----

| **UNITED                  STATES**                                                                                                              |
|-------------------------------------------------------------------------------------------------------------------------------------------------|
| **SECURITIES                  AND EXCHANGE COMMISSION**                                                                                         |
| **Washington,                  D.C. 20549**                                                                                                     |
|  **FORM                  10-K**                                                                                                       |
|                                                                                                                                            |
| [X]                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)                  OF THE SECURITIES EXCHANGE ACT OF 1934                      |
|                                                                                                                                            |
| For                  the fiscal year ended December 31, 2006                                                                                    |
|                                                                                                                                            |
| [                  ]                  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES                  EXCHANGE ACT OF 1934 |
|                                                                                                                                            |
| 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 incorporation or organization) | I.R.S.                  Employer Identification No. |
|                                                                            |                                                |

|                                                                                         |
|----------------------------------------------------------------------------------------------|
| 500                  Main Street                                                             |
| Natchez,                  Mississippi 39120                                                  |
| (Address                  of principal executive offices) (Zip Code)                         |
|                                                                                         |
| (601)                  445-5576                                                              |
| (Registrant’s                  Telephone Number, Including Area                  Code) |

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

| Title                  of each class                       | Common                  Stock, $2.50 Par Value |
|------------------------------------------------------------|------------------------------------------------|
| Name                  of each exchange on which registered | The                  NASDAQ Capital Market     |
|                                                       |                                           |

|                                                                                                   |
|--------------------------------------------------------------------------------------------------------|
| Securities                  registered pursuant to Section 12(g) of the Exchange                  Act: |
| **None**                                                                                               |

----

**DOCUMENTS        INCORPORATED BY REFERENCE**

----

CROSS

|                      | **PART                  I**                                                                                                      |   |
|---------------------------|----------------------------------------------------------------------------------------------------------------------------------|--------|
| ITEM                  1.  | BUSINESS                                                                                                                         | *      |
| ITEM                  1A. | RISK                  FACTORS                                                                                                    | *      |
| ITEM                  1B. | UNRESOLVED                  STAFF COMMENTS                                                                                       | *      |
| ITEM                  2.  | PROPERTIES                                                                                                                       | *      |
| ITEM                  3.  | LEGAL                  PROCEEDINGS                                                                                               | *      |
| ITEM                  4.  | SUBMISSION                  OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                             | *      |
|                      |                                                                                                                             |   |
|                      | **PART                  II**                                                                                                     |   |
| ITEM                  5.  | MARKET                  FOR REGISTRANT’S COMMON EQUITY, RELATED                                                            |   |
|                      | STOCKHOLDER                  MATTERS AND ISSUER PURCHASES OF EQUITY                                                              |   |
|                      | SECURITIES                                                                                                                       | *      |
| ITEM                  6.  | SELECTED                  FINANCIAL DATA                                                                                         | *      |
| ITEM                  7.  | MANAGEMENT’S                  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF                  OPERATIONS    | *      |
| ITEM                  7A. | QUANTITATIVE                  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                      | *      |
| ITEM                  8.  | FINANCIAL                  STATEMENTS AND SUPPLEMENTARY DATA                                                                     | *      |
| ITEM                  9.  | CHANGES                  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL                  DISCLOSURE           | *      |
| ITEM                  9A. | CONTROLS                  AND PROCEDURES.                                                                                        | *      |
| ITEM                  9B. | OTHER                  INFORMATION                                                                                               | *      |
|                      |                                                                                                                             |   |
|                      | **PART                  III**                                                                                                    |   |
| ITEM                  10. | DIRECTORS,                  EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                          | **     |
| ITEM                  11. | EXECUTIVE                  COMPENSATION                                                                                          | **     |
| ITEM                  12  | SECURITY                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED                  STOCKHOLDER MATTERS | **     |
| ITEM                  13  | CERTAIN                  RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR                  INDEPENDENCE                      | **     |
| ITEM                  14. | PRINCIPAL                  ACCOUNTING FEES AND SERVICES                                                                          | **     |
|                      |                                                                                                                             |   |
|                      | **PART                  IV**                                                                                                     |   |
| ITEM                  15  | EXHIBITS,                  FINANCIAL STATEMENT SCHEDULES                                                                         | *      |

SIGNATURES

LIST      OF SUBSIDIARIES

CONSENT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING      FIRM

CERTIFICATION      OF CHIEF EXECUTIVE OFFICER AS REQUIRED PURSUANT      TO SECTION 302 OF THE SARBANES-OXLEY ACTOF 2002

CERTIFICATION        OF CHIEF FINANCIAL OFFICER AS REQUIRED PURSUANT        TO SECTION 302 OF THE SARBANES-OXLEY ACTOF 2002

CERTIFICATION          OF CHIEF EXECUTIVE OFFICER AS REQUIRED PURSUANT          TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION      OF CHIEF FINANCIAL OFFICER AS REQUIRED PURSUANT      TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

| ** | Incorporated                by reference from Britton & Koontz Capital Corporation’s Definitive                Proxy Statement for its 2007 Annual Meeting of Shareholders in accordance                with Instruction G(3) of Form 10-K. |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**PART      I**

**Item      1. Business.**

**General**

*The      Company*

----

*Table          of Contents*

*The      Bank*

----

*Table          of Contents*

*The      Insurance Agency*

*Investment      in Sumx*

**Competition**

----

*Table          of Contents*

**Employees**

** **

**Supervision      and Regulation**

*General*

----

*Table          of Contents*

*Interstate      Banking and Branching Legislation*

----

*Table          of Contents*

*Financial      Modernization*

*Anti-Money      Laundering*

----

*Table          of Contents*

*Further      Changes in Regulatory Requirements*

*Restrictions      on Dividends*

*Corporate      Governance*

----

*Table          of Contents*

**Item      1A. Risk Factors.**

**Risks      Related To Our Business and Industry**

*We      are subject to interest rate risk.*

*We      are subject to lending risk.*

----

*Table          of Contents*

*The      allowance for possible loan losses may be insufficient. *

*Bank      holding companies depend on the accuracy and completeness of information about      customers and counterparties.*

----

*Table          of Contents*

*We      are subject to environmental liability risk associated with lending      activities.*

*The      profitability of the Company depends significantly on economic conditions in      the      States of Mississippi and Louisiana.*

*The      earnings of bank holding companies are significantly affected by general      business and economic conditions.*

----

*Table          of Contents*

*We      operate in a highly competitive industry and market area.*

| ·                  | The                ability to develop, maintain and build upon long-term customer                relationships based on top quality service, high ethical standards                and                safe, sound assets. |
|----------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·                  | The                ability to expand the Company’s market                position. |
|----------------------------------------|------------------------------------------------------------------------------------------|

| ·                  | The                scope, relevance and pricing of products and services offered to                meet                customer needs and demands. |
|----------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·                  | The                rate at which we introduce new products and services relative to                our                competitors. |
|----------------------------------------|------------------------------------------------------------------------------------------------------------------------------------|

| ·                  | Customer                satisfaction with our level of                service. |
|----------------------------------------|--------------------------------------------------------------------------------|

| ·                  | Industry                and general economic trends. |
|----------------------------------------|------------------------------------------------------|

*We      are subject to extensive government regulation and      supervision.*

----

*Table          of Contents*

----

*Table          of Contents*

*Slower      than anticipated growth in new branches and new product and service offerings      could result in reduced income.*

*We      are substantially dependent on dividends from the Bank for our      revenues.*

*We      may not be able to attract and retain skilled people.*

----

*Table          of Contents*

*Consumers      may decide not to use banks to complete their financial      transactions.*

*Severe      weather, natural disasters, acts of war or terrorism and other external events      could significantly impact our business.*

**Risks      Associated With Our Common Stock**

*Our      stock price can be volatile.*

----

*Table          of Contents*

| ·                  | Actual                or anticipated variations in quarterly results of                operations. |
|----------------------------------------|----------------------------------------------------------------------------------------------------|

| ·                  | Recommendations                by securities analysts. |
|----------------------------------------|--------------------------------------------------------|

| ·                  | Operating                and stock price performance of other companies that investors deem                comparable to the Company. |
|----------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|

| ·                  | News                reports relating to trends, concerns and other issues in the banking                and                financial services industry. |
|----------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·                  | Perceptions                in the marketplace regarding us and/or our                competitors. |
|----------------------------------------|---------------------------------------------------------------------------------------------------|

| ·                  | New                technology used, or services offered, by                competitors. |
|----------------------------------------|-----------------------------------------------------------------------------------------|

| ·                  | Significant                acquisitions or business combinations, strategic partnerships, joint                ventures or capital commitments by or involving us or our                competitors. |
|----------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·                  | Failure                to integrate acquisitions or realize anticipated benefits from                acquisitions. |
|----------------------------------------|--------------------------------------------------------------------------------------------------------------------|

| ·                  | Changes                in government regulations. |
|----------------------------------------|---------------------------------------------------|

| ·                  | Geopolitical                conditions such as acts or threats of terrorism or military                conflicts. |
|----------------------------------------|-------------------------------------------------------------------------------------------------------------------|

*The      trading volume in our common stock is less than that of other larger bank      holding companies.*

*An      investment in our common stock is not an insured deposit.*

*Our      Restated Articles of Association and By-laws, our Shareholder Rights Plan,      as      well as certain banking laws, may have an anti-takeover      effect.*

----

*Table          of Contents*

**Item      1B. Unresolved Staff Comments.**

**Item      2. Properties.**

|  **Location**                                                                                 |  **Own/Lease** |  **Use**                            | **Approximate                Office****Space                (square feet)** |
|----------------------------------------------------------------------------------------------------|---------------------|------------------------------------------|-----------------------------------------------------------------------------|
|  **Natchez**                                                                                  |                |                                     |                                                                        |
| 500                Main StreetNatchez,                Mississippi                                  |  Owned         |  Main                Office         |  33,790                                                                |
| 411                Highway 61 N.Natchez,                Mississippi                                |  Owned         |  Branch                Office       |  1,671                                                                 |
| 55A                Sgt. Prentiss DriveNatchez,                Mississippi                          |  Owned         |  Branch                Office       |  10,720                                                                |
|                                                                                               |                |                                     |                                                                        |
| **Vicksburg**                                                                                      |                |                                     |                                                                        |
| 2059                Highway 61 N.Vicksburg,                Mississippi                             |  Owned         |  Branch                Office       |  3,050                                                                 |
| 2150                S. Frontage RoadVicksburg,                Mississippi                          |  Owned         |  Branch                Office       |  4,570                                                                 |
|                                                                                               |                |                                     |                                                                        |
| **Baton                Rouge**                                                                     |                |                                     |                                                                        |
| 8810                BluebonnetSuites                A & BBaton                Rouge, Louisiana |   Lease   |   Branch                Office |   5,112                                                           |

----

*Table          of Contents*

**Item      3. Legal Proceedings. **

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

**PART      II**

**Item      5. Market for Registrant’s Common Equity, Related Stockholder      Matters and Issuer Purchases of Equity Securities.**

**Information      Regarding our Common Stock**

|                       |   |                                      |   |           |   |          |   |
|----------------------------|--------|-------------------------------------------|--------|----------------|--------|---------------|--------|
|                       |   | **Dividends****Per                Share** |   |  **High** |   |  **Low** |   |
| 2006                       |   |                                      |   |           |   |          |   |
| 4th                Quarter |   | $                                         | .18    |           | $      | 20.95         |   | $ | 19.16 |   |
| 3rd                Quarter |   |                                      | .18    |           |   | 21.50         |   |   | 18.85 |   |
| 2nd                Quarter |   |                                      | .18    |           |   | 23.04         |   |   | 18.25 |   |
| 1st                Quarter |   |                                      | .18    |           |   | 24.00         |   |   | 19.89 |   |
|                       |   |                                      |   |           |   |          |   |   |   |   |
| 2005                       |   |                                      |   |           |   |          |   |   |   |   |
| 4th                Quarter |   | $                                         | .18    |           | $      | 21.48         |   | $ | 20.07 |   |
| 3rd                Quarter |   |                                      | .18    |           |   | 21.68         |   |   | 19.56 |   |
| 2nd                Quarter |   |                                      | .33    |           |   | 22.80         |   |   | 17.01 |   |
| 1st                Quarter |   |                                      |   |           |   | 19.50         |   |   | 17.70 |   |

** **

----

*Table          of Contents*

**Stock        Performance Graph**

|                                                          | **12/31/2001** | **12/31/2002** | **12/31/2003** | **12/31/2004** | **12/31/2005** | **12/31/2006** |
|---------------------------------------------------------------|----------------|----------------|----------------|----------------|----------------|----------------|
| **Britton                  & Koontz Capital Corporation** | 100.00         | 101.41         | 124.58         | 136.48         | 163.40         | 158.74         |
| **Nasdaq                  Composite**                         | 100.00         | 68.76          | 103.68         | 113.16         | 115.57         | 127.58         |
| **S&P                  500 Banks Index (1)**              | 100.00         | 98.97          | 125.34         | 143.42         | 141.38         | 164.17         |

| (1) | The                  companies in the S&P 500 Banks Index are: BB&T Corporation,                  Comerica Incorporated, Commerce Banc, New Jersey, Compass Bancshares,                  Inc., Countrywide Financial Corporation, Federal National Mortgage                  Association, Fifth Third Bancorp, First Horizon National Corporation,                  Federal Home Loan Mortgage Corporation, Huntington Bancshares                  Incorporated, Keycorp, M&T Bank Corporation, Marshall & Ilsley                  Corporation, MGIC Investment Corporation, National City Corporation,                  The                  PNC Financial Services Group, Inc., Regions Financial Corporation,                  Sovereign Bancorp, Inc., Suntrust Banks, Inc., Synovus Financial                  Corporation, U.S. Bancorp, Wachovia Corporation, Washington Mutual,                  Inc.,                  Wells Fargo & Company and Zions Bancorporation. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Table          of Contents*

**Item      6. Selected Financial Data. **

| ($                IN THOUSANDS, EXCEPT PER SHARE DATA)    |   |
|-----------------------------------------------------------|--------|
|                                                      |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |
| **YEAR                END ACTUAL BALANCES**               |   | 2006 |   | 2005 |   | 2004 |   | 2003 |   | 2002 |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |
| Total                Assets                               |   | $ | 369,318 |   | $ | 389,260 |   | $ | 377,351 |   | $ | 373,032 |   | $ | 308,879 |   |
| Investment                Securities                      |   |   | 107,370 |   |   | 121,783 |   |   | 137,303 |   |   | 141,135 |   |   | 97,059 |   |
| Gross                Loans (net of unearned income)       |   |   | 243,534 |   |   | 244,912 |   |   | 219,311 |   |   | 206,591 |   |   | 180,398 |   |
| Loans                held for sale                        |   |   | 55 |   |   | 171 |   |   | 1,688 |   |   | 3,102 |   |   | 4,393 |   |
| Allowance                for Loan Losses                  |   |   | 2,344 |   |   | 2,378 |   |   | 2,237 |   |   | 2,070 |   |   | 2,129 |   |
| Total                Deposits                             |   |   | 253,757 |   |   | 257,377 |   |   | 226,288 |   |   | 232,934 |   |   | 233,012 |   |
| Total                Long-Term Debt                       |   |   | 39,579 |   |   | 53,041 |   |   | 60,078 |   |   | 65,711 |   |   | 30,315 |   |
| Stockholders’                Equity                 |   |   | 33,597 |   |   | 31,260 |   |   | 31,152 |   |   | 30,197 |   |   | 29,329 |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **YEAR                END AVERAGE BALANCES**              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                Assets                               |   |   | 376,626 |   |   | 390,317 |   |   | 375,496 |   |   | 340,566 |   |   | 299,600 |   |
| Earning                Assets                             |   |   | 357,407 |   |   | 370,609 |   |   | 354,004 |   |   | 320,337 |   |   | 280,233 |   |
| Investment                Securities                      |   |   | 112,458 |   |   | 132,843 |   |   | 134,993 |   |   | 116,520 |   |   | 92,502 |   |
| Gross                Loans (net of unearned income)*      |   |   | 242,910 |   |   | 236,796 |   |   | 218,301 |   |   | 201,595 |   |   | 182,744 |   |
| Allowance                for Loan Losses                  |   |   | 2,444 |   |   | 2,379 |   |   | 2,224 |   |   | 2,209 |   |   | 2,008 |   |
| Total                Deposits                             |   |   | 255,713 |   |   | 236,440 |   |   | 230,437 |   |   | 237,019 |   |   | 220,095 |   |
| Total                Long-Term Debt                       |   |   | 46,241 |   |   | 70,760 |   |   | 67,665 |   |   | 44,359 |   |   | 34,088 |   |
| Stockholders’                Equity                 |   |   | 32,248 |   |   | 31,347 |   |   | 30,853 |   |   | 30,181 |   |   | 29,323 |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Includes                loans held for sale              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **SUMMARY                OF EARNINGS**                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                Interest Income                      |   |   | 23,708 |   |   | 22,000 |   |   | 19,774 |   |   | 19,565 |   |   | 19,854 |   |
| Total                Interest Expense                     |   |   | 10,206 |   |   | 8,445 |   |   | 6,465 |   |   | 6,329 |   |   | 7,205 |   |
| Net                Interest Income                        |   |   | 13,502 |   |   | 13,555 |   |   | 13,309 |   |   | 13,236 |   |   | 12,649 |   |
| Provision                for Loan Losses                  |   |   | 475 |   |   | 300 |   |   | 390 |   |   | 670 |   |   | 1,025 |   |
| Non-interest                Income                        |   |   | 2,462 |   |   | 2,418 |   |   | 2,678 |   |   | 2,767 |   |   | 870 |   |
| Non-interest                Expense                       |   |   | 10,716 |   |   | 11,630 |   |   | 11,973 |   |   | 11,844 |   |   | 10,266 |   |
| Income                Tax Expense                         |   |   | 1,194 |   |   | 815 |   |   | 780 |   |   | 750 |   |   | 988 |   |
| Net                Income                                 |   |   | 3,579 |   |   | 3,228 |   |   | 2,844 |   |   | 2,739 |   |   | 1,240 |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **PER                SHARE DATA**                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings                Per Share-Basic                   |   |   | 1.69 |   |   | 1.53 |   |   | 1.35 |   |   | 1.30 |   |   | 0.59 |   |
| Earnings                Per Share - Diluted               |   |   | 1.69 |   |   | 1.52 |   |   | 1.34 |   |   | 1.29 |   |   | 0.59 |   |
| Cash                Dividends                             |   |   | 0.72 |   |   | 0.69 |   |   | 0.64 |   |   | 0.64 |   |   | 0.62 |   |
| Book                Value                                 |   |   | 15.86 |   |   | 14.77 |   |   | 14.72 |   |   | 14.29 |   |   | 13.88 |   |
| Year                End Stock Price                       |   |   | 19.76 |   |   | 21.10 |   |   | 18.25 |   |   | 17.27 |   |   | 14.60 |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **OTHER                KEY INFORMATION**                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return                on Average Assets                   |   |   | 0.95 | % |   | 0.83 | % |   | 0.76 | % |   | .080 | % |   | 0.41 | % |
| Return                on Average Equity                   |   |   | 11.10 | % |   | 10.30 | % |   | 9.22 | % |   | 9.07 | % |   | 4.23 | % |
| Dividend                Payout                            |   |   | 42.60 | % |   | 45.10 | % |   | 47.41 | % |   | 49.23 | % |   | 105.08 | % |
| Efficiency                Ratio                           |   |   | 63.11 | % |   | 68.52 | % |   | 70.51 | % |   | 69.80 | % |   | 70.79 | % |
| Net                Interest Income/Average Earning Assets |   |   | 3.78 | % |   | 3.66 | % |   | 3.76 | % |   | 4.13 | % |   | 4.51 | % |
| Allowance                for Loan Losses/Loans            |   |   | 0.96 | % |   | 0.97 | % |   | 1.02 | % |   | 1.00 | % |   | 1.18 | % |
| Non                Performing Loans/Loans                 |   |   | 0.59 | % |   | 0.51 | % |   | 0.41 | % |   | 0.74 | % |   | 1.29 | % |
| Loans/Deposits                                            |   |   | 95.97 | % |   | 95.16 | % |   | 96.92 | % |   | 88.69 | % |   | 77.42 | % |
| Total                Stockholders’ Equity/Assets    |   |   | 9.10 | % |   | 8.03 | % |   | 8.26 | % |   | 8.10 | % |   | 9.50 | % |
| Total                Risk-Based Ratio                     |   |   | 15.27 | % |   | 14.44 | % |   | 15.43 | % |   | 15.39 | % |   | 14.71 | % |
| Tier                1 Risk-Based Ratio                    |   |   | 14.40 | % |   | 13.55 | % |   | 14.49 | % |   | 14.48 | % |   | 13.61 | % |
| Tier                1 Leverage Ratio                      |   |   | 10.45 | % |   | 9.31 | % |   | 9.23 | % |   | 9.23 | % |   | 8.71 | % |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                Average Share Outstanding:        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                     |   |   | 2,117,529 |   |   | 2,116,316 |   |   | 2,114,649 |   |   | 2,113,087 |   |   | 2,109,809 |   |
| Diluted                                                   |   |   | 2,121,846 |   |   | 2,120.951 |   |   | 2,118,181 |   |   | 2,116,163 |   |   | 2,112,405 |   |

