<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K



[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                 ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                                       OR

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                             EXCHANGE ACT OF 1934
              FOR THE TRANSITION PERIOD FROM ______TO_____________

                           COMMISSION FILE NO: 1-14364

                            ACADIANA BANCSHARES, INC.
             ------------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

       LOUISIANA                                         72-1317124
       ---------------------------------           ----------------------
       (STATE OR OTHER JURISDICTION                   (I.R.S. EMPLOYER
       OF INCORPORATION OR ORGANIZATION)           IDENTIFICATION NUMBER)

       101 WEST VERMILION STREET
       LAFAYETTE, LOUISIANA                                 70501
       ---------------------------------                 ------------
       (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)           (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (318) 232-4631

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                     COMMON STOCK (PAR VALUE $.01 PER SHARE)
                     ---------------------------------------
                                (TITLE OF CLASS)

   SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NOT APPLICABLE

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

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

As of March 19, 1999, the aggregate market value of the 1,450,299 shares of
Common Stock of the Registrant issued and outstanding on such date, which
excludes 290,893 shares held by all directors and officers of the Registrant as
a group, was approximately $26.1 million. This figure is based on the closing
sale price of $18.00 per share of the Registrant's Common Stock on March 19,
1999.

Number of shares of Common Stock outstanding as of December 31, 1998: 1,820,492

                       DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents incorporated by reference and the Part of
the Form 10-K into which the document is incorporated.

(1) Portions of the Annual Report to Stockholders for the fiscal year ended
    December 31, 1998 are incorporated into Part II, Items 5 through 8 of
    this Form 10-K.

(2) Portions of the definitive proxy statement for the 1998 Annual Meeting of
    Stockholders to be filed within 120 days of Registrant's fiscal year end
    are incorporated into Part III, Items 9 through 13 of this Form 10-K.


                                       1
<PAGE>   2


PART I.

ITEM 1.  BUSINESS.

GENERAL

       Acadiana Bancshares, Inc., (the "Company") is a Louisiana corporation
organized in February 1996 by LBA Savings Bank (the "Bank", or the "Savings
Bank") for the purpose of acquiring all of the capital stock of the Bank to be
issued by the Bank in the conversion (the "Conversion") of the Bank to stock
form, which was completed on July 15, 1996. The only significant asset of the
Company is the capital stock of the Bank. The Company's common stock trades on
the AMEX under the symbol "ANA." At December 31, 1998, the Company had total
assets of $282.1 million, total deposits of $200.6 million, and stockholders'
equity of $32.2 million.

       The Company, as a bank holding company, is subject to regulation and
supervision by the Board of Governors of the Federal Reserve System ("Federal
Reserve Board" or "FRB"). The Bank is subject to examination and comprehensive
regulation by the Office of Financial Institutions of the State of Louisiana
("OFI"), which is the Bank's chartering authority and primary regulator. The
Bank is also subject to regulation by the Federal Deposit Insurance Corporation
("FDIC"), as the administrator of the SAIF, and to certain reserve requirements
established by the FRB. The Bank is a member of the Federal Home Loan Bank
("FHLB") of Dallas, which is one of twelve regional banks comprising the FHLB
System. The Bank is a Savings Association Insurance Fund ("SAIF") -insured,
Louisiana chartered, stock savings bank conducting business from its main office
and three branch offices located in Lafayette, Louisiana, one branch office
located in New Iberia, Louisiana and one loan production office in Eunice,
Louisiana. The Company's executive office is located at 101 West Vermilion
Street, Lafayette, Louisiana, 70501, and its telephone number is (318) 232-4631.

       Through its continuing operation of the Bank, the Company's principal
business has been, and continues to be, attracting deposits from its customers
and investing such funds in residential real estate loans and other loans. At
December 31, 1998, the Company's loan portfolio totaled $225.8 million, or 80.0%
of the Company's assets. In addition to its lending activities, the Company also
invests in mortgage-backed securities and investment securities. The Company's
investment securities portfolio amounted to $15.0 million, or 5.3% of total
assets and its mortgage-backed securities portfolio totaled $23.8 million, or
8.4% of the Company's total assets at December 31, 1998. At December 31, 1998,
the Company had total deposits of $200.6 million, of which $59.6 million, or
29.7% consisted of core deposits which include savings deposits, money market
deposits ("MMDA"), negotiable order of withdrawal ("NOW") and
noninterest-bearing accounts and $141.0 million, or 70.3%, consisted of
certificates of deposit, including $37.5 million of deposit accounts equal to or
exceeding $100,000. Traditionally, the Company's principal source of funds has
come from deposits; however, FHLB borrowings provide the Company with an
alternative source of funds compared to raising deposits in the local market.
The Company, like many other financial institutions, has experienced increasing
difficulty in attracting net new deposits in amounts necessary to fully fund new
loan demand. The FHLB has provided an important funding source that, when used
together with deposits, is expected to be an adequate source of funds to meet
anticipated loan demand. At December 31, 1998, borrowings from the FHLB totaled
$47.2 million, or 16.7% of total assets at such date.


                                       2
<PAGE>   3


       Stockholders' equity provides a permanent source of funding to the
Company, allows for future growth, and provides the Company with a cushion to
withstand unforeseen, adverse developments. At December 31, 1998, stockholders'
equity totaled $32.2 million, or 11.4% of total assets at such date. Federal
regulations impose minimum regulatory capital requirements on all institutions
with deposits insured by the FDIC. At December 31, 1998, the Company and the
Bank significantly exceeded all regulatory capital ratio requirements.







                                       3
<PAGE>   4


Lending Activities

       Loan Portfolio Composition. The following table sets forth the
composition of the Company's loan portfolio by type of loan at the dates
indicated.

<TABLE>
<CAPTION>
                                                                           At December 31,
                                            ------------------------------------------------------------------------------
        (Dollars in Thousands)                      1998                        1997                        1996          
                                            ----------------------      ----------------------      ----------------------
                                                           Percent                     Percent                     Percent
                                             Balance      of Total       Balance      of Total       Balance      of Total
                                            ---------     --------      ---------     --------      ---------     --------
<S>                                         <C>           <C>           <C>           <C>           <C>           <C>     
Type of loan:
     Real estate loans:
       Residential single family            $ 168,533       74.65%      $ 169,637       79.70%      $ 142,833       78.17%
       Construction                            11,651        5.16           9,301        4.37          10,565        5.78 
       Multi-family residential                   481        0.21             546        0.26             862        0.47 
       Commercial and other real estate         9,371        4.15           9,363        4.40          12,873        7.05 
                                            ---------      ------       ---------      ------       ---------      ------ 
Total real estate loans                       190,036       84.17         188,847       88.73         167,133       91.47 
                                            ---------      ------       ---------      ------       ---------      ------ 
     Non-real estate loans:
       Consumer                                21,388        9.48          16,355        7.67          16,859        9.23 
       Commercial business                     23,143       10.25          15,400        7.24           7,363        4.03 
                                            ---------      ------       ---------      ------       ---------      ------ 
Total non-real estate loans                    44,531       19.73          31,755       14.91          24,222       13.26 
                                            ---------      ------       ---------      ------       ---------      ------ 
Total loans                                   234,567      103.90         220,602      103.64         191,355      104.73 
Less:
     Undisbursed loan funds                     5,789        2.56           4,629        2.17           5,899        3.23 
     Unearned discounts                           (57)      (0.03)           (162)      (0.08)           (331)      (0.18)
     Allowance for loan losses                  2,726        1.21           2,760        1.30           2,592        1.42 
     Net deferred fees (cost)                     357        0.16             535        0.25             471        0.26 
                                            ---------      ------       ---------      ------       ---------      ------ 
Total loans, net                            $ 225,752      100.00%      $ 212,840      100.00%      $ 182,724      100.00%
                                            =========      ======       =========      ======       =========      ====== 
</TABLE>

<TABLE>
<CAPTION>
                                                              At December 31,
                                            -------------------------------------------------
        (Dollars in Thousands)                      1995                        1994
                                            ----------------------      ---------------------
                                                           Percent                    Percent
                                             Balance      of Total       Balance     of Total
                                            ---------     --------      ---------    --------
<S>                                         <C>           <C>           <C>          <C>
Type of loan:
     Real estate loans:
       Residential single family            $ 127,656       80.96%      $ 120,483      79.71%
       Construction                             7,304        4.63           6,908       4.57
       Multi-family residential                 1,202        0.76           1,638       1.08
       Commercial and other real estate        13,370        8.48          13,505       8.93
                                            ---------      ------       ---------     ------
Total real estate loans                       149,532       94.83         142,534      94.29
                                            ---------      ------       ---------     ------
     Non-real estate loans:
       Consumer                                13,704        8.69          12,749       8.43
       Commercial business                      1,358        0.86           1,479       0.98
                                            ---------      ------       ---------     ------
Total non-real estate loans                    15,062        9.55          14,228       9.41
                                            ---------      ------       ---------     ------
Total loans                                   164,594      104.38         156,762     103.70
Less:
     Undisbursed loan funds                     4,292        2.72           3,593       2.37
     Unearned discounts                          (206)      (0.13)            498       0.33
     Allowance for loan losses                  2,329        1.48           1,087       0.72
     Net deferred fees (cost)                     488        0.31             423       0.28
                                            ---------      ------       ---------     ------
Total loans, net                            $ 157,691      100.00%      $ 151,161     100.00%
                                            =========      ======       =========     ======
</TABLE>


                                       4
<PAGE>   5


       Contractual Maturities. The following table sets forth the time to
contractual maturity of the Company's loan portfolio at December 31, 1998.

<TABLE>
<CAPTION>
                                                                       Over One
                                                  Less than           Through Five          Over Five
                                                   One Year              Years                Years                 Total
                                               -----------------    -----------------    -----------------    -----------------
                                                                                (In Thousands)
<S>                                            <C>                  <C>                  <C>                  <C>
Residential single-family mortgage loans        $        26,599      $        60,118      $        81,816      $       168,533
Multi-family residential                                    211                  188                   82                  481
Commerical and other real estate                          4,138                4,413                  820                9,371
Construction loans                                       11,651                    -                    -               11,651
Commercial business loans                                10,443                5,848                6,852               23,143
All Other loans                                           7,744                9,517                4,127               21,388
                                               -----------------    -----------------    -----------------    -----------------
Total                                           $        60,786      $        80,084      $        93,697      $       234,567
                                               =================    =================    ================     =================
</TABLE>

       The following table sets forth the dollar amount at December 31, 1998 of
all loans maturing after December 31, 1999 by fixed and adjustable interest
rates.

<TABLE>
<CAPTION>
                                                                          Fixed             Adjustable
                                                                          Rates                Rates
                                                                    -----------------    -----------------
                                                                               (In thousands)
<S>                                                                 <C>                  <C>
Loans secured by 1-4 family residential property                     $        83,077      $        58,857
All other loans secured by real estate                                         1,737                3,766
All other loans                                                               13,765               12,579
                                                                    -----------------    -----------------
                                                                     $        98,579      $        75,202
                                                                    -----------------    -----------------
</TABLE>

       Contractual maturities of the company's loan portfolio do not reflect the
expected timing of loan repayments. The average life of its loans is
substantially less than contractual terms because of loan prepayments and due on
sale clauses. Prepayments occur when loan repayments are made before they are
contractually due. Prepayment amounts are expected to be higher when competing
loan rates are lower than actual loan rates. Prepayment amounts are expected to
be lower when competing loan rates are higher than actual loan rates. A
due-on-sale clause requires a loan to be paid in full upon sale of the
underlying collateral.

       Loan Origination and Sales Activity. The table below sets forth the
Company's total loan origination and loan reduction experience during the
periods indicated. The Company historically has not made any loan purchases.


                                       5
<PAGE>   6


<TABLE>
<CAPTION>
                                                                               Years Ended December 31,
                                                        -----------------------------------------------------------------------
             (In Thousands)                                     1998                     1997                     1996
                                                        ----------------------   ----------------------   ---------------------
<S>                                                     <C>                      <C>                      <C>
Loans receivable, net beginning of period                $            212,840     $            182,724     $           157,691
Loan originations:
     Residential single-family                                         41,007                   36,688                  27,612
     Construction loans                                                15,306                   17,375                  20,059
     Multi-family residential                                               -                        -                       -
     Commercial and other real estate                                       -                        -                      15
     Commercial business                                               32,750                   18,803                   7,334
     Consumer                                                          14,412                   10,762                  13,078
                                                        ----------------------   ----------------------   ---------------------
         Total loan originations                                      103,475                   83,628                  68,098
                                                        ----------------------   ----------------------   ---------------------
Loan reductions:
     Loan sales                                                       (19,479)                    (878)                 (6,460)
     Principal repayments                                             (64,838)                 (53,168)                (34,611)
     Other changes, net (1)                                            (6,246)                     534                  (1,994)
                                                        ----------------------   ----------------------   ---------------------
         Total loan reductions                                        (90,563)                 (53,512)                (43,065)
                                                        ----------------------   ----------------------   ---------------------
Loans receivable, net end of period                      $            225,752     $            212,840     $           182,724
                                                        ======================   ======================   =====================
</TABLE>

(1)    Includes changes in net deferred loan fees, allowance for loan
losses, unearned discounts and loans in process.

