8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) March 25, 2015

Hampton Roads Bankshares, Inc.
(Exact name of registrant as specified in its charter)
Virginia	001-32968	54-2053718
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)
641 Lynnhaven Parkway, Virginia Beach, VA 23452
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (757) 217-1000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

Hampton Roads Bankshares, Inc. (the “Company”), the holding company for The Bank of Hampton Roads and Shore Bank, issued a press release today regarding financial results for the fourth quarter and full year of 2014, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Use of Non-GAAP Financial Measures.

Certain measures provided in the press release attached as Exhibit 99.1 may be deemed to be non-GAAP financial measures. Tangible common equity to tangible assets ratio is not a measure recognized under U.S. generally accepted accounting principles (“GAAP”) and, therefore, is considered a non-GAAP financial measure. The most comparable GAAP measure is the ratio of total common shareholders’ equity to total assets.

Management uses this non-GAAP financial measure to assess the strength of the Company’s capital position. The Company believes that this non-GAAP financial measure provides meaningful additional information about the Company to assist investors in evaluating the Company’s financial strength and capitalization. The tangible common equity to tangible assets ratio is used by management and investment analysts to assess the strength of the Company’s capital position absent the effects of intangible assets. Management, banking regulators and many stock analysts use the tangible common equity ratio in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of intangible assets.

Below is a reconciliation of this non-GAAP financial measure to the most directly comparable financial measure calculated and presented in accordance with GAAP.

Non-GAAP Measurement
(From Press Release)
December 31, 2014
		As of			As of
(dollars in thousands)		December 31, 2014			December 31, 2013
Total assets	$	1,988,606		$	1,950,272
Less: intangible assets		842			1,437
Tangible assets	$	1,987,764		$	1,948,835
Total shareholders’ equity *	$	196,997		$	183,398
Less: intangible assets		842			1,437
Common shareholders’ equity - tangible *	$	196,155		$	181,961
Total shareholders’ equity (average)*	$	193,761		$	183,328
Less: intangible assets (average)		1,151			1,824
Common shareholders’ equity - tangible (average)*	$	192,610		$	181,504
Net income	$	9,329		$	4,076
Number of shares common stock		170,572,217			170,263,264
Return on average equity *		4.81	%		2.22	%
Return on average equity - tangible *		4.84	%		2.25	%
Total common shareholders’ equity to total assets *		9.91	%		9.40	%
Tangible common equity to tangible assets *		9.87	%		9.34	%
Book value per share		1.15	%		1.08	%
Book value per share - tangible		1.15	%		1.07	%
* Equity amounts exclude non-controlling interest

Item 7.01. Regulation FD Disclosure.

As noted in Item 2.02, the Company issued a press release regarding its financial results, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information contained in Item 2.02 above and this Item 7.01, including that which is incorporated by reference, is being furnished to the Securities and Exchange Commission (the “SEC”). Such information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. The information shall not be deemed incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, except as expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

Ex. 99.1 Press Release, dated March 25, 2015, announcing Hampton Roads Bankshares, Inc.’s fourth quarter and full year 2014 financial results.

Caution About Forward-Looking Statements.

Certain statements made herein and in the attached earnings press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are statements that include projections, predictions, expectations, or beliefs about events or results or otherwise are not statements of historical facts, including statements about future trends, benefits, opportunities and strategies. Although the Company believes that its expectations with respect to such forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from those expressed or implied by such forward-looking statements.  Factors that could cause actual events or results to differ significantly from those described in the forward-looking statements include, but are not limited to those described in the cautionary language included under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, and other filings made with the SEC.

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 hereunto duly authorized.

/s/.
	Hampton Roads Bankshares, Inc.
Date: March 25, 2015	By:	/s/ Douglas J. Glenn
		Douglas J. Glenn
		President and Chief Executive Officer

EXHIBIT INDEX

Exhibit No.	Description
Ex. 99.1	Press Release, dated March 25, 2015, announcing Hampton Roads Bankshares, Inc.’s fourth quarter and full year 2014 financial results.