----

*Table          of Contents*

**Item      7. Management’s Discussion and Analysis of Financial Condition and Results of      Operation.** 

**SUMMARY**

----

*Table          of Contents*

**FINANCIAL      CONDITION**

**Assets**

**Average      Earning Assets.**

----

*Table          of Contents*

**Investment      Securities. **

|                                                |   |     |        |                          |   |        |   |
|-----------------------------------------------------|--------|----------|-------------|-------------------------------|--------|-------------|--------|
|                                                |   |     |        | Amortized                Cost |   |        |   |
|                                                |   |     |        |                          |   |        |   |
|                                                |   | 12/31/06 |        | 12/31/05                      |   | 12/31/04    |   |
|                                                |   |     |        |                          |   |        |   |
| Obligations                of other U.S. Government |   |     |        |                          |   |        |   |   |   |   |
| Agencies                and Corporations            |   | $        | 68,015,850  |                          | $      | 82,864,118  |   | $ | 94,369,933 |   |
| Obligations                of State and             |   |     |        |                          |   |        |   |   |   |   |
| Political                Subdivisions               |   |     | 36,175,580  |                          |   | 34,904,765  |   |   | 35,321,401 |   |
| Privately                Issued Collateralized      |   |     |        |                          |   |        |   |   |   |   |
| Mortgage                Obligations                 |   |     | -           |                          |   | 127,770     |   |   | 173,419 |   |
| Corporate                Securities                 |   |     | **-**       |                          |   | -           |   |   | 1,007,752 |   |
|                                                |   |     |        |                          |   |        |   |   |   |   |
|                                                |   | $        | 104,191,430 |                          | $      | 117,896,653 |   | $ | 130,872,505 |   |

----

*Table          of Contents*

|                                                  |   | Amortized |        | Weighted                     |   |
|-------------------------------------------------------|--------|-----------|-------------|------------------------------|--------|
|                                                  |   | Cost      |        | Average                Yield |   |
|                                                  |   |      |        |                         |   |
| Due                in one year or less                |   | $         | 5,993,800   |                         |   | 4.116 | % |
| Due                after one year through five years  |   |      | 5,848,745   |                         |   | 5.235 | % |
| Due                after five years through ten years |   |      | 56,029,464  |                         |   | 5.175 | % |
| Due                after ten years                    |   |      | 36,319,421  |                         |   | 5.723 | % |
|  Total                                           |   | $         | 104,191,430 |                         |   | 5.308 | % |
|                                                  |   |      |        |                         |   |   |   |

**        Loans.      **

**TABLE      1: COMPOSITION OF LOAN PORTFOLIO **

|                                                  |   | 12/31/06 |        | 12/31/05 |   | 12/31/04    |   | 12/31/03 |        | 12/31/02 |   |
|-------------------------------------------------------|--------|----------|-------------|----------|--------|-------------|--------|----------|-------------|----------|--------|
| Commercial,                financial and agricultural |   | $        | 28,385,000  |     | $      | 32,868,000  |   | $        | 31,589,000  |     | $      | 31,853,000 |   | $ | 34,264,000 |   |
| Real                estate-construction               |   |     | 44,592,000  |     |   | 30,069,000  |   |     | 18,360,000  |     |   | 14,690,000 |   |   | 7,207,000 |   |
| Real                estate-residential                |   |     | 83,256,000  |     |   | 98,488,000  |   |     | 92,889,000  |     |   | 91,031,000 |   |   | 73,590,000 |   |
| Real                Estate-other                      |   |     | 76,473,000  |     |   | 70,875,000  |   |     | 63,685,000  |     |   | 57,826,000 |   |   | 53,694,000 |   |
| Installment                                           |   |     | 10,680,000  |     |   | 12,478,000  |   |     | 14,229,000  |     |   | 14,195,000 |   |   | 15,881,000 |   |
| Other                                                 |   |     | 203,000     |     |   | 306,000     |   |     | 249,000     |     |   | 102,000 |   |   | 170,000 |   |
|                                                  |   |     |        |     |   |        |   |     |        |     |   |   |   |   |   |   |
| Total                loans                            |   | $        | 243,589,000 |     | $      | 245,084,000 |   | $        | 221,001,000 |     | $      | 209,697,000 |   | $ | 184,806,000 |   |

----

*Table          of Contents*

|                                                  |   |                    |       | Due                after  |   |                      |   |   |      |
|-------------------------------------------------------|--------|-------------------------|------------|---------------------------|--------|---------------------------|--------|--------|-----------|
|                                                  |   | Due                in   |       | one                year   |   |                      |   |   |      |
|                                                  |   | one                year |       | through                   |   | Due                after  |   |   |      |
|                                                  |   | or                less  |       | five                years |   | five                years |   | Total  |      |
|                                                  |   |                    |       |                      |   |                      |   |   |      |
| Commercial,                financial and agricultural |   | $                       | 13,993,000 |                      | $      | 14,004,000                |   | $      | 388,000   |   | $ | 28,385,000 |   |
| Real                estate-construction               |   |                    | 28,033,000 |                      |   | 12,927,000                |   |   | 3,632,000 |   |   | 44,592,000 |   |
|                                                  |   |                    |       |                      |   |                      |   |   |      |   |   |   |   |
| Total                                                 |   | $                       | 42,026,000 |                      | $      | 26,931,000                |   | $      | 4,020,000 |   | $ | 72,977,000 |   |
|                                                  |   |                    |       |                      |   |                      |   |   |      |   |   |   |   |
|                                                  |   |                    |       |                      |   |                      |   |   |      |   |   |   |   |
| Predetermined                interest rates           |   |                    |       |                      | $      | 20,784,000                |   | $      | 1,331,000 |   |   |   |   |
|                                                  |   |                    |       |                      |   |                      |   |   |      |   |   |   |   |
| Floating                or adjustable interest rates  |   |                    |       |                      | $      | 6,147,000                 |   | $      | 2,689,000 |   |   |   |   |
|                                                  |   |                    |       |                      |   |                      |   |   |      |   |   |   |   |

**Asset      Quality**

----

*Table          of Contents*

**  TABLE      2: BREAKDOWN OF      NONPERFORMING LOANS**

|                                                                          |   | 12/31/06 |   | 12/31/05                              |   | 12/31/04 |   | 12/31/03 |   | 12/31/02 |   |
|-------------------------------------------------------------------------------|--------|----------|--------|---------------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                                                                          |   |     |   | (dollars                in thousands) |   |     |   |
| Non-accrual                loans by type                                      |   |     |   |                                  |   |     |   |     |   |     |   |   |   |   |   |   |
| Real                estate                                                    |   | $        | 829    |                                  | $      | 413      |   | $        | 532    |     | $      | 584 |   | $ | 1,513 |   |
| Installment                                                                   |   |     | 13     |                                  |   | 72       |   |     | 26     |     |   | 20 |   |   | 16 |   |
| Commercial                and all other loans                                 |   |     | 351    |                                  |   | 574      |   |     | 214    |     |   | 580 |   |   | 537 |   |
| Total                non-accrual loans                                        |   |     | 1,193  |                                  |   | 1,059    |   |     | 772    |     |   | 1,184 |   |   | 2,066 |   |
| Loans                past due 90 days or more                                 |   |     | 232    |                                  |   | 201      |   |     | 129    |     |   | 337 |   |   | 253 |   |
|                                                                          |   |     |   |                                  |   |     |   |     |   |     |   |   |   |   |   |   |
| Total                nonperforming loans                                      |   |     | 1,425  |                                  |   | 1,260    |   |     | 901    |     |   | 1,521 |   |   | 2,319 |   |
| Other                real estate owned (net)                                  |   |     | 1,257  |                                  |   | 1,471    |   |     | 1,320  |     |   | 1,741 |   |   | 1,554 |   |
| Total                nonperforming assets                                     |   | $        | 2,682  |                                  | $      | 2,731    |   | $        | 2,221  |     | $      | 3,262 |   | $ | 3,873 |   |
|  Nonperforming                loans as a percent                         |   |     |   |                                  |   |     |   |     |   |     |   |   |   |   |   |   |
| of                loans, net of unearned interest and loans held for sale     |   |     | .59    | %                                     |   | .51      | %      |     | .41    | %        |   | .74 | % |   | 1.29 | % |
|  Additional                interest income foregone on non-accrual loans |   | $        | 31     |                                  | $      | 24       |   | $        | 38     |     | $      | 28 |   | $ | 141 |   |
|                                                                          |   |     |   |                                  |   |     |   |     |   |     |   |   |   |   |   |   |

----

*Table          of Contents*

**Allowance      for Loan Losses**

----

*Table          of Contents*

**TABLE      3: ACTIVITY OF ALLOWANCE FOR LOAN LOSSES**

|                                                                            |   | 12/31/06 |   | 12/31/05                              |   | 12/31/04 |   | 12/31/03 |   | 12/31/02 |   |
|---------------------------------------------------------------------------------|--------|----------|--------|---------------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                                                                            |   |     |   | (dollars                in thousands) |   |     |   |
| Balance                at beginning of year                                     |   | $        | 2,378  |                                  | $      | 2,237    |   | $        | 2,070  |     | $      | 2,129 |   | $ | 2,108 |   |
|                                                                            |   |     |   |                                  |   |     |   |     |   |     |   |   |   |   |   |   |
| Charge-offs:                                                                    |   |     |   |                                  |   |     |   |     |   |     |   |   |   |   |   |   |
| Commercial,                financial & agricultural                         |   |     | (571   | )                                     |   | (54      | )      |     | (108   | )        |   | (285 | ) |   | (434 | ) |
| Real                Estate-construction                                         |   |     | (5     | )                                     |   | (0       | )      |     | (22    | )        |   | (0 | ) |   | (11 | ) |
| Real                Estate-residential                                          |   |     | (3     | )                                     |   | (40      | )      |     | (29    | )        |   | (37 | ) |   | (150 | ) |
| Real                Estate-other                                                |   |     | (64    | )                                     |   | (109     | )      |     | (62    | )        |   | (419 | ) |   | (266 | ) |
| Installment                and other                                            |   |     | (107   | )                                     |   | (48      | )      |     | (47    | )        |   | (91 | ) |   | (282 | ) |
| Recoveries:                                                                     |   |     |   |                                  |   |     |   |     |   |     |   |   |   |   |   |   |
| Commercial,                financial & agricultural                         |   |     | 26     |                                  |   | 22       |   |     | 23     |     |   | 60 |   |   | 64 |   |
| Real                Estate-residential                                          |   |     | 26     |                                  |   | 22       |   |     | 0      |     |   | 0 |   |   | 36 |   |
| Real                Estate-other                                                |   |     | 51     |                                  |   | 14       |   |     | 5      |     |   | 25 |   |   | 0 |   |
| Installment                and other                                            |   |     | 31     |                                  |   | 34       |   |     | 17     |     |   | 18 |   |   | 39 |   |
| Net                (charge-offs) / recoveries                                   |   |     | (509   | )                                     |   | (159     | )      |     | (223   | )        |   | (729 | ) |   | (1,004 | ) |
| Provision                charged to operations                                  |   |     | 475    |                                  |   | 300      |   |     | 390    |     |   | 670 |   |   | 1,025 |   |
|                                                                            |   |     |   |                                  |   |     |   |     |   |     |   |   |   |   |   |   |
| Balance                at end of year                                           |   | $        | 2,344  |                                  | $      | 2,378    |   | $        | 2,237  |     | $      | 2,070 |   | $ | 2,129 |   |
|                                                                            |   |     |   |                                  |   |     |   |     |   |     |   |   |   |   |   |   |
| Allowance                for loan losses as a percent of loans, net of unearned |   |     |   |                                  |   |     |   |     |   |     |   |   |   |   |   |   |
| interest                and loans held for sale                                 |   |     | .96    | %                                     |   | .97      | %      |     | 1.02   | %        |   | 1.00 | % |   | 1.18 | % |
|                                                                            |   |     |   |                                  |   |     |   |     |   |     |   |   |   |   |   |   |
| Net                charge-offs as a percent of average loans                    |   |     | .21    | %                                     |   | .07      | %      |     | .10    | %        |   | .36 | % |   | .55 | % |

----

*Table          of Contents*

**TABLE      4: ALLOCATION OF ALLOWANCE FOR LOAN LOSSES**

|                                     |   | Amounts                as of December 31, |   |
|------------------------------------------|--------|-------------------------------------------|--------|
|                                     |   |                                      |   |   |   |   |   |   |   |   |   |
|                                     |   | 2006                                      |   | 2005 |   | 2004 |   | 2003 |   | 2002 |   |
|                                     |   |                                      |   |   |   |   |   |   |   |   |   |
| Commercial,                financial and |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| agricultural                             |   | $                                         | 426    |   | $ | 502 |   | $ | 452 |   | $ | 350 |   | $ | 568 |   |
| Real                estate-construction  |   |                                      | 187    |   |   | 77 |   |   | 60 |   |   | 36 |   |   | 140 |   |
| Real                estate-residential   |   |                                      | 248    |   |   | 162 |   |   | 149 |   |   | 136 |   |   | 112 |   |
| Real                Estate-other         |   |                                      | 663    |   |   | 787 |   |   | 764 |   |   | 811 |   |   | 673 |   |
| Installment                              |   |                                      | 331    |   |   | 354 |   |   | 361 |   |   | 151 |   |   | 95 |   |
| Other                                    |   |                                      | 489    |   |   | 496 |   |   | 451 |   |   | 586 |   |   | 541 |   |
|                                     |   |                                      |        |   |   |  |   |   |   |   |   |   |   |   |   |   |
| Total                loans               |   | $                                         | 2,344  |   | $ | 2,378 |   | $ | 2,237 |   | $ | 2,070 |   | $ | 2,129 |   |
|                                     |   |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                     |   | Percent                of loans in each category to total loans |   |
|------------------------------------------|--------|-----------------------------------------------------------------|--------|
|                                     |   | 2006                                                            |   | 2005 |   | 2004 |   | 2003 |   | 2002 |   |
|                                     |   |                                                            |   |   |   |   |   |   |   |   |   |
| Commercial,                financial and |   |                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| agricultural                             |   |                                                            | 11.65  | % |   | 13.41 | % |   | 14.29 | % |   | 15.19 | % |   | 18.54 | % |
| Real                estate-construction  |   |                                                            | 18.31  |   |   | 12.27 |   |   | 8.31 |   |   | 7.01 |   |   | 3.90 |   |
| Real                estate-residential   |   |                                                            | 34.18  |   |   | 40.18 |   |   | 42.03 |   |   | 43.41 |   |   | 39.82 |   |
| Real                Estate-other         |   |                                                            | 31.40  |   |   | 28.92 |   |   | 28.82 |   |   | 27.58 |   |   | 29.05 |   |
| Installment                              |   |                                                            | 4.38   |   |   | 5.09 |   |   | 6.44 |   |   | 6.77 |   |   | 8.59 |   |
| Other                                    |   |                                                            | .08    |   |   | .13 |   |   | .11 |   |   | .04 |   |   | .10 |   |
|                                     |   |                                                            |        |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Total                loans               |   |                                                            | 100.00 | % |   | 100.00 | % |   | 100.00 | % |   | 100.00 | % |   | 100.00 | % |

**Other      Real Estate**

** **

----

*Table          of Contents*

**TABLE      5: OTHER REAL ESTATE ACTIVITY**

| Balance                at December 31, 2005                 |   |   |   |   | $      | 1,471  |   |
|-------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
| Write-downs                                                 |   |   | (22    | )      |   |   |   |
| Proceeds                from sales, net of gains and losses |   |   | (324   | )      |   |   |   |
| Transfers                to loan portfolio                  |   |   | (78    | )      |   |   |   |
| Foreclosures                                                |   |   | 210    |   |   | (214   | )      |
| Balance                at December 31, 2006                 |   |   |   |   | $      | 1,257  |   |

