UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period Ended March 31, 2006.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _______ to _______
Commission File Number 0-22606
BRITTON & KOONTZ CAPITAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Mississippi 64-0665423
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
500 Main Street, Natchez, Mississippi 39120
(Address of Principal Executive Offices) (Zip Code)
601-445-5576
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer Accelerated filer X Non-accelerated filer
- --- --- ---
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
2,117,086 Shares of Common Stock, Par Value $2.50, were
outstanding as of May 1, 2006.
BRITTON & KOONTZ CAPITAL CORPORATION
AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition
Consolidated Statements of Income
Consolidated Statements of Changes in Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
SIGNATURES
CERTIFICATIONS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
A S S E T S
March 31, December 31,
ASSETS: 2006 2005
---------------- ----------------
Cash and due from banks:
Non-interest bearing $ 9,097,678 $ 8,553,139
Interest bearing 8,799,263 1,272,320
---------------- ----------------
Total cash and due from banks 17,896,941 9,825,459
Federal funds sold 1,081,388 401,138
Investment Securities:
Held-to-maturity (market value, in 2006 and 2005,
of $38,856,085 and $39,015,853, respectively) 37,902,047 37,994,043
Available-for-sale (amortized cost, in 2006 and 2005,
of $76,362,001 and $79,902,610, respectively) 74,377,274 78,287,012
Equity securities 5,129,500 5,501,700
Loans, less unearned income of $585 in 2006 and
$794 in 2005, and allowance for loan losses of
$2,423,606 in 2006 and $2,377,840 in 2005 232,085,606 242,534,011
Loans held for sale - 171,200
Bank premises and equipment, net 8,005,290 8,046,668
Other real estate, net 1,447,327 1,470,584
Accrued interest receivable 2,146,598 2,258,225
Cash surrender value of life insurance 948,544 936,378
Core Deposits, net 853,986 880,890
Other assets 943,929 952,721
---------------- ----------------
TOTAL ASSETS $ 382,818,430 $ 389,260,029
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
LIABILITIES: 2006 2005
---------------- ----------------
Deposits
Non-interest bearing $ 51,201,873 $ 51,466,230
Interest bearing 212,368,005 205,910,680
---------------- ----------------
Total deposits 263,569,878 257,376,910
Federal Home Loan Bank advances 71,089,497 84,196,067
Securities sold under repurchase agreements 8,298,811 8,032,721
Accrued interest payable 1,730,651 1,438,836
Advances from borrowers for taxes and insurance 236,344 437,222
Accrued taxes and other liabilities 1,163,687 1,363,115
Junior subordinated debentures 5,155,000 5,155,000
---------------- ----------------
Total liabilities 351,243,868 357,999,871
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $2.50 par value per share;
12,000,000 shares authorized; 2,131,586 and 2,130,816 issued;
2,117,086 and 2,116,316 outstanding for March 31, 2006, and
December 31, 2005, respectively 5,328,965 5,327,040
Additional paid-in capital 7,268,635 7,254,113
Retained earnings 20,493,416 19,949,100
Accumulated other comprehensive income (1,259,079) (1,012,720)
---------------- ----------------
31,831,937 31,517,533
Cost of 14,500 shares of common stock held by the company (257,375) (257,375)
---------------- ----------------
Total stockholders' equity 31,574,562 31,260,158
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 382,818,430 $ 389,260,029
================ ================
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
--------------------------------
2006 2005
--------------- --------------
INTEREST INCOME:
Interest and fees on loans $ 4,338,445 $ 3,654,263
Interest on investment securities:
Taxable interest income 957,632 1,090,030
Exempt from federal taxes 408,574 408,837
Interest on federal funds sold 12,021 492
--------------- --------------
Total interest income 5,716,672 5,153,622
--------------- --------------
INTEREST EXPENSE:
Interest on deposits 1,440,148 886,040
Interest on Federal Home Loan Bank advances 716,945 801,036
Interest on federal funds purchased - 29,520
Interest on trust preferred securities 99,218 71,699
Interest on securities sold under repurchase agreements 80,428 46,763
--------------- --------------
Total interest expense 2,336,739 1,835,058
--------------- --------------
NET INTEREST INCOME 3,379,933 3,318,564
Provision for loan losses 60,000 90,000
--------------- --------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,319,933 3,228,564
--------------- --------------
OTHER INCOME:
Service charges on deposit accounts 327,348 319,252
Income from fiduciary activities 9,358 10,193
Income from investment activities 20,774 31,213
Insurance premiums and commissions - 71
Gain/(loss) on sale of ORE - 1,870
Gain/(loss) on sale of mortgage loans 85,148 94,514
Gain/(loss) on sale of other assets (400) -
Other 169,155 148,524
--------------- --------------
Total other income 611,383 605,637
--------------- --------------
OTHER EXPENSES:
Salaries 1,271,667 1,357,798
Employee benefits 191,451 237,275
Director fees 47,345 51,525
Net occupancy expense 223,218 241,679
Equipment expenses 263,885 255,684
FDIC assessment 7,906 7,867
Advertising 54,457 54,220
Stationery and supplies 45,742 50,797
Audit expense 45,481 47,451
Other real estate expense 26,389 7,063
Amortization of deposit premium 26,904 26,904
Other 484,854 504,047
--------------- --------------
Total other expenses 2,689,299 2,842,310
--------------- --------------
INCOME BEFORE INCOME TAX EXPENSE 1,242,017 991,891
Income tax expense 316,625 100,478
--------------- --------------
NET INCOME $ 925,392 $ 891,413
=============== ==============
EARNINGS PER SHARE DATA:
Basic earnings per share $ 0.44 $ 0.42
=============== ==============
Basic weighted shares outstanding 2,116,811 2,116,316
=============== ==============
Diluted earnings per share $ 0.44 $ 0.42
=============== ==============
Diluted weighted shares outstanding 2,124,283 2,120,750
=============== ==============
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
Accumulated
Additional Other Total
Commonn Stock Paid-in Retained Comprehensive Treasury Stockholders
