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

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

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

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

Morgan City
1001 7th St.
Morgan City, LA 70380
(985)384-0653

Bayou Vista
206 Arlington St.
Bayou Vista, LA 70380
(985)395-5244

New Iberia
529 N. Lewis St.
New Iberia, LA 70563
(337)367-2516

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

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

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

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

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

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

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

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

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

Table of Contents
President's Message ....................................................   2 & 3
Selected Financial Information .........................................    4
Business of The Company & Business of the Bank .........................    5
Market and Dividend Information ........................................    5
Management's Discussion and Analysis of Financial
  Condition and Results of Operations ..................................    6
Independent Auditors' Report ...........................................   12
Consolidated Balance Sheets ............................................   13
Consolidated Statements of Income ......................................   14
Consolidated Statements of Stockholders' Equity ........................   15
Consolidated Statements of Cash Flows ..................................   16
Notes to Consolidated Financial Statements .............................   18
Directors and Officers .................................................   35
General Information ....................................................   35

<PAGE>

                                     [LOGO]
                                 TECHE HOLDING
                                    COMPANY

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

For several years,  Teche has pursued a strategy called  SmartGrowth.  The goals
are challenging - to continuously build our customer base, develop a diversified
revenue  stream  that would grow in spite of  fluctuations  in  interest  rates,
increase core  deposits,  maintain a return on equity and increase  earnings per
share  each year.  The result of our  efforts is that we have seen our best year
yet in 2002.

Over 1,000  individuals  became our  customers  each month this past year.  Once
again,  many  brought us their old  checks to shred as they  traded in high cost
checking at other banks for Teche Federal's "Totally Free Checking."

[Graph appears here.]

Building a strong customer base has enabled us to diversify and grow our revenue
stream.  While mortgage lending is still a hallmark of Teche,  SmartGrowth Loans
increased to 36% of total loans in 2002, a significant increase when compared to
1998 when they comprised only 13% of total loans.  SmartGrowth Loans have higher
yields  and  provide  valuable  services  to  customers  in our  local  markets.
SmartGrowth  Loans  include  home  equity,  consumer  loans,  commercial  loans,
commercial real estate loans and (since 2001) alternative  mortgage loans. While
growing our SmartGrowth Loan portfolio,  Teche has also maintained asset quality
ratios  better than the  industry's  average in the key areas of  non-performing
assets  to  equity,   non-performing   loans  to  net  loans  and   reserves  to
non-performing loans.

[Graph appears here.]

As  part  of our  revenue  growth  and  diversification  strategies,  Teche  has
consistently focused on expanding our non-interest  income,  mainly derived from
account fees. In 1998  non-interest  income was 20% of operating  revenue and in
2002 it increased to 31%. This ranks us with the highest performing regional and
national  banks.  This  income is not  directly  affected by changes in interest
rates,  thereby,  buffering a portion of our revenue  stream from  interest rate
risk.

SmartGrowth deposits continue to grow by double digits as they have for the last
three  years.  This  year  they  increased  14% and now  comprise  44% of  total
deposits, compared to 39% of total deposits the previous year and 26% five years
ago.  SmartGrowth  deposits  are low cost  core  deposits,  including  checking,
savings and money market accounts,  and are a key element in maintaining healthy
margins.

2
<PAGE>

[Graph appears here.]

Shareholders  have again seen the value of Teche Holding Company growth in 2002.
Return on equity was 11.6% compared to 6.8% in 1998.  Earnings per share in 2002
were $2.58  compared to $1.81 in 2001, a 43% increase and a 121% increase  since
1998.  Average  annual growth of earnings per share over five years was 17%. The
Company also paid a dividend at an annual rate of $.50 per share and  maintained
its share repurchase plan in 2002.

Teche Holding  Company and Teche Federal  Savings Bank achieved a milestone this
year by reporting  $500+million  in total assets in the first  quarter.  Teche's
superior  performance  has not gone  unnoticed by the financial  community.  The
Company's  stock has earned "buy"  ratings from many of the analysts that follow
our stock,  and the stock price has  increased  29% from fiscal year end 2001 to
fiscal year end 2002.  This comes after a 41%  increase  over the year end price
for fiscal 2001.

At Teche we plan to  continue to  maximize  value by growing and adding  revenue
from both interest and non-interest income,  controlling  expenses,  maintaining
asset  quality  and  managing  capital  to  increase   shareholder   value  with
repurchases and consistent dividend payments.

[Graph appears here.]

We are also  expanding  into the  Baton  Rouge  market  in 2003  with our  first
location  scheduled to open in the Summer.  Louisiana  Economic  Outlook in 2002
identified  the Baton  Rouge  economy  as the  second  largest  in the state and
predicted  growth of 8,200 jobs in this market in  2003-2004.  The time is right
for Teche to offer its superior  services in the capital city.  Two of our other
key markets with existing operations - Houma and Lafayette - were also predicted
to  have   significant   job  growth  in  2003-2004  of  3,300  and  6,700  jobs
respectively.

Every Teche employee will continue to implement our vision of  SmartGrowth.  One
of our continuing initiatives in the SmartGrowth plan is building a strong sales
culture  throughout the Company.  Teche is also continuing to explore the market
and technology  for internet  banking  services.  We will be ready to offer this
service next year.

Employees,  officers  and  directors  now own or control  approximately  620,000
shares or 26% of Teche stock.  Employees  have benefited  considerably  from the
stock's recent strong performance and dividends.  As employees continue to build
value, all of us -shareholders, customers and employees reap the rewards.

This year also saw changes to our Board of  Directors.  Mrs.  Virginia Kyle Hine
retired after 23 years of excellent stewardship.  Newly elected to the board are
Robert  Judice,  Jr.,  who  formerly  served in an advisory  position,  and J.L.
Chauvin, the Chief Financial Officer and Treasurer of Teche.

With the support of our board, officers, employees and the continuing confidence
of our shareholders, we look forward to continued success in the coming year.

                                        Sincerely,


                                        /s/Patrick O. Little

                                        Patrick O. Little
                                        Chairman and Chief Executive Officer

                                                                               3
<PAGE>
<TABLE>
<CAPTION>

SELECTED FINANCIAL DATA (Dollars in thousands, except per share data)
-----------------------------------------------------------------------------------------------
                                                     At or for the Year Ended September 30,
                                     ----------------------------------------------------------
                                        2002        2001        2000        1999        1998
<S>                                  <C>         <C>         <C>         <C>         <C>
Assets ............................   $514,017    $467,531    $474,527    $434,265    $408,823
Loans Receivable, Net .............    350,623     380,830     386,512     342,986     345,172
Securities-Available for Sale .....     64,110      41,230      54,635      63,460      36,769
Securities-Held to Maturity .......     30,897          --       2,574          --          --
Cash and cash equivalents .........     35,375      24,108      10,384      10,292      10,680
Deposits ..........................    349,125     342,917     309,896     303,084     279,265
FHLB Advances .....................    103,471      67,120     111,853      78,682      67,721
Stockholders' Equity ..............     56,366      52,112      48,621      48,700      52,527

SUMMARY OF OPERATIONS
Interest Income ...................   $ 33,697    $ 35,186    $ 32,976    $ 30,275    $ 30,357
Interest Expense ..................     16,345      20,505      19,098      16,356      16,712
                                      --------    --------    --------    --------    --------
Net Interest Income ...............     17,352      14,681      13,878      13,919      13,645
Provision for Loan Losses .........        205          80         120         150         180
                                      --------    --------    --------    --------    --------
Net Interest Income after
  Provision for Loan Losses .......     17,147      14,601      13,758      13,769      13,465
Non-Interest Income ...............      7,900       6,699       5,608       4,452       3,475
Non-Interest Expense ..............     15,613      14,768      13,778      12,837      11,198
                                      --------    --------    --------    --------    --------
Income Before Gains on Sales of
  Securities and Income Taxes .....      9,434       6,532       5,588       5,384       5,742
Gains on Sales of Securities ......         87         123        --            14         138
Income Tax Expense ................      3,285       2,296       1,928       1,889       2,067
                                      --------    --------    --------    --------    --------
Net Income ........................   $  6,236    $  4,359    $  3,660    $  3,509    $  3,813
                                      ========    ========    ========    ========    ========
SELECTED FINANCIAL RATIOS
Ratio of Equity to Assets .........       11.0%       11.1%       10.2%       11.2%       12.8%
Book Value/Common Share ...........   $  23.80    $  21.61    $  19.43    $  17.79    $  16.97
Dividends Declared per Share ......   $   0.50    $   0.50    $   0.50    $   0.50    $   0.50
Basic Income per Common Share .....   $   2.72    $   1.86    $   1.56    $   1.32    $   1.23
Diluted Income per Common Share ...   $   2.58    $   1.81    $   1.55    $   1.29    $   1.17
Return on Average Assets ..........       1.25%       0.93%       0.81%       0.84%       0.94%
Return on Average Equity ..........      11.56%       8.71%       7.70%       6.90%       6.79%
Net Interest Margin ...............       3.66%       3.26%       3.21%       3.46%       3.45%
Non-Interest Expense/Average Assets       3.13%       3.14%       3.06%       3.06%       2.75%
Non-Interest Income/Average Assets        1.58%       1.42%       1.24%       1.06%       0.85%
Non Performing Loans/Loans (1) ....       0.65%       0.18%       0.28%       0.24%       0.21%
Allowance for Loan Losses/Loans (1)       0.98%       0.89%       0.93%       1.02%       1.01%
Dividend Payout ...................      18.15%      26.88%      32.05%      37.88%      40.65%
</TABLE>

