SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


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

For the fiscal year ended                    September 30, 1997
                          ------------------------------------------------------

                                     - or -

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

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

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

              Louisiana                                      72-128746
---------------------------------------------             -------------------
(State or other jurisdiction of incorporation             (I.R.S. Employer
  or organization)                                        Identification No.)

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

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

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

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

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

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

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

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

     The aggregate  market value of the voting stock held by  non-affiliates  of
the Registrant,  based on the closing price of the Registrant's  Common Stock as
quoted on the American  Stock  Exchange,  Inc., on December 22, 1997,  was $63.2
million (2,778,821 shares at $22.75 per share).

     As of December 22, 1997 there were issued and outstanding  3,437,530 shares
of the Registrant's Common Stock. DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions  of the Annual  Report to  Stockholders  for the Fiscal Year Ended
     September 30, 1997. (Parts I, II and IV)

2.   Portions  of  the  Proxy   Statement   for  the  1996  Annual   Meeting  of
     Stockholders. (Part III)


<PAGE>



                                      INDEX
<TABLE>
<CAPTION>
PART I                                                                                                         Page

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

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

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

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

PART II

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

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

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

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

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

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

PART III

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

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

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

Item 13.    Certain Relationships and Related Transactions......................................................   31

PART IV

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


<PAGE>



PART I

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

General

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

         The  Bank is a  community-oriented  federal  savings  bank  offering  a
variety of  financial  services  to meet the local  banking  needs of St.  Mary,
Lafayette,  Iberia, St. Martin and Terrebonne Parishes,  Louisiana (the "Primary
Market  Area").  Teche  Federal  conducts its  business  from its main office in
Franklin,  Louisiana  and eight full service  branch  offices  located in Morgan
City,  Bayou Vista,  New Iberia (two offices),  Lafayette (two offices),  Breaux
Bridge and Houma, Louisiana. The Bank also maintains a loan production office in
Lafayette.

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

Market Area/Competition

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

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

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


                                        1

<PAGE>




Lending Activities

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

<TABLE>
<CAPTION>
                                                                   At September 30,
                             ---------------------------------------------------------------------------------------------
                                   1997               1996               1995             1994                1993
                             ------------------ ----------------- ------------------ -------------------  ----------------
                                       Percent            Percent           Percent            Percent            Percent
                               Amount  of Total   Amount of Total   Amount  of Total Amount    of Total   Amount  of Total
                               ------  --------   ------ --------   ------  -------- ------    --------   ------  --------
                                                                   (Dollars in Thousands)
<S>                         <C>        <C>     <C>       <C>     <C>        <C>     <C>         <C>    <C>         <C>   
Residential real
estate mortgage loans:
  One- to four-family....    $310,306   86.25%  $288,109  87.03%  $234,329   87.49%  $213,325    86.27% $187,185    85.47%
  Construction/
    permanent loans......      11,067    3.08     13,740   4.15      8,097    3.02     11,676     4.72    10,976     5.01
  Multi-family...........       2,839     .79      3,006    .91      2,871    1.07      2,144      .87     2,126      .97
Commercial real 
  estate loans...........       6,897    1.92      7,346   2.22      7,540    2.82      7,152     2.89     7,627     3.48
Land loans...............       2,634     .73      2,844    .86      2,288     .85      1,858      .75     1,778      .81

Consumer loans:
  Loans on 
    savings accounts.....       5,984    1.66      5,657   1.71      6,260    2.34      5,312     2.15     4,912     2.24
  Other..................      20,049    5.57     10,343   3.12      6,441    2.41      5,796     2.35     4,403     2.02
                             --------  ------   -------- ------    -------  ------   --------   ------  --------   ------
        Total loans......     359,776  100.00%   331,045 100.00%   267,826  100.00%   247,263   100.00%  219,007   100.00%
                                       ======            ======             ======              ======             ======
Less:
  Allowance for 
    loan losses..........       3,355              3,182             2,966              2,778              2,193
  Deferred loan fees.....         860              1,122             1,266              1,308              1,120
  Undisbursed portion 
    of loans-in-process..       8,686             10,525             5,725              9,633              8,310
                             --------           --------          --------           --------           --------
        Net loans........    $346,875           $316,216          $257,869           $233,544           $207,384
                              =======           ========           =======            =======            =======
</TABLE>



                                        2

<PAGE>



         Origination,  Purchase and Repayment of Loans. The following table sets
forth the Bank's loan  originations and loan purchases and principal  repayments
for the  periods  indicated.  The Bank  originates  loans for  retention  in its
portfolio and did not sell loans during the periods indicated.
<TABLE>
<CAPTION>
                                                                           Year Ended September 30,
                                                   ----------------------------------------------------------------------------
                                                      1997            1996           1995             1994               1993
                                                      ----            ----           ----             ----               ----
                                                                               (In Thousands)

<S>                                                <C>             <C>             <C>               <C>               <C>     
Total gross loans receivable at                   
  beginning of year.........................       $331,045        $267,826        $247,263          $219,007          $198,488 
                                                    =======         =======         =======           =======           ======= 
Loans originated:                                  
  One- to four-family residential...........         49,705          70,730          33,010          $ 36,702          $ 27,434
  Residential construction/permanent(1).....         18,968          23,049          15,110            22,933            18,379
  Multi-family residential..................            167              --              --               268               982
  Land and non-residential real estate......          1,271           3,579           1,970             1,601             1,149
  Consumer loans............................         16,889          11,402          11,280             8,108             4,393
                                                     ------         -------          ------             -----            ------
      Total loans originated................         87,000         108,760          61,370            69,612            52,337
                                                     ------         -------          ------            ------            ------
Reductions in principal - primarily due
 to loan repayments and prepayments ........        (58,269)        (45,541)        (40,807)          (41,356)          (31,818)
                                                    -------         -------         -------           -------           -------
Net loan activity...........................       $ 28,731        $ 63,219        $ 20,563          $ 28,256          $ 20,519
                                                    =======         =======         =======           =======           =======

Total gross loans receivable at end of year.       $359,776        $331,045        $267,826          $247,263          $219,007
                                                    =======         =======         =======           =======           =======

</TABLE>

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

         Loan Purchases.  While the Bank primarily focuses on the origination of
one- to  four-family  residential  mortgages,  in 1992 the Bank  purchased  $4.7
million of performing adjustable and fixed-rate mortgage loans from the RTC at a
$200,000 discount. The Bank has not purchased any loans since 1992.



