UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(MARK ONE)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                For the quarterly period ended September 30, 1999

                                       or

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

             For the transition period from __________ to __________

                         Commission File No. 0-25805


                           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)


                                 Not Applicable
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)


     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
                                             -----   -----

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest  practicable date:  1,783,987 shares of common
stock, par value $3.13 per share, were outstanding as of October 27, 1999.


<PAGE>


                            Fauquier Bankshares, Inc.

                                      INDEX

<TABLE>
<CAPTION>
Part I.  FINANCIAL INFORMATION
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                             <C>
   Item 1. Financial Statements                                                                                   1

         Consolidated Balance Sheets as of September 30, 1999 (unaudited) and December 31, 1998                   1

         Consolidated Statements of Income (unaudited) for the Three Months Ended September 30, 1999 and 1998     2

         Consolidated Statements of Income (unaudited) for the Nine Months Ended September 30, 1999 and 1998      3

         Consolidated  Statements of Changes in Stockholders' Equity (unaudited)
         for the Nine Months Ended September 30, 1999 and 1998                                                    4

         Consolidated  Statements of Cash Flows  (unaudited) for the Nine Months
         Ended September 30, 1999 and 1998                                                                        5

         Notes to Condensed Consolidated Financial Statements                                                     6

   Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations                  7

   Item 3. Quantitative and Qualitative Disclosure of Market Risk                                                15

Part II. OTHER INFORMATION                                                                                       15

   Item 1.        Legal Proceedings                                                                              15

   Item 2.        Changes in Securities and Use of Proceeds                                                      15

   Item 3.        Defaults Upon Senior Securities                                                                15

   Item 4.        Submission of Matters to a Vote of Security Holders                                            15

   Item 5.        Other Information                                                                              16

   Item 6.        Exhibits and Reports on Form 8-K                                                               16



SIGNATURES
</TABLE>



<PAGE>

ITEM 1.  FINANCIAL STATEMENTS.

                    FAUQUIER BANKSHARES, INC. & SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                          SEPTEMBER 30, 1999      DECEMBER 31, 1998
                                                                                          ------------------      ------------------
<S>                                                                                          <C>                    <C>
ASSETS
Cash and due from banks                                                                      $  10,424,815          $   9,868,240
Interest-bearing deposits in other banks                                                           112,835              3,680,430
Federal funds sold                                                                               8,700,000             13,182,000
Securities (fair value: 1999, $30,891,626; 1998, $22,865,960)                                   30,892,869             22,790,801
Loans, net                                                                                     183,433,617            162,272,291
Bank premises and equipment, net                                                                 5,725,314              5,879,737
Accrued interest receivable                                                                      1,636,479              1,084,500
Other real estate                                                                                  122,335                 56,944
Other assets                                                                                     2,427,404              1,211,432
                                                                                             -------------          -------------

              Total assets                                                                   $ 243,475,668          $ 220,026,375
                                                                                             =============          =============

LIABILITIES
Deposits:
  Non-interest bearing demand deposits                                                       $  39,078,132          $  34,438,128
  Savings and interest-bearing demand deposits                                                 105,304,128            102,176,226
  Time deposits                                                                                 47,196,503             42,602,788
                                                                                             -------------          -------------
     Total deposits                                                                          $ 191,578,763          $ 179,217,142
Federal Home Loan advances                                                                      28,000,000             18,000,000
Dividends payable                                                                                  250,567                238,910
Other liabilities                                                                                2,368,906              1,393,487
                                                                                             -------------          -------------

              Total liabilities                                                              $ 222,198,236          $ 198,849,539
                                                                                             -------------          -------------


SHAREHOLDERS' EQUITY
Common stock, par value, $3.13; authorized 8,000,000 shares;
  issued and outstanding 1999, 1,787,527 shares;
  1998, 1,837,770 shares                                                                     $   5,594,960          $   5,752,220
Retained earnings                                                                               15,930,137             15,432,062
Accumulated other comprehensive income                                                            (247,665)                (7,446)
                                                                                             -------------          -------------
              Total shareholders' equity                                                        21,277,432             21,176,836
                                                                                             -------------          -------------

              Total liabilities and shareholders' equity                                     $ 243,475,668          $ 220,026,375
                                                                                             =============          =============

</TABLE>


See Accompanying Notes to Financial Statements.


                                       1
<PAGE>

                   FAUQUIER BANKSHARES, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
                                                                                          SEPTEMBER 30, 1999     SEPTEMBER 30, 1998
                                                                                          ------------------     ------------------
<S>                                                                                             <C>                 <C>
INTEREST INCOME
Interest and fees on loans                                                                      $3,956,797          $3,399,572
Taxable interest on investment securities                                                           51,261              83,886
Tax-exempt interest on investment securities                                                        29,125              37,044
Taxable interest on AFS securities                                                                 306,432             259,796
Tax-exempt interest on AFS securities                                                               11,727              34,736
Dividends                                                                                           33,485              40,448
Interest on federal funds sold                                                                     103,040              56,330
Interest on deposits in other banks                                                                  1,889               2,182
                                                                                                ----------          ----------
     Total interest income                                                                      $4,493,756          $3,913,994
                                                                                                ----------          ----------
Interest Expense
Interest on deposits                                                                            $1,227,006          $1,304,173
Interest on FHLB advances                                                                          283,034              95,173
Interest on federal funds purchased                                                                     --                  --
                                                                                                ----------          ----------
     Total interest expense                                                                     $1,510,040          $1,399,346
                                                                                                ----------          ----------
     Net interest income                                                                        $2,983,716          $2,514,648
Provision for loan losses                                                                          180,000             180,000
                                                                                                ----------          ----------
     Net interest income after
     provision for loan losses                                                                  $2,803,716          $2,334,648

