Teche Holding Company

                        New Iberia

                        Baton Rouge1120 Jefferson Terrace Boulevard

                        142 W. St. Peter Street

                        Wal-Mart Neighborhood MarketNew Iberia, LA 70560

                        New Iberia, LA 70560

                        9830 Old Hammond HighwayPHONE (337) 560-7151

                        (337) 364-5528

                        Baton Rouge, LA 70816FAX (337) 365-7130

                        

                        (225) 926-7378LafayetteNew Iberia

                        Broadmoor

                        Breaux Bridge1120 Jefferson Terrace Boulevard

                        5121 Johnston Street

                        601 East Bridge StreetNew Iberia, LA 70560

                        Lafayette, LA 70503

                        Breaux Bridge, LA 70517(337) 365-0366

                        (337) 981-1887

                        (337) 332-2149Call Center (800) 897-0315Lafayette

                        HoumaFranklin

                        Downtown

                        706 Barrow Street211 Willow Street

                        1001 Johnston Street

                        Houma, LA 70360Franklin, LA 70538

                        Lafayette, LA 70501

                        (985) 868-8766(337) 828-3212

                        (337) 232-6463HoumaFranklin Drive-Thru

                        Lafayette

                        912 Grand Caillou Road1823 Main Street

                        2200 W. Pinhook Road

                        Houma, LA 70363Franklin, LA 70538

                        Lafayette, LA 70508

                        (985) 857-9990(337) 828-4177

                        (337) 232-3419ThibodauxMorgan City

                        Baton Rouge

                        921 Canal Boulevard1001 7th Street

                        3524 S. Sherwood Forest Boulevard

                        Thibodaux, LA 70301Morgan City, LA 70380

                        Baton Rouge, LA 70816

                        (985) 446-6707(337) 384-0653

                        (337) 293-0954OpelousasBayou Vista

                        Prairieville

                        428 E. Landry Street206 Arlington Street

                        Wal-Mart SuperCenter

                        Opelousas, LA 70570Bayou Vista, LA 70380

                        17585 Airline Hwy.

                        (337) 942-5748(985) 395-5244

                        Prairieville, LA 70769(225) 677-8748

                        EuniceNew Iberia

                        

                        840 E. Laurel Avenue529 N. Lewis Street

                        Baton Rouge

                        Eunice, LA 70535New Iberia, LA 70563

                        Wal-Mart SuperCenter

                        (337) 457-9585(337) 367-2516

                        2171 O’Neal LaneBaton Rouge, LA 70816(225) 751-0264

                        www.teche.com
  Table of ContentsPresident’s Message

                        2Selected Financial Data

                        6Business of the Bank - Business of the Company

                        7Summary of Quarterly Operating Results

                        7Market and Dividend Information

                        8Management’s Discussion and Analysis of FinancialCondition and Results of Operations

                        9Management’s Report

                        17Report of Independent Registered Public Accounting Firm

                        18Consolidated Balance Sheets

                        19Consolidated Statements of Income

                        20Consolidated Statements of Stockholders’ Equity

                        21Consolidated Statements of Cash Flows

                        22Notes to Consolidated Financial Statements

                        24Directors and Officers

                        58


Message from Patrick Little, Chairman and CEO  Teche achieved record earnings per share during a national recession. These results are a testament to our SmartGrowth strategy, the talents of the Teche team and the resilient economy of our region.  Results of Fiscal Year 2009  In the financial chaos of 2009, Teche Holding Company was a pillar of profitability and growth. The Company set an earnings record of $3.36 per diluted share and paid an annual cash dividend of $1.405 per share, generating an annualized yield of 4.24%. These outstanding results emanated from our solid focus on growing the right kinds of deposits and loans, as well as our well-structured pricing and underwriting programs. For 10 years, we have honed our SmartGrowth strategy for increasing our core deposits and expanding the higher yielding loans in our portfolio. As a result, our net interest margin has increased for eight consecutive quarters to 4.01% in 2009. Furthermore due to excellent operating results, we increased our return on average tangible equity from 8.83% to 10.49% and our return on average assets from 0.76% to 0.91% from 2008 to 2009. Tangible stockholders’ equity increased 5.4% to $68 million and tangible book value per share increased 6.5% to $32.33. We also strengthened our capital ratios during the year by selling a block of fixed rate mortgage loans and reducing the bank’s higher cost time deposits. In addition, we decided to decline the federal “TARP” program which we felt was costly and an unnecessary source of capital for our institution. All of these actions benefited our shareholders with record
            returns and increased dividends. I will more fully discuss our consistent SmartGrowth deposit and loan growth, our strong asset quality and capitalization in the rest of my remarks.  The industries here (Gulf Coast) are pretty steady and it’s a much better job picture than it has been in other parts of the country. Peter Ricchiuti, Assistant Dean A.B. Freeman School of Business Tulane University ABC Good Morning America, 5/07/09  2
 
 Deposit Growth SmartGrowth (core) deposits increased 11.3% year over year to $368 million. Checking deposits, coveted by our competitors, grew to $166 million as we continued our totally free personal and business checking programs and superior customer service initiatives. Money market deposits fell to $95 million as rates declined. However, savings deposits grew to $106 million with only a marginal increase in rates this past year. Most importantly, time deposits, which are not in
            our SmartGrowth deposit category, had much lower costs and balances this year. For many years, Teche has competed for growth with the highest rate payers in our markets. This year we focused on customer relationships and reduced our dependence on single account “rate shoppers.” We will continue to focus on SmartGrowth (core) deposits as a long term strategy. These deposits have the lowest cost of funds and are important to our expanding net interest margin.  Loan Growth SmartGrowth loans, the highest yielding loans in the bank, grew 7.2% year over year to $460 million. These loans now comprise 77% of Teche’s total loan portfolio. In 2009, commercial and consumer loans increased 9.5% and 11.9% respectively over last year. Commercial loans increased to $210 million and consumer loans grew to $108 million. Not only did the Company grow these loans during a downturn in the national economy but Teche was also able to increase
            consumer loan interest rates. Some portions of the loan portfolio decreased such as Smart Mortgages, loans to builders for speculative home construction and closed-end home equity loans. While the Company continues to originate fixed and adjustable home loans, total balances in these categories have decreased as the Company fine-tuned its approach and sold $26 million in fixed rate loans. Asset Quality Teche’s strong commitment to sound underwriting standards, effective servicing and diligent collection efforts yielded high asset quality ratios compared to peers. Teche’s non-performing loans to total loans and non-performing assets to total assets were 1.21% and 1.19% respectively in the last twelve months compared to 2.88% and 2.68% average ratios of publicly traded
            southern banks during that same period. In addition Teche’s 0.29% net charge-offs to average loans is significantly lower than 1.31% which is the average of publicly traded southern banks over the last twelve months. Peer averages are according to Highline Financial data. Capital Strength Financial analysts following the banking industry this year say that “Credit and Capital” are the hallmarks of strong community banks. Teche receives top grades in both categories. As stated above Teche’s asset quality compares very favorably to other southern banks and the Company’s capital strength allowed Teche to forego the government bailout program
            called “TARP.” Through self-generated funds and solid funds management,  3
 
 Teche kept its capital ratios at healthy levels and above capital requirements established by banking regulators. Teche’s tier 1 risk-based capital ratio was 11.51% and its total risk-based capital ratio was 12.72% at year end with 6% and 10% respectively being the federal “well-capitalized” minimum standard. Since Teche did not participate in the
            “TARP” program, the Company avoided the high costs associated with the program. Non-Interest Expense This past year we held the line on expenses, increasing our non-interest expense by only 2.1% while increasing our core non-interest income by 3.3%. Our primary non-interest expense is the compensation of our employees. Teche Federal Bank has over 300 employees working in 20 different offices in a nine parish (county) area. We have invested in the development of customer service
            and business development skills of our entire Teche team and that investment has reaped returns. In 2009, we opened 22,000 deposit accounts and 2,400 loan accounts, including $235 million in total loans.  Louisiana Economy  [Graphic Omitted - Map of Teche Office Locations] My remarks would not be complete without a discussion of Louisiana’s economy. Although the national economy experienced high unemployment rates and generally negative real gross domestic product numbers since the first quarter of 2008, Louisiana was less affected by recessionary forces. Louisiana has a solid diversified economy with a strong community banking system that funds its large and small businesses. In addition, the state has significant petrochemical manufacturing and a major oil and gas extraction industry including the Haynesville Shale gas exploration project. Even though this project is located in north Louisiana it is currently pumping additional funds throughout the state. As a result of its healthy economy, Louisiana had lower
            unemployment rates than the national averages in the last 12 months. According to the Louisiana Economic Outlook 2010-2011, published by Louisiana State University Department of Economics, the state has a projected job growth of 0.9% in 2010 and 0.9% in 2011. The Baton Rouge MSA, an expansion area of Teche, has projected job growth of 1.1% in 2010 and 1.5% in 2011. The Lafayette MSA has projected job growth of 0.5% in 2010 and 0.7% in 2011. Furthermore, the Houma MSA
            has projected job growth of 0.9% in 2010 and 0.8% in 2011. We do have our challenges. Federal legislation currently under consideration including “Cap and Trade” and taxes on the extraction industry may affect our economic outlook. If these legislative initiatives are not approved, the economies of our key MSA areas may be even better than current projections. Other legislation affecting the banking industry may result in more expenses due to the
            cost of compliance for proposed regulations. Teche is well positioned to explore opportunities and take on future challenges.  4
 
  Focused on Continuous Growth and Earnings Although Teche has had a remarkable year especially considering the backdrop of the national economy, the Company is not resting on its laurels. Teche is continuing to closely monitor and improve credit quality, to aggressively pursue the right kinds of loans and deposits and to continue to build customer relationships. The fact that Teche has steadily grown personal and business
            checking accounts each year is a strong indicator of Teche’s solid strategic focus, service orientation and customer relationships.  Teamwork and Talent Matters We owe our success to our focused and dedicated employees and our values which emphasize a tradition of quality banking, customer relationships and shareholder returns. On behalf of the Board of Directors, I want to express our appreciation to our Teche team. I am always impressed with the diligent execution of our strategy as I visit our branches and see our associates working to
            meet the needs of our customers. We know and serve our customers, and I believe that has helped us to avoid costly mistakes which have been rampant in our industry. We are proud of our progress this year. However, we believe that we can continually improve and grow our institution. We are working for you, our shareholders on a daily basis and we appreciate your confidence and support. Sincerely,  Patrick Little Chairman and President/CEO    5


SELECTED FINANCIAL DATA (Dollars in thousands, except per share data) At or for the Year Ended September 30,  2009

                        

                        2008

                        

                        2007

                        

                        2006

                        

                        2005Assets

                        

                        $

                        765,071

                        

                        $

                        769,488

                        

                        $

                        719,367

                        

                        $

                        685,750

                        

                        $

                        676,822Loans Receivable, Net

                        

                        

                        588,527

                        

                        

                        584,139

                        

                        

                        561,623

                        

                        

                        520,185

                        

                        

                        487,427Securities-Available for Sale

                        

                        

                        20,936

                        

                        

                        26,652

                        

                        

                        51,647

                        

                        

                        63,517

                        

                        

                        77,491Securities-Held to Maturity

                        

                        

                        75,384

                        

                        

                        54,291

                        

                        

                        31,855

                        

                        

                        38,743

                        

                        

                        34,259Cash and Cash Equivalents

                        

                        

                        23,675

                        

                        

                        50,112

                        

                        

                        21,811

                        

                        

                        17,528

                        

                        

                        32,674Deposits

                        

                        

                        585,469

                        

                        

                        589,228

                        

                        

                        555,569

                        

                        

                        537,549

                        

                        

                        516,052FHLB Advances

                        

                        

                        100,628

                        

                        

                        104,877

                        

                        

                        89,756

                        

                        

                        77,386

                        

                        

                        93,409Stockholders’ Equity

                        

                        

                        71,485

                        

                        

                        68,044

                        

                        

                        67,006

                        

                        

                        63,929

                        

                        

                        61,338SUMMARY OF OPERATIONSInterest Income

                        

                        $

                        44,237

                        

                        $

                        45,633

                        

                        $

                        43,041

                        

                        $

                        39,197

                        

                        $

                        36,068Interest Expense

                        

                        

                        15,297

                        

                        

                        19,733

                        

                        

                        19,857

                        

                        

                        16,720

                        

                        

                        15,674Net Interest Income

                        

                        

                        28,940

                        

                        

                        25,900

                        

                        

                        23,184

                        

                        

                        22,477

                        

                        

                        20,394Provision for Loan Losses

                        

                        

                        3,026

                        

                        

                        825

                        

                        

                        605

                        

                        

                        210

                        

                        

                        950Net Interest Income afterProvision for Loan Losses

                        

                        

                        25,914

                        

                        

                        25,075

                        

                        

                        22,579

                        

                        

                        22,267

                        

                        

                        19,444Non-Interest Income

                        

                        

                        15,951

                        

                        

                        16,001

                        

                        

                        14,572

                        

                        

                        13,031

                        

                        

                        10,876Non-Interest Expense

                        

                        

                        31,372

                        

                        

                        30,740

                        

                        

                        27,464

                        

                        

                        24,364

                        

                        

                        22,644Income Before Gains (Losses) on Salesof Securities and Income Taxes

                        

                        

                        10,493

                        

                        

                        10,336

                        

                        

                        9,687

                        

                        

                        10,934

                        

                        

                        7,676Gains (Losses) on Sales of Securities

                        

                        

                        (99

                        )

                        

                        (2,580

                        )

                        

                        164

                        

                        

                        34

                        

                        

                        26Income Tax Expense

                        

                        

                        3,258

                        

                        

                        2,047

                        

                        

                        3,170

                        

                        

                        3,651

                        

                        

                        2,503Net Income

                        

                        $

                        7,136

                        

                        $

                        5,709

                        

                        $

                        6,681

                        

                        $

                        7,317

                        

                        $

                        5,199SELECTED FINANCIAL RATIOSRatio of Equity to Assets

                        

                        

                        9.34

                        %

                        

                        8.84

                        %

                        

                        9.31

                        %

                        

                        9.32

                        %

                        

                        9.06

                        %Book Value/Common Share

                        

                        $

                        34.09

                        

                        $

                        32.12

                        

                        $

                        30.42

                        

                        $

                        28.68

                        

                        $

                        26.78Dividends declared per Share

                        

                        $

                        1.41

                        

                        $

                        1.37

                        

                        $

                        1.26

                        

                        $

                        1.10

                        

                        $

                        0.94Basic Income per Common Share

                        

                        $

                        3.38

                        

                        $

                        2.65

                        

                        $

                        3.01

                        

                        $

                        3.22

                        

                        $

                        2.34Diluted Income per Common Share

                        

                        $

                        3.36

                        

                        $

                        2.63

                        

                        $

                        2.94

                        

                        $

                        3.15

                        

                        $

                        2.26Return on Average Assets

                        

                        

                        0.91

                        %

                        

                        0.76

                        %

                        

                        0.95

                        %

                        

                        1.07

                        %

                        

                        0.77

                        %Return on Average Equity

                        

                        

                        9.98

                        %

                        

                        8.29

                        %

                        

                        10.24

                        %

                        

                        11.79

                        %

                        

                        8.59

                        %Net Interest Margin

                        

                        

                        4.01

                        %

                        

                        3.74

                        %

                        

                        3.57

                        %

                        

                        3.53

                        %

                        

                        3.24

                        %Non-Interest Expense/Average Assets

                        

                        

                        4.02

                        %

                        

                        4.07

                        %

                        

                        3.89

                        %

                        

                        3.54

                        %

                        

                        3.34

                        %Non-Interest Income/Average Assets

                        

                        

                        2.03

                        %

                        

                        2.11

                        %

                        

                        2.06

                        %

                        

                        1.89

                        %

                        

                        1.60

                        %Non-Performing Loans/Loans (1)

                        

                        

                        1.21

                        %

                        

                        1.09

                        %

                        

                        0.68

                        %

                        

                        0.74

                        %

                        

                        0.98

                        %Allowance for Loan Losses/Loans (1)

                        

                        

                        1.14

                        %

                        

                        0.94

                        %

                        

                        0.90

                        %

                        

                        0.93

                        %

                        

                        1.04

                        %Dividend Payout

                        

                        

                        41.32

                        %

                        

                        51.90

                        %

                        

                        41.66

                        %

                        

                        33.65

                        %

                        

                        40.30

                        %
  (1)

                        Total loans before allowance for loan losses
   6
 
 Business of the Bank  Teche Federal Bank (the "Bank") attracts savings deposits from the general public and uses such deposits to originate primarily residential mortgage loans, commercial mortgage loans and consumer loans. Additionally, the Bank invests in mortgage-backed and investment securities. (See “Management Strategy” on page 9.)  It is the Bank's intention to remain an independent community savings bank serving the local banking needs of its primary market area, which presently includes twenty offices in the Louisiana Parishes of St. Mary, Iberia, Lafayette, St. Landry, St. Martin, Terrebonne, Lafourche, East Baton Rouge and Ascension. The FDIC insures deposits at the Bank up to the
            maximum legal amount.  Business of the Company  Teche Holding Company (the "Company") is a Louisiana corporation organized in December 1994 at the direction of the Board of Directors of the Bank to acquire all of the capital stock that the Bank issued upon its conversion from the mutual to stock form of organization.  Summary of Quarterly Operating Results   2009

                        

                        2008First

                        

                        Second

                        

                        Third

                        

                        Fourth

                        

                        First

                        

                        Second

                        

                        Third

                        

                        Fourth(Amounts in thousands, except per share data)Interest Income

                        

                        $

                        11,214

                        

                        $

                        11,013

                        

                        $

                        11,130

                        

                        $

                        10,880

                        

                        $

                        11,361

                        

                        $

                        11,391

                        

                        $

                        11,465

                        

                        $

                        11,417Interest Expense

                        

                        

                        4,378

                        

                        

                        3,950

                        

                        

                        3,583

                        

                        

                        3,386

                        

                        

                        5,233

                        

                        

                        5,082

                        

                        

                        4,798

                        

                        

                        4,620Net Interest Income

                        

                        

                        6,836

                        

                        

                        7,063

                        

                        

                        7,547

                        

                        

                        7,494

                        

                        

                        6,128

                        

                        

                        6,309

                        

                        

                        6,667

                        

                        

                        6,797Provision for Loan Losses

                        

                        

                        155

                        

                        

                        1,035

                        

                        

                        550

                        

                        

                        1,286

                        

                        

                        180

                        

                        

                        190

                        

                        

                        295

                        

                        

                        160Income (Loss) Before

                        

                        

                        2,602

                        

                        

                        2,482

                        

                        

                        2,395

                        

                        

                        2,915

                        

                        

                        2,863

                        

                        

                        3,223

                        

                        

                        (1,235

                        )

                        

                        2,906Income TaxesNet Income (Loss)

                        

                        

                        1,764

                        

                        

                        1,656

                        

                        

                        1,733

                        

                        

                        1,983

                        

                        

                        1,883

                        

                        

                        2,184

                        

                        

                        (476

                        )

                        

                        2,119Basic Income (Loss)

                        

                        

                        0.83

                        

                        

                        0.78

                        

                        

                        0.82

                        

                        

                        0.95

                        

                        

                        0.85

                        

                        

                        1.01

                        

                        

                        (0.22

                        )

                        

                        1.00per Common ShareDiluted Income (Loss)

                        

                        

                        0.83

                        

                        

                        0.78

                        

                        

                        0.81

                        

                        

                        0.94

                        

                        

                        0.84

                        

                        

                        1.00

                        

                        

                        (0.22

                        )

                        