       The lending activities of the Company are subject to written underwriting
standards and loan origination procedures established by the Company's Board of
Directors and management. Applications for residential mortgage loans are taken
by one of the Company's mortgage officers, while the Company's designated
consumer lenders have primary responsibility for taking consumer loan
applications, and its commercial lending officers have primary responsibility
for taking commercial business and commercial real estate loan applications. The
Company's loan originators will take loan applications at any of the Company's
offices and, on occasion, outside of the Company's offices at the customer's
convenience. The process of underwriting loans and obtaining appropriate
documentation, such as credit reports, appraisals and other documentation is
centralized in the Company's main office. The Company's commercial loan officers
are responsible for overseeing the underwriting of all commercial business and
commercial real estate loans. The Company generally requires that a property
appraisal be obtained in connection with all new mortgage loans. Property
appraisals generally are performed by an independent appraiser from a list
approved by the Company's Board of Directors. The Company requires that title
insurance or a title opinion (other than with respect to home equity loans) and
hazard insurance be maintained on all security properties and that flood
insurance be maintained if the property is within a designated flood plain.

       Residential mortgage loan applications are primarily developed from
advertising, referrals from real estate brokers and builders, existing customers
and walk-in customers. Commercial real estate and commercial business loan
applications are obtained primarily from previous borrowers, direct
solicitations by Company personnel, as well as referrals. Consumer loans
originated by the Company are obtained primarily from advertising, and through
existing and walk-in customers.


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<PAGE>   7


       Applications for real estate mortgage loans, construction loans and
commercial business loans must be reviewed and approved by appropriate Loan
Officers, the Loan Committee of the Company's Board of Directors, and the full
Board of Directors, depending on the amount of the request. Unsecured consumer
loans in amounts up to $25,000 and secured consumer loans in amounts up to
$50,000 may be approved by designated senior loan officers of the Company. The
Company's Commercial Lending Manager has authority to approve secured commercial
business loans in amounts up to $100,000. The Company's President and Chief
Executive Officer has authority to approve loans in amounts up to $250,000.
Loans exceeding the above-described amounts but which are less than $500,000
must be approved by the Loan Committee of the Company's Board of Directors.
Loans in excess of $500,000 must be reviewed and approved by the full Board of
Directors of the Company.

       Single-Family Residential Loans. Substantially all of the Company's
single-family residential mortgage loans consist of conventional loans.
Conventional loans are loans that are neither insured by the Federal Housing
Administration ("FHA") nor partially guaranteed by the Department of Veterans
Affairs ("VA"). The vast majority of the Company's single-family residential
mortgage loans are secured by properties located in Lafayette, Louisiana and the
Louisiana parishes immediately contiguous to Lafayette Parish, and are
originated under terms and documentation which permit their sale to the Federal
Home Loan Mortgage Corporation ("FHLMC"), or the Federal National Mortgage
Association ("FNMA"). As of December 31, 1998, $168.5 million, or 74.7%, of the
Company's total loan portfolio consisted of single-family residential mortgage
loans.

       The Company's residential mortgage loans either have fixed rates of
interest or interest rates which adjust periodically during the term of the
loan. Fixed-rate loans generally have maturities ranging from 15 to 30 years and
are fully amortizing with monthly loan payments sufficient to repay the total
amount of the loan with interest by the end of the loan term. The Company's
fixed-rate loans generally are originated under terms, conditions, and
documentation which permit them to be sold to U.S. Government-sponsored
agencies, such as the FNMA and the FHLMC, and other investors in the secondary
market for single-family residential mortgages. At December 31, 1998, $87.2
million, or 51.7%, of the Company's single-family residential mortgage loans
were fixed-rate loans. At December 31, 1998, the weighted average remaining term
to maturity of the Company's fixed-rate, single-family residential mortgage
loans was approximately 18 years. Substantially all of the Company's fixed-rate,
single family residential mortgage loans contain due-on-sale clauses, which
permit the Company to declare the unpaid balance to be due and payable upon the
sale or transfer of any interest in the property securing the loan. The Company
enforces such due-on-sale clauses.

       The adjustable-rate loans currently offered by the Company have interest
rates which adjust on an annual basis from the closing date of the loan or an
annual basis commencing after an initial fixed-rate period of one, three, five,
seven or ten years in accordance with a designated index (the primary index
utilized by the Company is the United States Treasury securities adjusted to a
constant maturity of one year), plus a stipulated margin. The Company's
adjustable-rate single-family residential real estate loans generally have a cap
of 2% on any increase or decrease in the interest rate at any adjustment date,
and include a specified cap on the maximum interest rate over the life of the
loan, which cap generally is 4% to 6% above the initial rate. The Company's
adjustable-rate loans require that any payment adjustment resulting from a
change in the interest rate of an adjustable-rate loan be sufficient to


                                        7
<PAGE>   8


result in full amortization of the loan by the end of the loan term and, thus,
do not permit any of the increased payment to be added to the principal amount
of the loan, or so-called negative amortization. From time-to-time, based on
prevailing market conditions, the Company may offer adjustable-rate loans with
"teaser" rates, i.e., initial rates below the fully indexed rate. At December
31, 1998, the weighted average remaining term to maturity of the Company's
adjustable-rate, single-family residential mortgage loans was approximately 25
years. At December 31, 1998, $81.3 million or 48.3%, of the Company's
single-family residential mortgage loans were adjustable-rate loans.

       Adjustable-rate loans decrease the risks associated with changes in
interest rates but involve other risks, primarily because as interest rates
increase, the loan payment by the borrower increases to the extent permitted by
the terms of the loan, thereby increasing the potential for default. Moreover,
as with fixed-rate loans, as interest rates increase, the marketability of the
underlying collateral property may be adversely affected by higher interest
rates. The Company believes these risks, which have not had a material adverse
effect on the Company to date because of the generally declining or flat
interest rate environment in recent years, generally are less than the risks
associated with holding fixed-rate loans in an increasing interest rate
environment.

       For conventional residential mortgage loans held in the portfolio and
also for those loans originated for sale in the secondary market, the Company's
maximum loan-to-value ("LTV") ratio is 80%, and is based on the lesser of sales
price or appraised value. Generally on loans with a LTV ratio of over 80%,
private mortgage insurance ("PMI") is required on the amount of the loan in
excess of 80% of value. However, the Loan Committee may approve loans with LTV
ratios of up to 89.5% without PMI.

       Commercial and Other Real Estate Loans and Multi-Family Residential
Loans. At December 31, 1998, the Company had $9.4 million in outstanding loans
secured by commercial and other real estate. Such commercial and other real
estate loans, which comprised 4.2% of the Company's total loan portfolio at
December 31, 1998, are secured primarily by office and other commercial
buildings, retail and manufacturing properties and church properties. None of
the Company's commercial and other real estate loans were non-performing loans
at such date.

       The Company's commercial real estate loans generally are one-year
adjustable rate loans indexed to the New York Prime Rate, as quoted in The Wall
Street Journal, plus a margin. Generally, fees of 50 basis points to 2% of the
principal loan balances are charged to the borrower upon closing. Although terms
for multi-family residential and commercial real estate loans may vary, the
Company's underwriting standards generally provide for terms of up to ten years,
with amortization of principal over the term of the loan and LTV ratios of not
more than 75%. Generally, the Company obtains personal guarantees of the
principals as additional security for any commercial real estate and
multi-family residential loans.

       At December 31, 1998, the Company had $0.5 million of multi-family
residential real estate loans. The Company has not originated any new
multi-family residential loans during the past three years, and does not
anticipate becoming an active originator of multi-family residential loans.

       The Company evaluates various aspects of commercial and multi-family
residential real estate loan transactions in an effort to mitigate risk to the
extent possible. In underwriting these


                                       8
<PAGE>   9


loans, consideration is given to the stability of the property's cash flow
history, future operating projections, current and projected occupancy, position
in the market, location and physical condition. In recent periods, the Company
has also generally imposed a debt coverage ratio (the ratio of net cash from
operations before payment of debt service to debt service) of not less than
150%. The underwriting analysis also includes credit checks and a review of the
financial condition of the borrower and guarantor, if applicable. An appraisal
report is prepared by a state-licensed or certified appraiser (generally Master
Appraisal Institute ("MAI") certified) commissioned by the company to
substantiate values for every commercial real estate and multi-family loan
transaction. All appraisal reports are reviewed by the Company prior to the
approval of the loan. On occasion, the Company also retains a second independent
appraiser to review an appraisal report.

       Commercial real estate and multi-family residential lending entails
different and significant risks when compared to single-family residential
lending because such loans often involve large loan balances to single borrowers
and because the payment experience on such loans is typically dependent on the
successful operation of the project or the borrower's business. These risks can
also be significantly affected by supply and demand conditions in the local
market for apartments, offices, warehouses or other commercial space. The
Company attempts to minimize its risk exposure by limiting such lending to
proven businesses, only considering properties with existing operating
performance which can be analyzed, requiring conservative debt coverage ratios,
and periodically monitoring the operation and physical condition of the
collateral.

       Construction Loans. Substantially all of the Company's construction loans
have consisted of loans to construct single-family residences. As of December
31, 1998, the Company's construction loans amounted to $11.7 million, or 5.2% of
the Company's total loan portfolio.

       The Company makes construction loans both to individuals and to builders.
Construction loans made to individuals for one-to-four family residences
normally are construction/permanent loans which provide for the payment of
interest during the construction period, after which the loan converts to a
permanent loan at fixed or adjustable interest rates with monthly amortization
of principal and interest. Construction loans to individuals for single-family
residential properties generally have a maximum LTV ratio of 80% of the sales
price or appraised value of the property, whichever is less. Higher ratios
require PMI. The Company originated $13.4 million of single-family construction
loans to individuals during the year ended December 31, 1998.

       The Company's policies permit loans to builders constructing
single-family residential properties on a speculative basis; however, such
policies generally limit a builder to two such loans. Other builder loans are
made to finance construction of residences, which have been pre-sold prior to
loan closing. Loans made to builders generally require the payment of interest
during the construction period and the payment of the principal in full at the
end of the construction period. Construction loans to builders made on a
speculative basis are generally limited to 85% of the appraised value of the
property. The Company originated $1.9 million in single-family construction
loans to builders during the year ended December 31, 1998.

       Prior to making a commitment to fund a construction loan, the Company
requires an appraisal of the property by an independent state-licensed or
qualified appraiser approved by



                                       9
<PAGE>   10


the Board of Directors. In addition, during the term of the construction loan,
the project periodically is inspected by an independent inspector.

       Construction financing is generally considered to involve a higher degree
of risk of loss than long-term financing on improved, owner-occupied real
estate. Risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value at completion of
construction or development and the estimated cost (including interest) of
construction. During the construction phase, a number of factors could result in
delays and cost overruns. If the estimate of value proves to be inaccurate, the
Company may be confronted, at or prior to maturity of the loan, with a project,
when completed, having a value which is insufficient to assure full repayment.
Loans on lots may run the risk of adverse zoning changes, environmental or other
restrictions on future use. As of December 31, 1998, none of the Company's
construction loans were considered non-performing.

       Consumer Loans. The Company offers consumer loans in order to provide a
full range of retail financial services to its customers. At December 31, 1998,
$21.4 million, or 9.5% of the Company's total loan portfolio was comprised of
consumer loans. The Company originates substantially all of such loans in its
primary market area.

       Origination of consumer loans by the Company amounted to $14.4 million in
1998 compared to $10.8 million and $13.1 million in 1997 and 1996, respectively.
During 1996, the Company discontinued its indirect automobile loan origination
program, which it had initiated during 1995. Indirect automobile loans
originated accounted for approximately 43.6% and 39.3% of the Company's total
consumer loans originated during 1996 and 1995, respectively. Although
applications for such loans were taken by employees of the dealer, the loans
were made pursuant to the Company's underwriting standards using the Company's
documentation, and all such indirect loans had to be approved by a loan officer
of the Company before disbursement of loan proceeds.

