SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934 (NO FEE  REQUIRED)
                 

                  For the fiscal year ended December 31, 1996

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 
    OF 1934

            For the transition period from            to

                         Commission File Number 0-20911

                              ALGIERS BANCORP, INC.
        (Exact name of small business issuer as specified in its charter)

        LOUISIANA                                      72 - 1317594
(State or other jurisdiction of                     (I.R.S. Employer
incorporation or organization)                      Identification No.)

              #1 WESTBANK EXPRESSWAY, NEW ORLEANS, LOUISIANA 70114
                    (Address of principal executive offices)

          Issuer's telephone number, including area code: (504)367-8221 


           Securities registered pursuant to Section 12(b) of the Act: 
                                 Not Applicable

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

                     Common Stock (par value $.01 per share
                                (Title of Class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period  that the issuer was  required  to file such  reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the best of Issuer's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-KSB. Yes [X] No [ ]

Issuer's revenues for the fiscal year ended December 31, 1996: $3.1 million

As of March 19, 1997, the aggregate market value of the 594,080 shares of Common
Stock of the Issuer held by non-affiliates, which excludes 53,945 shares held by
all  directors  and officers of the Issuer as a group,  was  approximately  $8.3
million.  This  figure is based on the  average  of the bid and asked  prices of
$14.00 per share of the Issuer's Common Stock on March 19, 1997.

Number of shares of Common Stock outstanding on March 19, 1997: 648,025

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]  
<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

(1) Portions of the Annual Report to  Stockholders  for the year ended  December
31, 1996 are incorporated  into Part II, Items 5 through 8 and Part III, Item 13
of this Form 10-KSB.

(2) Portions of the  definitive  proxy  statement for the 1997 Annual Meeting of
Stockholders  filed on April 7, 1997 are  incorporated  into  Part III,  Items 9
through 12 of this Form 10-KSB.

                                       1
<PAGE>
PART I.

Item 1. Description of Business

         Algiers  Bancorp,  Inc.  (the  "Company")  is a  Louisiana  corporation
organized in February 1996 by Algiers  Homestead  Association  ("Algiers" or the
"Association")  for the  purpose of  becoming a unitary  holding  company of the
Association. The only significant assets of the Company are the capital stock of
the  Association,  the Company's loan to its Employee Stock  Ownership Plan (the
"ESOP"),  and the  remainder  of the net  proceeds  retained  by the  Company in
connection with the conversion of the  Association  from mutual to stock form on
July 8, 1996 (the  "Conversion").  The  business and  management  of the Company
primarily  consists of the  business  and  management  of the  Association.  The
Company  neither owns nor leases any  property,  but instead uses the  premises,
equipment  and  furniture  of the  Association.  The Company  does not intend to
employ any  persons  other than  officers  of the  Association,  and the Company
utilizes  the support  staff of the  Association  from time to time.  Additional
employees  will be hired as  appropriate  to the extent the  Company  expands or
changes its business in the future.

         The  Association  is  a  Louisiana-chartered  stock  savings  and  loan
association  that was  originally  formed  in  1926.  The  Association  conducts
business  from its main office in New Orleans,  Louisiana and a branch office in
Terrytown,  Louisiana.  At December 31, 1996,  the Company had $48.2  million of
total assets,  $38.4 million of total  liabilities,  including  $36.6 million of
deposits, and $9.8 million of total stockholders' equity (representing 20.3 % of
total assets).

         The  Association is primarily  engaged in attracting  deposits from the
general public through its offices and using those and other  available  sources
of funds to purchase  mortgage-backed  securities and to originate loans secured
primarily  by  one-  to  four-family  residences  located  in the  New  Orleans,
Louisiana  metropolitan  area.  Algiers  had $32.9  million  of  mortgage-backed
securities  at December  31, 1996,  representing  68.2% of the  Company's  total
assets.  At December  31,  1996,  Algiers' net loans  receivable  totalled  $9.2
million or 19.1% of the Company's  total assets.  Conventional  first  mortgage,
one- to four-family residential loans (excluding construction loans) amounted to
$8.1 million or 82.9% of Algiers'  total loan portfolio at December 31, 1996. To
a lesser extent,  the Association also originates  consumer loans,  construction
loans and  commercial  real  estate  loans.  The  Company  had $3.3  million  of
investment securities (excluding FHLB stock) at December 31, 1996,  representing
6.8% of total assets. Of the $3.3 million of investment securities,  $825,000 or
25.1 % mature within one year of December 31, 1996.

         The  Association  is a  community-oriented  savings  institution  which
emphasizes customer service and convenience.  It generally has sought to enhance
its net income by, among other  things,  maintaining  strong asset  quality.  In
pursuit of these goals,  the  Association  has adopted a business  strategy that
emphasizes the purchase of  mortgage-backed  securities,  as well as lending and
deposit  products and services  traditionally  offered by savings  institutions.
Certain results of the  implementation of the Association's  business  strategy,
briefly noted below, have enabled the Association to be profitable and to exceed
regulatory capital requirements.

         o Capital Position.  As of December 31, 1996, the Association had total
stockholder's  equity of $9.8 million and exceeded all of its regulatory capital
requirements,  with  tangible,  core and  risk-based  capital  ratios of 14.83%,
14.83% and 54.24%,  respectively,  as compared  to the minimum  requirements  of
1.5%, 3.0% and 8.0%, respectively.

                                        2
<PAGE>
         o  Profitability.  The Company has been  profitable in each of the last
three years.  Net income  declined in 1996 to $156,000 from $169,000 in 1995 due
to a special assessment paid for SAIF insurance which amounted to $159,000 on an
after-tax  basis. Net income declined from $249,000 in 1994 to $169,000 in 1995,
as the  Association's  average  interest  rate spread  declined,  resulting in a
$137,000 decrease in net interest income.

         o Asset  Quality.  Management  believes  that  good  asset  quality  is
important to the Company's  long-term  profitability.  The  Association's  total
nonperforming assets, which consist of non-accruing loans, net real estate owned
("REO") and net non-accruing investment securities,  together with troubled debt
restructurings, amounted to $97,000 or .2% of total assets at December 31, 1996,
compared to $234,000 or .55% of total assets at December  31, 1995.  At December
31, 1996, the  Association's  allowance for loan losses  amounted to $530,000 or
5.4% of the total loan  portfolio,  and its allowance on  investment  securities
amounted to $62,400 or 100.0% of the total non-accruing investment securities.

         o Interest Rate Risk. The  Association  attempts to manage its exposure
to  interest  rate  risk by  maintaining  a high  percentage  of its  assets  in
adjustable-rate   mortgages   ("ARMs")   and   adjustable-rate   mortgage-backed
securities.  At December 31, 1996, ARMs amounted to $7.0 million or 71.6% of the
total loan  portfolio.  In  addition,  of the $32.9  million of  mortgage-backed
securities at December 31, 1996, $28.0 million or 85.1% have adjustable interest
rates.

         o Community  Orientation.  The  Association is committed to meeting the
financial needs of the communities in which it operates. Management believes the
Association  is large  enough to  provide  a full  range of  personal  financial
services,  yet small enough to be able to provide services on a personalized and
efficient basis. At December 31, 1996, most of the  Association's  loans were to
residents of its primary  market area. The  Association  intends to continue its
practice of investing in loans in its primary market area in accordance with its
underwriting  standards,  subject to economic conditions and the availability of
reasonable investment alternatives.

         The Association is subject to examination and comprehensive  regulation
by  the  Louisiana  Office  of  Financial  Institutions  ("OFI"),  which  is the
Association's  chartering  authority,  and by the  Office of Thrift  Supervision
("OTS"),  which is the Association's primary federal regulator.  The Association
is also regulated by the Federal Deposit  Insurance  Corporation  ("FDIC"),  the
administrator  of  the  Savings   Association   Insurance  Fund  ("SAIF").   The
Association is also subject to certain reserve  requirements  established by the
Board of Governors of the Federal  Reserve System ("FRB") and is a member of the
Federal Home Loan Bank ("FHLB") of Dallas, which is one of the 12 regional banks
comprising the FHLB System.

         The executive  office for the Company and the Association is located at
1 Westbank Expressway, New Orleans, Louisiana 70114, and its telephone number is
(504) 367-8221.
<PAGE>
Market Area

         The  Company's   market  area   consists  of  Orleans,   Jefferson  and
Plaquemines  Parishes in the New  Orleans,  Louisiana  metropolitan  statistical
area. The  traditional  components of the area's economic base have consisted of
tourism,  the port of New Orleans and related  shipbuilding,  and the  petroleum
industry.  Slowdowns in the petroleum industry had a material negative impact on
the area's economy in the early 1980s,  which were compounded by defense-related
cutbacks in recent years.  The area's economy has stabilized in recent years due
to development of tourism and convention activities and related service-oriented
companies, as well as the gaming industry.

                                       3
<PAGE>
In addition,  the New Orleans  economic base has diversified  into areas such as
health services,  the aerospace  industry and research and technology.  However,
there is still a significant  degree of volatility in the local economy due to a
continued  heavy reliance on the same  industries that led to the decline in the
1980s,  and there has been a decline in the  population  since the early  1980s.
Competition  for  deposits  and lending in Orleans,  Jefferson  and  Plaquemines
Parishes  is  substantial,  with  most of the  current  competition  being  from
commercial banks.

         New  Orleans  serves  as  the  headquarters  for  several  Fortune  500
companies, including Avondale Industries,  Freeport-McMoRan,  Louisiana Land and
Exploration  and McDermott,  Inc. Major  employers in the area include  Avondale
Industries,  Inc.,  Tulane  University,  Ochsner  Medical  Institutions,   Tenet
Healthcare  Corp.,  Schwegmann  Brothers Giant Super Markets,  Hibernia National
Bank, South Central Bell Telephone Company and First Commerce Corp.

Lending Activities

         Loan Portfolio Composition. At December 31, 1996, the Association's net
loan portfolio totalled $9.2 million,  representing  approximately 19.1 % of the
Company's  $48.2  million of total assets at that date.  The  principal  lending
activity  of  the   Association  is  the  origination  of  one-  to  four-family
residential loans. At December 31, 1996,  conventional  first mortgage,  one- to
four-family  residential loans (excluding  construction  loans) amounted to $8.1
million or 82.9% of the total  loan  portfolio,  before  net items.  To a lesser
extent, the Association  originates  construction loans,  commercial real estate
loans and consumer loans. At December 31, 1996,  construction  loans amounted to
$89,000  or 0.9% of the total  loan  portfolio,  commercial  real  estate  loans
totalled  $668,000  or 6.8% of the total  loan  portfolio,  and  consumer  loans
amounted to $869,000  or 8.9% of the total loan  portfolio,  in each case before
net items.
 
         Loan  Portfolio  Composition.   The  following  table  sets  forth  the
composition  of the  Association's  loan  portfolio by type of loan at the dates
indicated.

                                       4
<PAGE>
<TABLE>
<CAPTION>
                                                                    December 31,
                                       ------------------------------------------------------------------ 
                                                1996                    1995                  1994
                                       --------------------   --------------------   -------------------- 
                                        Amount         %       Amount         %       Amount         %
                                                                (Dollars in Thousands)
<S>                                    <C>           <C>      <C>           <C>      <C>           <C>
Real estate loans:
   One-to four-family residential:
     Conventional ................     $ 8,135        82.9%   $ 7,978        76.0%   $ 8,738        80.6%
     FHA and VA ..................          51         0.5         72         0.7         90         0.8
   Construction ..................          89         0.9        491         4.7         --          --
   Commercial real estate ........         668         6.8        858         8.1        879         8.1
                                       -------       -----    -------       -----    -------       -----
        Total real estate loans ..       8,943        91.1      9,399        89.5      9,707        89.5
                                       -------       -----    -------       -----    -------       -----

   Consumer loans:
     Second mortgage .............         175         1.8        111         1.1        111         1.0
      Loans on deposits ..........         694         7.1        986         9.4      1,025         9.5
                                       -------       -----    -------       -----    -------       -----
        Total consumer loans .....         869         8.9      1,097        10.5      1,136        10.5
                                       -------       -----    -------       -----    -------       -----
          Total loans ............       9,812       100.0%    10,496       100.0%    10,843       100.0%
                                                     =====                  =====                  =====

Less:
   Unearned discounts and interest           8                      6                     12
   Undisbursed portion of
      construction loans .........           7                    224                     --
   Deferred loan fees ............          47                     42                     32
   Allowance for loan losses .....         530                    534                    558
                                       -------                -------              ---------
     Net loans ...................     $ 9,220                $ 9,690              $  10,241
                                       =======                =======              =========

</TABLE>
<PAGE>
         Contractual Terms to Final  Maturities.  The following table sets forth
certain information as of December 31, 1996 regarding the dollar amount of loans
maturing in the  Association's  portfolio,  based on the contractual date of the
loan's final maturity, before giving effect to net items. Demand loans and loans
having no stated  schedule of repayments and no stated  maturity are reported as
due in one year or less. The amounts shown below do not reflect normal principal
amortization;  rather, the balance of each loan outstanding at December 31, 1996
is shown in the appropriate year of the loan's final maturity.

<TABLE>
<CAPTION>
                                              One-to
                                             four-family                    Commercial
                                             residential    Construction    real estate    Consumer      Total
                                             -----------    ------------    -----------    --------      -----
                                                                          (In Thousands)
<S>                                            <C>            <C>             <C>          <C>          <C>

Amounts due after December 31, 1996 in:
   One year or less ....................       $   --         $   89          $   --       $  694       $  783
   After one year through two years ....           --             --              --           --           --
   After two years through three years .           --             --              --           --           --
   After three years through five years            71             --              56            9          136
   After five years through ten years ..          855             --               6           12          873
   After ten years through fifteen years        2,800             --              13          154        2,967
   After fifteen years .................        4,460             --             593           --        5,053
                                               ------         ------          ------       ------       ------
     Total (1) .........................       $8,186         $   89          $  668       $  869       $9,812
                                               ======         ======          ======       ======       ======

 
(1) Gross of loans in process,  deferred fees,  unearned discounts and interest,
and allowance for loan losses.
</TABLE>
                                       5
<PAGE>
         The following  table sets forth the dollar amount of all loans,  before
net items,  due after one year from  December 31, 1996 as shown in the preceding
table,  which have fixed  interest  rates or which have  floating or  adjustable
interest rates.
 
<TABLE>
<CAPTION>
                                            Floating or
                                            Fixed-Rate  Adjustable-Rate    Total
                                            ----------  ---------------    -----
                                                         (In thousands)
<S>                                           <C>          <C>            <C>

One-to four-family residential .......        $1,999        $6,195        $8,194
Commercial real estate ...............          --             660           660
Consumer .............................          --             175           175
                                              ------        ------        ------
   Total .............................        $1,999        $7,030        $9,029
                                              ======        ======        ======

</TABLE>
 
         Scheduled  contractual  maturities of loans do not necessarily  reflect
the actual term of the  Association's  portfolio.  The average  life of mortgage
loans is substantially less than their average contractual terms because of loan
prepayments and enforcement of due-on-sale  clauses,  which give the Association
the right to declare a loan  immediately  due and  payable  in the event,  among
other things,  that the borrower sells the real property subject to the mortgage
and the  loan is not  repaid.  The  average  life of  mortgage  loans  tends  to
increase,  however,  when current mortgage loan rates substantially exceed rates
on existing  mortgage  loans and,  conversely,  decrease  when rates on existing
mortgage loans substantially exceed current mortgage loan rates.

