Fauquier Bankshares Announces Third Quarter 2009 Earnings

WARRENTON, Va., Nov. 4 /PRNewswire-FirstCall/ --

-- Net income increases 2% from third quarter 2008
-- Net interest income up 11.2% from third quarter 2008
-- Loans and deposits increased 7.6% and 7.4%, respectively, over last 12
months

-- Non-performing assets totaled $7.1 million or 1.29% of total assets

Fauquier Bankshares, Inc. (Nasdaq: FBSS) today reported net income of $956,000
for the quarter ended September 30, 2009 as compared with $935,000 for the
same quarter in 2008, representing an increase of 2%. Earnings for the third
quarter were boosted by several items, the most significant being a $551,000
or 11% increase in net interest income. Earnings per share were $0.26 on a
diluted basis for the quarter ended September 30, 2009, as compared with $0.26
per diluted share for the same quarter in 2008.

The positive performance was mostly offset by a $246,000 impairment loss on
corporate bond investments and increased assessments of $145,000 by the
Federal Deposit Insurance Corporation (FDIC) in the just completed quarter.

Randy K. Ferrell, president and chief executive officer, said, "The third
quarter provided some good news when it comes to the performance of the bank,
but we continue to pay dramatically increased fees to the FDIC, reflecting the
costs of over 100 new bank failures in 2009."

For the nine months ended September 30, 2009, net income was $2,603,000, or
$0.72 per diluted share, compared with $2,886,000, or $0.81 per diluted share
for the first nine months of 2008, a decrease of 9.8%. The decline in net
income for the first nine months of 2009 compared to the first nine months of
2008 was due to several items, the most significant being increased
assessments by the FDIC, charges associated with a proxy contest with
dissident shareholders, and an impairment loss on corporate bond investments
and equity shares held in Silverton Bank.

"We've again presented data showing how the bank would have performed without
the proxy contest and the increased assessments from the FDIC as a way of
helping our shareholders and prospective investors understand the significant
impact of these unusual expenses," Ferrell said.

The following table reconciles various non-GAAP adjustments to net income for
the first nine months on a GAAP basis.

RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL INFORMATION
For the Nine Months Ended September 30, 2009
(in thousands, except per share data)

Per Fully-
Diluted
Before Taxes Tax Expense After Taxes Share
------------ ----------- ----------- -------

Net income on GAAP basis $3,539 $937 $2,603 $0.723
Plus: Proxy contest
expense 291 99 192 0.053
Plus: FDIC special
assessment 240 82 158 0.044
Income excluding non-GAAP
adjustments $4,070 $1,118 $2,953 $0.820
====== ====== ====== ======

*Tax expense is computed using a federal tax rate of 34%.

Loans, net of reserve, totaling $455.4 million at September 30, 2009,
increased 4.8% when compared with December 31, 2008, and increased 7.6% when
compared with September 30, 2008. Deposits, totaling $435.6 million at
September 30, 2009, increased 8.8% compared with year-end 2008, and increased
7.4% when compared with September 30, 2008.

The net interest margin for the third quarter of 2009 was 4.32% compared with
4.15% for the same quarter in 2008. This represents the difference between the
interest income generated through loans and investments and the costs the
Fauquier Bank incurs in obtaining the deposits and other funds to lend and
invest.

Return on average assets (ROAA) was 0.70% and return on average equity (ROAE)
was 8.87% for the third quarter of 2009, a decrease from 0.73% but an increase
from 8.85%, respectively, from the third quarter of 2008. For the nine-month
period ended September 30, 2009, Fauquier Bankshares' return on average assets
was 0.66% and return on average equity was 8.26%, compared with 0.77% and
9.04%, respectively, for 2008.

The Bank's non-performing loans and repossessed assets totaled $6.4 million or
1.39% of total loans and repossessed assets, including real estate owned, at
September 30, 2009, as compared with $4.3 million or 0.97% of total loans and
repossessed assets at December 31, 2008, and $4.6 million or 1.07% of total
loans and repossessed assets at September 30, 2008. The Bank's non-performing
assets totaled $7.1 million or 1.29% of total assets at September 30, 2009, as
compared with $4.3 million or 0.81% of total assets at December 31, 2008, and
$4.6 million or 0.92% of total assets at September 30, 2008. Included in
non-performing assets at September 30, 2009 are $634,000 of non-performing
pooled trust-preferred corporate bonds. The provision for loan losses was
$920,000 for the first nine months of 2009 compared with $1.72 million for the
first nine months of 2008. Loan charge-offs, net of recoveries, totaled
$479,000 or 0.11% of total average loans for the first nine months of 2009,
compared with $1.22 million or 0.29% of total average loans for the first nine
months of 2008. The $801,000 decrease in the provision for loan losses from
the first nine months of 2008 to the first nine months of 2009 was largely in
response to the $743,000 decline in net charge-offs for the respective nine
month periods. Total allowance for loan losses was $5.2 million or 1.13% of
total loans at September 30, 2009 compared with $4.8 million or 1.08% of loans
at December 31, 2008 and $4.7 million or 1.10% of loans at September 30, 2008.

