other assets                                              734                 649
Premises and equipment, at cost, less accumulated depreciation              13,184              11,356
                                                                          --------            --------
TOTAL ASSETS                                                              $467,531            $474,527
                                                                          ========            ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits                                                                  $342,917            $309,896
Advances from Federal Home Loan Bank                                        67,120             111,853
Advance payments by borrowers for taxes and insurance                        1,642               1,625
Accrued interest payable                                                       964                 685
Accounts payable and other liabilities                                       2,776               1,847
                                                                          --------            --------
      Total liabilities                                                    415,419             425,906

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 10,000,000 shares authorized;
  4,306,064 and 4,233,350 shares issued                                         43                  42
Preferred stock, 5,000,000 shares authorized, none issued                       --                  --
Additional paid-in capital                                                  43,374              42,221
Retained earnings                                                           36,609              33,417
Unearned ESOP shares                                                        (1,089)             (1,421)
Unearned compensation - Management Stock Plan                                   --                 (41)
Treasury stock - 1,894,748 and 1,731,000 shares, at cost                   (27,518)
Unrealized gain (loss) on securities available-for-sale,
  net of deferred income taxes                                                 693                (945)
                                                                          --------            --------
      Total stockholders' equity                                            52,112              48,621
                                                                          --------            --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                $467,531            $474,527
                                                                          ========            ========
</TABLE>

See notes to consolidated financial statements.

                                                                              13
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                        2001      2000      1999
<S>                                                 <C>       <C>       <C>
INTEREST INCOME:
  Interest and fees on loans                         $31,437   $28,549   $26,539
  Interest and dividends on securities                 3,451     4,365     3,276
  Other interest income                                  298        62       460
                                                     -------   -------   -------
                                                      35,186    32,976    30,275
                                                     -------   -------   -------
INTEREST EXPENSE:
  Deposits                                            14,347    13,196    12,568
  Advances from Federal Home Loan Bank                 6,158     5,902     3,676
  Other borrowed money                                    --        --       112
                                                     -------   -------   -------
                                                      20,505    19,098    16,356
                                                     -------   -------   -------
NET INTEREST INCOME                                   14,681    13,878    13,919
PROVISION FOR LOAN LOSSES                                 80       120       150
                                                     -------   -------   -------
NET INTEREST INCOME AFTER PROVISION
  FOR LOAN LOSSES                                     14,601    13,758    13,769
                                                     -------   -------   -------
NON-INTEREST INCOME:
  Service charges                                      6,514     5,230     4,246
  Gain on sale of real estate owned                       20        51        79
  Other income                                           165       327       127
                                                     -------   -------   -------
    Total non-interest income                          6,699     5,608     4,452
                                                     -------   -------   -------
GAIN ON SALE OF SECURITIES, net                          123        --        14
                                                     -------   -------   -------
NON-INTEREST EXPENSE:
  Compensation and employee benefits                   6,618     6,685     5,955
  Occupancy, equipment and data processing expense     3,419     3,085     2,804
  Marketing and professional                           1,492     1,072     1,031
  SAIF deposit insurance premiums                         61        92       168
  Louisiana shares tax                                   605       669       680
  Other operating expenses                             2,573     2,175     2,199
                                                     -------   -------   -------
    Total non-interest expense                        14,768    13,778    12,837
                                                     -------   -------   -------
INCOME BEFORE INCOME TAXES                             6,655     5,588     5,398
INCOME TAXES                                           2,296     1,928     1,889
                                                     -------   -------   -------
NET INCOME                                           $ 4,359   $ 3,660   $ 3,509
                                                     =======   =======   =======
BASIC INCOME PER COMMON SHARE                        $  1.86   $  1.56   $  1.32
                                                     =======   =======   =======
DILUTED INCOME PER COMMON SHARE                      $  1.81   $  1.55   $  1.29
                                                     =======   =======   =======
</TABLE>

See notes to consolidated financial statements.

14
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                                                          Unrealized
                                                                                             Gain
                                                                                           (Loss) on
                                  Additional          Unearned    Unearned                Securities
                          Common   Paid-In   Retained   ESOP    Compensation   Treasury   Available-
                           Stock   Capital   Earnings  Shares      (MSP)         Stock   for-Sale, net     Total

<S>                        <C>   <C>        <C>      <C>         <C>        <C>            <C>         <C>
BALANCE, October 1, 1998     $42   $42,037    $28,757  $(2,086)    $(790)     $(15,783)      $ 350       $52,527

Contribution to ESOP                   104                 332                                               436
Amortization of MSP                                                  400                                     400
Tax benefit from vesting
  of MSP shares                         12                                                                    12
Purchase of common stock
  for treasury                                                                  (5,604)                   (5,604)
Dividends declared -
  $.50 per share                               (1,338)                                                    (1,338)
Comprehensive income:
  Net income                                    3,509                                                      3,509
  Change in unrealized
    gain (loss) on
    securities
    available-for-sale,
    net                                                                                     (1,242)       (1,242)
                                                                                                          ------
      Total
       comprehensive
       income                                                                                              2,267
                             ---   -------    -------  -------     -----      --------     -------       -------
BALANCE, September 30, 1999   42    42,153     30,928   (1,754)     (390)      (21,387)       (892)       48,700

