BRITTON & KOONTZ CAPITAL CORP, 10KSB, 1997-03-28

BRITTON & KOONTZ CAPITAL CORP
10KSB, 1997-03-28
STATE COMMERCIAL BANKS

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March 28, 1997

Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: Britton & Koontz Capital Corporation (the "Company")
Annual Report on Form 10-KSB for Period Ended
December 31, 1996 (Commission File No. 0-22606)

Ladies and Gentlemen:

Pursuant to Section 15(d) of the Securities Exchange Act of
1934, as amended (the "Act"), transmitted herewith for filing, is
the Company's Annual Report on Form 10-KSB, with exhibits, for the
period ended December 31, 1996.

The financial statements in the annual report do not reflect
any change from the prior year in any accounting principles or
practices or in the method of applying any such principles or
practices.

Sincerely yours,

William M Salters
Vice President/Controller

Enclosures

<PAGE>

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 1996

Commission File Number: 0-22606

Britton & Koontz Capital Corporation
(Name of Small Business Issuer in its Charter)

Mississippi 64-0665423
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

500 Main Street
Natchez, Mississippi 39120
(Address of Principal Executive Offices) (Zip Code)

(601) 445-5576
(Issuer's Telephone Number, Including Area Code)

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

None

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

Common Stock, $10 Par Value
(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 registrant 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 the registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [X]

The issuer's revenues for the 1996 fiscal year were $12,875,183.

The aggregate market value of the issuer's voting stock held by
non-affiliates computed by reference to the price at which the stock
was sold as of February 19, 1997 is $18,335,996 for 269,647 shares at an
estimated $68.00 per share.

State the number of shares outstanding of each of the issuer's classes of
common equity, as of March 31, 1997.

Common Stock, $10 Par Value: 441,072 shares

Transitional Small Business Disclosure Format (check one):

Yes No X

<PAGE>

DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of the Registrant's annual report to shareholders for
the fiscal year ended December 31, 1996 are incorporated by
reference into Part II of this annual report on Form 10-KSB.

2. Portions of the Registrant's definitive proxy statement, which
was filed on March 7, 1997 with the Securities and Exchange
Commission, are incorporated by reference into Part III of this
annual report on Form 10-KSB.

<PAGE>

CROSS REFERENCE INDEX
TO
FORM 10-KSB

Certain information required by Form 10-KSB is incorporated by
reference from the annual report to shareholders as indicated below. Only that
information expressly incorporated by reference is deemed filed with the
Commission.

PART I

ITEM 1. DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . . *
ITEM 2. DESCRIPTION OF PROPERTY.. . . . . . . . . . . . . . . . . . *
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . *
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . None

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . *
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION . . . . . . . . . . . . . . . . . . . . **
ITEM 7. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . **
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . None

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT . . . . . . . . . . . . ***
ITEM 10. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . ***
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . ***
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . ***
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K. . . . . . . . . . . *

* This information is included in this annual report on Form 10-KSB and is
not incorporated by reference from the Company's annual report to
shareholders.

** This information is incorporated by reference from the Company's annual
report to shareholders pursuant to Instruction E(2) of Form 10-KSB, which
annual report is included as Exhibit 13 to this annual report on Form 10-KSB.

*** The material required by Items 9 through 12 is incorporated by reference
from the Company's definitive proxy statement pursuant to Instruction E(3) of
Form 10-KSB. The Company filed a definitive proxy statement with the
Securities and Exchange Commission on March 7, 1997.

<PAGE>

PART I

Item 1. Description of Business.

General

The Company

Britton & Koontz Capital Corporation (the "Company") was organized
as a Mississippi business corporation in July of 1982 and became a one-bank
holding company registered under the Bank Holding Company Act of 1956,
as amended (the "BHCA"), when it acquired all of the issued and outstanding
shares of Britton & Koontz First National Bank, a national banking association
(the "Bank"), later that same year. The Bank is the only subsidiary of the
Company and its stock is the Company's most significant asset. In July, 1993,
the Company acquired Natchez First Federal Savings Bank ("Natchez First
Federal"), located in Natchez, Mississippi, and merged it into the Bank. As
a result of this merger, the Bank's total assets were increased by approximately
$48 million.

The Company's major source of income in 1996 was dividends from the
Bank in the amount of $952,858. The Company expects that dividends from
the Bank will continue to be the Company's major source of income in 1997.
As of December 31, 1996, the Company had total consolidated assets of
approximately $151 million, and total consolidated shareholders' equity of
approximately $16.5 million.

The Bank

The Bank conducts a full service banking business from its main office
and two branch offices, all of which are located in Natchez, Mississippi. The
Bank provides commercial and consumer banking and trust services to
customers in Adams County and the adjoining counties and parishes of
Mississippi and Louisiana, respectively. The geographical area serviced by the
Bank is economically diverse and includes public and private sector industries,
including government service, manufacturing, tourism, agriculture and oil and
gas exploration.

The products and services offered by the Bank include personal and
commercial checking accounts, money market deposit accounts, savings
accounts, and automated clearinghouse services. The Bank also offers money
transfer services, safe deposit box facilities and access to a network of
automated teller machines. In recent years and primarily as a result of its
merger with Natchez First Federal in July, 1993, the Bank has become a full-
service residential and commercial mortgage lender. The Bank also engages
in other commercial and consumer lending activities, including, among other
things, the issuance of VISA and MasterCard credit cards. The Bank's trust
department offers a range of trust services, acting as trustee, executor,
administrator, custodian, guardian and agent with responsibility for total
assets of approximately $22 million.

As of December 31, 1996, the Bank had total assets of approximately
$151 million and total deposits of approximately $127 million.

As of December 31, 1996, the Company and the Bank had approximately
67 full-time and 5 part-time employees for a total of 72 employees. The
employees are not represented by a collective bargaining unit. The Company
believes that its relationship with its employees is good.

<PAGE>

Internet and Electronic Banking Activities

Management of the Company and the Bank are dedicated to
keeping the Bank competitive as technological innovation in the
banking industry increases.

During 1996, the Bank replaced old check processing
equipment and systems and will provide customers with image check
statements in 1997.

In 1995, the Bank installed communications systems
necessary to provide Internet access to the public and for future
delivery of electronic banking services. The Bank currently has
in excess of 550 subscribers to its Internet access service.

Management of the Bank believes that this communications
infrastructure will enhance the Bank's long-term prospects in two
ways. First, the current Internet service pricing plans offer
discounted Internet access fees to subscribers who maintain
select banking relationships with the Bank thus encouraging
Internet users in the Natchez area to become customers of the
Bank.

Second, management of the Bank believes that the Bank's
ability to compete successfully in the future will depend on its
ability to provide consumer and business customers with an
electronic method to conduct some or all of their banking
business.

During 1996, the Bank invested approximately $125,000 in the
acquisition and development of electronic banking software and
hardware utilizing the Internet communications infrastructure to
provide electronic banking capabilities for its customers.

Currently Bank customers using the Internet may, among other
things, obtain account balances and information including extensive
transaction histories, transfer funds between accounts, and request stop
payment orders on outstanding checks. The Bank also intends in
the future to implement features which allow customers to view
images of cleared checks, request wire transfers to other
institutions, apply for an electronic banking account, apply for
loans, and receive current certificate of deposit, loan and
mortgage rates.

Management of the Bank believes that development of its
electronic banking capability will allow it to expand its
geographical market area and, perhaps, to compete on a regional
or national basis. Further information about the Bank's
electronic banking capabilities may be obtained from the Bank's
Internet home page at http://www.bkbank.com.

Supervision and Regulation

The banking industry is extensively regulated under federal and state
law. As a bank holding company, the Company is subject to regulation under the
BHCA and to supervision by the Board of Governors of the Federal Reserve
System (the "FRB"). Pursuant to the BHCA, the Company may not directly
or indirectly acquire the ownership or control of more than 5% of any class
of voting shares or substantially all of the assets of any other company,
including a bank, without the prior approval of the FRB. The BHCA further
limits the activities of both the Company and the Bank to the business of
banking and activities closely related or incidental to banking.

<PAGE>

As a national bank, the Bank is subject to supervision and regular
examination by the Office of the Comptroller of the Currency (the
"Comptroller"). Such examinations, however, are for the protection of the
Bank Insurance Fund ("BIF") and, indirectly to a degree, for depositors, and
not for the protection of investors and shareholders. Pursuant to the terms of
the Federal Deposit Insurance Act (the "FDIA"), the deposits of the Bank are
insured through the BIF and the Savings Association Insurance Fund ("SAIF")
of the Federal Deposit Insurance Corporation (the "FDIC"). Accordingly, the
Bank is subject to regulation by the FDIC and is also subject to the Federal
Reserve's requirements to maintain reserves against deposits, restrictions on
the types and amounts of loans that may be granted and the interest that may
be charged thereon, and limitations on the types of investments that may be
made and the types of services that may be offered.

In 1991, Congress enacted the Federal Deposit Insurance Corporation
Improvement Act ("FDICIA"), which, among other things, substantially
revised the depository institution regulatory and funding provisions of the
FDIA. FDICIA also expanded the regulatory and enforcement powers of bank
regulatory agencies. Most significantly, FDICIA mandates annual
examinations of banks by their primary regulators and requires the federal
banking agencies to take prompt "corrective action" whenever financial
institutions do not meet minimum capital requirements. FDICIA establishes
five capital tiers: "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized." A depository institution's capitalization status will depend
on how well its capital levels compare to various relevant capital measures and
certain other factors, as established by regulation. As of December 31, 1996,
the Bank maintained a capital level which qualified it as being "well
capitalized" under such regulations.

FDICIA also prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee
to its holding company if the depository institution would thereafter be
"undercapitalized." For additional information regarding restrictions on the
Bank's payment of dividends, see Item 5 - "Market for the Company's
Common Equity and Related Stockholder Matters -- Dividends," below.

The banking industry is affected by the policies of the FRB. An
important function of the FRB is to regulate the national supply of bank credit
to moderate recessions and to curb inflation. Among the instruments of
monetary policy used by the FRB to implement its objectives are: open-
market operations in U.S. Government securities, changes in the discount rate
on bank borrowings and changes in reserve requirements on bank deposits.

Interstate Banking and Branching Legislation

Federal Law

In 1994, Congress passed the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 ("Riegle-Neal"), which affected the interstate
banking and branching abilities of bank holding companies and banks.

<PAGE>

Beginning June 1, 1997, Riegle-Neal authorizes a national bank
domiciled in one state to establish branches in any other state as long as
neither state has opted out of interstate branching between the date of
enactment of Riegle-Neal and May 31, 1997. Riegle-Neal, however, does allow
states to preserve certain restrictions on the entry of out-of-state banks, such
as the fashion in which entry can be made, an age requirement for a bank being
merged or acquired, and a deposit cap. Under Riegle-Neal, once a bank has
established a branch in another state, it may exercise the same rights in that
state as national and state banks enjoy in that state, including the ability to
branch intra-state. Riegle-Neal provides that states may opt in early to
interstate branching prior to June 1, 1997.

Riegle-Neal also permits states to allow banks to enter the state by
establishing a de novo branch in that state. In order to allow de novo entry
into a state, that state must expressly provide for de novo branching. Once a
bank has established a branch in a host state through de novo branching, it
may exercise the same rights in that state as national and state banks enjoy,
including the ability to branch intra-state. If a state opts out of interstate
branching, no bank domiciled in that state may establish branches in other
states, and no bank domiciled in another state may establish branches in that
state.

Mississippi Law

On March 29, 1996, the Governor of Mississippi signed into law a bill
in which Mississippi elected to opt in to interstate branching, effective May 1,
1997. As enacted, the bill would (1) allow all Mississippi banks to establish
branches in any other state pursuant to the entry rules in the potential host
state, and (2) allow out-of-state banks to establish branches in Mississippi
pursuant to Mississippi's entry rules. The bill as enacted, however, does not
authorize de novo branching into Mississippi. An out-of-state bank can
establish branches in Mississippi only by (1) merging with a Mississippi
domiciled bank, (2) buying all of the assets of a Mississippi domiciled bank,
or (3) buying all of the assets in Mississippi of an out-of-state bank which has
branches in Mississippi. All interstate branching transactions require
appropriate regulatory approval.

Consequence of Increased Interstate Activity

Because of the increasing liberalization of the laws and regulations
affecting the conduct of interstate banking activities, it is anticipated that
competition in the Bank's geographical market area will increase. If large,
regional bank holding companies acquire branches in the Bank's market area,
they may offer a wider range of services than are currently offered by the
Bank. In addition, some of these competitors may be more highly capitalized
than the Bank and the Company.

Further Changes in Regulatory Requirements

The United States Congress and the Mississippi legislature have
periodically considered and adopted legislation that has resulted in
deregulation of, among other matters, banks and other financial institutions,
or adversely affected the profitability of the banking industry. Future
legislation could further modify or eliminate geographic restrictions on banks
and bank holding companies and current prohibitions with other financial
institutions, including mutual funds, securities brokerage firms, insurance
companies, banks from other states and investment banking firms. The effect of
any such legislation on the business of the Company or the Bank cannot be
accurately predicted. The Company also cannot predict what legislation might be
enacted or what other implementing regulations might be adopted, and if enacted
or adopted, the effect thereof.

<PAGE>

Restriction on Dividends

The Company is a legal entity separate and distinct from the Bank and
substantially all of the Company's revenues result from amounts paid by the
Bank, as dividends, to the Company. The payment of dividends by the Bank
is, of course, dependent upon its earnings and financial condition. The Bank,
however, as a national bank, is also subject to legal limitations on the amount
of its earnings that it may pay as dividends. For additional information
regarding the restrictions on the Bank's payment of dividends, see Item 5 -
"Market for the Company's Common Equity and Related Stockholder Matters
- -- Dividends," below.

Competition

There is significant competition among banks and bank holding
companies in Mississippi. The Bank competes with both national and state
banks for deposits, loans and trust accounts and with savings and loan
associations and credit unions for loans and deposits. The Bank also competes
with large national banks from the principal cities in Louisiana and Mississippi
for certain commercial loans.