                        0.99per Common Share
   
 7
 
 Market and Dividend Information Teche Holding Company's common stock trades on the NYSE Amex under the symbol "TSH.” The following sets forth the high and low sale prices and cash dividends declared for the common stock for the last two fiscal years.   Quarter ended

                        Sales Price

                        Period End Close

                        Cash Dividend Declared

                        Date DeclaredHigh

                        LowDecember 31, 2007

                        $44.00

                        $37.10

                        $37.75

                        $0.335

                        November 29, 2007March 31, 2008

                        $38.30

                        $29.50

                        $32.55

                        $0.34

                        February 26, 2008June 30, 2008

                        $38.39

                        $31.50

                        $37.17

                        $0.345

                        May 21, 2008September 30, 2008

                        $37.50

                        $28.90

                        $31.75

                        $0.35

                        August 27, 2008December 31, 2008

                        $31.81

                        $22.90

                        $25.01

                        $0.35

                        November 20, 2008March 31, 2009

                        $30.95

                        $22.40

                        $30.50

                        $0.35

                        February 19, 2009June 30, 2009

                        $35.50

                        $28.85

                        $33.10

                        $0.35

                        May 29, 2009September 30, 2009

                        $35.75

                        $31.09

                        $33.10

                        $0.355

                        August 27, 2009
   According to the records of the Company's transfer agent, there were 436 registered stockholders of record at November 30, 2009. This number does not include any persons or entities that hold their stock in nominee or "street" name through various brokerage firms.  The Company's ability to pay dividends is substantially dependent upon the dividends it receives from the Bank. Under current regulations, the Bank is not permitted to pay dividends if its regulatory capital would thereby be reduced below (1) the amount then required for the liquidation account established in connection with the Bank's conversion from mutual
            to stock form, or (2) the regulatory capital requirements imposed by the Office of Thrift Supervision ("OTS"). Capital distributions are also subject to certain limitations based on the Bank's net income. See Notes 18 and 19 of Notes to Consolidated Financial Statements. The Bank's total capital at September 30, 2009 exceeded the amounts of its liquidation account and regulatory capital requirements.   8
 
 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  General  The Private Securities Litigation Reform act of 1995 contains safe harbor provisions regarding forward-looking statements. When used in this discussion, the words “believe”, “anticipates”, “contemplates”, “expects”, and similar expressions are intended to identify forward-looking statements. Such statements are
            subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Those risks and uncertainties include changes in interest rates, risk associated with the effect of opening new branches, the ability to control costs and expenses, and general economic conditions. The Company undertakes no obligation to publicly release the results of any revisions to those forward-looking statements that may be made to reflect events or
            circumstances after the date hereof or to reflect the occurrences of unanticipated events.  The Company's consolidated results of operations are primarily dependent on the Bank's net interest income, or the difference between the interest income earned on its loan, mortgage-backed securities and investment securities portfolios, and the interest expense paid on its savings deposits and other borrowings. Net interest income is affected not only by the
            difference between the yields earned on interest-earning assets and the costs incurred on interest-bearing liabilities, but also by the relative amounts of such interest-earning assets and interest-bearing liabilities.  Other components of net income include: provisions for losses on loans and other assets, non-interest income (primarily, service charges on deposit accounts and other fees), and non-interest expenses (primarily, compensation and employee benefits, office occupancy expense, marketing expense and expenses associated with foreclosed real estate) and income
            taxes.  Earnings of the Company also are significantly affected by economic and competitive conditions, particularly changes in interest rates, government policies and regulations of regulatory authorities.  References to the "Bank" herein, unless the context requires otherwise, refer to the Company on a consolidated basis.  Overview  The Company’s net income increased $1.4 million to $7.1 million this past fiscal year primarily due to an increase in net interest income of $3.0 million offset somewhat by an increase in provision for loan losses of $2.2 million. Net income for fiscal 2008 was lower due to the Bank’s withdrawal from the AMF Ultra Short Fund which resulted in the
            Bank incurring a loss of $2.6 million before taxes, along with a pretax charge of $1.5 million due to the Bank’s exit and transfer out of its defined benefit pension plans during the third quarter. The Company’s assets in fiscal 2009 decreased $4.4 million to $765.1 million primarily due to decreases in interest bearing deposits and cash offset somewhat by a slight increase in loan receivables and securities.  Management Strategy  Management's strategy has been to maximize earnings and profitability through steady growth while maintaining asset quality. The Bank's lending strategy has historically focused on the origination of traditional one- to four-family mortgage loans with the primary emphasis on single-family residences in the Bank's primary market area. Additionally, management
            emphasizes a “SmartGrowth” strategy that focuses on the origination of consumer loans (primarily home equity and mobile home loans), Smart Mortgage loans, commercial loans and commercial real estate loans for retention in the Company’s loan portfolio. Smart Mortgage loans originated by the Bank are residential real estate loans that do not meet all of the Bank’s standard loan underwriting criteria for residential real estate loans. Consumer loans, commercial
            loans and commercial real estate loans generally have shorter terms to maturity and higher yields than residential real estate loans. While Smart Mortgage loans, consumer loans, commercial loans, and commercial real estate loans have greater credit risk than conforming residential real estate loans, the Company believes its SmartGrowth strategy will have a favorable impact on the Company’s net interest margin, as well as assist in interest rate risk management. SmartGrowth
            also emphasizes growth in core deposits (primarily transaction accounts), which include demand deposits, NOW accounts, money market deposit accounts and savings accounts.  Asset and Liability Management  Interest Rate Sensitivity Analysis. Net interest income, the primary component of the Bank's net income, is derived from the difference between the interest income on interest-earning assets and the interest expense of interest-bearing liabilities. The Bank has sought to manage its exposure to changes in interest rates by
            monitoring the effective maturities or re-pricing characteristics of its interest-earning assets and interest-bearing liabilities. The matching of the Bank's assets and liabilities may be analyzed by examining the extent to which its assets and liabilities are interest rate sensitive and by monitoring the expected effects of interest rate changes on its net interest income and net portfolio value.  The ability to maximize net interest income is largely dependent upon achieving a positive interest rate spread that can be sustained during fluctuations in prevailing interest rates. The Bank is exposed to interest rate risk as a result of the difference in the maturity of interest-bearing liabilities and interest-earning assets and the volatility of interest
            rates. Because most deposit accounts react more quickly to market interest rate movements than do traditional mortgage loans due to their shorter terms to maturity,  
 9
 
 increases in interest rates may have an adverse effect on the Bank's earnings. Conversely, this same mismatch will generally benefit the Bank's earnings during periods of declining or stable interest rates.  The Bank attempts to manage its interest rate exposure by shortening the maturities of its interest-earning assets by emphasizing adjustable rate mortgages ("ARMs"), periodically selling loans from the portfolio of long term fixed rate mortgages, originating shorter term loans such as residential construction, consumer, home equity and commercial loans and the
            investment of excess liquidity in purchased loans, adjustable rate mortgage-backed securities and other securities with relatively short terms to maturity. Furthermore, the Bank works to manage the interest rates it pays on deposits while maintaining a stable deposit base and providing quality services to its customers. In recent years, the Bank has used borrowings while continuing to rely primarily upon deposits as its source of funds. At September 30, 2009, the weighted average
            term to re-pricing of the Bank’s ARM loan and ARM mortgage-backed securities portfolio was approximately 16 months. In contrast, at September 30, 2009, $104.8 million of the Bank's certificate accounts and $367.8 million of the Bank's regular deposit accounts (e.g. demand, NOW, money market, savings), out of $585.5 million of total deposits, were scheduled to mature or re-price within one year or sooner.  Management believes that it has adequate capital to accept a certain degree of interest rate risk. Should interest rates rise management believes the Bank's capital position will enable it to withstand the negative impact on earnings.  Rate/Volume Analysis. The table below sets forth certain information regarding changes in interest income and interest expense of the Bank for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (changes in
            average volume multiplied by old rate); (ii) changes in rates (changes in rate multiplied by old average volume); and (iii) the net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.  Year Ended September 30,2009 vs. 2008

                        

                        

                        

                        2008 vs. 2007Increase (Decrease) Due to

                        

                        

                        

                        Increase (Decrease) Due toVolume

                        

                        Rate

                        

                        Net

                        

                        

                        

                        Volume

                        

                        Rate

                        

                        Net(Dollars in thousands)Interest-Earning Assets:Securities (1)

                        

                        $

                        90

                        

                        $

                        (115

                        )

                        $

                        (25

                        )

                        

                        

                        $

                        (522

                        )

                        $

                        18

                        

                        $

                        (504

                        )Loans Receivable, Net

                        

                        

                        1,200

                        

                        

                        (2,290

                        )

                        

                        (1,090

                        )

                        

                        

                        

                        3,290

                        

                        

                        (189

                        )

                        

                        3,101Other Interest-Earning Assets (2)

                        

                        

                        304

                        

                        

                        (585

                        )

                        

                        (281

                        )

                        

                        

                        

                        817

                        

                        

                        (822

                        )

                        

                        (5

                        )Total Interest-Earning Assets

                        

                        

                        1,594

                        

                        

                        (2,990

                        )

                        

                        (1,396

                        )

                        

                        

                        

                        3,585

                        

                        

                        (993

                        )

                        

                        2,592Interest-Bearing LiabilitiesDeposits

                        

                        

                        130

                        

                        

                        (4,891

                        )

                        

                        (4,761

                        )

                        

                        

                        

                        670

                        

                        

                        (1,440

                        )

                        

                        (770

                        )FHLB Advances

                        

                        

                        447

                        

                        

                        (122

                        )

                        

                        325

                        

                        

                        

                        

                        854

                        

                        

                        (208

                        )

                        

                        646Total Interest-Bearing Liabilities

                        

                        

                        577

                        

                        

                        (5,013

                        )

                        

                        (4,436

                        )

                        

                        

                        

                        1,524

                        

                        

                        (1,648

                        )

                        

                        (124

                        )Net Change in Net Interest Income

                        

                        $

                        1,017

                        

                        $

                        2,023

                        

                        $

                        3,040

                        

                        

                        

                        $

                        2,061

                        

                        $

                        655

                        

                        $

                        2,716
  (1)

                        Includes investment securities and FHLB stock.
 (2)

                        Includes certificates of deposit and other interest-bearing accounts.
  10
 
 Average Balance Sheet. The following table sets forth certain information relating to the Company's average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expenses by the average balance of assets or liabilities, respectively, for the periods
            presented. Average balances are derived from daily average balances.  Year Ended September 30,2009

                        

                        

                        

                        2008

                        

                        

                        

                        2007Average

                        

                        

                        

                        Average

                        

                        

                        

                        Average

                        

                        

                        

                        Average

                        

                        

                        

                        Average

                        

                        

                        

                        AverageBalance

                        

                        Interest

                        

                        Yield/Cost

                        

                        

                        

                        Balance

                        

                        Interest

                        

                        Yield/Cost

                        

                        

                        

                        Balance

                        

                        Interest

                        

                        Yield/CostAssetsInterest-Earning AssetsSecurities (1)

                        

                        $

                        86,215

                        

                        $

                        3,848

                        

                        4.46

                        %

                        

                        

                        $

                        84,249

                        

                        $

                        3,872

                        

                        4.60

                        %

                        

                        

                        $

                        95,651

                        

                        $

                        4,376

                        

                        4.57

                        %Loans Receivable (2) (3)

                        

                        

                        606,751

                        

                        

                        40,190

                        

                        6.62

                        %

                        

                        

                        

                        594,944

                        

                        

                        41,280

                        

                        7.00

                        %

                        

                        

                        

                        547,740

                        

                        

                        38,179

                        

                        6.97

                        %Other Interest-Earning Assets (4)

                        

                        

                        29,443

                        

                        

                        199

                        

                        0.67

                        %

                        

                        

                        

                        18,043

                        

                        

                        481

                        

                        2.67

                        %

                        

                        

                        

                        6,731

                        

                        

                        486

                        

                        7.22

                        %Total Interest-Earning Assets

                        

                        

                        722,409

                        

                        $

                        44,237

                        

                        6.12

                        %

                        

                        

                        

                        697,236

                        

                        $

                        45,633

                        

                        6.60

                        %

                        

                        

                        

                        650,122

                        

                        $

                        43,041

                        

                        6.62

                        %Non-Interest Earning Assets

                        

                        

                        58,778

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        52,589

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        54,423Total Assets

                        

                        $

                        781,187

                        

                        

                        

                        

                        

                        

                        

                        

                        $

                        749,825

                        

                        

                        

                        

                        

                        

                        

                        

                        $

                        704,545Liabilities and Stockholders’ EquityInterest-Bearing LiabilitiesNOW Accounts

                        

                        $

                        100,817

                        

                        $

                        538

                        

                        0.53

                        %

                        

                        

                        $

                        83,515

                        

                        $

                        456

                        

                        0.55

                        %

                        

                        

                        $

                        74,851

                        

                        $

                        328

                        

                        0.44

                        %Statement & Regular Savings Accounts

                        

                        

                        76,214

                        

                        

                        664

                        

                        0.87

                        %

                        

                        

                        

                        52,851

                        

                        

                        409

                        

                        0.77

                        %

                        

                        

                        

                        52,084

                        

                        

                        413

                        

                        0.79

                        %Money Funds Accounts

                        

                        

                        115,721

                        

                        

                        1,440

                        

                        1.24

                        %

                        

                        

                        

                        125,905

                        

                        

                        3,190

                        

                        2.53

                        %

                        

                        

                        

                        89,139

                        

                        

                        3,183

                        

                        3.52

                        %Certificates of Deposit

                        

                        

                        240,270

                        

                        

                        7,882

                        

                        3.28

                        %

                        

                        

                        

                        264,185

                        

                        

                        11,230

                        

                        4.25

                        %

                        

                        

                        

                        287,292

                        

                        

                        12,131

                        

                        4.22

                        %Total Deposits

                        

                        

                        533,022

                        

                        

                        10,524

                        

                        1.97

                        %

                        

                        

                        

                        526,456

                        

                        

                        15,285

                        

                        2.90

                        %

                        

                        

                        

                        503,366

                        

                        

                        16,055

                        

                        3.19

                        %FHLB Advances

                        

                        

                        105,060

                        

                        

                        4,773

                        

                        4.54

                        %

                        

                        

                        

                        95,225

                        

                        

                        4,448

                        

                        4.67

                        %

                        

                        

                        

                        77,550

                        

                        

                        3,802

                        

                        4.90

                        %Total Interest-Bearing Liabilities

                        

                        

                        638,082

                        

                        $

                        15,297

                        

                        2.40

                        %

                        

                        

                        

                        621,681

                        

                        $

                        19,733

                        

                        3.17

                        %

                        

                        

                        

                        580,916

                        

                        $

                        19,857

                        

                        3.42

                        %Non-Interest-Bearing Liabilities

                        

                        

                        71,626

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        59,311

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        58,396Total Liabilities

                        

                        

                        709,708

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        680,992

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        639,312Stockholders’ Equity

                        

                        

                        71,479

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        68,833

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        65,233Total Liabilities and Stockholders’ Equity

                        

                        $

                        781,187

                        

                        

                        

                        

                        

                        

                        

                        

                        $

                        749,825

                        

                        

                        

                        

                        

                        

                        

                        

                        $

                        704,545Net Interest Income/Interest Rate Spread (5)

                        

                        

                        

                        

                        $

                        28,940

                        

                        3.72

                        %

                        

                        

                        

                        

                        

                        $

                        25,900

                        

                        3.42

                        %

                        

                        

                        

                        

                        

                        $

                        23,184

                        

                        3.20

                        %Net Interest Margin (6)

                        

                        

                        

                        

                        

                        

                        

                        4.01

                        %

                        

                        

                        

                        

                        

                        

                        

                        

                        3.74

                        %

                        

                        

                        

                        

                        

                        

                        

                        

                        3.57

                        %Interest-Earning Assets/Interest-Bearing Liabilities

                        

                        

                        

                        

                        

                        

                        

                        113.22

                        %

                        

                        

                        

                        

                        

                        

                        

                        

                        112.15

                        %

                        

                        

                        

                        

                        

                        

                        

                        

                        111.91

                        %
  (1) Includes securities and Federal Home Loan Bank (“FHLB”) stock.
 (2) Amount is net of deferred loan fees, loan discounts and premiums and loans-in-process and includes non-accruing loans.
 (3) Interest income includes loan fees of approximately $585,000 in 2009, $565,000 in 2008 and $479,000 in 2007.
 (4) Amount includes certificates of deposit and other interest-bearing deposits.
 (5) Interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.(6) Net interest margin represents net interest income divided by average interest-earning assets.
  
 11
 
 Changes in Financial Condition from September 30, 2008 to September 30, 2009  General. Total assets decreased $4.4 million, or 0.6% to $765.1 million at September 30, 2009 from $769.5 million at September 30, 2008, due to decreases in interest bearing deposits and cash, offset somewhat by a slight increase in loans receivable and securities.  Cash and Cash Equivalents. Cash decreased $26.4 million from $50.1 million at September 30, 2008 to $23.7 million at September 30, 2009. The decrease resulted primarily from the purchase of securities along with a small increase in loans receivable.  Securities Available-for-Sale and Held to Maturity.Securities available-for-sale decreased $5.7 million from $26.6 million at September 30, 2008 to $20.9 million at September 30, 2009 due primarily to repayments on existing mortgage-backed securities. Securities held-to-maturity increased $21.1 million from $54.3 million to $75.4 million due primarily
            to purchases of $34.0 million offset by repayments on existing securities. (See Note 3 of the Consolidated Financial Statements.)  Loans Receivable, Net. The Bank’s net loans receivable increased $4.4 million or 0.7% to $588.5 million from $584.1 million at September 30, 2008 due primarily to growth in the Commercial Real Estate loan portfolio and Mobile Home loan portfolio, offset by a decrease in the One-to-Four Family Conforming loan portfolio brought about by a $26.0
            million sale of fixed rate conforming one-to-four family loans. (See Note 4 of the Consolidated Financial Statements for a comparative breakdown of the Bank’s loan portfolio.)  Premises and Equipment, Net.