         Origination of Loans.  The lending  activities of the  Association  are
subject to the written  underwriting  standards and loan origination  procedures
established  by the  Association's  Board  of  Directors  and  management.  Loan
originations are obtained through a variety of sources, including referrals from
real estate brokers, builders and existing customers.  Written loan applications
are  taken  by  lending  personnel,  and  the  loan  department  supervises  the
procurement of credit reports,  appraisals and other documentation involved with
a loan.  Property  valuations  are performed by independent  outside  appraisers
approved by the Association's Board of Directors or a committee thereof.

         Under the  Association's  real estate  lending  policy,  either a title
opinion  signed by an  approved  attorney  or a title  insurance  policy must be
obtained for each real estate  loan.  The  Association  also  requires  fire and
extended  coverage  casualty  insurance,  in order  to  protect  the  properties
securing  its real estate  loans.  Borrowers  must also obtain  flood  insurance
policies  when the  property  is in a flood  hazard  area as  designated  by the
Department  of Housing  and Urban  Development.  Borrowers  may be  required  to
advance  funds on a monthly  basis  together  with each payment of principal and
interest  to  a  mortgage  loan  account  from  which  the   Association   makes
disbursements for items such as real estate taxes, hazard insurance premiums and
private mortgage insurance premiums as they become due.

         The  Association's  loan  approval  process is  intended  to assess the
borrower's ability to repay the loan, the viability of the loan and the adequacy
of the value of the  property  that will  secure  the  loan.  The  Association's
lending  policies require that most loans to be originated by the Association be
approved in advance by the Board of Directors, except that the President and the
Chief Operating Officer are each authorized to approve second mortgage loans not
to exceed $5,000.

                                       6
<PAGE>
         The following table shows total loans  originated and repaid during the
periods indicated. No loans were purchased or sold during the periods shown.
<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                            ------------------------------------ 
                                              1996        1995        1994
                                              ----        ----        ----
                                                       (In Thousands)
<S>                                         <C>           <C>           <C>
Loan originations:
   One-to four-family residential ....      $   802       $   583       $ 1,039
   Construction ......................           89           491          --
   Commercial real estate ............          108          --              66
   Consumer ..........................        1,166           425           666
                                            -------       -------       -------
        Total loan originations ......        2,165         1,499         1,771
Loan principal repayments ............       (2,844)       (1,847)       (1,547)
Increase (decrease) due to other
   items, net (1) ....................          209          (203)          (13)
                                            -------       -------       -------
Net increase (decrease) in
   loan portfolio ....................      $  (470)      $  (551)      $   211
                                            =======       =======       =======

(1) Other items consist of loans in process,  deferred fees and  discounts,  and
allowance for loan losses.
</TABLE>
         Real Estate  Lending  Standards and  Underwriting  Policies.  Effective
March 19, 1993, all financial  institutions  were required to adopt and maintain
comprehensive written real estate lending policies that are consistent with safe
and sound banking practices.  These lending policies must reflect  consideration
of the Interagency  Guidelines for Real Estate Lending  Policies  adopted by the
federal banking  agencies,  including the OTS, in December 1992  ("Guidelines").
The  Guidelines  set forth uniform  regulations  prescribing  standards for real
estate  lending.  Real estate lending is defined as extensions of credit secured
by liens on interests  in real estate or made for the purpose of  financing  the
construction of a building or other  improvements to real estate,  regardless of
whether a lien has been taken on the property.

         An   institution's   lending  policy  must  address   certain   lending
considerations  set forth in the  Guidelines,  including  loan-to-value  ("LTV")
limits,  loan  administration  procedures,   underwriting  standards,  portfolio
diversification   standards,   and   documentation,   approval   and   reporting
requirements. The policy must also be appropriate to the size of the institution
and the nature and scope of its operations, and must be reviewed and approved by
the institution's board of directors at least annually. The LTV ratio framework,
with the LTV ratio being the total  amount of credit to be  extended  divided by
the appraised  value or purchase price of the property at the time the credit is
originated,  must be  established  for each category of real estate loans.  If a
loan is not secured by a first lien,  the lender must  combine all senior  liens
when calculating this ratio. The Guidelines,  among other things,  establish the
following  supervisory  LTV limits:  raw land  (65%);  land  development  (75%);
construction  (commercial,  multi-family  and  nonresidential)  (80%);  improved
property and one- to four-family  residential  construction  (85%);  and one- to
four-family (owner occupied) and home equity (no maximum ratio; however, any LTV
ratio  in  excess  of  90%  should  require  appropriate  insurance  or  readily
marketable collateral).

                                       7
<PAGE>
         Certain  institutions  can make real  estate  loans that do not conform
with the  established  LTV ratio  limits up to 100% of the  institution's  total
capital.   Within  this  aggregate  limit,   total  loans  for  all  commercial,
agricultural,   multi-family  and  other   non-one-to-four   family  residential
properties  should not exceed 30% of total  capital.  An  institution  will come
under increased supervisory scrutiny as the total of such loans approaches these
levels.  Certain loans are exempt from the LTV ratios (e.g., those guaranteed by
a government  agency,  loans to facilitate the sale of real estate owned,  loans
renewed,  refinanced  or  restructured  by the  original  lender(s)  to the same
borrower(s) where there is no advancement of new funds, etc.).

         The Association is in compliance with the above standards.

         Although Louisiana laws and regulations permit state-chartered  savings
institutions,  such as the Association,  to originate and purchase loans secured
by real estate located throughout the United States,  the Association's  present
lending is done  primarily  within its primary  market area,  which  consists of
Orleans,  Jefferson  and  Plaquemines  Parishes  in  Louisiana.  Subject  to the
Association's  loans-to-one borrower limitation, the Association is permitted to
invest without  limitation in  residential  mortgage loans and up to 400% of its
capital in loans  secured by  non-residential  or  commercial  real estate.  The
Association may also invest in secured and unsecured consumer loans in an amount
not exceeding 35% of the Association's  total assets. This 35% limitation may be
exceeded for certain types of consumer  loans,  such as home equity and property
improvement  loans  secured by  residential  real  property.  In  addition,  the
Association  may invest up to 10% of its total  assets in secured and  unsecured
loans for commercial,  corporate, business or agricultural purposes. At December
31, 1996, the Association was well within each of the above lending limits.

         As  required  by  the  Financial  Institutions  Reform,  Recovery,  and
Enforcement Act of 1989 ("FIRREA"), a savings institution generally may not make
loans to one borrower and related entities in an amount which exceeds 15% of its
unimpaired  capital  and  surplus,  although  loans  in an  amount  equal  to an
additional  10% of  unimpaired  capital and surplus may be made to a borrower if
the loans are fully secured by readily  marketable  securities.  At December 31,
1996, the Association's limit on loans-to-one borrower was $500,000 and its five
largest loans or groups of loans-to-one borrower,  including persons or entities
related to the borrower, amounted to $538,000,  $495,000, $274,000, $223,000 and
$223,000,  respectively,  at such  date.  The  $538,000  borrowing  relationship
consists  of a  $504,000  commercial  real  estate  loan  which is  treated as a
classified  asset at  December  31,  1996 and a  $34,000  loan to a  corporation
affiliated with the borrower and secured by a boathouse. All of these loans were
current  at  December  31,  1996,  including  the  $504,000  loan  treated  as a
classified asset. See "-Asset Quality-Classified Assets."

         Loans on  Existing  Residential  Properties.  The  primary  real estate
lending activity of the Association is the origination of loans secured by first
mortgage liens on one- to  four-family  residences.  At December 31, 1996,  $8.1
million or 82.9% of the  Association's  total loan portfolio,  before net items,
consisted of conventional first mortgage,  one-to four-family  residential loans
(excluding construction loans).
<PAGE>
         The  loan-to-value  ratio,  maturity and other  provisions of the loans
made by the Association  generally have reflected the policy of making less than
the maximum loan permissible  under applicable  regulations,  in accordance with
sound  lending   practices,   market   conditions  and  underwriting   standards
established by the Association.  The  Association's  lending policies on one- to
four-family residential mortgage loans generally limit the maximum loan-to-value
ratio to 95%

                                       8
<PAGE>
of the lesser of the  appraised  value or purchase  price of the  property,  and
generally   one-  to  four-family   residential   loans  in  excess  of  an  80%
loan-to-value  ratio require private mortgage  insurance.  Residential  mortgage
loans are  amortized  on a monthly  basis with  principal  and interest due each
month and customarily include "due-on-sale" clauses, which are provisions giving
the Association  the right to declare a loan  immediately due and payable in the
event the borrower sells or otherwise  disposes of the real property  subject to
the mortgage or the loan is not repaid.  The  Association  enforces  due-on-sale
clauses to the extent permitted under applicable laws.

         Various  legislative and regulatory  changes have given the Association
the  authority  to  originate  and  purchase  mortgage  loans which  provide for
periodic  interest  rate  adjustments  subject  to  certain   limitations.   the
Association  has  been  actively   marketing  ARMs  in  order  to  decrease  the
vulnerability  of its operations to changes in interest  rates.  At December 31,
1996, one- to four-family  residential ARMs represented $6.2 million or 63.1% of
the total loan portfolio, before net items.

         The  Association's  one- to  four-family  residential  ARMs  are  fully
amortizing loans with contractual maturities of up to 30 years. These loans have
interest rates which are scheduled to adjust  periodically  in accordance with a
designated  index.  The Association  currently offers ARMs on which the interest
rate  adjusts  every  year  based  upon the  monthly  median  cost of funds  for
SAIF-insured institutions, plus a specified margin. The margin above the cost of
funds index is generally  2.65%.  There is a 2% cap on the rate  adjustment  per
period  and a 6% cap on the  rate  adjustment  over the  life of the  loan.  The
Association   has  originated   ARMs  using  other  indexes  in  the  past.  The
adjustable-rate loans in the Association's loan portfolio are not convertible by
their terms into fixed-rate  loans, are not assumable  without the Association's
consent,  do not  contain  prepayment  penalties  and do  not  produce  negative
amortization.

         The Association  qualifies borrowers based on the initial interest rate
on the ARM  rather  than the  fully  indexed  rate.  In a rising  interest  rate
environment,  the interest rate on the ARM will increase on the next  adjustment
date,  resulting in an increase in the borrower's monthly payment. To the extent
the increased rate adversely  affects the borrower's  ability to repay his loan,
the  Association  is exposed to increased  credit risk. As of December 31, 1996,
the Association's non-accruing loans were $52,000. See "-Asset Quality."

         The  demand  for  adjustable-rate  loans in the  Association's  primary
market  area has been a function  of  several  factors,  including  the level of
interest  rates,  and the  difference  between  the  interest  rates  offered by
competitors for fixed-rate loans and adjustable-rate loans. Due to the generally
lower rates of interest  prevailing  in recent  periods,  the market  demand for
adjustable-rate  loans has decreased as consumer preference for fixed-rate loans
has increased.
 
         Construction  Loans.  At  December  31,  1996,  $89,000  or 0.9% of the
Association's total loan portfolio, before net items, consisted of two loans for
the construction of one- to four-family  residences.  Construction loans are not
being  actively  marketed  and are  offered  primarily  as a service to existing
customers. The two construction loans each bear a fixed interest rate during the
construction  phase  and  are  structured  to be  converted  to  adjustable-rate
permanent loans at the end of the construction phase.

         Construction lending is generally considered to involve a higher degree
of risk of loss than long-term financing on improved, owner-occupied real estate
because of the uncertainties of construction, including the possibility of costs
exceeding the initial  estimates and the need to

                                       9
<PAGE>
obtain a tenant or  purchaser if the property  will not be  owner-occupied.  The
Association   generally   attempts  to  mitigate  the  risks   associated   with
construction  lending by, among other  things,  lending  primarily in its market
area, using  conservative  underwriting  guidelines,  and closely monitoring the
construction process.

         Commercial Real Estate Loans. The Association's  commercial real estate
loan portfolio  primarily consists of loans secured by office buildings,  retail
establishments,   churches  and  multi-family   dwellings   located  within  the
Association's  primary  market area.  Commercial  real estate loans  amounted to
$668,000 or 6.8% of the total loan  portfolio at December 31, 1996.  The largest
commercial  real  estate  loan at December  31,  1996 was  $504,000  (gross of a
$190,000  reserve),  and the average  balance of such loans at December 31, 1996
was $82,000.

         Nonresidential  real  estate  loans  may have  terms up to 30 years and
generally have adjustable  rates of interest.  As part of its commitment to loan
quality,  the Association's  senior management reviews each  nonresidential loan
prior to  approval  by the  Board  of  Directors.  All  loans  are  based on the
appraised  value of the secured  property  and loans are  generally  not made in
amounts in excess of 70% of the  appraised  value of the secured  property.  All
appraisals  are  performed  by  an  independent   appraiser  designated  by  the
Association and are reviewed by management. In originating nonresidential loans,
the  Association  considers  the  quality  of the  property,  the  credit of the
borrower, the historical and projected cash flow of the project, the location of
the real estate and the quality of the property management.  A total of $108,000
of  commercial  real  estate  loans  were  originated  in 1996,  and  none  were
originated in 1995.

         Commercial  real estate  lending is generally  considered  to involve a
higher  degree of risk than  single-family  residential  lending.  Such  lending
typically  involves  large loan balances  concentrated  in a single  borrower or
groups of related borrowers for rental or business properties.  In addition, the
payment experience on loans secured by income-producing  properties is typically
dependent  on the success of the  operation  of the related  project and thus is
typically  affected by adverse  conditions  in the real estate market and in the
economy.  The Association  generally  attempts to mitigate the risks  associated
with commercial real estate lending by, among other things, lending primarily in
its market area and using low LTV ratios in the underwriting process.

         Consumer Loans.  The  Association's  consumer loans consist of loans on
deposits and second  mortgage  loans.  The consumer loans are not being actively
marketed  and are  offered  primarily  as a service to  existing  customers.  At
December 31, 1996, loans on deposits amounted to $694,000, representing 79.9% of
total  consumer  loans and 7.1% of the total loan  portfolio,  before net items.
Loans secured by deposit  accounts are  generally  offered with an interest rate
equal to 2% above the rate on the deposit account.
 
         The Association's second mortgage loans amounted to $175,000 or 1.8% of
the total loan portfolio at December 31, 1996. The second  mortgages are secured
by one- to four-family residences,  are for a fixed amount and a fixed term, and
are made to individuals for a variety of purposes.  All of the second  mortgages
at December 31, 1996 have adjustable interest rates.

         The  Association is considering  expanding the types of loans it offers
to include  equity lines of credit and mobile home loans.  The mobile home loans
would be sold to another institution  without recourse.  The Association is also
considering  purchasing loan  participation  interests through another financial
institution.

                                       10
<PAGE>
         Loan Fees and  Servicing  Income.  In addition  to  interest  earned on
loans,  the Association  receives income through the servicing of loans and loan
fees  charged in  connection  with loan  originations  and  modifications,  late
payments,  prepayments,  changes of  property  ownership  and for  miscellaneous
services  related  to its  loans.  Income  from  these  activities  varies  from
period-to-period with the volume and type of loans made.