OTHER INCOME
Trust department income                                                                         $  124,767          $  139,496
Service charges on deposit accounts                                                                296,034             295,641
Other service charges, commissions and fees                                                         74,638              71,862
Gains on securities AFS                                                                                 --              15,786
Other operating income                                                                                  --                  --
                                                                                                ----------          ----------
     Total other income                                                                         $  495,439          $  522,785
                                                                                                ----------          ----------
OTHER EXPENSES
Salaries and employee benefits                                                                  $  912,302          $  871,441
Net occupancy expense of premises                                                                   73,372              69,628
Furniture and equipment                                                                            231,464             207,546
Advertising                                                                                         81,469              45,553
Bank card                                                                                          112,321              73,985
Consulting                                                                                          65,042              59,006
Data processing                                                                                    210,062             289,614
Postage                                                                                             60,767              58,313
Supplies                                                                                            33,277              28,713
Taxes, other than income                                                                            93,890              86,749
Telephone                                                                                           50,821              40,472
Other operating expenses                                                                           178,112              81,216
                                                                                                ----------          ----------
     Total other expense                                                                        $2,102,899          $1,912,236
                                                                                                ----------          ----------

     Income before income taxes                                                                 $1,196,256          $  945,197

Income tax expense                                                                                 381,000             195,169
                                                                                                ----------          ----------

Net income                                                                                      $  815,256          $  750,028
                                                                                                ==========          ==========

Earnings per Share, basic                                                                       $     0.45          $     0.40
                                                                                                ==========          ==========

Earnings per Share, diluted                                                                     $     0.45          $     0.40
                                                                                                ==========          ==========

</TABLE>

See Accompanying Notes to Financial Statements.

                                       2
<PAGE>

                   FAUQUIER BANKSHARES, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
                                                                                  SEPTEMBER 30, 1999           SEPTEMBER 30, 1998
                                                                                  ------------------           ------------------
<S>                                                                                    <C>                        <C>
INTEREST INCOME
Interest and fees on loans                                                             $11,220,088                $ 9,580,701
Taxable interest on investment securities                                                  167,910                    270,101
Tax-exempt interest on investment securities                                                86,451                    111,055
Taxable interest on AFS securities                                                         852,967                    790,447
Tax-exempt interest on AFS securities                                                       36,866                     58,892
Dividends                                                                                  109,169                    114,241
Interest on federal funds sold                                                             394,387                    329,367
Interest on deposits in other banks                                                         29,577                      3,124
                                                                                       -----------                -----------
     Total interest income                                                             $12,897,415                $11,257,928
                                                                                       -----------                -----------
Interest Expense
Interest on deposits                                                                   $ 3,810,315                $ 3,878,000
Interest on FHLB advances                                                                  753,611                    107,129
Interest on federal funds purchased                                                             --                        160
                                                                                       -----------                -----------
     Total interest expense                                                            $ 4,563,926                $ 3,985,289
                                                                                       -----------                -----------

     Net interest income                                                               $ 8,333,489                $ 7,272,639

Provision for loan losses                                                                  640,000                    450,000
                                                                                       -----------                -----------
     Net interest income after
     provision for loan losses                                                         $ 7,693,489                $ 6,822,639

OTHER INCOME
Trust department income                                                                $   437,771                $   414,043
Service charges on deposit accounts                                                        879,250                    778,247
Other service charges, commissions and fees                                                213,182                    188,444
Gains on securities AFS                                                                         --                     15,786
Other operating income                                                                         877                      4,702
                                                                                       -----------                -----------
     Total other income                                                                $ 1,531,080                $ 1,401,222
                                                                                       -----------                -----------
OTHER EXPENSES
Salaries and employee benefits                                                         $ 2,803,187                $ 2,521,974
Net occupancy expense of premises                                                          314,054                    264,681
Furniture and equipment                                                                    633,805                    609,102
Advertising                                                                                182,936                    123,835
Bank card                                                                                  291,225                    190,205
Consulting                                                                                 265,792                    225,735
Data processing                                                                            503,683                    511,051
Postage                                                                                    135,403                    133,353
Supplies                                                                                    88,465                     81,480
Taxes, other than income                                                                   177,834                    175,901
Telephone                                                                                  165,550                    131,760
Other operating expenses                                                                   732,526                    692,111
                                                                                       -----------                -----------
     Total other expense                                                               $ 6,294,460                $ 5,661,188
                                                                                       -----------                -----------

     Income before income taxes                                                        $ 2,930,109                $ 2,562,673

Income tax expense                                                                         893,000                    676,261
                                                                                       -----------                -----------

Net income                                                                             $ 2,037,109                $ 1,886,412
                                                                                       ===========                ===========

Earnings per Share, basic                                                              $      1.13                $      1.02
                                                                                       ===========                ===========

Earnings per Share, diluted                                                            $      1.12                $      1.01
                                                                                       ===========                ===========

</TABLE>

See Accompanying Notes to Financial Statements.