                                        3

<PAGE>



         Loan Maturity  Tables.  The following  table sets forth the maturity of
the Bank's loan  portfolio  at September  30,  1997.  The table does not include
prepayments or scheduled principal  repayments.  Adjustable-rate  mortgage loans
are shown as maturing based on contractual maturities.
<TABLE>
<CAPTION>

                                       One- to     Residential                                                   All
                                        Four-      Construction/     Multi-        Commercial                   Other
                                       Family       Permanent        Family        Real Estate         Land     Loans      Total
                                       ------      ------------      ------        -----------         ----     -----      -----
                                                                            (In Thousands)
<S>                                  <C>             <C>             <C>               <C>          <C>        <C>      <C>      
Amounts due:
  1 year or less.....................$      337      $      --       $  111            $     2      $     6    $ 5,366  $   5,822
                                      ---------       --------        -----             ------       ------     ------   --------
  After 1 year:
    More than 1 year to 3 years......     1,250             --           --                104           96      5,023      6,473
    More than 3 years to 5 years.....     3,660             --           80                613          231      7,803     12,387
    More than 5 years to 10 years....    37,394             --          423              2,273        1,022      5,304     46,416
    More than 10 years to 20 years...   121,068          3,662        1,190              3,626        1,112      2,255    132,913
    More than 20 years...............   146,597          7,405        1,035                279          167        282    155,765
                                        -------         ------        -----              -----        -----    -------    -------

      Total due after September 30,
         1998........................   309,969         11,067        2,728              6,895        2,628     20,667    353,954
                                        -------         ------        -----              -----        -----     ------    -------

      Total amount due...............  $310,306        $11,067       $2,839             $6,897       $2,634    $26,033   $359,776
                                        =======         ======        =====              =====        =====     ======    =======
</TABLE>


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

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

One- to four-family..................  $159,042        $150,927      $309,969
Residential construction/permanent...     3,695           7,372        11,067
Other................................    24,232           8,686        32,918
                                        -------         -------       -------
      Total..........................  $186,969        $166,985      $353,954
                                        =======         =======       =======

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

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

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


                                        4

<PAGE>



         The Bank  currently  offers  ARMs  with  terms  of up to 30 years  that
initially adjust on the first,  third, fifth or tenth year after origination and
annually  thereafter.  The Bank began offering ARMs in 1981. The Bank originated
$44.6  million of ARMs during the year ended  September  30, 1997, of which $8.3
million  will first  adjust  annually  after five  years.  The  initial  rate is
determined  by the Bank in  accordance  with  market  and  competitive  factors.
Historically,  the  predominant  index was based on the  monthly  median cost of
funds at all SAIF insured  financial  institutions.  For ARMs  originated  after
December 31, 1994,  the Bank uses an index based on the one-year  U.S.  Treasury
Bill rate  adjusted to constant  maturity.  The terms and  conditions of the ARM
loans held by the Bank are varied,  partially due to changing market  conditions
and  partially due to the  acquisition  by the Bank of loans of First Federal in
Breaux  Bridge  from the  RTC,  Community  Homestead  in Houma  and  other  loan
purchases.  The Bank's current ARM originations  adjust by a maximum of 2.0% per
adjustment, with a current lifetime cap of 11.875%.

         The Bank  offers  fixed-rate  mortgages  with  terms of up to 30 years,
which amortize monthly.  Interest rates charged on fixed-rate mortgage loans are
competitively  priced based on market  conditions  and the Bank's cost of funds.
The Bank  originates  and  holds  its  fixed-rate  mortgage  loans as long  term
investments. Most loans are originated in conformance with the Federal Home Loan
Mortgage  Corporation  ("FHLMC") and the Federal National  Mortgage  Association
("FNMA")  guidelines  and can therefore be sold in the  secondary  market should
management deem it necessary.  The Bank  originated  $22.7 million of fixed-rate
mortgage loans during the year ended September 30, 1997.

         The Bank  offers  home  equity  loans on single  family  owner-occupied
residences.  At September  30, 1997,  home equity  mortgage  loans  totaled $8.2
million.  Home equity  loans are offered as  fixed-rate  loans for a term not to
exceed 15 years or ARMs for terms up to 30 years. The underwriting standards for
second mortgage loans are the same as the Bank's standards applicable to one- to
four-family residences.

         Residential Construction/Permanent Loans. The Bank's construction loans
have  primarily  been  made  to  finance  the  construction  of   owner-occupied
single-family  owner occupied  residential  properties and, to a limited extent,
single  family  housing for sale by  contractors.  Construction/permanent  loans
generally are made to customers of the Bank in its Primary Market Area. The Bank
offers  construction/permanent loans in amounts up to 80% of the appraised value
of the property  securing the loan. Loan proceeds are disbursed in increments as
construction progresses and as inspections warrant. Construction/permanent loans
to individuals generally do not pay off at completion of the construction phase,
but are automatically  transferred to the Bank's one- to four-family residential
portfolio.  These  single-family  residential  loans are structured to allow the
borrower to pay interest only on the funds advanced for the  construction  for a
period  of up to six  months  at the end of which  time the loan  converts  to a
permanent  mortgage.  While  construction  lending is  generally  considered  to
involve  a  higher  degree  of  risk  than  financing  of  existing  residential
properties,  at  September  30,  1997,  no  construction/permanent   loans  were
delinquent.

         Multi-Family   and   Commercial   Real  Estate  Loans.   The  Bank  has
historically  originated a limited amount of loans secured by  multi-family  and
commercial real estate,  including non-owner occupied  residential  multi-family
dwelling units (more than four units), as well as professional  office buildings
and apartment complexes.


                                        5

<PAGE>



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

         Loans secured by multi-family  and commercial real estate are generally
larger and involve a greater degree of risk than one- to four-family residential
mortgage loans.  Of primary  concern in multi-family  and commercial real estate
lending  is the  borrower's  creditworthiness,  the  feasibility  and cash  flow
potential of the project, and the outlook for successful operation or management
of the  properties.  As a result,  repayment  of such  loans may be subject to a
greater extent than residential  real estate loans to adverse  conditions in the
real estate market or the economy. In accordance with the Bank's  classification
of assets policy and procedure, the Bank requests annual financial statements on
major loans secured by multi-family and commercial real estate. At September 30,
1997 the aggregate balance of the five largest  multi-family and commercial real
estate loans totaled $1.7 million with no single loan larger than $363,000.

         Land Loans.  At September 30, 1997, the Bank had $2.6 million  invested
in residential lot loans to individuals.

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

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

         Loans  secured by deposits at the Bank are  typically  made for no more
than 90% of the deposit  and at an  interest  rate 2% above the rate paid on the
deposit.  At September  30, 1997,  the Bank had $6.0 million of loans secured by
deposits.

         Teche  Federal also  originates  automobile  and mobile home loans.  At
September 30, 1997,  $5.7 million and $.7 million  consisted of  automobile  and
mobile home loans, respectively.

         The  Bank  has  recently  instituted  a  credit  card  program  whereby
customers are offered  revolving credit through Teche Federal credit cards which
are serviced by a third-party  vender.  At September 30, 1997, such credit cards
had a balance of $1.7 million.

         Consumer  loans tend to be  originated  at higher  interest  rates than
conventional residential mortgage loans and for shorter terms which benefits the
Bank's interest rate risk management.  However, consumer loans generally involve
more risk than first mortgage one- to four-family residential real estate loans.
Repossessed  collateral for a defaulted loan may not provide an adequate  source
of repayment  of the  outstanding  loan  balance as a result of damage,  loss or
depreciation,  and the  remaining  deficiency  often  does not  warrant  further
substantial   collection  efforts  against  the  borrower.  In  addition,   loan
collections are dependent on the borrower's continuing financial stability,  and
thus are more likely to be adversely affected by job loss,  divorce,  illness or
personal bankruptcy. Further, the application of

                                        6

<PAGE>



various  state and federal  laws,  including  federal and state  bankruptcy  and
insolvency  law,  may limit the amount which may be  recovered.  These loans may
also give rise to defenses by the  borrower  against the Bank and a borrower may
be able to assert  against the Bank claims and defenses which it has against the
seller of the underlying  collateral.  In underwriting  consumer loans, the Bank
considers the borrower's  credit history,  an analysis of the borrower's  income
and ability to repay the loan, and the value of the collateral. The Bank's risks
associated with consumer loans have been further limited by the modest amount of
consumer  loans  made  by  the  Bank.  At  September  30,  1997,  the  Bank  had
approximately $.1 million in consumer loans delinquent more than 90 days.