"We continue to be active in serving our community's needs with a prudent
approach to lending," Ferrell said. "While the current economy has impacted
our credit quality numbers, we continue to compare favorably with other
Virginia banks. We are steadfast in working with our customers to help them
grow, as we keep a watchful eye on economic conditions."

Assets under Wealth Management Service, totaling $303.1 million in market
value at September 30, 2009, increased 10.7% from $273.7 million in market
value at September 30, 2008. During the same period, stocks measured in the
Standard & Poors' 500 index declined by approximately 9.4%

Fauquier Bankshares and The Fauquier Bank had combined assets of $548.4
million and total shareholders' equity of $42.6 million at September 30, 2009.
The Fauquier Bank's regulatory capital ratios continue to be deemed "Well
Capitalized," the highest category assigned by the Federal Reserve Bank of
Richmond. At September 30, 2009, the Company's leverage ratio, an important
indicator of financial health, was 8.84%, compared with 9.38% one year
earlier.

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
nine banking offices throughout Fauquier and Prince William counties in
Virginia. The new Bristow branch opened its doors on July 13, 2009 and
celebrated the Grand Opening on August 8, 2009. The Fauquier Bank is
continuing to move forward with its plans to open a branch in Haymarket during
late 2009 or early 2010. Later this year, the Broadview Avenue View Tree
Branch will move to a new 9,600-square-foot office at the intersection of West
Lee Highway and Fletcher Drive. Fauquier Bankshares' stock price closed at
$14.00 per share on November 2, 2009. Additional information, including a more
extensive investor presentation, is available at www.fauquierbank.com or by
calling (800) 638-3798.

This news release contains financial information determined by methods other
than in accordance with accounting principles generally accepted in the United
States of America ("GAAP"). The Company's management uses these "non-GAAP"
measures in their analysis of the Corporation's performance. The Company's
management believes that these non-GAAP financial measures provide a greater
understanding of ongoing operations and enhance comparability of results with
prior periods as well as demonstrating the effects of significant gains and
charges in the current period. The Company believes that a meaningful
analysis of its financial performance requires an understanding of the factors
underlying that performance. The Company's management believes that investors
may use these non-GAAP financial measures to analyze financial performance
without the impact of unusual items that may obscure trends in the Company's
underlying performance. Where incorporated into our disclosures, these
non-GAAP measures will be clearly identified as such. These disclosures should
not be viewed as a substitute for operating results determined in accordance
with GAAP, nor are they necessarily comparable to non-GAAP performance
measures that may be presented by other companies.

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, The FDIC 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,
Sep. 30, Jun. 31, Mar. 31, Dec. 31, Sep. 30,
2009 2009 2009 2008 2008
-------- -------- -------- -------- --------
(Dollars in thousands,
except per share data)

EARNINGS
STATEMENT
DATA:
Interest
income $7,092 $6,902 $6,846 $7,099 $7,268
Interest
expense 1,624 1,712 1,872 2,258 2,351
----- ----- ----- ----- -----
Net interest
income 5,468 5,190 4,974 4,841 4,917
Provision
for loan
losses 360 360 200 1,506 431
--- --- --- ------ ---
Net interest
income after
provision for
loan losses 5,108 4,830 4,774 3,335 4,486
Noninterest
income 1,438 1,356 1,085 1,366 1,482
Securities
gains
(losses) (246) (166) - - (298)
Noninterest
expense 5,021 5,024 4,594 3,792 4,256
----- ----- ----- ----- -----
Income
before
income
taxes 1,279 996 1,265 909 1,414
Income
taxes 323 272 342 142 479
--- --- --- --- ---
Net income $956 $724 $923 $767 $935
==== ==== ==== ==== ====

