TECHE
HOLDING COMPANY

ANNUAL
REPORT
2008

<PAGE>

<TABLE>
<CAPTION>
<S>                                     <C>                                             <C>
Teche Holding Company                           New Iberia                                  Baton Rouge
---------------------                           ----------                                  -----------
1120 Jefferson Terrace Boulevard                142 W. St. Peter Street                     Wal-Mart Neighborhood Market
New Iberia, LA 70560                            New Iberia, LA  70560                       ----------------------------
PHONE (337) 560-7151                            (337) 364-5528                              9830 Old Hammond Highway
FAX (337) 365-7130                                                                          Baton Rouge, LA  70816
                                                Lafayette                                   (225) 926-7378
                                                ---------
New Iberia                                      Broadmoor                                   Breaux Bridge
----------                                      ---------                                   -------------
1120 Jefferson Terrace Boulevard                5121 Johnston Street                        601 East Bridge Street
New Iberia, LA  70560                           Lafayette, LA  70503                        Breaux Bridge, LA  70517
(337) 365-0366                                  (337) 981-1887                              (337) 332-2149
Call Center (800) 897-0315
                                                Lafayette
                                                ---------
Franklin                                        Downtown                                    Houma
--------                                        --------                                    -----
211 Willow Street                               1001 Johnston Street                        706 Barrow Street
Franklin, LA  70538                             Lafayette, LA  70501                        Houma, LA  70360
(337) 828-3212                                  (337) 232-6463                              (985) 868-8766

Franklin Drive-Thru                             Lafayette                                   Houma
-------------------                             ---------                                   -----
1823 Main Street                                2200 W. Pinhook Road                        912 Grand Caillou Road
Franklin, LA  70538                             Lafayette, LA  70508                        Houma, LA  70363
(337) 828-4177                                  (337) 232-3419                              (985) 857-9990

Morgan City                                     Baton Rouge                                 Thibodaux
-----------                                     -----------                                 ---------
1001 7th Street                                 3524 S. Sherwood Forest Boulevard           921 Canal Boulevard
Morgan City, LA  70380                          Baton Rouge, LA  70816                      Thibodaux, LA  70301
(337) 384-0653                                  (337) 293-0954                              (985) 446-6707

Bayou Vista                                     Prairieville                                Opelousas
-----------                                     ------------                                ---------
206 Arlington Street                            Wal-Mart SuperCenter                        428 E. Landry Street
Bayou Vista, LA  70380                          --------------------                        Opelousas, LA  70570
(985) 395-5244                                  17585 Airline Hwy.                          (337) 942-5748
                                                Prairieville, LA  70769
                                                (225) 677-8748


New Iberia                                      Baton Rouge                                 Eunice
----------                                      -----------                                 ------
529 N. Lewis Street                             Wal-Mart SuperCenter                        840 E. Laurel Avenue
New Iberia, LA  70563                           --------------------                        Eunice, LA  70535
(337) 367-2516                                  2171 O'Neal Lane                            (337) 457-9585
                                                Baton Rouge, LA  70816
                                                (225) 751-0264                              Internet:
                                                                                            www.teche.com
</TABLE>

<TABLE>
<CAPTION>
<S>                                                                                                             <C>
Table of Contents

President's Message .........................................................................................    2

Selected Financial Data .....................................................................................    6

Business of the Bank - Business of the Company ..............................................................    7

Summary of Quarterly Operating Results ......................................................................    7

Market and Dividend Information .............................................................................    8

Stock Performance Graph .....................................................................................    9

Management's Discussion and Analysis of Financial
Condition and Results of Operations .........................................................................   10

Management's Report .........................................................................................   19

Report of Independent Registered Public Accounting Firm .....................................................   20

Consolidated Balance Sheets .................................................................................   21

Consolidated Statements of Income ...........................................................................   22

Consolidated Statements of Stockholders' Equity .............................................................   23

Consolidated Statements of Cash Flows .......................................................................   24

Notes to Consolidated Financial Statements ..................................................................   26

Directors and Officers ......................................................................................   52

</TABLE>

                                                                               1

<PAGE>


Message from Patrick Little, Chairman and CEO

[GRAPHIC OMITTED]

We are proud of our results this year.  They are an  indication  of the strength
and stability  that our  shareholders  have expected and received  during our 74
year history.

                           Results of Fiscal Year 2008
                           ---------------------------


Earnings and Dividend Growth

[GRAPHIC OMITTED]

Earnings for fiscal 2008 were $5.7 million or $2.63 per diluted share. Markdowns
on certain  securities and costs to transfer  obligations of the defined benefit
plans in the third  quarter  caused year end  earnings to be 10.5 % below fiscal
year 2007.  Excluding  those  non-operational  losses  fiscal year 2008 earnings
would have been $8.5 million or $3.92 per diluted  share,  a 33%  increase  over
2007.

Dividends have provided our shareholders a growing return on their investment in
our Company  over the past five years.  In 2008,  Teche paid $1.37 in total cash
dividends  per  share  and  $0.35 in cash in the  fourth  quarter.  Based on the
closing  price of our common stock on December 8, 2008 our  annualized  dividend
yield was 5.46%.


Revenue Growth

[GRAPHIC OMITTED]

We are proud that our revenue has  increased  for 10  consecutive  years and our
record continues in 2008. Revenue was $41.8 million, a 10.9% increase over 2007.
Net interest income increased to $25.9 million or 11.7%. Non-interest income was
$15.9 million, an increase of 9.4% over 2007.



Deposit Growth

[GRAPHIC OMITTED]

In 2008,  we  continued  to grow  our  total  deposits  and,  more  importantly,
SmartGrowth deposits.  Total deposits increased $33.7 million to $589.2 million,
a 6.1%  increase for 2008.  SmartGrowth  deposits for fiscal 2008  consisting of
checking,  savings  and money  market  accounts  grew  19.3% to $330.4  million.
SmartGrowth deposits were 56.1% of all deposits at

2
<PAGE>

September  30, 2008,  compared to only 29.0% in 2001.  Responding  to customers'
needs has been at the core of our mission and defines our success.


Loan Growth

[GRAPHIC OMITTED]

We have carefully pursued our SmartGrowth strategy by gradually transforming our
loan portfolio from 73% conforming  single family home loans and 27% SmartGrowth
loans in 2001 to an exact  inverse,  27%  conforming  loans and 73%  SmartGrowth
loans in 2008.

[GRAPHIC OMITTED]

SmartGrowth loans are comprised of commercial, home equity, alternative mortgage
and consumer loans but do not include what are conventionally  called "sub-prime
loans."  SmartGrowth loans increased $53.2 million or 14.1% to $429.5 million at
September  30,  2008.  In 2008,  commercial  loans  and  consumer  loans  showed
significant increases of 17.9% and 16.5% respectively. We have carefully layered
high quality commercial loans on a well developed base of retail lending.


Net-Interest Margin Increase

Net-interest  margin was 3.71% for 2008  compared  to 3.57% in 2007.  The margin
increased  due to our  SmartGrowth  successes,  especially  growth  in  checking
account and commercial loan balances.


High Asset Quality

The Company has maintained  high asset quality since its inception as a mortgage
lender in 1934. Non-performing assets as a percent of total assets were 0.88% at
September 30, 2008 compared to 0.71% at September 30, 2007. Net  charge-offs for
2008  were  0.06%  compared  to  0.07%  for  fiscal  2007.  This  is the  second
consecutive  year that our net  charge-offs  have  decreased.  We increased  our
allowance for loan losses to 0.94% of loans from .90% of loans last year.

This is a particularly important time to show discipline in the lending process.
Teche's asset quality is high  compared to industry  results this year.  Teche's
lending policies have steered the Company away from loans associated with higher
risk such as commercial construction and development loans and subprime lending.
We continue to focus on loans which fit our expertise such as secured commercial
loans and retail mortgage and consumer loan products.

                                                                               3

<PAGE>

Many national  lenders and banks in areas with  weakened  economies are strongly
reacting  to  existing  loan  problems.  While we have not  experienced  similar
conditions  in south  Louisiana,  we have  undertaken an  incremental,  measured
process to  identify  potential  areas of current  and  future  credit  risk and
deterioration.  As a result, Teche has made its lending guidelines slightly more
stringent,  particularly with regards to maximum loan to value  requirements and
minimum  credit scores of our  borrowers.  These changes are intended to enhance
future asset quality while only  minimally  impacting loan  originations.  These
initiatives started in 2008 and will continue in 2009.


Capital Strength

Our shareholders  should know that our balance sheet is strong with the ratio of
tangible  equity to total  assets at September  30, 2008 at 8.40%.  The tier one
risk-based capital ratio of Teche Federal Bank was 11.17% at September 30, 2008.


                    Teche and the National Financial Markets

The present national and international  economic  environment and the consequent
government  responses  have created  challenges for the financial  industry.  At
Teche, we have  maintained  conservative  lending  practices and our exposure to
loans and securities of low quality is very limited.

Amidst  turmoil in the financial  services  industry,  Teche had an  outstanding
year. We did however,  experience  direct  effects of the  deterioration  in the
quality and marketability of private label mortgage related  securities.  Losses
were limited to  securities  received in a  redemption  from the AMF Ultra Short
Mortgage Fund.

The general  turmoil of the financial  industry has also affected  Teche's stock
price. Demand for Teche shares brought  extraordinary  returns over the last few
years. However,  pressure on the financial industry has brought the price of our
stock down in recent  months to 2003 levels,  even though we have  significantly
increased  our  earnings  during such  periods.  For  example,  our earnings per
diluted  share in 2003 were $2.55 while our earnings  per diluted  share in 2008
would have been $3.92  excluding  losses on  investments  and the  benefit  plan
settlement. These 2008 operating earnings were 53.7% higher than in 2003.

We believe in the soundness of our SmartGrowth  strategy and operating policies.
Our leadership team is focused on growing our Company and improving results each
year.  However,  markets may continue to acknowledge  those results  differently
based on external economic factors.

One of the key  factors in Teche's  outstanding  2008  results is the economy of
south  Louisiana.  Unlike  other  parts  of the  United  States  where  jobs are
declining, the

4
<PAGE>

"Louisiana Economic Outlook for 2009-2010," a highly regarded study published by
Louisiana State  University,  indicates strong job growth in our markets.  Baton
Rouge increased jobs by 5.4% after  Hurricane  Katrina and in the next two years
jobs are forecasted to increase 3.5%.  Furthermore,  Lafayette's and Houma's job
growth is expected to be 4.0% and 4.3% respectively in 2009-2010.

Even though  Hurricanes Gustav and Ike did impact Teche's service areas in 2008,
operations  were not  significantly  interrupted  due to the dedication of Teche
associates to serve our customers.  We immediately re-opened branches located in
storm   damaged  areas  and  assisted  our  customers  to  resume  their  normal
activities.  The excellent  results of the fourth quarter are a testament to the
commitment and banking skills of the leadership team and our associates.


                         Teche Leadership and Associates

Our  results  are  driven by our  leadership  team and our  associates  at every
location.  On behalf of the board of directors,  I want to thank our  leadership
team and associates for the outstanding progress of the Company in 2008. We will
continue our efforts in building a successful and profitable  Company generating
solid returns for our shareholders.


