GENERAL

The Private Securities Litigation Reform Act of 1995 contains safe harbor provisions regarding forward-looking statements. When used in this discussion, the words "believe", "anticipates", "contemplates", "expects", and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Those risks and uncertainties include financial market volatility, changes in interest rates, risk associated with the effect of opening new branches, the ability to control costs and expenses, potential changes in regulation which could result in increased expenses and general economic conditions. The Company undertakes no obligation to publicly release the results of any revisions to those forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events. The Company is a "smaller reporting company" as defined by Item 10 of Regulation S-K and its financial statements were prepared in accordance with instructions applicable for such companies.

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

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

Earnings of the Company also are significantly affected by economic and competitive conditions, particularly changes in interest rates, government policies and regulations of regulatory authorities. References to the "Bank" herein, unless the context requires otherwise, refer to the Company on a consolidated basis.

Emergency Economic Stabilization Act of 2008

In response to unprecedented market turmoil, the Emergency Economic Stabilization Act of Act ("EESA") was enacted on October 3, 2008. Pursuant to his authority under EESA, the Secretary of the Treasury created the Troubled Asset Relief Program ("TARP") Capital Purchase Plan under which the Treasury Department was authorized to invest in senior preferred stock of U.S. banks and savings associations or their holding companies. While the Company did apply to participate in the CPP and was approved, the Company ultimately decided not to participate in this program. The decision not to access this additional source of capital was based for the most part on the Company's strong capital position.

The Federal Deposit Insurance Corporation Initiatives

On October 14, 2008, the Federal Deposit Insurance Corporation ("the FDIC") announced the Temporary Liquidity Guarantee Program ("TLG Program") to strengthen confidence and encourage liquidity in the banking system. The TLG Program consists of two components: a temporary guarantee of newly-issued senior unsecured debt of a bank or its holding company (the Debt Guarantee Program) and a temporary unlimited guarantee of funds in non-interest-bearing transaction accounts at FDIC-insured institutions (the Transaction Account Guarantee Program). Institutions that did not opt out of the program by December 5, 2008 are assessed ten basis points for non-interest-bearing transaction account balances in excess of $250,000 and 75 basis points of the amount of debt issued. The Company opted to participate in both components of the TLG Program.

As a result of the Federal Deposit Insurance Reform Act of 2006, the FDIC is required to set the insurance fund's reserve ratio at between 1.15% and 1.50% of insured deposits. Due to recent and projected future losses, the insurance fund has fallen below 1.15% of insured deposits. On December 16, 2008, the FDIC Board of Directors approved the final rule on deposit insurance assessment rates for the quarter ending March 31, 2009. The rule raises assessment rates uniformly by seven basis points (annualized) for the quarter ending March 31, 2009 only. The Bank anticipates a significant increase in federal insurance premium expense from a current level of five basis points to 12 basis points (annualized). The final rule for the quarter ending March 31, 2009 raised the assessment rate for the most highly rated institutions to between 12 and 14 basis points. Effective April 1, 2009, assessment rates will be further increased. Base rates for the most highly rated institutions will be between 12 and 16 basis points. In addition, the FDIC has introduced three adjustments that could be made to an institution's initial base assessment rate: (1) a potential decrease for long-term unsecured debt, including senior and subordinated debt and, for small institutions, a portion of Tier 1 capital; (2) a potential increase for secured liabilities above a threshold amount; and (3) for non-Risk Category I institutions, a potential increase for brokered deposits above a threshold amount. The FDIC also adopted an interim final rule that provides for the assessment of an emergency 20 basis point special assessment to be collected on September 30, 2009 based on an institution's assessable base as of June 30, 2009. The interim final rule also provides that, after June 30, 2009, if the Deposit Insurance Fund is estimated to fall to a level that the FDIC believes would affect public confidence or a level close to zero, an additional special assessment of up to 10 basis points may be imposed on all insured institutions. As a result of these increases in insurance rates and special assessments, the Bank believes its aggregate federal insurance premiums will increase significantly.