(1)  Total loans before allowance for loan losses


4
<PAGE>

Business of the Bank

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

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

Business of the Company

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

Summary of Quarterly Operating Results

<TABLE>
<CAPTION>
                                                  2002                                2001
                                   ---------------------------------------------------------------------
                                    First   Second    Third   Fourth    First   Second    Third   Fourth
                                             (Amounts in thousands, except for per share data)
<S>                               <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Interest Income ................   $8,596   $8,503   $8,404   $8,194   $8,886   $8,870   $8,821   $8,609
Interest Expense ...............    4,404    4,117    3,944    3,880    5,483    5,278    5,093    4,651
Net interest Income ............    4,192    4,386    4,460    4,314    3,403    3,592    3,728    3,958
Provision for Loan Losses ......       45       45       55       60       15       15       15       35
Income Before Income Taxes......    2,233    2,421    2,460    2,407    1,328    1,481    1,773    2,073
Net Income .....................    1,463    1,570    1,626    1,577      870      970    1,161    1,358
Basic income per common share ..     0.65     0.69     0.71     0.69     0.37     0.41     0.50     0.58
Diluted Income per common share      0.62     0.65     0.67     0.65     0.37     0.40     0.48     0.56
</TABLE>

Market and Dividend Information

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

<TABLE>
<CAPTION>
Quarter ended              Sales Price    Period End Close  Cash Dividend Declared    Date Declared
-------------              -----------    ----------------  ----------------------    -------------
                          High     Low
<S>                    <C>      <C>           <C>              <C>                 <C>
December 31, 2000        $16.25   $12.625        $16.25          $0.125               November 15, 2000
March 31, 2001           $17.47   $16.26         $17.00          $0.125               February 21, 2001
June 30, 2001            $19.70   $18.18         $18.50          $0.125               May 23, 2001
September 30, 2001       $19.69   $18.25         $19.00          $0.125               August 22, 2001
December 31, 2001        $19.96   $18.25         $19.80          $0.125               November 28, 2001
March 31, 2002           $24.25   $19.75         $24.10          $0.125               February 20, 2002
June 30, 2002            $26.00   $23.80         $25.10          $0.125               May 15, 2002
September 30, 2002       $25.40   $21.55         $24.50          $0.125               August 19, 2002
</TABLE>


According  to the  records  of the  Company's  transfer  ag ent,  there were 502
registered  stockholders  of record at November 26,  2002.  This number does not
include any persons or entities who hold their stock in nominee or "street" name
through various brokerage firms.

The  Company's  ability to pay  dividends is  substantially  dependent  upon the
dividends it receives from the Bank. Under current regulations,  the Bank is not
permitted to pay  dividends if its  regulatory  capital would thereby be reduced
below (1) the amount then required for the  liquidation  account  established in
connection  with the Bank's  conversion  from mutual to stock  form,  or (2) the
regulatory  capital  requirements  imposed by the  Office of Thrift  Supervision
("OTS").  Capital distributions are also subject to certain limitations based on
the Bank's net income.  See Notes 17 and 18 of notes to  Consolidated  Financial
Statements.  The Bank's total capital at September 30, 2002 exceeded the amounts
of its liquidation account and regulatory capital requirements.

                                                                               5
<PAGE>

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

The  Private  Securities  Litigation  Reform act of 1995  contains  safe  harbor
provisions regarding forward-looking  statements.  When used in this discussion,
the words  "believe",  "anticipates",  "contemplates",  "expects",  and  similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties  which could cause actual results
to differ materially from those projected. Those risks and uncertainties include
changes in  interest  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  which  may be made to
reflect  events  or  circumstances  after  the date  hereof  or to  reflect  the
occurrences  of  unanticipated  events.

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

Other components of net income include: provisions for losses on loans and other
assets;  noninterest income (primarily,  service charges on deposit accounts and
other fees, net rental income,  and gains and losses on investment  activities);
noninterest  expenses  (primarily,  compensation and employee benefits,  federal
insurance  premiums,  office occupancy  expense,  marketing expense and expenses
associated with foreclosed real estate) and income taxes.

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

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

Management Strategy

Management's  strategy has been to maximize earnings and  profitability  through
steady growth while maintaining  asset quality.  The Bank's lending strategy has
historically  focused  on  the  origination  of  traditional  one-to-four-family
mortgage  loans with the primary  emphasis on single  family  residences  in the
Bank's primary market area. Additionally,  management emphasizes a "SmartGrowth"
strategy  which focuses on the  origination of consumer  loans  (primarily  home
equity loans),  alternative mortgage loans, commercial loans and commercial real
estate loans for retention in the Company's loan portfolio. Alternative mortgage
loans  originated by the Bank are residential real estate loans that do not meet
all  of  the  Bank's  standard  loan  underwriting  criteria.   Consumer  loans,
commercial loans and commercial real estate loans,  generally have shorter terms
to  maturity  and higher  yields  than  residential  real  estate  loans.  While
alternative mortgage loans, consumer loans, commercial loans, and comercial 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 yield on
interest-earning assets and the cost of interest-bearing  liabilities.  The Bank
has sought to manage its exposure to changes in interest rates by monitoring the
effective maturities or repricing characteristics of its interest-earning assets
and  interest-bearing  liabilities.  The  matching  of  the  Bank's  assets  and
liabilities  may be  analyzed  by  examining  the extent to which its assets and
liabilities  are interest rate sensitive and by monitoring the expected  effects
of interest rate changes on its net interest income and net portfolio value.

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

6
<PAGE>

of  the  difference  in  the  maturity  of   interest-bearing   liabilities  and
interest-earning  assets and the  volatility  of interest  rates.  Because  most
deposit  accounts  react more quickly to market  interest rate movements than do
traditional mortgage loans 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"),   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, 2002,  the weighted  average
term  to  repricing  of the  Bank's  ARM  loan  and  mortgage-backed  securities
portfolio was approximately 25 months. In contrast, at September 30, 2002, $91.9
million  of the Bank's  certificate  accounts  and $153.2  million of the Bank's
regular  deposit  accounts (e.g.  demand,  NOW, money market,  savings),  out of
$349.1 million of total deposits, were scheduled to mature or reprice within one
year or sooner. Based on past experience, however, management believes that much
of the Bank's deposits will remain at the Bank.

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

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

<TABLE>
<CAPTION>
                                                                            Year Ended September 30,
                                                              2002 vs 2001                           2001 vs 2000
                                                      -------------------------------------------------------------------
                                                     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)                               $ 1,938         $  (806)   $ 1,132    $  (745)   $  (169)   $  (914)
         Loans receivable, net                         (2,013)           (655)    (2,668)     2,067        821      2,888
         Other interest-earning assets (2)                351            (304)        47        216         20        236
                                                      -------         -------    -------    -------    -------    -------
Total Interest-Earning Assets                             276          (1,765)    (1,489)     1,538        672      2,210
                                                      -------         -------    -------    -------    -------    -------
Interest-bearing liabilities:
         Deposits                                       1,134          (4,706)    (3,572)       532        619      1,151
         FHLB advances and other borrowings              (190)           (398)      (588)      (102)       358        256
                                                      -------         -------    -------    -------    -------    -------
Total Interest-Bearing liabilities                        944          (5,104)    (4,160)       430        977      1,407
                                                      -------         -------    -------    -------    -------    -------
           Net change in net interest income$         $  (668)        $ 3,339    $ 2,671    $ 1,108    $  (305)   $   803
                                                      =======         =======    =======    =======    =======    =======
</TABLE>

