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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
COMMISSION FILE NO.: 2-25805
FAUQUIER BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1288193
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10 COURTHOUSE SQUARE, WARRENTON, VIRGINIA 20186
(Address of principal executive offices) (Zip Code)
(540) 347-2700
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $3.13 PER SHARE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ( X ) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( ).
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the common equity was sold, or the
average bid and asked prices of such common equity, as of a specified date
within 60 days prior to the date of filing. The aggregate market value of the
registrant's common shares held by "non-affiliates" of the registrant, based
upon the closing sale price of its common shares on the NASDAQ SmallCap Market
System, was approximately $24,071,548. Common shares held by each officer,
director and holder of 5% or more of the registrant's outstanding common shares
have been excluded in that such persons or entities may be deemed to be
affiliates. Such determination of affiliate status is not a conclusive
determination for other purposes.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. The registrant had 1,709,377
shares outstanding as of March 19, 2001.
DOCUMENTS INCORPORTATED BY REFERENCE
Portions of the definitive proxy statement for the 2001 annual meeting of
shareholders to be filed within 120 days of the fiscal year ended December 31,
2000 are incorporated by reference into Part III of this Form 10-K.
TABLE OF CONTENTS
Page
PART I
Item 1. Business 3
Item 2. Properties 10
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for Registant's Common Equity and Related Stockholder Matters 11
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation 13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 25
Item 8. Financial Statements and Supplementary Data 27
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure 27
PART III
Item 10. Directors and Executive Officers of the Registrant 28
Item 11. Executive Compensation 30
Item 12. Security Ownership of Certain Beneficial Owners and Management 30
Item 13. Certain Relationships and Related Transactions 30
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 30
Audited Financial Statements
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PART I
ITEM 1. BUSINESS
GENERAL
Fauquier Bankshares, Inc. ("Bankshares") was incorporated under the laws of the
Commonwealth of Virginia on January 13, 1984. Bankshares is a registered bank
holding company and owns all of the voting shares of The Fauquier Bank ("TFB").
Bankshares engages in its business through TFB, a Virginia state-chartered bank
that commenced operations in 1902. Bankshares has no significant operations
other than owning the stock of TFB. Bankshares has issued and outstanding
1,712,191 shares of common stock, par value $3.13 per share, held by
approximately 405 holders of record on December 31, 2000.
TFB has six full service branch offices located in the Virginia communities of
Warrenton, Catlett, The Plains, Sudley Road-Manassas, and New Baltimore, in
addition to the main office branch located in Warrenton, Virginia. The executive
offices of Bankshares and the main office of TFB are located at 10 Courthouse
Square, Warrenton, Virginia 20186.
THE FAUQUIER BANK
TFB's general market area principally includes Fauquier County, western Prince
William County, and neighboring communities and is located approximately sixty
(60) miles southwest of Washington, D.C.
TFB provides a range of consumer and commercial banking services to individuals,
businesses and industries. The deposits of TFB are insured up to applicable
limits by the Bank Insurance Fund of the Federal Deposit Insurance Corporation.
The basic services offered by TFB include: demand interest bearing and
non-interest bearing accounts, money market deposit accounts, NOW accounts, time
deposits, safe deposit services, credit cards, cash management, direct deposits,
notary services, money orders, night depository, traveler's checks, cashier's
checks, domestic collections, savings bonds, bank drafts, automated teller
services, drive-in tellers, internet banking, and banking by mail. In addition,
TFB makes secured and unsecured commercial and real estate loans, issues
stand-by letters of credit and grants available credit for installment,
unsecured and secured personal loans, residential mortgages and home equity
loans, as well as automobile and other consumer financing. TFB provides
automated teller machine (ATM) cards, as a part of the Honor and Plus ATM
networks, thereby permitting customers to utilize the convenience of larger ATM
networks.
TFB operates a Wealth Management Division that began with the granting of Trust
powers to TFB in 1919. It is staffed with eleven professionals that provide
personalized services that include investment management, trust, estate
settlement, retirement, insurance, and brokerage services. During 2000, managed
assets increased by $7.9 million to $132.4 million, or 6.4%, when compared with
1999, with revenue declining by $19,000 to $547,000, or 3.3%, over the same time
period.
The revenues of TFB are primarily derived from interest on, and fees received in
connection with, real estate and other loans, and from interest and dividends
from investment and mortgage-backed securities, and short-term investments. The
principal sources of funds for TFB's lending activities are its deposits,
repayment of loans, the sale and maturity of investment securities, and
borrowings from the Federal Home Loan Bank of Atlanta. The principal expenses of
TFB are the interest paid on deposits and operating and general administrative
expenses.
As is the case with banking institutions generally, TFB's operations are
materially and significantly influenced by general economic conditions and by
related monetary and fiscal policies of financial institution regulatory
agencies, including the Board of Governors of the Federal Reserve System
("Federal Reserve"). As a Virginia-chartered bank and a member of the Federal
Reserve, TFB is supervised and examined by the Federal Reserve and the State
Corporation Commission ("SCC"). Interest rates on competing investments and
general market rates of interest influence deposit flows and costs of funds.
Lending activities are affected by the demand for financing of real estate and
other types of loans, which in turn is affected by the interest rates at which
such financing may be offered and other factors affecting local demand and
availability of funds. TFB faces strong competition in the attraction of
deposits (its primary source of lendable funds) and in the origination of loans.
See "Competition."
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As of December 31, 2000, Bankshares had total consolidated assets of $249.9
million, total consolidated deposits of $212.1 million, and total consolidated
shareholders' equity of $22.4 million.
LENDING ACTIVITIES
TFB offers a range of lending services, including real estate, consumer and
commercial loans, to individuals as well as small to medium sized businesses and
other organizations that are located in or conduct a substantial portion of
their business in TFB's market area. TFB's total loans at December 31, 2000 were
$200.4 million, or 80.2 % of total assets. The interest rates charged on loans
vary with the degree of risk, maturity, and amount of the loan, and are further
subject to competitive pressures, money market rates, availability of funds, and
government regulations. TFB has no foreign loans or loans for highly leveraged
transactions.
TFB's primary market area consists of Fauquier and Prince William Counties,
Virginia and the surrounding communities. There is no assurance that this area
will experience economic growth. Adverse conditions in any one or more of the
industries operating in Fauquier or Prince William Counties or a slow-down in
general economic conditions could have an adverse effect on Bankshares and TFB.
TFB's loans are concentrated in three major areas: commercial loans, real estate
loans, and consumer loans. Approximately 8.6% and 18.0% of TFB's loan portfolio
at December 31, 2000 consisted of commercial and consumer loans, respectively.
The majority of TFB's loans are made on a secured basis. As of December 31,
2000, approximately 70.5% of the loan portfolio consisted of loans secured by
mortgages on real estate.
LOANS SECURED BY REAL ESTATE
SINGLE FAMILY RESIDENTIAL LOANS. TFB's single-family residential mortgage loan
portfolio consists of conventional loans, with interest rates fixed for 10 years
or less and balloon loans with 3, 5, 7, or 10 year maturities and amortized for
30 years or less. As of December 31, 2000, TFB's conventional single-family
loans amounted to $74.2 million or 37.0% of the total loan portfolio.
Substantially all of TFB's single-family residential mortgage loans are secured
by properties located in TFB's service area. The majority of residential
mortgage loans originated by TFB are originated under terms and documentation
that permit the loans to be sold to the Federal Home Loan Mortgage Corporation
("FHLMC").
Loans with a fixed rate longer than 10 years are sold into the secondary market.
TFB does not retain the servicing of sold loans.
TFB requires private mortgage insurance if the principal amount of the loan
exceeds 80% of the value of the security property. TFB uses the underwriting
guidelines of the PMI provider for loans having a loan-to-value ratio in excess
of 80%. TFB also considers the income of the borrower in determining whether to
make single-family residential mortgage loans.
CONSTRUCTION LOANS. The majority of TFB's construction loans are made to
individuals to construct a primary residence. Such loans have a maximum term of
nine months, have a fixed rate of interest, and have loan-to-value ratios of 80%
or less of the appraised value upon completion. TFB requires that permanent
financing, with TFB or some other lender, be in place prior to closing any
construction loan. Construction loans are generally considered to involve a
higher degree of credit risk than single-family residential mortgage loans. The
risk of loss on a construction loan is dependent largely upon the accuracy of
the initial estimate of the property's value at completion.
TFB also provides construction loans and lines of credit to developers. Such
loans generally have maximum loan-to-value ratios of 80% of the appraised value
upon completion. The loans are made with a fixed rate of interest. The majority
of such loans consist of loans to selected local developers with whom TFB is
familiar to build single-family dwellings on either a pre-sold or speculative
basis. TFB limits the number of unsold units under construction. Loan proceeds
are disbursed in stages after inspections of the project indicate that
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such disbursements are for costs already incurred and which have added to the
value of the project. Construction loans include loans to developers to acquire
the necessary land, develop the site and construct the residential units. As of
December 31, 2000, TFB's construction loans totaled $12.9 million or 6.5% of the
total loan portfolio.
COMMERCIAL REAL ESTATE LOANS. Loans secured by commercial real estate comprised
$54.0 million or 26.9% of total loans and consist principally of commercial
loans for which real estate constitutes a source of collateral. These loans are
secured primarily by owner-occupied properties. Commercial real estate loans
generally involve a greater degree of risk than single-family residential
mortgage loans because repayment of such loans may be subject to a greater
extent to adverse conditions in the real estate market or the economy.
CONSUMER LOANS
The consumer loan portfolio consists primarily of loans to individuals for
various consumer purposes, but includes some business purpose loans that are
payable on an installment basis. TFB offers a wide variety of consumer loans,
which include installment loans, credit card loans, home equity loans and other
secured and unsecured credit facilities. The majority of these loans are for
terms of less than five years and are secured by liens on various personal
assets of the borrowers, but consumer loans may also be made on an unsecured
basis. Consumer loans are made at fixed and variable rates, and are often based
on up to a five-year amortization schedule.
COMMERCIAL LOANS
TFB's commercial loans include loans to individuals and small to medium sized
businesses located primarily in Fauquier and Prince William Counties for working
capital, equipment purchases, and various other business purposes. Equipment or
similar assets secure a majority of TFB's commercial loans, but these loans may
also be made on an unsecured basis. Commercial loans may be made at variable or
fixed rates of interest. Commercial lines of credit are typically granted on a
one-year basis. Other commercial loans with terms or amortization schedules
longer than one year will normally carry interest rates that vary with the prime
lending rate and other financial indexes and will become payable in full in
three to five years.
Loan originations are derived from a number of sources, including direct
solicitation by TFB's loan officers, existing customers and borrowers,
advertising and walk-in customers.
Certain credit risks are inherent in making loans. These include prepayment
risks, risks resulting from uncertainties in the future value of collateral,
risks resulting from changes in economic and industry conditions, and risks
inherent in dealing with individual borrowers. In particular, longer maturities
increase the risk that economic conditions will change and adversely affect our
ability to collect. TFB attempts to minimize loan losses through various means.
In particular, on larger credits, TFB generally relies on the cash flow of a
debtor as the source of repayment and secondarily on the value of the underlying
collateral. In addition, TFB attempts to utilize shorter loan terms in order to
reduce the risk of a decline in the value of such collateral.
DEPOSIT ACTIVITIES
Deposits are the major source of TFB's funds for lending and other investment
activities. TFB considers the majority of its regular savings, demand, NOW and
money market deposit accounts to be core deposits. These accounts comprised
approximately 65.1% of TFB's total deposits at December 31, 2000. Approximately
34.9% of TFB's deposits as of December 31, 2000 were certificates of deposit.
Generally, TFB attempts to maintain the rates paid on its deposits at a
competitive level. Time deposits of $100,000 and over made up approximately
11.5% of TFB's total deposits as of December 31, 2000 and generally pay interest
at the same rates as certificates of less than $100,000. The majority of the
deposits of TFB are generated from Fauquier and Prince William Counties. TFB has
not accepted brokered deposits to date, but will continue to evaluate many
funding sources, including the use of brokered deposits, as part of its
asset/liability management.