Contribution to ESOP                    71                 333                                               404
Amortization of MSP                                                  349                                     349
Tax expense from vesting of
  MSP shares                            (3)                                                                   (3)
Purchase of common stock
  for treasury                                                                  (3,265)                   (3,265)
Dividends declared -
  $.50 per share                               (1,171)                                                    (1,171)
Comprehensive income:
  Net income                                    3,660                                                      3,660
  Change in unrealized
    gain (loss) on
    securities
    available-for-sale,
    net                                                                                        (53)          (53)
                                                                                                          ------
      Total
        comprehensive
        income                                                                                             3,607
                             ---   -------    -------  -------     -----      --------     -------       -------
BALANCE, September 30, 2000   42    42,221     33,417   (1,421)      (41)      (24,652)       (945)       48,621

Contribution to ESOP                   218                 332                                               550
Amortization of MSP                                                   41                                      41
Exercise of stock options      1       935                                                                   936
Purchase of common stock
  for treasury                                                                  (2,866)                   (2,866)
Dividends declared -
  $.50 per share                               (1,167)                                                    (1,167)
Comprehensive income:
  Net income                                    4,359                                                      4,359
  Change in unrealized gain
    (loss) on securities
    available-for-sale, net                                                                  1,638         1,638
                                                                                                          ------
      Total comprehensive
        income                                                                                             5,997
                             ---   -------    -------  -------     -----      --------     -------       -------
BALANCE, September 30, 2001  $43   $43,374    $36,609  $(1,089)    $  --      $(27,518)    $   693       $52,112
                             ===   =======    =======  =======     =====      ========     =======       =======
</TABLE>
See notes to consolidated statements.
                                                                              15
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                2001        2000          1999

<S>                                                        <C>         <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                $  4,359    $  3,660      $  3,509
  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              (46)        (78)          (73)
    Provision for loan losses                                     80         120           150
    ESOP expense                                                 456         353           436
    MSP expense                                                   41         349           400
    Deferred income taxes (credit)                              (144)       (308)          175
    Gain on sale of premises                                      --         (85)           --
    Gain on sale of securities                                  (123)         --           (14)
    Gain on sale of real estate owned                            (20)        (51)          (79)
    Depreciation                                               1,191       1,098           926
    Accretion of discount on loans                               (97)        (35)         (325)
    Change in accrued interest receivable                         17        (245)          (94)
    Change in accrued interest payable                           279         253           (53)
    Change in accounts payable and other liabilities             243         366           281
    Other - net                                                  153         (35)          100
                                                             -------    --------      --------
      Net cash provided by operating activities                6,389       5,362         5,339
                                                             -------    --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from maturities of investment
    securities available-for-sale                              3,414       1,108            20
  Proceeds from sale of investment
    securities available-for-sale                                506          --           484
  Purchase of investment securities
    available-for-sale                                           (34)     (1,995)      (40,908)
  Principal repayments on mortgaged-backed
    securities available-for-sale                             14,790       9,700        11,888
  Purchase of mortgage-backed securities held-to-maturity         --      (3,416)           --
  Principal repayments on mortgaged-backed
    securities held-to-maturity                                   --         842            --
  Net decrease in certificates of deposit                         --          --           658
  Net loan (originations) repayments                           5,693     (43,522)        2,364
  Sales of (investment in) FHLB stock, net                     1,005      (1,552)         (345)
  Proceeds from sale of premises                                  --         595            --
  Purchase of premises and equipment                          (3,166)     (2,624)       (2,502)
                                                             -------    --------      --------
      Net cash provided by (used in) investing activities     22,208     (40,864)      (28,341)
                                                             -------    --------      --------
</TABLE>
                                                                     (Continued)

16
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                  2001        2000        1999

<S>                                                          <C>         <C>         <C>

CASH FLOWS FROM FINANCING ACTIVITIES:
  Dividends paid                                                (1,167)     (1,171)     (1,338)
  Net increase in deposits                                      33,021       6,812      23,819
  Proceeds of long-term FHLB advances                           34,000      29,000       8,000
  Repayment of long-term FHLB advances                         (21,233)    (44,029)     (6,339)
  Net increase (decrease) in short-term FHLB advances          (57,500)     48,200       9,300
  Cash paid for purchase of common stock for treasury           (2,866)     (3,265)    (10,435)
  Proceeds from exercise of stock options                          855          --          --
  Borrowings under loan agreement                                   --          --       6,767
  Repayment of borrowings under loan agreement                      --          --      (7,114)
  Increase (decrease) in advance payments by borrowers
    for taxes and insurance                                         17          47         (66)
                                                              --------     -------    --------
      Net cash (used in) provided by financing activities      (14,873)     35,594      22,594
                                                              --------     -------    --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS            13,724          92        (388)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                    10,384      10,292      10,680
                                                              --------     -------     -------
CASH AND CASH EQUIVALENTS, END OF YEAR                        $ 24,108    $ 10,384     $10,292
                                                              ========    ========     =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest                                      $ 20,226    $ 19,188     $16,504
                                                              ========    ========     =======
  Income taxes paid                                           $  2,318    $  1,970     $ 1,932
                                                              ========    ========     =======
</TABLE>

See notes to consolidated financial statements.

                                                                              17
<PAGE>

TECHE holding company and subsidiary
--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

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.

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  cash and
non-interest  bearing and interest  bearing demand deposits with other financial
institutions.

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

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

Gains  and  losses on  security  transactions  are  determined  on the  specific
identification method.

