##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2007
 or
 o
    
    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.: 000-25805
 Fauquier Bankshares, Inc.
  Virginia
(State or other jurisdiction of 
incorporation or organization)
    
    54-1288193
(I.R.S. Employer Identification No.)
 10 Courthouse Square, Warrenton, Virginia
(Address of principal executive offices)
    
    20186
(Zip Code)
 (540) 347-2700
 Not Applicable
 þ o
  o o þ
 o þ




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##### 



FAUQUIER BANKSHARES, INC.
  PagePart I. FINANCIAL INFORMATION
    
    3Item 1.
    
    Financial Statements
    
    3Consolidated Balance Sheets as of June 30, 2007 (unaudited) and December 31, 2006
    
    3Consolidated Statements of Income (unaudited) for the Three Months Ended June 30, 2007 and 2006
    
    4Consolidated Statements of Income (unaudited) for the Six Months Ended June 30, 2007 and 2006
    
    5Consolidated Statements of Changes in Shareholders Equity (unaudited) for the Six Months Ended June 30, 2007 and 2006
    
    6Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2007 and 2006
    
    7Notes to Consolidated Financial Statements
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    14Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    29Item 4.
    
    Controls and Procedures
    
    29Part II. OTHER INFORMATION
    
    29Item 1.
    
    Legal Proceedings
    
    29Item 1A.
    
    Risk Factors
    
    29Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    30Item 3.
    
    Defaults Upon Senior Securities
    
    30Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    30Item 5.
    
    Other Information
    
    31Item 6.
    
    Exhibits
    
    31SIGNATURES
    
    32
 -2-




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##### 



Fauquier Bankshares, Inc. and Subsidiaries
Consolidated Balance Sheets
 Unaudited
    
    
    AuditedJune 30,
    
    
    December 31,2007
    
    
    2006AssetsCash and due from banks
    
    $
    13,359,554
    
    
    $
    21,019,764Interest-bearing deposits in other banks
    
    
    538,881
    
    
    
    537,891Federal funds sold
    
    
    5,244,000
    
    
    
    20,122,000Securities available for sale
    
    
    38,270,457
    
    
    
    40,352,775Loans, net of allowance for loan losses of $4,407,421 in 2007 and $4,470,533 in 2006
    
    
    405,209,309
    
    
    
    416,061,150Bank premises and equipment, net
    
    
    7,411,444
    
    
    
    7,584,089Accrued interest receivable
    
    
    1,656,809
    
    
    
    1,802,379Other assets
    
    
    14,337,960
    
    
    
    14,282,097Total assets
    
    $
    486,028,414
    
    
    $
    521,762,145Liabilities and Shareholders EquityDeposits:Noninterest-bearing
    
    
    78,031,178
    
    
    
    85,495,160Interest-bearing
    
    
    332,119,816
    
    
    
    330,576,258Total deposits
    
    
    410,150,994
    
    
    
    416,071,418Federal funds purchased
    
    
    
    
    
    
    Federal Home Loan Bank advances
    
    
    28,000,000
    
    
    
    55,000,000Company-obligated mandatorily redeemable
capital securities
    
    
    4,124,000
    
    
    
    8,248,000Other liabilities
    
    
    3,523,498
    
    
    
    3,730,778Commitments and contingencies
    
    
    
    
    
    
    Total liabilities
    
    
    445,798,492
    
    
    
    483,050,196Shareholders EquityCommon stock, par value, $3.13; authorized 8,000,000
shares: issued and outstanding, 2007: 3,545,138 shares
(includes nonvested shares of 31,190);
2006: 3,478,960 shares (includes nonvested shares of
31,829)
    
    
    10,998,657
    
    
    
    10,789,521Retained earnings
    
    
    30,285,643
    
    
    
    28,962,409Accumulated other comprehensive income (loss), net
    
    
    (1,054,378
    )
    
    
    (1,039,981
    )Total shareholders equity
    
    
    40,229,922
    
    
    
    38,711,949Total liabilities and shareholders equity
    
    $
    486,028,414
    
    
    $
    521,762,145
  -3-




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##### 



Fauquier Bankshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
For the Three Months Ended June 30, 2007 and 2006
 2007
    
    
    2006Interest IncomeInterest and fees on loans
    
    $
    7,233,485
    
    
    $
    6,905,346Interest and dividends on securities available for sale:Taxable interest income
    
    
    363,447
    
    
    
    395,485Interest income exempt from federal income taxes
    
    
    16,291
    
    
    
    13,129Dividends
    
    
    92,907
    
    
    
    74,847Interest on federal funds sold
    
    
    23,951
    
    
    
    2,763Interest on deposits in other banks
    
    
    15,872
    
    
    
    6,303Total interest income
    
    
    7,745,953
    
    
    
    7,397,873Interest ExpenseInterest on deposits
    
    
    2,542,648
    
    
    
    1,846,576Interest on federal funds purchased
    
    
    51,602
    
    
    
    166,650Interest on Federal Home Loan Bank advances
    
    
    378,656
    
    
    
    394,625Distribution on capital securities of subsidiary trusts
    
    
    71,341
    
    
    
    87,018Total interest expense
    
    
    3,044,247
    
    
    
    2,494,869Net interest income
    
    
    4,701,706
    
    
    
    4,903,004Provision for loan losses
    
    
    120,000
    
    
    
    180,000Net interest income after
provision for loan losses
    
    
    4,581,706
    
    
    
    4,723,004Other IncomeWealth management income
    
    
    354,685
    
    
    
    336,334Service charges on deposit accounts
    
    
    717,525
    
    
    
    723,513Other service charges, commissions and income
    
    
    440,859
    
    
    
    373,063Total other income
    
    
    1,513,069
    
    
    
    1,432,910Other ExpensesSalaries and benefits
    
    
    2,313,208
    
    
    
    2,321,056Net occupancy expense of premises
    
    
    265,177
    
    
    
    262,648Furniture and equipment
    
    
    296,109
    
    
    
    347,787Advertising expense
    
    
    161,692
    
    
    
    166,569Consulting expense
    
    
    193,948
    
    
    
    233,265Data processing expense
    
    
    312,860
    
    
    
    281,827Other operating expenses
    
    
    722,055
    
    
    
    702,255Total other expenses
    
    
    4,265,049
    
    
    