Shares Amount Capital Earnings Income Stock Equity
--------- ----------- ----------- ------------ ------------- ----------- ------------
Balance at December 31, 2004 2,116,316 $ 5,327,040 $ 7,254,113 $18,181,718 $ 646,272 $ (257,375) $31,151,768
Comprehensive Income:
Net income 891,413 891,413
Other comprehensive
income (net of tax):
Net change in unrealized gain/(loss)
on securities available for sale, net
of taxes for $565,983 (951,398) (951,398)
Other Comprehensive gains from
derivates, net of reclassification
adjustment of $32,547 (54,711) (54,711)
------------
Total Comprehensive income (114,696)
--------- ----------- ----------- ------------ ------------ ----------- ------------
Balance at March 31, 2005 2,116,316 $ 5,327,040 $ 7,254,113 $19,073,131 $ (359,837) $ (257,375) $31,037,072
========= =========== =========== ============ ============ =========== ============
Accumulated
Additional Other Total
Commonn Stock Paid-in Retained Comprehensive Treasury Stockholders
Shares Amount Capital Earnings Income Stock Equity
--------- ----------- ----------- ------------ ------------- ----------- ------------
Balance at December 31, 2005 2,116,316 $ 5,327,040 $ 7,254,113 $19,949,100 $(1,012,720) $ (257,375) $31,260,158
Comprehensive Income:
Net income 925,392 925,392
Other comprehensive
income (net of tax):
Net change in unrealized gain/(loss)
on securities available for sale, net
of taxes of $137,685 (231,444) (231,444)
Other Comprehensive gains from
derivates, net of reclassification
adjustment of $8,873 (14,916) (14,916)
------------
Total Comprehensive income 679,032
Cash Dividend paid $0.18 per share (381,075) (381,075)
Stock Options exercised 770 1,925 14,522 16,447
--------- ----------- ----------- ------------ ------------ ----------- ------------
Balance at March 31, 2006 2,117,080 $ 5,328,965 $ 7,268,635 $20,493,416 $(1,259,079) $ (257,375) $31,574,562
========= =========== =========== ============ ============ =========== ============
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
PERIODS ENDED MARCH 31,
2006 2005
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 925,392 $ 891,413
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Deferred income taxes (239,390) (130,869)
Provision for loan losses 60,000 90,000
Provision for depreciation 196,632 186,666
Stock dividends received (48,200) (36,000)
(Gain)/loss on sale of other real estate - (1,870)
(Gain)/loss on sale of mortgage loans (85,148) (94,514)
Net amortization (accretion) of securities 44,768 94,839
Amortization of deposit premium 26,904 26,904
Writedown of other real estate 22,178 -
Net change in:
Loans held for sale 171,200 (277,667)
Accrued interest receivable 111,627 (43,639)
Cash surrender value (12,166) 32,367
Other assets (14,997) (106,730)
Accrued interest payable 291,815 88,805
Accrued taxes and other liabilities 186,520 16,165
------------------- -------------------
Net cash provided by (used) in operating activities 1,637,135 735,870
------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase)/decrease in federal funds sold (680,250) 109,031
Proceeds from sales, maturities and paydowns
of investment securities 4,200,719 5,396,887
Redemption of FHLB stock 420,400 -
Purchase of FHLB stock - (371,500)
Purchases of investment securities (612,882) (7,031,532)
(Increase)/decrease in loans 10,469,053 (9,007,120)
Proceeds from sale and transfers of other real estate 1,079 36,870
Proceeds from sale and transfers of other repossessed assets 4,500 -
Purchase of premises and equipment (155,254) (175,636)
------------------- -------------------
Net cash provided by (used) in investing activities 13,647,365 (11,043,000)
------------------- -------------------
2006 2005
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase /(decrease) in customer deposits 6,114,609 4,500,584
Increase /(decrease) in brokered deposits 78,359 1,916,000
Increase /(decrease) in securities sold under
repurchase agreements 266,090 242,721
Increase /(decrease) in federal funds purchased - (3,740,000)
Increase /(decrease) in FHLB advances (13,106,570) 8,262,959
Increase /(decrease) in advances from borrowers
for taxes and insurance (200,878) (179,492)
Cash dividends paid (381,075) -
Common stock issued 16,447 -
------------------- -------------------
Net cash provided by (used) in financing activities (7,213,018) 11,002,772
------------------- -------------------
NET INCREASE/(DECREASE) IN CASH AND DUE FROM BANKS 8,071,482 695,642
------------------- -------------------
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 9,825,459 6,576,825
------------------- -------------------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 17,896,941 $ 7,272,467
=================== ===================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for interest $ 2,044,924 $ 1,746,253
=================== ===================
SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Transfers from loans foreclosed to other real estate $ - $ 67,178
=================== ===================
Change in unrealized gains (losses)
on securities available for sale $ (369,129) $ (1,517,380)
=================== ===================
Change in the deferred tax effect in unrealized
gains (losses) on securities available for sale $ (137,685) $ (565,983)
=================== ===================
Change in unrealized gains (losses) on derivative $ (23,789) $ (87,258)
=================== ===================
Change in the deferred tax effect in
unrealized gains (losses) on derivative $ (8,873) $ (32,547)
=================== ===================
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
Note A. Basis of Presentation
The consolidated balance sheet for Britton & Koontz Capital Corporation
(the "Company") as of December 31, 2005, has been derived from the audited
financial statements of the Company for the year then ended. The accompanying
interim consolidated financial statements as of March 31, 2006, are unaudited
and reflect all normal recurring adjustments which, in the opinion of
management, are necessary for the fair presentation of financial position and
operating results of the periods presented. Certain 2005 amounts have been
reclassified to conform to the 2006 presentation.