Derivative  Instruments  -  Effective  October  1,  2000,  the  Company  adopted
Financial   Accounting  Standards  Board  Statement  No.  133,  "Accounting  for
Derivative Instruments and Hedging Activities" (SFAS No. 133). The Statement was
issued in June 1998 and  requires the Company to recognize  all  derivatives  as
either assets or  liabilities  in the Company's  balance sheet and measure those
instruments  at fair value.  If certain  conditions are met, a derivative may be
specially  designated as a hedge.  The accounting for changes in fair value of a
derivative  depends on the  intended  use of the  derivative  and the  resulting
designation. Further, SFAS No. 133 permitted, at the time of implementation, the
reclassification of securities currently classified as held-to-maturity  without
calling into question the Company's original intent.

The  Company  is not  currently  engaged  in  any  significant  activities  with
derivatives;  therefore,  the impact of the adoption of this  Statement  was not
significant.  However,  at the time of  implementation  of this  Statement,  the
Company  reclassified its held-to-maturity  portfolio to its  available-for-sale
portfolio.  The securities that were  transferred to  available-for-sale  had an
amortized  cost of $2,574 and  unrealized  gross gains of $33 ($22 net of income
taxes) at October 1, 2000.

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

When  doubt  exist  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  prior to the  judgment of  uncollectibility  is charged to  operations.
Loans are

18
<PAGE>

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

The Company considers a loan to be impaired when, based upon current information
and  events,  it believes  it is  possible  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.  The  Company did not have a
significant amount of impaired loans at September 30, 2001 or 2000.

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

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

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

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

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

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

Premises  and  Equipment - The Company  computes  depreciation  generally on the
straight-line  method  for both  financial  reporting  and  federal  income  tax
purposes. The estimated useful lives used to compute depreciation are: buildings
and improvements,  twenty to forty years; and furniture, fixtures and equipment,
three to ten years.  Interest is capitalized on major construction  programs and
amounted to $105,  $78 and $95 in the years ended  September 30, 2001,  2000 and
1999, respectively.

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

Income Taxes - Income taxes are accounted for using the liability method.

                                                                              19
<PAGE>

Income Per Share - Basic income per common share (EPS) excludes  dilution and is
computed by dividing net income by the weighted-average  number of common shares
outstanding  for the period.  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 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.

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

Reclassifications  -  Certain  reclassifications  have been made to the 2000 and
1999 consolidated financial statements in order to conform to the classification
adopted for reporting in 2001.

2. INTEREST RATE RISK

The Company is engaged  principally in providing  first mortgage and other types
of loans to individuals.  At September 30, 2001 the Company had interest earning
assets of approximately  $445,000,  most of which will not mature or be repriced
until after five  years.  Interest  bearing  liabilities  totaled  approximately
$385,000,  most of which will  mature or can be  repriced  within one year.  The
shorter duration of  interest-sensitive  liabilities  indicates that in a rising
rate   environment  the  Company  is  exposed  to  interest  rate  risk  because
liabilities may be repricing  faster at higher interest rates,  thereby reducing
the market value of long-term assets and net interest income.  In a falling rate
environment the market value of long-term  assets and net interest income may be
increased.

3. SECURITIES

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

<TABLE>
<CAPTION>
                                                          September 30, 2001
                                              ---------------------------------------------
                                                            Gross       Gross     Estimated
                                              Amortized   Unrealized  Unrealized    Market
                                                Cost        Gains        Losses     Value
<S>                                          <C>        <C>         <C>         <C>

Investment securities:
  Municipal obligations                        $     70   $     --    $     --    $     70
                                               --------   --------    --------    --------
Mortgage-backed securities:
  Government National Mortgage Corporation        8,101        105          --       8,206
  Federal Home Loan Mortgage Corporation          4,721         75          --       4,796
  Federal National Mortgage Association           8,320        222         (12)      8,530
                                               --------   --------    --------    --------
                                                 21,142        402         (12)     21,532
Collateralized mortgage obligations ("CMOs")     18,762        633          --      19,395
Equity securities                                   190         43          --         233
                                               --------   --------    --------    --------
                                               $ 40,164   $  1,078    $    (12)   $ 41,230
                                               ========   ========    ========    ========
</TABLE>


20
<PAGE>

<TABLE>
<CAPTION>
                                                                 September 30, 2000
                                                    ---------------------------------------------
                                                                   Gross       Gross     Estimated
                                                    Amortized   Unrealized  Unrealized    Market
                                                       Cost        Gains        Losses     Value
<S>                                                 <C>        <C>         <C>         <C>

Investment securities:
  Federal Home Loan Bank bond due in February 2001   $  3,391    $     --     $    (6)    $ 3,385
  Municipal obligations                                    93          --          --          93
                                                     --------    --------     -------     -------
                                                        3,484          --          (6)      3,478
                                                     --------    --------     -------     -------
Mortgage-backed securities:
  Government National Mortgage Corporation             11,643          23         (54)     11,612
  Federal Home Loan Mortgage Corporation                8,019          16         (75)      7,960
  Federal National Mortgage Association                11,758          17        (398)     11,377
                                                     --------    --------     -------     -------
                                                       31,420          56        (527)     30,949
Collateralized mortgage obligations ("CMOs")           20,654          --      (1,047)     19,607
Equity securities                                         539          62          --         601
                                                     --------    --------     -------     -------
                                                     $ 56,097    $    118     $(1,580)    $54,635
                                                     ========    ========     =======     =======
</TABLE>


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

<TABLE>
<CAPTION>
                                                                 September 30, 2000
                                                    ---------------------------------------------
                                                                   Gross       Gross     Estimated
                                                    Amortized   Unrealized  Unrealized    Market
                                                       Cost        Gains        Losses     Value
<S>                                                 <C>        <C>         <C>         <C>
Collateralized mortgage obligations ("CMOs")         $ 2,574       $   33     $  --       $ 2,607
                                                     =======       ======     =====       =======
</TABLE>


Gross gains of $127 and $55 were  realized on sales of  securities  in the years
ended September 30, 2001 and 1999, respectively. Gross losses of $4 and $41 were
realized on sales of securities in the years ended  September 30, 2001 and 1999,
respectively.  There were no gains or losses on sales of  securities in the year
ended September 30, 2000.