On March 5, 2009, the FDIC Chairman announced that the FDIC intends to lower the special assessment from 20 basis point to 10 basis points. The approval of the cutback is contingent on whether Congress clears legislation that would expand the FDIC's line of credit with the Treasury to $100 billion. Legislation to increase the FDIC's borrowing authority on a permanent basis is also expected to advance to Congress, which should aid in reducing the burden on the industry. The assessment rates, including the special assessment, are subject to change at the discretion of the Board of Directors of the FDIC.

COMPARISON OF FINANCIAL CONDITION

The Company's total assets at March 31, 2009 totaled $795.5 million, an increase of $26.0 million or 3.4% as compared to $769.5 million at September 30, 2008. The increase was primarily the result of an increase in loans and interest bearing deposits from additional funding provided by the Company's increase in savings and checking account balances.

Securities available-for-sale totaled $24.2 million and securities held to maturity totaled $56.5 million at March 31, 2009, which, combined, represented a decrease of $237,000 or 0.3% as compared to September 30, 2008. The decrease was primarily due to normal principal payments on the existing

portfolio offset by purchases of FHLB agency securities totaling $6.3 million. Also, for the six months ended March 31, 2009, impairments of $496,000 were incurred related to certain private label mortgage backed investment securities. The impairments of securities are primarily occurring in our private label mortgage backed securities portfolio. The $5.7 million carrying value of the private label mortgage backed securities amounts to 0.7% of total assets. Approximately 90% are rated AAA, AA or A at March 31, 2009. The following table provides additional information on this part of our investment portfolio:

              Private Label Mortgage-Backed Securities as of March 31, 2009

    Bond             Fair                 Carrying Value                     % of
    Ratings          Value                   3/31/2009                      Assets
                                 $ in millions        % of Face

    AAA to A       $     6.1    $           5.1                  83 %            0.60 %
    BBB to B             1.7                0.5                  29              0.10
    CCC to C             0.5                0.1                  21              0.00
    Total          $     8.3    $           5.7                  69 %            0.70 %

Loans receivable totaled $607.1 million at March 31, 2009, which represented an increase of $22.5 million or 3.9% compared to September 30, 2008. The increase was due primarily to growth in the commercial loan portfolio along with slight growth in the consumer loan portfolio, offset by a decrease in the mortgage portfolio.

Total deposits, after interest credited, at March 31, 2009 were $611.7 million, which represented an increase of $22.5 million or 3.8% as compared to September 30, 2008. The increase was due primarily to increases in balances in checking and a premium high rate savings account titled diamond savings, offset by decreases in money market and time deposit accounts.

Advances increased $2.2 million or 2.1% as compared to the amount at September 30, 2008. The increase was due to a takedown of a $5.0 million long term advance offset somewhat by principal payments on existing advances.

Stockholders' equity was $70.1 million at March 31, 2009 and $68.0 million at September 30, 2008. Earnings for the six months ended March 31, 2009 as well as unrealized gains on securities available for sale were offset by dividend payments of $1.5 million, the purchase of $126,000 in additional treasury stock, and a loan to the Employee Stock Ownership plan for $432,000.

COMPARISON OF EARNINGS FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2009 AND
2008

Net Income. The Company had net income of $1.7 million or $0.78 per diluted share, and $3.4 million or $1.61 per diluted share, for the three and six months ended March 31, 2009 as compared to net income of $2,184,000 or $1.00 per diluted share, and $4,067,000 or $1.84 per diluted share, for the three and six month periods ended March 31, 2008, respectively. The decrease in net income was primarily due to an increase in the provision for loan losses. Other changes affecting net income are discussed in the following paragraphs by category.