         Loan  origination  fees or "points" are a percentage  of the  principal
amount of the mortgage loan and are charged to the borrower in  connection  with
the origination of the loan. The Association's  loan origination fees are offset
against direct loan origination  costs, and the resulting net amount is deferred
and amortized as interest income over the contractual  life of the related loans
as an  adjustment  to the  yield  of such  loans.  At  December  31,  1996,  the
Association had approximately $47,000 of loan fees which had been deferred.  The
deferred loan fees are being  recognized as income over the lives of the related
loans.

Asset Quality

         Delinquent Loans. The following table sets forth information concerning
delinquent  loans at December 31, 1996, in dollar amounts and as a percentage of
the  Association's  total 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>
                                                         December 31, 1996
                                 -------------------------------------------------------------------- 
                                     30-59                                         90 or More Days
                                   Days overdue         60-89 Days overdue             Overdue
                                 -------------------------------------------------------------------- 
                                            Percent                 Percent                  Percent
                                            of Total                of Total                 of Total
                                 Amount      Loans       Amount      Loans       Amount       Loans
                                 ------      -----       ------      -----       ------       -----
                                                       (Dollars in Thousands)
<S>                               <C>         <C>         <C>         <C>         <C>          <C>
One- to four-family
   residential real estate
   loans .................        $652        6.64%       $193        1.97%       $ 97         0.99%
commercial real estate
   loans .................          58        0.59         --         --           --          --
Consumer loans ...........         206        2.10           3        0.03           6         0.06
                                  ----        ----        ----        ----        ----         ---- 
   Total delinquent loans         $916        9.33%       $196        2.00%       $103         1.05%
                                  ====        ====        ====        ====        ====         =====
</TABLE>
 
         Nonperforming  Assets.  When a borrower  fails to make a required  loan
payment, the Association attempts to cause the default to be cured by contacting
the borrower. In general, contacts are made after a payment is more than 15 days
past due. A significant  portion of the Association's loans provide for a 45 day
grace period, and no late charge is assessed on these loans until the payment is
46 days past due.  Defaults are cured promptly in most cases. If the delinquency
on a mortgage  loan exceeds 90 days and is not cured  through the  Association's
normal  collection  procedures,  or an acceptable  arrangement is not worked out
with the borrower, the Association will commence foreclosure action.


                                       11
<PAGE>
         If foreclosure is effected,  the property is sold at a sheriff's  sale.
If the Association is the successful  bidder,  the acquired real estate property
is then included in the  Association's  "real estate owned"  account until it is
sold. The Association is permitted under applicable regulations to finance sales
of real estate owned by "loans to  facilitate"  which may involve more favorable
interest rates and terms than generally would be granted under the Association's
underwriting  guidelines.  At December 31, 1996, the Association had no loans to
facilitate.

         The Association  generally places loans on non-accrual  status when the
payment of  interest  becomes  90 days past due or when  interest  payments  are
otherwise deemed uncollectible.

         The  following  table  sets  forth  the  amount  of  the  Association's
nonperforming assets at the dates indicated.
<TABLE>
<CAPTION>
                                                           December 31,
                                                 ------------------------------- 
                                                   1996        1995        1994
                                                   ----        ----        ----
                                                     (Dollars In Thousands)
<S>                                              <C>           <C>         <C>
Total nonperforming assets:
   Non-accruing loans ....................       $   52        $ 76        $ 31
   Real estate owned, net (1) ............           45          92         161
   Non-accruing investment
      securities, net (1) ................           --         --          265
                                                 ------        ----        ----
   Total nonperforming assets ............       $   97        $168        $457
                                                 ======        ====        ====
Troubled debt restructurings .............       $   --        $ 66        $ 64
                                                 ======        ====        ====

Total nonperforming loans and
  troubled debt restructurings
  as a percentage of total loans .........         0.53%       1.35%       0.88%
                                                 ======        ====        ====

Total nonperforming loans and
  troubled debt restructurings
  as a percentage of total assets ........         0.20%       0.55%       1.24%
                                                 ======        ====        ====
-----------------
(1) Net of related loss  allowances as of each date shown,  which  allowances at
December  31, 1996  amounted  to $46,000  for real estate  owned and $62,000 for
non-accruing GIC bonds.
</TABLE>
 
         The $52,000 of  non-accruing  loans at December 31, 1996 consisted of a
one-to four- family  residential  loan for $44,000 and a commercial  real estate
loan for $8,000.

         The Association's real estate owned has steadily declined over the last
three  years,  and at December  31,  1996 the  Association's  real estate  owned
consisted of two one- to four-family  residential  properties and one vacant lot
in the New Orleans metropolitan area. The real estate owned at December 31, 1996
consisted of a single-family  residential property for $45,000, net of reserves,
plus two other  properties that were fully reserved.  The $45,000 of real estate
owned at December 31, 1996 is net of a $46,000 allowance for loss. See Note I of
Notes to Consolidated  Financial  Statements contained in the 1996 Annual Report
to Stockholders, which is filed as Exhibit 13 hereto (the "Annual Report").

                                       12
<PAGE>
         The non-accruing  investment  securities at December 31, 1996 consisted
of the Association's Guaranteed Investment Contract Bonds (the "GIC Bonds"), and
the amount of the  securities  are shown net of the related  allowance for loss.
The  allowance  for loss equalled the  remaining  $62,000  principal  balance at
December  31,  1996.  The GIC  bonds  matured  in 1996 and the  remaining  fully
reserved  balance is an estimate of the amount that the  Association  expects to
receive based on the reports of the GIC bond trustees.

         Classified  Assets. All loans are reviewed on a regular basis under the
Association's  asset  classification  policy. The Association's total classified
assets at December 31, 1996  (excluding loss assets  specifically  reserved for)
amounted to $850,000,  of which  $314,000  was  classified  as special  mention,
$536,000 was classified as substandard,  and $ 0 was classified as doubtful. The
largest   classified  asset  at  December  31,  1996  consisted  of  a  $504,000
adjustable-rate  commercial  real estate loan secured by a furniture store and a
warehouse,  on which the  Association  has  established  reserves of $190,000 at
December  31,  1996.  The  collateral  was  previously  foreclosed  upon  by the
Association,  and the borrower  repurchased  the real estate owned property from
the Association in June 1991 at the  Association's  total carrying value.  Until
recently,  the loan had been  performing in accordance with its terms since June
1992, and the reserve was established  solely because the appraised value of the
collateral in April 1992 was less than the principal balance of the loan. Of the
$504,000  balance at December  31,  1996,  $314,000  was  classified  as special
mention and $190,000 was classified as substandard.  As of March 31, 1997, there
are two payments due for principal,  interest and escrow totalling  $9,400,  and
the loan is thus not current as of such date.  The  Association's  management is
closely monitoring this loan and is discussing its status with the borrower. The
borrower  has pledged to the  Association  a deposit  account  with a balance of
$15,000 to be used to make monthly  payments if necessary.  It is the opinion of
management  that the property  securing this loan has a value  adequate to cover
the net amount of the loan.

         The  remaining  $346,000 of  substandard  assets at  December  31, 1996
consisted of (1)  residential  mortgage loans totalling  $193,000,  of which the
largest loan had a balance of $111,000 at December 31, 1996, and (2) the $91,000
of gross  real  estate  owned,  which is  included  in the above  table net of a
$46,000 reserve. The $111,000  substandard  residential mortgage loan is secured
by a duplex and a $20,000 certificate of deposit at the Association. The $62,000
of substandard  investment  securities  consist of the  Association's GIC bonds,
which are fully reserved at December 31, 1996. The GIC bonds matured in 1996 and
the  remaining  fully  reserved  balance is an  estimate  of the amount that the
Association expects to receive based on the reports of the GIC bond trustees.
 
         Allowance  for Loan Losses.  At December 31,  1996,  the  Association's
allowance  for loan  losses  amounted  to  $530,000  or 5.4% of the  total  loan
portfolio.  The  Association's  loan  portfolio  consists  primarily  of one- to
four-family  residential  loans and, to a lesser extent,  commercial real estate
loans,  construction  loans  and  consumer  loans.  The loan loss  allowance  is
maintained by management at a level considered adequate to cover possible losses
that are currently  anticipated  based on prior loan loss experience,  known and
inherent  risks  in the  portfolio,  adverse  situations  that  may  affect  the
borrower's  ability to repay, the estimated value of any underlying  collateral,
general economic  conditions,  and other factors and estimates which are subject
to  change  over  time.  Although  management  believes  that it uses  the  best
information  available  to  make  such  determinations,  future  adjustments  to
allowances may be necessary,  and net income could be significantly affected, if
circumstances  differ  substantially  from the  assumptions  used in making  the
initial determinations.

                                       13
<PAGE>
           The  following  table  summarizes  changes in the  allowance for loan
losses and other selected statistics for the periods presented:
<TABLE>
<CAPTION>
                                                 At or For the Year Ended December 31,
                                                      1996          1995          1994
                                                  --------      --------      --------
                                                          (Dollars in Thousands)
<S>                                               <C>           <C>           <C>

Total loans outstanding ......................    $  9,812      $ 10,496      $ 10,843
                                                  ========      ========      ========
Allowance for loan losses, beginning of period    $    534      $    558      $    573
Provision (credit) for loan losses ...........          (4)          (24)          (15)
New loans charged-off (recovered)(1) .........        --            --            --
                                                  --------      --------      --------
Allowance for loan losses, end of period .....    $    530      $    534      $    558
                                                  ========      ========      ========
Allowance for loan losses as a percent of
   total loans outstanding ...................         5.4%         5.90%          5.3%
                                                  ========      ========      ========
Allowance for loan losses as a percent of
   nonperforming loans and troubled debt
   restructurings ............................    1,019.23%       702.63%     1,800.00%
                                                  ========      ========      ========
-----------------
(1) There were no loan charge-offs or recoveries in 1996, 1995 and 1994.
</TABLE>
 
         The  following  table  presents  the  allocation  of the  Association's
allowance for loan losses by type of loan at each of the dates indicated.
<TABLE>
<CAPTION>
                                                                 December 31,
                                   ---------------------------------------------------------------------- 
                                            1996                    1995                   1994
                                   ----------------------  ----------------------   --------------------- 
                                                   Loan                    Loan                   Loan
                                                 Category                Category               Category
                                    Amount        as a %     Amount       as a %     Amount       as a %
                                      of         of Total      of        of Total      of        of Total
                                   Allowance       Loans   Allowance      Loans     Allowance     Loans
                                   ---------       -----   ---------      -----     ---------     -----
<S>                                   <C>         <C>         <C>         <C>         <C>        <C>
One-to four-family residential        $298         83.4%      $338         76.7%      $355        81.4%

Construction .................           3          0.9        --           4.7        --          --

Commercial real estate .......         229          6.8        196          8.1        203         8.1

Consumer .....................         --           8.9        --          10.5        --         10.5
                                      ----        -----       ----        -----       ----       -----

Total ........................        $530        100.0%      $534        100.0%      $558       100.0%
                                      ====        =====       ====        =====       ====       =====

</TABLE>
<PAGE>
Mortgage-Backed Securities

        Algiers has invested in a portfolio of  mortgage-backed  securities that
are  insured  or  guaranteed  by the  Federal  Home  Loan  Mortgage  Corporation
("FHLMC"),  the Federal National Mortgage Association ("FNMA") or the Government
National Mortgage Association ("GNMA").  Mortgage-backed  securities (which also
are known as mortgage participation  certificates or pass-through  certificates)
represent  a  participation  interest  in a  pool  of  one-  to  four-family  or
multi-family residential mortgages, the principal and interest payments on which
are passed from the mortgage originators, through intermediaries (generally U.S.
government  agencies  and  government  sponsored   enterprises)  that  pool  and
repackage the  participation  interests in the form of securities,  to investors
such as the  Association.  FHLMC is a public  corporation  chartered by the U.S.
government and guarantees the 

                                       14
<PAGE>
timely  payment  of  interest  and  the  ultimate  return  of  principal.  FHLMC
mortgage-backed  securities  are not  backed by the full faith and credit of the
United  States,  but because FHLMC is a U.S.  government  sponsored  enterprise,
these  securities are considered  high 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.  The GNMA guarantees the timely payment of principal and interest, and
GNMA securities are backed by the full faith and credit of the U.S.  Government.
The FNMA  guarantees  the timely  payment of principal  and  interest,  and FNMA
securities are indirect obligations of the U.S. government.

        Of the $32.9 million of mortgage-backed securities at December 31, 1996,
$23.8 million were accounted for as held to maturity and had an aggregate market
value  of  $23.2  million  at  such  date.   The   remaining   $9.1  million  of
mortgage-backed  securities  at December 31, 1996 are accounted for as available
for sale and are thus  carried  at  market  value.  For  additional  information
relating to the Association's mortgage-backed securities, see Note G of Notes to
Consolidated Financial Statements in the Annual Report.
 
        Mortgage-backed  securities  generally  yield  less than the loans  that
underlie such  securities,  because of the cost of payment  guarantees or credit
enhancements  that result in nominal  credit risk. In addition,  mortgage-backed
securities  are more liquid than  individual  mortgage  loans and may be used to
collateralize  obligations  of  the  Association.  In  general,  mortgage-backed
pass-through  securities are weighted at no more than 20% for risk-based capital
purposes,  compared  to an  assigned  risk  weighting  of 50% to 100% for  whole
residential  mortgage  loans. As a result,  these types of securities  allow the
Association   to  optimize   regulatory   capital  to  a  greater   extent  than
non-securitized  whole loans. While  mortgage-backed  securities carry a reduced
credit risk as compared to whole loans,  such  securities  remain subject to the
risk that a fluctuating interest rate environment, along with other factors such
as the geographic  distribution of the underlying  mortgage loans, may alter the
prepayment rate of such mortgage loans and so affect both the prepayment  speed,
and value, of such securities.

