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Hampton Roads Bankshares Announces Second Quarter Financial Results

  • Second quarter net income available to common shareholders totaled $2.5 million, a $2.4 million increase over the comparable period in 2013
  • Year-to-date earnings totaled $6.3 million, a $5.6 million increase over the comparable period in 2013
  • Continued improvement in credit quality results in non-performing assets ratio of 4.19%, an improvement in excess of 20% over year end 2013
  • Expansion into new product lines through Shore Premier Finance and markets such as Baltimore create potential for growth
  • Commercial banking and cash management professionals added in core markets

VIRGINIA BEACH, Va., Aug. 7, 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 second quarter of 2014. Net income available to common shareholders for the three and six months ended June 30, 2014 was $2.5 million and $6.3 million, respectively, as compared with net income for the three and six months ended June 30, 2013 of $89 thousand and $721 thousand, respectively.

"Our operating performance in the second quarter has allowed us to make continued, strategic investments in the Company that we believe will benefit our shareholders, employees and customers over the long term," said Douglas Glenn, President and Chief Executive Officer. "Our commitment to developing a strong and vibrant corporate culture is also resonating in our markets and has attracted talented individuals who we believe will create new opportunities for our company and serve to enhance the customer experience."

Net Interest Income

Net interest income decreased $1.1 million and $2.0 million in the three and six months ended June 30, 2014 compared to the same periods in 2013. The decreases were due primarily to the decreases in average interest-earning assets, and a slight decline in net interest margin.

Credit Quality

Our non-performing assets ratio was 4.19% and 5.29% at June 30, 2014 and December 31, 2013, respectively. The non-performing assets ratio is defined as the ratio of loans 90 days past due and still accruing interest plus nonaccrual loans plus other real estate owned and repossessed assets to gross loans plus loans held for sale plus other real estate owned and repossessed assets.

Allowance for loan losses at June 30, 2014 decreased 25.6% to $26.1 million from $35.0 million at December 31, 2013 as net charge-offs of previously identified impaired loans exceeded additional provisions for loan losses.

Noninterest Income

Noninterest income for the three and six months ended June 30, 2014 was $5.5 million and $12.8 million, respectively, a decline of 27.2% and 1.5% from the same periods in 2013. A major driver of this decline is mortgage banking revenue which decreased $1.1 million or 26.0% and $5.3 million or 51.5% during the three and six months ended June 30, 2014, respectively, compared to the same periods in 2013. The decrease in mortgage banking revenue is due to declines in both origination volume and margin, driven by rising market interest rates, which resulted in a negative impact on refinance demand. Offsetting these declines were decreases in losses on premises and equipment associated with certain branch closings that occurred in 2013, decreases in other than temporary impairment of other real estate owned and repossessed assets, and an increase in income from bank-owned life insurance due to life insurance benefits received in excess of cash surrender value.

Noninterest Expense

Noninterest expense finished at $17.7 million and $36.2 million for the three and six months ended June 30, 2014, respectively, representing declines of $4.5 million or 20.2% and $5.4 million or 13.0%, compared to the same periods in 2013, primarily due to lower salaries and employee benefits, occupancy and FDIC insurance expenses.

Balance Sheet Trends

Assets were $2.0 billion at June 30, 2014. Total assets increased by $25.2 million or 1.3% from December 31, 2013. The increase in assets was primarily associated with a $29.3 million or 68.4% increase in overnight funds sold and due from FRB, a $21.3 million or 6.5% increase in investment securities available for sale, a $9.0 million or 25.6% decrease in the allowance for loan losses, and a $5.5 million or 21.7% increase in loans held for sale. These increases were partially offset by a $20.7 million or 1.5% decrease in gross loans, and a $14.3 million or 38.9% decrease in other real estate owned and repossessed assets.

Gross loans decreased by $20.7 million or 1.5% during the six months ended June 30, 2014, primarily due to normal loan pay down and charge off activity which exceeded new loan origination volume.

Deposits at June 30, 2014 increased $38.2 million or 2.5% from December 31, 2013 as a result of increases of $21.5 million or 8.8% in noninterest-bearing demand deposits, increases of $16.4 million or 5.1% in time deposits less than $100 thousand, increases of $5.6 million in time deposits of $100 thousand or more, partially offset by decreases of $4.7 million or 7.5% in savings deposits.

Year-to-date average core deposits, which exclude brokered deposits and time deposits of $100 thousand or more, have increased by $19.7 million reflecting continued progress in furthering the Company's funding strategy.

Capitalization

At June 30, 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. Our consolidated regulatory capital ratios were Tier 1 Leverage Ratio of 11.10%, Tier 1 Risk-Based Capital Ratio of 14.06%, and Total Risk-Based Capital of 15.31%.