                                       3
<PAGE>

                   FAUQUIER BANKSHARES, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                   (UNAUDITED)
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                                         ACCUMULATED
                                                                                            OTHER
                                                   COMMON      CAPITAL      RETAINED    COMPREHENSIVE  COMPREHENSIVE
                                                   STOCK       SURPLUS      EARNINGS        INCOME         INCOME        TOTAL
                                                   -----       -------      --------        ------         ------        -----
<S>                                             <C>         <C>           <C>           <C>               <C>         <C>
BALANCE, DECEMBER 31, 1997                      $5,978,150  $  1,207,680  $ 13,887,212  $    (95,144)                 $ 20,977,898
Comprehensive income:
  Net income                                                                 1,886,412                    $1,886,412     1,886,412
  Other comprehensive income net of tax:
    Unrealized holding gains on
      securities available for sale,
      net of deferred income taxes of $57,977                                                                112,543           --
                                                                                                          ----------
  Other comprehensive income net of tax                                                      112,543         112,543      112,543
                                                                                                          ----------
  Total comprehensive income                                                                              $1,998,955
                                                                                                          ==========
Cash dividends                                                                (592,887)                                  (592,887)
Acquisition of 75,238 shares of common stock      (235,194)   (1,198,416)      (32,607)                                (1,466,217)
Change in par value from $6.25 to $3.13              9,264        (9,264)                                                      --
                                                ----------  ------------  ------------  ------------                  -----------
BALANCE, SEPTEMBER 30, 1998                     $5,752,220  $         --  $ 15,148,130  $     17,399                  $20,917,749
                                                ==========  ============  ============  ============                  ===========
BALANCE, DECEMBER 31, 1998                      $5,752,220  $         --  $ 15,432,062  $     (7,446)                 $21,176,836
Comprehensive income:
  Net income                                                                 2,037,109                   $2,037,109     2,037,109
  Other comprehensive income (loss) net of tax:
    Unrealized holding gains on
      securities available for sale,
      net of deferred income taxes of $(123,749)                                                           (240,219)
                                                                                                         ----------
  Other comprehensive income (loss) net of tax                                              (240,219)      (240,219)     (240,219)
                                                                                                         ----------
  Total comprehensive income                                                                             $1,796,890
                                                                                                         ==========
Cash dividends                                                                (739,398)                                  (739,398)
Acquisition of 50,243 shares of common stock      (157,260)                   (799,636)                                  (956,896)
                                                ----------  ------------  ------------  ------------                  -----------
Balance, September 30, 1999                     $5,594,960  $         --  $ 15,930,137  $   (247,665)                 $21,277,432
                                                ==========  ============  ============  ============                  ===========
</TABLE>




See Accompanying Notes to Financial Statements.


                                       4
<PAGE>

                   FAUQUIER BANKSHARES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                                                     NINE MONTHS ENDED SEPTEMBER 30,
                                                                                                     -------------------------------
                                                                                                        1999              1998
                                                                                                        ----              ----
<S>                                                                                                <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
         Net income                                                                                $  2,037,109        $  1,886,412
         Adjustments to reconcile net income to net
           cash provided by operating activities:
              Depreciation                                                                              575,805             586,402
              Provision for loan losses                                                                 640,000             450,000
              Provision for other real estate                                                             6,000              30,000
              (Gain) on securities available for sale                                                        --             (15,786)
              Net premium amortization on investment
                  securities                                                                             30,095              24,497
              Changes in assets and liabilities:
                  (Increase) in accrued interest receivable                                            (551,979)           (489,126)
                  (Increase) decrease in other assets                                                (1,055,176)           (995,878)
                  Increase (decrease) in other liabilities                                              975,419             719,168
                                                                                                   ------------        ------------
                               Net cash provided by operating activities                           $  2,657,273        $  2,195,689
                                                                                                   ------------        ------------
CASH FLOWS FROM INVESTING ACTIVITIES
         Proceeds from sale of securities available for sale                                       $     66,700        $  2,733,244
         Proceeds from maturities, calls and principal
              payments of investment securities                                                       1,095,879           2,380,727
         Proceeds from maturities, calls and principal
              payments of securities available for sale                                               4,579,670          12,105,219
         Purchase of investment securities                                                                   --            (499,250)
         Purchase of securities available for sale                                                  (14,275,427)        (12,349,087)
         Proceeds from sale of other real estate owned                                                       --             102,974
         Purchase of premises and equipment                                                            (421,382)           (374,421)
         Net (increase) in loans                                                                    (21,872,717)        (26,479,630)
                                                                                                   ------------        ------------
                               Net cash (used in) investing activities                             $(30,827,277)       $(22,380,224)
                                                                                                   ------------        ------------
CASH FLOWS FROM FINANCING ACTIVITIES
         Net increase in demand deposits, NOW accounts
              and savings accounts                                                                 $  7,767,906        $  5,384,225
         Net increase (decrease) in certificates of deposit                                           4,593,715           1,914,210
         Proceeds from FHLB advances                                                                 10,000,000          13,000,000
         Cash dividends paid                                                                           (727,741)           (612,990)
         Acquisition of common stock                                                                   (956,896)         (1,433,610)
                                                                                                   ------------        ------------
                               Net cash provided by financing activities                           $ 20,676,984        $ 18,251,835
                                                                                                   ------------        ------------