                        Premises and equipment increased $0.3 million or 1.2% due to a land purchase.
  Deposits.The Bank’s deposits decreased $3.7 million or 0.6% to $585.5 million at September 30, 2009, from $589.2 million at September 30, 2008. SmarthGrowth deposits which consist of non-interest bearing checking, interest-bearing checking, savings accounts, and money market accounts increased $37.3 million during the fiscal year. Time deposits
            decreased $41.1 million from $258.8 million to $217.7 million. (See Note 7 of the Consolidated Financial Statements for a comparative breakdown of the Bank’s deposit portfolio.)  Advances from FHLB. Advances from the Federal Home Loan Bank of Dallas decreased $4.3 million, or 4.1% to $100.6 million from $104.9 million at September 30, 2008. The decrease was due to principal payments on existing advances.  Stockholders’ Equity. Stockholders’ equity increased $3.5 million, or 5.1% from $68.0 million at September 30, 2008, to $71.5 million at September 30, 2009. The increase was due primarily to net income less dividends and the purchase of treasury stock.  Comparison of Operating Results for Years Ended September 30, 2009, 2008 and 2007  Analysis of Net Income  General.The Company had net income of $7.1 million, $5.7 million and $6.7 million for the years ended 2009, 2008 and 2007. The $1.4 million increase during fiscal 2009 was primarily due to a $3.0 million increase in net interest income, offset by an increase in the provision for loan losses of $2.2 million. The $972,000 decrease during fiscal 2008 was
            primarily due to two major items. First the Bank withdrew its investment in the AMF Ultra Short Mortgage Fund resulting in a pre-tax charge of $2.6 million, and the Bank also settled and transferred the obligations of its defined benefit pension Plans to Hartford Insurance Company resulting in a pre-tax charge of $1.5 million.  Revenue. Revenue amounted to $45.3 million, $41.8 million and $37.7 million for the years ended 2009, 2008 and 2007, respectively. The $3.5 million increase during fiscal 2009 was primarily due to a reduction in total interest expense of $4.4 million offset somewhat by a decrease in interest income on loans of $1.1 million. The $4.0 million increase
            during fiscal 2008 was primarily due to an increase in interest income on loans resulting from growth in the loan portfolio coupled with an increase in service charges on transaction accounts. Non-interest income remained relatively stable at $16.3 million in fiscal 2009 compared to $16.6 million in fiscal 2008.  Interest Income.Interest income amounted to $44.2 million, $45.6 million and $43.0 million for the years ended 2009, 2008 and 2007, respectively. The $1.4 million decrease during fiscal 2009 was primarily due to a decrease in interest rates offset by an increase in the average balance on earning assets. The $2.6 million increase during fiscal 2008 was
            primarily due to an increase in the average balance on earning assets, offset by a slight decrease in interest rates.  The average balance of loans increased during fiscal 2009 and fiscal 2008 by approximately $17.1 million, or 2.9% and $41.9 million, or 7.6%, respectively.  Interest Expense. Interest expense totaled $15.3 million, $19.7 million and $19.9 million for the years ended September 30, 2009, 2008 and 2007. The $4.4 million decrease from fiscal 2008 to fiscal 2009 was primarily due to lower interest rates offset by an increase in both deposit and FHLB advance average balances. The $124,000 decrease from fiscal
            2007 to fiscal 2008 was primarily  12
 
 due to lower interest rates along with good growth in lower rate deposit accounts. The average balance of deposits increased $6.6 million and $23.1 million in fiscal 2009 and 2008, respectively.  Net Interest Income. Net interest income increased $3.1 million to $28.9 million during the year ended September 30, 2009 primarily due to a decrease in interest expense on deposits and FHLB advances, offset by a decrease in interest income on loans. Net interest income increased $2.7 million to $25.9 million during the year ended September 30, 2008
            primarily due to an increase in interest income on loans and to a decrease in interest expense on deposits, offset somewhat by an increase in interest expense on FHLB advances.  Provision for Loan Losses. The Bank provided $3.0 million, $825,000 and $605,000 to the allowance for loan losses for the years ended September 30, 2009, 2008 and 2007 respectively. The provision increased in fiscal 2009 due to continued loan growth along with an increase in qualitative adjustments necessary to address negative economic and credit
            quality trends. The provision increased in fiscal 2008 primarily due to growth in loan portfolio as well as changes to the qualitative and quantitative factors considered during the analysis of the allowance for loan losses. The allowance for loan losses was $6.8 million at September 30, 2009, $5.5 million at September 30, 2008, and $5.1 million at 2007 fiscal year end.  Management periodically estimates the likely level of losses to determine whether the allowance for loan losses is adequate to absorb probable losses inherent in the existing portfolio. Based on these estimates, an amount is charged or credited to the provision for loan losses and credited or charged to the allowance for loan losses in order to adjust the allowance to a level
            determined to adequately absorb probable inherent losses.  While the Bank maintains its allowance for losses at a level that it considers to be adequate to provide for existing losses, there can be no assurance that further additions will not be made to the loss allowances and that such losses will not exceed the estimated amounts. (See Note 1 to the Consolidated Financial Statements.)  Non-Interest Income. Non-interest income during the years ended September 30, 2009, 2008 and 2007 amounted to $15.9 million, $13.4 million and $14.7 million respectively. Non-interest income in fiscal 2008 and 2009 included charges for certain securities in the investment portfolio in the amount of $3.0 million and $1.0 million respectively.
            Non-interest income in fiscal 2009 included a gain of $559,000 on the sale of $26 million of conforming loans. (See Loans Receivable, Net) Excluding these charges, non-interest income remained relatively stable between fiscal 2008 and 2009. The increase between fiscal 2007 and 2008, excluding impairment charges, was primarily due to an increase in deposit related fees due to an increase in the number of deposit accounts.  Non-Interest Expense. Non-interest expense totaled $31.4 million; $30.7 million and $27.4 million during the years ended September 30, 2009, 2008 and 2007, respectively. The $0.6 million increase during fiscal 2009 was primarily due to an increase in deposit insurance premiums. The $3.3 million increase during fiscal 2008 was primarily due to
            compensation expense that included a $1.5 million charge for exiting the defined benefit pension plan.  The Bank is subject to the Louisiana Shares Tax, which amounted to an expense of $567,000, $666,000 and $535,000 in the fiscal years ended September 30, 2009, 2008 and 2007, respectively.  Gain (loss) on Sale of Securities.In the years ended September 30, 2009, 2008 and 2007, (losses) and gains on the sale of securities amounted to $(99,000), ($2,580,000) and $164,000, respectively. The loss recorded in 2009 resulted from the Company’s recording an impairment loss on an equity security for $175,000, offset by a gain on sale of
            equity securities of $76,000. The loss recorded in 2008 resulted from the Company’s withdrawal of a $16.1 million investment in a mortgage mutual fund that had continued to decline in value during the year as a result of the turmoil that existed in the mortgage markets in general. (See Note 3 of the Consolidated Financial Statements.)  Income Tax Expense. For the years ended September 30, 2009, 2008 and 2007, the Company incurred income tax expense of $3.3 million, $2.0 million and $3.2 million, respectively. There was an increase in the effective tax rate in 2009 due to higher pre-tax income and the benefit of tax credits were lower than in 2008. There was a decrease in the effective
            tax rate in 2008 due to lower pre-tax income and the benefit of certain tax credits related to tax incentives applied to the Company’s 2006 and 2007 income tax returns recorded in the 2008 financial statements. (See Note 10 of the Consolidated Financial Statements for further explanation.)  Liquidity and Capital Resources  The Bank's average liquidity ratio is based on deposits and was approximately 10.0% percent during September 2009. The Bank manages its average liquidity ratio to meet its funding needs, including: deposit outflows; disbursement of payments collected from borrowers for taxes and insurance; repayment of Federal Home Loan Bank advances and other borrowings; and loan principal
            disbursements. The Bank also monitors its liquidity position in accordance with its asset/liability management objectives.  
 13
 
 In addition to funds provided from operations, the Bank's primary sources of funds are: savings deposits, principal repayments on loans and mortgage-backed securities, and matured or called investment securities. The Bank also borrows funds from the Federal Home Loan Bank of Dallas (the “FHLB”).  Scheduled loan repayments and maturing investment securities are a relatively predictable source of funds. However, savings deposit flows and prepayments on loans and mortgage-backed securities are significantly influenced by changes in market interest rates, economic conditions and competition. The Bank strives to manage the pricing of its deposits to maintain a balanced stream of
            cash flows commensurate with its loan commitments and other predictable funding needs.  The Bank usually maintains a portion of its cash on hand in interest-bearing demand deposits with the FHLB and other correspondent banks to meet immediate loan commitment and savings withdrawal funding requirements. When applicable, cash in excess of immediate funding needs is invested into longer-term investment and mortgage-backed securities, some of which may also qualify as
            liquid investments under current OTS regulations.  Funds available under existing credit facilities from the FHLB totaled $175.3 million. The Bank has total FHLB borrowings of $100.6 million, or 13.2% of the Bank’s assets. Approximately $10.6 million is due in the year ending September 30, 2010.  Management believes the Bank has sufficient resources available to meet its foreseeable funding requirements. At September 30, 2009, the Bank had outstanding loan commitments of $44.4 million, and certificates of deposit scheduled to mature within one year of $104.8 million, much of which management expects, based on past experience, will remain with the Bank upon
            maturity.  Regulations of the OTS require the Bank to meet or exceed three separate standards of capital adequacy. These regulations require financial institutions to have minimum tangible capital equal to 1.5 percent of total adjusted assets; minimum core capital equal to 4.0 percent of total adjusted assets; and risk-based capital equal to 8.0 percent of total risk-weighted assets. At
            September 30, 2009, the Bank exceeded all regulatory capital requirements. (See Note 18 to the Consolidated Financial Statements.)  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 re-price at different rates than our interest-earning assets. Although having liabilities that mature or re-price 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 liabilities, as well as cash flows from off-balance sheet contracts. The Bank manages
            assets and liabilities within the context of the marketplace, regulatory limitations and within its limits on the amount of change in NPV which is acceptable given certain interest rate changes.  The OTS requires all regulated thrift institutions to calculate the estimated change in the institution’s NPV assuming instantaneous parallel shifts in the Treasury yield curve of 100 to 300 basis points either up or down in 100 basis point increments. The NPV is defined as the present value of expected cash flows from existing assets less the present value of expected cash
            flows from existing liabilities plus the present value of net expected cash inflows from existing off-balance sheet contracts.  The OTS provides an interest rate sensitivity report of NPV to all institutions that file with the OTS a Consolidated Maturity & Rate Schedule (“CMR”) as a part of the institution’s quarterly Thrift Financial Report. The OTS simulation model uses a discounted cash flow analysis and an option-based pricing approach to measuring the interest rate sensitivity of
            NPV. The OTS model estimates the economic value of each type of asset, liability, and off-balance sheet contract under the assumption that the Treasury yield curve shifts instantaneous and parallel up and down 100 to 300 basis points in 100 basis point increments. The OTS allows thrifts with under $1 billion 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  14
 
 accounts are valued at 100% of the respective account balances on the liability side. On the asset side of the analysis, the value of the “customer relationship” of the various types of deposit accounts is reflected as a deposit intangible.  The NPV sensitivity of borrowed funds is estimated by the OTS model based on a discounted cash flow approach.  The OTS uses, as a critical point, a change of plus or minus 200 basis points in order to set its “normal” institutional results and peer comparisons. A resulting change in NPV of more than 2% of the estimated market value of its assets will require the institution to deduct from its capital 50% of that excess change. The rules provide that the OTS will calculate the
            IRR component quarterly for each institution. The greater the change, positive or negative, in NPV, the more interest rate risk is assumed to exist with the institution. The following table lists the Bank’s latest percentage change in NPV assuming an immediate change of plus or minus 100, 200, and 300 basis points from the level of interest rates at September 30, 2009.  Net Portfolio Value

                        

                        NPV as % of PVof AssetsChangein Rates(1)

                        

                        $ Amount

                        

                        $ Change(2)

                        

                        %Change(3)

                        

                        NPVRatio(4)

                        

                        Change(5)(Dollars in Thousands)+300 bp

                        

                        

                        $ 95,701

                        

                        $

                        -1,805

                        

                        -2

                        %

                        12.16

                        %

                        +14

                        bp+200 bp

                        

                        

                        98,413

                        

                        

                        906

                        

                        +1

                        %

                        12.35

                        %

                        +33

                        bp+100 bp

                        

                        

                        98,908

                        

                        

                        1,402

                        

                        +1

                        %

                        12.29

                        %

                        +27

                        bp+50 bp

                        

                        

                        98,246

                        

                        

                        740

                        

                        +1

                        %

                        12.16

                        %

                        +14

                        bp0 bp

                        

                        

                        97,507

                        

                        

                        

                        

                        

                        

                        12.02

                        %-50 bp

                        

                        

                        94,519

                        

                        

                        -2,987

                        

                        -3

                        %

                        11.63

                        %

                        -39

                        bp-100 bp

                        

                        

                        91,245

                        

                        

                        -6,082

                        

                        -6

                        %

                        11.24

                        %

                        -78

                        bp
  (1)

                        The -200bp and -300bp scenarios are not shown due to low interest rate environment.
 (2)

                        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.
 (3)

                        Calculated as the amount of change in the estimated NPV divided by the estimated NPV assuming no change in interest rates.
 (4)

                        Calculated as the estimated NPV divided by average total assets.
 (5)

                        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 30,2009

                        

                        September 30,2008*** RISK MEASURES: +200 BP RATE SHOCK ***Pre-Shock NPV Ratio: NPV as % of PV of Assets

                        

                        12.02

                        %

                        11.09

                        %Exposure Measure: Post-Shock NPV Ratio

                        

                        11.24

                        %

                        9.94

                        %Sensitivity Measure: Decline in NPV Ratio

                        

                        78

                        bp

                        115

                        bp*** CALCULATION OF CAPITAL COMPONENT ***Change in NPV as % of PV of Assets

                        

                        0.78

                        %

                        1.15

                        %
  As the table shows, increases in interest rates would result in net decreases in the Bank’s NPV. The Bank’s NPV decreases by 0.9% 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 re-pricing 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 re-pricing of interest rate sensitive assets could be expected to have a positive effect on the Bank.  Contractual Obligations  The Company has various contractual obligations related to borrowings, deposits and operating lease payments. These obligations are outlined in Notes 6, 7 and 8 in the Consolidated Financial Statements of the Company.   
 15
 
 Critical Accounting Policies  Certain critical accounting policies affect the more significant judgments and estimates used in the preparation of the consolidated financial statements. The Company’s most critical accounting policies are as follows:  Allowance for Loan Losses -The allowance for loan losses is a valuation allowance available for losses incurred on loans. Any losses are charged to the allowance for loan losses when the loss actually occurs or when a determination is made that a loss is probable to occur. Recoveries are credited to the allowance at the time of recovery.  Management estimates the likely level of losses to determine whether the allowance for loan losses is adequate to absorb losses inherent in the existing portfolio. Based on the estimates, an amount is charged to or recovered from the provision for loan losses and credited or debited to the allowance for loan losses in order to adjust the allowance to a level determined to be
            adequate to absorb such losses.  Management’s judgment as to the level of losses on existing loans involves the consideration of current and anticipated economic conditions and their potential effects on specific borrowers; an evaluation of the existing relationships among loans, known and inherent risks in the loan portfolio, and the present level of the allowance; results of examination of the loan
            portfolio by regulatory agencies; and management’s internal review of the loan portfolio. In determining the collectibility of certain loans, management also considers the fair value of any underlying collateral.  It should be understood that estimates of loan losses involve an exercise of judgment. During the fiscal year ending September 30, 2009, the company made changes to the allowance model. These changes included using a three year rolling average charge-off history instead of five years, switching to actual charge-off history instead of a blend with peer rates and increased the
            qualitative factors due to an overall negative economic environment and credit quality trends in the banks portfolio. While it is possible that in particular periods the Company may sustain losses, which are substantial relative to the allowance for loan losses, it is the judgment of management that the allowance for loan losses reflected in the consolidated balance sheets is adequate to absorb probable losses inherent in the existing loan
            portfolio.  Goodwill –Goodwill does not require amortization but is subject to at least an annual assessment for impairment unless interim events or circumstances make it more likely than not that an impairment loss has occurred. Impairment is defined at that amount by which the implied fair value of the goodwill is less than the goodwill’s carrying
            value. Impairment losses would be charged to operating expense. Goodwill is not deductible for income tax purposes.  Impact of Off-Balance Sheet Instruments  The Company has certain off-balance-sheet instruments in the form of contractual commitments to extend credit to customers. These legally binding commitments have set expiration dates and are at predetermined interest rates. The underwriting criteria for these commitments are the same as for loans in our loan portfolio. Collateral is also obtained, if necessary, based on the
            credit evaluation of each borrower. Although many of the commitments will expire unused, management believes that we have the necessary resources to fund these commitments. (See Note 16 in the accompanying Consolidated Financial Statements.)  16
 
 MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING  Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a- 15(f). The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
            transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
            acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.  Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of inherent limitations, internal control over financial reporting may not prevent or detect
            misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.  Under supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control- Integrated Framework issued by the Committee of
            Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control- Integrated Framework, management concluded that our internal control over financial reporting was effective as of September 30, 2009.  This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to
            provide only management’s report in this annual report.    /s/ Patrick Little

                            

                            Patrick Little

                            President and Chief Executive Officer

                        

                        /s/ J. L. Chauvin

                            

                            J. L. Chauvin

                            Senior Vice President and Chief Financial Officer
     
 17





DIXON HUGHESPLC CERTIFIED PU BLIC ACCOUNTANTS AND ADVISORS
 Report of Independent Registered Public Accounting Firm  To the Board of Directors and Stockholders Teche Holding Company Franklin, Louisiana  We have audited the accompanying consolidated balance sheets of Teche Holding Company and subsidiary (hereinafter referred to as the “Company”) as of September 30, 2009 and 2008, and the related consolidated statements of income, stockholders’ equity and cash flows for each of the years in the three-year period ended September 30, 2009. These consolidated financial statements are the
            responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit
            included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing
            the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Teche Holding Company and subsidiary as of September 30, 2009 and 2008, and the results of their operations and their cash flows for each of the years in the three-year period ended September 30, 2009, in conformity with accounting principles generally accepted in
            the United States of America.  As of March 1, 2009, the Company adopted a new investment impairment standard as discussed in Note 1.     Asheville, North Carolina
 December 23, 2009        500 Ridgefield Court, PO Box 3049

                                Asheville, NC 28802-3049
 Ph. 828.254.2254 Fx. 828.254.6859
 www.dixon-hughes.com
    18


TECHE HOLDING COMPANY AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS September 30, 2009 and 2008  2009

                        

                        2008(Amounts in thousands,except share and per share data)ASSETSCash and due from banks

                        

                        $

                        13,958

                        

                        $

                        14,159Interest-bearing deposits

                        

                        

                        9,717

                        

                        

                        35,953Securities available-for-sale - at estimated fair value (amortized cost of $20,277 in 2009 and $27,051 in 2008)

                        

                        

                        20,936

                        

                        

                        26,652Securities held-to-maturity—at amortized cost (estimated fair value of $76,887 in 2009 and $53,788 in 2008)

                        

                        

                        75,384

                        

                        

                        54,291Loans receivable—net of allowance for loan losses of $6,806 in 2009 and $5,545 in 2008

                        

                        

                        588,527

                        

                        

                        584,139Accrued interest receivable

                        

                        

                        2,622

                        

                        

                        2,843Investment in Federal Home Loan Bank stock, at cost

                        

                        

                        5,063

                        

                        

                        4,764Real estate owned, net

                        

                        

                        1,953

                        

                        

                        343Prepaid expenses and other assets

                        

                        

                        3,321

                        

                        

                        3,670Goodwill

                        

                        

                        3,647

                        

                        

                        3,647Life insurance contracts

                        

                        

                        12,724

                        

                        

                        12,127Premises and equipment, net

                        

                        

                        27,219

                        

                        

                        26,900TOTAL ASSETS

                        

                        $

                        765,071

                        

                        $

                        769,488LIABILITIES AND STOCKHOLDERS’ EQUITYDeposits

                        

                        $

                        585,469

                        

                        $

                        589,228Advances from Federal Home Loan Bank

                        

                        

                        100,628

                        

                        

                        104,877Advance payments by borrowers for taxes and insurance

                        

                        

                        2,433

                        

                        

                        2,876Accrued interest payable

                        

                        

                        743

                        

                        

                        875Accounts payable and other liabilities

                        

                        

                        4,313

                        

                        

                        3,588TOTAL LIABILITIES

                        

                        

                        693,586

                        

                        

                        701,444COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS’ EQUITY:Preferred stock, 5,000,000 shares authorized, none issued

                        

                        

                        —

                        

                        

                        —Common stock, $.01 par value, 10,000,000 shares authorized; 4,666,950 and 4,658,325 shares issued

                        

                        

                        47

                        

                        

                        47Additional paid-in capital

                        

                        

                        52,285

                        

                        

                        51,973Retained earnings

                        

                        

                        69,786

                        

                        