                                       15
<PAGE>
        The  following  table  sets  forth  the  composition  of  the  Company's
mortgage-backed securities at each of the dates indicated.
<TABLE>
<CAPTION>
                                                        December 31,
                                           -------------------------------------
                                              1996           1995           1994
                                              ----           ----           ----
                                                      (In Thousands)
<S>                                        <C>            <C>            <C>
Mortgage-backed
   securities held to
    maturity:
      FNMA ........................        $16,684        $13,971        $11,626
      FHLMC .......................          3,927          2,771          3,568
      GNMA ........................          3,199          3,719          2,470
                                           -------        -------        -------
        Subtotal ..................         23,810         20,461         17,664
                                           -------        -------        -------

Mortgage-backed
   securities available
   for sale:
      FNMA ........................          5,415          3,293          4,837
      FHLMC .......................          2,761          3,237          3,092
      GNMA ........................          1,158          1,764
                                           -------        -------        -------
                                                                             901
        Subtotal ..................          9,077          7,688          9,693
                                           -------        -------        -------
Total .............................        $32,887        $28,149        $27,357
                                           =======        =======        =======


</TABLE>
                                       16
<PAGE>
        Information  regarding the contractual  maturities and weighted  average
yield of the Company's mortgage-backed securities portfolio at December 31, 1996
is presented  below.  Due to  repayments  of the  underlying  loans,  the actual
maturities of mortgage-backed  securities  generally are substantially less than
the scheduled maturities.
<TABLE>
<CAPTION>

                                                   Amounts at December 31, 1996 Which Mature In
                                      ---------------------------------------------------------------------
                                                                     After Five
                                      One Year     After One to          to         Over 10
                                      or Less       Five Years       10 Years        Years         Total
                                      -------       ----------       --------        -----         -----
                                                                   (In Thousands)
<S>                                     <C>            <C>            <C>            <C>            <C>
Held to maturity:
    FNMA ........................       $  --          $   229        $ 1,819        $14,636        $16,684
    FHLMC .......................          --             --             --            3,927          3,927
    GNMA ........................          --             --             --            3,199          3,199
                                        -------        -------        -------        -------        -------
       Total ....................          --              229          1,819         21,762         23,810
                                        -------        -------        -------        -------        -------

    Weighted average
        yield ...................          0.00%          6.08%          6.12%          6.31%          6.30%
                                        =======        =======        =======        =======        =======

Available for sale:
    FNMA ........................            35             29            605          4,746          5,415
    FHLMC .......................          --              163           --            2,598          2,761
    GNMA ........................             8            211            148            534            901
                                        -------        -------        -------        -------        -------
       Total ....................            43            403            753          7,878          9,077
                                        -------        -------        -------        -------        -------

    Weighted average
        yield ...................         12.43%         10.20%          8.40%          7.16%          7.45%
                                        =======        =======        =======        =======        =======
Total mortgage-backed securities:
    FNMA ........................            35            258          2,424         19,382         22,099
    FHLMC .......................          --              163           --            6,525          6,688
    GNMA ........................             8            211            148          3,733          4,100
                                        -------        -------        -------        -------        -------
       Total ....................       $    43        $   632        $ 2,572        $29,640        $32,887
                                        =======        =======        =======        =======        =======

    Weighted average
        yield ...................         12.43%          8.71%          6.79%          6.51%          6.59%
                                        =======        =======        =======        =======        =======


</TABLE>
                                       17
<PAGE>
       The  following  table  sets  forth the  purchases,  sales  and  principal
repayments  of the  Company's  mortgage-backed  securities  during  the  periods
indicated.
<TABLE>
<CAPTION>
                                                    At or For the
                                                Year Ended December 31,
                                        ---------------------------------------
                                          1996           1995           1994
                                        --------       --------       --------
                                                (Dollars in Thousands)
<S>                                     <C>            <C>            <C>
Mortgage-backed securities
  at beginning of period ..........     $ 28,149       $ 27,357       $ 28,002
Purchases .........................        9,228          4,170          6,237
Repayments ........................       (3,676)        (3,653)        (6,338)
Sales
                                            (638)          --             --
Mark to market adjustment .........          (31)           408           (464)
Amortizations of premiums
  and discounts, net...............         (145)          (133)           (80)
                                        --------       --------       --------
Mortgage-backed securities at
  end of period ...................     $ 32,887       $ 28,149       $ 27,357
                                        ========       ========       ========
Weighted average yield at
  end of period ...................         6.59%          6.96%          6.25%
                                        ========       ========       ========
</TABLE>

 Investment Securities

       The investment  policy of the Company,  which is established by the Board
of  Directors,  is designed  to maintain  liquidity  within  regulatory  limits,
maintain  a balance  of  high-quality  investments  to  minimize  risk,  provide
collateral for pledging requirements,  provide alternative investments when loan
demand is low,  maximize  returns while  preserving  liquidity  and safety,  and
manage  interest  rate risk.  The  Association  is required to maintain  certain
liquidity  ratios and does so by investing in securities  that qualify as liquid
assets under OTS  regulations.  Such securities  include  obligations  issued or
fully  guaranteed by the United States  Government  and certain  federal  agency
obligations.

        Investment  securities  (excluding  FHLB stock) totalled $3.3 million or
6.8% of total  assets at December 31,  1996.  Of the $3.3 million of  investment
securities,  which  consists  of U.S.  Government  and agency  securities,  $2.5
million are  accounted  for as available for sale and $825,000 are accounted for
as held to  maturity.  The  aggregate  market value of the  securities  that are
accounted  for as held to  maturity  was  $824,000  at December  31,  1996.  The
investment  securities that are accounted for as available for sale and are thus
carried at market value. At December 31, 1996, $868,000 of investment securities
were  scheduled to mature in one year or less,  and $2.5  million of  investment
securities were scheduled to mature in more than five years.

                                       18
<PAGE>
         The  following  table sets forth  certain  information  relating to the
Company's investment securities portfolio at the dates indicated.
<TABLE>
<CAPTION>
                                                               December 31,
                                  ----------------------------------------------------------------------- 
                                          1996                      1995                      1994
                                  ----------------------------------------------------------------------- 
                                  Carrying     Market      Carrying      Market      Carrying      Market
                                   Value       Value        Value        Value        Value        Value
                                   -----       -----        -----        -----        -----        -----
                                                                 (In Thousands)
<S>                               <C>          <C>          <C>          <C>          <C>          <C>
Available for Sale:
   U.S. Treasury ..........       $ --         $ --         $  697       $  697       $1,150       $1,150
   FHLB notes .............        1,999        1,993         --           --           --           --
   FNMA notes .............          325          325
   FHLMC notes ............          150          151
   Southeast Texas
    Housing Finance
    Authority(1) ..........           43           43           83           83          408          408
   Louisiana Agricultural
    Finance Authority(1) ..           19           19           46           46          216          216
                                  ------       ------       ------       ------       ------       ------
   Subtotal ...............        2,536        2,531          826          826        1,774        1,774

Less:
   Allowance for loss .....           66           60          129          129          339          339
   Discount on securities .            2            2         --           --             20           20
                                  ------       ------       ------       ------       ------       ------
Total available for sale ..        2,468        2,469          697          697        1,415        1,415
                                  ------       ------       ------       ------       ------       ------
Held to maturity
   Louisiana Public
    Facility Authority ....         --           --            300          300          300          300
   FHLB notes .............          425          425          925          904          925          916
   Federal Farm Credit Bank          200          200         --           --           --           --
   Certificates of deposit          --           --           --           --             99           99
   Sallie Mae .............          200          200         --           --           --           --
   FHLB stock .............          455          455          430          430          403          403
                                  ------       ------       ------       ------       ------       ------
Total Held to Maturity ....        1,280        1,280        1,655        1,634        1,727        1,718
                                  ------       ------       ------       ------       ------       ------
    Total .................       $3,748       $3,749       $2,352       $2,331       $3,142       $3,133
                                  ======       ======       ======       ======       ======       ======



(1) Gross of a related  allowance for loss,  which  allowance  equalled the full
amount shown at December 31, 1996.
</TABLE>
                                       19
<PAGE>
         The  following  table sets forth the  amount of  investment  securities
which  mature  during each of the periods  indicated  and the  weighted  average
yields for each range of maturities  at December 31, 1996. No tax-exempt  yields
have been adjusted to a tax-equivlaent basis.
<TABLE>
<CAPTION>

                                                            Amounts at December 31, 1996 Which Mature In
                                     --------------------------------------------------------------------------------------
                                                                     Over One
                                                       Weighted        Year         Weighted         Over          Weighted
                                        One Year        Average      Through        Average          Five          Average
                                        or Less          Yield       Five Years       Yield          Years          Yield
                                        -------          -----       ----------       -----          -----          -----
                                                                     (Dollars in thousands)
<S>                                  <C>                  <C>       <C>                <C>        <C>                 <C>      
Bonds and other debt
 securities available for sale:
    FHLB notes
   and federal agencies              $        -              - %    $        -            - %     $   1,999           7.83%
   FNMA notes                                                                                           325
   FHLMC notes                                                                                          150           7.50
   Southeast Texas Housing                                                                                            8.00
    Finance Authority(1)                     43              -               -            -
   Louisiana Agricultural
    Finance Authority(1)                     19              -               -            -               -              -
                                     ----------           ----      ----------       -------      ---------           ---- 
   Subtotal                                  62              -               -            -           2,474           7.79
                                     ----------           ----      ----------       -------      ---------           ---- 

Bonds and other debt
 securities held to maturity:
   Federal Farm Credit Bank                 200           3.94               -            -               -              -
   Sallie Mae                               200           3.92               -            -               -              -
    FHLB notes(1)                           425           4.29               -            -               -              -
                                     ----------           ----      ----------       -------      ---------           ---- 
  Subtotal                                  825           4.11               -            -               -              -
                                     ----------           ----      ----------       -------      ---------           ---- 

Equity securities held to:
 maturity:
  FHLB stock(2)                               -              -               -            -             455           5.85
                                     ----------           ----      ----------       -------      ---------           ---- 
     Total                           $      887           3.82%     $        -            - %     $   2,929           7.49%
                                     ==========           ====      ==========       =======      =========           ==== 

(1) As a member of the FHLB of Dallas,  the  Association is required to maintain
its investment in FHLB stock, which has no stated maturity.
</TABLE>

          At December 31, 1996, the Company did not have  investments in any one
issuer which exceeded more than 10% of the Company's total stockholders' equity,
except for FHLB notes which had both a carrying value and a market value of $2.0
million at December 31, 1996.
<PAGE>
Sources of Funds

        General.  Deposits are the primary source of the Association's funds for
lending and other  investment  purposes.  In addition to  deposits,  the Company
derives funds from principal and interest payments on loans and  mortgage-backed
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.  Borrowings may be used on a short-term basis
to compensate  for reductions in the  availability  of funds from other sources.
They may also be used on a longer-term basis for general business purposes.

                                       20
<PAGE>
        Deposits.  The  Association's  deposits are attracted  principally  from
within the  Association's  primary  market area  through the offering of a broad
selection of deposit instruments,  including NOW accounts,  money market deposit
accounts ("MMDA's"),  regular savings accounts,  and term certificate  accounts.
Included  among  these  deposit  products  are  individual   retirement  account
certificates  of  approximately  $6.0  million  or 16.0% of  total  deposits  at
December 31, 1996.  Deposit account terms vary,  with the principal  differences
being the minimum  balance  required,  the time periods the funds must remain on
deposit and the interest rate.

        The large variety of deposit  accounts  offered by the  Association  has
increased the Association's ability to retain deposits and allowed it to be more
competitive  in  obtaining  new  funds,  but has not  eliminated  the  threat of
disintermediation  (the flow of funds away from savings institutions into direct
investment vehicles such as government and corporate securities). During periods
of high interest rates,  deposit  accounts that have  adjustable  interest rates
have been more costly than  traditional  passbook  accounts.  In  addition,  the
Association is subject to short-term fluctuations in deposit flows because funds
in  transaction  accounts can be withdrawn at any time and because 64.2 % of the
certificates  of deposit at December  31,  1996 mature in one year or less.  The
Association's  ability to attract and maintain  deposits is affected by the rate
consciousness  of its  customers  and  their  willingness  to  move  funds  into
higher-yielding  accounts.  The  Association's  cost of funds has been, and will
continue to be, affected by money market conditions.
 
         The  following  table shows the  distribution  of , and  certain  other
information  relating to, the Association's  deposits by type of deposit,  as of
the dates indicated.
<TABLE>
<CAPTION>
                                                          December 31,
                             ---------------------------------------------------------------------- 
                                       1996                   1995                     1994
                             ---------------------------------------------------------------------- 
                               Amount        %       Amount         %          Amount         %
                                                     (Dollars in Thousands)
<S>                          <C>           <C>      <C>           <C>        <C>            <C>   
Certificate accounts:
   2.00% - 2.99% .......     $    94         0.3%   $   169         0.5%     $    349         0.9%
   3.00% - 3.99% .......        --             0         12           0          6360        16.8
   4.00% - 4.99% .......       6,957        19.0     10,058        26.3        10,118        26.7
   5.00% - 5.99% .......      13,347        36.4     10,505        27.5         6,946        18.4
   6.00% - 6.99% .......       5,544        15.1      5,704        14.9         3,209         8.5
   7.00% - 7.99% .......       1,990         5.4      2,091         5.5            10         0.1
   8.00% or more .......        --          --            4        --               4        --
                             -------       -----    -------       -----      --------       -----
       Total certificate
         accounts ......      27,932        76.2     28,543        74.7        26,996        71.4
                             -------       -----    -------       -----      --------       -----

Transaction accounts:
  Passbook savings .....       5,774        15.8      6,431        16.8         7,603        20.1
  MMDAs ................       1,216         3.3      1,530         4.0         1,909         5.0
  Demand and NOW
   accounts(1) .........       1,713         4.7      1,699         4.5         1,317         3.5
                             -------       -----    -------       -----      --------       -----
     Total transaction
       accounts ........       8,703        23.8      9,660        25.3        10,829        28.6
                             -------       -----    -------       -----      --------       -----
     Total deposits ....     $36,635       100.0%   $38,203       100.0%      $37,825       100.0%
                             =======       =====    =======       =====       =======       =====
</TABLE>
                                       21
<PAGE>
         The  following  table  presents  the  average  balance  of each type of
deposit  and the  average  rate paid on each  type of  deposit  for the  periods
indicated.
<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                       ----------------------------------------------------------------------- 
                                                1996                     1995                     1994
                                      ------------------------------------------------------------------------ 
                                                     Average                  Average                  Average
                                        Average       Rate       Average       Rate       Average       Rate
                                        Balance       Paid       Balance       Paid       Balance       Paid        
                                        -------       ----       -------       ----       -------       ---- 
                                                                (Dollars in Thousands)
<S>                                    <C>            <C>      <C>             <C>      <C>             <C>

Passbook savings accounts              $   6,856      2.56%    $   6,662       2.73%    $   8,953       2.84%
Demand and NOW accounts                    1,716      2.20         1,453       2.36         1,200       2.49
MMDAs                                      1,475      2.41         1,829       2.56         2,452       2.57
Certificates of deposit                   28,706      5.47        27,296       5.39        27,306       4.21
                                       ---------      ----     ---------       ----     ---------       ----
   Total interest-bearing
     deposits                          $  38,753      4.69%    $  37,240       4.66%    $  39,911       3.75%
                                       =========      ====     =========       ====     =========       ==== 
</TABLE>
         The  following  table sets forth the savings  flows of the  Association
during the periods indicated.
<TABLE>
<CAPTION>
                                                      Year Ended December 31,
                                                -------------------------------- 
                                                 1996         1995        1994
                                                 ----         ----        ----
                                                         (In Thousands)
<S>                                             <C>         <C>         <C>

Increase (decrease) before interest ........    $(3,001)    $  (834)    $(4,581)
   credited
Interest credited ..........................      1,433       1,212       1,056
                                                -------     -------     -------
   Net increase (decrease) in deposits .....    $(1,568)    $   378     $(3,525)
                                                =======     =======     =======


(1) The  information  provided is net of deposits  and  withdrawals  because the
gross amount of deposits and withdrawals is not readily available.
</TABLE>

         The Association attempts to control the flow of deposits by pricing its
accounts to remain generally  competitive  with other financial  institutions in
its market area, but does not  necessarily  seek to match the highest rates paid
by competing institutions. The Association has generally not taken a position of
price  leadership in its markets,  except when there has been an  opportunity to
market longer term deposits.

         The  principal  methods  used by the  Association  to attract  deposits
include the  offering of a wide variety of services  and  accounts,  competitive
interest rates and convenient office locations.
<PAGE>
         The Association  does not advertise for deposits outside of its primary
market area.  At December 31, 1996,  the  Association  had no deposits that were
obtained  through deposit  brokers.  The Association  does not actively  solicit
broker deposits and does not pay fees to such brokers.