The deregulation of depository institutions as well as the increased
ability of nonbanking financial institutions, such as finance companies,
investment companies, insurance companies and several governmental agencies, to
provide services previously reserved to commercial banks has further intensified
competition. Accordingly, the Bank now competes with these nonbanking
financial institutions, all of which are engaged in marketing various types of
loans, commercial paper, short-term obligations, investments and other
services. Because nonbanking financial institutions are not subject to the same
regulatory restrictions as banks and bank holding companies, in many instances
they may operate with greater flexibility. The continued deregulation of the
financial services industry may have a detrimental effect on the Bank's long-
term growth and profitability.

Environmental

The Company is subject to various federal, state and local statutes and
ordinances regulating the discharge of materials into the environment. The
Company does not believe that it will be required to expend any material
amounts to comply with these laws and regulations.

Item 2. Description of Property.

The Company has its principal offices in its headquarters building at
500 Main Street, Natchez, Adams County, Mississippi 39120, which is owned and
occupied by the Bank. The Bank also owns the properties on which its two
branch offices are located, as well as other residential and commercial
properties which it has acquired primarily through foreclosure proceedings.
In the judgment of management, the facilities of the Company and the Bank
are generally suitable and adequate for the needs of the Company and the
Bank.

Item 3. Legal Proceedings.

None

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

Not applicable.

<PAGE>

PART II

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

(a) Market Information

On October 17, 1996, the Company listed its Common Stock on the
Nasdaq Small Cap Market. Prior to that date, there was no established public
trading market for the Common Stock.

The table below sets forth the high and low prices for the Company's
Common Stock for the periods indicated. For the period October 17, 1996
through December 31, 1996, the table sets forth the Nasdaq Small Cap bid
prices for the Common Stock. For all other periods, the table sets forth the
high and low sales price for Common Stock based upon a small number of
transactions that were reported to the Company by a regional securities broker
who facilitated the trading of the Common Stock during those periods. The
quotations for these periods reflect inter-dealer prices, without retail
mark-up, mark-down or commissions and may not reflect actual transactions in the
Company's Common Stock.

Dividends
High Low per Share
Period 1996
_________________ ______ ______ _________
<S> <C> <C> <C>

10/17/96-12/31/96 $58.00 $45.00 $1.20
10/01/96-10/16/96 $41.00 $41.00
3rd Quarter $40.00 $40.00
2nd Quarter $40.00 $37.00 $ .80
1st Quarter $39.00 $36.00

Fiscal 1995

4th Quarter $39.00 $36.00 $1.15
3rd Quarter $37.00 $34.00
2nd Quarter $36.00 $33.50 $ .75
1st Quarter $36.00 $34.00

(b) Holders

On February 19, 1997, there were 539 shareholders of record of Britton
& Koontz Capital Corporation Common Stock.

</TABLE>
<PAGE>

Pursuant to Mississippi law, the Company's Board of Directors may
authorize the Company to pay cash dividends to its shareholders. The only
limitation on such a dividend is that no distribution may be made if, after
giving effect to the distribution (a) the Company would not be able to pay
its debts as they come due in the usual course of business, or (b) the Company's
total assets would be less than the sum of its total liabilities plus the
amount that would be needed, if the Company were to be dissolved at the time
of the distribution, to satisfy the preferential rights upon dissolution of
any shareholders whose preferential rights are superior to those receiving
the distribution.

The principal source of the Company's cash revenues, however, are
dividends from the Bank. There are certain limitations under federal law on
the payment of dividends by national banks. Under federal law, the directors
of a national bank, after making proper deduction for all expenses and other
deductions required by the Comptroller, may credit net profits to the bank's
undivided profits account, and may declare a dividend from that account of
so much of the net profits as they judge expedient.

The prior approval of the Comptroller is required, however,
if the total of all dividends declared by a national bank in any
calendar year will exceed the sum of such bank's net profits for that year
and its retained net profits for the preceding two calendar years, less any
required transfers to surplus. Federal law also prohibits national banks from
paying dividends which would be greater than the bank's undivided profits
after deducting statutory bad debt in excess of the bank's allowance for loan
losses. Finally, FDICIA generally prohibits a depository institution from
making any capital distribution to its holding company if the depository
institution would thereafter be "undercapitalized."

In addition, both the Company and the Bank are subject to
various regulatory policies and requirements relating to the payment
of dividends, including requirements to maintain adequate capital
above regulatory minimums. The appropriate federal regulatory authority is
authorized to determine under certain circumstances relating to the financial
condition of a national bank or bank holding company that the payment of
dividends would be an unsafe or unsound practice and to prohibit payment
thereof. The Comptroller has indicated that paying dividends that deplete a
national bank's capital base to an inadequate level would be an unsound and
unsafe banking practice. The Comptroller and the Federal Reserve Board have
each indicated that banking organizations should generally pay dividends only
out of current operating earnings. The Bank's ability to pay dividends is also
limited by prudence, statutory and regulatory guidelines, and a variety of other
factors.

Further, in connection with the acquisition of Natchez First Federal
in 1993, the Bank assumed a liquidation account of approximately $2.8
million which has the effect of prohibiting the payment of dividends
if the Bank's net worth would thereby be reduced below the amount required
for the liquidation account. Management does not anticipate that this
restriction will have a material adverse effect on the Bank's ability to pay
dividends to the Company.

The Company has declared semiannual cash dividends in each of the last
three fiscal years totalling, on an annual basis, $1.85 per share for 1994,
$1.90 per share for 1995 and $2.00 per share for 1996. Historical dividend
payout ratios, expressed as a percentage of net income, for 1994 to 1996 were
38.454%, 39.31% and 43.41%, respectively.

The declaration of future dividends is at the discretion of the Company
and generally will be dependent upon the earnings of the Bank, the assessment
of capital requirements, considerations of safety and soundness, applicable law
and regulation and other factors. Subject to the limitations set forth above,
it is the present policy of the Board of Directors of the Company to continue
the declaration of cash dividends on the Company's Common Stock on a semiannual
basis, to the extent practicable.

<PAGE>

Retained earnings of the Bank available for payment of cash dividends
under applicable dividend regulations exceeded $3.7 million as of December 31,
1996, although the Bank intends to retain most of these funds for capital and
not to pay them out as dividends.

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

This information is incorporated by reference from the Company's annual
report to shareholders, which annual report is included as Exhibit 13 to this
annual report on Form 10-KSB.

Item 7. Financial Statements.

The following consolidated financial statements of the Company and the
Bank are included in the Company's annual report to shareholders, which annual
report is included as Exhibit 13 to this annual report on Form 10-KSB, and are
herein incorporated by reference:

- Independent Auditor's Report;
- Consolidated Statements of Financial Condition - December 31,
1996 and 1995;
- Consolidated Statements of Income - Years ended December 31,
1996 and 1995;
- Consolidated Statements of Changes in Stockholders' Equity -
Years ended December 31, 1996 and 1995;
- Consolidated Statements of Cash Flows - Years ended December
31, 1996 and 1995; and
- Notes to Consolidated Financial Statements.

Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.

None.

PART III

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

This information is incorporated by reference to the Company's
definitive proxy statement filed with the Commission pursuant to Regulation 14A.

Item 10. Executive Compensation.

This information is incorporated by reference to the Company's
definitive proxy statement filed with the Commission pursuant to Regulation 14A.

<PAGE>

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

This information is incorporated by reference to the Company's
definitive proxy statement filed with the Commission pursuant to Regulation
14A.

Item 12. Certain Relationships and Related Transactions.

This information is incorporated by reference to the Company's
definitive proxy statement filed with the Commission pursuant to Regulation
14A.

Item 13. Exhibits, List and Reports on Form 8-K.

(a) Exhibits

The response to this portion of Item 13 is submitted as the Exhibit Index
attached hereto and hereby incorporated herein by this reference.

(b) Reports on Form 8-K

The Company filed a report on Form 8-K, dated November 15, 1996,
announcing the listing of its stock on NASDAQ under the symbol BKBK.

The Company filed a report on Form 8-K, dated November 15, 1996,
reporting third quarter earnings and the declaration of a semi-annual dividend.

<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.

BRITTON & KOONTZ CAPITAL CORPORATION
(Registrant)

By: /s/ W. Page Ogden
_________________________________
W. Page Ogden
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.

Signature Title Date
_________ _____ ____
<S> <C> <C>

/s/ W. Page Ogden President, March 28, 1997
_________________ Chief Executive
W. Page Ogden Officer and
Director
(Principal Executive Officer)

/s/ W. W. Allen, Jr. Director March 28, 1997
____________________
W. W. Allen, Jr.

/s/ Craig A. Bradford Director March 28, 1997
______________________
Craig A. Bradford, DMD

/s/ James J. Cole Director March 28, 1997
_________________
James J. Cole

{SIGNATURES CONTINUE ON FOLLOWING PAGE}

<PAGE>

{SIGNATURES CONTINUED FROM PRECEDING PAGE}

Signature Title Date
_________ _____ ____

/s/ Wilton R. Dale Director March 28, 1997
__________________
Wilton R. Dale

/s/ William J. Feltus, Jr. Chairman and March 28, 1997
__________________________ Director
William J. Feltus, Jr.

/s/ A. J. Ferguson Director March 28, 1997
__________________
A. J. Ferguson

_____________________ Director March 28, 1997
Charles W. Herold, Jr.

/s/ C. Hayden Kaiser, Jr. Vice Chairman March 28, 1997
_________________________ and Director
Hayden Kaiser, Jr.

/s/ Donald E. Killelea Director March 28, 1997
______________________
Donald E. Killelea, M.D.

/s/ Bazile R. Lanneau, Sr. Director March 28, 1997
__________________________
Bazile R. Lanneau, Sr.

/s/ Bazile R. Lanneau, Jr. Vice President, Chief March 28, 1997
__________________________ Financial Officer, Treasurer,
Bazile R. Lanneau, Jr. Assistant Secretary and Director
(Principal Financial Officer)
(Principal Accounting Officer)

/s/ Albert W. Metcalfe Secretary and March 28, 1997
______________________ Director
Albert W. Metcalfe

/s/ Bethany L. Overton Director March 28, 1997
______________________
Bethany L. Overton

/s/ Robert R. Punches Director March 28, 1997
_____________________
Robert R. Punches

</TABLE>
<PAGE>

EXHIBITS TO ANNUAL REPORT ON FORM 10-KSB

OF BRITTON & KOONTZ CAPITAL CORPORATION

FOR THE FISCAL YEAR

ENDED DECEMBER 31, 1996

<PAGE>

EXHIBIT INDEX

Exhibit Description of Exhibit
_______ ______________________

3.1 Restated Articles of Incorporation of Britton & Koontz Capital *
Corporation, incorporated by reference to Exhibit 4.1 to
Registrant's Registration Statement on Form S-8, Registration
No. 333-20631, filed with the Commission on January 29,
1997.

3.2 By-Laws of Britton & Koontz Capital Corporation, as amended *
and restated, incorporated by reference to Exhibit 3.2 to
Registrant's Current Report on Form 8A filed with the
Commission on October 13, 1993.

4.1 Certain provisions defining the rights of Shareholders are found
in the Articles of Incorporation and By-Laws of Britton &
Koontz Capital Corporation. See Exhibits 3.1 and 3.2, above.

4.2 Shareholder Rights Agreement dated June 1, 1996 between *
Britton & Koontz Capital Corporation and Britton & Koontz
First National Bank, as Rights Agent, incorporated by
reference to Exhibit 4.3 to Registrant's Registration Statement
on Form S-8, Registration No. 333-20631, filed with the
Commission on January 29, 1997.

10.1 Employment Agreement dated December 31, 1996, between
Britton & Koontz Capital Corporation and W. Page Ogden.

10.2 Employment Agreement dated December 31, 1996, between
Britton & Koontz Capital Corporation and Bazile R. Lanneau, Jr.

10.3 Employment Agreement dated January 1, 1996 between Britton *
& Koontz Capital Corporation and James J. Cole, incorporated
by reference to Exhibit 10.3 to Registrant's Annual Report on
Form 10-KSB filed with the Commission on March 29, 1996.

10.4 Salary Continuation Plan Agreements dated September 26, *
1994, between Britton & Koontz Capital Corporation and W.
Page Ogden, Bazile R. Lanneau, Jr. and James J. Cole,
incorporated by reference to Exhibit 10 to Registrant's Current
Report on Form 10-QSB filed with the Commission on
November 14, 1994.

10.5 System Purchase Agreement dated January 22, 1996 between *
the Britton & Koontz First National Bank and InterBank
Systems, Inc., incorporated by reference to Exhibit 10.5 to
Registrant's Annual Report on Form 10-KSB filed with the
Commission on March 29, 1996 and Form 10-KSB/A, Amendment Number
1, filed with the Commission on June 14, 1996.

<PAGE>

10.6 Independent Contractor Agreement dated January 22, 1996 *
between InterBank Systems, Inc. and Summit Research, Inc.,
incorporated by reference to Exhibit 10.6 to Registrant's
Annual Report on Form 10-KSB filed with the Commission on
March 29, 1996 and Form 10-KSB/A, Amendment Number 1,
filed with the Commission on June 14, 1996.

10.7 Britton & Koontz Capital Corporation Long-Term Incentive *
Compensation Plan and Amendment, incorporated by reference
to Exhibit 4.4 to Registrant's Registration Statement on Form
S-8, Registration No. 333-20631, filed with the Commission on
January 29, 1997.

11 Statement re: computation of per share earnings.

13 Annual report to shareholders for 1996 fiscal year

21 Subsidiaries of the Registrant

23.1 Consent of Independent Auditors

27 Financial Data Schedule

* As indicated in the column entitled "Description of Exhibit," this exhibit
is incorporated by reference to another filing or document.

EXHIBIT 10.1

EMPLOYMENT AGREEMENT OF W. PAGE OGDEN
<PAGE>

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

AGREEMENT dated effective as this 31st day of December, 1996, between
BRITTON & KOONTZ FIRST NATIONAL BANK (hereinafter referred to as "B&K",
BRITTON & KOONTZ CAPITAL CORPORATION (hereinafter referred to as "B&K Capital
Corp."), and W. PAGE OGDEN (hereinafter referred to as "Employee").

I. EMPLOYMENT

B&K agrees to employ the Employee and the Employee agrees to work as a
full-time employee of B&K, upon the terms and conditions of this agreement.

II. TERM

This agreement shall terminate on December 31, 1999. However, it shall
automatically renew for three successive one-year terms, unless 90 days prior
notice is given by the respective parties.

