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

CONTACT ERIC GRAAP

(540) 349-0212 or

egraap@fauquierbank.com

FAUQUIER BANKSHARES, INC. ANNOUNCES ANNUAL AND QUARTERLY NET INCOME

  •   Net Income of $5.6 million.

  •   14.86% Return on Average Equity; 1.14% Return on Average Assets.

  •   Loan portfolio growth of 9.2%.

WARRENTON, VA, January 31, 2007 – Fauquier Bankshares, Inc. (NASDAQ Capital Market: FBSS), today reported net income of $5,604,000 or $1.56 per diluted share, for the year ended December 31, 2006. This compares with $5,702,000 or $1.60 per diluted share, for 2005, a decrease of 1.7%. Return on average assets was 1.14% and return on average equity was 14.86% for 2006, compared with 1.27% and 16.94%, respectively, for 2005. The decline in net income was primarily due to the decline in the net interest margin caused by the current economic environment with a flat and inverted yield curve. The net interest margin for 2006 was 4.28% compared with 4.67% for 2005.

For the quarter ended December 31, 2006, net income was $1,435,000 or $0.40 per diluted share, compared with $1,669,000 or $0.47 per diluted share for the fourth quarter of 2005, a decrease of 14.1%. Return on average assets was 1.14% and return on average equity was 14.52% for the fourth quarter of 2006, compared with 1.43% and 18.90%, respectively, for the fourth quarter of 2005. The net interest margin for the fourth quarter of 2006 was 3.98% compared with 4.54% for the fourth quarter of 2005.

Randy Ferrell, President and CEO of Fauquier Bankshares, Inc. and its primary subsidiary, The Fauquier Bank, commented, “We are very pleased to report a return on asset of 1.14% and return on equity of 14.86% for 2006, in spite of the declining net interest margins. We were able to accomplish this by increasing our operating efficiencies and reducing the rate of non-interest expense growth. While our total assets and loan portfolio grew by 8.4% and 9.2%, respectively, and total other income grew by 12.1%, total other expenses grew by only 6.9%.”

Mr. Ferrell continued, “For most of 2006, the interest-rate yield curve had inverted to the point that a three month Treasury was yielding the same or more than the five year and ten year Treasury. While our deposit costs rapidly increased, the lack of a similar movement in longer-term rates limited our ability to increase the yield of our loan portfolio. As result, our net interest margin contracted in a fashion similar with much of the banking industry.”

Net loans and total deposits were $416.1 million and $416.1 million, respectively, at December 31, 2006, an increase of 9.2% and 6.2%, respectively, since December 31, 2005. At December 31, 2006, Fauquier Bankshares’ Wealth Management Services division had approximately $320.8 million in assets under management, a growth of 17.8% from December 31, 2005. Fauquier Bankshares and The Fauquier Bank had combined assets of $521.8 million and total shareholders’ equity of $38.7 million at December 31, 2006. Non-performing assets were $1.75 million or 0.42% of total loans at December 31, 2006, compared with $195,000 or 0.05% of total loans one year earlier. Loan charge-offs, net of recoveries, totaled $128,000 and $295,000 for 2006 and 2005, 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 throughout Fauquier County and Manassas, Virginia, and plans to open its ninth banking office in Haymarket, Virginia in late 2007. Fauquier Bankshares’ stock price closed at $25.01 per share on January 30, 2007. It is listed on NASDAQ under the stock symbol FBSS. 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)

                 
     December 31, 
    2006   2005
Assets
                
Cash and due from banks
   $ 21,019,764     $ 26,565,702  
Interest-bearing deposits in other banks
     537,891       680,013  
Federal funds sold
     20,122,000       493,000  
Securities, at fair value
     40,352,775       48,390,771  
Loans, net of allowance for loan losses of $4,470,533 in 2006 and $4,238,143 in 2005
     416,061,150       381,049,471  
Bank premises and equipment, net
     7,584,089       8,289,581  
Accrued interest receivable
     1,802,379       1,585,849  
Other assets
     14,282,097       14,191,023  
Total assets
     521,762,145       481,245,410  
 