    4,315,407Income before income taxes
    
    
    1,829,726
    
    
    
    1,840,507Income tax expense
    
    
    550,295
    
    
    
    552,695Net Income
    
    $
    1,279,431
    
    
    $
    1,287,812Earnings per Share, basic
    
    $
    0.36
    
    
    $
    0.37Earnings per Share, assuming dilution
    
    $
    0.36
    
    
    $
    0.36Dividends per Share
    
    $
    0.200
    
    
    $
    0.190
  -4-




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##### 



Consolidated Statements of Income
(Unaudited)
For the Six Months Ended June 30, 2007 and 2006
 2007
    
    
    2006Interest IncomeInterest and fees on loans
    
    $
    14,511,990
    
    
    $
    13,328,784Interest and dividends on securities available for sale:Taxable interest income
    
    
    735,452
    
    
    
    813,322Interest income exempt from federal income taxes
    
    
    29,488
    
    
    
    26,252Dividends
    
    
    143,404
    
    
    
    121,995Interest on federal funds sold
    
    
    66,551
    
    
    
    17,405Interest on deposits in other banks
    
    
    20,662
    
    
    
    11,278Total interest income
    
    
    15,507,547
    
    
    
    14,319,036Interest ExpenseInterest on deposits
    
    
    4,961,275
    
    
    
    3,417,674Interest on federal funds purchased
    
    
    138,445
    
    
    
    204,450Interest on Federal Home Loan Bank advances
    
    
    903,604
    
    
    
    882,437Distribution on capital securities of subsidiary trusts
    
    
    227,442
    
    
    
    172,723Total interest expense
    
    
    6,230,766
    
    
    
    4,677,284Net interest income
    
    
    9,276,781
    
    
    
    9,641,752Provision for loan losses
    
    
    240,000
    
    
    
    300,000Net interest income after
provision for loan losses
    
    
    9,036,781
    
    
    
    9,341,752Other IncomeWealth management income
    
    
    693,558
    
    
    
    663,881Service charges on deposit accounts
    
    
    1,377,316
    
    
    
    1,359,452Other service charges, commissions and income
    
    
    864,997
    
    
    
    725,405Gain on cancellation of property rights
    
    
    
    
    
    
    250,000Loss on sale of securities
    
    
    
    
    
    
    (82,564
    )Total other income
    
    
    2,935,871
    
    
    
    2,916,174Other ExpensesSalaries and benefits
    
    
    4,661,441
    
    
    
    4,504,823Net occupancy expense of premises
    
    
    533,283
    
    
    
    503,801Furniture and equipment
    
    
    583,709
    
    
    
    679,506Advertising expense
    
    
    282,093
    
    
    
    264,833Consulting expense
    
    
    433,890
    
    
    
    527,260Data processing expense
    
    
    612,541
    
    
    
    553,513Other operating expenses
    
    
    1,347,271
    
    
    
    1,386,762Total other expenses
    
    
    8,454,228
    
    
    
    8,420,498Income before income taxes
    
    
    3,518,424
    
    
    
    3,837,428Income tax expense
    
    
    1,066,513
    
    
    
    1,152,004Net Income
    
    $
    2,451,911
    
    
    $
    2,685,424Earnings per Share, basic
    
    $
    0.70
    
    
    $
    0.77Earnings per Share, assuming dilution
    
    $
    0.69
    
    
    $
    0.75Dividends per Share
    
    $
    0.390
    
    
    $
    0.365
  -5-




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##### 



Fauquier Bankshares, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders Equity
(Unaudited)
For the Six Months Ended June 30, 2007 and 2006
 AccumulatedOtherCommon
    
    
    Retained
    
    
    Comprehensive
    
    
    ComprehensiveStock
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Income
    
    
    TotalBalance, December 31, 2005
    
    $
    10,794,700
    
    
    $
    25,440,838
    
    
    $
    (656,393
    )
    
    
    
    
    
    $
    35,579,145Comprehensive income:Net income
    
    
    
    
    
    
    2,685,424
    
    
    
    
    
    
    $
    2,685,424
    
    
    
    2,685,424Other comprehensive income (loss) net
of tax:Unrealized holding losses on
securities available
for sale, net of deferred income
taxes of $120,771
    
    
    
    
    
    
    
    
    
    
    (234,437
    )
    
    
    
    
    
    
    Add: reclassification adjustment, net
of tax of $28,072
    
    
    
    
    
    
    
    
    
    
    54,492Other comprehensive income (loss) net
of tax:
    
    
    
    
    
    
    
    
    
    
    (179,945
    )
    
    
    (179,945
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,505,479Cash dividends ($.365 per share)
    
    
    
    
    
    
    (1,268,073
    )
    
    
    
    
    
    
    
    
    
    
    (1,268,073
    )SFAS No. 123(R) implementation
adjustment
    
    
    (67,238
    )
    
    
    67,238
    
    
    
    Amortization of unearned compensation,
restricted stock awards
    
    
    
    
    
    
    102,879
    
    
    
    
    
    
    
    
    
    
    
    102,879Issuance of common stock
    
    
    10,993
    
    
    
    75,688
    
    
    
    
    
    
    
    
    
    
    
    86,681Exercise of stock options
    
    
    38,937
    
    
    
    26,760
    
    
    
    
    
    
    
    
    
    
    
    65,697Balance, June 30, 2006
    
    $
    10,777,392
    
    
    $
    27,130,754
    
    
    $
    (836,338
    )
    
    
    
    
    
    $
    37,251,753Balance, December 31, 2006
    
    $
    10,789,521
    
    
    $
    28,962,409
    
    
    $
    (1,039,981
    )
    
    
    
    
    
    $
    38,711,949Comprehensive income:Net income
    
    
    
    
    
    
    2,451,911
    
    
    
    
    
    
    $
    2,451,911
    
    
    
    2,451,911Other comprehensive income (loss) net
of tax:Unrealized holding losses on
securities available
for sale, net of deferred income
taxes of $7,418
    
    
    
    
    
    
    
    
    
    
    (14,397
    )
    
    
    (14,397
    )
    
    
    (14,397
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,437,514Cash dividends ($.39 per share)
    
    
    
    
    
    
    (1,380,939
    )
    
    
    
    
    
    
    
    
    
