U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Under Section 13 Or 15(d) Of The Securities Exchange
Act Of 1934 For The Quarterly Period Ended September 30, 1996
[ ] Transition Report Pursuant To Section 13 Or 15(d) Of The Securities
Exchange Act Of 1934
Commission File Number 02-22606
BRITTON & KOONTZ CAPITAL CORPORATION
Mississippi 64-0665423
(State of Incorporation) (IRS Employer
Identification No.)
500 Main Street, Natchez, Mississippi 39120
Telephone: 601-445-5576
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X , No
441,072 Shares of Common Stock, Par Value $10.00, were issued and outstanding
as of October 1, 1996.
Transitional Small Business Disclosure Format: Yes , No X
BRITTON & KOONTZ CAPITAL CORPORATION
AND SUBSIDIARY
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets for September 30, 1996
and December 31, 1995
Consolidated Statements of Income for the Three Months and
the Nine Months Ended September 30, 1996 and September 30, 1995
Consolidated Statements of Stockholders' Equity
for the Nine Months Ended September 30, 1996 and
September 30, 1995
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1996 and September 30, 1995
Notes to the Consolidated Financial Statements
Item 2. Management's Discussion and Analysis or
Plan of Operation
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
September 30, December 31,
1996 1995
------------ ------------
ASSETS:
Cash and due from banks:
Non-interest bearing $ 3,532,876 $ 3,340,954
Interest bearing 251,260 1,361,539
------------ ------------
Total cash and due from banks 3,784,136 4,702,493
Federal funds sold 175,000 1,450,000
Investment securities:
Held-to-maturity(estimated market value of
$45,952,889 in 1996 and $47,181,462 in 1995) 46,237,459 46,794,280
Equity securities 1,211,850 1,198,950
Loans, less unearned income of $269,440 in 1996 and
$284,865 in 1995; and allowance for loan losses of
$685,156 in 1996 and $723,641 in 1995 94,129,744 91,998,966
Bank premises and equipment, net of accumulated
depreciation 3,702,185 3,569,586
Other real estate owned,less allowance for losses
of $0 in 1996 and $11,658 in 1995 63,250 258,536
Accrued interest receivable 1,356,696 1,137,337
Cash surrender value life insurance 627,328 599,646
Other assets 69,453 77,445
------------ ------------
Total Assets $151,357,101 $151,787,239
============ ============
LIABILITIES:
Deposits
Non-interest bearing 15,419,681 13,983,026
Interest bearing 112,498,586 114,584,214
------------ ------------
Total Deposits $127,918,267 $128,567,240
Securities sold under repurchase agreements 2,454,053 2,722,882
Federal funds purchased 0 0
Accrued Interest Payable 729,044 817,119
Negative Goodwill, net of accumulated amortization
of $1,462,550 in 1996 and $1,196,030 in 1995 1,597,872 1,864,392
Advances from borrowers for taxes & insurance 299,394 381,644
Accrued taxes and other liabilities 1,965,282 2,062,725
------------ ------------
Total Liabilities $134,963,912 $136,416,002
------------ ------------
STOCKHOLDERS EQUITY:
Common stock, $10 par value per share; 3,000,000
shares authorized; 441,072 shares issued and
outstanding in 1996 and 1995 4,410,720 4,410,720
Additional paid-in-capital 3,395,617 3,395,617
Retained earnings 8,586,852 7,564,900
------------ ------------
Total Stockholders' Equity $ 16,393,189 $ 15,371,237
------------ ------------
Total Liabilities and Stockholders' Equity $151,357,101 $151,787,239
============ ============
The accompanying notes are an integral part of these financial statements.