                
Liabilities
                
Deposits:
                
Noninterest-bearing
     85,495,160       95,411,624  
Interest-bearing
     330,576,258       296,245,545  
 
                
Total deposits
     416,071,418       391,657,169  
Federal funds purchased
     —       5,000,000  
Dividends payable
     —       —  
Federal Home Loan Bank advances
     55,000,000       42,000,000  
Company-obligated mandatorily redeemable capital securities
     8,248,000       4,124,000  
Other liabilities
     3,730,778       2,885,096  
Commitments and contingent liabilities
     —       —  
 
                
Total liabilities
     483,050,196       445,666,265  
 
                
Shareholders’ Equity
                
Common stock, par value, $3.13; authorized 8,000,000 shares; issued and outstanding, 2006, 3,478,960 shares; 2005, 3,448,786 shares
     10,889,145       10,794,700  
Retained earnings
     28,862,785       25,440,838  
Accumulated other comprehensive income (loss), net
     (1,039,981 )     (656,393 )
Total shareholders’ equity
     38,711,949       35,579,145  
 
                
Total liabilities and shareholders’ equity
   $ 521,762,145     $ 481,245,410  
 
                

2

Fauquier Bankshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
For Each of the Three Years in the Period Ended December 31, 2006

                                                         
                    2006           2005           2004
Interest Income
                                        
   Interest and fees on loans
   $ 8,039,607             $ 23,186,158             $ 20,034,615  
 
                                                        
   Interest and dividends on securities available for sale:
                                        
      Taxable interest income
     1,599,174               1,874,519               1,613,828  
      Interest income exempt from federal income taxes
     52,580               52,280               56,215  
      Dividends
     341,815               246,276               181,946  
   Interest on federal funds sold
     92,221               47,215               71,940  
   Interest on deposits in other banks
     26,306               7,270               19,708  
      Total interest income
     30,151,703               25,413,718               21,978,252  
 
                                                        
Interest Expense
                                        
   Interest on deposits
     7,878,058               4,948,904               3,400,473  
   Interest on federal funds purchased
     452,301               202,706               34,026  
   Interest on Federal Home Loan Bank advances
     2,135,506               911,434               770,496  
   Distribution on capital securities of subsidiary trusts
     435,771               275,176               206,274  
      Total interest expense
     10,901,636               6,338,220               4,411,269  
 
                                                        
      Net interest income
     19,250,067               19,075,498               17,566,983  
Provision for loan losses
     360,000               472,917               539,583  
 
                                        
      Net interest income after
                                        
      provision for loan losses
     18,890,067               18,602,581               17,027,400  
 
                                                        
Other Income
                                        
   Wealth management income
     1,343,963               1,331,511               1,270,405  
   Service charges on deposit accounts
     2,781,884               2,615,408               2,603,215  
   Other service charges, commissions and income
     1,532,081               1,322,946               1,165,702  
   Gain on sale of property rights
     250,000               -               -  
      Total other income
     5,907,928               5,269,865               5,039,322  
 
                                                        
Other Expenses
                                        
   Salaries and benefits
     9,051,834               8,263,400               7,769,172  
   Net occupancy expense of premises
     1,016,527               920,866               863,600  
   Furniture and equipment
     1,360,063               1,303,990               1,274,349  
   Other operating expenses
     5,219,720               5,165,982               4,941,149  
   Loss on sale of securities
     82,564               -               -  
      Total other expenses
     16,730,708               15,654,238               14,848,270  
 
                                                        
      Income before income taxes
     8,067,287               8,218,208               7,218,452  
 
                                                        
Income tax expense
     2,463,745               2,516,591               2,240,268  
 
                                        
      Net Income
   $ 5,603,542             $ 5,701,617             $ 4,978,184  
 
                                                        
Earnings per Share, basic
   $ 1.61           $ 1.66           $ 1.49
 
                                        
Earnings per Share, assuming dilution
   $ 1.56           $ 1.60           $ 1.41
 