                        65,600Unearned ESOP shares

                        

                        

                        (586

                        )

                        

                        —Treasury stock 2,570,296 and 2,542,028 shares - at cost

                        

                        

                        (50,234

                        )

                        

                        (49,313

                        )Accumulated other comprehensive loss on held-to-maturity securities

                        

                        

                        (247

                        )

                        

                        —Accumulated other comprehensive income (loss) on available for sale securities

                        

                        

                        434

                        

                        

                        (263

                        )TOTAL STOCKHOLDERS’ EQUITY

                        

                        

                        71,485

                        

                        

                        68,044TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

                        

                        $

                        765,071

                        

                        $

                        769,488
    See notes to consolidated financial statements.
 19
 
  TECHE HOLDING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME Years Ended September 30, 2009, 2008 and 2007  2009

                        

                        2008

                        

                        2007(Amounts in thousands, except per share amounts)INTEREST INCOME:Interest and fees on loans

                        

                        $

                        40,190

                        

                        $

                        41,280

                        

                        $

                        38,179Interest and dividends on securities

                        

                        

                        3,848

                        

                        

                        3,873

                        

                        

                        4,376Other interest income

                        

                        

                        199

                        

                        

                        480

                        

                        

                        486TOTAL INTEREST INCOME

                        

                        

                        44,237

                        

                        

                        45,633

                        

                        

                        43,041INTEREST EXPENSE:Deposits

                        

                        

                        10,524

                        

                        

                        15,285

                        

                        

                        16,055Advances from Federal Home Loan Bank

                        

                        

                        4,773

                        

                        

                        4,448

                        

                        

                        3,802TOTAL INTEREST EXPENSE

                        

                        

                        15,297

                        

                        

                        19,733

                        

                        

                        19,857NET INTEREST INCOME

                        

                        

                        28,940

                        

                        

                        25,900

                        

                        

                        23,184PROVISION FOR LOAN LOSSES

                        

                        

                        3,026

                        

                        

                        825

                        

                        

                        605NET INTEREST INCOME AFTERPROVISION FOR LOAN LOSSES

                        

                        

                        25,914

                        

                        

                        25,075

                        

                        

                        22,579NON-INTEREST INCOME:Total other-than temporary impairment losses

                        

                        

                        (1,311

                        )

                        

                        (408

                        )

                        

                        —Portion of impairment losses recognized in other comprehensive loss

                        

                        

                        375

                        

                        

                        —

                        

                        

                        —Net impairment losses recognized in earnings

                        

                        

                        (936

                        )

                        

                        (408

                        )

                        

                        —Service charges and other

                        

                        

                        15,415

                        

                        

                        15,482

                        

                        

                        13,589Gain on sale of premises and equipment

                        

                        

                        10

                        

                        

                        1

                        

                        

                        2Gain (Loss) on sale and impairments of equity securities

                        

                        

                        (99

                        )

                        

                        (2,580

                        )

                        

                        164Gain (Loss) on sale of loans

                        

                        

                        559

                        

                        

                        (172

                        )

                        

                        —Other income

                        

                        

                        903

                        

                        

                        1,098

                        

                        

                        981TOTAL NON-INTEREST INCOME

                        

                        

                        15,852

                        

                        

                        13,421

                        

                        

                        14,736NON-INTEREST EXPENSE:Compensation and employee benefits

                        

                        

                        16,418

                        

                        

                        16,746

                        

                        

                        13,997Occupancy, equipment and data processing expense

                        

                        

                        6,244

                        

                        

                        6,084

                        

                        

                        5,470Marketing and professional fees

                        

                        

                        2,743

                        

                        

                        2,986

                        

                        

                        3,224Deposit insurance premiums

                        

                        

                        1,082

                        

                        

                        74

                        

                        

                        66Louisiana shares tax

                        

                        

                        567

                        

                        

                        666

                        

                        

                        535Other operating expenses

                        

                        

                        4,318

                        

                        

                        4,184

                        

                        

                        4,172TOTAL NON-INTEREST EXPENSE

                        

                        

                        31,372

                        

                        

                        30,740

                        

                        

                        27,464INCOME BEFORE INCOME TAXES

                        

                        

                        10,394

                        

                        

                        7,756

                        

                        

                        9,851INCOME TAXES

                        

                        

                        3,258

                        

                        

                        2,047

                        

                        

                        3,170NET INCOME

                        

                        $

                        7,136

                        

                        $

                        5,709

                        

                        $

                        6,681BASIC INCOME PER COMMON SHARE

                        

                        $

                        3.38

                        

                        $

                        2.65

                        

                        $

                        3.01DILUTED INCOME PER COMMON SHARE

                        

                        $

                        3.36

                        

                        $

                        2.63

                        

                        $

                        2.94DIVIDENDS PER SHARE

                        

                        $

                        1.41

                        

                        $

                        1.37

                        

                        $

                        1.26
   See notes to consolidated financial statements.
 20
 
 **TECHE HOLDING COMPANY AND SUBSIDIARY** CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Years Ended September 30, 2009, 2008 and 2007  AccumulatedAdditional

                        

                        

                        

                        

                        Unearned

                        

                        

                        

                        

                        OtherCommon

                        

                        Paid-in

                        

                        Retained

                        

                        ESOP

                        

                        Treasury

                        

                        ComprehensiveStock

                        

                        Capital

                        

                        Earnings

                        

                        Shares

                        

                        Stock

                        

                        Loss

                        

                        Total(Dollars in thousands, except per share amountsBALANCE – October 1, 2006

                        

                        $

                        46

                        

                        $

                        50,334

                        

                        $

                        58,748

                        

                        $

                        —

                        

                        $

                        (43,951

                        )

                        $

                        (1,248

                        )

                        $

                        63,929Exercise of stock options, including tax benefit

                        

                        

                        —

                        

                        

                        642

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        642Stock based compensation

                        

                        

                        —

                        

                        

                        390

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        390Purchase of common stock for treasury

                        

                        

                        

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        (2,098

                        )

                        

                        —

                        

                        

                        (2,098

                        )Dividends declared - $1.26 per share

                        

                        

                        —

                        

                        

                        —

                        

                        

                        (2,783

                        )

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        (2,783

                        )Comprehensive income:Net income

                        

                        

                        —

                        

                        

                        —

                        

                        

                        6,681

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        6,681Change in unrealized loss on securities available-for-sale, net

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        245

                        

                        

                        245Total comprehensive income

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        6,926BALANCE - September 30, 2007

                        

                        

                        46

                        

                        

                        51,366

                        

                        

                        62,646

                        

                        

                        —

                        

                        

                        (46,049

                        )

                        

                        (1,003

                        )

                        

                        67,006Exercise of stock options, including tax benefit

                        

                        

                        1

                        

                        

                        256

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        257Stock based compensation

                        

                        

                        —

                        

                        

                        351

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        351Cumulative effect adjustment

                        

                        

                        —

                        

                        

                        —

                        

                        

                        208

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        208Purchase of common stock for treasury

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        (3,264

                        )

                        

                        —

                        

                        

                        (3,264

                        )Dividends declared - $1.37 per share

                        

                        

                        —

                        

                        

                        —

                        

                        

                        (2,963

                        )

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        (2,963

                        )Comprehensive income:Net income

                        

                        

                        —

                        

                        

                        —

                        

                        

                        5,709

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        5,709Change in unrealized loss on securities available-for-sale, net

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        740

                        

                        

                        740Total comprehensive income

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        6,449BALANCE - September 30, 2008

                        

                        

                        47

                        

                        

                        51,973

                        

                        

                        65,600

                        

                        

                        —

                        

                        

                        (49,313

                        )

                        

                        (263

                        )

                        

                        68,044Unearned ESOP compensation

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        (586

                        )

                        

                        —

                        

                        

                        —

                        

                        

                        (586

                        )Exercise of stock options, including tax benefit

                        

                        

                        —

                        

                        

                        14

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        14Tax effect of restricted stock vesting

                        

                        

                        —

                        

                        

                        (28

                        )

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        (28

                        )Stock based compensation

                        

                        

                        —

                        

                        

                        326

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        326Purchase of common stock for treasury

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        (921

                        )

                        

                        —

                        

                        

                        (921

                        )Dividends declared - $1.41 per share

                        

                        

                        —

                        

                        

                        —

                        

                        

                        (2,950

                        )

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        (2,950

                        )Comprehensive income:Net income

                        

                        

                        —

                        

                        

                        —

                        

                        

                        7,136

                        

                        

                        —

                        

                        

                        —

                        

                        

                        —

                        

                        

                        7,136Accumulated other comprehensive income, net (Note 12)

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        450

                        

                        

                        450Total comprehensive income

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        7,586BALANCE - September 30, 2009

                        

                        $

                        47

                        

                        $

                        52,285

                        

                        $

                        69,786

                        

                        $

                        (586

                        )

                        $

                        (50,234

                        )

                        $

                        187

                        

                        $

                        71,485
   See notes to consolidated financial statements.
 21
 
   TECHE HOLDING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended September 30, 2009, 2008 and 2007    2009

                        

                        2008

                        

                        2007(Dollars in thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income

                        

                        $

                        7,136

                        

                        $

                        5,709

                        

                        $

                        6,681Adjustments to reconcile net incometo net cash provided by operating activities:(Accretion of discount) amortization of premiumon investments and mortgage-backed securities

                        

                        

                        (295

                        )

                        

                        37

                        

                        

                        290Provision for loan losses

                        

                        

                        3,026

                        

                        

                        825

                        

                        

                        605Provision for loss on real estate owned

                        

                        

                        221

                        

                        

                        54

                        

                        

                        179Stock-based compensation

                        

                        

                        326

                        

                        

                        351

                        

                        

                        390Deferred income tax (benefit) expense

                        

                        

                        (925

                        )

                        

                        58

                        

                        

                        (554

                        )(Gain) Loss on sale of loans

                        

                        

                        (559

                        )

                        

                        172

                        

                        

                        —(Gain) Loss on sale and impairment of equity securities

                        

                        

                        99

                        

                        

                        2,580

                        

                        

                        (164

                        )Gains on sale of premises and equipment

                        

                        

                        (10

                        )

                        

                        (1

                        )

                        

                        (3

                        )(Gain) loss on sale of real estate owned

                        

                        

                        16

                        

                        

                        38

                        

                        

                        (36

                        )Impairment of securities

                        

                        

                        936

                        

                        

                        408

                        

                        

                        —Depreciation

                        

                        

                        1,536

                        

                        

                        1,533

                        

                        

                        1,333Increase in bank owned life insurance

                        

                        

                        (597

                        )

                        

                        (635

                        )

                        

                        (597

                        )Amortization of intangible assets

                        

                        

                        41

                        

                        

                        54

                        

                        

                        70Change in prepaid expenses and other assets

                        

                        

                        308

                        

                        

                        (1,379

                        )

                        

                        (68

                        )Change in accrued interest receivable

                        

                        

                        349

                        

                        

                        109

                        

                        

                        (250

                        )Change in accounts payable and other liabilities

                        

                        

                        725

                        

                        

                        410

                        

                        

                        (955

                        )Change in accrued interest payable

                        

                        

                        (132

                        )

                        

                        (566

                        )

                        

                        18Other, net

                        

                        

                        775

                        

                        

                        (287

                        )

                        

                        2,028NET CASH PROVIDED BY OPERATINGACTIVITIES

                        

                        

                        12,976

                        

                        

                        9,470

                        

                        

                        8,967CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sales of investment securitiesavailable-for-sale

                        

                        

                        201

                        

                        

                        2,357

                        

                        

                        1,527Purchase of securities available-for-sale

                        

                        

                        (12

                        )

                        

                        (499

                        )

                        

                        (266

                        )Principal repayments on securities available-for-sale

                        

                        

                        6,299

                        

                        

                        10,311

                        

                        

                        10,704Purchase of securities held-to-maturity

                        

                        

                        (33,954

                        )

                        

                        (18,374

                        )

                        

                        —Principal repayments on securities held-to-maturity

                        

                        

                        11,855

                        

                        

                        6,743

                        

                        

                        6,875Net loan originations

                        

                        

                        (33,056

                        )

                        

                        (62,811

                        )

                        

                        (27,042

                        )Purchase of loans

                        

                        

                        (4,684

                        )

                        

                        (3,474

                        )

                        

                        (16,354

                        )Proceeds from sales of loans

                        

                        

                        28,654

                        

                        

                        42,952

                        

                        

                        —Investment in FHLB stock, net

                        

                        

                        (299

                        )

                        

                        (421

                        )

                        

                        (158

                        )Purchase of premises and equipment

                        

                        

                        (1,855

                        )

                        

                        (2,287

                        )

                        

                        (7,663

                        )Proceeds from sale of premises and equipment

                        

                        

                        10

                        

                        

                        1

                        

                        

                        3Proceeds from sale of real estate owned

                        

                        

                        350

                        

                        

                        855

                        

                        

                        1,288NET CASH USED IN INVESTING ACTIVITIES

                        

                        

                        (26,491

                        )

                        

                        (24,647

                        )

                        

                        (31,086

                        )
     See notes to consolidated financial statements.
 22
 
 
 TECHE HOLDING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended September 30, 2009, 2008 and 2007  2009

                        

                        2008

                        

                        2007(Dollars in thousands)CASH FLOWS FROM FINANCING ACTIVITIES:Dividends paid

                        

                        $

                        (2,950

                        )

                        $

                        (2,963

                        )

                        $

                        (2,783

                        )Loan to ESOP

                        

                        

                        (586

                        )

                        

                        —

                        

                        

                        —Net increase (decrease) in deposits

                        

                        

                        (3,759

                        )

                        

                        33,659

                        

                        

                        18,020Proceeds of long-term FHLB advances

                        

                        

                        5,000

                        

                        

                        43,000

                        

                        

                        —Repayment of long-term FHLB advances

                        

                        

                        (9,249

                        )

                        

                        (5,379

                        )

                        

                        (5,130

                        )Net increase (decrease) in short-term FHLB advances

                        

                        

                        —

                        

                        

                        (22,500

                        )

                        

                        17,500Cash paid for purchase of common stock for treasury

                        

                        

                        (921

                        )

                        

                        (3,264

                        )

                        

                        (2,098

                        )Proceeds from exercise of stock options

                        

                        

                        14

                        

                        

                        107

                        

                        

                        444Excess tax benefit (expense)from share-based paymentArrangements

                        

                        

                        (28

                        )

                        

                        150

                        

                        

                        198Change in advance payments byborrowers for taxes and insurance

                        

                        

                        (443

                        )

                        

                        668

                        

                        

                        251NET CASH (USED) PROVIDEDBY FINANCING ACTIVITIES

                        

                        

                        (12,922

                        )

                        

                        43,478

                        

                        

                        26,402NET (DECREASE) INCREASE INCASH AND CASH EQUIVALENTS

                        

                        

                        (26,437

                        )

                        

                        28,301

                        

                        

                        4,283CASH AND CASH EQUIVALENTSBeginning of year

                        

                        

                        50,112

                        

                        

                        21,811

                        

                        

                        17,528CASH AND CASH EQUIVALENTSEnd of year

                        

                        $

                        23,675

                        

                        $

                        50,112

                        

                        $

                        21,811SUPPLEMENTAL DISCLOSURE OF CASHFLOW INFORMATION:Cash paid for interest

                        

                        $

                        15,429

                        

                        $

                        20,299

                        

                        $

                        19,875Cash paid for taxes

                        

                        $

                        3,800

                        

                        $

                        2,675

                        

                        $

                        2,600SUPPLEMENTAL SCHEDULE OF NON-CASHINVESTING ACTIVITIES:Accumulated other comprehensive income,

                        

                        $

                        450

                        

                        $

                        740

                        

                        $

                        245net of income taxesTransfer from loans to real estate owned

                        

                        $

                        2,212

                        

                        $

                        727

                        

                        $

                        1,600Loans originated to sell real estate owned

                        

                        $

                        15

                        

                        $

                        620

                        

                        $

                        17Investment securities received from Ultra Short AMFFund Redemption

                        

                        $

                        —

                        

                        

                        11,193

                        

                        $

                        —Cumulative effect adjustment (Note 1)

                        

                        $

                        —

                        

                        

                        208

                        

                        $

                        —
   See notes to consolidated financial statements.
 23
 
 TECHE HOLDING COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)
 1.

                        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 The significant accounting policies of the Company are described below. Principles of Consolidation -The consolidated financial statements include the accounts of Teche Holding Company and its wholly-owned subsidiary, Teche Federal Bank (collectively “the Company”). All significant intercompany balances and transactions have been eliminated in consolidation. The Company operates principally in the community savings bank
            segment by attracting deposits from the general public and using such deposits primarily to originate loans. These loans include those secured by first mortgages on owner-occupied, family residences as well as home improvement and other consumer loans. The Company also makes commercial mortgage loans. Concentrations of Credit Risk –The Company makes loans to individuals and small businesses located primarily in southern Louisiana for various personal and commercial purposes. The Company has a diversified loan portfolio and the borrowers’ ability to repay their loans is not directly dependent upon any specific economic sector. The Company will from
            time to time purchase loans from outside the market area. Use of Estimates -The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
            period. Actual results could differ from those estimates. Cash and Cash Equivalents -Cash and cash equivalents comprise cash on hand and non-interest bearing and interest bearing demand deposits with other financial institutions. The Company is required to maintain certain cash reserves relating to its deposit liabilities. Securities -Securities are classified as held-to-maturity or available-for-sale. Management determines the classification of securities when they are purchased and reevaluates this classification periodically as conditions change that could require reclassification. Securities which the Company both positively intends and has the ability to hold to maturity are classified as securities held-to-maturity and are carried at amortized cost. Intent and ability to hold are not considered satisfied when a security is available to be sold in response to changes in interest rates, prepayment rates, liquidity needs or other reasons as part of an overall asset/liability
            management strategy. Securities not meeting the criteria to be classified as securities held-to-maturity are classified as available-for-sale and are carried at fair value. Net unrealized holding gains or losses are excluded from net income and are recognized, net of income taxes, in other comprehensive income and in accumulated other comprehensive income, a separate component of stockholders’ equity. Premiums and discounts on securities, both those held-to-maturity and those available-for-sale, are amortized and accreted to income as an adjustment to the securities’ yields using the interest method. Realized gains and losses on securities, including declines in value judged to be other than temporary, are reported as a component of income. The cost of securities sold is specifically
            identified for use in calculating realized gains and losses.  
 24
 
  ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)   If the fair value of a security is below its amortized cost basis at the quarter end, the security is evaluated for other-than-temporary impairment (OTTI).For debt securities, we consider our intention to sell the security. If we do not intend on selling the security, then we evaluate whether it is more likely than not we will be required to sell the security before recovery of the securities
            amortized cost. If we fail either of those tests, then we record OTTI for the affected security equal to the difference between the fair value and amortized cost. If it is more likely than not we will be required to sell the debt security, then we go to the next step to determine if OTTI exists. In determining if OTTI exists, management considers: (1) the length of time and the extent to which the fair value has been less than cost, (2) Adverse conditions related to the security, industry or geographic area, (3) the financial condition and near-term prospects
            of the issuer, (4) failure of the issuer to make schedule interest or principal payments and the outlook for receiving the contractual cash flows of the investments, (5) changes in the rating of the security and (6) historical and subsequent volatility of fair value of the security. If these conditions provide an indication of a reduction in expected cash flows, then cash flows are evaluated to determine the amount of credit related impairment. If a debt security is an investment in
            a beneficial interest security and it is rated below AA, cash flows are evaluated for a decrease in expected cash flows and related credit impairment. If OTTI has been identified, the credit related impairment, to the extent it does not reduce the security below fair value, is charged to earnings and the credit-related impairment is adjusted through other comprehensive income for both held to maturity and available for sales securities. For marketable equity securities, the Company evaluates its ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Evidence considered to determine anticipated recovery are analysts reports on the issuer and the financial condition of the issuer or the industry If OTTI is identified, the security is adjusted to fair value
            through a charge to earnings. During the year ended September 30, 2009, the Company recognized non-credit impairment charges in other comprehensive loss related to certain held-to-maturity securities. The cumulative amount of these charges created a separate accumulated other comprehensive loss for held to maturity securities. This accumulated other comprehensive loss will be accreted to other comprehensive income over the
            remaining life of the security in a prospective manner on the basis of the amount and timing of future estimated cash flows.. See Note 3 for further discussion of other-than-temporary impairments on investment securities, and Note 12 for more information on impairment losses recognized in Other Comprehensive Income (Loss). Loans Receivable -Loans receivable are stated at the unpaid principal balances, less the allowance for loan losses, net deferred loan fees, and unearned premiums and discounts. The unearned premiums and discounts relate principally to purchased loans. Interest on loans is credited to income based on the principal amount outstanding using the interest
            method. When doubt exists as to collectability of a loan (typically 90 days delinquent or impaired), the loan is placed on non-accrual status. When a loan is placed on non-accrual status, interest accrued prior to the judgment of uncollectibility is reversed from income. Loans are returned to an accruing status only as payments are received and when collection of all principal and interest is no longer in
            doubt. Payments received on such non-accrual loans are applied first to outstanding loan amounts and next as recovery of lost interest. 25
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)  The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Company’s impaired loans include troubled debt restructurings and non-homogeneous loans in which full payment of all scheduled amounts due is not
                expected. The Company calculates a reserve required for impaired loans based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of its collateral if the loan is collateral dependent.
 Allowance for Loan Losses -The allowance for loan losses is a valuation allowance available for losses incurred on loans. Any losses are charged to the allowance for loan losses when the loss actually occurs. Recoveries are credited to the allowance at the time of recovery. Management estimates the likely level of losses to determine whether the allowance for loan losses is adequate to absorb probable losses inherent in the existing portfolio. Based on these estimates, an amount is charged to or recovered from the provision for loan losses and credited or debited to the allowance for loan losses in order to adjust the allowance to a level determined to be adequate to
            absorb such losses. Management’s judgment as to the level of losses on existing loans involves the consideration of current economic conditions and their potential effects on specific borrowers; an evaluation of the existing relationships among loans, known and inherent risks in the loan portfolio, and the present level of the allowance; results of examination of the loan portfolio by regulatory agencies; and
            management’s internal review of the loan portfolio. In determining the collectability of certain loans, management also considers the fair value of any underlying collateral. It should be understood that estimates of loan losses involve an exercise of judgment. While it is possible that in particular periods the Company may sustain losses which are substantially different from the allowance for loan losses, it is the judgment of management that the allowance for loan losses reflected in the consolidated balance sheets is adequate to absorb probable losses inherent in the
            loan portfolio. Loan Fees, Loan Costs, Discounts and Premiums -Loan origination fees, certain direct loan origination costs and discounts and premiums on loans are deferred and amortized as an adjustment to the related loan’s yield using the interest method over the contractual life of the loan. Federal Home Loan Bank Stock -Federal Home Loan Bank (FHLB) stock is recorded at cost and is periodically reviewed for impairment. The Company owns stock in the FHLB of Dallas in order to gain access to cost effective funding and liquidity sources. The Company considers the capital position of the FHLB of Dallas, recent redemptions of the common stock when
            considering whether or not the investment is impaired. As of September 30, 2009, the FHLB of Dallas was in compliance with its regulatory capital requirements, and was still redeeming excess activity-based common stock, therefore the Company concluded that the investment was not impaired. The FHLB received a rating of Aaa which reflects its consistent risk-adjusted earnings, superior asset quality, and unique position as a key funding source to its member institutions, as well as
            the substantial support of the U.S. Government. No ready market exists for the FHLB stock. It has no quoted market value and is carried at cost. Cost approximates fair market value based upon the redemption requirements of the FHLB, which require redemption at par.  6
  
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)
 Goodwill -Goodwill does not require amortization but is subject to at least an annual assessment for impairment, unless interim events or circumstances make it more likely than not that an impairment loss has occurred. Impairment is defined as that amount by which the implied fair value of the goodwill is less than the goodwill’s carrying
            value. Impairment losses would be charged to operating expense. The existing goodwill is not deductible for income tax purposes. For the purposes of evaluating goodwill, theCompany has determined that it operates only one reporting unit. The Company has performed its annual test as of September 30, 2009 for goodwill and has determined that goodwill is not impaired. Core Deposit Intangible -The core deposit intangible with a cost of $520 and accumulated amortization of $452, and $411 at September 30, 2009, and 2008, respectively, is included in prepaid expenses and other assets on the consolidated balance sheets. Premises and Equipment -Land is carried at cost. Buildings and equipment are carried at cost less accumulated depreciation. The Company computes depreciation generally on the straight-line method for financial reporting. The estimated useful lives used to compute depreciation are: buildings and improvements, twenty to forty years; and furniture, fixtures and
            equipment, three to ten years. Real Estate Owned -Real estate acquired through, or in lieu of, foreclosure is initially recorded at the fair value at the time of foreclosure, less estimated selling cost, and any related writedown is charged to the allowance for loan losses. Valuations are periodically performed by management and provisions for estimated losses on real estate owned are charged
            to income when fair value is determined to be less than the carrying value. Costs relative to the development and improvement of properties are capitalized to the extent realizable, whereas, ordinary upkeep disbursements are charged to expense. The ability of the Company to recover the carrying value of real estate is based upon future sales of the real estate owned. The ability to affect such sales is subject to market conditions and other factors, many of which are beyond the
            Company’s control. Operating income of such properties, net of related expenses, and gains and losses on their disposition are included in the accompanying consolidated statements of income. Life Insurance Contracts -Life insurance contracts represent single premium life insurance contracts on the lives of certain officers of the Company. The Company is the beneficiary of these policies. These contracts are reported at their cash surrender value and changes in the cash surrender value are included in other non-interest income. Defined Benefit Plan -The expense of the multi-employer defined benefit plans in which the Company participates equals the amount of contributions required by the Company. In June 2008, the Company settled and transferred the obligations of its defined benefit plans to Hartford Insurance Co., resulting in a pre-tax charge of approximately $1,500. Income Taxes -The Company follows the practice of filing a consolidated federal return. Income taxes are allocated to each company as if filed separately for federal purposes. Certain items of income and expense for financial reporting are recognized differently for income tax purposes (principally the provision for loan losses and depreciation). Provisions for deferred taxes are made in recognition of such temporary differences using the liability method. Current income taxes are recorded based on amounts due with the current income tax returns. The need for a valuation
            allowance is considered when it is determined more likely than not that a deferred tax asset will not be realized.   27
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)  The Company accounts for penalties and interest related to income tax liabilities as a component of other expense. The Company and its subsidiaries’ tax filings for the years ended September 30, 2005 through 2008 are currently open to audit under statutes of limitation by the Internal Revenue Service.
  Income Per Share -Basic net income per common share (EPS) is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Shares controlled by the ESOP are not considered in the weighted average shares outstanding until the shares are committed for allocation to an employee’s individual account.
            Diluted EPS reflects the potential dilution that couldoccur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the net income of the Company. Diluted EPS is computed by dividing net income by the total of the weighted-average number of shares outstanding plus the effect of outstanding options and stock grants. The dilution effect of stock options and stock grants
            is determined using the treasury stock method. The effect of any anti-dilutive common stock equivalents is excluded from the diluted EPS computation. Comprehensive Income -Comprehensive income includes net income and other comprehensive income or loss, which in the case of the Company includes only unrealized gains and losses on securities available-for-sale, net of related income taxes. Stock-Based Compensation -The Company recognizes the cost of employee services received in exchange for an award of equity instruments in the financial statements over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period). It also requires measurement of the cost
            of employee services received in exchange for an award based on the grant date fair value of the award. Excess tax benefits are reported as financing cash inflows, rather than as a reduction of taxes paid, which is included within operating cash flows.  New Accounting Pronouncements  On June 29, 2009, the FASB issued an accounting pronouncement establishing the FASB Accounting Standards CodificationTM (the “ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities. This pronouncement was effective for financial statements issued for interim and annual periods
            ending after September 15, 2009, for most entities. On the effective date, all non-SEC accounting and reporting standards will be superceded. The Company adopted this new accounting pronouncement for the year ended September 30, 2009, as required, and adoption did not have a material impact on the Company’s financial statements taken as a whole. FASB 141(R) (ASC 805) FASB No. 141(R) –Business Combinations, which is a revision to Statement No. 141, changes the way that acquiring entities will account for business combinations. Some of the more significant changes are that the equity securities issued as consideration will be valued at the date that the acquirer takes control of assets and assumes
            liabilities of the acquired company (typically would be the date of closing), and that direct costs of the acquisition will be expensed as incurred rather than capitalized. This statement was effective for transactions closing on or after January 1, 2009. Adoption of this standard did not have an impact on the consolidated financial statements but will impact the accounting for future business combinations.     28
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)  FASB 160 (ASC 810) FASB No. 160 –Non-controlling Interests in Consolidated Financial Statements, which improves the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report non-controlling (minority) interests in subsidiaries in the same way as equity in the consolidated financial
                statements. Moreover, SFAS 160 eliminates the diversity that currently exists in accounting for transactions between an entity and non-controlling interests by requiring they be treated as equity transactions. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The effective date of this statement is the same as that of the related SFAS 141(R). This statement shall
                be applied prospectively as of the beginning of the fiscal year in which this statement is initially applied, except for the presentation and disclosure requirements. The presentation and disclosure requirements shall be applied retrospectively for all periods presented. The Company has determined that this standard will have no impact on its consolidated financial statements.
 EITF 99-20-1(ASC 325) In January of 2009 the FASB issued FASB Staff Position (FSP) EITF 99-20-1,Amendments to the Impairment Guidance of EITF Issue No. 99-20. This FSP amends the impairment guidance in EITF Issue No. 99-20,Recognition of Interest Income and Impairment on Purchased Beneficial interests and Beneficial Interests That Continue to Be
            Held by a Transferor in Securitized Financial Assets. The FASB believes this guidance will achieve a more consistent determination of whether an other-than-temporary impairment has occurred. The FSP also retains and emphasizes the objective of an other-than-temporary impairment assessment and the related disclosure requirements in ASC 320-10,Investments-Debt and Equity Securities, and other related
            guidance. The amendment to EITF 99-20 removed the requirement that other-than-temporary impairment be measured using exclusively estimated cash flows expected by market participants, rather than permitting the use of reasonable management judgment of the probability that the holder will be unable to collect all amounts due. The Company has adopted FSP EITF 99-20-1 as of December 31, 2008 and applied its guidance in the determination of other-than-temporary impairment for securities
            within its scope. FSP FAS 157-4  (ASC 820) The FASB has issued FASB Staff Position (FSP) FAS 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This FSP affirms that the objective of fair value when the market for an asset is not active is the price that would be
            received to sell the asset in an orderly transaction. The FSP clarifies and includes additional factors for determining whether there has been a significant decrease in market activity for an asset when the market for that asset is not active. The FSP requires an entity to base its conclusion about whether a transaction was not orderly on the weight of the evidence. The FSP includes an example that provides additional explanation on estimating fair value when the market activity for
            an asset has declined significantly. The FSP requires an entity to disclose a change in valuation technique (and the related inputs) resulting from the application of the FSP and to quantify its effects, if practicable. The FSP applies to all fair value measurements when appropriate. FSP FAS 157-4 must be applied prospectively and retrospective application is not permitted. FSP FAS 157-4 is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity early adopting FSP FAS 157-4 must also early adopt FSP FAS 115-2 and FAS 124-2,Recognition and Presentation of
            Other-Than-Temporary Impairment.Adoption of this statement did not have a material impact on the consolidated financial statements.     29
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)  FAS 115-2 and FAS 124-2 (ASC 320) The FASB has issued FSP FAS 115-2 and FAS 124-2,Recognition and Presentation of Other-Than-Temporary Impairments. This FSP changes existing guidance for determining whether an impairment is other than temporary to debt securities. This FSP replaces the existing requirement that the entity’s management assert it has both the intent and
                ability to hold an impaired security until recovery with a requirement that management assert: (a) it does not have the intent to sell the security; and (b) it is more likely than not it will not have to sell the security before recovery of its cost basis. This FSP incorporates examples of factors from existing literature that should be considered in determining whether a debt
                security is other-than-temporarily impaired. This FSP requires that an entity recognize noncredit losses on held-to-maturity debt securities in other comprehensive income and amortize that amount over the remaining life of the security in a prospective manner by offsetting the recorded value of the asset unless the security is subsequently sold or there are additional credit losses. This FSP requires an entity to present the total other-than-temporary impairment in the statement
                of earnings with an offset for the amount recognized in other comprehensive income; and when adopting FSP FAS 115-2 and FAS 124-2, an entity is required to record a cumulative-effect adjustment as of the beginning of the period of adoption to reclassify the noncredit component of a previously recognized other-temporary impairment from retained earnings to accumulated other comprehensive income if the entity does not intend to sell the security and it is not more likely than not
                that the entity will be required to sell the security before recovery.
 FSP FAS 115-2 and FAS 124-2 were adopted as of June 30, 2009. The adoption did impact the presentation of the other-than-temporary impairment in the income statement and substantially increased disclosures in the consolidated financial statements. FAS 107-1 and APB 28-1 (AC 825) The FASB has issued FSP FAS 107-1 and APB 28-1,Interim Disclosures about Fair Value of Financial Instruments. This FSP amends FASB Statement No. 107,Disclosures about Fair Value of Financial Instruments, to require an entity to provide disclosures about fair value of financial instruments in
            interim financial information. This FSP also amends APB Opinion No. 28,Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. Under this FSP, a publicly traded company shall include disclosures about the fair value of its financial instruments whenever it issues summarized financial information for interim reporting periods. In addition, an entity shall disclose
            in the body or in the accompanying notes of its summarized financial information for interim reporting periods and in its financial statements for annual reporting periods the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not recognized in the statement of financial position, as required by Statement 107. FSP 107-1 and APB 28-1 were effective for interim periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The impact of this pronouncement was additional fair value disclosures in the footnotes to the interim consolidated financial statements.  
 30
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS** ***Years Ended September 30, 2009, 2008 and 2007*** **(in thousands except share and per share data)**   FASB 165 (ASC 155)  In May 2009, the FASB issued SFAS No. 165,Subsequent Events, which establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires entities to disclose the date through which it has evaluated
                subsequent events and the basis for that date. SFAS 165 is effective for interim and annual periods ending after June 15, 2009. SFAS 165 was effective for the Company as of June 30, 2009. The adoption of SFAS 165 did not have a material impact on our financial condition, or results of operations. The adoption added a disclosure of the date through which subsequent events were considered and did not have a significant impact on our disclosures.
 FAS 166 (ASC 860) is a revision to FAS 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and will require more information about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to
            transferred financial assets. FAS 166 also eliminates the concept of aqualifying special-purpose entity, and changes the requirements for derecognizing financial assets and requires additional disclosures. FAS 167 (ASC 810) is a revision to FASB Interpretation No. 46(R),Consolidation of Variable Interest Entities, and changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is
            required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. Both FAS 166 and FAS 167 will be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The recognition and measurement provisions of FAS 166 shall be applied to transfers
            that occur on or after the effective date. FASB 168 (ASC 105) In September 2009, the Company adopted the provisions of FASB 168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of the FASB 162. The FASB Accounting Standards Codification (“Codification”) has become the source of authoritative
            US generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants, which include the Company. The Codification supersedes all existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification has
            therefore become nonauthoritative. The Company does not anticipate the adoption of those standards will have an impact on our consolidated financial statements. 
 31
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)
 2.

                        INTEREST RATE RISK
 The Company is engaged principally in providing first mortgage and other types of loans to individuals and businesses. The shorter duration of interest-sensitive liabilities indicates that in a rising rate environment the Company is exposed to interest rate risk because liabilities may be re-pricing faster at higher interest rates, thereby reducing the market value of long-term assets and net interest
            income. In a falling rate environment the market value of long-term assets and net interest income may be increased.  Management has the intent to hold loans and has strategies to hedge interest rate risk. Management continues to price long-term fixed rate loan products 25bp’s to 50bp’s above market rates and recently reduced originations of 30 year fixed rate loans. Additionally, management is pricing CD specials in the longer-term products and continues to focus on consumer and commercial loans,
            checking, savings and money market deposits to manage interest rate risk. Management may periodically decide to sell loans to manage changes in interest rates.  The Banks interest rate risk position is currently within the limits established by the Board of Directors.  3.

