BRITTON & KOONTZ CAPITAL CORPORATION
MESSAGE TO SHAREHOLDERS
Our company enjoyed a profitable year characterized by significant asset growth.
Net after-tax earnings were $2.2 million, or $1.26 per share. Cash dividends
totaled $.60 per share, which represented a 48 % payout of annual earnings.
Returns on average assets and average equity were 1.16% and 11.1% respectively.
Total assets grew to $208.9 million from $173.6 million a year earlier.
Your board has pursued two strategic initiatives to address long-term growth and
profitability. The first initiative has been to expand geographically. The
second has focused on technology to enhance service and products for our
customers. In the Miss-Lou economy B&K has moved to a leadership position
through in-market acquisitions, a strong commitment to lend in our community,
and innovative products, particularly in the areas of Internet access and online
banking. Our challenge is to maintain our leadership position and to grow in
other markets as well.
In August the bank completed the acquisition of a branch of Union Planters Bank
in Vicksburg, a very dynamic market approximately 70 miles north of Natchez. In
the acquisition, B&K obtained just over $6 million in deposits, $1.4 million in
loans, and a new branch facility. In addition to regular product lines, B&K has
already distinguished itself with the introduction of attractively priced
Internet access and online banking . In late December, the bank completed plans
to open a loan production office in Baton Rouge, Louisiana, approximately 100
miles to the south of Natchez. In both Vicksburg and Baton Rouge, the bank is
aggressively pursuing its mortgage business. Sale of larger volumes of
originated mortgages should have a positive effect on non-interest income.
Embedded in the 1999 net income is an after-tax loss of approximately $150
thousand related to the 35% preferred equity interest of Britton & Koontz
Capital in Sumx Inc., which has developed online banking software used at B&K
and other financial institutions. Much of the bank's $1 million investment has
gone to develop Sumx's robust online banking software. Prospects for future
licensing of the system appear excellent as we move into a post Y2K financial
environment.
Success with Sumx and further implementation of our growth initiative present a
host of challenges for us. However, they both hold out significant reward for
measured risk of investment. We are committed to managing for long-term value,
and all of us appreciate your continued support and confidence.
Yours truly,
/s/ W. J. Feltus III /s/ W. Page Ogden
- --------------------- -----------------
W. J. Feltus III W. Page Ogden
Chairman of the Board President & CEO
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
Highlights
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
1999 1998
-------------- --------------
Net Income 2,220 2,332
Net Income Per Share 1.26 1.32
Net Loans 139,141 118,285
Deposits 166,317 143,186
Total Assets 208,854 173,573
Total Stockholders' Equity 20,152 19,249
CONTENTS
Message to Shareholders ii
Financial Statements 3
Managements's Discussion and
Analysis of Financial Condition
and Results of Operations 36
Corporate Information 45
Directors and Officers 46
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION
AND SUBSIDIARY
Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
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, 1999
and 1998, 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, 1999 and 1998, 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 14, 2000
<PAGE>
<TABLE>
<CAPTION>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1999 AND 1998
ASSETS
1999 1998
---------------- -----------------
ASSETS:
<S> <C> <C>
Cash and due from banks:
Non-interest bearing $ 5,450,435 $ 4,337,900
Interest bearing 136,258 472,727
---------------- -----------------
Total cash and due from banks 5,586,693 4,810,627
Federal funds sold 875,000 -
Investment securities:
Held-to-maturity (market value of $45,536,865 and
$31,300,856, respectively) 46,553,344 30,724,063
Available-for-sale (amortized cost of $4,640,428
$10,900,039, respectively) 4,263,618 10,923,838
Equity securities, at cost less equity in unallocated losses 751,626 990,149
Other equity securities 1,197,250 1,197,350
Loans, less unearned income of $90,185 in 1999 and
$182,917 in 1998, and allowance for loan losses of
$835,576 in 1999 and $746,738 in 1998 139,140,966 118,285,228
Bank premises and equipment, net 6,215,852 4,090,692
Other real estate, net 102,719 96,322
Accrued interest receivable 1,680,622 1,371,834
Cash surrender value of life insurance 759,130 716,313
Other assets 1,727,032 367,027
---------------- -----------------
TOTAL ASSETS $ 208,853,852 $ 173,573,443
================ =================
See accompanying notes to the consolidated financial statements.
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
---------------- -----------------
LIABILITIES:
Deposits:
Non-interest bearing $ 25,572,145 $ 21,681,170
Interest bearing 140,745,125 121,505,227
---------------- -----------------
Total deposits 166,317,270 143,186,397
Federal Home Loan Bank advances 17,850,000 5,000,000
Federal funds purchased - 350,000
Securities sold under repurchase agreements 1,482,445 2,416,043
Accrued interest payable 891,735 951,472
Negative goodwill, net of accumulated amortization
of $2,276,241 in 1999 and $2,075,441 in 1998 784,181 984,981
Advances from borrowers for taxes and insurance 433,908 357,025
Accrued taxes and other liabilities 942,572 1,078,342
---------------- -----------------
Total liabilities 188,702,111 154,324,260
---------------- -----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $2.50 par value per share;
12,000,000 shares authorized;
1,767,064 shares issued and outstanding 4,417,660 4,417,660
Additional paid-in capital 3,414,927 3,414,927
Retained earnings 12,559,261 11,399,263
Accumulated other comprehensive income (240,107) 17,333
----------------- -----------------
Total stockholders' equity 20,151,741 19,249,183
---------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 208,853,852 $ 173,573,443
================ =================
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---------------- -----------------
INTEREST INCOME:
Interest and fees on loans $ 11,186,885 $ 9,967,320
Interest on investment securities:
Taxable interest income 2,751,136 2,898,549
Exempt from federal income taxes 123,928 91,217
Interest on federal funds sold 44,156 109,372
---------------- -----------------
Total interest income 14,106,105 13,066,458
---------------- -----------------
INTEREST EXPENSE:
Interest on deposits 5,286,530 5,592,734
Interest on federal funds purchased 460,598 97,272
Interest on securities sold under repurchase agreements 113,297 119,151
---------------- -----------------
Total interest expense 5,860,425 5,809,157
---------------- -----------------
NET INTEREST INCOME 8,245,680 7,257,301
PROVISION FOR LOAN LOSSES 275,000 162,000
---------------- -----------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 7,970,680 7,095,301
---------------- -----------------
OTHER INCOME:
Service charges on deposit accounts 1,096,325 759,060
Income from fiduciary activities 80,744 81,787
Insurance premiums and commissions 26,166 29,291
Other real estate income 404 6,408
Amortization of negative goodwill 200,800 241,631
Equity in investee losses (238,523) (9,851)
Other 551,987 387,311
---------------- -----------------
Total other income 1,717,903 1,495,637
---------------- -----------------
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---------------- -----------------
OTHER EXPENSES:
Salaries 2,847,026 2,381,824
Director fees 145,260 144,960
Employee benefits 491,957 326,429
Net occupancy expense 414,141 375,912
Equipment expense 715,962 555,059
FDIC assessment 39,920 37,679
Stationery and supplies 206,861 166,590
Amortization 87,624 -
Other 1,405,035 1,114,749
---------------- -----------------
Total other expenses 6,353,786 5,103,202
---------------- -----------------
INCOME BEFORE INCOME TAX EXPENSE 3,334,797 3,487,736
INCOME TAX EXPENSE 1,114,561 1,156,218
---------------- -----------------
NET INCOME $ 2,220,236 $ 2,331,518
================ =================
EARNINGS PER SHARE DATA:
Basic earnings per share $ 1.26 $ 1.32
================ =================
Diluted earnings per share $ 1.26 $ 1.32
================ =================
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
Accumulated
Additional Other
Common Stock Paid-In Retained Comprehensive
Shares Amount Capital Earnings Income Total
--------- ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 1,767,064 $ 4,417,660 $ 3,414,927 $ 10,110,313 $ 38,844 $ 17,981,744
Comprehensive income:
Net income - - - 2,331,518 - 2,331,518
Other comprehensive
income (net of tax):
Net change in
unrealized gain on
securities available
for sale, net of taxes
of $16,642 - - - - (21,511) (21,511)
----------- ------------ ------------ ------------ ------------ ------------
Total comprehensive
income - - - 2,331,518 (21,511) 2,310,007
----------- ------------ ------------ ------------ ------------ ------------
Cash dividends declared
($.59 per share) - - - (1,042,568) - (1,042,568)
----------- ------------ ------------ ------------ ------------ ------------
BALANCE, December 31, 1998 1,767,064 4,417,660 3,414,927 11,399,263 17,333 19,249,183
Comprehensive income:
Net income - - - 2,220,236 - 2,220,236
Other comprehensive
income (net of tax):
Net change in
unrealized gain on
securities available
for sale, net of taxes
of $143,169 - - - - (257,440) (257,440)
----------- ------------ ------------ ------------ ------------ -------------