At  September  30, 2001  securities  with a cost of  approximately  $10,000 were
pledged to secure  deposits  and  advances  from the  Federal  Home Loan Bank as
required or permitted by law.

4. LOANS RECEIVABLE

Loans receivable are summarized as follows (in thousands):

                                                   September 30,
                                              ----------------------
                                                   2001       2000
Residential real estate mortgage loans:
  One-to-four family units                     $293,435   $310,505
  Multi-family                                    1,107      1,186
Land loans                                        9,161      8,173
Construction loans (net of loans in process)      8,908     10,821
Non-residential real estate loans                10,775      5,465
Home improvement and home equity loans           36,039     33,007
Loans on savings accounts                         4,536      4,960
Auto loans                                        5,550      5,358
Mobile home loans                                10,426      6,446
Credit card loans                                 1,462      1,581
Other secured and unsecured                       3,613      3,232
                                               --------   --------
                                                385,012    390,734
Less:
  Allowance for loan losses                       3,436      3,630
  Deferred loan fees                                746        592
                                               --------   --------
                                               $380,830   $386,512
                                               ========   ========

                                                                              21
<PAGE>

Changes in the allowance for loan losses are as follows (in thousands):

                                                  Year Ended
                                                  September 30,
                                        --------------------------------
                                            2001       2000       1999

Beginning balance, October 1             $ 3,630    $ 3,537    $ 3,515
Provision charged to operating expense        80        120        150
Recoveries                                    12         62         44
Loans charged off                           (286)       (89)      (172)
                                         -------    -------    -------
Ending balance, September 30             $ 3,436    $ 3,630    $ 3,537
                                         =======    =======    =======


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

At  September  30,  2001 and 2000  there  were  unamortized  discounts  on loans
purchased  of  approximately  $430 and  $525,  respectively.  These  unamortized
discounts  have been deducted from the related loan balances in the table above.
The  amount  of  nonaccrual  loans  at  September  30,  2001  and  2000  was not
significant.  The amount of  interest  not accrued on these loans did not have a
significant effect on net income in 2001, 2000 or 1999.

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

5.   REAL  ESTATE  OWNED  Real  estate  owned  consisted  of the  following  (in
     thousands):


                                            September 30,
                                          ----------------
                                            2001     2000

Real estate acquired through foreclosure   $ 354    $ 344
Less allowance for losses                    (72)    (112)
                                           -----    -----
Real estate owned, net                     $ 282    $ 232
                                           =====    =====


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


                                        Year Ended September 30,
                                        ------------------------
                                          2001     2000     1999

Beginning balance, October 1             $ 112    $ 147    $ 112
Provision charged to operating expense      --       --       35
Reduction of allowance at date of sale     (40)     (35)      --
                                         -----    -----    -----
Ending balance, September 30             $  72    $ 112    $ 147
                                         =====    =====    =====

6. PREMISES AND EQUIPMENT

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

                                        September 30,
                                    --------------------
                                       2001        2000

Land                                $  3,062    $  3,091
Buildings and improvements            10,053       8,146
Furniture, fixtures and equipment      6,146       5,782
                                    --------    --------
                                      19,261      17,019
Less accumulated depreciation         (6,077)     (5,663)
                                    --------    --------
                                    $ 13,184    $ 11,356
                                    ========    ========

22
<PAGE>

7. DEPOSITS

Deposits are summarized as follows (in thousands):

                                              September 30,
                                        -------------------------
                                            2001           2000

Non-interest bearing demand accounts     $ 23,309       $ 18,708
Interest bearing:
  NOW accounts                             40,088         36,706
  Passbook and regular savings             24,469         21,901
  Money funds accounts                     46,568         13,363
  Certificates of deposit                 208,483        219,218
                                         --------       --------
                                         $342,917       $309,896
                                         ========       ========

Certificates  of deposit of $100 and over  amounted  to $42,200  and  $50,600 at
September 30, 2001 and 2000, respectively. Certificates of deposits at September
30, 2001 mature as follows (in thousands):

         Less than one year         $130,801
         1-2 years                    31,775
         2-3 years                    34,535
         3-4 years                     6,502
         4-5 years                     3,059
         Over 5 years                  1,811
                                    --------
         TOTAL                      $208,483
                                    ========

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

At  September  30,  2000,  the Company  was  indebted to the FHLB for $67,120 of
advances  bearing  interest at a weighted average rate of 6.65% which are due as
follows (in thousands):

         Year Ended
         September 30,
         2002                  $13,559
         2003                    8,996
         2004                    3,822
         2005                    1,795
         2006                    1,292
         Thereafter             37,656
                               -------
                               $67,120
                               =======


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

Included  in the table  above is a $5,000  advance  callable  in the year  ended
September 30, 2003. This advance has been included in the above table based upon
its call date rather than its stated due date of 2008.

At September  30,  2000,  the Company was indebted to the Federal Home Loan Bank
(FHLB) for  $111,853 of advances  bearing  interest at an average rate of 6.66%,
$69,388 of which were due or  callable  in the year ended  September  30,  2001,
$7,794 in 2002, $8,185 in 2003, $2,961 in 2004 and the balance thereafter.