                        SECURITIES
 The amortized cost and estimated fair values of securities available-for-sale are as follows:  September 30, 2009Gross

                        

                        Gross

                        

                        EstimatedAmortized Cost

                        

                        Unrealized Gains

                        

                        Unrealized Losses

                        

                        Fair

                            ValueMortgage-backed securities:Government National Mortgage Association

                        

                        $

                        2,508

                        

                        $

                        41

                        

                        $

                        -

                        

                        $

                        2,549Federal Home Loan Mortgage Corporation

                        

                        

                        8,187

                        

                        

                        139

                        

                        

                        (4

                        )

                        

                        8,322Federal National Mortgage Association

                        

                        

                        5,809

                        

                        

                        211

                        

                        

                        -

                        

                        

                        6,02016,504

                        

                        

                        391

                        

                        

                        (4

                        )

                        

                        16,891Collateralized mortgage obligationsCMO’s:Government National Mortgage Association

                        

                        

                        3,181

                        

                        

                        136

                        

                        

                        -

                        

                        

                        3,317Marketable equity securities

                        

                        

                        592

                        

                        

                        159

                        

                        

                        (23

                        )

                        

                        728Total

                        

                        $

                        20,277

                        

                        $

                        686

                        

                        $

                        (27

                        )

                        $

                        20,936
         32
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)   September 30, 2008Gross

                            

                            Gross

                            

                            EstimatedAmortized Cost

                            

                            Unrealized Gains

                            

                            Unrealized Losses

                            

                            Fair

                                ValueInvestment securities:Municipal obligations

                            

                            $

                            19

                            

                            $

                            -

                            

                            $

                            -

                            

                            $

                            19Mortgage-backed securities:Government National Mortgage Association

                            

                            

                            3,150

                            

                            

                            9

                            

                            

                            (4

                            )

                            

                            3,155Federal Home Loan Mortgage Corporation

                            

                            

                            11,579

                            

                            

                            7

                            

                            

                            (127

                            )

                            

                            11,459Federal National Mortgage Association

                            

                            

                            7,337

                            

                            

                            4

                            

                            

                            (253

                            )

                            

                            7,08822,066

                            

                            

                            20

                            

                            

                            (384

                            )

                            

                            21,702Collateralized mortgage obligationsCMO’s:Government National Mortgage Association

                            

                            

                            4,009

                            

                            

                            --

                            

                            

                            (86

                            )

                            

                            3,923Marketable equity securities

                            

                            

                            957

                            

                            

                            177

                            

                            

                            (126

                            )

                            

                            1,008$

                            27,051

                            

                            $

                            197

                            

                            $

                            (596

                            )

                            $

                            26,652
  The amortized cost and estimated fair values of securities held-to-maturity are as follows:   September 30, 2009Gross

                        

                        Gross

                        

                        EstimatedAmortized Cost

                        

                        Unrealized Gains

                        

                        Unrealized Losses

                        

                        Fair

                            ValueInvestment securities:Federal Home Loan Bank

                        

                        $

                        16,476

                        

                        $

                        97

                        

                        $

                        -

                        

                        $

                        16,573Time deposits other banks

                        

                        

                        17,049

                        

                        

                        24

                        

                        

                        -

                        

                        

                        17,073Mortgage-backed securities:Federal National Mortgage Association

                        

                        

                        24,658

                        

                        

                        1,212

                        

                        

                        (1

                        )

                        

                        25,869Federal Home Loan Mortgage Corporation

                        

                        

                        10,770

                        

                        

                        709

                        

                        

                        -

                        

                        

                        11,479Private Label

                        

                        

                        2,572

                        

                        

                        146

                        

                        

                        (588

                        )

                        

                        2,130CMOs:Federal Home Loan Mortgage Corporation

                        

                        

                        341

                        

                        

                        6

                        

                        

                        -

                        

                        

                        347Federal National Mortgage Association

                        

                        

                        1,843

                        

                        

                        63

                        

                        

                        -

                        

                        

                        1,906Private Label

                        

                        

                        1,675

                        

                        

                        40

                        

                        

                        (205

                        )

                        

                        1,510$

                        75,384

                        

                        $

                        2,297

                        

                        $

                        (794

                        )

                        $

                        76,887
      33
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)    September 30, 2008Gross

                            

                            Gross

                            

                            EstimatedAmortized Cost

                            

                            Unrealized Gains

                            

                            Unrealized Losses

                            

                            Fair

                                ValueMortgage-backed securitiesFederal National Mortgage Association

                            

                            $

                            31,419

                            

                            $

                            12

                            

                            $

                            (313

                            )

                            $

                            31,118Federal Home Loan Mortgage Corporation

                            

                            

                            13,883

                            

                            

                            142

                            

                            

                            (24

                            )

                            

                            14,001Private Label

                            

                            

                            3,621

                            

                            

                            15

                            

                            

                            (303

                            )

                            

                            3,333CMOs:Federal Home Loan Mortgage Corporation

                            

                            

                            425

                            

                            

                            -

                            

                            

                            (12

                            )

                            

                            413Federal National Mortgage Association

                            

                            

                            2,083

                            

                            

                            27

                            

                            

                            (35

                            )

                            

                            2,075Private Label

                            

                            

                            2,860

                            

                            

                            3

                            

                            

                            (15

                            )

                            

                            2,848$

                            54,291

                            

                            $

                            199

                            

                            $

                            (702

                            )

                            $

                            53,788
 Details concerning securities with unrealized losses as of September 30, 2009 are as follows:  Securities with losses

                        

                        Securities with lossesunder 12 months

                        

                        over 12 months

                        

                        TotalFair value

                        

                        Gross
                            unrealized
                            losses

                        

                        Fair value

                        

                        Gross
                            unrealized
                            losses

                        

                        Fair value

                        

                        Gross
                            unrealized
                            lossesAvailable-for-saleFederal Home Loan MortgageCorporation

                        

                        $

                        1,463

                        

                        $

                        (4

                        )

                        $

                        —

                        

                        $

                        —

                        

                        $

                        1,463

                        

                        $

                        (4

                        )Marketable equity securities

                        

                        

                        64

                        

                        

                        (12

                        )

                        

                        11

                        

                        

                        (11

                        )

                        

                        75

                        

                        

                        (23

                        )$

                        1,527

                        

                        $

                        (16

                        )

                        $

                        11

                        

                        $

                        (11

                        )

                        $

                        1,538

                        

                        $

                        (27

                        )
   Securities with losses

                        

                        Securities with lossesunder 12 months

                        

                        over 12 months

                        

                        TotalFair value

                        

                        Gross
                            unrealized
                            losses

                        

                        Fair value

                        

                        Gross
                            unrealized
                            losses

                        

                        Fair value

                        

                        Gross
                            unrealized

                            lossesHeld-to-maturityInvestment securitiesFederal Home Loan Bank

                        

                        $

                        —

                        

                        $

                        —

                        

                        $

                        —

                        

                        $

                        —

                        

                        $

                        —

                        

                        $

                        —Time deposits other banksMortgage-backed securities:Federal National Mortgage Association

                        

                        

                        272

                        

                        

                        —

                        

                        

                        122

                        

                        

                        (1

                        )

                        

                        394

                        

                        

                        (1

                        )Federal Home Loan MortgageCorporationPrivate Label

                        

                        

                        459

                        

                        

                        (82

                        )

                        

                        888

                        

                        

                        (506

                        )

                        

                        1,347

                        

                        

                        (588

                        )CMOs:Federal Home Loan MortgageCorporationFederal NationalMortgage Assoc.

                        

                        

                        —

                        

                        

                        —

                        

                        

                        33

                        

                        

                        —

                        

                        

                        33

                        

                        

                        —Private Label

                        

                        

                        11

                        

                        

                        (20

                        )

                        

                        1,019

                        

                        

                        (185

                        )

                        

                        1,030

                        

                        

                        (205

                        )$

                        742

                        

                        $

                        (102

                        )

                        $

                        2,062

                        

                        $

                        (692

                        )

                        $

                        2,804

                        

                        $

                        (794

                        )
   
 34
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)  The Company has 290 investments at September 30, 2009 of which 52 had unrealized losses. These unrealized losses generally result from changes in market interest rates and as a result of the disruption in the existing mortgage securities market due to illiquidity in certain sectors of that market. The unrealized losses associated with investment securities issued by government
                sponsored enterprises (GSE’s) are caused by changes in interest rates and are not considered credit related since the contractual cash flows of these investments are guaranteed by these agencies.  GSE’s have access to additional capital and liquidity resources from the U.S. Treasury, which indicates that they will be able to honor their guarantees, related to the contractual cash flows of the mortgage-backed securities (MBS) that they have issued. In the case of securities issued by the Government National Mortgage Association, the securities are fully guaranteed by the
                U.S. Government.
  For each private label security, duration of the impairment, credit support and cash flows were assessed to determine whether the security was temporarily or other than temporarily impaired. Management evaluates the actual mortgage delinquencies, foreclosures, and real estate owned for each security, as well as future expected losses in the underlying mortgage collateral to
            determine if there is a high probability for expected losses and contractual shortfalls of interest or principal, which could warrant recognition of other than temporary impairment. Based upon our evaluation, we have determined that some securities have been other-than-temporarily impaired. Consequently, the value of these securities has been reduced with a corresponding charge to earnings of $936, which represents the credit portion of the loss. The remaining balances of the
            private label securities have been determined to have sufficient credit support and cash flows to repay the remaining principal of the security.  Marketable equity securities contains an unrealized loss of $23 at September 30, 2009, which consists of a unit investment trust that consists of common stock in 25 community banks around the nation and three single issue bank common stocks, typically obtained in a mutual to stock thrift conversion. The current state of the banking industry in general has contributed to the significant short term
            decline. Due to the short duration of the unrealized losses, the anticipated benefits from the U.S. Government liquidity and capital purchase programs, and the prospects of the companies that we have invested in, it has been determined that the securities are not other than temporarily impaired. Management will continue to monitor the securities and make an impairment adjustment if deemed necessary based upon the prospects for recovery and the duration and severity of the unrealized
            losses. The Company charged $175 to earnings related to other than temporary impairment for year ending September 30, 2009.       35
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)  Details concerning securities with unrealized losses as of September 30, 2008 are as follows:   Securities with losses

                            

                            Securities with lossesunder 12 months

                            

                            over 12 months

                            

                            TotalFair value

                            

                            Gross

                                unrealized

                                losses

                            

                            Fairvalue

                            

                            Gross
                                unrealized

                                losses

                            

                            Fairvalue

                            

                            Gross
                                unrealized

                                lossesAvailable-for-SaleMortgage-backed securitiesGovernment National MortgageAssociation

                            

                            $

                            1,164

                            

                            $

                            (4

                            )

                            $

                            —

                            

                            $

                            —

                            

                            $

                            1,164

                            

                            $

                            (4

                            )Federal Home Loan MortgageCorporation

                            

                            

                            3,246

                            

                            

                            (42

                            )

                            

                            6,904

                            

                            

                            (85

                            )

                            

                            10,150

                            

                            

                            (127

                            )Federal National MortgageAssociation

                            

                            

                            158

                            

                            

                            (1

                            )

                            

                            6,791

                            

                            

                            (252

                            )

                            

                            6,949

                            

                            

                            (253

                            )CMOs:Government National MortgageAssociation

                            

                            

                            3,923

                            

                            

                            (86

                            )

                            

                            —

                            

                            

                            —

                            

                            

                            3,923

                            

                            

                            (86

                            )Marketable equity securities

                            

                            

                            215

                            

                            

                            (120

                            )

                            

                            9

                            

                            

                            (6

                            )

                            

                            224

                            

                            

                            (126

                            )$

                            8,706

                            

                            $

                            (253

                            )

                            $

                            13,704

                            

                            $

                            (343

                            )

                            $

                            22,410

                            

                            $

                            (596

                            )
  Held-to-MaturityMortgage-backed securitiesFederal National MortgageAssociation

                        

                        $

                        7,239

                        

                        $

                        (43

                        )

                        $

                        11,247

                        

                        $

                        (270

                        )

                        $

                        18,486

                        

                        $

                        (313

                        )Federal Home Loan MortgageCorporation

                        

                        

                        6,682

                        

                        

                        (24

                        )

                        

                        —

                        

                        

                        —

                        

                        

                        6,682

                        

                        

                        (24

                        )Private Label

                        

                        

                        2,267

                        

                        

                        (303

                        )

                        

                        —

                        

                        

                        —

                        

                        

                        2,267

                        

                        

                        (303

                        )CMOs:Federal Home Loan MortgageCorporation

                        

                        

                        413

                        

                        

                        (12

                        )

                        

                        —

                        

                        

                        —

                        

                        

                        413

                        

                        

                        (12

                        )Federal National MortgageAssociation

                        

                        

                        816

                        

                        

                        (35

                        )

                        

                        —

                        

                        

                        —

                        

                        

                        816

                        

                        

                        (35

                        )Private Label

                        

                        

                        998

                        

                        

                        (15

                        )

                        

                        —

                        

                        

                        —

                        

                        

                        998

                        

                        

                        (15

                        )$

                        18,415

                        

                        $

                        (432

                        )

                        $

                        11,247

                        

                        $

                        (270

                        )

                        $

                        29,662

                        

                        $

                        (702

                        )
  The Company has 158 investments at September 30, 2008 of which 48 had unrealized losses. These unrealized losses generally result from changes in market interest rates and as a result of the disruption in the existing mortgage securities market due to illiquidity in certain sectors of that market. The unrealized losses associated with investment securities issued by government sponsored
            enterprises (GSE’s) are caused by changes in interest rates and are not considered credit related since the contractual cash flows of these investments are guaranteed by these agencies. GSE’s have access to additional capital and liquidity resources from the U.S. Treasury, which indicates that they will be able to honor their guarantees, related to the contractual cash flows of the mortgage-backed securities (MBS) that they have issued. In the case of securities issued
            by the Government National Mortgage Association, the securities are fully secured by the U.S. Government.   
  36


***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)  For each private label security, duration of the impairment, credit support and cash flows were assessed to determine whether the security was temporarily or other than temporarily impaired. Management evaluates the actual mortgage delinquencies, foreclosures, and real estate owned for each security, as well as future expected losses in the underlying mortgage collateral to determine if there is a
                high probability for expected losses and contractual shortfalls of interest or principal, which could warrant further recognition of impairment. Based upon our evaluation, we have determined that some securities have been other-than-temporarily impaired. Consequently, the value of these securities has been reduced with a corresponding charge to earnings of $408. The remaining balances of the private label securities have been determined to have sufficient credit support and cash
                flows to cover any projected underlying loan losses.  Marketable equity securities contains an unrealized loss of $126 at September 30, 2008, which consists of a unit investment trust that consists of stock in 25 community banks around the nation and certain single issue bank common stocks, typically obtained in a mutual to stock thrift conversion. The current state of the banking industry in general has contributed to the significant short term
                decline. Due to the short duration of the unrealized losses, the anticipated benefits from the U.S. Government liquidity and capital purchase programs, and the prospects of the companies that we have invested in, it has been determined that the securities are not other than temporarily impaired. Management will continue to monitor the securities and make an impairment adjustment if deemed necessary based upon the prospects for recovery and the duration and severity of the
                unrealized losses.
 At September 30, 2009 and 2008, securities with a cost of approximately $18,950 and $20,550 were pledged to secure deposits and advances from the Federal Home Loan Bank of Dallas as required or permitted by law. The amortized cost and estimated fair value of available-for-sale securities by contractual maturity at September 30, 2009, has not been presented due to the investment in mortgage-backed securities whose actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with out call or prepayment penalties.  The amortized cost and estimated fair value of held-to-maturity securities by contractual maturity at September 30, 2009, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.  (In thousands)

                        

                        Amortized

                            Cost

                        

                        Fair ValueDue within one year

                        

                        $

                        22,423

                        

                        $

                        22,504Due after one year but within five years

                        

                        

                        11,102

                        

                        

                        11,142Total

                        

                        

                        33,525

                        

                        

                        33,646Mortgage-backed securities

                        

                        

                        41,859

                        

                        

                        43,241$

                        75,384

                        

                        $

                        76,887
      37
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)  The following table presents a roll-forward of the amount of credit losses on the Company’s investment securities recognized in earnings for the year ended September 30, 2009.  Beginning balance of credit losses at October 1, 2008*

                            

                            $

                            408Other-than-temporary impairment credit losses

                            

                            

                            936Ending balance of cumulative credit losses recognized in earnings

                            

                            $

                            1,344
  *- The beginning balance includes credit related losses included in OTTI charges recognized on debt securities.  The amount of other-than-temporary impairment credit losses on securities related to previous losses amounted to $738 and the amount related to losses on securities with no previous losses amounted to $198 at September 30, 2009. Debt securities with unrealized losses are reviewed for other-than temporary impairment at each reporting period. Management monitors these securities for evidence of
                credit deterioration that could indicate that an other-than-temporary impairment has occurred. Among other factors, changes in the security’s credit rating from a credit rating agency is considered as evidence of potential credit deterioration. For securities that have indications of credit related impairment, management analyzes future expected cash flows to determine if any credit related impairment is evident. Estimated cash flows are determined using management’s
                best estimate of future cash flows based on specific assumptions. The assumptions used to determine the cash flows were based on estimates of loss severity, credit default, and prepayment speeds. For each security, these assumptions were developed by taking the trailing six month historical average rate for the security.
 Gains on sale of available for sale securities of $76, 0, and $164 were realized on sales of securities in the year ended September 30, 2009, 2008, and 2007 respectively. Proceeds of $201, $0, and $1,527 were received from the sale of securities during the twelve months ended September 30, 2009, 2008, and 2007 respectively. In June 2008, the Company withdrew or redeemed its investment in the AMF Ultra
            Short Mortgage Fund (the AMF Fund), resulting in a pre-tax charge of $2,580. The Company terminated its investment in the AMF Fund as a result of continuing declines in the market value of the securities held by the Fund. Upon termination of this investment, the Company received cash, and, in a like-kind exchange, a pro rata net distribution of private label and Government Sponsored Enterprise (GSE) securities held by the AMF Fund.  The following is the summary of the transaction:  Summary

                        In MillionsCash received

                        $

                        2.3Private Label MBS’s and CMOs, at market

                        

                        7.1GSE MBS’s and CMOs, at market

                        

                        4.1Loss

                        

                        2.6Total

                        $

                        16.1
   Non credit other than temporary impairment losses in accumulated other comprehensive income were $375 as of September 30, 2009. These losses were related to investments in private label CMOs.  
 38
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)
 4.LOANS RECEIVABLE  Loans receivable are summarized as follows:  September 30,2009

                        

                        2008Residential real estate mortgage loans:One-to-four family units - Conforming

                        

                        $

                        131,735

                        

                        $

                        154,745One-to-four family units - Commercial

                        

                        

                        39,652

                        

                        

                        37,763One-to-four family units - Smart

                        

                        

                        83,775

                        

                        

                        87,404Multi-family

                        

                        

                        25,253

                        

                        

                        25,943Land loans

                        

                        

                        40,243

                        

                        

                        37,729Construction loans

                        

                        

                        4,800

                        

                        

                        7,267Commercial real estate loans

                        

                        

                        94,352

                        

                        

                        77,025Commercial non-real estate loans

                        

                        

                        30,434

                        

                        

                        29,709Home improvement and home equity loans

                        

                        

                        57,137

                        

                        

                        54,590Loans on savings accounts

                        

                        

                        7,779

                        

                        

                        8,189Auto loans

                        

                        

                        3,045

                        

                        

                        3,517Mobile home loans

                        

                        

                        68,850

                        

                        

                        61,372Other secured and unsecured

                        

                        

                        8,605

                        

                        

                        4,724595,660

                        

                        

                        589,977LessAllowance for loan losses

                        

                        

                        6,806

                        

                        

                        5,545Deferred loan fees, net

                        

                        

                        327

                        

                        

                        293$

                        588,527

                        

                        $

                        584,139
  Smart one-to-four family mortgages represent those loans not meeting all of the Bank’s standard loan underwriting criteria for residential real estate loans. Smart mortgage loans consist primarily of smaller mortgage loans of $100,000 or less with higher interest rates, first time home buyer loans with 100% loan-to-value (LTVs), and loans with LTVs greater than 80% to conforming
            borrowers.  Changes in the allowance for loan losses are as follows:  Year Ended September 30,2009

                        

                        

                        

                        2008

                        

                        

                        2007Beginning balance - October 1

                        

                        

                        

                        $

                        5,545

                        

                        

                        

                        $

                        5,083

                        

                        

                        $

                        4,890Provision charged to operating expense

                        

                        

                        

                        

                        3,026

                        

                        

                        

                        

                        825

                        

                        

                        

                        605Recoveries

                        

                        

                        

                        

                        29

                        

                        

                        

                        

                        19

                        

                        

                        

                        16Loans charged off

                        

                        

                        

                        

                        (1,794

                        )

                        

                        

                        

                        (382

                        )

                        

                        

                        (428

                        )Ending balance - September 30

                        

                        

                        

                        $

                        6,806

                        

                        

                        

                        $

                        5,545

                        

                        

                        $

                        5,083
  The amount of nonaccrual loans at September 30, 2009 and 2008 was approximately $5,600 and $3,500, respectively. The amount of impaired loans at September 30, 2009 was approximately $9,600 and at September 30, 2008 was approximately $2,700. The amount of allowance allocated to impaired loans was approximately $812 at September 30, 2009 and $588 at September 30, 2008. The average investment in
            impaired loans was $5,234 and $768 for the years ended September 30, 2009 and 2008, respectively. The amount of forgone interest on impaired loans was approximately $115 and $82, respectively.  
 39
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)
 Approximately $5,800 at September 30, 2009 and $1,400 at September 30, 2008 of impaired loans had no related reserves. Reserves were not considered necessary based on management’s assessment of the fair value less costs to sell of the underlying collateral backing the loans. A majority of the increase in the amount of impaired loans with no related reserve over the prior year is due to a single loan relationship totaling approximately $4.2 million. The loan is collateralized by off-shore oil drilling equipment. The collateral and type of borrower are unique in the Company’s portfolio, and are not representative of the remainder of the Company’s loans. The Company has collateralized its advances from the Federal Home Loan Bank with a blanket-floating lien on its residential real estate first mortgage loans. The Company has loans that it services for others which amounted to $60,835 and $47,059 at September 30, 2009 and 2008, respectively.  5.