Note B. Interest Rate Risk Management
In an effort to reduce funding costs, the Company enters into or
purchases interest rate caps. On February 4, 2005, the Company entered into an
agreement with the Federal Home Loan Bank of Dallas ("FHLB") to cap the interest
rate paid on a $20 million advance for 3 years at 3-Month LIBOR with a strike
price of 4% and a cost of 35 basis points ("bps") plus a margin of 2 bps. A cap
with a 2-year term was entered into with the FHLB on October 18, 2005, for $5
million with a strike price of 3-Month LIBOR at 4.50% at a cost of 35 bps with
no margin. On May 8, 2006, 3-Month LIBOR was 5.16% and both caps were in the
money. The cost of both caps is included in the monthly interest expense paid to
the FHLB.
On May 9, 2002, Britton & Koontz Bank, N.A., the Company's wholly-owned
subsidiary (the "Bank"), entered into an off-balance sheet interest rate swap
agreement to convert existing prime based loans to a fixed rate. Under the terms
of the agreement, the Bank receives a fixed rate of 7.635% and is obligated to
pay a floating rate based on USD-Prime-H.15, calculated on a contractual
notional amount of $5,000,000. The original term is for five years, expiring May
10, 2007. The fair value of this derivative, designated as a cash flow hedge and
considered highly effective over its term, indicated a loss of $23 thousand at
March 31, 2006, and is reflected in other assets. The positive impact on income
through March 31, 2006, is $3 thousand. Management does not consider the
arrangement to have a material impact toward the Company's liquidity or capital
resources or to pose any known risks with respect to market or credit risk.
Note C. Loans Held-for-Sale
Loans held-for-sale are primarily thirty year and fifteen year fixed
rate, one to four family real estate loans which are valued at the lower of cost
or market, as determined by outstanding commitments from investors or current
investor yield requirements, calculated on an individual basis. These loans are
sold to protect earnings and equity from undesirable shifts in interest rates.
Unrealized losses on loans held-for-sale are charged against income in the
period of decline. Such declines are recorded in a valuation allowance account
and deducted from the cost basis of the loans. At March 31, 2006, no charge was
recorded. Gains on loans are recognized when realized and at March 31, 2006,
there were no loans held for sale.
Note D. Junior Subordinated Debentures
On March 26, 2003, the Company finalized its participation in FTN
Financial Capital Market's and Keefe, Bruyette & Woods' pooled trust preferred
offering. The Company established Britton & Koontz Statutory Trust # 1 which
issued 5,000 capital securities and 155 common securities with an aggregate
liquidation amount of $5 million and $155 thousand, respectively. The term of
the capital securities and debentures is 30 years, callable after 5 years at the
option of the Company. The initial interest rate was 4.41%, adjusting quarterly
at 3-Month LIBOR plus 3.15% and capped at 11.75%. The interest rate at March 31,
2006, was 8.11%.
Note E. Loan Commitments
In the ordinary course of business, the Company enters into commitments
to extend credit to its customers. Letters of credit at March 31, 2006, and
December 31, 2005, were $2.3 million and $1.9 million, respectively. As of March
31, 2006, the Company had entered into other commercial and residential loan
commitments with certain customers that had an aggregate unused balance of $92.9
million, an increase from $82.6 million at December 31, 2005. This compares with
loan commitments of $46.4 million and $40.7 million at March 31, 2005, and
December 31, 2004, respectively. Because letters of credit and loan commitments
often are not used in their entirety, if at all, before they expire, the
balances on such commitments should not be used to project actual future
liquidity requirements. However, the Company does incorporate expectations about
the level of draws under all credit-related commitments into its funds
management process.
Note F. Earnings per Share
Basic income per share amounts are computed by dividing net income by
the weighted average number of common shares outstanding. The computation of
diluted income per share assumes the exercise of all outstanding securities
potentially convertible into common stock, including options granted, unless the
effect is anti-dilutive. The effect will be anti-dilutive when the exercise
price per share of an option exceeds the current market price for a share of
Company stock. The Company uses the Black Scholes method for valuing stock
options and does not expect that the adoption of FAS 123R will materially impact
the financial statements. The following is information about the computation of
earnings per share for the three months ended March 31, 2006 and 2005.