**Funding**

**Deposits.      **

----

*Table          of Contents*

|                                          |   | 12/31/06 |       | 12/31/05 |   |
|-----------------------------------------------|--------|----------|------------|----------|--------|
|                                          |   |     |       |     |   |
| Time                remaining until maturity: |   |     |       |     |   |
| Three                months or less           |   | $        | 11,261,017 |     | $      | 10,061,668 |   |
| Over                three through six months  |   |     | 15,290,171 |     |   | 11,198,948 |   |
| Over                six through twelve months |   |     | 26,185,733 |     |   | 21,735,701 |   |
| Over                twelve months             |   |     | 9,647,050  |     |   | 15,523,648 |   |
|                                          |   |     |       |     |   |   |   |
|                                          |   | $        | 62,383,971 |     | $      | 58,519,965 |   |
|                                          |   |     |       |     |   |   |   |

|                                                |   | 12/31/06 |        | 12/31/05 |   |
|-----------------------------------------------------|--------|----------|-------------|----------|--------|
|                                                |   |     |        |     |   |
| Non-interest                bearing demand deposits |   | $        | 50,345,279  |     | $      | 51,466,230 |   |
| Now                accounts                         |   |     | 24,555,009  |     |   | 23,016,487 |   |
| Money                market deposit accounts        |   |     | 37,101,457  |     |   | 36,516,395 |   |
| Savings                accounts                     |   |     | 18,082,839  |     |   | 23,032,910 |   |
| Certificates                of deposit              |   |     | 123,672,691 |     |   | 123,344,888 |   |
|                                                |   |     |        |     |   |   |   |
|                                                |   | $        | 253,757,275 |     | $      | 257,376,910 |   |
|                                                |   |     |        |     |   |   |   |

**Borrowings.      **

----

*Table          of Contents*

**TABLE      6: SHORT-TERM BORROWINGS**

|                                        |   | 2006   |       | 2005   |   | 2004       |   |
|---------------------------------------------|--------|--------|------------|--------|--------|------------|--------|
|                                        |   |   |       |   |   |       |   |
| Year-end                balance             |   | $      | 39,393,000 |   | $      | 44,343,000 |   | $ | 56,538,000 |   |
| Weighted                average rate        |   |   | 4.73       | %      |   | 3.07       | %      |   | 2.74 | % |
| Maximum                month-end balance    |   | $      | 49,510,000 |   | $      | 59,455,000 |   | $ | 52,816,000 |   |
|                                        |   |   |       |   |   |       |   |   |   |   |
| Year                to date average balance |   | $      | 38,091,000 |   | $      | 47,696,000 |   | $ | 42,371,000 |   |
| Weighted                average rate        |   |   | 4.26       | %      |   | 3.24       | %      |   | 2.11 | % |

**Average      Balances and Yield Analysis**

----

*Table          of Contents*

**Average        Balances and Yield Analysis**

**(dollars        in thousands)**

|                                                             |   |   |   | **Twelve                  Months Ended December 31,** |   |
|------------------------------------------------------------------|--------|--------|--------|-------------------------------------------------------|--------|
|                                                             |   |   |   |                                                  |   | **2006** |   |   |   |   |   | **2005** |   |   |   |   |   | **2004** |   |   |   |
|                                                             |   |   |   |                                                  |   | **Interest** |   |   |   |   |   | **Interest** |   |   |   |   |   | **Interest** |   |  |   |
|                                                             |   |   |   | **Average**                                           |   | **Income/** |   | **Average                  %** |         | **Average** |   | **Income/** |   | **Average                  %** |   | **Average** |   | **Income/** |   | **Average                  %** |   |
|                                                             |   |   |   | **Balance**                                           |   | **Expense** |   | **Yield/Rate** |        | **Balance** |   | **Expense** |   | **Yield/Rate** |         | **Balance** |   | **Expense** |   | **Yield/Rate** |      |
| **ASSETS**                                                       |   |   |   |                                                  |   |   |   |   |   |   |   |
|                                                             |   |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                                            |   |   |   |                                                  | $      | 242,910 |   | $ | 18,443 |   |   | 7.59 | % | $ | 236,796 |   | $ | 16,101 |   |   | 6.80 | % | $ | 218,301 |   | $ | 14,031 |   |   | 6.43 | % |
| Investment                  securities:                          |   |   |   |                                                  |   |  |   |   |   |   |   |   |   |   |  |   |   |   |   |   |   |   |   |  |   |   |   |   |   |   |   |
| U.S.                  Government                                 |   |   |   |                                                  |   | - |   |   | - |   |   | 0.00 | % |   | - |   |   | - |   |   | 0.00 | % |   | 339 |   |   | 12 |   |   | 3.63 | % |
| Mortgage                  Backed Securities                      |   |   |   |                                                  |   | 66,425 |   |   | 3,045 |   |   | 4.58 | % |   | 86,062 |   |   | 3,776 |   |   | 4.39 | % |   | 91,870 |   |   | 3,820 |   |   | 4.16 | % |
| State                  & municipal                           |   |   |   |                                                  |   | 35,146 |   |   | 1,641 |   |   | 4.67 | % |   | 34,914 |   |   | 1,634 |   |   | 4.68 | % |   | 35,036 |   |   | 1,634 |   |   | 4.66 | % |
| Other                                                            |   |   |   |                                                  |   | 10,887 |   |   | 479 |   |   | 4.40 | % |   | 11,867 |   |   | 459 |   |   | 3.86 | % |   | 7,748 |   |   | 267 |   |   | 3.44 | % |
|                                                             |   |   |   |                                                  |   |  |   |   |  |   |   |   |   |   |  |   |   |  |   |   |   |   |   |  |   |   |  |   |   |   |   |
| Total                  investment securities                     |   |   |   |                                                  |   | 112,458 |   |   | 5,166 |   |   | 4.59 | % |   | 132,843 |   |   | 5,869 |   |   | 4.42 | % |   | 134,993 |   |   | 5,733 |   |   | 4.25 | % |
|                                                             |   |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  bearing bank balances                  |   |   |   |                                                  |   | 1,435 |   |   | 69 |   |   | 4.83 | % |   | 735 |   |   | 22 |   |   | 2.95 | % |   | 543 |   |   | 8 |   |   | 1.50 | % |
| Federal                  funds sold                              |   |   |   |                                                  |   | 604 |   |   | 30 |   |   | 4.91 | % |   | 235 |   |   | 8 |   |   | 3.35 | % |   | 167 |   |   | 2 |   |   | 1.56 | % |
|                                                             |   |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  earning assets                            |   |   |   |                                                  |   | 357,407 |   |   | 23,708 |   |   | 6.63 | % |   | 370,609 |   |   | 22,000 |   |   | 5.94 | % |   | 354,004 |   |   | 19,774 |   |   | 5.59 | % |
|                                                             |   |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance                  for loan losses                       |   |   |   |                                                  |   | (2,444 | ) |   |   |   |   |  |   |   | (2,379 | ) |   |   |   |   |  |   |   | (2,224 | ) |   |   |   |   |  |   |
| Cash                  & due from banks, non-interest bearing |   |   |   |                                                  |   | 7,419 |   |   |   |   |   |  |   |   | 7,548 |   |   |   |   |   |  |   |   | 8,610 |   |   |   |   |   |  |   |
| Bank                  premises & equipment                   |   |   |   |                                                  |   | 7,901 |   |   |   |   |   |  |   |   | 8,221 |   |   |   |   |   |  |   |   | 8,547 |   |   |   |   |   |  |   |
| Cash                  Value Life Insurance and other             |   |   |   |                                                  |   | 957 |   |   |   |   |   |   |   |   | 929 |   |   |   |   |   |   |   |   | 929 |   |   |   |   |   |   |   |
| Other                  assets                                    |   |   |   |                                                  |   | 5,386 |   |   |   |   |   |  |   |   | 5,389 |   |   |   |   |   |  |   |   | 5,630 |   |   |   |   |   |  |   |
|                                                             |   |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL                  ASSETS                                    |   |   |   |                                                  | $      | 376,626 |   |   |   |   |   |  |   | $ | 390,317 |   |   |   |   |   |  |   | $ | 375,496 |   |   |   |   |   |  |   |
|                                                             |   |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **LIABILITIES                  AND STOCKHOLDERS' EQUITY**        |   |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                             |   |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  bearing deposits:                      |   |   |   |                                                  |   |  |   |   |   |   |   |  |   |   |  |   |   |   |   |   |  |   |   |  |   |   |   |   |   |  |   |
| Savings                                                          |   |   |   |                                                  | $      | 20,623 |   | $ | 249 |   |   | 1.21 | % | $ | 20,289 |   | $ | 215 |   |   | 1.06 | % | $ | 16,859 |   | $ | 122 |   |   | 0.72 | % |
| Interest                  bearing checking                       |   |   |   |                                                  |   | 23,711 |   |   | 334 |   |   | 1.41 | % |   | 27,961 |   |   | 216 |   |   | 0.77 | % |   | 34,150 |   |   | 186 |   |   | 0.54 | % |
| Money                  rate savings                              |   |   |   |                                                  |   | 38,709 |   |   | 968 |   |   | 2.50 | % |   | 27,318 |   |   | 392 |   |   | 1.44 | % |   | 25,631 |   |   | 250 |   |   | 0.97 | % |
| Certificates                  of deposit and other time deposits |   |   |   |                                                  |   | 123,198 |   |   | 4,918 |   |   | 3.99 | % |   | 118,297 |   |   | 3,463 |   |   | 2.93 | % |   | 117,039 |   |   | 2,780 |   |   | 2.38 | % |
|                                                             |   |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  interest bearing deposits                 |   |   |   |                                                  |   | 206,241 |   |   | 6,469 |   |   | 3.14 | % |   | 193,865 |   |   | 4,286 |   |   | 2.21 | % |   | 193,679 |   |   | 3,338 |   |   | 1.72 | % |
|                                                             |   |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short                  term borrowed funds                       |   |   |   |                                                  |   | 38,091 |   |   | 1,623 |   |   | 4.26 | % |   | 47,696 |   |   | 1,546 |   |   | 3.24 | % |   | 42,371 |   |   | 893 |   |   | 2.11 | % |
| Long                  term debt                                  |   |   |   |                                                  |   | 46,241 |   |   | 2,114 |   |   | 4.57 | % |   | 70,760 |   |   | 2,613 |   |   | 3.69 | % |   | 67,665 |   |   | 2,234 |   |   | 3.30 | % |
|                                                             |   |   |   |                                                  |   |   |   |   |  |   |   |   |   |   |  |   |   |  |   |   |   |   |   |  |   |   |  |   |   |   |   |
| Total                  interest bearing liabilities              |   |   |   |                                                  |   | 290,542 |   |   | 10,206 |   |   | 3.51 | % |   | 312,321 |   |   | 8,445 |   |   | 2.70 | % |   | 303,715 |   |   | 6,465 |   |   | 2.13 | % |
|                                                             |   |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest                  bearing deposits                   |   |   |   |                                                  |   | 49,472 |   |   |   |   |   |  |   |   | 42,575 |   |   |   |   |   |  |   |   | 36,759 |   |   |   |   |   |  |   |
| Other                  liabilities                               |   |   |   |                                                  |   | 4,364 |   |   |   |   |   |   |   |   | 4,074 |   |   |   |   |   |   |   |   | 4,169 |   |   |   |   |   |   |   |
| Shareholders'                  equity                            |   |   |   |                                                  |   | 32,248 |   |   |   |   |   |  |   |   | 31,347 |   |   |   |   |   |  |   |   | 30,853 |   |   |   |   |   |  |   |
|                                                             |   |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL                  LIABILITIES & STOCKHOLDERS' EQUITY    |   |   |   |                                                  | $      | 376,626 |   | $ | 10,206 |   |   |  |   | $ | 390,317 |   | $ | 8,445 |   |   |  |   | $ | 375,496 |   | $ | 6,465 |   |   |  |   |
|                                                             |   |   |   |                                                  |   |  |   |   |  |   |   |   |   |   |  |   |   |  |   |   |   |   |   |  |   |   |  |   |   |   |   |
| Interest                  income and rate earned                 |   |   |   |                                                  |   |   |   | $ | 23,708 |   |   | 6.63 | % |   |   |   | $ | 22,000 |   |   | 5.94 | % |   |   |   | $ | 19,774 |   |   | 5.59 | % |
| Interest                  expense and rate paid                  |   |   |   |                                                  |   |   |   |   | 10,206 |   |   | 3.51 | % |   |   |   |   | 8,445 |   |   | 2.70 | % |   |   |   |   | 6,465 |   |   | 2.13 | % |
| Interest                  rate spread                            |   |   |   |                                                  |   |   |   |   |  |   |   | 3.12 | % |   |   |   |   |  |   |   | 3.23 | % |   |   |   |   |  |   |   | 3.46 | % |
| NET                  INTEREST INCOME & NET YIELD ON          |   |   |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| AVERAGE                  EARNING ASSETS                          |   |   |   |                                                  |   |   |   | $ | 13,502 |   |   | 3.78 | % |   |   |   | $ | 13,555 |   |   | 3.66 | % |   |   |   | $ | 13,309 |   |   | 3.76 | % |

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*Table          of Contents*

**Capital**

|                                        |   | December                31, 2006 |    |                                                      December 31, 2005 |   |
|---------------------------------------------|--------|----------------------------------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                        |   |                             |    |                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |
|                                        |   | Company                          |    | Bank                                                                                                                                                                                                                                                            |   |   |   | Company |   | Bank |   |
|                                        |   |                             |    |                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |
| Risk-based                capital:          |   |                             |    |                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |
| Total                                       |   | $                                | 40,943  |                                                                                                                                                                                                                                                            | $      | 37,961 |   |   |   |   | $ | 38,770 |   | $ | 36,423 |   |
| Tier                1                       |   |                             | 38,599  |                                                                                                                                                                                                                                                            |   | 35,617 |   |   |   |   |   | 36,392 |   |   | 34,045 |   |
| Leverage                                    |   |                             | 38,599  |                                                                                                                                                                                                                                                            |   | 35,617 |   |   |   |   |   | 36,392 |   |   | 34,045 |   |
| Assets:                                     |   |                             |    |                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |
| Quarterly                average assets (1) |   |                             | 369,411 |                                                                                                                                                                                                                                                            |   | 372,266 |   |   |   |   |   | 390,734 |   |   | 394,351 |   |
| Risk-weighted                assets         |   |                             | 268,095 |                                                                                                                                                                                                                                                            |   | 267,944 |   |   |   |   |   | 268,481 |   |   | 268,118 |   |
| Ratios:                                     |   |                             |    |                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                risk-based capital     |   |                             | 15.27   | %                                                                                                                                                                                                                                                               |   | 14.17 | % |   |   |   |   | 14.44 | % |   | 13.58 | % |
| Tier                1 risk-based capital    |   |                             | 14.40   | %                                                                                                                                                                                                                                                               |   | 13.29 | % |   |   |   |   | 13.55 | % |   | 12.70 | % |
| Leverage                                    |   |                             | 10.45   | %                                                                                                                                                                                                                                                               |   | 9.57 | % |   |   |   |   | 9.31 | % |   | 8.63 | % |
|                                        |   |                             |    |                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |

| (1)   | Excludes                disallowed assets |
|-----------------|-------------------------------------------|

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*Table          of Contents*

**RESULTS      OF OPERATIONS**

|                                            |   | 2006   |   | 2005   |   | 2004   |   |
|-------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                            |   |   |   |   |   |   |   |
| Return                on average assets         |   |   | .95    | %      |   | .83    | %      |   | .76 | % |
| Return                on average equity         |   |   | 11.09  | %      |   | 10.30  | %      |   | 9.22 | % |
| Dividend                payout ratio            |   |   | 42.60  | %      |   | 45.10  | %      |   | 47.41 | % |
| Average                equity to average assets |   |   | 8.56   | %      |   | 8.03   | %      |   | 8.22 | % |
| Net                interest margin              |   |   | 3.78   | %      |   | 3.66   | %      |   | 3.76 | % |
| Basic                income per share           |   | $      | 1.69   |   | $      | 1.53   |   | $ | 1.35 |   |
| Diluted                income per share         |   | $      | 1.69   |   | $      | 1.52   |   | $ | 1.34 |   |

**Non-Interest      Income/Non-Interest Expense**

----

*Table          of Contents*

**Net      Interest Income/Margins**

----

*Table          of Contents*

|                                                                  |   | Volume/Rate                  Analysis   |
|------------------------------------------------------------------|--------|-----------------------------------------|
|                                                             |   | 2006                  change from 2005  | 2005                  change from 2004 |
|                                                                  |   |                                    | Total |   |   | Volume |   |   | Rate |              |   | Total |   |   | Volume |   |   | Rate |   |
| Interest                  earning assets:                        |   | (dollars                  in thousands) | (dollars                  in thousands) |
| Loans                                                            |   | $                                       | 2,343 |   | $ | 426 |   | $ | 1,917 |   | $ | 2,070 |   | $ | 1,230 |   | $ | 840 |   |
| Investment                  securities:                          |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S.                  Government                                 |   |                                    | - |   |   | - |   |   | - |   |   | (12 | ) |   | (6 | ) |   | (6 | ) |
| Mortgage                  Backed Securities                      |   |                                    | (731 | ) |   | (894 | ) |   | 163 |   |   | (44 | ) |   | (250 | ) |   | 206 |   |
| State                  & municipal                           |   |                                    | 7 |   |   | 11 |   |   | (4 | ) |   | - |   |   | (6 | ) |   | 6 |   |
| Other                                                            |   |                                    | 20 |   |   | (41 | ) |   | 61 |   |   | 192 |   |   | 156 |   |   | 36 |   |
|                                                             |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  investment securities                     |   |                                    | (704 | ) |   | (924 | ) |   | 220 |   |   | 136 |   |   | (106 | ) |   | 242 |   |
|                                                             |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  bearing bank balances                  |   |                                    | 47 |   |   | 29 |   |   | 18 |   |   | 14 |   |   | 4 |   |   | 10 |   |
| Federal                  funds sold                              |   |                                    | 22 |   |   | 17 |   |   | 5 |   |   | 6 |   |   | 2 |   |   | 4 |   |
|                                                             |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  earning assets                            |   | $                                       | 1,708 |   | $ | (452 | ) | $ | 2,160 |   | $ | 2,226 |   | $ | 1,130 |   | $ | 1,096 |   |
|                                                             |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  bearing deposits:                      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                                                          |   |                                    | 34 |   |   | 3 |   |   | 31 |   |   | 93 |   |   | 28 |   |   | 65 |   |
| Interest                  bearing checking                       |   |                                    | 118 |   |   | (36 | ) |   | 154 |   |   | 30 |   |   | (38 | ) |   | 68 |   |
| Money                  rate savings                              |   |                                    | 576 |   |   | 207 |   |   | 369 |   |   | 142 |   |   | 17 |   |   | 125 |   |
| Certificates                  of deposit and other time deposits |   |                                    | 1,456 |   |   | 150 |   |   | 1,306 |   |   | 683 |   |   | 30 |   |   | 653 |   |
|                                                             |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  interest bearing deposits                 |   |                                    | 2,184 |   |   | 324 |   |   | 1,860 |   |   | 948 |   |   | 37 |   |   | 911 |   |
|                                                             |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short                  term borrowed funds                       |   |                                    | 77 |   |   | (350 | ) |   | 427 |   |   | 653 |   |   | 124 |   |   | 529 |   |
| Long                  term debt                                  |   |                                    | (500 | ) |   | (1,034 | ) |   | 534 |   |   | 379 |   |   | 106 |   |   | 273 |   |
|                                                             |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  interest bearing liabilities              |   | $                                       | 1,761 |   | $ | (1,060 | ) | $ | 2,821 |   | $ | 1,980 |   | $ | 267 |   | $ | 1,713 |   |
|                                                             |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Change                  in Interest Earning Assets               |   |                                    | 1,708 |   |   | (452 | ) |   | 2,160 |   |   | 2,226 |   |   | 1,130 |   |   | 1,096 |   |
| Change                  in Interest Bearing Liabilities          |   |                                    | 1,761 |   |   | (1,060 | ) |   | 2,821 |   |   | 1,980 |   |   | 267 |   |   | 1,713 |   |
| Change                  in Net Interest Income                   |   | $                                       | (53 | ) | $ | 608 |   | $ | (661 | ) | $ | 246 |   | $ | 863 |   | $ | (617 | ) |
|                                                             |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