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

                                                                               7
<PAGE>

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

<TABLE>
<CAPTION>
                                                                  Year Ended September 30,
                                   ---------------------------------------------------------------------------------------
                                              2002                          2001                           2000
                                   --------------------------     -------------------------     --------------------------
                                   Average             Yield/     Average            Yield/     Average             Yield/
                                   Balance  Interest    Cost      Balance Interest    Cost      Balance  Interest    Cost
                                   -------  --------    ----      ------- --------    ----      -------  --------    ----
                                                                   (Dollars in Thousands)
<S>                             <C>        <C>       <C>      <C>       <C>        <C>      <C>        <C>        <C>
Assets
  Interest-Earning Assets
  Securities, Net (1)             $ 92,108   $4,583     4.98%    $ 55,283  $ 3,451    6.24%    $ 67,113   $ 4,365    6.50%
  Loans receivable (2) (3)         364,676   28,769     7.89%     389,963   31,437    8.06%     364,237    28,549    7.84%
  Other interest-earning
    assets (4)                      16,952      345     2.04%       4,868      298    6.12%       1,210        62    5.12%
                                  --------  -------               -------  -------              -------   -------
  Total interest-earning assets    473,736  $33,697     7.11%     450,114  $35,186    7.82%     432,560   $32,976    7.62%
                                            =======                        =======                        =======
  Non-interest earning assets       25,725                         20,881                        18,268
                                  --------                       --------                      --------
Total Assets                      $499,461                       $470,995                      $450,828
                                  ========                       ========                      ========
Liabilities and Stockholders
  Equity
  Interest-bearing Liabilities
  NOW accounts                      44,105      269     1.19%      38,325      642    1.62%    $ 38,747   $   784    2.02%
  Statement & regular
    savings accounts                25,925      344     1.33%      22,637      397    1.75%      23,357       444    1.90%
  Money funds accounts              54,761    1,126     2.06%      28,618    1,194    4.17%      11,424       435    3.81%
  Certificates of Deposit          202,321    9,036     4.47%     212,135   12,114    5.71%     216,694    11,533    5.32%
                                  --------  -------               -------  -------              -------   -------
      Total Deposits               327,112   10,775     3.29%     301,715   14,347    4.76%     290,222    13,196    4.55%
  FHLB advances and
    other borrowings                91,140    5,570     6.11%      94,089    6,158    6.54%      95,753     5,902    6.16%
                                  --------  -------               -------  -------              -------   -------
  Total interest-bearing
    liabilities                    418,252  $16,345     3.91%     395,804  $20,505    5.18%     385,975   $19,098    4.95%
                                            =======                        =======                        =======
  Non-interest-bearing
    liabilities                     27,274                         25,172                        17,311
                                   -------                       --------                      --------
      Total liabilities            445,526                        420,976                       403,286
Stockholders' Equity                53,935                         50,019                        47,542
                                  --------                       --------                       -------
Total Liabilities and
  Stockholders' Equity            $449,461                       $470,995                      $450,828
                                  ========                       ========                      ========
Net interest income/interest
  rate spread (5)                           $17,352     3.20%             $ 14,681    2.64%               $13,878    2.67%
                                            =======                       ========                                 =======
Net interest margin (6)                                 3.66%                         3.26%                          3.21%
Interest-earning assets/
Interest bearing liabilities                          113.27%                       113.72%                        112.07%
</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  $399,000  in 2002,
     $117,000 in 2001 and $141,000 in 2000.
(4)  Amount  includes   certificates  of  deposit  and  other   interest-bearing
     deposits.
(5)  Interest rate spread represents the difference between the yield on average
     interest-earning   assets   and  the  cost  of   average   interest-bearing
     liabilities.
(6)  Net  interest  margin  represents  net interest  income  divided by average
     interest-earning assets.

8
<PAGE>

Changes in Financial Condition From September 30, 2001 to September 30, 2002

General.  Total assets  increased  $46.5  million,  or 9.9% to $514.0 million at
September  30, 2002 from $467.5  million at September  30, 2001,  primarily as a
result of purchases of mortgage-backed securities using FHLB advance borrowings.

Cash and Cash Equivalents.  Cash increased $11.3 million from $24.1 at September
30, 2001 to $35.4 million at September 30, 2002. Increases were due primarily to
an  increase  in  deposits  and  to  principal   repayments  on  mortgage-backed
securities  and  loans.

Securities  Available-for-Sale and Held-to-Maturity.  Securities  available-for-
sale  increased  $22.9 million from $41.2 million at September 30, 2001 to $64.1
million at September  30, 2002.  This  increase was due primarily to purchase of
mortgage backed securities using funds from loan repayments and FHLB borrowings.
Securities held to maturity  increased $30.9 million from September 30, 2001 due
to new purchases during the fiscal year.

Loans Receivable,  Net. The Bank's net loans receivable  decreased $30.2 million
or 7.9% to  $350.6  million  from  $380.8  million  at  September  30,  2001 due
primarily to repayments  due to lower interest  rates.  Of all real estate loans
originated in fiscal 2002, 31.0% had adjustable rates.

Deposits.  The Bank's deposits  increased $6.2 million or 1.8% to $349.1 million
from $342.9  million at September  30,  2001.  Increases  were due  primarily to
growth in money  market  accounts  and  demand  deposit  accounts.  Management's
deposit strategy is focused on growing these core deposits.

Advances From FHLB. Advances from the Federal Home Loan Bank of Dallas increased
$36.4  million,  or 54.2% to $103.5  million from $67.1 million at September 30,
2001,  as the  Company  used $30.0  million  to fund  purchases  of  securities.

Stockholders'  Equity.  Stockholders' equity increased $4.3 million or 8.3% from
$52.1 million at September 30, 2001, to $56.4 million at September 30, 2002, due
primarily to net income and the proceeds from the exercise of stock options less
dividends and stock repurchases.

Comparison of Operating  Results for Years Ended September 30, 2002 to September
30, 2001

Analysis of Net Income

General.  The  Company  had net income of $6.2  million,  $4.4  million and $3.7
million 2002, 2001 and 2000. The $1,877,000 or 43.1% increase during fiscal 2002
compared to fiscal 2001 was primarily due to an increase in net interest  income
and service fee  income.

Interest  Income.  Interest income amounted to $33.7 million,  $35.2 million and
$33.0 million for the years ended 2002,  2001 and 2000,  respectively.  The $1.5
million  or 4.3%  decrease  during  fiscal  2002  compared  to  fiscal  2001 was
primarily due to decreased interest on loans,  offset somewhat by an increase in
interest  income on  securities.  The average  rates earned on loans  receivable
decreased  from 8.06% in fiscal 2001 to 7.89% in fiscal 2002.  The average rates
earned decreased from 7.46 % in the first quarter of fiscal 2002 to 6.84% in the
fourth  quarter of fiscal 2002 as rates  decreased.  The  decrease  was due to a
lower  average  balance  of loans  receivable.  The  higher  average  balance of
securities was offset by a 1.26% decrease in the yield thereon. The $2.2 million
or 6.7%  increase  in fiscal 2001 was  primarily  due to  increased  interest on
loans, offset somewhat by a decrease in interest on securities.

Interest  Expense.  Interest  expense  totaled $16.3 million,  $20.5 million and
$19.1 million for the years ended September  2002, 2001 and 2000,  respectively.
The $4.2 million or 20.5%  decrease  during  fiscal 2002 compared to fiscal 2001
was primarily due to a decrease in deposit  interest rates paid during the year.
The $4.2  million or 20.5%  decrease in fiscal 2002 was  primarily  due to a 147
basis point drop in deposit  interest  rates along with a 43 basis point drop in
FHLB advance interest rates. The average rates paid on interest bearing deposits
decreased  from  4.76% in fiscal  2001 to 3.29% in  fiscal  2002.  However,  the
average rates paid  decreased  from 4.35% in the first quarter of fiscal 2002 to
3.65% in the fourth quarter of fiscal 2002 market rates decreased.

Net  Interest  Income.  Net interest  income  amounted to $17.4  million,  $14.7
million and $13.9 million for the years ended September 30, 2002, 2001 and 2000.
The interest rate margin was 3.66% in fiscal 2002 and 3.26% in fiscal 2001.  The
increase in margin was mainly due to the large  decrease in interest  rates paid
on deposits driven mostly by decreasing market rates.

                                                                               9
<PAGE>

Provision for Loan Losses. The Bank provided  $205,000,  $80,000 and $120,000 to
the allowance for loan losses for the years ended  September 30, 2002,  2001 and
2000  respectively.  The allowance for loan losses was $3,459,000 at 2002 fiscal
year end and  $3,436,00  at 2001 fiscal year end and  $3,630,000  at 2000 fiscal
year end. The 2002 provision  reflects a higher balance in the loan portfolio of
consumer and commercial real estate loans.

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

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

Non-Interest  Income.  Non-interest  income during the years ended September 30,
2002,  2001 and 2000  amounted to $7.9  million,  $6.7  million and $5.6 million
respectively.  The increases in both fiscal 2002 and fiscal 2001 were  primarily
due to  increased  fee  income  primarily  due to an  increase  in the number of
transaction  accounts.  In addition,  the Company earned $186,000 in fiscal 2002
from its 2002 investment in bank-owned insurance.

Non-Interest  Expense.  Non-interest  expense increased  steadily over the three
periods,  totaling  $15.6  million,  $14.8 million and $13.8 million  during the
years ended September 30, 2002, 2001 and 2000. The increases in both fiscal 2002
and  2001  were due to  continued  expansion  of  office  facilities,  increased
marketing  expenses and increased  investment in new  technology.  The principal
component of non-interest expense, compensation and employee benefits, decreased
slightly from $6.685 million in fiscal 2000 to $6.618 million in fiscal 2001 and
increased to $7.3 million in fiscal 2002. A $308,000 decrease in the cost of the
Management  Incentive  Plan from fiscal 2000 to fiscal 2001 offset  increases in
other areas of  compensation  and employee  benefit  expenses.  Other  operating
expenses  increased  from $2.2  million in fiscal 2000 to $2.6 million in fiscal
2001 and decreased to $2.1 million in fiscal 2002.