Sincerely,


/s/ Patrick Little

Patrick Little
/hairman, President/Chief Executive Officer

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

                                                                               5

<PAGE>


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

<S>                                              <C>               <C>              <C>               <C>              <C>
                                                 2008              2007             2006              2005             2004
Assets                                       $769,488          $719,367         $685,750          $676,822         $653,034
Loans Receivable, Net                         584,591           561,988          520,503           487,816          471,327
Securities-Available for Sale                  26,652            51,647           63,517            77,491           98,939
Securities-Held to Maturity                    54,291            31,855           38,743            34,259           21,636
Cash and Cash Equivalents                      50,112            21,811           17,528            32,674           15,362
Deposits                                      589,228           555,569          537,549           516,052          432,417
FHLB Advances                                 104,877            89,756           77,386            93,409          154,439
Stockholders' Equity                           68,044            67,006           63,929            61,338           60,287
SUMMARY OF OPERATIONS
Interest Income                              $ 45,633          $ 43,041         $ 39,197          $ 36,068         $ 30,668
Interest Expense                               19,733            19,857           16,720            15,674           13,076
                                             --------          --------         --------          --------         --------
Net Interest Income                            25,900            23,184           22,477            20,394           17,592
Provision for Loan Losses                         825               605              210               950               60
                                             --------          --------         --------          --------         --------
Net Interest Income after
   Provision for Loan Losses                   25,075            22,579           22,267            19,444           17,532
Non-Interest Income                            15,851            14,486           12,997            10,819            9,740
Non-Interest Expense                           30,590            27,378           24,330            22,587           18,730
                                             --------          --------         --------          --------         --------
Income Before Gains (Losses) on Sales
   of Securities and Income Taxes              10,336             9,687           10,934             7,676            8,542
Gains (Losses) on Sales of Securities         (2,580)               164               34                26              232
Income Tax Expense                              2,047             3,170            3,651             2,503            2,848
                                             --------          --------         --------          --------         --------

Net Income                                   $  5,709          $  6,681         $  7,317          $  5,199          $ 5,926
                                             ========          ========         ========          ========          =======

SELECTED FINANCIAL RATIOS
Ratio of Equity to Assets                        8.84%             9.31%            9.32%             9.06%            9.23%
Book Value/Common Share                         $32.12            $30.42           $28.68            $26.78           $26.54
Dividends declared per Share                     $1.37             $1.26            $1.10             $0.94            $0.78
Basic Income per Common Share                    $2.65             $3.01            $3.22             $2.34            $2.66
Diluted Income per Common Share                  $2.63             $2.94            $3.15             $2.26            $2.48
Return on Average Assets                         0.76%             0.95%            1.07%             0.77%            0.87%
Return on Average Equity                         8.29%            10.24%           11.79%             8.59%            9.40%
Net Interest Margin                              3.71%             3.57%            3.53%             3.24%            3.24%
Non-Interest Expense/Average Assets              4.07%             3.89%            3.54%             3.34%            3.33%
Non-Interest Income/Average Assets               2.11%             2.06%            1.89%             1.60%            1.53%
Non-Performing Loans/Loans (1)                   1.09%             0.68%            0.74%             0.98%            0.63%
Allowance for Loan Losses/Loans (1)              0.94%             0.90%            0.93%             1.04%            0.92%
Dividend Payout                                 51.90%            41.66%           33.65%            40.30%           29.31%
</TABLE>

(1)       Total loans before allowance for loan losses

6
<PAGE>

Business of the Bank

     Teche Federal Bank (the "Bank")  attracts savings deposits from the general
public and uses such deposits to originate primarily residential mortgage loans,
commercial mortgage loans and consumer loans. Additionally,  the Bank invests in
mortgage-backed and investment securities. (See "Management Strategy" on page 6)

     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

<TABLE>
<CAPTION>
                                                         2008                                             2007
                                         First     Second    Third     Fourth             First     Second    Third    Fourth
                                                         (Amounts in thousands, except per share data)

<S>                                   <C>        <C>      <C>        <C>               <C>        <C>      <C>       <C>
Interest Income                        $11,361    $11,391  $11,465    $11,417           $10,388    $10,695  $10,917   $11,040

Interest Expense                         5,233      5,082    4,798      4,620             4,709      4,894    5,079     5,176

Net Interest Income                      6,128      6,309    6,667      6,797             5,679      5,801    5,838     5,864

Provision for Loan Losses                  180        190      295        160                85         60       60       400

Income (Loss) Before Income Taxes        2,863      3,223   (1,235)     2,906             2,725      2,609    2,469     2,048

Net Income (Loss)                        1,883      2,184     (476)     2,119             1,798      1,709    1,617     1,556

Basic Income (Loss)                       0.85       1.01    (0.22)      1.00              0.81       0.77     0.73      0.70
  per Common Share

Diluted Income (Loss)                     0.84       1.00    (0.22)      0.99              0.78       0.75     0.71      0.69
  per Common Share
</TABLE>

                                                                               7

<PAGE>

Market and Dividend Information

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

<TABLE>
<CAPTION>
===================================================================================================================
Quarter ended                  Sales Price                 Period End Close      Cash          Date Declared
                                                                                 Dividend
                                                                                 Declared
                               ----------------------------
                               High            Low
-------------------------------------------------------------------------------------------------------------------
<S>                               <C>           <C>                <C>           <C>
December 29, 2006                   $54.15        $50.15             $51.50        $0.30       November 29, 2006
-------------------------------------------------------------------------------------------------------------------
March 30, 2007                      $51.29        $44.03             $44.26        $0.31       February 28, 2007
-------------------------------------------------------------------------------------------------------------------
June 29, 2007                       $45.50        $38.61             $45.25        $0.32       May 23, 2007
-------------------------------------------------------------------------------------------------------------------
September 28, 2007                  $45.75        $41.00             $41.00        $0.33       August 21, 2007
-------------------------------------------------------------------------------------------------------------------
December 31, 2007                   $44.00        $37.10             $37.75       $0.335       November 29, 2007
-------------------------------------------------------------------------------------------------------------------
March 31, 2008                      $38.30        $29.50             $32.55        $0.34       February 26, 2008
-------------------------------------------------------------------------------------------------------------------
June 30, 2008                       $38.39        $31.50             $37.17       $0.345       May 21, 2008
-------------------------------------------------------------------------------------------------------------------
September 30, 2008                  $37.50        $28.90             $31.75        $0.35       August 27, 2008
===================================================================================================================
</TABLE>

     According to the records of the Company's  transfer  agent,  there were 456
registered  stockholders  of record at November 30,  2008.  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, 2008 exceeded the amounts
of its liquidation account and regulatory capital requirements.

8

<PAGE>

Stock Performance Graph

     Set forth below is the performance  graph for the Common Stock for the five
fiscal years ended  September 30, 2008. The  performance  graph, as prepared for
the Company by Zacks  Investment  Research Inc.,  compares the cumulative  total
return on the Common Stock with the (i) the NYSE  Alternext US, which takes into
account the cumulative total return on stocks included in the NYSE Alternext US,
and (ii) the SIC Industry Index,  which takes into account the cumulative  total
return  on the  stocks  of  companies  with the  same  SIC code as the  Company.
Comparison  with the NYSE  Alternext US, and the SIC Industry  Index assumes the
investment of $100 as of September 30, 2003. The cumulative total return for the
indices and for the Company is computed  with the  reinvestment  of dividends at
the frequency with which dividends, if any, were paid during the period.

[GRAPHIC OMITTED]

<TABLE>
<CAPTION>

     ------------------------------------------------- -------------- ------------ ----------- ------------ ------------ -----------
                                                          9/30/03       9/30/04     9/30/05      9/30/06      9/30/07      9/30/08
     ------------------------------------------------- -------------- ------------ ----------- ------------ ------------ -----------
<S>                                                     <C>           <C>         <C>          <C>          <C>          <C>
     Teche Holding Company                                $100.00       $115.04     $114.63      $163.96      $127.40      $102.63
     ------------------------------------------------- -------------- ------------ ----------- ------------ ------------ -----------
     NYSE Alternext US (Amex Composite Index)             $100.00       $131.90     $185.15      $208.43      $270.41      $201.30
     ------------------------------------------------- -------------- ------------ ----------- ------------ ------------ -----------
     SIC Industry Index                                   $100.00       $109.25     $112.81      $138.43      $134.38      $100.67
     ------------------------------------------------- -------------- ------------ ----------- ------------ ------------ -----------
</TABLE>

NOTE: Data complete through last fiscal year.

NOTE: Corporate   Performance  Graph  with  peer  group  uses  peer  group  only
      performance (excludes only company).

NOTE: Peer  group  indices  use   beginning  of  period  market   capitalization
      weighting.

There can be no assurance that the Company's  future stock  performance  will be
the same or  similar to the  historical  stock  performances  shown in the graph
above.  The Company  neither  makes nor  endorses  any  predictions  as to stock
performance.

                                                                               9

<PAGE>

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

General

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

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

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

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

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

Overview

     The Company's  assets in fiscal 2008 grew  $50.1million  to $769.5  million
reflecting  increases in loans  receivable  offset somewhat by decreases in cash
and securities.  Net income decreased  $972,000 to $5.7 million this past fiscal
year  primarily  due to the  Bank's  withdrawal  from the AMF Ultra  Short  Fund
incurring  a loss of $2.6  million  before  taxes  in the  third  quarter  and a
subsequent impairment write-down of $408,000 before taxes in the fourth quarter,
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. Additionally,
in order to manage interest rate risk, management sold approximately $36 million
of long term fixed rate first mortgage loans in one transaction during the year.
We have  provided  details of the  reasons  for these  changes in the  following
pages.

Management Strategy

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

Asset and Liability Management

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

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

10
<PAGE>

maturity of  interest-bearing  liabilities and  interest-earning  assets and the
volatility of interest rates.  Because most deposit  accounts react more quickly
to market  interest rate  movements  than do  traditional  mortgage loans due to
their shorter terms to maturity, increases in interest rates may have an adverse
effect on the Bank's  earnings.  Conversely,  this same mismatch will  generally
benefit the Bank's  earnings  during  periods of  declining  or stable  interest
rates.

     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,  and home  equity  loans and the  investment  of excess
liquidity in purchased  loans,  adjustable rate  mortgage-backed  securities and
other securities with relatively short terms to maturity.  Furthermore, the Bank
works to manage the  interest  rates it pays on  deposits  while  maintaining  a
stable deposit base and providing  quality services to its customers.  In recent
years,  the Bank has used  borrowings  while  continuing to rely  primarily upon
deposits as its source of funds.  At September  30, 2008,  the weighted  average
term to  repricing  of the  Bank's ARM loan and ARM  mortgage-backed  securities
portfolio  was  approximately  21 months.  In contrast,  at September  30, 2008,
$169.5  million of the Bank's  certificate  accounts  and $330.3  million of the
Bank's regular deposit accounts (e.g. demand, NOW, money market,  savings),  out
of $589.2 million of total deposits,  were scheduled to mature or reprice 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.

<TABLE>
<CAPTION>
                                                                     Year Ended September 30,
                                            ---------------------------------------------------------------------------
                                                      2008 vs. 2007                           2007 vs 2006
                                            -----------------------------------    ------------------------------------
                                                Increase (Decrease) Due to             Increase (Decrease) Due to
                                            -----------------------------------    ------------------------------------
                                             Volume        Rate         Net         Volume        Rate          Net
                                            ---------    ----------   ---------    ---------    ----------   ----------
                                                                      (Dollars in Thousands)
<S>                                       <C>          <C>          <C>          <C>          <C>           <C>
Interest-Earning Assets:
Securities (1)                              $   (522)    $      18    $   (504)    $   (568)    $     252     $   (316)
Loans Receivable, Net                          3,290          (189)      3,101        2,941         1,954        4,895
Other Interest-Earning Assets (2)                817          (822)         (5)         311        (1,046)        (735)
                                            ---------    ----------   ---------    ---------    ----------    ---------
Total Interest-Earning Assets                  3,585          (993)      2,592        2,684         1,160        3,844
                                            ---------    ----------   ---------    ---------    ----------    ---------
Interest-Bearing Liabilities
Deposits                                         670        (1,440)       (770)         429         2,940        3,369
FHLB Advances                                    854          (208)        646         (229)           (3)        (232)
                                            ---------    ----------   ---------    ---------    ----------    ---------
Total Interest-Bearing Liabilities             1,524        (1,648)       (124)         200         2,937        3,137
                                            ---------    ----------   ---------    ---------    ----------    ---------
   Net Change in Net Interest Income        $  2,061     $     655    $  2,716     $  2,484     $  (1,777)    $    707
                                            =========    ==========   =========    =========    ==========    =========
</TABLE>

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

                                                                              11
<PAGE>

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

<TABLE>
<CAPTION>

                                                                       Year Ended September 30,
                                     ---------------------------------------------------------------------------------------------
                                                   2008                             2007                          2006
                                     ----------------------------------  ---------------------------   ---------------------------
                                     Average                  Average    Average           Average     Average           Average
                                     Balance        Interest Yield/Cost  Balance  Interest Yield/Cost  Balance  Interest Yield/Cost
                                     -------        -------- ----------  -------  -------- ----------  -------  -------- ----------
                                                                           (Dollars in Thousands)
<S>                                <C>            <C>           <C>    <C>      <C>          <C>     <C>      <C>          <C>
Assets
   Interest-Earning Assets
   Securities (1)                    $ 84,249       $ 3,872       4.60%  $ 95,651 $ 4,376      4.57%   $108,822 $ 4,692      4.31%
   Loans Receivable (2) (3)           594,944        41,280       6.97%   547,740  38,179      6.97%    503,252  33,284      6.61%
   Other Interest-Earning Assets (4)   18,043           481       2.67%     6,731     486      7.22%     24,502   1,221      4.98%
                                     --------       -------              -------- -------              -------- -------
   Total Interest-Earning Assets      697,236       $45,633       6.54%   650,122 $43,041      6.62%    636,576 $39,197      6.16%
                                                    =======                       =======                       =======
   Non-Interest Earning Assets         52,589                              54,423                        50,329
                                     --------                            --------                      --------
Total Assets                         $749,825                            $704,545                      $686,902
                                     ========                            ========                      ========