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

9. INCOME TAXES

The Company was  permitted  under the Internal  Revenue Code to deduct an annual
addition to an allowance for bad debts in determining taxable income, subject to
certain  limitations.  The Company had generally  used the

                                                                              23
<PAGE>

percentage of taxable income method to calculate  this  addition.  This addition
differed from the bad debt  experience used for financial  accounting  purposes.
Bad debt  deductions  for income tax purposes were included in taxable income of
later years only if the bad debt  reserve  was used  subsequently  for  purposes
other than to absorb bad debt losses.  Because the Company did not intend to use
the  reserve  for  purposes  other  than to absorb  bad debt  losses,  generally
accepted  accounting  principles  did not require that deferred  income taxes be
provided on that portion  which  existed as of September  30, 1988. At September
30, 2001, retained earnings includes  approximately $4,400 representing such bad
debt deductions for which no deferred income taxes have been provided.

During  the  year  ended  September  30,  1996  legislation  was  enacted  which
eliminated  the use of the  percentage of taxable income method to calculate the
addition  to the  allowance  for bad debts for  income  tax  purposes.  This was
effective  October  1,  1996 with  respect  to the  Company.  In  addition,  the
legislation  requires that the Company  include in taxable  income the allowance
established  subsequent  to  September  30,  1988.  This  allowance  amounted to
approximately  $2,800 at  September  30,  1997 and is being  included in taxable
income in annual  installments of approximately  $470 beginning October 1, 1998.
As the taxes with respect to this  allowance are paid they are added to deferred
tax assets and, therefore, the payment of these taxes should have no significant
effect upon the Company's results of operations.

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's  deferred tax assets and  liabilities as of September 30, 2001 and
2000 are as follows (in thousands):


                                                        2001       2000
Deferred tax assets:
  MSP expense                                        $    --    $   120
  Allowance for loan losses                              550        450
  Unrealized loss on securities available-for-sale        --        517
  Other                                                  182        230
                                                     -------    -------
      Total deferred tax assets                          732      1,317
                                                     -------    -------
Deferred tax liabilities:
  Deferred loan fees and costs, net                      300        470
  Unrealized gain on securities available-for-sale       373         --
  Tax over book depreciation                              95        160
  Dividends on FHLB stock                                560        610
  Other                                                   90         17
                                                     -------    -------
      Total deferred tax liabilities                   1,418      1,257
                                                     -------    -------
      Net deferred tax assets (liabilities)          $  (686)   $    60
                                                     =======    =======

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

                                 Year Ended
                                September 30,
                       -----------------------------
                          2001      2000       1999
Currently payable      $ 2,440    $ 2,236    $ 1,714
Deferred                  (144)      (308)       175
                       -------    -------    -------
                       $ 2,296    $ 1,928    $ 1,889
                       =======    =======    =======

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

                                                        Year Ended
                                                       September 30,
                                               ---------------------------
                                                 2001      2000      1999
Taxes computed at statutory rates              $2,263    $1,900    $1,835
Increase in taxes due to miscellaneous items       33        28        54
                                               ------    ------    ------
                                               $2,296    $1,928    $1,889
                                               ======    ======    ======
Actual tax rate                                    35%       35%       35%
                                               ======    ======    ======

24
<PAGE>

10. NON-INTEREST EXPENSE

Occupancy, equipment and data processing expenses consisted of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                                Year Ended
                                                                               September 30,
                                                                      ------------------------
                                                                        2001     2000     1999
<S>                                                                 <C>      <C>      <C>
Occupancy, including depreciation, insurance, rent, utilities, etc    $  935   $  879   $  833
Equipment, including depreciation, telephone, etc                      1,693    1,569    1,408
Data processing                                                          791      637      563
                                                                      ------   ------   ------
                                                                      $3,419   $3,085   $2,804
                                                                      ======   ======   ======
</TABLE>

Other operating expenses consisted of the following (in thousands):

                                          Year Ended
                                         September 30,
                                   ------------------------
                                     2001     2000     1999
Stationery, printing and postage   $  649   $  650   $  696
Debit card expense                    426      293      209
Other                               1,498    1,232    1,294
                                   ------   ------   ------
                                   $2,573   $2,175   $2,199
                                   ======   ======   ======

11. OTHER COMPREHENSIVE INCOME

The  adjustment  to  determine  other  comprehensive  income as  included in the
consolidated  statements  of changes in  stockholders'  equity  consists  of the
following for the years ended September 30, 2001, 2000 and 1999 (in thousands):

<TABLE>
<CAPTION>
                                                                                             Tax       Net of
                                                                              Before-Tax   (Expense)     Tax
                                                                                Amount      Credit      Amount
<S>                                                                          <C>         <C>        <C>
2001
----
  Gross change in unrealized gain on securities available-for-sale              $ 2,651     $(933)     $ 1,718
  Less: Reclassification for gain included in net income                            123       (43)          80
                                                                                -------     -----      -------
  Net change in unrealized gain on securities available-for-sale                $ 2,528     $(890)     $ 1,638
                                                                                =======     =====      =======

2000
----
  Gross change in unrealized gain (loss) on securities available-for-sale       $   (79)    $  26      $   (53)
  Less: Reclassification for gain included in net income                             --        --           --
                                                                                -------     -----      -------
  Net change in unrealized gain (loss) on securities available-for-sale         $   (79)    $  26      $   (53)
                                                                                =======     =====      =======