III. COMPENSATION

For all services rendered by the Employee, as outlined hereinafter, the
Employee shall be paid an annual salary of One Hundred Thousand ($100,000)
Dollars , which shall be payable in accordance with B&K's ordinary payroll
procedures.

IV. ADDITIONAL EMPLOYEE BENEFITS

A) In addition to the compensation recited hereinabove, Employee shall
be entitled to participate to the fullest extent allowable in all additional
benefits normally made available to employee.

B) B&K agrees to provide Employee with an automobile and to reimburse
Employee for all maintenance, repairs, insurance, gasoline, and other costs
incidental to the automobile. Employee agrees to reimburse B&K for such
automobile costs or expenses necessary to comply with the current or future
tax laws and regulations promulgated thereunder.

C) B&K agrees to pay the country club, professional and civic
organization dues for Employee and his wife.

V. DUTIES

Employee is hired by B&K as the President and Chief Executive Officer of
B&K and B&K Capital Corp. Employee will report directly to the Board of
Directors of B&K and B&K Capital Corp. and will be responsible for the
supervision and administration of the bank in accordance with 1) the strategic
plan, 2) policies adopted by the Board and 3) applicable state and federal law
and regulations.

Employee will serve on the Board of Directors of B&K and B&K Capital Corp.
in accordance with federal banking regulations. Employee is expected to spend
a reasonable amount of his time in civic and professional activities, and it is
agreed that the time spent by Employee in these activities, along with other
reasonable amounts of time for personal or outside business, shall not
constitute a breach of this agreement by Employee, provided that such
activities do not materially interfere with the services required to be rendered
by Employee to B&K.

<PAGE>

VI. TERMINATION OF EMPLOYMENT

It is agreed that B&K may terminate Employee's employment at any time, with
or without cause, but any termination other than for cause shall not affect
Employee's right to compensation or other benefits. Termination for cause shall
include termination because of personal dishonesty, willful misconduct, breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, willful violation of any law, rule or regulation (other than
traffic violations or similar offenses), and/or flagrant abuse and violation of
the bank policies adopted by the B&K Board of Directors. If employee is
terminated without cause B&K shall pay Employee a lump sum termination payment
equal to the greater of Fifty Thousand ($50,000.00) Dollars or six months of
Employee's then current annual salary. As a condition precedent to employee
receiving this lump sum termination payment, employee must sign an agreement not
to sue B&K or B&K Capital based on any violation of labor laws, including age
discrimination.

VII. ASSIGNMENT

Employee acknowledges that the services to be rendered by him are unique
and personal. Accordingly, the Employee may not assign any of his rights or
delegate any of his authorities or obligations under this agreement.

VIII. ENTIRE AGREEMENT

This agreement contains the entire understanding of the parties, may not be
changed orally, but only by an agreement in writing signed by the party against
whom enforcement of any waiver, change, modification, extension or discharge is
sought.

IX. GOVERNING LAW

This agreement shall be construed and enforced in accordance with the laws
of the State of Mississippi.

X. SEVERABILITY AND MODIFICATION

The invalidity of unenforceability of any provision hereof shall in no way
affect the validity or enforceability of other provisions.

XI. COUNTERPARTS

This instrument is executed in duplicate counterparts, each of which shall
be deemed an original, but both of which shall constitute one and the same
instrument. Employee shall have one fully executed copy and B&K shall have one
fully executed copy.

<PAGE>

XII. BINDING EFFECTS OF THIS AGREEMENT

This agreement shall be binding upon the heirs, legal representative,
successors and assigns of the parties hereto.

IN WITNESS WHEREOF this agreement is executed as of the date first
hereinabove recited.

BRITTON & KOONTZ FIRST NATIONAL BANK

By: _______________________________
W. J. Feltus III, Chairman

BRITTON & KOONTZ CAPITAL CORPORATION

By: _______________________________
W. J. Feltus III, Chairman

___________________________________
W. PAGE OGDEN

EXHIBIT 10.2

EMPLOYMENT AGREEMENT OF BAZILE R. LANNEAU, JR.

<PAGE>

EXHIBIT 10.2

EMPLOYMENT AGREEMENT

AGREEMENT dated effective as this 31st day of December, 1996, between
BRITTON & KOONTZ FIRST NATIONAL BANK (hereinafter referred to as "B&K", BRITTON
& KOONTZ CAPITAL CORPORATION (hereinafter referred to as "B&K Capital Corp."),
and BAZILE R. LANNEAU, JR. (hereinafter referred to as "Employee").

I. EMPLOYMENT

B&K agrees to employ the Employee and the Employee agrees to work as a
full-time employee of B&K, upon the terms and conditions of this agreement.

II. TERM

This agreement shall terminate on December 31, 1999. However, it shall
automatically renew for three successive one-year terms, unless 90 days prior
notice is given by the respective parties.

III. COMPENSATION

For all services rendered by the Employee, as outlined hereinafter, the
Employee shall be paid an annual salary of Eighty Five Thousand ($85,000)
Dollars, which shall be payable in accordance with B&K's ordinary payroll
procedures.

IV. ADDITIONAL EMPLOYEE BENEFITS

A) In addition to the compensation recited hereinabove, Employee shall be
entitled to participate to the fullest extent allowable in all additional
benefits normally made available to employee.

C) B&K agrees to pay the country club, professional and civic organization
dues for Employee and his wife.

V. DUTIES

Employee is hired by B&K as Executive Vice President and by B&K Capital
Corp. as Vice President and will report directly to the President and CEO.
Employee will be the second ranking employee in the bank and will be responsible
for the supervision and administration of areas listed below in accordance with
the policies and strategic plans of the bank and applicable state and federal
laws and regulations. Employee will be responsible for the ongoing development
of policy and procedures in and oversight of investments and funds management,
operations, accounting, personnel and trust.

Employee will be a member of the Board of Directors of B&K and B&K Capital
Corp. and will serve as Chairman of the Investment and Trust Committees of the
Board of B&K and B&K Capital Corp. Employee will be a voting member of both the
Directors' and Officers' Loan Committees and will service a portfolio of loan
accounts selected by the president. Employee is expected to spend a reasonable
amount of his time in civic and professional activities, and it is agreed that
the time spent by Employee in these activities, along with other reasonable
amounts of time for personal or outside business, shall not constitute a breach
of this agreement by Employee, provided that such activities do not materially
interfere with the services required to be rendered by Employee to B&K.

<PAGE>

VI. TERMINATION OF EMPLOYMENT

It is agreed that B&K may terminate Employee's employment at any time, with
or without cause, but any termination other than for cause shall not affect
Employee's right to compensation or other benefits. Termination for cause shall
include termination because of personal dishonesty, willful misconduct, breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, willful violation of any law, rule or regulation (other than
traffic violations or similar offenses), and/or flagrant abuse and violation of
the bank policies adopted by the B&K Board of Directors. If employee is
terminated without cause B&K shall pay Employee a lump sum termination payment
equal to the greater of Forty Two Thousand Five Hundred ($42,500.00) Dollars or
six months of Employee's then current annual salary. As a condition precedent
to employee receiving this lump sum termination payment, employee must sign an
agreement not to sue B&K or B&K Capital based on any violation of labor laws,
including age discrimination.

VII. ASSIGNMENT

VIII. ENTIRE AGREEMENT

IX. GOVERNING LAW

This agreement shall be construed and enforced in accordance with the laws
of the State of Mississippi.

X. SEVERABILITY AND MODIFICATION

The invalidity of unenforceability of any provision hereof shall in no way
affect the validity or enforceability of other provisions.

XI. COUNTERPARTS

<PAGE>

XII. BINDING EFFECTS OF THIS AGREEMENT

This agreement shall be binding upon the heirs, legal representative,
successors and assigns of the parties hereto.

IN WITNESS WHEREOF this agreement is executed as of the date first
hereinabove recited.

BRITTON & KOONTZ FIRST NATIONAL BANK

By: _______________________________
W. Page Ogden, President & CEO

BRITTON & KOONTZ CAPITAL CORPORATION

By: _______________________________
W. Page Ogden, President & CEO

___________________________________
BAZILE R. LANNEAU, JR.

EXHIBIT 11

Statement Re: Computation of Per Share Earnings

<PAGE>

EXHIBIT 11

Statement Re: Computation of Per Share Earnings

Twelve Months Ended
December 31
_________________________
1996 1995
__________ __________
<S> <C> <C>
Primary:

Average shares outstanding: 441,072 439,949

Net Effect of the assumed exercise of stock
options-based on the treasury stock method
using average stock price 1,560 2,196
__________ __________
Total 442,632 442,145
========== ==========
Net Income $2,032,289 $2,130,086
========== ==========
Net income per share $4.59 $4.82
========== ==========

Fully Diluted:

Average shares outstanding: 441,072 439,949

Net effect of the assumed exercise of stock
options-based on the treasury stock method
using average market price or year end
market price, whichever is higher 1,595 2,432
__________ __________
Total 442,667 442,381
========== ==========
Net income $2,032,289 $2,130,086
========== ==========
Net income per share $4.59 $4.82
========== ==========

</TABLE>

EXHIBIT 13

ANNUAL REPORT TO SHAREHOLDERS

<PAGE>

EXHIBIT 13

ANNUAL REPORT TO SHAREHOLDERS

Message to Shareholders

Britton & Koontz Capital Corporation enjoyed another year of strong financial
performance in 1996. Net after-tax earnings were $2,032,289. Dividends
distributed from such earnings were $882,144, a payout of 43%. Earnings per
share did decline from $4.82 in 1995 to $4.59 in 1996, primarily because the
Company absorbed a special nonrecurring FDIC assessment of $257,029 on deposits
acquired in the 1993 merger with Natchez First Federal Savings Bank. Returns
on average equity and assets were 12.53% and 1.33% respectively. Equity capital
at year-end stood at $16,521,382, or 10.92% of assets.

The Company took a major step in October in listing its stock with Nasdaq.
Trades in the stock now appear under the symbol BKBK in the Nasdaq SmallCap
Market. Our listing gives the Company stock national exposure and enhances
its liquidity. Our initial experience in a broader market has been quite
positive with the price per share moving from $45 when our listing commenced
in October to a year-end closing price of $56.

Earlier we reported the introduction of a unique community service in the
offering of local Internet access through the bank. Our Internet providership
has enhanced our local reputation as a leader in banking innovation. It has
afforded us the opportunity to provide a valuable community service and to
build another communication link between the bank and our customers.
Furthermore, it has provided the vehicle for Internet-based electronic banking,
which we are presently introducing. We invite our shareholders and customers
to visit our world wide web site at www.bkbank.com and find out more about the
new services at B&K.

As mentioned in the past, we aim to offer at B&K the personal touch that
banking customers value so highly in a community bank as well as innovation
in the electronic arena. Such a banking system requires that we assemble
a group of employees with commitment to service and a dedicated interest in
mastering new technologies. We are proud of the team at B&K, and we remain
excited about the bank's opportunities for growth. As always, we appreciate
your continued interest and support.

Yours truly,

/s/ W.J. Feltus lll /s/ W. Page Ogden
___________________ __________________
W. J. Feltus III W. Page Ogden
Chairman of the Board President & CEO

<PAGE>

Highlights
($ In Thousands, Except Per Share Data)
______________________________________

1996 1995
_______ _______

Net Income 2,032 2,130
Net Income Per Share 4.59 4.82
Net Loans 95,322 91,999
Deposits 126,440 128,567
Total Assets 151,303 151,787
Total Shareholders' Equity 16,521 15,371

Contents
________

Message to Shareholders

Financial Statements

Management's Discussion and Analysis of
Financial Condition and Results of Operation

Corporate Information

Directors and Officers

<PAGE>

BRITTON & KOONTZ CAPITAL CORPORATION
AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1996 AND 1995

with

INDEPENDENT AUDITOR'S REPORT

<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders
Britton & Koontz Capital Corporation and Subsidiary

We have audited the accompanying consolidated statements of
financial condition of Britton & Koontz Capital Corporation and
Subsidiary as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in stockholders' equity, and
cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Britton & Koontz Capital Corporation and Subsidiary at
December 31, 1996 and 1995, and the consolidated results of their
operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.