Liabilities and Stockholders'
     Equity
   Interest-Bearing Liabilities
   NOW Accounts                      $ 83,515       $   456       0.55%  $ 74,851     328      0.44%   $ 71,423  $  200      0.28%
   Statement & Regular Savings
       Accounts                        52,851           409       0.77%    52,084     413      0.79%     59,675     626      1.04%
   Money Funds Accounts               125,905         3,190       2.53%    89,139   3,183      3.52%     63,861   1,375      2.15%
   Certificates of Deposit            264,185        11,230       4.25%   287,292  12,131      4.22%    294,838  10,485      3.56%
                                     ---------      --------             -------- --------             -------- --------
       Total Deposits                 526,456        15,285       2.90%   503,366  16,055      3.19%    489,797  12,686      2.59%
   FHLB Advances                       95,225         4,448       4.67%    77,550   3,802      4.90%     82,214   4,034      4.91%
                                     ---------      --------             -------- --------             -------- --------
   Total Interest-Bearing
       Liabilities                    621,681       $19,733       3.17%   580,916 $19,857      3.42%    572,011 $16,720      2.92%
                                                    ========                      ========                      ========
   Non-Interest-Bearing
       Liabilities                     59,311                              58,396                        52,859
                                     ---------                           ---------                     --------

       Total Liabilities              680,992                             639,312                       624,870
Stockholders' Equity                   68,833                              65,233                        62,035
                                     ---------                           ---------                     --------
Total Liabilities and
     Stockholders' Equity            $749,825                            $704,545                      $686,905
                                     ========                            =========                     ========
Net Interest  Income/Interest Rate
     Spread (5)                                     $ 25,900      3.37%           $23,184      3.20%            $22,477      3.24%
                                                    ========                      ========                      ========
Net Interest Margin (6)                                           3.71%                        3.57%                         3.53%
Interest-Earning Assets/
Interest-Bearing Liabilities                                    112.15%                      111.91%                       111.29%
</TABLE>

(1)  Includes securities and Federal Home Loan Bank ("FHLB") stock.
(2)  Amount is net of  deferred  loan fees,  loan  discounts  and  premiums  and
     loans-in-process and includes non-accruing loans.
(3)  Interest  income  includes  loan fees of  approximately  $565,000  in 2008,
     $479,000 in 2007 and $429,000 in 2006.
(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

12
<PAGE>

Changes in Financial Condition from September 30, 2007 to September 30, 2008

     General. Total assets increased $50.1 million, or 7.0% to $769.5 million at
September  30, 2008 from $719.4  million at September  30, 2007,  primarily as a
result of growth in loans receivable and interest bearing  deposits,  which were
attributable  to an increase in deposits and advances with the Federal Home Loan
Bank.

     Cash and Cash Equivalents.  Cash increased $28.3 million from $21.8 million
at  September  30, 2007 to $50.1  million at September  30,  2008.  The increase
resulted  primarily  from deposit  growth,  along with increases in Federal Home
Loan Bank advances.

     Securities    Available-for-Sale   and   Held   to   Maturity.   Securities
available-for-sale  decreased  $25.0 million from $51.6 million at September 30,
2007 to $26.6  million at  September  30, 2008 due  primarily to  repayments  on
existing  mortgage-backed  securities and to withdrawal from the AMF Ultra Short
Mortgage Fund during the year. The Company withdrew from the fund as a result of
continuing  declines  in its  market  value and  recorded  a  pre-tax  charge of
$2,580,000,  receiving  securities in return.  Securities received from the fund
were classified as held-to-maturity.  Securities  held-to-maturity  increased in
2008 due to investments  received from the AMF fund and other  purchases  during
the year. (See note 3 of the Consolidated Financial Statements).

     Loans  Receivable,  Net. The Bank's net loans  receivable  increased  $22.6
million or 4.0% to $584.6  million from $562.0 million at September 30, 2007 due
primarily to growth in the portfolio of  commercial  and consumer  loans.  These
increases  are reflected in the Bank's  portfolio of mobile home,  multi-family,
commercial real estate and land loans which is part of the Company's strategy to
grow net interest margin and manage  interest rate risk. The one-to-four  family
mortgage loan portfolio decreased during the year due to a sale of $36.3 million
in long term, fixed rate mortgages.  (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 $754,000 or
2.8% due to completion of a new full service branch in our Houma market area.

     Deposits.  The Bank's  deposits  increased  $33.7 million or 6.1% to $589.2
million at September 30, 2008, from $555.5 million at September 30, 2007.  These
increases resulted from growth in money market,  savings,  non-interest checking
and NOW accounts,  offset somewhat by a decrease in time deposits.  This deposit
growth  reflects the Company's  strategy of growing lower costs  deposits.  (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
increased  $15.1  million,  or 16.8% to $104.9  million  from  $89.8  million at
September  30, 2007.  The increase was due  primarily to fund growth in the loan
portfolio.  Longer term Federal Home Loan Bank advances were acquired during the
year to help manage interest rate risk.

     Stockholders' Equity.  Stockholders' equity increased $1.0 million, or 1.5%
from $67.0  million at September  30, 2007,  to $68.0  million at September  30,
2008.  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, 2008,  2007 and
2006

Analysis of Net Income

     General. The Company had net income of $5.7 million,  $6.7 million and $7.3
million for the years ended 2008,  2007 and 2006. 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. The $0.6 million decrease during fiscal 2007 was
primarily  due to an increase in  non-interest  expenses and  provision for loan
losses.

     Revenue.  Revenue for fiscal 2008 amounted to $41.8 million,  $37.7 million
and $35.5  million for the years ended 2008,  2007 and 2006,  respectively.  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.  The $2.2 million
increase  during  fiscal 2007  compared to fiscal 2006 was  primarily  due to an
increase in interest income on loans resulting from growth in both the rates and
the average  balance of the loan portfolio.  Non-interest  income also increased
from growth in service  charges on  transactions  accounts  primarily  due to an
increase in the number of accounts during the year.

     Interest Income.  Interest income amounted to $45.6 million,  $43.0 million
and $39.2  million for the years ended 2008,  2007 and 2006,  respectively.  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 $3.8 million increase during fiscal 2007 compared to fiscal 2006 was
primarily  due to an  increase  in the average  balance  and  interest  rates on
earning assets.

                                                                              13
<PAGE>

     The average balance of loans  increased  during fiscal 2008 and fiscal 2007
by  approximately   $47.2  million,   or  8.6%  and  $44.5  million,   or  8.8%,
respectively.

     Interest Expense. Interest expense totaled $19.7 million, $19.9 million and
$16.7  million  for the years  ended  September  30,  2008,  2007 and 2006.  The
$124,000  decrease  from fiscal 2007 to fiscal 2008 was  primarily  due to lower
interest rates along with good growth in lower rate deposit  accounts.  The $3.1
million or 18.6%  increase  from fiscal 2006 to fiscal 2007 was due primarily to
an  increase  in the average  balance  and rates paid on deposit  accounts.  The
average balance of deposits  increased $23.1 million and $13.6 million in fiscal
2008 and 2007, respectively.

     Net Interest  Income.  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.  Net
interest  income  increased  $707,000  to $23.2  million  during  the year ended
September  30, 2007  primarily  due to an increase in interest  income on loans,
offset somewhat by an increase in interest expense on deposits.

     Provision  for  Loan  Losses.  The Bank  provided  $825,000,  $605,000  and
$210,000 to the  allowance  for loan losses for the years  ended  September  30,
2008,  2007 and 2006  respectively.  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  provision  was also  impacted  by  changes  to the  reserves
necessary for impaired loans.  The provision  increased in fiscal 2007 primarily
due  to  two  delinquent   commercial  loans  that  were  expected  to  go  into
foreclosure,  one of which  was  resolved  during  2008 and the  other is in the
process of  foreclosure.  The  allowance  for loan  losses  was $5.5  million at
September 30, 2008, $5.1 million at September 30, 2007, and $4.9 million at 2006
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,  2008,  2007 and 2006  amounted to $15.8  million,  $14.5  million and $13.0
million respectively.  The increases in all three fiscal years are due primarily
to fee income  resulting  from an  increase  in deposit  related  fees due to an
increase in the number of deposit accounts.

     Non-Interest  Expense.  Non-interest  expense totaled $30.6 million;  $27.3
million and $24.3 million  during the years ended  September 30, 2008,  2007 and
2006,  respectively.  The $3.2 million increase during fiscal 2008 was primarily
due to compensation  expense that did include a one time $1.5 million charge for
exiting the defined  benefit  pension plans.  The $3.1 million  increase  during
fiscal 2007 was due  primarily  to  compensation  expense,  expenses  related to
deposit services and revaluation of foreclosed real estate. Compensation expense
this year  increased  primarily  due to annual salary  adjustments,  increase in
incentive pay, additional staff for commercial lending and retail operations.

     The Bank is subject to the  Louisiana  Shares  Tax,  which  amounted  to an
expense of $666,000,  $535,000 and $524,000 in the fiscal years ended  September
30, 2008, 2007 and 2006, respectively.

     Gain (loss) on Sale of Securities.  In the years ended  September 30, 2008,
2007  and  2006,  (losses)  and  gains  on the sale of  securities  amounted  to
($2,580,000),  $164,000 and  $34,000,  respectively.  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, 2008, 2007 and 2006,
the Company  incurred income tax expense of $2.0 million,  $3.2 million and $3.7
million,  respectively.  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.)  There was a decrease  in the
effective  tax rate in 2007  due to a  decrease  in  permanent  tax  differences
related to the ESOP in 2007 compared to 2006.

14

<PAGE>

Liquidity and Capital Resources

     The  Bank's  average   liquidity   ratio  is  based  on  deposits  and  was
approximately  10.0% percent during September 2008. The Bank manages its average
liquidity  ratio  to  meet  its  funding  needs,  including:  deposit  outflows;
disbursement  of payments  collected  from  borrowers  for taxes and  insurance;
repayment of Federal  Home Loan Bank  advances  and other  borrowings;  and loan
principal  disbursements.  The Bank also  monitors  its  liquidity  position  in
accordance with its asset/liability management objectives.

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

     Scheduled  loan  repayments  and  maturing  investment   securities  are  a
relatively  predictable  source of funds.  However,  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 and one
other  correspondent  bank combined  totaled $171.4 million.  The Bank has total
FHLB borrowings of $104.9 million, or 13.6% of the Bank's assets.  Approximately
$9.6 million is due in the year ending September 30, 2009.

     Management believes the Bank has sufficient resources available to meet its
foreseeable  funding   requirements.   At  September  30,  2008,  the  Bank  had
outstanding  loan  commitments of $50.5  million,  and  certificates  of deposit
scheduled to mature within one year of $169.5 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, 2008, the Bank exceeded all regulatory capital requirements.  (See
Note 18 to the Consolidated Financial Statements.)

     On October 14, 2008, the FDIC announced the  establishment of its Temporary
Liquidity Guarantee Program (the "Liquidity Guarantee  Program").  The Liquidity
Guarantee  Program contains two elements:  (i) a debt guarantee program and (ii)
an increase in deposit  insurance  coverage  for certain  types of  non-interest
bearing accounts.

     All insured depository institutions were initially covered by both parts of
the Liquidity  Guarantee Program at no cost.  Institutions had until December 5,
2008 to opt out of one or both of the  programs.  Institutions  that did not opt
out by that date are deemed to be participants in both and will be assessed fees
related to these programs.  The Bank did not opt out of either program. The Bank
does not intend to issue senior  unsecured  debt  covered by the debt  guarantee
program.  Additionally,  fees associated with the  non-interest  bearing deposit
accounts program are expected to be minimal.

