EX-99.1 2 hr4745ex991.txt EXHIBIT 99.1 Exhibit 99.1 NEWS RELEASE: CONTACT: Tiffany K. Glenn February 7, 2006 (757) 217-1000 33% INCREASE IN NET INCOME REPORTED BY HAMPTON ROADS BANKSHARES NORFOLK, VA: Hampton Roads Bankshares, Inc., parent company of Bank of Hampton Roads, today announced its financial results for fiscal year 2005. The Company's net income of $5,507,329 reflected an increase of 33% over the $4,134,015 earned during 2004. On a diluted per share basis, net income was $0.66 for 2005, an increase of 32% compared to 2004. The Company's profitability ratios reflected its strong financial performance. Return on average assets for 2005 was 1.44%, an increase of 17 basis points compared to 2004. Return on average equity for the year was 12.28%, an increase of 243 basis points compared to 2004. Net interest income for the twelve months ended December 31, 2005 was $18.7 million, an increase of 32% compared to the $14.2 million earned during 2004. The increase resulted from higher average loans, higher loan fees, and the rising interest rate environment. During 2005, the Federal Reserve raised the federal funds rate eight times for a total of 200 basis points. As a result of these factors, the Company's average yield on earning assets increased to 6.92% for 2005 compared to 6.01% for 2004. Because of its deposit mix, the interest rate increases had a less significant effect on the Company's cost of funds. Net interest margin for the twelve months ended December 31, 2005 was 5.26%, an increase of 55 basis points compared to 2004. In consideration of positive trends in credit quality, the Company lowered its 2005 provision for loan losses to $486,000 from $926,000 in 2004. The 2004 amount included a $500,000 charge for a specific credit. In spite of the lower 2005 provision for loan losses, the Company's allowance for loan losses as a percentage of loans increased to 1.26% from 1.12% in 2004. In 2005, recoveries on charged off loans exceeded loan losses. In addition, total nonperforming assets decreased from 0.69% of total assets in 2004 to 0.44% of total assets in 2005. The Company had no foreclosed assets at year-end 2005. Partially offsetting the positive effects of the changes in net interest income and the provision for loan losses was a $2,246,301, or 21%, increase in noninterest expense in 2005. Contributing to this increase were operating costs related to the Company's branch expansion, costs for renovations to some existing locations, and salaries for new employees. In addition to staffing the new offices, the Company expanded its risk management department to keep up with the demands of the growing number of regulatory policies governing the banking industry. Salaries and benefits as well as other expense were affected by changes relating to accounting for stock options and increases in stock-based compensation. At December 31, 2005, total assets were a record $410 million, up 19% over December 31, 2004. Total loans at year-end were $285 million. Loan growth was strongest in the construction and real estate development categories. Construction loans increased 15% from last year with total commitments of $85 million on December 31, 2005 compared to $74 million on December 31, 2004. Total deposits grew 19% to $327 million compared to $275 million at December 31, 2004. Deposit growth was concentrated in the Company's non-interest bearing demand deposit and premium savings accounts. At December 31, 2005, core deposits totaled $293 million and accounted for 89% of the Company's total deposits. The Bank's noninterest bearing demand deposits to total deposits ratio at year-end was 32%. Fourth Quarter 2005 Financial Results ------------------------------------ The Company's fourth quarter net income of $1,495,437 reflected an increase of 34% over the $1,114,383 earned during the fourth quarter of 2004. On a diluted per share basis, net income was $0.18, an increase of 38% over fourth quarter 2004. Return on average assets for the fourth quarter of 2005 was 1.47%, an increase of 14 basis points compared to fourth quarter 2004. Return on average equity for the fourth quarter of 2005 was 12.76%, an increase of 243 basis points compared to fourth quarter 2004. Net interest income for the three months ended December 31, 2005 was $5,455,496, an increase of 41% compared to the $3,871,109 earned during the comparable period in 2004. In consideration of credit quality measures noted previously, the Company did not record a loan loss provision in the fourth quarter of 2005. Included in fourth quarter results the Company recorded a pre-tax charge in the amount of $318,482 related to stock-based compensation expense. The charge was an adjustment related to a technical accounting matter for prior periods. In addition, the Company reclassified its liability for stock options to a component of shareholders' equity. The net effect of the two changes was an increase in shareholders' equity of $1,522,888 and $0.18 in book value per share. "We are especially pleased with 2005's performance and the achievements of the Company throughout its history. This was our eighteenth consecutive year of record earnings and our fourteenth year in a row with a return on assets well above the industry benchmark of 1.00%," said President and Chief Executive Officer Jack W. Gibson. As depicted in the chart below, he also noted his pride in the Company's consistent track record. RETURN ON RETURN ON YEAR TOTAL ASSETS NET INCOME AVERAGE ASSETS AVERAGE EQUITY ---- ------------- ----------- -------------- -------------- 2000 $ 204,208,951 $ 3,107,510 1.59% 9.53% 2001 240,079,761 3,130,311 1.44% 9.19% 2002 298,714,400 3,298,035 1.24% 9.04% 2003 316,473,228 4,023,015 1.34% 10.23% 2004 344,968,930 4,134,015 1.27% 9.85% 2005 409,517,283 5,507,329 1.44% 12.28% 2 Bank of Hampton Roads has been very successful at attracting core deposits through its network of seventeen branch offices. Two de novo offices were opened in 2005: one in the heart of the Great Bridge area of Chesapeake and one in the Dominion Tower in Downtown Norfolk, the center of the Hampton Roads' financial district. The Bank has more full-service branch locations serving Southside Hampton Roads than any other bank headquartered in the area. Shortly after opening a branch office in the Dominion Tower, the corporate offices for Hampton Roads Bankshares and Bank of Hampton Roads were relocated there as well. The Bank's executive offices as well as the accounting, branch administration, compliance, human resources, internal audit, loan operations, marketing, risk management, security, and shareholder relations departments are now located in the building. The Company recently received regulatory approval to redesignate the Dominion Tower as its official corporate headquarters. The Company's former headquarters building in the Greenbrier section of Chesapeake has been fully renovated and serves as a lending center, state-of-the-art training facility and banking office. In 2006 some of the Bank's other locations will undergo renovations, and signage at all offices will be replaced with the distinctive new logo. Management recently unveiled an advertising campaign designed to emphasize the Bank's excellent customer service and friendly way of doing business - both Bank hallmarks. The ads feature testimonials from a cross-section of customers and also highlight the Bank's new corporate headquarters in Downtown Norfolk. The campaign is currently airing on all of the major television networks and various cable channels. It has been well-received by customers and should prove to be a valuable investment contributing to continued growth. In consideration of the Company's financial performance and strength, the Board of Directors recently declared a semi-annual dividend in the amount of $0.20 per share payable on March 15, 2006, to shareholders of record as of February 15, 2006. This amount represents an 11% increase over the $0.18 semi-annual dividend paid in September 2005. As of December 31, 2005, the Company had approximately 8.2 million shares outstanding which will result in a total dividend payment of approximately $1.6 million. The total of the two semi-annual dividends paid in consideration of 2005's earnings is $3.1 million, a 7% increase over that paid in consideration of the prior year's earnings. Including this dividend, the Company has declared over $19 million in dividends since 1992. Shares of Hampton Roads Bankshares common stock are traded on the Over the Counter Bulletin Board under the symbol HMPR. Additional information about the Company and its subsidiaries can be found on the Web at www.bankofhamptonroads.com. 3 HAMPTON ROADS BANKSHARES FINANCIAL HIGHLIGHTS UNAUDITED