       Consumer finance loans generally involve more credit risk than mortgage
loans because of the type and nature of the collateral and, in certain cases,
the absence of collateral. In addition, consumer-lending collections are
dependent on the borrower's continuing financial stability, and thus are more
likely to be adversely affected by job loss, divorce, illness and personal
bankruptcy. In many cases, any repossessed collateral for a defaulted consumer
finance loan will not provide an adequate source of repayment of the outstanding
loan balance because of improper repair and maintenance of the underlying
security. The remaining deficiency often does not warrant further substantial
collection efforts against the borrower. As of December 31, 1998, $50,000, or
0.2% of the Company's total consumer loans were considered non-performing.

       Commercial Business Loans. At December 31, 1998, the Company's commercial
business loans amounted to $23.1 million, or 10.3% of the Company's total loan
portfolio. Prior to 1996, the Company had not been an active originator of
commercial business loans.

       The Company concentrates its commercial lending activities among small-
to mid-size businesses in Lafayette, Louisiana and contiguous parishes in a
manner consistent with its current underwriting standards. Commercial business
lending generally involves more credit risk than traditional, single-family
residential mortgage lending. Origination of commercial



                                       10
<PAGE>   11


business loans by the Company amounted to $32.8 million in 1998, compared to
$18.8 million, and $7.3 million in 1997 and 1996, respectively.

       Loans-to-One Borrower Limitations. The Louisiana Savings Bank Act of 
1990 (the "LSBA") imposes limitations on the aggregate amount of loans that a
Louisiana chartered savings bank can make to any one borrower. Under the LSBA,
the permissible amount of loans-to-one borrower may not exceed 15% of a savings
bank's total net worth. In addition, a savings bank may make loans in an amount
equal to an additional 10% of a savings bank's net worth if the loans are 100%
secured by readily marketable collateral. A savings bank's net worth shall be
calculated based on its last quarterly call report and consists of (i)
outstanding and unimpaired common stock; (ii) outstanding and unimpaired
perpetual preferred stock; (iii) unimpaired capital surplus, undivided profits,
capital reserves, minus intangible assets; (iv) purchased mortgage servicing
rights; and (v) mandatory convertible debt up to 20% of categories (i) through
(iv). Readily marketable collateral consists of financial instruments or
bullion, which are salable under ordinary circumstances with reasonable
promptness at fair market value or on an auction or a similarly available daily
bid and ask price market. At December 31, 1998, the Company's limit on
loans-to-one borrower under LSBA was approximately $4.0 million. At December 31,
1998, the Company's five largest loans or groups of loans-to-one borrower ranged
from $1.1 million to $2.5 million and all such loans were performing in
accordance with their terms.

ASSET QUALITY

       General. As part of the Company's efforts to improve its asset quality,
it has developed and implemented an asset classification system. All of the
Company's assets are subject to review under the classification system. All
assets of the Company are periodically reviewed and the classifications are
reviewed by the Audit Committee of the Board of Directors on at least a
quarterly basis.

       When a borrower fails to make a required payment on a loan, the Company
attempts to cure the deficiency by contacting the borrower and seeking payment.
Contacts are generally made 16 days after a payment is due. In most cases,
deficiencies are cured promptly. If a delinquency continues, late charges are
assessed and additional efforts are made to collect the loan. While the Company
generally prefers to work with borrowers to resolve such problems, when the
account becomes 90 days delinquent, the Company institutes foreclosure or other
proceedings, as necessary, to minimize any potential loss.

       Loans are placed on non-accrual status when, in the judgment of
management, the probability of collection of interest is deemed insufficient to
warrant further accrual. When a loan is placed on non-accrual status, previously
accrued but unpaid interest is deducted from interest income. As a matter of
policy, the Company does not accrue interest on loans past due 90 days or more.

       Real estate acquired by the Company as a result of foreclosure or by
deed-in-lieu of foreclosure is classified as real estate owned until sold.
Pursuant to Statement of Procedure ("SOP") 92-3 issued by the American Institute
of Certified Public Accountants ("AICPA") in April 1992, which provides guidance
on determining the balance sheet treatment of foreclosed assets in annual
financial statements for periods ending on or after December 15, 1992, there is
a refutable presumption that foreclosed assets are held for sale and such assets
are



                                       11
<PAGE>   12


recommended to be carried at the lower of fair value minus estimated costs to
sell the property, or cost (generally the balance of the loan on the property at
the date of acquisition). After the date of acquisition, all costs incurred in
maintaining the property are expensed and costs incurred for the improvement or
development of such property are capitalized up to the extent of their net
realizable value. The Company's accounting for its real estate owned complies
with the guidance set forth in SOP 92-3.

       Under GAAP, the Company is required to account for certain loan
modifications or restructurings as "troubled debt restructurings". In general,
the modification or restructuring of a debt constitutes a troubled debt
restructuring if the Company, for economic or legal reasons related to the
borrower's financial difficulties, grants a concession to the borrower that the
Company would not otherwise consider under current market conditions. Debt
restructurings, however, and troubled debt restructurings do not necessarily
result in non-accrual loans. The Company had $490,000 of loans deemed troubled
debt restructurings as of December 31, 1998. The interest income that would have
been recognized if those loans had been current with their original terms was
approximately $111,000 for the year ended December 31, 1998. Interest income
totaling $62,000 was included in income for the year ended December 31, 1998.

       Delinquent Loans. The following table sets forth information concerning
delinquent loans at December 31, 1998, in dollar amounts and as a percentage of
each category of the Company's loan portfolio. The amounts presented represent
the total outstanding principal balances of the related loans, rather than the
actual payment amounts, which are past due.

<TABLE>
<CAPTION>
                                                                               At December 31, 1998
                                                 ---------------------------------------------------------------------------------
                                                               30-59 Days                                60-89 Days
                                                 ---------------------------------------   ---------------------------------------
                                                                         Percent of                                Percent of
                                                      Amount           Loan Category            Amount           Loan Category
                                                 -----------------   -------------------   -----------------   -------------------
                                                                              (Dollars in Thousands)
<S>                                              <C>                 <C>                   <C>                 <C>
Mortgage loans:
     Residential:
       Single family                              $           339                  0.20%    $           132                  0.08%
       Multi-family                                             -                  0.00%                  -                  0.00%
       Commercial and other real estate                         -                  0.00%                  -                  0.00%
       Construction                                             -                  0.00%                  -                  0.00%
       Consumer                                               182                  0.85%                 46                  0.22%
       Commercial business                                     47                  0.20%                  -                  0.00%
                                                 -----------------   -------------------   -----------------   -------------------
             Total                                $           568                  1.26%    $           178                  0.29%
                                                 =================   ===================   =================   ===================
</TABLE>



                                       12
<PAGE>   13


       Non-Performing Assets and Troubled Debt Restructurings. The following
table sets forth information with respect to non-performing assets identified by
the Company, including non-accrual loans, other real estate owned, and
non-performing investments in real estate at the dates indicated.

<TABLE>
<CAPTION>
                                                                                   At December 31,
                                                   --------------------------------------------------------------------------------
                                                       1998            1997             1996             1995            1994
                                                   -------------   --------------   -------------    -------------   --------------
                                                                               (Dollars in Thousands)
<S>                                                <C>             <C>              <C>              <C>             <C>
Accruing loans 90 days or more past due:
      Residential single-family                     $         -     $          -     $         -      $         -     $        377
      Construction                                            -                -               -                -                -
      Multi-family residential                                -                -               -                -                -
      Commercial and other real estate                        -                -               -                -                -
      Consumer                                                -                -               -                -               96
      Commercial business                                     -                -               -                -                -
                                                   -------------   --------------   -------------    -------------   --------------
        Total accruing loans                                  -                -               -                -              473
                                                   -------------   --------------   -------------    -------------   --------------
Non-accrual loans:
      Residential single-family                             140              285             632              527               72
      Construction                                            -                -               -                -                -
      Multi-family residential                                -                -               -                -                -
      Commercial and other real estate                        -                -             145              197                -
      Consumer                                               50              129              96               16               21
      Commercial business                                     -                -               -                -                -
                                                   -------------   --------------   -------------    -------------   --------------
        Total non-accrual loans                             190              414             873              740               93
                                                   -------------   --------------   -------------    -------------   --------------
Total non-performing loans                                  190              414             873              740              566
                                                   -------------   --------------   -------------    -------------   --------------
Other real estate owned, and repossessed assets               7              204              75              845            2,449
                                                   -------------   --------------   -------------    -------------   --------------
Total non-performing assets                         $       197     $        618     $       948      $     1,585     $      3,015
                                                   =============   ==============   =============    =============   ==============

Performing troubled debt restructurings             $       490     $        515     $       536      $       878     $        954
                                                   =============   ==============   =============    =============   ==============

Total non-performing assets and troubled debt
    restructuings                                   $       687     $      1,133     $     1,484      $     2,463     $      3,969
                                                   =============   ==============   =============    =============   ==============


Non-performing assets to total loans                       0.08%            0.29%           0.52%            0.96%            1.92%
Non-performing assets to total assets                      0.07             0.22            0.36             0.70             1.35
Non-performing loans to total loans                        0.08             0.19            0.48             0.45             0.36
Non-performing loans to total assets                       0.07             0.15            0.33             0.33             0.25
Total non-performing assets and troubled debt
    restructurings to total assets                         0.24             0.41            0.56             1.09             1.78
</TABLE>

       Other Classified Assets. Federal regulations require that the Company
classify its assets on a regular basis. In addition, concerning examinations of
insured institutions, federal examiners have authority to identify problem
assets and, if appropriate, classify them in their reports of examination. There
are three classifications for problem assets: "substandard,", "doubtful" and
"loss." Substandard assets have one or more defined weaknesses and are
characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of substandard assets



                                       13
<PAGE>   14


with the additional characteristic that the weaknesses make collection or
liquidation in full, based on currently existing facts, conditions and values
questionable, and there is a high possibility of loss. An asset classified as
loss is considered uncollectible and of such little value that continuance as an
asset of the institution is not warranted.

       At December 31, 1998, the Company had $1.4 million of assets classified
substandard and no assets classified as doubtful or loss. At such date, the
aggregate of the Company's classified assets amounted to 0.5% of total assets.

       Potential Problem Loans. The Company has identified a group of
residential mortgage loans which were originated under its discontinued program
of making loans to facilitate the sale of real estate owned, and which, at
December 31, 1998, totaled $3.4 million, or 1.4%, of the Company's gross loan
portfolio. Loans in this portfolio were originated at 90% to 100% of collateral
value, without credit enhancements such as private mortgage insurance. Although
the portfolio is not currently demonstrating credit problems evidenced by
delinquent loan payments, the Company recognizes that these loans are secured
primarily by residential real estate, which generally became severely depressed
during the most recent economic downturn. In that regard, the Company has
serious concerns that the collateral values would again become severely
adversely affected in the next economic downturn. Accordingly, the Company
believes the relative credit risk with regard to this group of loans to be
higher than that of its other residential mortgage loans, taken as a whole.

       Also, during 1995, the Company commenced a program of originating
automobile loans indirectly through a network of approximately 12 new and used
automobile dealers located in Lafayette, Louisiana, and in nearby parishes.
Although the Company determined to discontinue this program ( see "Business -
Consumer Loans") in 1996, the outstanding portfolio totaled $2.4 million at
December 31, 1998, or 1.1% of the Company's net loans. This group of loans has
demonstrated much higher delinquency ratios than that of the Company's other
secured consumer loans. Several of the loans in this portfolio demonstrated
serious credit problems such as first payment default. In addition, the
Company's experience indicates that the collateral values securing those loans,
which became delinquent, are generally insufficient to cover the amounts due the
Company. Accordingly, the Company believes this indirect loan portfolio has
higher relative credit risks than that of its other consumer loans, taken as a
whole.

       Allowance for Loan Losses. The Company's policy is to establish reserves
for estimated losses on loans when it determines that losses are expected to be
incurred on such loans. The allowance for losses on loans is maintained at a
level believed adequate by management to absorb potential losses in the
portfolio. Management's determination of the adequacy of the allowance is based
on an evaluation of the portfolio, past loss experience, current economic
conditions, volume, growth, and composition of the portfolio, and other relevant
factors. The allowance is increased by provisions for loan losses, which are
charged against income. As shown in the table below, at December 31, 1998, the
Company's allowance for loan losses amounted to 400.88% and 1.16% of the
Company's non-performing loans and troubled debt restructurings, and gross
loans, respectively.