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INVESTMENTS
TFB invests a portion of its assets in U.S. Treasury and U.S. Government
corporation and agency obligations, state, county and municipal obligations,
corporate obligations, mutual funds, FHLB stock, and equity securities. TFB's
investments are managed in relation to loan demand and deposit growth, and are
generally used to provide for the investment of excess funds at reduced yields
and risks relative to yields and risks of the loan portfolio, while providing
liquidity to fund increases in loan demand or to offset fluctuations in
deposits. TFB does not currently engage in any off-balance sheet hedging
activities.
GOVERNMENT SUPERVISION AND REGULATION
FINANCIAL SERVICES MODERNIZATION LEGISLATION. On November 12, 1999, President
Clinton signed into law the Gramm-Leach-Bliley Financial Services Modernization
Act of 1999 (the "Act"), federal legislation intended to modernize the financial
services industry by establishing a comprehensive framework to permit
affiliations among commercial banks, insurance companies, securities firms and
other financial service providers. Generally, the Act: (i.) repeals the
historical restrictions and eliminates many federal and state law barriers to
affiliations among banks, securities firms, insurance companies and other
financial service providers; (ii.) provides a uniform framework for the
functional regulation of the activities of banks, savings institutions and their
holding companies; (iii.) broadens the activities that may be conducted by
national banks, banking subsidiaries of bank holding companies and their
financial subsidiaries; (iv.) provides an enhanced framework for protecting the
privacy of consumer information; (v.) adopts a number of provisions related to
the capitalization, membership, corporate governance and other measures designed
to modernize the Federal Home Loan Bank system; (vi.) modifies the laws
governing the implementation of the Community Reinvestment Act; and (vii.)
addresses a variety of other legal and regulatory issues affecting both
day-to-day operations and long-term activities of financial institutions.
Bank holding companies will be permitted to engage in a wider variety of
financial activities than permitted under prior law, particularly with respect
to insurance and securities activities. In addition, in a change from prior law,
bank holding companies will be in a position to be owned, controlled or acquired
by any company engaged in financially-related activities.
Bankshares does not believe that the Act will have a material adverse effect on
our operations in the near-term. However, to the extent that it permits banks,
securities firms and insurance companies to affiliate, the financial services
industry may experience further consolidation. This could result in a growing
number of financial institutions that offer a wider variety of financial
services than Bankshares currently offers and that can aggressively compete in
the markets Bankshares currently serves.
BANK HOLDING COMPANY REGULATION. Bankshares is a one-bank holding company,
registered with the Federal Reserve under the Bank Holding Company Act of 1956
("BHC Act"). As such, Bankshares is subject to the supervision, examination, and
reporting requirements of the BHC Act and the regulations of the Federal
Reserve. Bankshares is required to furnish to the Federal Reserve an annual
report of its operations at the end of each fiscal year and such additional
information as the Federal Reserve may require pursuant to the BHC Act.
The BHC Act requires every bank holding company to obtain the prior approval of
the Federal Reserve before (i) it may acquire direct or indirect ownership or
control of any voting shares of any bank if, after such acquisition, the bank
holding company will directly or indirectly own or control more than 5% of the
total voting shares of the bank, (ii) it or any of its subsidiaries, other than
a bank, may acquire all or substantially all of the assets of the bank, or (iii)
it may merge or consolidate with any other bank holding company.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anti-competitive effects of the proposed
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transaction are clearly outweighed by the public interest in meeting the
convenience and needs of the community to be served. The Federal Reserve is also
required to consider the financial and managerial resources and future prospects
of the bank holding companies and banks concerned and the convenience and needs
of the community to be served. Consideration of financial resources generally
focuses on capital adequacy and consideration of convenience and needs issues
including the parties' performance under the Community Reinvestment Act of 1977
(the "CRA"), both of which are discussed below.
The BHC Act generally prohibits Bankshares from engaging in activities other
than banking or managing or controlling banks or other permissible subsidiaries
and from acquiring or retaining direct or indirect control of any company
engaged in any activities other than those activities determined by the Federal
Reserve to be so closely related to banking or managing or controlling banks as
to be a proper incident thereto. In determining whether a particular activity is
permissible, the Federal Reserve must consider whether the performance of such
an activity reasonably can be expected to produce benefits to the public, such
as greater convenience, increased competition, or gains in efficiency, that
outweigh possible adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interests, or unsound banking
practices. For example, factoring accounts receivable, acquiring or servicing
loans, leasing personal property, conducting discount securities brokerage
activities, performing certain data processing services, acting as agent or
broker in selling credit life insurance and certain other types of insurance in
connection with credit transactions, and performing certain insurance
underwriting activities all have been determined by the Federal Reserve to be
permissible activities of bank holding companies. Despite prior approval, the
Federal Reserve has the power to order a bank holding company or its
subsidiaries to terminate any activity or to terminate its ownership or control
of any subsidiary when it has reasonable cause to believe that continuation of
such activity or such ownership or control constitutes a serious risk to the
financial safety, soundness, or stability of any bank subsidiary of that bank
holding company.
Banks are subject to the provisions of the CRA. Under the terms of the CRA, the
appropriate federal bank regulatory agency is required, in connection with its
examination of a bank, to assess such bank's record in meeting the credit needs
of the community served by that bank, including low- and moderate-income
neighborhoods. The regulatory agency's assessment of the bank's record is made
available to the public. Further, such assessment is required of any bank that
has applied to (i) charter a national bank, (ii) obtain deposit insurance
coverage for a newly chartered institution, (iii) establish a new branch office
that will accept deposits, (iv) relocate an office, or (v) merge or consolidate
with, or acquire the assets or assume the liabilities of, a federally regulated
financial institution. In the case of a bank holding company applying for
approval to acquire a bank or other bank holding company, the Federal Reserve
will assess the record of each subsidiary bank of the applicant bank holding
company, and such records may be the basis for denying the application.
BANK REGULATION. TFB is chartered under the laws of the Commonwealth of
Virginia. The Federal Deposit Insurance Corporation (the "FDIC") insures its
deposits to the extent provided by law. TFB is subject to comprehensive
regulation, examination and supervision by the Federal Reserve and to other laws
and regulations applicable to banks. Such regulations include limitations on
loans to a single borrower and to its directors, officers and employees;
restrictions on the opening and closing of branch offices; the maintenance of
required capital and liquidity ratios; the granting of credit under equal and
fair conditions; and the disclosure of the costs and terms of such credit. State
regulatory authorities also have broad enforcement powers over TFB, including
the power to impose fines and other civil or criminal penalties and to appoint a
receiver in order to conserve the assets of any such institution for the benefit
of depositors and other creditors.
Under federal law, federally insured banks are subject, with certain exceptions,
to certain restrictions on any extension of credit to their parent holding
companies or other affiliates, on investment in the stock or other securities of
affiliates, and on the taking of such stock or securities as collateral from any
borrower. In addition, such banks are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit or the providing of any
property or service.
In 1989, the Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") was enacted. FIRREA contains major regulatory reforms, stronger
capital standards for savings and loan associations and stronger civil and
criminal enforcement provisions. FIRREA also provides that a depository
7
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989 in
connection with (i) the default of a commonly controlled FDIC insured depository
institution, or (ii) any assistance provided by the FDIC to a commonly
controlled FDIC insured institution in danger of default.
In 1991, the FDIC Improvement Act of 1991 ("FDICIA") was enacted. FDICIA made a
number of reforms addressing the safety and soundness of deposit insurance
funds, supervision, accounting, and prompt regulatory action, and also
implemented other regulatory improvements. Annual full-scope, on-site
examinations are required of all insured depository institutions. The cost for
conducting an examination of an institution may be assessed to that institution,
with special consideration given to affiliates and any penalties imposed for
failure to provide information requested. Insured state banks also are precluded
from engaging as principal in any type of activity that is impermissible for a
national bank, including activities relating to insurance and equity
investments. FDICIA also re-codified current law restricting extensions of
credit to insiders under the Federal Reserve Act.
DIVIDENDS. Dividends from TFB constitute the primary source of funds for
dividends to be paid by Bankshares. There are various statutory and contractual
limitations on the ability of TFB to pay dividends, extend credit, or otherwise
supply funds to Bankshares, including the requirement under Virginia banking
laws that cash dividends only be paid out of undivided profits and only if such
dividends would not impair the capital of TFB. The Federal Reserve also has the
general authority to limit the dividends paid by bank holding companies and
state member banks, if such payment may be deemed to constitute an unsafe and
unsound practice. The Federal Reserve Board has indicated that banking
organizations should generally pay dividends only if (1) the organization's net
income available to common shareholders over the past year has been sufficient
to fund fully the dividends and (2) the prospective rate of earnings retention
appears consistent with the organization's capital needs, asset quality and
overall financial condition. TFB does not expect any of these laws, regulations
or policies to materially impact its ability to pay dividends.
EFFECT OF GOVERNMENTAL POLICIES. The earnings and business of Bankshares and TFB
are affected by the policies of various regulatory authorities of the United
States, especially the Federal Reserve. The Federal Reserve, among other things,
regulates the supply of credit and deals with general economic conditions within
the United States. The instruments of monetary policy employed by the Federal
Reserve for those purposes influence in various ways the overall level of
investments, loans, other extensions of credits, and deposits, and the interest
rates paid on liabilities and received on assets.
ENFORCEMENT POWERS. Congress has provided the Federal Reserve and the FDIC with
an array of powers to enforce laws, rules, regulations and orders. Among other
things, these agencies may require that institutions cease and desist from
certain activities, may preclude persons from participating in the affairs of
insured depository institutions, may suspend or remove deposit insurance, and
may impose civil money penalties against institution-affiliated parties for
certain violations.
MAXIMUM LEGAL INTEREST RATES. Like the laws of many states, Virginia law
contains provisions that govern interest rates that may be charged by banks and
other lenders on certain types of loans. Numerous exceptions exist to the
general interest limitations imposed by Virginia law. The relative importance of
these interest limitation laws to the financial operations of TFB will vary from
time to time, depending on a number of factors, including conditions in the
money markets, the costs and availability of funds, and prevailing interest
rates.
CHANGE OF CONTROL. Federal law restricts the amount of voting stock of a bank
holding company and a bank that a person may acquire without the prior approval
of banking regulators. The overall effect of such laws is to make it more
difficult to acquire a bank holding company and a bank by tender offer or
similar means than it might be to acquire control of another type of
corporation. Consequently, shareholders of Bankshares may be less likely to
benefit from the rapid increases in stock prices that may result from tender
offers or similar efforts to acquire control of other companies. Federal law
also imposes restrictions on acquisitions of stock in a bank holding company and
a state bank. Under the federal Change in Bank Control Act and the regulations
thereunder, a person or group must give advance notice to the Federal Reserve
before acquiring control of any bank holding company. Upon receipt of such
notice, the Federal Reserve and the
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SCC, as the case may be, may approve or disapprove the acquisition. The Change
in Bank Control Act creates a rebuttable presumption of control if a member or
group acquires a certain percentage or more of a bank holding company's or
bank's voting stock, or if one or more other control factors set forth in the
act are present.
INSURANCE OF DEPOSITS. TFB's deposit accounts are insured by the FDIC up to a
maximum of $100,000 per insured depositor. The FDIC issues regulations, conducts
periodic examinations, requires the filing of reports and generally supervises
the operations of its insured banks. Any insured bank that is not operated in
accordance with or does not conform to FDIC regulations, policies and directives
may be sanctioned for non-compliance. Proceedings may be instituted against any
insured bank or any director, officer, or employee of such bank engaging in
unsafe and unsound practices, including the violation of applicable laws and
regulations. The FDIC has the authority to terminate insurance of accounts
pursuant to procedures established for that purpose.