THREE MONTHS ENDED TWELVE MONTHS ENDED ----------------------------- ----------------------------- DEC. 31, 2005 DEC. 31, 2004 DEC. 31, 2005 DEC. 31, 2004 ------------- ------------- ------------- ------------- OPERATING RESULTS ----------------- Interest income $ 7,097,244 $ 4,906,171 $ 24,558,111 $ 18,067,771 Interest expense 1,641,748 1,035,062 5,868,887 3,911,210 ------------- ------------- ------------- ------------- Net interest income 5,455,496 3,871,109 18,689,224 14,156,561 Provision for loan losses - 129,000 486,000 926,000 Noninterest income 683,966 822,911 3,214,467 3,791,282 Noninterest expense 3,866,504 2,864,321 13,040,371 10,794,070 Income taxes 777,521 586,316 2,869,991 2,139,583 ------------- ------------- ------------- ------------- Net income before cumulative effect of change in accounting principle 1,495,437 1,114,383 5,507,329 4,088,190 Cumulative effect of change in accounting principle, net - - - 45,825 ------------- ------------- ------------- ------------- Net income $ 1,495,437 $ 1,114,383 $ 5,507,329 $ 4,134,015 ============= ============= ============= ============= Earnings per share: Before change in accounting principle Basic $ 0.18 $ 0.13 $ 0.68 $ 0.51 Diluted 0.18 0.13 0.66 0.49 After change in accounting principle Basic $ 0.18 $ 0.13 $ 0.68 $ 0.52 Diluted 0.18 0.13 0.66 0.50 Book value per share 5.96 5.41 5.96 5.41 BALANCE SHEET AT PERIOD-END --------------------------- Total Loans $ 285,329,935 $ 275,190,194 $ 285,329,935 $ 275,190,194 Total securities 73,825,659 38,994,585 73,825,659 38,994,585 Total deposits 327,446,518 275,115,358 327,446,517 275,115,358 Other borrowings 30,500,000 23,000,000 30,500,000 23,000,000 Shareholder's equity 49,130,529 43,625,560 49,130,529 43,625,560 Total assets 409,517,283 344,968,930 409,517,283 344,968,930 DAILY AVERAGES -------------- Total Loans $ 285,108,763 $ 264,460,565 $ 287,979,238 $ 236,082,227 Total securities 67,275,002 40,749,357 52,705,560 57,454,947 Total deposits 320,553,185 264,007,035 302,167,398 260,109,564 Other borrowings 30,500,000 23,153,261 30,943,521 18,734,016 Shareholder's equity 46,509,360 42,920,518 44,855,453 41,960,224 Interest-earning assets 374,229,016 309,069,746 355,000,767 300,566,882 Interest-bearing liabilities 245,655,736 195,081,579 233,450,020 194,455,083 Total assets 402,490,149 333,761,060 382,820,912 324,485,490
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THREE MONTHS ENDED TWELVE MONTHS ENDED ----------------------------- ----------------------------- DEC. 31, 2005 DEC. 31, 2004 DEC. 31, 2005 DEC. 31, 2004 ------------- ------------- ------------- ------------- FINANCIAL RATIOS ---------------- Return on average assets 1.47% 1.33% 1.44% 1.27% Return on average equity 12.76% 10.33% 12.28% 9.85% Net interest margin 5.78% 4.98% 5.26% 4.71% Efficiency ratio 62.98% 61.02% 59.54% 60.14% ALLOWANCE FOR LOAN LOSSES ------------------------- Beginning balance $ 3,516,341 $ 3,651,503 $ 3,070,600 $ 2,948,011 Provision for losses - 129,000 486,000 926,000 Charge-offs (34,992) (744,386) (98,737) (940,555) Recoveries 116,148 34,483 139,634 137,144 Ending balance 3,597,497 3,070,600 3,597,497 3,070,600 NONPERFORMING ASSETS -------------------- Nonaccrual loans $ 1,790,869 $ 1,904,430 $ 1,790,869 $ 1,904,430 Loans 90 days past due and still accruing interest 30,112 469,146 30,112 469,146 Other real estate owned - - - - Total nonperforming assets 1,820,981 2,373,576 1,820,981 2,373,576 ASSET QUALITY RATIOS -------------------- Nonperforming assets to total assets 0.44% 0.69% 0.44% 0.69% Allowance for loan losses to total loans 1.26% 1.12% 1.26% 1.12% Allowance for loan losses to nonperforming assets 197.56% 129.37% 197.56% 129.37%
Certain statements in this report 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. Although the Company believes that its expectations with respect to certain 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 any future results, performance or achievements expressed or implied by such forward-looking statements. Actual future results and trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the effects and changes in: general economic conditions, the interest rate environment, legislative and regulatory requirements, competitive pressures, new products and delivery systems, and inflation. ### 5