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

- Net interest margin increased to 4.22% from 4.12% compared to the year ago quarter

- Loan portfolio increased 5% compared with the second quarter of 2007

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.