                               Increase (decrease) in cash and cash equivalents                    $ (7,493,020)       $ (1,932,700)
CASH AND CASH EQUIVALENTS
         Beginning                                                                                   26,730,670          20,212,129
                                                                                                   ------------        ------------
         Ending                                                                                    $ 19,237,650        $ 18,279,429
                                                                                                   ============        ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
         Cash payments for:
              Interest                                                                             $  4,488,932        $  3,980,371
                                                                                                   ============        ============
              Income taxes                                                                         $    796,000        $    887,000
                                                                                                   ============        ============
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING ACTIVITIES:
         Other real estate acquired in settlement of loans                                         $     71,391        $     17,267
                                                                                                   ============        ============
         Unrealized gain (loss) on securities available for sale, net                              $   (401,015)       $    170,520
                                                                                                   ============        ============
</TABLE>


                                       5
<PAGE>

FAUQUIER BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     GENERAL

       The consolidated  statements include the accounts of Fauquier Bankshares,
       Inc. and subsidiaries, The Fauquier Bank and Fauquier Bank Services, Inc.
       All  significant   intercompany   balances  and  transactions  have  been
       eliminated.  In the opinion of  management,  the  accompanying  unaudited
       consolidated financial statements contain all adjustments  (consisting of
       only normal recurring accruals) necessary to present fairly the financial
       positions as of September 30, 1999 and December 31, 1998, and the results
       of operations and cash flows for the nine months ended September 30, 1999
       and 1998.

       The results of  operations  for the nine months ended  September 30, 1999
       and 1998 are not necessarily  indicative of the results  expected for the
       full year.

2.     INVESTMENT SECURITIES

       Amortized  costs and fair values of securities  being held to maturity as
       of September 30, 1999 and December 31, 1998, are as follows:

<TABLE>
<CAPTION>
                                                                                     GROSS                GROSS
                                                                 AMORTIZED         UNREALIZED          UNREALIZED           FAIR
                                                                    COST              GAINS             (LOSSES)            VALUE
                                                                 ---------         ----------          ----------           -----
                                                                                        SEPTEMBER 30, 1999
                                                                 -------------------------------------------------------------------
<S>                                                              <C>               <C>                <C>                <C>
       U. S. Treasury securities and obligations
         of U.S. government corporations and
         agencies                                                $ 3,132,719       $       146        $    (8,412)       $ 3,124,453
       Obligations of states and political
         subdivisions                                              2,735,820             7,196               (173)         2,742,843
                                                                 -----------       -----------        -----------        -----------

                                                                 $ 5,868,539       $     7,342        $    (8,585)       $ 5,867,296
                                                                 ===========       ===========        ===========        -----------
</TABLE>
<TABLE>
<CAPTION>
                                                                                     GROSS                GROSS
                                                                 AMORTIZED         UNREALIZED          UNREALIZED           FAIR
                                                                    COST              GAINS             (LOSSES)            VALUE
                                                                 ---------         ----------          ----------           -----
                                                                                        DECEMBER 31, 1998
                                                                 -------------------------------------------------------------------
<S>                                                              <C>               <C>                <C>                <C>
       U. S. Treasury securities and obligations
         of U.S. government corporations and
         agencies                                                $ 4,229,829       $    25,582        $    (1,844)       $ 4,253,567
       Obligations of states and political
         subdivisions                                              2,738,025            51,421                 --          2,789,446
                                                                 -----------       -----------        -----------        -----------
                                                                 $ 6,967,854       $    77,003        $    (1,844)       $ 7,043,013
                                                                 ===========       ===========        ===========        ===========
</TABLE>

       Amortized  costs and fair values of  securities  available for sale as of
       September 30, 1999 and December 31, 1998, are as follows:

<TABLE>
<CAPTION>
                                                                                     GROSS                GROSS
                                                                 AMORTIZED         UNREALIZED          UNREALIZED           FAIR
                                                                    COST              GAINS             (LOSSES)            VALUE
                                                                 ---------         ----------          ----------           -----
                                                                                        SEPTEMBER 30, 1999
                                                                 -------------------------------------------------------------------
<S>                                                              <C>               <C>                <C>                <C>
       U. S. Treasury securities and obligations
         of U.S. government corporations and
         agencies                                                $14,801,350       $    16,296        $  (287,752)       $14,529,894
       Obligations of states and political
         subdivisions                                                683,215                 6               (385)           682,836
       Corporate bonds                                             6,991,004                --             (8,518)         6,982,486
</TABLE>
<PAGE>

<TABLE>
<S>                                                              <C>               <C>                <C>                <C>
       Mutual funds                                                  937,809                --           (118,195)           819,614