Total comprehensive
income - - - 2,220,236 (257,440) 1,962,796
----------- ------------ ------------ ------------ ------------- ------------
Cash dividends declared
($.60 per share) - - - (1,060,238) - (1,060,238)
----------- ------------ ------------ ------------- ------------ -------------
BALANCE, December 31, 1999 1,767,064 $ 4,417,660 $ 3,414,927 $ 12,559,261 $ (240,107) $ 20,151,741
=========== ============ ============ ============ ============= ============
See accompanying notes to the consolidated financial statements.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 2,220,236 $ 2,331,518
Adjustments to reconcile net income to
net cash provided by operating activities:
Deferred taxes (100,191) (37,124)
Provision for loan losses 275,000 162,000
Provision for depreciation 595,219 464,055
Gain on sale of investments (4,385) -
Gain on sale of mortgage loans (12,779) (16,658)
Loss on sale of premises and equipment 2,990 -
Loss on sale of other real estate 18,094 -
Stock dividends received (51,800) (55,900)
Amortization (accretion) of investment security
premiums (discounts), net (23,897) (50,104)
Amortization of valuation adjustment on acquired loans 31,520 47,360
Amortization of valuation adjustment on acquired deposits (74,007) (700)
Amortization of negative goodwill (200,800) (241,631)
Equity in investee losses 238,523 9,851
Write-down of other real estate 10,690 -
Increase in accrued interest receivable (290,127) (138,653)
Increase in cash surrender value of life insurance (42,817) (36,388)
(Increase) decrease in other assets 254,205 (286,526)
Decrease in accrued interest payable (182,623) (4,544)
Increase (decrease) in accrued taxes and other liabilities 102,297 (125,068)
--------------- ---------------
Net cash provided by operating activities 2,765,348 2,021,488
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in federal funds sold (875,000) -
Proceeds from sales, maturities and paydowns
of investment securities 16,167,577 11,069,298
Redemption of securities 51,900 56,400
Purchases of investment securities (25,708,965) (10,946,700)
Net increase in loans (17,912,416) (12,343,977)
Cash and due from banks received in acquisition of branches 11,271,434 -
Proceeds from sale of other real estate 195,000 -
Proceeds from sale of premises and equipment 4,230 -
Purchases of premises and equipment (1,152,186) (607,540)
--------------- ---------------
Net cash used in investing activities (17,958,426) (12,772,519)
--------------- ---------------
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits 5,325,309 8,761,908
Net increase in time deposits 60,788 943,812
Increase in Federal Home Loan Bank advances 12,850,000 2,000,000
Decrease in federal funds purchased (350,000) (1,300,000)
Net increase (decrease)in securities sold under
repurchase agreements (933,598) 282,066
Increase (decrease) in advances from borrowers
for taxes and insurance 76,883 (13,203)
Cash dividends paid (1,060,238) (1,042,568)
--------------- ---------------
Net cash provided by financing activities 15,969,144 9,632,015
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND
DUE FROM BANKS 776,066 (1,119,016)
--------------- ---------------
CASH AND DUE FROM BANKS AT
BEGINNING OF YEAR 4,810,627 5,929,643
--------------- ---------------
CASH AND DUE FROM BANKS AT
END OF YEAR $ 5,586,693 $ 4,810,627
=============== ===============
SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Transfer of loans foreclosed to other real estate $ 30,181 $ 22,284
=============== ===============
Total increase in unrealized losses
on securities available-for-sale $ (400,609) $ (38,153)
================ ===============
Total decrease in deferred income taxes
on unrealized losses on securities available-for-sale $ 143,169 $ 16,642
=============== ===============
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
--------------- ---------------
Acquisition of branches:
Loans, net $ 3,267,244 $ -
Accrued interest receivable 18,661 -
Premises and equipment 1,575,413 -
Other branch premises (1) 200,000 -
Premium on deposits 1,614,210 -
Deposits (17,818,783) -
Accrued interest payable (122,886) -
Other accrued liabilities (5,293) -
--------------- ---------------
Cash and due from banks received in
acquisition of branches $ (11,271,434) $ -
=============== ===============
(1)Other branch premises were acquired with the intent of disposition and
were placed directly into other real estate.
See accompanying notes to the consolidated financial statements.
<PAGE>
</TABLE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
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 southwest region of Mississippi and
services are provided at five locations in Natchez and Vicksburg,
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. In connection with the determination of the
allowances for losses on loans, management obtains independent
appraisals for significant properties.
While management uses available information to recognize losses
on loans, future additions to the allowance 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 allowance for losses on
loans. Such agencies may require the Bank to recognize additions
to the allowance 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 allowance for
losses on loans may change materially.
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
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
positive 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. Equity securities also include an investment in
the voting stock of Sumx Inc. This investment is carried at cost
adjusted for the Company's share of the investee's earnings or
losses. There is no readily available market for the voting stock
of Sumx Inc. and, accordingly, no quoted market price is
available.
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.
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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 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.
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.
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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. 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.
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.
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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.
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Earnings Per Share
Basic earnings per share is the income available to the weighted
average number of shares of common stock outstanding for each
period presented. All shares held by the Employee Stock Ownership
Plan (ESOP) are treated as outstanding in computing the earnings
per share. Stock options are used in the calculation of diluted
earnings per share if they are dilutive (i.e., the average market
price exceeds the exercise price). The following table reconciles
the basic and diluted earnings per share amounts:
<TABLE>
<CAPTION>
Income Shares Per Share
(Numerator) (Denominator) Amount
Year ending December 31, 1999:
Basic earnings per share:
<S> <C> <C> <C>
Income available to common
shareholders $ 2,220,236 1,767,064 $ 1.26
===========
Diluted earnings per share:
Options - -
--------------- --------------
Income available to common
shareholders assuming conversion $ 2,220,236 1,767,064 $ 1.26
=============== ============== ===========
Year ending December 31, 1998:
Basic earnings per share:
Income available to common
shareholders $ 2,331,518 1,767,064 $ 1.32
===========
Diluted earnings per share:
Options - 1,636
--------------- --------------
Income available to common
shareholders assuming conversion $ 2,331,518 1,768,700 $ 1.32
=============== ============== ===========
</TABLE>
Options to purchase 30,000 shares of common stock at $19.94 per
share were granted on November 18, 1997. These options were not
included in the computation of 1999 diluted earnings per share
because the options' exercise price was greater than the average
market price of the common shares. However, during 1998, the
average price exceeded the exercise price and, therefore, the
effects of the options have been included. The options, which
expire on November 18, 2007, were still outstanding at December
31, 1999.
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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 and cap 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 $1,159,239 and $1,500,849 in
1999 and 1998, respectively. Interest paid on deposit liabilities
and other borrowings was $5,920,162 and $5,813,701 in 1999 and
1998, respectively.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board also
issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. SFAS 133 establishes accounting and reporting
standards for derivative instruments and for hedging activities.
This statement was originally effective for all fiscal quarters
beginning after June 15, 1999. The issuance of SFAS No. 137
deferred the effective date of SFAS No. 133 until fiscal quarters
beginning after June 15, 2000. The adoption of this statement
should not have a material effect on the consolidated financial
statements.
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 1999 and 1998 were $136,963 and
$93,756, respectively.
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Negative Goodwill
During 1993, the Company purchased Natchez First Federal Savings
Bank in a business combination accounted for as a purchase. The
combination created negative goodwill of $3,060,422. This amount
is being amortized into income over the life of the acquired,
long-term, interest bearing assets which is approximately fifteen
years.