CAPITAL REQUIREMENTS. The federal bank regulatory authorities have adopted
risk-based capital guidelines for banks and bank holding companies that are
designed to make regulatory capital requirements more sensitive to differences
in risk profile among banks and bank holding companies. The resulting capital
ratios represent qualifying capital as a percentage of total risk-weighted
assets and off-balance sheet items. The guidelines are minimums, and the federal
regulators have noted that banks and bank holding companies contemplating
significant expansion programs should not allow expansion to diminish their
capital ratios and should maintain all ratios well in excess of the minimums.
The current guidelines require all bank holding companies and federally
regulated banks to maintain a minimum risk-based total capital ratio equal to
8%, of which at least 4% must be Tier 1 capital. Tier 1 capital includes common
stockholders' equity, qualifying perpetual preferred stock, and minority
interests in equity accounts of consolidated subsidiaries, but excludes goodwill
and most other intangibles and excludes the allowance for loan and lease losses.
Tier 2 capital includes the excess of any preferred stock not included in Tier 1
capital, mandatory convertible securities, hybrid capital instruments,
subordinated debt and intermediate term-preferred stock, and general reserves
for loan and lease losses up to 1.25% of risk-weighted assets. As of December
31, 2000 (i) Bankshares' Tier 1 and total risk-based capital ratios were 12.0 %
and 13.2%, respectively, and (ii) TFB's Tier 1 and total risk-based capital
ratios were 12.0% and 13.3%, respectively.
FDICIA contains "prompt corrective action" provisions pursuant to which banks
are to be classified into one of five categories based upon capital adequacy,
ranging from "well capitalized" to "critically undercapitalized" and which
require (subject to certain exceptions) the appropriate federal banking agency
to take prompt corrective action with respect to an institution which becomes
"significantly undercapitalized" or "critically undercapitalized".
The FDIC has issued regulations to implement the "prompt corrective action"
provisions of FDICIA. In general, the regulations define the five capital
categories as follows: (i) an institution is "well capitalized" if it has a
total risk-based capital ratio of 10% or greater, has a Tier 1 risk-based
capital ratio of 6% or greater, has a leverage ratio of 5% or greater and is not
subject to any written capital order or directive to meet and maintain a
specific capital level for any capital measures; (ii) an institution is
"adequately capitalized" if it has a total risk-based capital ratio of 8% or
greater, has a Tier 1 risk-based capital ratio of 4% or greater, and has a
leverage ratio of 4% or greater; (iii) an institution is "undercapitalized" if
it has a total risk-based capital ratio of less than 8%, has a Tier 1 risk-based
capital ratio that is less than 4% or has a leverage ratio that is less than 4%;
(iv) an institution is "significantly undercapitalized" if it has a total
risk-based capital ratio that is less than 6%, a Tier 1 risk-based capital ratio
that is less than 3% or a leverage ratio that is less than 3%; and (v) an
institution is "critically undercapitalized" if its "tangible equity" is equal
to or less than 2% of its total assets. The FDIC also, after an opportunity for
a hearing, has authority to downgrade an institution from "well capitalized" to
"adequately capitalized" or to subject an "adequately capitalized" or
"under-capitalized" institution to the supervisory actions applicable to the
next lower category, for supervisory concerns. As of December 31, 2000, TFB had
a total risk-based capital ratio of 13.3%, a Tier 1 risk-based capital ratio of
12.0%, and a leverage ratio of 9.2%. TFB was notified by the Federal Reserve
Bank of Richmond that, at December 31, 2000, TFB was "well capitalized" under
the regulatory framework for prompt corrective action.
9
Additionally, FDICIA requires, among other things, that (i) only a "well
capitalized" depository institution may accept brokered deposits without prior
regulatory approval and (ii) the appropriate federal banking agency annually
examine all insured depository institutions, with some exceptions for small,
"well capitalized" institutions and state-chartered institutions examined by
state regulators. FDICIA also contains a number of consumer banking provisions,
including disclosure requirements and substantive contractual limitations with
respect to deposit accounts.
COMPETITION
Bankshares encounters strong competition both in making loans and in attracting
deposits. The deregulation of the banking industry and the widespread enactment
of state laws that permit multi-bank holding companies as well as an increasing
level of interstate banking have created a highly competitive environment for
commercial banking. In one or more aspects of its business, TFB competes with
other commercial banks, savings and loan associations, credit unions, finance
companies, mutual funds, insurance companies, brokerage and investment banking
companies, and other financial intermediaries. Most of these competitors, some
of which are affiliated with bank holding companies, have substantially greater
resources and lending limits, and may offer certain services that TFB does not
currently provide. In addition, many of TFB's non-bank competitors are not
subject to the same extensive federal regulations that govern bank holding
companies and federally insured banks. Recent federal and state legislation has
heightened the competitive environment in which financial institutions must
conduct their business, and the potential for competition among financial
institutions of all types has increased significantly.
To compete, TFB relies upon specialized services, responsive handling of
customer needs, and personal contacts by its officers, directors, and staff.
Large multi-branch banking competitors tend to compete primarily by rate and the
number and location of branches while smaller, independent financial
institutions tend to compete primarily by rate and personal service.
EMPLOYEES
As of December 31, 2000, Bankshares and TFB employed 83 full-time employees and
36 part-time employees. A collective bargaining unit does not represent the
employees. Bankshares and TFB consider relations with employees to be good.
ITEM 2. PROPERTIES
TFB owns or leases property and operates branches at the following locations:
LOCATION LEASE/OWN RENT (ANNUAL) EXPIRATION RENEWAL
- -------------------------------------------------------------------------------------------------------
Main Office *
P.O. Box 561 Own N/A N/A N/A
10 Courthouse Square
Warrenton, VA 20186
Catlett Branch Office
Rt. 28 and 806 Own N/A N/A N/A
Catlett, VA 20119
Sudley Road Branch Office
8091 Sudley Rd. Lease $41,160 2004 Additional 5 yrs.
Manassas, VA 20109
New Baltimore Office
5119 Lee Highway Own N/A N/A N/A
Warrenton, VA 20187
10
The Plains Office
6464 Main Street Own N/A N/A N/A
The Plains, VA 20198
View Tree Office
216 Broadview Avenue Own N/A N/A N/A
Warrenton, VA 20186
- -----------------------------------------------------------------------------------------------
* TFB and Bankshares
ITEM 3. LEGAL PROCEEDINGS
There is no pending or threatened litigation and no litigation was terminated
during the fourth quarter of the fiscal year ended December 31, 2000 that, in
the opinion of management, may materially impact the financial condition of
Bankshares or TFB.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Bankshares' common shares are traded over the counter on the National
Association of Securities Dealers Automated Quote ("NASDAQ") SmallCap Market
System under the symbol "FBSS". Bankshares' common shares commenced trading on
December 27, 1999.
As of December 31, 2000, there were 1,712,191 outstanding shares of common
stock, which is the only class of Bankshares capital stock. As of December 31,
2000 there were approximately 405 holders of record of Bankshares common stock.
The following sets forth the high and low sales prices for Bankshares common
shares and the amounts of any cash dividends paid for each full quarterly period
within the two most recent fiscal years:
2000 1999 Dividends Per Share
---------------- ---------------- -------------------
High Low High Low High Low
---------------- ---------------- -------------------
1st Quarter $18.50 $15.38 $19.38 $18.50 $0.15 $0.13
2nd Quarter $17.50 $15.00 $19.00 $18.00 $0.16 $0.14
3rd Quarter $18.25 $15.75 $19.00 $18.38 $0.16 $0.14
4th Quarter $16.00 $14.50 $19.38 $17.00 $0.17 $0.15
Bankshares' future dividend policy is subject to the discretion of the Board of
Directors and will depend upon a number of factors, including future earnings,
financial condition, cash requirements, and general business conditions.
Bankshares' ability to pay cash dividends will depend entirely upon TFB's
ability to pay dividends to Bankshares.
11
Transfers of funds from TFB to Bankshares in the form of loans, advances and
cash dividends are restricted by federal and state regulatory authorities. As of
December 31, 2000, the aggregate amount of unrestricted funds that could be
transferred from TFB to Bankshares without prior regulatory approval totaled
$1.5 million.
ITEM 6: SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
At and for the Year Ended December 31,
(Dollars in thousands, except per share data) 2000 1999 1998 1997 1996
EARNINGS STATEMENT DATA:
Interest income $ 18,002 $ 17,129 $ 15,024 $ 13,575 $ 12,547
Interest expense 6,084 6,043 5,519 4,751 4,699
--------------- --------------- ----------- ----------- -----------
Net interest income 11,918 11,086 9,505 8,824 7,848
Provision for loan losses 457 695 535 465 578
--------------- --------------- ----------- ----------- -----------
Net interest income after provision
for loan losses 11,461 10,391 8,970 8,359 7,270
Noninterest income 2,842 2,433 2,202 2,217 2,207
Securities gains (losses) (111) -- 17 10 78
Noninterest expense 9,665 9,023 7,708 7,354 6,965
--------------- --------------- ----------- ----------- -----------
Income before income taxes 4,527 3,801 3,481 3,232 2,590
Income taxes 1,430 1,162 1,039 981 748
--------------- --------------- ----------- ----------- -----------
Net income $ 3,097 2,639 $ 2,442 $ 2,251 $ 1,842
============== =============== =========== =========== ===========
PER SHARE DATA: (1)
Net income per share, basic 1.76 1.46 1.31 1.18 0.96
Net income per share, diluted 1.75 1.45 1.30 1.17 0.96
Cash dividends 0.64 0.56 0.45 0.35 0.26
Average basic shares outstanding 1,755,182 1,802,165 1,857,282 1,913,008 1,912,328
Average diluted shares outstanding 1,766,773 1,818,132 1,875,641 1,921,073 1,916,513
Book value at period end 13.09 11.95 11.52 10.97 10.08
BALANCE SHEET DATA:
Total Assets $ 249,855 $ 233,208 $ 220,026 $ 184,442 $ 173,416
Loans, net 197,879 181,503 162,272 128,153 114,280
Investment securities 16,956 18,779 22,791 27,946 41,705
Deposits 212,103 187,273 179,217 161,869 152,938
Shareholders' equity 22,419 21,204 21,177 20,978 19,270
PERFORMANCE RATIOS:
Net interest margin(2) 5.56% 5.35% 5.35% 5.45% 5.16%
Return on average assets 1.32% 1.14% 1.21% 1.27% 1.09%
Return on average equity 14.13% 12.50% 11.60% 11.62% 9.86%
Dividend payout 36.09% 34.34% 34.10% 29.70% 27.00%
Efficiency ratio(3) 65.18% 63.51% 65.90% 65.80% 68.30%
ASSET QUALITY RATIOS:
Allowance for loan losses to period
end loans, net 1.27% 1.24% 1.13% 1.27% 1.18%
Nonperforming loans to allowance for
loan losses 4.74% 5.49% 35.96% 38.93% 50.03%
Net charge-offs to average loans 0.10% 0.15% 0.23% 0.22% 0.28%
CAPITAL AND LIQUIDITY RATIOS:
Leverage 9.13% 8.80% 9.70% 11.90% 11.10%
Risk Based Capital Ratios:
Tier 1 capital 11.96% 12.20% 13.10% 16.40% 16.50%
Total capital 13.21% 13.40% 14.30% 17.70% 17.70%
(1) Amounts have been restated to reflect a two-for-one stock split during 1998
and a four-for-one stock split during 1996.
(2) Net interest margin is calculated as fully taxable equivalent net interest
income divided by average earning assets and represents the Corporation's net
yield on its earning assets.
(3) Efficiency ratio is computed by dividing non-interest expense by the sum of
fully taxable equivalent net interest income and non-interest income.
12
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following discussion is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Form 10-K. In addition to the historical information contained herein,
this report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements, which are based on
certain assumptions and describe future plans, strategies, and expectations of
Bankshares, are generally identifiable by use of the words "believe," "expect,"
"intend," "anticipate," "estimate," "project" or similar expressions.
Bankshares' ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors that could have a material adverse
effect on the operations and future prospects of Bankshares include, but are not
limited to, changes in: interest rates, general economic conditions,
legislative/regulatory changes, 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 or
investment portfolios, demand for loan products, deposit flows, competition,
demand for financial services in Bankshares' market area and accounting
principles, policies and guidelines. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements.