                                       22
<PAGE>
         The following table presents, by various interest rate categories,  the
amount of  certificates  of  deposit at  December  31,  1996 and the  amounts at
December 31, 1996 which mature during the periods indicated.
<TABLE>
<CAPTION>
                                          Balance at December 31, 1996
                                  Maturing in the 12 Months Ending December 31,
                             -----------------------------------------------------
Certificates of Deposit        1997        1998      1999     Thereafter   Total
-----------------------        ----        ----      ----     ----------   -----
<S>                          <C>           <C>      <C>         <C>        <C>           
Certificate accounts:
   2.00% - 2.99% .......     $    94      $  --     $  --      $  --       $    94
   3.00% - 3.99% .......        --           --        --         --           --
   4.00% - 4.99% .......       6,957         --        --         --         6,957
   5.00% - 5.99% .......       5,975       5,551     1,730         91       13,347
   6.00% - 6.99% .......       4,039         452        26      1,027        5,544
   7.00% - 7.99% .......         876         124        51        939        1,990
   8.00% or more .......        --           --        --         --           --
                             -------      ------    ------     ------      -------     
       Total certificate
         accounts ......      17,941      $6,127    $1,807     $2,057      $27,932
                             =======      ======    ======     ======      ======= 
</TABLE>
         The  following  table sets forth the  maturities  of the  Association's
certificates  of  deposit  of  $100,000  or more at  December  31,  1996 by time
remaining to maturity.
<TABLE>
<CAPTION>

Maturing During Quarter Ending:                     Amounts
--------------------------------------------------------------- 
                                                 (In Thousands)
<S>                                               <C>
March 31, 1997                                    $       315
June 30, 1997                                             108
September 30, 1997                                        412
December 31, 1997                                         122
After December 31, 1997                                 1,048
                                                  -----------
   Total certificates of deposit with
      balances of $100,000 or more                $     2,005
                                                  ===========
</TABLE>

         Borrowings. The Association may obtain advances from the FHLB of Dallas
upon the  security  of the common  stock it owns in that bank and certain of its
residential   mortgage   loans,   investment   securities  and   mortgage-backed
securities,  provided certain  standards  related to credit worthiness have been
met. See  "Regulation  - The  Association - Federal Home Loan Bank System." Such
advances are made pursuant to several credit programs, each of which had its own
interest rate and range of maturities.  Such advances are generally available to
meet seasonal and other  withdrawals of deposit accounts and to permit increased
lending. At December 31, 1996, the Association had $1.5 million in advances from
the FHLB of Dallas.
 
Subsidiary

         At December  31,  1996,  the  Association  had no  subsidiaries.  Under
Louisiana law, a state-chartered  association may invest up to 10% of its assets
in service  organizations  or  corporations.  One  December 26, 1996 the Company
formed a subsidiary  corporation,  Jefferson Community Lending, LLC (the "LLC"),
along with Jefferson  Community Housing Foundation (the  "Foundation").  The LLC
was formed to originate  mortgage loans for sale in the secondary  market. As of
December 31, 1996 the LLC has an operating loss of approximately $ 14,000, which
was organizational costs.

                                       23
<PAGE>
Competition

         The Company faces significant  competition both in attracting  deposits
and in  making  loans.  Its  most  direct  competition  for  deposits  has  come
historically from commercial banks, credit unions and other savings institutions
located in its primary market area, including many large financial  institutions
which have greater financial and marketing  resources available to them. Some of
the  Company's  major  competitors  include Bank One,  Hibernia  National  Bank,
Whitney  National  Bank,  First  National  Bank of Commerce  and Fifth  District
Savings  and  Loan.  In  addition,  the  Company  faces  additional  significant
competition for investors'  funds from short-term  money market mutual funds and
issuers of  corporate  and  government  securities.  The  Company  competes  for
deposits  principally by offering depositors a variety of deposit programs.  The
Company does not rely upon any individual group or entity for a material portion
of its deposits.  The Company  estimates that its market share of total deposits
in Orleans parish and Jefferson parish, Louisiana is less than 1.0%.

         The Company's  competition for real estate loans comes principally from
mortgage banking  companies,  commercial banks,  other savings  institutions and
credit unions. The Company competes for loan originations  primarily through the
interest  rates and loan fees it  charges,  and the  efficiency  and  quality of
services it provides  borrowers  and real estate  brokers.  Factors which affect
competition include general and local economic conditions, current interest rate
levels and volatility in the mortgage markets.

Employees

         The Company and its subsidiaries had 12 full-time employees at December
31, 1996.  None of these  employees are  represented by a collective  bargaining
agent,  and the  Company  believes  that  it  enjoys  good  relations  with  its
personnel.

                                   REGULATION

The Company

          General. The Company, as a registered savings and loan holding company
within the meaning of the Home Owners' Loan Act, as amended ("HOLA"), is subject
to OTS regulations,  examinations,  supervision and reporting requirements. As a
subsidiary of a savings and loan holding company,  the Association is subject to
certain restrictions in its dealings with the Company and affiliates thereof.
 
         Activities  Restrictions.  There are generally no  restrictions  on the
activities of a savings and loan holding company which holds only one subsidiary
savings  institution.  However, if the Director of the OTS determines that there
is  reasonable  cause to believe  that the  continuation  by a savings  and loan
holding  company of an  activity  constitutes  a serious  risk to the  financial
safety,  soundness or  stability  of its  subsidiary  savings  institution,  the
Director may impose such  restrictions as deemed necessary to address such risk,
including  limiting (i) payment of dividends  by the savings  institution;  (ii)
transactions  between the savings institution and its affiliates;  and (iii) any
activities of the savings  institution that might create a serious risk that the
liabilities  of the  holding  company and its  affiliates  may be imposed on the
savings institution.  Notwithstanding the above rules as to permissible business
activities  of  unitary  savings  and loan  holding  companies,  if the  savings
institution  subsidiary of such a holding company fails to meet the QTL test, as
discussed  under "-The  Association  - Qualified  Thrift Lender Test," then such
unitary holding company also shall become subject to the activities restrictions
applicable  to  multiple  savings and loan  holding  companies  and,  unless the
savings  institution  requalifies 

                                       24
<PAGE>
as a QTL within one year  thereafter,  shall  register as, and become subject to
the restrictions  applicable to, a bank holding company. See "-The Association -
Qualified Thrift Lender Test."

         If the Company were to acquire control of another savings  institution,
other than through merger or other business  combination  with the  Association,
the Company would thereupon  become a multiple savings and loan holding company.
Except where such acquisition is pursuant to the authority to approve  emergency
thrift  acquisitions and where each subsidiary savings institution meets the QTL
test,  as set  forth  below,  the  activities  of  the  Company  and  any of its
subsidiaries   (other  than  the   Association  or  other   subsidiary   savings
institutions) would thereafter be subject to further  restrictions.  Among other
things, no multiple savings and loan holding company or subsidiary thereof which
is not a savings  institution shall commence or continue for a limited period of
time after  becoming a multiple  savings and loan holding  company or subsidiary
thereof any business activity, upon prior notice to and no objection by the OTS,
other than:  (i) furnishing or performing  management  services for a subsidiary
savings  institution;  (ii) conducting an insurance  agency or escrow  business;
(iii)  holding,  managing,  or  liquidating  assets owned by or acquired  from a
subsidiary  savings  institution;  (iv) holding or managing  properties  used or
occupied by a subsidiary savings institution;  (v) acting as trustee under deeds
of trust; (vi) those activities  authorized by regulation as of March 5, 1987 to
be engaged in by multiple  savings and loan holding  companies;  or (vii) unless
the Director of the OTS by regulation  prohibits or limits such  activities  for
savings and loan holding  companies,  those activities  authorized by the FRB as
permissible  for bank holding  companies.  Those  activities  described in (vii)
above also must be approved by the Director of the OTS prior to being engaged in
by a multiple savings and loan holding company.

         Limitations  on  Transactions  with  Affiliates.  Transactions  between
savings  institutions  and any affiliate are governed by Sections 23A and 23B of
the  Federal  Reserve  Act  and  OTS  regulations.  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,  such provisions (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 such
provisions, 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.
<PAGE>
         In addition,  Sections 22(h) and (g) of the Federal  Reserve Act places
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 and 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 

                                       25
<PAGE>
exceed the institution's  unimpaired capital and surplus.  Furthermore,  Section
22(g) places additional restrictions on loans to executive officers. At December
31, 1996, the Association was in compliance with the above restrictions.

         Restrictions  on  Acquisitions.  Except  under  limited  circumstances,
savings and loan holding companies are prohibited from acquiring,  without prior
approval  of  the  Director  of the  OTS,  (i)  control  of  any  other  savings
institution or savings and loan holding company or substantially  all the assets
thereof or (ii) more than 5% of the voting  shares of a savings  institution  or
holding  company  thereof  which is not a  subsidiary.  Except  with  the  prior
approval  of the  Director  of the OTS,  no director or officer of a savings and
loan holding  company or person owning or controlling by proxy or otherwise more
than  25%  of  such  company's   stock,  may  acquire  control  of  any  savings
institution,  other  than a  subsidiary  savings  institution,  or of any  other
savings and loan holding company.

         The Director of the OTS may only approve acquisitions  resulting in the
formation of a multiple  savings and loan holding company which controls savings
institutions in more than one state if (i) the multiple savings and loan holding
company involved controls a savings  institution which operated a home or branch
office  located in the state of the  institution  to be  acquired as of March 5,
1987;  (ii) the  acquirer  is  authorized  to  acquire  control  of the  savings
institution  pursuant to the  emergency  acquisition  provisions  of the Federal
Deposit Insurance Act ("FDIA");  or (iii) the statutes of the state in which the
institution to be acquired is located  specifically  permit  institutions  to be
acquired  by the  state-chartered  institutions  or  savings  and  loan  holding
companies  located in the state where the  acquiring  entity is located (or by a
holding company that controls such state-chartered savings institutions).
 
         Under the Bank Holding  Company Act of 1956,  the FRB is  authorized to
approve an application by a bank holding company to acquire control of a savings
institution.  In  addition,  a bank  holding  company  that  controls  a savings
institution  may merge or consolidate  the assets and liabilities of the savings
institution  with, or transfer  assets and  liabilities  to, any subsidiary bank
which is a member of the Bank  Insurance  Fund  ("BIF") with the approval of the
appropriate federal banking agency and the FRB. As a result of these provisions,
there have been a number of acquisitions of savings institutions by bank holding
companies in recent years.

The Association

         General. The OFI is the Association's chartering authority, and the OTS
is the  Association's  primary  federal  regulator.  The OTS  and  the OFI  have
extensive   authority  over  the  operations  of   Louisiana-chartered   savings
institutions.  As part of this authority,  savings  institutions are required to
file  periodic  reports  with the OTS and the OFI and are  subject  to  periodic
examinations  by the OTS,  the OFI and the  FDIC.  The  investment  and  lending
authority  of  savings   institutions   are   prescribed  by  federal  laws  and
regulations,   and  such  institutions  are  prohibited  from  engaging  in  any
activities  not  permitted by such laws and  regulations.  Such  regulation  and
supervision is primarily intended for the protection of depositors.

         The OTS' enforcement  authority over all savings institutions and their
holding  companies  includes,  among other  things,  the ability to assess civil
money  penalties,  to issue  cease and desist or removal  orders and to initiate
injunctive actions.  In general,  these enforcement actions may be initiated for
violations  of laws and  regulations  and unsafe and  unsound  practices.  Other
actions or inactions may provide the basis for  enforcement  actions,  including
misleading or untimely reports filed with the OTS.

                                       26
<PAGE>
         On  December  19,  1991,  the  Federal  Deposit  Insurance  Corporation
Improvement  Act of 1991  ("FDICIA")  was enacted into law. The FDICIA  provided
for, among other things, the  recapitalization  of the BIF; the authorization of
the FDIC to make  emergency  special  assessments  under  certain  circumstances
against BIF members and members of the SAIF;  the  establishment  of  risk-based
deposit   insurance   premiums;   and  improved   examinations   and   reporting
requirements.  The FDICIA also  provided for  enhanced  federal  supervision  of
depository  institutions based on, among other things, an institution's  capital
level. See" - Prompt Corrective Action."

         Insurance of Accounts.  The deposits of the  Association are insured to
the maximum extent permitted by the SAIF, which is administered by the FDIC, and
are backed by the full faith and credit of the U.S. Government.  As insurer, the
FDIC is  authorized  to conduct  examinations  of, and to require  reporting by,
FDIC-insured  institutions.  It also may prohibit any  FDIC-insured  institution
from engaging in any activity the FDIC determines by regulation or order to pose
a serious  threat  to the FDIC.  The FDIC  also has the  authority  to  initiate
enforcement  actions  against  savings  institutions,  after  giving  the OTS an
opportunity to take such action.
 
         Under  current FDIC  regulations,  institutions  are assigned to one of
three  capital  groups which are based  solely on the level of an  institution's
capital--"well       capitalized,"       "adequately      capitalized,"      and
"undercapitalized"--which  are  defined  in the same  manner as the  regulations
establishing the prompt  corrective  action system under Section 38 of the FDIA,
as discussed  below.  These three  groups are then divided into three  subgroups
which  reflect  varying  levels of  supervisory  concern,  from those  which are
considered  to be healthy to those  which are  considered  to be of  substantial
supervisory  concern.  The matrix so created  results  in nine  assessment  risk
classifications,  with rates  ranging  prior to September 30, 1996 from .23% for
well capitalized, healthy institutions to .31% for undercapitalized institutions
with  substantial   supervisory   concerns.   The  insurance  premiums  for  the
Association for the first half of 1994 were .26% (per annum) of insured deposits
and for each of the semi-annual periods from the second half of 1994 through the
first half of 1996 were .23% (per annum) of insured deposits.

         The deposits of the Association are currently insured by the SAIF. Both
the SAIF and the 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 has achieved a fully funded status
and, therefore,  as discussed below, the FDIC recently substantially reduced the
average  deposit   insurance  premium  paid  by  commercial  banks  to  a  level
approximately 75% below the average premium then paid by savings institutions.

         On November 14, 1995, the FDIC approved a final rule regarding  deposit
insurance  premiums.  The final rule reduces deposit insurance  premiums for BIF
member  institutions  to zero basis  points  (subject to a $2,000  minimum)  for
institutions  in the lowest  risk  category,  while  holding  deposit  insurance
premiums  for SAIF  members at their then  current  levels (23 basis  points for
institutions  in the lowest risk  category).  The reduction  was effective  with
respect to the semiannual premium assessment beginning January 1, 1996.

         On September 30, 1996,  President  Clinton signed into law  legislation
which eliminates the premium differential between SAIF-insured  institutions and
BIF-insured  institutions by recapitalizing  the SAIF's reserves to the required
ratio.  The  legislation  required all SAIF member  institutions  pay a one-time
special  assessment to recapitalize  the SAIF,  with the aggregate  amount to be
<PAGE>
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.


                                       27
<PAGE>
         Implementing  FDIC regulations  imposed a one-time  special  assessment
equal to 65.7 basis  points  for all  SAIF-assessable  deposits  as of March 31,
1995,  which was  accrued as an expense on  September  30,  1996.  The  one-time
special  assessment for the Association  amount to $241,000.  Net of related tax
benefits,  the  one-time  special  assessment  amounted  to $159,000 or $.25 per
share.  The payment of such  special  assessment  had the effect of  immediately
reducing the Association's capital by such amount. Nevertheless, management does
not believe that this one-time special  assessment had a material adverse effect
on the Company's consolidated financial condition.
 