Interest-Rate Cap
The cost of interest-rate cap agreements is amortized to interest
expense over the terms of the caps. The unamortized cost is
included in other assets in the consolidated statement of
financial position. Amounts receivable under cap agreements are
accrued as a reduction of interest expense. The Company does not
engage in trading of derivatives. All such financial instruments
are used to manage interest rate risk.
Reclassifications
Certain 1998 amounts have been reclassified to conform with the
1999 presentation.
Goodwill
During 1999, the Company acquired certain assets and liabilities
of three Union Planters, N.A. branches in Natchez and Vicksburg,
Mississippi, which were accounted for as a purchase. The Bank
paid a premium for the depositor and borrower relationships. This
premium is included in other assets and is being amortized
straight-line over 15 years.
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE B. INVESTMENT SECURITIES
The amortized cost and approximate market value of investment
securities classified as held-to-maturity at December 31, 1999,
are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross Approximate
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
Obligations of other U. S.
Government agencies and
corporations $ 35,562,339 $ 91,194 $ (818,904) $ 34,834,629
Obligations of states and
political subdivisions 4,494,348 1,959 (142,246) 4,354,061
Privately issued collateralized
mortgage obligations 6,496,657 1,312 (149,794) 6,348,175
---------------- ------------ ------------- ---------------
$ 46,553,344 $ 94,465 $ (1,110,944) $ 45,536,865
================ ============ ============= ===============
The amortized cost and approximate market value of investment
securities classified as available-for-sale at December 31, 1999,
are summarized as follows:
Gross Gross Approximate
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------------- ------------ ------------- ---------------
Obligations of other U.S.
Government agencies
and corporations $ 4,640,428 $ - $ (376,810) $ 4,263,618
---------------- ------------ ------------- ---------------
$ 4,640,428 $ - $ (376,810) $ 4,263,618
================ ============ ============= ===============
Continued
<PAGE>
</TABLE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE B. INVESTMENT SECURITIES - CONTINUED
The amortized cost and approximate market value of investment
securities classified as held-to-maturity at December 31, 1998,
are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross Approximate
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Obligations of other U. S.
Government agencies and
corporations $ 27,632,404 $ 644,707 $ (110,005) $ 28,167,106
Obligations of states and
political subdivisions 1,044,554 41,990 - 1,086,544
Privately issued collateralized
mortgage obligations 2,047,105 101 - 2,047,206
---------------- ------------ ------------- ---------------
$ 30,724,063 $ 686,798 $ (110,005) $ 31,300,856
================ ============ ============= ===============
The amortized cost and approximate market value of investment
securities classified as available-for-sale at December 31, 1998,
are summarized as follows:
Gross Gross Approximate
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
U. S. Treasury obligations $ 5,989,208 $ 60,812 $ - $ 6,050,020
Obligations of other U.S.
Government agencies
and corporations 4,910,831 - (37,013) 4,873,818
---------------- ------------ ------------- ---------------
$ 10,900,039 $ 60,812 $ (37,013) $ 10,923,838
================ ============ ============= ===============
Proceeds from sales and maturities of investment securities
held-to-maturity were $480,000 and $2,075,000, and available for
sale were $6,004,385 and $-0- during 1999 and 1998, respectively.
The Bank purchased $25,708,965 and $3,002,276 of investment
securities held-to-maturity and received $9,340,655 and
$8,967,819 from principal paydowns during 1999 and 1998,
respectively. The Bank also purchased $-0- and $6,944,424 of
investment securities available for sale and received $342,537
and $26,479 from principal paydowns during 1999 and 1998,
respectively.
Continued
<PAGE>
</TABLE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE B. INVESTMENT SECURITIES - CONTINUED
Equity securities include the Bank's investment in the Federal
Home Loan Bank and the Federal Reserve Bank. The Bank acquired
$51,800 and $55,900 of additional stock in the Federal Home Loan
Bank and no additional stock in the Federal Reserve Bank during
1999 and 1998, respectively. The Bank subsequently redeemed
$51,900 and $56,400 of stock in the Federal Home Loan Bank during
1999 and 1998, 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; therefore, there are no gross
unrealized gains or losses associated with these investments.
Equity securities also reflect an investment in Sumx Inc. During
1998, Britton & Koontz Capital Corporation invested $1 million in
this electronic banking development and marketing company. This
investment reflects a 35% preferred interest in the voting stock
of Sumx Inc. This investment is carried at equity, which is the
cost of the investment adjusted for the Company's proportionate
share of the investee's earnings or losses.
During 1999, Sumx Inc. incurred a net loss of $681,493. The
Company's proportionate share of that loss was $238,523
and is reflected in other income.
The President and CEO and the Vice President of Britton & Koontz
Capital Corporation serve as two of the three members of the
Board of Directors of Sumx Inc. In addition, the Vice President
of Britton & Koontz Capital Corporation individually owns 19.5%
of the voting stock of Sumx Inc. The Company has also entered
into an agreement with Sumx Inc. whereby this Vice President will
devote substantially all of his time to the management of Sumx
Inc. for up to two years for an annual fee of $90,000.
Investment securities carried at approximately $41,884,000
(approximate market value $40,979,000) at December 31, 1999, and
approximately $32,957,000 (approximate market value $33,179,000)
at December 31, 1998, were pledged to collateralize public
deposits and for other purposes as required by law or agreement.
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE B. INVESTMENT SECURITIES - CONTINUED
The amortized cost and approximate market value of investment
debt securities at December 31, 1999, 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.
<TABLE>
<CAPTION>
Securities held-to-maturity
Approximate
Amortized Market
Cost Value
<S> <C> <C>
Due in one year or less $ 5,346,764 $ 5,208,368
Due after one year through five years 20,410,952 20,059,719
Due after five years through ten years 7,074,834 6,852,630
Due after ten years 13,720,794 13,416,148
--------------- ---------------
$ 46,553,344 $ 45,536,865
=============== ===============
Securities available-for-sale
Approximate
Amortized Market
Cost Value
Due in one year or less $ - $ -
Due after one year through five years - -
Due after five years through ten years - -
Due after ten years 4,640,428 4,263,618
--------------- ---------------
$ 4,640,428 $ 4,263,618
=============== ===============
Continued
<PAGE>
</TABLE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
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 accrued at 6.25% per year. The Bank
retained title to the property until the end of the lease. Upon
receipt of the final lease payment, the title passed to the City
of Natchez. The obligation of the City to the Bank was evidenced
by a series of Certificates of Participation. Each Certificate
represented an annual principal payment. The Certificates did not
represent a legal obligation of the City and were contingent and
expressly limited to the extent of any specific, annual
appropriation made by the City to fund the lease. The Bank
carried 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, 1998:
Total minimum lease payments to be received $ 588,750
Portion of payments representing interest 108,750
-------------
Net investment $ 480,000
=============
During 1999, the certificates of participation were redeemed by
the City of Natchez.
Continued
<PAGE>
<TABLE>
<CAPTION>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE D. LOANS
The Bank's loan portfolio at December 31, 1999 and 1998, consists
of the following:
1999 1998
---------------- -----------------
<S> <C> <C>
Commercial, financial and agricultural $ 22,081,720 $ 22,365,655
Real estate-construction 4,155,724 1,895,106
Real estate-mortgage 97,116,610 80,286,252
Installment 16,550,764 14,521,075
Overdrafts 161,909 146,795
---------------- -----------------
Total loans $ 140,066,727 $ 119,214,883
================ =================
</TABLE>
Loans on which accrual of interest has been discontinued or
reduced amount to approximately $411,000 and $222,000 at December
31, 1999 and 1998, respectively. If interest on such loans had
been accrued, the income would have approximated $10,000 and
$5,100 in 1999 and 1998, 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 $3,413,281 and $2,841,291 at
December 31, 1999 and 1998, 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, 1999 $ 2,841,291
New loans 1,260,473
Repayments (688,483)
--------------
Balance at December 31, 1999 $ 3,413,281
==============
Continued
<PAGE>
<TABLE>
<CAPTION>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE E. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses are as follows:
1999 1998
-------------- --------------
<S> <C> <C>
Balance at January 1 $ 746,738 $ 676,745
-------------- --------------
Credits charged off (207,575) (117,448)
Recoveries 21,413 25,441
-------------- --------------
Net credits charged off (186,162) (92,007)
--------------- --------------
Provision for loan losses 275,000 162,000
-------------- --------------
Balance at December 31 $ 835,576 $ 746,738
============== ==============
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 were $1,473,480 and
$4,806,937 in 1999 and 1998, respectively.