         Loan  Approval  Authority  and  Underwriting.  All loans of $100,000 or
more,  including  second  mortgage  loans  where the total of both the first and
second mortgages exceeds $100,000,  assumptions and loans to facilitate the sale
of REO,  must be  approved  by a  minimum  of two  members  of the  senior  loan
committee and a loan officer for the  geographic  area where the  collateral for
the loan is located.

         All loans of $30,000 to $100,000, including second mortgage loans where
the total of both the first and second mortgages exceed this amount, assumptions
and loan to  facilitate  the sale of REO, must be approved by a minimum of three
members of the loan  committee or by two members of the loan  committee,  one of
which is a member of the senior loan committee.  All loans of under $30,000 must
be approved by two loan committee members.

         Certain  officers  approved  by the Board  are  authorized  to  approve
consumer  loans.  The  amounts  which any one  officer may approve for a secured
consumer loan range from $25,000 to $15,000.  The maximum  amounts for unsecured
consumer loans are $5,000 to $3,000. Any two loan officers may combine authority
for consumer loans up to their combined limits.

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

         The Bank generally requires title insurance for its one- to four-family
residential loans, (except in St. Mary Parish, where an attorney's title opinion
is customarily considered sufficient).  The Bank requires that fire and extended
coverage casualty insurance (and, if appropriate, flood insurance) be maintained
in an amount at least equal to the outstanding loan balance.

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

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


                                        7

<PAGE>



         Loan Commitments.  Teche Federal issues written,  formal commitments to
prospective borrowers on all real estate approved loans. The commitment requires
acceptance  within 30 days of the date of  issuance.  Commitments  for  consumer
loans,  which  are not  given in  writing,  expire 30 days  after  issuance.  At
September  30,  1997,  the Bank had $13.6  million of  commitments  to originate
mortgage  loans,   including  $8.7  million  of  the   undisbursed   portion  of
loans-in-process.

         Loans-to-One  Borrower.  Savings  associations cannot make any loans to
one  borrower  in an amount  that  exceeds in the  aggregate  15% of  unimpaired
capital and retained income on an unsecured basis and an additional amount equal
to 10% of  unimpaired  capital  and  retained  income if the loan is  secured by
readily  marketable  collateral  (generally,  financial  instruments,  not  real
estate) or  $500,000,  whichever  is  higher.  The  Bank's  maximum  loan-to-one
borrower limit was approximately $6.5 million as of September 30, 1997.

         At  September  30,  1997,  the  Bank's  largest  lending   relationship
consisted of a $750,000  construction/permanent loan to a non-profit corporation
for the  construction  of a 60-apartment  complex for the elderly and low income
families in Alexandria,  Louisiana.  This project was funded with a $1.2 million
grant from the Affordable  Housing  Program of the FHLB of Dallas and a $755,000
loan from the Bank which is fully  guaranteed by the U.S.  Department of Housing
and Urban  Development  ("HUD").  The project is currently in use. The next five
largest  lending  relationships  at September  30, 1997 ranged from  $405,000 to
$570,000  and were  secured  primarily by  apartment  complexes  and  commercial
properties  located in the Bank's  Primary  Market Area.  Of these  loans,  $1.3
million are classified as substandard. See "-- Non-performing and Problem Assets
--Classified Assets."

Non-Performing and Problem Assets

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

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

                                        8

<PAGE>





         The Bank's general policy is to place a loan on nonaccrual  status when
the loan becomes 90 days  delinquent  or otherwise  demonstrates  other risks of
collectibility.  Interest on loans that are  contractually  90 days or more past
due is reserved through an allowance account.  The allowance is established by a
charge to interest income equal to all interest previously accrued, and interest
is subsequently  recognized only to the extent cash payments are received until,
in management's  judgment,  the borrower's ability to make periodic interest and
principal  payments  is back to normal,  in which case the loan is  returned  to
accrual status.

         The following table sets forth information regarding non-accrual loans,
real estate owned ("REO"),  and loans that are 90 days or more delinquent but on
which the Bank was accruing  interest at the dates  indicated  and  restructured
loans. There are no restructured loans other than those included in the table.
<TABLE>
<CAPTION>
                                                                                      At September 30,
                                                                   -----------------------------------------------
                                                                     1997       1996      1995       1994     1993
                                                                     ----       ----      ----       ----     ----
                                                                                  (Dollars in thousands)
<S>                                                                <C>        <C>       <C>        <C>        <C> 
Loans accounted for on a non-accrual basis:
 Mortgage loans:
   Permanent loans secured by one- to four-family
     residences ................................................   $ 1,028    $  544    $   584    $   578    $189
   All other mortgage loans ....................................        --        --         59        198     139
 Consumer ......................................................        88        15         19         50      14
                                                                   -------    ------    -------    -------    ----
      Total ....................................................   $ 1,116    $  559    $   662    $   826    $342
                                                                   =======    ======    =======    =======    ====

Accruing loans which are contractually past due 90 days or more:
 Mortgage loans:
   Permanent loans secured by one- to four-family
     residences ................................................        --        --         --         --       --
   All other mortgage loans ....................................        --        --         --         --       --
 Consumer ......................................................        --        --         --         --       --
                                                                   -------    ------    -------    -------    -----
      Total ....................................................   $    --    $   --    $    --    $    --    $  --
                                                                   =======    ======    =======    =======    =====
Total non-performing loans .....................................   $ 1,116    $  559    $   662    $   826    $ 342
                                                                   =======    ======    =======    =======    =====

Real estate owned ..............................................   $    33    $   46    $   253    $    99    $ 267
                                                                   =======    ======    =======    =======    =====
Total non-performing assets ....................................   $ 1,149    $  605    $   915    $   925    $ 609
                                                                   =======    ======    =======    =======    =====

Total non-performing loans to total loans
  outstanding before allowance .................................       .31%      .17%       .25%       .35%     .16%
                                                                   =======    ======    =======    =======     ====
Total non-performing loans to total assets .....................       .27%      .15%       .20%       .29%     .14%
                                                                   =======    ======    =======    =======     ====
Total non-performing assets to total assets ....................       .28%      .16%       .28%       .33%     .25%
                                                                   =======    ======    =======    =======     ====
</TABLE>



         Interest income that would have been recorded on loans accounted for on
a non-accrual  basis under the original terms of such loans was not  significant
for the year ended September 30, 1997.


                                        9

<PAGE>



         The  following  table sets  forth the types and  dollar  amounts of the
Bank's loans which were more than 60 days delinquent as of September 30, 1997:

                                                                      At
                                                                 September 30,
                                                                     1997
                                                                     ----
                                                                (In Thousands)
Residential mortgage loans.......................                  $2,800
Non-residential real estate loans................                      --
Land loans.......................................                      --
Consumer loans...................................                     312


         Real Estate  Owned.  Real estate  acquired by the Bank as the result of
foreclosure or by deed in lieu of foreclosure is classified as real estate owned
until it is sold.  When property is acquired it is recorded at the fair value at
the date of  foreclosure.  At September  30,  1997,  the Bank had REO with a net
balance of $33,000.