       Restricted investment -
         Federal Home Loan Bank stock                              1,400,000                --                 --          1,400,000
       Equity securities                                             609,500                --                 --            609,500
                                                                 -----------       -----------        -----------        -----------
                                                                 $25,422,878       $    16,302        $  (414,850)       $25,024,330
                                                                 ===========       ===========        ===========        ===========
</TABLE>
<TABLE>
<CAPTION>
                                                                                          GROSS            GROSS
                                                                    AMORTIZED          UNREALIZED        UNREALIZED          FAIR
                                                                      COST                GAINS           (LOSSES)           VALUE
                                                                      ----                -----           --------           -----
                                                                                            DECEMBER 31, 1998
                                                                 -------------------------------------------------------------------
<S>                                                              <C>               <C>                <C>                <C>
       U. S. Treasury securities and obligations
         of U.S. government corporations and
         agencies                                                $12,621,891       $    76,979        $   (16,387)       $12,682,483
       Obligations of states and political
         subdivisions                                                684,580             3,832                 --            688,412
       Mutual funds                                                  937,809                              (61,957)           875,852
       Restricted investment -
         Federal Home Loan Bank stock                                966,700                --                 --            966,700
       Equity securities                                             609,500                --                 --            609,500
                                                                 -----------       -----------        -----------        -----------
                                                                 $15,820,480       $    80,811        $   (78,344)       $15,822,947
                                                                 ===========       ===========        ===========        ===========
</TABLE>

3.     LOANS

       Major classifications of loans are as follows:

<TABLE>
<CAPTION>
                                                                                                 SEPTEMBER 30,       DECEMBER 31,
                                                                                                     1999                1998
                                                                                                     ----                ----
                                                                                                         (Thousands)
<S>                                                                                                 <C>                 <C>
       Real estate loans:
         Construction and land development                                                          $ 12,594            $ 8,297
         Secured by farmland                                                                             909              1,163
         Secured by 1-4 family residential                                                            60,860             53,430
         Other real estate                                                                            52,096             49,814
       Commercial and industrial loans (except those secured by real estate)                          19,590             16,933
       Loans to individuals for personal expenditures                                                 35,105             30,284
       All other loans                                                                                 4,894              4,620
                                                                                                   ---------          ---------
                   Total loans                                                                     $ 186,048          $ 164,541
       Less:  Unearned income                                                                            224                416
                 Allowance for loan losses                                                             2,390              1,853
                                                                                                   ---------          ---------
                   Net loans                                                                       $ 183,434          $ 162,272
                                                                                                   =========          =========
</TABLE>

       The following  schedule  summarizes the changes in the allowance for loan
       losses:

<TABLE>
<CAPTION>
                                                                                                  NINE MONTHS        NINE MONTHS
                                                                                                     ENDING             ENDING
                                                                                                  SEPTEMBER 30,     SEPTEMBER 30,
                                                                                                      1999               1998
                                                                                                      ----               ----
                                                                                                   (THOUSANDS)
<S>                                                                                                  <C>                <C>
       Balance at beginning of year                                                                  $ 1,853            $ 1,655
       Provision charged against income                                                                  640                450
       Recoveries                                                                                         42                 21
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                  <C>                <C>
       Loans charged off                                                                                 145                212
                                                                                                     -------            -------
       Balance at end of year                                                                        $ 2,390            $ 1,914
                                                                                                     =======            =======
</TABLE>

       Nonperforming assets consist of the following:

<TABLE>
<CAPTION>
                                                                                                   SEPTEMBER 30,     DECEMBER 31,
                                                                                                       1999              1998
                                                                                                       ----              ----
                                                                                                             (Thousands)
<S>                                                                                                    <C>                <C>
       Nonaccrual loans                                                                                $ 152              $ 539
       Restructured loans                                                                                 --                 --
                                                                                                     -------            -------
                   Total non-performing loans                                                          $ 152              $ 539
       Foreclosed real estate                                                                            122                 57
                                                                                                     -------            -------
                   Total non-performing assets                                                         $ 274              $ 596
                                                                                                     =======            =======
</TABLE>

       Total  loans  past  due 90 days or more  and  still  accruing  were  $510
       thousand on September 30, 1999 and $951 thousand on December 31, 1998.

4.     EARNINGS PER SHARE

       The following  table shows the weighted  average number of shares used in
       computing earnings per share and the effect on weighted average number of
       shares of diluted  potential  common stock.  Weighted  average  number of
       shares for all periods reported have been restated giving effect to stock
       splits.

<TABLE>
<CAPTION>
                                                                SEPTEMBER 30, 1999                  DECEMBER 31, 1998
                                                                                  PER SHARE                          PER SHARE
                                                                 SHARES             AMOUNT            SHARES            AMOUNT
                                                                 ------             ------            ------            ------
<S>                                                            <C>                   <C>           <C>                   <C>
       Basic earnings per share                                1,809,779             $ 1.13        1,857,282             $ 1.31
                                                                                     ======                              ======

       Effect of dilutive securities, stock options               16,542                              18,359
                                                                  ------                              ------

       Diluted earnings per share                              1,826,321             $ 1.12        1,875,641             $ 1.30
                                                               =========             ======        =========             ======
</TABLE>


                                       6
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION.