         In the fourth quarter of 1996,  the FDIC lowered the  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 generally range
from zero basis points to 27 basis points, except that during the fourth quarter
of 1996,  the rates for SAIF  members  ranged  from 18 basis  points to 27 basis
points  in order  to  include  assessments  paid to the  Financing  Corporations
("FICO"). From 1997 through 1999, SAIF members will pay 6.4 basis points to fund
the FICO, while BIF member institutions will pay approximately 1.3 basis points.
The  Association's  insurance  premiums,  which had amounted to 23 basis points,
were thus reduced to 6.4 basis points  effective  January 1, 1997.  Based on the
$36.5 million of assessable  deposits at December 31, 1996, the Association will
pay $30,000 less in insurance premiums in the first half of 1997.

         The FDIC may terminate the deposit insurance of any insured  depository
institution,  including the  Association,  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 months to two years, as determined by
the FDIC. Management is aware of no existing circumstances which would result in
termination of the Association's deposit insurance.

         Regulatory Capital Requirements. Federally insured savings institutions
are  required to maintain  minimum  levels of  regulatory  capital.  The OTS has
established  capital  standards  applicable to all savings  institutions.  These
standards generally must be as stringent as the comparable capital  requirements
imposed  on  national  banks.  The OTS  also is  authorized  to  impose  capital
requirements  in excess  of these  standards  on  individual  institutions  on a
case-by-case basis.

         Current OTS capital standards  require savings  institutions to satisfy
three  different   capital   requirements.   Under  these   standards,   savings
institutions must maintain "tangible" capital equal to at least 1.5% of adjusted
total assets, "core" capital equal to at least 3.0% of adjusted total assets and
"total" capital (a combination of core and "supplementary"  capital) equal to at
least 8.0% of  "risk-weighted"  assets.  For  purposes of the  regulation,  core
capital generally consists of common  stockholders'  equity (including  retained
earnings), noncumulative perpetual preferred stock and related surplus, minority
interests in the equity  accounts of fully  consolidated  subsidiaries,  certain
nonwithdrawable  accounts  and  pledged  deposits  and  "qualifying  supervisory
goodwill."  Tangible  capital is given the same  definition  as core capital but
does not include qualifying supervisory goodwill and is reduced by the amount of
all the savings  institution's  intangible assets, with only a limited exception
for purchased  mortgage  servicing rights. At December 31, 1996, the Association
had no goodwill or other  intangible  assets which are deducted in computing its
tangible  capital.  Both core and  tangible  capital are  further  reduced by an
amount  equal  to  a  savings  institution's  debt  and  equity 

                                       28
<PAGE>
investments in  subsidiaries  engaged in activities not  permissible to national
banks (other than  subsidiaries  engaged in  activities  undertaken as agent for
customers  or  in  mortgage   banking   activities  and  subsidiary   depository
institutions or their holding companies).  At December 31, 1996, the Association
had no subsidiaries.
 
         In determining  compliance with the risk-based capital  requirement,  a
savings  institution  is allowed to include both core capital and  supplementary
capital in its total capital,  provided that the amount of supplementary capital
included does not exceed the savings  institution's core capital.  Supplementary
capital generally consists of hybrid capital  instruments;  perpetual  preferred
stock which is not eligible to be included as core  capital;  subordinated  debt
and intermediate-term preferred stock; and general allowances for loan losses up
to a maximum of 1.25% of  risk-weighted  assets.  In  determining  the  required
amount of risk-based capital, total assets,  including certain off-balance sheet
items,  are  multiplied by a risk weight based on the risks inherent in the type
of assets.  The risk weights  assigned by the OTS for  principal  categories  of
assets  are (i) 0% for cash and  securities  issued  by the U.S.  Government  or
unconditionally backed by the full faith and credit of the U.S. Government; (ii)
20%  for   securities   (other   than   equity   securities)   issued   by  U.S.
Government-sponsored agencies and mortgage-backed securities issued by, or fully
guaranteed  as to principal  and interest by, the FNMA or the FHLMC,  except for
those  classes  with  residual  characteristics  or  stripped   mortgage-related
securities;  (iii) 50% for prudently  underwritten permanent one- to four-family
first  lien  mortgage  loans  not  more  than 90 days  delinquent  and  having a
loan-to-value  ratio of not more than 80% at origination  unless insured to such
ratio by an insurer  approved by the FNMA or the FHLMC,  qualifying  residential
bridge  loans  made  directly  for  the  construction  of  one-  to  four-family
residences, and qualifying multi-family residential loans; and (iv) 100% for all
other loans and investments,  including  consumer loans,  commercial  loans, and
one- to four-family  residential real estate loans more than 90 days delinquent,
and for repossessed assets.

         In  August  1993,  the  OTS  adopted  a  final  rule  incorporating  an
interest-rate risk component into the risk-based capital  regulation.  Under the
rule, an  institution  with a greater than "normal"  level of interest rate risk
will be subject to a deduction of its interest  rate risk  component  from total
capital for purposes of calculating its risk-based capital. As a result, such an
institution will be required to maintain  additional  capital in order to comply
with the risk-based  capital  requirement.  An  institution  with a greater than
"normal"  interest  rate risk is defined as an  institution  that would suffer a
loss of net portfolio  value  exceeding 2.0% of the estimated  economic value of
its assets in the event of a 200 basis point  increase or decrease (with certain
minor  exceptions) in interest  rates.  The interest rate risk component will be
calculated,  on a quarterly  basis,  as one-half  of the  difference  between an
institution's  measured interest rate risk and 2.0%,  multiplied by the economic
value of its assets.  The rule also  authorizes  the Director of the OTS, or his
designee,  to waive or defer an institution's  interest rate risk component on a
case-by-case  basis.  The final rule was  originally  effective as of January 1,
1994,  subject however to a two quarter "lag" time between the reporting date of
the data used to calculate an institution's interest rate risk and the effective
date of each quarter's  interest rate risk component.  However,  in October 1994
the Director of the OTS indicated that it would waive the capital deductions for
institutions  with a greater  than  "normal"  risk  until the OTS  published  an
appeals  process.  On August 21, 1995, the OTS released Thrift Bulletin 67 which
established (i) an appeals process to handle  "requests for  adjustments" to the
interest  rate risk  component  and (ii) a process  by which  "well-capitalized"
institutions may obtain  authorization to use their own interest rate risk model
to  determine  their  interest  rate risk  component.  The  Director  of the OTS
indicated,  concurrent with the release of Thrift Bulletin 67, that the OTS will
continue to delay the  implementation of the capital deduction for interest rate
risk pending the testing of the appeals process set forth in Thrift Bulletin 67.

                                       29
<PAGE>
         At December 31, 1996,  the  Association  exceeded all of its regulatory
capital  requirements,  with  tangible,  core and  risk-based  capital ratios of
14.83%,  14.83% and 54.24%,  respectively.  The  following  table sets forth the
Association's ' compliance with each of the above-described capital requirements
as of December 31, 1996.
<TABLE>
<CAPTION>

                                            Tangible       Core        Risk-Based
                                            Capital      Capital(1)     Capital(2)
                                            -------      ----------     ----------
                                                     (Dollars in Thousands)
<S>                                          <C>           <C>           <C>
Capital under GAAP ...................       $6,751        $6,751        $6,751
Additional capital items:
  General valuation
   allowances(3) .....................         --            --             173
   Net unrealized loss on
   securities available for sale .....           26            26            26
                                             ------        ------        ------
Regulatory capital ...................        6,777         6,777         6,950
Minimum required
   regulatory capital(4) .............          686         1,371         1,025
                                             ------        ------        ------
Excess regulatory capital ............       $6,091        $5,406        $5,925
                                             ======        ======        ======
Regulatory capital as a
percentage ...........................        14.83%        14.83%        54.24%
Minimum capital required
as a percentage(4) ...................         1.50          3.00          8.00
                                             ------        ------        ------
Regulatory capital as a
percentage in excess of
requirements .........................        13.33%        11.83%        46.24%
                                             ======        ======        ======
------------
(1) Does not reflect the 4.0%  requirement to be met in order for an institution
to be "adequately capitalized." See " -Prompt Corrective Action."

(2) Does not reflect the interest-rate  risk component in the risk-based capital
requirement, the effective date of which has been postponed as discussed above.

(3) General valuation  allowances are only used in the calculation of risk-based
capital. Such allowances are limited to 1.25% of risk-weighted assets.

(4) Tangible and core  capital are  computed as a percentage  of adjusted  total
assets of $45.7  million.  Risk-based  capital is  computed as a  percentage  of
adjusted risk-weighted assets of $12.8 million.
</TABLE>
         Effective  November 28, 1994, the OTS revised its interim policy issued
in August  1993 under  which  savings  institutions  computed  their  regulatory
capital in accordance with SFAS No.115,  "Accounting for Certain  Investments in
Debt and Equity Securities." Under the revised OTS policy,  savings institutions
must  value  securities  available  for sale at  amortized  cost for  regulatory
capital  purposes.  This means that in  computing  regulatory  capital,  savings
institutions  should add back any  unrealized  losses and deduct any  unrealized
gains, net of income taxes, on debt securities  reported as a separate component
of GAAP capital.  This change in policy increased the  Association's  regulatory
capital at December 31, 1996 by approximately $26,000.
<PAGE>
         A savings  institution  which is not in capital  compliance or which is
otherwise  deemed  to  require  more  than  normal  supervision  is  subject  to
restrictions  on its ability to grow  pursuant to

                                       30
<PAGE>
Regulatory  Bulletin 3a-1. In addition,  a provision of HOLA generally  provides
that  the  Director  of the OTS  must  restrict  the  asset  growth  of  savings
institutions  not  in  regulatory  capital  compliance,  subject  to  a  limited
exception for growth not exceeding interest credited.

         A  savings  institution  which  is not in  capital  compliance  is also
automatically  subject to the following:  (i) new directors and senior executive
officers and employment contracts for senior executive officers must be approved
by the OTS in advance;  (ii) the savings institution may not accept or renew any
brokered  deposits;  (iii) the  savings  institution  is  subject  to higher OTS
assessments as a capital-deficient institution; and (iv) the savings institution
may not make any capital distributions without prior written approval.

         Any savings  institution that fails any of the capital  requirements is
subject to possible  enforcement  actions by the OTS or the FDIC.  Such  actions
could  include a  capital  directive,  a cease and  desist  order,  civil  money
penalties,  the establishment of restrictions on the  institution's  operations,
termination of federal deposit insurance and the appointment of a conservator or
receiver.  The OTS'  capital  regulation  provides  that such  actions,  through
enforcement proceedings or otherwise,  could require one or more of a variety of
corrective actions.

         Prompt Corrective Action. Under Section 38 of the FDIA, as added by the
FDICIA, each federal banking agency was required to implement a system of prompt
corrective  action for  institutions  which it  regulates.  The federal  banking
agencies,  including  the OTS,  adopted  substantially  similar  regulations  to
implement  Section 38 of the FDIA,  effective as of December 19, 1992. Under the
regulations,  an  institution is deemed to be (i) "well  capitalized"  if it has
total risk-based capital of 10.0% or more, has a Tier 1 risk-based capital ratio
of 6.0% or more, has a Tier 1 leverage  capital ratio of 5.0% or more and is not
subject to any order or final capital  directive to meet and maintain a specific
capital level for any capital measure, (ii) "adequately capitalized" if it has a
total  risk-based  capital  ratio of 8.0% or more, a Tier 1  risk-based  capital
ratio of 4.0% or more and a Tier 1 leverage  capital ratio of 4.0% or more (3.0%
under  certain  circumstances)  and  does  not  meet  the  definition  of  "well
capitalized,"  (iii)  "undercapitalized"  if it has a total  risk-based  capital
ratio that is less than 8.0%,  a Tier 1  risk-based  capital  ratio that is less
than 4.0% or a Tier 1 leverage  capital ratio that is less than 4.0% (3.0% under
certain circumstances),  (iv) "significantly undercapitalized" if it has a total
risk-based  capital  ratio that is less than 6.0%, a Tier 1  risk-based  capital
ratio  that is less than 3.0% or a Tier 1  leverage  capital  ratio that is less
than 3.0%, and (v) "critically  undercapitalized"  if it has a ratio of tangible
equity to total  assets  that is equal to or less than  2.0%.  Section 38 of the
FDIA and the regulations promulgated thereunder also specify circumstances under
which a federal banking agency may reclassify a well capitalized  institution as
adequately capitalized and may require an adequately capitalized  institution or
an undercapitalized institution to comply with supervisory actions as if it were
in the  next  lower  category  (except  that  the  FDIC  may  not  reclassify  a
significantly undercapitalized institution as critically undercapitalized).
 
         An institution  generally must file a written capital  restoration plan
which meets specified  requirements  with an appropriate  federal banking agency
within 45 days of the date that the institution  receives notice or is deemed to
have  notice  that it is  undercapitalized,  significantly  undercapitalized  or
critically   undercapitalized.   A  federal  banking  agency  must  provide  the
institution with written notice of approval or disapproval  within 60 days after
<PAGE>
receiving a capital  restoration  plan,  subject to extensions by the agency. An
institution  which  is  required  to  submit a  capital  restoration  plan  must
concurrently  submit a  performance  guaranty by each company that  controls the
institution. In addition,  undercapitalized  institutions are subject to various
regulatory  restrictions,  and the  appropriate  federal banking agency also may
take any number of discretionary supervisory actions.

                                       31
<PAGE>
         At December 31, 1996,  the  Association  was deemed a well  capitalized
institution for purposes of the above  regulations and as such is not subject to
the above mentioned restrictions.

         Safety and Soundness.  On November 18, 1993, a joint notice of proposed
rulemaking  was issued by the OTS, the FDIC,  the Office of  Comptroller  of the
Currency and the FRB  (collectively,  the "agencies")  concerning  standards for
safety and soundness required to be prescribed by regulation pursuant to Section
39 of the  FDIA.  In  general,  the  standards  relate  to (1)  operational  and
managerial matters;  (2) asset quality and earnings;  and (3) compensation.  The
operational and managerial standards cover (a) internal controls and information
systems,  (b)  internal  audit  system,  (c)  loan  documentation,   (d)  credit
underwriting,  (e)  interest  rate  risk  exposure,  (f) asset  growth,  and (g)
compensation,  fees and benefits.  Under the proposed asset quality and earnings
standards,  the Association would be required to maintain (1) a maximum ratio of
classified  assets (assets  classified  substandard,  doubtful and to the extent
that related losses have not been recognized,  assets  classified loss) to total
capital of 1.0, and (2) minimum  earnings  sufficient to absorb  losses  without
impairing  capital.  The last ratio  concerning  market  value to book value was
determined  by  the  agencies  not  to  be  feasible.   Finally,   the  proposed
compensation  standard states that compensation will be considered  excessive if
it is unreasonable or disproportionate to the services actually performed by the
individual being  compensated.  Legislation  enacted in 1994: (1) authorizes the
agencies to establish safety and soundness  standards by regulation or guideline
for  all  insured  depository  institutions;  (2)  gives  the  agencies  greater
flexibility in prescribing  asset quality and earnings  standards by eliminating
the  requirement  that  agencies  establish  quantitative  standards;   and  (3)
eliminates  the  requirement  that  the  standards  referenced  above  apply  to
depository  institution  holding companies.  The agencies have published a final
rule and interagency guidelines  ("Guidelines"),  which were effective August 9,
1995,  as well as asset  quality and earning  standards  which were added to the
Guidelines effective October 1, 1996.

