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Hampton Roads Bankshares Announces First Quarter Financial Results

  • Year-to-date earnings totaled $3.9 million, a $3.3 million increase over the comparable period in 2013
  • Non-performing asset ratio improves by more than 30% year-over-year
  • Average core deposits grow by more than $24 million year-over-year

VIRGINIA BEACH, Va., May 8, 2014 (GLOBE NEWSWIRE) -- Hampton Roads Bankshares, Inc. (the "Company") (Nasdaq:HMPR), the holding company for the Bank of Hampton Roads and Shore Bank, today announced financial results for the first quarter of 2014. Net income attributable to Hampton Roads Bankshares, Inc. was $3.9 million for the three months ended March 31, 2014, compared to $0.6 million for the comparable period in 2013.

"Our financial results in the first quarter reflect the continued discipline in the execution of our One Bank strategic plan which we implemented in early 2013," said Douglas Glenn, President and Chief Executive Officer. "We are committed to achieving sustained profitability in a difficult banking environment without taking undue risk. Our success has allowed for additional investment in people, products and services which provide our customers consistency, convenience and choice in helping them achieve their financial dreams. "

Net Interest Income

Net interest income for the three months ended March 31, 2014 and March 31, 2013 was $15.0 million and $15.9 million, respectively. The decrease in year-over-year net interest income was primarily the result of decreases in average interest-earning assets and a slight decline in net interest margin.

Credit Quality

The Company's non-performing assets ratio improved to 5.16% at March 31, 2014 from 5.29% at December 31, 2013 and from 7.51% at the comparable quarter end in 2013.

The allowance for loan losses decreased $3.8 million (net of charge-offs and recoveries) during the three months ended March 31, 2014 as a result of net charge-offs exceeding additional provisions for loan losses. Net charge-offs were $3.9 million during the three months ended March 31, 2014 compared with $4.7 million during the same period in 2013. Our provision for loan losses was $100 thousand during the three months ended March 31, 2014 compared to no provision for loan losses being recorded during the same period in 2013.

Noninterest Income

Noninterest income for the three months ended March 31, 2014 was $7.3 million, an increase of $1.9 million as compared to $5.4 million for the same period in 2013. Declines in losses on premises and equipment, other real estate owned and repossessed assets, and an increase in income from bank-owned life insurance, offset by a decline in mortgage banking revenue, produced a year-over -year increase.

Income from bank-owned life insurance increased $2.8 million to $3.2 million for the three months ended March 31, 2014 compared to $373 thousand for the comparative period in 2013, largely because of life insurance benefits recognized in excess of cash surrender value from the deaths of one current employee and one former employee during the first quarter of 2014.

Noninterest Expense

Noninterest expense was $18.5 million and $19.4 million for the three months ended March 31, 2014 and March 31, 2013, respectively, a decrease of $915 thousand. Year-over-year reductions in headcount and lower volume in our mortgage company were largely responsible for a $1.4 million decline in salaries and employee benefits.

Increased data processing costs and elevated professional and consultant fees partially offset the drop in salaries and employee benefits. Data processing increased $350 thousand mainly due to implementation costs and operating expenses associated with the Company's additional products and services.

Professional and consultant fees remain elevated due to a number of factors related to the launch of new products and services, the resolution of problem assets, and ongoing costs related to legal matters.

Balance Sheet Trends

Total assets were $1.9 billion at March 31, 2014, a decrease of $4.7 million from December 31, 2013. The decrease in assets was primarily associated with a $4.5 million decrease in loans held for sale, a $34.8 million decrease in gross loans, a $9.0 million decrease in other real estate owned and repossessed assets, a $7.1 million decrease in investment securities available for sale, partially offset by a $47.0 million increase in overnight funds sold and due from FRB and a $4.2 million increase in other assets.

Gross loans decreased by $34.8 million during the three months ended March 31, 2014, primarily due to normal loan pay down and charge-off activity exceeding new loan origination volume. Impaired loans increased by $3.3 million during the three months ended March 31, 2014 to $70.9 million, up from $67.6 million at December 31, 2013, primarily as a result of three credit relationships that became impaired.

Allowance for loan losses at March 31, 2014 decreased 10.8% to $31.3 million from $35.0 million at December 31, 2013 as net charge-offs exceeded additional provisions for loan losses.

Deposits at March 31, 2014 decreased $5.4 million from December 31, 2013 as a result of decreases of $4.5 million in time deposits over $100 thousand, decreases of $3.7 million in noninterest-bearing demand deposits, decreases of $3.4 million in savings deposits, partially offset by increases of $5.4 million in interest-bearing demand deposits. The decline in time deposits is primarily the result of the attrition of certain national market time deposits and reflects the Company's continuing efforts to improve its mix of funds.

