Fauquier Bankshares, parent company of The Fauquier Bank (TFB), reported net income of $2.5 million, or $0.66 per share assuming dilution, for the year ended December 31, 2017, compared to $3.7 million, or $0.98 per share assuming dilution, for the year ended December 31, 2016.
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The Company reported a net loss of $544,000 for the fourth quarter of 2017, or $(0.14) per share assuming dilution, compared with net income of $1.3 million, or $0.34 per share assuming dilution, for the prior quarter and $808,000, or $0.22 per share assuming dilution, for the fourth quarter of 2016.
The results for the year and quarter ended December 31, 2017 include the effect of the Tax Cuts and Jobs Act, which was signed into law on December 22, 2017.
Among other things, the Act permanently lowers the federal corporate income tax rate to 21% from the maximum rate prior to the passage of the Act of 35%, effective January 1, 2018.
As a result of the reduction of the federal corporate income tax rate, U.S.
generally accepted accounting principles (GAAP) require companies to re-measure their deferred tax assets and deferred tax liabilities, including those accounted for in accumulated other comprehensive income, as of the date of the Act's enactment and record the corresponding effects in income tax expense in the fourth quarter of 2017.
As a result of the permanent reduction in the corporate income tax rate, the Company recognized a $1.7 million reduction in the value of its net deferred tax asset and recorded a corresponding incremental income tax expense of $1.7 million in the Company's consolidated results of operations for the fourth quarter of 2017.
Management expects the negative effect of the Act on the Company's results of operations in 2017 will be recovered over future periods when the lower corporate income tax rate of 21% will be used to calculate income tax expense, which is expected to positively affect the Company's net income.
The Company's evaluation of the effect of the Act is subject to refinement for up to one year after enactment.
For the year ended December 31, 2017, the Company's return on average equity (ROE) and on average assets (ROA) were 4.44% and 0.39%, respectively, compared to 6.82% and 0.60%, respectively, for the year ended December 31, 2016.
For the fourth quarter of 2017, the Company's ROE and ROA were (3.77)% and (0.33)%, respectively, compared to 8.96% and 0.80%, respectively, for the prior quarter and 5.91% and 0.51%, respectively, for the fourth quarter of 2016.
Excluding the effect of the revaluation of the Company's net deferred tax asset, for the year ended December 31, 2017, the Company's adjusted ROE and adjusted ROA were 7.39% and 0.66%, respectively, and for the fourth quarter of 2017, the Company's adjusted ROE and adjusted ROA were 7.72% and 0.69%, respectively. ■