         Under the Guidelines  and final rule of the OTS, if an insured  savings
institution  fails to meet any of the standards  promulgated by the  Guidelines,
then the OTS may require  such  institution  to submit a plan within 30 days (or
such different period specified by the OTS) specifying the steps it will take to
correct  the  deficiency.  In the event that an  institution  fails to submit or
fails in any material  respect to  implement a  compliance  plan within the time
allowed by the OTS, the OTS must order the institution to correct the deficiency
and may (1) restrict asset growth;  (2) require the  institution to increase its
ratio of tangible equity to assets;  (3) restrict the rates of interest that the
institution  may pay; or (4) take any other  action that would  better carry out
the purpose of prompt corrective action. The Association  believes that it is in
compliance with the Guidelines and final rule as adopted.
 
         Liquidity  Requirements.  All  savings  institutions  are  required  to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity  requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings  institutions.  At the present time,  the required  minimum
liquid  asset ratio is 5%. At December  31, 1996,  the  Association's  liquidity
ratio was 9.4%.
<PAGE>
         Capital Distributions.  OTS regulations govern capital distributions by
savings  institutions,  which  include  cash  dividends,  stock  redemptions  or
repurchases, cash-out mergers, interest payments on certain convertible debt and
other  transactions  charged to the capital account of a savings  institution to
make capital distributions.  Generally, the regulation creates a safe harbor for
specified levels of capital  distributions  from  institutions  meeting at least
their minimum capital requirements,  so long as such institutions notify the OTS
and receive no objection to the distribution from the OTS. Savings 

                                       32
<PAGE>
institutions  and  distributions  that do not  qualify  for the safe  harbor are
required to obtain prior OTS approval before making any capital distributions.

         Generally,  a savings  institution  that before and after the  proposed
distribution  meets or exceeds its fully phased-in capital  requirements (Tier 1
institutions) may make capital  distributions  during any calendar year equal to
the higher of (i) 100% of net income for the calendar  year-to-date  plus 50% of
its "surplus capital ratio" at the beginning of the calendar year or (ii) 75% of
net income over the most recent four-quarter period. The "surplus capital ratio"
is defined to mean the percentage by which the institution's  tangible,  core or
risk-based  capital  ratio  exceeds its  tangible,  core or  risk-based  capital
requirement. Failure to meet minimum capital requirements will result in further
restrictions on capital  distributions,  including possible  prohibition without
explicit OTS approval. See "-Regulatory Capital Requirements."

         In order to make  distributions  under these safe  harbors,  Tier 1 and
Tier 2  institutions  must  submit  30 days  written  notice to the OTS prior to
making the  distribution.  The OTS may object to the  distribution  during  that
30-day  period based on safety and  soundness  concerns.  In addition,  a Tier 1
institution  deemed to be in need of more than normal supervision by the OTS may
be  downgraded  to a  Tier  2 or  Tier  3  institution  as a  result  of  such a
determination.

         At December 31, 1996,  the  Association  was a Tier 1  institution  for
purposes of this regulation.

         On December 5, 1994, the OTS published a notice of proposed  rulemaking
to amend its capital distribution regulation.  Under the proposal,  institutions
would be permitted to only make capital  distributions  that would not result in
their  capital  being  reduced  below the level  required to remain  "adequately
capitalized,"  as defined above under "-Prompt  Corrective  Action." Because the
Association  will be a  subsidiary  of a holding  company,  the  proposal  would
require  the  Association  to provide  notice to the OTS of its intent to make a
capital  distribution.  The Association  does not believe that the proposal will
adversely  affect its  ability to make  capital  distributions  if it is adopted
substantially as proposed.
 
         Loans to One Borrower.  The permissible amount of loans-to-one borrower
now  generally  follows the national bank standard for all loans made by savings
institutions.  The national bank standard generally does not permit loans-to-one
borrower  to exceed the greater of  $500,000  or 15% of  unimpaired  capital and
surplus. Loans in an amount equal to an additional 10% of unimpaired capital and
surplus also may be made to a borrower if the loans are fully secured by readily
marketable  securities.  For  information  about the largest  borrowers from the
Association,  see "Business - Lending Activities - Real Estate Lending Standards
and Underwriting Policies."

         Classified  Assets.  Federal  regulations  require  that  each  insured
savings  institution  classify its assets on a regular  basis.  In addition,  in
connection with  examinations of insured  institutions,  federal  examiners have
authority to identify  problem assets and, if appropriate,  classify them. 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,  with the additional  characteristic that
the weaknesses  make collection or liquidation in full on the basis of currently
<PAGE>
existing  facts,  conditions  and  values  questionable,  and  there  is a  high
possibility of loss. An asset classified loss is considered uncollectible and of
such  little  value  that  continuance  as an  asset of the  institution  is not
warranted.   Another  category   designated   "special  mention"  also  must  be
established  and maintained for assets which do not currently  expose an insured
institution  to a  sufficient  degree  of  risk  to  warrant  classification  as
substandard,  doubtful or loss.

                                       33
<PAGE>
Assets  classified  as  substandard  or  doubtful  require  the  institution  to
establish general  allowances for loan losses. If an asset or portion thereof is
classified  loss,  the  insured   institution  must  either  establish  specific
allowances  for loan  losses in the  amount of 100% of the  portion of the asset
classified loss, or charge-off such amount.  General loss allowances established
to cover possible  losses related to assets  classified  substandard or doubtful
may be included in determining an institution's regulatory capital up to certain
amounts,  while specific valuation  allowances for loan losses do not qualify as
regulatory capital. Federal examiners may disagree with an insured institution's
classifications and amounts reserved. See "Business - Asset Quality - Classified
Assets."

         Branching  by  Federal   Savings   Institutions.   OTS  policy  permits
interstate  branching  to  the  full  extent  permitted  by  statute  (which  is
essentially  unlimited).   Generally,  federal  law  prohibits  federal  savings
institutions  from  establishing,  retaining or  operating a branch  outside the
state  in  which  the  federal  institution  has  its  home  office  unless  the
institution meets the Internal Revenue Service's domestic building and loan test
(generally,  60% of a thrift's assets must be housing-related) ("IRS Test"). The
IRS Test  requirement  does not apply if: (i) the  branch(es)  result(s) from an
emergency  acquisition  of a  troubled  savings  institution  (however,  if  the
troubled  savings  institution is acquired by a bank holding  company,  does not
have its home office in the state of the bank holding  company  bank  subsidiary
and does not  qualify  under the IRS  Test,  its  branching  is  limited  to the
branching  laws  for  state-chartered  banks  in the  state  where  the  savings
institution  is  located);  (ii) the law of the state where the branch  would be
located  would  permit  the  branch to be  established  if the  federal  savings
institution were chartered by the state in which its home office is located;  or
(iii) the branch was operated  lawfully as a branch under state law prior to the
savings institution's conversion to a federal charter.
 
         Furthermore,  the OTS will evaluate a branching  applicant's  record of
compliance   with  the  Community   Reinvestment   Act  of  1977   ("CRA").   An
unsatisfactory   CRA  record  may  be  the  basis  for  denial  of  a  branching
application.

         Qualified Thrift Lender Test. All savings  institutions are required to
meet a QTL test set in order to avoid certain  restrictions on their operations.
Under Section 2303 of the Economic Growth and Regulatory Paperwork Reduction Act
of 1996, a savings institution can comply with the QTL test by either qualifying
as a domestic building and loan association as defined in Section 7701(a)(19) of
the  Internal  Revenue Code of 1986,  as amended  ("Code") or meeting the second
prong  of the QTL test  set  forth in  Section  10(m)  of the  HOLA.  A  savings
institution  that  does  not meet the QTL test  must  either  convert  to a bank
charter or comply with the following  restrictions  on its  operations:  (i) the
institution  may not  engage  in any new  activity  or make any new  investment,
directly or indirectly,  unless such activity or investment is permissible for a
national bank; (ii) the branching powers of the institution  shall be restricted
to those of a national  bank;  (iii) the  institution  shall not be  eligible to
obtain  any  advances  from its  FHLB;  and (iv)  payment  of  dividends  by the
institution  shall be subject to the rules  regarding  payment of dividends by a
national  bank.  Upon the  expiration  of three  years from the date the savings
institution  ceases to meet the QTL test,  it must  cease any  activity  and not
retain any investment not permissible for a national bank and immediately  repay
any outstanding FHLB advances (subject to safety and soundness considerations).
<PAGE>
         Currently,  the  prong  of the QTL test  that is not  based on the Code
requires that 65% of an institution's "portfolio assets" (as defined) consist of
certain housing and  consumer-related  assets on a monthly average basis in nine
out of very 12 months.  Assets that qualify  without limit for inclusion as part
of the 65% requirement are loans made to purchase, refinance, construct, improve
or repair domestic  residential  housing and manufactured  housing;  home equity
loans;  mortgage-backed  securities (where the mortgages are secured by domestic
residential  housing  or  manufactured  housing);  stock  issued  by the FHLB of
Dallas;  and  direct or  indirect  obligations  of the FDIC.  In  addition,  the

                                       34
<PAGE>
following assets,  among others,  may be included in meeting the test subject to
an overall limit of 20% of the savings  institution's  portfolio assets:  50% of
residential  mortgage loans  originated and sold within 90 days of  origination;
100% of  consumer  and  educational  loans  (limited  to 10% of total  portfolio
assets);  and stock issued by the FHLMC or the FNMA. Portfolio assets consist of
total assets minus the sum of (i) goodwill  and other  intangible  assets,  (ii)
property  used by the savings  institution  to conduct its  business,  and (iii)
liquid assets up to 20% of the institution's total assets. At December 31, 1996,
the qualified thrift investments of the Association were approximately  89.9% of
its portfolio assets.

         Accounting   Requirements.   FIRREA   required  the  OTS  to  establish
accounting  standards to be applicable to all savings  institutions for purposes
of complying with regulations,  except to the extent otherwise  specified in the
capital standards. Such standards must incorporate GAAP to the same degree as is
prescribed by the federal  banking  agencies for banks or may be more  stringent
than such requirements.
 
         Effective  October 2, 1992,  the OTS amended a number of its accounting
regulations  and reporting  requirements to adopt the following  standards:  (i)
regulatory  reports will  incorporate  GAAP when GAAP is used by federal banking
agencies;  (ii)  savings  institution  transactions,   financial  condition  and
regulatory  capital  must be  reported  and  disclosed  in  accordance  with OTS
regulatory  reporting  requirements  that will be at least as  stringent  as for
national  banks;  and (iii) the  Director  of the OTS may  prescribe  regulatory
reporting requirements more stringent than GAAP whenever the Director determines
that such  requirements are necessary to ensure the safe and sound reporting and
operation of savings institutions.

         Effective  February  10,  1992,  the OTS adopted a statement  of policy
("Statement")  set forth in Thrift  Bulletin 52 concerning  (i) procedures to be
used in the  selection  of a  securities  dealer,  (ii) the need to document and
implement  prudent  policies and  strategies  for  securities,  whether held for
investment,  trading or for sale, and to establish systems and internal controls
to  ensure  that  securities   activities  are  consistent  with  the  financial
institution's  policies  and  strategies,  (iii)  securities  trading  and sales
practices  that may be  unsuitable  in  connection  with  securities  held in an
investment portion, (iv) high-risk mortgage securities that are not suitable for
investment   portfolio   holdings   for   financial   institutions,    and   (v)
disproportionately  large  holdings  of  long-term,  zero-coupon  bonds that may
constitute an imprudent investment practice. The Statement applies to investment
securities,   high-yield,  corporate  debt  securities,  loans,  mortgage-backed
securities  and  derivative  securities,  and provides  guidance  concerning the
proper classification of and accounting for securities held for investment, sale
and  trading.   Securities  held  for   investment,   sale  or  trading  may  be
differentiated  based upon an  institution's  desire to earn an  interest  yield
(held for investment), to realize a holding gain from assets held for indefinite
periods of time (held for sale),  or to earn a dealer's  spread  between the bid
and  asked  prices  (held  for  trading).   Depository   institution  investment
portfolios are maintained to provide earnings consistent with the safety factors
of quality,  maturity,  marketability and risk diversification.  Securities that
are purchased to accomplish  these objectives may be reported at their amortized
cost only when the  depository  institution  has both the intent and  ability to
hold  the  assets  for  long-term  investment  purposes.   Securities  held  for
investment purposes may be accounted for at amortized cost,  securities held for
sale are to be accounted for at the lower of cost or market, and securities held
for trading are to be accounted for at market. The Association believes that its
investment  activities have been and will continue to be conducted in accordance
with the requirements of OTS policies and GAAP.
<PAGE>
         The Omnibus  Reconciliation  Act of 1993 added a new Section 475 to the
Code, which provides that certain financial  institutions must recognize gain or
loss  annually with regard to any 

                                       35
<PAGE>
security held by them as inventory  for resale.  Gain or loss is not required to
be  recognized  with regard to  securities  which are  intended to be held until
their maturity.  The Association  believes that it is not a "dealer" as a result
of its sales of investment and mortgage  -backed  securities  available for sale
during  the last  three  years,  and that it is  currently  not  subject  to the
provisions of Section 475 of the Code.
 
         In June 1996, the FASB issued SFAS No. 125,  "Accounting  for Transfers
and Servicing of Financial Assets and  Extinguishment of Liabilities."  Pursuant
to SFAS No.  125,  after a transfer  of  financial  assets,  an entity  would be
required to  recognize  all  financial  assets and  servicing  it  controls  and
liabilities it has incurred and, conversely,  would not be required to recognize
either  financial  assets when control has been  surrendered or liabilities when
extinguished.  SFAS No. 125 provides standards for  distinguishing  transfers of
financial assets that are sales from transfers that are secured borrowings. SFAS
No.  125 will be  effective  with  respect  to the  transfer  and  servicing  of
financial assets and the extinguishment of liabilities  occurring after December
31, 1996, with earlier  application  prohibited.  The adoption of this Statement
will be prospective,  and the Company  anticipates no material adverse effect on
its consolidated financial statements.

         Federal Home Loan Bank System.  The Association is a member of the FHLB
of Dallas, which is one of 12 regional FHLBs that administers the home financing
credit  function  of  savings  institutions.  Each FHLB  serves as a reserve  or
central bank for its members within its assigned region.  It is funded primarily
from  proceeds  derived from the sale of  consolidated  obligations  of the FHLB
System.  It makes loans to members (i.e.,  advances) in accordance with policies
and  procedures  established  by the Board of Directors of the FHLB. At December
31, 1996, the Association had $1.5 million in FHLB advances.

         As a member, the Association is required to purchase and maintain stock
in the FHLB of Dallas in an amount equal to at least 1% of its aggregate  unpaid
residential  mortgage loans, home purchase  contracts or similar  obligations at
the beginning of each year. At December 31, 1996, the  Association  had $455,500
in FHLB stock, which was in compliance with this requirement.

         The FHLBs are required to provide funds for the  resolution of troubled
savings  institutions  and to contribute to affordable  housing programs through
direct loans or interest subsidies on advances targeted for community investment
and low-and moderate-income housing projects. These contributions have adversely
affected the level of FHLB  dividends  paid in the past and could continue to do
so in the future.  These  contributions also could have an adverse effect on the
value of FHLB stock in the future.