For the three months ended
March 31,
-------------------------------
2006 2005
------------- --------------
Basic weighted average shares outstanding 2,116,811 2,116,316
Dilutive effect of granted options 7,472 4,434
Diluted weighted average shares outstanding 2,124,283 2,120,750
Net income $ 925,392 $ 891,413
Net income per share-basic $ 0.44 $ 0.42
Net income per share-diluted $ 0.44 $ 0.42
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This discussion is intended to present a review of the major
factors affecting the financial condition and results of operations of the
Company as of March 31, 2006, and disclose and expand on material changes from
prior periods.
SUMMARY
The Company reported net income of approximately $925 thousand
($0.44 basic and $0.44 diluted earnings per share) for the three months ended
March 31, 2006, compared to $891 thousand ($0.42 basic and $0.42 diluted
earnings per share) for the three months ended March 31, 2005.
Included in the first quarter results of 2005 was a one-time
adjustment to tax expense for previous entries to establish a tax asset in
regards to the Company's Bank Owned Life Insurance. After determining that the
Company would likely not cancel the policies, a tax reserve became unnecessary.
Excluding this one-time adjustment of $124 thousand, the Company's net income
increased 20.6% instead of the current 3.8% from the first quarter of 2005 to
the first quarter of 2006.
Total assets decreased $6.4 million to $382.8 million at March 31,
2006, from $389.3 million at December 31, 2005. Expected pay-downs in the loan
portfolio during the first quarter of 2006 lowered net loan balances to
approximately $232 million at March 31, 2006, from approximately $243 million at
year-end. This decrease in loans along with the re-directing of cash flows from
the investment portfolio to pay down overnight advances from the FHLB
contributed to the decline in total assets for the period. While assets
declined, cash and due from banks increased during this same period from $9.8
million to $17.9 million as cash accumulated due to the remaining borrowed funds
from the FHLB were term advances with the earliest maturities in May 2006.
Available-for-sale investment securities decreased $3.9 million to $74.4 million
while the held-to-maturity portfolio fell $92 thousand to $37.9 million as
management refrained from purchasing additional securities during the first
quarter of 2006 because it was not satisfied with the rates of return offered in
the market. Other real estate owned decreased $24 thousand to $1.4 million since
year end. Deposits increased $6.2 million from December 31, 2005, to $263.6
million at March 31, 2006, while borrowings decreased $12.8 million to $79.4
million over the same period. Total stockholders' equity increased $314 thousand
to $31.6 million at March 31, 2006. Earnings of $925 thousand and additional
capital of $16 thousand received by the Company upon the exercise of employee
stock options for an aggregate of 770 shares the first quarter of 2006 were
offset by $381 thousand in dividends paid and additional unrealized losses of
$231 and $15 thousand in the available-for-sale investment portfolio and
off-balance sheet derivatives, respectively.
Financial Condition
Assets
The Company's total assets decreased $6.4 million from $389.3
million at December 31, 2005, to $382.8 million at March 31, 2006. The Company's
investment portfolio fell $4.4 million to $117.4 million while net loan
balances, excluding loans held for sale, declined $10.4 million from $242.5
million at December 31, 2005, to $232.1 million at March 31, 2006.
Investment Securities
The Company's investment portfolio at March 31, 2006, consisted of
mortgage-backed, municipal, and agency securities. Investment securities that
are deemed to be held-to-maturity ("HTM") are accounted for by the amortized
cost method while securities in the available-for-sale ("AFS") category are
accounted for at fair value.
Management determines the classification of its securities at
acquisition. Total HTM and AFS investment securities decreased $4.0 million to
$112.3 million as cash flows from such securities for the first quarter of 2006
were used to pay down borrowed funds rather than being reinvested in the market
as the returns on investment securities have become less attractive in the
current interest rate environment. Equity securities decreased $372 thousand to
$5.1 million from December 31, 2005, to March 31, 2006, due primarily to a
mandatory redemption of FHLB stock by the Company as a result of the recent
modification made by the FHLB of the minimum investment requirement for their
members. At March 31, 2006, equity securities were comprised primarily of
Federal Reserve Bank stock of $522 thousand, FHLB stock of $4.3 million and ECD
Investments, LLC ("ECD") membership interests of $100 thousand. ECD is a vehicle
through which banks, individuals and other institutions can participate in
economic and business development activities in economically depressed regions
of the country, in this instance, the states of Arkansas, Louisiana and
Mississippi.
The amortized cost of the Bank's investment securities, including
HTM and AFS securities, at March 31, 2006, and December 31, 2005, are summarized
in Table 1.