The Company is subject to the Louisiana  Shares Tax. This amounted to an expense
of $650,000,  $605,000 and $669,000 in the years ended  September 30, 2002, 2001
and 2000, respectively.

Gain on Sale of  Securities.  In the years ended  September  30, 2002,  2001 and
2000,  gains on the sale of  securities  amounted to $87,000,  $123,000  and $0,
respectively.  The increases in 2002 and 2001 were primarily due to the increase
in the market values of certain financial  institutions in which the Company had
invested.

Income Tax Expense.  For the years ended  September 30, 2002, 2001 and 2000, the
Bank incurred income tax expense of $3.3 million, $2.3 million and $1.9 million,
respectively.  The varying  amounts were caused  primarily by the varied pre-tax
income  of the  Bank as the  Company's  overall  effective  income  tax rate was
approximately 35% for all three years.

Liquidity and Capital Resources

The Bank's  average  liquidity  ratio is based on a  percentage  of deposits and
short term borrowings and was approximately 18.6% percent during September 2002.
The  Bank  manages  its  average  liquidity  ratio to meet  its  funding  needs,
including:  deposit outflows;  disbursement of payments collected from borrowers
for taxes and insurance;  repayment of Federal Home Loan Bank advances and other
borrowings;  and loan  principal  disbursements.  The  Bank  also  monitors  its
liquidity position in accordance with its asset/liability management objectives.

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

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

10
<PAGE>

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

The Bank has other sources of liquidity if a need for  additional  funds arises,
such  as  FHLB  of  Dallas   advances   and  the   ability  to  borrow   against
mortgage-backed and other securities.  On September 30, 2002, the Bank had total
FHLB borrowings of $103.5 million, or 20.1% of the Bank's assets.

Management  believes  the Bank has  sufficient  resources  available to meet its
foreseeable  funding   requirements.   At  September  30,  2002,  the  Bank  had
outstanding  loan  commitments of $22.1  million,  and  certificates  of deposit
scheduled to mature within one year of $91.9 million, substantially all of which
management  expects,  based on past  experience,  will  remain  with  the  Bank.

Regulations  of the OTS  require  the  Bank to meet  or  exceed  three  separate
standards of capital adequacy.  These regulations require financial institutions
to have minimum  tangible capital equal to 1.5 percent of total adjusted assets;
minimum  core  capital  equal to 4.0  percent  of  total  adjusted  assets;  and
risk-based  capital  equal to 8.0  percent  of total  risk-weighted  assets.  At
September 30, 2002, Teche Federal exceeded all regulatory capital  requirements.
See Note 17 to  Consolidated  Financial  Statements.

Impact of Inflation and Changing Prices

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

Critical Accounting Policies

Certain critical accounting policies affect the more significant  judgements and
estimates used in the  preparation  of the  consolidated  financial  statements.
Teche's single most critical accounting policy relates to its allowance for loan
losses,  which reflects the estimated losses resulting from the inability of its
borrowers to make loan  payments.  If the  financial  condition of its borrowers
were to  deteriorate,  resulting  in an  impairment  of  their  ability  to make
payments,  its estimates  would be updated,  and additional  provisions for loan
losses may be required.

                                                                              11
<PAGE>

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

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

                                                                        Deloitte
                                                                        & Touche


INDEPENDENT AUDITORS' REPORT


Board of Directors and Shareholders
Teche Holding Company
Franklin, Louisiana

We have audited the  accompanying  consolidated  balance sheets of Teche Holding
Company  and  subsidiary  as of  September  30,  2002 and 2001,  and the related
consolidated statements of income,  stockholders' equity and cash flows for each
of the three years in the period  ended  September  30,  2002.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,   the  financial  position  of  Teche  Holding  Company  and
subsidiary  as of  September  30,  2002  and  2001,  and the  results  of  their
operations  and their cash flows for each of the three years in the period ended
September 30, 2002 in conformity with accounting  principles  generally accepted
in the United States of America.

/s/DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP
November 15, 2002

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

12
<PAGE>

<TABLE>
<CAPTION>
TECHE HOLDING COMPANY AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2002 AND 2001
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
----------------------------------------------------------------------------------------

                                                                     2002         2001
<S>                                                              <C>          <C>
ASSETS
Cash and cash equivalents                                         $  35,375    $  24,108
Securities available-for-sale, at estimated market
  value (amortized cost of $63,009 in 2002 and $40,164 in 2001)      64,110       41,230
Securities held-to-maturity, at cost (estimated market
  value of $31,188)                                                  30,897           --
Loans receivable, net of allowance for loan losses of
  $3,459 in 2002 and $3,436 in 2001                                 350,623      380,830
Accrued interest receivable                                           2,501        2,387
Investment in Federal Home Loan Bank stock, at cost                   5,211        4,776
Real estate owned, net                                                  580          282
Prepaid expenses and other assets                                       742          734
Life insurance contracts                                              8,772           --
Premises and equipment, at cost, less accumulated depreciation       15,206       13,184
                                                                  ---------    ---------

TOTAL ASSETS                                                      $ 514,017    $ 467,531
                                                                  =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                          $ 349,125    $ 342,917
Advances from Federal Home Loan Bank                                103,471       67,120
Advance payments by borrowers for taxes and insurance                 1,352        1,642
Accrued interest payable                                                702          964
Accounts payable and other liabilities                                3,001        2,776
                                                                  ---------    ---------

      Total liabilities                                             457,651      415,419

COMMITMENTS AND CONTINGENCIES                                            --           --

STOCKHOLDERS' EQUITY:
  Common stock, $.01 par value, 10,000,000 shares authorized;
     4,373,871 and 4,306,064 shares issued                               44           43
  Preferred stock, 5,000,000 shares authorized, none issued              --           --
  Additional paid-in capital                                         44,618       43,374
  Retained earnings                                                  41,713       36,609
  Unearned ESOP shares                                                 (757)      (1,089)
  Treasury stock - 2,005,588 and 1,894,748 shares, at cost          (29,968)     (27,518)
  Unrealized gain on securities available-for-sale, net
    of deferred income taxes                                            716          693
                                                                  ---------    ---------

      Total stockholders' equity                                     56,366       52,112
                                                                  ---------    ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                        $ 514,017    $ 467,531
                                                                  =========    =========
</TABLE>

See notes to consolidated financial statements.

                                                                              13

<PAGE>

TECHE HOLDING COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------------------------------------

                                                        2002      2001      2000

INTEREST INCOME:
  Interest and fees on loans                         $28,769   $31,437   $28,549
  Interest and dividends on securities                 4,583     3,451     4,365
  Other interest income                                  345       298        62
                                                     -------   -------   -------
                                                      33,697    35,186    32,976
                                                     -------   -------   -------
INTEREST EXPENSE:
  Deposits                                            10,775    14,347    13,196
  Advances from Federal Home Loan Bank                 5,570     6,158     5,902
                                                     -------   -------   -------
                                                      16,345    20,505    19,098
                                                     -------   -------   -------

NET INTEREST INCOME                                   17,352    14,681    13,878

PROVISION FOR LOAN LOSSES                                205        80       120
                                                     -------   -------   -------
NET INTEREST INCOME AFTER PROVISION
  FOR LOAN LOSSES                                     17,147    14,601    13,758
                                                     -------   -------   -------
NON-INTEREST INCOME:
  Service charges                                      7,522     6,514     5,230
  Gain on sale of real estate owned                       21        20        51
  Other income                                           357       165       327
                                                     -------   -------   -------

    Total non-interest income                          7,900     6,699     5,608
                                                     -------   -------   -------

GAIN ON SALE OF SECURITIES, net                           87       123        --
                                                     -------   -------   -------

NON-INTEREST EXPENSE:
  Compensation and employee benefits                   7,269     6,618     6,685
  Occupancy, equipment and data processing expense     3,377     3,419     3,085
  Marketing and professional                           2,133     1,492     1,072
  SAIF deposit insurance premiums                         62        61        92
  Louisiana shares tax                                   650       605       669
  Other operating expenses                             2,122     2,573     2,175
                                                     -------   -------   -------
    Total non-interest expense                        15,613    14,768    13,778
                                                     -------   -------   -------

INCOME BEFORE INCOME TAXES                             9,521     6,655     5,588

INCOME TAXES                                           3,285     2,296     1,928
                                                     -------   -------   -------

NET INCOME                                           $ 6,236   $ 4,359   $ 3,660
                                                     =======   =======   =======

BASIC INCOME PER COMMON SHARE                        $  2.72   $  1.86   $  1.56
                                                     =======   =======   =======

DILUTED INCOME PER COMMON SHARE                      $  2.58   $  1.81   $  1.55
                                                     =======   =======   =======


See notes to consolidated financial statements.

