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Hampton Roads Bankshares Announces Third Quarter 2015 Financial Results


  • Net income totaled $0.3 million in the third quarter of 2015 despite $2.2 million in one-time expenses attributable to CEO transition
  • Mortgage loan originations increased 67% on a year-to-date basis
  • Average core deposits were up 6% on a year-to-date basis
  • Merger of the bank subsidiaries was completed in October

NORFOLK, Va., Nov. 05, 2015 (GLOBE NEWSWIRE) -- Hampton Roads Bankshares, Inc. (the “Company”) (Nasdaq: HMPR), the holding company for the Bank of Hampton Roads (“BOHR”), today announced financial results for the third quarter of 2015. Net income attributable to common shareholders for the three and nine months ended September 30, 2015 was $0.3 million and $4.4 million, respectively, as compared with net income for the three and nine months ended September 30, 2014 of $2.0 million and $8.3 million, respectively. Included in these results was $2.9 million of income attributable to a one-time insurance benefit received in the first quarter of 2014 and one-time CEO transition expenses totaling $2.2 million in the third quarter of 2015. Excluding the CEO transition expenses, earnings for the third quarter of 2015 would have totaled $2.5 million, an increase of 25% over the third quarter of 2014.

Merger of Subsidiary Banks

On October 13, 2015, the Company merged its two bank subsidiaries, BOHR and Shore Bank ("Shore") into BOHR. The merged bank subsidiary will operate under the brand names of Bank of Hampton Roads, Gateway Bank, and Shore Bank in their respective markets. The Company's mortgage banking subsidiary, Gateway Bank Mortgage, and its specialty finance business, Shore Premier Finance, will continue to operate under their respective brand names in all the markets they serve.

Net Interest Income

Net interest income was $15.6 million and $46.0 million, respectively, in the third quarter and first nine months of 2015. This represented an increase of $0.4 million and $0.9 million, respectively, over the comparable periods in 2014. Growth in loans drove the increases. Loans totaled $1.5 billion at September 30, 2015, compared to $1.4 billion at the end of 2014.

Credit Quality

The 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 2.94% and 2.95% at September 30, 2015 and December 31, 2014, respectively. At September 30, 2015 and December 31, 2014, there were no loans categorized as 90 days or more past due and still accruing interest.

The allowance for loan losses was $22.9 million at September 30, 2015, or 1.49% of loans. This compares to $27.1 million, or 1.90% of loans at year-end 2014. Net credit losses totaled $4.9 million and $4.8 million, respectively, in the third quarter and first nine months of 2015. No provision for loan losses was recorded in the third quarter of 2015. Provision for loan losses was $0.6 million during the nine months ended September 30, 2015.

Noninterest Income

Noninterest income for the three and nine months ended September 30, 2015 was $8.4 million and $22.9 million, respectively, an increase of $2.3 million or 37% and $3.9 million or 21%, compared to the same periods in 2014. Mortgage banking revenue has benefited from the favorable mortgage origination environment in 2015. Mortgage originations for the nine months ended September 30, 2015 totaled $552.5 million compared to $330.3 million in the same period in 2014. Offsetting growth in mortgage was a year-over-year decline in income from bank-owned life insurance related to death benefits received in 2014.

Noninterest Expense

Noninterest expense for the three and nine months ended September 30, 2015 was $23.2 million and $62.3 million, respectively, an increase of $4.0 million or 21% and $6.9 million or 12%, 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 business growth, mortgage-related commissions, one-time CEO transition costs, and increased share-based compensation.

Balance Sheet Trends

Assets were $2.0 billion at September 30, 2015, generally in line with year-end 2014. Since December 31, 2014, there has been a significant shift out of relatively low-yielding assets into loans.

Loans have grown 8% 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.

Total deposits were $1.7 billion at September 30, 2015, an increase of $105.5 million or 7% from December 31, 2014. The Company has made a concerted effort to attract additional deposits in order to support loan growth.

Year-to-date average core deposits, which exclude brokered deposits and certificates of deposit greater than $100,000, were $1.3 billion in 2015. This represented an increase of 6% over 2014.