       Effective December 21, 1993, the FDIC, in conjunction with the Office of
the Comptroller of the Currency, the Office of Thrift Supervision ("OTS") and
the Federal Reserve Board, issued the Policy Statement regarding an
institution's allowance for loan and lease losses. The Policy Statement, which
reflects the position of the issuing regulatory agencies and does not



                                       14
<PAGE>   15


necessarily constitute GAAP, includes guidance (i) on the responsibilities of
management for the assessment and establishment of an adequate allowance and
(ii) for the agencies' examiners to use in evaluating the adequacy of such
allowance and the policies utilized to determine such allowance. The Policy
Statement also sets forth quantitative measures for the allowance with respect
to assets classified substandard and doubtful and with respect to the remaining
portion of an institution's loan portfolio. Specifically, the Policy Statement
also sets forth quantitative measures which examiners may use to determine the
reasonableness of an allowance; (i) 50% of the portfolio that is classified
doubtful; (ii) 15% of the portfolio that is classified substandard; and (iii)
for the portions of the portfolio that have not been classified (including loans
designated special mention), estimated credit losses over the upcoming 12 months
based on facts and circumstances available on the evaluation date. While the
Policy Statement sets forth this quantitative measure, such guidance is not
intended as a "floor" or "ceiling."

<TABLE>
<CAPTION>
                                                                              Years Ended December 31,
                                                    ----------------------------------------------------------------------------
         (Dollars in Thousands)                         1998            1997            1996            1995            1994
                                                    ------------    ------------    ------------    ------------    ------------
<S>                                                 <C>             <C>             <C>             <C>             <C>
Balance, beginning of period                         $    2,760      $    2,592      $    2,329      $    1,087      $    1,015
Provision for loan losses                                    90             180             355           1,274              63
Charge-offs:
      Residential single-family                             (40)            (14)              -             (70)            (37)
      Construction                                            -               -               -               -               -
      Multi-family residential                                -               -               -              (7)              -
      Commercial and other real estate                        -               -             (67)              -               -
      Commercial business                                  (169)              -               -               -             (11)
      Consumer                                             (104)           (221)           (210)            (50)           (135)
                                                    ------------    ------------    ------------    ------------    ------------
        Total charge-offs                                  (313)           (235)           (277)           (127)           (183)
                                                    ------------    ------------    ------------    ------------    ------------
Recoveries:
      Residential single-family                              36              76              87              10              72
      Construction                                            -               -               -               -               -
      Multi-family residential                                -               -               -               -               -
      Commercial and other real estate                        -              56              10               -              55
      Commercial business                                    22               -               -               -               -
      Consumer                                              131              91              88              85              65
                                                    ------------    ------------    ------------    ------------    ------------
        Total recoveries                                    189             223             185              95             192
                                                    ------------    ------------    ------------    ------------    ------------
Net (charge-offs) / recoveries                             (124)            (12)            (92)            (32)              9
                                                    ------------    ------------    ------------    ------------    ------------
Balance, end of period                                    2,726           2,760           2,592           2,329           1,087
                                                    ============    ============    ============    ============    ============
Allowance for loan losses to total non-
      performing loans and troubled debt
      restructurings at end of period                    400.88%         297.09%         183.96%         143.94%          71.51%
                                                    ============    ============    ============    ============    ============
Allowance for loan losses to
      total loans at end of period                         1.16%           1.25%           1.35%           1.41%           0.69%
                                                    ============    ============    ============    ============    ============
Net (charge-offs) / recoveries to
      average loans outstanding                          (0.06)%         (0.01)%         (0.05)%         (0.02)%           0.01%
                                                    ============    ============    ============    ============    ============
</TABLE>

       The following table describes the activity related to the Company's
allowance for possible loan losses for the periods indicated.


                                       15
<PAGE>   16


       The following table presents an allocation of the allowance for losses on
loans by the categories indicated and the percentage that loans in each category
bear to the total loans. This allocation is used by management to assist in its
evaluation of the Company's loan portfolio. It should be noted that allocations
are no more than estimates and are subject to revisions as conditions change.
Based upon historical loss experience and the Company's assessment of its loan
portfolio, all of the Company's allowances for losses on loans have been
allocated to the categories indicated. Allocations of these loans are based
primarily on the creditworthiness of each borrower. In addition, general
allocations are also made to each category based upon, among other things, the
current and future impact of economic conditions on the loan portfolio taken as
a whole. Losses on loans made to consumers are reasonably predictable based on
the prior loss experience and a review of current economic conditions.

<TABLE>
<CAPTION>
                                                                       At December 31,
                                          ---------------------------------------------------------------------------
     (Dollars in Thousands)                              Percent                   Percent                   Percent 
                                                        of Loans                  of Loans                  of Loans 
                                             1998       to Gross       1997       to Gross       1996       to Gross 
                                            Amount        Loans       Amount       Loans        Amount       Loans   
                                          ----------   ----------   ----------   ----------   ----------   ----------
<S>                                       <C>          <C>          <C>          <C>          <C>          <C>       
Real estate loans:
       Residential single family           $  1,591        71.85%    $  1,739        76.90%    $  1,565        74.64%
       Construction                              80         4.97%          64         4.22%          58         5.52%
       Multi-family residential                   3         8.31%           5         0.25%           7         0.45%
       Commercial and other real estate         397         4.00%         350         4.24%         460         6.73%
                                          ----------   ----------   ----------   ----------   ----------   ----------
Total real estate loans                       2,071        81.02%       2,158        85.61%       2,090        87.34%
                                          ----------   ----------   ----------   ----------   ----------   ----------
Non-real estate loans:
       Commercial business                      346         9.12%         274         6.98%         163         3.85%
       Consumer                                 309         9.86%         328         7.41%         339         8.81%
                                          ----------   ----------   ----------   ----------   ----------   ----------
Total non-real estate loans                     655        18.98%         602        14.39%         502        12.66%
                                          ----------   ----------   ----------   ----------   ----------   ----------
Total allowance for loans                  $  2,726       100.00%    $  2,760       100.00%    $  2,592       100.00%
                                          ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>

<TABLE>
<CAPTION>
                                                            At December 31,
                                          -------------------------------------------------
     (Dollars in Thousands)                              Percent                   Percent
                                                        of Loans                  of Loans
                                             1995       to Gross       1994       to Gross
                                            Amount       Loans        Amount       Loans
                                          ----------   ----------   ----------   ----------
<S>                                       <C>          <C>          <C>          <C>
Real estate loans:
       Residential single family           $  1,773        77.55%    $    597        76.86%
       Construction                              22         4.44%          15         4.41%
       Multi-family residential                  80         0.73%          30         1.04%
       Commercial and other real estate         331         8.13%         277         8.62%
                                          ----------   ----------   ----------   ----------
Total real estate loans                       2,206        90.85%         919        90.93%
                                          ----------   ----------   ----------   ----------
Non-real estate loans:
       Commercial business                       26         0.82%           -         0.94%
       Consumer                                  97         8.33%         168         8.13%
                                          ----------   ----------   ----------   ----------
Total non-real estate loans                     123         9.15%         168        9.07%
                                          ----------   ----------   ----------   ----------
Total allowance for loans                  $  2,329       100.00%    $  1,087       100.00%
                                          ==========   ==========   ==========   ==========
</TABLE>

       Management of the Company presently believes that its allowance for loan
losses is adequate to cover any potential losses in the Company's loan
portfolio. However, future adjustments to this allowance may be necessary, and
the Company's results of operations could be adversely affected if circumstances
differ substantially from the assumptions used by management in making its
determinations in this regard.



                                       16
<PAGE>   17


INVESTMENT ACTIVITIES

       General. Interest income from mortgage-backed securities and investment
securities generally provides the second largest source of income to the Company
after interest on loans. The Company's Board of Directors has authorized
investments in U.S. Government and agency securities, obligations of the FHLB,
and mortgage-backed securities issued by FNMA, FHLMC and certain highly related
private issues. The Company's objective is to use such investments to reduce
interest rate risk, enhance yields on assets and provide liquidity. On December
31, 1998, the Company's mortgage-backed securities and investment securities
portfolio amounted to $23.8 million and $15.0 million, respectively. At such
date, the Company had an unrealized gain of $258,000, net of deferred taxes,
with respect to its securities available for sale.

       Mortgage-Backed Securities. As of December 31, 1998, the Company's
mortgage-backed securities amounted to $23.8 million, or 8.4%, of total assets.
The Company's mortgage-backed securities portfolio provides a means of investing
in housing-related mortgage instruments without the costs associated with
originating mortgage loans for portfolio retention and with limited credit risk
of default which arises in holding a portfolio of loans to maturity.
Mortgage-backed securities (which also are known as mortgage participation
certificates or pass-through certificates) represent a participation interest in
a pool of single-family or multi-family mortgages. The servicer, through
intermediaries (generally U.S. Government agencies and government-sponsored
enterprises) pool and repackage the participation interests in the form of
securities, to investors such as the Company. Such U.S. Government agencies and
government-sponsored enterprises, which guarantee the payment of principal and
interest to investors, primarily include the FHLMC, the FNMA and the Government
National Mortgage Association ("GNMA").

       The FHLMC is a public corporation chartered by the U.S. Government and
owned by the 12 FHLBs and federally insured savings institutions. The FHLMC
issues participation certificates backed principally by conventional mortgage
loans. The FHLMC guarantees the timely payment of interest and the ultimate
return of principal on participation certificates. The FNMA is a private
corporation chartered by the U.S. Congress with a mandate to establish a
secondary market for mortgage loans. The FNMA guarantees the timely payment of
principal and interest on FNMA securities. FHLMC and FNMA securities are not
backed by the full faith and credit of the United States, but because the FHLMC
and FNMA are U.S. Government-sponsored enterprises, these securities are
considered to be among the highest quality investments with minimal credit
risks. The GNMA is a government agency within the Department of Housing and
Urban Development, which is intended to help finance government-assisted housing
programs. GNMA securities are backed by FHA-insured and VA-guaranteed loans, and
the timely payment of principal and interest on GNMA securities are guaranteed
by the GNMA and backed by the full faith and credit of the U.S. Government.
Because the FHLMC, the FNMA and the GNMA were established to provide support for
low- and middle-income housing, there are limits to the maximum size of loans
that qualify for these programs, which limit is currently $227,150.

       Mortgage-backed securities typically are issued with stated principal
amounts, and the securities are backed by pools of mortgages that have loans
with interest rates that are within a range and have varying maturities. The
underlying pool of mortgages, (i.e., fixed rate or adjustable rate) as well as
prepayment risk, are passed on to the certificate holder. The life of a



                                       17
<PAGE>   18


mortgage-backed pass-through security thus approximates the life of the
underlying mortgages. The Company's mortgage-backed securities portfolio
includes investments in mortgage-backed securities backed by adjustable rate
mortgages ("ARMs") or securities which otherwise have an adjustable rate
feature.

       The Company's mortgage-backed securities include interests in
collateralized mortgage obligations ("CMOs"). CMOs have been developed in
response to investor concerns regarding the uncertainty of cash flows associated
with the prepayment option of the underlying mortgagor and are typically issued
by governmental agencies, governmental sponsored enterprises and special purpose
entities, such as trusts, corporations or partnerships, established by financial
institutions or other similar institutions. A CMO can be collateralized by loans
or securities, which are insured or guaranteed by the FNMA, the FHLMC or the
GNMA. In contrast to pass-through mortgage-backed securities, in which cash flow
is received pro rata by all security holders, the cash flow from the mortgages
underlying a CMO is segmented and paid in accordance with a predetermined
priority to investors holding various CMO classes. By allocating the principal
and interest cash flows from the underlying collateral among the separate CMO
classes, different classes of bonds are created, each with its own stated
maturity, estimated average life, coupon rate and prepayment characteristics.
The regular interests of some CMOs are like traditional debt instruments because
they have stated principal amounts and traditionally defined interest rate
terms. Purchasers of certain other CMOs are entitled to the excess, if any, of
the issuer's cash inflows, including reinvestment earnings, over the cash
outflows for debt service and administrative expenses. These CMOs may include
instruments designated as residual interests, which represent an equity
ownership interest in the underlying collateral, subject to the first lien of
the investors in the other classes of the CMO. Certain residual CMO interests
may be riskier than many regular CMO interests to the extent that they could
result in the loss of a portion of the original investment. Moreover, cash flows
from residual interests are very sensitive to prepayments and thus contain a
high degree of interest rate risk. At December 31, 1998, the Company's
investment in CMOs amounted to $11.2 million, or 4.0% of total assets, all of
which consisted of regular interests. As of December 31, 1998, the Company's
CMOs did not include any residual interests or interest-only or principal-only
securities. As a matter of policy, the Company does not invest in residual
interests of CMOs or interest-only and principal-only securities.

       Mortgage-backed securities generally yield less than the loans which
underlie such securities because of their payment guarantees or credit
enhancements which offer nominal credit risk. In addition, mortgage-backed
securities issued or guaranteed by the FNMA or the FHLMC (except interest-only
securities or the residual interests in CMOs) are weighted at no more than 20.0%
for risk-based capital purposes, compared to a weight of 50.0% to 100.0% for
residential loans.