**Provision      for Loan Losses**

----

*Table          of Contents*

**Liquidity**

----

*Table          of Contents*

**OFF-BALANCE        SHEET ARRANGEMENTS**

----

*Table          of Contents*

**CONTRACTUAL        OBLIGATIONS**

----

*Table          of Contents*

***Quarterly        Financial Trends***

|                  **2006**             |   |                                                                         |   |   |         |   |   |         |   |   |         |   |   |                          |
|--------------------------------------------|--------|-------------------------------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|--------------------------|
|                                       |   | First                                                                   |   |   | Second  |   |   | Third   |   |   | Fourth  |   |   | Year                     |
|                                            |   | Quarter                                                                 |   |   | Quarter |   |   | Quarter |   |   | Quarter |   |   | to                  Date |
| Interest                  Income           | $      | 5,717                                                                   |   | $      | 5,844   |   | $      | 6,074   |   | $      | 6,073   |   | $      | 23,708                   |
| Interest                  Expense          |   | 2,337                                                                   |   |   | 2,444   |   |   | 2,686   |   |   | 2,739   |   |   | 10,206                   |
| Net                  Interest Income       |   | 3,380                                                                   |   |   | 3,400   |   |   | 3,388   |   |   | 3,334   |   |   | 13,502                   |
| Provision                  for Loan Losses |   | 60                                                                      |   |   | 60      |   |   | 90      |   |   | 265     |   |   | 475                      |
| Non-interest                  Income       |   | 611                                                                     |   |   | 593     |   |   | 618     |   |   | 639     |   |   | 2,462                    |
| Non-interest                  Expense      |   | 2,689                                                                   |   |   | 2,776   |   |   | 2,670   |   |   | 2,581   |   |   | 10,716                   |
| Income                  Taxes              |   | 317                                                                     |   |   | 282     |   |   | 321     |   |   | 274     |   |   | 1,194                    |
| Net                  Income                | $      | 925                                                                     |   | $      | 875     |   | $      | 925     |   | $      | 854     |   | $      | 3,579                    |
| Per                  common share:         |   |                                                                    |   |   |    |   |   |    |   |   |    |   |   |                     |
| Basic                                      | $      | 0.44                                                                    |   | $      | 0.41    |   | $      | 0.44    |   | $      | 0.40    |   | $      | 1.69                     |
| Diluted                                    |   | 0.44                                                                    |   |   | 0.41    |   |   | 0.44    |   |   | 0.40    |   |   | 1.69                     |
| Cash                  Dividends            | $      | 0.18                                                                    |   | $      | 0.18    |   | $      | 0.18    |   | $      | 0.18    |   | $      | 0.72                     |
|                                       |   |                                                                    |   |   |    |   |   |    |   |   |    |   |   |                     |
|   **2005**                       |   |                                                                         |   |   |         |   |   |    |   |   |         |   |   |                          |
|                                            |   | First            |   |   | Second  |   |   | Third   |   |   | Fourth  |   |   | Year                     |
|                                            |   | Quarter                                                                 |   |   | Quarter |   |   | Quarter |   |   | Quarter |   |   | to                  Date |
| Interest                  Income           | $      | 5,153                                                                   |   | $      | 5,413   |   | $      | 5,659   |   | $      | 5,775   |   | $      | 22,000                   |
| Interest                  Expense          |   | 1,835                                                                   |   |   | 2,003   |   |   | 2,270   |   |   | 2,337   |   |   | 8,445                    |
| Net                  Interest Income       |   | 3,318                                                                   |   |   | 3,410   |   |   | 3,389   |   |   | 3,438   |   |   | 13,555                   |
| Provision                  for Loan Losses |   | 90                                                                      |   |   | 90      |   |   | 60      |   |   | 60      |   |   | 300                      |
| Non-interest                  Income       |   | 606                                                                     |   |   | 589     |   |   | 642     |   |   | 578     |   |   | 2,415                    |
| Non-interest                  Expense      |   | 2,843                                                                   |   |   | 2,781   |   |   | 2,876   |   |   | 3,127   |   |   | 11,627                   |
| Income                  Taxes              |   | 100                                                                     |   |   | 279     |   |   | 267     |   |   | 169     |   |   | 815                      |
| Net                  Income                | $      | 891                                                                     |   | $      | 849     |   | $      | 828     |   | $      | 660     |   | $      | 3,228                    |
| Per                  common share:         |   |                                                                    |   |   |    |   |   |    |   |   |    |   |   |                     |
| Basic                                      | $      | 0.42                                                                    |   | $      | 0.40    |   | $      | 0.39    |   | $      | 0.32    |   | $      | 1.53                     |
| Diluted                                    |   | 0.42                                                                    |   |   | 0.40    |   |   | 0.39    |   |   | 0.31    |   |   | 1.52                     |
| Cash                  Dividends            | $      | -                                                                       |   | $      | 0.33    |   | $      | 0.18    |   | $      | 0.18    |   | $      | 0.69                     |

----

*Table          of Contents*

**      Item        7A.        Quantitative and Qualitative Disclosures About Market        Risk.**

**      **

** **

** **

----

*Table            of Contents*

**Item        8. Financial Statements        and Supplementary Data.**

**BRITTON        & KOONTZ CAPITAL CORPORATION**

**AND        SUBSIDIARIES**

**CONSOLIDATED        FINANCIAL STATEMENTS**

**DECEMBER        31, 2006, 2005 AND 2004**

----

*Table            of Contents*

|                                                                                                                                                                                      |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                      |        |
|                                                                                                                                                                                      |   |
|                                                                                                                                                                                      |   |
| Audited                  Financial Statements:                                                                                                                                            |   |
|                                                                                                                                                                                      |   |
| Report                  of Independent Registered Public Accounting                  Firm                                                                                                 | F-1    |
|                                                                                                                                                                                      |   |
| Consolidated                  Balance Sheets December 31, 2006 and                  2005                                                                                                  | F-2    |
|                                                                                                                                                                                      |   |
|  Consolidated                  Statements of Income for the years                  ended December 31, 2006, 2005 and 2004                                                            | F-4    |
|                                                                                                                                                                                           |   |
| Consolidated                  Statements of Changes in Stockholders’                  Equity for                  the years ended December 31, 2006, 2005 and                  2004 | F-6    |
|                                                                                                                                                                                      |   |
| Consolidated                  Statements of Cash Flows for the years                  ended December 31, 2006, 2005 and 2004                                                              | F-7    |
|                                                                                                                                                                                           |        |
| Notes                  to the Consolidated Financial                  Statements                                                                                                          | F-9    |
|                                                                                                                                                                                      |   |
|                                                                                                                                                                                      |   |
|                                                                                                                                                                                      |   |
|                                                                                                                                                                                      |   |

----

*Table            of Contents*

Report        of Independent Registered Public Accounting        Firm

----

*Table            of Contents*

**BRITTON&KOONTZ        CAPITAL CORPORATION AND        SUBSIDIARIES**

**ASSETS**

|                                                                                                                                                                                                                            |   | 2006   |        | 2005   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|
|                                                                                                                                                                                                                            |   |   |        |   |   |
| **ASSETS:**                                                                                                                                                                                                                     |   |   |        |   |   |
| Cash                  and Due from Banks:                                                                                                                                                                                       |   |   |        |   |   |   |   |
| Non-interest                  bearing                                                                                                                                                                                           |   | $      | 6,254,364   |   | $      | 8,553,139 |   |
| Interest                  bearing                                                                                                                                                                                               |   |   | 317,799     |   |   | 1,272,320 |   |
|                                                                                                                                                                                                                            |   |   |        |   |   |   |   |
| Total                  Cash and Due from Banks                                                                                                                                                                                  |   |   | 6,572,163   |   |   | 9,825,459 |   |
|                                                                                                                                                                                                                            |   |   |        |   |   |   |   |
| Federal                  funds sold                                                                                                                                                                                             |   |   | 304,569     |   |   | 401,138 |   |
| Investment                  Securities:                                                                                                                                                                                         |   |   |        |   |   |   |   |
| Held-to-maturity                  (market value, in 2006 and 2005, of $39,525,495 and $39,015,853,                  respectively)                                                                                               |   |   | 38,610,920  |   |   | 37,994,043 |   |
| Available-for-sale                  (amortized cost, in 2006 and 2005, of $65,580,510 and $79,902,610,                  respectively)                                                                                           |   |   | 64,419,428  |   |   | 78,287,012 |   |
| Equity                  securities                                                                                                                                                                                              |   |   | 4,339,700   |   |   | 5,501,700 |   |
|                      Loans, less unearned income of $122 in 2006 and $794 in 2005, and                  allowance for loan losses of $2,344,434 in 2006 and $2,377,840                  in                  2005 |   |   | 241,190,049 |   |   | 242,534,011 |   |
| Loans                  held-for-sale                                                                                                                                                                                            |   |   | 54,810      |   |   | 171,200 |   |
| Bank                  premises and equipment, net                                                                                                                                                                               |   |   | 7,719,278   |   |   | 8,046,668 |   |
| Other                  real estate, net                                                                                                                                                                                         |   |   | 1,256,611   |   |   | 1,470,584 |   |
| Accrued                  interest receivable                                                                                                                                                                                    |   |   | 2,437,387   |   |   | 2,258,225 |   |
| Cash                  surrender value of life insurance                                                                                                                                                                         |   |   | 973,212     |   |   | 936,378 |   |
| Core                  deposits, net                                                                                                                                                                                             |   |   | 773,275     |   |   | 880,890 |   |
| Other                  assets                                                                                                                                                                                                   |   |   | 666,839     |   |   | 952,721 |   |
|                                                                                                                                                                                                                            |   |   |        |   |   |   |   |
| **TOTAL                  ASSETS**                                                                                                                                                                                               |   | $      | 369,318,241 |   | $      | 389,260,029 |   |
|                                                                                                                                                                                                                            |   |   |        |   |   |   |   |

----

*Table            of Contents*

**LIABILITIES        AND STOCKHOLDERS' EQUITY**

|                                                                                                                                                                                                                                                                                           |   | 2006   |        | 2005   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|
|                                                                                                                                                                                                                                                                                           |   |   |        |   |   |
| **LIABILITIES:**                                                                                                                                                                                                                                                                               |   |   |        |   |   |
| Deposits:                                                                                                                                                                                                                                                                                      |   |   |        |   |   |   |   |
| Non-interest                  bearing                                                                                                                                                                                                                                                          |   | $      | 50,345,279  |   | $      | 51,466,230 |   |
| Interest                  bearing                                                                                                                                                                                                                                                              |   |   | 203,411,996 |   |   | 205,910,680 |   |
| Total                  Deposits                                                                                                                                                                                                                                                                |   |   | 253,757,275 |   |   | 257,376,910 |   |
|                                                                                                                                                                                                                                                                                           |   |   |        |   |   |   |   |
| Securities                  sold under repurchase agreements                                                                                                                                                                                                                                   |   |   | 8,149,016   |   |   | 8,032,721 |   |
| Federal                  Home Loan Bank advances                                                                                                                                                                                                                                               |   |   | 65,667,972  |   |   | 84,196,067 |   |
| Junior                  subordinated debentures                                                                                                                                                                                                                                                |   |   | 5,155,000   |   |   | 5,155,000 |   |
| Accrued                  interest payable                                                                                                                                                                                                                                                      |   |   | 1,786,288   |   |   | 1,438,836 |   |
| Advances                  from borrowers for taxes and insurance                                                                                                                                                                                                                               |   |   | 401,678     |   |   | 437,222 |   |
| Accrued                  taxes and other liabilities                                                                                                                                                                                                                                           |   |   | 804,124     |   |   | 1,363,115 |   |
| Total                  Liabilities                                                                                                                                                                                                                                                             |   |   | 335,721,353 |   |   | 357,999,871 |   |
|                                                                                                                                                                                                                                                                                           |   |   |        |   |   |   |   |
|                                                                                                                                                                                                                                                                                           |   |   |        |   |   |   |   |
| **STOCKHOLDERS'                  EQUITY:**                                                                                                                                                                                                                                                     |   |   |        |   |   |   |   |
| Common                  stock, $2.50 par value per share; 12,000,000 shares authorized;                  2,132,466                  and 2,130,816 issued and 2,117,966 and 2,116,316 outstanding, for                  December                  31, 2006 and December 31, 2005, respectively. |   |   | 5,331,165   |   |   | 5,327,040 |   |
| Additional                  paid-in capital                                                                                                                                                                                                                                                    |   |   | 7,295,235   |   |   | 7,254,113 |   |
| Retained                  earnings                                                                                                                                                                                                                                                             |   |   | 22,003,063  |   |   | 19,949,100 |   |
| Accumulated                  other comprehensive income                                                                                                                                                                                                                                        |   |   | (775,200    | )      |   | (1,012,720 | ) |
|                                                                                                                                                                                                                                                                                           |   |   | 33,854,263  |   |   | 31,517,533 |   |
| Less:                  Treasury stock, 14,500 shares, at cost                                                                                                                                                                                                                                  |   |   | (257,375    | )      |   | (257,375 | ) |
| Total                  Stockholders' Equity                                                                                                                                                                                                                                                    |   |   | 33,596,888  |   |   | 31,260,158 |   |
|                                                                                                                                                                                                                                                                                           |   |   |        |   |   |   |   |
| **TOTAL                  LIABILITIES AND STOCKHOLDERS' EQUITY**                                                                                                                                                                                                                                |   | $      | 369,318,241 |   | $      | 389,260,029 |   |

----

*Table            of Contents*

**BRITTON&KOONTZ        CAPITAL CORPORATION AND        SUBSIDIARIES**

|                                                                     |   | 2006   |       | 2005   |   | 2004       |   |
|--------------------------------------------------------------------------|--------|--------|------------|--------|--------|------------|--------|
|                                                                     |   |   |       |   |   |       |   |
| **INTEREST                  INCOME:**                                    |   |   |       |   |   |       |   |
| Interest                  and fees on loans                              |   | $      | 18,443,069 |   | $      | 16,101,335 |   | $ | 14,030,704 |   |
| Interest                  on investment securities:                      |   |   |       |   |   |       |   |   |   |   |
| Taxable                  interest income                                 |   |   | 3,593,781  |   |   | 4,256,926  |   |   | 4,107,372 |   |
| Exempt                  from federal income taxes                        |   |   | 1,641,361  |   |   | 1,634,084  |   |   | 1,633,638 |   |
| Other                  interest income                                   |   |   | 29,672     |   |   | 7,876      |   |   | 2,598 |   |
|                                                                     |   |   |       |   |   |       |   |   |   |   |
| Total                  Interest Income                                   |   |   | 23,707,883 |   |   | 22,000,221 |   |   | 19,774,312 |   |
|                                                                     |   |   |       |   |   |       |   |   |   |   |
| **INTEREST                  EXPENSE:**                                   |   |   |       |   |   |       |   |   |   |   |
| Interest                  on deposits                                    |   |   | 6,468,890  |   |   | 4,285,526  |   |   | 3,337,903 |   |
| Interest                  on Federal Home Loan Bank advances             |   |   | 2,915,388  |   |   | 3,422,399  |   |   | 2,667,895 |   |
| Interest                  on federal funds purchased                     |   |   | -          |   |   | 190,594    |   |   | 77,662 |   |
| Interest                  on trust preferred securities                  |   |   | 417,930    |   |   | 327,120    |   |   | 235,195 |   |
| Interest                  on securities sold under repurchase agreements |   |   | 403,863    |   |   | 219,422    |   |   | 146,633 |   |
|                                                                     |   |   |       |   |   |       |   |   |   |   |
| Total                  Interest Expense                                  |   |   | 10,206,071 |   |   | 8,445,061  |   |   | 6,465,288 |   |
|                                                                     |   |   |       |   |   |       |   |   |   |   |
| **NET                  INTEREST INCOME**                                 |   |   | 13,501,812 |   |   | 13,555,160 |   |   | 13,309,024 |   |
|                                                                     |   |   |       |   |   |       |   |   |   |   |
| **PROVISION                  FOR LOAN LOSSES**                           |   |   | 475,000    |   |   | 300,000    |   |   | 390,000 |   |
|                                                                     |   |   |       |   |   |       |   |   |   |   |
| **NET                  INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES** |   |   | 13,026,812 |   |   | 13,255,160 |   |   | 12,919,024 |   |
|                                                                     |   |   |       |   |   |       |   |   |   |   |
| **OTHER                  INCOME:**                                       |   |   |       |   |   |       |   |   |   |   |
| Service                  charges on deposit accounts                     |   |   | 1,430,164  |   |   | 1,388,327  |   |   | 1,350,548 |   |
| Income                  from fiduciary activities                        |   |   | 38,202     |   |   | 41,038     |   |   | 43,547 |   |
| Income                  from investment activities                       |   |   | 179,457    |   |   | 201,890    |   |   | 210,523 |   |
| Net                  gain on sales of loans                              |   |   | 313,327    |   |   | 359,821    |   |   | 331,593 |   |
| Net                  gain (loss) on sale of securities                   |   |   | (30,481    | )      |   | -          |   |   | - |   |
| Net                  gain (loss) on sales of premises and equipment      |   |   | -          |   |   | (36,612    | )      |   | 175,091 |   |
| Other                                                                    |   |   | 531,124    |   |   | 463,151    |   |   | 566,484 |   |
|                                                                     |   |   |       |   |   |       |   |   |   |   |
| Total                  Other Income                                      |   |   | 2,461,793  |   |   | 2,417,615  |   |   | 2,677,786 |   |
| Income                  before Other Expenses                            |   |   | 15,488,605 |   |   | 15,672,775 |   |   | 15,596,810 |   |
|                                                                     |   |   |       |   |   |       |   |   |   |   |