Average core deposits, which exclude brokered deposits and certificates of deposit greater than $100 thousand, increased by $24.4 million over the comparable quarterly average in 2013 as a result of successful marketing campaigns of the Company's deposit products.

Capitalization

At March 31, 2014, 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. The Company's total risk-based capital, Tier 1 and Tier 1 leverage ratios as of March 31, 2014, were 15.98%, 14.72% and 11.18%, respectively.

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, and other filings made with the SEC.

About Hampton Roads Bankshares, Inc.

Hampton Roads Bankshares, Inc. is a 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. 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 six banking offices, ATMs and loan production offices in West Ocean City, Maryland and Rehoboth Beach, Delaware. Through various affiliates, the Banks also offer mortgage banking services and investment products. 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.

Hampton Roads Bankshares, Inc.
Financial Highlights
(in thousands)
(unaudited) March 31, 2014 December 31, 2013 March 31, 2013
Assets:
Cash and due from banks $ 17,568 $ 18,806 $ 14,767
Interest-bearing deposits in other banks 698 654 818
Overnight funds sold and due from Federal Reserve Bank 89,866 42,841 108,637
Investment securities available for sale, at fair value 318,374 325,484 292,669
Restricted equity securities, at cost 16,419 17,356 17,323
Loans held for sale 20,544 25,087 51,846
Loans 1,349,743 1,384,531 1,412,650
Allowance for loan losses (31,260) (35,031) (43,709)
Net loans 1,318,483 1,349,500 1,368,941
Premises and equipment, net 66,565 67,146 71,457
Interest receivable 4,567 4,811 5,371
Other real estate owned and repossessed assets, net of valuation allowance 27,619 36,665 33,834
Intangible assets, net 1,288 1,437 2,075
Bank-owned life insurance 49,773 50,802 53,572
Other assets 13,848 9,683 11,032
Totals assets $ 1,945,612 $ 1,950,272 $ 2,032,342
Liabilities and Shareholders' Equity:
Deposits:
Noninterest-bearing demand $ 241,748 $ 245,409 $ 239,813
Interest-bearing:
Demand 605,697 600,315 570,544
Savings 58,873 62,283 61,949
Time deposits:
Less than $100 325,357 324,635 362,446
$100 or more 286,236 290,686 360,412
Total deposits 1,517,911 1,523,328 1,595,164
Federal Home Loan Bank borrowings 188,958 194,178 194,839
Other borrowings 29,086 28,983 41,103
Interest payable 6,341 6,025 5,181
Other liabilities 13,524 13,912 10,693
Total liabilities 1,755,820 1,766,426 1,846,980
Shareholders' equity:
Common stock 1,703 1,703 1,703
Capital surplus 587,786 587,424 586,508
Retained deficit (401,005) (404,864) (410,754)
Accumulated other comprehensive income, net of tax 1,130 (865) 6,598
Total shareholders' equity before non-controlling interest 189,614 183,398 184,055
Non-controlling interest 178 448 1,307
Total shareholders' equity 189,792 183,846 185,362
Total liabilities and shareholders' equity $ 1,945,612 $ 1,950,272 $ 2,032,342
Non-performing Assets at Period-End:
Nonaccrual loans including nonaccrual impaired loans $ 44,242 $ 39,854 $ 78,633
Loans 90 days past due and still accruing interest 298 -- --
Other real estate owned and repossessed assets 27,619 36,665 33,834
Total non-performing assets $ 72,159 $ 76,519 $ 112,467
Composition of Loan Portfolio at Period-End:
Commercial $ 206,130 $ 225,492 $ 239,563
Construction 149,067 158,473 199,782
Real-estate commercial 588,480 590,475 553,350
Real-estate residential 355,074 354,035 364,743
Installment 52,439 57,623 56,296
Deferred loan fees and related costs (1,447) (1,567) (1,084)
Total loans $ 1,349,743 $ 1,384,531 $ 1,412,650
Hampton Roads Bankshares, Inc.
Financial Highlights
(in thousands, except share and per share data) Three Months Ended
(unaudited) March 31, 2014 December 31, 2013 March 31, 2013
Interest Income:
Loans, including fees $ 15,692 $ 16,471 $ 17,673
Investment securities 2,234 2,225 1,815