    
    (1,380,939
    )Acquisition of 8,270 shares of common
stock
    
    
    (25,886
    )
    
    
    (180,955
    )
    
    
    
    
    
    
    
    
    
    
    (206,841
    )Amortization of unearned compensation,
restricted stock awards
    
    
    
    
    
    
    127,140
    
    
    
    
    
    
    
    
    
    
    
    127,140Issuance of common stock  nonvested
shares
(11,437 shares)
    
    
    35,797
    
    
    
    (35,797
    )
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    199,224
    
    
    
    341,874
    
    
    
    
    
    
    
    
    
    
    
    541,098Balance, June 30, 2007
    
    $
    10,998,656
    
    
    $
    30,285,643
    
    
    $
    (1,054,378
    )
    
    
    
    
    
    $
    40,229,922
 -6-




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##### 





Fauquier Bankshares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended June 30, 2007 and 2006


2007
    
    
    2006Cash Flows from Operating ActivitiesNet income
    
    $
    2,451,911
    
    
    $
    2,685,424Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation and amortization
    
    
    518,956
    
    
    
    604,154Provision for loan losses
    
    
    240,000
    
    
    
    300,000Amortization (accretion) of security premiums, net
    
    
    (2,798
    )
    
    
    14,830Amortization of unearned compensation
    
    
    127,140
    
    
    
    102,879Changes in assets and liabilities:Decrease in other assets
    
    
    97,126
    
    
    
    622,964Decrease in other liabilities
    
    
    (207,280
    )
    
    
    (107,939
    )Net cash provided by operating activities
    
    
    3,225,055
    
    
    
    4,222,312Cash Flows from Investing ActivitiesProceeds from sale of securities available for sale
    
    
    
    
    
    
    3,024,745Proceeds from maturities, calls and principal
payments of securities available for sale
    
    
    1,997,343
    
    
    
    2,150,247Purchase of securities available for sale
    
    
    (1,093,743
    )
    
    
    Proceeds from sale of premises and equipment
    
    
    
    
    
    
    Purchase of premises and equipment
    
    
    (346,311
    )
    
    
    (316,954
    )Proceeds from sale of other bank stock
    
    
    1,159,700
    
    
    
    391,100Net decrease (increase) in loans
    
    
    10,611,841
    
    
    
    (31,888,840
    )Net cash provided by (used in) investing activities
    
    
    12,328,830
    
    
    
    (26,639,702
    )Cash Flows from Financing ActivitiesNet (decrease) increase in demand deposits, NOW accounts
and savings accounts
    
    
    9,571,507
    
    
    
    (15,411,318
    )Net (decrease) increase in certificates of deposit
    
    
    (15,491,931
    )
    
    
    27,059,281Federal Home Loan Bank advances
    
    
    25,000,000
    
    
    
    Federal Home Loan Bank principal repayments
    
    
    (52,000,000
    )
    
    
    (11,000,000
    )Purchase of federal funds
    
    
    
    
    
    
    12,000,000Repayment of trust preferred securities
    
    
    (4,124,000
    )
    
    
    Cash dividends paid on common stock
    
    
    (1,380,939
    )
    
    
    (1,268,073
    )Issuance of common stock
    
    
    541,098
    
    
    
    152,376Acquisition of common stock
    
    
    (206,841
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    (38,091,106
    )
    
    
    11,532,266(Decrease) in cash and cash equivalents
    
    
    (22,537,221
    )
    
    
    (10,885,124
    )Cash and Cash EquivalentsBeginning
    
    
    41,679,655
    
    
    
    27,738,715Ending
    
    $
    19,142,434
    
    
    $
    16,853,591Supplemental Disclosures of Cash Flow InformationCash payments for:Interest
    
    $
    5,017,141
    
    
    $
    3,251,617Income taxes
    
    $
    720,000
    
    
    $
    808,000Supplemental Disclosures of Noncash Investing ActivitiesUnrealized gain (loss) on securities available for sale, net
of tax effect
    
    $
    (14,397
    )
    
    $
    272,644


-7-




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##### 





Fauquier Bankshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements


1.
    
    General






2.
    
    Securities




Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    (Losses)
    
    
    ValueJune 30, 2007Obligations of U.S.
Government corporations
and agencies
    
    $
    27,529,304
    
    
    $
    1,175
    
    
    $
    (588,536
    )
    
    $
    26,941,943Obligations of states and political
subdivisions
    
    
    2,056,557
    
    
    
    36,142
    
    
    
    (35,055
    )
    
    
    2,057,644Corporate Bonds
    
    
    6,000,000
    
    
    
    50,000
    
    
    
    (21,250
    )
    
    
    6,028,750Mutual Funds
    
    
    285,431
    
    
    
    
    
    
    
    (13,531
    )
    
    
    271,900FHLMC Preferred Bank Stock
    
    
    441,000
    
    
    
    
    
    
    
    (10,000
    )
    
    
    431,000Restricted investments:Federal Home Loan Bank Stock
    
    
    2,277,300
    
    
    
    
    
    
    
    
    
    
    
    2,277,300Federal Reserve Bank Stock
    
    
    99,000
    
    
    
    
    
    
    
    
    
    
    
    99,000Community Bankers Bank Stock
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    50,000The Bankers Bank Stock
    
    
    112,920
    
    
    
    
    
    
    
    
    
    
    
    112,920$
    38,851,512
    
    
    $
    87,317
    
    
    $
    (668,372
    )
    
    $
    38,270,457


Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    (Losses)
    
    
    ValueDecember 31, 2006Obligations of U.S.
Government corporations
and agencies
    
    $
    29,529,836
    
    
    $
    2,029
    
    
    $
    (599,698
    )
    
    $
    28,932,167Obligations of states and political
subdivisions
    
    
    962,814
    
    
    
    48,740
    
    
    
    
    
    
    
    1,011,554Corporate Bonds
    
    
    6,000,000
    
    
    
    27,500
    
    
    
    (42,500
    )
    
    
    5,985,000Mutual Funds
    
    
    279,445
    
    
    
    
    
    
    
    (9,311
    )
    
    
    270,134FHLMC Preferred Bank Stock
    
    
    441,000
    
    
    
    14,000
    
    
    
    
    
    
    
    455,000Restricted investments:Federal Home Loan Bank Stock
    
    
    3,437,000
    
    
    