       As of December 31, 1998, $12.4 million of the Company's mortgage-backed
securities were classified as held to maturity and $11.4 million were classified
as available for sale. Mortgage-backed securities which are held to maturity are
carried at cost, adjusted for the amortization of premiums and the accretion of
discounts using a method which approximates a level yield. Mortgage-backed
securities classified as available for sale are carried at fair value.
Unrealized gains and losses on available for sale mortgage-backed securities are
recognized as direct increases or decreases in equity, net of applicable income
taxes.



                                       18
<PAGE>   19


       At December 31, 1998, the weighted average contractual maturity of the
Company's fixed-rate mortgage-backed securities was approximately 10.8 years.
The actual maturity of a mortgage-backed security may be less than its stated
maturity due to prepayments of the underlying mortgages. Prepayments that are
faster than anticipated may shorten the life of the security and adversely
affect its yield to maturity. The yield is based upon the interest income and
the amortization of any premium or discount related to the mortgage-backed
security. In accordance with GAAP, premiums and discounts are amortized over the
estimated lives of the loans, which decrease and increase interest income,
respectively. The prepayment assumptions used to determine the amortization
period for premiums and discounts can significantly affect the yield of the
mortgage-backed security, and these assumptions are reviewed periodically to
reflect actual prepayments. Although prepayments of underlying mortgages depend
on many factors, including the type of mortgages, the coupon rate, the age of
mortgages, the geographical location of the underlying real estate
collateralizing the mortgages and general levels of market interest rates, the
difference between the interest rates on the underlying mortgages and the
prevailing mortgage interest rates generally is the most significant determinant
of the rate of prepayments.

       During periods of rising mortgage interest rates, if the coupon rates of
the underlying mortgages are less than the prevailing market interest rates
offered for mortgage loans, refinancings generally decrease and slow the
prepayment of the underlying mortgages and the related securities. During
periods of falling mortgage interest rates, if the coupon rates of the
underlying mortgages are more than the prevailing interest rates offered for
mortgage loans, refinancings generally increase and accelerate the prepayment of
the underlying mortgages and the related securities. Under such circumstances,
the Company may be subject to reinvestment risk because to the extent that the
Company's mortgage-related securities amortize or prepay faster than
anticipated, the Company may not be able to reinvest the proceeds of such
repayments and prepayments at a comparable rate. At December 31, 1998, of the
$23.8 million of mortgage-backed securities, an aggregate of $11.4 million were
secured by fixed-rate securities and classified as available for sale, and an
aggregate of $12.4 million were secured by adjustable-rate securities and
classified as held to maturity.

       The following table sets forth certain information regarding the
Company's mortgage-backed securities at the dates indicated.

<TABLE>
<CAPTION>
                                                                    December 31,
                                    ---------------------------------------------------------------------------
                                              1998                      1997                      1996
                                    -----------------------   -----------------------   -----------------------
                                     Available     Held to     Available     Held to     Available    Held to
                                     for Sale     Maturity     for Sale     Maturity     for Sale     Maturity
                                    ----------   ----------   ----------   ----------   ----------   ----------
                                                                   (In Thousands)
<S>                                 <C>          <C>          <C>          <C>          <C>          <C>
Mortgage-backed securities:
        FHLMC                        $  2,596     $    616     $  5,463     $    750     $  6,853     $    822
        FNMA                            7,223          185       10,487          206       12,449          232
        GNMA                            1,165          828        1,399        1,121        1,776        1,320
        FNMA CMO                          425        4,736          497        4,736          488        4,733
        FHLMC CMO                         -          5,995          -          5,993          -          5,980
                                    ----------   ----------   ----------   ----------   ----------   ----------
Total mortgage-backed securities     $ 11,409     $ 12,360     $ 17,846     $ 12,806     $ 21,566     $ 13,087
                                    ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>



                                       19
<PAGE>   20


       Investment Securities. The Company's investments in investment securities
consist primarily of securities issued by the U.S. Treasury and federal
government agency obligations. As of December 31, 1998, the Company's entire
portfolio of investment securities was classified as available for sale and
amounted to $15.0 million, net of gross unrealized gains of $49,000. The Company
attempts to maintain a high degree of liquidity in its investment securities
portfolio and generally does not invest in securities with terms to maturity
exceeding ten years. As of December 31, 1998, the estimated weighted average
life of the Company's investment securities portfolio was 1.9 years.

       The following table sets forth certain information regarding the
Company's investment securities at the dates indicated.

<TABLE>
<CAPTION>
                                                                    December 31,
                                    ---------------------------------------------------------------------------
                                              1998                      1997                      1996
                                    -----------------------   -----------------------   -----------------------
                                     Carrying      Market      Carrying      Market      Carrying      Market
                                       Value        Value        Value        Value        Value        Value
                                    ----------   ----------   ----------   ----------   ----------   ----------
                                                                  (In Thousands)
<S>                                 <C>          <C>          <C>          <C>          <C>          <C>
U.S. Government and federal
        agency obligations           $  8,973     $  8,973     $ 11,021     $ 11,021     $ 20,524     $ 20,524
Commercial paper                        5,992        5,992          -            -            -            -
                                    ----------   ----------   ----------   ----------   ----------   ----------
        Subtotal                       14,965       14,965       11,021       11,021       20,524       20,524
Marketable equity securities               30           30           23           23           15           15
                                    ----------   ----------   ----------   ----------   ----------   ----------
        Total                        $ 14,995     $ 14,995     $ 11,044     $ 11,044     $ 20,539     $ 20,539
                                    ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>

The following table sets forth certain information regarding the maturities of
the Company's investment securities at December 31, 1998.

<TABLE>
<CAPTION>
                                                                      Contractually Maturing
                               -----------------------------------------------------------------------------------------------------
                                             Weighted                  Weighted                  Weighted                  Weighted
                                Under 1       Average        1-5        Average       6-10        Average     Over 10       Average
                                  Year         Yield        Years        Yield       Years         Yield       Years         Yield
                               ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------
                                                                      (Dollars in Thousands)
<S>                            <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
U.S. Government and federal
          agency obligations    $  3,949         5.93%    $    -            -       $  5,000         6.03%    $    -            -
Commercial paper                   5,992         5.82%         -            -            -            -            -            -
                               ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------
                                $  9,941         5.86%    $    -            -       $  5,000         6.03%    $    -            -
                               ==========   ==========   ==========  ===========   ==========   ==========   ==========   ==========
</TABLE>

In addition, as a member of the FHLB of Dallas, the Bank is required to maintain
an investment in stock of the FHLB of Dallas equal to the greater of 1% of the
Bank's outstanding home mortgage related assets or 5% of its outstanding
advances from the FHLB of Dallas. As of December 31, 1998, the Bank's investment
in stock of the FHLB of Dallas amounted to $2.9 million. During the year ended
December 31, 1998, the Bank received $153,000 in dividends on its FHLB stock. No
ready market exists for such stock, which is carried at par value.



                                       20
<PAGE>   21


SOURCES OF FUNDS

       General. The Company's principal source of funds for use in lending and
for other general business purposes has traditionally come from deposits
obtained through the Company's branch offices and advances from the FHLB of
Dallas. The Company also derives funds from amortization and prepayments of
outstanding loans and mortgage-related securities and from maturing investment
securities. Loan repayments are a relatively stable source of funds, while
deposit inflows and outflows are significantly influenced by general interest
rates and money market conditions.

       Deposits. The Company's current deposit products include passbook
accounts, NOW accounts, MMDA, certificates of deposit ranging in terms from 90
days to five years and noninterest-bearing personal and business checking
accounts. The Company's deposit products also include Individual Retirement
Accounts ("IRA") certificates and Keogh accounts.

       The Company's deposits are obtained primarily from residents in its
Primary Market Area. The Company attracts local deposit accounts by offering a
variety of accounts, competitive interest rates and convenient branch office
locations and service hours. The Company utilizes traditional marketing methods
to attract new customers and savings deposits, including print and broadcast
advertising and direct mailings. However, the Company does not solicit funds
through deposit brokers nor does it pay any brokerage fees if it accepts such
deposits. The Company operates two automated teller machines ("ATMs") and
participates in the regional ATM network known as CIRRUS(R).

       The Company has been competitive in the types of accounts and in interest
rates it has offered on its deposit products but does not necessarily seek to
match the highest rates paid by competing institutions. With the significant
decline in interest rates paid on deposit products, the Company, in recent
years, has experienced disintermediation of deposits into competing investment
products.

       The following table sets forth certain information relating to the
Company's deposits.

<TABLE>
<CAPTION>
                                                                           December 31,
                                       -------------------------------------------------------------------------------------
                                                  1998                         1997                         1996
                                       ---------------------------  ---------------------------  ---------------------------
                                                      Percent of                   Percent of                   Percent of
       (Dollars in Thousands)             Amount    Total Deposits     Amount    Total Deposits     Amount    Total Deposits
                                       -----------  --------------  -----------  --------------  -----------  --------------
<S>                                    <C>            <C>           <C>            <C>           <C>            <C>
NOW accounts                            $   9,022        4.50%       $   8,177        4.23%       $  11,528        5.96%
Money market accounts                      19,364        9.65%           9,436        4.88%           5,101        2.64%
Noninterest-bearing checking accounts      11,512        5.74%           8,941        4.62%           4,954        2.56%
                                       -----------    ---------     -----------    ---------     -----------    ---------
     Total demand deposits                 39,898       19.89%          26,554       13.73%          21,583       11.16%
                                       -----------    ---------     -----------    ---------     -----------    ---------
Savings deposits                           19,706        9.82%          23,343       12.07%          25,071       12.96%
                                       -----------    ---------     -----------    ---------     -----------    ---------
Certificate of Deposit accounts:
     Less than 6 months                    34,954       17.42%          41,898       21.66%          44,256       22.88%
     6-11 months                           37,026       18.45%          25,020       12.93%          31,148       16.10%
     12-35 months                          51,689       25.76%          59,246       30.63%          53,329       27.57%
     More than 35 months                   17,374        8.66%          17,361        8.98%          18,063        9.34%
                                       -----------    ---------     -----------    ---------     -----------    ---------
     Total certificates                   141,043       70.29%         143,525       74.20%         146,796       75.88%
                                       -----------    ---------     -----------    ---------     -----------    ---------
Total Deposits                          $ 200,647      100.00%       $ 193,422      100.00%       $ 193,450      100.00%
                                       ===========    =========     ===========    =========     ===========    =========
</TABLE>



                                       21
<PAGE>   22


       The following table sets forth by various interest-rate categories the
certificates of deposit with the Company at the dates indicated. The Company had
no "brokered" deposits during any of the periods reported below.

<TABLE>
<CAPTION>
                                            December 31,
                               -------------------------------------
                                  1998         1997         1996
                               -----------  -----------  -----------
                                      (Dollars in Thousands)
<S>                            <C>          <C>          <C>
0.00% to 2.99%                  $     122    $     226    $     100
3.00% to 3.99%                        347            -            -
4.00% to 4.99%                     38,636       13,474       17,031
5.00% to 5.99%                     57,020       79,702       71,021
6.00% to 6.99%                     32,493       34,172       34,364
7.00% to 8.99%                     11,533       15,056       23,434
9.00% and over                        892          895          846
                               -----------  -----------  -----------
                                $ 141,043    $ 143,525    $ 146,796
                               ===========  ===========  ===========
</TABLE>

       The following table sets forth information relating to the Company's
deposit flows during the periods shown and total deposits at the end of the
periods shown.

<TABLE>
<CAPTION>
                                                     At or for the year ended December 31,
                                                     -------------------------------------
                                                        1998         1997         1996
                                                     -----------  -----------  -----------
                                                                 (In Thousands)
<S>                                                  <C>          <C>          <C>
Total deposits, beginning of period                   $ 193,422    $ 193,450    $ 206,343
Net increase (decrease) before interest credited            823       (6,143)     (19,616)
Interest credited                                         6,402        6,115        6,723
                                                     -----------  -----------  -----------
Total deposits, end of period                         $ 200,647    $ 193,422    $ 193,450
                                                     ===========  ===========  ===========
</TABLE>

       The following table sets forth the amount and maturities of the Company's
certificates of deposit at December 31,1998.