NOTE G. BANK PREMISES AND EQUIPMENT
A summary of Bank premises and equipment is as follows:
1999 1998
-------------- --------------
Land $ 781,375 $ 442,675
Buildings 5,110,531 3,723,251
Furniture and equipment 4,787,068 3,794,474
-------------- --------------
10,678,974 7,960,400
Less accumulated depreciation 4,463,122 3,869,708
-------------- --------------
Bank premises and equipment, net $ 6,215,852 $ 4,090,692
============== ==============
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
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.
NOTE I. DEPOSITS
Maturities of certificates of deposit of $100,000 or more
outstanding at December 31, 1999 and 1998, are summarized as
follows:
1999 1998
--------------- ---------------
Time remaining until maturity:
<S> <C> <C>
Three months or less $ 16,875,547 $ 4,886,521
Over three through six months 4,507,511 11,096,570
Over six through twelve months 994,108 2,654,412
Over twelve months 6,970,760 4,861,294
--------------- ---------------
$ 29,347,926 $ 23,498,797
=============== ===============
Approximate scheduled maturities of certificates of deposits for
each of the next five years are:
2000 $ 59,495,000
2001 13,572,000
2002 6,815,000
2003 3,307,000
2004 1,901,000
Thereafter 59,000
---------------
$ 85,149,000
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE I. DEPOSITS - CONTINUED
Deposits at December 31, 1999 and 1998, consisted of the
following:
1999 1998
---------------- -----------------
<S> <C> <C>
Non-interest bearing demand deposits $ 25,572,146 $ 21,681,170
NOW accounts 30,393,696 24,705,808
Money market deposit accounts 10,474,870 10,622,990
Savings accounts 14,727,696 11,584,129
Certificates of deposit 85,148,862 74,592,300
---------------- -----------------
$ 166,317,270 $ 143,186,397
================ =================
NOTE J. FEDERAL HOME LOAN BANK ADVANCES
During 1999, the Bank received advances from and remitted
payments to the Federal Home Loan Bank. On December 13, 1999, the
Bank received a $17,850,000 advance which remained outstanding at
December 31, 1999. This advance accrues interest at an annual
rate of 5.79% and matures on January 10, 2000. The advance is
collateralized by a portion of the Bank's one to four family
residential mortgage portfolio in accordance with the Advance
Security and Collateral Agreement with the Federal Home Loan
Bank.
Continued
<PAGE>
</TABLE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
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 $40,000 and $40,000 in 1999 and 1998, respectively.
This plan owned 228,570 and 213,070 shares of Britton & Koontz
Capital Corporation stock, as of December 31, 1999 and 1998,
respectively at an overall cost to the plan of $5.82 per share.
Employees with one or more years of service are eligible to
participate in a 401(k) plan established by the Company effective
January 1, 1997. Under this plan, employees may contribute up to
12% of their yearly salary, not to exceed $7,000. These
contributions are immediately 100% vested. Employer contributions
are vested 20% after three years of service and an additional 20%
for each additional year of service, fully vested after seven
years of service. Employer contributions to the plan are made at
the discretion of the Board of Directors and aggregated $80,000
for the years ended December 31, 1999 and 1998.
During 1996, the Company adopted a long-term incentive plan in
which all employees of the Company and the Bank are eligible to
participate. 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 160,000 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
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE K. EMPLOYEE BENEFIT PLANS - CONTINUED
non-employee directors as appointed by the full Board of
Directors. On November 18, 1997, options to purchase 30,000
shares were granted as part of this plan. These options are
exercisable in installments beginning six months after the date
of grant and become fully exercisable nine and one-half years
after the date of grant. All options expire 10 years from the
date of grant. 6,600 and 3,300 shares were exercisable as of
December 31, 1999 and 1998, respectively. The summary of stock
option activity is shown below:
<TABLE>
<CAPTION>
Weighted
Options Average
Outstanding Exercise Price
<S> <C> <C>
December 31, 1997 30,000 $ 19.94
Options granted - $ 0.00
Stock options exercised - $ 0.00
----------
December 31, 1998 30,000 $ 19.94
Options granted - $ 0.00
Stock options exercised - $ 0.00
----------
December 31, 1999 30,000 $ 19.94
==========
</TABLE>
The following table summarizes information about stock options
outstanding at December 31, 1999:
Exercise Price Options Outstanding Remaining Contractual Life
$ 19.94 30,000 7.9 years
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE K. EMPLOYEE BENEFIT PLANS - CONTINUED
During fiscal 1997, the Company adopted SFAS No. 123, Accounting
for Stock-Based Compensation, which requires companies to
estimate the fair value for stock options on date of grant. Under
SFAS No. 123, the Company is required to record the estimated
fair value of stock options issued as compensation expense in its
income statements over the related service periods or,
alternatively, continue to apply accounting methodologies as
prescribed by Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and disclose the pro
forma effects of the estimated fair value of stock options issued
in the accompanying footnotes to its financial statements. The
determination of fair value is only required for stock options
issued beginning in 1996. In adopting SFAS No. 123, the Company
decided to continue to follow the accounting methodologies as
prescribed by APB Opinion No. 25.
The pro forma effects of the total compensation expense that
would have been recognized under SFAS No. 123 are as follows:
<TABLE>
<CAPTION>
1999 1998
--------------- --------------
<S> <C> <C>
Net income, as reported $ 2,220,236 $ 2,331,518
Pro forma net income $ 2,202,994 $ 2,308,678
Basic earnings per share, as reported $ 1.26 $ 1.32
Pro forma basic earnings per share $ 1.25 $ 1.31
Diluted earnings per share, as reported $ 1.26 $ 1.32
Pro forma diluted earnings per share $ 1.25 $ 1.31
In adopting SFAS No. 123, the Company utilized the Black-Scholes
Option Pricing Model to estimate the fair value of stock options
granted using the following weighted average assumptions:
Expected dividend yield 2.94%
Expected option life 7.25 years
Expected volatility 25.00%
Risk-free interest rates 5.85%
Continued
<PAGE>
</TABLE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE K. EMPLOYEE BENEFIT PLANS - CONTINUED
Based on the results of the model, the fair value of the stock
options issued on the date of grant were $5.57 per share for the
30,000 shares granted in 1997.
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, 1999
and 1998, respectively, include $33,316 and $30,572 of expense
related to this plan.
In addition to other benefits, the Company 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 based on
the number of covered employees ($258,351 and $136,619 at
December 31, 1999 and 1998, respectively). Claims exceeding these
annual limits are covered by traditional insurance contracts.
NOTE L. LEASES
The Company had no material lease obligations or similar
commitments at December 31, 1999 or 1998. 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
$3,874 and $3,067 in 1999 and 1998, respectively.
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE M. INCOME TAX PROVISION
The provision for income taxes included in the consolidated
statements of income is as follows:
1999 1998
-------------- ---------------
Current $ 1,214,732 $ 1,193,342
Deferred (100,191) (37,124)
-------------- --------------
$ 1,114,561 $ 1,156,218
============== ==============
Refundable income taxes of $14,404 and $59,082 in 1999 and 1998,
respectively, are included in other assets.
Net deferred tax liabilities of $472,614 in 1999 and $715,974 in
1998, are included in accrued taxes and other liabilities.