EX-99.1

March 25, 2015

Contact:    Douglas J. Glenn

President and Chief Executive Officer

(757) 217-1000

Hampton Roads Bankshares Announces Fourth Quarter and Full year 2014 Financial Results

• Net income available to common shareholders for the quarter ended December 31, 2014 totaled $1.0 million, a $447 thousand increase over the comparable period in 2013

• Net income available to common shareholders for the year ended December 31, 2014 totaled $9.3 million, a $5.2 million increase over 2013

• Continued improvement in credit quality results in a 43.5% annual decline of non-performing assets

• Company returns to growth as gross loans increase by 2.8% in 2014

• Year-to-date average core deposits increase 2.4% as the Company emphasizes a retail funding strategy

• Company improves regulatory standing with the termination of the FRB’s memorandum of understanding

• Company commits to major portfolio diversification and market expansion in 2014 by launching Shore Premier Finance, expanding Gateway Bank Mortgage throughout the geographic footprint, establishing a new lending presence in Raleigh, North Carolina and opening a Baltimore, Maryland loan production office

Hampton Roads Bankshares, Inc. (the “Company”) (Nasdaq: HMPR), the holding company for the Bank of Hampton Roads ("BOHR") and Shore Bank ("Shore"), today announced net income attributable to common shareholders of $9.3 million for the year ended December 31, 2014 and $1.0 million for the three months ended December 31, 2014 as compared to net income for the year ended December 31, 2013 and three months ended December 31, 2013 of $4.1 million and $551 thousand, respectively.

“We think everyone will be pleased with the Company’s results for 2014,” said Douglas Glenn, President and Chief Executive Officer. "Against some strong headwinds for banking, we have established a strong capital base, an improved credit risk profile and an enhanced regulatory standing which has allowed us to

expand into new business lines and geographies. The vision we established through our One Bank strategy more than two years ago is now serving to propel our Company successfully into the future."

Net Interest Income

Net interest income decreased $3.5 million and $795 thousand for the year and quarter ended December 31, 2014, respectively, as compared to the same periods ended December 31, 2013. The decrease was due primarily to declines in average interest-earning assets, and a reduction in the net interest margin.  

Credit Quality

Non-performing assets were reduced to $43.2 million at December 31, 2014 from $76.5 million on December 31, 2013. Non-performing assets consist of loans 90 days past due and still accruing interest, nonaccrual loans, and other real estate owned and repossessed assets. Our non-performing assets ratio, defined as the ratio of non-performing assets to gross loans plus loans held for sale plus other real estate owned and repossessed assets was 2.95% and 5.29% at December 31, 2014 and 2013, respectively.

Allowance for loan losses at December 31, 2014 decreased 22.8% to $27.1 million from $35.0 million at December 31, 2013. New defaults during 2014 continued to decline as compared to prior year. In particular, the specific component of the allowance for loan losses decreased to $3.5 million from $13.1 million.

Noninterest Income

Noninterest income for 2014 was $24.6 million, compared to $25.5 million and $7.7 million in 2013 and 2012, respectively. Mortgage banking revenue continued to decline in 2014 as compared to 2013 and 2012, due to declines in both origination volume and margin, driven by rising market interest rates, which resulted in a dramatic negative impact on refinance demand. Offsetting these declines were decreases in losses on premises and equipment associated with certain branch closings in 2013, and decreases in other than temporary impairment of other real estate owned and repossessed assets as real estate values have mostly stabilized or improved. Income from bank-owned life insurance increased $798 thousand during 2014 to $4.1 million compared to $3.3 million and $1.6 million for 2013 and 2012, respectively.

Noninterest income increased $1.1 million in the fourth quarter 2014 compared to the same quarter in 2013. The increase was primarily due to a decline in the impairment of OREO as well as an increase in mortgage banking revenue.

Noninterest Expense

Noninterest expense in 2014 finished at $74.7 million, decreasing $7.7 million or 9.3%, compared to 2013, primarily due to lower salary and employee benefits, occupancy, and FDIC insurance expenses.

Noninterest expense decreased $654 thousand in the fourth quarter 2014, compared to the same quarter in 2013. The decrease was primarily due to a decline in occupancy, FDIC insurance, and problem loan and repossessed asset costs offset by an increase in salaries and employee benefits and professional and consultant fees.

Balance Sheet Trends

Assets were $2.0 billion at December 31, 2014.  Total assets increased by $38.3 million or 2.0% from December 31, 2013. The increase in assets was primarily associated with a $42.7 million or 99.8% increase in overnight funds sold and due from FRB, a $38.4 million or 2.8% increase in gross loans, an $8.0 million or 22.8% decrease in the allowance for loan losses, offset by a $23.3 million or 7.1% decrease in investment securities available for sale, and a $14.9 million or 40.8% decrease in other real estate owned and repossessed

assets. The majority of the recent loan demand within our markets has come from the real estate - commercial mortgage and installment loan categories. 