----

*Table            of Contents*

|                                                  |   | 2006   |       | 2005   |   | 2004       |   |
|-------------------------------------------------------|--------|--------|------------|--------|--------|------------|--------|
|                                                  |   |   |       |   |   |       |   |
| **OTHER                  EXPENSES:**                  |   |   |       |   |   |       |   |
| Salaries                                              |   |   | 5,003,831  |   |   | 5,863,029  |   |   | 6,060,543 |   |
| Employee                  benefits                    |   |   | 747,685    |   |   | 872,998    |   |   | 870,638 |   |
| Director                  fees                        |   |   | 198,012    |   |   | 208,087    |   |   | 203,348 |   |
| Net                  occupancy expense                |   |   | 977,511    |   |   | 912,357    |   |   | 927,430 |   |
| Equipment                  expense                    |   |   | 1,102,240  |   |   | 1,109,984  |   |   | 979,139 |   |
| Other                     real estate, net            |   |   | 76,365     |   |   | 71,895     |   |   | 218,510 |   |
| FDIC                  assessment                      |   |   | 32,526     |   |   | 31,160     |   |   | 34,358 |   |
| Advertising                                           |   |   | 207,834    |   |   | 198,233    |   |   | 259,284 |   |
| Stationery                  and supplies              |   |   | 188,057    |   |   | 182,497    |   |   | 233,379 |   |
| Amortization                                          |   |   | 107,616    |   |   | 107,616    |   |   | 107,616 |   |
| Audit                  expense                        |   |   | 186,485    |   |   | 192,996    |   |   | 165,074 |   |
| Other                                                 |   |   | 1,887,878  |   |   | 1,879,189  |   |   | 1,913,037 |   |
|                                                  |   |   |       |   |   |       |   |   |   |   |
| Total                  Other Expenses                 |   |   | 10,716,040 |   |   | 11,630,041 |   |   | 11,972,356 |   |
|                                                  |   |   |       |   |   |       |   |   |   |   |
| **INCOME                  BEFORE INCOME TAX EXPENSE** |   |   | 4,772,565  |   |   | 4,042,734  |   |   | 3,624,454 |   |
|                                                  |   |   |       |   |   |       |   |   |   |   |
| **INCOME                  TAX EXPENSE**               |   |   | 1,193,982  |   |   | 815,094    |   |   | 780,245 |   |
|                                                  |   |   |       |   |   |       |   |   |   |   |
| **NET                  INCOME**                       |   | $      | 3,578,583  |   | $      | 3,227,640  |   | $ | 2,844,209 |   |
|                                                  |   |   |       |   |   |       |   |   |   |   |
| **PER                  SHARE DATA:**                  |   |   |       |   |   |       |   |   |   |   |
| Basic                  earnings per share             |   | $      | 1.69       |   | $      | 1.53       |   | $ | 1.35 |   |
|                                                  |   |   |       |   |   |       |   |   |   |   |
| Basic                  weighted shares outstanding    |   |   | 2,117,529  |   |   | 2,116,316  |   |   | 2,114,649 |   |
|                                                  |   |   |       |   |   |       |   |   |   |   |
| Diluted                  earnings per share           |   | $      | 1.69       |   | $      | 1.52       |   | $ | 1.34 |   |
|                                                  |   |   |       |   |   |       |   |   |   |   |
| Diluted                  weighted shares outstanding  |   |   | 2,121,846  |   |   | 2,120,951  |   |   | 2,118,181 |   |
|                                                  |   |   |       |   |   |       |   |   |   |   |
| Cash                  dividends per share             |   | $      | 0.72       |   | $      | 0.69       |   | $ | 0.64 |   |
|                                                  |   |   |       |   |   |       |   |   |   |   |

----

*Table            of Contents*

**BRITTON&KOONTZ        CAPITAL CORPORATION AND        SUBSIDIARIES**

|                                              |   |                          |      |    |   |       |   |          |      | Accumulated |   |       |   |   |       |
|---------------------------------------------------|--------|-------------------------------|-----------|---------|--------|------------|--------|---------------|-----------|-------------|--------|------------|--------|--------|------------|
|                                              |   |                          |      |    |   | Additional |   |          |      | Other       |   |       |   |   |       |
|                                              |   | Common                  Stock |      | Paid-In |   | Retained   |   | Comprehensive |      | Treasury    |   |       |   |
|                                              |   | Shares                        |      | Amount  |   | Capital    |   | Earnings      |      | Income      |   | Stock      |   | Total  |       |
| BALANCE,                  December 31,2003        |   |                          | 2,113,087 |    | $      | 5,318,968  |   | $             | 7,225,408 |        | $      | 16,690,918 |   | $      | 1,218,680  |   | $ | (257,375 | ) | $ | 30,196,599 |   |
| Comprehensive                  Income:            |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| Net                  Income                       |   |                          | -         |    |   | -          |   |          | -         |        |   | 2,844,209  |   |   | -          |   |   | - |   |   | 2,844,209 |   |
| Other                  Comprehensive Income:      |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| Change                  in fair value of          |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| available                  for sale securities,   |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| net                  of taxes of $128,353         |   |                          | -         |    |   | -          |   |          | -         |        |   | -          |   |   | (469,749   | ) |   | - |   |   | (469,749 | ) |
| Change                  in fair value of          |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| derivatives,                  net of taxes of     |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| $61,073                                           |   |                          | -         |    |   | -          |   |          | -         |        |   | -          |   |   | (102,659   | ) |   | - |   |   | (102,659 | ) |
| Total                  Comprehensive Income       |   |                          | -         |    |   | -          |   |          | -         |        |   | -          |   |   | -          |   |   | - |   |   | 2,271,801 |   |
| Cash                  dividends ($0.64 per share) |   |                          | -         |    |   | -          |   |          | -         |        |   | (1,353,409 | )      |   | -          |   |   | - |   |   | (1,353,409 | ) |
| Issuance                  of common stock         |   |                          | 3,229     |    |   | 8,072      |   |          | 28,705    |        |   | -          |   |   | -          |   |   | - |   |   | 36,777 |   |
| BALANCE,                  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                       |   |                          | -         |    |   | -          |   |          | -         |        |   | 3,227,640  |   |   | -          |   |   | - |   |   | 3,227,640 |   |
| Other                  Comprehensive Income       |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| Change                  in fair value of          |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| available                  for sale securities,   |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| net                  of taxes of $ 930,312        |   |                          | -         |    |   | -          |   |          | -         |        |   | -          |   |   | (1,563,823 | ) |   | - |   |   | (1,563,823 | ) |
| Change                  in fair value of          |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| derivatives,                  net of taxes of     |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| $56,615                                           |   |                          | -         |    |   | -          |   |          | -         |        |   | -          |   |   | (95,169    | ) |   | - |   |   | (95,169 | ) |
| Total                  Comprehensive Income       |   |                          | -         |    |   | -          |   |          | -         |        |   | -          |   |   | -          |   |   | - |   |   | 1,568,648 |   |
| Cash                  dividends ($0.69 per share) |   |                          | -         |    |   | -          |   |          | -         |        |   | (1,460,258 | )      |   | -          |   |   | - |   |   | (1,460,258 | ) |
| BALANCE,                  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                       |   |                          | -         |    |   | -          |   |          | -         |        |   | 3,578,583  |   |   | -          |   |   | - |   |   | 3,578,583 |   |
| Other                  Comprehensive Income:      |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| Change                  in fair value of          |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| available                  for sale securities,   |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| net                  of taxes of $169,535,        |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| net                  of reclassification          |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| adjustment                  of $1,875             |   |                          | -         |    |   | -          |   |          | -         |        |   | -          |   |   | 284,982    |   |   | - |   |   | 284,982 |   |
| Change                  in fair value of          |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| derivatives,                  net of taxes of     |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| $28,235,                  net of reclassification |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |
| adjustment                  of $28,605            |   |                          | -         |    |   | -          |   |          | -         |        |   | -          |   |   | (47,462    | ) |   | - |   |   | (47,462 | ) |
| Total                  Comprehensive Income       |   |                          | -         |    |   | -          |   |          | -         |        |   | -          |   |   | -          |   |   | - |   |   | 3,816,103 |   |
| Cash                  dividends ($0.72 per share) |   |                          | -         |    |   | -          |   |          | -         |        |   | (1,524,619 | )      |   | -          |   |   | - |   |   | (1,524,619 | ) |
| Issuance                  of common stock         |   |                          | 1,650     |    |   | 4,125      |   |          | 41,122    |        |   | -          |   |   | -          |   |   | - |   |   | 45,247 |   |
| BALANCE,                  December 31, 2006       |   |                          | 2,117,966 |    | $      | 5,331,165  |   | $             | 7,295,235 |        | $      | 22,003,063 |   | $      | (775,200   | ) | $ | (257,375 | ) | $ | 33,596,888 |   |
|                                              |   |                          |      |    |   |       |   |          |      |        |   |       |   |   |       |   |   |   |   |   |   |   |

----

*Table            of Contents*

**BRITTON&KOONTZ        CAPITAL CORPORATION AND        SUBSIDIARIES**

|                                                                   |   | 2006   |       | 2005   |   | 2004        |   |
|------------------------------------------------------------------------|--------|--------|------------|--------|--------|-------------|--------|
|                                                                   |   |   |       |   |   |        |   |
| **CASH                  FLOWS FROM OPERATING ACTIVITIES:**             |   |   |       |   |   |        |   |
| Net                  income                                            |   | $      | 3,578,583  |   | $      | 3,227,640   |   | $ | 2,844,209 |   |
| Adjustments                  to reconcile net income to                |   |   |       |   |   |        |   |   |   |   |
| net                  cash provided by operating activities:            |   |   |       |   |   |        |   |   |   |   |
| Deferred                  taxes                                        |   |   | (114,945   | )      |   | (264,520    | )      |   | 104,018 |   |
| Provision                  for loan losses                             |   |   | 475,000    |   |   | 300,000     |   |   | 390,000 |   |
| Provision                  for depreciation                            |   |   | 798,221    |   |   | 824,447     |   |   | 727,564 |   |
| Write-down                  of other real estate                       |   |   | 22,178     |   |   | 34,255      |   |   | 126,000 |   |
| (Gain)                  on sale of loans                               |   |   | (313,327   | )      |   | (359,821    | )      |   | (331,593 | ) |
| (Gain)                  Loss on sale of other repossessed assets       |   |   | -          |   |   | 1,500       |   |   | (193 | ) |
| (Gain)                  Loss on sale of premises and equipment         |   |   | -          |   |   | 36,612      |   |   | (175,091 | ) |
| (Gain)                  Loss on sale of securities                     |   |   | 30,480     |   |   | -           |   |   | - |   |
| (Gain)                  Loss on sale of other real estate              |   |   | (11,032    | )      |   | (3,161      | )      |   | 42,970 |   |
| Stock                  dividends received                              |   |   | (192,200   | )      |   | (181,600    | )      |   | (85,100 | ) |
| Net                  amortization (accretion) of securities            |   |   | 139,519    |   |   | 307,126     |   |   | 590,506 |   |
| Amortization                  of acquisition premium                   |   |   | 107,616    |   |   | 107,616     |   |   | 107,616 |   |
| Net                  change in:                                        |   |   |       |   |   |        |   |   |   |   |
| Loans                  held for sale                                   |   |   | 116,390    |   |   | 1,517,138   |   |   | 1,413,668 |   |
| Accrued                  interest receivable                           |   |   | (179,162   | )      |   | (131,146    | )      |   | (31,417 | ) |
| Cash                  surrender value of life insurance                |   |   | (36,834    | )      |   | 7,103       |   |   | (38,391 | ) |
| Other                  assets                                          |   |   | 198,704    |   |   | (169        | )      |   | 320,689 |   |
| Accrued                  interest payable                              |   |   | 347,452    |   |   | 453,977     |   |   | 154,361 |   |
| Accrued                  taxes and other liabilities              |   |   | (558,993   | )      |   | 559,562     |   |   | 352,977 |   |
|                                                                   |   |   |       |   |   |        |   |   |   |   |
| Net                  Cash Provided by Operating Activities        |   |   | 4,407,650  |   |   | 6,436,559   |   |   | 6,512,793 |   |
|                                                                   |   |   |       |   |   |        |   |   |   |   |
| **CASH                  FLOWS FROM INVESTING ACTIVITIES:**             |   |   |       |   |   |        |   |   |   |   |
| (Increase)                  decrease in federal funds sold             |   |   | 96,570     |   |   | (292,107    | )      |   | (67,670 | ) |
| Proceeds                  from principal paydowns and maturities       |   |   |       |   |   |        |   |   |   |   |
| of                  investment securities held-to-maturity             |   |   | 1,149,236  |   |   | 1,759,528   |   |   | 2,813,609 |   |
| Proceeds                  from principal paydowns and maturities of    |   |   |       |   |   |        |   |   |   |   |
| investment                  securities available-for-sale              |   |   | 19,446,947 |   |   | 24,938,759  |   |   | 25,139,010 |   |
| Proceeds                  from redemption of Federal Home Loan         |   |   |       |   |   |        |   |   |   |   |
| Bank                  stock                                            |   |   | 1,354,200  |   |   | 603,000     |   |   | - |   |
| Purchases                  of investment securities held-to-maturity   |   |   | (1,774,002 | )      |   | -           |   |   | (473,892 | ) |
| Purchases                  of investment securities available-for-sale |   |   | (5,286,957 | )      |   | (14,029,560 | )      |   | (24,465,532 | ) |
| Purchase                  of other equity securities                   |   |   | -          |   |   | (371,500    | )      |   | (129,700 | ) |
| Net                  (increase)/decrease in loans                      |   |   | 1,013,155  |   |   | (26,509,385 | )      |   | (13,171,667 | ) |
| Proceeds                  from sales of other repossessed assets       |   |   | 22,626     |   |   | 30,565      |   |   | - |   |
| Proceeds                  from sale of other real estate               |   |   | 334,461    |   |   | 890,709     |   |   | 1,260,075 |   |
| Purchases                  of premises and equipment                   |   |   | (470,831   | )      |   | (641,972    | )      |   | (1,444,730 | ) |
| Proceeds                  from sales of premises and equipment         |   |   | -          |   |   | -           |   |   | 775,000 |   |
|                                                                   |   |   |       |   |   |        |   |   |   |   |
| Net                  Cash Provided by/ (Used in) Investing Activities  |   |   | 15,885,405 |   |   | (13,621,963 | )      |   | (9,765,497 | ) |

----

*Table            of Contents*

**BRITTON        & KOONTZ CAPITAL CORPORATION AND SUBSIDIARIES**

|                                                                     |   | 2006   |        | 2005   |   | 2004        |   |
|--------------------------------------------------------------------------|--------|--------|-------------|--------|--------|-------------|--------|
| **CASH                  FLOWS FROM FINANCING ACTIVITIES:**               |   |   |        |   |   |        |   |
| Net                  increase (decrease) in customer deposits            |   |   | (4,961,586  | )      |   | 33,069,981  |   |   | (9,220,853 | ) |
| Net                  increase (decrease) in brokered deposits            |   |   | 1,341,951   |   |   | (1,981,000  | )      |   | 2,575,000 |   |
| Net                  increase (decrease) in federal funds purchased      |   |   | -           |   |   | (6,435,000  | )      |   | 1,885,000 |   |
| Net                  increase (decrease) in Federal Home Loan Bank       |   |   |        |   |   |        |   |   |   |   |
| advances                                                                 |   |   | (18,528,095 | )      |   | (12,726,804 | )      |   | 9,347,110 |   |
| Net                  increase (decrease) in securities sold under        |   |   |        |   |   |        |   |   |   |   |
| repurchase                  agreements                                   |   |   | 116,295     |   |   | (70,660     | )      |   | (1,831,919 | ) |
| Increase                  (decrease) in advances from borrowers          |   |   |        |   |   |        |   |   |   |   |
| for                  taxes and insurance                                 |   |   | (35,544     | )      |   | 37,779      |   |   | 32,068 |   |
| Cash                  dividends paid                                     |   |   | (1,524,619  | )      |   | (1,460,258  | )      |   | (1,353,409 | ) |
| Cash                  received from stock options exercised              |   |   | 45,247      |   |   | -           |   |   | 36,777 |   |
|                                                                     |   |   |        |   |   |        |   |   |   |   |
| Net                  Cash Provided by/(Used in) Financing Activities     |   |   | (23,546,351 | )      |   | 10,434,038  |   |   | 1,469,774 |   |
|                                                                     |   |   |        |   |   |        |   |   |   |   |
| **NET                  INCREASE/(DECREASE) IN CASH AND DUE**             |   |   |        |   |   |        |   |   |   |   |
| **FROM                  BANKS**                                          |   |   | (3,253,296  | )      |   | 3,248,634   |   |   | (1,782,930 | ) |
|                                                                     |   |   |        |   |   |        |   |   |   |   |
| **CASH                  AND DUE FROM BANKS AT BEGINNING OF YEAR**        |   |   | 9,825,459   |   |   | 6,576,825   |   |   | 8,359,755 |   |
|                                                                     |   |   |        |   |   |        |   |   |   |   |
| **CASH                  AND DUE FROM BANKS AT END OF YEAR**              |   | $      | 6,572,163   |   | $      | 9,825,459   |   | $ | 6,576,825 |   |
|                                                                     |   |   |        |   |   |        |   |   |   |   |
|                                                                     |   |   |        |   |   |        |   |   |   |   |
| **SUPPLEMENTAL                  DISCLOSURES OF CASH FLOW**               |   |   |        |   |   |        |   |   |   |   |
| **INFORMATION:**                                                         |   |   |        |   |   |        |   |   |   |   |
| Cash                  payments for:                                      |   |   |        |   |   |        |   |   |   |   |
| Income                  taxes                                            |   | $      | 1,623,914   |   | $      | 579,504     |   | $ | 644,624 |   |
|                                                                     |   |   |        |   |   |        |   |   |   |   |
| Interest                  on deposits and borrowings                     |   | $      | 9,858,619   |   | $      | 7,991,084   |   | $ | 6,310,927 |   |
|                                                                     |   |   |        |   |   |        |   |   |   |   |
| **SCHEDULE                  OF NONCASH INVESTING AND**                   |   |   |        |   |   |        |   |   |   |   |
| **FINANCING                  ACTIVITIES:**                               |   |   |        |   |   |        |   |   |   |   |
| Transfers                  to other real estate/other repossessed assets |   | $      | 169,134     |   | $      | 1,072,050   |   | $ | 1,008,255 |   |
|                                                                     |   |   |        |   |   |        |   |   |   |   |
| Change                  in unrealized (gains) losses on                  |   |   |        |   |   |        |   |   |   |   |
| securities                  available-for-sale                           |   | $      | 454,517     |   | $      | (2,494,135  | )      | $ | (598,102 | ) |
|                                                                     |   |   |        |   |   |        |   |   |   |   |
| Change                  in the deferred tax effect in unrealized         |   |   |        |   |   |        |   |   |   |   |
| gains                  (losses) on securities available-for-sale         |   | $      | 169,535     |   | $      | (930,312    | )      | $ | (128,353 | ) |
|                                                                     |   |   |        |   |   |        |   |   |   |   |
| Change                  in unrealized gains on derivatives               |   | $      | (75,697     | )      | $      | (151,784    | )      | $ | (163,732 | ) |
|                                                                     |   |   |        |   |   |        |   |   |   |   |
| Change                  in the deferred tax effect in                    |   |   |        |   |   |        |   |   |   |   |
| unrealized                  gains on derivatives                         |   | $      | (28,235     | )      | $      | (56,615     | )      | $ | (61,073 | ) |