Amounts comprising deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Deferred tax liability:
Insurance $ 57,148 $ 45,082
Discount accretion - 10,025
Depreciation 628,812 588,976
Federal Home Loan Bank dividends 143,517 131,641
Purchase accounting 20,731 32,566
Self-insured medical plan 9,681 13,410
Unrealized gain on available-for-sale securities - 6,466
-------------- --------------
Total gross deferred tax liability $ 859,889 $ 828,166
============== ==============
Deferred tax asset:
Bad debts $ 105,634 $ 68,650
Unrealized loss on available-for-sale securities 136,703 -
Deferred compensation 55,969 43,542
Investee losses 88,969 -
-------------- --------------
Total gross deferred tax asset, net
of valuation allowance of $-0- $ 387,275 $ 112,192
============== ==============
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE M. INCOME TAX PROVISION - CONTINUED
The temporary differences resulting in deferred income taxes and
the tax effect of each are as follows:
1999 1998
-------------- --------------
Accretion of discount $ (10,025) $ 6,149
Depreciation 39,836 40,261
FHLB stock dividend 11,876 13,495
Provision for loan losses (33,136) (87,656)
Amortization of purchase accounting adjustments (15,683) (17,612)
Insurance 12,066 11,848
Deferred compensation (12,427) (11,403)
Self-insured medical plan (3,729) 7,794
Unrealized loss on available-for-sale securities (143,169) (16,642)
Investee losses (88,969) -
-------------- --------------
$ (243,360) $ 53,766
============== ==============
The provision for federal income taxes is less than that computed
by applying the federal statutory rate of 34% in 1999 and 1998,
as indicated in the following analysis:
1999 1998
-------------- --------------
Tax based on statutory rate $ 1,154,320 $ 1,185,830
State taxes 151,637 134,809
Effect of tax-exempt income (43,817) (29,002)
Amortization of negative goodwill (68,272) (82,154)
Officers' life insurance 1,320 1,220
Other (80,627) (54,485)
--------------- --------------
$ 1,114,561 $ 1,156,218
============== ==============
The income tax provision includes substantially no amounts in
1999 and 1998, resulting from securities transactions.
Continued
<PAGE>
</TABLE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE N. SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
At December 31, 1999 and 1998, 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. The related liability to repurchase these
securities is included in securities sold under repurchase
agreements. These securities have coupon rates ranging from 5.5%
to 7.00% and maturity dates ranging from 2008 to 2009. The
maximum amount of outstanding agreements at any month-end was
$2,316,043 and $2,904,167 during 1999 and 1998, respectively. The
monthly average amount of outstanding agreements was $1,874,606
and $2,203,615 during 1999 and 1998, respectively. At December
31, 1999, the securities underlying the repurchase agreements had
an approximate amortized cost of $1,636,939 and an approximate
market value of $1,588,499.
NOTE O. REGULATORY MATTERS
The primary sources of revenue of Britton & Koontz Capital
Corporation are dividends from its subsidiary, Britton & Koontz
First National Bank. On December 31, 1999, approximately
$2,446,000 was available for future distribution by the Bank as
dividends without prior approval of the banking regulatory
agencies. However, such distribution would be subject 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 initial 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.
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE O. REGULATORY MATTERS - CONTINUED
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.
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, 1999, that the
Bank meets all capital adequacy requirements to which it is
subject.
As of December 31, 1999, 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.
Continued
<PAGE>
<TABLE>
<CAPTION>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE O. REGULATORY MATTERS - CONTINUED
The Bank's actual capital amounts and ratios are also presented
in the table.
To Be Adequately To Be Well
Actual Capitalized Capitalized
Amount Ratio Amount Ratio Amount Ratio
------------- ----- ----------- ----- --------- ------
(amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999
- -----------------------
Total Capital (to Risk-
Weighted Assets) $ 17,692 13.80% $ 10,256 8.00% $ 12,820 10.00%
Tier I Capital (to Risk-
Weighted Assets) $ 16,856 13.15% $ 5,127 4.00 % $ 7,691 6.00%
Tier I Capital (to Average
Assets) $ 16,856 8.49% $ 5,956 3.00 % $ 9,927 5.00%
As of December 31, 1998
- -----------------------
Total Capital (to Risk-
Weighted Assets) $ 18,126 15.81% $ 9,172 8.00% $ 11,465 10.00%
Tier I Capital (to Risk-
Weighted Assets) $ 17,380 15.16% $ 4,586 4.00% $ 6,879 6.00%
Tier I Capital (to Average
Assets) $ 17,380 10.15% $ 5,137 3.00% $ 8,562 5.00%
Continued
<PAGE>
</TABLE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE P. 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.
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:
1999 1998
--------------- --------------
Commitments to extend credit $ 27,551,659 $ 18,779,289
=============== ==============
Commercial letters of credit $ 864,795 $ 848,950
=============== ==============
The Bank is required to maintain average reserves at the Federal
Reserve Bank. This requirement approximated $275,000 at December
31, 1999 and 1998, respectively. The Bank is in compliance with
this requirement.
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE P. COMMITMENTS AND CONTINGENCIES - CONTINUED
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 Q. CONCENTRATIONS OF CREDIT
Substantially 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.
NOTE R. DIVIDENDS
Britton & Koontz Capital Corporation's only subsidiary, Britton &
Koontz First National Bank, paid dividends to the Capital
Corporation amounting to $1,400,000, $2,262,449 and $1,076,358
for the years 1999, 1998 and 1997, respectively.
NOTE S. INTEREST RATE RISK MANAGEMENT
During 1999, the Bank entered into an off-balance sheet, interest
rate swap agreement to reduce its interest-rate risk and to
decrease its costs of funds for special deposit promotions. Under
the terms of this agreement, the Bank receives a fixed rate and
is obligated to pay a floating rate based on three month LIBOR
calculated on a contractual notional amount of $5,000,000 at
December 31, 1999. The original term is for eighteen months,
expiring in February, 2001. The fixed payment rate was 6.0% at
December 31, 1999. The average variable-payment rate was 5.8% at
December 31, 1999. The interest differentials received from this
agreement and recorded in current operations was $811 during
1999.
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE S. INTEREST RATE RISK MANAGEMENT - CONTINUED
During 1998, the Bank entered into an off-balance-sheet
interest-rate cap agreement to reduce the potential impact of
increases in interest rates on floating-rate liabilities. The
agreement entitles the Bank to receive from counterparties on a
quarterly basis the amounts, if any, by which the three month
LIBOR exceeds 6.0% computed on a $10 million notional amount.
This interest-rate cap expires on September 22, 2000. At December
31, 1999, the original cost of the cap of $20,000 had been
amortized into interest expense to a balance of $7,500.
NOTE T. ACQUISITION OF BRANCHES
During 1999, the Bank acquired three bank branches from Union
Planters Bank, N.A. The Bank paid a premium for the acquisition
of $1,614,210. This premium relates to depositor and borrower
relationships and is based on the estimated benefits attributable
to the relationships that existed at the date of acquisition
without regard to new depositors or borrowers that may replace
them. This premium is being amortized over fifteen years, which
is the estimated life of these existing relationships.
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.
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE U. FAIR VALUE OF FINANCIAL INSTRUMENTS - CONTINUED
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.
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 re-pricing 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.
Deposits
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.
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE U. FAIR VALUE OF FINANCIAL INSTRUMENTS - CONTINUED
Federal Funds Purchased and Federal Home Loan Bank Advance
Due to the short-term nature of these liabilities, the carrying
values of these items approximates their fair values.
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:
<TABLE>
<CAPTION>
1999
-------------------------------------
Carrying Fair
Amount Value
---------------- -----------------
<S> <C> <C>
Financial assets:
Cash and due from banks $ 5,587,000 $ 5,587,000
Federal funds sold $ 875,000 $ 875,000
Investment securities:
Held-to-maturity $ 46,553,000 $ 45,537,000
Available for sale $ 4,264,000 $ 4,264,000
Equity securities $ 1,949,000 $ 1,949,000
Cash surrender value of life insurance $ 759,000 $ 759,000
Loans $ 139,141,000 $ 138,093,000
Financial liabilities:
Deposits $ 166,317,000 $ 165,845,000
Federal Home Loan Bank advances $ 17,850,000 $ 17,850,000
Securities sold under repurchase agreements $ 1,482,000 $ 1,482,000
Face Fair
Amount Value
---------------- -----------------
Other:
Commitments to extend credit $ 27,552,000 $ 27,552,000
Commercial letters of credit $ 865,000 $ 865,000
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE U. FAIR VALUE OF FINANCIAL INSTRUMENTS - CONTINUED
1998
-------------------------------------
Carrying Fair
Amount Value
---------------- -----------------
Financial assets:
Cash and due from banks $ 4,811,000 $ 4,811,000
Investment securities:
Held-to-maturity $ 30,724,000 $ 31,301,000
Available for sale $ 10,924,000 $ 10,924,000
Equity securities $ 2,187,000 $ 2,187,499
Cash surrender value of life insurance $ 716,000 $ 716,000
Loans $ 119,215,000 $ 119,978,000
Financial liabilities:
Deposits $ 143,186,000 $ 143,590,000
Federal Home Loan Bank advances $ 5,000,000 $ 5,000,000
Federal funds purchased 350,000 $ 350,000
Securities sold under repurchase agreements $ 2,416,000 $ 2,416,000
Face Fair
Amount Value
---------------- -----------------
Other:
Commitments to extend credit $ 18,779,000 $ 18,779,000
Commercial letters of credit $ 849,000 $ 849,000
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.