Deposits at December 31, 2014 increased $58.0 million or 3.8% from December 31, 2013, as a result of increases of $21.5 million or 8.8% in noninterest-bearing demand deposits, increases of $18.2 million or 5.6% in time deposits less than $100 thousand, increases of $3.7 million or 1.3% in time deposits over $100 thousand, increases of $20.8 million or 3.5% in interest-bearing demand deposits, partially offset by decreases of $6.1 million or 9.7% in savings deposits.

Year-to-date average core deposits, which exclude brokered deposits and certificates of deposit greater than $100 thousand, have increased by $28.7 million reflecting continued progress in furthering the Company’s funding strategy.

Loan Diversification and Market Expansion

The Company executed on a number of major commitments in 2014 to diversify its loan portfolio credit exposure and expand its market footprint. In May 2014, Shore launched Shore Premier Finance ("SPF"), a specialty finance unit that specializes in marine financing for U.S. Coast Guard documented vessels to customers throughout the United States. SPF was started by hiring a group of lending professionals with deep expertise in marine finance. The team at SPF has developed several strategic partnerships that will assist in SPF's future growth. The plan is for SPF to grow the marine loan portfolio through direct loan originations of dealer floor plan loans and consumer retail loans, as well as purchases of existing marine loan portfolios. In addition to SPF, in July 2014, Shore also launched a new loan production office for the Baltimore, Maryland metropolitan area, with a focus on commercial real estate and commercial and industrial lending relationships. Throughout 2014, Gateway Bank Mortgage, a subsidiary of BOHR, expanded in the markets we serve by opening mortgage loan offices in Maryland and North Carolina, and adding personnel to our team of mortgage lenders serving the Hampton Roads region of Virginia. In September 2014, BOHR, under its Gateway Bank brand, enhanced its prospects in Raleigh, North Carolina through the addition of a Market President dedicated to commercial banking business growth and development. The Company expects these strategic moves to have a significant impact to its growth in 2015 and in coming years.

Improved Regulatory Standing

On February 9, 2015, the Company received notice of the termination of the memorandum of understanding, entered into on March 27, 2014, by and among the Company, BOHR, Federal Reserve Bank of Richmond ("FRB") and the Virginia Bureau of Financial Institutions.

Capitalization

As of December 31, 2014, our consolidated regulatory capital ratios were Tier 1 Leverage Ratio of 11.08%, Tier 1 Risk-Based Capital Ratio of 13.90%, and Total Risk-Based Capital of 15.15%. As of December 31, 2014, the Company exceeded the regulatory capital minimums, and BOHR and Shore were considered “well capitalized” under the risk-based capital standards. Their Tier 1 Leverage Ratio, Tier 1 Risk-Based Capital Ratio, and Total Risk-Based Capital Ratio were as follows: 10.16%, 12.73%, and 13.99%, respectively for BOHR and 10.70%, 13.67%, and 14.79%, respectively for Shore.

Caution About Forward-Looking Statements

Certain statements made in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include projections, predictions, expectations, or beliefs about events or results or otherwise are not statements of historical facts, including statements about future trends and strategies. Although the Company believes that its expectations with respect to such forward-looking statements are based upon reasonable assumptions

within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual events or results to differ significantly from those described in the forward-looking statements include, but are not limited to those described in the cautionary language included under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, and other filings made with the SEC.

About Hampton Roads Bankshares

Hampton Roads Bankshares, Inc. is a multi-bank holding company headquartered in Virginia Beach, Virginia. The Company’s primary subsidiaries are The Bank of Hampton Roads, which opened for business in 1987, and Shore Bank, which opened in 1961 (collectively, the “Banks”).  The Banks engage in general community and commercial banking business, targeting the needs of individuals and small to medium-sized businesses. Currently, The Bank of Hampton Roads operates banking offices in Virginia and North Carolina doing business as Bank of Hampton Roads and Gateway Bank & Trust Co. Shore Bank serves the Eastern Shore of Virginia, eastern Maryland and southern Delaware through seven full service banking offices, ATMs and three loan production offices. Through various divisions, the Banks also offer mortgage banking and marine financing. Shares of the Company’s common stock are traded on the NASDAQ Global Select Market under the symbol “HMPR.” Additional information about the Company and its subsidiaries can be found at www.hamptonroadsbanksharesinc.com.