----

*Table            of Contents*

**NOTE        A.**
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES**

**Principles        of Consolidation**

**Nature        of Operations**

**Use        of Estimates**

----

*Table            of Contents*

**NOTE        A.**
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**

**Investment        Securities**

**Loans**

**Loans        Held-for-Sale**

----

*Table            of Contents*

**NOTE        A.**
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**

**Allowance        for Loan Losses**

**Bank        Premises and Equipment**

**Other        Real Estate**

**Compensated        Absences**

----

*Table            of Contents*

**NOTE        A.**
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**

**Income        Taxes**

**Earnings        Per Share**

|                                                          |   | 2006   |      | 2005   |   | 2004      |   |
|---------------------------------------------------------------|--------|--------|-----------|--------|--------|-----------|--------|
| Basic                  weighted average shares outstanding    |   |   | 2,117,529 |   |   | 2,116,316 |   |   | 2,114,649 |   |
| Dilutive                  effect of stock options             |   |   | 4,317     |   |   | 4,635     |   |   | 3,532 |   |
|                                                          |   |   |      |   |   |      |   |   |   |   |
| Dilutive                  weighted average shares outstanding |   |   | 2,121,846 |   |   | 2,120,951 |   |   | 2,118,181 |   |
| Net                  income                                   |   | $      | 3,578,583 |   | $      | 3,227,640 |   | $ | 2,844,209 |   |
| Net                  income per share-basic                   |   | $      | 1.69      |   | $      | 1.53      |   | $ | 1.35 |   |
| Net                  income per share-dilutive                |   | $      | 1.69      |   | $      | 1.52      |   | $ | 1.34 |   |

----

*Table            of Contents*

**NOTE        A.**
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**

**Off-Balance-Sheet        Financial Instruments**

**Statement        of Cash Flows**

**Advertising        Costs**

**Interest-Rate        Cap Agreements**

**Interest-Rate        Swap Agreements**

**Core        Deposits**

----

*Table            of Contents*

**NOTE        A.**
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**

**Stock        Compensation Plans**

*,*

**Comprehensive        Income**

**Recent        Accounting Pronouncements**

----

*Table            of Contents*

**NOTE        A.**
**SUMMARY        OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**

**    Reclassifications**

----

*Table            of Contents*

**NOTE        B.**
**INVESTMENT        SECURITIES**

|                                        |   |      |       | Gross      |   | Gross      |   |   |    |
|---------------------------------------------|--------|-----------|------------|------------|--------|------------|--------|--------|---------|
|                                        |   | Amortized |       | Unrealized |   | Unrealized |   | Fair   |    |
|                                        |   | Cost      |       | Gains      |   | Losses     |   | Value  |    |
| Obligations                  of State and   |   |      |       |       |   |       |   |   |    |   |   |   |   |
| Political                  Subdivisions     |   | $         | 36,175,580 |       | $      | 1,008,011  |   | $      | (76,999 | ) | $ | 37,106,592 |   |
|                                        |   |      |       |       |   |       |   |   |    |   |   |   |   |
| Mortgage-Backed                  Securities |   |      | 2,435,340  |       |   | 2,005      |   |   | (18,442 | ) |   | 2,418,903 |   |
|                                        |   | $         | 38,610,920 |       | $      | 1,010,016  |   | $      | (95,441 | ) | $ | 39,525,495 |   |

|                                        |   |      |       | Gross      |   | Gross      |   |   |       |
|---------------------------------------------|--------|-----------|------------|------------|--------|------------|--------|--------|------------|
|                                        |   | Amortized |       | Unrealized |   | Unrealized |   | Fair   |       |
|                                        |   | Cost      |       | Gains      |   | Losses     |   | Value  |       |
|                                        |   |      |       |       |   |       |   |   |       |
| Mortgage-Backed                  Securities |   | $         | 59,083,551 |       | $      | 35,224     |   | $      | (1,138,712 | ) | $ | 57,980,063 |   |
| Agency                  Obligations         |   |      | 6,496,959  |       |   | -          |   |   | (57,594    | ) |   | 6,439,365 |   |
|                                        |   | $         | 65,580,510 |       | $      | 35,224     |   | $      | (1,196,306 | ) | $ | 64,419,428 |   |

|                                        |   |      |       | Gross      |   | Gross      |   |   |                              |
|---------------------------------------------|--------|-----------|------------|------------|--------|------------|--------|--------|-----------------------------------|
|                                        |   | Amortized |       | Unrealized |   | Unrealized |   | Fair   |                              |
|                                        |   | Cost      |       | Gains      |   | Losses     |   | Value  |                              |
|                                        |   |      |       |       |   |       |   |   |                              |
| Obligations                  of State and   |   |      |       |       |   |       |   |   |                              |   |   |   |   |
| Political                  Subdivisions     |   | $         | 34,904,765 |       | $      | 1,125,045  |   | $      | (81,676                           | ) | $ | 35,948,134 |   |
| Mortgage-Backed                  Securities |   |      | 3,089,278  |       |   | 8,139      |   |   | (29,698)                  (29,698 | ) |   | 3,067,719 |   |
|                                        |   | $         | 37,994,043 |       | $      | 1,133,184  |   | $      | (111,374                          | ) | $ | 39,015,853 |   |

----

*Table            of Contents*

**NOTE        B.**
**INVESTMENT        SECURITIES (Continued)**

|                                        |   |           |       | Gross      |   | Gross      |   |   |       |
|---------------------------------------------|--------|-----------|------------|------------|--------|------------|--------|--------|------------|
|                                        |   | Amortized |       | Unrealized |   | Unrealized |   | Fair   |       |
|                                        |   | Cost      |       | Gains      |   | Losses     |   | Value  |       |
|                                        |   |      |       |       |   |       |   |   |       |   |   |   |   |
| Mortgage-Backed                  Securities |   | $         | 73,407,065 |       | $      | 170,203    |   | $      | (1,692,906 | ) | $ | 71,884,362 |   |
| Agency                  Obligations         |   |      | 6,495,545  |       |   | -          |   |   | (92,895    | ) |   | 6,402,650 |   |
|                                        |   | $         | 79,902,610 |       | $      | 170,203    |   | $      | (1,785,801 | ) | $ | 78,287,012 |   |

|                                    |   | Less                  than 12 Months |      | 12                  Months or More |   | Total   |   |
|-----------------------------------------|--------|--------------------------------------|-----------|------------------------------------|--------|---------|--------|
|                                    |   | Fair                                 |      | Unrealized                         |   | Fair    |   | Unrealized |   | Fair |   | Unrealized |   |
|                                    |   | Value                                |      | Loss                               |   | Value   |   | Loss |   | Value |   | Loss |   |
| Held-to-Maturity:                       |   |                                 |      |                               |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations                  of         |   |                                 |      |                               |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| State                  and Political    |   |                                 |      |                               |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subdivisions                  (5)       |   | $                                    | 1,433,200 |                               | $      | (30,881 | )      | $ | 955,936 |   | $ | (46,118 | ) | $ | 2,389,136 |   | $ | (76,999 | ) |
| Mortgaged-backed                        |   |                                 |      |                               |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities                  (1)         |   |                                 | -         |                               |   | -       |   |   | 1,744,972 |   |   | (18,442 | ) |   | 1,744,972 |   |   | (18,442 | ) |
|                                    |   | $                                    | 1,433,200 |                               | $      | (30,881 | )      | $ | 2,700,908 |   | $ | (64,560 | ) | $ | 4,134,108 |   | $ | (95,441 | ) |
|                                    |   |                                 |      |                               |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available                  for Sale:    |   |                                 |      |                               |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgaged-backed                        |   |                                 |      |                               |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities                  (26)        |   | $                                    | 1,756,255 |                               | $      | (18,286 | )      | $ | 50,035,263 |   | $ | (1,120,425 | ) | $ | 51,791,518 |   | $ | (1,138,711 | ) |
| Agency                  Obligations (3) |   |                                 | -         |                               |   | -       |   |   | 6,439,365 |   |   | (57,594 | ) |   | 6,439,365 |   |   | (57,594 | ) |
|                                    |   | $                                    | 1,756,255 |                               | $      | (18,286 | )      | $ | 56,474,628 |   | $ | (1,178,019 | ) | $ | 58,230,883 |   | $ | (1,196,305 | ) |

----

*Table            of Contents*

**NOTE        B.**
**INVESTMENT        SECURITIES (Continued)**

|                                            |   | Less                    than 12 Months |       | 12                    Months or More |   | Total      |   |
|-------------------------------------------------|--------|----------------------------------------|------------|--------------------------------------|--------|------------|--------|
|                                            |   | Fair                                   |       | Unrealized                           |   | Fair       |   | Unrealized |   | Fair |   | Unrealized |   |
|                                            |   | Value                                  |       | Loss                                 |   | Value      |   | Loss |   | Value |   | Loss |   |
| Held-to-Maturity:                               |   |                                   |       |                                 |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations                    of               |   |                                   |       |                                 |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| State                    and Political          |   |                                   |       |                                 |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subdivisions                    (7)             |   | $                                      | 802,424    |                                 | $      | (15,240    | )      | $ | 935,988 |   | $ | (66,435 | ) | $ | 1,738,412 |   | $ | (81,675 | ) |
| Mortgaged-backed                                |   |                                   |       |                                 |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities                    (1)               |   |                                   | 2,180,195  |                                 |   | (29,698    | )      |   | - |   |   | - |   |   | 2,180,195 |   |   | (29,698 | ) |
|                                            |   | $                                      | 2,982,619  |                                 | $      | (44,938    | )      | $ | 935,988 |   | $ | (66,435 | ) | $ | 3,918,607 |   | $ | (111,373 | ) |
|                                            |   |                                   |       |                                 |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available                    for Sale:          |   |                                   |       |                                 |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency                    Obligations (3)  |   | $                                      | 6,402,650  |                                 | $      | (92,895    | )      | $ | - |   | $ | - |   | $ | 6,402,650 |   | $ | (92,895 | ) |
| Mortgaged-backed                                |   |                                   |       |                                 |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities                    (33)              |   |                                   | 46,386,361 |                                 |   | (982,002   | )      |   | 18,643,555 |   |   | (710,904 | ) |   | 65,029,916 |   |   | (1,692,906 | ) |
|                                            |   | $                                      | 52,789,011 |                                 | $      | (1,074,897 | )      | $ | 18,643,555 |   | $ | (710,904 | ) | $ | 71,432,566 |   | $ | (1,785,801 | ) |

----

*Table            of Contents*

**NOTE        B.**
**INVESTMENT        SECURITIES (Continued)**

|                                                     |   | Securities                  held-to-maturity   |     |
|----------------------------------------------------------|--------|------------------------------------------------|----------|
|                                                     |   | Weighted                                       |     |   |   |   |   |
|                                                     |   | Average                                        |     | Amortized |   | Market |   |
|                                                     |   | Yield                                          |     | Cost |   | Value |   |
|                                                     |   |                                           |     |   |   |   |   |
| Due                  in One Year or Less                 |   |                                           | 5.694    | % | $ | 502,693 |   | $ | 505,643 |   |
| Due                    After One Year through Five Years |   |                                           | 6.683    | % |   | 2,669,288 |   |   | 2,730,952 |   |
| Due                  After Five Years through Ten Years  |   |                                           | 6.709    | % |   | 20,195,912 |   |   | 20,697,533 |   |
| Due                  After Ten Years                     |   |                                           | 6.802    | % |   | 15,243,027 |   |   | 15,591,367 |   |
|                                                     |   |                                           |     |   |   |   |   |   |   |   |
|                                                     |   |                                           | 6.734    | % | $ | 38,610,920 |   | $ | 39,525,495 |   |
|                                                     |   |                                           |     |   |   |   |   |   |   |   |
|                                                     |   |                                           |     |   |   |   |   |   |   |   |
|                                                          |   | Securities                  available-for-sale |
|                                                          |   |                                           | Weighted |   |   |   |   |   |   |   |
|                                                          |   |                                           | Average  |   |   | Amortized |   |   | Market |   |
|                                                          |   |                                           | Yield    |   |   | Cost |   |   | Value |   |
|                                                     |   |                                           |     |   |   |   |   |   |   |   |
| Due                  in One Year or Less                 |   |                                           | 3.972    | % | $ | 5,491,106 |   | $ | 5,449,400 |   |
| Due                  After One Year through Five Years   |   |                                           | 4.020    | % |   | 3,179,457 |   |   | 3,133,185 |   |
| Due                  After Five Years through Ten Years  |   |                                           | 4.310    | % |   | 35,833,552 |   |   | 35,002,585 |   |
| Due                  After Ten Years                     |   |                                           | 4.943    | % |   | 21,076,395 |   |   | 20,834,258 |   |
|                                                     |   |                                           |     |   |   |   |   |   |   |   |
|                                                     |   |                                           | 4.472    | % | $ | 65,580,510 |   | $ | 64,419,428 |   |
|                                                     |   |                                           |     |   |   |   |   |   |   |   |

----

*Table            of Contents*

**NOTE        C.**
**LOANS**

|                                                    |   | 2006   |        | 2005   |   |
|---------------------------------------------------------|--------|--------|-------------|--------|--------|
|                                                    |   |   |        |   |   |
| Commercial,                  Financial and Agricultural |   | $      | 28,385,000  |   | $      | 32,868,000 |   |
| Real                  Estate-Construction               |   |   | 44,592,000  |   |   | 30,069,000 |   |
| Real                  Estate-Mortgage                   |   |   | 159,729,000 |   |   | 169,363,000 |   |
| Installment                                             |   |   | 10,680,000  |   |   | 12,478,000 |   |
| Overdrafts                                              |   |   | 203,000     |   |   | 306,000 |   |
|                                                    |   |   |        |   |   |   |   |
| Total                  loans                            |   | $      | 243,589,000 |   | $      | 245,084,000 |   |
|                                                    |   |   |        |   |   |   |   |

|                                    |   | 2006   |       | 2005   |   |
|-----------------------------------------|--------|--------|------------|--------|--------|
| Balance                  at January 1   |   | $      | 2,807,745  |   | $      | 2,391,668 |   |
| New                  Loans              |   |   | 1,732,202  |   |   | 1,812,367 |   |
| Repayments                              |   |   | (1,284,288 | )      |   | (1,396,290 | ) |
| Balance                  at December 31 |   | $      | 3,255,659  |   | $      | 2,807,745 |   |

----

*Table            of Contents*

**NOTE        D.**
**ALLOWANCE        FOR LOAN LOSSES**

|                                                    |   | 2006   |      | 2005   |   | 2004      |   |
|---------------------------------------------------------|--------|--------|-----------|--------|--------|-----------|--------|
|  Balance                  at January 1             |   | $      | 2,377,840 |   | $      | 2,236,778 |   | $ | 2,070,162 |   |
| Credits                  charged off:                   |   |   |      |   |   |      |   |   |   |   |
| Real                  Estate - Mortgage                 |   |   | (7,501    | )      |   | (149,502  | )      |   | (113,888 | ) |
| Commercial,                  Financial and Agricultural |   |   | (570,717  | )      |   | (53,960   | )      |   | (107,208 | ) |
| Installment                  Loans                      |   |   | (64,488   | )      |   | (47,187   | )      |   | (46,738 | ) |
| Total                  Charge-Offs                      |   |   | (642,706  | )      |   | (250,649  | )      |   | (267,834 | ) |
| Recoveries:                                             |   |   |      |   |   |      |   |   |   |   |
| Real                  Estate - Mortgage                 |   |   | 77,198    |   |   | 35,225    |   |   | 4,256 |   |
| Commercial,                  Financial and Agricultural |   |   | 25,991    |   |   | 22,520    |   |   | 23,032 |   |
| Installment                  Loans                      |   |   | 31,111    |   |   | 33,966    |   |   | 17,162 |   |
| Total                  Recoveries                       |   |   | 134,300   |   |   | 91,711    |   |   | 44,450 |   |
| Net                  Credits Charged Off                |   |   | (508,406  | )      |   | (158,938  | )      |   | (223,384 | ) |
| Provision                  for Loan Losses              |   |   | 475,000   |   |   | 300,000   |   |   | 390,000 |   |
|  Balance                  at December 31           |   | $      | 2,344,434 |   | $      | 2,377,840 |   | $ | 2,236,778 |   |

**NOTE        E.**
**LOAN        SERVICING**

**NOTE        F.**
**BANK        PREMISES AND EQUIPMENT**

|                                              |   | 2006   |       | 2005   |   |
|---------------------------------------------------|--------|--------|------------|--------|--------|
| Buildings                  and Improvements       |   | $      | 7,327,873  |   | $      | 7,292,935 |   |
| Furniture                  and Equipment          |   |   | 5,227,504  |   |   | 4,783,170 |   |
|                                              |   |   | 12,555,377 |   |   | 12,076,105 |   |
| Less:                  Accumulated Depreciation   |   |   | (5,950,652 | )      |   | (5,152,431 | ) |
| Land                                              |   |   | 1,114,553  |   |   | 1,122,994 |   |
| Bank                  Premises and Equipment, Net |   | $      | 7,719,278  |   | $      | 8,046,668 |   |