1999
----
  Gross change in unrealized gain (loss) on securities available-for-sale       $(1,898)    $ 665      $(1,233)
  Less: Reclassification for gain included in net income                             14        (5)           9
                                                                                -------     -----      -------
  Net change in unrealized gain (loss) on securities available-for-sale         $(1,912)    $ 670      $(1,242)
                                                                                =======     =====      =======
</TABLE>

12. RETIREMENT PLAN

The Company  participates  in a defined benefit  multi-employer  retirement plan
which  covers  substantially  all  employees.  The plan is  administered  by the
Financial  Institutions  Retirement  Fund.  Charges to operations under the plan
include  normal  cost.  There  were no  required  payments  in the  years  ended
September  30,  2001,  2000 and 1999.  The market value of the net assets of the
retirement fund exceeds the liability of the present value of accrued  benefits.
No  separate  information  regarding  the  Company's  share  of the  assets  and
liabilities of this plan is available.

                                                                              25
<PAGE>

13. 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, 2001, 2000 and
1999 (in thousands):
                                                           Year Ended
                                                          September 30,
                                                    -----------------------
                                                      2001    2000    1999
Weighted average number of common shares
  outstanding - used in computation of basic
  income per common share                            2,349   2,346   2,660
Effect of dilutive securities:
Stock options                                           59      --      40
MSP stock grants                                         4      20      27
                                                     -----   -----   -----
Weighted average number of common shares
  outstanding plus effect of dilutive securities -
  used in computation of diluted income
  per common share                                   2,412   2,366   2,727
                                                     =====   =====   =====



14. 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  Savings Bank makes
cash  contributions to the ESOP on a basis sufficient to enable the ESOP to make
the required loan payments to the Company.

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

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

Compensation  expense  related to the ESOP was $456, $353 and $436 for the years
ended  September  30,  2001,  2000 and 1999,  respectively.  The  following is a
summary of shares held in the ESOP Trust as of September 30, 2001 and 2000 :

                                                               2001       2000

Shares released for allocation or committed to be released    202,315    178,306
Unreleased shares                                             108,933    142,167
                                                             --------   --------
Total ESOP shares                                             311,248    320,473
                                                             ========   ========
Market value of unreleased shares (in thousands)             $  2,070   $  1,919
                                                             ========   ========

In the year ended September 30, 1996, the  stockholders of the Company  approved
the Teche  Holding  Company  1995 Stock  Option  Plan (the  "Plan")  under which
options to purchase 423,200 common shares were reserved and granted to executive
employees  and  directors  of Teche  Federal  Savings  Bank.  In the years ended
September 30, 1999 and 1998,  issuances of additional  options were  authorized.
The  exercise  prices are equal to the market price on the date of grant and 20%
of the options are generally exercisable within the first anniversary date after
the date of grant and 20% annually  thereafter.  All unexercised  options expire
ten years from the date of grant. No compensation  expense was recognized  under
the  Plans in 2001,  2000 or  1999.  The  following  table  summarizes  activity
relating to the Plans:

26
<PAGE>

                                             Available                  Weighted
                                                for         Options     Average
                                               Grant      Outstanding    Price

Balance, October 1, 1998                       3,200         495,650     $14.63
  Reserved                                    30,682              --         --
  Granted                                    (30,682)         30,682      16.34
                                             -------         -------     ------
Balance, September 30, 1999                    3,200         526,332      14.73
  Reserved                                        --              --         --
  Granted                                         --              --         --
                                             -------         -------     ------
Balance, September 30, 2000                    3,200         526,332      14.73
  Exercised                                       --        (109,234)     13.94
  Reserved                                        --              --
  Granted                                         --              --
  Expired and other                           14,200         (14,200)     19.88
                                             -------         -------     ------
Balance, September 30, 2001                   17,400         402,898     $14.90
                   === ====                   ======         =======     ======
Exercisable at September 30, 1999                            278,007     $14.20
                         === ====                            =======     ======
Exercisable at September 30, 2000                            380,993     $14.35
                         === ====                            =======     ======
Exercisable at September 30, 2001                            362,628     $14.56
                         === ====                            =======     ======

Options  exercisable at September 30, 2001 include  313,966 at $13.94 per share,
6,650 at $15.94 per  share,  29,760 at $19.88 per share and 12,272 at $16.38 per
share.  Outstanding  options at September 30, 2000 include 313,966 at $13.94 per
share with an average remaining contractual life of 4 years, 8,650 at $15.94 and
5 years,  49,600 at $19.88 and 6 years and 30,682 at $16.31 and 8 years.

In the year ended September 30, 1996, the  stockholders of the Company  approved
the  Management  Stock Plan  ("MSP")  under which  restricted  grants of 169,280
shares were made to executive  employees and directors of Teche Federal  Savings
Bank. Teche Federal Savings Bank acquired the Company's stock on the open market
for the  benefit of the  recipients.  In the year ended  September  30, 1999 the
Board  of  Directors  authorized  restricted  grants  of 6,000  shares  to a new
executive  employee.  The recipients vest 20% annually as long as they remain as
Teche  Federal  Savings Bank  directors  or  employees.  The Company  recognizes
compensation  expense  ratably over the vesting  period and the cost of unvested
shares is reported  as unearned  compensation  as a reduction  of  stockholders'
equity.  Compensation  expense related to the MSP was $41, $349 and $400 for the
years ended  September 30, 2001,  2000 and 1999,  respectively.  All shares were
vested at September 30, 2001.