                        REAL **ESTATE OWNED**
 Real estate owned consisted of the following:  September 30,2009

                        

                        

                        

                        2008Real estate acquired through foreclosure:One-to-four family units – Conforming

                        

                        $

                        118

                        

                        

                        $

                        258One-to-four family units – Smart

                        

                        

                        320

                        

                        

                        

                        -Multi-family

                        

                        

                        1,190

                        

                        

                        

                        -Land loans

                        

                        

                        404

                        

                        

                        

                        41Commercial real estate loans

                        

                        

                        174

                        

                        

                        

                        79Less allowance for losses

                        

                        

                        (253

                        )

                        

                        

                        (35

                        )Real estate owned - net

                        

                        $

                        1,953

                        

                        

                        $

                        343
  6.

                        PREMISES AND EQUIPMENT
 Premises and equipment are summarized as follows:  September 30,2009

                        

                        2008Land

                        

                        $

                        10,686

                        

                        $

                        9,919Buildings and improvements

                        

                        

                        19,075

                        

                        

                        19,236Furniture, fixtures and equipment

                        

                        

                        10,750

                        

                        

                        10,66040,511

                        

                        

                        39,815Less accumulated depreciation

                        

                        

                        (13,292

                        )

                        

                        (12,915

                        )$

                        27,219

                        

                        $

                        26,900
   
 40
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)
 Pursuant to the terms of non-cancelable lease agreements in effect at September 30, 2009 pertaining to banking premises and equipment, future minimum rent commitments under various operating leases are as follows:  2010

                        

                        $

                        1462011

                        

                        

                        1112012

                        

                        

                        61$

                        318
  All leases contain options to extend for periods from three to ten years. Total rent expense for the years ended September 30, 2009, 2008, and 2007 amounted to $160, $200 and $159 respectively. 7.

                        DEPOSITS
 Deposits are summarized as follows:  September 30,2009

                        

                        2008Non-interest bearing demand accounts

                        $

                        64,380

                        

                        $

                        57,913Interest bearing:NOW accounts

                        

                        101,416

                        

                        

                        86,687Passbook and regular savings

                        

                        106,479

                        

                        

                        55,391Money funds accounts

                        

                        95,461

                        

                        

                        130,399Certificates of deposit

                        

                        217,733

                        

                        

                        258,838$

                        585,469

                        

                        $

                        589,228
  Certificates of deposit of over $100 amounted to $66,663 and $75,764 at September 30, 2009 and 2008, respectively. Certificates of deposits at September 30, 2009 mature as follows:  Less than one year

                        

                        $

                        104,7991-2 years

                        

                        

                        38,1522-3 years

                        

                        

                        40,7613-4 years

                        

                        

                        8,8044-5 years

                        

                        

                        10,530Over 5 years

                        

                        

                        14,687TOTAL

                        

                        $

                        217,733
  
 41
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)   8.

                            ADVANCES FROM FEDERAL HOME LOAN BANK
 At September 30, 2009 and 2008 respectively, the Company was indebted to the FHLB for $100,628 and $104,877 of advances bearing interest at a weighted average rate of 4.56% and 4.62%, which are due as follows:
  Year EndedSeptember 30,2010

                        

                        $

                        10,6182011

                        

                        

                        21,5792012

                        

                        

                        5,5342013

                        

                        

                        5,8112014

                        

                        

                        11,038Thereafter

                        

                        

                        46,048$

                        100,628
  These advances are collateralized by a blanket-floating lien on the Company’s residential real estate first mortgage loans, certain investment securities and stock in the Federal Home Loan Bank of Dallas.  At September 30, 2009, the Company had an additional $175,259 available under its line of credit with the FHLB.  9.

                        OTHER NON-INTEREST INCOME
 Other non-interest income consisted of the following:  Year Ended September 30,2009

                        

                        2008

                        

                        2007Life insurance contracts

                        

                        $

                        597

                        

                        $

                        635

                        

                        $

                        597Other

                        

                        

                        306

                        

                        

                        463

                        

                        

                        384$

                        903

                        

                        $

                        1,098

                        

                        $

                        981
     
 42
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)  10.

                            INCOME TAXES
  Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of September 30, 2009 and 2008 are as follows:
  Year Ended September 30,2009

                        

                        2008Deferred tax assets:Allowance for loan losses

                        

                        $

                        1,733

                        

                        $

                        1,527Net unrealized loss on investment securities

                        

                        

                        -

                        

                        

                        135Accruals and stock based compensation

                        

                        

                        886

                        

                        

                        833Impairments on securities

                        

                        

                        516

                        

                        

                        -Total deferred tax assets

                        

                        

                        3,135

                        

                        

                        2,495Deferred tax liabilities:Deferred loan fees and costs - net

                        

                        

                        197

                        

                        

                        206Tax over book depreciation

                        

                        

                        1,143

                        

                        

                        1,134Net unrealized gain on investment securities

                        

                        

                        96

                        

                        

                        -Dividends on FHLB stock

                        

                        

                        386

                        

                        

                        375Other

                        

                        

                        418

                        

                        

                        430Total deferred tax liabilities

                        

                        

                        2,240

                        

                        

                        2,145Net deferred tax asset

                        

                        $

                        895

                        

                        $

                        350
  The components of income tax expense are as follows:  Year Ended September 30,2009

                        

                        2008

                        

                        2007Current

                        

                        $

                        4,183

                        

                        $

                        1,989

                        

                        $

                        3,724Deferred

                        

                        

                        (925

                        )

                        

                        58

                        

                        

                        (554

                        )$

                        3,258

                        

                        $

                        2,047

                        

                        $

                        3,170
  Income taxes differ from the amounts computed by applying the U.S. Federal income tax rate of 34% to earnings before income taxes. The reasons for these differences are as follows:  Year Ended September 30,2009

                        

                        

                        2008

                        

                        

                        2007Taxes computed at statutory rates

                        

                        $

                        3,534

                        

                        

                        $

                        2,637

                        

                        

                        $

                        3,349Decrease in taxes due to net nontaxable income

                        

                        

                        (134

                        )

                        

                        

                        (160

                        )

                        

                        

                        (179

                        )Tax credits

                        

                        

                        (142

                        )

                        

                        

                        (430

                        )

                        

                        

                        -$

                        3,258

                        

                        

                        $

                        2,047

                        

                        

                        $

                        3,170Effective tax rate

                        

                        

                        31.3

                        %

                        

                        

                        26.4

                        %

                        

                        

                        32.2

                        %
  During the third quarter of 2008, the Company determined that it qualified for certain tax credits related to tax incentives in conjunction with the relief efforts related to hurricane’s that devastated southern Louisiana in late 2006. These tax credits applied to the Company’s 2006 and 2007 income tax returns   
 43
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)  and provided net benefits in the amounts of $168 and $171, respectively. The net benefit of the tax credits was recorded in the 2008 financial statements.
 Generally accepted accounting principles does not require that deferred income taxes be provided on certain portions of the allowance for loan losses that existed as of September 30, 1988. At September 30, 2009, retained earnings include approximately $4.4 million representing such allowances for which no deferred income taxes have been provided.  11.

                        NON-INTEREST EXPENSE
  Occupancy, equipment and data processing expenses consisted of the following:  Year Ended September 30,2009

                        

                        

                        2008

                        

                        

                        2007Occupancy, including depreciation, insurance,rent, utilities, etc.

                        

                        $

                        2,307

                        

                        

                        $

                        2,276

                        

                        

                        $

                        1,842Equipment, including depreciation, telephone, etc.

                        

                        

                        2,458

                        

                        

                        

                        2,444

                        

                        

                        

                        2,396Data processing

                        

                        

                        1,479

                        

                        

                        

                        1,364

                        

                        

                        

                        1,232$

                        6,244

                        

                        

                        $

                        6,084

                        

                        

                        $

                        5,470
  Other operating expenses consisted of the following:  Year Ended September 30,2009

                        

                        

                        2008

                        

                        

                        2007Stationery, printing and postage

                        

                        $

                        950

                        

                        

                        $

                        1,060

                        

                        

                        $

                        948Debit card expense, and other deposit related costs

                        

                        

                        1,731

                        

                        

                        

                        1,749

                        

                        

                        

                        1,829Other

                        

                        

                        1,637

                        

                        

                        

                        1,375

                        

                        

                        

                        1,395$

                        4,318

                        

                        

                        $

                        4,184

                        

                        

                        $

                        4,172
    12.

                        OTHER COMPREHENSIVE INCOME (LOSS)
 The adjustment to determine other comprehensive income (loss) as included in the consolidated statements of changes in stockholders’ equity consists of the following for the years ended September 30, 2009, 2008 and 2007:  
 44
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)
  Gross

                            amount

                        

                        

                        Tax

                            Effect

                        

                        

                        Net of

                            Tax

                            amount2009Gross change in unrealized loss on securitiesheld to maturity with OTTI

                        

                        $

                        (375

                        )

                        

                        $

                        128

                        

                        

                        $

                        (247

                        )Gross change in unrealized gain (loss) on securitiesavailable-for-sale

                        

                        

                        21

                        

                        

                        

                        (7

                        )

                        

                        

                        14Less reclassification for OTTI losses onheld to maturity securities included in net income

                        

                        

                        936

                        

                        

                        

                        (318

                        )

                        

                        

                        618Less reclassification for gain on saleof available for sale securities included in net income

                        

                        

                        (76

                        )

                        

                        

                        26

                        

                        

                        

                        (50

                        )Less reclassification for OTTI losses on saleof available for sale securities included in net income

                        

                        

                        175

                        

                        

                        

                        (60

                        )

                        

                        

                        115Other comprehensive income

                        

                        $

                        681

                        

                        

                        $

                        (231

                        )

                        

                        $

                        450
  2008Gross change in unrealized loss on securitiesavailable-for-sale

                        

                        $

                        (1,867

                        )

                        

                        $

                        635

                        

                        

                        $

                        (1,232

                        )Less reclassification loss included in net income

                        

                        

                        2,988

                        

                        

                        

                        (1,016

                        )

                        

                        

                        1,972Other comprehensive income

                        

                        $

                        1,121

                        

                        

                        $

                        (381

                        )

                        

                        $

                        740
  2007Gross change in unrealized gain on securitiesavailable-for-sale

                        

                        $

                        535

                        

                        

                        $

                        (182

                        )

                        

                        $

                        353Less reclassification gain included in net income

                        

                        

                        (164

                        )

                        

                        

                        56

                        

                        

                        

                        (108

                        )Other comprehensive income

                        

                        $

                        371

                        

                        

                        $

                        (126

                        )

                        

                        $

                        245
  13.

                        RETIREMENT PLANS
 Through June 2008 the Company participated in a defined benefit multi-employer retirement plan, which covers substantially all employees. The plan is administered by the Financial Institutions Retirement Fund. The Company froze the benefits under this plan during the year ended September 30, 2004. The expense relating to this plan amounted to $52, $1,797 and $446 in the years ended
            September 30, 2009, 2008 and 2007, respectively, and are the amounts of the required payments relating to these years. The significant increase in expense at September 30, 2008 was because the Company settled and transferred the obligations of the plan to Hartford Insurance Co., on June 30, 2008 resulting in a pre-tax charge of $1,500. The expense of $52 in 2009 related to the completion of this transaction.  
 45
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)
  The Company has a 401 (k) Plan whereby substantially all employees participate in the Plan. Employees may contribute up to 50 percent of their compensation subject to certain limits based on federal tax laws. The Company makes matching contributions equal to 100 percent of the first 3 percent plus 50 percent after the next 2 percent of an employee’s compensation contributed to the Plan. Matching
            contributions vest to the employee equally over a five-year period. For the years ended September 30, 2009, 2008, and 2007, expense attributable to the Plan amounted to approximately $308, $277, and $222, respectively.  14.

                        INCOME PER SHARE
 Following is a summary of the information used in the computation of basic and diluted income per common share for the years ended September 30, 2009, 2008, and 2007:  Year Ended September 30,2009

                        

                        

                        2008

                        

                        

                        2007Weighted average number of common sharesoutstanding - used in computation of basicincome per common share

                        

                        

                        2,110,000

                        

                        

                        

                        2,154,000

                        

                        

                        

                        2,217,000Effect of dilutive securities:Stock options

                        

                        

                        11,000

                        

                        

                        

                        17,000

                        

                        

                        

                        54,000Stock grants

                        

                        

                        4,000

                        

                        

                        

                        -

                        

                        

                        

                        3,000Weighted average number of common sharesoutstanding plus effect of dilutive securities -used in computation of diluted income percommon share

                        

                        

                        2,125,000

                        

                        

                        

                        2,171,000

                        

                        

                        

                        2,274,000
  At September 30, 2009 and 2008, approximately 184,000 and 219,000 of common stock equivalents were excluded from diluted earnings per share because the option price exceeded the average market price. The excluded common stock equivalents for 2007 and 2006 were insignificant.  15. EMPLOYEE STOCK PLANS  The Company maintains an Employee Stock Ownership Plan (ESOP) for the benefit of Teche Federal Bank’s employees who meet certain eligibility requirements. During the fiscal year ended September 30, 2009 the ESOP Trust purchased an additional 20,408 shares of common stock in the Company with a loan from the Company. Teche Federal Bank periodically makes cash contributions to the ESOP on a basis
            sufficient to enable the ESOP to make the required loan payments to the Company.  The note payable referred to above bears interest at the prime rate adjusted quarterly with principal and interest payable quarterly for nine consecutive quarters. The loan was collateralized by the unreleased shares of the stock purchased.  As the debt is repaid, shares are released from collateral and allocated to qualified employees based on the proportion of principal paid in the year. The shares pledged as collateral are reported as a reduction of stockholders’ equity in the consolidated balance sheets. As shares are committed to be released from collateral, the Company reports compensation expense equal to the current market
            price of the shares,  
 46
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)
 and the shares become outstanding for income per share computations. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings and dividends on unallocated ESOP shares are recorded as a reduction of debt or as compensation expense if not used for debt service.  Compensation expense related to the ESOP was $644, $713 and $580 for the years ended September 30, 2009, 2008 and 2007, respectively. The ESOP has 20,408 unreleased shares at September 30, 2009. The fair value of unreleased shares at September 30, 2009 was approximately $676. The Company has five share-based compensation plans in effect at September 30, 2009. The compensation cost that has been charged against income for those plans was approximately $326, $351, and $390 for the years ended September 30, 2009, 2008, and 2007, respectively. The plans allow for the granting of both qualified and non-qualified stock options. The Company recorded a deferred tax benefit in the amount of $26, $24, and $73 for the years ended September 30, 2009, 2008, and 2007, respectively, related to share-based compensation. In 1998, the Company implemented the 1998 Stock Option Plan, which authorized the Board of Directors to grant up to 68,000 of stock options to employees, officers and directors of the Company. Options granted under the 1998 Stock Option Plan have a term of up to ten years from the date of grant. Vesting of options is determined at the time of grant and ranges from immediate to five years. Options
            under this plan must be granted at a price not less than the fair market value at the date of grant. In 1999, the Company implemented the 1999 Stock Option and Restricted Stock Plan, which authorized the Board of Directors to grant 30,682 non-qualified stock options and 6,000 shares of restricted stock to a new senior officer in accordance with the terms of his employment. The options and restricted stock were granted at fair market value of the stock at the date of grant and vested over a four-year
            period. A similar plan was implemented in 2002 authorizing the Board of Directors to grant 12,696 stock options to a new director. These options have a five-year vesting period. In 2001, the Company implemented the 2001 Stock-Based Incentive Plan, which authorized the Board of Directors to grant up to 250,000 stock options or restricted stock (limited to 37,500 shares) to officers and employees of the Company. Options granted under the 2001 Stock Option Plan have a term of up to ten years from the date of grant. Vesting of options is determined at the time of grant and
            ranges from immediate to five years. Options under this plan must be granted at a price not less than the fair market value at the date of grant. In 2005, the Company implemented the 2004 Stock-Based Incentive Plan, which authorized the Board of Directors to grant up to 200,000 stock options or restricted stock (limited to 50,000 shares) to employees, officers and directors of the Company. Options granted under the 2004 Stock Based Incentive Plan will have a term of up to ten years from the date of grant and vesting of grants will be
            determined at the time of grant. Options under this plan must be granted at a price not less than the fair market value at the date of grant. The share-based awards granted under the aforementioned Plans have similar characteristics, except that some awards have been granted in options and certain awards have been granted in restricted stock. Therefore, the following disclosures have been disaggregated for the stock option and restricted stock awards of the Plans due to their dissimilar characteristics.  
 47
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)
 Stock Options  The fair market value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. The Company granted 2,500 stock options for the year ended September 30, 2009 with an average fair value of $7.08 per option. The Company granted 102,800 stock options for the year ended September 30, 2008 with a weighted average fair value of $5.22 per option.  The risk-free interest rate is based upon a U.S. Treasury instrument with a life that is similar to the expected life of the option grant. Expected volatility is based upon the historical volatility of the Company based upon the previous 6 years trading history. The expected term of the options is based upon the average life of previously issued stock options. The expected dividend yield is based upon
            current yield on date of grant. No post-vesting restrictions exist for these options. The following table illustrates the assumptions for the Black-Scholes model used in determining the fair value of options granted to employees in the year ended September 30, 2009 and 2008.  Year Ended

                        

                        

                        Year EndedSeptember 30, 2009

                        

                        

                        September 30, 2008Dividend yield

                        

                        4.40

                        %

                        

                        

                        3.70

                        %Risk-free interest rate

                        

                        2.38

                        %

                        

                        

                        3.50

                        %Volatility

                        

                        31.00

                        %

                        

                        

                        19.00

                        %Expected life

                        

                        6 years

                        

                        

                        

                        6 years
   A summary of option activity under the stock option plans as of September 30, 2009, and changes during the year ended September 30, 2009 is presented below:  WeightedWeighted

                        

                        AverageAverage

                        

                        Remaining

                        

                        

                        AggregateExercise

                        

                        Contractual

                        

                        

                        IntrinsicShares

                        

                        

                        Price

                        

                        Term

                        

                        

                        ValueOutstanding at September 30, 2008

                        

                        267,756

                        

                        

                        $

                        33.80

                        

                        7.0 years

                        

                        $

                        536Exercised

                        

                        (661

                        )

                        

                        

                        21.21Authorized

                        

                        -

                        

                        

                        

                        -Forfeited

                        

                        (24,900

                        )

                        

                        

                        36.31Granted

                        

                        2,500

                        

                        

                        

                        32.80Outstanding at September 30, 2009

                        

                        244,695

                        

                        

                        $

                        33.59

                        

                        6.0 years

                        

                        $

                        562Exercisable at September 30, 2009

                        

                        136,455

                        

                        

                        $

                        31.21

                        

                        4.8 years

                        

                        $

                        554
   
 48
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)
 For the years ended September 30, 2009, 2008, and 2007 respectively, the intrinsic value of options exercised was approximately $10, $464 and $577. The fair value of options vested during the years ended 2009, 2008, and 2007 was approximately $94, $105 and $96, respectively.  Net cash received from options exercised under all share-based payment arrangements for year ended September 30, 2009 was approximately $14. The actual tax benefit in stockholders’ equity realized for the tax deductions from option exercise of the share-based payment arrangements and the tax effect of restricted stock vesting totaled $(28) for the year ended September 30, 2009.  Stock Awards  A summary of the status of the Company’s non-vested stock awards as of September 30, 2009, and changes during the year then ended is presented below:  WeightedAverageGrant DateShares

                        

                        

                        Fair VaueNon-vested – September 30, 2008

                        8,394

                        

                        

                        

                        $

                        39.07Forfeitures

                        -

                        

                        

                        

                        $

                        -Granted

                        6,515

                        

                        

                        

                        $

                        30.88Vested

                        (7,233

                        )

                        

                        

                        $

                        37.17Non-vested - September 30, 2009

                        7,676

                        

                        

                        

                        $

                        34.80
  The fair value of restricted stock vested and the fair value of shares granted as direct compensation for the years ended September 30, 2009, 2008, and 2007, respectively was $269, $246 and $294.  As of September 30, 2009, there was $681 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under all of the Company’s stock benefit plans. That cost is expected to be recognized over a weighted-average period of 2.2 years.  The Company funds the option shares and restricted stock from authorized, but unissued shares. The Company does not typically purchase shares to fulfill the obligations of the stock benefit plans. Company policy does allow option holders to exercise options with seasoned shares.  16.