14
<PAGE>

<TABLE>
<CAPTION>
TECHE HOLDING COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
------------------------------------------------------------------------------------------------------------------------------------

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

<S>                                         <C>    <C>         <C>       <C>        <C>          <C>           <C>        <C>
BALANCE, October 1, 1999                     $ 42   $ 42,153    $ 30,928  $ (1,754)  $ (390)      $ (21,387)    $ (892)     $48,700
Contribution to ESOP                                      71                   333                                              404
Amortization of MSP                                                                     349                                     349
Tax expense from vesting of MSP shares                    (3)                                                                    (3)
Purchase of common stock for treasury                                                                (3,265)                 (3,265)
Dividends declared - $.50 per share                               (1,171)                                                    (1,171)
Comprehensive income:
  Net income                                                       3,660                                                      3,660
  Change in unrealized gain (loss)
    on securities available-for-sale, net                                                                          (53)         (53)
                                                                                                                            -------
           Total comprehensive income                                                                                         3,607
                                             ----   --------    --------    ------   ------       ---------     ------      -------
BALANCE, September 30, 2000                    42     42,221      33,417    (1,421)     (41)        (24,652)      (945)      48,621
Contribution to ESOP                                     218                   332                                              550
Amortization of MSP                                                                      41                                      41
Exercise of stock options                       1        935                                                                    936
Purchase of common stock for treasury                                                                (2,866)                 (2,866)
Dividends declared - $.50 per share                               (1,167)                                                    (1,167)
Comprehensive income:
  Net income                                                       4,359                                                      4,359
  Change in unrealized gain (loss)
    on securities available-for-sale, net                                                                        1,638        1,638
                                                                                                                            -------
           Total comprehensive income                                                                                         5,997
                                             ----   --------    --------    ------   ------       ---------     ------      -------
BALANCE, September 30, 2001                    43     43,374      36,609    (1,089)                 (27,518)       693       52,112
Contribution to ESOP                                     413                   332                                              745
Exercise of stock options                       1        831                                                                    832
Purchase of common stock for treasury                                                                (2,450)                 (2,450)
Dividends declared - $.50 per share                               (1,132)                                                    (1,132)
Comprehensive income:
  Net income                                                       6,236                                                      6,236
  Change in unrealized gain (loss)
    on securities available-for-sale, net                                                                           23           23
                                                                                                                            -------
           Total comprehensive income                                                                                         6,259
                                             ----   --------    --------    ------   ------       ---------     ------      -------
BALANCE, September 30, 2002                  $ 44   $ 44,618    $ 41,713    $ (757)  $            $ (29,968)    $  716      $56,366
                                             ====   ========    ========    ======   ======       =========     ======      =======
</TABLE>

See notes to consolidated financial statements.

                                                                              15

<PAGE>

<TABLE>
<CAPTION>
TECHE HOLDING COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000 (DOLLARS IN THOUSANDS)
---------------------------------------------------------------------------------------------------

                                                                    2002        2001        2000
<S>                                                            <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                     $  6,236    $  4,359    $  3,660
  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                 217         (46)        (78)
      Provision for loan losses                                       205          80         120
      ESOP expense                                                    633         456         353
      MSP expense                                                      20          41         349
      Deferred income tax credit                                     (115)       (144)       (308)
      Gain on sale of land                                             --          --         (85)
      Gain on sale of securities                                      (87)       (123)         --
      Gain on sale of real estate owned                               (21)        (20)        (51)
      Depreciation                                                  1,076       1,191       1,098
      Accretion of discount on loans                                 (115)        (97)        (35)
      Change in accrued interest receivable                          (114)         17        (245)
      Change in accrued interest payable                             (262)        279         253
      Other - net                                                    (170)        396         331
                                                                 --------    --------    --------

           Net cash provided by operating activities                7,503       6,389       5,362
                                                                 --------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from maturities of investment securities
     available-for-sale                                                11       3,414       1,108
  Proceeds from sale of investment securities
     available-for-sale                                               354         506          --
  Purchase of investment securities available-for-sale               (228)        (34)     (1,995)
  Purchase of mortgaged-backed securities available-for-sale      (55,460)         --          --
  Principal repayments on mortgaged-backed securities
     available-for-sale                                            32,348      14,790       9,700
  Purchase of mortgage-backed securities held-to-maturity         (35,754)         --      (3,416)
  Principal repayments on mortgaged-backed securities
    held-to-maturity                                                4,857          --         842
  Net loan repayments (originations)                               30,150       5,693     (43,522)
  Purchase of life insurance contracts                             (8,500)         --          --
  (Investment in) sales of FHLB stock, net                           (435)      1,005      (1,552)
  Proceeds from sale of land                                           --          --         595
  Purchase of premises and equipment                               (3,098)     (3,166)     (2,624)
                                                                 --------    --------    --------

           Net cash (used in) provided by investing activities    (35,755)     22,208     (40,864)
                                                                 --------    --------    --------

                                                                                        (Continued)
</TABLE>

16

<PAGE>

<TABLE>
<CAPTION>
TECHE HOLDING COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000 (DOLLARS IN THOUSANDS)
----------------------------------------------------------------------------------------------


                                                                2002        2001        2000
<S>                                                       <C>         <C>         <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Dividends paid                                              (1,132)     (1,167)     (1,171)
  Net increase in deposits                                     6,208      33,021       6,812
  Proceeds of long-term FHLB advances                         51,000      34,000      29,000
  Repayment of long-term FHLB advances                       (14,649)    (21,233)    (44,029)
  Net (decrease) increase in short-term FHLB
    advances                                                      --     (57,500)     48,200
  Cash paid for purchase of common stock for treasury         (2,450)     (2,866)     (3,265)
  Proceeds from exercise of stock options                        832         855          --
  (Decrease) increase in advance payments by
    borrowers for taxes and insurance                           (290)         17          47
                                                            --------    --------    --------

      Net cash provided by (used in) financing activities     39,519     (14,873)     35,594
                                                            --------    --------    --------
NET INCREASE IN CASH AND CASH
  EQUIVALENTS                                                 11,267      13,724          92

CASH AND CASH EQUIVALENTS,
  BEGINNING OF YEAR                                           24,108      10,384      10,292
                                                            --------    --------    --------
CASH AND CASH EQUIVALENTS,
  END OF YEAR                                               $ 35,375    $ 24,108    $ 10,384
                                                            ========    ========    ========

SUPPLEMENTAL DISCLOSURE OF CASH
  FLOW INFORMATION:
  Cash paid for interest                                    $ 16,083    $ 20,226    $ 19,188
                                                            ========    ========    ========

  Income taxes paid                                         $  3,516    $  2,318    $  1,970
                                                            ========    ========    ========
</TABLE>

See notes to consolidated financial statements.

                                                                     (Concluded)


                                                                              17
<PAGE>

TECHE holding company and subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
--------------------------------------------------------------------------------


1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      The significant accounting policies of the Company are described below.

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

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

      Cash and Cash  Equivalents - Cash and cash  equivalents  comprise cash and
      non-interest  bearing and  interest  bearing  demand  deposits  with other
      financial institutions.

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

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

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

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

18
<PAGE>

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

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

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

      The  Company  considers  a loan to be impaired  when,  based upon  current
      information  and events,  it believes it is possible that the Company will
      be unable to collect all amounts due according to the contractual terms of
      the loan  agreement.  The Company's  impaired loans include  troubled debt
      restructurings,  and  performing and  non-performing  major loans in which
      full  payment of  principal  or  interest  is not  expected.  The  Company
      calculates  a reserve  required  for  impaired  loans based on the present
      value of expected  future cash flows  discounted  at the loan's  effective
      interest rate, or the loan's  observable market price or the fair value of
      its collateral.  The Company did not have a significant amount of impaired
      loans at September 30, 2002 or 2001.

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

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

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

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

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

                                                                              19
<PAGE>

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

      Premises and Equipment - The Company  computes  depreciation  generally on
      the straight-line  method for both financial  reporting and federal income
      tax purposes. The estimated useful lives used to compute depreciation are:
      buildings and improvements, twenty to forty years; and furniture, fixtures
      and  equipment,  three to ten  years.  Interest  is  capitalized  on major
      construction programs and amounted to $-0-, 105 and $78 in the years ended
      September 30, 2002, 2001 and 2000, respectively.

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

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

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

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

      Reclassifications - Certain  reclassifications have been made to the prior
      years'  financial  statements  in order to conform to the  classifications
      adopted for reporting in 2002.

2.    INTEREST RATE RISK

      The Company is engaged  principally in providing  first mortgage and other
      types of loans to  individuals.  At September  30,  2002,  the Company had
      interest earning assets of approximately  $485,000, most of which will not
      mature or be repriced until after five years. Interest bearing liabilities
      totaled  approximately  $427,000,  most of  which  will  mature  or can be
      repriced  within two years.  The shorter  duration  of  interest-sensitive
      liabilities  indicates  that in a rising rate  environment  the Company is
      exposed to interest rate risk because  liabilities may be repricing faster
      at higher interest rates,  thereby  reducing the market value of long-term
      assets and net interest  income.  In a falling rate environment the market
      value of long-term assets and net interest income may be increased.

