EX-99.1 2 exhibit991-2q2015.htm EXHIBIT 99.1 Exhibit991-2Q2015
August 6, 2015

Contact:    Douglas J. Glenn
President and Chief Executive Officer
(757) 217-1000

Hampton Roads Bankshares Announces Second Quarter 2015 Financial Results

Second quarter net income available to common shareholders totaled $2.7 million, a 10.1% increase over the comparable period in 2014 driven by improvement in net interest income and mortgage banking revenues
Expansion of Gateway Bank Mortgage contributes to a 69.7% increase in quarterly funded mortgage volume over the comparable period in 2014
Year-over-year average core deposit growth increases by more than $80 million
The Company discloses an adjustment to certain income tax related information

Hampton Roads Bankshares, Inc. (the “Company”) (Nasdaq: HMPR), the holding company for the Bank of Hampton Roads (“BOHR”) and Shore Bank (“Shore” collectively the “Banks”), today announced financial results for the second quarter of 2015. Net income attributable to common shareholders for the three and six months ended June 30, 2015 was $2.7 million and $4.1 million, respectively, as compared with net income for the three and six months ended June 30, 2014 of $2.5 million and $6.3 million, respectively, which included $2.9 million of income attributable to an insurance benefit.

“We continue to improve our earnings in the face of strong competition by keeping banking simple - we collect deposits and make loans,” said Douglas Glenn, President and Chief Executive Officer.  “This approach has been welcomed by our customers and employees and creates the kind of sustainable relationships that builds long-term value for our shareholders.”




Net Interest Income
Net interest income increased $702 thousand and $439 thousand during the three and six months ended June 30, 2015 as compared to the same periods in 2014.  The growth in net interest income has resulted from the shift away from noninterest-bearing assets and lower yielding assets.

Credit Quality
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 3.36% and 2.95% at June 30, 2015 and December 31, 2014, respectively. The Company’s largest borrower, as measured by total exposure, was downgraded to substandard in the third quarter of 2014, and was placed in nonaccrual status in the second quarter of 2015. Excluding the impact of this one relationship moving into nonaccrual status, our non-performing assets ratio would have been 2.02% at June 30, 2015, continuing the downward trend in nonaccrual loans.

Allowance for loan losses increased $686 thousand, or 2.5% to $27.7 million at June 30, 2015; up from $27.1 million at December 31, 2014. Lower historical loss rates reduced the necessary general reserve. The specific reserve component of the allowance rose as a result of the decision by management to move into default the Company's largest remaining substandard relationship. While recoveries are trending downward on a quarterly basis, they continue to offset charge-offs for the year-to-date. There was no additional loss provision expense recorded in the second quarter.

Noninterest Income
Noninterest income for the three and six months ended June 30, 2015 was $8.0 million and $14.5 million, respectively, an increase of $2.5 million or 45.3% and $1.7 million or 12.9%, compared to the same periods in 2014. Mortgage banking revenue continues to be the major driver, due in part to favorable mortgage rates which have produced healthy growth in our mortgage services division during the first six months of 2015 compared to the same period in 2014. Funded mortgage volume in the quarter for Gateway Bank Mortgage totaled $191.8 million versus $113.0 million during the comparable period in 2014.

Noninterest Expense
Noninterest expense for the three and six months ended June 30, 2015 was $20.5 million and $39.1 million, respectively, an increase of $2.8 million or 15.6% and $2.9 million or 8.0%, compared to the same periods in 2014. The overall increase in noninterest expense was primarily driven by increases in salaries and employee benefits resulting from subsidiary expansions, mortgage-related commissions, and increased share-based compensation.

Balance Sheet Trends
Assets were $2.0 billion at June 30, 2015.  Since December 31, 2014, there has been a major shift out of overnight funds sold and due from FRB and investment securities available for sale into loans held for sale and loans. Investment securities available for sale were $210.2 million as of June 30, 2015, down from $302.2 million at December 31,



2014.  The proceeds from investment security sales partially funded the loan portfolio growth during the quarter and year to date. A general decrease in interest rates contributed to an increase in the net unrealized gains in our portfolio.

Loans have grown 7.5% since December 31, 2014 to $1.5 billion; this growth was primarily driven by a $104.7 million marine loan portfolio purchase which occurred in the first quarter of 2015. In the second quarter of 2015, management made the decision to move into default the Company's largest remaining substandard relationship. Therefore, impaired loans increased by $21.8 million, or 44.6% to $70.7 million at June 30, 2015, compared to $48.9 million at December 31, 2014.