    
    
    
    
    
    
    
    
    3,437,000Federal Reserve Bank Stock
    
    
    99,000
    
    
    
    
    
    
    
    
    
    
    
    99,000Community Bankers Bank Stock
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    50,000The Bankers Bank Stock
    
    
    112,920
    
    
    
    
    
    
    
    
    
    
    
    112,920$
    40,912,015
    
    
    $
    92,269
    
    
    $
    (651,509
    )
    
    $
    40,352,775


-8-



---



##### 



June 30, 2007Amortized
    
    
    FairCost
    
    
    ValueDue in one year or less
    
    $
    11,752,532
    
    
    $
    11,572,212Due after one year through five years
    
    
    22,633,240
    
    
    
    22,295,017Due after five years through ten years
    
    
    517,960
    
    
    
    502,458Due after ten years
    
    
    682,129
    
    
    
    658,650Equity securities
    
    
    3,265,651
    
    
    
    3,242,120$
    38,851,512
    
    
    $
    38,270,457
  June 30, 2007
    
    Less than 12 Months
    
    
    12 Months or More
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    (Losses)
    
    
    Fair Value
    
    
    (Losses)
    
    
    Fair Value
    
    
    (Losses)Obligations of U.S. Government,
corporations and agencies
    
    $
    4,032
    
    
    $
    (2
    )
    
    $
    26,803,622
    
    
    $
    (588,534
    )
    
    $
    26,807,654
    
    
    $
    (588,536
    )Corporate Bonds
    
    
    
    
    
    
    
    
    
    
    1,978,750
    
    
    
    (21,250
    )
    
    
    1,978,750
    
    
    
    (21,250
    )Obligations of states and political
subdivisions
    
    
    1,058,015
    
    
    
    (35,055
    )
    
    
    
    
    
    
    
    
    
    
    1,058,015
    
    
    
    (35,055
    )Subtotal, debt securities
    
    
    1,062,047
    
    
    
    (35,057
    )
    
    
    28,782,372
    
    
    
    (609,784
    )
    
    
    29,844,419
    
    
    
    (644,841
    )Mutual Funds
    
    
    
    
    
    
    
    
    
    
    271,900
    
    
    
    (13,531
    )
    
    
    271,900
    
    
    
    (13,531
    )FHLMC Preferred Bank Stock
    
    
    441,000
    
    
    
    (10,000
    )
    
    
    
    
    
    
    
    
    
    
    441,000
    
    
    
    (10,000
    )Total temporary impaired securities
    
    $
    1,503,047
    
    
    $
    (45,057
    )
    
    $
    29,054,272
    
    
    $
    (623,315
    )
    
    $
    30,557,319
    
    
    $
    (668,372
    )
 December 31, 2006
    
    Less than 12 Months
    
    
    12 Months or More
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    (Losses)
    
    
    Fair Value
    
    
    (Losses)
    
    
    Fair Value
    
    
    (Losses)Obligations of U.S. Government,
corporations and agencies
    
    $
    
    
    
    $
    
    
    
    $
    28,734,320
    
    
    $
    (599,698
    )
    
    $
    28,734,320
    
    
    $
    (599,698
    )Corporate Bonds
    
    
    
    
    
    
    
    
    
    
    3,957,500
    
    
    
    (42,500
    )
    
    
    3,957,500
    
    
    
    (42,500
    )Mutual Funds
    
    
    
    
    
    
    
    
    
    
    279,445
    
    
    
    (9,311
    )
    
    
    279,445
    
    
    
    (9,311
    )Total temporary impaired securities
    
    $
    
    
    
    $
    
    
    
    $
    32,971,265
    
    
    $
    (651,509
    )
    
    $
    32,971,265
    
    
    $
    (651,509
    )
  -9-




---



##### 



3. Loans
  June 30,
    
    
    December 31,2007
    
    
    2006(Thousands)Real estate loans:Construction
    
    $
    33,696
    
    
    $
    33,662Secured by farmland
    
    
    1,372
    
    
    
    1,365Secured by 1-to-4 family residential
    
    
    171,163
    
    
    
    168,310Other real estate loans
    
    
    127,189
    
    
    
    134,955Commercial and industrial loans (not secured by real estate)
    
    
    39,867
    
    
    
    41,508Consumer installment loans
    
    
    28,217
    
    
    
    31,952All other loans
    
    
    8,495
    
    
    
    9,273Total loans
    
    $
    409,999
    
    
    $
    421,025Unearned income
    
    
    (382
    )
    
    
    (493
    )Allowance for loan losses
    
    
    (4,407
    )
    
    
    (4,471
    )Net loans
    
    $
    405,210
    
    
    $
    416,061
  Six
    
    
    Six
    
    
    TwelveMonths
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    EndedJune 30,
    
    
    June 30,
    
    
    December 31,2007
    
    
    2006
    
    
    2006Balance at beginning of period
    
    $
    4,470,533
    
    
    $
    4,238,143
    
    
    $
    4,238,143Provision for loan losses
    
    
    240,000
    
    
    
    300,000
    
    
    
    360,000Recoveries of loans previously charged-off
    
    
    21,542
    
    
    
    48,347
    
    
    
    128,463Loan losses charged-off
    
    
    (324,654
    )
    
    
    (128,520
    )
    
    
    (256,073
    )Balance at end of period
    
    $
    4,407,421
    
    
    $
    4,457,970
    
    
    $
    4,470,533
  June 30,
    
    
    December 31,2007
    
    
    2006(Thousands)Nonaccrual loans
    
    $
    724
    
    
    $
    1,608Restructured loans
    
    
    
    
    
    
    Total nonperforming loans
    
    
    724
    
    
    
    1,608Foreclosed property
    
    
    284
    
    
    
    140Total nonperforming assets
    
    $
    1,008
    
    
    $
    1,748
  -10-




---



##### 



4. Company-Obligated Mandatorily Redeemable Capital Securities of Subsidiary Trusts
    5. Earnings per Share
  Three Months
    
    
    Three MonthsEnded
    
    
    EndedJune 30, 2007
    
    
    June 30, 2006Per Share
    
    
    
    
    
    
    Per ShareShares
    
    
    Amount
    
    
    Shares
    
    
    AmountBasic earnings per share
    
    
    3,515,669
    
    
    $
    0.36
    
    
    