20
<PAGE>

3.    SECURITIES

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

<TABLE>
<CAPTION>
                                                            September 30, 2002
                                            ---------------------------------------------
                                                          Gross       Gross     Estimated
                                            Amortized   Unrealized  Unrealized    Market
                                               Cost       Gains       Losses      Value
                                               ----       -----       ------      -----
<S>                                        <C>        <C>         <C>         <C>
Investment securities:
  Municipal obligations                      $     59   $     --    $     --    $     59
                                             --------   --------    --------    --------

Mortgage-backed securities:
  Government National Mortgage Corporation      4,791        119          --       4,910
  Federal Home Loan Mortgage Corporation       41,163        735          --      41,898
  Federal National Mortgage Association         6,215        114          --       6,329
                                             --------   --------    --------    --------
                                               52,169        968          --      53,137
Collateralized mortgage obligations
  ("CMOs")                                     10,630        117          (3)     10,744
Equity securities                                 151         19          --         170
                                             --------   --------    --------    --------

                                             $ 63,009   $  1,104    $     (3)   $ 64,110
                                             ========   ========    ========    ========
</TABLE>

<TABLE>
<CAPTION>
                                                             September 30, 2001
                                            ---------------------------------------------
                                                          Gross       Gross     Estimated
                                            Amortized   Unrealized  Unrealized    Market
                                               Cost       Gains       Losses      Value
                                               ----       -----       ------      -----
<S>                                        <C>        <C>         <C>         <C>
Investment securities:
  Municipal obligations                      $     70   $   --      $     --    $     70
                                             --------   --------    --------    --------

Mortgage-backed securities:
  Government National Mortgage Corporation      8,101        105                   8,206
  Federal Home Loan Mortgage Corporation        4,721         75                   4,796
  Federal National Mortgage Association         8,320        222         (12)      8,530
                                             --------   --------    --------    --------
                                               21,142        402         (12)     21,532
Collateralized mortgage obligations
  ("CMOs")                                     18,762        633                  19,395
Equity securities                                 190         43                     233
                                             --------   --------    --------    --------

                                             $ 40,164   $  1,078    $    (12)   $ 41,230
                                             ========   ========    ========    ========
</TABLE>


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

<TABLE>
<CAPTION>
                                                             September 30, 2002
                                            ---------------------------------------------
                                                          Gross       Gross     Estimated
                                            Amortized   Unrealized  Unrealized    Market
                                               Cost       Gains       Losses      Value
                                               ----       -----       ------      -----

<S>                                         <C>       <C>           <C>       <C>
Mortgaged-backed securities                   $21,366   $   138       $    --    $21,504
Federal National Mortgage Company's
  corporate                                     9,531       153            --      9,684
                                              -------   -------       -------    -------

                                              $30,897   $   291       $    --    $31,188
                                              =======   =======       =======    =======
</TABLE>


                                                                              21
<PAGE>

      Gross gains of $87 and $127 were  realized on sales of  securities  in the
      years ended  September  30, 2002 and 2001,  respectively.  Gross losses of
      $-0- and $4 were  realized  on  sales of  securities  in the  years  ended
      September 30, 2002 and 2001,  respectively.  There were no gains or losses
      on sales of securities in the year ended September 30, 2000.

      At September 30, 2002 securities with a cost of approximately $12,000 were
      pledged to secure deposits and advances from the Federal Home Loan Bank as
      required or permitted by law.

4.    LOANS RECEIVABLE

      Loans receivable are summarized as follows (in thousands):

                                                         September 30,
                                                  ---------------------------
                                                      2002              2001

Residential real estate mortgage loans:
  One-to-four family units - Conforming           $222,069          $273,546
  One-to-four family units - Alternative            31,599            19,889
  Multi-family                                       5,804             1,107
Land loans                                           8,750             9,161
Construction loans                                   8,814             8,908
Non-residential real estate loans                    7,792            10,775
Commercial non real estate loans                     3,295              --
Home improvement and home equity loans              40,779            36,039
Loans on savings accounts                            3,978             4,536
Auto loans                                           4,143             5,550
Mobile home loans                                   12,972            10,426
Credit card loans                                    1,282             1,462
Other secured and unsecured                          3,012             3,613
                                                  --------          --------

                                                   354,289           385,012
Less:
  Allowance for loan losses                          3,459             3,436
  Deferred loan fees                                   207               746
                                                  --------          --------

                                                  $350,623          $380,830
                                                  ========          ========


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

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

                                                       Year Ended
                                                      September 30,
                                             ------------------------------
                                                2002       2001       2000

Beginning balance, October 1                 $ 3,436    $ 3,630    $ 3,537
Provision charged to operating expense           205         80        120
Recoveries                                        33         12         62
Loans charged off                               (215)      (286)       (89)
                                             -------    -------    -------

Ending balance, September 30                 $ 3,459    $ 3,436    $ 3,630
                                             =======    =======    =======

22
<PAGE>


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

      At September 30, 2002 and 2001 there were  unamortized  discounts on loans
      purchased of approximately $320 and $430, respectively.  These unamortized
      discounts  have been  deducted from the related loan balances in the table
      above.

      The amount of  nonaccrual  loans at  September  30,  2002 and 2001 was not
      significant.  The amount of  interest  not  accrued on these loans did not
      have a significant effect on net income in 2002, 2001 or 2000.

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

5.    REAL ESTATE OWNED

      Real estate owned consisted of the following (in thousands):

                                                        September 30,
                                                    --------------------
                                                      2002          2001

Real estate acquired through foreclosure             $ 630         $ 354
Less allowance for losses                              (50)          (72)
                                                     -----         -----

Real estate owned, net                               $ 580         $ 282
                                                     =====         =====



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

                                                          Year Ended
                                                         September 30,
                                                  -------------------------
                                                    2002     2001     2000

Beginning balance, October 1                       $  72    $ 112    $ 147
Reduction of allowance at date of sale               (22)     (40)     (35)
                                                   -----    -----    -----

Ending balance, September 30                       $  50    $  72    $ 112
                                                   =====    =====    =====


6.    PREMISES AND EQUIPMENT

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

                                                        September 30,
                                                --------------------------
                                                    2002              2001

Land                                            $  4,327          $  3,062
Buildings and improvements                        11,285            10,053
Furniture, fixtures and equipment                  6,628             6,146
                                                --------          --------
                                                  22,240            19,261
Less accumulated depreciation                     (7,034)           (6,077)
                                                --------          --------

                                                $ 15,206          $ 13,184
                                                ========          ========

                                                                              23
<PAGE>


7.    DEPOSITS

      Deposits are summarized as follows (in thousands):

                                                       September 30,
                                                 ------------------------
                                                     2002            2001

Non-interest bearing demand accounts             $ 25,210        $ 23,309
Interest bearing:
  NOW accounts                                     46,565          40,088
  Passbook and regular savings                     26,187          24,469
  Money funds accounts                             55,246          46,568
  Certificates of deposit                         195,917         208,483
                                                 --------        -------

                                                 $349,125        $342,917
                                                 ========        ========


      Certificates  of deposit of over $100  amounted  to $37,469 and $42,200 at
      September 30, 2002 and 2001, respectively.

      Certificates  of  deposits  at  September  30,  2002 mature as follows (in
      thousands):

Less than one year                                            $ 91,937
1-2 years                                                       47,824
2-3 years                                                       14,051
3-4 years                                                       30,155
4-5 years                                                        5,742
Over 5 years                                                     6,208
                                                              --------

TOTAL                                                         $195,917
                                                              ========


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

      At September  30, 2002,  the Company was indebted to the FHLB for $103,471
      of advances bearing interest at a weighted average rate of 5.89% which are
      due as follows (in thousands):

  Year Ended
September 30,

    2003                                                      $ 11,385
    2004                                                         6,344
    2005                                                         4,445
    2006                                                         4,076
    Thereafter                                                  77,221
                                                              --------
                                                              $103,471
                                                              ========

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

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

24
<PAGE>

      At September  30, 2001,  the Company was indebted to the Federal Home Loan
      Bank for $67,120 of advances bearing interest at an average rate of 6.65%,
      $8,996 of which were due or callable in the year ended September 30, 2002,
      $3,822 in 2003, $1,795 in 2004, $1,292 in 2005 and the balance thereafter.

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

9.    INCOME TAXES

      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,  2002  and  2001  are  as  follows  (in
      thousands):

                                                               2002       2001

Deferred tax assets:
  Allowance for loan losses                                 $   727    $   550
  Other                                                         145        182
                                                            -------    -------
         Total deferred tax assets                              872        732
                                                            -------    -------
Deferred tax liabilities:
  Deferred loan fees and costs, net                             240        300
  Unrealized gain on securities available-for-sale              385        373
  Tax over book depreciation                                     80         --
  Dividends on FHLB stock                                       610        560
  Other                                                         140        185
                                                            -------    -------
         Total deferred tax liabilities                       1,455      1,418
                                                            -------    -------

         Net deferred tax liabilities                       $  (583)   $  (686)
                                                            =======    =======



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

                                                          Year Ended
                                                         September 30,
                                                ------------------------------
                                                   2002       2001       2000

Currently payable                               $ 3,400    $ 2,440    $ 2,236
Deferred                                           (115)      (144)      (308)
                                                -------    -------    -------

                                                $ 3,285    $ 2,296    $ 1,928
                                                =======    =======    =======


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

                                                       Year Ended
                                                      September 30,
                                               ---------------------------
                                                 2002      2001      2000

Taxes computed at statutory rates              $3,237    $2,263    $1,900
Increase in taxes due to miscellaneous items       48        33        28
                                               ------    ------    ------
                                               $3,285    $2,296    $1,928
                                               ======    ======    ======

Actual tax rate                                    35%       35%       35%
                                               ======    ======    ======

                                                                              25
<PAGE>

      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, 2002,
      retained  earnings  includes   approximately   $4,400   representing  such
      allowances for which no deferred income taxes have been provided.

