EX-99 2 exhibit1.htm EX-99 EX-99

NEWS RELEASE

CONTACT ERIC GRAAP

(540) 349-0212 or

egraap@fauquierbank.com

FAUQUIER BANKSHARES, INC. ANNOUNCES RECORD ANNUAL AND QUARTERLY NET INCOME

  •   Net Income increased 15% to $5.7 million.

  •   16.94% Return on Average Equity; 1.27% Return on Average Assets.

  •   Loan portfolio growth of 13%.

WARRENTON, VA, February 1, 2006 – Fauquier Bankshares, Inc. (NASDAQ Capital Market: FBSS), today reported record annual net income of $5,702,000 or $1.60 per diluted share, for the year ended December 31, 2005. This compares with $4,978,000 or $1.41 per diluted share, for 2004, an increase of 14.5%. Return on average assets was 1.27% and return on average equity was 16.94% for 2005, compared with 1.21% and 16.82%, respectively, for 2004. The growth in net income was primarily due to an 8.6% increase in net interest income; partially offset by a 5.4% increase in total other expenses.

For the quarter ended December 31, 2005, net income was $1,669,000 or $0.47 per diluted share, compared with $1,492,000 or $0.42 per diluted share for the fourth quarter of 2004, an increase of 11.9%. Return on average assets was 1.43% and return on average equity was 18.90% for the fourth quarter of 2005, compared with 1.37% and 19.08%, respectively, for the fourth quarter of 2004. The growth in fourth quarter net income was primarily due to a 3.6% increase in net interest income; partially offset by a 1.8% increase in total other expenses.

Randy Ferrell, President and CEO of Fauquier Bankshares, Inc. and its primary subsidiary, The Fauquier Bank, commented, “We are very pleased to report record annual and quarterly net income for the respective periods ended December 31, 2005. This earnings momentum should well serve investors and customers as we enter 2006. In addition, despite rising interest rates and the inversion of the interest rate yield curve during 2005, the Bank maintained its net interest margin and improved net interest income. Even more gratifying has been the significant improvement in the Company’s efficiency measures.”

Net interest income increased $169,000 to $4.87 million for the quarter ended December 31, 2005 from $4.70 million for the quarter ended December 31, 2004. The increase in net interest income resulted from a 6.3% increase in total average earning assets from $399.6 million during the fourth quarter of 2004 to $424.7 million for the fourth quarter of 2005. This was partially offset by net interest margin decreasing to 4.54% for the December 2005 quarter compared with 4.67% for the December 2004 quarter. For 2005, net interest income increased $1.51 million to $19.08 million. The net interest margin for 2005 was 4.67% compared with 4.68% for 2004. The efficiency ratio for 2005 was 63.8% compared with 65.1% for 2004. The efficiency ratio is computed by dividing non-interest expense by the sum of fully taxable equivalent net interest income and non-interest income, with the lower number being the more efficient.

Net loans and total deposits were $381.0 million and $391.7 million, respectively, at December 31, 2005, an increase of 12.8% and 4.5%, respectively, since December 31, 2004. At December 31, 2005, Fauquier Bankshares’ Wealth Management Services division had approximately $272 million in assets under management, a growth of 10.1% from December 31, 2004. Mr. Ferrell commented, “We are well aware of the financial management needs of our growing market area and are committed to be the primary provider of these value-added services, which include estate planning, retirement planning, IRA and 529 savings and roll-overs as well as asset management and brokerage.” Mr. Ferrell continued, “With the realignment of our deposit account products in 2006, we continue to be well positioned to attract the growing population in the communities we serve.”

Fauquier Bankshares and The Fauquier Bank, had combined assets of $481.2 million and total shareholders’ equity of $35.5 million at December 31, 2005. Non-performing assets were $195,000 or 0.05% of total loans at December 31, 2005, compared with $183,000 or 0.05% of total loans one year earlier. Loan charge-offs, net of recoveries, totaled $295,000 and $54,000 for 2005 and 2004, respectively.

The Fauquier Bank, an independent, locally-owned, community bank, offers a full range of financial services, including internet banking, commercial, retail, insurance and wealth management services, through eight banking offices and nine ATM locations throughout Fauquier County and Manassas, Virginia. Additional information may be found by contacting us at www.fauquierbank.com or by calling: (800) 638-3798.

This press release may contain “forward-looking statements” as defined by federal securities laws. These statements address issues that involve risks, uncertainties, estimates and assumptions made by management, and actual results could differ materially from the results contemplated by these forward-looking statements. Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to, changes in: interest rates and the shape of the interest rate yield curve, general economic conditions, legislative/regulatory policies, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System, the quality or composition of the loan and/or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in our market area, and accounting principles, policies and guidelines. Other risk factors are detailed from time to time in our Securities and Exchange Commission filings. Readers should consider these risks and uncertainties in evaluating our forward-looking statements and should not place undue reliance on such statements. We undertake no obligation to update these statements following the date of this press release.