Vicksburg, Mississippi
January 30, 1997 /s/ May & Company
_________________
May & Company

<PAGE>

BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31,

ASSETS
<TABLE>
<CAPTION>
1996 1995
____________ ____________
<S> <C> <C>
Cash and due from banks:
Non-interest bearing $ 4,656,684 $ 3,340,954
Interest bearing 449,801 1,361,539
____________ ____________
Total cash and due from banks 5,106,485 4,702,493

Federal funds sold 700,000 1,450,000

Investment securities:
Held-to-maturity (market value of $43,595,368 and
$47,539,923, respectively) 43,412,008 46,794,280
Equity securities 1,197,650 1,198,950

Loans, less unearned income of $252,625 in 1996 and
$284,865 in 1995, and allowance for loan losses of
$622,975 in 1996 and $723,641 in 1995 95,322,179 91,998,966

Bank premises and equipment, net 3,674,397 3,569,586

Other real estate, net 78,928 258,536

Accrued interest receivable 1,058,111 1,137,337

Cash surrender value of life insurance 634,930 599,646

Other assets 117,974 77,445
____________ ____________
Total assets $151,302,662 $151,787,239
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Deposits:
Non-interest bearing $ 16,065,133 $ 13,983,026
Interest bearing 110,375,292 114,584,214
____________ ____________
Total deposits 126,440,425 128,567,240

Federal Home Loan Bank advances 2,000,000 0
Securities sold under repurchase agreements 1,664,139 2,722,882
Accrued interest payable 839,461 817,119
Negative goodwill, net of accumulated amortization
of $1,543,680 in 1996 and $1,196,030 in 1995 1,516,742 1,864,392
Advances from borrowers for taxes and insurance 367,734 381,644
Accrued taxes and other liabilities 1,952,779 2,062,725
____________ ____________
Total liabilities 134,781,280 136,416,002

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Common stock, $10 par value per share; 3,000,000
shares authorized; 441,072 shares issued
and outstanding, in 1996 and 1995 4,410,720 4,410,720
Additional paid-in capital 3,395,617 3,395,617
Retained earnings 8,715,045 7,564,900
____________ ____________
Total stockholders' equity 16,521,382 15,371,237
____________ ____________
Total liabilities and stockholders' equity $151,302,662 $151,787,239
============ ============
</TABLE>
<PAGE>

BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,

1996 1995
____________ ____________
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 8,172,215 $ 7,580,829
Interest on investment securities:
Taxable interest income 3,194,276 3,551,400
Exempt from federal income taxes 77,365 69,923
Interest on federal funds sold 67,586 16,988
____________ ____________
Total interest income 11,511,442 11,219,140

INTEREST EXPENSE:
Interest on deposits 4,980,904 4,896,976
Interest on federal funds purchased 38,063 28,284
Interest on securities sold under repurchase agreements 138,185 240,969
____________ ____________
Total interest expense 5,157,152 5,166,229

NET INTEREST INCOME 6,354,290 6,052,911

PROVISION FOR LOAN LOSSES 50,000 175,000
____________ ____________
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 6,304,290 5,877,911

OTHER INCOME:
Service charges on deposit accounts 646,521 573,606
Income from fiduciary activities 57,181 55,486
Insurance premiums and commissions 45,057 37,746
Gain (loss) on sale of other real estate (7,086) 2,705
Amortization of negative goodwill 347,650 415,910
Other 274,418 241,128
____________ ____________
Total other income 1,363,741 1,326,581

OTHER EXPENSES:
Salaries 2,009,480 1,832,107
Director fees 137,400 134,400
Employee benefits 296,174 311,611
Net occupancy expense 360,388 338,930
Equipment expense 494,151 335,198
FDIC assessment 345,229 199,211
Stationery and supplies 116,468 97,851
Other real estate (income) expense (6,339) 6,483
Other 1,022,181 852,466
____________ ____________
Total other expenses 4,775,132 4,108,257

INCOME BEFORE INCOME TAX EXPENSE 2,892,899 3,096,235

INCOME TAX EXPENSE 860,610 966,149
____________ ____________
NET INCOME $ 2,032,289 $ 2,130,086
============ ============
EARNINGS PER SHARE DATA:

Primary earnings per share $ 4.59 $ 4.82
============= ============
Fully diluted earnings per share $ 4.59 $ 4.82
============= ============
Weighted average shares outstanding:

Primary 442,632 442,145
============= ============
Fully diluted 442,667 442,381
============= ============

See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>

BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Total Stock Capital Earnings
___________ __________ __________ __________

<S> <C> <C> <C> <C>
BALANCE, December 31, 1994 $14,030,434 $4,390,720 $3,367,617 $6,272,097

Net income 2,130,086 0 0 2,130,086
Cash dividends declared ($1.90 per share) (837,283) 0 0 (837,283)
New shares issued (2,000 shares) 48,000 20,000 28,000 0
___________ __________ __________ __________
BALANCE, December 31, 1995 15,371,237 4,410,720 3,395,617 7,564,900

Net income 2,032,289 0 0 2,032,289
Cash dividends declared ($2.00 per share) (882,144) 0 0 (882,144)
___________ __________ __________ __________
BALANCE, December 31, 1996 $16,521,382 $4,410,720 $3,395,617 $8,715,045
=========== ========== ========== ==========

See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>

BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
<TABLE>
<CAPTION>

<S> <C> <C>
1996 1995
____________ ____________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,032,289 $ 2,130,086
Adjustments to reconcile net income to
net cash provided by operating activities:
Deferred taxes (134,841) (44,539)
Provision for loan losses 50,000 175,000
Provision for depreciation 315,167 268,644
Gain on sale of mortgage loans (5,340) 0
(Gain) loss on sale of other real estate 7,086 (2,705)
Stock dividends received (56,100) (61,000)
Amortization of investment security premiums, net 77,530 80,857
Amortization of valuation adjustment on acquired loans 111,410 181,230
Amortization of valuation adjustment on acquired deposits (68,760) (100,430)
Amortization of negative goodwill (347,650) (415,910)
Net decrease in unrealized loss on loans held-for-sale 0 (56,248)
Principal payments received on loans held-for-sale 0 1,791
Decrease in accrued interest receivable 79,226 32,847
Increase in cash surrender value of life insurance (35,284) (41,107)
Increase in other assets (40,529) (12,423)
Increase in accrued interest payable 22,342 223,243
Increase (decrease) in advances
from borrowers for taxes and insurance (13,910) 13,666
Increase in accrued taxes and other liabilities 24,895 158,307
____________ ____________
Net cash provided by operating activities 2,017,531 2,531,309
____________ ____________
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in federal funds sold 750,000 (1,450,000)
Proceeds from maturities, and paydowns
of investment securities 11,321,271 10,805,889
Redemption of securities 57,400 50,300
Purchases of investment securities (8,016,529) 0
Net increase in loans (3,595,775) (8,742,542)
Purchases of premises and equipment (419,978) (333,685)
Proceeds from sale of other real estate 289,014 81,705
____________ ____________
Net cash provided by investing activities 385,403 411,667
____________ ____________
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits 40,239 (704,703)
Net increase (decrease) in time deposits (2,098,294) 5,924,898
Federal Home Loan Bank advances 2,000,000 0
Decrease in federal funds purchased 0 (3,450,000)
Net decrease in securities sold under repurchase agreements (1,058,743) (3,444,797)
Cash dividends paid (882,144) (837,283)
Proceeds from the sale of common stock, net 0 48,000
____________ ____________
Net cash used in financing activities (1,998,942) (2,463,885)
____________ ____________
NET INCREASE IN CASH AND DUE FROM BANKS 403,992 479,091

CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 4,702,493 4,223,402
____________ ____________
CASH AND DUE FROM BANKS AT END OF YEAR $ 5,106,485 $ 4,702,493
============ ============

SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:

Transfer of loans foreclosed to other real estate $ 116,492 $ 94,194
============ ============
Transfer of loans held-for-sale to loans $ 0 $ 540,098
============ ============
See accompanying notes to the consolidated financial statements.

</TABLE>
<PAGE>

BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995

NOTE A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the
accounts of Britton & Koontz Capital Corporation and its
wholly-owned subsidiary Britton & Koontz First National
Bank ("the Bank"). All material intercompany profits,
balances and transactions have been eliminated.

Nature of Operations

The Company operates under a national bank
charter and provides full banking services, including trust
services. The primary area served by the Company is the
west central region of Mississippi and services are
provided at three locations in Natchez, Mississippi.

Use of Estimates

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

Material estimates that are particularly susceptible
to significant change relate to the determination of the
allowance for losses on loans and the valuation of real
estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the
determination of the allowances for losses on loans and
foreclosed real estate, management obtains independent
appraisals for significant properties.

While management uses available information to
recognize losses on loans and foreclosed real estate,
future additions to the allowances may be necessary based
on changes in local economic conditions. In addition,
regulatory agencies, as an integral part of their
examination process, periodically review the Bank's
allowances for losses on loans and foreclosed real estate.
Such agencies may require the Bank to recognize
additions to the allowances based on their judgments
about information available to them at the time of their
examination. Because of these factors, it is reasonably
possible that the allowances for losses on loans and
foreclosed real estate may change materially in the near
term.

<PAGE>

NOTE A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

Investment Securities

Management determines the appropriate
classification of securities at the time of purchase. If
management has the intent and the Bank has the ability at
the time of purchase to hold debt securities until maturity,
they are classified as held-to-maturity and carried at cost,
adjusted for amortization of premiums and accretion of
discounts using methods approximating the interest
method. Available-for-sale securities include securities
that management intends to use as part of its asset and
liability management strategy and that may be sold in
response to changes in interest rates, resultant prepayment
risk and other factors related to interest rates and
resultant prepayment risk changes. These securities are
carried at fair value. Equity securities include stock in
the Federal Reserve Bank and the Federal Home Loan
Bank, which are restricted and are carried at cost.

Realized gains and losses on dispositions are based
on the net proceeds and the adjusted book value of the
securities sold, using the specific identification method.
Unrealized gains and losses on investment securities
available-for-sale are based on the difference between
book value and fair value of each security. These gains
and losses are credited or charged to stockholders' equity,
net of applicable taxes. Realized gains and losses flow
through the Company's yearly operations. The Bank
does not engage in trading account activities.

Interest-Rate Swap Agreements

The Bank enters into interest-rate swap agreements
to modify the interest rate characteristics of its assets and
liabilities. These agreements may involve the receipt or
payment of fixed rate amounts in exchange for floating
rate interest receipts or payments over the life of the
agreement without an exchange of the underlying
principal amount. The differential to be paid or received
is accrued as interest rates change and recognized as an
adjustment to interest income or expense. The related
amount payable to or receivable from counter-parties is
included in other liabilities or assets. The fair values of
the swap agreements are not recognized in the financial
statements.

Loans

Loans are stated at the amount of principal
outstanding, reduced by unearned income and an
allowance for loan losses. Unearned income on certain
installment loans is recognized as income over the terms
of the loans by a method which approximates the interest
method. Interest on other loans is calculated by using the
simple interest

<PAGE>

NOTE A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

Loans - Continued

method on daily balances of the principal amount
outstanding. Loans are ordinarily placed on nonaccrual
when a loan is specifically determined to be impaired or
when principal or interest is delinquent for 90 days or
more; however, management may elect to continue the
accrual when the estimated net realizable value of
collateral is sufficient to cover the principal balance and
the accrued interest. Any unpaid interest previously
accrued on nonaccrual loans is reversed from income.
Interest income, generally, is not recognized on specific
impaired loans unless the likelihood of further loss is
remote. Interest payments received on such loans are
applied as a reduction of the loan principal balance.
Interest income on other nonaccrual loans is recognized
only to the extent of interest payments received.

Allowance for Loan Losses

The allowance is an amount that management
believes will be adequate to absorb possible losses on
existing loans that may become uncollectible, based on
evaluations of the collectibility of loans and prior loan
loss experience. The evaluations take into consideration
such factors as changes in the nature and volume of the
loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may
affect the borrower's ability to pay. Allowances for
impaired loans are generally determined based on
collateral values or the present value of estimated cash
flows. Credits deemed uncollectible are charged to the
allowance. Provisions for loan losses and recoveries on
loans previously charged off are added to the allowance.

Loans Held-for-Sale

Loans held-for-sale are primarily thirty year and
fifteen year fixed rate, one to four family real estate loans
which are valued at the lower of cost or market, as
determined by outstanding commitments from investors or
current investor yield requirements, calculated on an
individual basis. These loans are originated with the
intent of selling them on the secondary market.

Unrealized losses on loans held-for-sale are
charged against income in the period of decline. Such
declines are recorded in a valuation allowance account
and deducted from the cost basis of the loans. Gains on
loans held-for-sale are recognized when realized.

<PAGE>

NOTE A.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

Bank Premises and Equipment

Bank premises and equipment are stated at cost, less
accumulated depreciation. Depreciation expense is
computed by the straight-line method and is charged to
expense over the estimated useful lives of the assets.

Other Real Estate

Other real estate consists primarily of foreclosed
property. Properties acquired through foreclosure or in
settlement of loans and in-substance foreclosures are
classified as foreclosed properties and are valued at the
lower of the loan value or estimated fair value of the
property acquired less estimated selling costs. At the
time of foreclosure, the excess, if any, of the loan value
over the estimated fair value of the property acquired less
estimated selling costs is charged to the allowance for
loan losses. Additional decreases in the carrying values
of foreclosed properties or changes in estimated selling
costs, subsequent to the time of foreclosure, are
recognized through provisions charged to operations. A
valuation reserve is maintained for estimated selling costs
and to record the excess of the carrying values over the
fair market values of properties if changes in the carrying
value are judged to be temporary. Revenues and
expenses associated with owning and operating other real
estate, and gains and losses on dispositions of such assets
are recorded in earnings in the period incurred.

The fair value of foreclosed properties is
determined based upon appraised value, utilizing either
the estimated replacement cost, the selling price of
properties utilized for similar purposes or discounted cash
flow analyses of the properties' operations.

Changes in the reserve for other real estate are as follows:

1996 1995

Balance at January 1 $ 11,658 $ 11,658

Losses charged against the reserve (11,658) 0
_________ _________
Balance at December 31 $ 0 $ 11,658
========= =========

<PAGE>

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

Compensated Absences

Employees of the Bank are entitled to paid
vacation, emergency and sick days off, depending on
length of service in the Banking industry. Vacation,
emergency and sick days are granted on an annual basis
to eligible employees. Unused vacation and emergency
days expire on December 31 of each year. Unused sick
days expire on each related employee's employment
anniversary date each year.

The estimated amount of compensation for future
absences is deemed immaterial to the consolidated
financial statements, and, accordingly, no liability has
been recorded in the accompanying financial statements.
The Bank's policy is to recognize the costs of
compensated absences when actually paid to employees.

Income Taxes

The provision for income taxes is based on
amounts reported in the statements of income after
exclusion of nontaxable income such as interest on state
and municipal securities. Also, certain items of income
and expenses are recognized in different time periods for
financial statement purposes than for income tax
purposes. Thus, provisions for deferred taxes are
recorded in recognition of such temporary differences.

Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible
temporary differences and deferred tax liabilities are
recognized for taxable temporary differences. Temporary
differences are the differences between the reported
amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and
rates on the date of enactment.

The Company and its wholly owned subsidiary file
a consolidated federal income tax return. Consolidated
income tax expense is allocated on the basis of each
company's income adjusted for permanent differences.

<PAGE>

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

Earnings Per Share

Primary earnings per common share is calculated
by the treasury stock method on the basis of the weighted
average number of shares of common stock and common
stock equivalents outstanding for each period presented.
All shares held by the Employee Stock Ownership Plan
(ESOP) are treated as outstanding in computing the
income per share. Stock options are considered common
stock equivalents and are used in the calculation of
primary earnings per share if they are dilutive (i.e., the
average market price exceeds the exercise price). If the
stock options will cause further dilution (i.e., the ending
market price of the common stock is higher than the
average market price for the period), the additional
dilution is used in the calculation of fully diluted earnings
per share.

Off-Balance-Sheet Financial Instruments

In the ordinary course of business, the Bank has
entered into off-balance-sheet financial instruments
consisting of interest-rate swap agreements, commitments
to extend credit and commercial letters of credit.
Financial instruments related to loans are recorded in the
financial statements when they become payable.