     On November 14, 2008, the Company filed an  application  with the Office of
Thrift  Supervision  ("OTS") to  voluntarily  participate  in the U.S.  Treasury
Department's (the  "Department")  Capital Purchase Program (the "CPP") announced
on October 14, 2008 in conjunction with the  Department's  Troubled Asset Relief
Program (the "TARP")  under the  Emergency  Economic  Stabilization  Act. If the
Company's  application is approved,  the Company would be eligible to receive up
to  $15,000,000  in capital  through  the  issuance  of  preferred  stock to the
Department,  based on three percent of the Company's  risk-weighted assets as of
September  30, 2008.  The  preferred  stock that the Company  would issue to the
Department  would be  included  as Tier 1  capital, be  senior to the  Company's
common stock,  be  non-voting,  perpetual  preferred  stock,  with a liquidation
preference of $1,000 per share, and would initially pay cumulative  dividends at
five percent  annually for each of the first five years of the  investment,  and
nine percent thereafter,  unless the Company redeems the shares prior to the end
of the five-year  period.  The Company would also issue 10-year warrants for its
common stock to the Department in an amount equal to 15% of the preferred  stock
purchased,  which will give the  Department  the  opportunity to benefit from an
increase  in the  common  stock  price  of the  Company.  The  warrants  will be
immediately  exercisable.  The  exercise  price of the  warrants  issued  to the
Department  will be based on the market price of the  Company's  common stock on
the date of issuance of the preferred stock, as determined by the 20-trading day
trailing average. None of the preferred shares,  warrants or common stock issued
to  the   Department,   if  any,  will  be  subject  to  any   restrictions   on
transferability by the Department. The Company's participation

                                                                              15
<PAGE>

in the CPP,  as well as the  amount the  Department  may  invest,  is subject to
approval of the  Department,  in  consultation  with the OTS,  the  execution of
various agreements and standard closing conditions.  If approved, the Company at
such time will consider  whether and to what extent it will  participate  in the
CPP, if at all. The factors the Company will consider in determining  whether to
participate  in the CPP will include,  among others,  the  capital needs  of the
Company, liquidity  levels, asset quality,  ability to invest profitably the new
capital and the then existing market conditions for capital, loans and deposits.

Net Portfolio Value Analysis - Interest Rate Risk

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

     The Bank  believes  it is  critical  to  manage  the  relationship  between
interest rates and the effect on its net portfolio value ("NPV").  This approach
calculates the difference  between the present value of expected cash flows from
assets and the present value of expected cash flows from 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 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, 2008.

16
<PAGE>

<TABLE>
<CAPTION>
                                                                    NPV as % of PV
                         Net Portfolio Value                           of Assets
                    ------------------------------       --------------------------------------
      Change                                                           NPV
    in Rates(1)           $ Amount      $ change(2)     % Change(3)    Ratio(4)    Change(5)
--------------------      -----------   -----------     -----------    --------    ---------
                           (Dollars in Thousands)
<S>                    <C>             <C>               <C>         <C>         <C>
            +300 bp       $    69,947   $ -19,013           -21%         9.15%      -195bp
            +200 bp            77,321     -11,639           -13%         9.94%      -115bp
            +100 bp            83,979     - 4,981            -6%        10.62%       -47bp
             +50 bp            86,711      -2,249            -3%        10.89%       -21bp
               0 bp            88,960                                   11.09%
             -50 bp            89,346        +386             0%        11.09%         0bp
            -100 bp            89,955        +996            +1%        11.11%        +1bp
</TABLE>

(1)  The -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,    September 30,
                                                     2008             2007
                                                --------------    --------------
*** RISK MEASURES: +200 BP RATE SHOCK ***
Pre-Shock NPV Ratio: NPV as % of PV of Assets       11.09%            11.39%
Exposure Measure: Post-Shock NPV Ratio               9.94%             9.38%
Sensitivity Measure: Decline in NPV Ratio             115bp             201bp
*** CALCULATION OF CAPITAL COMPONENT ***
Change in NPV as % of PV of Assets                   1.15%             2.01%

As the table shows, increases in interest rates would result in net decreases in
the Bank's NPV. The Bank's NPV decreases by 21.0% if interest  rates increase by
200 basis points.  Certain  shortcomings are inherent in the methodology used in
the above  table.  Modeling  changes  in NPV  requires  the  making  of  certain
assumptions  that may tend to oversimplify the manner in which actual yields and
costs respond to changes in market interest rates. First, the models assume that
the composition of the Bank's interest sensitive assets and liabilities existing
at the beginning of a period  remains  constant over the period being  measured.
Second,  the  models  assume  that a  particular  change  in  interest  rates is
reflected  uniformly  across  the yield  curve  regardless  of the  duration  to
maturity or repricing of specific assets and liabilities.  Accordingly, although
the NPV  measurements  do provide an indication of the Bank's interest rate risk
exposure at a particular  point in time, such  measurements  are not intended to
provide a precise  forecast of the effect of changes in market interest rates on
the Bank's net interest income.

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

Contractual Obligations

     The Company  has various  contractual  obligations  related to  borrowings,
deposits  and  operating  lease  payments.  These  obligations  are  outlined in
footnotes 6, 7 and 8 in the consolidated financial statements of the Company.

                                                                              17
<PAGE>

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.  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  Footnote  16  in  the  accompanying  consolidated  financial
statements.)

18
<PAGE>

                     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, 2008.

     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.

<TABLE>
<CAPTION>
<S>                                             <C>
/s/Patrick Little                                       /s/J. L. Chauvin

Patrick Little                                          J. L. Chauvin
President and Chief Executive Officer                   Senior Vice President and Chief Financial Officer
</TABLE>

                                                                              19
<PAGE>

                                                    [GRAPHIC OMITTED]
                                              D I X O N   H U G H E S   PLLC
                                       Certified Public 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, 2008 and 2007, 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, 2008. 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, 2008 and 2007,  and the results of
their  operations  and their cash flows for each of the years in the  three-year
period ended  September  30, 2008,  in  conformity  with  accounting  principles
generally accepted in the United States of America.

                                                           /s/ Dixon Hughes PLLC


Asheville, North Carolina
December 12, 2008

                                                               [GRAPHIC OMITTED]
                                               500 Ridgefield Court, PO Box 3049
                                                        Asheville, NC 28802-3049
                                               Ph. 828.254.2254 Fx. 828-254-6859
                                                            www.dixon-hughes.com

20
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 2008 and 2007
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
                                                                   2008         2007
                                                                 --------     --------
                                                                  (Amounts in thousands,
                                                            except share and per share data)
<S>                                                               <C>          <C>
ASSETS

Cash and due from banks                                           $14,159      $14,338
Interest-bearing deposits                                          35,953        7,473
Securities available-for-sale - at estimated fair value
  (amortized cost of $27,051 in 2008 and $53,166 in 2007)          26,652       51,647
Securities held-to-maturity-at amortized cost (estimated fair
  value of $53,788 in 2008 and $31,170 in 2007)                    54,291       31,855
Loans receivable-net of allowance for loan losses of
  $5,545 in 2008 and $5,083 in 2007                               584,591      561,988
Accrued interest receivable                                         2,843        2,952
Investment in Federal Home Loan Bank stock, at cost                 4,764        4,343
Real estate owned, net                                                343        1,218
Prepaid expenses and other assets                                   3,218        2,268
Goodwill                                                            3,647        3,647
Life insurance contracts                                           12,127       11,492
Premises and equipment, net                                        26,900       26,146
                                                                 --------     --------
                                TOTAL ASSETS                     $769,488     $719,367
                                                                 ========     ========
LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                         $589,228     $555,569
Advances from Federal Home Loan Bank                              104,877       89,756
Advance payments by borrowers for taxes and insurance               2,876        2,208
Accrued interest payable                                              875        1,441
Accounts payable and other liabilities                              3,588        3,387
                                                                 --------     --------

                                TOTAL LIABILITIES                 701,444      652,361

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Preferred stock, 5,000,000 shares authorized, none issued               -            -
Common stock, $.01 par value, 10,000,000 shares authorized;
  4,658,325 and 4,635,666 shares issued                                47           46
Additional paid-in capital                                         51,973       51,366
Retained earnings                                                  65,600       62,646
Treasury stock -2,542,028 and 2,432,828 shares - at cost          (49,313)     (46,049)
Accumulated other comprehensive loss                                 (263)      (1,003)
                                                                 --------     --------
                                TOTAL STOCKHOLDERS' EQUITY         68,044       67,006
                                                                 --------     --------
                TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $769,488     $719,367
                                                                 ========     ========
</TABLE>

See notes to consolidated financial statements.

                                                                              21

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended September 30, 2008, 2007 and 2006
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------

                                                                     2008                2007                2006
                                                                   ---------          ----------          ---------
                                                                   (Amounts in thousands, except per share amounts)
<S>                                                                <C>                <C>                 <C>
INTEREST INCOME:
   Interest and fees on loans                                      $  41,280          $   38,179          $  33,284
   Interest and dividends on securities                                3,873               4,376              4,692
   Other interest income                                                 480                 486              1,221
                                                                   ---------          ----------          ---------

                                     TOTAL INTEREST INCOME            45,633              43,041             39,197
                                                                   ---------          ----------          ---------

INTEREST EXPENSE:
   Deposits                                                           15,285              16,055             12,686
   Advances from Federal Home Loan Bank                                4,448               3,802              4,034
                                                                   ---------          ----------          ---------

                                    TOTAL INTEREST EXPENSE            19,733              19,857             16,720
                                                                   ---------          ----------          ---------

                                       NET INTEREST INCOME            25,900              23,184             22,477

PROVISION FOR LOAN LOSSES                                                825                 605                210
                                                                   ---------          ----------          ---------

                                NET INTEREST INCOME AFTER
                                 PROVISION FOR LOAN LOSSES            25,075              22,579             22,267
                                                                   ---------          ----------          ---------

NON-INTEREST INCOME:
   Service charges                                                    15,482              13,589             11,912
   Other income                                                          369                 897              1,085
                                                                   ---------          ----------          ---------

                                 TOTAL NON-INTEREST INCOME            15,851              14,486             12,997
                                                                   ---------          ----------          ---------

GAIN (LOSS) ON SALE OF SECURITIES                                     (2,580)                164                 34
                                                                   ---------          ----------          ---------

NON-INTEREST EXPENSE:
   Compensation and employee benefits                                 16,746              13,997             12,448
   Occupancy, equipment and data processing expense                    6,084               5,470              5,165
   Marketing and professional fees                                     2,986               3,224              2,759
   Deposit insurance premiums                                             74                  66                 67
   Louisiana shares tax                                                  666                 535                524
   Other operating expenses                                            4,034               4,086              3,367
                                                                   ---------          ----------          ---------

                                 TOTAL NON-INTEREST EXPENSE           30,590              27,378             24,330
                                                                   ---------          ----------          ---------

                                INCOME BEFORE INCOME TAXES             7,756               9,851             10,968

INCOME TAXES                                                           2,047               3,170              3,651
                                                                   ---------          ----------          ---------
                                                NET INCOME         $   5,709          $    6,681          $   7,317
                                                                   =========          ==========          =========

BASIC INCOME PER COMMON SHARE                                      $    2.65          $     3.01          $    3.22
                                                                   =========          ==========          =========

DILUTED INCOME PER COMMON SHARE                                    $    2.63          $     2.94          $    3.15
                                                                   =========          ==========          =========

DIVIDENDS PER SHARE                                                $    1.37          $     1.26          $    1.10
                                                                   =========          ==========          =========
</TABLE>

See notes to consolidated financial statements.