Total Interest Income. Total interest income decreased $378,000 or 3.3% and $526,000 or 2.3% for the three and six months ended March 31, 2009, respectively, as compared to the same periods ended March 31, 2008. The decrease in interest income was due primarily to increases in interest bearing deposits at lower average rates along with a decrease in average rates on loans. The average yield on loans decreased to 6.61% for the three months ended March 31, 2009, from 7.04% for the same period in 2008. The average yield on loans decreased to 6.71% for the six months ended March 31, 2009, from 7.09% for the same period in 2008. The average rates on loans were offset somewhat by an increase in loan average balances.

Total Interest Expense. Total interest expense decreased $1.1 million or 22.3% and $2.0 million or 19.2%, respectively, for the three and six month periods ended March 31, 2009 as compare to the same periods in the prior fiscal year. The average balance of deposits increased in the 2009 period as compared to the 2008 period. However, the higher average balance for the 2009 period was offset by a decrease in the average cost of deposits and advances. The average cost of deposits decreased to 2.05% for the three months ended March 31, 2009, from 3.07% for the same period in 2008. The average cost of deposits decreased to 2.23% for the six months ended March 31, 2009, from 3.16% for the same period in 2008.

Net Interest Income. Net interest income increased $754,000 or 12.0% and $1.5 million or 11.7% for the three and six month periods ended March 31, 2009, as compared to the same periods ended March 31, 2008. The increase in net interest income was primarily due to decreases in average rates on deposits and advances offset by increases in average balances of both deposits and advances, along with decreases in average rates on both interest bearing deposits and loans offset by increases in interest bearing deposits and loan balances.

Provision for Loan Losses. The provision for loan losses increased $845,000 and $820,000, respectively, for the three and six month periods ended March 31, 2009, as compared to the same periods in 2008. The increase in the loan loss provision for the three and six month periods ended March 31, 2009 was primarily due to an increase in impaired loans. Impaired loans increased from $1.8 million at March 31, 2008 to $4.4 million at March 31, 2009. The increase in impaired loans consisted primarily of first mortgage loans on non-owner occupied condominium units in the Baton Rouge area in the amount of $1.5 million. Total loans on non-owner occupied condominium units in the Baton Rouge area amounted to $5.0 million at March 31, 2009. In comparison to the linked quarter, total delinquent loans, which includes loans past due 30 days and over and non accrual loans, decreased $2.4 million or 14.4%.

Management regularly estimates the likely level of losses to determine whether the allowance for loan losses is adequate to absorb probable losses in the existing portfolio. Based on these estimates, an amount is charged or credited to the provision for loan losses and credited or charged to the allowance for loan losses in order to adjust the allowance to a level determined to be adequate to absorb probable losses. There have been no significant changes in the Company's estimation methods during the current period.

Management's judgment as to the level of the allowance for loan losses involves the consideration of current economic conditions and their potential effects on specific borrowers, an evaluation of the existing relationships among loans, known and inherent risks in the loan portfolio and the present level of the allowance, results of examination of the loan portfolio by regulatory agencies and management's internal review of the loan portfolio. In determining the collectibility of impaired loans, management also considers the fair value of any underlying collateral. In addition, management considers changes in loan concentrations, the level of and trends in non-performing loans during the period, and historical charge-off percentages for state and national savings associations for similar types of loans in determining the

appropriate amount of the allowance for loan losses. Because certain types of loans have higher credit risk, greater concentrations of such loans may result in an increase to the allowance. For this reason, management segregates the loan portfolio by type of loan and number of days of past due loans. Management also considers the Bank's historical loss experience in determining the amount of the allowance. Non-performing loans as a percent of total loans were 1.26% at March 31, 2009, compared to 1.08% at September 30, 2008 and 0.67% at March 31, 2008.

Non-Interest Income. Total non-interest income increased $65,000 and decreased $324,000 for the three and six month periods ended March 31, 2009, respectively as compared to the same periods in 2008. The decrease in the six month period is attributable to losses of securities of $419,000. The increase in the three month period is attributable to an increase in service charge income.