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1996 1995 1996 1995
__________ __________ __________ __________
Interest Income:
Interest and fees on loans $2,074,386 $1,974,897 $6,094,693 $5,560,228
Interest on investment securities
Taxable interest income 796,899 868,074 2,430,619 2,731,465
Exempt from federal taxes 19,609 17,340 57,737 52,332
Interest on federal funds sold 996 4,960 58,005 8,036
---------- --------- ---------- ----------
Total Interest Income $2,891,890 $2,865,271 $8,641,054 $8,352,061
---------- ---------- ---------- ----------
Interest Expense:
Interest on deposits $1,217,977 $1,296,224 $3,746,095 $3,616,533
Interest on federal funds purchase 34,281 5,296 34,515 22,315
Interest on securities sold under
repurchase agreements 34,333 34,897 110,358 205,914
---------- ---------- ---------- ----------
Total Interest expense $1,286,591 $1,336,417 $3,890,968 $3,844,762
---------- ---------- ---------- ----------
Net Interest Income $1,605,299 $1,528,854 $4,750,086 $4,507,299
Provision for loan losses 0 25,000 50,000 $75,000
---------- ---------- ---------- ----------
Net interest income after
Provision for loan Losses $1,605,299 $1,503,854 $4,700,086 $4,432,299
---------- ---------- ---------- ----------
Other Income:
Service charge on deposit accounts 167,917 161,661 480,622 461,160
Income from fiduciary activities 13,385 13,799 41,323 42,135
Insurance premiums and commissions 7,864 10,563 31,713 28,119
Gain/(loss) on sale of ORE 0 0 (7,086) (5,610)
Gain/(loss) on sale of mortgage loans 615 0 (399) 0
Gain on sale of premises & equipment 0 0 100 0
Amortization of negative goodwill 84,880 101,560 266,520 318,790
Valuation adjustment loans held for sale 0 0 0 56,248
Other 58,466 23,104 195,039 106,619
---------- ---------- ---------- ----------
Total other income $ 333,127 $ 310,687 $1,007,832 $1,007,461
---------- ---------- ---------- ----------
Other Expense
Salaries 601,838 473,581 1,629,188 1,458,420
Employee benefits 63,043 77,236 202,233 233,041
Net occupancy expense 90,035 80,168 261,216 247,814
Equipment expense 119,107 80,487 370,660 244,217
FDIC assessment 286,553 24,046 345,619 163,071
Stationery & supplies 31,462 22,494 95,020 73,797
Other real estate expense (1,442) 2,082 (6,053) 4,155
Other 269,923 227,260 787,062 637,967
---------- ---------- ---------- ----------
Total other expenses $1,460,519 $ 987,354 $3,684,945 $3,062,482
---------- ---------- ---------- ----------
Income Before Income Taxes 477,907 827,187 2,022,973 2,377,278
Income tax expense 155,607 255,939 648,163 763,872
---------- ---------- ---------- ----------
Net Income $ 322,300 $ 571,248 $1,374,810 $1,613,406
========== ========== ========== ==========
Net Income Per Share $0.73 $1.29 $3.10 $3.65
Weighted Average Shares Outstanding 442,194 442,342 442,831 441,835
The accompanying notes are an integral part of these financial statements
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30 1996 AND 1995
PAR RETAINED
# SHARES VALUE SURPLUS EARNINGS TOTAL
--------- ---------- ---------- ---------- -----------
Balance December 31, 1994 439,072 $4,390,720 $3,367,617 $6,272,097 $14,030,434
Net income for nine months
ended September 30, 1995 1,613,406 1,613,406
Cash dividend declared
$.75 per share (330,054) (330,054)
Capital stock issued 2,000 20,000 28,000 48,000
---------- ---------- ---------- ---------- -----------
Balance September 30, 1995 441,072 $4,410,720 $3,395,617 $7,555,449 $15,361,786
========== ========== ========== ========== ===========
Balance December 31, 1995 441,072 $4,410,720 $3,395,617 $7,564,900 $15,371,237
Net income for nine months
ended September 30, 1996 1,374,810 1,374,810
Cash dividend declared
$.80 per share (352,858) (352,858)
---------- ---------- ---------- ---------- -----------
Balance September 30, 1996 441,072 $4,410,720 $3,395,617 $8,586,852 $16,393,189
========== ========== ========== ========== ===========
The accompanying notes are an integral part of these financial statements
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER, 1996 AND 1995
1996 1995
----------- -----------
Operating activities
Net Income $ 1,374,810 $ 1,613,406
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Deferred taxes (30,683) (25,956)
Provision for loan losses 50,000 75,000
Provision for depreciation 226,068 192,955
(Gain) loss on sale of other real estate 7,086 5,610
(Gain) loss on sale of loans 399 0
Amortization of investment security premiums, net 62,306 65,984
Amortization of valuation adjustment on acquired loans 88,310 143,840
Amortization of valuation adjustment on acquired deposits (60,380) (77,030)
Amortization of negative goodwill (266,520) (318,790)
Net decrease in loans held for sale 0 485,641
(Increase) decrease in accrued interest receivable (219,359) (177,734)
(Increase) decrease in cash surrender value (27,682) (33,370)
(Increase) decrease in other assets 7,992 (74,262)
Increase (decrease) in accrued interest payable (88,075) 111,840
Increase (decrease) in advances from borrowers for
taxes and insurance (82,250) (58,281)
Increase (decrease) in other liabilities (66,760) (10,224)
------------ ------------
Net cash provided (used) by operating activities $ 975,262 $ 1,918,629
------------ ------------
Investing activities
Purchase of Federal Home Loan Bank Stock (42,100) (45,700)
Proceeds from sale of federal home loan bank stock 29,200 34,900
Purchases of investment securities 0 0
Proceeds from maturities and paydowns
of investment securities 494,515 8,869,505