1

                         
    Fauquier Bankshares, Inc. and Subsidiaries    
    Consolidated Balance Sheets    
            Unaudited   Audited
            December 31, 2005   December 31, 2004
Assets                        
Cash and due from banks
           $ 26,565,702     $ 8,944,590  
Interest-bearing deposits in other banks
     680,013       112,984  
Federal funds sold
             493,000       109,000  
Securities, at fair value
             48,390,771       58,594,905  
Loans, net of allowance for loan losses of $4,238,143
                
in 2005 and $4,060,321 in 2004
             381,049,471       337,791,782  
Bank premises and equipment, net
             8,289,581       8,533,619  
Accrued interest receivable
             1,585,849       1,507,391  
Other assets
             14,191,023       13,604,948  
   Total assets
     481,245,410       429,199,219  
 
                        
Liabilities
                        
Deposits:
                        
Noninterest-bearing
             95,411,624       79,222,524  
Interest-bearing
             296,245,545       295,433,173  
 
                        
Total deposits
             391,657,169       374,655,697  
Federal funds purchased
             5,000,000       —  
Dividends payable
             —       508,887  
Federal Home Loan Bank advances
             42,000,000       15,000,000  
Company-obligated mandatorily redeemable capital securities
     4,124,000       4,124,000  
Other liabilities
             2,885,096       3,019,571  
Commitments and contingent liabilities
             —       —  
 
                        
   Total liabilities
     445,666,265       397,308,155  
 
                        
Shareholders’ Equity
                        
Common stock, par value, $3.13; authorized 8,000,000 shares;
                
issued and outstanding, 2005, 3,448,786 shares; 2004, 3,392,580 shares
     10,794,700       10,618,775  
Retained earnings
             25,440,838       21,320,223  
Accumulated other comprehensive income (loss), net
     (656,393 )     (47,934 )
   Total shareholders' equity
     35,579,145       31,891,064  
 
                        
   Total liabilities and shareholders' equity
   $ 481,245,410     $ 429,199,219  
 
                        
See accompanying Notes to Consolidated Financial Statements.
                

2

                                         
    Fauquier Bankshares, Inc. and Subsidiaries        
    Consolidated Statements of Income        
            (Unaudited)        
    For Each of the Three Years in the Period Ended December 31, 2005        
                    2005   2004   2003
Interest Income
                                        
   Interest and fees on loans
           $ 23,186,158     $ 20,034,615     $ 17,168,004  
   Interest and dividends on securities available for sale:
                        
      Taxable interest income
     1,874,519       1,613,828       1,576,813  
      Interest income exempt
                        
      from federal income taxes
     52,280       56,215       66,917  
      Dividends
     246,276       181,946       274,097  
   Interest on federal funds sold
             47,215       71,940       48,533  
   Interest on deposits in other banks
             7,270       19,708       1,950  
      Total interest income
     25,413,718       21,978,252       19,136,314  
 
                                        
Interest Expense
                                        
   Interest on deposits
             4,948,904       3,400,473       3,047,245  
   Interest on federal funds purchased
             202,706       34,026       38,524  
   Interest on Federal Home Loan Bank advances
     911,434       770,496       720,560  
   Distribution on capital securities of subsidiary trust
     275,176       206,274       194,897  
      Total interest expense
     6,338,220       4,411,269       4,001,226  
 
                                        
      Net interest income
     19,075,498       17,566,983       15,135,088  
Provision for loan losses
             472,917       539,583       784,000  
 
                                        
      Net interest income after
                        
      provision for loan losses
     18,602,581       17,027,400       14,351,088  
 
                                        
Other Income
                                        
   Wealth management income
             1,331,511       1,270,405       935,534  
   Service charges on deposit accounts
             2,615,408       2,603,215       2,473,161  
   Other service charges, commissions and fees
     1,276,442       1,168,842       1,334,490  
   Gain on securities
             —       —       248,240  
   Impairment loss on securities available for sale
     -       (46,500 )     -  
   Other operating income
             46,504       43,360       36,608  
      Total other income
     5,269,865       5,039,322       5,028,033  
 
                                        
Other Expenses
                                        
   Salaries and benefits
             8,263,400       7,769,172       6,521,456  
   Net occupancy expense of premises
             920,866       863,600       837,734  
   Furniture and equipment
             1,303,990       1,274,349       1,176,014  
   Other operating expenses
             5,165,982       4,941,149       4,686,758  
      Total other expenses
     15,654,238       14,848,270       13,221,962  
 
                                        
      Income before income taxes
     8,218,208       7,218,452       6,157,159  
 
                                        
Income tax expense
                     2,516,591       2,240,268       1,821,309  
 