         Federal Reserve System. The FRB requires all depository institutions to
maintain  reserves against their transaction  accounts  (primarily NOW and Super
NOW checking accounts) and non-personal time deposits.  As of December 31, 1996,
no  reserves  were  required  to be  maintained  on the first  $4.4  million  of
transaction accounts,  reserves of 3% were required to be maintained against the
next $44.9 million of net transaction accounts (with such dollar amounts subject
to adjustment by the FRB),  and a reserve of 10% (which is subject to adjustment
by the FRB to a level between 8% and 14%, is required  against all remaining net
transaction  accounts.  Because required reserves must be maintained in the form
of vault cash or a  noninterest-bearing  account at a Federal  Reserve Bank, the
effect of this reserve requirement is to reduce an institution's earning assets.
<PAGE>
Louisiana Regulation

         As a Louisiana-chartered  savings association,  the Association also is
subject to regulation and supervision by the OFI. The Association is required to
file periodic reports with and is subject to

                                       36
<PAGE>
periodic  examinations  at least once every three years by the OFI.  The lending
and investment  authority of the Association is prescribed by Louisiana laws and
regulations,  as  well as  applicable  federal  laws  and  regulations,  and the
Association is prohibited  from engaging in any activities not permitted by such
law and regulations.
 
         The  Association is required by Louisiana law and regulations to comply
with  certain  reserve  and capital  requirements.  At December  31,  1996,  the
Association  was  in  compliance   with  all  applicable   reserve  and  capital
requirements.

         Louisiana law and regulations  also restrict the lending and investment
authority of Louisiana-chartered savings institutions. Such laws and regulations
restrict the amount a  Louisiana-chartered  savings  association can lend to any
one borrower to an amount which, in the aggregate, does not exceed the lesser of
(I)  10%  of  the  association's  savings  deposits  or  (ii)  the  sum  of  the
association's  paid-in  capital,  surplus,  reserves for losses,  and  undivided
profits.  FIRREA imposes more  restrictive  limitations.  See  "Business-Lending
Activities."  Notwithstanding  the foregoing,  Louisiana and federal law permits
any such association to lend to any one borrower an aggregate amount of at least
$500,000.

         In addition, Louisiana law restricts the ability of Louisiana-chartered
savings  associations  to invest in, among other  things,  (i)  commercial  real
estate loans (including commercial  construction real estate loans) up to 40% of
total  assets;  (ii) real estate  investments  for other than the  association's
offices up to 10% of total assets;  (iii) consumer loans,  commercial  paper and
corporate debt securities up to 30% of total assets; (iv) commercial, corporate,
business or agricultural loans up to 10% of total assets; and (v) capital stock,
obligations  and other  securities of service  organizations  up to 10% of total
assets.  Louisiana law also sets forth maximum loan-to-value ratios with respect
to  various  types  of  loans.   Applicable  federal   regulations  impose  more
restrictive   limitations   in   certain   instances.    See   "Business-Lending
Activities-Real Estate Lending Standards and Underwriting Policies."

         The investment authority of Louisiana-chartered savings associations is
broader  in many  respects  than that of  federally-chartered  savings  and loan
associations.  However, since the enactment of FIRREA,  state-chartered  savings
associations,  such as the Association,  are generally prohibited from acquiring
or retaining any equity  investment,  other than certain  investments in service
corporations,  of  a  type  or  in  an  amount  that  is  not  permitted  for  a
federally-chartered  savings  association.  This  prohibition  applies to equity
investments  in real  estate,  investments  in equity  securities  and any other
investment or transaction that is in substance an equity investment, even if the
transaction is nominally a loan or other  permissible  transaction.  At December
31, 1996, the Association was in compliance with such provisions.

        Furthermore,  effective  January  1,  1990,  a  state-chartered  savings
association  may not engage as  principal  in any  activity  not  permitted  for
federal  associations  unless the FDIC has  determined  that such activity would
pose  no  significant  risk  to the  affected  deposit  insurance  fund  and the
association  is  in  compliance  with  the  fully  phased-in  capital  standards
prescribed under FIRREA.  When certain  activities are permissible for a federal
association, the state association may engage in the activity in a higher amount
if the FDIC has not determined that such activity would pose a significant  risk
of loss to the affected  deposit  insurance fund and the  association  meets the
fully phased-in capital  requirements.  This increased investment authority does
not apply to investments in  nonresidential  real estate loans.  At December 31,
1996, the  Association  had no investments  which were affected by the foregoing
limitations.

                                       37
<PAGE>
         Under  Louisiana law, a  Louisiana-chartered  savings  association  may
establish  or  maintain  a  branch  office  anywhere  in  Louisiana  with  prior
regulatory approval. In addition, an out-of-state savings association or holding
company may acquire a Louisiana-chartered savings association or holding company
if  the  OFI   determines   that  the  laws  of  such  other   state   permit  a
Louisiana-chartered  savings association or holding company to acquire a savings
association or holding company in such other state. Any such  acquisition  would
require the out-of-state entity to apply to the OFI and receive OFI approval.

                                    TAXATION
Federal Taxation

         General.  The Company and the  Association are subject to the generally
applicable  corporate tax provisions of the Code, and the Association is subject
to certain  additional  provisions  of the Code which  apply to thrift and other
types of financial institutions. The following discussion of federal taxation is
intended only to summarize certain pertinent federal income tax matters material
to the taxation of the Company and the  Association  and is not a  comprehensive
discussion of the tax rules applicable to the Company and the Association.

         Year. The Company and the  Association  file federal income tax returns
on the basis of a calendar  year ending on December  31. For 1996 and 1997,  the
Company and the Association intend to file separate tax returns.

         Bad Debt Reserves. Savings institutions, such as the Association, which
meet  certain  definitional  tests  primarily  relating to their  assets and the
nature of their  businesses,  are permitted to establish a reserve for bad debts
and to make  annual  additions  to the  reserve.  These  additions  may,  within
specified formula limits,  be deducted in arriving at the institution's  taxable
income.  For  purposes  of  computing  the  deductible  addition to its bad debt
reserve,  the  institution's  loans are separated into "qualifying real property
loans"  (i.e.,  generally  those  loans  secured  by certain  interests  in real
property)  and all other loans  ("non-qualifying  loans").  The  deduction  with
respect to non-qualifying  loans must be computed under the experience method as
described  below.  The  following  formulas  may be used to compute the bad debt
deduction  with  respect to  qualifying  real  property  loans:  (i) actual loss
experience, or (ii) for tax years beginning before 1996, a percentage of taxable
income.  Reasonable  additions to the reserve for losses on non-qualifying loans
must be based upon actual loss  experience  and would reduce the current  year's
addition to the reserve for losses on  qualifying  real property  loans,  unless
that addition is also  determined  under the experience  method.  The sum of the
additions  to each  reserve for each year is the  institution's  annual bad debt
deduction.

         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  Association'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.
<PAGE>
         Under the percentage of taxable  income method,  the bad debt deduction
equalled 8% of taxable  income  determined  without regard to that deduction and
with certain  adjustments.  The 

                                       38
<PAGE>
availability  of the percentage of taxable income method  permitted a qualifying
savings  institution  to be taxed at a lower  effective  federal income tax rate
than that applicable to corporations in general.  This resulted  generally in an
effective  federal income tax rate payable by a qualifying  savings  institution
fully  able to use the  maximum  deduction  permitted  under the  percentage  of
taxable income method, in the absence of other factors affecting taxable income,
of 31.3% exclusive of any minimum tax or  environmental  tax (as compared to 34%
for  corporations  generally).  For tax years  beginning on or after  January 1,
1993, the maximum  corporate tax rate was increased to 35%, which  increased the
maximum  effective  federal  income  tax rate  payable by a  qualifying  savings
institution  fully  able to use the  maximum  deduction  to 32.2%  for tax years
beginning before 1996. Any savings  institution at least 60% of whose assets are
qualifying assets, as described in the Code, was generally eligible for the full
deduction of 8% of taxable income.

         Pursuant to legislation  effective for tax years  beginning after 1995,
savings  institutions are no longer permitted to make additions to their tax bad
debt reserve under the percentage of taxable income  method.  Such  institutions
are permitted to use the  experience  method in lieu of deducting bad debts only
as they occur.  Such legislation  requires the Association to realize  increased
tax  liability  over a period of six  years,  which  period was to begin in 1996
until  it was  suspended  as set  forth  below.  Specifically,  the  legislation
requires each savings  institution 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 additions to its reserves using
the experience method.  The recapture  requirement will be suspended for each of
two successive  taxable years beginning January 1, 1996 in which the Association
originates  an  amount  of  certain  kinds  of  residential  loans  which in the
aggregate  are equal to or greater than the average of the  pricipal  amounts of
such loans made by the Association  during its six taxable years preceding 1996,
and the recapture requirement was suspended for 1996. It is anticipated that any
recapture of the Association's bad debt reserves accumulated after 1987 will not
have a material adverse effect on the Company's consolidated financial condition
or results of operations.

         At  December  31,  1996,   the  federal  income  tax  reserves  of  the
Association  included  $1.3  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 Association in
connection  with the  conversion of the  Association to stock form, the retained
earnings of the Association are substantially restricted.

         Distributions.  If the Association  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 Association 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 share, (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.
<PAGE>
         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

                                       39
<PAGE>
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 three taxable years and forward
to the succeeding 15 taxable years. This provision applies to losses incurred in
taxable years beginning after 1986. At December 31, 1996, the Association 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.

         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 Association.

         The  Association's  federal  income tax returns for the tax years ended
December  31, 1993  forward 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 Louisiana taxable income, as well as franchise taxes. 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,  beginning in 1997, the
Association  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
may also be subtracted in calculating a company's capitalized earnings.

                                       40
<PAGE>
Item 2. Description of Property.

         At December 31, 1996, the Company and the  Association  conducted their
business  from the  Association's  main office and one branch  office in the New
Orleans,  Louisiana  area.  The  following  table  sets forth the net book value
(including furnishings and equipment) and certain other information with respect
to the offices and other properties of the Company at December 31, 1996.
<TABLE>
<CAPTION>
                                                                   Net Book
                                             Value of             Amount of
Description/Address                        Leased/Owned           Property             Deposits
-------------------                        ------------           --------             --------
<S>                                           <C>                  <C>                  <C>
Main Office:                                                            (In thousands)
# 1 Westbank Expressway
New Orleans, Louisiana 70114                  Leased               $   54               $21,038

Branch Office:
2021 Carol Sue Avenue
Terrytown, Louisiana  70056                   Owned                   177                15,597
                                                                   ------               ------- 
    Total                                                          $  231               $36,635
                                                                   ======               =======

</TABLE>

Item 3. Legal Proceedings.

         The  Company  and  the   Association  are  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  consolidated
financial condition and results of operations of the Company.

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

         Not applicable.

PART II.

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

         The  information   required  herein,  to  the  extent  applicable,   is
incorporated by reference from the inside front cover page of the Company's 1996
Annual Report.

Item 6.  Management's Discussion and Analysis or Plan of Operation.

         The information required herein is incorporated by reference from pages
37 to 54 of the 1996 Annual Report.
 
Item 7.  Financial Statements.

         The information required herein is incorporated by reference from pages
1 to 35 of the 1996 Annual Report.


                                       41
<PAGE>
Item 8.  Changes in and Disagreements With Accountants on Accounting and
               Financial  Disclosure.

         Not applicable.

PART III.

Item 9.  Directors, Executive Officers, Promoters and Control Persons; 
                Compliance with Section 16(a) of the Exchange Act.

         The information required herein is incorporated by reference from pages
2, 3, 5, and 7 of the definitive  proxy  statement of the Company for the Annual
Meeting of Stockholders  to be held on April 30, 1997,  which was filed on April
7, 1997 ("Definitive Proxy Statement").

Item 10. Executive Compensation.

         The information required herein is incorporated by reference from pages
7 to 10 the Definitive Proxy Statement.

Item 11.  Security Ownership of Certain Beneficial Owners and Management.

         The information required herein is incorporated by reference from pages
5 to 7 the Definitive Proxy Statement.

Item 12.  Certain Relationships and Related Transactions.

         The information required herein is incorporated by reference from pages
10 to 11 the Definitive Proxy Statement.

Item 13.  Exhibits, List 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 7 hereof (see Exhibit 13):
                       Independent Auditor's Report

                       Consolidated  Statements  of  Financial  Condition  as of
                            December 31, 1996 and 1995

                       Consolidated Statements of Operations for the Years Ended
                            December 31, 1996 and 1995

                       Consolidated   Statements  of  Changes  in  Stockholders'
                            Equity for the Years  Ended  December  31,  1996 and
                            1995

                       Consolidated Statements of Cash Flows for the Years Ended
                            December 31, 1996 and 1995

                       Notes to Consolidated Financial Statements
 
         (2) All  schedules  for  which  provision  is  made  in the  applicable
accounting  regulations of the Securities  and Exchange  Commission  ("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.

                                       42
<PAGE>
         (3) The following  exhibits are filed as part of this Form 10-KSB,  and
this list includes the Exhibit Index.



                                  Exhibit Index
                                                          

 2.1*       Plan of Conversion
 3.1*       Articles of Incorporation of Algiers Bancorp, Inc.
 3.2*       Bylaws of Algiers Bancorp, Inc.
 4.1*       Stock Certificate of Algiers Bancorp, Inc.
10.1*       Employment Agreement among Algiers Bancorp, Inc.,
                  Algiers Homestead Association and Hugh E.
                  Humphrey, Jr., dated July 8, 1996
10.2*       Employment Agreement among Algiers Bancorp, Inc.,
                  Algiers Homestead Association and Dennis J.
                  McCluer, dated July 8, 1996
10.3        Employment Agreement among Algiers Bancorp, Inc.,
                  Algiers Homestead Association and Hugh E.
                  Humphrey, III, dated July 8, 1996
10.4*       Lease for main office building
13.0        1996 Annual Report to Stockholders
21.0        Subsidiaries of the Registrant - Reference is made to Item 2.
                  "Business" for the required information
27.0        Financial Data Schedule


(*) Incorporated herein by reference from the Company's  Registration  Statement
on Form SB-2  (Registration  No.  333-2770) filed by the Company with the SEC on
March 26, 1996, as subsequently amended.


           (b) Reports on Form 8-K

         The  Company  did not file any  reports  on Form 8-K  during the fourth
quarter of the year ended December 31, 1996.

                                       43
<PAGE>


                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                            ALGIERS BANCORP, INC.


                                            By: /s/ Hugh E. Humphrey, Jr.
                                                ------------------------
                                                Hugh E. Humphrey, Jr.
                                                Chairman of the Board, President
                                                and  Chief Executive Officer

         In accordance  with the Exchange Act, 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/  Hugh E. Humphrey, Jr.      Chairman of the Board, President       March  31, 1997
--------------------------      and  Chief Executive Officer
Hugh E. Humphrey, Jr.                    


/s/ Thu Dang                    Director                               March  31, 1997
------------
Thu Dang

                               
------------
John H. Gary                    Director                               March  31, 1997


/s/ Eugene LeBoeuf              Director                               March  31, 1997
------------------
Eugene LeBouef


/s/ Hugh E. Humphrey, III       Director                               March  31, 1997
------------------------- 
Hugh E. Humphrey, III


/s/ Dennis J. McCluer           Vice President and Chief Operating     March   31, 1997
---------------------           Officer (also principal financial
Dennis J. McCluer               and accounting officer)             
                                                         
     
                                       44
</TABLE>