TABLE 1: COMPOSITION OF INVESTMENT PORTFOLIO (Amortized Cost)
03/31/06 12/31/05
--------------- ---------------
Mortgage-Backed Securities $ 72,770,405 $ 76,496,343
Agencies Obligations 6,495,201 6,495,545
Obligations of State and
Political Subdivisions 34,998,442 34,904,765
============== ===============
$ 114,264,048 $ 117,896,653
============== ===============
Loans
Net loans held to maturity fell $10.4 million to $232.1 million at
March 31, 2006, from $242.5 million at December 31, 2005. Loan balances
decreased primarily from expected paydowns by bank customers who had contracted
to complete jobs to repair damage caused by Hurricane Katrina. These customers
quickly moved from a borrower to depositor status as they were paid for their
hurricane related contract work. The Company, however, believes that its loan
pipeline indicates strong demand for the remainder of the year in all three
Company markets (Baton Rouge, Louisiana, and Natchez and Vicksburg,
Mississippi). At the same time, the Company has reduced the mortgage loans held
with terms of less than 15 years now selling these loans in the secondary
market. The percentage of net loans, excluding loans held for sale, to total
assets decreased to 60.6% at March 31, 2006, compared to 62.3% at December 31,
2005. The net loan to deposit ratio was 88.1% at March 31, 2006, compared to
94.2% at year-end
Table 2 presents the Bank's loan portfolio composition at March 31,
2006, and December 31, 2005.
TABLE 2: COMPOSITION OF LOAN PORTFOLIO (including loans held for sale)
03/31/06 12/31/05
-------------- --------------
Commercial, financial & agricultural $ 29,900,000 $ 32,868,000
Real estate-construction 31,713,000 30,069,000
Real estate-1-4 family residential 85,614,000 94,126,000
Real estate-other 75,278,000 75,237,000
Installment 11,825,000 12,478,000
Other 180,000 306,000
-------------- --------------
Total loans $ 234,510,000 $ 245,084,000
============== ==============
The Company's loan portfolio at March 31, 2006, had no significant
concentrations of loans other than in the categories presented in the table
above.
Bank Premises
There have been no material changes in the Company's premises since
the year-end.
Asset Quality
The Bank's asset quality improved in the first quarter as compared
to year-end. Nonperforming assets, including non-accrual loans, other real
estate and loans 90 days or more delinquent, decreased $347 thousand to $2.4
million at March 31, 2006, from $2.7 million at year-end. The decrease is mainly
due to lower balances in non-accrual loans. The Bank's nonperforming loan ratio
decreased as well to .40% at March 31, 2006, from .51% at December 31, 2005. A
breakdown of nonperforming assets at March 31, 2006, and December 31, 2005, is
shown in Table 3.
TABLE 3: BREAKDOWN OF NONPERFORMING ASSETS
03/31/06 12/31/05
----------- ----------
(dollars in thousands)
Non-accrual loans by type:
Real estate $ 300 $ 413
Installment 54 72
Commercial and all other loans 312 574
---------- ----------
Total non-accrual loans 666 1,059
Loans past due 90 days or more 271 201
---------- ----------
Total nonperforming loans 937 1,260
Other real estate owned (net) 1,447 1,471
---------- ----------
Total nonperforming assets $ 2,384 $ 2,731
========== ==========
Nonperforming loans as a percent
of loans, net of unearned interest
and loans held for sale .40% .51%
========== ==========
Allowance for Possible Loan Losses
The allowance for loan losses is established as losses are
estimated through a provision for loan losses charged against operations and is
maintained at a level that management considers adequate to absorb losses in the
loan portfolio. The allowance is subject to change as management re-evaluates
the adequacy of the allowance on a quarterly basis. Management's judgment in
determining the adequacy of the allowance is inherently subjective and is based
on the evaluation of individual loans, the known and inherent risk
characteristics and size of the loan portfolios, the assessment of current
economic and real estate market conditions, estimates of the current value of
underlying collateral, past loan loss experience, review of regulatory authority
examination reports and evaluations of specific loans and other relevant
factors. The Bank risk rates each loan at the initiation of the transaction and
risk ratings are reviewed and changed, when necessary, during the life of the
loan.
The allowance consists of specific, general and unallocated
components. The specific component relates to loans that are considered
impaired. Loan loss reserve factors are multiplied against the balances in each
risk rating category to arrive at the appropriate level of the specific
component of the allowance. Loans assigned higher risk ratings are monitored
more closely by management. The general component of the allowance for loan
losses groups loans with similar characteristics; the level of the general
component is a percentage of the balance of these loans. The percentage is based
upon historical losses and the inherent risks within each category. The
unallocated portion of the allowance reflects management's estimate of probable
but undetected losses inherent in the portfolio; such estimates are influenced
by uncertainties in economic conditions, delays in obtaining information,
including unfavorable information about a borrower's financial condition,
difficulty in identifying triggering events that correlate to subsequent loss
rates, and risk factors that have not yet manifested themselves in loss
allocation factors. The methodology for determining the adequacy of the
allowance for loan losses is consistently applied; however, revisions may be
made to the methodology and assumptions based on historical information related
to charge-off and recovery experience and management's evaluation of the current
loan portfolio.
Based upon this evaluation, management believes the allowance for
loan losses of $2.4 million at March 31, 2006, which represents 1.03% of gross
loans held to maturity, is adequate, under prevailing economic conditions, to
absorb probable losses on existing loans. At March 31, 2006, total reserves
included specific reserves of $699 thousand, general reserves of $956 thousand
and unallocated reserves of $745 thousand. At December 31, 2005, the allowance
for loan loss was $2.4 million or .97% of gross loans held to maturity.
Provision for Possible Loan Losses
The provision for possible loan losses is a charge to earnings to
maintain the allowance for possible loan losses at a level consistent with
management's assessment of the loan portfolio in light of current and expected
economic conditions. The Company's regular review of the allowance is an effort
to maintain it at an adequate level and make a proper provision expense to
earnings.