INTRODUCTION
This discussion is intended to focus on certain financial information regarding
Bankshares and TFB. The purpose of this discussion is to provide the reader with
a more thorough understanding of the financial statements. This discussion
should be read in conjunction with the financial statements and accompanying
notes contained elsewhere herein.
Management is not aware of any market or institutional trends, events or
uncertainties that are expected to have a material effect on the liquidity,
capital resources or operations of Bankshares or TFB. Also, management is not
aware of any current recommendations by its regulatory authorities that would
have a material effect on liquidity, capital resources or operations. TFB's
internal sources of such liquidity are deposits, loan repayments and securities
available for sale. TFB's primary external source of liquidity is advances from
the Federal Home Loan Bank ("FHLB") of Atlanta.
OVERVIEW
The reported results of Bankshares are dependent on a variety of factors,
including the general interest rate environment, competitive conditions in the
industry, governmental policies and regulations and conditions in the markets
for financial assets. Net interest income is the largest component of net
income, and consists of the difference between income generated on
interest-earning assets and interest expense incurred on interest-bearing
liabilities. Net interest income is primarily affected by the volume, interest
rates and composition of interest-earning assets and interest-bearing
liabilities.
13
COMPARISON OF OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 2000 AND
DECEMBER 31, 1999
Net income of $3.1 million in 2000 was a 17.3% increase from 1999 net income of
$2.6 million. Earnings per share ("EPS") on a fully diluted basis were $1.75 in
2000 compared to $1.45 in 1999. Profitability as measured by return on average
equity increased from 12.5% in 1999 to 14.1% in 2000.
Certain expenses associated with a misappropriation of cash reduced 2000 and
1999 earnings by $86,000 and $288,000, net of tax, respectively. On February 28,
2000, the Bank was first advised by its accountants as to the possible
misappropriation of cash in the approximate amount of $437,000. The Bank
immediately reported the loss to its insurance carrier and began an aggressive
investigation of the misappropriation. The $437,000 loss, or $288,000 net of
taxes, was recorded in 1999. Based on the ongoing investigation, an additional
loss of $130,000, or $86,000 net of taxes, was recorded in 2000. On January 29,
2001, the Bank recovered $542,000, or $358,000 net of taxes, from its insurance
carrier for these losses. This recovery will be recorded as income in the first
quarter of the year ended December 31, 2001. Subject to further results of the
ongoing investigation, additional recoveries, if any, would be recorded as
income in the year received.
NET INTEREST INCOME. Total interest income grew $0.9 million or 5.1% to $18.0
million in 2000 from $17.1 million in 1999. This increase was primarily the
result of loan growth. Average loan balances increased from $174.9 million in
1999 to $193.4 million in 2000. The average yield on loans remained a relatively
stable 8.64% in 2000 compared with 8.70% in 1999. Together, this resulted in a
$1.5 million increase in interest income from loans for the year 1999 compared
with year 2000. Partially offsetting the increase in interest income from loans
was the $0. 7 million decline in investment income due to the decline in average
investment assets. Average investment balances decreased $11.5 million from
$28.4 million in 1999 to $16.9 million in 2000, primarily due to investment
maturity proceeds being reinvested into loans rather than other investments. The
tax-equivalent average yield on investments declined slightly from 6.19% in 1999
to 6.08% in 2000. The use of maturing investments to fund new loan growth, as
exhibited in 2000, is projected to significantly lessen in 2001. Loan growth
will be primarily funded by deposit growth and/or FHLB of Atlanta advances.
Average deposit balances grew $7.6 million, primarily in demand deposits and
time certificates of deposit. The average rate on interest-bearing deposits
increased from 3.24% in 1999 to 3.28% in 2000 due to the growth in costlier time
certificates of deposit, which more than offset the decline in NOW, money market
account, and savings account rates.
Net interest income for 2000 increased $0.8 million or 7.5% to $11.9 million for
the year ended December 31, 2000 from $11.1 million for the year ended December
31, 1999. This increase was accomplished through a rise in total average earning
assets from $215.2 million in 1999 to $217.7 million in 2000, as well as the
reduction in average interest-bearing liabilities from $174.4 million in 1999 to
$173.1 million in 2000. The percentage of average earning assets to total assets
decreased slightly in 2000 to 92.6% from 92.9%. The Bank's net interest margin
increased from 5.35 % in 1999 to 5.56% in 2000.
Future trends regarding net interest income are dependent on the absolute level
of market interest rates, the shape of the yield curve, the amount of lost
income from non-performing assets, the amount of prepaying loans, the mix and
amount of various deposit types, and many other factors, as well as the overall
volume of interest-earning assets. These factors are individually difficult to
predict, and when taken together, the uncertainty of future trends compounds.
Based on management's current projections, net interest income will remain
relatively stable as interest-earning assets increase, but the net interest
margin may decrease in 2001 due to the growth in time deposits and/or FHLB of
Atlanta advances as the funding source for loan growth, rather than maturing
investment proceeds.
PROVISION FOR LOAN LOSSES. The provision for loan losses was $457,000 for 2000
and $695,000 for 1999. The amount of the provision for loan loss for 2000 and
1999 was based upon management's continual evaluation of the adequacy of the
allowance for loan losses, which encompasses the overall risk characteristics of
the loan portfolio, trends in TFB's delinquent and non-performing loans,
estimated values of collateral, and the impact of economic conditions on
borrowers. There can be no assurances, however, that future losses will not
exceed estimated amounts, or that increased amounts of provisions for loan
losses will not be required in future periods as conditions dictate.
14
NON-INTEREST INCOME. Total other income increased by $298,000 or 12.2% from $2.4
million for 1999 to $2.7 million for 2000. Other income is primarily derived
from non-interest fee income, which consists primarily of fiduciary fees,
service charges, and other fee income. In 2000, the increase stemmed from a
$126,000 increase in other service charges, commissions and fees, and a $294,000
increase in service charges on deposit accounts. These increases were partially
offset by a $111,000 loss on sales of securities in 2000.
One major factor in the increase in service charges on deposit accounts was
management's focus on reducing the level of waivers on Not Sufficient Fund
("NSF") service charges. During 1999 approximately 33% of NSF were waived
compared with approximately 22% in 2000, which in itself increased non-interest
income $114,000.
NON-INTEREST EXPENSE. Total other operating expenses increased $642,000 or 7.1%
in 2000 from 1999. The primary component of the increase was an increase in
salaries and employees' benefits of $390,000 or 10.5%, primarily due to the
increase in full-time equivalent personnel from approximately 93 at year-end
1999 to 104 at year-end 2000, as well as normal annual salary increases. In
addition, other operating expenses increased $218,000 or 5.4%, primarily due to
investigation-related expenses as result of the misappropriation of cash, as
well as an increase in management consulting fees in connection with TFB's
strategic and succession planning processes.
INCOME TAXES. Income tax expense increased by $268,000 for the year ended
December 31, 2000 compared to the year ended December 31, 1999. The effective
tax rates were 31.6% for 2000 and 30.6% for 1999. The effective tax rate differs
from the statutory federal income tax rate of 34% due to TFB's investment in
tax-exempt securities.
The following table presents a quarterly summary of earnings for the last two
years. In 1999, quarterly income increased in the first three quarters and
declined during the fourth quarter. The reduction in fourth quarter earnings was
due primarily to the aforementioned non-recurring expenses associated with a
misappropriation of cash. In 2000, earnings exhibited stable growth,
particularly strong in the second quarter, due to increased earnings from
operations.
EARNINGS
(In Thousands)
Three Months Ended 2000
-----------------------------------------------------------
Dec. 31 Sep. 30 June 30 Mar. 31
Interest income $ 4,741 $ 4,581 $ 4,401 $ 4,279
Interest expense 1,801 1,458 1,379 1,447
------- ------- ------- -------
Net interest income 2,940 3,124 3,022 2,832
Provision for loan losses 0 138 152 167
------- ------- ------- -------
Net interest income after
provision for loan losses 2,940 2,986 2,869 2,665
Other income 653 711 712 658
Other expense 2,629 2,295 2,496 2,249
------- ------- ------- -------
Income before income taxes 964 1,403 1,085 1,074
Income tax expense 298 449 342 341
------- ------- ------- -------
Net income $ 667 $ 953 $ 744 $ 733
======= ======= ======= =======
Net income per share, basic $0.39 $0.54 $0.42 $0.41
Net Income per share, diluted $0.39 $0.54 $0.41 $0.41
Three Months Ended 1999
--------------------------------------------------------------
Dec. 31 Sep. 30 June 30 Mar. 31
Interest income $ 4,509 $ 4,390 $ 4,292 $ 3,938
Interest expense 1,479 1,510 1,486 1,568
------- ------- ------- --------
Net interest income 3,030 2,880 2,806 2,370
Provision for loan losses 55 180 225 235
------- ------- ------- --------
Net interest income after
provision for loan losses 2,975 2,700 2,581 2,135
Other income 624 599 613 597
Other expense 2,729 2,103 2,101 2,090
------- ------- ------- --------
Income before income taxes 871 1,196 1,093 641
Income tax expense 269 381 302 210
------- ------- ------- --------
Net income $ 602 $ 815 $ 791 $ 431
======= ======= ======= ========
Net income per share, basic $0.33 $0.45 $0.44 $0.24
Net Income per share, diluted $0.33 $0.45 $0.43 $0.24
COMPARISON OF OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 1999 AND
DECEMBER 31, 1998
Net income of $2.6 million in 1999, was an 8.1% increase from 1998 net income of
$2.4 million. Earnings per share (EPS) on a fully diluted basis were $1.45 in
1999 compared to $1.30 in 1998. Profitability as measured by return on average
equity increased from 11.6% in 1998 to 12.5% in 1999. Certain non-recurring
expenses associated with a misappropriation of cash of $288,000, net of tax,
reduced 1999 earnings and return on average equity by 9.9% and 13.9%,
respectively.
NET INTEREST INCOME. Total interest income grew $2.1 million or 14.1% to $17.1
million in 1999 from $15.0 million in 1998. This increase was primarily the
result of loan growth. Loan receivables grew 11.9% or $19.2 million from
December 31, 1998 to December 31, 1999. Loan growth was funded by an increase in
deposits of $8.1 million, a $5 million increase in FHLB of Atlanta advances and
a reduction of $4.0 million in the investment portfolio. Total interest expense
grew by $524,000 or 9.5% to $6.0 million in 1999 from $5.5 million in 1998.
Net interest income for 1999 increased $1.6 million or 16.7% to $11.1 million
for the year ended December 31, 1999 from $9.5 million for the year ended
December 31, 1998. This increase was accomplished through an increase in total
average earning assets from $185.7 million in 1998 to $215.2 million in 1999.
The percentage of average earning assets to total assets increased slightly in
1999 to 92.9% from 92.0%. The Bank's net interest margin remained constant in
1999 at 5.35%.
PROVISION FOR LOAN LOSSES. The provision for loan losses was $695,000 for 1999
and $535,000 for 1998. The amount of the provision for loan loss for 1999 and
1998 was determined based upon management's
15
continual evaluation of the adequacy of the allowance for loan losses, which
encompasses the overall risk characteristics of the loan portfolio, trends in
TFB's delinquent and non-performing loans, and the impact of economic conditions
on borrowers. There can be no assurances, however, that future losses will not
exceed estimated amounts or that additional provisions for loan losses will not
be required in future periods.
NON-INTEREST INCOME. Total other income increased by $214,000 or 9.7% from $2.2
million for 1998 to $2.4 million for 1999. Other income is primarily derived
from non-interest fee income, which consists primarily of fiduciary fees,
service charges, and other fee income. In 1999, the increase stemmed from an
$83,000 increase in other service charges, commissions and fees, a $143,000
increase in service charges on deposit accounts and a $10,000 increase in trust
department income. These increases were partially offset by $22,000 decrease in
gains on sales of securities and other operating income in 1999.