----

*Table            of Contents*

**NOTE        G.**
**TRUST        DEPARTMENT ASSETS**

**NOTE        H.**
**DEPOSITS**

|                                                  |   | 2006   |        | 2005   |   |
|-------------------------------------------------------|--------|--------|-------------|--------|--------|
| Non-Interest                  Bearing Demand Deposits |   | $      | 50,345,279  |   | $      | 51,466,230 |   |
| NOW                  Accounts                         |   |   | 24,555,009  |   |   | 23,016,487 |   |
| Money                  Market Deposit Accounts        |   |   | 37,101,457  |   |   | 36,516,395 |   |
| Savings                  Accounts                     |   |   | 18,082,839  |   |   | 23,032,910 |   |
| Certificates                  of Deposit              |   |   | 123,672,691 |   |   | 123,344,888 |   |
|                                                  |   | $      | 253,757,275 |   | $      | 257,376,910 |   |

|                                            |   | 2006   |       | 2005   |   |
|-------------------------------------------------|--------|--------|------------|--------|--------|
| Time                  Remaining Until Maturity: |   |   |       |   |   |   |   |
| Three                  Months or Less           |   | $      | 11,261,017 |   | $      | 10,061,668 |   |
| Over                  Three Through Six Months  |   |   | 15,290,171 |   |   | 11,198,948 |   |
| Over                  Six Through Twelve Months |   |   | 26,185,733 |   |   | 21,735,701 |   |
| Over                  Twelve Months             |   |   | 9,647,050  |   |   | 15,523,648 |   |
|                                            |   | $      | 62,383,971 |   | $      | 58,519,965 |   |

----

*Table            of Contents*

**NOTE        H.**
**DEPOSITS        (Continued)**

| 2007   |   | $      | 106,230,771 |   |
|--------|--------|--------|-------------|--------|
| 2008   |   |   | 11,242,316  |   |
| 2009   |   |   | 4,877,830   |   |
| 2010   |   |   | 921,634     |   |
| 2011   |   |   | 400,140     |   |
|   |   | $      | 123,672,691 |   |

**NOTE        I.**
**BORROWINGS**

**Federal        Home Loan Bank Advances:**

**Advances        outstanding at December 31, 2006, consist of:**

**Advances        outstanding at December 31, 2005, consist of:**

----

*Table            of Contents*

**NOTE        I.**
**BORROWINGS        (Continued)**

| 2007   |   | $      | 31,243,868 |   |
|--------|--------|--------|------------|--------|
| 2008   |   |   | 30,487,211 |   |
| 2009   |   |   | 3,936,893  |   |
|   |   | $      | 65,667,972 |   |

**Junior        Subordinated Debentures:**

**NOTE        J.**
**EMPLOYEE        BENEFIT PLANS**

----

*Table            of Contents*

**NOTE        J.**
**EMPLOYEE        BENEFIT PLANS (Continued)**

|                                                                                                                                                   |   |        |                 | Weighted                        |                                  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|----------------------|---------------------------------|---------------------------------------|
|                                                                                                                                                   |   | Options     |                 | Average                         |                                  |
|                                                                                                                                                   |   | Outstanding |                 | Exercise                  Price |                                  |
|   **December                  31, 2003**Options                  grantedOptions                  exercisedOptions                  forfeited |   |        | 53,229-(3,229(15,000 | ))                              | $                      | 17.38-                  11.3919.94 |   |
| **December                  31, 2004**                                                                                                                 |   |        | 35,000               |                            | $                                     | 16.83 |   |
| Options                  granted                                                                                                                       |   |        | 5,000                |                            |                                  | 18.00 |   |
| Options                  exercised                                                                                                                     |   |        | -                    |                            |                                  | - |   |
| Options                  forfeited                                                                                                                     |   |        | (4,480               | )                               |                                  | 14.50 |   |
| **December                  31, 2005**                                                                                                                 |   |        | 35,520               |                            | $                                     | 17.29 |   |
| Options                  granted                                                                                                                       |   |        | -                    |                            |                                  | - |   |
| Options                  exercised                                                                                                                     |   |        | (1,650               | )                               |                                  | 14.50 |   |
| Options                  forfeited                                                                                                                     |   |        | (5,500               | )                               |                                  | 16.97 |   |
| **December                  31, 2006**                                                                                                                 |   |        | 28,370               |                            | $                                     | 17.51 |   |

| Exercise                  Price |   | Options                  Outstanding |   | Remaining                  Contractual Life |   |
|---------------------------------|--------|--------------------------------------|--------|---------------------------------------------|--------|
| $                  19.94        |   |                                 | 12,500 |                                        |   | 0.9                  years |   |
| $                  14.50        |   |                                 | 10,870 |                                        |   | 4.9                  years |   |
| $                  18.00        |   |                                 | 5,000  |                                        |   | 4.0                  years |   |

----

*Table            of Contents*

**NOTE        J.**
**EMPLOYEE        BENEFIT PLANS (Continued)**

|                                                     |   | 2005   |      | 2004   |   |
|----------------------------------------------------------|--------|--------|-----------|--------|--------|
|                                                     |   |   |      |   |   |
| Net                  Income, as Reported                 |   | $      | 3,227,640 |   | $      | 2,844,209 |   |
| Pro                  Forma Net Income                    |   | $      | 3,215,915 |   | $      | 2,837,413 |   |
| Basic                  Earnings Per Share, as Reported   |   | $      | 1.53      |   | $      | 1.35 |   |
| Pro                  Forma Basic Earnings Per Share      |   | $      | 1.52      |   | $      | 1.34 |   |
| Diluted                  Earnings Per Share, as Reported |   | $      | 1.52      |   | $      | 1.34 |   |
| Pro                  Forma Diluted Earnings Per Share    |   | $      | 1.52      |   | $      | 1.34 |   |

| Assumption                           |   | 2005   |                     |
|--------------------------------------|--------|--------|--------------------------|
|                                 |   |   |                     |
| Dividend                  yield      |   |   | 3.59                     | % |
| Risk                  free rate      |   |   | 4.42                     | % |
| Expected                  life       |   |   | 5                  years |   |
| Expected                  volatility |   |   | 27.59                    | % |

----

*Table            of Contents*

**NOTE        K.**
**LEASES**

| 2007       |   | $      | 105,792 |   |
|------------|--------|--------|---------|--------|
| 2008       |   |   | 105,792 |   |
| 2009       |   |   | 105,792 |   |
| 2010       |   |   | 105,792 |   |
| 2011       |   |   | 105,792 |   |
| Thereafter |   |   | 203,136 |   |
|       |   | $      | 732,096 |   |

**NOTE        L.**
**INCOME        TAXES**

|     |   | 2006   |      | 2005   |   | 2004      |   |
|----------|--------|--------|-----------|--------|--------|-----------|--------|
|     |   |   |      |   |   |      |   |
| Current  |   | $      | 1,308,927 |   | $      | 1,079,614 |   | $ | 676,227 |   |
| Deferred |   |   | (114,945  | )      |   | (264,520  | )      |   | 104,018 |   |
|     |   |   |      |   |   |      |   |   |   |   |
|     |   | $      | 1,193,982 |   | $      | 815,094   |   | $ | 780,245 |   |

|                                         |   | 2006   |      | 2005   |   | 2004      |   |
|----------------------------------------------|--------|--------|-----------|--------|--------|-----------|--------|
|                                         |   |   |      |   |   |      |   |
| Tax                  Based on Statutory Rate |   | $      | 1,622,672 |   | $      | 1,374,530 |   | $ | 1,232,314 |   |
| State                  Taxes                 |   |   | 108,971   |   |   | 98,051    |   |   | 108,211 |   |
| Effect                  of Tax-Exempt Income |   |   | (565,412  | )      |   | (565,456  | )      |   | (569,345 | ) |
| Other                                        |   |   | 27,751    |   |   | (92,031   | )      |   | 9,065 |   |
|                                         |   |   |      |   |   |      |   |   |   |   |
|                                         |   | $      | 1,193,982 |   | $      | 815,094   |   | $ | 780,245 |   |

----

*Table            of Contents*

**NOTE        L.**
**INCOME        TAXES (Continued)**

|                                                              |   | 2006   |       | 2005   |   | 2004       |   |
|-------------------------------------------------------------------|--------|--------|------------|--------|--------|------------|--------|
| Deferred                  Tax Liabilities:                        |   |   |       |   |   |       |   |
| Unrealized                  gain on available-for-sale securities |   | $      | -          |   | $      | -          |   | $ | (327,694 | ) |
| Unrealized                  gain on derivatives                   |   |   | -          |   |   | (155       | )      |   | (56,770 | ) |
| Depreciation                                                      |   |   | (978,128   | )      |   | (992,514   | )      |   | (1,019,448 | ) |
| Federal                  Home Loan Bank dividends                 |   |   | (271,687   | )      |   | (335,975   | )      |   | (309,575 | ) |
| Other                                                             |   |   | (6,869     | )      |   | (191,067   | )      |   | (122,031 | ) |
|                                                              |   |   | (1,256,685 | )      |   | (1,519,711 | )      |   | (1,835,518 | ) |
| Deferred                  Tax Assets:                             |   |   |       |   |   |       |   |   |   |   |
| Unrealized                  Loss on available-for-sale securities |   |   | 433,083    |   |   | 602,618    |   |   | - |   |
| Unrealized                  gain on derivatives                   |   |   | 28,080     |   |   | -          |   |   | - |   |
| Provision                  for loan losses                        |   |   | 584,673    |   |   | 597,133    |   |   | 544,517 |   |
| Other                  real estate                                |   |   | 19,463     |   |   | 11,190     |   |   | 44,760 |   |
| Voluntary                  severance                              |   |   | 35,293     |   |   | 171,770    |   |   | - |   |
| Other                                                             |   |   | 165,713    |   |   | 172,974    |   |   | 221,835 |   |
|                                                              |   |   | 1,266,305  |   |   | 1,555,685  |   |   | 811,112 |   |
| Net                  Deferred Tax Asset/(Liability)               |   | $      | 9,620      |   | $      | 35,974     |   | $ | (1,024,406 | ) |

|                                                         |   | 2006   |     | 2005   |   | 2004       |   |
|--------------------------------------------------------------|--------|--------|----------|--------|--------|------------|--------|
| Balance                  at beginning of year                |   | $      | 35,974   |   | $      | (1,024,406 | )      | $ | (1,204,554 | ) |
| Deferred                  tax expense, charged to operations |   |   | 114,945  |   |   | 264,520    |   |   | (104,018 | ) |
| Other                  comprehensive income, charged to      |   |   |     |   |   |       |   |   |   |   |
| equity                                                       |   |   | (141,299 | )      |   | 795,860    |   |   | 284,166 |   |
| Balance                  at end of year                      |   | $      | 9,620    |   | $      | 35,974     |   | $ | (1,024,406 | ) |

**NOTE        M.**
**SECURITIES        SOLD UNDER REPURCHASE AGREEMENTS**

----

*Table            of Contents*

**NOTE        N.**
**REGULATORY        MATTERS**

----

*Table            of Contents*

**NOTE        N.**
**REGULATORY        MATTERS (Continued)**

|                                         |   | Actual                                  |   | Minimum                  Capital Requirement |   | Minimum                  To Be Well Capitalized Under Prompt Corrective Action                  Provisions |   |
|----------------------------------------------|--------|-----------------------------------------|--------|----------------------------------------------|--------|------------------------------------------------------------------------------------------------------------|--------|
|                                         |   | Amount                                  |   | Ratio                                        |   | Amount                                                                                                     |   | Ratio |   | Amount |   | Ratio |   |
|                                         |   | (dollars                  in thousands) |   |
| **As                  of December 31, 2006** |   |                                    |   |                                         |   |                                                                                                       |   |   |   |   |   |   |   |
| Total                  Capital (to Risk-     |   |                                    |   |                                         |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                  Assets)            |   |                                    |   |                                         |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                 |   | $                                       | 40,943 |                                         |   | 15.27                                                                                                      | %      | $ | 21,448 |   |   | 8.00 | % |   | N/A |   |   | N/A |   |
| The                  Bank                    |   | $                                       | 37,961 |                                         |   | 14.17                                                                                                      | %      | $ | 21,435 |   |   | 8.00 | % | $ | 26,794 |   |   | 10.00 | % |
| Tier                  I Capital (to Risk-    |   |                                    |   |                                         |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                  Assets)            |   |                                    |   |                                         |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                 |   | $                                       | 38,599 |                                         |   | 14.40                                                                                                      | %      | $ | 10,724 |   |   | 4.00 | % |   | N/A |   |   | N/A |   |
| The                  Bank                    |   | $                                       | 35,617 |                                         |   | 13.29                                                                                                      | %      | $ | 10,718 |   |   | 4.00 | % | $ | 16,075 |   |   | 6.00 | % |
| Tier                  I Capital (to Average  |   |                                    |   |                                         |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets)                                      |   |                                    |   |                                         |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                 |   | $                                       | 38,599 |                                         |   | 10.45                                                                                                      | %      | $ | 14,776 |   |   | 4.00 | % |   | N/A |   |   | N/A |   |
| The                  Bank                    |   | $                                       | 35,617 |                                         |   | 9.57                                                                                                       | %      | $ | 14,891 |   |   | 4.00 | % | $ | 18,613 |   |   | 5.00 | % |

|                                         |   | Actual                                  |   | Minimum                  Capital Requirement |   | Minimum                  To Be Well Capitalized Under Prompt Corrective Action                  Provisions |   |
|----------------------------------------------|--------|-----------------------------------------|--------|----------------------------------------------|--------|------------------------------------------------------------------------------------------------------------|--------|
|                                         |   | Amount                                  |   | Ratio                                        |   | Amount                                                                                                     |   | Ratio |   | Amount |   | Ratio |   |
|                                         |   | (dollars                  in thousands) |   |
| **As                  of December 31, 2005** |   |                                    |   |                                         |   |                                                                                                       |   |   |   |   |   |   |   |
| Total                  Capital (to Risk-     |   |                                    |   |                                         |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                  Assets)            |   |                                    |   |                                         |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                 |   | $                                       | 38,770 |                                         |   | 14.44                                                                                                      | %      | $ | 21,476 |   |   | 8.00 | % |   | N/A |   |   | N/A |   |
| The                  Bank                    |   | $                                       | 36,423 |                                         |   | 13.58                                                                                                      | %      | $ | 21,457 |   |   | 8.00 | % | $ | 26,821 |   |   | 10.00 | % |
| Tier                  I Capital (to Risk-    |   |                                    |   |                                         |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                  Assets)            |   |                                    |   |                                         |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                 |   | $                                       | 36,392 |                                         |   | 13.55                                                                                                      | %      | $ | 10,741 |   |   | 4.00 | % |   | N/A |   |   | N/A |   |
| The                  Bank                    |   | $                                       | 34,045 |                                         |   | 12.70                                                                                                      | %      | $ | 10,723 |   |   | 4.00 | % | $ | 16,084 |   |   | 6.00 | % |
| Tier                  I Capital (to Average  |   |                                    |   |                                         |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets)                                      |   |                                    |   |                                         |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                 |   | $                                       | 36,392 |                                         |   | 9.31                                                                                                       | %      | $ | 15,635 |   |   | 4.00 | % |   | N/A |   |   | N/A |   |
| The                  Bank                    |   | $                                       | 34,045 |                                         |   | 8.63                                                                                                       | %      | $ | 15,780 |   |   | 4.00 | % | $ | 19,725 |   |   | 5.00 | % |

----

*Table            of Contents*

**NOTE        O.**
**COMMITMENTS        AND CONTINGENCIES**

**NOTE        P.**
**CONCENTRATIONS        OF CREDIT**

----

*Table            of Contents*

**NOTE        Q.**
**DIVIDENDS**

**NOTE        R.**
**INTEREST        RATE RISK MANAGEMENT**

** **

**NOTE        S.**
**FAIR        VALUE OF FINANCIAL INSTRUMENTS**

----

*Table            of Contents*

**NOTE        S.**
**FAIR        VALUE OF FINANCIAL INSTRUMENTS (Continued)**

----

*Table            of Contents*

**NOTE        S.**
**FAIR        VALUE OF**
**        FINANCIAL INSTRUMENTS (Continued)**

|                                                      |   | 2006     |       | 2005                                      |   |
|-----------------------------------------------------------|--------|----------|------------|-------------------------------------------|--------|
|                                                      |   | Carrying |       | Fair                                      |   | Carrying |   | Fair |   |
|                                                      |   | Amount   |       | Value                                     |   | Amount |   | Value |   |
|                                                      |   |     |       | (dollars                    in Thousands) |   |   |   |
| Financial                    Assets:                      |   |     |       |                                      |   |   |   |   |   |
| Cash                    and due from banks                |   | $        | 6,572      |                                      | $      | 6,572 |   | $ | 9,825 |   | $ | 9,825 |   |
| Federal                    funds sold                     |   |     | 305        |                                      |   | 305 |   |   | 401 |   |   | 401 |   |
| Investment                    securities:                 |   |     |       |                                      |   |   |   |   |   |   |   |   |   |
| Held-to-maturity                                          |   |     | 38,611     |                                      |   | 39,525 |   |   | 37,994 |   |   | 39,016 |   |
| Available-for-sale                                        |   |     | 64,419     |                                      |   | 64,419 |   |   | 78,287 |   |   | 78,287 |   |
| Equity                    securities                      |   |     | 4,340      |                                      |   | 4,340 |   |   | 5,502 |   |   | 5,502 |   |
| Cash                    surrender value of life insurance |   |     | 973        |                                      |   | 973 |   |   | 936 |   |   | 936 |   |
| Loans,                    net                             |   |     | 241,245    |                                      |   | 239,567 |   |   | 242,705 |   |   | 240,119 |   |
|                                                      |   |     |       |                                      |   |   |   |   |   |   |   |   |   |
| Financial                    Liabilities:                 |   |     |       |                                      |   |   |   |   |   |   |   |   |   |
| Deposits                                                  |   |     | 253,757    |                                      |   | 253,135 |   |   | 257,377 |   |   | 256,493 |   |
| Short-term                    borrowings                  |   |     | 31,244     |                                      |   | 31,146 |   |   | 36,310 |   |   | 35,955 |   |
| Long-term                    borrowings                   |   |     | 34,424     |                                      |   | 34,044 |   |   | 47,886 |   |   | 47,263 |   |
| Securities                    sold under                  |   |     |       |                                      |   |   |   |   |   |   |   |   |   |
| repurchase                    agreements                  |   |     | 8,149      |                                      |   | 8,131 |   |   | 8,033 |   |   | 8,033 |   |
| Junior                    subordinated debentures         |   |     | 5,155      |                                      |   | 5,155 |   |   | 5,155 |   |   | 5,155 |   |
|                                                      |   |     |       |                                      |   |   |   |   |   |   |   |   |   |
|                                                 |   |     | FaceAmount |                                      |   | FairValue |   |   | FaceAmount |   |   | FairValue |   |
|                                                      |   |     |       |                                      |   |   |   |   |   |   |   |   |   |
| Other:                                                    |   |     |       |                                      |   |   |   |   |   |   |   |   |   |
| Commitments                    to extend credit           |   | $        | 67,516     |                                      | $      | 67,516 |   | $ | 82,642 |   | $ | 82,642 |   |
| Standby                    letters of credit              |   |     | 2,092      |                                      |   | 2,092 |   |   | 2,390 |   |   | 2,390 |   |
| Interest                    rate swap                     |   |     | (75        | )                                         |   | (75 | ) |   | - |   |   | - |   |
|                                                      |   |     |       |                                      |   |   |   |   |   |   |   |   |   |