<TABLE>
<CAPTION>
                                         Over Six        Over One        Over Two       Over Three
                                          Months           Year            Years           Years           Over
                         Six Months      Through          Through         Through         Through          Five
                          and Less       One Year        Two Years      Three Years      Five Years        Years           Total
                       -------------   -------------   -------------   -------------   -------------   -------------   -------------
                                                                   (Dollars in Thousands)
<S>                    <C>             <C>             <C>             <C>             <C>             <C>             <C>
0.00% to 2.99%          $       122     $         -     $         -     $         -     $         -     $         -     $       122
3.00% to 3.99%                  347               -               -               -               -               -             347
4.00% to 4.99%               17,674          12,172           7,720             827             225              18          38,636
5.00% to 5.99%               17,198          14,900          11,243          10,994           2,244             441          57,020
6.00% to 6.99%                2,516           8,825          13,284           2,010           5,591             267          32,493
7.00% to 8.99%                  841           1,468             843             367           6,549           1,465          11,533
9.00% and over                  892               -               -               -               -               -             892
                       -------------   -------------   -------------   -------------   -------------   -------------   -------------
                        $    39,590     $    37,365     $    33,090     $    14,198     $    14,609     $     2,191     $   141,043
                       -------------   -------------   -------------   ------------   -------------   -------------   -------------
</TABLE>



                                       22
<PAGE>   23


       As of December 31, 1998, the aggregate amount of time certificates of
deposit in amounts greater than or equal to $100,000 was approximately $37.5
million. The following table presents the maturity of these time certificates of
deposit at such dates.

<TABLE>
<CAPTION>
                  Over Three       Over Six        Over One        Over Two      Over Three
   Three            Months          Months           Year           Years          Years            Over
   Months          Through         Through         Through         Through        Through           Five
  and Less        Six Months       One Year       Two Years      Three Years     Five Years         Years           Total
-------------   -------------   -------------   -------------   -------------   -------------   -------------   -------------
                                                   (Dollars in Thousands)
<S>             <C>             <C>             <C>             <C>             <C>             <C>             <C>
 $     4,835     $     5,027     $    12,662     $     8,218     $     3,201     $     3,302     $       247     $    37,492
=============   =============   =============   =============   =============   =============   =============   =============
</TABLE>

       Borrowings. The Company may obtain advances from the FHLB of Dallas upon
the security of the common stock it owns in the FHLB and certain of its
residential mortgage loans, investment securities and mortgage-backed securities
provided certain standards related to creditworthiness have been met. Such
advances are made pursuant to several credit programs, each of which has its own
interest rate and range of maturities.

       The following table sets forth the amount of the Company's borrowings and
the weighted average rates for the periods indicated.

<TABLE>
<CAPTION>
                                                                           At December 31,
                                  --------------------------------------------------------------------------------------------------
                                             1998                             1997                                 1996
                                  ---------------------------      -----------------------------        ----------------------------
                                                     Percent                             Percent                            Percent
                                    Amount             Rate          Amount               Rate            Amount             Rate
                                  ---------         ---------      ---------           ---------        ---------         ----------
                                                                       (Dollars in Thousands)
<S>                               <C>               <C>            <C>                 <C>              <C>               <C>
FHLB advances                     $  47,228             5.17%      $  36,628               5.82%        $  22,250              5.50%
                                  ---------                        ---------                            ---------

Maximum amount
  outstanding at any month-
  end during the period           $  56,728                        $  36,628                            $  22,250
                                  ---------                        ---------                            ---------

Average balance outstanding
  during the period               $  46,277                        $  29,648                            $  10,388
                                  ---------                        ---------                            ---------

Weighted average interest
  rates on average balance
  during the period                                      5.47%                              5.67%                             5.59%
                                                        ------                             ------                            ------

</TABLE>


                                       23
<PAGE>   24


       Advances at December 31, 1998 have maturities in future years as follows
(dollars in thousands):

<TABLE>
<CAPTION>
                                     Year Ending December 31,        Amount
                                     ------------------------       --------
                                     <S>                            <C>
                                              1999                  $ 16,878
                                              2003                     8,100
                                              2005                       250
                                              2008                    22,000
                                                                   ---------   
                                              Total                 $ 47,228
                                                                   ---------   
</TABLE>

A significant portion of the advances contains a quarterly call feature
beginning between one and three years after the date of issuance; therefore,
actual repayments could vary from contractual maturities.

SUBSIDIARIES

       The Bank is a wholly owned subsidiary of the Company. The Bank currently
has no subsidiaries. The Company has no other subsidiaries; however, the Company
owns a 40 percent interest in Cadence Holdings, LLC ("Cadence"), an affiliate in
the financial services industry, which is accounted for under the equity method.
A Limited Liability Company (LLC) is a legal form of doing business that
combines partnership and corporate attributes. The Company's share of Cadence's
net loss for the year ended December 31, 1998 was $34,000. The Company is
guarantor in the amount of $400,000 for a $1.0 million bank line of credit to
Cadence originated in January, 1999.

LEGAL PROCEEDINGS

       The Company is involved in routine legal proceedings occurring in the
ordinary course of business which, in the aggregate, are believed by management
to be immaterial to the financial condition of the Company.

COMPETITION

       The Company faces strong competition in both attracting deposits and
making loans. Its most direct competition for deposits has historically come
from other savings institutions, credit unions and commercial banks located in
its market area including many large financial institutions, which have greater
financial and marketing resources available to them. In addition, the Company
faces additional significant competition for investors' funds from short-term
money market securities, mutual funds and other corporate and government
securities. The ability of the Company to attract and retain savings deposits
depends on its ability to generally provide a rate of return, liquidity and risk
comparable to that offered by competing investment opportunities.

       The Company experiences strong competition for real estate loans,
commercial business loans and consumer loans, principally from other savings
institutions, commercial banks and mortgage banking companies. The Bank competes
for loans principally through the



                                       24
<PAGE>   25


interest rates and loan fees it charges, the efficiency and quality of services
it provides borrowers and the convenient locations of its branch office network.
Competition may increase as a result of the continuing reduction of restrictions
on the interstate operations of financial institutions.

EMPLOYEES

       The Bank had 84 full-time employees and 7 part-time employees as of
December 31, 1998. None of these employees is represented by a collective
bargaining agreement. The Bank believes that it enjoys excellent relations with
its personnel. The officers of the Company are officers of the Bank.

REGULATION

       Set forth below is a brief description of certain laws and regulations,
which relate to the regulation of the Company and the Bank. The description of
these laws and regulations, as well as descriptions of laws and regulations
contained elsewhere herein, does not purport to be complete and is qualified in
its entirety by reference to applicable laws and regulations.

       The Company. The Company is a registered bank holding company pursuant to
the Bank Holding Company Act of 1956, as amended (the "BCHA"). The Company, as a
bank holding company, is subject to regulation and supervision by the Federal
Reserve Board. The Company is required to file annually a report of its
operations with, and will be subject to examination by, the Federal Reserve
Board.

       BHCA Activities and Other Limitations. The BHCA prohibits a bank holding
company from acquiring direct or indirect ownership or control of more than 5%
of the voting shares of any bank or increasing such ownership or control of any
bank without prior approval of the Federal Reserve Board. The BCHA also
generally prohibits a bank holding company from acquiring any bank located
outside of the state in which the existing bank subsidiaries of the bank holding
company are located unless specifically authorized by applicable state law. No
approval under the BHCA is required, however, for a bank holding company already
owning or controlling 50% of the voting shares of a bank to acquire additional
shares of such bank.

       The BCHA also prohibits a bank holding company, with certain exceptions,
from acquiring more than 5% of the voting share of any company that is not a
bank and from engaging in any business other than banking or managing or
controlling banks. Under the BHCA, the Federal Reserve Board is authorized to
approve the ownership of shares by a bank holding company in any company, the
activities of which the Federal Reserve Board has determined to be so closely
related to banking or to managing or controlling banks as to be a proper
incident thereto. In making such determinations, the Federal Reserve Board is
required to weigh the expected benefit to the public, such as greater
convenience, increased competition or gains in efficiency, against the possible
adverse effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest or unsound banking practices.

       The Federal Reserve Board has by regulation determined that certain
activities are closely related to banking within the meaning of the BHCA. These
activities include operating a mortgage company, finance company, credit card
company, factoring company, trust company or savings association; performing
certain data processing operations; providing limited



                                       25
<PAGE>   26


securities brokerage services; acting as an investment or financial advisor;
acting as an insurance agent for certain types of credit-related insurance;
leasing personal property on a full-payout, non-operating basis; providing tax
planning and preparation services; operating a collection agency; and providing
certain courier services. The Federal Reserve Board also has determined that
certain other activities, including real estate brokerage and syndication, land
development, property management, and underwriting of life insurance not related
to credit transactions, are not closely related to banking and a proper incident
thereto.

       Limitation on Transactions with Affiliates. Transaction between savings
institutions and any affiliate are governed by Sections 23A and 23B of the
Federal Reserve Act. An affiliate of a savings institution is any company or
entity, which controls, is controlled by or is under common control with the
savings institution. In a holding company context, the parent holding company of
a savings institution (such as the Company) and any companies, which are
controlled by such parent holding company, are affiliates of the savings
institution. Generally, Sections 23A and 23B (i) limit the extent to which the
savings institution or its subsidiaries may engage in "covered transactions"
with any one affiliate to an amount equal to 10% of such institution's capital
stock and surplus, and contain an aggregate limit on all such transactions with
all affiliates to an amount equal to 20% of such capital stock and surplus and
(ii) require that all such transactions be on terms substantially the same, or
at least as favorable, to the institution or subsidiary as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans,
purchase of assets, issuance of a guarantee and other similar transactions. In
addition to the restrictions imposed by Sections 23A and 23B, no savings
institution may (i) loan or otherwise extend credit to an affiliate, except for
any affiliate which engages only in activities which are permissible for bank
holding companies, or (ii) purchase or invest in any stocks, bonds, debentures,
notes or similar obligations of any affiliate, except for affiliates which are
subsidiaries of the savings institution.

       In addition, Sections 22(h) and (g) of the Federal Reserve Act place
restrictions on loans to executive officers, directors and principal
stockholders. Under Section 22(h), loans to a director, an executive officer and
to a greater than 10% stockholder of a savings institution, and certain
affiliated interests of either, may not exceed, together with all other
outstanding loans to such person and affiliated interests, the savings
institution's loans to one borrower limit (generally equal to 15% of the
institution's unimpaired capital and surplus). Section 22(h) also requires that
loans to directors, executive officers and principal stockholders be made on
terms substantially the same as offered in comparable transactions to other
persons unless the loans are made pursuant to a benefit or compensation program
that (i) is widely available to employees of the institution and (ii) does not
give preference to any director, executive officer or principal stockholder, or
certain affiliated interests of either, over other employees of the savings
institutions. Section 22(h) also requires prior board approval for certain
loans. In addition, the aggregate amount of extensions of credit by a savings
institution to all insiders cannot exceed the institution's unimpaired capital
and surplus. Furthermore, Section 22(g) places additional restrictions on loans
to executive officers.

       Capital Requirements. The Federal Reserve Board has adopted capital
adequacy guidelines pursuant to which it assesses the adequacy of capital in
examining and supervising a bank holding company and in analyzing applications
to it under the BHCA. The Federal Reserve Board capital adequacy guidelines
generally require bank holding companies to maintain total capital equal to 8%
of total risk-adjusted assets, with at least one-half of that amount consisting
of Tier I or core capital and up to one-half of that amount consisting of Tier
II



                                       26
<PAGE>   27


or supplementary capital. Tier I capital for bank holding companies generally
consists of the sum of common stockholders' equity and perpetual preferred stock
(subject in the case of the latter to limitations on the kind and amount of such
stocks which may be included as Tier I capital), less goodwill and, with certain
exceptions, intangibles. Tier II capital generally consists of hybrid capital
instruments; perpetual preferred stock, which is not eligible to be included as
Tier I capital; term subordinated debt and intermediate-term preferred stock;
and, subject to limitations, general allowances for loan losses. Assets are
adjusted under the risk-based guidelines to take into account different risk
characteristics, with the categories ranging from 0% (requiring no additional
capital) for assets such as cash to 100% for the bulk of assets which are
typically held by a bank holding company, including multi-family residential and
commercial real estate loans, commercial business loans and consumer loans.
Single-family residential first mortgage loans which are not past-due (90 days
or more) or non-performing and which have been made in accordance with prudent
underwriting standards are assigned a 50% level in the risk-weighing system, as
are certain privately-issued mortgage-backed securities representing indirect
ownership of such loans. Off-balance sheet items also are adjusted to take into
account certain risk characteristics.

       In addition to the risk-based capital requirements, the Federal Reserve
Board requires bank holding companies to maintain a minimum leverage capital
ratio of Tier I capital to total assets of 3.0%. Total assets for this purpose
does not include goodwill and any other intangible assets and investments that
the Federal Reserve Board determines should be deducted from Tier I capital. The
Federal Reserve Board has announced that the 3.0% Tier I leverage capital ratio
requirement is the minimum for the top-rated bank holding companies without any
supervisory, financial or operational weaknesses or deficiencies or those which
are not experiencing or anticipating significant growth. Other bank holding
companies will be expected to maintain Tier I leverage capital ratios of at
least 4.0% to 5.0% or more, depending on their overall condition. At December
31, 1998, the Company believes it complies with the above-described Federal
Reserve Board regulatory capital requirements.