10.   NON-INTEREST EXPENSE

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

                                                             Year Ended
                                                            September 30,
                                                    --------------------------
                                                       2002     2001     2000

Occupancy, including depreciation, insurance,
  rent, utilities, etc                               $1,091   $  935   $  879
Equipment, including depreciation, telephone, etc     1,521    1,693    1,569
Data processing                                         765      791      637
                                                     ------   ------   ------

                                                     $3,377   $3,419   $3,085
                                                     ======   ======   ======


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

                                                             Year Ended
                                                            September 30,
                                                     -------------------------
                                                       2002     2001     2000

Stationery, printing and postage                     $  698   $  649   $  650
Debit card expense                                      471      426      293
Other                                                   953    1,498    1,232
                                                     ------   ------   ------

                                                     $2,122   $2,573   $2,175
                                                     ======   ======   ======

26
<PAGE>


11.   OTHER COMPREHENSIVE INCOME

      The adjustment to determine other comprehensive  income as included in the
      consolidated statements of changes in stockholders' equity consists of the
      following  for the  years  ended  September  30,  2002,  2001 and 2000 (in
      thousands):

<TABLE>
<CAPTION>
                                                                          Tax           Net of
                                                          Before-Tax    (Expense)        Tax
                                                           Amount        Credit         Amount

<S>                                                      <C>           <C>           <C>
2002
----
  Gross change in unrealized gain on securities
    available-for-sale                                     $   122       $   (42)      $    80
  Less reclassification for gain included in net income         87           (30)           57
                                                           -------       -------       -------

  Net change in unrealized gain on securities
    available-for-sale                                     $    35       $   (12)      $    23
                                                           =======       =======       =======

2001
----
  Gross change in unrealized gain on securities
    available-for-sale                                     $ 2,651       $  (933)      $ 1,718
  Less reclassification for gain included in net income        123           (43)           80
                                                           -------       -------       -------

  Net change in unrealized gain on securities
    available-for-sale                                     $ 2,528       $  (890)      $ 1,638
                                                           =======       =======       =======

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

  Net change in unrealized gain (loss) on
    securities available-for-sale                          $   (79)      $    26       $   (53)
                                                           =======       =======       =======
</TABLE>

12.   RETIREMENT PLAN

      The Company  participates in a defined benefit  multi-employer  retirement
      plan which covers substantially all employees. The plan is administered by
      the Financial  Institutions  Retirement Fund.  Charges to operations under
      the plan include normal cost. There were no required payments in the years
      ended  September  30,  2002,  2001 and 2000.  The market  value of the net
      assets of the  retirement  fund exceeds the liability of the present value
      of accrued benefits. No separate information regarding the Company's share
      of the assets and liabilities of this plan is available.

                                                                              27
<PAGE>

13.   INCOME PER SHARE

      Following is a summary of the information used in the computation of basic
      and  diluted  income per common  share for the years ended  September  30,
      2002, 2001 and 2000 (in thousands):

<TABLE>
<CAPTION>
                                                                 Year Ended
                                                                September 30,
                                                          ----------------------
                                                            2002    2001    2000
<S>                                                      <C>     <C>     <C>
Weighted average number of common shares
  outstanding - used in computation of basic
  income per common share                                  2,290   2,349   2,346
Effect of dilutive securities:
  Stock options                                              125      59      --
  MSP stock grants                                             1       4      20
                                                           -----   -----   -----
Weighted  average  number of common shares
  outstanding  plus effect of dilutive
  securities - used in computation of diluted income per
  common share                                             2,416   2,412   2,366
                                                           =====   =====   =====
</TABLE>



14.   EMPLOYEE STOCK PLANS

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

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

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

      Compensation  expense  related to the ESOP was $633, $456 and $353 for the
      years ended September 30, 2002, 2001 and 2000, respectively. The following
      is a summary of shares held in the ESOP Trust as of September 30, 2002 and
      2001 :


                                                                 2002       2001

Shares released for allocation or committed to be released    224,053    202,315

Unreleased shares                                              75,699    108,933
                                                             --------   --------

Total ESOP shares                                             299,752    311,248
                                                             ========   ========

Market value of unreleased shares (in thousands)             $  1,855   $  2,070
                                                             ========   ========

28

<PAGE>

      In the year ended  September  30, 1996,  the  stockholders  of the Company
      approved  the Teche  Holding  Company  1995 Stock Option Plan (the "Plan")
      under which  options to purchase  423,200  common shares were reserved and
      granted to executive  employees  and  directors of Teche  Federal  Savings
      Bank. In the years ended September 30, 2002,  1999 and 1998,  issuances of
      additional  options were authorized.  The exercise prices are equal to the
      market  price  on the  date of  grant  and 20% to 25% of the  options  are
      generally  exercisable within the first anniversary date after the date of
      grant and 20% to 25% annually  thereafter.  All unexercised options expire
      ten years from the date of grant. No  compensation  expense was recognized
      under the Plans in 2002,  2001 or 2000.  The  following  table  summarizes
      activity relating to the Plans:

<TABLE>
<CAPTION>
                                              Available                     Weighted
                                                 for         Options        Average
                                                Grant      Outstanding       Price
                                                -----      -----------       -----

<S>                                         <C>         <C>              <C>
Balance, October 1, 1999                         3,200       526,332          14.73

  Changes during year                               --            --             --
                                               -------       -------      ---------

Balance, September 30, 2000                      3,200       526,332          14.73

  Exercised                                         --      (109,234)         13.94
  Expired and other                             14,200       (14,200)         19.88
                                               -------       -------      ---------

Balance, September 30, 2001                     17,400       402,898          14.90

  Exercised                                                 (103,226)         16.12
  Reserved                                     212,500
  Granted                                      (47,567)       47,567          20.43
  Expired and other                              1,200        (1,200)         19.80
                                               -------       -------      ---------

Balance, September 30, 2002                    183,533       346,039      $   15.43
                                               =======       =======      =========

Exercisable at September 30, 2000                            380,993      $   14.35
                                                             =======      =========
Exercisable at September 30, 2001                            362,628      $   14.56
                                                             =======      =========
Exercisable at September 30, 2002                            292,295      $   14.59
                                                             =======      =========
</TABLE>

      Options  exercisable  at September 30, 2002 include  245,350 at $13.94 per
      share,  22,400 at  $19.88  per share  and  24,545  at  $16.38  per  share.
      Outstanding  options at September  30, 2002 include  245,350 at $13.94 per
      share with an average  remaining  contractual  life of 3 years,  22,400 at
      $19.88 and 5 years,  30,682 at $16.38 and 7 years,  34,911 at $18.50 and 9
      years and 12,696 at $25.70 and 10 years.

      In the year ended  September  30, 1996,  the  stockholders  of the Company
      approved the Management Stock Plan ("MSP") under which  restricted  grants
      of 169,280 shares were made to executive  employees and directors of Teche
      Federal  Savings Bank.  Teche Federal  Savings Bank acquired the Company's
      stock on the open market for the benefit of the recipients. The recipients
      vest 20%  annually as long as they remain as Teche  Federal  Savings  Bank
      directors  or  employees.  The  Company  recognized  compensation  expense
      ratably  over the  vesting  period  and the cost of  unvested  shares  was
      reported as unearned  compensation as a reduction of stockholders' equity.
      Compensation  expense  related  to the MSP was $-0-,  $41 and $349 for the
      years ended  September 30, 2002, 2001 and 2000,  respectively.  All shares
      were vested at September 30, 2002.

      In the year ended September 30, 2002, the Company issued restricted grants
      of up to 2,030 shares to certain executive officers.

                                                                              29
<PAGE>

      The Company  applies APB  Opinion  No. 25 and related  interpretations  in
      accounting for its stock options.  Accordingly,  no compensation  cost has
      been  recognized.   The  Financial  Accounting  Standards  Board  requires
      disclosure of the compensation cost for stock-based  incentives granted by
      the Company based on the fair value at grant date for awards. The weighted
      average fair value of options  granted during the year ended September 30,
      2002 was $6.10. Applying SFAS No. 123 would result in pro forma net income
      and income per share amounts as follows:

                                              2002           2001           2000

Net income (in thousands):
  As reported                            $   6,236      $   4,359      $   3,660
  Pro forma                                  6,136          4,264          3,285

Basic income per share:
  As reported                            $    2.72      $    1.86      $    1.56
  Pro forma                                   2.68           1.82           1.40

Diluted income per share
  As reported                            $    2.58      $    1.81      $    1.55
  Pro forma                                   2.54           1.77           1.39


      The fair value of the 2002  options  were  estimated  on the date of grant
      using  an  option-pricing   model  with  the  following   weighted-average
      assumptions used for grants:  dividend yield of 2%; expected volatility of
      25 percent;  risk-free interest rate of 4.5 percent; and expected lives of
      8 years for all options.