NON-INTEREST EXPENSE. Total other operating expenses increased $1.3 million or
17.1% in 1999 from 1998. The primary components of the increase were an increase
in salaries and employees' benefits of $532,000, partially due to the staffing
of the Manassas branch opened in 1999, and a $437,000 non-recurring
miscellaneous non-loan charge resulting from a misappropriation of cash. Also,
net occupancy and furniture and equipment expense increased by $139,000 during
1999.
INCOME TAXES. Income tax expense increased by $123,000 for the year ended
December 31, 1999 compared to the year ended December 31, 1998. The effective
tax rates were 30.6% for 1999 and 29.9% for 1998. The effective tax rate differs
from the statutory federal income tax rate of 34% due to TFB's investment in
tax-exempt securities.
COMPARISON OF DECEMBER 31, 2000 AND DECEMBER 31, 1999 FINANCIAL CONDITION
Total assets were $249.9 million at December 31, 2000, an increase of 7.1% or
$16.6 million from $233.2 million at December 31, 1999. Balance sheet categories
reflecting significant changes included investment securities, total loans,
deposits, and Federal Home Loan Bank advances. Each of these categories is
discussed below.
INVESTMENT SECURITIES. Total investment securities were $17.0 million at
December 31, 2000, reflecting a decrease of $1.8 million from $18.8 million at
December 31, 1999. The fund proceeds resulting from the decrease were primarily
reinvested into loans. At December 31, 2000, the investment securities portfolio
was segregated into available for sale of $13.0 million and held to maturity of
$4.0 million. The valuation allowance for the available for sale portfolio had
an unrealized loss of $130,000 at December 31, 2000 compared to $557,000 at
December 31, 1999. Effective January 1, 2001, TFB adopted SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities," and transferred
securities with a book value of $3,980,000 and a market value of $3,981,000 to
the available for sale category.
LOANS. The total net loan balance after allowance for loan losses was $197.9
million at December 31, 2000, which represents an increase of $16.4 million or
9.0% from $181.5 million as of December 31, 1999. The majority of this increase
was reflected in the loans secured by 1-4 family residential real estate, which
increased $9.2 million from 1999 to 2000. In addition, loans secured by
nonresidential real estate and consumer installment loans increased $3.0 million
and $2.3 million, respectively, over the same time period. The majority of
consumer installment loans were comprised of automobile loans. TFB's loans are
made primarily to customers located within its local trade area.
DEPOSITS. For the year ended December 31, 2000, total deposits grew $24.8
million or 13.3% when compared with total deposits one year earlier. The growth
in deposits was in noninterest-bearing demand deposits that increased by $6.3
million and time deposits that increased $27.4 million. NOW accounts were
relatively stable year to year, while money market accounts and savings deposits
declined $6.2 million and $2.5 million, respectively.
FHLB ADVANCES. Amounts borrowed from the FHLB of Atlanta decreased from $23
million or 10.6% of earning assets at December 31, 1999 to $13 million or 5.6%
of earning assets at December 31, 2000. The decreased borrowings from the FHLB
were a result of strong deposit growth. The term structure of the advances
borrowed was 10 years with a 5 year call option in 2003.
16
ASSET QUALITY
Non-performing loans, in most cases, consist of loans that are 90 days or more
past due and for which the accrual of interest has been discontinued. Management
evaluates all loans that are 90 days or more past due, as well as loans that
have suffered financial distress, to determine if they should be placed on
non-accrual status. Factors considered by management include the estimated value
of collateral, if any, and other resources of the borrower that may be available
to satisfy the delinquency.
Non-accrual loans totaled approximately $121,000 or .06% of total loans at
December 31, 2000, as compared to $125,000 or .07% of total loans at December
31, 1999. Non-performing loans as a percentage of the allowance for loan losses
were 4.7% and 5.5% at December 31, 2000 and 1999, respectively.
Loans past due 90 days and accruing interest totaled $800,000 and $170,000 at
December 31, 2000 and 1999, respectively. At December 31, 2000, approximately
$749,000 of the $800,000 consisted of two loans, both secured by real estate. No
loss is anticipated on either loan.
There are no loans other than those disclosed above as either non-performing or
impaired where known information about the borrower caused management to have
serious doubts about the borrower's ability to comply with the contractual
repayment obligations. There are also no other interest-bearing assets that
would be subject to disclosure as either non-performing or impaired if such
interest-bearing assets were loans. There are no concentrations of loans to
borrowers engaged in similar activities that exceed 10% of total loans of which
management is aware.
CAPITAL RESOURCES AND LIQUIDITY
Shareholders' equity totaled $22.4 million at December 31, 2000 compared with
$21.2 million at December 31, 1999. The relative stability in the amount of
equity reflects management's desire to increase shareholders' return on equity
by managing the growth in equity. During the first quarter of 1998, the company
initiated a Dutch Auction self-tender offer to buy back shares directly from
shareholders. As a result of this action, Bankshares bought back 60,238 shares,
as adjusted for the two for one stock split, or 3.3% of shares outstanding on
December 31, 1997, for $1.2 million. Exclusive of the Dutch Auction, Bankshares
initiated an open market buyback program in 1998, through which it has bought
back an additional 15,000 shares at a cost of $0.3 million in 1998, 68,213
shares at a cost of $1.3 million in 1999, and 63,120 shares at a cost of $1.1
million in 2000.
The securities portfolio valuation account decreased its unrealized loss after
tax to $86,000 at December 31, 2000 compared to an unrealized loss of $368,000
at December 31, 1999.
Banking regulations have established minimum capital requirements for financial
institutions, including risk-based capital ratios and leveraged ratios. As of
December 31, 2000, the appropriate regulatory authorities have categorized
Bankshares and TFB as well capitalized under the regulatory framework for prompt
corrective action.
The primary sources of funds are deposits, repayment of loans, maturities of
investments, funds provided from operations and advances from the FHLB of
Atlanta. While scheduled repayments of loans and maturities of investment
securities are predictable sources of funds, deposit flows and loan repayments
are greatly influenced by the general level of interest rates, economic
conditions and competition. TFB uses its sources of funds to fund existing and
future loan commitments, to fund maturing certificates of deposit and demand
deposit withdrawals, to invest in other interest-earning assets, to maintain
liquidity, and to meet operating expenses. Management monitors projected
liquidity needs and determines the desirable level based in part on TFB's
commitments to make loans and management's assessment of TFB's ability to
generate funds.
Cash and amounts due from depository institutions and federal funds sold totaled
$25.6 million at December 31, 2000. These assets provide the primary source of
liquidity for TFB. In addition, management has designated a substantial portion
of the investment portfolio, approximately $13.0 million as available for sale,
and has an available line of credit with the FHLB of Atlanta with a borrowing
limit of approximately $38 million at December 31, 2000 to provide additional
sources of liquidity. At December 31, 2000, $13.0 million of the FHLB of Atlanta
line of credit was in use.
17
The following table sets forth information relating to Bankshares' average
balance sheet and reflects the average yield on assets and average cost of
liabilities for the periods indicated and the average yields and rates paid for
the periods indicated. Such yields and costs are derived by dividing income or
expense by the average daily balances of assets and liabilities, respectively,
for the periods presented.
AVERAGE BALANCES, INCOME AND EXPENSES, AND AVERAGE YIELDS AND RATES
(In Thousands)
2000 1999
--------------------------------- -------------------------------------
Average Income/ Average Average Income/ Average
ASSETS: Balances Expense Rate Balances Expense Rate
-------- ------- ------- -------- ------- --------
Loans
Taxable $188,935 $16,357 8.66% $169,731 $14,780 8.71%
Tax-exempt (1) 4,257 345 8.11% 4,357 429 9.85%
Nonaccrual 219 -- 770 --
-------- ------- -------- -------
Total Loans 193,411 16,702 8.64% 174,858 15,209 8.70%
-------- ------- -------- -------
Securities
Taxable 14,209 841 5.92% 25,477 1,510 5.93%
Tax-exempt (1) 2,651 184 6.95% 2,888 245 8.48%
-------- ------- -------- -------
Total securities 16,860 1,025 6.08% 28,365 1,755 6.19%
-------- ------- -------- -------
Deposits in banks 105 5 5.02% 666 32 4.80%
Federal funds sold 7,331 450 6.14% 11,317 562 4.97%
-------- ------- -------- -------
Total earning assets 217,707 18,182 8.35% 215,206 $17,558 8.16%
------- -------
Less: Reserve for loan losses (2,569) (2,213)
Cash and due from banks 9,846 9,704
Bank premises and equipment, net 5,464 5,268
Other assets 4,548 3,783
-------- --------
Total Assets $234,996 $231,748
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits
Demand deposits $37,123 -- $ 33,906 --
-------- ------- -------- -------
Interest-bearing deposits
NOW accounts 37,201 415 1.12% 37,349 $544 1.46%
Money market accounts 34,969 1,185 3.39% 36,390 1,297 3.56%
Savings accounts 32,869 881 2.68% 33,220 973 2.93%
Time deposits 53,001 2,707 5.11% 46,683 2,164 4.64%
-------- ------- -------- -------
Total interest-bearing deposits 158,040 5,188 3.28% 153,642 4,978 3.24%
Federal funds purchased and securities sold
under agreements to repurchase -- -- -- --
Federal Home Loan Bank advances 15,022 896 5.96% 20,733 1,065 5.14%
-------- ------- -------- -------
Total interest-bearing liabilities 173,062 6,084 3.52% 174,375 6,043 3.47%
-------- ------- -------- -------
Other liabilities 2,899 2,348
-------- --------
Shareholders' equity 21,912 21,119
-------- --------
Total Liabilities & Shareholders' Equity $234,996 $231,748
======== ========
------- -------
Net interest spread $12,098 4.83% $11,515 4.69%
======= =======
Interest expense as a percent of average earning assets 2.79% 2.81%
Net interest margin 5.56% 5.35%
1998
--------------------------------------
Average Income/ Average
Balances Expense Rate
-------- ------- -------
ASSETS:
Loans
Taxable $141,265 $12,706 8.99%
Tax-exempt (1) 4,102 373 9.09%
Nonaccrual 724 --
-------- -------
Total Loans 146,091 13,079 8.95%
-------- -------
Securities
Taxable 24,250 1,464 6.04%
Tax-exempt (1) 4,435 323 7.28%
-------- -------
Total securities 28,685 1,787 6.23%
-------- -------
Deposits in banks 1,791 89 4.97%
Federal funds sold 9,126 493 5.40%
-------- -------
Total earning assets 185,693 15,448 8.32%
-------
Less: Reserve for loan losses (1,808)
Cash and due from banks 9,593
Bank premises and equipment, net 5,494
Other assets 2,808
--------
Total Assets $201,780
========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits
Demand deposits $ 30,721 --
-------- -------
Interest-bearing deposits
NOW accounts 33,186 661 1.99%
Money market accounts 37,958 1,509 3.98%
Savings accounts 29,920 1,038 3.47%
Time deposits 40,266 1,970 4.89%
-------- -------
Total interest-bearing deposits 141,330 5,178 3.66%
Federal funds purchased and securities sold under
agreements to repurchase 3 -- 0.00%
Federal Home Loan Bank advances 6,726 341 5.07%
-------- -------
Total interest-bearing liabilities 148,059 5,519 3.73%
-------- -------
Other liabilities 1,967
--------
Shareholders' equity 21,033
--------
Total Liabilities & Shareholders' Equity $201,780
========
-------
Net interest spread $ 9,929 4.59%
=======
Interest expense as a percent of average earning assets 2.97%
Net interest margin 5.35%
(1) Income and rates on non-taxable assets are computed on a tax equivalent
basis using a federal tax rate of 34%.
18
RATE/VOLUME ANALYSIS
The following table sets forth certain information regarding changes in interest
income and interest expense of Bankshares' for the periods indicated. For each
category of interest-earning asset and interest-bearing liability, information
is provided on changes attributable to changes in volume (changes in volume
multiplied by old rate); and changes in rates (change in rate multiplied by old
volume). Changes in rate-volume, which cannot be separately identified, are
allocated proportionately between changes in rate and changes in volume.