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 year ended September 30, 1999 was $4.53.  Applying SFAS No. 123 would
result in pro forma net income and income per share amounts as follows:

                                           2001     2000     1999
Net income (in thousands):
  As reported                            $4,359   $3,660   $3,509
  Pro forma                               4,264    3,285    3,115
Basic income per share:
  As reported                            $ 1.86   $ 1.56   $ 1.32
  Pro forma                                1.82     1.40     1.17
Diluted income per share
  As reported                            $ 1.81   $ 1.55   $ 1.29
  Pro forma                                1.77     1.39     1.16

The fair  value  of each  option  was  estimated  on the date of grant  using an
option-pricing  model with the following  weighted-average  assumptions used for
grants:  dividend yield of 2.5%;  expected  volatility of 20 percent;  risk-free
interest  rate of 5.5 to 6.0  percent;  and  expected  lives of 8 years  for all
options.

                                                                              27
<PAGE>

15. 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, 2001,  the Company had made various  commitments  to extend
credit totaling approximately $7,200 including $5,900 of the undisbursed portion
of loans in process.  Most of these commitments are at fixed rates. The rates on
fixed rate loan  commitments  range from 6.625% to 8.000% at September 30, 2001.
The rates on  variable  rate loan  commitments  range  from  6.375% to 6.875% at
September  30,  2001.  As  of  September  30,  2000  such  commitments   totaled
approximately  $10,700  including $8,200 of the undisbursed  portion of loans in
process.

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.

16. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

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

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

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

Advances  from  Federal Home Loan Bank - The 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.

The estimated fair values of the Company's significant financial instruments are
as follows at September 30, 2001 and 2000 (in thousands):


                                                2001                2000
                                        -------------------  -------------------
                                                  Estimated            Estimated
                                        Carrying    Fair     Carrying    Fair
                                         Amount     Value     Amount     Value
Financial assets:
  Cash and cash equivalents             $ 24,108  $ 24,108    $ 10,384  $ 10,384
  Investment securities                   41,230    41,230      57,209    57,242
  Loans                                  384,266   396,000     390,142   386,000
  Less: allowance for loan losses          3,436     3,436       3,630     3,630
                                         -------   -------     -------   -------
  Loans, net of allowance                380,830   392,564     386,512   382,370
                                         -------   -------     -------   -------
Financial liabilities:
  Deposits                               342,917   347,000     309,896   308,400
  Advances from Federal Home Loan Bank    67,120    73,800     111,853   112,600

28
<PAGE>

17. REGULATORY CAPITAL

The Bank's actual capital and its statutorially required capital levels based on
the consolidated  financial statements  accompanying these notes were as follows
(in thousands):

                                         September 30, 2001
                          ------------------------------------------------------
                                                                   To be Well
                                                               Capitalized Under
                                             For Capital       Prompt Corrective
                                           Adequacy Purposes   Action Provisions
                           --------------  -----------------   -----------------
                                 Actual          Required          Required
                           --------------  -----------------   -----------------
                            Amount    %        Amount   %        Amount    %

Core capital               $46,658  10.0%    $18,672   4.0%     $28,008   6.0%
Tangible capital           $46,658  10.0%    $ 7,002   1.5%         N/A   N/A
Total Risk based capital   $49,976  17.8%    $22,419   8.0%     $28,024  10.0%
Leverage                   $46,658  10.0%        N/A   N/A      $23,340   5.0%

                                         September 30, 2000
                          ------------------------------------------------------
                                                                   To be Well
                                                               Capitalized Under
                                             For Capital       Prompt Corrective
                                           Adequacy Purposes   Action Provisions
                           --------------  -----------------   -----------------
                                 Actual          Required          Required
                           --------------  -----------------   -----------------
                            Amount    %        Amount   %        Amount    %
Core capital                $43,140  9.1%     $18,982  4.0%     $28,473   6.0%
Tangible capital            $43,140  9.1%     $ 7,118  1.5%         N/A   N/A
Total Risk based capital    $46,588 16.8%     $22,147  8.0%     $27,683  10.0%
Leverage                    $43,140  9.1%         N/A  N/A      $23,727   5.0%


The Federal  Deposit  Insurance  Corporation  Improvement Act of 1991 ("FDICIA")
requires each federal banking agency to implement prompt corrective  actions for
institutions  that it regulates.  In response to this  requirement,  OTS adopted
final rules based upon  FDICIA's  five capital  tiers.  The rules provide that a
savings bank is "well  capitalized" if its total risk-based capital ratio is 10%
or greater,  its Tier 1 risk-based capital ratio is 6% or greater,  its leverage
is 5% or greater  and the  institution  is not  subject to a capital  directive.
Under  this  regulation,  the Bank was  deemed  to be "well  capitalized"  as of
September  30, 2001 and 2000 based upon the most recent  notifications  from its
regulators.  There are no  conditions or events since those  notifications  that
management believes would change its classifications.