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

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



                                                        10

<PAGE>



         Allocation of Allowance for Loan Losses. The following table sets forth
the allocation of the Bank's  allowance for loan losses by loan category and the
percent  of loans in each  category  to total  loans  receivable  at  the  dates
indicated.  The  portion  of the loan  loss  allowance  allocated  to each  loan
category  does not  represent  the total  available  for losses  which may occur
within the loan  category  since the total loan loss  allowance  is a  valuation
reserve applicable to the entire loan portfolio.
<TABLE>
<CAPTION>
                                                                          At September 30,(1)
                                    ------------------------------------------------------------------------------------------------
                                          1997             1996                1995                 1994              1993
                                    -----------------  -----------------  ------------------  ------------------  ------------------
                                           Percent of         Percent of         Percent of          Percent of          Percent of
                                            Loans to           Loans to           Loans to           Loans to            Loans to
                                    Amount Total Loans Amount Total Loans Amount Total Loans  Amount Total Loans  Amount Total Loans
                                    ------ ----------- ------ ----------- ------ -----------  ------ -----------  ------ -----------
                                                                         (Dollars in Thousands)
<S>                                <C>        <C>     <C>        <C>     <C>         <C>     <C>        <C>      <C>        <C>   
At end of year allocated to:
One- to four-family...............  $2,558     86.25%  $2,426     87.03%  $2,201      87.49%  $2,050     86.27%   $1,448     85.47%
Multi-family and commercial
  real estate.....................     437       2.71     414       3.13     510        3.89     494       3.76      552       4.45
Construction......................      26       3.08      25       4.15      25        3.02      25       4.72       25       5.01
Consumer and other loans..........     334       7.96     317       5.69     230        5.60     209       5.25      168       5.07
                                      ----     ------   -----     ------   -----      ------   -----     ------   ------     ------
Total allowance(1)................  $3,355    100.00%  $3,182    100.00%  $2,966     100.00%  $2,778    100.00%   $2,193    100.00%
                                     =====    ======    =====    ======    =====     ======    =====    ======     =====    ======
</TABLE>


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



                                       11

<PAGE>



         Analysis of the  Allowance for Loan Losses.  The  following  table sets
forth  information  with respect to the Bank's allowance for loan losses for the
periods indicated:
<TABLE>
<CAPTION>
                                                                                      At September 30,
                                                       -----------------------------------------------------------------------------
                                                          1997            1996            1995           1994            1993
                                                          ----            ----            ----           ----            ----
                                                                                   (Dollars in Thousands)

<S>                                                     <C>             <C>             <C>             <C>            <C>     
Total loans outstanding, net...................         $346,875        $316,216        $257,869        $233,554       $207,384
                                                         =======         =======         =======         =======        =======
Average loans outstanding......................         $336,509        $283,962        $245,567        $219,393       $196,547
                                                         =======         =======         =======         =======        =======

Allowance balances (at beginning of year)......        $   3,182         $ 2,966       $   2,778       $   2,193      $   2,042
                                                        --------          ------        --------        --------       --------
Provision.....................................               240             300             360             577            183
                                                        --------          ------        --------        --------       --------
Effect of pooling..............................               --              --              --              --             --
Charge offs:
  Residential real estate mortgage loans:
    One- to four-family units..................               (7)            (28)            (81)            (63)          (125)
  Construction loans...........................               --              --              --              --             --
  Multi-family and commercial real estate
    loans......................................               --              --            (72)              --             --
  Land loans..................................                --              --              --              --             --
  Other........................................              (69)            (59)            (32)            (34)            --
                                                        --------          ------      ----------        --------       --------
      Total charge-offs........................              (76)            (87)           (185)            (97)          (125)
Recoveries
  Residential real estate mortgage loans.......               --               3              --              --             --
    One- to four-family units..................                9              --              12             105             93
  Construction loans...........................               --              --              --              --             --
  Multi-family and commercial real estate
    loans......................................               --              --              --              --             --
  Land loans...................................               --              --              --              --             --
  Other........................................               --              --               1              --             --
                                                       ---------       ---------      ----------       ---------      ---------
      Total recoveries.........................                9               3              13             105             93
                                                       ---------         -------      ----------       ---------      ---------
  Net (charge-offs) recoveries.................              (67)            (84)           (172)              8           (32)
                                                       ---------        --------       ---------       ---------      --------
Allowance balance (at end of year).............        $   3,355        $  3,182       $   2,966       $   2,778      $   2,193
                                                        ========         =======        ========        ========       ========

Allowance for loan losses to total loans
  outstanding before allowance.................              .96%           1.00%           1.14%           1.18%          1.05%
Net loans charged off as a percent of average
  loans outstanding before allowance...........              .02%            .03%            .07%             --%           .02%

</TABLE>




                                       12

<PAGE>



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

                                                 At September 30,
                                  ----------------------------------------------
                                   1997     1996      1995      1994      1993
                                   ----     ----      ----      ----      ----
                                             (Dollars in Thousands)

Total real estate owned, net ..   $  33    $  46     $ 253     $  99     $ 267
                                  =====    =====     =====     =====     =====

Allowance - beginning .........     108      131     $ 163     $ 186     $ 905

Provision .....................       4     --        --        --          44

Charge-offs ...................    --        (23)      (32)      (23)     (763)
                                  -----    -----     -----     -----     -----

Allowance - ending ............   $ 112    $ 108     $ 131     $ 163     $ 186
                                  =====    =====     =====     =====     =====

Allowance for losses on
  real estate owned to real
  estate owned before allowance      77%      70%       34%       62%       41%



Investment Activities

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

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

         The Bank is required  under federal  regulations  to maintain a minimum
amount of liquid assets and is also  permitted to make certain other  securities
investments.  At September  30, 1997 the Bank's  regulatory  liquidity was 6.19%
which is in  excess  of 5%  required  by OTS  regulations.  See  "Regulation  --
Regulation  of the Bank --  Federal  Home Loan Bank  System"  and  "Management's
Discussion  and Analysis of Financial  Condition  and Results of  Operations  --
Liquidity and Capital Resources."

         The Boards of Directors of the Bank and the Company maintain Investment
Committees which are authorized to establish and implement  investment  policies
and to supervise the Bank's or the Company's investment activities.  Pursuant to
its delegated authority, the Investment Committees have

                                       13

<PAGE>



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

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

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

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

                                                  At September 30,
                                             ----------------------------
                                               1997      1996     1995
                                               ----      ----     ----
                                                   (In Thousands)

Investment securities issued by U.S. .....
  Government agencies and corporations (1)   $ 7,312   $11,462   $20,927
FHLB Stock ...............................     3,927     3,703     2,671
Mortgage-backed securities (1) ...........    30,378    32,099    28,123
Common stock and municipal obligations ...       164       935       572
                                             -------   -------   -------
   Total investment and mortgage-backed
      securities .........................    41,781    48,199    52,293
Interest-bearing deposits ................     4,510     6,064     5,293
                                             -------   -------   -------
   Total investments .....................   $46,291   $54,263   $57,586
                                             =======   =======   =======


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


                                       14

<PAGE>



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

         Mortgage-backed  securities  typically are issued with stated principal
amounts,  and the  securities  are backed by pools of mortgages  that have loans
with  interest  rates that are within a range and have varying  maturities.  The
underlying pool of mortgages can be composed of either  fixed-rate  mortgages or
adjustable-rate  mortgage  loans.   Mortgage-backed   securities  are  generally
referred to as mortgage participation certificates or pass-through certificates.
As a result,  the interest rate risk  characteristics  of the underlying pool of
mortgages,  i.e., fixed rate or adjustable rate, as well as prepayment risk, are
passed on to the certificate holder. The life of a mortgage-backed  pass-through
security  is  equal  to the life of the  underlying  mortgages.  Mortgage-backed
securities  issued  by  FHLMC,  FNMA,  and  GNMA  make  up  a  majority  of  the
pass-through   certificates   market.  At  September  30,  1997,  the  Bank  had
mortgage-backed  securities  available for sale with an amortized  cost of $29.9
million and an estimated market value of $30.4 million.