RATE/VOLUME VARIANCE
(In Thousands)
2000 Compared to 1999 1999 Compared to 1998
------------------------------------- -------------------------------------
Due to Due to Due to Due to
Change Volume Rate Change Volume Rate
------- ------- -------- ------ ------- --------
INTEREST INCOME:
Loans; taxable $ 1,577 $ 1,611 $ (34) $ 2,074 $ 2,438 $ (364)
Loans; tax-exempt (84) (10) (74) 56 24 32
Securities; taxable (669) (667) (3) 46 72 (26)
Securities; tax-exempt (61) (19) (42) (78) (148) 70
Deposits in banks (27) (28) 2 (57) (54) (3)
Federal funds sold (112) (338) 226 69 103 (34)
------- ------- ------- ------- ------- -------
Total Interest Income 624 549 75 2,110 2,435 (325)
------- ------- ------- ------- ------- -------
INTEREST EXPENSE:
NOW accounts (129) (2) (127) (117) 104 (221)
Money market accounts (112) (50) (62) (212) (60) (152)
Savings accounts (92) (10) (82) (65) 158 (223)
Time deposits 543 311 232 194 286 (92)
Federal funds purchased and securities
sold under agreements to repurchase -- -- -- -- -- --
Federal Home Loan Bank Advances (169) (402) 233 724 719 5
------- ------- ------- ------- ------- -------
Total Interest Expense 41 (153) 194 524 1,207 (683)
------- ------- ------- ------- ------- -------
Net Interest Income $ 583 $ 702 $ (119) $ 1,586 $ 1,228 $ 358
======= ======= ======= ======= ======= =======
LOAN PORTFOLIO
At December 31, 2000 and 1999 net loans accounted for 79.2% and 77.8%,
respectively, of total assets and was the largest category of Bankshares'
earning assets.
Loans are shown on the balance sheets net of unearned discounts and the
allowance for loan losses. Interest is computed by methods that result in level
rates of return on principal. Loans are charged-off when deemed by management to
be uncollectable after taking into consideration such factors as the current
financial condition of the customer and the underlying collateral and
guarantees.
Bankshares adopted FASB No. 114, "Accounting by Creditors for Impairment of a
Loan." This statement has been amended by FASB No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures." FASB No. 114, as
amended, requires that the impairment of loans that have been separately
identified for evaluation is to be measured based on the present value of
expected future cash flows or, alternatively, the observable market price of the
loans or the fair value of the collateral. However, for those loans that are
collateral dependent (that is, if repayment of those loans is expected to be
provided solely by the underlying collateral) and for which management has
determined foreclosure is probable, the measure of impairment is to be based on
the fair value of the collateral. FASB No. 114, as amended also requires certain
disclosures about investments in impaired loans and the allowance for loan
losses and interest income recognized on loans.
Bankshares considers all consumer installment loans and residential mortgage
loans to be homogenous loans. These loans are not subject to impairment under
FASB No. 114. A loan is considered impaired when it is probable that TFB will be
unable to collect all principal and interest amounts according to the
contractual terms of the loan agreement. Factors involved in determining
impairment include, but are not limited to, expected future cash flows,
financial condition of the borrower, and the current economic conditions. A
performing loan may be considered impaired if the factors above indicate a need
for impairment. A loan on non-accrual status may not be impaired if it is in the
process of collection or there is an insignificant shortfall in payment. An
insignificant delay of less than 30 days or a shortfall of less than 5% of the
required principal and interest payments generally do not indicate an impairment
situation, if in management's judgement the loan will be paid in full. Loans
that meet the regulatory definitions of doubtful or loss generally qualify as
impaired loans under FASB No. 114. Charge-offs for impaired loans occur when the
loan or portion of the loan is determined to be uncollectible, as is the case
for all loans.
Loans are placed on non-accrual status when they have been specifically
determined to be impaired or when principal or interest is delinquent for 90
days or more, unless when such loans are well secured and in the process of
collection. Any unpaid interest previously accrued on such loans is reversed
from income. Interest income generally is not recognized on specific impaired
loans unless the likelihood of further loss is remote. Interest payments
received on such loans are applied as a reduction of the loan principal balance.
Interest income on other non-accrual loans is recognized only to the extent of
interest payments received.
Total loans on the balance sheet are comprised of the following classifications
as of December 31, 2000, 1999, 1998, 1997, and 1996.
LOAN PORTFOLIO (In Thousands)
December 31,
------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------- ------------- -------------- ------------- -------------
Loans secured by real estate:
Construction and land development $ 12,948 $ 11,746 $ 8,297 $ 6,998 $ 9,617
Secured by farmland 381 903 1,163 1,449 1,345
Secured by 1-4 family residential 74,167 64,921 53,430 42,120 34,145
Nonfarm, nonresidential loans 53,959 50,988 49,814 34,513 36,354
Commercial and industrial loans
(except those secured by real estate) 17,148 16,689 16,933 15,844 12,689
Agricultural loans - - - - 51
Loans to individuals (except those
secured by real estate) 36,083 33,787 30,284 24,417 21,119
All other loans 5,873 4,868 4,620 5,176 1,147
------------- ------------- -------------- ------------- -------------
Total loans 200,559 183,902 164,541 130,517 116,467
Less: Unearned discount (126) (115) (416) (709) (722)
------------- ------------- -------------- ------------- -------------
Total Loans, Net $200,433 $183,787 $164,125 $129,808 $115,745
============= ============= ============== ============= =============
The following table sets forth certain information with respect to the Bank's
non-accrual, restructured and past due loans, as well as foreclosed assets, for
the periods indicated:
NON-PERFORMING ASSETS AND LOANS CONTRACTUALLY PAST DUE
(In Thousands)
Years ended December 31,
---------------------------------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
Nonaccrual loans $ 121 $ 125 $ 666 $ 551 $ 733
Restructured loans 0 0 0 0 0
Other real estate owned 0 0 57 199 477
------ ------ ------ ------ ------
Total Non-Performing Assets $ 121 $ 125 $ 723 $ 750 $1,210
====== ====== ====== ====== ======
Loans past due 90 days
accruing interest $ 800 $ 170 $ 951 $ 491 $ 21
====== ====== ====== ====== ======
Allowance for loan losses to
total loans at period end 1.27% 1.24% 1.13% 1.27% 1.26%
Non-performing assets to
period end loans and other
real estate owned 0.06% 0.07% 0.33% 0.41% 0.67%
Potential Problem Loans: At December 31, 2000, Management is not aware of any
significant problem loans not included in table.
19
SUMMARY OF LOAN LOSS EXPERIENCE
ANALYSIS OF LOAN LOSS EXPERIENCE. The allowance for loan losses is maintained at
a level which, in management's judgement, is adequate to absorb probable credit
losses inherent in the loan portfolio. The amount of the allowance is based on
management's evaluation of the collectibility of the loan portfolio, credit
concentration, trends in historical loss experience, specific impaired loans,
and current economic conditions. Management periodically reviews the loan
portfolio to determine probable credit losses related to specifically identified
loans as well as probable credit losses inherent in the remainder of the loan
portfolio that have been incurred. Allowances for impaired loans are generally
determined based on collateral values or the present value of estimated cash
flows. The allowance is increased by a provision for loan losses, which is
charged to expense and reduced by charge-offs, net of recoveries. Changes in the
allowances relating to impaired loans are charged or credited to the provision
for loan losses. Because of uncertainties inherent in the estimation process,
management's estimate of credit losses inherent in the loan portfolio and the
related allowance may change in the near term.
Additions to the allowance for loan losses, which are recorded as the provision
for loan losses on Bankshares' statements of earnings, are made monthly to
maintain the allowance at an appropriate level based on management's analysis of
the potential risk in the loan portfolio. The amount of the provision is a
function of the level of loans outstanding, the level of non-performing loans,
historical loan-loss experience, the amount of loan losses actually charged off
or recovered during a given period and current national and local economic
conditions.
At December 31, 2000, 1999, 1998, 1997, and 1996 the allowance for loan losses
was $2,554,000, $2,284,000, $1,853,000, $1,655,000, and $1,465,000,
respectively.
The following table summarizes TFB's loan loss experience for each of the last
five years ended December 31, 2000, 1999, 1998, 1997, and 1996, respectively:
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(In Thousands)
Year Ended
December 31,
---------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------- ----------- ----------- ----------- -----------
Allowance for Loan Losses, January 1 $2,284 $1,853 $1,655 $1,465 $1,181
------------- ----------- ----------- ----------- -----------
Loans Charged-Off:
Commercial, financial and
agricultural 247 217 108 176 128
Real estate-construction
and development 4 - - - -
Real estate-mortgage 20 - 40 - 40
Consumer 171 110 223 187 225
------------- ----------- ----------- ----------- -----------
Total Loans Charged-Off 442 327 371 363 393
------------- ----------- ----------- ----------- -----------
Recoveries:
Commercial, financial and
agricultural 45 18 6 7 51
Real estate-construction
and development - - - - -
Real estate-mortgage 177 4 - - 1
Consumer 33 41 29 81 47
------------- ----------- ----------- ----------- -----------
Total Recoveries 255 63 35 88 99
------------- ----------- ----------- ----------- -----------
Net Charge-Offs 187 264 336 275 294
------------- ----------- ----------- ----------- -----------
Provision for Loan Losses 457 695 534 465 578
------------- ----------- ----------- ----------- -----------
Allowance for Loan Losses, December 31 $2,554 $2,284 $1,853 $1,655 $1,465
============= =========== =========== =========== ===========
Ratio of Net Charge-Offs
to Average Loans: 0.10% 0.15% 0.23% 0.22% 0.27%
============= =========== =========== =========== ===========
20
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES. The following table allocates the
allowance for loan losses at December 31, 2000, 1999, 1998, 1997, and 1996 to
each loan category. The allowance has been allocated according to the amount
deemed to be reasonably necessary to provide for the possibility of losses being
incurred within the following categories of loans at the dates indicated,
although the entire allowance balance is available to absorb any actual
charge-offs that may occur.
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(In Thousands)
2000 1999 1998
------------------------------ ------------------------------ ------------------------------
Allowance Percentage Allowance Percentage Allowance Percentage
for Loan of Total for Loan of Total for Loan of Total
Losses Loans Losses Loans Losses Loans
------------- ------------ ------------- ------------- ------------ -------------
Commercial $950 8.55% $895 9.08% $714 10.29%
Agricultural 0.00% 0.00% 0.00%
Real Estate:
Construction 25 6.46% 6.39% 5.04%
Secured by Farmland 0.19% 0.49% 0.71%
1-4 Family Residential 300 36.98% 264 35.32% 160 32.47%
Other Real Estate 50 26.90% 27.74% 30.27%
Consumer 1,229 17.99% 1,125 18.38% 979 18.41%
All Other Loans 2.93% 2.65% 2.81%
--------- ----------- ---------- ---------- ---------
$2,554 100.00% $2,284 100.00% $1,853 100.00%
========= =========== ========== ========== =========
1997 1996
------------------------------ ------------------------------
Allowance Percentage Allowance Percentage
for Loan of Total for Loan of Total
Losses Loans Losses Loans
------------- ------------ ------------- -------------
Commercial $777 12.14% $522 10.89%
Agricultural 0.00% 0.04%
Real Estate:
Construction 5.36% 8.26%
Secured by Farmland 1.11% 1.15%
1-4 Family Residential 274 32.27% 293 29.32%
Other Real Estate 26.44% 31.21%
Consumer 604 18.71% 650 18.13%
All Other Loans 3.97% 1.00%
--------- ----------- ----------- ---------
$1,655 100.00% $1,465 100.00%
========= =========== =========== =========
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
The following is a schedule of maturities and sensitivities of loans subject to
changes in interest rates as of December 31, 2000:
MATURITY SCHEDULE OF SELECTED LOANS (In Thousands)
1 Year
WIthin Within After
1 Year 5 Years 5 Years Total
------------- -------------- ------------- -------------
Commercial and industrial loans $ 4,028 $ 7,655 $ 1,265 $ 12,948
Construction Loans 9,940 6,283 925 17,148
------------- -------------- ------------- -------------
$ 13,968 $ 13,938 $ 2,190 $ 30,096
============= ============== ============= =============
For maturities over one year:
Floating rate loans $ 4,095 $ 1,478 $ 5,573
Fixed rate loans 9,843 712 10,555
-------------- ------------- -------------
$ 13,938 $ 2,190 $ 16,128
============== ============= =============
21
INVESTMENT PORTFOLIO
At December 31, 2000, 1999 and 1998, the carrying values of the major
classifications of securities were as follows:
INVESTMENT PORTFOLIO
(In Thousands)
Available for Sale (1) Held to Maturity (1)
----------------------------------- ------------------------------------
2000 1999 1998 2000 1999 1998
------ ------ ------ ------ ------ ------
U.S. Treasury and other U.S.