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

                                 Balance Sheets

                                                          2000             1999
Assets:
  Investment in subsidiary                              $47,427          $42,270
  Cash and cash equivalents                               3,507            4,388
  Due from ESOP                                           1,089            1,421
  Other                                                      89              542
                                                        -------          -------
                                                        $52,112          $48,621
                                                        =======          =======
Stockholders' equity                                    $52,112          $48,621
                                                        =======          =======

                                                                              29
<PAGE>

                             Statements of Earnings

                                                      Year Ended September 30
                                                 -------------------------------
                                                    2001       2000        1999
Dividends received from subsidiary               $ 1,500    $ 2,500    $ 17,000
Equity in earnings of subsidiary greater than
  (less than) dividends received                   2,771      1,152     (13,351)
Interest income from subsidiary                      183        109         237
Management fees and other expenses allocated
  to the Parent                                     (113)      (150)       (252)
Other income (expenses), net                         114         63        (195)
Income tax (expense) credit                          (96)       (14)         70
                                                --------    -------    --------
Net income                                      $  4,359    $ 3,660    $  3,509
                                                ========    =======    ========


                            Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                  Year Ended September 30
                                                             --------------------------------
                                                                 2001        2000        1999

<S>                                                        <C>         <C>         <C>
Cash Flows from Operating Activities                         $  2,820    $  2,484    $ 16,903
Cash Flows from Investing Activities -
  Repayment of loan by subsidiary                                 332         333         332
                                                             --------    --------    --------
Cash Flows from Financing Activities:
  Borrowings under note payable agreement                          --          --       6,767
  Repayment of borrowings under loan agreement                     --          --      (7,114)
  Dividends paid                                               (1,167)     (1,171)     (1,338)
  Cash paid for purchase of common stock for treasury          (2,866)     (3,265)    (10,435)
                                                             --------    --------    --------
      Net cash used in financing activities                    (4,033)     (4,436)    (12,120)
                                                             --------    --------    --------
Net increase (decrease) in cash and cash equivalents             (881)     (1,619)      5,115
Cash and cash equivalents, beginning of year                    4,388       6,007         892
                                                             --------    --------    --------
Cash and cash equivalents, end of year                       $  3,507    $  4,388    $  6,007
                                                             ========    ========    ========
</TABLE>


Cash dividends of $1,500,  $2,500 and $17,000 were paid by Teche Federal Savings
Bank to Teche Holding  Company in the years ended  September 30, 2001,  2000 and
1999, respectively.

Stockholders' equity of the Company includes the undistributed earnings of Teche
Federal  Savings Bank.  Dividends  are payable only out of retained  earnings or
current  net income.  Moreover,  dividends  to the  Company's  stockholders  can
generally be paid only from liquid assets of Teche Holding Company and dividends
paid to the Company by the Bank. The amount of capital of the Bank available for
dividends at September 30, 2001 was approximately $18,500.

30
<PAGE>
[PICTURE OMITTED]

Directors of Teche Holding Company
and Teche Federal Savings Bank
--------------------------------------------------------------------------------
Patrick O. Little, Chairman
Mary Coon Biggs
Donelson T. Caffery, Jr.
Henry L. Friedman
Virginia Kyle Hine
Robert Judice, Jr. - Advisory
Dr. Thomas F. Kramer
W. Ross Little, Jr.
Robert E. Mouton
Christian L. Olivier, Jr.
Maunette B. Risher -
  Advisory

INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
Deloitte & Touche LLP
One Shell Square
701 Poydras Street, Suite 3700
New Orleans, LA 70139

LEGAL COUNSEL
--------------------------------------------------------------------------------
Biggs, Trowbridge, Supple,
Cremaldi and Curet, L.L.P.
Lawless Building
Willow Street
Franklin, LA 70538

SPECIAL COUNSEL
--------------------------------------------------------------------------------
Malizia, Spidi & Fisch, PC
1100 New York Avenue, N.W.,
Suite 340 West
Washington, D.C. 20005

REGISTRAR AND STOCK
TRANSFER AGENT
--------------------------------------------------------------------------------
Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016-3572
(800) 525-7686
Fax (908) 272-1006

Officers of Teche Federal Savings Bank
--------------------------------------------------------------------------------
Patrick O. Little          Chairman, President/CEO
Robert E. Mouton           Executive Vice President
Scott Sutton               Senior Vice-President/
                           Operations
J.L. Chauvin               Senior Vice-President/Treasurer
                           Chief Financial Officer
Darryl Broussard           Senior Vice-President
                           Chief Lending Officer
W. Ross Little, Jr.        Senior Vice President, Secretary
Eddie LeBlanc              Vice President, Internal Auditor
Stanley Plessala           Vice President
D. Ross Landry             Vice President
Angela Badeaux             Vice President
Glen Brown                 Vice President
Kevin Caswell              Vice President
Bill Babineaux             Vice President
Lynn Blanchard             Vice President
James Hamilton             Assistant Vice President
William F. Ball            Assistant Vice President
Tamaria B. Lecompte        Assistant Vice-President
Gwen Doucet                Assistant Vice-President
Lavergne Boutte            Assistant Vice-President
Vicky Landry               Assistant Vice-President
Mary Beth Brady            Assistant Vice-President
Irma Nell Bourque          Assistant Vice-President
Andy Magers                Assistant Vice-President
Brenda Henson              Assistant Vice-President
Karen Verret               Assistant Vice President
Wendy Frederick            Assistant Vice President
Lydia B. Hebert            Assistant Vice-President
Carol Nini                 Assistant Vice-President
Elaine G. Gussman          Assistant Vice-President
Genevieve Bihm             Assistant Vice-President
Gerry Mouton               Assistant Vice-President
D'Aun Barras               Assistant Vice-President
Beverly Adams              Assistant Vice-President
Debbie Stevens             Assistant Vice-President
Dalie Eldridge             Assistant Vice-President
Kay Clause                 Assistant Vice-President
Susan Simoneaux            Assistant Vice-President
Theresa Landry             Assistant Vice-President
Carl W. Tritschler         Assistant Vice-President

                                                                              31