         At  September  30, 1997,  Teche  Federal had an  investment  securities
portfolio  with an amortized  cost of  approximately  $7.4  million,  consisting
primarily of  obligations  of U.S.  government  corporations  and  agencies,  as
permitted by the OTS regulations.  The market value of investment  securities at
September 30, 1997 (excluding  FHLB stock and  interest-bearing  accounts),  was
$7.5 million.  Teche Federal will continue to seek high quality investments with
short to intermediate maturities.

         Interest-Bearing  Accounts  Held at Other  Financial  Institutions.  At
September 30, 1997, the Bank held $4.5 million in the FHLB and  interest-bearing
deposits in other financial  institutions.  The Bank maintains these accounts in
order to maintain liquidity.



                                       15

<PAGE>



         Investment Portfolio Maturities. The following table sets forth certain
information regarding the amortized cost, carrying value, market value, weighted
average  yields and  maturities  of the Bank's  investment  and  mortgage-backed
securities portfolio at September 30, 1997.
<TABLE>
<CAPTION>

                                                        As of September 30, 1997
                   -----------------------------------------------------------------------------------------------------------------
                    One Year or Less One to Five Years  Five to Ten Years More than Ten Years        Total Investments
                   ----------------- -----------------  ----------------- --------------------- ------------------------------------
                   Amortized Average Amortized Average  Amortized Average Amortized Average       Amortized Average Carrying  Market
                      Cost     Yield    Cost     Yield    Cost    Yield      Cost     Yield        Cost    Yield    Value   Value
                     ------   -------  ------   -------  ------   ------  ---------    ------      ------  ------    -----  ------
                                                          (Dollars in Thousands)                
<S>                  <C>       <C>      <C>       <C>       <C>           <C>        <C>        <C>        <C>    <C>       <C>    
Investment                                                                                      
 Securities                                                                                     
 available                                                                                      
 for sale.......     $2,949    7.14%    $4,302    6.60%     $ --     N/A% $    --     N/A%      $ 7,251    6.82%  $ 7,312   $ 7,312
Mortgage-                                                                                       
  backed                                                                                        
  Securities                                                                                    
  available                                                                                     
  for sale(1)...         --     N/A      8,569    6.26        64    9.14  21,249     6.60        29,882    6.50    30,378    30,378
FHLB Stock......        N/A     N/A        N/A     N/A       N/A     N/A     N/A      N/A         3,927    6.07     3,927     3,927
Municipal                                                                                       
  Obligations...         --     N/A        164    6.00        --     N/A      --      N/A           164    6.00       164       164
                     ------              -----               ---          -------               -------            ------   -------
      Total.....     $2,949    7.14%   $13,035    6.37%      $64    9.14% $21,249    6.60%      $41,224    6.59%  $41,781   $41,781
                      =====             ======               ===           ======               =======            ======    ======
</TABLE>                                                                 
                                                                          
-----------------------------
(1)      Does not assume prepayments.


                                       16

<PAGE>



Sources of Funds

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

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

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

         Regular  savings  accounts,  money  market  accounts  and NOW  accounts
constituted $66.0 million, or 23.5% of the Bank's deposit portfolio at September
30, 1997.  Certificates  of deposit  constituted  $214.3 million or 76.5% of the
deposit portfolio, including $47.7 million of which had balances of $100,000 and
over. As of September 30, 1997, the Bank had no brokered deposits.

         Time Deposits by Rate. The following  table  presents,  by various rate
categories,  the  amount  of  certificate  accounts  outstanding  at  the  dates
indicated and the periods to maturity of the certificate accounts outstanding at
September 30, 1997.

             
                           Period to Maturity from September 30, 1997
                        ------------------------------------------------
                        Less than     One to       Two to     Over Three 
                        One Year     Two Years   Three Years     Years
                        --------     ---------   -----------   ---------
                                       (In Thousands)       
Certificate accounts:                                         
  3.00 to 3.99% .....   $  1,341     $     --     $     --     $      2
  4.00 to 4.99% .....     27,843        3,121          381           --
  5.00 to 5.99% .....     83,915       22,681        2,287        2,726
  6.00 to 6.99% .....     19,444       15,358       16,698       13,855
  7.00 to 7.99% .....      1,871         --          2,389          420
                        --------     --------     --------     --------
      Total .........   $134,414     $ 41,160     $ 21,755     $ 17,001
                        ========     ========     ========     ========
                                                            

         Certificate  Accounts of $100,000 and Above.  Teche Federal maintains a
policy of offering higher interest rates on certificates  with larger  balances.
For example,  for  certificates  with terms of 12 months which were purchased on
September 30, 1997,  those with  balances of $500 would yield 4.75%,  those with
balances of $40,000  would yield  5.00%,  those with  balances of $75,000  would
yield 5.10% and those with balances of $99,000  would yield 5.20%.  As a result,
to some extent, Teche Federal customers tend to consolidate accounts to earn the
highest possible interest.  This enables the Bank to effectively  compete in the
marketplace,  reduce the number of accounts and associated  costs, and increase,
to some extent the number of accounts with  balances of $100,000.  The following
table indicates the

                                       17

<PAGE>



amount  of the  Bank's  certificates  of  deposit  of  $100,000  or more by time
remaining until maturity as of September 30, 1997.

                                                Certificates         Weighted
                                                  of Deposit       Interest Rate
                                                  ----------       -------------
                                                (In Thousands)
Maturity Period:
3 months or less.....................               $ 8,628             5.59%
Over 3 through 6 months..............                 7,755             5.54
Over 6 through 12 months.............                14,188             5.58
Over 12 months.......................                17,129             6.12
     --                                              ------            
Totals...............................               $47,700             5.77
                                                     ======             


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

                                                 At September 30,
                                        ------------------------------------
                                            1997       1996         1995
                                        ----------   ---------    ---------
                                                  (In Thousands)

Beginning balance ...................   $ 254,723    $ 233,805    $ 236,736
Net deposits (withdrawals) ..........      12,545        9,259      (13,896)
Interest credited on deposits .......      13,034       11,659       10,965
                                        ---------    ---------    ---------
Ending balance ......................     280,302    $ 254,723    $ 233,805
                                        =========    =========    =========
Total increase (decrease) in deposits   $  25,579    $  20,918    $  (2,931)
                                        =========    =========    =========
Percentage increase (decrease) ......       10.04%        8.95%       (1.24)%


Borrowings

         Deposits  are the  primary  source of funds of the Bank's  lending  and
investment activities and for its general business purposes. The Bank may obtain
advances  from the FHLB of Dallas to  supplement  its supply of lendable  funds.
Advances from the FHLB of Dallas are typically secured by a pledge of the Bank's
stock in the FHLB of Dallas and a portion of the Bank's first mortgage loans and
certain other assets.  The Bank, if the need arises, may also access the Federal
Reserve Bank discount  window to supplement  its supply of lendable funds and to
meet deposit withdrawal  requirements.  At September 30, 1997, Teche Federal had
$65.4 million in advances outstanding from the FHLB of Dallas.


