Fauquier Bankshares Announces Second Quarter 2008 Earnings

- Net income down 26% versus the second quarter of 2007, primarily due to
provision for loan losses

WARRENTON, Va., July 31 /PRNewswire-FirstCall/ -- Fauquier Bankshares,
Inc. (Nasdaq: FBSS) today reported net income of $942,000 for the quarter
ended June 30, 2008 as compared with $1,280,000 for the same quarter in 2007,
representing a decrease of 26.4%. Earnings per share were $0.26 on a diluted
basis for the quarter ended June 30, 2008, as compared with $0.36 per diluted
share for the same quarter in 2007.
Results for the second quarter of 2008 were negatively affected by a
$714,000 increase to the provision for loan losses in the second quarter of
2008 compared with the second quarter of 2007. In addition, during the second
quarter, the bank recorded a loss of $125,000 due to a write-down of its
Freddie Mac preferred stock. The bank's remaining holdings in Freddie Mac
preferred stock are valued at approximately $300,000.
For the six months ended June 30, 2008, net income was $1,951,000, or
$0.55 per diluted share, compared with $2,452,000, or $0.69 per diluted share
for the first six months of 2007, a decrease of 20.4%. The decline in net
income for the first six months of 2008 versus the first six months of 2007
was due primarily to the $1,050,000 increase in loan loss provision. Net
interest income before the loan loss provision increased by $281,000 for the
first half of 2008 compared with the first half of 2007.
Randy K. Ferrell, President and Chief Executive Officer, commented, "Our
performance for the quarter was burdened by the increase to our loan loss
provision in an effort to address identified credit issues and the impact of
economic conditions on borrowers. The housing market downturn and other asset
quality issues continue to place negative pressure on the financial industry
affecting bank earnings and stock values. While Fauquier Bankshares is not
immune to this, we have been proactively taking the appropriate measures
relative to any potential exposure, and all other areas of the bank are
performing well. We are pleased with the 5% growth in our loan portfolio,
given the interest rate environment. We have been realizing positive results
from our recent marketing initiatives, as the ending balances of total
transaction accounts grew by 8% from June 30, 2007 to June 30, 2008 with NOW
deposit accounts increasing by 27% over that same period."
"Our capital position remains strong," continued Ferrell. "Fauquier
Bankshares continues to be well-capitalized, exceeding the highest level of
capitalization requirements set forth by the Federal Depository Insurance
Corporation. By exceeding all FDIC capitalization requirements, we can assure
our customers that we are a strong and stable community bank."
Non-performing assets were $3.0 million at June 30, 2008, compared with
$1.0 million at June 30, 2007. The non-performing assets-to-loans ratio
increased to 0.70% in the second quarter of 2008 compared with 0.25% in the
same quarter of 2007. Charge-offs, net of recoveries, for the second quarter
of 2008 were $711,000 compared with $231,000 for the same quarter in 2007.
"While these numbers indicate the ongoing strain on some community businesses,
we are comfortable generating new loans under our prudent approach and believe
we are well-positioned to improve our performance as economic growth returns,"
commented Ferrell.
Return on average assets was 0.76% and return on average equity was 8.80%
for the second quarter of 2008, compared with 1.05% and 12.65%, respectively,
for the second quarter of 2007. For the six month period ended June 30, 2008,
Fauquier Bankshares' return on average assets was 0.79% and return on average
equity was 9.14%, compared with 1.00% and 12.34%, respectively, for 2007.
Net interest income before the loan loss provision for the second quarter
of 2008 increased by 3.0% compared with the same quarter in 2007 primarily
resulting from lower interest expense due to the reduced cost of deposits and
borrowings. Net interest margin for the second quarter of 2008 was 4.22%
compared with 4.12% for the same quarter in 2007.
Assets under management for the Bank's Wealth Management Services division
were $288 million at June 30, 2008, down from $303 million at June 30, 2007.
Assets under management continue to be adversely impacted by the decline in
the mark to market valuation related to the overall performance of the stock
market. Net loans were $425.1 million, an increase of 4.9% compared with the
$405.2 at June 30, 2007, and total deposits were $388.2 million, a decline of
5.3% compared with June 30, 2007. Fauquier Bankshares and The Fauquier Bank
had combined assets of $503.0 million and total shareholders' equity of $41.8
million at June 30, 2008.
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 eight banking offices throughout Fauquier and Prince William
Counties in Virginia. The Fauquier Bank is continuing to move forward with
its proposed plans to open two banking offices in Haymarket and Bristow,
Virginia, in addition to moving its current Broadview Avenue View Tree Branch
to a newly proposed 9,600-square-foot office in Warrenton. These additions
are anticipated to occur in late 2009. Fauquier Bankshares' stock price
closed at $15.75 per share on July 30, 2008. Additional information,
including a more extensive investor presentation, is available at
www.fauquierbank.com or by calling (800) 638-3798.
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.
SELECTED FINANCIAL DATA