Table 4 details allowance activity for the three months ended March
31, 2006 and 2005:
TABLE 4: ACTIVITY OF ALLOWANCE FOR POSSIBLE LOAN LOSSES
03/31/06 03/31/05
------------- -------------
(dollars in thousands)
Balance at beginning of period $ 2,378 $ 2,237
Charge-offs:
Real Estate (8) (3)
Commercial (10) (8)
Installment and other (26) (16)
Recoveries:
Real Estate 21 0
Commercial 5 5
Installment and other 4 3
---------- -----------
Net (charge-offs)/recoveries (14) (19)
Provision charged to operations 60 90
---------- -----------
Balance at end of period $ 2,424 $ 2,308
========== ===========
Allowance for loan losses as a percent of
loans, net of unearned interest & loans
held for sale 1.03% 1.01%
========== ===========
Net charge-offs as a percent of average loans .01% .01%
========== ===========
Potential Problem Loans
At March 31, 2006, the Company had no loans, other than those
balances incorporated in tables 3 and 4 above, which management had significant
doubts as to the ability of the borrower to comply with current repayment terms.
Deposits
Total deposits increased $6.2 million from $257.4 million at
December 31, 2005, to $263.6 million at March 31, 2006. The increase in total
deposits is due primarily to an increase in what the Company considers its core
deposits, primarily money market and savings accounts. The Company feels that
depositors moved to these shorter-term more liquid accounts while waiting for
interest rates to move higher. The Company believes these accounts will shift
from overnight to time deposits at some point to lock in a higher rate as the
market expectation is for lower rates after 2006.
TABLE 5: COMPOSITION OF DEPOSITS
03/31/06 12/31/05
----------------- -----------------
Non-Interest Bearing $ 51,201,873 $ 51,466,230
NOW Accounts 23,770,158 23,016,487
Money Market Deposit Accounts 37,918,545 36,516,395
Savings Accounts 26,471,689 23,032,910
Certificates of Deposit 124,207,613 123,344,888
----------------- -----------------
Total Deposits $ 263,569,878 $ 257,376,910
================= =================
Borrowings
Total Bank borrowings, including FHLB advances and customer
repurchase agreements, decreased $12.8 million from $92.2 million at December
31, 2005, to $79.4 million at March 31, 2006. The Company used the cash flows
generated from the investment portfolio and deposit increases to reduce the
borrowed position.
Capital
Stockholders' equity totaled $31.6 million at March 31, 2006,
compared to $31.3 million at December 31, 2005. Earnings of $925 thousand and
additional capital of $16 thousand received by the Company upon exercise of
employee stock options for an aggregate of 770 shares in the first quarter of
2006 were offset by $381 thousand, or $0.18 per share in dividends paid and
additional losses of $231 and $15 thousand from unrealized losses in the
available-for-sale investment portfolio and off-balance sheet derivatives,
respectively. Losses in the AFS investment portfolio and off-balance sheet
derivatives, included in comprehensive income, are considered declines due to
interest rates and are therefore a temporary impairment of the security.
Components of comprehensive income are excluded from the
calculation of capital ratios. The Company maintained a total capital to risk
weighted assets ratio of 14.80%, a Tier 1 capital to risk weighted assets ratio
of 13.89% and a leverage ratio of 9.73% at March 31, 2006. These levels
substantially exceed the minimum requirements of bank regulatory agencies for
well-capitalized institutions of 10.00%, 6.00% and 5.00% respectively. The ratio
of shareholders' equity to assets increased to 8.2% at March 31, 2006, compared
to 8.0% at December 31, 2005.
Off-Balance Sheet Arrangements
There have been no significant changes in the Company's off-balance
sheet arrangements during the three months ended March 31, 2006. See Note B and
Note E to the Company's consolidated financial statements for a description of
the Company's off-balance sheet arrangements.
Contractual Obligations
There have been no material changes outside the ordinary course of
the Company's business in the contractual obligations set forth in the Company's
Annual Report on Form 10-K for the year ended December 31, 2005.
Results of Operations
Net Income
Net income for the three months ended March 31, 2006, increased $34
thousand to $925 thousand, or $0.44 per diluted share, compared to $891
thousand, or $0.42 per diluted share for the same period in 2005. The increase
from period to period would have been $158 thousand had it not been for a
one-time tax adjustment of $124 thousand related to the Company's bank owned
life insurance in the first quarter of 2005. The increase in net income was in
large part due to lower expenses particularly in the area of salaries and
employee benefits. Returns on both average assets and average equity increased
to .97% and 11.73% at March 31, 2006, respectively, from .83% and 10.30% at
December 31, 2005, respectively.
Net Interest Income and Net Interest Margin
One of the largest components of the Company's earnings is net
interest income, which is the difference between the interest and fees earned on
loans and investments and the interest paid for deposits and borrowed funds. The
net interest margin is net interest income expressed as a percentage of average
earning assets.