                                       18

<PAGE>



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

                                                  At or For the Year Ended September 30,
                                                  --------------------------------------
                                                        1997       1996       1995
                                                        ----       ----       ----
                                                         (Dollars in Thousands)
<S>                                                   <C>        <C>        <C>    
FHLB advances:
  Average balance outstanding .....................   $64,685    $42,405    $18,842
  Maximum amount outstanding at any
 month-end during the year ........................    72,684     72,500     34,300
  Balance outstanding at end of year ..............    65,398     66,900      4,200
  Weighted average interest rate during the year...      5.64%      5.53%      5.77%
  Weighted average interest rate at end of year....      5.73%      5.39%      5.71%

</TABLE>

Subsidiary Activity

         The only subsidiary of the Company is Teche Federal.

         As of  September  30,  1997,  the  Bank had one  subsidiary:  Appraisal
Services, Inc. ("ASI") and the net book value of the Bank's investment in stock,
unsecured  loans and conforming  loans in its service  corporation was $106,000.
ASI was inactive at September 30, 1997.

         Teche  Federal  is  permitted  to invest up to 2% of its  assets in the
capital  stock of, or secured or unsecured  loans to,  subsidiary  corporations,
with an additional investment of 1% of assets when such additional investment is
utilized primarily for community development  purposes.  Under such limitations,
as of  September  30,  1997,  Teche  Federal  was  authorized  to  invest  up to
approximately  $8.1 million in the stock of, or loans to,  service  corporations
(based upon the 2% limitation).

Personnel

         As of September  30, 1997 the Bank had 127  full-time  and 46 part-time
employees.  None  of  the  Bank's  employees  is  represented  by  a  collective
bargaining  group. The Bank believes that its relationship with its employees is
good.

Regulation

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


                                       19

<PAGE>



Holding Company Regulation

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

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

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

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

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

Regulation of the Bank

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


                                       20

<PAGE>



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

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

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

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

         The FDIC  charges an annual  assessment  for the  insurance of deposits
based on the risk a particular  institution poses to its deposit insurance fund.
Under this system, a bank or thrift pays within a range of six cents to 31 cents
per  $100  of  domestic   deposits,   depending  upon  the  institution's   risk
classification.  This risk  classification is based on an institution's  capital
group and supervisory subgroup assignment.  In addition,  the FDIC is authorized
to  increase  such  deposit  insurance  rates,  on a  semi-annual  basis,  if it
determines  that such  action is  necessary  to cause the balance in the SAIF to
reach the designated  reserve ratio of 1.25% of  SAIF-insured  deposits within a
reasonable period of time. The FDIC also may impose special  assessments on SAIF
members to repay amounts borrowed from the U.S. Treasury or for any other reason
deemed  necessary by the FDIC.  The Bank's  federal  deposit  insurance  premium
expense for the fiscal year ended September 30, 1997,  amounted to approximately
$225,000.

         Examination  Fees. In addition to federal deposit  insurance  premiums,
savings  institutions  like the  Bank are  required  by OTS  regulations  to pay
assessments to the OTS to fund the operations of the OTS. The general assessment
is paid on a  semi-annual  basis and is  computed  based on total  assets of the
institution,  including subsidiaries.  The Bank's OTS assessment expense for the
fiscal year ended September 30, 1997 totalled approximately $94,000.

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

                                       21

<PAGE>



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

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

         As shown  below,  the Bank's  regulatory  capital  exceeded all minimum
regulatory capital requirements applicable to it as of September 30, 1997:

                                                      Percent of
                                                       Adjusted
                                      Amount            Assets
                                      ------            ------
                                       (Dollars in Thousands)
    Tangible Capital:                                
    Actual capital .......           $48,221             12.0%
    Regulatory requirement             6,050              1.5
                                     -------           ------
    Excess ...............           $42,171             10.5%
                                     =======           ======
                                                     
    Core Capital:                                    
    Actual capital .......           $48,221             12.0%
    Regulatory requirement            12,100              3.0
                                     -------           ------
    Excess ...............           $36,121              9.0%
                                     =======           ======
                                                     
    Risk-Based Capital:                              
    Actual capital .......           $50,990             22.5%
    Regulatory requirement            18,160              8.0
                                     -------           ------
    Excess ...............           $32,830             14.5%
                                     =======           ======
                                      


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

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

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

                                       22
<PAGE>


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

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

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

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

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

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

         The OTS uses, as a critical  point, a change of plus or minus 200 basis
points in order to set its "normal"  institutional results and peer comparisons.
A resulting  change in NPV of more than 2% of the estimated  market value of its
assets  will  require  the  institution  to deduct  from its capital 50% of that
excess  change.  The rules provide that the OTS will calculate the IRR component
quarterly for each institution. The greater the change, positive or negative, in
NPV, the more interest rate risk is assumed to exist with the  institution.  The
following  table lists the Bank's  latest  percentage  change in NPV assuming an
immediate  change of plus or minus 100,  200,  300 and 400 basis points from the
level of interest rates at September 30, 1997.

                                       23

<PAGE>



<TABLE>
<CAPTION>

                                                                                                          NPV as % of PV
                                            Net Portfolio Value                                              of Assets
                                 -----------------------------------------------------             ------------------------------

Change                                                                                             NPV
in Rates                         $ Amount             $Change(1)            %Change(2)             Ratio(3)             Change(4)
--------                         --------             ----------            ----------             --------             ---------
                                                                      (Dollars in Thousands)



<S>         <C>                   <C>                  <C>                      <C>                 <C>                  <C>   
             +400 bp               25,379               -32,946                  -56%                 6.88%               -724 bp

             +300 bp               34,067               -24,258                  -42%                 8.95%               -516 bp

             +200 bp               42,773               -15,552                  -27%                10.91%               -320 bp

             +100 bp               51,101                -7,224                  -12%                12.68%               -144 bp

                0 bp               58,235                                                            14.11%

             -100 bp               63,187                 4,861                    8%                15.00%                +89 bp

             -200 bp               65,229                 6,904                   12%                15.30%               +118 bp

             -300 bp               66,576                 8,251                   14%                15.45%               +133 bp

             -400 bp               69,273                10,948                   19%                15.85%               +174 bp

</TABLE>

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

                                               September 30,  September 30,
                                                    1997         1996
                                               ------------- --------------