(Dollars in thousands,
except per share data) For the Quarter Ended,
Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30,
2008 2008 2007 2007 2007

EARNINGS STATEMENT DATA:

Interest income $7,061 $7,274 $7,730 $7,706 $7,746
Interest expense 2,194 2,584 2,940 3,097 3,044
Net interest income 4,867 4,690 4,790 4,609 4,702
Provision for loan
losses 834 456 357 120 120
Net interest income
after provision for
loan losses 4,033 4,234 4,433 4,489 4,582
Noninterest income 1,776 1,481 1,589 1,538 1,513
Securities gains
(losses) (125) 88 - - -

Noninterest expense 4,395 4,395 4,245 4,283 4,265
Income before
income taxes 1,289 1,408 1,777 1,744 1,830
Income taxes 347 399 487 534 550
Net income $ 942 $1,009 $1,290 $1,210 $1,280

PER SHARE DATA:

Net income per
share, basic $0.27 $0.29 $ 0.37 $ 0.34 $0.36
Net income per
share, diluted $0.26 $0.28 $ 0.36 $ 0.34 $0.36
Cash dividends $0.20 $0.20 $ 0.20 $ 0.20 $0.20
Average basic
shares
outstanding 3,531,310 3,515,475 3,507,481 3,513,130 3,515,669
Average diluted
shares
outstanding 3,563,826 3,551,926 3,551,242 3,558,309 3,587,648
Book value at
period end $11.70 $11.88 $11.82 $11.45 $11.30

BALANCE SHEET DATA:

Total Assets $503,029 $490,493 $489,896 $486,493 $486,028
Loans, net 425,134 411,972 409,107 406,346 405,209
Investment
securities 39,863 38,934 37,377 40,508 38,270
Deposits 388,241 390,107 404,559 398,306 410,151
Transaction
Deposits (Demand
Deposit and NOW
Accounts) 158,813 152,667 166,251 145,356 147,502
Shareholders'
equity 41,772 42,454 41,828 40,557 40,053

PERFORMANCE RATIOS:

Net interest margin(1) 4.22% 4.15% 4.16% 4.02% 4.12%
Return on average
assets 0.76% 0.83% 1.04% 0.99% 1.05%
Return on average
equity 8.80% 9.48% 12.30% 11.68% 12.65%
Efficiency ratio(2) 66.64% 69.40% 65.78% 68.93% 68.02%

ASSET QUALITY RATIOS:

Allowance for loan
losses $4,319 $4,196 $4,185 $4,413 $4,407
Allowance for loan
losses to period
end loans 1.01% 1.02% 1.02% 1.09% 1.09%
Non-performing assets $3,012 $2,025 $2,128 $1,382 $1,008
Non-performing assets
to period end loans
and other repossessed
assets owned 0.70% 0.49% 0.51% 0.34% 0.25%
Net charge-offs $ 711 $ 445 $586 $114 $231
Net charge-offs to
average loans 0.17% 0.11% 0.14% 0.03% 0.06%

CAPITAL RATIOS:

Leverage 9.46% 9.61% 9.49% 9.35% 9.26%
Risk Based Capital
Ratios:
Tier 1 capital 11.78% 12.13% 11.90% 11.59% 11.71%
Total capital 12.86% 13.32% 12.98% 12.71% 12.85%

For the Six Month Period Ended,
Jun. 30, 2008 Jun. 30, 2007
EARNINGS STATEMENT DATA:
Interest income $14,336 $15,508
Interest expense 4,778 6,231
Net interest income 9,558 9,277
Provision for loan losses 1,290 240
Net interest income after
provision for loan losses 8,268 9,037
Noninterest income 3,256 2,936
Securities gains (losses) (37) -
Noninterest expense 8,791 8,454
Income before income taxes 2,696 3,519
Income taxes 745 1,067
Net income $1,951 $2,452

PER SHARE DATA:
Net income per share, basic $0.55 $0.70
Net income per share, diluted $0.55 $0.69
Cash dividends $0.40 $0.39
Average basic shares outstanding 3,523,392 3,503,359
Average diluted shares outstanding 3,557,875 3,576,053

PERFORMANCE RATIOS:
Net interest margin(1) 4.18% 4.04%
Return on average assets 0.79% 1.00%
Return on average equity 9.14% 12.34%
Efficiency ratio(2) 67.99% 68.60%

Net charge-offs $1,156 $303
Net charge-offs to average loans 0.28% 0.07%

(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.

Eric Graap, +1-540-349-0212, egraap@fauquierbank.com