Cash Flows

For purposes of the statements of cash flows, the
Company considers only cash and due from banks to be
cash equivalents.

The Company paid income taxes of $931,744 in
1996, and $1,095,686 in 1995. Interest paid on deposit
liabilities and other borrowings was $5,134,810 in 1996,
and $4,942,986 in 1995.

<PAGE>

NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

Recent Accounting Pronouncements

The Financial Accounting Standards Board issued
Statement on Financial Accounting Standards No. 125
Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities, which
becomes effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after
December 31, 1996. The standards are based on the
constant application of the financial-components
approach, which recognizes that financial assets and
liabilities can be divided into various components. Under
that approach, an entity recognizes all financial assets and
servicing it controls and liabilities it has incurred and
would derecognize financial assets when control has been
surrendered and liabilities when extinguished. The effect
of the implementation of this standard is not expected to
be material. The Financial Accounting Standards Board
subsequently issued Statement No. 127, Deferral of the
Effective Date of Certain Provisions of FASB Statement
No. 125. This statement defers, for one year, certain
provisions contained in Statement No. 125.

Advertising Costs

Advertising and marketing costs are recorded as
expenses in the year in which they are incurred.
Advertising and marketing costs charged to operations
during 1996 and 1995 were $73,995 and $71,043,
respectively.

Reclassifications

Certain 1995 amounts have been reclassified to
conform with the 1996 presentation.

<PAGE>

NOTE B. INVESTMENT SECURITIES

The amortized cost and approximate market value
of investment securities classified as held-to-maturity at
December 31, 1996, are summarized as follows:
<TABLE>
<CAPTION>

Gross Gross Approximate
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
___________ ___________ ___________ ___________

<S> <C> <C> <C> <C>
U. S. Treasury obligations $ 6,509,679 $ 18,648 $ (6,327) $ 6,522,000
Obligations of other U. S. Government agencies
and corporations 34,693,508 464,846 (389,459) 34,768,895
Obligations of states and political subdivisions 778,155 28,204 0 806,359
Privately issued collateralized
mortgage obligations 1,430,666 67,461 (13) 1,498,114
___________ ___________ ___________ ___________
$43,412,008 $ 579,159 $ (395,799) $43,595,368
=========== =========== =========== ===========
</TABLE>

The amortized cost and approximate market value
of investment securities classified as held-to-maturity at
December 31, 1995, are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross Approximate
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
___________ ___________ ___________ ___________
<S> <C> <C> <C> <C>
U. S. Treasury obligations $ 5,562,676 $ 55,755 $ (16,219) $ 5,602,212
Obligations of other U. S. Government agencies
and corporations 38,853,412 775,228 (180,756) 39,447,884
Obligations of states and political subdivisions 585,415 22,031 (144) 607,302
Privately issued collateralized
mortgage obligations 1,792,777 89,748 0 1,882,525
___________ ___________ ___________ ___________
$46,794,280 $ 942,762 $ (197,119) $47,539,923
=========== =========== =========== ===========

</TABLE>

Proceeds from maturities of investment securities
held-to-maturity were $3,000,000 and $4,163,300 during
1996 and 1995, respectively. There were no sales and,
therefore, no resultant gains or losses from the sales of
investment securities held-to-maturity in 1996 or 1995.
The Bank purchased $8,016,529 and $-0- of investment
securities held-to-maturity and received $8,321,271 and
$6,692,889 from principal paydowns during 1996 and
1995, respectively.

<PAGE>
Equity securities include the Bank's investment in
the Federal Home Loan Bank and the Federal Reserve
Bank. The Bank acquired $56,100 and $61,000 of
additional stock in the Federal Home Loan Bank and no
additional stock in the Federal Reserve Bank during 1996
and 1995, respectively. The Bank subsequently redeemed
$57,400 and $50,300 of stock in the Federal Home Loan
Bank during 1996 and 1995, respectively. This stock is
considered a restricted stock as only Banks which are
members of these organizations may acquire or redeem
the stock. The stock is redeemable at its face value; and,
therefore, there are no gross unrealized gains or gross
unrealized losses associated with these investments.

Investment securities carried at approximately
$16,900,000 (approximate market value $16,821,000) at
December 31, 1996, and approximately $21,170,000
(approximate market value $21,521,000) at December 31,
1995, were pledged to collateralize public deposits, and
for other purposes as required by law or agreement.

The amortized cost and approximate market value
of investment debt securities at December 31, 1996, by
contractual maturity (including mortgage-backed
securities), are shown below. Expected maturities will
differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or
without call or prepayment penalties.

Securities held-to-maturity
__________________________________
Amortized Approximate
Cost Market Value
___________ ____________

Due in one year or less $ 4,976,064 $ 4,983,680
Due after one year through five years 3,027,644 3,035,714
Due after five years through ten years 8,827,798 8,586,627
Due after ten years 26,580,502 26,989,347
___________ ___________
$43,412,008 $43,595,368
=========== ===========

<PAGE>

NOTE C. SALES-TYPE LEASE INVESTMENT

During 1994, the Bank entered into a sales-type
lease agreement with the City of Natchez. In this agreement,
the Bank sold the City certain land and buildings included in
other real estate and certain land, buildings and improvements
included in bank premises and equipment for a contract price
of $830,000. The City agreed to make annual lease payments
and semi-annual interest payments. The interest will accrue at
6.25 percent per year. The Bank will retain title to the
property until the end of the lease. Upon receipt of the final
lease payment in May, 2004, the title will pass to the City of
Natchez. The obligation of the City to the Bank is evidenced
by a series of Certificates of Participation. Each Certificate
represents an annual principal payment. The Certificates do
not represent a legal obligation of the City and are contingent
and expressly limited to the extent of any specific, annual
appropriation made by the City to fund the lease. The Bank
currently carries these Certificates in its investment
portfolio as held-to-maturity.

The following is a summary of the components of
the Bank's net investment in sales-type leases at
December 31, 1996:

Total minimum lease payments
to be received $ 730,781

Portion of payments
representing interest (175,781)
___________
Net investment $ 555,000
===========

Minimum lease payments to be received as of
December 31, 1996, for each of the next five years are:

1997 0
1998 75,000
1999 0
2000 85,000
2001 90,000
Thereafter 305,000
___________
$ 555,000
===========

<PAGE>

NOTE D. LOANS

The Bank's loan portfolio at December 31, 1996
and 1995, consists of the following:

1996 1995
____________ ____________

Commercial, financial and
agricultural $ 17,453,750 $ 14,300,392
Real estate - construction 827,314 873,521
Real estate - mortgage 64,831,842 65,584,976
Installment 12,923,032 12,078,825
Overdrafts 161,841 169,758
____________ ____________
Total loans $ 96,197,779 $ 93,007,472
============ ============

Loans on which accrual of interest has been
discontinued or reduced amount to approximately
$235,000 and $300,000 at December 31, 1996 and 1995,
respectively. If interest on such loans had been accrued,
the income would have approximated $48,000 and
$41,000 in 1996 and 1995, respectively.

In the ordinary course of business, the Bank makes
loans to its executive officers, principal stockholders,
directors and to companies in which these borrowers are
principal owners. Loans outstanding to such borrowers
(including companies in which they are principal owners)
amounted to $1,387,135 and $1,816,090 at December
31, 1996 and 1995, respectively. These loans were
made on substantially the same terms, including interest
rate and collateral, as those prevailing at the time for
comparable transactions with other persons and did not
involve more than normal risk of collectibility or present
other unfavorable features.

Changes in these loans are as follows:

Balance, at January 1, 1996 $ 1,816,090

New loans 769,982
Repayments (1,198,937)
___________
Balance, at December 31, 1996 $ 1,387,135
===========

<PAGE>

NOTE E. ALLOWANCE FOR LOAN LOSSES

Changes in the allowance for loan losses are as follows:

1996 1995
__________ __________
Balance at January 1, $ 723,641 $ 750,523
__________ __________
Credits charged off (169,572) (241,680)

Recoveries 18,906 39,798
__________ __________
Net credits charged off (150,666) (201,882)
__________ __________
Provision for loan losses 50,000 175,000
__________ __________
Balance at December 31, $ 622,975 $ 723,641
========== ==========

NOTE F. LOAN SERVICING

Mortgage loans serviced for others are not
included in the accompanying consolidated statements of
financial condition. The unpaid principal balances of
these loans are summarized as follows:

December 31,

1996 1995
___________ ___________
Mortgage loans serviced for:
Federal National Mortgage
Association (FNMA) $ 7,832,038 $ 9,196,281
=========== ===========
<PAGE>

NOTE F. LOAN SERVICING - CONTINUED

Custodial escrow balances maintained in
connection with the foregoing loan servicing and included
in advances from borrowers for taxes and insurance in
the accompanying consolidated statements of financial
condition were $ 85,639 and $106,588 at December 31, 1996
and 1995, respectively.

NOTE G. BANK PREMISES AND EQUIPMENT

A summary of Bank premises and equipment is as
follows:

December 31,

1996 1995
___________ ___________
Land $ 442,675 $ 428,675
Buildings 3,719,251 3,656,138
Furniture and equipment 2,538,379 2,197,112
___________ ___________
6,700,305 6,281,925
Less accumulated depreciation 3,025,908 2,712,339
___________ ___________
Bank premises and equipment, net $ 3,674,397 $ 3,569,586
=========== ===========

NOTE H. TRUST DEPARTMENT ASSETS

Property (other than cash deposits) held by the
Bank in fiduciary or agency capacities for its customers is
not included in the accompanying consolidated statements
of financial condition as such items are not assets of the
Bank. Trust fees are reported on the cash basis. The
difference between cash basis and the accrual basis is
immaterial.

<PAGE>

NOTE I. DEPOSITS

Maturities of certificates of deposit of $100,000 or
more outstanding at December 31, 1996 and 1995, are
summarized as follows:

1996 1995
___________ ___________
Time remaining until maturity:
Three months or less $ 5,887,275 $ 5,023,213
Over three through six months 6,962,831 4,654,228
Over six through twelve months 3,015,962 3,912,281
Over twelve months 2,138,026 3,800,807
___________ ___________
$18,004,094 $17,390,529
=========== ===========

Approximate scheduled maturities of certificates of
deposits for each of the next five years are:

1997 $ 62,109,000
1998 8,039,000
1999 4,074,000
2000 3,000
2001 0
____________
$ 74,225,000
============

Deposits at December 31, 1996 and 1995, consisted of
the following:

1996 1995
____________ ____________
Non-interest bearing demand deposits $ 16,065,133 $ 13,983,026
NOW accounts 17,798,875 19,291,165
Money market deposit accounts 7,854,890 8,456,287
Savings accounts 10,496,551 10,444,732
Certificates of deposit 74,224,976 76,392,030
____________ ____________
$126,440,425 $128,567,240
============ ============
<PAGE>

NOTE J. FEDERAL HOME LOAN BANK ADVANCES

On December 30, 1996, the Bank received a
$2,000,000 advance from the Federal Home Loan Bank.
This advance accrues interest at an annual rate of 5.63
percent and matures on January 7, 1997. The advance is
collateralized by a portion of the Bank's 1 to 4 family
residential mortgage portfolio in accordance with the
Advance Security and Collateral Agreement with the
Federal Home Loan Bank.

NOTE K. EMPLOYEE BENEFIT PLANS

The Bank has an employee stock ownership plan which
is designed to invest primarily in employer stock.
Essentially, all employees of the Britton & Koontz
Capital Corporation and its wholly owned subsidiary are
covered under this plan, with employees becoming fully
vested in their benefits after seven years of participation.
Employer contributions are determined by the Board of
Directors each year and are allocated among participants
on the basis of their total annual compensation.
Dividends on the Company stock owned by the plan are
recorded as a reduction of retained earnings. Operating
expenses include contributions to the plan of $120,000 in
1996 and 1995. This plan owned 53,584 and 56,977
shares of Britton & Koontz Capital Corporation stock as
of December 31, 1996 and 1995, respectively, at an
overall cost to the plan of $16.63 and $16.16 per share.

During 1996, the Company adopted a long-term
incentive plan that is eligible to all employees of the
Company and the Bank. The plan provides for
discretionary grants of various incentives including stock
options; shares of common stock subject to restrictions
on transfer, forfeitability provisions or other limitations;
and shares of common stock, the issuance and delivery
of which may be subject to the attainment of specified
performance objectives. A maximum of 40,000 shares
of common stock is available for grant under the plan,
subject to adjustment on account of stock dividends or
stock splits, recapitalizations, mergers, consolidations or
other corporate reorganizations. The plan is
administered by a committee of at least two non-
employee directors as appointed by the full Board of
Directors. At December 31, 1996, no shares had been
granted as part of this plan.

During 1994, the Bank entered into a nonqualified
salary continuation plan with its executive officers.
These officers will be entitled to agreed-upon benefits
which will begin vesting when each participant reaches
the age of fifty-five. The vested percentage will increase
annually through the age of sixty-five when the officers
will be fully vested. Payment of any benefits is
contingent upon the officers' continued employment with
the Bank through the age of fifty-five. The projected
benefit to each officer at age sixty-five is allocated
through a present value calculation to each year from
inception of the plan through age sixty-five. The Plan
also includes a change of control benefit for these
officers. If any or all of the covered executives are
terminated from employment within 36 months of a sale
or acquisition of the Bank, the executive(s) may elect
from the acquirer to receive fully vested income benefits
as stated above, or to receive an agreed-upon lump-sum
distribution, which would total $640,000 if all covered
executives selected this option. The financial statements
for the years ended December 31, 1996 and 1995,
respectively, include $26,062 and $24,679 of expense
related to this plan.
<PAGE>

In addition to other benefits, the Company also
provides medical insurance to its employees and makes
medical insurance available to its employees' families.
The Company self-insures up to $15,000 per person per
year with a total annual maximum of $126,023 for all
covered employees. Claims exceeding these annual
limits are covered by traditional insurance contracts.

Natchez First Federal Savings Bank (acquired by
Britton & Koontz First National Bank in 1993) had a
trusteed non-contributory defined benefit retirement plan
covering all qualifying employees with six months
continuous service at the anniversary date of employment
and who were between the ages of twenty-four and one-
half and sixty at the time they entered the plan. The
plan required the Bank to fund the cost of the plan
annually at the beginning of each plan year. The plan
assets were invested in life insurance and annuity
contracts. In 1993, a decision was made to terminate the
plan with all assets liquidated and distributed to
participants in 1995 with no resulting gain or loss.