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

Pre-Shock NPV Ratio: NPV as % of PV of Assets       14.11 %      12.71 %

Exposure Measure: Post-Shock NPV Ratio ......       10.91 %       9.04 %

Sensitivity Measure: Change in NPV Ratio ....        -320 bp      -367 bp



*** CALCULATION OF CAPITAL COMPONENT ***

Change in NPV as % of PV of Assets ..........        3.76 %       4.15 %

Interest Rate Risk Capital Component ($000) .   $   3,643    $   4,135



                                       24

<PAGE>




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

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

         Prompt  Corrective  Action.  The FDICIA  also  established  a system of
prompt   corrective   action  to  resolve  the   problems  of   undercapitalized
institutions.  Under this system,  which became effective December 19, 1992, the
banking  regulators  are required to take certain  supervisory  actions  against
undercapitalized   institutions,   the  severity  of  which   depends  upon  the
institution's  degree of  capitalization.  Under the OTS final rule implementing
the prompt  corrective action  provisions,  an institution shall be deemed to be
(i) "well  capitalized" if it has total risk-based capital of 10.0% or more, has
a Tier I risk- based  capital ratio (core or leverage  capital to  risk-weighted
assets)  of 6.0% or  more,  has a  leverage  capital  of 5.0% or more and is not
subject to any order or final capital  directive to meet and maintain a specific
capital level for any capital measure, (ii) "adequately capitalized" if it has a
total risk-based  capital ratio of 8.0% or more, a Tier I risked-based  ratio of
4.0% or more and a leverage  capital  ratio of 4.0% or more (3.0% under  certain
circumstances)  and does not meet the  definition of "well  capitalized,"  (iii)
"undercapitalized"  if it has a total risk-based capital ratio that is less than
6.0%,  a Tier I  risk-based  capital  ratio that is less than 4.0% or a leverage
capital  ratio  that is less than 4.0%  (3.0% in  certain  circumstances),  (iv)
"significantly undercapitalized" if it has a total risk-based capital ratio that
is less than 6.0%, a Tier I risk-based capital ratio that is less than 3.0% or a
leverage   capital   ratio   that  is  less  than   3.0%  and  (v)   "critically
undercapitalized"  if it has a ratio of tangible  equity to total assets that is
equal to or less than 2.0%. In addition, under certain circumstances,  a federal
banking  agency may  reclassify a well  capitalized  institution  as  adequately
capitalized  and  may  require  an  adequately  capitalized  institution  or  an
undercapitalized institution to comply with supervisory actions as if it were in
the next lower category (except that the FDIC may not reclassify a significantly
undercapitalized institution as critically  undercapitalized).  Immediately upon
becoming  undercapitalized,  an  institution  shall  become  subject  to various
restrictions and could be subject to additional supervisory actions.

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

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

                                       25

<PAGE>




         OTS regulations  impose  limitations upon all capital  distributions by
savings  institutions,  such  as  cash  dividends,  payments  to  repurchase  or
otherwise acquire its shares, payments to shareholders of another institution in
a cash-out  merger and other  distributions  charged against  capital.  The rule
establishes  three tiers of  institutions,  based primarily on an  institution's
capital  level.  An  institution  that  exceeds  all  fully  phased-in   capital
requirements  before  and  after  a  proposed  capital   distribution  ("Tier  1
institution")  and has not  been  advised  by the OTS that it is in need of more
than the normal  supervision can, after prior notice but without the approval of
the OTS, make capital  distributions during a calendar year equal to the greater
of (i) 100% of its net income to date during the  calendar  year plus the amount
that would reduce by one-half its "surplus  capital  ratio" (the excess  capital
over its fully phased-in capital  requirements) at the beginning of the calendar
year,  or (ii) 75% of its net income over the most recent four  quarter  period.
Any additional capital  distributions  require prior regulatory approval.  As of
June 30,  1993,  the Bank was a Tier 1  institution.  In the  event  the  Bank's
capital fell below its fully  phased-in  requirement or the OTS notified it that
it was in need of more than  normal  supervision,  the  Bank's  ability  to make
capital distributions could be restricted. In addition, the OTS could prohibit a
proposed  capital  distribution  by any  institution,  which would  otherwise be
permitted by the regulation,  if the OTS determines that such distribution would
constitute an unsafe or unsound practice.

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

         Qualified  Thrift Lender Test.  The Home Owners' Loan Act ("HOLA"),  as
amended, requires savings institutions to meet a QTL test. If the Bank maintains
an appropriate  level of Qualified  Thrift  Investments  (primarily  residential
mortgages and related investments, including certain mortgage-backed securities)
("QTIs")  and  otherwise  qualifies  as a QTL,  it will  continue  to enjoy full
borrowing privileges from the FHLB of Dallas. The required percentage of QTIs is
65% of portfolio assets (defined as all assets minus intangible assets, property
used by the  institution  in conducting  its business and liquid assets equal to
10% of total assets).  Certain assets are subject to a percentage  limitation of
20% of portfolio assets. In addition, savings associations may include shares of
stock of the FHLBs,  FNMA and FHLMC as qualifying  QTIs. The FDICIA also amended
the method for measuring  compliance  with the QTL test to be on a monthly basis
in nine out of every 12 months,  as  opposed to on a daily or weekly  average of
QTIs.  As of  September  30,  1997,  the  Bank  was in  compliance  with its QTL
requirement with 93.07% of its assets invested in QTIs.

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

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

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

                                       26

<PAGE>



moderate  income  neighborhoods.  The CRA does not  establish  specific  lending
requirements  or  programs  for  financial  institutions  nor  does it  limit an
institution's  discretion  to develop the types of products and services that it
believes are best suited to its particular  community,  consistent with the CRA.
The CRA  requires  the OTS,  in  connection  with its  examination  of a savings
institution,  to assess the institution's  record of meeting the credit needs of
its community and to take such record into account in its  evaluation of certain
applications by such  institution.  Current law requires public disclosure of an
institution's CRA rating and requires the OTS to provide a written evaluation of
an  institution's  CRA performance  utilizing a four-tiered  descriptive  rating
system in lieu of the existing  five-tiered  numerical  rating  system.  The OTS
reported  that Teche  Federal had an  "outstanding  record of meeting  community
credit  needs," in its last  examination  dated  November  1995. The OTS further
stated that "an institution in this group has an outstanding record of, and is a
leader in,  ascertaining  and  helping  to meet the  credit  needs of its entire
delineated  community,  including low- and moderate-income  neighborhoods,  in a
manner consistent with its resources and capabilities."

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

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

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

         Liquidity  Requirements.  All  savings  associations  are  required  to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity  requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings  associations.  At the present  time,  the required  liquid
asset ratio is 5%. At September 30, 1997, the Bank's liquidity ratio was 6.19%

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

                                       27

<PAGE>



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

         Federal  Home  Loan  Bank  System.  The Bank is a member of the FHLB of
Dallas,  which is one of 12 regional  FHLBs that  administer  the home financing
credit  function  of  savings  associations.  Each FHLB  serves as a reserve  or
central bank for its members within its assigned region.  It is funded primarily
from  proceeds  derived from the sale of  consolidated  obligations  of the FHLB
System.  It makes loans to members (i.e.,  advances) in accordance with policies
and  procedures  established  by the  Board  of  Directors  of the  FHLB.  As of
September 30, 1997, the Bank had $65.4 million  borrowed from the FHLB of Dallas
to  fund  operations;  however,  there  can  be no  assurances  that  additional
borrowings will not be made in the future.

         As a member, the Bank is required to purchase and maintain stock in the
FHLB of  Dallas  in an  amount  equal  to at least  1% of its  aggregate  unpaid
residential  mortgage loans, home purchase contracts,  or similar obligations at
the beginning of each year. As of September 30, 1997,  the Bank had $3.9 million
in FHLB stock, which was in compliance with this requirement.

         The FHLBs are required to provide funds for the  resolution of troubled
savings  associations  and to contribute to affordable  housing programs through
direct loans or interest subsidies on advances targeted for community investment
and  low-  and  moderate-income  housing  projects.   These  contributions  have
adversely  affected the level of FHLB dividends paid and could continue to do so
in the future.  For the fiscal year ended September 30, 1997,  dividends paid by
the FHLB of Dallas to the Bank totalled $224,000.