    3,475,064
    
    
    $
    0.37Effect of dilutive securities, stock-based awards
    
    
    71,979
    
    
    
    
    
    
    
    112,9863,587,648
    
    
    $
    0.36
    
    
    
    3,588,050
    
    
    $
    0.36
 Six Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30, 2007
    
    
    June 30, 2006Per Share
    
    
    
    
    
    
    Per ShareShares
    
    
    Amount
    
    
    Shares
    
    
    AmountBasic earnings per share
    
    
    3,503,359
    
    
    $
    0.70
    
    
    
    3,466,540
    
    
    $
    0.77Effect of dilutive securities, stock-based awards
    
    
    72,694
    
    
    
    
    
    
    
    112,6863,576,053
    
    
    $
    0.69
    
    
    
    3,579,226
    
    
    $
    0.75
 -11-




---



##### 



6. Stock-Based Compensation
  
   Six Months EndedJune 30, 2007WeightedAverage
    
    
    AverageNumber of
    
    
    Exercise
    
    
    IntrinsicShares
    
    
    Price
    
    
    Value (1)Outstanding at January 1,
    
    
    177,466
    
    
    $
    9.50Granted
    
    
    
    
    
    
    Exercised
    
    
    (63,650
    )
    
    
    8.50Forfeited
    
    
    
    
    
    
    Outstanding at June 30,
    
    
    113,816
    
    
    $
    10.06
    
    
    $
    1,695,858Exercisable at end of quarter
    
    
    113,816
    
    
    
    
    
    
    $
    1,695,858Weighted-average fair value per
option of options granted during
the year
    
    $
    
 
 (1)
    
    The aggregate intrinsic value of stock options in the table above reflects the
pre-tax intrinsic value (the amount by which the June 30, 2007 market value of the
underlying stock option exceeded the exercise price of the option) that would have been
received by the option holders had all option holders exercised their options on June
30, 2007. This amount changes based on the changes in the market value of the
Companys stock.  -12-




---



##### 



Six Months EndedJune 30, 2007WeightedAverageNumber
    
    
    Grant Dateof
    
    
    Fair ValueShares
    
    
    (per Share)Nonvested at January 1,
    
    
    31,829Granted
    
    
    10,798
    
    
    $
    25.40Vested
    
    
    (11,437
    )Forfeited
    
    
    Nonvested at June 30,
    
    
    31,190
  7. Employee Benefit Plan
  Three Months EndedJune 30,2007
    
    
    2006Service cost
    
    $
    167,680
    
    
    $
    173,127Interest cost
    
    
    100,343
    
    
    
    93,997Expected return on plan assets
    
    
    (111,378
    )
    
    
    (98,960
    )Amortization of transition (asset)
    
    
    1,942
    
    
    
    (4,745
    )Amortization of prior service cost
    
    
    (4,745
    )
    
    
    1,942Recognized net actuarial loss
    
    
    5,258
    
    
    
    15,239Net periodic benefit cost
    
    $
    159,100
    
    
    $
    180,600
 Six Months EndedJune 30,2007
    
    
    2006Service cost
    
    $
    335,360
    
    
    $
    346,254Interest cost
    
    
    200,686
    
    
    
    187,994Expected return on plan assets
    
    
    (222,756
    )
    
    
    (197,920
    )Amortization of transition (asset)
    
    
    3,884
    
    
    
    (9,490
    )Amortization of prior service cost
    
    
    (9,490
    )
    
    
    3,884Recognized net actuarial loss
    
    
    10,516
    
    
    
    30,478Net periodic benefit cost
    
    $
    318,200
    
    
    $
    361,200
  -13-




---



##### 



-14-




---



##### 



-15-




---



##### 



-16-




---



##### 



-17-




---



##### 



-18-




---



##### 



Three Months Ended June 30, 2007
    
    
    Three Months Ended June 30, 2006Average
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    AverageBalances
    
    
    Expense
    
    
    Rate
    
    
    Balances
    
    
    Expense
    
    
    RateASSETS:LoansTaxable
    
    $
    403,856
    
    
    $
    7,142
    
    
    
    7.00
    %
    
    $
    397,433
    
    
    $
    6,806
    
    
    
    6.78
    %Tax-exempt (1)
    
    
    7,711
    
    
    
    140
    
    
    
    7.18
    %
    
    
    8,390
    
    
    
    151
    
    
    
    7.10
    %Nonaccrual
    
    
    1,569
    
    
    
    
    
    
    
    
    
    
    
    1,114
    
    
    
    Total Loans
    
    
    413,136
    
    
    
    7,282
    
    
    
    6.98
    %
    
    
    406,937
    
    
    
    6,957
    
    
    
    6.77
    %SecuritiesTaxable
    
    
    36,930
    
    
    
    456
    
    
    
    4.94
    %
    
    
    42,322
    
    
    
    470
    
    
    
    4.45
    %Tax-exempt (1)
    
    
    1,290
    
    
    
    25
    
    
    
    7.65
    %
    
    
    1,016
    
    
    
    20
    
    
    
    7.75
    %Total securities
    
    
    38,220
    
    
    
    481
    
    
    
    5.03
    %
    
    
    43,338
    
    
    
    490
    
    
    
    4.52
    %Deposits in banks
    
    
    1,061
    
    
    
    16
    
    
    
    5.96
    %
    
    
    622
    
    
    
    6
    
    
    
    4.01
    %Federal funds sold
    
    
    1,869
    
    
    
    24
    
    
    
    5.07
    %
    
    
    397
    
    
    
    3
    
    
    
    2.75
    %Total earning assets
    
    
    454,286
    
    
    
    7,803
    
    
    
    6.81
    %
    
    
    451,294
    
    
    
    7,456
    
    
    
    6.55
    %Less: Reserve for loan losses
    
    
    (4,512
    )
    
    
    
    
    
    
    
    
    
    
    (4,369
    )Cash and due from banks
    
    
    15,820
    
    
    
    
    
    
    
    
    
    
    
    16,368Bank premises and equipment, net
    
    
    7,479
    
    
    
    
    
    
    
    
    
    
    
    8,136Other assets
    
    
    15,556
    
    
    
    
    
    
    
    
    
    
    
    14,823Total Assets
    
    $
    488,629
    
    
    