Continued
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
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,
1999 1998
---------------- ----------------
<S> <C> <C>
ASSETS:
Cash $ 878,741 $ 766,970
Investments in:
Britton & Koontz First National Bank 18,143,316 17,397,196
Sumx Inc. 751,626 990,149
Premises and equipment, net 205,971 23,057
Cash surrender value of life insurance 80,919 70,450
Other assets 91,168 1,361
---------------- ----------------
TOTAL ASSETS $ 20,151,741 $ 19,249,183
================ ================
STOCKHOLDERS' EQUITY $ 20,151,741 $ 19,249,183
================ ================
Continued
<PAGE>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE V. SUMMARIZED FINANCIAL INFORMATION OF BRITTON & KOONTZ CAPITAL CORPORATION - CONTINUED
STATEMENTS OF INCOME
Years Ended December 31,
1999 1998
---------------- ----------------
REVENUE:
Dividends received:
Britton & Koontz First National Bank $ 1,400,000 $ 2,262,449
Interest and other income earned 11,227 10,545
---------------- ----------------
1,411,227 2,272,994
EXPENSES 44,997 106,758
---------------- ----------------
1,366,230 2,166,236
INCOME TAX BENEFIT (88,969) (38,943)
---------------- ----------------
1,455,199 2,205,179
EQUITY IN UNDISTRIBUTED
EARNINGS (LOSSES):
Britton & Koontz First National Bank 1,003,560 136,190
Sumx Inc. (238,523) (9,851)
----------------- ----------------
NET INCOME $ 2,220,236 $ 2,331,518
================ ================
Continued
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE V. SUMMARIZED FINANCIAL INFORMATION OF BRITTON & KOONTZ CAPITAL CORPORATION - CONTINUED
STATEMENTS OF CASH FLOWS
Years Ended December 31,
1999 1998
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 2,220,236 $ 2,331,518
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation 5,124 2,562
Equity on undistributed earnings
and losses of affiliates (765,037) (126,339)
Increase in cash surrender value of life insurance (10,469) (4,625)
(Increase) decrease in other assets (89,807) 11,506
----------------- ----------------
Net cash provided by operating activities 1,360,047 2,214,622
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Sumx Inc. - (1,000,000)
Purchase of premise and equipment (188,038) (25,619)
---------------- ---------------
Net cash used in investing activities (188,038) (1,025,619)
---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (1,060,238) (1,042,568)
---------------- ---------------
Net cash used in financing activities (1,060,238) (1,042,568)
----------------- ---------------
NET INCREASE IN CASH 111,771 146,435
CASH AT BEGINNING OF YEAR 766,970 620,535
---------------- ----------------
CASH AT END OF YEAR $ 878,741 $ 766,970
================ ================
SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Change in unrealized gain on securities
available-for-sale, net of deferred
income taxes $ (257,440) $ (21,511)
================= ================
<PAGE>
</TABLE>
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. In January 1999, the Bank completed
the acquisition of two local branches owned by a regional bank with
deposits of $12 million and $1.8 million in loans. In July 1999,
the Bank acquired another branch in Vicksburg, MS. with deposits
and loans totaling $6 million and $1.4 million, respectively. In
January 2000, the Bank established a loan production office in
Baton Rouge, LA. The office will be engaged primarily in the
origination of residential mortgage and construction loans. 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 four branch offices, located in Natchez and Vicksburg,
Mississippi, provide commercial and consumer banking and trust
services in Adams and Warren 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. The Bank is an Internet
Service Provider and sells local Internet access as well as
providing online banking services over the Internet. In December
1998, the Company acquired a 35% interest in Sumx Inc., a company
formed to develop and market internet-based electronic banking to
financial institutions.
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, 1999, to the
same period in 1998.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Report includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, such
forward-looking statements are based on numerous assumptions (some
of which may prove to be incorrect) and are subject to risks and
uncertainties which could cause the actual results to differ
materially from the Company's expectations. Forward-looking
statements have been and will be made in written documents and oral
presentations of the Company. Such statements are based on
management's beliefs as well as assumptions made by and information
currently available to management. When used in the Company's
documents or oral presentations, the words "anticipate,"
"estimate," "expect," "objective," "projection," "forecast," "goal"
and similar expressions are intended to identify forward-looking
statements. In addition to any assumptions and other factors
referred to specifically in connection with such forward-looking
statements, factors that could cause the Company's actual results
to differ materially from those contemplated in any forward-looking
statements include, among others, increased competition, regulatory
factors, economic conditions, changing interest rates, changing
market conditions, availability or cost of capital, employee
workforce factors, cost and other effects of legal and
administrative proceedings, and changes in federal, state or local
legislative requirements. The Company undertakes no obligation to
update or revise any forward-looking statements, whether as a
result of changes in actual results, changes in assumptions or
other factors affecting such statements.
<PAGE>
Financial Condition
Total Assets. Total assets increased 20.3% to $208.9 million
at December 31, 1999, from $173.6 million at year-end 1998. Loans,
net of unearned interest and allowance for loan losses, increased
17.6% to $139.1 million at December 31, 1999, compared to $118.3
million at December 31, 1998. Loan growth was funded by increases
of $5.4 million in deposits, $11.3 million in cash received from
acquisitions of branches and $4.1 million in Federal Home Loan Bank
advances. A further analysis of the Bank's loan portfolio is shown
in Note D to the financial statements.
Nonperforming Loans. Nonperforming loans at December 31, 1999,
increased to $717 thousand from $670 thousand at December 31, 1998.
Nonperforming loans consisted of nonaccrual loans of $411 thousand
and loans past due ninety days or more of $306 thousand compared to
$222 thousand and $448 thousand, respectively, for the year ended
December 31, 1998. Nonperforming loans as a percent of loans, net
of unearned income, decreased to .51% at December 31, 1999, from
.56% at December 31, 1998. The table below presents additional
information on nonperforming assets as of December 31, 1999 and
1998.
1999 1998
-------- -------
(dollars in thousands)
Nonaccrual loans by type
Real estate $ 373 $ 97
Installment 12 30
Commercial and all other loans 26 95
----- -----
Total nonaccrual loans 411 222
Loans past due 90 days or more 306 448
----- -----
Total nonperforming loans 717 670
Other real estate 103 96
----- -----
Total nonperforming assets $ 820 $ 766
===== =====
Nonperforming loans as a
percent of loans, net of
unearned interest and loans
held for sale 0.51% 0.56%
===== =====
<PAGE>
Allowance for Loan Losses. The allowance for loan losses increased $89
thousand to $836 thousand at December 31, 1999, compared to $747 thousand at
December 31, 1998. The ratio of the allowance for loan losses to loans, net of
unearned income, decreased slightly to .60% at December 31, 1999 from .63% at
December 31, 1998. Approximately half of the loan portfolio is invested in 1-4
family residential mortgage loans. A smaller portion of the allowance is
allocated to these loans as compared to 1998, due to their generally higher
credit quality. Management regularly reviews the level of the allowance for loan
losses to ensure the level is adequate to absorb loan losses inherent in the
loan portfolio. Activity in the allowance for loan losses for the period ended
December 31, 1999 and 1998 is presented in Note E to the financial statements.
The allocation of the allowance for loan losses between 1-4 family residential
first mortgage loans and other loans, net of unearned interest, as of December
31, 1999 and 1998 is presented below.