(Increase) decrease in federal funds sold 1,275,000 0
Net increase in loans (2,327,737) (10,389,391)
Purchases of premises and equipment (358,667) (285,354)
Proceeds from sales of other real estate, net 246,450 49,390
------------ ------------
Net cash provided (used) by investing activities $ (683,339) $(1,766,650)
------------ ------------
Financing activities
Net increase (decrease) in customer deposits (588,593) 5,164,665
Net increase (decrease) in short term borrowings (268,829) (5,159,465)
Common stock issued 0 48,000
Cash dividends paid (352,858) (330,054)
------------ ------------
Net cash provided (used) by financing activities $(1,210,280) $ (276,854)
------------ ------------
Increase (decrease) in cash and cash equivalents (918,357) (124,875)
Cash and cash equivalents at beginning of period 4,702,493 4,223,402
Cash and cash equivalents at end of period $ 3,784,136 $ 4,098,527
============ ============
(Continued)
The accompanying notes are an integral part of these financial statements
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Continued)
1996 1995
---------- ----------
Supplemental disclosures:
Cash paid for:
Interest on deposits and other borrowing $3,979,043 $3,732,922
Income taxes $ 784,244 $ 839,261
Non-cash investing activities:
Transfers from loans to other real estate
owned acquired through foreclosure $ 35,065 $ 94,194
The accompanying notes are an integral part of these financial statements
BRITTON & KOONTZ CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
Presentation. The accompanying consolidated balance sheet as of December 31,
1995, has been derived from the audited financial statements of the Company
for the year then ended.
The accompanying consolidated financial statements as of September 30, 1996,
and for the three and nine month periods ending September 30 of 1996 and 1995,
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.
Nonperforming assets at September 30, 1996 and December 31, 1995, were
as follows:
09/30/96 12/31/95
---------- ----------
Nonaccrual loans $ 275,362 $ 299,501
Ninety days or more past due 355,097 204,738
---------- ----------
Total nonperforming loans $ 630,459 $ 504,239
Other real estate owned (net) 63,930 258,536
---------- ----------
Total nonperforming assets $ 694,389 $ 762,775
========== ==========
Nonperforming loans as a
percent of loans, net of
unearned interest and loans
held for sale .66% .54%
The following table reflects the transactions in the allowance for loan losses
for the nine month periods ended September 30, 1996 and 1995:
1996 1995
--------- ---------
Balance at beginning of year $ 723,641 $ 750,523
Provision charged to operations 50,000 75,000
Charge offs (102,403) (159,229)
Recoveries 13,918 36,334
---------- ----------
Net recoveries (charge offs) $ (88,485) $(122,895)
Balance at end of period $ 685,156 $ 702,628
========== ==========
Allowance for loan losses as a
percent of loans, net of unearned
interest and loans held for sale .72% .75%
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
This discussion is intended to supplement the consolidated financial
statements, expand on material changes in financial condition since year end
and to compare the operating results for the nine months ended September 30,
1996, to the same period in 1995.
Financial Condition
Total assets were $151.4 million at September 30, 1996, compared to
$151.8 million at year end 1995.
Total loans, net of unearned interest and allowance for losses,
increased $2.13 million from $92.0 million at December 31, 1995, to $94.1
million at September 30, 1996.
Nonperforming loans at September 30, 1996, were $630 thousand compared
to $504 thousand at December 31, 1995. The breakdown of nonperforming loans
at September 30, 1996 were nonaccrual loans of $275 thousand and loans past
due ninety days or more of $355 thousand compared to $300 thousand and $205
thousand respectively at December 31, 1995. Nonperforming loans as a percent
of loans, net of unearned income, was .66% at September 30, 1996, as compared
to .54% at December 31, 1995. The increase in ninety days or more past due of
$150 thousand is primarily related to delinquencies in residential mortgages.
The allowance for possible loan losses was $685 thousand at September
30, 1996, compared to $703 thousand at September 30, 1995. The ratio of the
allowance for possible loan losses to loans, net of unearned income and loans
held for sale, remained stable at .72% at September 30, 1996, as compared to
.75% at September 30, 1995. Management regularly reviews the level of the
allowance for possible loan losses and is of the opinion that it is adequate
at September 30, 1996. Net chargeoffs decreased for the first nine months of
1996 to $88 thousand as compared to $123 thousand for the same period in 1995.
Other real estate decreased to $64 thousand compared to $259 thousand
at December 31, 1995, due to the sale of property obtained with the acquisition
of Natchez First Federal Savings Bank in 1993.
Management determines the classification of its securities at
acquisition. Securities that are deemed to be held to maturity are accounted
for by the amortized cost method. These securities decreased $.6 million to
$46.2 million at September 30, 1996, as compared to $46.8 million at December
31, 1995. Equity securities at September 30, 1996, comprised of Federal
Reserve Bank Stock of $239 thousand and Federal Home Loan Bank Stock of $972
thousand remained stable. There were no securities held for sale at either
period.