    
    
    
    
    
    
    
    $
    486,252LIABILITIES AND SHAREHOLDERS EQUITY:DepositsDemand deposits
    
    $
    77,103
    
    
    
    
    
    
    
    
    
    
    $
    90,285Interest-bearing depositsNOW accounts
    
    
    72,261
    
    
    
    229
    
    
    
    1.27
    %
    
    
    66,620
    
    
    
    85
    
    
    
    0.47
    %Money market accounts
    
    
    26,063
    
    
    
    92
    
    
    
    1.41
    %
    
    
    38,634
    
    
    
    133
    
    
    
    1.38
    %Premium money market accounts
    
    
    70,049
    
    
    
    724
    
    
    
    4.15
    %
    
    
    50,522
    
    
    
    489
    
    
    
    3.88
    %Savings accounts
    
    
    33,287
    
    
    
    34
    
    
    
    0.41
    %
    
    
    38,612
    
    
    
    33
    
    
    
    0.34
    %Time deposits
    
    
    129,551
    
    
    
    1,464
    
    
    
    4.53
    %
    
    
    115,328
    
    
    
    1,114
    
    
    
    3.88
    %Total interest-bearing deposits
    
    
    331,211
    
    
    
    2,543
    
    
    
    3.08
    %
    
    
    309,716
    
    
    
    1,854
    
    
    
    2.39
    %Federal funds purchased
    
    
    3,676
    
    
    
    52
    
    
    
    5.63
    %
    
    
    12,071
    
    
    
    167
    
    
    
    5.46
    %Federal Home Loan Bank advances
    
    
    28,473
    
    
    
    379
    
    
    
    5.26
    %
    
    
    30,176
    
    
    
    395
    
    
    
    5.17
    %Company-obligated mandatorily
redeemable capital securities
    
    
    4,124
    
    
    
    71
    
    
    
    6.84
    %
    
    
    4,124
    
    
    
    87
    
    
    
    8.35
    %Total interest-bearing liabilities
    
    
    367,484
    
    
    
    3,045
    
    
    
    3.32
    %
    
    
    356,087
    
    
    
    2,503
    
    
    
    2.80
    %Other liabilities
    
    
    3,489Shareholders equity
    
    
    40,553Total Liabilities & Shareholders Equity
    
    $
    488,629
    
    
    
    
    
    
    
    
    
    
    $
    446,372Net interest spread
    
    
    
    
    
    $
    4,758
    
    
    
    3.49
    %
    
    
    
    
    
    $
    4,953
    
    
    
    3.75
    %Interest expense as a percent of average
earning assets
    
    
    
    
    
    
    
    
    
    
    2.68
    %
    
    
    
    
    
    
    
    
    
    
    2.21
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    4.12
    %
    
    
    
    
    
    
    
    
    
    
    4.34
    %
 
 (1)
    
    Income and rates on
non-taxable assets
are computed on a
tax equivalent
basis using a
federal tax rate of
34%. -19-




---



##### 



Three Months Ended June 30, 2007 Compared toThree Months Ended June 30, 2006Due to
    
    
    Due toChange
    
    
    Volume
    
    
    RateINTEREST INCOMELoans; taxable
    
    $
    336
    
    
    $
    136
    
    
    $
    200Loans; tax-exempt (1)
    
    
    (11
    )
    
    
    (12
    )
    
    
    1Securities; taxable
    
    
    (14
    )
    
    
    (54
    )
    
    
    40Securities; tax-exempt (1)
    
    
    5
    
    
    
    5
    
    
    
    Deposits in banks
    
    
    10
    
    
    
    5
    
    
    
    5Federal funds sold
    
    
    21
    
    
    
    10
    
    
    
    11Total Interest Income
    
    
    347
    
    
    
    90
    
    
    
    257INTEREST EXPENSENOW accounts
    
    
    144
    
    
    
    7
    
    
    
    137Money market accounts
    
    
    (41
    )
    
    
    (43
    )
    
    
    2Premium money market accounts
    
    
    235
    
    
    
    189
    
    
    
    46Savings accounts
    
    
    1
    
    
    
    (5
    )
    
    
    6Time deposits
    
    
    350
    
    
    
    137
    
    
    
    213Federal funds purchased
    
    
    (115
    )
    
    
    (116
    )
    
    
    1Federal Home Loan Bank advances
    
    
    (16
    )
    
    
    (22
    )
    
    
    6Company-obligated mandatorily
redeemable capital securities
    
    
    (16
    )
    
    
    
    
    
    
    (16
    )Total Interest Expense
    
    
    542
    
    
    
    147
    
    
    
    395Net Interest Income
    
    $
    (195
    )
    
    $
    (57
    )
    
    $
    (138
    )
 
 (1)
    
    Income and rates on
non-taxable assets
are computed on a
tax equivalent
basis using a
federal tax rate of
34%.   -20-




---



##### 



-21-




---



##### 



-22-




---



##### 



Six Months Ended June 30, 2007
    
    
    Six Months Ended June 30, 2006Average
    
    
    Income/
    
    
    Average
    
    
    Average
    
    
    Income/
    
    
    AverageBalances
    
    
    Expense
    
    
    Rate
    
    
    Balances
    
    
    Expense
    
    
    RateASSETS:LoansTaxable
    
    
    407,805
    
    
    
    14,327
    
    
    
    7.00
    %
    
    
    389,581
    
    
    
    13,130
    
    
    
    6.71
    %Tax-exempt (1)
    
    
    7,779
    
    
    
    281
    
    
    
    7.18
    %
    
    
    8,030
    
    
    
    301
    
    
    
    7.45
    %Nonaccrual
    
    
    1,601
    
    
    
    
    
    
    
    
    
    
    
    918Total Loans
    
    
    417,185
    
    
    
    14,607
    
    
    
    6.97
    %
    
    
    398,529
    
    
    
    13,431
    
    
    
    6.71
    %SecuritiesTaxable
    
    
    37,604
    
    
    
    879
    
    
    
    4.67
    %
    
    
    44,046
    
    
    
    935
    
    
    
    4.25
    %Tax-exempt (1)
    
    
    1,150
    
    
    
    45
    
    
    
    7.77
    %
    
    
    1,018
    
    
    
    40
    
    
    
    7.81
    %Total securities
    
    
    38,754
    
    
    