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.

     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
Fund. 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, 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.

     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,  and  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.

     TFB's  general  market  area  principally   includes  Fauquier  County  and
neighboring  communities and is located approximately sixty (60) miles southwest
of Washington, D.C.

SAFE HARBOR STATEMENT FOR FORWARD-LOOKING STATEMENTS

     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


                                       7
<PAGE>

actual effect of future plans or strategies  is  inherently  uncertain.  Factors
which  could  have a  material  adverse  affect  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.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
AND SEPTEMBER 30, 1998

     Net  Income.  Net income for the three  months  ended  September  30,  1999
increased  8.7% to $815,000 from  $750,000 for the three months ended  September
30,  1998.  The  increase in net income was  primarily  due to  increases in net
interest  income that more than offset  increases  in total other  expenses  and
decreases in total other income.

     Net Interest  Income.  Net interest income  increased  $470,000 or 18.7% to
$2.98  million for the three months ended  September  30, 1999 compared to $2.51
million  for the three  months  ended  September  30,  1998.  The  increase  was
primarily due to growth in total  interest  income of $580,000 as compared to an
increase in total interest expense of only $111,000.

     Interest  Income.  Total  interest  income grew  $580,000 or 14.8% to $4.49
million for the three months ended  September 30, 1999 compared to $3.91 million
for the three months  ended  September  30,  1998.  The increase was a result of
increases in loan originations. Interest and fees on loans increased $557,000 or
16.4%.

     Interest  Expense.  Total interest  expense  increased  $111,000 or 7.9% to
$1.51  million for the three months ended  September 30, 1999 from $1.40 million
for the three months ended  September  30, 1998.  This was due to an increase in
interest  expenses on Federal Home Loan Bank  advances of $188,000 that was only
partially offset by a decrease in interest expense on deposits.

     Provision  for Loan Losses.  The provision for loan losses was $180,000 for
the  three  months  ended  September  30,  1999 and for the three  months  ended
September  30,  1998.  The amount of the  provision  for loan loss for the third
quarter  of 1999 and 1998  was  determined  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, and the impact of economic  conditions on
borrowers.  There can be no  assurance,  however,  that  future  losses will not
exceed estimated amounts or that additional  provisions for loan losses will not
be required in future periods.



                                       8
<PAGE>

     Other Income. Total other income decreased by $28,000 or 5.2% from $523,000
for the three months ended  September  30, 1998 to $495,000 for the three months
ended September 30, 1999.  Other income is primarily  derived from  non-interest
fee income,  which is typically divided into three major categories:  fiduciary,
service charges,  and other fee income. The decrease resulted from reduced gains
on  securities  AFS of $16,000 and a  reduction  in trust  department  income of
$15,000  which  were not  offset by  increases  in  service  charges  on deposit
accounts and other service charges, commissions and fees.

     Other  Expenses.  Total other expenses  increased 10.0% or $191,000 for the
three  months  ended  September  30,  1999  compared to the three  months  ended
September  30, 1998.  During that same periods  salaries and benefits  increased
$41,000,  bank card  expenses  increased  $38,000 and other  operating  expenses
increased $97,000.

COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
SEPTEMBER 30, 1998

     Net  Income.  Net income  for the nine  months  ended  September  30,  1999
increased  8.0% to $2.04  million  from $1.89  million for the nine months ended
September 30, 1998. The increase in net income was primarily due to increases in
net interest  income and total other  income that more than offset  increases in
total other expenses and provisions for loan losses.

     Net Interest  Income.  Net interest income increased $1.06 million or 14.6%
to $8.33 million for the nine months ended  September 30, 1999 compared to $7.27
million for the nine months ended September 30, 1998. The increase was primarily
due to growth  in total  interest  income of $1.64  million  as  compared  to an
increase in total interest expense of only $579,000.

     Interest Income. Total interest income grew $1.64 million or 14.5% to $12.9
million for the nine months ended  September  30, 1999 compared to $11.3 million
for the nine months  ended  September  30,  1998.  The  increase was a result of
increases  in loan  originations.  Interest  and fees on loans  increased  $1.64
million or 17.1%.

     Interest  Expense.  Total interest expense  increased  $579,000 or 14.5% to
$4.56  million for the nine months ended  September  30, 1999 from $3.99 million
for the nine months ended  September  30,  1998.  This was  primarily  due to an
increase in interest expenses on Federal Home Loan Bank advances of $646,000.

     Provision  for Loan Losses.  The provision for loan losses was $640,000 for
the nine months ended  September 30, 1999 and $450,000 for the nine months ended
September 30, 1998. The amount of the provision for loan loss for the first nine
months  of 1999  and 1998  was  determined  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, and the impact of economic  conditions on
borrowers.  There can be no  assurance,


                                       9
<PAGE>

however, that future losses will not exceed estimated amounts or that additional
provisions for loan losses will not be required in future periods.