Deposits increased $93.1 million or 5.9% from December 31, 2014. The Company has made a concerted effort to attract additional deposits in order to support loan growth. Approximately half of the deposit growth came from the addition of one commercial deposit relationship obtained through the Company's expansion into Baltimore, MD.

Year-to-date average core deposits, which exclude brokered deposits and certificates of deposit greater than $100,000, have increased by $81.7 million reflecting continued progress in furthering the Company’s funding strategy.

Adjustments to Previously Reported Financial Information
In the second quarter of 2015, the Company determined that the gross deferred tax assets, the gross deferred tax liabilities, and the related valuation allowance disclosed in Note 21, “Income Taxes,” to the consolidated financial statements of the Company included in the Company’s Form 10-K for the fiscal year ended December 31, 2014 (the “2014 Form 10-K”), were overstated by $13.8 million, $48 thousand, and $13.7 million, respectively, as of December 31, 2014. Gross deferred tax assets, and the related valuation allowance were overstated by $13.6 million, and $14.2 million, respectively, and the gross deferred tax liabilities were understated by $581 thousand as of December 31, 2013.
The Company does not consider the overstatements, or the understatements, to be material to the consolidated financial statements. As the Company maintains a full valuation allowance on its net deferred tax assets, the revisions did not require any changes to the Company’s consolidated balance sheets, consolidated statements of operations, consolidated statements of cash flows, or consolidated statements of comprehensive income for fiscal year 2014 or any prior period. The corrected information will appear in a footnote to the consolidated financial statements of the Company in its upcoming Form 10-Q for the quarter ended June 30, 2015.

Capitalization
At June 30, 2015, the Company exceeded all of the regulatory capital minimums and Bank of Hampton Roads and Shore Bank were both considered “well capitalized” under all applicable regulatory capital standards. Our consolidated regulatory capital ratios were Common Equity Tier 1 Capital Ratio of 11.52%, Tier 1 Risk-Based Capital Ratio of 13.12%, Total Risk-Based Capital Ratio of 14.37%, and Tier 1 Leverage Ratio of 11.18%.  




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, 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 BOHR and Shore. The Banks engage in general community and commercial banking business, targeting the needs of individuals and small- to medium-sized businesses in our primary service areas. Currently, BOHR operates 17 full-service offices in the Hampton Roads region of southeastern Virginia and 10 full-service offices throughout Richmond, Virginia and the Northeastern and Research Triangle regions of North Carolina that do business as Gateway Bank. Shore operates 7 full-service offices in the Eastern Shore of Virginia and Maryland and 3 loan production offices in Maryland and Delaware. 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)
 
 
June 30,
 
 
December 31,
(unaudited)
 
 
2015
 
 
2014
Assets:
 
 
 
 
 
 
Cash and due from banks
 
$
17,630

 
$
16,684

Interest-bearing deposits in other banks
 
 
1,195

 
 
1,349

Overnight funds sold and due from Federal Reserve Bank
 
 
45,969

 
 
85,586

Investment securities available for sale, at fair value
 
 
210,187

 
 
302,221

Restricted equity securities, at cost
 
 
11,539

 
 
15,827

 
 
 
 
 
 
 
Loans held for sale
 
 
65,374

 
 
22,092

 
 
 
 
 
 
 
Loans
 
 
1,529,024

 
 
1,422,935

Allowance for loan losses
 
 
(27,736)

 
 
(27,050)

Net loans
 
 
1,501,288

 
 
1,395,885

Premises and equipment, net
 
 
62,511

 
 
63,519

Interest receivable
 
 
4,115

 
 
4,503

Other real estate owned and repossessed assets,
 
 
 
 
 
 
net of valuation allowance
 
 
13,112

 
 
21,721

Intangible assets, net
 
 
545

 
 
842

Bank-owned life insurance
 
 
50,190

 
 
49,536

Other assets
 
 
7,648

 
 
8,841

Totals assets
 
$
1,991,303

 
$
1,988,606

Liabilities and Shareholders' Equity:
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
Noninterest-bearing demand
 
$
317,281

 
$
266,921

Interest-bearing:
 
 
 
 
 
 
Demand
 
 
619,129

 
 
621,066

Savings
 
 
58,557

 
 
56,221

Time deposits:
 
 
 
 
 
 
Less than $100
 
 
346,363

 
 
342,794

$100 or more
 
 
333,133

 
 
294,346

Total deposits
 
 
1,674,463

 
 
1,581,348

Federal Home Loan Bank borrowings
 
 
67,546

 
 
165,847

Other borrowings
 
 
29,451

 
 
29,224

Interest payable
 
 
563

 
 
560

Other liabilities
 
 
15,682

 
 
14,130

Total liabilities
 
 
1,787,705

 
 