    924
    
    
    
    4.76
    %
    
    
    45,064
    
    
    
    975
    
    
    
    4.33
    %Deposits in banks
    
    
    1,472
    
    
    
    21
    
    
    
    2.79
    %
    
    
    678
    
    
    
    11
    
    
    
    3.31
    %Federal funds sold
    
    
    2,595
    
    
    
    67
    
    
    
    5.10
    %
    
    
    785
    
    
    
    17
    
    
    
    4.41
    %Total earning assets
    
    
    460,006
    
    
    
    15,618
    
    
    
    6.76
    %
    
    
    445,056
    
    
    
    14,435
    
    
    
    6.46
    %Less: Reserve for loan losses
    
    
    (4,500
    )
    
    
    
    
    
    
    
    
    
    
    (4,336
    )Cash and due from banks
    
    
    15,100
    
    
    
    
    
    
    
    
    
    
    
    17,280Bank premises and equipment, net
    
    
    7,499
    
    
    
    
    
    
    
    
    
    
    
    8,198Other assets
    
    
    15,678
    
    
    
    
    
    
    
    
    
    
    
    18,082Total Assets
    
    
    493,783
    
    
    
    
    
    
    
    
    
    
    
    484,280LIABILITIES AND SHAREHOLDERS EQUITY:DepositsDemand deposits
    
    
    75,713
    
    
    
    
    
    
    
    
    
    
    
    89,586Interest-bearing depositsNOW accounts
    
    
    71,415
    
    
    
    430
    
    
    
    1.21
    %
    
    
    70,449
    
    
    
    190
    
    
    
    0.55
    %Money market accounts
    
    
    27,347
    
    
    
    194
    
    
    
    1.43
    %
    
    
    39,795
    
    
    
    272
    
    
    
    1.38
    %Premium money market accounts
    
    
    64,088
    
    
    
    1,300
    
    
    
    4.09
    %
    
    
    45,569
    
    
    
    879
    
    
    
    3.89
    %Savings accounts
    
    
    33,747
    
    
    
    68
    
    
    
    0.41
    %
    
    
    38,330
    
    
    
    63
    
    
    
    0.33
    %Time deposits
    
    
    131,892
    
    
    
    2,969
    
    
    
    4.54
    %
    
    
    110,275
    
    
    
    2,013
    
    
    
    3.68
    %Total interest-bearing deposits
    
    
    328,489
    
    
    
    4,961
    
    
    
    3.05
    %
    
    
    304,418
    
    
    
    3,417
    
    
    
    2.27
    %Federal funds purchased
    
    
    4,969
    
    
    
    138
    
    
    
    5.62
    %
    
    
    7,769
    
    
    
    204
    
    
    
    5.31
    %Federal Home Loan Bank advances
    
    
    34,862
    
    
    
    904
    
    
    
    5.16
    %
    
    
    35,785
    
    
    
    882
    
    
    
    4.90
    %Company-obligated mandatorily
redeemable capital securities
    
    
    6,129
    
    
    
    227
    
    
    
    7.38
    %
    
    
    4,124
    
    
    
    173
    
    
    
    8.33
    %Total interest-bearing liabilities
    
    
    374,449
    
    
    
    6,230
    
    
    
    3.35
    %
    
    
    352,096
    
    
    
    4,676
    
    
    
    2.67
    %Other liabilities
    
    
    3,548
    
    
    
    
    
    
    
    
    
    
    
    2,636Shareholdersequity
    
    
    40,072
    
    
    
    
    
    
    
    
    
    
    
    36,962Total Liabilities & Shareholders Equity
    
    
    493,783
    
    
    
    
    
    
    
    
    
    
    
    481,280Net interest spread
    
    
    
    
    
    
    9,388
    
    
    
    3.41
    %
    
    
    
    
    
    
    9,759
    
    
    
    3.79
    %Interest expense as a percent of average earning assets
    
    
    
    
    
    
    
    
    
    
    2.72
    %
    
    
    
    
    
    
    
    
    
    
    2.11
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    4.04
    %
    
    
    
    
    
    
    
    
    
    
    4.35
    %
 
 (1)
    
    Income and rates on
non-taxable assets
are computed on a
tax equivalent
basis using a
federal tax rate of
34%.
   - 23 -




---



##### 



Six Months Ended June 30, 2007 Compared toSix Months Ended June 30, 2006Due to
    
    
    Due toChange
    
    
    Volume
    
    
    RateINTEREST INCOMELoans; taxable
    
    $
    1,196
    
    
    $
    608
    
    
    $
    588Loans; tax-exempt (1)
    
    
    (20
    )
    
    
    (9
    )
    
    
    (11
    )Securities; taxable
    
    
    (56
    )
    
    
    (127
    )
    
    
    71Securities; tax-exempt (1)
    
    
    5
    
    
    
    5
    
    
    
    Deposits in banks
    
    
    9
    
    
    
    13
    
    
    
    (4
    )Federal funds sold
    
    
    49
    
    
    
    40
    
    
    
    9Total Interest Income
    
    
    1,183
    
    
    
    530
    
    
    
    653INTEREST EXPENSENOW accounts
    
    
    239
    
    
    
    3
    
    
    
    236Money market accounts
    
    
    (78
    )
    
    
    (85
    )
    
    
    7Premium money market accounts
    
    
    422
    
    
    
    357
    
    
    
    65Savings accounts
    
    
    5
    
    
    
    (8
    )
    
    
    13Time deposits
    
    
    956
    
    
    
    395
    
    
    
    561Federal funds purchased
    
    
    (66
    )
    
    
    (74
    )
    
    
    8Federal Home Loan Bank advances
    
    
    21
    
    
    
    (23
    )
    
    
    44Company-obligated mandatorily
redeemable capital securities
    
    
    55
    
    
    
    84
    
    
    
    (29
    )Total Interest Expense
    
    
    1,554
    
    
    
    649
    
    
    
    905Net Interest Income
    
    $
    (371
    )
    
    $
    (119
    )
    
    $
    (252
    )
 
 (1)
    
    Income and rates on
non-taxable assets
are computed on a
tax equivalent
basis using a
federal tax rate of
34%.
    -24-