                                        
Dividends per Share
   $ 0.745             $ 0.645             $ 0.560  
 
             =               =          

3

Fauquier Bankshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
For the Three Months Ended December 31, 2006 and 2005

                                 
                    2006   2005
Interest Income
                                
   Interest and fees on loans
           $ 7,339,172     $ 6,255,861  
   Interest and dividends on securities available for sale:
                
      Taxable interest income
     390,991       435,253  
      Interest income exempt from federal income taxes
     13,139       13,061  
      Dividends
     140,779       99,121  
   Interest on federal funds sold
             70,033       812  
   Interest on deposits in other banks
             3,151       3,040  
      Total interest income
     7,957,265       6,807,148  
 
                                
Interest Expense
                                
   Interest on deposits
             2,318,350       1,430,660  
   Interest on federal funds purchased
             62,953       144,472  
   Interest on Federal Home Loan Bank advances
     703,555       285,049  
   Distribution on capital securities of subsidiary trusts
     162,558       73,304  
      Total interest expense
     3,247,416       1,933,485  
 
                                
      Net interest income
     4,709,849       4,873,663  
Provision for loan losses
             -       -  
 
                                
      Net interest income after
                
      provision for loan losses
     4,709,849       4,873,663  
 
                                
Other Income
                                
   Wealth management income
             342,994       297,061  
   Service charges on deposit accounts
             718,353       638,448  
   Other service charges, commissions and income
     428,928       343,426  
   Gain on sale of property rights
             —       —  
      Total other income
     1,490,275       1,278,935  
 
                                
Other Expenses
                                
   Salaries and benefits
             2,281,909       2,028,365  
   Net occupancy expense of premises
             272,217       212,770  
   Furniture and equipment
             350,772       355,459  
   Other operating expenses
             1,201,580       1,175,838  
   Loss on sale of securities
             —       —  
      Total other expenses
     4,106,478       3,772,432  
 
                                
      Income before income taxes
     2,093,646       2,380,166  
 
                                
Income tax expense
                     658,859       710,745  
 
                                
      Net Income
   $ 1,434,787     $ 1,669,421  
 
                                
Earnings per Share, basic
           $ 0.41     $ 0.48  
 
                                
Earnings per Share, assuming dilution
           $ 0.40     $ 0.47  
 
                                
Dividends per Share
                   $ 0.190     $ 0.175  
 
                                

4

Fauquier Bankshares, Inc. and Subsidiaries
Selected Financial Data
(Unaudited)

                                 
    For the three months ended   For the twelve months ended
    December 31   December 31
    2006   2005   2006   2005
DOLLAR PER SHARE DATA:
                                
Net income per share, basic
   $ 0.41     $ 0.48     $ 1.61     $ 1.66  
Net income per share, diluted
   $ 0.40     $ 0.47     $ 1.56     $ 1.60  
Book value at period end
   $ 11.13     $ 10.32     $ 11.13     $ 10.32  
PERFORMANCE RATIOS:
                                
Net interest margin (1)
     3.98 %     4.54 %     4.28 %     4.67 %
Return on average assets
     1.14 %     1.43 %     1.14 %     1.27 %
Return on average equity
     14.52 %     18.90 %     14.86 %     16.94 %
Efficiency ratio (2)
     65.62 %     60.82 %     65.90 %     63.77 %
ASSET QUALITY RATIOS:
                                
Allowance for loan losses to period end loans, net
     1.07 %     1.11 %     1.07 %     1.11 %
Non-performing assets to period end loans
                                
and other real estate owned
     0.42 %     0.05 %     0.42 %     0.05 %
Net charge-offs to average loans
     0.03 %     0.08 %     0.03 %     0.08 %
CAPITAL RATIOS:
                                
Leverage
     9.54 %     8.66 %                
Risk Based Capital Ratios:
                                
Tier 1 capital
     12.68 %     10.83 %                
Total capital
     13.87 %     11.97 %                
(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