22

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended September 30, 2008, 2007 and 2006
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------

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

<S>                                           <C>         <C>         <C>           <C>       <C>          <C>          <C>
BALANCE - October 1, 2005                     $   46      $  48,458   $   53,893    $  (143)  $ (39,537)   $  (1,379)   $ 61,338
ESOP compensation                                  -            444            -        143           -            -         587
Exercise of stock options,
   including tax benefit                           -            817            -          -           -            -         817
Stock based compensation                           -            442            -          -           -            -         442
Reclassification of vested
   stock based compensation                        -            173            -          -           -            -         173
Purchase of common stock for treasury              -              -            -          -      (4,414)           -      (4,414)
Dividends declared - $1.10 per share               -              -       (2,462)         -           -            -      (2,462)
Comprehensive income:
   Net income                                      -              -        7,317          -           -            -       7,317
   Change in unrealized loss
     on securities available-for-sale, net         -              -            -          -           -          131         131
                                                                                                                        --------
       Total comprehensive income                                                                                          7,448
                                              ------      ---------   ----------    -------   ---------    ---------    --------
BALANCE - September 30, 2006                      46         50,334       58,748          -     (43,951)      (1,248)     63,929
Exercise of stock options,
   including tax benefit                           -            642            -          -           -            -         642
Stock based compensation                           -            390            -          -           -            -         390
Purchase 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          -           -            -       6,681
   Change in unrealized loss
     on securities available-for-sale, net         -              -            -          -           -          245         245
                                                                                                                        --------
       Total comprehensive income                                                                                          6,926
                                              ------      ---------   ----------    -------   ---------    ---------    --------
BALANCE - September 30, 2007                      46         51,366       62,646          -     (46,049)      (1,003)     67,006
Exercise of stock options,
   including tax benefit                           1            256            -          -           -            -         257
Stock based compensation                           -            351            -          -           -            -         351
Cumulative effect adjustment                       -              -          208          -           -            -         208
Purchase 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          -           -            -       5,709
Change in unrealized loss
   on securities available-for-sale, net                                                                         740         740
                                                                                                                        --------
Total comprehensive income                                                                                                 6,449
                                              ------      ---------   ----------    -------   ---------    ---------    --------
BALANCE - September 30, 2008                  $   47      $  51,973   $   65,600    $     -   $ (49,313)   $    (263)   $ 68,044
                                              ======      =========   ==========    =======   =========    =========    ========
</TABLE>

See notes to consolidated financial statements.

                                                                              23
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED  STATEMENTS OF CASH FLOWS
Years Ended September 30, 2008, 2007 and 2006
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------

                                                               2008       2007        2006
                                                            ---------   ---------   ---------
                                                                    (Dollars in thousands)
<S>                                                            <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                   $5,709      $6,681      $7,317
  Adjustments to reconcile net income
     to net cash provided by operating activities:
      Accretion of discount and amortization of premium
       on investments and mortgage-backed securities               37         290         246
      Provision for loan losses                                   825         605         210
          Provision for loss on real estate owned                  54         179           -
      ESOP expense                                                  -           -         587
      Stock-based compensation                                    351         390         442
      Deferred income tax expense (benefit)                        58        (554)        (19)
      Loss on sale of loans                                       172           -           -
      (Gain) Loss on sale of securities                         2,580        (164)        (34)
      Gains on sale of premises and equipment                      (1)         (3)       (244)
      Loss (Gain) on sale of real estate owned                     38         (36)        (57)
      Impairment of securities                                    408           -           -
      Depreciation                                              1,533       1,333       1,317
          Increase in bank owned life insurance                  (635)       (597)       (538)
          Amortization of intangible assets                        54          70         102
         (Increase) decrease in prepaid assets                 (1,379)        (68)        262
      Change in accrued interest receivable                       109        (250)        (98)
      Change in accrued interest payable                         (566)         18         615
      Other, net                                                  123       1,073      (1,339)
                                                            ---------   ---------   ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES                       9,470       8,967       8,769
                                                            ---------   ---------   ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sales of investment securities
     available-for-sale                                         2,357       1,527         200
  Purchase of securities available-for-sale                      (499)       (266)        (22)
  Principal repayments on securities available-for-sale        10,311      10,704      13,806
  Purchase of securities held-to-maturity                     (18,374)          -     (10,988)
  Principal repayments on securities held-to-maturity           6,743       6,875       6,409
  Net loan originations                                       (62,811)    (27,042)    (24,751)
  Purchase of loans                                            (3,474)    (16,354)    (14,366)
  Proceeds from sales of loans                                 42,952           -       4,800
   Sale of (Investment in) FHLB stock, net                       (421)       (158)      2,382
  Purchase of premises and equipment                           (2,287)     (7,663)     (2,254)
  Proceeds from sale of premises and equipment                      1           3         284
  Proceeds from sale of real estate owned                         855       1,288         681
                                                            ---------   ---------   ---------
  NET CASH USED IN INVESTING ACTIVITIES                       (24,647)    (31,086)    (23,819)
                                                            ---------   ---------   ---------
</TABLE>
See notes to consolidated financial statements.

24
<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED  STATEMENTS OF CASH FLOWS
Years Ended September 30, 2008, 2007 and 2006
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------

                                                                   2008           2007            2006
                                                              -----------     -----------     ----------
                                                                       (Dollars in thousands)
<S>                                                           <C>             <C>             <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Dividends paid                                              $    (2,963)    $    (2,783)    $   (2,462)
  Net increase in deposits                                         33,659          18,020         21,497
  Proceeds of long-term FHLB advances                              43,000               -              -
  Repayment of long-term FHLB advances                             (5,379)         (5,130)       (11,023)
  Net increase (decrease) in short-term FHLB advances             (22,500)         17,500         (5,000)
  Cash paid for purchase of common stock for treasury              (3,264)         (2,098)        (4,414)
  Proceeds from exercise of stock options                             107             444            646
  Excess tax benefit from share-based payment arrangements            150             198            171
  Change in advance payments by
     borrowers for taxes and insurance                                668             251            489
                                                              -----------     -----------     ----------

NET CASH PROVIDED (USED)
 BY FINANCING ACTIVITIES                                           43,478          26,402            (96)
                                                              -----------     -----------     ----------

                               NET INCREASE (DECREASE) IN
                                 CASH AND CASH EQUIVALENTS         28,301           4,283        (15,146)

CASH AND CASH EQUIVALENTS
  Beginning of year                                                21,811          17,528         32,674
                                                              -----------     -----------     ----------

CASH AND CASH EQUIVALENTS
  End of year                                                 $    50,112     $    21,811     $   17,528
                                                              ===========     ===========     ==========

SUPPLEMENTAL DISCLOSURE OF CASH
    FLOW INFORMATION:
  Cash paid for interest                                      $    20,299     $    19,875     $   16,105
                                                              ===========     ===========     ==========

  Cash paid for taxes                                         $     2,675     $     2,600     $    4,745
                                                              ===========     ===========     ==========

SUPPLEMENTAL SCHEDULE OF NON-CASH
    INVESTING ACTIVITIES:
  Accumulated other comprehensive income,                     $       740     $       245     $      131
   net of income taxes                                        ===========     ===========     ==========

  Transfer from loans to real estate owned                    $       727     $     1,600     $    2,502
                                                              ===========     ===========     ==========

  Loans originated to sell real estate owned                  $       620     $        17     $    1,082
                                                              ===========     ===========     ==========

  Investment securities received from Ultra Short AMF
  Fund Redemption                                             $    11,193     $         -     $        -
                                                              ===========     ===========     ==========

  Cumulative effect adjustment (Note 1)                       $       208     $         -     $        -
                                                              ===========     ===========     ==========
</TABLE>

                                                                              25

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(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  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.

26

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------


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

Loans Receivable - Loans receivable are stated at the unpaid principal balances,
less the  allowance  for loan  losses,  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 charged to income.  Loans are returned to an accruing status only as payments
are received and when  collection  of all principal and interest is no longer in
doubt.  Payments  received  on such  non-accrual  loans  are  applied  first  to
outstanding loan amounts and next as recovery of lost interest.

The Company considers a loan to be impaired when, based upon current information
and  events,  it believes  it is  probable  that the  Company  will be unable to
collect  all  amounts  due  according  to the  contractual  terms  of  the  loan
agreement. The Company's impaired loans include troubled debt restructurings and
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
collectibility of certain loans, management also considers the fair value of any
underlying collateral.

It should be  understood  that  estimates of loan losses  involve an exercise of
judgment.  While it is  possible  that in  particular  periods  the  Company may
sustain  losses which are  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.

                                                                              27

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------

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.  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, and this investment is not considered impaired at September 30, 2008.

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.

Core Deposit  Intangible - The core deposit  intangible  with a cost of $520 and
accumulated  amortization  of $411,  and $357 at September  30, 2008,  and 2007,
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 and separate state returns. Income taxes are allocated to each company as
if filed separately for federal purposes.

28

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------

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

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, 2004 through 2007 are  currently
open to audit under statutes of limitation by the Internal  Revenue  Service and
the State of Louisiana Department of Revenue.

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.  The  Company  accounts  for the shares  acquired by the ESOP in
accordance with Statement of Position 93-6 and, therefore,  shares controlled by
the ESOP are not considered in the weighted average shares outstanding until the
shares are committed for allocation to an employee's individual account. Diluted
EPS reflects the  potential  dilution  that could occur if  securities  or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the  issuance of common  stock that then shared in the net income of
the Company.  Diluted EPS is computed by dividing net income by the total of the
weighted-average  number of shares  outstanding  plus the effect of  outstanding
options and 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 accounts for stock-based compensation in
accordance  with SFAS No. 123 (revised  2004),  Share-Based  Payment,  (SFAS No.
123R) which was issued by the FASB in  December  2004.  SFAS No.  123R  requires
recognition of 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). SFAS No. 123R 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.  SFAS No. 123R also amends SFAS No. 95  Statement  of Cash Flows,  to
require that excess tax benefits be reported as financing  cash inflows,  rather
than as a reduction  of taxes  paid,  which is included  within  operating  cash
flows.

New  Accounting  Pronouncements  - FAS 157 - In September  2006, the FASB issued
SFAS No. 157 - Fair Value  Measurements - which enhances  existing  guidance for
measuring  assets  and  liabilities  using fair  value and  requires  additional
disclosure  about  the use of fair  value  for  measurement.  The  Statement  is
effective  for  financial  statements  issued for fiscal years  beginning  after
November 15, 2007, and interim  periods  within those fiscal years.  The Company
has  determined  the  impact of  adopting  this  statement  on the  consolidated
financial statements to be additional disclosures.

                                                                              29

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------

FAS 157 - 2 was amended by FASB Staff position  (FSP) FAS 157-2,  Effective Date
of FASB  Statement  No.  157,  which  deferred  the  adoption  of  SFAS  157 for
non-financial  assets  and  liabilities,  except  those that are  recognized  or
disclosed at fair value in the  financial  statements  on a recurring  basis (at
least annually) until fiscal years beginning after November 15, 2008.


FAS 157 - 3 was amended by FASB Staff Position (FSP) FAS 157-3,  Determining the
Fair Value of a  Financial  Asset When the Market for That Asset is Not  Active,
which  clarified the application of Statement 157 in a market that is not active
and provides an example to illustrate key considerations in determining the fair
value of a  financial  asset  when the market  for that  financial  asset is not
active and is effective  immediately.  The Company has not determined the impact
of this FSP on its financial assets carried at fair value.


FAS 159 - SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities - an amendment of SFAS No. 115. This statement permits, but does not
require,  entities to measure  many  financial  instruments  at fair value.  The
objective is to provide  entities with an opportunity to mitigate  volatility in
reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting  provisions.  Entities electing
this  option  will  apply  it when  the  entity  first  recognizes  an  eligible
instrument and will report  unrealized  gains and losses on such  instruments in
current  earnings.  This  statement  1) applies to all  entities,  2)  specifies
certain election dates, 3) can be applied on an  instrument-by-instrument  basis
with  some  exceptions,  4)  is  irrevocable  and  5)  applies  only  to  entire
instruments.  Demand deposit  liabilities are explicitly  excluded as qualifying
for fair value.  SFAS No. 159 is effective for financial  statements  issued for
fiscal years beginning after November 15, 2007, and interim periods within those
fiscal  years.  SFAS No. 159 does  contain an early  election  option that would
allow the Company to elect the fair value option for existing  eligible items as
of the  beginning  of a fiscal year that begins on or before  November 15, 2007.
The Company has not early  adopted  SFAS 159 and does not expect the adoption of
SFAS 159 to impact the Company's consolidated financial statements.

FIN 48 - In  June  2006,  the  FASB  issued  Financial  Interpretation  No.  48,
Accounting for Uncertainty in Income Taxes-an  interpretation  of FASB Statement
No. 109 ("FIN 48"),  which is a change in accounting  for income  taxes.  FIN 48
specifies how tax benefits for  uncertain  tax  positions are to be  recognized,
measured, and derecognized in financial statements; requires certain disclosures
of uncertain  tax matters;  specifies  how reserves for  uncertain tax positions
should be classified on the balance sheet;  and provides  transition and interim
period  guidance,  among  other  provisions.  The Company  adopted the  standard
effective  October 1, 2007 and determined that it had no uncertain tax positions
for which a liability should be recorded.  As a result of this determination,  a
previous  liability of approximately  $208,000 was reversed against beginning of
the year retained earnings as a cumulative effect adjustment.