NOTE L. LEASES

The Company had no material lease obligations or
similar commitments at December 31, 1996 or 1995.
All leases are of the normal cancelable operating type
and generally short-term in nature and not susceptible to
capitalization for financial accounting reporting purposes.
Rent expense charged to income was $7,277 and $7,106
in 1996 and 1995, respectively.

NOTE M. INCOME TAX PROVISION

The provision for income taxes included in the
consolidated statements of income is as follows:

1996 1995
__________ __________
Current $ 995,451 $1,010,688
Deferred (134,841) (44,539)
__________ __________
$ 860,610 $ 966,149
========== ===========

Income taxes payable of $47,954 in 1996, and an
income tax overpayment of $14,760 in 1995, are
included in accrued taxes and other liabilities.
<PAGE>

NOTE M. INCOME TAX PROVISION - CONTINUED

Net deferred tax liabilities of $782,646 in 1996 and
$917,487 in 1995, are included in accrued taxes and
other liabilities. Amounts comprising deferred tax assets
and liabilities are as follows:

1996 1995
__________ __________
Bad debt recapture $ 123,059 $ 192,998
Insurance 21,481 10,677
Discount accretion 2,922 1,704
Depreciation 512,623 502,403
Federal Home Loan Bank dividends 103,664 92,516
Purchase accounting 78,430 196,937
__________ __________
Total gross deferred tax liability $ 842,179 $ 997,235
========== ==========

1996 1995
___________ __________
Bad debts $ 22,486 $ 62,771
Other real estate 0 4,547
Deferred compensation 21,609 12,430
Self-insured medical plan 15,438 0
___________ __________
Total gross deferred tax asset, net
of valuation allowance of $ 0 $ 59,533 $ 79,748
=========== ==========

The temporary differences resulting in deferred income
taxes and the tax effect of each are as follows:

1996 1995
___________ __________
Accretion of discount $ 1,218 $ (13,006)
Depreciation 10,220 46,909
FHLB stock dividend 11,148 22,291
Provision for loan losses (29,654) (46,769)
Amortization of purchase accounting adjustments (118,507) (50,571)
Valuation adjustment on other real estate 4,547 (175)
Insurance 10,804 9,212
Deferred compensation (9,179) (12,430)
Self-insured medical plan (15,438) 0
___________ __________
$ (134,841) $ (44,539)
=========== ==========
<PAGE>

NOTE M. INCOME TAX PROVISION - CONTINUED

The provision for federal income taxes is less than
that computed by applying the federal statutory rate of
34% in 1996 and 1995, as indicated in the following
analysis:

1996 1995
___________ __________
Tax based on statutory rate $ 983,586 $1,052,720
State taxes 114,738 129,792
Effect of tax-exempt income (32,276) (33,613)
Exercise of employee stock options 0 (7,480)
Amortization of negative goodwill (118,201) (141,409)
Officers' life insurance 1,027 2,011
Other (88,264) (35,872)
___________ __________
$ 860,610 $ 966,149
=========== ==========

The income tax provision includes no amounts in 1996
and 1995, resulting from securities transactions.

NOTE N. INTEREST-RATE RISK MANAGEMENT

In 1994, the Bank entered into three off-balance-
sheet, interest-rate swap agreements to reduce its interest-
rate risk and to decrease its cost of funds for special
deposit promotions. Under the terms of these agreements,
the Bank received a fixed rate and was obligated to pay a
floating rate based on three month LIBOR calculated on
contractual notional amounts. The notional principal amount
of interest-rate swaps outstanding was $-0- at December 31,
1996 and 1995. The original terms were for up to three years
and $5,000,000 each of notional principal of swaps expiring in
March, 1995; May, 1996; and July, 1997. The interest
differentials received from these agreements and recorded
in current operations were $ 0 and $8,832 during 1996
and 1995, respectively.

The Bank's position with respect to the interest-rate
swap agreements was uncollateralized. It is the Bank's
policy not to require collateral on such agreements entered
into with companies it deems to be financially sound.
During 1995, the Bank negotiated the early settlement of
the swaps.
<PAGE>

NOTE O. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS

At December 31, 1996 and 1995, the Bank had sold
various investment securities with an agreement to
repurchase these securities at various times within one
year. The underlying securities are U.S. Government
obligations and obligations of other U.S. Government
agencies and corporations. These securities generally
remain under the Bank's control and are included in
investment securities and the related liability to repurchase
these securities is included in securities sold under
repurchase agreements. These securities have coupon
rates ranging from 6.5% to 7.0% and maturity dates
ranging from 2003 to 2008. The maximum amount of
outstanding agreements at any month-end was $3,877,368
and $8,432,590 during 1996 and 1995, respectively. The
monthly average amount of outstanding agreements was
$2,554,047 and $4,200,041 during 1996 and 1995,
respectively.

NOTE P. REGULATORY MATTERS

The primary sources of revenue of Britton &
Koontz Capital Corporation are dividends from its
subsidiary, Britton & Koontz First National Bank.
Banking regulations limit the amount of dividends that
may be paid without prior approval of the Bank's
regulatory agency. On December 31, 1996,
approximately $3,705,000 was available for future
distribution by the Bank as dividends; however, such
distribution would be subject to regulatory approval and to
the requirements described in the following paragraphs.

In accordance with Office of Thrift Supervision
regulations, a special "Liquidation Account" has been
established for the benefit of certain Qualifying Depositors
of Natchez First Federal Savings Bank (acquired by
Britton & Koontz First National Bank in 1993) in an
amount of approximately $2.8 million. The Liquidation
Account serves as a restriction on the distribution of
stockholders' equity in Britton & Koontz First National
Bank, and no cash dividend may be paid on its capital
stock if the effect thereof would be to cause the regulatory
capital of Britton & Koontz First National Bank to be
reduced below an amount equal to the adjusted
Liquidation Account balance.

In the event of a complete liquidation of Britton &
Koontz First National Bank, each Qualifying Depositor
would be entitled to his or her pro rata interest in the
Liquidation Account. Such claims would be paid before
payment to Britton & Koontz Capital Corporation as the
Britton & Koontz First National Bank's sole shareholder.
A merger, consolidation, purchase of assets and
assumption of deposits and/or other liabilities or similar
transaction, with an FDIC-insured institution, would not
be a complete liquidation for the purpose of paying the
Liquidation Account. In such a transaction, the
Liquidation Account would be required to be assumed by
the surviving institution.
<PAGE>

NOTE P. REGULATORY MATTERS - CONTINUED

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

The Bank's capital amounts and classification are
also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.

Quantitative measures established by regulation to
ensure capital adequacy require the Bank to maintain
minimum amounts and ratios (set forth in the table below)
of total and Tier I capital (as defined in the regulation) to
risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management
believes, as of December 31, 1996, that the Bank meets
all capital adequacy requirements to which it is subject.

As of December 31, 1995, the most recent regulatory
notification categorized the Bank as well capitalized under
the regulatory capital framework. To be categorized as
well capitalized, the Bank must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as
set forth in the table. There are no conditions or events
since that notification that management believes have
changed the institution's category.

The Bank's actual capital amounts and ratios are also
presented in the table.

(amounts in thousands)
<TABLE>
<CAPTION>

To Be Adequately To Be Well
Actual Capitalized Capitalized
__________________ _________________ _________________
Amount Ratio Amount Ratio Amount Ratio
_______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital
(to Risk-Weighted Assets) $16,489 18.73% $7,043 8.00% $8,804 10.00%
Tier I Capital
(to Risk-Weighted Assets) $15,866 18.03% $3,520 4.00% $5,280 6.00%
Tier I Capital
(to Average Assets) $15,866 10.52% $6,033 4.00% $7,541 5.00%

As of December 31, 1995
Total Capital
(to Risk-Weighted Assets) $15,486 18.21% $6,803 8.00% $8,504 10.00%
Tier I Capital
(to Risk-Weighted Assets) $14,763 17.36% $3,402 4.00% $5,102 6.00%
Tier I Capital
(to Average Assets) $14,763 9.74% $6,063 4.00% $7,579 5.00%

</TABLE>
<PAGE>

NOTE Q. STOCK OPTION PLANS

Under the terms of its stock option plans, options
to purchase shares of the Company's common stock are
granted at a price equal to or above the market price of
the stock at the date granted. Following is a summary of
transactions:

Shares Under Option
___________________
1996 1995
______ ______
Outstanding, beginning of year 6,000 8,000

Granted during the year 0 0

Exercised during the year (at
$24.00 per share in 1995) 0 (2,000)

Purchase of option rights (at
$14.00 in 1996) (6,000) 0
______ ______
Outstanding, end of year (at
$26.00 in 1995) 0 6,000
====== ======
Eligible, end of year for exercise
currently (at $26.00 per share in 1995) 0 6,000
====== ======

NOTE R. COMMITMENTS AND CONTINGENCIES

The Bank is a party to financial instruments with
off-balance-sheet risk in the normal course of business to
meet the financing needs of its customers. These
financial instruments include commitments to extend
credit and commercial letters of credit. These instruments
involve, to varying degrees, elements of credit and
interest rate risk in excess of the amounts recognized in
the consolidated statements of financial condition.

Commitments to extend credit are agreements to
lend money with fixed expiration dates or termination
clauses. The Bank applies the same credit standards used
in the lending process when extending these commitments,
and periodically reassesses the customer's
creditworthiness through ongoing credit reviews. Since
many of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. Collateral
is obtained based on the Bank's assessment of the
transaction.
<PAGE>

NOTE R. COMMITMENTS AND CONTINGENCIES-CONTINUED

Commercial letters of credit are conditional
commitments issued by the Bank to guarantee the
performance of a customer to a third party. The credit
risk and collateralization policy involved in issuing
standby letters of credit is essentially the same as that
involved in extending loans to customers.

The Bank's maximum exposure to credit loss is
represented by the contractual amount of the commitments
to extend credit and letters of credit as follows:

December 31,

1996 1995
____________ ____________

Commitments to extend credit $ 11,521,615 $ 11,698,305
============ ============
Commercial letters of credit $ 646,995 $ 706,484
============ ============

The Bank is required to maintain average reserves at
the Federal Reserve Bank. This requirement approximated
$275,000 at December 31, 1996. The Bank is in compliance with
this requirement.

Britton & Koontz Capital Corporation and its wholly-
owned subsidiary, Britton & Koontz First National Bank,
are involved in certain litigation incurred in the normal
course of business. In the opinion of management and
legal counsel, liabilities arising from such claims, if any,
would not have a material effect upon the Bank's
consolidated financial statements.

NOTE S. CONCENTRATIONS OF CREDIT

All of the Bank's loans, commitments, and commercial
letters of credit have been granted to customers in the
Bank's market area. Investments in state and municipal
securities also involve governmental entities in and around
the Bank's market area. The concentrations of credit by
type of loan are set forth in Note D. The distribution of
commitments to extend credit approximates the
distribution of loans outstanding. Commercial letters of
credit are granted primarily to commercial borrowers.

<PAGE>

NOTE T. DIVIDENDS

Britton & Koontz Capital Corporation's only
subsidiary, Britton & Koontz First National Bank, paid
dividends to the Capital Corporation amounting to
$952,858; $855,054; and $815,000 for the years 1996,
1995 and 1994, respectively.

NOTE U. FAIR VALUE OF FINANCIAL INSTRUMENTS

In December of 1991, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standards No. 107 relative to disclosures about fair values
of financial instruments. The statement requires
disclosure of financial instruments' fair values, as well as
the methodology and significant assumptions used in
estimating fair values. These requirements have been
incorporated throughout the notes to the consolidated
financial statements. In cases where quoted market prices
are not available, fair values are based on estimates using
present value techniques. Those techniques are
significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In
that regard, the derived fair value estimates for those
assets or liabilities cannot be substantiated by comparison
to independent markets and, in many cases, can not be
realized in immediate settlement of the instrument. All
nonfinancial instruments, by definition, have been
excluded from these disclosure requirements.
Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Corporation
and may not be indicative of amounts that might
ultimately be realized upon disposition or settlement of
those assets and liabilities.

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

Cash and Due From Banks

Fair value equals the carrying value of such assets.

Federal Funds Sold

Due to the short-term nature of this asset, the
carrying value of this item approximates its fair value.

<PAGE>

NOTE U. FAIR VALUE OF FINANCIAL INSTRUMENTS-CONTINUED

Investment Securities

Fair values for investment securities are based on
quoted market prices, where available. If quoted market
prices are not available, fair values are based on quoted
market prices of comparable instruments.

Cash Surrender Value of Life Insurance

The fair value of this item approximates its carrying
value.

Loans

For variable rate loans which are repricing
immediately, fair values are based on carrying values.
Other variable rate loans, fixed rate commercial loans,
installment loans, and mortgage loans are valued using
discounted cash flows. The discount rates used to
determine the present value of these loans are based on
interest rates currently being charged by the bank on
comparable loans as to credit risk and term.

Deposit Liabilities

The fair values of demand deposits are equal to the
carrying value of such deposits. Demand deposits include
non-interest bearing demand deposits, savings accounts,
NOW accounts, and money market demand accounts.
Discounted cash flows have been used to value fixed rate
term deposits. The discount rate used is based on interest
rates currently being offered by the bank on comparable
deposits as to amount and term.

Federal Home Loan Bank Advance

Due to the short-term nature of this liability, the
carrying value of this item approximates its fair value.
<PAGE>

NOTE U. FAIR VALUE OF FINANCIAL INSTRUMENTS-CONTINUED

Securities Sold Under Repurchase Agreements

The fair value of these items approximates their
carrying values.