Government agencies and
Corporations $9,559 $10,151 $12,682 $1,589 $2,885 $4,230
States and political subdivisions 1,657 682 688 2,391 2,491 2,738
Mutual funds -- 810 862
Restricted investment - Federal
Home Loan Bank stock 1,150 1,150 967
FHLMC preferred stock 488 488 488
Other securities 122 122 122
------- ------- ------- ------ ------ ------
Total $12,976 $13,403 $15,809 $3,980 $5,376 $6,968
------- ------- ------- ------ ------ ------
(1) Amounts for held-to-maturity are based on amortized cost. Amounts for
available-for-sale are based on fair value
22
MATURITY OR NEXT RATE ADJUSTMENT DATE
The following is a schedule of maturities or next rate adjustment date and
related weighted average yields of securities at December 31, 2000:
MATURITY DISTRIBUTION AND YIELDS OF SECURITIES (in Thousands)
Due in one year Due after 1 Due after 5
or less through 5 years through 10 years
------------------------ ------------------------ ---------- ----------
Amount Yield Amount Yield Amount Yield
------------ --------- ------------ --------- ---------- ----------
SECURITIES HELD TO MATURITY:
Obligations of U.S. government
corporations and agencies $ 1,287 6.38% $ 302 6.39% $ -
Obligations of states and political
subdivisions, taxable
------------ ------------ ----------
Total taxable 1,287 6.38% 302 6.39% -
Obligations of states and political
subdivisions, tax-exempt 510 6.26% 1,881 6.58% -
------------ ------------ ----------
Total 1,797 6.35% 2,183 6.56% -
------------ ------------ ----------
SECURITIES AVAILABLE FOR SALE:
Obligations of U.S. government
corporations and agencies 3,433 6.03% 4,851 6.29% 815 6.65%
Obligations of states and political
subdivisions, taxable 476 7.09% - -
Other taxable securities - - -
------------ ------------ ----------
Total taxable 3,909 6.16% 4,851 6.29% 815 6.65%
------------ ------------ ----------
Obligations of states and political
subdivisions, tax-exempt 207 9.33% - 975 8.11%
------------ ------------ ----------
Total 4,116 6.32% 4,851 6.29% 1,790 7.44%
------------ ------------ ----------
TOTAL SECURITIES: $ 5,913 6.33% $ 7,034 6.37% $ 1,790 7.44%
============ ============ ==========
Due after 10 years
and Equity Securities Total
--------------------- -------------------------
Amount Yield Amount Yield
-------- ---------- ----------- ----------
SECURITIES HELD TO MATURITY:
Obligations of U.S. government
corporations and agencies $ - $ 1,589 6.39%
Obligations of states and political
subdivisions, taxable -
-------- -----------
Total taxable - 1,589 6.39%
Obligations of states and political
subdivisions, tax-exempt - 2,391 6.51%
-------- -----------
Total - 3,980 6.46%
-------- -----------
SECURITIES AVAILABLE FOR SALE:
Obligations of U.S. government
corporations and agencies 460 6.90% 9,559 6.26%
Obligations of states and political
subdivisions, taxable - 476 7.09%
Other taxable securities 1,759 7.25% 1,759 7.25%
-------- -----------
Total taxable 2,219 7.18% 11,794 6.44%
-------- -----------
Obligations of states and political
subdivisions, tax-exempt - 1,182 8.32%
-------- -----------
Total 2,219 7.18% 12,976 6.61%
-------- -----------
TOTAL SECURITIES: $2,219 7.18% $ 16,956 6.58%
======== ===========
(1) Yields on tax-exempt securities have been computed on a tax-equivalent basis
using a federal tax rate of 34%.
23
DEPOSITS
The average daily amounts of deposits and rates paid on deposits is summarized
for the periods indicated in the following table:
DEPOSITS AND RATES PAID (In Thousands)
December 31,
--------------------------------------------------------------------------------------------------
2000 1999 1998
-------------------------- ------------------------- ----------------------------
Amount Rate Amount Rate Amount Rate
--------- -------- -------- -------- -------- ---------
Noninterest-bearing $ 37,123 $33,906 $30,721
--------- -------- --------
Interest-bearing:
NOW accounts 37,201 1.12% 37,349 1.46% 33,186 1.99%
Money market accounts 34,969 3.39% 36,390 3.56% 37,958 3.98%
Regular savings accounts 32,869 2.68% 33,220 2.93% 29,920 3.47%
Time deposits: 53,001 5.11% 46,683 4.64% 40,266 4.89%
--------- -------- --------
Total interest-bearing 158,040 3.28% 153,642 3.24% 141,330 3.66%
--------- -------- --------
Total deposits $195,163 $187,548 $172,051
========= ======== ========
MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
The following is a schedule of maturities of time deposits in amounts of
$100,000 or more as of December 31, 2000:
MATURITIES OF CERTIFICATES OF DEPOSIT
AND OTHER TIME DEPOSITS OF $100,000 AND MORE
(In Thousands)
Within Three to Six to One to Over
Three Six Twelve Five Five
Months Months Months Years Years Total
------ -------- ------ ------ ----- -----
(Dollars in thousands)
At December 31, 2000 $1,859 $5,150 $10,678 $4,547 $2,187 $24,421
====== ====== ======= ====== ====== =======
BORROWED FUNDS
LONG-TERM BORROWINGS. Amounts and weighted average rates for long-term
borrowings for 2000, 1999 and 1998 are as follows:
BORROWED FUNDS (in Thousands)
-----------------------------------------------------------------------------------------
December 31, 2000 December 31, 1999 December 31, 1999
Amount Rate Amount Rate Amount Rate
----------------------- ---------------------- ------------------------
FHLB Advances $13,000 5.27% $23,000 5.57% $18,000 5.19%
SHORT-TERM BORROWINGS. This information is not required, as the average amount
of borrowings during the period did not exceed 30% of shareholders' equity.
24
CAPITAL
Bankshares and TFB are subject to various regulatory capital requirements
administered by banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on
Bankshares' financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, Bankshares and TFB must meet
specific capital guidelines that involve quantitative measures of the assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. Bankshares' and TFB's capital amounts and classification
are also subject to qualitative judgments by the regulators about components,
risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require Bankshares and TFB to maintain minimum amounts and ratios (set forth in
the table below) of Total and Tier I Capital (as defined in the regulations) to
risk-weighted assets (as defined in the regulations), and of Tier I Capital to
average assets (as defined in the regulations). Management believes, as of
December 31, 2000 that Bankshares and TFB meet all capital adequacy requirements
to which they are subject.
Bankshares and TFB exceeded their regulatory capital ratios, as set forth in the
following table:
RISK BASED CAPITAL RATIOS (In Thousands)
December 31,
----------------------
2000 1999
-------- --------
Tier 1 Capital:
Shareholders' Equity $ 22,504 $ 21,204
Tier 2 Capital:
Allowable Allowance for Loan Losses 2,355 2,178
-------- --------
Total Capital: $ 24,859 $ 23,382
======== ========
Risk Weighted Assets: $188,213 $174,493
Risk Based Capital Ratios:
Tier 1 to Risk Weighted Assets 11.96% 12.20%
Total Capital to Risk Weighted Assets 13.21% 13.40%
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements and the accompanying notes presented
elsewhere in this document, have been prepared in accordance with generally
accepted accounting principles, which require the measurement of financial
position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time and
due to inflation. Unlike most industrial companies, virtually all the assets and
liabilities of Bankshares and TFB are monetary in nature. The impact of
inflation is reflected in the increased cost of operations. As a result,
interest rates have a greater impact on performance than do the effects of
general levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which, as amended, is required to be
adopted in years beginning after June 15, 2000. The Statement permits early
adoption as of the beginning of any fiscal quarter after its issuance. This
Statement establishes accounting and reporting standards for derivative
instruments and hedging activities, including certain derivative instruments
embedded in other contracts, and requires that an entity recognize all
derivatives as assets or liabilities in the balance sheet and measure them at
fair value. Effective January 1, 2001, TFB adopted SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities," and transferred securities with
a book value of $3,979,645 and a market value of $3,980,765 to the available for
sale category.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
An important component of both earnings performance and liquidity is management
of interest rate sensitivity. Interest rate sensitivity reflects the potential
effect on net interest income of a movement in market interest rates. TFB is
subject to interest rate sensitivity to the degree that its interest-earning
assets mature or reprice at different time intervals than its interest-bearing
liabilities. However, TFB is not subject to any of the other major categories of
market risk such as foreign currency exchange rate risk or commodity price risk.
TFB uses a number of tools to manage its interest rate risk, including
simulating net interest income under various scenarios, monitoring the present
value change in equity under the same scenarios, and monitoring the difference
or gap between rate sensitive assets and rate sensitive liabilities over various
time periods. Management believes that rate risk is best measured by simulation
modeling.
25
The earnings simulation model forecasts annual net income under a variety of
scenarios that incorporate changes in the absolute level of interest rates,
changes in the shape of the yield curve and changes in interest rate
relationships. Management evaluates the effect on net interest income and
present value equity under varying market rate assumptions.
TFB monitors exposure to gradual changes in rates of up to 200 basis points up
or down over a rolling 12-month period. TFB's policy limit for the maximum
negative impact on net interest income and change in equity from gradual changes
in interest rates of 200 basis points over 12 months is 15% and 20%,
respectively. Management has maintained a risk position well within these
guideline levels during 2000.
The following tables present TFB's market value changes in equity under various
rate scenarios as of December 31, 2000 and 1999.