30

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------

FASB 141(R) - 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
will be effective  for  transactions  closing on or after  January 1, 2009.  The
Company  has  determined   that  this  standard  will  have  no  impact  on  its
consolidated financial statements.

FASB 160 - 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.





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 repricing
faster at higher interest rates,  thereby reducing the market value of long-term
assets and net interest  income.  In a falling rate environment the market value
of long-term assets and net interest income may be increased.

                                                                              31

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------

3.       SECURITIES

The amortized  cost and estimated  fair values of securities  available-for-sale
are as follows:
<TABLE>
<CAPTION>
                                                               September 30, 2008
                                               --------------------------------------------------------
                                                                   Gross          Gross       Estimated
                                                 Amortized       Unrealized     Unrealized      Fair
                                                   Cost             Gains         Losses       Value
                                               ----------          --------     ---------     ---------
<S>                                            <C>                 <C>          <C>           <C>
Investment securities:
  Municipal obligations                        $       19          $      -     $       -     $      19
                                               ----------          --------     ---------     ---------

Mortgage-backed securities:
  Government National Mortgage
   Association                                      3,150                 9            (4)        3,155
  Federal Home Loan Mortgage
   Corporation                                     11,579                 7          (127)       11,459
  Federal National Mortgage Association             7,337                 4          (253)        7,088
                                               ----------          --------     ---------     ---------
                                                   22,066                20          (384)       21,702
                                               ----------          --------     ---------     ---------

Collateralized mortgage obligations
CMOs:
   Government National Mortgage
       Association                                  4,009               -             (86)        3,923
Other securities                                      957               177          (126)        1,008
                                               ----------          --------     ---------     ---------
                                               $   27,051          $    197     $    (596)    $  26,652
                                               ==========          ========     =========     =========

<CAPTION>

                                                               September 30, 2007
                                               --------------------------------------------------------
                                                                   Gross          Gross       Estimated
                                                 Amortized       Unrealized     Unrealized      Fair
                                                   Cost             Gains         Losses       Value
                                               ----------          --------     ---------     ---------
<S>                                            <C>                 <C>          <C>           <C>
Investment securities:
  Federal Farm Credit Bank                     $    3,275          $      -     $     (56)    $  3,219
  Municipal obligations                                25                 -             -           25
                                               ----------          --------     ---------     --------
                                                    3,300                 -           (56)       3,244
                                               ----------          --------     ---------     --------
Mortgage-backed securities:
  Government National Mortgage
   Association                                      4,408                 8           (28)       4,388
  Federal Home Loan Mortgage
   Corporation                                     15,451                 -          (340)      15,111
  Federal National Mortgage Association             8,730                 7          (497)       8,240
                                               ----------          --------     ---------     --------
                                                   28,589                15          (865)      27,739
                                               ----------          --------     ---------     --------
AMF Mutual Funds                                   16,133                 -          (459)      15,674
Collateralized mortgage obligations
CMOs:
 Government National Mortgage
   Association                                      4,687                 -          (212)       4,475
Other securities                                      457                60            (2)         515
                                               ----------          --------     ---------     --------
                                               $  53,166           $     75     $  (1,594)    $ 51,647
                                               ==========          ========     =========     ========
</TABLE>

32

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------

The amortized cost and estimated fair values of securities  held-to-maturity are
as follows:
<TABLE>
<CAPTION>
                                                               September 30, 2008
                                               --------------------------------------------------------
                                                                   Gross          Gross       Estimated
                                                 Amortized       Unrealized     Unrealized      Fair
                                                   Cost             Gains         Losses       Value
                                               ----------          --------     ---------     ---------
<S>                                            <C>                 <C>          <C>           <C>
Mortgaged-backed securities:
  Federal National Mortgage Association        $ 31,419          $     12       $   (313)      $  31,118
  Federal Home Loan Mortgage
   Corporation                                   13,883               142            (24)         14,001
  Private Label                                   3,621                15           (303)          3,333
CMOs:
  Federal Home Loan Mortgage
   Corporation                                      425                 -            (12)            413
  Federal National Mortgage
   Association                                    2,083                27            (35)          2,075
  Private Label                                   2,860                 3            (15)          2,848
                                               --------          --------       --------       ---------
                                               $ 54,291          $    199       $   (702)      $  53,788
                                               ========          ========       ========       =========

<CAPTION>
                                                               September 30, 2007
                                               --------------------------------------------------------
                                                                   Gross          Gross       Estimated
                                                 Amortized       Unrealized     Unrealized      Fair
                                                   Cost             Gains         Losses       Value
                                               ----------          --------     ---------     ---------
<S>                                            <C>                 <C>          <C>           <C>
Mortgaged-backed securities:
  Federal National Mortgage Association        $ 31,855          $     46       $   (731)      $  31,170
                                               --------          --------       --------       ---------
                                               $ 31,855          $     46       $   (731)      $  31,170
                                               ========          ========       ========       =========
</TABLE>


Details  concerning  securities with unrealized  losses as of September 30, 2008
are as follows:
<TABLE>
<CAPTION>
                                       Securities with losses       Securities with losses
                                          under 12 months               over 12 months                     Total
                                    -------------------------      ------------------------      ------------------------
                                                    Gross                         Gross                          Gross
                                      Fair        unrealized        Fair        unrealized         Fair        unrealized
                                     value         losses          value         losses           value         losses
                                    -------       ----------      ------        ----------       -------       ----------
<S>                                <C>             <C>            <C>            <C>            <C>             <C>
Available-for-Sale

Mortgage-backed securities:
  Government National
   Mortgage Assoc.                 $ 1,164         $   (4)        $     -        $     -        $  1,164        $    (4)
  Federal Home Loan
   Mortgage Corporation              3,246            (42)          6,904            (85)         10,150           (127)
  Federal National
   Mortgage Association                158             (1)          6,791           (252)          6,949           (253)
CMOs:
  Government National
   Mortgage Association              3,923            (86)              -              -           3,923            (86)
Other securities                       215           (120)              9             (6)            224           (126)
                                   -------         ------         -------        -------        --------        -------
                                   $ 8,706         $ (253)        $13,704        $  (343)       $ 22,410        $  (596)
                                   =======         ======         =======        =======        ========        =======
</TABLE>

                                                                              33

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S>                                <C>             <C>            <C>            <C>            <C>             <C>

Held-to-Maturity

Mortgage-backed securities:
  Federal National
   Mortgage Association            $ 7,239         $  (43)        $11,247        $  (270)       $ 18,486        $  (313)
  Federal Home Loan
   Mortgage Corporation              6,682            (24)              -              -           6,682            (24)
  Private Label                      2,267           (303)              -              -           2,267           (303)
CMOs:
  Federal Home Loan Mortgage
   Corporation                         413            (12)              -              -             413            (12)
  Federal National Mortgage
   Association                         816            (35)              -              -             816            (35)
  Private Label                        998            (15)              -              -             998            (15)
                                   -------         ------         -------        -------        --------        -------
                                   $18,415         $ (432)        $11,247        $  (270)       $ 29,662        $  (702)
                                   =======         ======         =======        =======        ========        =======
</TABLE>

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.

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 for $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.

Other  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.

34

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------


Overall,  the Company has the ability and intent to hold the securities  until a
market value recovery.  Details concerning  securities with unrealized losses as
of September 30, 2007 are as follows:
<TABLE>
<CAPTION>
                                       Securities with losses       Securities with losses
                                          under 12 months               over 12 months                     Total
                                    -------------------------      ------------------------      ------------------------
                                                    Gross                         Gross                          Gross
                                      Fair        unrealized        Fair        unrealized         Fair        unrealized
                                     value         losses          value         losses           value         losses
                                    -------       ----------      ------        ----------       -------       ----------
<S>                                <C>             <C>            <C>            <C>            <C>             <C>
Available-for-Sale
Investment securities:
  Federal Farm Credit Bank          $    -         $    -        $ 3,219        $   (56)        $ 3,219        $   (56)

Mortgage-backed securities:
  Government National
   Mortgage Assoc.                       -              -          3,853            (28)          3,853            (28)
  Federal Home Loan Mortgage
   Corporation                         572             (4)        14,373           (336)         14,945           (340)
  Federal National Mortgage
   Association                         112             (1)         7,963           (496)          8,075           (497)
                                    ------         ------        -------        -------         -------        -------
                                       684             (5)        29,408           (916)         30,092           (921)
AMF Mutual Funds                         -              -         15,674           (459)         15,674           (459)
CMOs                                     -              -          4,476           (212)          4,476           (212)
Other securities                         -              -             12             (2)             12             (2)
                                    ------         ------        -------        -------         -------        -------
                                    $  684         $   (5)       $49,570        $(1,589)        $50,254        $(1,594)
                                    ======         ======        =======        =======         =======        =======

Held-to-Maturity
Federal National Mortgage
   Association                      $    -         $    -        $22,715        $  (731)        $22,715        $  (731)
                                    ======         ======        =======        =======         =======        =======
                                    $    -         $    -        $22,715        $  (731)        $22,715        $  (731)
                                    ======         ======        =======        =======         =======        =======

</TABLE>

The Company had 44  investments at September 30, 2007 of which 24 had unrealized
losses.  These unrealized losses generally resulted from securities,  which were
purchased at a premium. Market interest rates had declined somewhat during 2007,
which had resulted in a partial recovery in the market value of some securities.
The AMF  Mutual  fund was  primarily  invested  in short  term  mortgage  backed
securities. The Company had assessed the securities underlying the fund, and had
determined  that the  decrease in the fair market  value was due to increases in
market  interest  rates  and not  deteriorating  credit  quality  of the  assets
underlying the fund. These issues were deemed to be temporary,  however, see the
note below about events occurring  subsequent to September 30, 2007. The Company
had the ability and intent to hold the securities until a market value recovery.

Gross  (losses) / gains of $  (2,580),  $164 and $34 were  realized  on sales of
securities in the years ended September 30, 2008,  2007 and 2006,  respectively.
No losses were realized on sales of securities in the years ended  September 30,
2007 or 2006.

In June  2008,  the  Company  withdrew  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

                                                                              35

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------


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 transactions:

         Summary                                         In Millions
         -------                                         -----------
         Cash received                                     $ 2.3
         Private Label MBS's and CMOs, at market           $ 7.1
         GSE MBS's and CMOs, at Market                     $ 4.1
         Loss                                              $ 2.6
                                                           -----
         Total                                             $16.1
                                                           =====


An impairment  of $408 was incurred in the quarter ended  September 30, 2008 due
to an internal  evaluation by management of the securities received from the AMF
Fund  redemption  transaction.  The impairment was related  primarily to private
label CMOs.

At September 30, 2008 and 2007,  securities with a cost of approximately $20,550
and $17,950 were pledged to secure  deposits and advances  from the Federal Home
Loan Bank as required or permitted by law.


4. LOANS RECEIVABLE

Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
                                                               September 30,
                                                         -----------------------
                                                           2008           2007
                                                         --------       --------
<S>                                                      <C>            <C>
Residential real estate mortgage loans:
  One-to-four family units - Conforming                  $154,745       $181,090
  One-to-four family units - Commercial                    37,763         32,664
  One-to-four family units - Alternative                   87,404         84,338
  Multi-family                                             25,943         24,540
Land loans                                                 37,729         28,376
Construction loans                                          7,267         10,853
Commercial real estate loans                               77,025         75,961
Commercial non-real estate loans                           29,709         15,378
Home improvement and home equity loans                     54,590         51,240
Loans on savings accounts                                   8,189          5,939
Auto loans                                                  3,517          4,694
Mobile home loans                                          61,372         48,144
Other secured and unsecured                                 5,176          4,189
                                                         --------       --------
                                                          590,429        567,406
Less:
  Allowance for loan losses                                 5,545          5,083
  Deferred loan fees, net                                     293            335
                                                         --------       --------
                                                         $584,591       $561,988
                                                         ========       ========
</TABLE>

36

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------

Alternative  one-to-four family mortgages  represent those loans not meeting all
of the Banks' standard loan underwriting  criteria.  Alternative  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,
                                                 ------------------------------
                                                  2008        2007         2006
                                                 ------      ------      ------

Beginning balance - October 1                    $5,083      $4,890      $5,151
Provision charged to operating expense              825         605         210
Recoveries                                           19          16         236
Loans charged off                                  (382)       (428)       (707)
                                                 ------      ------      ------
Ending balance - September 30                    $5,545      $5,083      $4,890
                                                 ======      ======      ======

The amount of nonaccrual loans at September 30, 2008 and 2007 was  approximately
$3,500 and $2,600,  respectively.  The amount of impaired loans at September 30,
2008 was  approximately  $2,700  and at  September  30,  2007 was  approximately
$1,691.  The amount of allowance  allocated to impaired loans was  approximately
$588 at  September  30,  2008  and  $387 at  September  30,  2007.  The  average
investment in impaired loans was $768 and $530 for the years ended September 30,
2008 and 2007,  respectively.  The amount of forgone  interest on impaired loans
was approximately $62 and $30, respectively.

