Fauquier Bankshares Announces Third Quarter 2017 Results

WARRENTON, Va., Oct. 30, 2017 /PRNewswire/ -- Fauquier Bankshares, Inc. (NASDAQ: FBSS) parent company of The Fauquier Bank (TFB) reported net income of $1.28 million for the third quarter of 2017 an increase of 29.39% from the previous quarter and 83.52% from the third quarter of 2016. Basic and diluted earnings per share were $0.34 up from $0.26 in the previous quarter and $0.19 for the third quarter of 2016.  Net income for the first nine months of 2017 was $3.04 million compared to $2.87 million for the same period of 2016 which included the effects of a one-time recovery of $508,000 from a previously charged-off loan. For the nine months ended September 30, 2017, basic and diluted earnings per share were $0.81 compared to $0.76 for the same period in 2016.

Marc Bogan, President and CEO, said, "We are pleased with the progress made in the third quarter. Our initial challenge was to change the trajectory of earning asset growth and expense management in order to improve profitability.  We have seen improvement in most of the components that lead to improved profitability: increased earning assets, increased net interest income, improved margins, and reduced noninterest expense.  These, combined with sustained low funding costs and solid expense management, have resulted in much improved profitability.  As we go forward, our challenge will pivot to continuing to incrementally improve earning asset growth and expense management, and sustain our progress toward becoming a top performing bank."

Total assets were $631.72 million on September 30, 2017 compared to $624.45 million on December 31, 2016 and $623.88 million on September 30, 2016. Net loans increased $26.72 million or 5.83% to $485.33 million on September 30, 2017 from $458.61 million on December 31, 2016 and increased $32.45 million or 7.17% from $452.87 million on September 30, 2016. Total deposits were $556.21 million on September 30, 2017 compared to $546.16 million and $545.40 million on December 31, 2016 and September 30, 2016, respectively. Low cost transaction deposits (demand and interest checking accounts) were $348.01 million, an increase of $6.87 million from the end of the third quarter of 2016 and decrease of $814,000 from 2016 year end.

Return on average assets (ROAA) was 0.80% and return on average equity (ROAE) was 8.96% for the third quarter of 2017, compared to 0.63% and 7.10%, respectively for the second quarter of 2017 and 0.44% and 5.11%, respectively, for the third quarter of 2016. For the nine month period ended September 30, 2017, return on average assets was 0.65% and return on average equity was 7.27%, compared to 0.63% and 7.13%, respectively, for the nine month period ended September 30, 2016.

Net interest margin was 3.75% in the third quarter of 2017 compared to 3.60% for the previous quarter and 3.45% for the same period in 2016. Net interest income for the third quarter of 2017 increased $282,000 when compared to the prior quarter and increased $521,000 to $5.49 million when compared to $4.97 million for the same period in 2016. Net interest margin was 3.62% for the first nine months of 2017 compared to 3.50% for the same period in 2016. Net interest income for the first nine months of 2017 increased $985,000 to $15.64 million when compared to $14.65 million for the same period in 2016. 

Nonperforming assets were $3.79 million, or 0.60% of total assets, on September 30, 2017, compared to $4.58 million, or 0.73% of total assets, on September 30, 2016. Included in nonperforming assets on September 30, 2017 were $2.43 million of nonperforming loans and $1.36 million of other real estate owned. The ratio of nonperforming loans to total loans at the period's end was 0.50% at September 30, 2017 compared to 0.70% at September 30, 2016.

Net loan recoveries in the third quarter of 2017 were $39,000 compared to net loan charge-offs of $609,000 in the third quarter of 2016. Net loan charge-offs for the first nine months of 2017 were $492,000 or 0.11% of average loans, compared to net loan recoveries of $732,000, or (0.16%) of average loans for the same period in 2016. Allowance for loan losses was $4.43 million or 0.90% of total loans on September 30, 2017 compared to $4.42 million or 0.97% of total loans on September 30, 2016. The allowance for loan losses coverage ratio was 1.82 times nonperforming loans on September 30, 2017 compared to 1.37 times for the same period in 2016.

Noninterest income, excluding securities gains and losses, decreased $6,000 to $1.28 million in the third quarter of 2017 compared to $1.29 million in the same quarter of 2016 and increased $76,000 to $4.09 million during the first nine months of 2017 compared to $4.01 million during the same period in 2016. Noninterest expense for the third quarter of 2017 decreased $24,000 to $4.99 million compared to $5.02 million for the third quarter of 2016. Noninterest expense for the first nine months of 2017 was $15.56 million compared to $15.57 million for the first nine months of 2016.

Shareholders' equity increased $2.73 million to $57.19 million on September 30, 2017 compared to $54.45 million on December 31, 2016. The book value per common share was $15.20 as of September 30, 2017. Fauquier Bankshares' stock price closed at $20.80 per share on October 27, 2017. 

At September 30, 2017, the Bank's common equity tier 1 capital ratio and tier 1 risk-based capital ratio were 12.07%. The Bank's total risk-based ratio and leverage ratio were 12.96% and 9.51%, respectively, at September 30, 2017. The Bank exceeds all fully phased-in capital requirements of Basel III, effective January 1, 2019, at September 30, 2017.

The Company continues to focus on its growth and profitability strategy for the remainder of 2017 and beyond, including growth in ROAE and ROAA, by increasing our emphasis on promoting products and services that contribute to balance sheet growth while enhancing noninterest income and improving operational processes and cost savings to reduce noninterest expenses.  Progress on our strategic initiatives include:

• Continued growth in all lending sectors by attracting and employing additional lending professionals, originating residential loans for sale on the secondary market, offering new loan products such as secured-based lending through our wealth management line of business, and a strategy of online origination of unsecured commercial and consumer loans to our depositors through a partnership with a third-party Fintech provider.
• Continued focus on maintaining high credit quality standards by reducing nonperforming loans to total loans.
• Commitment to continued profitability in the Wealth Management division with three financial planners obtaining professional certifications.
• Improvement in the net interest margin through increased earning assets and yield, while maintaining low cost of funds through disciplined deposit gathering and pricing strategies.
• Continued expense control and process improvements throughout the Company. 

Fauquier Bankshares, through its operating subsidiary, The Fauquier Bank is an independent, locally-owned, community bank offering a full range of financial services, including internet banking, mobile banking with mobile deposit, commercial, retail, insurance, wealth management, and financial planning services through eleven banking offices throughout Fauquier and Prince William counties in Virginia. Additional information is available at www.tfb.bank or by calling Investor Relations at (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, 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.            

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SOURCE Fauquier Bankshares, Inc.