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*Table            of Contents*

**NOTE        T.**
**CONDENSED        FINANCIAL INFORMATION OF **

**BRITTON        & KOONTZ CAPITAL CORPORATION**

**BALANCE        SHEETS**

|                                                       |   | December                  31 |       |
|------------------------------------------------------------|--------|------------------------------|------------|
|                                                       |   | 2006                         |       | 2005 |   |
| ASSETS:                                                    |   |                         |       |   |   |   |   |
| Cash                                                       |   | $                            | 2,778,862  |   | $ | 1,942,459 |   |
| Investment                  in subsidiaries                |   |                         | 35,914,120 |   |   | 34,199,317 |   |
| Other                  assets                              |   |                         | 95,557     |   |   | 279,971 |   |
| TOTAL                  ASSETS                              |   | $                            | 38,788,539 |   | $ | 36,421,747 |   |
| LIABILITIES:                                               |   |                         |       |   |   |   |   |
| Junior                  subordinated debentures            |   | $                            | 5,155,000  |   | $ | 5,155,000 |   |
| Other                  liabilities                         |   |                         | 36,651     |   |   | 6,589 |   |
| TOTAL                  LIABILITIES                         |   |                         | 5,191,651  |   |   | 5,161,589 |   |
| STOCKHOLDERS’                  EQUITY                |   |                         | 33,596,888 |   |   | 31,260,158 |   |
| TOTAL                  LIABILITIES AND STOCKHOLDERS’ |   |                         |       |   |   |   |   |
| EQUITY                                                     |   | $                            | 38,788,539 |   | $ | 36,421,747 |   |

**STATEMENTS        OF INCOME **

|                                                    |   | Years                  Ended December 31, |      |
|---------------------------------------------------------|--------|-------------------------------------------|-----------|
|                                                    |   | 2006                                      |      | 2005 |   | 2004 |   |
| REVENUE:                                                |   |                                      |      |   |   |   |   |   |   |   |
| Dividends                  Received:                    |   |                                      |      |   |   |   |   |   |   |   |
| Britton                  & Koontz Bank, N.A.        |   | $                                         | 2,500,000 |   | $ | 2,100,000 |   | $ | 1,700,000 |   |
| Other                  income                           |   |                                      | 3,308     |   |   | 18,592 |   |   | 4,671 |   |
|                                                    |   |                                      | 2,503,308 |   |   | 2,118,592 |   |   | 1,704,671 |   |
| EXPENSES                                                |   |                                      | 675,339   |   |   | 414,355 |   |   | 310,563 |   |
|                                                    |   |                                      | 1,827,969 |   |   | 1,704,237 |   |   | 1,394,108 |   |
| INCOME                  TAX EXPENSE (BENEFIT)           |   |                                      | (273,332  | ) |   | (162,090 | ) |   | (123,354 | ) |
|                                                    |   |                                      | 2,101,301 |   |   | 1,866,327 |   |   | 1,517,462 |   |
| EQUITY                  IN UNDISTRIBUTED                |   |                                      |      |   |   |   |   |   |   |   |
| EARNINGS:                                               |   |                                      |      |   |   |   |   |   |   |   |
| Britton                  & Koontz Bank, N.A.        |   |                                      | 1,464,176 |   |   | 1,337,909 |   |   | 1,308,982 |   |
| B                  & K Title Insurance Agency, Inc. |   |                                      | 13,106    |   |   | 23,404 |   |   | 17,765 |   |
| NET                  INCOME                             |   | $                                         | 3,578,583 |   | $ | 3,227,640 |   | $ | 2,844,209 |   |
|                                                    |   |                                      |      |   |   |   |   |   |   |   |

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*Table            of Contents*

**         NOTE T.**
**CONDENSED        FINANCIAL INFORMATION OF **

**BRITTON        & KOONTZ CAPITAL CORPORATION (Continued)**

**STATEMENTS        OF CASH FLOWS**

|                                                        |   | Years                  Ended December 31, |       |
|-------------------------------------------------------------|--------|-------------------------------------------|------------|
|                                                        |   | 2006                                      |       | 2005 |   | 2004 |   |
|                                                        |   |                                      |       |   |   |   |   |
| CASH                  FLOWS FROM OPERATING ACTIVITIES:      |   |                                      |       |   |   |   |   |   |   |   |
| Net                  Income                                 |   | $                                         | 3,578,583  |   | $ | 3,227,640 |   | $ | 2,844,209 |   |
| Adjustments                  to reconcile net income to net |   |                                      |       |   |   |   |   |   |   |   |
| cash                  provided by operating activities:     |   |                                      |       |   |   |   |   |   |   |   |
| Equity                  on undistributed earnings           |   |                                      |       |   |   |   |   |   |   |   |
| and                  losses of affiliates                   |   |                                      | (1,477,282 | ) |   | (1,361,313 | ) |   | (1,326,747 | ) |
| (Increase)                  decrease in other assets        |   |                                      | 184,413    |   |   | 26,006 |   |   | (53,741 | ) |
| Increase                  in other liabilities              |   |                                      | 30,061     |   |   | 1,693 |   |   | 1,184 |   |
| Net                  Cash Provided by Operating Activities  |   |                                      | 2,315,775  |   |   | 1,894,026 |   |   | 1,464,905 |   |
| CASH                  FLOWS FROM INVESTING ACTIVITIES:      |   |                                      |       |   |   |   |   |   |   |   |
| Transfer                  of bank premises to subsidiary    |   |                                      | -          |   |   | - |   |   | 188,038 |   |
|                                                        |   |                                      |       |   |   |   |   |   |   |   |
| Net                  Cash Provided by (Used in) Investing   |   |                                      |       |   |   |   |   |   |   |   |
| Activities                                                  |   |                                      | -          |   |   | - |   |   | 188,038 |   |
|                                                        |   |                                      |       |   |   |   |   |   |   |   |
| CASH                  FLOWS FROM FINANCING ACTIVITIES:      |   |                                      |       |   |   |   |   |   |   |   |
| Cash                  dividends paid                        |   |                                      | (1,524,619 | ) |   | (1,460,258 | ) |   | (1,353,409 | ) |
| Cash                  received from stock options exercised |   |                                      | 45,247     |   |   | - |   |   | 36,778 |   |
| Net                  Cash Provided by (Used in)             |   |                                      |       |   |   |   |   |   |   |   |
| Financing                  Activities                       |   |                                      | (1,479,372 | ) |   | (1,460,258 | ) |   | (1,316,631 | ) |
|                                                        |   |                                      |       |   |   |   |   |   |   |   |
| NET                  INCREASE (DECREASE) IN CASH            |   |                                      | 836,403    |   |   | 433,768 |   |   | 336,312 |   |
| CASH                  AT BEGINNING OF YEAR                  |   |                                      | 1,942,459  |   |   | 1,508,691 |   |   | 1,172,379 |   |
| CASH                  AT END OF YEAR                        |   | $                                         | 2,778,862  |   | $ | 1,942,459 |   | $ | 1,508,691 |   |

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*Table            of Contents*

**Item      9. Changes in and Disagreements with Accountants on Accounting      and Financial Disclosure.**

**Item      9A. Controls and Procedures.**

**Item      9B. Other Information.**

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*Table          of Contents*

**PART      III**

**Item      10. Directors, Executive Officers and Corporate Governance.** 

| **DIRECTORS**                                                                                                                      |   | **EXECUTIVE                    OFFICERS**                                                                                                              |
|------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                               |   |                                                                                                                                                   |
| Robert                    R. Punches                                                                                               |   | W.                    Page Ogden                                                                                                                       |
| *Partner,                    Gwin, Lewis & Punches, LLP*                                                                       |   | *President                    & Chief Executive Officer*                                                                                           |
| *Chairman,                    Britton & Koontz Capital Corporation*                                                            |   | *Britton                    & Koontz Capital Corporation**Britton                    & Koontz Bank, National Association*                      |
|                                                                                                                               |   |                                                                                                                                                   |
| R.                    Andrew Patty II                                                                                              |   | William                    M. Salters                                                                                                                  |
| *Member,                    Sieberth & Patty, LLC**Vice                    Chairman, Britton & Koontz Capital Corporation* |   | *Treasurer,                    Chief Financial & Accounting Officer**Britton&Koontz                    Capital                    Corporation* |
|                                                                                                                               |   | *Britton                    & Koontz Bank, National Association*                                                                                   |
| W.                    W. Allen, Jr.                                                                                                |   |                                                                                                                                                   |
| *President,                    Allen Petroleum Services, Inc.*                                                                     |   | Jarrett                    E. Nicholson                                                                                                                |
|                                                                                                                               |   | *Credit                    Policy Officer*                                                                                                             |
| Craig                    A. Bradford, D.M.D                                                                                        |   | *Chief                    Operations Officer*                                                                                                          |
| *Pediatric                    Dentist*                                                                                             |   | *Britton                    & Koontz Capital Corporation*                                                                                          |
|                                                                                                                               |   | *Britton                  & Koontz Bank, National Association*                                                                                     |
| A.                    J. Ferguson                                                                                                  |   |                                                                                                                                                   |
| *Petroleum                    Geologist*                                                                                           |   |                                                                                                                                                   |
|                                                                                                                               |   |                                                                                                                                                   |
| George                    R. Kurz                                                                                                  |   |                                                                                                                                                   |
| *Principal,                    Kurz & Hebert*                                                                                  |   |                                                                                                                                                   |
|                                                                                                                               |   |                                                                                                                                                   |
| Bethany                    L. Overton                                                                                              |   |                                                                                                                                                   |
| *President,                    Lambdin-Bisland Realty Co.*                                                                         |   |                                                                                                                                                   |
|                                                                                                                               |   |                                                                                                                                                   |
| Vinod                    K. Thukral, Ph.D.                                                                                         |   |                                                                                                                                                   |
| *Retired                    University Professor*                                                                                  |   |                                                                                                                                                   |

**Code      of Ethics**

**Item      11. Executive Compensation.** 

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*Table          of Contents*

**Item      12. Security Ownership of Certain Beneficial Owners and      Management and Related Stockholder Matters.**

**Item      13. Certain Relationships and Related Transactions, and Director      Independence.** 

**Item      14. Principal Accounting Fees and      Services.**

**PART      IV**

**Item      15. Exhibits, Financial Statement      Schedules.**

| 1.   | Consolidated                Financial Statements and Supplementary Information for Years Ended                December 31, 2006, 2005 and 2004, which include the                following: |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (a)   | Selected                Financial Data |
|-----------------|----------------------------------------|

| (b)   | Report                of Independent Registered Public Accounting                Firm |
|-----------------|---------------------------------------------------------------------------------------|

| (c)   | Consolidated                Balance Sheets |
|-----------------|--------------------------------------------|

| (d)   | Consolidated                Statements of Income |
|-----------------|--------------------------------------------------|

| (e)   | Consolidated                Statements of Changes in Shareholders’Equity |
|-----------------|--------------------------------------------------------------------------------|

| (f)   | Consolidated                Statement of Cash Flows |
|-----------------|-----------------------------------------------------|

| (g)   | Notes                to the Consolidated Financial                Statements |
|-----------------|------------------------------------------------------------------------------|

| 2.   | Financial                Statement Schedules |
|----------------|----------------------------------------------|

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*Table          of Contents*

| Exhibit |     | Description                of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|---------|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 3.1     | *        | Restated                Articles of Incorporation of Britton & Koontz Capital Corporation,                incorporated by reference to Exhibit 3.1 to Registrant’s Quarterly Report                on Form 10-Q, filed with the Securities and Exchange Commission (the                “Commission”) on August 4, 2006.                                                                                                                                                                                                                                                                                                                                                                                      |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 3.2     | *        | By-Laws                of Britton & Koontz Capital Corporation, as amended, incorporated by                reference to Exhibit 3.2 to Registrant’s Quarterly Report on Form 10-Q                filed with the Commission on November 14, 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, as amended by Amendment No. 1 to                Rights                Agreement dated as of August 15, 2006, incorporated by reference                to                Exhibit 4.2 to Registrants Current Report on Form 8-K filed with                the                Commission on August 17, 2006. |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.01   | *† | Employment                Agreement dated December 31, 2002, between Britton & Koontz Capital                Corporation and W. Page Ogden, incorporated by reference to Exhibit                10.01                to Registrant’s Annual Report on Form 10-KSB filed with the Commission on                March 27, 2003.                                                                                                                                                                                                                                                                                                                                                                                            |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.02   | *† | Salary                Continuation Plan Agreement dated September 26, 1994, between Britton                & Koontz Capital Corporation and W. Page Ogden, incorporated by                reference to Exhibit 10 to Registrant’s Quarterly** **Report                on Form 10-QSB filed with the Commission on November 14, 1994, (Commission                File Number 33-56204).                                                                                                                                                                                                                                                                                                                              |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.03   | *† | Britton                & Koontz Capital Corporation Long-Term Incentive Compensation Plan                and                Amendment, incorporated by reference to Exhibit 4.4 to Registrant’s                Registration Statement on Form S-8, Registration No. 333-20631, filed                with                the Commission on January 29, 1997.                                                                                                                                                                                                                                                                                                                                                              |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 21      |     | Subsidiaries                of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 23      |     | Consent                of Independent Registered Public Accountants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 31.1    |     | Certification                of Chief Executive Officer as required pursuant to Section 302 of                the                Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 31.2    |     | Certification                of Chief Financial Officer as required pursuant to Section 302 of                the                Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 32.1    |     | Certification                of Chief Executive Officer as required pursuant to Section 906 of                the                Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 32.2    |     | Certification                of Chief Financial Officer as required pursuant to Section 906 of                the                Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

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

| † | Management                contract or compensatory plan or arrangement required to be filed                as an                exhibit to this Annual Report on Form 10-K pursuant to Item 15 of                Form                10-K. |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Table          of Contents*

SIGNATURES

**BRITTON      & KOONTZ CAPITAL CORPORATION**

|  **Signature**                       |   |  **Title**                      |   |  **Date**           |
|------------------------------------------------|--------|-------------------------------------------|--------|-------------------------------|
|  /s/              Robert R. Punches  |   |                                      |   |                          |
| Robert                R. Punches               |   | Chairman                and Director      |   | March                14, 2007 |
|                                           |   |                                      |   |                          |
|  /s/              R. Andrew Patty II      |   |                                      |   |                          |
| R.                Andrew Patty II              |   | Vice                Chairman and Director |   | March                14, 2007 |
|                                           |   |                                      |   |                          |
|  /s/              W.W. Allen, Jr.         |   |                                      |   |                          |
| W.                W. Allen, Jr.                |   | Director                                  |   | March                14, 2007 |
|                                           |   |                                      |   |                          |
|  /s/              Craig A. Bradford, DMD  |   |                                      |   |                          |
| Craig                A. Bradford, DMD          |   | Director                                  |   | March                14, 2007 |
|                                           |   |                                      |   |                          |
|  /s/              A.J. Ferguson           |   |                                      |   |                          |
| A.                J. Ferguson                  |   | Director                                  |   | March                14, 2007 |
|                                           |   |                                      |   |                          |
|  /s/              Bethany L. Overton      |   |                                      |   |                          |
| Bethany                L. Overton              |   | Director                                  |   | March                14, 2007 |
|                                           |   |                                      |   |                          |
|  /s/              George R. Kurz          |   |                                      |   |                          |
| George                R. Kurz                  |   | Director                                  |   | March                14, 2007 |
|                                           |   |                                      |   |                          |
|  /s/              Vinod K. Thukral, Ph.D. |   |                                      |   |                          |
| Vinod                K. Thukral, Ph.D.         |   | Director                                  |   | March                14, 2007 |
|                                           |   |                                      |   |                          |

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*Table          of Contents*

|  **Signature**                  |   |  **Title**                                                                                    |   |  **Date**           |
|-------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|--------|-------------------------------|
|  /s/              W. Page Ogden      |   |                                                                                                    |   |                          |
| W.                Page Ogden              |   | President,Chief                Executive Officer                                                        |   | March                14, 2007 |
|                                      |   |                                                                                                    |   |                          |
|  /s/              William M. Salters |   |                                                                                                    |   |                          |
| William                M. Salters         |   | Treasurer,Chief                Financial Officer,Principal                Accounting Officer,Controller |   | March                14, 2007 |

**EXHIBIT      INDEX**

| Exhibit |   | Description                of Exhibit                                                                                                                        |
|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                         |
|    |   |                                                                                                                                                         |
| 21      |   | Subsidiaries                of Britton & Koontz Capital Corporation, as amended                                                                          |
|    |   |                                                                                                                                                         |
| 23      |   | Consent                of Independent Registered Public Accountants                                                                                          |
|    |   |                                                                                                                                                         |
| 31.1    |   | Certification                of Chief Executive Officer as required pursuant to Section 302 of                the                Sarbanes-Oxley Act of 2002. |
|    |   |                                                                                                                                                         |
| 31.2    |   | Certification                of Chief Financial Officer as required pursuant to Section 302 of                the                Sarbanes-Oxley Act of 2002. |
|    |   |                                                                                                                                                         |
| 32.1    |   | Certification                of Chief Executive Officer as required pursuant to Section 906 of                the                Sarbanes-Oxley Act of 2002  |
|    |   |                                                                                                                                                         |
| 32.2    |   | Certification                of Chief Financial Officer as required pursuant to Section 906 of                the                Sarbanes-Oxley Act of 2002  |