1,791,109

Shareholders' equity:
 
 
 
 
 
 
Common stock
 
 
1,707

 
 
1,706

Capital surplus
 
 
589,908

 
 
588,692

Accumulated deficit
 
 
(391,474)

 
 
(395,535)

Accumulated other comprehensive income, net of tax
 
 
2,594

 
 
2,134

Total shareholders' equity before non-controlling interest
 
 
202,735

 
 
196,997

Non-controlling interest
 
 
863

 
 
500

Total shareholders' equity
 
 
203,598

 
 
197,497

Total liabilities and shareholders' equity
 
$
1,991,303

 
$
1,988,606

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-performing Assets at Period-End:
 
 
 
 
 
 
Nonaccrual loans including nonaccrual impaired loans
 
$
40,892

 
$
21,507

Loans 90 days past due and still accruing interest
 
 

 
 

Other real estate owned and repossessed assets
 
 
13,112

 
 
21,721

Total non-performing assets
 
$
54,004

 
$
43,228

 
 
 
 
 
 
 
Composition of Loan Portfolio at Period-End:
 
 
 
 
 
 
Commercial
 
$
243,023

 
$
219,029

Construction
 
 
144,827

 
 
136,955

Real-estate commercial
 
 
637,124

 
 
639,163

Real-estate residential
 
 
350,086

 
 
354,017

Installment
 
 
154,396

 
 
74,821

Deferred loan fees and related costs
 
 
(432)

 
 
(1,050)

Total loans
 
$
1,529,024

 
$
1,422,935




Hampton Roads Bankshares, Inc.
 
 
 
 
 
 
 
 
Financial Highlights
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands, except share and per share data)
 
Three Months Ended
 
 
Six Months Ended
(unaudited)
 
 
June 30,
 
 
June 30,
 
 
June 30,
 
 
June 30,
 
 
 
2015
 
 
2014
 
 
2015
 
 
2014
Interest Income:
 
 
 
 
 
 
 
 
 
 
 
 
Loans, including fees
 
$
17,452

 
$
15,584

 
$
33,612
 
$
31,276
Investment securities
 
 
1,555

 
 
2,299

 
 
3,297
 
 
4,533
Overnight funds sold and due from FRB
 
 
40

 
 
51

 
 
99
 
 
83
Total interest income
 
 
19,047

 
 
17,934

 
 
37,008
 
 
35,892
Interest Expense:
 
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
Demand
 
 
670

 
 
658

 
 
1,344
 
 
1,281
Savings
 
 
13

 
 
8

 
 
23
 
 
16
Time deposits:
 
 
 
 
 
 
 
 
 
 
 
 
Less than $100
 
 
943

 
 
810

 
 
1,853
 
 
1,581
$100 or more
 
 
1,007

 
 
779

 
 
1,941
 
 
1,516
Interest on deposits
 
 
2,633

 
 
2,255

 
 
5,161
 
 
4,394
Federal Home Loan Bank borrowings
 
 
251

 
 
405

 
 
574
 
 
828
Other borrowings
 
 
424

 
 
237

 
 
842
 
 
678
Total interest expense
 
 
3,308

 
 
2,897

 
 
6,577
 
 
5,900
Net interest income
 
 
15,739

 
 
15,037

 
 
30,431
 
 
29,992
Provision for loan losses
 
 

 
 

 
 
600
 
 
100
Net interest income after provision for loan losses
 
 
15,739

 
 
15,037

 
 
29,831
 
 
29,892
Noninterest Income:
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage banking revenue
 
 
5,500

 
 
3,144

 
 
9,722
 
 
4,954
Service charges on deposit accounts
 
 
1,298

 
 
1,195

 
 
2,440
 
 
2,354
Income from bank-owned life insurance
 
 
305

 
 
329

 
 
655
 
 
3,545
Gain on sale of investment securities available for sale
 
 
126

 
 
118

 
 
238
 
 
185
Loss on sale of premises and equipment
 
 

 
 
(18)

 
 
(14)
 
 
(31)
Gain (loss) on sale of other real estate owned and repossessed assets
 
 
(56)

 
 
(77)

 
 
20
 
 
144
Impairment of other real estate owned and repossessed assets
 
 
(331)

 
 
(1,090)

 
 
(1,265)
 
 
(1,426)
Visa check card income
 
 
676

 
 
654

 
 
1,317
 
 
1,247
Other
 
 
506

 
 
1,266

 
 
1,364
 
 
1,851
Total noninterest income
 
 
8,024

 
 
5,521

 
 
14,477
 
 
12,823
Noninterest Expense:
 
 
 