The estimated fair values of the Bank's financial
instruments are as follows:

1996
______________________________
Carrying Fair
Amount Value
_____________ _____________
Financial assets:
Cash and due from banks $ 5,106,000 $ 5,106,000
Federal funds sold $ 700,000 $ 700,000
Investment securities:
Held-to-maturity $ 43,412,000 $ 43,595,000
Equity securities $ 1,198,000 $ 1,198,000
Cash surrender value
of life insurance $ 635,000 $ 635,000
Loans $ 96,198,000 $ 95,848,000

Financial liabilities:
Deposits $ 126,440,000 $ 126,609,000
Federal Home Loan Bank advances $ 2,000,000 $ 2,000,000
Securities sold under
repurchase agreements $ 1,664,000 $ 1,664,000

Face Fair
Amount Value
Other: _____________ _____________
Commitments to extend credit $ 11,522,000 $ 11,522,000
Commercial letters of credit $ 647,000 $ 647,000

<PAGE>

NOTE U. FAIR VALUE OF FINANCIAL INSTRUMENTS-CONTINUED

1995
______________________________
Carrying Fair
Amount Value
_____________ _____________
Financial assets:
Cash and due from banks $ 4,702,000 $ 4,702,000
Federal funds sold $ 1,450,000 $ 1,450,000
Investment securities:
Held-to-maturity $ 46,794,000 $ 47,540,000
Equity securities $ 1,199,000 $ 1,199,000
Cash surrender value
of life insurance $ 600,000 $ 600,000
Loans $ 93,007,000 $ 93,129,000

Financial liabilities:
Deposits $ 128,567,000 $ 128,896,000
Securities sold under
repurchase agreements $ 2,723,000 $ 2,723,000

Face Fair
Amount Value
Other: _____________ _____________
Commitments to extend credit $ 11,698,000 $ 11,698,000
Commercial letters of credit $ 706,000 $ 706,000

Off-Balance-Sheet Instruments

Loan commitments are negotiated at current
market rates and are relatively short-term in nature.
Therefore, the estimated value of loan commitments
approximates the face amount.
<PAGE>

NOTE V. SUMMARIZED FINANCIAL INFORMATION OF BRITTON & KOONTZ CAPITAL
CORPORATION

Summarized financial information of Britton & Koontz
Capital Corporation, parent company only, is as follows:

STATEMENTS OF FINANCIAL CONDITION

December 31,

1996 1995
____________ ____________
<S> <C> <C>
ASSETS:
Cash $ 557,850 $ 559,004
Investments in-
Britton & Koontz First National Bank 15,900,842 14,761,540
Cash surrender value of life insurance 52,339 47,270
Other assets 10,351 3,423
____________ ____________
TOTAL ASSETS $ 16,521,382 $ 15,371,237
============ ============
STOCKHOLDERS' EQUITY $ 16,521,382 $ 15,371,237
============ ============

STATEMENTS OF INCOME

Years Ended December 31,

1996 1995
REVENUE: ____________ ____________
Dividends received-
Britton & Koontz First National Bank $ 952,858 $ 855,054
Interest and other income earned 10,040 13,558
____________ ____________
962,898 868,612
EXPENSES 69,911 11,632
____________ ____________
892,987 856,980

EQUITY IN UNDISTRIBUTED EARNINGS-
Britton & Koontz First National Bank 1,139,302 1,273,106
____________ ____________

NET INCOME $ 2,032,289 $ 2,130,086
============ ============

</TABLE>
<PAGE>

NOTE V. SUMMARIZED FINANCIAL INFORMATION OF BRITTON & KOONTZ CAPITAL
CORPORATION-CONTINUED

STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

Years Ended December 31,
<S> <C> <C>
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES: ____________ ____________
Net income $ 2,032,289 $ 2,130,086
Adjustments to reconcile net income
to net cash provided by operating activities:
Undistributed earnings of affiliate (1,139,302) (1,273,106)
Increase in cash surrender value of life insurance (5,069) (13,355)
Increase in other assets (6,928) (723)
____________ ____________
Net cash provided by operating activities 880,990 842,902
____________ ____________

CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (882,144) (837,283)
Proceeds from sale of common stock 0 48,000
____________ ____________
Net cash used in financing activities (882,144) (789,283)
____________ ____________

NET INCREASE (DECREASE) IN CASH (1,154) 53,619

CASH AT BEGINNING OF YEAR 559,004 505,385
____________ ____________
CASH AT END OF YEAR $ 557,850 $ 559,004
============ ============

</TABLE>
<PAGE>

BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
BUSINESS OF THE CORPORATION AND SUBSIDIARY

Britton & Koontz Capital Corporation (the "Company") was organized in
July, 1982, under the Mississippi Business Corporation Act, and became a
one-bank holding company when it acquired all of the outstanding shares of
Britton & Koontz First National Bank (the "Bank") in 1982. In July, 1993, the
Company acquired Natchez First Federal Savings Bank ("Natchez First Federal")
located in Natchez, Mississippi, and merged it into the Bank, increasing total
assets by approximately $48 million. The Company's major sources of income
are dividends from the Bank and interest on its deposits in the Bank. The
Bank's main office and its two branch offices are located in Natchez,
Mississippi, providing commercial and consumer banking and trust services in
Adams County, Mississippi, and in adjoining counties and parishes of
Mississippi and Louisiana. These services include personal and commercial
checking, savings and time deposits, money market deposit accounts, money
transfer, safe deposit facilities, access to automated teller machines,
short-term and long-term credit facilities, and residential and commercial
mortgages to individuals and businesses. In December of 1996, the Bank began
providing account access and transaction capabilities over the Internet.

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

This discussion is intended to supplement the consolidated financial
statements, to explain material changes in financial condition and to compare
the operating results of Britton & Koontz Capital Corporation for the year
ended December 31, 1996, to the same period in 1995.

Results of Operations

Net income and net income per share decreased from $2.1 million and
$4.82 per share for the year ending December 31, 1995, to $2.0 million and
$4.59 per share for the year ended December 31, 1996. The returns on average
assets and average equity for 1996 decreased to 1.33% and 12.53%, respectively,
compared to 1.40% and 14.25% in 1995. The decrease in earnings is primarily
the result of a $257 thousand one-time assessment for recapitalization of the
Savings Association Insurance Fund (SAIF). The Company has deposits acquired
from thrifts on which the assessment for the SAIF recapitalization is based.
Return on average equity decreased due to a continued equity growth while
earnings remained flat.

Analysis of Net Interest Income. Net interest income increased $301
thousand or 5% to $6.4 million in 1996. Interest income increased to $11.5
million while interest expense remained stable at $5.1 million. Net interest
income increased due to an increase in loan volumes resulting in an improvement
in the mix of interest earning assets along with improvements in the interest
spread. A shift in earning assets from lower yielding investment securities to
higher yielding loans contributed to the increase in net interest income for
1996. (See the Summary of Changes in Net Interest Income below.) Loan yields
increased 25 basis points, offsetting the decrease in yield on investment
securities.

The following Average Balance Yield Analysis presents average balances,
interest earned or paid, and average rates earned or paid. Yields and costs are
derived by dividing income or expense by the average balance of assets or
liabilities, respectively. Average balances are derived from average monthly
balances.

Average Balance and Yield Analysis
(dollars in thousands)

Twelve Months Ended December 31,
_____________________________________________________________
1996 1995
_____________________________ _____________________________
Average Income/ Average Average Income/ Average
Balance Expense Yield/Rate Balance Expense Yield/Rate
________ _______ __________ ________ _______ __________
<S> <C> <C> <C> <C> <C> <C>
ASSETS

Loans (1)(2) $94,247 $8,172 8.67% $ 90,028 $7,581 8.42%
Investment securities:
U.S. Government & other (3) 46,839 3,147 6.72% 51,393 3,513 6.84%
State & municipal 779 44 5.66% 592 36 6.12%
________ ______ _______ _______
Total investment securities 47,618 3,191 6.70% 51,985 3,549 6.83%
Interest bearing bank balances 897 47 5.25% 643 38 5.95%
Federal funds sold 1,277 68 5.29% 297 17 5.72%
Other (Cash Surrender Value Life Ins) 619 33 5.37% 579 34 5.81%
________ ______ _______ _______
Total earning assets 144,658 11,511 7.96% 143,532 11,219 7.82%

Allowance for loan losses (687) (743)
Cash & due from banks, non-interest
bearing 3,838 3,571
Bank premises & equipment 3,643 3,563
Other assets 1,558 1,813
________ ________
TOTAL ASSETS $153,010 $151,736
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY

Interest bearing deposits:
Savings $10,532 $268 2.55% $11,004 $278 2.53%
Interest bearing checking 18,353 471 2.57% 18,552 523 2.82%
Money rate savings 8,056 232 2.88% 8,848 231 2.61%
Certificates of deposit and other
time deposits(3) 75,474 4,010 5.31% 73,698 3,865 5.24%
________ ______ ________ _______
Total interest bearing deposits 112,415 4,981 4.43% 112,102 4,897 4.37%
Short-term borrowed funds 3,352 176 5.26% 5,089 269 5.29%
________ _______ ________ _______
Total interest bearing
liabilities 115,767 5,157 4.45% 117,191 5,166 4.41%
________ _______ ________ _______
Non-interest bearing deposits 15,885 15,217
Other liabilities 5,147 4,381
Shareholders' equity 16,211 14,947
________ ________
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $153,010 $5,157 $151,736 $5,166
======== ======= ======== =======
Interest income and rate earned $11,511 7.96% $11,219 7.82%
Interest expense and rate paid 5,157 4.45% 5,166 4.41%
_______ _______ _______ _______
Interest rate spread 3.51% 3.41%
======= =======
NET INTEREST INCOME & NET YIELD
ON AVERAGE EARNING ASSETS $6,354 4.39% $6,053 4.22%
======= ======= ======= =======

(1) Nonaccrual loans are included in average balances for yield computations.
(2) Includes loan fees and late charges in both interest income and yield computations.
(3) Includes income (expense) resulting from interest-rate swaps used to manage interest rate risk.

</TABLE>
<PAGE>

Summary of Changes in Net Interest Income

1996 compared to 1995
____________________________________
Increase (Decrease) Due to Change In
<S> <C> <C> <C>
Total Volume Rates
____________________________________

INTEREST EARNED ON:

Loans $591 $362 $229
Investment securities:
U.S. Government & other (366) (307) (59)
State & municipal 8 11 (3)
Interest bearing bank balances 9 14 (5)
Federal funds sold 51 52 (1)
Other (Cash Surrender Value Life Ins) (1) 1 (2)
____ ____ ____
Total earning assets 292 133 159

INTEREST PAID ON:

Savings (10) (12) 2
Interest bearing checking (52) (6) (46)
Money rate savings 1 (22) 23
Certificates of deposit and other
time deposits 145 95 50
Short-term borrowed funds (93) (91) (2)
____ ____ ____
Total interest bearing liabilities (9) (36) 27
____ ____ ____

NET INTEREST INCOME $301 $169 $132
==== ==== ====

</TABLE>

Provision for Loan Losses. The provision for loan losses decreased from
$175 thousand in 1995 to $50 thousand in 1996 due to a reduction in losses from
charge-offs. To determine the provision amount, management considers factors
such as historical trends of charge-offs and recoveries, past due loans and
economic conditions along with additional analysis of individual loans and
pools of loans for exposure. After allocating the existing reserves to
estimated exposures, management then adds to the reserve through a loan loss
provision to cover potential losses in the portfolio. Management is of the
opinion that the reserve at year end is adequate to cover estimated exposures.

Non-Interest Income. Non-interest income remained stable at $1.4 million
for the year ended December 31, 1996. However, the Company's core
non-interest income for 1996 increased $88 thousand over 1995. Fee and service
charge income were the largest contributors to this increase. The Company's
Internet providership services contributed an additional $73 thousand to non
interest income. While in 1996, core earnings increased, the decrease in the
Company's amortization of negative goodwill and a gain in 1995 on loans held
for sale resulted in the flat performance in non interest income.

<PAGE>

Non-Interest Expense. Non-interest expense increased $667 thousand to
$4.78 million in 1996, as compared to $4.11 million in 1995. This increase is
primarily attributable to the $257 thousand one-time FDIC assessment to
recapitalize the Savings Association Insurance Fund, increases in salaries and
employee benefits of $162 thousand and $180 thousand in occupancy and
equipment expenses due to higher depreciation and maintenance expenses related
to the Company's investment in electronic banking and check processing
equipment.

The combination of all the above factors produced a pretax income of $2.9
million in 1996, as compared to $3.1 million in 1995.

Income Taxes. Income taxes for 1996 decreased by 10.9% to $861
thousand as compared to $966 thousand in 1995. The change in income taxes is
detailed in Note M to the financial statements.

<PAGE>

Financial Condition

Total assets decreased .3% to $151.3 million at December 31, 1996, from
$151.8 million at year end 1995. Average total assets increased .8% to $153.0
million for 1996 compared to $151.7 million for 1995.

Loans, net of unearned interest and allowance for loan losses, increased
3.6% to $95.3 million at December 31, 1996, as compared to $92.0 million at
December 31, 1995. This growth occurred primarily in the areas of installment
and commercial loans. Loan growth was funded by $3.0 million of maturities
of investment securities. A further analysis of the Bank's loan portfolio is
shown in Note D to the financial statements.

Nonperforming loans at December 31, 1996, were $617 thousand compared
to $505 thousand at December 31, 1995. Nonperforming loans consisted of
nonaccrual loans of $234 thousand and loans past due ninety days or more of
$383 thousand compared to $300 thousand and $205 thousand, respectively, for
the year ended December 31, 1995. Nonperforming loans as a percent of loans,
net of unearned income, and loans held for sale increased to .64% at December
31, 1996, from .54% at December 31, 1995. The increase in nonperforming loans
is attributable primarily to the increase of 90 day past due amounts in 1-4
residential first mortgages. Loans in this category are generally well secured
with very little loss expected. The table below presents additional
information on nonperforming assets as of December 31, 1996 and 1995.

1996 1995
_______ _______
(dollars in thousands)

Nonaccrual loans by type
Real estate $157 $254
Installment 2 9
Commercial and all other loans 75 37
____ ____
Total nonaccrual loans 234 300
Loans past due 90 days or more 383 205
____ ____
Total nonperforming loans 617 505

Other real estate 79 259
____ ____
Total nonperforming assets $696 $764
==== ====

Nonperforming loans as a
percent of loans, net of
unearned interest and loans
held for sale 0.64% 0.54%
==== ====

The allowance for loan losses was $623 thousand at December 31, 1996,
compared to $724 thousand at December 31, 1995. The ratio of the allowance
for loan losses to loans, net of unearned income and loans held for sale,
decreased to .65% at December 31, 1996, as compared to .78% at December 31,
1995. Over one-half of the loan portfolio is invested in 1-4 family
residential first mortgage loans. A smaller portion of the allowance is
allocated to these loans due to their generally higher credit quality.
Management regularly reviews the level of the allowance for loan losses and
is of the opinion that it is adequate at December 31, 1996. Activity in the
allowance for loan losses for the period ended December 31, 1996 and 1995 is
presented in Note E to the financial statements.