MARKET RISK
- --------------------------------------------------------------------------------------------------------
2000 Percentage Market Minus Current
(Dollars in thousands) Change Value Change 200 pts Fair Value
- --------------------------------------------------------------------------------------------------------
Federal funds sold 0.16% 24 14,712 14,688
Securities 5.31% $ 900 $ 17,857 $ 16,957
Loans receivable 5.77% 11,360 208,278 196,918
---------------- ---------------- ----------------
Total rate sensitive assets 5.37% 12,284 240,847 228,563
Other assets 0.00% - 20,332 20,332
---------------- ---------------- ----------------
Total assets 4.94% $ 12,284 $ 261,179 $ 248,895
================ ================ ================
Demand deposits 10.66% $ 3,221 $ 33,430 $ 30,209
Rate-bearing deposits 3.69% 6,118 171,977 165,859
Borrowed funds 14.04% 1,810 14,702 12,892
Other liabilities 0.00% - 2,333 2,333
---------------- ---------------- ----------------
Total liabilities 5.28% 11,149 222,442 211,293
Present Value Equity 3.02% 1,135 38,737 37,602
---------------- ---------------- ----------------
Total liabilities and equity 4.94% $ 12,284 $ 261,179 $ 248,895
================ ================ ================
- -----------------------------------------------------------------------------------------
2000 Plus Market Percentage
(Dollars in thousands) 200 pts Value Change Change
- -----------------------------------------------------------------------------------------
Federal funds sold 14,664 (24) -0.16%
Securities $ 16,129 $ (828) -4.88%
Loans receivable 186,597 (10,321) -5.24%
-------------- ----------------
Total rate sensitive assets 217,390 (11,173) -4.89%
Other assets 20,332 - 0.00%
-------------- ----------------
Total assets $ 237,722 $ (11,173) -4.49%
============== ================
Demand deposits $ 28,489 $ (1,720) -5.69%
Rate-bearing deposits 161,795 (4,064) -2.45%
Borrowed funds 11,333 (1,559) -12.09%
Other liabilities 2,333 - 0.00%
--------------- ----------------
Total liabilities 203,950 (7,343) -3.48%
Present Value Equity 33,772 (3,830) -10.19%
-------------- ----------------
Total liabilities and equity $ 237,722 $ (11,173) -4.49%
============== ================
- -------------------------------------------------------------------------------------------------------
1999 Percentage Market Minus Current
(Dollars in thousands) Change Value Change 200 pts Fair Value
- -------------------------------------------------------------------------------------------------------
Federal funds sold 0.16% $ 23 $ 14,033 $ 14,010
Securities 5.19% 974 19,727 18,753
Loans receivable 6.20% 11,210 192,039 180,829
---------------- ---------------- ----------------
Total rate sensitive assets 5.72% 12,207 225,799 213,592
Other assets 0.00% - 18,915 18,915
---------------- ---------------- ----------------
Total assets 5.25% $ 12,207 $ 244,714 $ 232,507
================ ================ ================
Rate sensitive deposits 3.17% $ 5,626 $ 183,370 $ 177,744
Borrowed funds 8.78% 1,997 24,744 22,747
Other liabilities 0.00% - 1,731 1,731
---------------- ---------------- ----------------
Total liabilities 3.77% 7,623 209,845 202,222
Present Value Equity 15.14% 4,584 34,869 30,285
---------------- ---------------- ----------------
Total liabilities and equity 5.25% $ 12,207 $ 244,714 $ 232,507
================ ================ ================
- ----------------------------------------------------------------------------------------
1999 Plus Market Percantage
(Dollars in thousands) 200 pts Value Change Change
- ----------------------------------------------------------------------------------------
Federal funds sold $ 13,987 $ (23) -0.16%
Securities 18,011 (742) -3.96%
Loans receivable 170,901 (9,928) -5.49%
---------------- ---------------
Total rate sensitive assets 202,899 (10,693) -5.01%
Other assets 18,915 - 0.00%
---------------- ----------------
Total assets $ 221,814 $(10,693) -4.60%
================ ================
Rate sensitive deposits $ 172,542 $ (5,202) -2.93%
Borrowed funds 21,891 (856) -3.76%
Other liabilities 1,731 - 0.00%
---------------- ----------------
Total liabilities 196,164 (6,058) -3.00%
Present Value Equity 25,650 (4,635) -15.30%
---------------- ----------------
Total liabilities and equity $ 221,814 $(10,693) -4.60%
================ ================
26
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITOR'S REPORT
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
27
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Bankshares executive officers is contained herein. All
other information concerning Bankshares required by this item is contained in
Bankshares' definitive proxy statement for the 2001 annual meeting of
shareholders, to be filed within 120 days of the fiscal year ended December 31,
2000 and is incorporated herein by reference.
CLASS I
POSITION HELD WITH COMPANY
AND/OR PRINCIPAL OCCUPATIONS FIRST YEAR
AND DIRECTORSHIPS DURING THE AS OFFICER
NAME PAST FIVE YEARS OF COMPANY AGE
- ----- ---------------------------------- ---------- ---
C. Hunton Tiffany Chairman of the Board of 1984 61
Bankshares and TFB; President
Fauquier Bank Services, Inc.;
President of Bankshares since
1984; President of the TFB since
1982; Director of TFB since 1974
Randy K. Ferrell Senior Vice President of Bankshares; 1994 50
Executive Vice President of TFB,
Commercial and Retail Banking and
Management Information Systems
Division since 2001
28
Rosanne T. Gorkowki Senior Vice President of Bankshares; 1999 55
Senior Vice President of TFB, Human
Resources and Administration Division since
2000.
Eric P. Graap Senior Vice President and Chief Financial 2000 48
Officer of Bankshares; Senior Vice
President and Chief Financial Officer
of TFB; since 2000.
Gary R. Shook Senior Vice President of Bankshares; 1995 40
Senior Vice President of TFB,
Wealth Management Division;
since 2001.
C. Hunton Tiffany has been an employee of TFB since 1965. He was elected to
TFB's Board in 1974 and to Bankshares' Board in 1984. He has served as President
of TFB since 1982 and Bankshares since 1984, and is currently Chairman of both
Boards of Directors. Mr. Tiffany is President and a Director of Fauquier Bank
Services, Inc., a subsidiary of TFB. Mr. Tiffany serves on the Executive,
Investment, Long Range Planning Committee and Trust Committees.
Randy K. Ferrell joined TFB in September 1994. He serves as Executive Vice
President of TFB, and heads the Commercial and Retail Banking and Management
Information Systems Division, and he serves as Executive Vice President of
Bankshares. Mr. Ferrell is a member of Senior Management, and also serves on the
Asset/Liability Management Committee of TFB. Mr. Ferrell is an Executive Vice
President and Director of Fauquier Bank Services, Inc., a subsidiary of TFB. He
oversees all aspects of the lending and retail branching functions. He
participates in presentations to the Boards of TFB and Bankshares, and leads the
presentation of new loans and analysis of the loan portfolio at the Executive
Committee meetings.
Rosanne T. Gorkowski joined TFB in 1999. She serves as Senior Vice President,
Human Resoures and Administration of Bankshares. As head of Human Resources and
Administration Division, she is responsible for managing the human resources and
administration functions, including compensation and performance management,
benefits, training, EEO/AAP, employee relations, facilities, and purchasing.
From 1994 to 1997, Mrs. Gorkowski was Managing Partner of Windsong Associates, a
management consulting firm specializing in Human Resource services. From 1997 to
1999, she was director of Human Resources for Walcoff Associates, Inc., an
information technology company. Mrs. Gorkowski is a member of Senior Management,
and also serves on the Human Resources, Asset/Liability Management and Strategic
Planning Committees of TFB. She participates in presentations to the Boards of
TFB and Bankshares.
Eric P. Graap joined TFB in 2000. He serves as Senior Vice President and Chief
Financial Officer of TFB and Senior Vice President and Chief Financial Officer
of Bankshares. As head of Support Services Division, he directs the activities
of the Accounting, Data Processing and Investment departments and is responsible
for the integrity of the financial systems of the organization. From 1994 to
2000, Mr. Graap was employed at The Community Development Corporation, a
community development financial intermediary located in New York City, as Chief
Financial Officer and Treasurer. Mr. Graap is a member of Senior Management, and
also serves on the Asset/Liability Management and Strategic Planning Committees
of TFB. He participates in presentations to the Boards of TFB and Bankshares.
Gary R. Shook joined TFB in January 1995. He serves as Senior Vice President,
and heads the Wealth Management Division, including the Investment Sales and
Trust Services areas, and Senior Vice President of Bankshares. Mr. Shook serves
as a Senior Vice President and Director of Fauquier Bank Services, Inc., a
29
subsidiary of TFB. Mr. Shook participates in presentations to the Boards of TFB
and Bankshares, and reports to the Trust Committee of the Board of Directors on
all trust activities. He is a member of Senior Management and serves on the
Asset/Liability Management and Strategic Planning Committees of TFB.
COMMITTEES OF THE BOARD
During the year ended December 31, 2000, the Board of Directors acted as a
Committee of the whole as to all matters. The three Committees of the Company
are the Executive, Audit and Committee on Board Governance.
MEETINGS OF BOARD OF DIRECTORS
During the year ended December 31, 2000, the Board of Directors of Bankshares
held nine meetings.
ITEM 11: EXECUTIVE COMPENSATION
Information relating to executive compensation is contained in Bankshares'
definitive proxy statement for the 2001 annual meeting of shareholders to be
filed within 120 days of the fiscal year ended December 31, 2000 and is
incorporated herein by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is contained in Bankshares' definitive proxy
statement for the 2001 annual meeting of shareholders to be filed within 120
days of the fiscal year ended December 31, 2000 and is incorporated herein by
reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is contained in Bankshares' definitive proxy
statement for the 2001 annual meeting of shareholders to be filed within 120
days of the fiscal year ended December 31, 2000 and is incorporated herein by
reference.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8K
(a) (1) - Financial Statements
The following consolidated financial statements of Fauquier Bankshares Inc. and
subsidiaries are filed as part of this document under Item 8. Financial
Statements and Supplementary Data.
Independent Auditor's Report on the Consolidated Financial Statements
Consolidated Balance Sheets - December 31, 2000 and December 31, 1999
Consolidated Statements of Income - Years ended December 31, 2000, 1999
and 1998
Consolidated Statements of Cash Flow - Years ended December 31, 2000,
1999 and 1998
Consolidated Statements of Changes in Shareholders' Equity - December
31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements - Years ended December 31,
2000, 1999 and 1998
(a) (2) - Financial Statement Schedules
30
All schedules to the Consolidated Financial Statements required by Article 9 of
Regulation S-X are omitted since they are either not applicable or the required
information is set forth in the consolidated financial statements or notes
thereto.
(a) (3) - Exhibits
EXHIBIT NUMBER
(3)(i) Articles of Incorporation of Fauquier Bankshares, Inc.
(including amendments)*
(3)(ii) Bylaws of Fauquier Bankshares, Inc.*
(10)(i) Fauquier Bankshares, Inc. Omnibus Stock Ownership and
Long Term Incentive Plan, Amended and Restated
Effective January 1, 2000**
(11) Statement regarding computation of per share earnings
(21) Subsidiaries of the Registrant (Incorporated herein by
reference to Part I of this Form 10-K)
* Incorporated by reference to Bankshares' Securities Exchange Act of 1934
("Exchange Act") Registration Statement on Form 10, filed with the Securities
and Exchange Commission on April 16, 1999 and amended June 10, 1999.
** Incorporated by reference to Bankshares' definitive proxy statement for the
2001 annual meeting of shareholders to be filed within 120 days of the fiscal
year ended December 31, 2000.
(b) Reports on Form 8-K Filed in the fourth quarter of 2000
None.
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FAUQUIER BANKSHARES, INC.
/s/ C. Hunton Tiffany
- -----------------------------
C. Hunton Tiffany
President and Chief Executive Officer
Dated: March 30, 2001
/s/ Eric P. Graap
- --------------------------
Eric P. Graap
Senior Vice President and Chief Financial Officer
Dated: March 30, 2001
Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ C. Hunton Tiffany
- --------------------------- President, Chief Executive Officer, March 30, 2001
C. Hunton Tiffany Director
/s/ Alexander G. Green, Jr.
- --------------------------- Director March 30, 2001
Alexander G. Green, Jr.
/s/ Stanley C. Haworth
- --------------------------- Director March 30, 2001
Stanley C. Haworth
/s/ John J. Norman, Jr.
- --------------------------- Director March 30, 2001
John J. Norman, Jr.
/s/ Douglas C. Larson
- --------------------------- Director March 30, 2001
Douglas C. Larson
/s/ C.H. Lawrence, Jr.
- --------------------------- Director March 30, 2001
C.H. Lawrence, Jr.
/s/ D. Harcourt Lees, Jr.
- --------------------------- Director March 30, 2001
D. Harcourt Lees, Jr.
/s/ Randolph T. Minter
- --------------------------- Director March 30, 2001
Randolph T. Minter
/s/ B.S. Montgomery
- --------------------------- Director March 30, 2001
B.S. Montgomery
/s/ H.P. Neale
- --------------------------- Director March 30, 2001
H.P. Neale
/s/ Pat H. Nevill
- --------------------------- Director March 30, 2001
Pat H. Nevill
/s/ Henry M. Ross
- --------------------------- Director March 30, 2001
Henry M. Ross
/s/ H. Frances Stringfellow
- --------------------------- Director March 30, 2001
H. Frances Stringfellow
33