                                        
      Net Income
   $ 5,701,617     $ 4,978,184     $ 4,335,850  
 
                                        
Earnings per Share, basic
           $ 1.66     $ 1.49     $ 1.31  
 
                                        
Earnings per Share, assuming dilution
           $ 1.60     $ 1.41     $ 1.24  
 
                                        
Dividends per Share
                   $ 0.65     $ 0.56     $ 0.48  
 
                                        

3

                                 
    Fauquier Bankshares, Inc. and Subsidiaries    
    Consolidated Statements of Income    
            (Unaudited)    
    For the Three Months Ended December 31, 2005 and 2004    
                    2005   2004
Interest Income
                                
 
                           $    
   Interest and fees on loans
           $ 6,255,861       5,313,043  
   Interest and dividends on securities available for sale:
                
      Taxable interest income
     435,253       480,860  
      Interest income exempt
                
      from federal income taxes
     13,061       13,043  
      Dividends
     99,121       69,563  
   Interest on federal funds sold
             812       32,299  
   Interest on deposits in other banks
             3,040       912  
      Total interest income
     6,807,148       5,909,720  
 
                                
Interest Expense
                                
   Interest on deposits
             1,430,660       969,929  
   Interest on federal funds purchased
             144,472       209  
   Interest on Federal Home Loan Bank advances
     285,049       177,739  
   Distribution on capital securities of subsidiary trust
     73,304       57,066  
      Total interest expense
     1,933,485       1,204,943  
 
                                
      Net interest income
     4,873,663       4,704,777  
Provision for loan losses
             -       -  
 
                                
      Net interest income after
                
      provision for loan losses
     4,873,663       4,704,777  
 
                                
Other Income
                                
   Wealth management income
             297,061       300,639  
   Service charges on deposit accounts
             638,448       680,668  
   Other service charges, commissions and fees
     331,517       271,419  
   Other operating income
             11,909       (36,348 )
      Total other income
     1,278,935       1,216,378  
 
                                
Other Expenses
                                
   Salaries and benefits
             2,028,365       1,969,768  
   Net occupancy expense of premises
             212,770       214,111  
   Furniture and equipment
             355,459       322,241  
   Other operating expenses
             1,175,838       1,197,898  
      Total other expenses
     3,772,432       3,704,018  
 
                                
      Income before income taxes
     2,380,166       2,217,137  
 
                                
Income tax expense
                     710,745       724,956  
 
                                
 
                           $    
      Net Income
   $ 1,669,421       1,492,181  
 
                                
 
                           $    
Earnings per Share, basic
           $ 0.48       0.44  
 
                                
 
                           $    
Earnings per Share, assuming dilution
           $ 0.47       0.42  
 
                                
 
                           $    
Dividends per Share
                   $ 0.18       0.15  
 
                                

4

                                 
    Fauquier Bankshares, Inc.    
    Selected Financial Data    
    For the three month ending December 31,   For the twelve month ending
                    December 31,
    2005   2004   2005   2004
DOLLAR PER SHARE DATA:
                                
 
                                
Net income per share, basic
     0.48       0.44       1.66       1.49  
Net income per share, diluted
     0.47       0.42       1.60       1.41  
Book value at period end
     10.32       9.40       10.32       9.40  
PERFORMANCE RATIOS:
                                
 
                                
Net interest margin (1)
     4.54 %     4.67 %     4.67 %     4.68 %
Return on average assets
     1.43 %     1.37 %     1.27 %     1.21 %
Return on average equity
     18.90 %     19.08 %     16.94 %     16.82 %
Efficiency ratio (2)
     60.82 %     62.61 %     63.77 %     65.12 %
ASSET QUALITY RATIOS:
                                
 
                                
Allowance for loan losses to period
                                
end loans, net
     1.11 %     1.19 %     1.11 %     1.19 %
Nonperforming assets to allowance for
                                
loan losses
     4.60 %     4.51 %     4.60 %     4.51 %
Non-performing assets to period end loans
                                
and other real estate owned
     0.05 %     0.05 %     0.05 %     0.05 %
Net charge-offs to average loans
     0.08 %     0.02 %     0.08 %     0.02 %
CAPITAL RATIOS:
                                
 
                                
Leverage
     8.21 %     8.30 %     8.21 %     8.30 %
Risk Based Capital Ratios:
                                
Tier 1 capital
     11.08 %     10.87 %     11.08 %     10.87 %
Total capital
     12.27 %     12.10 %     12.27 %     12.10 %
(1) Net interest margin is calculated as fully taxable equivalent net interest income divided by average earning assets and
represents the Corporation’s net yield on its earning assets.
                        
(2) Efficiency ratio is computed by dividing non-interest expense by the sum of fully taxable equivalent net interest income and
non-interest income.
                                

5