                        FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
 In the normal course of business the Company is a party to financial instruments with off-balance sheet risk to meet the financing needs of its customers. The financial instruments include commitments to extend credit and commitments to sell loans. Those instruments involve, to varying degrees, elements of credit risk in excess of the amounts recognized in the consolidated balance sheets. The
            contract amounts of those instruments reflect the extent of the involvement the Company has in particular classes of financial instruments.  
 49
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)
 As of September 30, 2009 the Company had made various commitments to extend credit totaling approximately $44,438. Most of these commitments are at variable rates. As of September 30, 2008, such commitments totaled approximately $50,527. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being fully drawn upon, the total commitment amount disclosed above does not
            necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by the Company upon extension of credit, is based on management’s credit evaluation of the customer.  17.

                        DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
 The Company utilizes fair value measurements to record fair value adjustments to certain financial assets and financial liabilities and to determine fair value disclosures. Available for sale securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as securities
            held-to-maturity, and impaired loans. These nonrecurring fair value adjustments typically involve other than temporary impairment accounting or impairments of individual assets. The Company has not disclosed non-financial assets and liabilities recorded at fair value on a recurring or non-recurring basis. The Company will adopt changes to the fair value standards that will require this disclosure effective for periods beginning after October 1, 2009. The Company uses a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: Level 1

                        - Observable inputs such as quoted prices in active markets;
 Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. Following is a description of valuation methodologies used for assets recorded at fair value. Investment Securities Securities available for sale are valued at quoted market prices where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable securities. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, and encompass marketable equity securities. Level 2 securities include mortgage-backed securities issued
            by 
 50
 
  ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)  government sponsored entities, municipal bonds. Securities classified as Level 3 include asset-backed securities in less liquid markets. Level 3 securities are valued using discounted cash flow models that use market participant assumptions about prepayment speeds, coupon default rates, discount rates and timing and other assumptions that affect the amounts of cash flows.  Impaired Loans The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired,
            management measures impairment using one of several methods, including collateral value, market value of similar debt, or present values of cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At September 30, 2009, substantially all of the total impaired loans were evaluated based on the fair value of the collateral less estimated costs to sell.
            Impaired loans where an allowance is established requires classification in the fair value hierarchy. When the fair value of the collateral is based on the observable market price or a current appraised value, less estimated costs to sell, the Company records the impaired loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market
            price, the Company records the impaired loan as nonrecurring Level 3.  Fair Value At September

                        

                        Fair Value Hierarchy30, 2009

                        

                        Level 1

                        

                        Level 2

                        

                        Level 3(In thousands)Assets valued on a recurring basis:Mortgage-backed securities:Government National Mortgage Assoc.

                        

                        $

                        2,549

                        

                        $

                        -

                        

                        $

                        2,549

                        

                        $

                        -Federal Home Loan Mortgage Corp.

                        

                        

                        8,322

                        

                        

                        -

                        

                        

                        8,322

                        

                        

                        -Federal National Mortgage Assoc.

                        

                        

                        6,020

                        

                        

                        -

                        

                        

                        6,020

                        

                        

                        -16,891

                        

                        

                        -

                        

                        

                        16,891

                        

                        

                        -Collateralized mortgage obligationsCMO’s:Government National Mortgage Assoc.

                        

                        

                        3,317

                        

                        

                        -

                        

                        

                        3,317

                        

                        

                        -Marketable equity securities

                        

                        

                        728

                        

                        

                        728

                        

                        

                        -

                        

                        

                        -Total recurring

                        

                        $

                        20,936

                        

                        $

                        728

                        

                        $

                        20,208

                        

                        $

                        -Assets valued on a non-recurring basis:CMO’s: Private label

                        

                        $

                        164

                        

                        $

                        -

                        

                        $

                        164

                        

                        $

                        -Impaired loans

                        

                        

                        2,988

                        

                        

                        -

                        

                        

                        2,988

                        

                        

                        -Total non-recurring

                        

                        $

                        3,152

                        

                        $

                        -

                        

                        $

                        3,152

                        

                        $

                        -
   
 51
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)   The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financialinstruments. In cases where quoted market prices are not
                available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The aggregate fair value amounts presented below may not necessarily represent the underlying fair value of the Company.
 The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:  Cash -For those short-term instruments, the carrying amount is a reasonable estimate of fair value.  Investment Securities -For investment securities, fair value is determined as disclosed in the previous investment security disclosure.  Loans -The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers for the same remaining maturities.  Federal Home Loan Bank Stock -The carrying value of Federal Home Loan Bank stock approximates fair value based on the redemption provisions of the Federal Home Loan Bank.  Accrued Interest -The carrying amounts of accrued interest approximate fair value.  Deposits -The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturities certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.  Advances from Federal Home Loan Bank -The fair value of advances is estimated using rates currently available for advances of similar remaining maturities.  Commitments -The fair value of commitments to extend credit was not significant.  The estimated fair values of the Company’s significant financial instruments are as follows at September 30, 2009 and 2008:  2009

                        

                        2008Carrying

                        

                        Estimated

                        

                        Carrying

                        

                        Estimatedamount

                        

                        fair value

                        

                        amount

                        

                        fair valueFinancial assets:Cash and cash equivalents

                        

                        $

                        23,675

                        

                        $

                        23,675

                        

                        $

                        50,112

                        

                        $

                        50,112Investment securities

                        

                        

                        96,320

                        

                        

                        97,823

                        

                        

                        80,943

                        

                        

                        80,440FHLB stock

                        

                        

                        5,063

                        

                        

                        5,063

                        

                        

                        4,764

                        

                        

                        4,764Accrued interest receivable

                        

                        

                        2,622

                        

                        

                        2,622

                        

                        

                        2,843

                        

                        

                        2,843Loans

                        

                        

                        595,333

                        

                        

                        624,129

                        

                        

                        589,684

                        

                        

                        597,109Less allowance for loan losses

                        

                        

                        6,806

                        

                        

                        6,806

                        

                        

                        5,545

                        

                        

                        5,545Loans-net of allowance

                        

                        $

                        588,527

                        

                        $

                        617,323

                        

                        $

                        584,139

                        

                        $

                        591,564
   
 52
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)
  Financial liabilities:Deposits

                        

                        $

                        585,469

                        

                        $

                        593,273

                        

                        $

                        589,228

                        

                        $

                        593,168Advances from Federal HomeLoan Bank

                        

                        

                        100,628

                        

                        

                        107,931

                        

                        

                        104,877

                        

                        

                        107,303Accrued interest payable

                        

                        $

                        743

                        

                        $

                        743

                        

                        $

                        875

                        

                        $

                        875
   18.

                        REGULATORY CAPITAL
  The Bank’s actual capital and its statutorily required capital levels were as follows:  2009To be wellcapitalized underFor capital

                        

                        Prompt correctiveadequacy purposes

                        

                        action provisionsActual

                        

                        Required

                        

                        RequiredAmount

                        

                        %

                        

                        Amount

                        

                        %

                        

                        Amount

                        

                        %Core capital

                        

                        $

                        59,804

                        

                        7.9

                        %

                        

                        $

                        30,332

                        

                        4.0

                        %

                        

                        $

                        37,914

                        

                        5.0

                        %Tangible capital

                        

                        $

                        59,804

                        

                        7.9

                        %

                        

                        $

                        11,374

                        

                        1.5

                        %

                        

                        

                        N/A

                        

                        N/ATotal Risk based capital

                        

                        $

                        66,068

                        

                        12.7

                        %

                        

                        $

                        41,560

                        

                        8.0

                        %

                        

                        $

                        51,950

                        

                        10.0

                        %Tier 1 Risk based capital

                        

                        $

                        59,804

                        

                        11.5

                        %

                        

                        

                        N/A

                        

                        N/A

                        

                        

                        $

                        31,170

                        

                        6.0

                        %
   2008To be wellcapitalized underFor capital

                        

                        Prompt correctiveadequacy purposes

                        

                        action provisionsActual

                        

                        Required

                        

                        RequiredAmount

                        

                        %

                        

                        Amount

                        

                        %

                        

                        Amount

                        

                        %Core capital

                        

                        $

                        56,232

                        

                        7.4

                        %

                        

                        $

                        30,524

                        

                        4.0

                        %

                        

                        $

                        38,155

                        

                        5.0

                        %Tangible capital

                        

                        $

                        56,232

                        

                        7.4

                        %

                        

                        $

                        11,446

                        

                        1.5

                        %

                        

                        

                        N/A

                        

                        N/ATotal Risk based capital

                        

                        $

                        61,433

                        

                        12.2

                        %

                        

                        $

                        40,261

                        

                        8.0

                        %

                        

                        $

                        50,327

                        

                        10.0

                        %Tier 1 Risk based capital

                        

                        $

                        56,232

                        

                        11.2

                        %

                        

                        

                        N/A

                        

                        N/A

                        

                        

                        $

                        30,196

                        

                        6.0

                        %
   
 53
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)
  The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and Bank’s financial statements. Under capital adequacy guidelines and
            the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.  Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the previous table) of risk-based capital (as defined in the regulations) to risk weighted assets (as defined), total Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as
            defined). Management believes, as of September 30, 2009, and 2008, that the Bank meets all capital adequacy requirements to which they are subject.  As of September 30, 2009, the most recent notification from its regulators categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 core capital and Tier 1 leverage ratios as set forth in the previous tables. There are no conditions or events since the
            notification that management believes have changed the Bank’s category. The Bank’s actual capital amounts and ratios as of September 30, 2009 and 2008 are also presented in the previous tables.  The holding company does not have regulatory captial requirements, due to its status as a unitary thrift holding company.  19.

                        SUMMARIZED FINANCIAL INFORMATION OF TECHE HOLDING COMPANY (PARENT COMPANY ONLY)
  Balance Sheets   2009

                        

                        2008Assets:Investment in subsidiary

                        

                        $

                        65,116

                        

                        $

                        60,261Cash and cash equivalents

                        

                        

                        4,732

                        

                        

                        5,844Other

                        

                        

                        1,637

                        

                        

                        1,939Total assets

                        

                        $

                        71,485

                        

                        $

                        68,044Stockholders' equity

                        

                        $

                        71,485

                        

                        $

                        68,044
   
 54
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)
  Statements of Earnings  Year ended September 30,2009

                        

                        

                        2008

                        

                        

                        2007Dividends received from subsidiary

                        

                        

                        $

                        3,500

                        

                        

                        $

                        5,600

                        

                        

                        $

                        8,000Equity in earnings ofsubsidiary (less than)greater than dividends received

                        

                        

                        

                        3,956

                        

                        

                        

                        520

                        

                        

                        

                        (1,207

                        )Interest income from subsidiary

                        

                        

                        

                        72

                        

                        

                        

                        238

                        

                        

                        

                        228Management fees and otherallocated to the Parent

                        

                        

                        

                        (77

                        )

                        

                        

                        (77

                        )

                        

                        

                        (77

                        )Other expenses-net

                        

                        

                        

                        (315

                        )

                        

                        

                        (572

                        )

                        

                        

                        (263

                        )Net income

                        

                        

                        $

                        7,136

                        

                        

                        $

                        5,709

                        

                        

                        $

                        6,681
  Statements of Cash Flows  Year ended September 30,2009

                        

                        

                        2008

                        

                        

                        2007Cash flows from operating activities

                        

                        

                        $

                        3,170

                        

                        

                        $

                        5,554

                        

                        

                        $

                        7,250Cash flows from investing activities:Purchase of securities available-for-sale

                        

                        

                        

                        (12

                        )

                        

                        

                        (499

                        )

                        

                        

                        -Proceeds from sale of securities

                        

                        

                        

                        201

                        

                        

                        

                        -

                        

                        

                        

                        492Net cash provided (used) byinvesting activities

                        

                        

                        

                        189

                        

                        

                        

                        (499

                        )

                        

                        

                        492Cash flows from financing activities:Dividends paid

                        

                        

                        

                        (2,950

                        )

                        

                        

                        (2,963

                        )

                        

                        

                        (2,783

                        )Proceeds from exercise of stock options

                        

                        

                        

                        (14

                        )

                        

                        

                        257

                        

                        

                        

                        642Loan to ESOP

                        

                        

                        

                        (586

                        )

                        

                        

                        -

                        

                        

                        

                        -Cash paid for purchase ofcommon stock for treasury

                        

                        

                        

                        (921

                        )

                        

                        

                        (3,264

                        )

                        

                        

                        (2,098

                        )Net cash used in financingactivities

                        

                        

                        

                        (4,471

                        )

                        

                        

                        (5,970

                        )

                        

                        

                        (4,239

                        )Net increase (decrease) in cash and cash equivalents

                        

                        

                        

                        (1,112

                        )

                        

                        

                        (915

                        )

                        

                        

                        3,503Cash and cash equivalents - beginning of year

                        

                        

                        

                        5,844

                        

                        

                        

                        6,759

                        

                        

                        

                        3,256Cash and cash equivalents - end of year

                        

                        

                        $

                        4,732

                        

                        

                        $

                        5,844

                        

                        

                        $

                        6,759
  Federal and state banking regulations place certain restrictions on dividends paid. The total amount of dividends, which may be paid at any date, is generally limited to the retained earnings of the Bank. The Company’s ability to pay dividends is dependent upon dividends received from the Bank. At September 30, 2009, the Bank’s retained earnings available for the payment of dividends was
            approximately $24.5 million. The Bank is required to file an application with the OTS prior to paying dividends to the Company. In addition, dividends paid by the Bank to the Company would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements.  
 55
 
 ***TECHE HOLDING COMPANY AND SUBSIDIARY*** NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ***Years Ended September 30, 2009, 2008 and 2007*** (in thousands except share and per share data)
  20.

                        SUBSEQUENT EVENTS
 Subsequent events have been evaluated through December 23, 2009, the date of the financial statement issuance.  ******    56







DIRECTORS OF TECHE HOLDING COMPANY AND TECHE FEDERAL BANK  Patrick O. Little, Chairman

                        J. L. Chauvin

                        Robert J. Judice, Jr.

                        Robert L. Wolfe, Jr.Mary Coon Biggs

                        Ernest Freyou

                        Dr. Thomas F. Kramer

                        Robert E. Mouton – Director EmeritusDonelson T. Caffery, Jr.

                        Henry L. Friedman

                        W. Ross Little, Jr.

                        Maunette B. Risher - Advisory
  OFFICERS OF TECHE FEDERAL BANK
  Patrick O. Little

                        Chairman, President/CEO

                        Bryan Rowell

                        Vice PresidentDarryl Broussard

                        Sr. Vice President/CLO

                        Susan L. Simoneaux

                        Vice PresidentJ. L. Chauvin

                        Sr. Vice President/Treasurer/CFO

                        Martin M. Vasquez

                        Vice PresidentJason P. Freyou

                        Sr. Vice President/ COO

                        Tina M. Vidrine

                        Vice PresidentEddie R. LeBlanc

                        Sr. Vice President/Internal Auditor

                        Daniel E. Adler, Sr.

                        Assistant Vice PresidentW. Ross Little, Jr.

                        Sr. Vice President/Secretary/CRO

                        Terry T. Albarado

                        Assistant Vice PresidentTom A. Aldrich

                        Vice President

                        Montreen D. Badeaux

                        Assistant Vice PresidentAngela Badeaux

                        Vice President

                        Paulette A. Boudreaux

                        Assistant Vice PresidentF. William Ball

                        Vice President

                        Lisa Burleigh

                        Assistant Vice PresidentPatricia O. Begnaud

                        Vice President

                        Jeanette D. Charles

                        Assistant Vice PresidentGenevieve V. Bihm

                        Vice President

                        Angela M. Cliburn

                        Assistant Vice PresidentGeorgia B. Boudreaux

                        Vice President

                        Stephanie F. Dandry

                        Assistant Vice PresidentElmo P. Boudreaux, Jr.

                        Vice President

                        Patrick Fontenot

                        Assistant Vice PresidentIrma Nell Bourque

                        Vice President

                        Debra A. Guidry

                        Assistant Vice PresidentBart C. Boyer

                        Vice President

                        Henrietta S. Hollier

                        Assistant Vice PresidentMary Beth Brady

                        Vice President

                        Christina Irvin-Simpson

                        Assistant Vice PresidentJudy V. Breaux

                        Vice President

                        Christy B. Istre

                        Assistant Vice PresidentChristopher C. Brown

                        Vice President

                        Barbara A. Jesset

                        Assistant Vice PresidentGlen W. Brown

                        Vice President

                        Anne P. Jones

                        Assistant Vice PresidentKevin T. Caswell

                        Vice President

                        Jason D. Kennemer

                        Assistant Vice PresidentBelinda Cavazos

                        Vice President

                        Debbie M. Lancon

                        Assistant Vice PresidentS. Michael Comeaux

                        Vice President

                        Ruby B. Langley

                        Assistant Vice PresidentGwendoline Doucet

                        Vice President

                        Sylvia Lassalle

                        Assistant Vice PresidentDalie S. Eldridge

                        Vice President

                        Vicki L. Laubach

                        Assistant Vice PresidentElaine H. Gussman

                        Vice President

                        Janna Leblanc

                        Assistant Vice PresidentKaren Hardy

                        Vice President

                        Angel Lecompte

                        Assistant Vice PresidentConstance E. Harris

                        Vice President

                        Monique McBride

                        Assistant Vice PresidentChad Hebert

                        Vice President

                        Linda Roman

                        Assistant Vice PresidentScott P. Landrum

                        Vice President

                        Lesley E. Schexnayder

                        Assistant Vice PresidentD. Ross Landry

                        Vice President

                        Tanya Thibodeaux

                        Assistant Vice PresidentAngelina M. Mire

                        Vice President

                        Ashley Townley

                        Assistant Vice PresidentCarol Nini

                        Vice President

                        Leslie White

                        Assistant Vice PresidentPeggy P. Romero

                        Vice President
   INDEPENDENT AUDITORS

                        SPECIAL COUNSEL

                        ST. LANDRY ADVISORY BOARDDixon Hughes PLLC

                        Malizia Spidi & Fisch, PC

                        Wayne M. Gilmore, Chairman500 Ridgefield Court

                        901 New York Avenue, N.W.

                        H Kent AguillardAsheville, NC 28806

                        Suite 210 East

                        James R. BienvenuWashington, DC 20001

                        Anna Lee DunbarLynette Young FeuchtLEGAL COUNSEL

                        REGISTRAR AND STOCK

                        Patrick FontenotBiggs, Supple, Cremaldi and Curet, LLP

                        TRANFER AGENT

                        Simon Howard FournierLawless Building

                        Registrar and Transfer Company

                        Morgan J. Goudeau, IIIWillow Street

                        10 Commerce Drive

                        Martin A. Roy, Jr.Franklin, LA 70538

                        Cranford, NJ 07016-3572

                        Marvin Schwartzenburg(800) 525-7686Fax (908) 272-1006
    57