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, 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 March 31, 2014, 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. 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 loan production offices. Through various affiliates, the Banks also offer mortgage banking services. 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) June 30, 2014 March 31, 2014 June 30, 2013
Assets:
Cash and due from banks $ 18,266 $ 17,568 $ 16,783
Interest-bearing deposits in other banks 577 698 648
Overnight funds sold and due from Federal Reserve Bank 72,131 89,866 107,339
Investment securities available for sale, at fair value 346,771 318,374 278,386
Restricted equity securities, at cost 16,072 16,419 17,351
Loans held for sale 30,539 20,544 51,369
Loans 1,363,797 1,349,743 1,400,250
Allowance for loan losses (26,062) (31,260) (38,234)
Net loans 1,337,735 1,318,483 1,362,016
Premises and equipment, net 65,652 66,565 69,925
Interest receivable 4,403 4,567 5,003
Other real estate owned and repossessed assets, net of valuation allowance 22,419 27,619 32,906
Intangible assets, net 1,139 1,288 1,741
Bank-owned life insurance 49,288 49,773 54,006
Other assets 10,454 13,848 11,465
Totals assets $ 1,975,446 $ 1,945,612 $ 2,008,938
Liabilities and Shareholders' Equity:
Deposits:
Noninterest-bearing demand $ 266,878 $ 241,748 $ 268,372
Interest-bearing:
Demand 599,719 605,697 575,615
Savings 57,589 58,873 66,751
Time deposits:
Less than $100 341,060 325,357 341,193
$100 or more 296,276 286,236 324,466
Total deposits 1,561,522 1,517,911 1,576,397
Federal Home Loan Bank borrowings 176,255 188,958 194,619
Other borrowings 29,007 29,086 41,206
Interest payable 481 6,341 5,493
Other liabilities 13,384 13,524 11,988
Total liabilities 1,780,649 1,755,820 1,829,703
Shareholders' equity:
Common stock 1,703 1,703 1,703
Capital surplus 587,734 587,786 586,745
Retained deficit (398,529) (401,005) (410,665)
Accumulated other comprehensive income, net of tax 3,378 1,130 1,028
Total shareholders' equity before non-controlling interest 194,286 189,614 178,811
Non-controlling interest 511 178 424
Total shareholders' equity 194,797 189,792 179,235
Total liabilities and shareholders' equity $ 1,975,446 $ 1,945,612 $ 2,008,938
Non-performing Assets at Period-End:
Nonaccrual loans including nonaccrual impaired loans $ 36,127 $ 44,242 $ 63,739
Loans 90 days past due and still accruing interest 843 298 --
Other real estate owned and repossessed assets 22,419 27,619 32,906
Total non-performing assets $ 59,389 $ 72,159 $ 96,645
Composition of Loan Portfolio at Period-End:
Commercial $ 198,110 $ 206,130 $ 239,293
Construction 138,083 149,067 183,513
Real-estate commercial 628,764 588,480 560,235
Real-estate residential 347,780 355,074 355,568
Installment 52,161 52,439 62,680
Deferred loan fees and related costs (1,101) (1,447) (1,039)
Total loans $ 1,363,797 $ 1,349,743 $ 1,400,250
Hampton Roads Bankshares, Inc.
Financial Highlights
(in thousands, except share and per share data) Three Months Ended Six Months Ended
(unaudited) June 30, 2014 March 31, 2014 June 30, 2013 June 30, 2014 June 30, 2013
Interest Income:
Loans, including fees $ 15,584 $ 15,692 $ 17,687 $ 31,276 $ 35,360
Investment securities 2,299 2,234 1,839 4,533 3,654
Overnight funds sold and due from FRB 51 32 63 83 105
Interest-bearing deposits in other banks -- -- -- -- --
Total interest income 17,934 17,958 19,589 35,892 39,119
Interest Expense:
Deposits:
Demand 658 623 558 1,281 1,067
Savings 8 8 9 16 19
Time deposits:
Less than $100 810 772 921 1,581 1,921
$100 or more 779 737 935 1,516 1,943
Interest on deposits 2,255 2,140 2,423 4,394 4,950
Federal Home Loan Bank borrowings 405 422 479 8,208 965
Other borrowings 237 441 592 678 1,179
Total interest expense 2,897 3,003 3,494 5,900 7,094
Net interest income 15,037 14,955 16,095 29,992 32,025
Provision for loan losses -- 100 1,000 100 1,000
Net interest income after provision for loan losses 15,037 14,855 15,095 29,892 31,025
Noninterest Income:
Mortgage banking revenue 3,144 1,811 4,250 4,954 10,214
Service charges on deposit accounts 1,195 1,159 1,300 2,354 2,517
Income from bank-owned life insurance 329 3,216 434 3,545 807
Gain (loss) on sale of premises and equipment (18) (13) 7 (31) (120)
Impairment of premises and equipment -- -- -- -- (2,825)
Gain (loss) on other real estate owned and repossessed assets (77) 221 233 144 (1)
Other than temporary impairment of other real estate owned and repossessed assets (1,090) (336) (1,007) (1,426) (1,677)
Gain on sale of investment securities available for sale 118 67 763 185 763
Visa check card income 654 593 662 1,247 1,258
Rental Income 160 153 149 313 301
Other 1,106 431 793 1,538 1,775
Total noninterest income 5,521 7,302 7,584 12,823 13,012
Noninterest Expense:
Salaries and employee benefits 9,109 9,567 10,951 18,676 21,907
Occupancy 1,501 1,719 2,517 3,221 4,319
FDIC insurance 253 901 878 1,154 1,896
Professional and consultant fees 1,922 1,232 1,639 3,154 2,532
Data processing 1,019 1,147 1,129 2,166 1,926
Problem loan and repossessed asset costs 375 433 530 807 1,010
Equipment 391 373 491 764 955
Directors' and regional board fees 543 387 338 930 579
Advertising and marketing 349 254 341 603 601
Other 2,250 2,504 3,379 4,753 5,900
Total noninterest expense 17,712 18,517 22,193 36,228 41,625
Income before provision for income taxes 2,846 3,640 486 6,487 2,412
Provision for income taxes 37 7 135 45 135
Net income 2,809 3,633 351 6,442 2,277
Net income attributable to non-controlling interest 333 (226) 262 107 1,556
Net income attributable to Hampton Roads Bankshares, Inc. $ 2,476 $ 3,859 $ 89 $ 6,335 $ 721
Per Share:
Cash dividends declared $ -- $ -- $ -- $ -- $ --
Basic Income $ 0.01 $ 0.02 $ -- $ 0.04 $ --
Diluted Income $ 0.01 $ 0.02 $ -- $ 0.04 $ --
Basic weighted average shares outstanding 170,443,468 170,477,548 170,391,127 170,725,817 170,390,137
Effect of dilutive shares and warrant 1,284,234 751,215 1,247,524 1,279,762 1,238,967
Diluted weighted average shares outstanding 171,727,702 171,228,763 171,638,651 172,005,579 171,629,104
Hampton Roads Bankshares, Inc.
Financial Highlights
(in thousands, except share and per share data) Three Months Ended Six Months Ended
(unaudited) June 30, 2014 March 31, 2014 June 30, 2013 June 30, 2014 June 30, 2013
Daily Averages:
Total assets $ 1,956,846 $ 1,936,027 $ 2,027,560 $ 1,946,493 $ 2,029,399
Gross loans (excludes loans held for sale) 1,358,893 1,357,676 1,415,523 1,358,289 1,421,351
Investment and restricted equity securities 342,005 333,798 298,100 337,924 301,007
Intangible assets 1,222 1,376 1,903 1,298 2,068
Total deposits 1,531,914 1,509,574 1,590,107 1,520,805 1,592,474
Total borrowings 213,895 218,783 235,883 216,326 235,943
Shareholders' equity * 191,600 186,904 184,954 189,265 184,680
Shareholders' equity - tangible * 190,378 185,528 183,051 187,967 182,612
Interest-earning assets 1,812,901 1,785,041 1,874,902 1,799,048 1,874,824
Interest-bearing liabilities 1,499,114 1,486,452 1,576,668 1,492,818 1,584,571
Financial Ratios:
Return on average assets 0.51% 0.81% 0.02% 0.66% 0.07%
Return on average equity * 5.18% 8.37% 0.19% 6.75% 0.79%
Return on average equity - tangible * 5.22% 8.44% 0.20% 6.80% 0.80%
Net interest margin 3.33% 3.40% 3.44% 3.36% 3.44%
Efficiency ratio 86.65% 83.45% 96.84% 84.98% 94.02%
Tangible equity to tangible assets * 9.78% 9.69% 8.82% 9.78% 8.82%
Allowance for Loan Losses:
Beginning balance $ 31,260 $ 35,031 $ 43,709 $ 35,031 $ 48,382
Provision for losses -- 100 1,000 100 1,000
Charge-offs (6,410) (5,167) (8,501) (11,577) (14,523)
Recoveries 1,212 1,296 2,026 2,508 3,375
Ending balance $ 26,062 $ 31,260 $ 38,234 $ 26,062 $ 38,234
Asset Quality Ratios:
Annualized net charge offs to average loans -1.51% -1.14% -1.77% -1.33% -1.52%
Non-performing loans to total loans 2.59% 3.23% 4.39% 2.59% 4.39%
Non-performing assets ratio 4.19% 5.16% 6.51% 4.19% 6.51%
Allowance for loan losses to total loans 1.91% 2.32% 2.73% 1.91% 2.73%
* 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.