Fauquier Bankshares Announces 2011 Earnings

WARRENTON, Va., Jan. 31, 2012/PRNewswire/ -- Fauquier Bankshares, Inc. (Nasdaq: FBSS) the parent holding company of The Fauquier Bank (TFB), reported net income of $910,000for the quarter ended December 31, 2011compared with $870,000for the same quarter in 2010, representing an increase of 4.6%.  Basic and diluted earnings per share for the fourth quarter of 2011 were $0.25compared with $0.24per share in the fourth quarter of 2010.

For the year ended December 31, 2011, net income was $4.1 millioncompared with $3.7 millionfor 2010, an increase of 12.3%. Basic and diluted earnings per share for the year ended December 31, 2011were $1.12compared with $1.01for 2010. The improvement in year-to-date earnings was primarily attributable to a $674,000increase in noninterest income, and a $775,000decrease on the net loss on the sale or impairment of securities from 2010.  This was partially offset by an increase of $898,000in loss on sale or impairment of other real estate owned (OREO).

Randy Ferrell, President and CEO stated, "I am pleased with our performance over the past year.  The Company continues to focus on problem assets, improving operating efficiency, growing our core deposits and enhancing long-term shareholder value.  In 2011 we returned 43% of our net income to our shareholders in the form of dividends.  Our Bank is in an enviable position with the ability to grow our customer base through new branch locations, as well as taking care of our existing customers' needs."

Return on average assets was 0.59% and return on average equity was 7.63% for the fourth quarter of 2011, compared with 0.57% and 7.78%, respectively, for the fourth quarter of 2010.  For the year ended December 31, 2011, Fauquier Bankshares' return on average assets was 0.69% and return on average equity was 8.93%, compared with 0.63% and 8.34%, respectively, for 2010.

Net interest margin decreased 9 basis points to 3.87% in the fourth quarter of 2011 compared with 3.96% in the fourth quarter of 2010.  Net interest income for the fourth quarter of 2011 decreased $122,000or 2.2% when compared with the same period in 2010.  The decline in both the margin and net interest income was due to the lower interest rates earned on loans and investments during 2011.  The net interest margin decreased 14 basis points to 4.00% in the year ended December 31, 2011compared with 4.14% in 2010.  Net interest income for the year ended December 31, 2011decreased $132,000, or 0.59%, over the same period in 2010.

Allowance for loan losses was $6.7 millionor 1.47% of total loans at December 31, 2011, compared with $6.3 million, or 1.35%, at December 31, 2010.  The Company was aggressive in recognizing and addressing problem loans throughout the year.  This resulted in $1.5 millionin net loans charge-offs and $1.9 millionexpensed to earnings to build the allowance for loan losses.  The ratio of net charge-offs to average loans outstanding was 0.33% for the year ended December 31, 2011, compared with 0.27% for 2010.

Nonperforming assets totaled $6.7 millionor 1.10% of total assets at December 31, 2011, compared with $5.5 millionor 0.92% as of December 31, 2010.  The Company sold three of the four OREO properties held during the fourth quarter 2011.  Included within nonperforming assets was $335,000of pooled trust preferred securities at December 31, 2011compared with $552,000at December 31, 2010, both at fair value.  The company recognized $189,000of impairment losses in 2011 compared with $1.4 millionin 2010 due to its investment in pooled trust preferred securities.

"We are committed to delivering credit to our communities and remain appreciative of our customers' banking business.  It was a successful year in core deposit growth.  Transaction deposit accounts (Demand and NOW) increased by 22.8% from December 2010.  We continue to exceed regulatory benchmarks for "well-capitalized" and are positioned to serve local businesses and neighbors by providing a full banking relationship and helping make their financial life easier," Ferrell stated.

Fauquier Bankshares' regulatory capital ratios continue to be deemed "Well Capitalized," the highest category assigned by the Federal Reserve Bank of Richmond. At December 31, 2011, the Company's leverage ratio, an important indicator of financial health, was 8.70%, compared with 8.55% one year earlier. The company's tier 1 and total risk-based ratios were 12.05% and 13.31%, respectively, at December 31, 2011, compared with 11.30% and 12.55% at December 31, 2010.  The minimum capital ratios to be considered "Well Capitalized" by the Federal Reserve are 5.00% for the leverage ratio, 6.00% for the tier 1 risk-based ratio, and 10.00% for the total risk-based ratio.