15.   FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

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

      As of September  30, 2002,  the Company had made  various  commitments  to
      extend  credit  totaling  approximately  $6,900  including  $5,000  of the
      undisbursed portion of loans in process.  Most of these commitments are at
      fixed rates. The rates on fixed rate loan commitments  range from 5.50% to
      6.75% at September 30, 2002.  The rates on variable rate loan  commitments
      range from 4.88% to 7.00% at September 30, 2002. As of September 30, 2001,
      such  commitments  totaled  approximately  $7,200  including $5,900 of the
      undisbursed portion of loans in process.

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


30
<PAGE>

16.   DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

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

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

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

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

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

      The  estimated  fair  values  of  the  Company's   significant   financial
      instruments are as follows at September 30, 2002 and 2001 (in thousands):


                                            2002                   2001
                                      --------------------  --------------------
                                                 Estimated             Estimated
                                      Carrying     Fair     Carrying      Fair
                                      Amount      Value     Amount       Value
Financial assets:
  Cash and cash equivalents          $ 35,375   $ 35,375   $ 24,108   $ 24,108
  Investment securities                95,007     95,298     41,230     41,230

  Loans                               354,082    370,500    384,266    396,000
  Less: allowance for loan losses       3,459      3,459      3,436      3,436
                                     --------   --------   --------   --------
  Loans, net of allowance             350,623    367,041    380,830    392,564
                                     --------   --------   --------   --------

Financial liabilities:
  Deposits                            349,125    355,500    342,917    347,000
  Advances from Federal Home
     Loan Bank                        103,471    115,900     67,120     73,800


                                                                              31
<PAGE>

17.   REGULATORY CAPITAL

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

<TABLE>
<CAPTION>
                                                              September 30, 2002
                               ----------------------------------------------------------------------------------
                                                                                              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                          $46,078      9.0 %          $20,424      4.0 %         $30,636       6.0 %

Tangible capital                      $46,078      9.0 %          $ 7,659      1.5 %             N/A         N/A

Total Risk based capital              $49,386     17.3 %          $22,832      8.0 %         $28,540      10.0 %

Leverage                              $46,078      9.0 %              N/A        N/A         $25,530       5.0 %

</TABLE>

<TABLE>
<CAPTION>
                                                              September 30, 2001
                               ----------------------------------------------------------------------------------
                                                                                              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                          $46,658     10.0 %          $18,672      4.0 %         $28,008       6.0 %

Tangible capital                      $46,658     10.0 %          $ 7,002      1.5 %             N/A         N/A

Total Risk based capital              $49,976     17.8 %          $22,419      8.0 %         $28,024      10.0 %

Leverage                              $46,658     10.0 %              N/A        N/A         $23,340       5.0 %

</TABLE>


      The  Federal  Deposit  Insurance  Corporation   Improvement  Act  of  1991
      ("FDICIA")  requires  each  federal  banking  agency to  implement  prompt
      corrective actions for institutions that it regulates. In response to this
      requirement,  OTS adopted  final rules based upon  FDICIA's  five  capital
      tiers. The rules provide that a savings bank is "well  capitalized" if its
      total  risk-based  capital ratio is 10% or greater,  its Tier 1 risk-based
      capital  ratio is 6% or  greater,  its  leverage  is 5% or greater and the
      institution is not subject to a capital directive.  Under this regulation,
      the Bank was deemed to be "well  capitalized" as of September 30, 2002 and
      2001 based upon the most recent  notifications from its regulators.  There
      are no  conditions  or events since those  notifications  that  management
      believes would change its classifications.

32
<PAGE>

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

                                 Balance Sheets

                                                           2002             2001
Assets:
  Investment in subsidiary                              $46,884          $47,427
  Cash and cash equivalents                               6,062            3,507
  Due from ESOP                                             757            1,089
  Other                                                   2,663               89
                                                        -------          -------

                                                        $56,366          $52,112
                                                        =======          =======

Stockholders' equity                                    $56,366          $52,112
                                                        =======          =======

<TABLE>
<CAPTION>
                             Statements of Earnings
                                                          Year Ended September 30
                                                      ------------------------------
                                                          2002       2001       2000

<S>                                                   <C>        <C>        <C>
Dividends received from subsidiary                     $ 7,600    $ 1,500    $ 2,500
Equity in earnings of subsidiary (less than) greater
  than dividends received                               (1,365)     2,771      1,152
Interest income from subsidiary                            212        183        109
Management fees and other expenses allocated to
  the Parent                                              (135)      (113)      (150)
Other income (expenses), net                               (76)       114         63
Income tax (expense) credit                                 --        (96)       (14)
                                                       -------    -------    -------

Net income                                             $ 6,236    $ 4,359    $ 3,660
                                                       =======    =======    =======
</TABLE>

<TABLE>
<CAPTION>
                     Statements of Cash Flows
                                                          Year Ended September 30
                                                      ------------------------------
                                                          2002       2001       2000

<S>                                                   <C>        <C>        <C>
Cash Flows from Operating Activities                   $ 8,086    $ 2,820    $ 2,484

Cash Flows from Investing Activities:
  Repayment of loan by subsidiary                          332        332        333
  Purchase of land                                      (2,281)        --         --
                                                       -------    -------    -------

Net cash (used in) provided by investing activities     (1,949)       332        333
                                                       -------    -------    -------

Cash Flows from Financing Activities:
  Dividends paid                                        (1,132)    (1,167)    (1,171)
  Cash paid for purchase of common stock for
    treasury                                            (2,450)    (2,866)    (3,265)
                                                       -------    -------    -------

      Net cash used in financing activities             (3,582)    (4,033)    (4,436)
                                                       -------    -------    -------

Net increase (decrease) in cash and cash equivalents     2,555       (881)    (1,619)

Cash and cash equivalents, beginning of year             3,507      4,388      6,007
                                                       -------    -------    -------

Cash and cash equivalents, end of year                 $ 6,062    $ 3,507    $ 4,388
                                                       =======    =======    =======
</TABLE>
                                                                              33
<PAGE>

      Cash  dividends  of $7,600,  $1,500 and $2,500 were paid by Teche  Federal
      Savings Bank to Teche  Holding  Company in the years ended  September  30,
      2002, 2001 and 2000, respectively.

      Stockholders' equity of the Company includes the undistributed earnings of
      Teche  Federal  Savings  Bank.  Dividends are payable only out of retained
      earnings or current  net  income.  Moreover,  dividends  to the  Company's
      stockholders  can  generally  be paid  only  from  liquid  assets of Teche
      Holding  Company and dividends paid to the Company by the Bank. The amount
      of capital of the Bank  available  for dividends at September 30, 2002 was
      approximately $15,400.


                                     ******

34
<PAGE>
Directors of Teche Holding Company
and Teche Federal Savings Bank
--------------------------------------------------------------------------------

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

INDEPENDENT AUDITORS
----------------------------------------

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

LEGAL COUNSEL
----------------------------------------

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

SPECIAL COUNSEL
----------------------------------------

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

REGISTRAR AND STOCK
TRANSFER AGENT
----------------------------------------

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

<TABLE>
<CAPTION>

Officers of Teche Federal Savings Bank
-----------------------------------------------------------------
<S>                     <C>
Patrick O. Little          Chairman, President/CEO
Scott Sutton               Senior Vice President/Operations
J.L. Chauvin               Senior Vice President/Treasurer, Chief Financial Officer
Darryl Broussard           Senior Vice President, Chief Lending Officer
W. Ross Little, Jr.        Senior Vice President, Secretary, Sales & Marketing
Eddie LeBlanc              Vice President, Internal Auditor
Stanley Plessala           Vice President
D. Ross Landry             Vice President
Angela Badeaux             Vice President
Glen Brown                 Vice President
Kevin Caswell              Vice President
Bill Babineaux             Vice President
Lynn Blanchard             Vice President
Carol Nini                 Vice President
Belinda Cavazos            Vice President
James Hamilton             Assistant Vice President
William F. Ball            Assistant Vice President
Tamaria B. Lecompte        Assistant Vice President
Gwen Doucet                Assistant Vice President
Lavergne Boutte            Assistant Vice President
Vicky Landry               Assistant Vice President
Mary Beth Brady            Assistant Vice President
Irma Nell Bourque          Assistant Vice President
Andy Magers                Assistant Vice President
Brenda Henson              Assistant Vice President
Karen Verret               Assistant Vice President
Wendy Frederick            Assistant Vice President
Carl W. Tritschler         Assistant Vice President
Beverly Adams              Assistant Vice President
Debbie Stevens             Assistant Vice President
Dalie Eldridge             Assistant Vice President
Susan Simoneaux            Assistant Vice President
Theresa Landry             Assistant Vice President
</TABLE>

                                                                              35