Net income up 12.3% for year Warrenton-based Fauquier Bankshares Inc. (Nasdaq: FBSS) the parent holding company of The Fauquier Bank (TFB), reported net income of $910,000 for the quarter ended Dec. 31, compared with $870,000 for the same quarter in 2010, representing an increase of 4.6 percent.

Basic and diluted earnings per share for the fourth quarter were 25 cents, compared with 24 cents per share in the fourth quarter of 2010.

For 2011, net income totaled $4.1 million, compared with $3.7 million for 2010, an increase of 12.3 percent.

Basic and diluted earnings per share for the year were $1.12, compared with $1.01 for 2010.

The improvement in year-to-date earnings was primarily attributable to a $674,000 increase in non-interest income, and a $775,000 decrease on the net loss on the sale or impairment of securities from 2010, according to President and CEO Randy Ferrell. This was partially offset by an increase of $898,000 in loss on sale or impairment of other real estate owned (OREO).

“I am pleased with our performance over the past year,” Mr. Ferrell said. “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 percent 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 percent, and return on average equity was 7.63 percent for the fourth quarter of 2011, compared with 0.57 percent and 7.78 percent, 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 percent in the fourth quarter of 2011, compared with 3.96 percent in the fourth quarter of 2010. Net interest income for the fourth quarter of 2011 decreased $122,000 or 2.2 percent 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, Mr. Ferrell said.

The net interest margin decreased 14 basis points to 4 percent in 2011, with 4.14 percent in 2010. Net interest income for the year ended December 31, 2011 decreased $132,000, or 0.59 percent, over the same period in 2010.

Allowance for loan losses was $6.7 million or 1.47 percent of total loans at year’s end, compared with $6.3 million, or 1.35 percent, at Dec. 31, 2010. The company was aggressive in recognizing and addressing problem loans throughout the year, Mr. Ferrell said. This resulted in $1.5 million in net loans charge-offs and $1.9 million expensed to earnings to build the allowance for loan losses. The ratio of net charge-offs to average loans outstanding was 0.33 percent for 2011, compared with 0.27 percent for 2010.

Nonperforming assets totaled $6.7 million or 1.10 percent of total assets at year’s end, compared with $5.5 million or 0.92 percent as of Dec. 31, 2010. The company sold three of the four OREO properties held during the fourth quarter 2011. Included within nonperforming assets was $335,000 of pooled trust preferred securities at year’s end, compared with $552,000 at Dec. 31, 2010, both at fair value. The company recognized $189,000 of impairment losses in 2011 compared with $1.4 million in 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,” Mr. Ferrell said. “It was a successful year in core deposit growth. Transaction deposit accounts (Demand and NOW) increased by 22.8 percent 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."

Fauquier Bankshares' regulatory capital ratios continue to be deemed "Well Capitalized," the highest category assigned by the Federal Reserve Bank of Richmond. At year’s end, the company's leverage ratio, an important indicator of financial health, was 8.70 percent, compared with 8.55% one year earlier.

The company's tier 1 and total risk-based ratios were 12.05 percent and 13.31 percent, respectively, at Dec. 31, 2011, compared with 11.30 percent and 12.55 percent a year earlier. The minimum capital ratios to be considered "Well Capitalized" by the Federal Reserve are 5 percent for the leverage ratio, 6 percent for the tier 1 risk-based ratio, and 10 percent for the total risk-based ratio.

At year’s end, Fauquier Bankshares' Wealth Management Services division revenues were $1.64 million, compared to $1.45 million a year earlier, an increase of 12.5 percent.

"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,” Mr. Ferrell said. “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 percent to $1.7 million for the quarter ended Dec. 31, compared with $1.5 million for the same period in 2010. Noninterest income increased $674,000 or 11.8 percent to $6.4 million for the year, compared to $5.7 million for 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 $775,000 for the year, compared with 2010.

Noninterest expense for the fourth quarter 2011 increased $493,000 or 9.9 percent to $5.5 million compared with $5 million a year earlier. Noninterest expense for the year increased $667,000 or 3.3 percent to $20.9 million, compared with $20.2 million in 2010. The increase in noninterest expense was due to the $898,000 increase in the losses on the sale or impairment of other real estate owned properties, partially offset by a decrease of $231,000 in all other operating expenses.

Fauquier Bankshares and The Fauquier Bank had combined assets of $614.2 million and total shareholders' equity of $47.6 million at Dec. 31, 2011.

The Fauquier Bank is an independent, locally-owned, community bank with 10 offices in Fauquier and Prince William counties in Virginia.

Fauquier Bankshares' stock price closed at $11.80 per share on Jan. 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 (800) 638-3798.

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