Overnight funds sold and due from FRB 32 64 42
Interest-bearing deposits in other banks -- -- --
Total interest income 17,958 18,760 19,530
Interest Expense:
Deposits:
Demand 623 566 509
Savings 8 8 10
Time deposits:
Less than $100 772 819 1,000
$100 or more 737 783 1,008
Interest on deposits 2,140 2,176 2,527
Federal Home Loan Bank borrowings 422 468 486
Other borrowings 441 440 587
Total interest expense 3,003 3,084 3,600
Net interest income 14,955 15,676 15,930
Provision for loan losses 100 -- --
Net interest income after provision for loan losses 14,855 15,676 15,930
Noninterest Income:
Mortgage banking revenue 1,811 2,478 5,964
Service charges on deposit accounts 1,159 1,233 1,217
Income from bank-owned life insurance 3,216 296 373
Gain (loss) on sale of premises and equipment (13) 457 (127)
Impairment of premises and equipment -- -- (2,825)
Gain (loss) on other real estate owned and repossessed assets 221 (13) (234)
Other than temporary impairment of other real estate owned and repossessed assets (336) (1,489) (670)
Gain on sale of investment securities available for sale 67 18 --
Visa check card income 593 649 596
Rental Income 153 309 152
Other 431 659 982
Total noninterest income 7,302 4,597 5,428
Noninterest Expense:
Salaries and employee benefits 9,567 9,370 10,956
Occupancy 1,719 2,001 1,802
FDIC insurance 901 1,939 1,018
Professional and consultant fees 1,232 1,561 893
Data processing 1,147 1,176 797
Problem loan and repossessed asset costs 433 696 480
Equipment 373 389 464
Directors' and regional board fees 387 421 241
Advertising and marketing 254 434 260
Other 2,504 1,947 2,521
Total noninterest expense 18,517 19,934 19,432
Income before provision for income taxes 3,640 339 1,926
Provision for income taxes 7 (248) --
Net income 3,633 587 1,926
Net income attributable to non-controlling interest (226) (36) 1,294
Net income attributable to Hampton Roads Bankshares, Inc. $ 3,859 $ 551 $ 632
Per Share:
Cash dividends declared $ -- $ -- $ --
Basic Income $ 0.02 $ -- $ --
Diluted Income $ 0.02 $ -- $ --
Basic weighted average shares outstanding 170,477,548 170,370,406 170,390,149
Effect of dilutive shares and warrant 751,215 729,051 391,254
Diluted weighted average shares outstanding 171,228,763 171,099,457 170,781,403
Hampton Roads Bankshares, Inc.
Financial Highlights
(in thousands, except share and per share data) Three Months Ended
(unaudited) March 31, 2014 December 31, 2013 March 31, 2013
Daily Averages:
Total assets $ 1,936,027 $ 1,973,557 $ 2,031,259
Gross loans (excludes loans held for sale) 1,357,676 1,361,073 1,427,245
Investment and restricted equity securities 333,797 330,664 303,948
Intangible assets 1,375 1,509 2,235
Total deposits 1,509,574 1,547,534 1,594,868
Total borrowings 218,783 223,213 233,557
Shareholders' equity * 187,208 185,864 185,361
Shareholders' equity - tangible * 185,833 184,355 183,126
Interest-earning assets 1,785,041 1,818,693 1,874,746
Interest-bearing liabilities 1,486,452 1,503,824 1,592,562
Financial Ratios:
Return on average assets 0.80% 0.02% 0.12%
Return on average equity * 8.31% 1.19% 1.36%
Return on average equity - tangible * 8.37% 1.20% 1.37%
Net interest margin 3.40% 3.42% 3.45%
Efficiency ratio 83.45% 98.42% 80.35%
Tangible equity to tangible assets * 9.69% 9.34% 8.96%
Allowance for Loan Losses:
Beginning balance $ 35,031 $ 37,701 $ 48,382
Provision for losses 100 -- --
Charge-offs (5,167) (4,620) (6,023)
Recoveries 1,296 1,950 1,350
Ending balance $ 31,260 $ 35,031 $ 43,709
Asset Quality Ratios:
Annualized net chargeoffs to average loans -1.37% -0.80% -1.43%
Non-performing loans to total loans 3.30% 2.88% 5.57%
Non-performing assets ratio 5.16% 5.29% 7.51%
Allowance for loan losses to total loans 2.32% 2.53% 3.09%
* Equity amounts exclude non-controlling interest

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.

CONTACT: Douglas J. Glenn President and Chief Executive Officer (757) 217-1000Source:Hampton Roads Bankshares, Inc.