Approximately  $1,400 at September  30, 2008 and $1,170 at September 30, 2007 of
impaired loans had no related reserves.

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 $47,059 at
September 30, 2008.




5. REAL ESTATE OWNED

Real estate owned consisted of the following:

                                                             September 30,
                                                            -----------------
                                                             2008       2007
                                                            ------     ------


Real estate acquired through foreclosure                   $  378      $1,403
Less allowance for losses                                     (35)       (185)
                                                           ------      ------
Real estate owned - net                                    $  343      $1,218
                                                           ======      ======


                                                                              37

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------

6. PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows:

                                                          September 30,
                                                      ----------------------
                                                        2008          2007
                                                      --------      --------

Land                                                  $  9,919      $  9,907
Buildings and improvements                              19,236        17,835
Furniture, fixtures and equipment                       10,660        10,204
                                                      --------      --------
                                                        39,815        37,946
Less accumulated depreciation                          (12,915)      (11,800)
                                                      --------      --------

                                                      $ 26,900      $ 26,146
                                                      ========      ========


Pursuant to the terms of non-cancelable  lease agreements in effect at September
30, 2008,  pertaining to banking  premises and  equipment,  future  minimum rent
commitments under various operating leases are as follows:

                2009                      $        146
                2010                               137
                2011                               137
                2012                                96
                2013                                43
                Thereafter                          78
                                          ------------
                                          $        637
                                          ============

All leases contain options to extend for periods from three to ten years.  Total
rent expense for the years ended September 30, 2008,  2007, and 2006 amounted to
$200, $159 and $158 respectively.



7.    DEPOSITS

Deposits are summarized as follows:
                                                              September 30,
                                                         -----------------------
                                                            2008           2007
                                                         --------       --------

Non-interest bearing demand accounts                     $ 57,913       $ 54,358
Interest bearing:
  NOW accounts                                             86,687         79,681
  Passbook and regular savings                             55,391         51,868
  Money funds accounts                                    130,399         90,944
  Certificates of deposit                                 258,838        278,718
                                                         --------       --------

                                                         $589,228       $555,569
                                                         ========       ========

38

<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------


Certificates  of  deposit  of over $100  amounted  to  $75,764  and  $77,964  at
September 30, 2008 and 2007, respectively.

Certificates of deposits at September 30, 2008 mature as follows:

Less than one year                                           $          169,535
1-2 years                                                                44,547
2-3 years                                                                20,548
3-4 years                                                                20,565
4-5 years                                                                 2,016
Over 5 years                                                              1,627
                                                             ------------------

TOTAL                                                        $          258,838
                                                             ==================




8. ADVANCES FROM FEDERAL HOME LOAN BANK

At  September  30, 2008 and 2007  respectively,  the Company was indebted to the
FHLB for $104,877 and $89,756 of advances bearing interest at a weighted average
rate of 4.62% and 4.87%, which are due as follows:

 Year Ended
September 30,
-------------
   2009                                                      $            9,551
   2010                                                                  10,544
   2011                                                                  21,500
   2012                                                                   5,450
   2013                                                                   5,736
   Thereafter                                                            52,096
                                                             ------------------

                                                             $          104,877
                                                             ==================

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

At September 30, 2008, the Company had an additional  $163,376  available  under
its line of credit with the FHLB.


                                                                              39

<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------


9. OTHER NON-INTEREST INCOME

Included in other non-interest  income for the year ended September 30, 2008 was
approximately $172 of losses on sales of loans and approximately $408 impairment
loss on held to maturity securities.  No gains or losses from sales of loans and
no impairment  losses on securities were  recognized  during 2007 and 2006. Also
included is income from the increase in life insurance  contracts of $635, $597,
and $538 for the years ended 2008, 2007, and 2006, respectively.



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, 2008 and
2007 are as follows:


                                                        Year Ended September 30,
                                                        ------------------------
                                                            2008       2007
                                                           ------     ------
Deferred tax assets:
  Allowance for loan losses                                $1,527     $1,370
  Unrealized loss on securities available-for-sale            135        517
 Accruals and stock based compensation                        833        627
                                                           ------     ------
         Total deferred tax assets                          2,495      2,514
                                                           ------     ------
Deferred tax liabilities:
  Deferred loan fees and costs - net                          206        228
  Tax over book depreciation                                1,134        544
  Dividends on FHLB stock                                     375        437
  Other                                                       430         97
                                                           ------     ------
         Total deferred tax liabilities                     2,145      1,306
                                                           ------     ------

         Net deferred tax asset                            $  350     $1,208
                                                           ======     ======

The components of income tax expense are as follows:

                                              Year Ended September 30,
                                      -----------------------------------------
                                       2008             2007             2006
                                      -------          -------          -------

Current                               $ 2,419          $ 3,724          $ 3,670
Deferred                                   58             (554)             (19)
Tax credits                              (430)               -                -
                                      -------          -------          -------

                                      $ 2,047          $ 3,170          $ 3,651
                                      =======          =======          =======


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:

40

<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------


                                                     Year Ended September 30,
                                                -------------------------------
                                                 2008        2007        2006
                                                -------     -------     -------

Taxes computed at statutory rates               $ 2,637     $ 3,349     $ 3,729
Decrease in taxes due to net nontaxable income     (160)       (179)        (78)
Tax credits                                        (430)          -           -
                                                -------     -------     -------

                                                $ 2,047     $ 3,170     $ 3,651
                                                =======     =======     =======

Effective tax rate                                 26.4%       32.2%       33.3%
                                                =======     =======     =======


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 and
provided  net  benefits  in the amounts of $168 and $171  respectively.  The net
benefit of the tax credits was recorded in these 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, 2008,  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,
                                                     ------------------------
                                                      2008     2007     2006
                                                     ------   ------   ------
Occupancy, including depreciation, insurance,
  rent, utilities, etc.                              $2,276   $1,842   $1,796
Equipment, including depreciation, telephone, etc.    2,444    2,396    2,117
Data processing                                       1,364    1,232    1,252
                                                     ------   ------   ------

                                                     $6,084   $5,470   $5,165
                                                     ======   ======   ======

Other operating expenses consisted of the following:

                                                      Year Ended September 30,
                                                      ------------------------
                                                       2008     2007     2006
                                                      ------   ------   ------

Stationery, printing and postage                      $1,060   $  948   $  934
Debit card expense, and other deposit related costs    1,749    1,829    1,415
Other                                                  1,225    1,309    1,018
                                                      ------   ------   ------

                                                      $4,034   $4,086   $3,367
                                                      ======   ======   ======

                                                                              41
<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------


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, 2008, 2007 and 2006:

<TABLE>
<CAPTION>
                                                                               Net of
                                                       Before-tax    Tax        tax
                                                         amount     effect     effect
                                                         ------     ------     ------
<S>                                                    <C>        <C>        <C>
2008
----
  Gross change in unrealized gain (loss) on securities
    available-for-sale                                  $(1,459)   $   496    $  (963)
  Less reclassification for loss included in net income   2,580       (877)     1,703
                                                        -------    -------    -------

  Net change in unrealized gain (loss) on securities
    available-for-sale                                  $ 1,121    $  (381)   $   740
                                                        =======    =======    =======

2007
----
  Gross change in unrealized gain (loss) on securities
    available-for-sale                                  $   535    $  (182)   $   353
  Less reclassification for gain included in net income    (164)        56       (108)
                                                        -------    -------    -------

  Net change in unrealized gain (loss) on securities
    available-for-sale                                  $   371    $  (126)   $   245
                                                        =======    =======    =======

2006
----
  Gross change in unrealized gain (loss) on securities
    available-for-sale                                  $   231    $   (78)   $   153
  Less reclassification for gain included in net income     (34)        12        (22)
                                                        -------    -------    -------

  Net change in unrealized gain (loss) on securities
    available-for-sale                                  $   197    $   (66)   $   131
                                                        =======    =======    =======
</TABLE>

13. RETIREMENT PLANS

The Company has  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 $1,797,  $446 and $188 in the years ended  September 30, 2008,
2007 and  2006,  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 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

42

<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------


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, 2008, 2007, and 2006, expense  attributable to the
Plan amounted to approximately $277, $222, and $130, 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, 2008, 2007 and
2006:

<TABLE>
<CAPTION>
                                                         Year Ended September 30,
                                                     ---------------------------------
                                                       2008        2007        2006
                                                     ---------   ---------   ---------
<S>                                                 <C>         <C>         <C>
Weighted average number of common shares
  outstanding - used in computation of basic
  income per common share                            2,154,000   2,217,000   2,271,000
Effect of dilutive securities:
  Stock options                                         17,000      54,000      45,000
  Stock grants                                               -       3,000       5,000
                                                     ---------   ---------   ---------
Weighted average number of common shares
  outstanding plus effect of dilutive securities -
  used in computation of diluted income per
  common share                                       2,171,000   2,274,000   2,321,000
                                                     =========   =========   =========
</TABLE>

At September 30, 2008,  approximately  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.  The
ESOP Trust  acquired  332,337  shares of common stock in the  Company's  initial
public  offering  in 1995  with  proceeds  from a loan from the  Company.  Teche
Federal  Bank  makes cash  contributions  to the ESOP on a basis  sufficient  to
enable the ESOP to make the required loan payments to the Company.

The note  payable  referred to above bears  interest at the prime rate  adjusted
quarterly with interest payable  quarterly and was paid in full during 2006. 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 released from collateral,  the
Company  reports  compensation  expense equal to the current market price of the
shares,  and the shares become  outstanding  for income per share  computations.
Dividends  on  allocated  ESOP shares are  recorded  as a reduction  of retained
earnings and dividends on unallocated ESOP shares are recorded as a reduction of
debt.

                                                                              43

<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------


Compensation  expense  related to the ESOP was $713, $580 and $587 for the years
ended  September  30,  2008,  2007  and  2006,  respectively.  The  ESOP  has no
unreleased shares at September 30, 2008.

The Company has five share-based  compensation  plans in effect at September 30,
2008. The compensation cost that has been charged against income for those plans
was  approximately  $351, $390, and $442 for the years ended September 30, 2008,
2007, and 2006, 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 $24,  $73, and $93
for the years ended September 30, 2008, 2007 and 2006, 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.

44

<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(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 102,800 stock
options  for the year ended  September  30,  2008 with an average  fair value of
$5.22.  The Company granted 5,000 stock options for the year ended September 30,
2007 with a weighted average fair value of $7.96 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, 2008 and 2007.

                                            Year Ended            Year Ended
                                        September 30, 2008    September 30, 2007
                                        ------------------    ------------------

         Dividend yield                        3.70 %                  2.70 %
         Risk-free interest rate               3.50 %                  4.60 %
         Volatility                           19.00 %                 14.00 %
         Expected life                        6 years                 6 years


A summary of option  activity  under the stock option plans as of September  30,
2008, and changes during the year ended September 30, 2008 is presented below:

<TABLE>
<CAPTION>
                                                                          Weighted
                                                          Weighted        Average
                                                          Average         Remaining        Aggregate
                                                          Exercise        Contractual      Intrinsic
                                           Shares         Price           Term             Value
                                           ----------------------------------------------------------
<S>                                       <C>            <C>              <C>               <C>
Outstanding at September 30, 2007          197,363        $30.43          6.0 years         $2,116

Exercised                                   25,407        $17.09

Authorized                                       -             -

Forfeited                                    7,000        $37.62

Granted                                    102,800        $36.39
                                           ----------------------------------------------------------

Outstanding at September 30, 2008          267,756        $33.80          7.0 years         $  536
                                           ----------------------------------------------------------

Exercisable at September 30, 2008          162,585        $31.91          5.5 years         $  535
                                           ----------------------------------------------------------
</TABLE>

                                                                              45

<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------


For the  years  ended  September  30,  2008,  2007 and 2006,  respectively,  the
intrinsic value of options  exercised was  approximately  $464, $577 and $1,005.
The fair value of options vested during the years ended 2008,  2007 and 2006 was
approximately $105, $96 and $161, respectively.