Use of Non-GAAP Financial Measures

This earnings press release contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding our results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in the Form 8-K filed related to this release. The Form 8-K can be found on the SEC’s EDGAR website at www.sec.gov or our website at www.hamptonroadsbanksharesinc.com.

Hampton Roads Bankshares, Inc.
Financial Highlights
(in thousands)		December 31,		December 31,
(unaudited)		2014		2013
Assets:
Cash and due from banks	$	16,684	$	18,806
Interest-bearing deposits in other banks		1,349		654
Overnight funds sold and due from Federal Reserve Bank		85,586		42,841
Investment securities available for sale, at fair value		302,221		325,484
Restricted equity securities, at cost		15,827		17,356
Loans held for sale		22,092		25,087
Loans		1,422,935		1,384,531
Allowance for loan losses		(27,050)		(35,031)
Net loans		1,395,885		1,349,500
Premises and equipment, net		63,519		67,146
Interest receivable		4,503		4,811
Other real estate owned and repossessed assets,
net of valuation allowance		21,721		36,665
Intangible assets, net		842		1,437
Bank-owned life insurance		49,536		50,802
Other assets		8,841		9,683
Totals assets	$	1,988,606	$	1,950,272
Liabilities and Shareholders' Equity:
Deposits:
Noninterest-bearing demand	$	266,921	$	245,409
Interest-bearing:
Demand		621,066		600,315
Savings		56,221		62,283
Time deposits:
Less than $100		342,794		324,635
$100 or more		294,346		290,686
Total deposits		1,581,348		1,523,328
Federal Home Loan Bank borrowings		165,847		194,178
Other borrowings		29,224		28,983
Interest payable		560		6,025
Other liabilities		14,130		13,912
Total liabilities		1,791,109		1,766,426
Shareholders' equity:
Common stock		1,706		1,703
Capital surplus		588,692		587,424
Retained deficit		(395,535)		(404,864)
Accumulated other comprehensive income, net of tax		2,134		(865)
Total shareholders' equity before non-controlling interest		196,997		183,398
Non-controlling interest		500		448
Total shareholders' equity		197,497		183,846
Total liabilities and shareholders' equity	$	1,988,606	$	1,950,272
Non-performing Assets at Period-End:
Nonaccrual loans including nonaccrual impaired loans	$	21,507	$	39,854
Loans 90 days past due and still accruing interest		—		—
Other real estate owned and repossessed assets		21,721		36,665
Total non-performing assets	$	43,228	$	76,519
Composition of Loan Portfolio at Period-End:
Commercial	$	219,029	$	225,492
Construction		136,955		158,473
Real-estate commercial		639,163		590,475
Real-estate residential		354,017		354,035
Installment		74,821		57,623
Deferred loan fees and related costs		(1,050)		(1,567)
Total loans	$	1,422,935	$	1,384,531