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
 
 
11,249

 
 
9,109

 
 
21,916
 
 
18,676
Professional and consultant fees
 
 
1,459

 
 
1,922

 
 
2,267
 
 
3,150
Occupancy
 
 
1,626

 
 
1,501

 
 
3,255
 
 
3,221
FDIC insurance
 
 
399

 
 
253

 
 
1,023
 
 
1,154
Data processing
 
 
1,606

 
 
1,019

 
 
3,037
 
 
2,166
Problem loan and repossessed asset costs
 
 
492

 
 
375

 
 
612
 
 
807
Equipment
 
 
335

 
 
391

 
 
685
 
 
764
Directors' and regional board fees
 
 
293

 
 
543

 
 
594
 
 
930
Advertising and marketing
 
 
445

 
 
349

 
 
705
 
 
603
Other
 
 
2,570

 
 
2,250

 
 
5,016
 
 
4,757
Total noninterest expense
 
 
20,474

 
 
17,712

 
 
39,110
 
 
36,228
Income before provision for income taxes
 
 
3,289

 
 
2,846

 
 
5,198
 
 
6,487
Provision for income taxes
 
 
35

 
 
37

 
 
75
 
 
45
Net income
 
 
3,254

 
 
2,809

 
 
5,123
 
 
6,442
Net income attributable to non-controlling interest
 
 
528

 
 
333

 
 
1,062
 
 
107
Net income attributable to Hampton Roads Bankshares, Inc.
 
$
2,726

 
$
2,476

 
$
4,061
 
$
6,335
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Share:
 
 
 
 
 
 
 
 
 
 
 
 
Basic Income
 
$
0.02

 
$
0.01

 
$
0.02
 
$
0.04
Diluted Income
 
$
0.02

 
$
0.01

 
$
0.02
 
$
0.04
Basic weighted average shares outstanding
 
 
171,505,172

 
 
170,443,468

 
 
171,447,138
 
 
170,725,817
Effect of dilutive shares and warrant
 
 
1,170,106

 
 
1,284,234

 
 
1,095,593
 
 
1,279,762
Diluted weighted average shares outstanding
 
 
172,675,278

 
 
171,727,702

 
 
172,542,731
 
 
172,005,579




 
 
 
 
 
 
 
 
 
 
 
 
 













Hampton Roads Bankshares, Inc.












Financial Highlights












(in thousands, except share and per share data)

Three Months Ended


Six Months Ended
(unaudited)


June 30,


June 30,


June 30,


June 30,
Daily Averages:


2015


2014


2015


2014
Total assets

$
2,035,901


$
1,956,846


$
2,035,178


$
1,946,493

Gross loans (excludes loans held for sale)


1,536,988



1,358,893



1,513,132



1,358,289

Investment and restricted equity securities


238,979



342,005



253,063



337,924

Intangible assets


636



1,222



710



1,298

Total deposits


1,673,718



1,531,914



1,651,635



1,520,805

Total borrowings


141,700



213,895



161,651



216,326

Shareholders' equity *


204,099



191,600



202,205



189,265

Shareholders' equity - tangible *


203,463



190,378



201,495



187,967

Interest-earning assets


1,903,614



1,812,901



1,901,060



1,799,048

Interest-bearing liabilities


1,521,933



1,499,114



1,532,768



1,492,818














Financial Ratios:












Return on average assets


0.54
%


0.51
%


0.40
 %


0.66
%
Return on average equity *


5.36
%


5.18
%


4.05
 %


6.75
%
Return on average equity - tangible *


5.37
%


5.22
%


4.06
 %


6.80
%
Net interest margin


3.32
%


3.33
%


3.23
 %


3.36
%
Efficiency ratio


86.62
%


86.65
%


87.55
 %


84.98
%
Tangible equity to tangible assets *


10.16
%


9.78
%


10.16
 %


9.78
%













Allowance for Loan Losses:












Beginning balance

$
28,177


$
31,260


$
27,050


$
35,031

Provision for losses








600



100

Charge-offs


(1,246)



(6,410)



(1,697)



(11,577)

Recoveries


805



1,212



1,783



2,508

Ending balance

$
27,736


$
26,062


$
27,736


$
26,062














Asset Quality Ratios:












Annualized net charge-offs to average loans


0.12
%


1.53
%


(0.01
)%


1.35
%
Non-performing loans to total loans


2.67
%


2.65
%


2.67
 %


2.65
%
Non-performing assets ratio


3.36
%


4.19
%


3.36
 %


4.19
%
Allowance for loan losses to total loans


1.81
%


1.91
%


1.81
 %


1.91
%













* Equity amounts exclude non-controlling interest