Comparing the three month period ended March 31, 2006, to the same
period in 2005, net interest income increased $61 thousand to $3.4 million. An
increase in average loan volumes was offset by a decrease in the investment
securities portfolio. As a result, the Company's average total assets decreased
slightly by $2.4 million from the first quarter of 2005 to the first quarter of
2006. Average assets declined from $383.2 million at March 31, 2005, to $380.8
million at March 31, 2006. The value of the investment portfolio declined as
cash flows generated by investments were used to pay down borrowed funds, which
contributed positively to net interest income. The decreased funding costs
generated by the lower balances of borrowed funds, however, were substantially
offset by higher interest rates paid on costing liabilities during the first
quarter of 2006. The higher rate environment moved yields on average earning
assets higher by 70 bps for the comparative periods while funding costs
increased 77 bps. Annualized net interest margin was 3.75% for the three months
ended March 31, 2006, an increase over the 3.64% for the same period in 2005.
The Company expects additional short-term interest rate increases in 2006 which
will add additional pressure on net interest margin during the year. However,
management believes that the decline in the Company's net interest margin seen
during 2005 has slowed materially and any pressure from anticipated interest
rate increases should be more than offset by average loan growth in the final
three quarters of 2006.
Non-Interest Income
Non-interest income includes service charges on deposit accounts,
income from fiduciary and brokerage activities, gains from the sale of mortgage
loans and other revenue not derived from interest on earning assets.
Non-interest income for the three months ended March 31, 2006, increased $6
thousand over the same period in 2005. Included in this increase was a one-time
adjustment of $33 thousand to the Company's deferred compensation plan due to
the resignation of a senior employee. Increases in service charges on deposit
accounts were offset by lower gains on sale of mortgage loans. The Company's
mortgage loan department generates loans for the secondary market and recorded
gains of $85 thousand on $8.3 million in sales of mortgage loans during the
first quarter of 2006 compared to gains of $95 thousand on sales of $8.0 million
in 2005.
Non-Interest Expense
Non-interest expense includes salaries and benefits, occupancy,
equipment, audit and other operating expenses. Non-interest expenses for the
three months ended March 31, 2006, were $2.7 million compared to $2.8 million
for the same period in 2005. As was discussed earlier, lower salaries and
benefits were the primary contributor to the decrease in non-interest expense.
Income Taxes
The Company recorded income tax expense of $317 thousand for the
three months ended March 31, 2006, compared to $100 thousand for the same period
in 2005. The increase is a result of a one-time adjustment to tax expenses in
2005 previously explained in the summary section.
Liquidity and Capital Resources
The Company utilizes a funds management process to assist
management in maintaining net interest income during times of rising or falling
interest rates and in maintaining sufficient liquidity. Principal sources of
liquidity for the Company are asset cash flows, customer deposits and the
ability to borrow against investment securities and loans. Secondary sources of
liquidity include the sale of investment and loan assets. All components of
liquidity are reviewed and analyzed on a monthly basis.
The Company has established a liquidity contingency plan to guide
the Bank in the event of a liquidity crisis. The plan describes the normal
operating environment, prioritizes funding options and outlines management
responsibilities and board notification procedures.
The Company's cash and cash equivalents increased $8.0 million to
$17.9 million at March 31, 2006, from $9.8 million at December 31, 2005. Cash
provided by operating and investing activities during the first quarter of 2006
was $1.6 million and $13.6 million, respectively, while financing activities
used $7.2 million. Investing activities include a net decrease in loans of $10.5
million along with the purchase of $613 thousand of investment securities,
offset by pay downs of $4.2 million.
At March 31, 2006, the Company had unsecured federal funds lines
with correspondent banks of $40 million and maintained the ability to draw on
its available line of credit with the FHLB in the amount of approximately $43
million. In addition to these lines of credit, the bank had approximately $65
million in unencumbered investment securities available for collateralized
borrowing. Management believes it maintains adequate liquidity for the Company's
current needs.
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 (including this Report) 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 market conditions, availability or cost of capital, employee workforce
factors, costs 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk reflects the potential risk of economic loss that would
result from adverse changes in interest rates and market prices. The risk is
usually seen in either reduced market value of financial assets or reduced net
interest income in future periods. The Company does not participate in some of
the financial instruments that are inherently subject to substantial market
risk.
The Company utilizes an asset/liability committee comprised of three
outside directors, the Bank's Chief Executive Officer and its Chief Financial
Officer, who acts as chairman of the committee. The committee meets monthly and
its primary responsibility is the management of the assets and liabilities of
the Bank to produce a stable and evenly rising flow of net interest income, an
appropriate level of capital and a level of liquidity adequate to respond to the
needs of depositors and borrowers and to earnings' enhancement opportunities.
The committee manages the interest rate risk inherent in the loan, investment,
deposit and borrowed funds portfolios. Further, the committee manages the risk
profile of the Company and determines strategies to maintain interest rate
sensitivity at a low level.
Annually, an economic value of equity analysis is performed to
determine the sensitivity of capital associated with interest rate changes. The
analysis showed that, at December 31, 2005, in a falling rate scenario where
rates moved down by 200 basis points, net portfolio value would decline by less
than 5%. The committee as reported to the Board of Directors agreed that this
was well within acceptable limits.
There have been no significant changes in the Company's market risk
position since December 31, 2005.