       Financial Support of Affiliated Institutions. Under Federal Reserve Board
policy, the Company will be expected to act as a source of financial strength to
the Bank and to commit resources to support the Bank in circumstances when it
might not do so absent such policy. The legality and precise scope of this
policy is unclear, however, in light of recent judicial precedent.

       Federal Securities Laws. The Company's common stock is registered with
the SEC under the Securities Exchange Act of 1934 ("Exchange Act"). The Company
is subject to the information, proxy solicitation, insider trading restrictions
and other requirements under the Exchange Act.

       The Bank. The Bank is subject to extensive regulation and examination by
the OFI and by the FDIC and is subject to certain requirements established by
the Federal Reserve Board. The federal and state laws and regulations which are
applicable to banks regulate, among other things, the scope of their business,
their investments, their reserves against deposits, the timing of the
availability of deposited funds and the nature, amount of and collateral for
certain loans. There are periodic examinations by the OFI and the FDIC to test
the Bank's compliance with various regulatory requirements. This regulation and
supervision establishes a comprehensive framework of activities in which an
institution can engage and is intended primarily for the protection of the
insurance fund and depositors. The regulatory structure also gives the



                                       27
<PAGE>   28


regulatory authorities extensive discretion in connection with their supervisory
and enforcement activities and examination policies, including policies with
respect to the classification of assets and the establishment of adequate loan
loss reserves for regulatory purposes. Any change in such regulation whether by
the OFI, the FDIC or the Congress could have a material adverse impact on the
Company, the Bank and their operations.

       FDIC Insurance Premiums. The deposits of the Bank are currently insured
by the SAIF. Both the SAIF and the Bank Insurance Fund ("BIF"), the federal
deposit insurance fund that covers commercial bank deposits are required by law
to attain and thereafter maintain a reserve ratio of 1.25% of insured deposits.
The BIF fund met its target reserve level in September 1995, but the SAIF was
not expected to meet its target reserve level until at least 2002. Consequently,
in late 1995, the FDIC approved a final rule regarding deposit insurance
premiums which, effective with respect to the semiannual premium assessment
beginning January 1, 1996, reduced deposit insurance premiums for BIF member
institutions to zero basis points (subject to an annual minimum of $2,000) for
institutions in the lowest risk category. Deposit insurance premiums for SAIF
members were maintained at their existing levels (23 basis points for
institutions in the lowest risk category).

       On September 30, 1996, President Clinton signed into law legislation,
which eliminated the premium differential between SAIF-insured institutions and
BIF-insured institutions by re-capitalizing the SAIF's reserves to the required
ratio. The legislation provided that all SAIF member institutions pay a one-time
special assessment to recapitalize the SAIF, which in the aggregate was
sufficient to bring the reserve ratio in the SAIF to 1.25% of insured deposits.
The legislation also provides for the merger of the BIF and the SAIF, with such
merger being conditioned upon the prior elimination of the thrift charter.

       Effective October 8, 1996, FDIC regulations imposed a one-time special
assessment of 65.7 basis points on SAIF-assessable deposits as of March 31,
1995, which was collected on November 27, 1996. The Bank's one-time special
assessment amounted to $1.3 million pre-tax. The payment of such special
assessment had the effect of immediately reducing the Bank's capital by $883,000
after tax.

       On October 16, 1996, the FDIC proposed to lower assessment rates for SAIF
members to reduce the disparity in the assessment rates paid by BIF and SAIF
members. Beginning October 1, 1996, effective SAIF rates would range from zero
basis points to 27 basis points. From 1997 through 1999, SAIF members will pay
6.4 basis points to fund the Financing Corporation while BIF member institutions
will pay approximately 1.3 basis points. The Bank's deposit insurance premiums,
which had amounted to 23 basis points, were reduced to 6.4 basis points.

       The FDIC may terminate the deposit insurance of any insured depository
institution, including the Bank, if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, order or any condition imposed by an agreement with
the FDIC. It also may suspend deposit insurance temporarily during the hearing
process for the permanent termination of insurance, if the institution has no
tangible capital. If insurance of accounts is terminated, the accounts at the
institution at the time of the termination, less subsequent withdrawals, shall
continue to be insured for a period of six



                                       28
<PAGE>   29


months to two years, as determined by the FDIC. Management is aware of no
existing circumstances that would result in termination of the Bank's deposit
insurance.

       Capital Requirements. The FDIC has promulgated regulations and adopted a
statement of policy regarding the capital adequacy of state-chartered banks
which, like the Bank, will not be members of the Federal Reserve System. These
requirements are substantially similar to those adopted by the Federal Reserve
Board regarding bank holding companies, as described above.

       The FDIC's capital regulations establish a minimum 3.0% Tier I leverage
capital requirement for the most highly-rated state-chartered, non-member banks,
with an additional cushion of at least 100 to 200 basis points for all other
state-chartered, non-member banks, which effectively will increase the minimum
Tier I leverage ratio for such other banks to 4.0% to 5.0% or more. Under the
FDIC's regulation, highest-rated banks are those that the FDIC determines are
not anticipating or experiencing significant growth and have well diversified
risk, including no undue interest rate risk exposure, excellent asset quality,
high liquidity, good earnings and, in general, which are considered a strong
banking organization and are rated composite 1 under the Uniform Financial
Institutions Rating System. Leverage or core capital is defined as the sum of
common stockholders' equity (including retained earnings), non-cumulative
perpetual preferred stock and related surplus, and minority interests in
consolidated subsidiaries, minus all intangible assets other than certain
qualifying supervisory goodwill and certain purchased mortgage servicing rights.

       The FDIC also requires that savings banks meet a risk-based capital
standard. The risk-based capital standard for savings banks requires the
maintenance of total capital (which is defined as Tier I capital and
supplementary (Tier 2) capital) to risk weighted assets of 8%. In determining
the amount of risk-weighted assets, all assets, plus certain off balance sheet
assets, are multiplied by a risk-weight of 0% to 100%, based on the risks the
FDIC believes are inherent in the type of asset or item. The components of Tier
I capital are equivalent to those discussed above under the 3% leverage capital
standard. The components of supplementary capital include certain perpetual
preferred stock, certain mandatory convertible securities, certain subordinated
debt and intermediate preferred stock and general allowances for loan and lease
losses. Allowance for loan and lease losses includable in supplementary capital
is limited to a maximum of 1.25% of risk-weighted assets. Overall, the amount of
capital counted toward supplementary capital cannot exceed 100% of core capital.
At December 31, 1998, the Bank met each of its capital requirements.

       In August 1995, the FDIC and other federal banking agencies published a
final rule modifying their existing risk-based capital standards to provide for
consideration of interest rate risk when assessing capital adequacy of a bank.
Under the final rule, the FDIC must explicitly include a bank's exposure to
declines in the economic value of its capital due to changes in interest rates
as a factor in evaluating a bank's capital adequacy. In addition, in August
1995, the FDIC and the other federal banking agencies published a joint policy
statement for public comment that describes the process the banking agencies
will use to measure and assess the exposure of a bank's net economic value to
changes in interest rates. Under the policy statement, the FDIC will consider
results of supervisory and internal interest rate risk models as one factor in
evaluating capital adequacy. The FDIC intends, at a future date, to incorporate
explicit minimum requirements for interest rate risk in its risk-based capital
standards through



                                       29
<PAGE>   30


the use of a model developed from the policy statement, a future proposed rule
and the public comments received therefrom.

       Activities and Investments of Insured State-Chartered Banks. The
activities and equity investments of FDIC-insured, state-chartered banks are
generally limited to those that are permissible for national banks. Under
regulations dealing with equity investments, an insured state bank generally may
not directly or indirectly acquire or retain any equity investment of a type, or
in an amount, that is not permissible for a national bank. An insured state bank
is not prohibited from, among other things, (i) acquiring or retaining a
majority interest in a subsidiary, (ii) investing as a limited partner in a
partnership the sole purpose of which is direct or indirect investment in the
acquisition, rehabilitation or new construction of a qualified housing project,
provided that such limited partnership investments may not exceed 2% of the
bank's total assets, (iii) acquiring up to 10% of the voting stock of a company
that solely provides or reinsures directors', trustees' and officers' liability
insurance coverage or bankers' blanket bond group insurance coverage for insured
depository institutions, and (iv) acquiring or retaining the voting shares of a
depository institution if certain requirements are met. In addition, an insured
state-chartered bank may not, directly, or indirectly through a subsidiary,
engage as "principal" in any activity that is not permissible for a national
bank unless the FDIC has determined that such activities would pose no risk to
the insurance fund of which it is a member and the bank is in compliance with
applicable regulatory capital requirements. Any insured state-chartered bank
directly or indirectly engaged in any activity that is not permitted for a
national bank must cease the impermissible activity.

       Louisiana Savings Bank Law. As a Louisiana chartered savings bank, the
Bank is subject to regulation and supervision by the OFI under LSBA. The LSBA
contains provisions governing the incorporation and organization, location of
offices, rights and responsibilities of directors, officers and members as well
as the corporate powers, savings, lending, capital and investment requirements
and other aspects of the Bank and its affairs. In addition, the OFI is given
extensive rulemaking power and administrative discretion under the LSBA
including authority to enact and promulgate rules and regulations governing the
conversion of Louisiana chartered savings banks which convert from the mutual to
the stock form.

       The Bank is required under the LSBA to comply with certain capital
requirements established by the OFI. In addition, the LSBA prohibits the Bank
from declaring dividends unless the Bank has a surplus equal to 20% of the
outstanding common stock of the Bank both before and after the dividend is paid.
The LSBA also restricts the amount the Bank can lend to one borrower to an
amount, which may not exceed 15% of the Bank's total net worth. The Bank may
lend an amount equal to an additional 10% of the Bank's total net worth to one
borrower if the loans are secured 100% by readily marketable collateral.

       The OFI generally examines the Bank once every year and the current
practice is for the OFI to conduct a joint examination with the FDIC. The OFI
may publish part of an examination of any savings bank, which does not take
corrective action to comply with comments received from the examiner within
forty-five days after notice. In addition, the OFI may require corrective action
be taken by directors, officers and employees of any savings bank and issue a
formal order if corrective action is not taken. If the formal order contains a
finding that the business of the Bank is being conducted in a fraudulent,
illegal, unsafe or unsound manner or could lead to insolvency or substantial
dissipation of assets, earnings or impairment of capital, such order



                                       30
<PAGE>   31


must be complied with immediately and may be enforced by the OFI through a court
of competent jurisdiction.

       Regulatory Enforcement Authority. Applicable banking laws include
substantial enforcement powers available to federal banking regulators. This
enforcement authority includes, among other things, the ability to assess civil
money penalties, to issue cease-and-desist or removal orders and to initiate
injunctive actions against banking organizations and institution-affiliated
parties, as defined. In general, these enforcement actions may be initiated for
violations of laws and regulations and unsafe or unsound practices. Other action
or inaction may provide the basis for enforcement action, including misleading
or untimely reports filed with regulatory authorities.

FEDERAL AND STATE TAXATION

       GENERAL. The Company and the Bank are subject to the corporate tax
provisions of the Code, as well as certain additional provisions of the Code,
which apply to thrift and other types of financial institutions. The following
discussion of tax matters is intended only as a summary and does not purport to
be a comprehensive description of the tax rules applicable to the company and
the Bank.

       METHOD OF ACCOUNTING. The Bank maintains its books and records for
federal income tax purposes using the accrual method of accounting. The accrual
method of accounting generally requires that items of income be recognized when
all events have occurred that establish the right to receive the income and the
amount of income can be determined with reasonable accuracy, and that items of
expense be deducted at the later of (i) the time when all events have occurred
that establish the liability to pay the expense and the amount of such liability
can be determined with reasonable accuracy or (ii) the time when economic
performance with respect to the item of expense has occurred.

       BAD DEBT RESERVES. For tax years beginning after 1995, a small thrift
institution (one with an adjusted basis of assets of less than $500 million),
such as the Bank, is no longer permitted to make additions to its tax bad debt
reserve under the percentage of taxable income method. The Bank experience
method must be used. In addition, the institution is required to recapture (i.e.
take into income) over a multi-year period the balance of its bad debt reserves
in excess of the lesser of (i) the balance of such reserves as of the end of its
last taxable year ending before 1988 or (ii) an amount that would have been the
balance of such reserves had the institution always computed its reserves using
the experience method. The recapture requirement is suspended for each of two
successive taxable years beginning January 1, 1996 in which the Bank originates
an amount of certain kinds of residential loans which in the aggregate are equal
to or greater than the average of the principal amounts of such loans made by
the Bank during its six taxable years preceding 1996. The amount of reserves of
the Bank that is subject to recapture is not material.