     Other Income. Other income increased by $130,000 or 9.3% from $1.40 million
for the nine  months  ended  September  30,  1998 to $1.53  million for the nine
months  ended  September  30,  1999.  Other  income is  primarily  derived  from
non-interest fee income, which is typically divided into three major categories:
fiduciary, service charges, and other fee income. The increase was the result of
increases  in trust  department  income of $24,000,  service  charges on deposit
accounts of $101,000 and other service charges, commissions and fees of $25,000,
that more than offset decreases in other areas.

     Other  Expenses.  Other expenses  increased  11.2% or $633,000 for the nine
months ended  September 30, 1999 compared to the nine months ended September 30,
1998.  The majority of this  increase  resulted  from  increases in salaries and
benefits of $281,000,  bank card expenses of $101,000 and net occupancy  expense
of premises of $49,000.

COMPARISON OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998 FINANCIAL CONDITION

     Total assets were $243 million at September  30, 1999, an increase of 10.7%
or $23 million from $220 million at December 31, 1998.  Balance sheet categories
reflecting  significant changes include loans,  deposits,  and Federal Home Loan
advances. Each of these categories is discussed below.

     Loans.  Net  loans  were  $183.4  million  at  September  30,  1999,  which
represents an increase of $21.2 million or 13.1% from $162.3 million at December
31, 1998.

     Deposits. On September 30, 1999, total deposits had increased $12.4 million
or 6.9% to $191.6 million from $179.2 million at December 31, 1998.  Most of the
growth was in non-interest bearing demand deposits, which increased $4.6 million
and time deposits, which grew $4.6 million.

     Federal Home Loan Advances.  Federal Home Loan advances were $28 million at
September  30, 1999,  which  represents an increase of $10 million or 55.6% from
$18 million at December 31, 1998.

     Shareholder's  Equity.  Total  shareholders  equity  was $21.3  million  at
September 30, 1999 compared to $21.2 million at December 31, 1998 an increase of
$101,000 or 0.48%. The relative stability in equity reflects management's desire
to increase  shareholders' return on equity by minimizing growth in equity. This
was accomplished through the acquisition of 50,533 shares of common stock.


                                       10
<PAGE>

CAPITAL RESOURCES AND LIQUIDITY

     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 funds  for  existing  and  future  loan  commitments,
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,  interest-bearing  deposits  in other  banks and
federal funds sold totaled  $19.2  million at September  30, 1999.  These assets
provide the primary  source of liquidity  for TFB. In addition,  management  has
designated a substantial portion of the investment  portfolio,  as available for
sale and has an  available  line of credit  with the  Federal  Home Loan Bank of
Atlanta with a borrowing  limit of  approximately  $36 million at September  30,
1999 to provide additional sources of liquidity.

     As of  September  30,  1999 the  appropriate  regulatory  authorities  have
categorized  Bankshares  and  TFB  as  well  capitalized  under  the  regulatory
framework for prompt corrective action.

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 stockholder's 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  September  30,  1999 (i)
Bankshares'  Tier 1 and total  risk-based  capital  ratios were 11.5% and 12.8%,
respectively,  and (ii) TFB's Tier 1 and total  risk-based  capital  ratios were
11.6% and 12.8%, respectively.


                                       11
<PAGE>

     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 September 30, 1999, TFB had
a total risk-based  capital ratio of 12.8%, a Tier 1 risk-based capital ratio of
11.6%,  and a leverage  ratio of 9.1%.  TFB was notified by the Federal  Reserve
Bank of Richmond  that, at December 31, 1998, TFB was "well  capitalized"  under
the regulatory framework for prompt corrective action.

     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.

YEAR 2000 COMPLIANCE

     A great deal of information has been disseminated about the global computer
crash that may occur at the beginning of the Year 2000.  Many computer  programs
that can only  distinguish  the final two  digits of the year  entered (a common
programming practice in earlier years) are expected to read entries for the Year
2000 as the year 1900 and compute payment,  interest or delinquency based on the
wrong  date or are  expected  to be  unable  to  compute  payment,  interest  or
delinquency. Rapid and accurate data processing is essential to the operation of
TFB. TFB has initiated a Year 2000 plan and


                                       12
<PAGE>

has closely monitored the situation by thoroughly assessing systems and programs
that may be date sensitive.

     In early 1997,  TFB began  planning its  strategy to address the issue.  In
1997,  a  cross-functional  project  team was formed to assess and address  both
internal and external risks  associated with Y2K. A readiness plan was developed
consisting of six phases:

     In the first phase, the Board adopted policies,  procedures,  and schedules
to address the issue. The Board and senior managers have been regularly  updated
on their  implementation.  Officers and associates  have been provided  internal
newsletters  outlining TFB's progress and containing  information to assist them
in responding to customers' questions.

     In  the  second  phase,  a  complete  inventory,  including  all  hardware,
software,  networks and other  equipment that may have imbedded  computer chips,
such as heating and air conditioning,  security  systems,  vaults and elevators,
was  developed  and each item  identified as either  mission  critical,  mission
necessary,  mission  desirable  or  non-critical.  The  team  continues  to meet
regularly to update the status of each item on the inventory.

     Vendors and  correspondent  organizations'  readiness has been assessed and
evaluations  will  continue  until  readiness  is  assured.  Every new  vendor's
readiness is evaluated before  contracting.  Approximately  95% of TFB's vendors
for critical  applications have informed TFB that they are fully compliant.  The
remaining  vendors have advised TFB that they are in the testing and  validation
stage of the process.