Item 4. Controls and Procedures
As of the end of the period covered by this quarterly report on
Form 10-Q, the Company carried out an evaluation, under the supervision and with
the participation of our principal executive officer and principal financial
officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) under
the Securities Exchange Act of 1934, as amended. Based on this evaluation, our
principal executive officer and principal financial officer concluded that our
disclosure controls and procedures are effective in timely alerting them to
material information required to be included in our periodic SEC reports. There
has been no change in the Company's internal control over financial reporting
that occurred during the Company's most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1A. Risk Factors
Information regarding risk factors appears in Part I, Item 1A,
"Risk Factors," of the Company's Annual Report on Form 10-K for the year ended
December 31, 2005. There have been no material changes in the risk factors
previously disclosed in our Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Company's ability to pay dividends to its shareholders is
substantially dependent on the ability of the Bank to transfer funds to the
Company in the form of dividends, loans and advances. Federal law imposes
limitations on the payment of dividends by national banks. Under federal law,
the directors of a national bank, after making proper deduction for all expenses
and other deductions required by the Comptroller of the Currency, may credit net
profits to the bank's undivided profits account and may declare a dividend from
that account of so much of the net profits as they judge expedient. The
Comptroller and the Federal Reserve Board have each indicated that banking
organizations should generally pay dividends only out of current operating
earnings. The Bank's ability to pay dividends to the Company is also limited by
prudence, statutory and regulatory guidelines and a variety of other factors. At
March 31, 2006, retained earnings available for payment of cash dividends under
applicable dividend regulations exceed $4.4 million.
Certain restrictions also exist on the ability of the Bank to
transfer such funds to the Company in the form of loans. Federal Reserve
regulations limit the amount the Bank may loan to the Company unless such loans
are collateralized by specific obligations. At March 31, 2006, the maximum
amount available for transfer from the Bank to the Company in the form of loans
on a secured basis was $2.1 million. There were no loans outstanding from the
Bank to the Company at March 31, 2006.
Item 6. Exhibits
Exhibit Description of Exhibit
3.1 Restated Articles of Incorporation of Britton & Koontz Capital
Corporation, incorporated by reference to Exhibit 4.1 to
Registrant's Registration Statement on Form S-8, Registration No.
333-20631, filed with the Securities and Exchange Commission on
January 29, 1997. *
3.2 By-Laws of Britton & Koontz Capital Corporation, as amended and
restated, incorporated by reference to Exhibit 3.2 to Registrant's
Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 27, 2006. *
4.1 Shareholder Rights Agreement dated June 1, 1996, between Britton &
Koontz Capital Corporation and Britton & Koontz First National
Bank, as Rights Agent, incorporated by reference to Exhibit 4.3 to
Registrant's Registration Statement on Form S-8, Registration No.
333-20631, filed with the Commission on January 29, 1997. *
31.1 Certifications of the Chief Executive Officer, as required pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certifications of the Chief Financial Officer, as required pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certifications of the Chief Executive Officer, as required pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certifications of the Chief Financial Officer, as required pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
* As indicated in the column entitled "Description of Exhibits" this
exhibit is incorporated by reference to another filing or document.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRITTON & KOONTZ CAPITAL CORPORATION
Date: May 12, 2006 /s/ W. Page Ogden
------------------------------------------
W. Page Ogden
Chief Executive Officer
Date: May 12, 2006 /s/ William M. Salters
------------------------------------------
William M. Salters
Chief Financial Officer
EXHIBIT INDEX
Exhibit Description of Exhibit
31.1 Certifications of the Chief Executive Officer, as required pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certifications of the Chief Financial Officer, as required pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certifications of the Chief Executive Officer, as required pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certifications of the Chief Financial Officer, as required pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
EXHIBIT 31.1
SECTION 302 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, W. Page Ogden, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Britton &
Koontz Capital Corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by the report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: May 12, 2006 /s/ W. Page Ogden
-----------------------------
W. Page Ogden
Chief Executive Officer
EXHIBIT 31.2
SECTION 302 - CERTIFICATION OF CHIEF FINANCIAL OFFICER
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, William M. Salters, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Britton &
Koontz Capital Corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by the report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: May 12, 2006 /s/ William M. Salters
------------------------------
William M. Salters
Chief Financial Officer
EXHIBIT 32.1
SECTION 906 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER
EXHIBIT 32.1
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. ss. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Quarterly Report on Form 10-Q for the quarter
ended March 31, 2006, of Britton & Koontz Capital Corporation (the "Company"),
as filed with the Securities Exchange Commission on the date hereof (the
"Quarterly Report"), I, W. Page Ogden, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that:
(1) the Quarterly Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2) the information contained in the Quarterly Report fairly presents,
in all material respects, the financial condition and results of
operations of the Company.
Date: May 12, 2006
/s/ W. Page Ogden
------------------------------------
W. Page Ogden
Chief Executive Officer
EXHIBIT 32.2
SECTION 906 - CERTIFICATION OF CHIEF FINANCIAL OFFICER
EXHIBIT 32.2
Certification of Chief Financial Officer
Pursuant to 18 U.S.C. ss. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Quarterly Report on Form 10-Q for the quarter
ended March 31, 2006, of Britton & Koontz Capital Corporation (the "Company"),
as filed with the Securities Exchange Commission on the date hereof (the
"Quarterly Report"), I, William M. Salters, Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Quarterly Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2) the information contained in the Quarterly Report fairly presents,
in all material respects, the financial condition and results of
operations of the Company.
Date: May 12, 2006
/s/ William M. Salters
--------------------------------
William M. Salters
Chief Financial Officer