At December 31, 2011, Fauquier Bankshares' Wealth Management Services division revenues were $1.64 millioncompared to $1.45 milliona year earlier, an increase of 12.5%. Mr. Ferrell commented, "The growth in wealth management revenues is a testament to our commitment for providing the highest standard of services to our clients in the areas of financial planning, trust administration, estate settlement, as well as asset management and brokerage services.  We have an experienced team of trusted advisors that focus on protecting and growing our client's financial portfolios."

Noninterest income increased $175,000, or 11.7% to $1.7 millionfor the quarter ended December 31, 2011, compared with $1.5 millionfor the same period in 2010.  Noninterest income increased $674,000or 11.8% to $6.4 millionfor the year ended December 31, 2011compared to $5.7 millionfor the same period in 2010.  The increase in noninterest income was primarily due to increases in trust and brokerage income, as well as service charges on deposit accounts and other service charges.  Net securities losses decreased $775,000for the year ended December 31, 2011compared with the same time period in 2010.

Noninterest expense for the fourth quarter 2011 increased $493,000or 9.9% to $5.5 millioncompared with $5.0for the same period in 2010.  Noninterest expense for the year ended December 31, 2011increased $667,000or 3.3% to $20.9 millioncompared with $20.2 millionfor the same period in 2010.  The increase in noninterest expense was due to the $898,000increase in the losses on the sale or impairment of other real estate owned properties, partially offset by a decrease of $231,000in all other operating expenses.

Fauquier Bankshares and The Fauquier Bank had combined assets of $614.2 millionand total shareholders' equity of $47.6 millionat December 31, 2011.  The Fauquier Bank is an independent, locally-owned, community bank offering a full range of financial services, including internet banking, commercial, retail, insurance, wealth management, and financial planning services through ten banking offices throughout Fauquierand Prince WilliamCounties in Virginia.  Fauquier Bankshares' stock price closed at $11.80per share on January 30, 2012.

Additional information, including a more extensive investor presentation with comparisons of the company's performance to peer institutions is available at http://investor.fauquierbank.com/CorporateProfile.aspx?iid=1017981 or by calling Investor Relations at [phone].

This news 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, our plans to expand our branch network and increase our market share, 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 news release.

FAUQUIER BANKSHARES, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA
	For the Quarter Ended,
(Dollars in thousands, except per share data)	Dec. 31, 2011		Sep. 30, 2011		Jun. 30, 2011		Mar. 31, 2011		Dec. 31, 2010
EARNINGS STATEMENT DATA:
Interest income	$           6,685		$            6,837		$             6,788		$             6,839		$           7,030
Interest expense	1,222		1,287		1,265		1,301		1,445
Net interest income	5,463		5,550		5,523		5,538		5,585
Provision for loan losses	463		700		308		463		625
Net interest income after provision for loan losses	5,000		4,850		5,215		5,075		4,960
Noninterest income	1,670		1,681		1,576		1,437		1,495
Securities gains (losses)	74		24		3		(189)		(437)
Noninterest expense	5,486		4,983		5,263		5,131		4,993
Income before income taxes	1,258		1,572		1,531		1,192		1,025
Income taxes	348		424		393		271		155
Net income	$              910		$            1,148		$             1,138		$                921		$              870
PER SHARE DATA:
Net income per share, basic	$              0.25		$              0.31		$               0.31		$               0.25		$             0.24
Net income per share, diluted	$              0.25		$              0.31		$               0.31		$               0.25		$             0.24
Cash dividends	$              0.12		$              0.12		$               0.12		$               0.12		$             0.12
Average basic shares outstanding	3,669,758		3,669,758		3,669,758		3,655,354		3,636,758
Average diluted shares outstanding	3,691,688		3,688,974		3,686,259		3,669,529		3,652,631
Book value at period end	$            12.96		$            12.81		$             12.58		$             12.27		$           12.13
BALANCE SHEET DATA:
Total assets	$        614,224		$        604,594		$         599,173		$         593,550		$       598,040
Loans, net	452,086		447,964		447,808		455,097		460,442
Investment securities	50,193		51,807		52,605		52,221		49,926
Deposits	530,569		522,278		518,619		514,513		520,056
Transaction accounts (Demand & NOW accounts)	259,694		215,707		218,053		206,517		211,468
Shareholders' equity	47,571		47,001		46,156		45,032		44,106
PERFORMANCE RATIOS:
Net interest margin(1)	3.87%		3.97%		4.06%		4.12%		3.96%
Return on average assets	0.59%		0.76%		0.77%		0.63%		0.57%
Return on average equity	7.63%		9.74%		9.99%		8.37%		7.78%
Efficiency ratio(2)	74.71%		67.43%		72.44%		73.73%		73.34%
(1) Net interest margin is calculated as fully taxable equivalent net interest income divided by average earning assets and represents the Company'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.