1999 1998
------------- -------------
1-4 Family Residential 1st Mortgage Loans
Volume $ 63,700,577 $ 58,029,874
Allocated reserve 39,879 165,493
Reserves as a percent of volume 0.06% 0.29%
Other Loans
Volume $ 76,275,965 $ 61,002,092
Allocated reserve 795,697 581,245
Reserves as a percent of volume 1.04% 0.95%
Total Loans
Volume $139,976,542 $119,031,966
Allocated reserve 835,576 746,738
Reserves as a percent of volume 0.60% 0.63%
<PAGE>
Other Real Estate. Other real estate increased to $103
thousand at December 31, 1999, compared to $96 thousand at December
31, 1998.
Premises and Equipment. Premises and equipment increased $2.7
million in 1999 with more than half of the increase related to the
acquisition of branches and expansion into other markets. Other
major contributors to the increase were the replacement of existing
phone systems, new branch site real estate purchases, and general
renovation of bank premises.
Investment Securities. 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 while securities that
are purchased as available-for-sale are accounted for at fair
value. Securities held-to-maturity increased $15.9 million to $46.6
million at December 31, 1999, compared to $30.7 million at December
31, 1998. However, the bank's available-for-sale securities
portfolio decreased by $6.7 million to $4.3 million at December 31,
1999. After tax-effecting the available-for-sale securities, net
unrealized losses amounted to $240 thousand. Equity securities
decreased $239 thousand reflecting the Company's 35% equity share
of the net operating loss of Sumx Inc., an Internet banking
solutions provider.
The Company's cash and cash equivalents ended the year at $5.6
million, an increase of $776 thousand from December 31, 1998. Due
primarily to the $17.9 million increase in loans, investing
activities used $18.0 million. The increase in investing activities
was provided for by $16.0 million in financing activities, most of
which came from an increase in FHLB advances and demand deposits
along with operating activities providing $2.8 million.
Funding Sources. Deposits are the Company's primary source of
funding for earning assets. Average deposits, used to finance
additional loan growth, increased $10.6 million to $155.2 million
at December 31, 1999. Average borrowings, which include federal
funds purchased, securities sold under repurchase agreements, and
advances from the Federal Home Loan Bank of Dallas increased $7.1
million. Management plans continued use of nontraditional funding
sources to manage overall funding costs and to meet loan demand in
new locations. A further analysis of the Company's funding uses and
sources is reflected in the table below.
<TABLE>
<CAPTION>
Average Balances Percent of Total
1999 1998 1999 1998
-------- -------- ------- -------
<S> <C> <C> <C> <C>
(dollars in thousands)
Funding Uses
Loans, less unearned income $ 130,841 $ 114,082 68.2% 66.4%
Investments 44,360 43,287 23.1% 25.2%
Federal funds sold 890 2,140 0.5% 1.2%
Other 15,814 12,294 8.2% 7.2%
--------- --------- ----- -----
Total $ 191,905 $ 171,803 100.0% 100.0%
========= ========= ===== =====
Funding Sources
Non-interest bearing deposits $ 22,374 $ 19,277 11.7% 11.2%
Interest bearing deposits 132,871 125,349 69.2% 73.0%
Short-term borrowings 11,276 4,147 5.9% 2.4%
Other 5,408 4,136 2.8% 2.4%
Equity 19,976 18,894 10.4% 11.0%
--------- --------- ----- -----
Total $ 191,905 $ 171,803 100.0% 100.0%
========= ========= ===== =====
<PAGE>
</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 $19 million, or 10% of average
assets, in 1999. The portfolio primarily includes investments in
obligations of the U.S. Treasury, government agency obligations and
mortgage-backed securities.
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 1999, over
$27.5 million, or 19.6% of the loan portfolio, was scheduled to
mature within one year.
Sizable core deposits provide liability liquidity along with
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. From time to time the bank utilizes
brokered and national market deposits to meet funding needs.
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 purchased 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 Sensitivity. 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 unforeseen, shifts in interest rates.
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.
Management utilizes computerized interest rate simulation
analysis as its primary measure of interest rate sensitivity.
Management's analyses indicate that in a rising rate scenario, in
the first 12 to 16 months, net interest income decreases as the
large short-term funding base reprices much faster than the
longer-term asset base. As the simulation progresses and funding
costs stabilize, the downward pressure on net interest income is
reversed as the long-term asset sensitivity of the balance sheet
becomes more prevalent. In a falling rate environment, net interest
income remains virtually unchanged over the first 12 months of the
simulation, as decreases in funding costs are just enough to offset
the decline in asset yields. Late in the second year and beyond,
net interest income starts to trend downward as funding cost
decreases subside while assets continue to be replaced or repriced
at lower rates.
<PAGE>
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, 1999, is
shown in the table below.
<TABLE>
<CAPTION>
Immediate
to 3 4-12 1 to 3 3 to 5 Over 5
Months Months Years Years Years Totals
--------- --------- ------- ------- -------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest Sensitive Assets $ 37,717 $ 40,456 $41,774 $29,918 $ 42,667 $192,532
Interest Sensitive Liabilities 63,924 51,102 13,867 5,406 52,206 $186,505
-------- --------- ------- ------- -------- --------
Interest Sensitivity Gaps $( 26,207) $( 10,646) $27,907 $24,512 $ (9,539) $ 6,027
========= ========= ======= ======= ======== ========
Cumulative ratio of interest
sensitive assets to interest
sensitive liabilities 0.59 0.68 0.93 1.12 1.03
========= ========= ======= ======= ========
</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.
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 or caps 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 these hedging techniques is reflected as
adjustments to interest expense. A further discussion of the
Company's use of off-balance sheet agreements is shown in Note S of
the financial statements.
Capital and Dividends. Stockholders' equity increased by 4.7%
to $20.2 million at December 31, 1999, compared to $19.2 million at
the end of 1998. The ratio of stockholders' equity to assets
decreased to 9.65% at December 31, 1999, from 11.09% at December
31, 1998 primarily due to a 20% increase in assets of the Company.
The Company paid dividends of $.60 per share in 1999 compared to
$.59 in 1998. In 1999, the Company paid out 47.75% of earnings
compared to 44.72% in 1998.
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, 1999, of 13.15%, a total capital to
risk weighted assets ratio of 13.80% and a leverage ratio of 8.49%.
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. A further analysis of the capital
component is provided in Note O.
<PAGE>
Results of Operations
Analysis of Net Income. The Company earned $2.2 million, or
$1.26 per share in 1999 compared to $2.3 million or $1.32 per share
in 1998. Returns on average assets and average equity for 1999 were
1.16% and 11.11%, respectively, compared to 1.36% and 12.34% in
1998. The decrease is primarily attributable to the Company's $1.0
million investment in Sumx Inc., a 35% owned subsidiary established
to market Internet banking solutions to the banking industry. The
Company recorded an after-tax loss from Sumx Inc. of $150 thousand
that was partially offset by $70 thousand in management fees and
other expenses. Other factors contributing to the decrease in
earnings for 1999 were costs associated with the Company's
acquisition of three Union Planters, N.A. branches in Natchez and
Vicksburg, MS, costs related to Y2k compliance and data processing
and equipment expenses for improvements in the bank's computer
systems.
Analysis of Net Interest Income. Net interest income increased
$990 thousand or 13.6% to $8.2 million in 1999 due to a 10.0%
growth in average earning assets. Net interest margin increased
from 4.49% to 4.64% primarily due to the rate environment
throughout the year. A fall in interest rates proved to have a
positive effect on earnings due to greater declines in rates paid
on liabilities than on rates earned on assets. Yields on earning
assets decreased 15 basis points to 7.93% while cost of funds fell
42 basis points to 4.07%. As indicated in the table, Summary of
Changes in Net Interest Income, overall growth in the balance
sheet, primarily a 14.7% increase in average loan volumes,
contributed $863 thousand to the increase in net interest income.
The favorable rate environment contributed $127 thousand to the
increase in net interest income.
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.