       Under the experience method, the deductible annual addition to the
institution's bad debt reserves is the amount necessary to increase the balance
of the reserve at the close of the taxable year to the greater of (a) the amount
which bears the same ratio to loans outstanding at the close of the taxable year
as the total net bad debts sustained during the current and five preceding
taxable years bear to the sum of the loans outstanding at the close of the six
years, or (b) the lower of (i) the balance of the reserve account at the close
of the


                                       31
<PAGE>   32


Bank's "base year," which was its tax year ended December 31, 1987, or (ii) if
the amount of loans outstanding at the close of the taxable year is less than
the amount of loans outstanding at the close of the base year, the amount which
bears the same ratio to loans outstanding at the close of the taxable year as
the balance of the reserve at the close of the base year bears to the amount of
loans outstanding at the close of the base year.

       At December 31, 1998, the federal income tax reserves of the Bank
included $7.1 million for which no federal income tax has been provided. Because
of these federal income tax reserves and the liquidation account established for
the benefit of certain depositors of the Bank in connection with the conversion
of the Bank to stock form, the retained earnings of the Bank is substantially
restricted.

       DISTRIBUTIONS. If the Bank were to distribute cash or property to its
sole stockholder, and the distribution was treated as being from its accumulated
bad debt reserves, the distribution would cause the Bank to have additional
taxable income. A distribution is deemed to have been made from accumulated bad
debt reserves to the extent that (a) the reserves exceed the amount that would
have been accumulated on the basis of actual loss experience, and (b) the
distribution is a "non-qualified distribution." A distribution with respect to
stock is a non-qualified distribution to the extent that, for federal income tax
purposes, (i) it is in redemption of shares, (ii) it is pursuant to a
liquidation of the institution, or (iii) in the case of a current distribution,
together with all other such distributions during the taxable year, it exceeds
the institution's current and post-1951 accumulated earnings and profits. The
amount of additional taxable income created by a non-qualified distribution is
an amount, that when reduced by the tax attributable to it, is equal to the
amount of the distribution.

       MINIMUM TAX. The Code imposes an alternative minimum tax at a rate of
20%. The alternative minimum tax generally applies to a base of regular taxable
income plus certain tax preferences ("alternative minimum taxable income" or
"AMTI") and is payable to the extent such AMTI is in excess of an exemption
amount. The Code provides that an item of tax preference is the excess of the
bad debt deduction allowable for a taxable year pursuant to the percentage of
taxable income method over the amount allowable under the experience method.
Other items of tax preference that constitute AMTI include (a) tax-exempt
interest on newly issued (generally, issued on or after August 8, 1986) private
activity bonds other than certain qualified bonds and (b) 75% of the excess (if
any) of (i) adjusted current earnings as defined in the Code, over (ii) AMTI
(determined without regard to this preference and prior to reduction by net
operating losses).

       NET OPERATING LOSS CARRYOVERS. A financial institution may carry back net
operating losses ("NOLs") to the preceding two taxable years and forward to the
succeeding 20 taxable years. This provision applies to losses incurred in
taxable years beginning after 1997. At December 31, 1998, the Bank had no NOL
carryforwards for federal income tax purposes.

       CAPITAL GAINS AND CORPORATE DIVIDENDS-RECEIVED DEDUCTION. Corporate net
capital gains are taxed at a maximum rate of 34%. The corporate
dividends-received deduction is 80% in the case of dividends received from
corporations with which a corporate recipient does not file a consolidated tax
return, and corporations which own less than 20% of the stock of a corporation
distributing a dividend may deduct only 70% of dividends received or accrued on
their behalf. However, a corporation may deduct 100% of dividends from a member
of the same affiliated group of corporations.



                                       32
<PAGE>   33


       OTHER MATTERS. Federal legislation is introduced from time to time that
would limit the ability of individuals to deduct interest paid on mortgage
loans. Individuals are currently not permitted to deduct interest on consumer
loans. Significant increases in tax rates or further restrictions on the
deductibility of mortgage interest could adversely affect the Bank.

       The Bank's federal income tax returns for the tax years ended 1995, 1996,
1997 and 1998 are open under the statute of limitations and are subject to
review by the IRS.

       STATE TAXATION. The Company is subject to the Louisiana Corporation
Income Tax based on its separate Louisiana taxable income, and it is subject to
franchise tax. The Corporation Income Tax applies at graduated rates from 4%
upon the first $25,000 of Louisiana taxable income to 8% on all Louisiana
taxable income in excess of $200,000. For these purposes, "Louisiana taxable
income" means net income which is earned within or derived from sources within
the State of Louisiana, after adjustments permitted under Louisiana law
including a federal income tax deduction and an allowance for net operating
losses, if any. In addition, the Bank is subject to the Louisiana Shares Tax,
which is imposed on the assessed value of its stock. The formula for deriving
the assessed value is to calculate 15% of the sum of (a) 20% of the company's
capitalized earnings, plus (b) 80% of the company's taxable stockholders equity,
and to subtract from that figure 50% of the company's real and personal property
assessment. Various items are also subtracted in calculating a company's
capitalized earnings.



                                       33
<PAGE>   34


ITEM 2.  PROPERTIES.

OFFICES AND PROPERTIES

       At December 31, 1998, the Bank conducted business from its main office
and four branch offices, three of which are located in Lafayette, Louisiana and
one located in New Iberia, Louisiana. The Bank also conducted business from its
one loan production office in Eunice, Louisiana.

       The following table sets forth certain information relating to the
Company's offices at December 31, 1998.

<TABLE>
<CAPTION>
                                                                              Net Book Value of
                                                                                Premises and
                                                          Owned or              Equipment at                  Deposits at
                                                           Leased             December 31, 1998            December 31, 1998
                                                      -----------------   --------------------------   --------------------------
                                                                                     (In Thousands)
                                                      ---------------------------------------------------------------------------
<S>                                                   <C>                 <C>                          <C>
Main Office:

  101 West Vermilion Street                           Owned                                 $ 1,578                     $ 89,023
  Lafayette, Louisiana  70501

Branch Offices:

  Northside Office                                    Owned                                     260                       34,697
  2601 Moss Street
  Lafayette, Louisiana  70501

  Southside Office                                    Owned                                     169                       38,543
  3701 Johnston Street
  Lafayette, Louisiana  70503

  Broadmoor Office                                    Owned                                     233                       29,554
  5301 Johnston Street
  Lafayette, Louisiana  70503

  New Iberia Office                                   Owned                                     531                        8,830
  230 West Main Street
  New Iberia, Louisiana  70560

  Eunice Loan Production Office                       Leased                                      6                            -
                                                                          --------------------------   --------------------------
  136 South Third Street
  Eunice, Louisiana  70535

                                                                                            $ 2,777                    $ 200,647
                                                                          ==========================   ==========================
</TABLE>



                                       34
<PAGE>   35


ITEM 3.  LEGAL PROCEEDINGS.

       The Company and the Bank are not involved in any pending legal
proceedings other than non-material legal proceedings occurring in the ordinary
course of business.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

       Not Applicable.

PART II.

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

       The information required herein, to the extent applicable, is
incorporated by reference from page 51 of the Registrant's 1998 Annual Report to
Stockholders ("Annual Report").

ITEM 6.  SELECTED FINANCIAL DATA.

       The Information required herein is incorporated by reference from page 6
of the Registrant's 1998 Annual Report.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

       The Information required herein is incorporated by reference from pages 7
to 20 of the Registrant's 1998 Annual Report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

       The Information required herein is incorporated by reference from pages 
15 to 19 of the Registrant's 1998 Annual Report.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.



                                       35
<PAGE>   36


       The Information required herein is incorporated by reference from pages
22 to 49 of the Registrant's 1998 Annual Report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.

       Not Applicable.

PART III.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

       The information required herein is incorporated by reference from the
Registrant's definitive proxy statement for the 1998 Annual Meeting of
Stockholders ("Proxy Statement").

ITEM 11.  EXECUTIVE COMPENSATION.

       The information required herein is incorporated by reference from the
Registrant's Proxy Statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

       The information required herein is incorporated by reference from the
Registrant's Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

       The information required herein is incorporated by reference from the
Registrant's Proxy Statement.

PART IV.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)    Documents Filed as Part of this Report.

(1)    The following financial statements are incorporated by reference from
       Item 8 hereof (see Exhibit 13):

       Report of Independent Auditors
       Consolidated Balance Sheets as of December 31, 1998 and 1997
       Consolidated Statements of Income for the Fiscal Periods Ended December
          31, 1998, 1997 and 1996



                                       36
<PAGE>   37


       Consolidated Statements of Changes in Shareholders' Equity for the Fiscal
          Periods ended December 31, 1998, 1997 and 1996
       Consolidated Statements of Cash Flows for the Fiscal Periods Ended
          December 31, 1998, 1997 and 1996
       Notes to consolidated Financial Statements

(2)    All schedules for which provisions is made in the applicable accounting
       regulation of the SEC are omitted because of the absence of conditions
       under which they are required or because the required information is
       included in the consolidated financial statements and related notes
       thereto.

(3)    The following exhibits are filed as part of this Form 10-K and this list
       includes the Exhibit Index.


                                  EXHIBIT INDEX

<TABLE>
<S>         <C>
3.1*        Articles of Incorporation of Acadiana Bancshares, Inc.
3.2*        Bylaws of Acadiana Bancshares, Inc.
4.0*        Form of Stock Certificate of Acadiana Bancshares, Inc.
10.1**      Stock Option Plan
10.2**      1996 Recognition and Retention Plan and Trust Agreement for Employees and Non-Employee Directors
10.3***     Employment Agreement between LBA Savings Bank and Gerald G. Reaux, Jr.
10.4*       Form of Severance Agreement between Acadiana Bancshares, Inc., LBA Savings Bank and Lawrence Gankendorff,
            James J. Montelaro, Gregory King, Mary Anne Bertrand, Wayne Bares, Emile E. Soulier, III and Thomas F. Debaillon.
13.0        1998 Annual Report to Stockholders
22.0        Subsidiaries of the Registrant - Reference is made to "Item 2.  "Business" for the required information
23.1        Consent of Castaing, Hussey, Lolan & Dauterive, LLP
27.0        Financial Data Schedule
</TABLE>

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

(*)    Incorporated herein by reference from the Registration Statement on Form
       S-1 (Registration No. 333-1396) filed by the Registrant with the SEC on
       February 15, 1996, as subsequently amended.

(**)   Incorporated herein by reference from the definitive proxy statement,
       dated December 16, 1996, filed by the Registrant with the SEC (Commission
       File No. 1-14364).

(***)  Incorporated herein by reference to the Annual Report on Form 10-K (File
       No. 1-14364) filed by the Registrant with the SEC on March 31, 1997.



                                       37
<PAGE>   38


                                   SIGNATURES

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

                                       ACADIANA BANCSHARES, INC.

March 26, 1999                         By: /s/ Gerald G. Reaux, Jr.
                                           ------------------------
                                       Gerald G. Reaux, Jr.
                                       President and Chief Executive Officer and
                                       Director

       Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Name                                  Title                                     Date
----                                  -----                                     ----
<S>                                   <C>                                       <C>
/s/ Gerald G. Reaux, Jr.              President, Chief Executive                March 26, 1999
-----------------------               Officer and Director
Gerald G. Reaux, Jr.

/s/ Lawrence E. Gankendorff           Chairman of the Board                     March 26, 1999
----------------------------
Lawrence E. Gankendorff

/s/ Albert W. Beacham                 Director                                  March 26, 1999
----------------------
Albert W. Beacham, M.D.

/s/ James J. Montelaro                Executive Vice President                  March 26, 1999
-----------------------               and Director
James J. Montelaro

/s/ John H. DeJean                    Director                                  March 26, 1999
------------------
John H. DeJean

/s/ Thomas S. Ortego                  Director                                  March 26, 1999
--------------------
Thomas S. Ortego

/s/ William H. Mouton                 Director                                  March 26, 1999
---------------------
William H. Mouton

/s/ Donald J. O'Rourke, Sr.           Director                                  March 26, 1999
---------------------------
Donald J. O'Rourke, Sr.
</TABLE>



                                       38
<PAGE>   39


<TABLE>
<S>                                   <C>                                       <C>
/s/ Kaliste J. Saloom, Jr.            Director                                  March 26, 1999
--------------------------
Kaliste J. Saloom, Jr.

/s/ Emile E. Soulier, III.            Vice President and Chief                  March 26, 1999
-------------------------             Financial Officer
Emile E. Soulier, III                 (principal financial and
                                      accounting officer)
</TABLE>



                                       39