<PAGE>

The allocation of the allowance for loan losses between 1-4 family
residential first mortgage loans and other loans, net of unearned interest and
loans held for sale, as of December 31, 1996 and 1995 is presented below.

1996 1995
___________ ___________

1-4 Family Residential 1st Mortgage Loans
Volume $47,677,658 $48,706,615
Allocated reserve 174,792 158,020
Reserves as a percent of volume 0.37% 0.32%

Other Loans
Volume $48,267,496 $44,015,992
Allocated reserve 448,183 565,621
Reserves as a percent of volume 0.93% 1.29%

Total Loans
Volume $95,945,154 $92,722,607
Allocated reserve 622,975 723,641
Reserves as a percent of volume 0.65% 0.78%

Other real estate decreased to $79 thousand at December 31 1996,
compared to $259 thousand at December 31, 1995.

Premises and equipment increased by $418 thousand in 1996 pursuant to
a capital expenditure plan to upgrade and replace existing data and check
processing systems. Major components of the capital plan include replacement
of the Bank's core accounting hardware and software, acquisition of a new check
processing system with imaging capabilities, and upgrades or replacement of
ancillary systems. Check imaging technology will allow bank customers to view
check images daily on the Bank's electronic banking system, as well as provide
operating efficiencies to support future growth. Approximately $800 thousand
additional capital expenditures will be made over the next twelve to eighteen
months.

Management determines the classification of its investment securities at
the time of acquisition. Securities that are deemed to be held-to-maturity are
accounted for by the amortized cost method. Securities to be held-to-maturity
decreased $3.4 million to $43.4 million at December 31, 1996, as compared to
$46.8 million at December 31, 1995. Equity securities remained stable at $1.2
million at December 31, 1996.

The Company's cash and cash equivalents ended the year at $5.1 million.
Cash provided by operating activities was $2.0 million, while financing
activities used $2.0 million and investing activities provided $.4 million.

Average interest bearing deposits remained level at $112 million for the
year ended December 31, 1996.

<PAGE>

Net-interest income benefited from changes in the Company's sources and
uses of funds, with an increase in loans offset by a decrease in investment
securities. A further analysis is reflected in the table below.

Average Balances Percent of Total
________________ ________________
1996 1995 1996 1995
______ ______ ______ ______

(dollars in thousands)
<S> <C> <C> <C> <C>
Funding Uses
Loans, less unearned income $94,247 $90,028 61.6% 59.3%
Investments 47,618 51,985 31.1% 34.3%
Federal funds sold 1,277 297 0.8% 0.2%
Other 9,868 9,426 6.5% 6.2%
________ ________ _____ _____
Total $153,010 $151,736 100.0% 100.0%
======== ======== ===== =====

Funding Sources
Non-interest bearing deposits $15,885 $15,217 10.4% 10.0%
Interest bearing deposits 112,415 112,102 73.4% 73.8%
Short term borrowings 3,352 5,089 2.2% 3.4%
Other 5,147 4,381 3.4% 2.9%
Equity 16,211 14,947 10.6% 9.9%
________ ________ _____ _____
Total $153,010 $151,736 100.0% 100.0%
======== ======== ===== =====

</TABLE>

Liquidity. Principal sources of liquidity for the Company are asset cash
flows and the ability to borrow against investment securities and loans.
Principal and interest cash flows from investment securities exceeded $14
million, or 9% of average assets, in 1996. The portfolio primarily includes
investments in obligations of the U.S. Treasury, government agency obligations
and mortgage-backed securities. Management of the Company anticipates that
future capital expenditure requirements will be funded with internally
generated cash flows.

Asset liquidity is provided by scheduled maturities within the loan
portfolio, although the probability of conversion is not as certain as with
investment securities. At the end of 1996, over $13.6 million, or 14.5% of the
loan portfolio, was scheduled to mature within one year.

Liability liquidity is provided by sizable core deposits and other sources
of funds generated from the normal customer base. Substantially all the funds
utilized by the Company are generated from the normal customer base. Brokered
deposits are not solicited; however, national market deposits have been
utilized from time to time to meet funding needs.

<PAGE>

In addition to the liquidity provided by the balance sheet, the Company
maintains a capacity to borrow additional funds when the need arises through
federal funds lines with correspondent banks and broker repurchase agreements.
Additional borrowing capacity is available on 1-4 family residential first
mortgage loans through the Federal Home Loan Bank.

Interest Rate Risk Management. The primary assets of banks are portfolios
of investment securities and loans, while liabilities are primarily composed of
interest bearing deposits and borrowed funds. Assets and liabilities have
varying maturities, and the associated rates may be fixed or variable.
Asset/liability management techniques are used to maintain what are believed
to be appropriate levels and relationships between rate-sensitive assets and
liabilities. They represent the efforts to maximize overall returns and to
minimize the risk of loss associated with significant, often unforseen, shifts
in overall interest rates.

Management utilizes computerized interest rate simulation analysis as its
primary measure of interest rate sensitivity. Management's analyses indicate
that the Company is liability sensitive over the next 12-24 months. A
liability sensitive company will generally benefit from a falling interest rate
environment as the cost of interest bearing liabilities falls faster than the
yields on interest earning assets, thus creating a widening of the net interest
margin. Conversely, an asset sensitive company will generally benefit from a
rising interest rate environment as the yields on interest earning assets rise
faster than the costs on interest bearing liabilities.

A traditional measure of interest rate sensitivity is the difference
between the balances of assets and liabilities in the Company's current
portfolio that are subject to repricing at various time horizons. These
differences are known as interest sensitivity gaps: Immediate to 3 months,
4 to 12 months, 1 to 3 years, 3 to 5 years, over 5 years and on a cumulative
basis. The Company's interest sensitivity analysis as of December 31, 1996 is
shown in the table below.

(dollars in thousands)

Immediate
to 3 4-12 1 to 3 3 to 5 Over 5
Months Months Years Years Years Totals
________ ________ _______ _______ ________ ________
<S> <C> <C> <C> <C> <C> <C>
Interest Sensitive Assets $37,555 $ 28,902 $38,517 $11,934 $ 24,457 $141,365
Interest Sensitive Liabilities 26,195 48,592 12,113 3,003 41,671 131,574
________ ________ _______ _______ ________ ________
Interest Sensitivity Gaps $11,360 $(19,690) $26,404 $8,931 $(17,214) $9,791
======== ======== ======= ======= ======== ========
Cumulative ratio of interest
sensitive assets to interest
sensitive liabilities 1.43 0.89 1.21 1.30 1.07
======== ======== ======= ======= ========

</TABLE>

Changes in the mix of earning assets or supporting liabilities can either
increase or decrease the net interest margin without affecting interest rate
sensitivity. In addition, the interest rate spread between an asset and its
supporting liability can vary significantly while the timing of repricing for
both the asset and the liability remains the same, thus impacting net interest
income. Varying interest rate environments can create unexpected changes in
prepayment levels of assets and liabilities which are not reflected in the
above interest sensitivity analysis report. These prepayments may have
significant effects on the Company's net interest margin. Because of these
factors, the interest sensitivity analysis contained in the above table does
not provide a complete assessment of the Company's exposure to changes in
interest rates.

<PAGE>

Management also evaluates the condition of the economy, the pattern of
market interest rates and other economic data in an attempt to determine the
appropriate mix and repricing characteristics of assets and liabilities
required to produce an optimal net interest margin and thus maximize income.

In addition to the ongoing monitoring of its interest-sensitive assets and
liabilities, the Company from time to time utilizes interest-rate swaps to
augment the management of its interest rate sensitivity. The interest rate
risk factor in these contracts is considered in the overall interest income and
interest rate risk management strategies. The income or expense associated
with interest-rate swaps are reflected as adjustments to interest income or
expense. At December 31, 1996, there were no swap contracts outstanding.

Capital and Dividends. Stockholders' equity increased by 7.5% to $16.5
million at December 31, 1996, compared to $15.4 million at the end of 1995.
The ratio of stockholder's equity to assets increased to 10.92% at December 31,
1996, compared to 10.13% at the end of 1995. The Company paid dividends of
$2.00 per share in 1996 compared to $1.90 in 1995.

The Company's wholly-owned subsidiary, Britton and Koontz First
National Bank, maintained a Tier 1 capital to risk-weighted assets ratio at
December 31, 1996, of 18.03%, a total capital to risk-weighted assets ratio of
18.73% and a leverage ratio of 10.52%. These levels substantially exceed the
minimum requirements of the regulatory agencies of 4.00%, 8.00% and 3.00%,
respectively, and place the Company in the "well capitalized" category under
applicable regulatory guidelines.

<PAGE>

Principal Market and Prices of the Company's Stock

On October 17, 1996, the Company listed its Common Stock on the Nasdaq
Small Cap Market. Prior to that date, there was no established public trading
market for the Common Stock.

The table below sets forth the high and low sales prices for the
Company's Common Stock for the periods indicated below. For the period October
17, 1996 through December 31, 1996, the table sets forth the Nasdaq Small Cap
Market price ranges for the Common Stock. For all other periods, the table sets
forth the high and low sales prices for Common Stock based upon a small number
of transactions that were reported to the Company by a regional securities
broker who facilitated the trading of the Common Stock during those periods.
The quotations for these periods reflect inter-dealer prices, without retail
mark-up, mark-down or commissions and may not reflect actual transactions in
the Company's Common Stock.

Dividends
High Low per Share
______ ______ _________

<S> <C> <C> <C>
Period 1996
10/17/96-12/31/96 $58.00 $45.00 $1.20
10/01/96-10/16/96 $41.00 $41.00
3rd Quarter $40.00 $40.00
2nd Quarter $40.00 $37.00 $ .80
1st Quarter $39.00 $36.00

Fiscal 1995
4th Quarter $39.00 $36.00 $1.15
3rd Quarter $37.00 $34.00
2nd Quarter $36.00 $33.50 $ .75
1st Quarter $36.00 $34.00

On February 19, 1997, there were 539 shareholders of record
of Britton & Koontz Capital Corporation Common Stock.

</TABLE>
<PAGE>

Britton and Koontz Capital Corporation and Subsidiary
Corporate Information
_____________________________________________________

Annual Meeting/ Principal Office:
3:30 P.M., Thursday, April 10, 1997
Britton & Koontz First National Bank
500 Main Street
Natchez, Mississippi 39120

Transfer Agent and Registrar:
American Stock Transfer & Trust
40 Wall Street
New York, New York 10005
718-921-8200

Independent Auditors:
May & Company
110 Monument Place
P.O. Box 821568
Vicksburg, Mississippi 39182

For Additional Information Contact:
Bazile R. Lanneau, Jr.
Chief Financial Officer
601-445-5576
e-mail: [email protected]

For copies of the Annual Report on Form 10-K or Quarterly Reports on Form 10-Q
filed with the Securities and Exchange Commission, Contact:

Bazile R. Lanneau, Jr.
Chief Financial Officer
500 Main Street
P.O. Box 1407
Natchez, Mississippi 39121
601-445-5576
e-mail: [email protected]

Questions regarding stock holdings, certificates, replacement, dividends, and
address changes should be addressed to:

American Stock Transfer & Trust
40 Wall Street
New York, New York 10005
715-921-8200

<PAGE>

Britton and Koontz Capital Corporation and Subsidiary
Directors and Executive Officers
_____________________________________________________

W. W. Allen, Jr.
President
Allen Petroleum Services, Inc.

Craig A. Bradford, D.M.D.
Pediatric Dentist

James J. Cole
Executive Vice-President
Britton & Koontz First National Bank

Wilton R. Dale
Petroleum Geologist
Co-Owner, Dale Exploration Company

W. J. Feltus, III
President
Feltus Brothers, Ltd.
Chairman
Britton & Koontz Capital Corporation
Britton & Koontz First National Bank

A. J. Ferguson
Consulting Geologist
Owner, Mini-Storage Rentals

Charles W. Herold, Jr.
President
Herold & Miller, Inc.

C. H. Kaiser, Jr.
Partner
Jordan, Kaiser & Sessions, Engineering
Vice-Chairman
Britton & Koontz Capital Corporation
Britton & Koontz First National Bank

Donald Killelea. M.D.
Pediatrician

Bazile R. Lanneau
Life Insurance

<PAGE>

Bazile R. Lanneau, Jr.
Vice-President, Assistant Secretary,
Treasurer & Chief Financial Officer
Britton & Koontz Capital Corporation and
Executive Vice-President & Trust Officer
Britton & Koontz First National Bank

Albert W. Metcalfe
President
Jordan Auto Company, Inc.
Secretary
Britton & Koontz Capital Corporation
Britton & Koontz First National Bank

W. Page Ogden
President & Chief Executive Officer
Britton & Koontz Capital Corporation and
Brittton & Koontz First National Bank

Bethany L. Overton
President
Oilwell Acquisition Company, Inc.

Robert R. Punches
Partner
Gwin, Lewis & Punches, Attorneys

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

<PAGE>

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

The following is a list of subsidiaries of the Company at December 31, 1996 and
all are included in the Company's consolidated financial statements:

Jurisdiction Percentage of
of Voting Securities
Subsidiary (1)(2) Incorporation Owned
_____________ _________________

Britton & Koontz First National Bank Federal Law 100%

NOTES

(1) The Subsidiary is included in the consolidated financial statements.
(2) The Subsidiary conducts business under its own name.

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in this Annual Report
(Form 10-KSB) of Britton & Koontz Capital Corporation and Subsidiary of
our report dated January 30, 1997, included in the 1996 Annual Report to
Shareholders of Britton & Koontz Capital Corporation and Subsidiary.

/s/ May & Company
-----------------
May & Company

Vicksburg, Mississippi
March 25, 1997

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<NAME> BRITTON AND KOONTZ CAPITAL CORPORATION
<MULTIPLIER> 1

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<FISCAL-YEAR-END> DEC-31-1996
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</TABLE>