Hampton Roads Bankshares, Inc.
Financial Highlights
(in thousands, except share and per share data)	Three Months Ended					Twelve Months Ended
(unaudited)		December 31,		December 31,		December 31,		December 31,
		2014		2013		2014		2013
Interest Income:
Loans, including fees	$	15,889	$	16,471	$	63,132	$	68,954
Investment securities		2,154		2,225		9,018		7,710
Overnight funds sold and due from FRB		65		63		193		238
Interest-bearing deposits in other banks		—		1		—		1
Total interest income		18,108		18,760		72,343		76,903
Interest Expense:
Deposits:
Demand		689		566		2,667		2,156
Savings		7		8		31		36
Time deposits:
Less than $100		901		819		3,351		3,592
$100 or more		866		783		3,212		3,563
Interest on deposits		2,463		2,176		9,261		9,347
Federal Home Loan Bank borrowings		346		468		1,531		1,910
Other borrowings		418		440		1,506		2,145
Total interest expense		3,227		3,084		12,298		13,402
Net interest income		14,881		15,676		60,045		63,501
Provision for loan losses		102		—		218		1,000
Net interest income after provision for loan losses		14,779		15,676		59,827		62,501
Noninterest Income:
Mortgage banking revenue		3,220		2,479		11,389		15,832
Service charges on deposit accounts		1,153		1,233		4,703		5,014
Income from bank-owned life insurance		288		296		4,110		3,312
Gain on sale of investment securities available for sale		63		18		306		781
Gain (loss) on sale of premises and equipment		—		457		(112)		580
Impairment of premises and equipment		—		—		—		(2,825)
Gain (loss) on other real estate owned and repossessed assets		43		(13)		360		356
Other than temporary impairment of other real estate owned and repossessed assets		(552)		(1,489)		(2,405)		(3,914)
Visa check card income		677		649		2,635		2,556
Other		787		968		3,650		3,820
Total noninterest income		5,679		4,598		24,636		25,512
Noninterest Expense:
Salaries and employee benefits		10,044		9,370		38,930		41,223
Professional and consultant fees		1,812		1,574		6,108		5,910
Occupancy		1,543		2,001		6,476		9,092
FDIC insurance		611		1,939		2,366		4,762
Data processing		1,196		1,176		4,610		4,198
Problem loan and repossessed asset costs		491		696		1,788		2,429
Equipment		472		389		1,726		1,730
Directors' and regional board fees		336		421		1,591		1,493
Advertising and marketing		488		434		1,513		1,431
Other		2,286		1,933		9,549		10,080
Total noninterest expense		19,279		19,933		74,657		82,348
Income before provision for income taxes		1,179		341		9,806		5,665
Provision for income taxes (benefit)		7		(247)		6		(90)
Net income		1,172		588		9,800		5,755
Net income attributable to non-controlling interest		174		37		471		1,679
Net income attributable to Hampton Roads Bankshares, Inc.	$	998	$	551	$	9,329	$	4,076
Per Share:
Cash dividends declared	$	-	$	-	$	-	$	-
Basic Income	$	0.01	$	-	$	0.05	$	0.02
Diluted Income	$	0.01	$	-	$	0.05	$	0.02
Basic weighted average shares outstanding		171,065,163		170,370,406		170,841,420		170,371,336
Effect of dilutive shares and warrant		1,080,929		729,051		1,086,447		699,401
Diluted weighted average shares outstanding		172,146,092		171,099,457		171,927,867		171,070,737

Hampton Roads Bankshares, Inc.
Financial Highlights
(in thousands, except share and per share data)	Three Months Ended							Twelve Months Ended
(unaudited)		December 31,			December 31,			December 31,			December 31,
Daily Averages:		2014			2013			2014			2013
Total assets	$	2,000,622		$	1,973,557		$	1,973,880		$	2,006,793
Gross loans (excludes loans held for sale)		1,394,930			1,361,072			1,370,952			1,394,723
Investment and restricted equity securities		334,225			330,664			342,996			308,161
Intangible assets		933			1,509			1,151			1,824
Total deposits		1,594,122			1,547,533			1,556,386			1,575,427
Total borrowings		195,632			223,213			206,832			231,012
Shareholders' equity *		197,899			185,349			193,761			183,328
Shareholders' equity - tangible *		196,966			183,840			192,610			181,504
Interest-earning assets		1,866,259			1,818,693			1,830,461			1,850,692
Interest-bearing liabilities		1,518,811			1,503,824			1,506,566			1,550,026
Financial Ratios:
Return on average assets		0.20	%		0.11	%		0.47	%		0.20	%
Return on average equity *		2.00	%		1.18	%		4.81	%		2.22	%
Return on average equity - tangible *		2.01	%		1.19	%		4.84	%		2.25	%
Net interest margin		3.16	%		3.42	%		3.28	%		3.43	%
Efficiency ratio		94.01	%		98.41	%		88.47	%		93.33	%
Tangible equity to tangible assets *		9.87	%		9.34	%		9.87	%		9.34	%
Allowance for Loan Losses:
Beginning balance	$	28,718		$	37,701		$	35,031		$	48,382
Provision for losses		102			—			218			1,000
Charge-offs		(3,594)			(4,573)			(17,745)			(21,539)
Recoveries		1,824			1,903			9,546			7,188
Ending balance	$	27,050		$	35,031		$	27,050		$	35,031
Asset Quality Ratios:
Annualized net charge-offs to average loans		0.50	%		0.78	%		0.60	%		1.03	%
Non-performing loans to total loans		1.51	%		2.88	%		1.51	%		2.88	%
Non-performing assets ratio		2.95	%		5.29	%		2.95	%		5.29	%
Allowance for loan losses to total loans		1.90	%		2.53	%		1.90	%		2.53	%
* Equity amounts exclude non-controlling interest