     TFB's  credit  risk  related  to  current  commercial  customers  has  been
assessed.  Organizations  with  relationships  of $100,000 or more with TFB have
been contacted and their  compliance  status  evaluated.  Their progress will be
evaluated  on an  on-going  basis  to  insure  compliance.  All  new  commercial
customers are evaluated as a regular part of the lending process.

     Customers are being kept informed of TFB's  progress by way of the Internet
web site,  communications  in  statements  mailed to the  customers,  updates at
branch offices, teller receipts,  messages on telephone voice systems, seminars,
and presentations at local community meetings. A special Y2K mailing was sent to
all  customers  and  shareholders  in  October  1999.  TFB has  begun  to  place
advertisements in the local newspapers indicating TFB's Y2K readiness, and radio
spot announcements are scheduled beginning in November 1999.

     The  impact  of the  Year  2000  issue  on TFB  depends  not  only on TFB's
corrective action,  but also on the corrective action of governmental  agencies,
utilities,  businesses and other third parties that provide services or data to,
or  receive  services  or  data  from  TFB,  or  whose  financial  condition  or
operational  capability  is important to TFB. To reduce this  exposure,  TFB has
identified,  and  continues to contact  these  significant  parties to determine
their Year 2000 plans and target dates.



                                       13
<PAGE>

     In the third phase,  upgrades and replacement  systems for all hardware and
software were  ordered,  installed and are  operational.  Through  September 30,
1999,  approximately  $250,000  was  spent  on Y2K  remediation  efforts.  It is
expected that an additional $20,000 will be required to complete this project.

     Contingency  plans for all critical  applications were developed to prepare
for unforeseen  situations.  TFB used the same  contingency  formula on the data
processing  systems  as has been used  successfully  in  previous  major  system
conversions. Staff members have received training and the contingency plans have
been tested. Testing will continue through the balance of the year.

     In the  fourth  phase,  in-house  testing  on  the  upgrades  to  the  data
processing systems was completed  successfully in the current  environment.  M&I
Data Services,  TFB's outsource  service  provider,  has completed proxy testing
under the Y2K environment.  Specific testing of transmittals between TFB and M&I
Data  Services  using  the  Y2K  simulated  environment  has  been  accomplished
successfully.  Sungard,  TFB's Trust Services outsource partner, has assured TFB
that it is Y2K compliant and has provided  proxy-testing  results.  Both vendors
have provided TFB with third party validation test results.

     Integration  testing has been  successfully  completed on TFB's  electronic
funds and reporting systems.  The testing of networking system upgrades has been
substantially accomplished,  and replacements were totally in-place by September
30, 1999. Other  non-critical  applications have been  substantially  tested and
found to be  compliant.  TFB  continues  to monitor  its  vendors'  testing  and
compliance status.

     In the fifth phase,  TFB was reviewed by regulatory  authorities  to ensure
that it has  been  proceeding  with a  prudent  plan of  action  for  Year  2000
readiness.  In late August 1999, TFB submitted  substantial  data to the Federal
Reserve reporting contingency plans, business resumption plans, liquidity plans,
customer awareness  planning,  and testing results for an off-site  examination.
TFB  is  on  schedule  and  in  compliance   with   regulatory   guidelines  and
requirements.

     In the sixth phase,  which is being  implemented  throughout the balance of
1999,  systems,  contingency  plans,  and  business  resumption  plans  will  be
re-tested and refined.

     Liquidity  alternatives  have  been  evaluated,  and  applications  made to
outside sources to insure alternative funding for a worst-case scenario of funds
shortage.  Liquidity will be monitored on a regular basis.  Insurance risks have
been evaluated and discussed with TFB's insurance carriers.


                                       14
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES 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 a different time interval from that
of 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.

     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 change 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%.  Management  has
maintained a risk position well within these guideline levels during 1999.

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

     There is no  pending  or  threatened  litigation  that,  in the  opinion of
management, may materially impact the financial condition of Bankshares or TFB.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

     None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

     None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None.


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<PAGE>

ITEM 5.  OTHER INFORMATION.

     None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

     (a)  Exhibit  (3)(i) - Articles of  Incorporation  of Fauquier  Bankshares,
          Inc. (including  amendments),  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.

          Exhibit (3)(ii) - Bylaws of Fauquier Bankshares, Inc., incorporated by
          reference to Bankshares  Exchange Act  Registration  Statement on Form
          10, filed with the  Securities  and Exchange  Commission  on April 16,
          1999.

          Exhibit (11) - Not applicable

          Exhibit (27) - Financial Data Schedule (filed herewith)

     (b)  Reports on Form 8-K:

          None.

SIGNATURES

     Pursuant to the  requirements  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.

Date: November 12, 1999             By  /s/ C. Hunton Tiffany
                                        ----------------------------------
                                         C. Hunton Tiffany
                                         President and Chief Executive Officer


Date: November 12, 1999             By  /s/ Diane B. Coppage
                                        ----------------------------------
                                         Diane B. Coppage
                                         Senior Vice President and Treasurer


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