The Company's cash and cash equivalents decreased to $3.8 million at
September 30, 1996, compared to $4.7 million at December 31, 1995. Cash
provided by operating activities increased by $1.0 million while investing and
financing activities used $.7 million and $1.2 million respectively.
Deposits decreased to $127.9 million at September 30, 1996, compared
to $128.6 million at December 31, 1995.
Stockholders' equity increased to $16.4 million at September 30, 1996,
compared to $15.4 million at the end of 1995. The ratio of Stockholders'
equity to assets increased to 10.83% at September 30, 1996, compared to 10.13%
at the end of 1995, due to growth in retained earnings.
The Company maintained a Tier 1 capital to risk weighted assets ratio
at September 30, 1996, of 19.09%, a total capital to risk weighted assets ratio
of 19.89% and a leverage ratio of 10.74%. These levels exceed the minimum
requirements of the regulatory agencies of 4.00%, 8.00% and 3.00%
respectively.
Results of Operations
First nine months of 1996 Compared to the First nine months of 1995
Net income through September 30, 1996 was $1.37 million compared to
$1.61 million for the same period in 1995. Earnings per share decreased to
$3.10 per share for the first nine months of 1996 compared to $3.65 per share
for the same period in 1995. These decreases were primarily the result of one-
time expenses such as an additional FDIC assessment of $257 thousand to
recapitalize the SAIF fund, compensation to executive management of $84
thousand to buy back existing stock options, and $40 thousand for legal fees
related to the adoption of a Long-Term Incentive Plan, Shareholder Rights
Agreement and other corporate matters. In addition, the bank has invested $75
thousand in the acquisition of electronic banking capabilities during the
first nine months of 1996. Accounting guidelines provide that the majority of
this expense be charged against current income and not capitalized. Management
of the bank believes that the ability of the bank to expand its market and
compete successfully in the future will depend upon its ability to provide
customers with an electronic method to conduct all or some of their banking
business. These one-time expenses in 1996 were offset by an increase of $243
thousand in net interest income.
The returns on average assets and average equity for the first three
quarters of 1996 were 1.20% and 11.40%, respectively, while the returns were
1.42% and 14.55%, respectively, for the comparable period in 1995.
Net interest income for the period ended September 30, 1996 was $4.75
million, an increase of 5.4%, from $4.51 million over the same period in 1995.
This is attributed primarily to the increase in the company's volume of
average earning assets by $741 thousand along with a decrease in average
interest-bearing liabilities of $667 thousand. The increase in average
earning assets produced a greater effect on net interest income than did the
decrease in average interest-bearing liabilities due to the shift from lower
yielding investment securities, created through maturities, to higher yielding
loans. This move helped the interest spread, the difference between the yield
on interest-earning assets and the rate paid on interest-bearing liabilities,
increase from 3.39% in 1995 to 3.54% in 1996 further enhancing the net
interest income.
As a result of management's continuing assessment of the allowance
for loan losses, the company determined that the current level of $685 thousand
was adequate. The provision added for the three quarters ended September 30,
1996 was $50 thousand as compared to $75 thousand for the same period in 1995.
Other income remained stable at $1.0 million for the nine months ended
September 30, 1996.
Other operating expenses for the nine months ended September 30, 1996
were $3.69 million, an increase of $622 thousand or 20.3% compared to the same
period in 1995. $257 thousand of this increase is related to a one-time FDIC
assessment to recapitalize the SAIF fund. The remaining increase of $365
thousand is primarily the result of expenses related to electronic banking and
increases in salaries and employee benefits along with an increase in legal
fees in relation to the adoption of a Long-Term Incentive Plan and Shareholder
Rights Agreement. The company also showed a gain of $56 thousand for the nine
months ended September 30, 1995 on the valuation of loans held for sale.
The combination of all the above factors produced a pretax income of
$2,023 thousand for the nine months ended September 30, 1996, as compared to
$2,377 thousand for the same period in 1995. Income taxes for the nine months
ended September 30, 1996, were $648 thousand as compared to $764 thousand for
the same period in 1995.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Statement Regarding Computation of Per Share Earnings
20 Other Documents or Statements to Security Holders
(b) Reports on Form 8-K
None.
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 thereto duly authorized.
BRITTON & KOONTZ CAPITAL CORPORATION
November 13, 1996 /s/ W. Page Ogden
W. Page Ogden
President and Chief Executive
Officer
November 13, 1996 /s/ Bazile R. Lanneau, Jr.
Bazile R. Lanneau, Jr.
Vice President and
Chief Financial Officer
EXHIBIT INDEX
-------------
Exhibit
Number Item
- ------- ----
11 Statement Regarding Computation of Per Share Earnings
20 Other Documents or Statements to Security Holders