<PAGE>
<TABLE>
<CAPTION>
Average Balance and Yield Analysis
(dollars in thousands)
Twelve Months Ended December 31,
--------------------------------------------------------------------------
1999 1998
------------------------------------ -----------------------------------
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) $130,841 $11,187 8.55% $114,082 $ 9,966 8.74%
Investment securities:
U.S. Government & other 42,673 2,703 6.33% 42,216 2,821 6.68%
State & municipal 1,687 86 5.11% 1,071 56 5.22%
-------- ------- -------- -------
Total investment securities 44,360 2,789 6.29% 43,287 2,877 6.65%
Interest bearing bank balances 969 49 5.01% 1,475 77 5.25%
Federal funds sold 890 44 4.96% 2,140 110 5.12%
Other (Cash Value Life Insurance) 741 38 5.08% 707 36 5.04%
-------- ------- -------- -------
Total earning assets 177,801 14,107 7.93% 161,691 13,066 8.08%
-------- ------- -------- -------
Allowance for loan losses (810) (738)
Cash & due from banks, non-interest
bearing 5,168 4,989
Bank premises & equipment 5,644 4,009
Other assets 4,102 1,852
-------- --------
TOTAL ASSETS $191,905 $171,803
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing deposits:
Savings $ 14,085 $ 311 2.21% $ 11,085 $ 276 2.49%
Interest bearing checking 30,146 759 2.52% 25,305 734 2.90%
Money rate savings 10,495 327 3.12% 10,828 354 3.27%
Certificates of deposit and other
time deposits (3) 78,145 3,889 4.98% 78,131 4,229 5.41%
--------- ------- -------- -------
Total interest bearing deposits 132,871 5,286 3.98% 125,349 5,593 4.46%
Short-term borrowed funds 11,276 574 5.09% 4,147 216 5.22%
--------- ------- -------- -------
Total interest bearing
liabilities 144,147 5,860 4.07% 129,496 5,809 4.49%
--------- ------- -------- -------
Non-interest bearing deposits 22,374 19,277
Other liabilities 5,408 4,136
Shareholders' equity 19,976 18,894
--------- --------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $191,905 $ 5,860 $171,803 $ 5,809
========= ======== ======== ========
Interest income and rate earned $ 14,107 7.93% $ 13,066 8.08%
Interest expense and rate paid 5,860 4.07% 5,809 4.49%
-------- ----- -------- -----
Interest rate spread 3.87% 3.59%
===== =====
NET INTEREST INCOME & NET YIELD
ON AVERAGE EARNING ASSETS $ 8,247 4.64% $ 7,257 4.49%
======== ===== ======== =====
(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 caps
and swaps used to manage interest rate risk.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Summary of Changes in Net Interest Income
1999 compared to 1998
--------------------------------------------
Increase (Decrease) Due to Change In
Total Volume Rates
--------------------------------------------
INTEREST EARNED ON:
<S> <C> <C> <C>
Loans $ 1,221 $ 1,437 $ (216)
Investment securities:
U.S. Government & other (118) 30 (148)
State & municipal 30 32 (2)
Interest bearing bank balances (28) (24) (4)
Federal funds sold (66) (63) (3)
Other (Cash Surrender Value Life Insurance) 2 2 -
------- ------- ------
Total earning assets $ 1,041 $ 1,414 $ (373)
------- ------- ------
INTEREST PAID ON:
vings 35 69 (34)
Interest bearing checking 25 128 (103)
Money rate savings (27) (11) (16)
Certificates of deposit and other
time deposits (340) 1 (341)
Short-term borrowed funds 358 364 (6)
------- ------- ------
Total interest bearing liabilities 51 551 (500)
------- ------- ------
NET INTEREST INCOME $ 990 $ 863 $ 127
======= ======= ======
</TABLE>
Provision for Loan Losses. The provision for loan losses
increased 70% to $275 thousand in 1999 to keep pace with the
growing loan portfolio. 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 December 31, 1999,
is adequate to cover estimated exposures.
Non-Interest Income. Non-interest income, excluding equity in
investee losses, increased 30% from $1.51 million to $1.96 million.
Income from bank operations continues to reflect strong core income
growth which occurred in most major categories, including fees
charged on deposit accounts, internet fees, commissions on consumer
investment services and ATM fees. Fee income associated with
deposit accounts increased primarily because of branch
acquisitions. Commissions on investment sales increased 61% to $44
thousand primarily as a result of higher sales volumes on stock and
annuity products.
<PAGE>
Non-Interest Expense. Non-interest expense increased $1.3
million to $6.4 million in 1999, as compared to $5.1 million in
1998. Salaries and employee benefits accounted for nearly one-half
of the increase, or $632 thousand, primarily due to the number of
employees associated with the branch acquisitions and annual merit
increases. Equipment and occupancy expense increased $199 thousand
with the addition of the new branches along with anticipation and
preparation for Y2k. The Bank is currently amortizing premiums on
the branch acquisitions that amounted to $88 thousand in 1999 with
a projection of $108 thousand for 2000.
Income Taxes. Income taxes for 1999 decreased slightly to $1.1
million. The change in income taxes is detailed in Note M to the
financial statements.
Year 2000. The Bank had prepared throughout the previous two
years by adopting several steps to assure that the systems it uses
to process financial institution records will be Year 2000
compliant. The year end date changeover did not present any
technological issues or malfunctions of the systems. The Bank will
continue to monitor this issue over the remaining critical dates in
the future.
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 NASDAQ Small Cap Market price high and low
ranges for the Common Stock.
Dividends Per Share
High Low
Period 1999
4th Quarter $ .30 $20.00 $17.88
3rd Quarter $21.25 $19.50
2nd Quarter $ .30 $21.00 $19.00
1st Quarter $20.50 $19.00
Period 1998
4th Quarter $ .30 $21.50 $18.00
3rd Quarter $23.00 $19.50
2nd Quarter $ .29 $22.50 $20.50
1st Quarter $23.00 $20.50
On December 31, 1999 there were 500 shareholders of record of the Company's
Stock.
<PAGE>
CORPORATE INFORMATION
Annual Meeting/ Principal Office:
3:30 P.M., Tuesday, April 25, 2000
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 & KOONTZ FIRST NATIONAL BANK
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
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 - retired
Bazile R. Lanneau
Life Insurance
<PAGE>
Bazile R. Lanneau, Jr.
President & Chief Executive Officer
Sumx Inc.
Vice-President, Assistant Secretary,
Treasurer & Chief Financial Officer
Britton & Koontz Capital Corporation and
Executive Vice-President
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
Lambdin-Bisland Realty, Co.
Robert R. Punches
Partner
Gwin, Lewis & Punches, Attorneys
<PAGE>
BRITTON & KOONTZ FIRST NATIONAL BANK
OFFICERS
ADMINISTRATION
W. Page Ogden
President & Chief Executive Officer
Bazile R. Lanneau, Jr.
Executive Vice President,
Chief Financial Officer
James J. Cole
Executive Vice President
LENDING
Michael B. Ellard
Senior Vice President
Senior Lending Officer
Glynn A. Laird
Senior Vice President
Patricia J. Bonds
Vice President
G. Mike Malone
Vice President
Barry L. Maxwell
Vice President
Kimberly A. Arnold
Assistant Vice President
MORTGAGE LOANS
Frances B. Cothren
Vice President
Steve Gwin
Vice President - Vicksburg
Janet W. Bruce
Loan Officer
Mitzi Burkley
Loan Officer
Mary Scheffy
Loan Officer - Baton Rouge
BRANCH ADMINISTRATION, HUMAN RESOURCES, MARKETING, & OPERATIONS
Rosemary I. Hall
Senior Vice President
Walter L. Reed
Senior Vice President
Jarrett E. Nicholson
City President - Vicksburg
Curtis L. Moroney
Systems Administrator
<PAGE>
Martha J. Seibert
Marketing Director
Sandra J. Boyte
Assistant Vice President,
Branch Manager
Eddie A. Hobson
Assistant Vice President,
Branch Manager
Dunbar B. Peale
Assistant Vice President
Dorothy A. Weadock
Assistant Vice President
Martin Lanneau
Virtual Branch Manager
Holly B. Sandifer
Branch Officer
R. Talmadge Anderson
Operations Officer
CONTROLLER
William M. Salters
Senior Vice President
LOAN REVIEW AND ADMINISTRATION
Janice B. Delaney
Loan Closing Officer
Sherri Lambert
Loan Operations Officer
COMPLIANCE
Cliffie S. Anderson
Assistant Vice President
Compliance Officer
TRUST
Rene' P. Maher
Trust Officer,
Branch Manager