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##### 



-25-




---



##### 



-26-




---



##### 



June 30, 2007
    
    
    December 31, 2006Tier 1 Capital:Shareholders Equity
    
    $
    40,230
    
    
    $
    38,712Plus: Unrealized loss on securities available for sale
    
    
    360
    
    
    
    365Plus: Unrealized loss on defined benefit plan under SFAS 158
    
    
    671
    
    
    
    671Less: Intangible assets, net
    
    
    
    
    
    
    (6
    )Plus: Company-obligated mandatorily redeemable capital securities
    
    
    4,000
    
    
    
    8,000Total Tier 1 Capital
    
    
    45,261
    
    
    
    47,742Tier 2 Capital:Allowable Allowance for Loan Losses
    
    
    4,407
    
    
    
    4,471Total Capital
    
    $
    49,668
    
    
    $
    52,213Risk Weighted Assets:
    
    $
    386,419
    
    
    $
    404,603Regulatory Capital Ratios:Leverage Ratio
    
    
    9.26
    %
    
    
    9.50
    %Tier 1 to Risk Weighted Assets
    
    
    11.71
    %
    
    
    11.80
    %Total Capital to Risk Weighted Assets
    
    
    12.85
    %
    
    
    12.90
    %
   -27-




---



##### 



June 30, 2007
    
    
    December 31, 2006Total
    
    
    In Use
    
    
    Available
    
    
    Total
    
    
    In Use
    
    
    AvailableSources:Federal funds borrowing lines of credit
    
    $
    52,152
    
    
    $
    
    
    
    $
    52,152
    
    
    $
    51,901
    
    
    $
    
    
    
    $
    51,901Federal Home Loan Bank advances
    
    
    136,944
    
    
    
    28,000
    
    
    
    108,944
    
    
    
    139,194
    
    
    
    55,000
    
    
    
    84,194Federal funds sold
    
    
    
    
    
    
    
    
    
    
    5,244
    
    
    
    
    
    
    
    
    
    
    
    20,122Securities, available for sale and unpledged
at fair value
    
    
    
    
    
    
    
    
    
    
    20,279
    
    
    
    
    
    
    
    
    
    
    
    21,070Total short-term funding sources
    
    $
    189,096
    
    
    $
    28,000
    
    
    $
    186,619
    
    
    $
    191,095
    
    
    $
    55,000
    
    
    $
    177,287Uses:Unfunded loan commitments and
lending lines of credit
    
    
    
    
    
    
    
    
    
    $
    58,080
    
    
    
    
    
    
    
    
    
    
    $
    50,801Letters of credit
    
    
    
    
    
    
    
    
    
    
    7,955
    
    
    
    
    
    
    
    
    
    
    
    8,679Total potential short-term funding uses
    
    
    
    
    
    
    
    
    
    $
    66,035
    
    
    
    
    
    
    
    
    
    
    $
    59,480Ratio of short-term funding sources to
potential short-term funding uses
    
    
    
    
    
    
    
    
    
    
    282.6
    %
    
    
    
    
    
    
    
    
    
    
    298.1
    %
      -28-




---



##### 



-29-




---



##### 



Total Number of
    
    Maximum Number ofShares Purchased as
    
    Shares that May YetPart of Publicly
    
    Be Purchased UnderTotal Number
    
    Average Price Paid
    
    Announced Plan
    
    the Planof Shares Purchased
    
    per Share
    
    (1)
    
    (1)April 1  30, 2007
    
    
    1,360
    
    
    $
    25.61
    
    
    
    1,360
    
    
    
    204,943May 1  31, 2007
    
    
    2,400
    
    
    $
    24.60
    
    
    
    2,400
    
    
    
    202,543June 1  30, 2007
    
    
    2,075
    
    
    $
    24.40
    
    
    
    2,075
    
    
    
    200,468Total
    
    
    5,835
    
    
    
    
    
    
    
    5,835
 
 (1)
    
    In September 1998, the Company announced a stock repurchase program for its common
stock. Initially, the plan authorized the Company to repurchase up to 73,672 shares of its
common stock through December 31, 1999. Annually, the Board resets the amount of shares
authorized to be repurchased during the year under the buyback program. On January 18,
2007, the Board authorized the Company to repurchase up to 208,738 shares (6% of the shares
of common stock outstanding on January 1, 2007) beginning January 1, 2007 and continuing
until the next Board reset.       FOR
    
    WITHHELDRandy K. Ferrell
    
    
    2,822,885.72
    
    
    
    4,471.00Brian S. Montgomery
    
    
    2,823,034.33
    
    
    
    4,322.39P. Kurt Rodgers
    
    
    2,820,104.72
    
    
    
    7,252.00Sterling T. Strange, III
    
    
    2,819,604.72
    
    
    
    7,752.00
  FOR
    
    AGAINST
    
    ABSTAIN
    
    BROKER NON-VOTE2,797,500.72
    
    16,392.00
    
    13,464.00
    
    0.00
 -30-




---



##### 



3.1
    
    Articles of Incorporation of Fauquier Bankshares, Inc., as amended, incorporated by reference
to Exhibit 3(i) to registration statement on Form 10 filed April 16, 19993.2
    
    Amended and Restated Bylaws of Fauquier Bankshares, Inc., incorporated by reference to
Exhibit 3.2 to Form 8-K filed March 22, 200610.20
    
    Consulting Agreement, dated April 19, 2007 between The Fauquier Bank and C.H.
Lawrence, Jr., incorporated by reference to Exhibit 10.20 to
Form 10-Q filed May 14, 200710.21
    
    Employment Agreement, dated April 2, 2007, between Fauquier Bankshares, Inc., The Fauquier
Bank and Gregory D. Frederick, incorporated by reference to Exhibit 10.21 to Form 8-K/A filed
April 4, 200711
    
    Refer to Part I, Item 1, Note 5 to the Consolidated Financial Statements31.1
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)31.2
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350 of Chief Executive Officer32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350 of Chief Financial Officer
 -31-




---



##### 



SIGNATURES
  FAUQUIER BANKSHARES, INC.
(Registrant)/s/ Randy K. FerrellRandy K. FerrellPresident and Chief Executive Officer
(principal executive officer)Dated: August 10, 2007/s/ Eric P. GraapEric P. GraapExecutive Vice President and Chief Financial Officer
(principal financial and accounting officer)Dated: August 10, 2007 -32-