Net  cash  received  from  options  exercised  under  all  share-based   payment
arrangements  for year ended  September  30, 2008 was  approximately  $107.  The
actual tax benefit in stockholders'  equity realized for the tax deductions from
option exercise of the  share-based  payment  arrangements  totaled $150 for the
year ended September 30, 2008.


Stock Awards
------------

A summary of the status of the Company's non-vested stock awards as of September
30, 2008, and changes during the year then ended is presented below:

                                                                   Weighted
                                                                   Average
                                                                   Grant Date
                                                    Shares         Fair Value
                                                    --------------------------

     Non-vested - September 30, 2007                 6,087          $42.62
     Forfeitures                                      (833)         $44.87
     Granted                                         9,900          $37.93
     Vested                                         (6,760)        ($39.92)
                                                    --------------------------
     Non-vested - September 30, 2008                 8,394          $39.07
                                                    --------------------------

The fair value of restricted  stock vested and the fair value of shares  granted
as direct  compensation  for the years ended  September 30, 2008, 2007 and 2006,
respectively was $246, $294 and $281.

As of September 30, 2008, there was $832 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 2.9 years.

The Company funds the option shares and  restricted  stock from  authorized  but
un-issued 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.

46

<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------


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.

As of  September  30, 2008 the Company had made  various  commitments  to extend
credit totaling approximately $50,527. Most of these commitments are at variable
rates. As of September 30, 2007, such commitments totaled approximately $48,571.

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

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

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

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

                                                                              47

<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------


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, 2008 and 2007:


                                          2008                   2007
                                   -------------------   -------------------
                                   Carrying   Estimated   Carrying  Estimated
                                    amount    fair value   amount   fair value
                                    ------    ----------   ------   ----------

Financial assets:
  Cash and cash equivalents        $ 50,112   $ 50,112   $ 21,811   $ 21,811
  Investment securities              80,943     80,440     83,502     82,817
  FHLB stock                          4,764      4,764      4,343      4,343
  Accrued interest receivable         2,843      2,843      2,952      2,952

  Loans                             590,136    597,566    567,071    567,612
  Less allowance for loan losses      5,545      5,545      5,083      5,083
                                   --------   --------   --------   --------
  Loans-net of allowance            584,591    592,021    561,988    562,529
                                   --------   --------   --------   --------

Financial liabilities:
  Deposits                          589,228    593,168    555,569    556,174
  Advances from Federal Home
  Loan Bank                         104,877    107,303     89,756     89,313
  Accrued interest payable              875        875      1,441      1,441


48

<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------


18. REGULATORY CAPITAL

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

<TABLE>
<CAPTION>

                                                                         2008
                               ------------------------------------------------------------------------------------
                                                                                                   To be well
                                                                                                capitalized under
                                                                       For capital              prompt corrective
                                                                    adequacy purposes           action provisions
                               -------------------------    --------------------------   --------------------------
                                           Actual                       Required                    Required
                               -------------------------    --------------------------   --------------------------
                                  Amount             %         Amount              %        Amount              %
                               -----------         -----    -----------         ------   -----------         ------
<S>                          <C>                  <C>     <C>                   <C>    <C>                   <C>
Core capital                   $    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/A

Total 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%
</TABLE>

<TABLE>
<CAPTION>

                                                                         2007
                               ------------------------------------------------------------------------------------
                                                                                                   To be well
                                                                                                capitalized under
                                                                       For capital              prompt corrective
                                                                    adequacy purposes           action provisions
                               -------------------------    --------------------------   --------------------------
                                           Actual                       Required                    Required
                               -------------------------    --------------------------   --------------------------
                                  Amount             %         Amount              %        Amount              %
                               -----------         -----    -----------         ------   -----------         ------
<S>                          <C>                  <C>     <C>                   <C>    <C>                   <C>
Core capital                   $    55,347          7.8%    $    28,576           4.0%   $    35,720           5.0%

Tangible capital               $    55,347          7.8%    $    10,716           1.5%   $       N/A            N/A

Total Risk based capital       $    59,922         12.6%    $    38,065           8.0%   $    47,582          10.0%

Tier 1 Risk based capital      $    55,347         11.6%    $       N/A            N/A   $    28,549           6.0%
</TABLE>

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

                                                                              49

<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------


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, 2008, and 2007,  that the Bank meets all capital  adequacy  requirements  to
which they are subject.

As of  September  30, 2008,  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, 2008
and 2007 are also presented in the previous tables.



19.  SUMMARIZED  FINANCIAL  INFORMATION OF TECHE HOLDING COMPANY (PARENT COMPANY
ONLY)

                                 Balance Sheets

                                                               2008      2007
                                                             -------   -------
Assets:
  Investment in subsidiary                                   $60,261   $58,685
  Cash and cash equivalents                                    5,844     6,759
  Other                                                        1,939     1,562
                                                             -------   -------

          Total assets                                       $68,044   $67,006
                                                             =======   =======

Stockholders' equity                                         $68,044   $67,006
                                                             =======   =======


                             Statements of Earnings
<TABLE>
<CAPTION>

                                                         Year ended September 30,
                                                       -----------------------------
                                                        2008       2007       2006
                                                       -------    -------    -------

<S>                                                   <C>        <C>        <C>
Dividends received from subsidiary                     $ 5,400    $ 8,000    $ 4,100
Equity in earnings of subsidiary (less than) greater
  than dividends received                                  520     (1,207)     3,358
Interest income from subsidiary                            238        228         87
Management fees and other expenses allocated to
  the Parent                                               (77)       (77)       (77)
Other expenses-net                                        (372)      (263)      (151)
                                                       -------    -------    -------

Net income                                             $ 5,709    $ 6,681    $ 7,317
                                                       =======    =======    =======
</TABLE>

50

<PAGE>
TECHE HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 2008, 2007 and 2006
(in thousands except share and per share data)
--------------------------------------------------------------------------------


                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                          Year ended September 30,
                                                        -----------------------------
                                                          2008       2007       2006
                                                        -------    -------    -------

<S>                                                    <C>        <C>        <C>
Cash flows from operating activities                    $ 5,554    $ 7,250    $ 4,253

Cash flows from investing activities:
  Repayment of loan by subsidiary                             -          -        143
  Purchase of securities available-for-sale                (499)         -          -
  Proceeds from sale of securities                            -        492          -
                                                        -------    -------    -------

     Net cash provided by investing activities             (499)       492        143
                                                        -------    -------    -------

Cash flows from financing activities:
  Dividends paid                                         (2,963)    (2,783)    (2,462)
  Proceeds from exercise of stock options                   257        642        646
  Cash paid for purchase of common stock for treasury    (3,264)    (2,098)    (4,414)
                                                        -------    -------    -------

     Net cash used in financing activities               (5,970)    (4,239)    (6,230)
                                                        -------    -------    -------

Net increase (decrease) in cash and cash equivalents       (915)     3,503     (1,834)

Cash and cash equivalents - beginning of year             6,759      3,256      5,090
                                                        -------    -------    -------

Cash and cash equivalents - end of year                 $ 5,844    $ 6,759    $ 3,256
                                                        =======    =======    =======
</TABLE>


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,
2008, the Bank's  retained  earnings  available for the payment of dividends was
approximately  $21.6 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.


                                     ******

                                                                              51


<PAGE>

<TABLE>
<CAPTION>
<S>                           <C>                                   <C>                              <C>
                                                  DIRECTORS OF TECHE HOLDING COMPANY
                                                                  AND
                                                          TECHE FEDERAL BANK
                                Patrick O. Little, Chairman            Robert  J. Judice, Jr.
                                Mary Coon Biggs                        Dr. Thomas F. Kramer
                                Donelson T. Caffery, Jr.               W. Ross Little, Jr.
                                J. L. Chauvin                          Robert L. Wolfe, Jr.
                                Ernest Freyou                          Robert E. Mouton - Director Emeritus
                                Henry L. Friedman                      Maunette B. Risher - Advisory

                                                     OFFICERS OF TECHE FEDERAL BANK

Patrick O. Little               Chairman, President/CEO                Carol W. Nini                     Vice President
Darryl Broussard                Sr. Vice President/CLO                 Peggy P. Romero                   Vice President
J. L. Chauvin                   Sr. Vice President/Treasurer/CFO       Susan L. Simoneaux                Vice President
Jason P. Freyou                 Sr. Vice President/ COO                Martin M. Vasquez                 Vice President
Eddie R. LeBlanc                Sr. Vice President/Internal Auditor    Tina M. Vidrine                   Vice President
W. Ross Little, Jr.             Sr. Vice President/Secretary           Daniel E. Adler, Sr.              Assistant Vice President
Tom A. Aldrich                  Vice President                         Terry T. Albarado                 Assistant Vice President
Angela Badeaux                  Vice President                         Montreen D. Badeaux               Assistant Vice President
F. William Ball                 Vice President                         Paulette A. Boudreaux             Assistant Vice President
Patricia O. Begnaud             Vice President                         Lavergne B Boutte                 Assistant Vice President
Genevieve V. Bihm               Vice President                         Judy V. Breaux                    Assistant Vice President
Lynn P. Blanchard               Vice President                         Christopher C. Brown              Assistant Vice President
Georgia B. Boudreaux            Vice President                         Jeanette D. Charles               Assistant Vice President
Elmo P. Boudreaux, Jr.          Vice President                         Angela M. Cliburn                 Assistant Vice President
Irma Nell Bourque               Vice President                         Stephanie F. Dandry               Assistant Vice President
Bart C. Boyer                   Vice President                         Arlette D. Fontenot               Assistant Vice President
Mary Beth Brady                 Vice President                         Debra A. Guidry                   Assistant Vice President
Glen W. Brown                   Vice President                         Henrietta S. Hollier              Assistant Vice President
Bruce A. Burga                  Vice President                         Christina Irvin-Simpson           Assistant Vice President
Kevin T. Caswell                Vice President                         Christy B. Istre                  Assistant Vice President
Belinda Cavazos                 Vice President                         Barbara A. Jesset                 Assistant Vice President
Shelton M. Comeaux              Vice President                         Anne P. Jones                     Assistant Vice President
Gwendoline Doucet               Vice President                         Jason D. Kennemer                 Assistant Vice President
Dalie S. Eldridge               Vice President                         Debbie M. Lancon                  Assistant Vice President
Elaine H. Gussman               Vice President                         Ruby B. Langley                   Assistant Vice President
Karen Hardy                     Vice President                         Vicki L. Laubach                  Assistant Vice President
Constance E. Harris             Vice President                         Weston J. Moreau III              Assistant Vice President
Chad L. Hebert                  Vice President                         Linda S. Roman                    Assistant Vice President
Scott P. Landrum                Vice President                         Lesley E. Schexnayder             Assistant Vice President
David R. Landry                 Vice President                         Tanya P. Thibodaux                Assistant Vice President
Angelina M. Mire                Vice President                         Leslie C. White                   Assistant Vice President

INDEPENDENT AUDITORS                            SPECIAL COUNSEL                              ST. LANDRY ADVISORY BOARD
Dixon Hughes PLLC                               Malizia Spidi & Fisch, PC                    Wayne M. Gilmore, Chairman
500 Ridgefield Court                            901 New York Avenue, N.W.                    H Kent Aguillard
Asheville, NC  28806                            Suite 210 East                               James R. Bienvenu
                                                Washington, DC  20001                        Anna Lee Dunbar
                                                                                             Lynette Young Feucht
LEGAL COUNSEL                                   REGISTRAR AND STOCK                          Patrick Fontenot
Biggs, Supple, Cremaldi and Curet, LLP            TRANFER AGENT                              Simon Howard Fournier
Lawless Building                                Registrar and Transfer Company               Morgan J. Goudeau, III
Willow Street                                   10 Commerce Drive                            Martin A. Roy, Jr.
Franklin, LA  70538                             Cranford, NJ  07016-3572                     Marvin Schwartzenburg
                                                (800) 525-7686
                                                Fax (908) 272-1006
</TABLE>

52