WHAT DO WE THINK MATTERS IN RUNNING A BANK AND A PUBLIC COMPANY?
AMONG OTHER THINGS, ACCURACY, TRANSPARENCY, AND PERHAPS AN OLD FASHIONED WORD, FORTHRIGHTNESS.
Lets look at what Mr. Tiffany has said in his proxy materials, and then the facts.
He said We do not want to sell the bank!
In an email Mr. Tiffany sent on May 1, 2008 to ten individuals including board members and
management, he stated, The board some day may begin to see that the competitive advantage
of being an independent community bank is no longer a reality for FBSS.
In the first week of October 2008, Mr. Tiffany hosted a luncheon at his home inviting a
number of local business people and former directors and further discussed his plans to
arrange a sale of the Bank.
Soon thereafter, Mr. Tiffany paid a visit to a Senior Mid-Atlantic regional officer of PNC
Bank and tried to convince him that a PNC acquisition of The Fauquier Bank would make good
sense.
Finally, in a March 2009 conversation with a current director, Mr. Tiffany stated that he
had numerous discussions with PNC about a possible acquisition of The Fauquier Bank.
He said the Board saw fit to increase the CEOs total compensation by 73% from 2005 to 2008.
This data is wrong. When compared on the same basis, if you do not include retirement
valuation compensation for 2008, which was not included in the SEC reporting requirements
of 2005, the 2008 CEO compensation declined by 1%.
He said company management has presided over extraordinary misalignment of pay and performance
and we are fed up with bloated pay.
In fact, when you apply todays reporting rules to Mr. Tiffanys own compensation, he was
better compensated, or in his words, more bloated, over his last five years as CEO than our
current CEO has been compensated for his last five years, despite the fact that during Mr.
Tiffanys tenure banks assets averaged only 2/3 of the banks current size, the stock price
was a little over one-half the current average, and the total net income was substantially
lower.
He compared non-employee director compensation to that of one competitor.
What he didnt tell you is he chose a bank where one third of the board had only served for
part of the year, and been paid for only part of the year. He also didnt tell you The
Fauquier Bank paid its directors about the same as these Northern Virginia banks: Access,
Alliance, First National of Strasburg, Eagle Bank Corp (Bank of Clark County).
He said the companys Board rewarded itself by raising meeting fees 50% and increasing its annual
retainer 60%,
In fact, aggregate Board compensation increased from 2005 to 2008 by a little over 14%,
during a period when Sarbanes-Oxley and economic challenges substantially increased the time
spent by boards of directors.
He said, Since the beginning of 2004, the CEO and the Board have been net sellers of company
stock.
What he didnt say is he bought no shares of the bank during this period, and sold 20,000
shares as a sitting director.
He compared your banks growth with that of other banks.
What he didnt explain was that those figures include mergers and acquisitions. During the
period he cites, eleven Virginia banks were bought, adding $6.5 billion to the assets of
other Virginia banks. This is not organic growththis is buying assets and deposits, and we
believe it makes this comparison useless for any analysis of a bank such as ours.
He said In 2008 for the first time in four decadesshareholder equity declined.
Yes it didby less than 1%. He seems to have forgotten that it declined from 1993 to 1994
by 3%, when he was CEO and President.
He said from 2006 to 2008, the rate of decline of earnings per share was greater than both the
Virginia state public bank and national public bank medians.
In fact, the median earnings for all Virginia banks traded on the NYSE, NASDAQ, AMEX, OTC
Bulletin Board and the Pink Sheets were down by 70%, and those Virginia banks on only the
NYSE, NASDAQ, and AMEX the medians earnings were down 60%. Our earnings were, on the other
hand, down by only 34%.
Mr. Tiffanys latest materials attribute the banks improved performance in the first half of this
decade to himself, and the general economic decline since 2007 that has affected virtually all bank
stocks to the banks present management. The fact he doesnt tell you is that, coincidentally, the
improvement in total return performance began during the banks management transition. Randy
Ferrell, our CEO, and Eric Graap, our CFO and one of this
years board nominees, began working together as a team in November 2000. The table below shows the
facts from November 2000 to the present, the Companys total return increased by 124.4% compared
to a total for all U.S. banks over that period of a negative 22.5%. It is also important to note
that our bank declined 40% from June, 2006 through May 7, 2009, while the average of all banks
declined 56% during the same time period, per SNL Financial LC.
We are concerned that the large number of errors noted above could influence you to support the
dissidents, and we firmly believe that such support is not in your best interests, nor the Banks.
We have a proud tradition of integrity and service to our community, and we are faced with a group
of opponents intent upon selling the bank. We ask for your support against Mr. Tiffany and his
dissident group, allowing the bank to remain a locally owned, independent community resource
dedicated to making your financial life easier.
Additional Information and Where to Find It
This letter is solicitation material in respect of the matters to be considered at the 2009 Annual
Meeting of Shareholders. On April 20, 2009, Fauquier Bankshares, Inc. (the Company) filed a
definitive proxy statement with the Securities and Exchange Commission (the SEC) and has mailed
the definitive proxy statement to the Companys shareholders. WE URGE SHAREHOLDERS AND INVESTORS TO
READ THE PROXY STATEMENT ALONG WITH ANY OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH
THE SEC BECAUSE THEY CONTAIN IMPORTANT INFORMATION. A free copy of the proxy statement and other
related documents filed by the Company may be obtained at the SECs website at www.sec.gov. The
Companys proxy statement and other related documents may also be obtained by contacting the
Companys Secretary at Fauquier Bankshares, Inc., 10 Courthouse Square, Warrenton, Virginia 20186.
Participants in Solicitation
A listing of persons who are participants in the solicitation and certain
information concerning such persons is set forth in the Companys
definitive proxy statement filed with the SEC on April 20, 2009, which
may be obtained through the website maintained by the SEC at www.sec.gov.
Forward-Looking Statements
In addition to historical information, this letter contains
forward-looking statements that are based upon the Companys estimates
and expectations concerning future events and are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those reflected in the forward-looking statements. We
caution that such statements are subject to a number of uncertainties and
actual results could differ materially and therefore you should not place
undue reliance on any forward-looking statements we make. We may not
update any forward-looking statements we make today for future events or
developments. Information about risks and uncertainties are described in
our filings with the SEC, which are available on the SECs website and
our website and may be obtained by contacting the Secretary of the
Company.