Non-Interest Expense. Total non-interest expense increased $715,000 and $1.3 million, respectively, during the three and six months ended March 31, 2009, as compared to the same periods in 2008 due primarily to increased payroll benefits, incentive pay, normal compensation increases, along with an increase in FDIC insurance premiums.

Income Tax Expense. Income tax expense decreased by $213,000 and $355,000 for the three and six month period ended March 31, 2009 as compared to the same periods in 2008. The decrease in tax expense was due to lower pretax income. The Company's effective tax rate did not change materially for the three and six months ended March 31, 2009 and 2008 respectively.

LIQUIDITY AND CAPITAL RESOURCES

Under current Office of Thrift Supervision regulations, the Bank maintains certain levels of capital. At March 31, 2009 the Bank was in compliance with its three regulatory capital requirements as follows:

                                  Amount    Percent

Tangible capital                 $ 57,802     7.34 %
Tangible capital requirement       11,820     1.50 %
Excess over requirement            45,982     5.84 %

Core capital                     $ 57,802     7.34 %
Core capital requirement           31,521     4.00 %
Excess over requirement          $ 26,281     3.34 %

Risk based capital               $ 62,866    11.98 %
Risk based capital requirement     41,966     8.00 %
Excess over requirement          $ 20,900     3.98 %

For the Bank to be well capitalized under current risk-based capital standards, all banks are required to have Tier I capital of at least 4% and total risk-based capital of 8%. Based on these standards, Teche Federal Bank is categorized as well capitalized at March 31, 2009. Management believes that under

current regulations, the Bank will continue to meet its minimum capital requirements in the foreseeable future. Events beyond the control of the Bank, such as increased interest rates or a downturn in the economy in areas in which the Bank operates could adversely affect future earnings and as a result, the ability of the Bank to meet its future minimum capital requirements.

The Bank's liquidity is a measure of its ability to fund loans, pay withdrawals of deposits, and other cash outflows in an efficient, cost effective manner. The Bank's primary sources of funds are deposits, scheduled amortization and prepayments on loan and mortgage-backed securities, and advances from the FHLB. As of March 31, 2009, FHLB borrowed funds totaled $107.1 million. Advances are collateralized by a blanket-floating lien on the Company's residential real estate first mortgage loans. Additional borrowing capacity at March 31, 2009 is available from FHLB totaling $160.9 million, based on current collateral levels. The Bank, if the need arises, may also access a line of credit provided by a large commercial bank to supplement its supply of lendable funds and to meet deposit withdrawal requirements.

Loan repayments, maturing investments and mortgage-backed securities prepayments are greatly influenced by general interest rates and economic conditions.

The Bank is required under federal regulations to maintain sufficient liquidity for its safe and sound operation. The Bank believes that it maintains sufficient liquidity to operate the Bank in a safe and sound manner.

ADDITIONAL KEY RATIOS



                                            At or For the             At or For the
                                          Three Months Ended         Six Months Ended
                                              March 31,                 March 31,
                                        2009(1)        2008(1)     2009(1)      2008(1)

Return on average assets                     0.85 %        1.18 %      0.88 %       1.11 %
Return on average equity                     9.24 %       12.39 %      9.68 %      11.79 %
Average interest rate spread                 3.64 %        3.35 %      3.59 %       3.33 %
Nonperforming assets to total assets         1.05 %        0.67 %      1.05 %       0.67 %
Nonperforming loans to total loans           1.26 %        0.67 %      1.26 %       0.67 %
Average net interest margin                  3.92 %        3.69 %      3.88 %       3.68 %
Tangible book value per share          $    33.08      $  30.18   $   33.08     $  30.18

(1) Annualized where appropriate.

At March 31, 2009 the Company was in a liability sensitive position. Generally, an asset sensitive position will result in enhanced earnings in a rising interest rate environment and declining earnings in a falling interest rate environment because larger volumes of assets than liabilities will reprice. Conversely, a liability sensitive position will be detrimental to earnings in a rising interest rate environment and will enhance earnings in a falling interest rate environment.