FAUQUIER BANKSHARES, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA
	For the Quarter Ended,
(Dollars in thousands, except for ratios)	Dec. 31, 2011		Sep. 30, 2011		Jun. 30, 2011		Mar. 31, 2011		Dec. 31, 2010
ASSET QUALITY RATIOS:
Nonperforming loans	$            4,621		$            4,499		$             2,957		$             1,710		$           2,109
Other real estate owned	1,776		3,614		3,469		3,233		2,821
Foreclosed property	15		1		-		5		21
Nonperforming corporate bonds, at fair value	335		276		324		324		552
Total nonperforming assets	6,747		8,390		6,750		5,272		5,503
Restructured loans still accruing	-		178		-		-		-
Loans past due 90 or more days and still accruing	101		5		-		-		-
Total nonperforming and other risk assets	$             6,848		$             8,573		$             6,750		$             5,272		$           5,503
Nonperforming loans to total loans, period end	1.01%		0.99%		0.65%		0.37%		0.45%
Nonperforming loans, other real estate owned and other repossessed assets as percentage of total loans, other real estate owned and other repossessed assets, period end	1.39%		1.77%		1.40%		1.06%		1.05%
Nonperforming assets to period end total assets	1.10%		1.39%		1.13%		0.89%		0.92%
Allowance for loan losses	$            6,728		$            6,882		$             6,616		$             6,673		$           6,307
Allowance for loan losses to period end loans	1.47%		1.51%		1.46%		1.45%		1.35%
Allowance for loan losses as percentage of nonperforming loans, period end	145.61%		152.97%		223.73%		390.15%		299.10%
Allowance for loan losses as percentage of nonperforming loans, other real estate owned and other repossessed assets, period end	104.94%		84.81%		102.96%		134.86%		127.41%
Net loan charge-offs for the quarter	$               616		$               434		$               366		$                96		$               48
Net loan charge-offs to average loans	0.13%		0.10%		0.08%		0.02%		0.01%
CAPITAL RATIOS:
Tier 1 leverage ratio	8.70%		8.69%		8.66%		8.53%		8.55%
Tier 1 risk-based capital ratio	12.05%		12.04%		11.82%		11.61%		11.30%
Total risk-based capital ratio	13.31%		13.29%		13.07%		12.87%		12.55%
Tangible equity to total assets	7.74%		7.77%		7.70%		7.59%		7.38%

FAUQUIER BANKSHARES, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA
(Dollars in thousands, except per share data)	For the Twelve Month Period Ended,
	Dec. 31, 2011		Dec. 31, 2010
EARNINGS STATEMENT DATA:
Interest income	$          27,149		$                28,330
Interest expense	5,075		6,124
Net interest income	22,074		22,206
Provision for loan losses	1,933		2,075
Net interest income after
provision for loan losses	20,141		20,131
Noninterest income	6,362		5,688
Securities gains (losses)	(87)		(862)
Noninterest expense	20,863		20,197
Income before income taxes	5,553		4,760
Income taxes	1,436		1,093
Net income	$            4,117		$                 3,667
PER SHARE DATA:
Net income per share, basic	$              1.12		$                   1.01
Net income per share, diluted	$              1.12		$                   1.01
Cash dividends	$              0.48		$                   0.72
Average basic shares outstanding	3,666,206		3,627,016
Average diluted shares outstanding	3,684,162		3,643,109
PERFORMANCE RATIOS:
Net interest margin(1)	4.00%		4.14%
Return on average assets	0.69%		0.63%
Return on average equity	8.93%		8.34%
Efficiency ratio(2)	72.05%		72.91%
Net loan charge-offs	$            1,512		$                1,250
Net loan charge-offs to average loans	0.33%		0.27%
(1) Net interest margin is calculated as fully taxable equivalent net interest income divided by average earning assets and represents the Company'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.

SOURCE Fauquier Bankshares, Inc.