PER SHARE DATA:
Net income per
share,
basic $0.27 $0.20 $0.26 $0.22 $0.26
Net income
per share,
diluted $0.26 $0.20 $0.26 $0.22 $0.26
Cash
dividends $0.20 $0.20 $0.20 $0.20 $0.20
Average
basic shares
outstand-
ing 3,597,602 3,596,537 3,535,817 3,526,380 3,529,347
Average
diluted
shares
outstand-
ing 3,610,160 3,606,529 3,554,757 3,553,655 3,560,531
Book value
at period
end $11.84 $11.51 $11.35 $11.64 $11.38

BALANCE SHEET
DATA:
Total
Assets $548,384 $530,834 $526,813 $514,515 $499,760
Loans, net 455,391 452,132 443,349 434,678 423,077
Investment
securities 38,275 36,385 35,225 37,839 35,284
Deposits 435,567 412,601 416,281 400,294 405,623
Transaction
Deposits
(Demand
Deposit and
NOW
accounts) 145,644 132,902 142,493 143,622 142,581
Shareholders'
equity 42,601 41,389 40,819 41,488 40,591

PERFORMANCE
RATIOS:
Net interest
margin(1) 4.32% 4.21% 4.17% 4.08% 4.15%
Return on
average
assets 0.70% 0.55% 0.72% 0.60% 0.73%
Return on
average
equity 8.87% 6.99% 8.89% 7.45% 8.85%
Efficiency
ratio(2) 74.48% 77.78% 73.21% 60.22% 68.81%

ASSET QUALITY
RATIOS:
Nonaccrual
loans $4,332 $1,139 $1,573 $1,208 $4,457
Restructured
Loans - - - - -
------- ------- ------- ------- -------
Total
nonperforming
loans $4,332 $1,139 $1,573 $1,208 $4,457
Other real
estate
owned 2,029 2,029 2,029 3,034 -
Foreclosed
Property 68 51 36 33 133
Nonperforming
corporate
bond investments,
at fair value 634 - - - -
---- ---- ---- ---- ----
Total non-
performing
assets $7,061 $3,219 $3,638 $4,275 $4,590
====== ====== ====== ====== ======
Nonperforming
loans and
repossessed
assets to
period-end
loans and
other
repossessed
assets 1.39% 0.70% 0.81% 0.97% 1.07%
Nonperforming
assets to
period end
total assets 1.29% 0.61% 0.69% 0.81% 0.92%

Allowance for
loan losses $5,221 $5,091 $4,873 $4,780 $4,684
Allowance for
loan losses
to period-
end loans 1.13% 1.11% 1.08% 1.08% 1.10%
Net loan charge-
offs for
the quarter $230 $142 $107 $1,411 $66
Net charge-
offs to
average loans 0.05% 0.06% 0.02% 0.32% 0.02%

CAPITAL RATIOS:
Leverage
Ratio 8.84% 9.14% 9.26% 9.37% 9.38%
Tangible
equity to
total assets 7.77% 7.80% 7.75% 8.06% 8.12%

For the Nine Month Period Ended,
Sep. 30, Sep. 30,
2009 2008
-------- --------
EARNINGS STATEMENT DATA:
Interest income $20,801 $21,740
Interest expense 5,208 7,129
----- -----
Net interest income 15,593 14,611
Provision for loan losses 920 1,721
--- -----
Net interest income after
provision for loan losses 14,673 12,890
Noninterest income 3,918 4,690
Securities gains (losses) (412) (423)
Noninterest expense 14,640 13,047
------ ------
Income before income taxes 3,539 4,110
Income taxes 936 1,224
--- -----
Net income $2,603 $2,886
====== ======

PER SHARE DATA:
Net income per share, basic $0.72 $0.82
Net income per share, diluted $0.72 $0.81
Cash dividends $0.60 $0.60
Average basic shares
outstanding 3,591,796 3,525,633
Average diluted shares
outstanding 3,600,864 3,559,017

PERFORMANCE RATIOS:
Net interest margin(1) 4.22% 4.21%
Return on average assets 0.66% 0.77%
Return on average equity 8.26% 9.04%
Efficiency ratio(2) 75.87% 68.26%

Net loan charge-offs year
to date $479 $1,222
Net charge-offs to
average loans 0.11% 0.29%

(1) Net 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 of Fauquier Bankshares, Inc., +1-540-349-0212,
egraap@fauquierbank.com