         Federal  Reserve  System.   The  Federal  Reserve  Board  requires  all
depository  institutions to maintain  non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW and Super NOW
checking  accounts) and non-personal time deposits.  The balances  maintained to
meet the reserve  requirements  imposed by the Federal Reserve Board may be used
to satisfy the liquidity  requirements that are imposed by the OTS. At September
30, 1997,  the Bank's total  transaction  accounts were in  compliance  with the
Federal Reserve Board requirements.

         Savings  associations have authority to borrow from the Federal Reserve
Bank "discount  window," but Federal Reserve policy  generally  requires savings
associations  to exhaust  all OTS  sources  before  borrowing  from the  Federal
Reserve System. The Bank had no such borrowings at September 30, 1997.

State Taxation

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

                                       28

<PAGE>



Louisiana  taxable  income to 8% on all  Louisiana  taxable  income in excess of
$200,000. For these purposes,  "Louisiana taxable income" means net income which
is earned within or derived from sources  within the State of  Louisiana,  after
adjustments  permitted  under  Louisiana  law  including  a federal  income  tax
deduction and an allowance for net operating losses,  if any.  Beginning January
1,  1996,  the  Company  became  subject  to the  Louisiana  Shares  Tax and the
Louisiana  Franchise  Tax. The  Louisiana  Shares Tax is imposed on the assessed
value of the Bank's  stock.  The formula for deriving  the assessed  value is to
calculate  15% of the sum of (i) 20% of a  corporation's  capitalized  earnings,
plus (ii) 80% of a corporation's  taxable  stockholders' equity, and to subtract
from that amount 50% of a corporation's  real and personal property  assessment.
Other  various  items may also be  subtracted  in  calculating  a  corporation's
capitalized  earnings.  The Louisiana Shares Tax and the Louisiana Franchise Tax
was approximately $350,000 (net of taxes) for the year ended September 30, 1997.

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

Properties

         The Bank  operates from its main office  located at 211 Willow  Street,
Franklin,  Louisiana and eight branch  offices.  The Bank's total  investment in
office  property  and  equipment  is $9.8  million with a net book value of $6.4
million at September 30, 1997.  The Bank  currently  operates  automated  teller
machines at most of its branch offices.

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

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

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

         None.


                                     PART II


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

         Information  relating to the market for Registrant's  common equity and
related stockholder  matters appears under "Market and Dividend  Information" in
the  Registrant's  Annual  Report to  Stockholders  for the  fiscal  year  ended
September 30, 1997 ("Annual  Report") on page 3, and is  incorporated  herein by
reference.

Item 6.  Selected Financial Data

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


                                       29

<PAGE>



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

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

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

         See Net Portfolio Value Analysis on pages 22 and 23.

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

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

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

         None.



                                    PART III

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

         The information contained under the section captioned "Information with
Respect to Nominees for Director,  Directors  Continuing in Office and Executive
Officers" at pages 4 to 8 of the Registrant's definitive proxy statement for the
Registrant's  Annual Meeting of Stockholders to be held on January 21, 1998 (the
"Proxy Statement"), which was filed with the Commission on December 18, 1997 and
incorporated herein by reference. See also "Item 1.
Business of the Bank -- Personnel" included herein.

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

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

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

         The information  relating to security  ownership of certain  beneficial
owners and management is  incorporated  herein by reference to the  Registrant's
Proxy Statement at pages 1 through 4.

                                       30

<PAGE>




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

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


                                     PART IV

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

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

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

                                                                            PAGE
                                                                            ----

Independent Auditors' Report.........................................         11
Consolidated Balance Sheets as of September 30, 1997 and 1996........         12
Consolidated Statements of Income For the Years Ended
  September 30, 1997, 1996 and 1995..................................         13
Consolidated Statements of Stockholders' Equity
  for the Years Ended September 30, 1997, 1996 and 1995..............         14
Consolidated Statements of Cash Flows for the Years Ended
  September 30, 1997, 1996 and 1995..................................      15-16

Notes to Consolidated Financial Statements...........................         17

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

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


                                       31

<PAGE>



         (3)      Exhibits

                  (a)   The following exhibits are filed as part of this report.
<TABLE>
<CAPTION>
<S>      <C>      <C>
          3.1     Articles of Incorporation of Teche Holding Company*
          3.2     Bylaws of Teche Holding Company*
          4.0     Stock Certificate of Teche Holding Company*
         10.1     Form of Teche Federal Savings Bank Management Stock Plan**
         10.2     Form of Teche Holding Company 1995 Stock Option Plan**
         11.0     Statement regarding computation of earnings per share (see Note 1 to the Notes
                  to  Consolidated  Financial  Statements in the Annual  Report)
         13.0     Annual Report to Stockholders  for the fiscal year ended September 30, 1997
         21.0     Subsidiary  of the  Registrant  (see "Item 1 Business - Subsidiary Activity" herein) 
         23.0     Consent of Accountants 
         27.0     Financial Data Schedule***
</TABLE>

                  (b)   Reports on Form 8-K.

                  None

*        Incorporated  herein by reference  into this document from the Exhibits
         to  Form  S-1,  Registration   Statement,   initially  filed  with  the
         Commission on December 16, 1994, Registration No. 33-87486.
**       Incorporated  herein by reference  into this document from the Exhibits
         to the  Registrant's  Form 10-K for the fiscal year ended September 30,
         1995, filed with the Commission.
***      Only in electronic filing.

                                       32

<PAGE>



                                                    SIGNATURES

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

                              TECHE HOLDING COMPANY

Dated:  December 29, 1997      By:  /s/Patrick O. Little
                                    --------------------------------------------
                                    Patrick O. Little
                                    President, Chief Executive
                                    Officer and Director
                                    (Duly Authorized Representative)

         Pursuant to the  requirement  of the  Securities  Exchange Act of 1934,
this  Report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on December 29, 1997.

<TABLE>
<CAPTION>

<S>      <C>                                                  <C>   <C>   
By:      /s/Patrick O. Little                                 By:   /s/J. L. Chauvin
         -----------------------------------------------            -------------------------------------------
         Patrick O. Little                                          J. L. Chauvin
         President, Chief Executive Officer                         Vice President and Treasurer
           and Director                                             (Principal Financial Officer)
         (Principal Executive Officer)                              
                                                                    
                                                                    
                                                                    
By:      /s/W. Ross Little                                    By:   /s/Robert Earl Mouton
         -----------------------------------------------            -------------------------------------------
         W. Ross Little                                             Robert Earl Mouton
         Chairman of the Board and Secretary                        Director
                                                                    
                                                                    
                                                                    
By:      /s/Mary Coon Biggs                                   By:   /s/Christian L. Olivier
         -----------------------------------------------            -------------------------------------------
         Mary Coon Biggs                                            Christian L. Olivier
         Director                                                   Director
                                                                    
                                                                    
By:      /s/Virginia Kyle Hine                                 By:  /s/W. Ross Little, Jr.
         -----------------------------------------------            -------------------------------------------
         Virginia Kyle Hine                                         W. Ross Little, Jr.
         Director                                                   Director
                                                                    
                                                                    
                                                                    
By:      /s/Henry L. Friedman                                 By:   /s/Thomas F. Kramer, M.D.
         -----------------------------------------------            -------------------------------------------
         Henry L. Friedman                                          Thomas F. Kramer, M.D.
         Director                                                   Director
                                                                    
                                                                    

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