Capitalization

As of September 30, 2015, consolidated regulatory capital ratios were Common Equity Tier 1 Capital Ratio of 11.58%, Tier 1 Risk-Based Capital Ratio of 13.19%, Total Risk-Based Capital Ratio of 14.44%, and Tier 1 Leverage Ratio of 11.56%. As of September 30, 2015, the Company exceeded the regulatory capital minimums, and BOHR and Shore were considered “well capitalized” under the risk-based capital standards.

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 bank holding company headquartered in Virginia Beach, Virginia. The Company’s primary subsidiary is BOHR. BOHR engages 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, 10 full-service offices throughout Richmond, Virginia and the Northeastern and Research Triangle regions of North Carolina that do business as Gateway Bank and 7 full-service offices on the Eastern Shore of Virginia and in Maryland and 3 loan production offices in Maryland and Delaware that do business as Shore Bank. Through various divisions, BOHR also offers 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.


Hampton Roads Bankshares, Inc.
Financial Highlights
(in thousands) September 30, December 31,
(unaudited) 2015 2014
Assets:
Cash and due from banks $ 17,616 $ 16,684
Interest-bearing deposits in other banks 1,035 1,349
Overnight funds sold and due from Federal Reserve Bank 46,110 85,586
Investment securities available for sale, at fair value 204,034 302,221
Restricted equity securities, at cost 10,398 15,827
Loans held for sale 46,476 22,092
Loans 1,534,596 1,422,935
Allowance for loan losses (22,874) (27,050)
Net loans 1,511,722 1,395,885
Premises and equipment, net 61,706 63,519
Interest receivable 4,149 4,503
Other real estate owned and repossessed assets,
net of valuation allowance 12,450 21,721
Bank-owned life insurance 50,406 49,536
Other assets 11,510 9,683
Totals assets $ 1,977,612 $ 1,988,606
Liabilities and Shareholders' Equity:
Deposits:
Noninterest-bearing demand $ 330,514 $ 266,921
Interest-bearing:
Demand 625,128 621,066
Savings 63,651 56,221
Time deposits:
Less than $100 344,142 342,794
$100 or more 323,373 294,346
Total deposits 1,686,808 1,581,348
Federal Home Loan Bank borrowings 40,000 165,847
Other borrowings 29,569 29,224
Interest payable 483 560
Other liabilities 16,313 14,130
Total liabilities 1,773,173 1,791,109
Shareholders' equity:
Common stock 1,709 1,706
Capital surplus 590,120 588,692
Accumulated deficit (391,171) (395,535)
Accumulated other comprehensive income, net of tax 2,944 2,134
Total shareholders' equity before non-controlling interest 203,602 196,997
Non-controlling interest 837 500
Total shareholders' equity 204,439 197,497
Total liabilities and shareholders' equity $ 1,977,612 $ 1,988,606
Non-performing Assets at Period-End:
Nonaccrual loans including nonaccrual impaired loans $34,378 $21,507
Loans 90 days past due and still accruing interest
Other real estate owned and repossessed assets 12,450 21,721
Total non-performing assets $46,828 $43,228
Composition of Loan Portfolio at Period-End:
Commercial $ 231,754 $ 219,029
Construction 137,410 136,955
Real-estate commercial 658,189 639,163
Real-estate residential 352,345 354,017
Installment 155,423 74,821
Deferred loan fees and related costs (525) (1,050)
Total loans $ 1,534,596 $ 1,422,935



Hampton Roads Bankshares, Inc.
Financial Highlights
(in thousands, except share and per share data) Three Months Ended Nine Months Ended
(unaudited) September 30, September 30, September 30, September 30,
2015 2014 2015 2014
Interest Income:
Loans, including fees $ 17,296 $ 15,967 $ 50,908 $ 47,243
Investment securities 1,436 2,331 4,733 6,864
Overnight funds sold and due from FRB 28 45 126 128
Total interest income 18,760 18,343 55,767 54,235
Interest Expense:
Deposits:
Demand 661 697 2,005 1,978
Savings 15 8 39 24
Time deposits:
Less than $100 968 868 2,821 2,450
$100 or more 991 830 2,932 2,346
Interest on deposits 2,635 2,403 7,797 6,798
Federal Home Loan Bank borrowings 95 357 668 1,185
Other borrowings 439 411 1,281 1,088
Total interest expense 3,169 3,171 9,746 9,071
Net interest income 15,591 15,172 46,021 45,164
Provision for loan losses 16 600 116
Net interest income after provision for loan losses 15,591 15,156 45,421 45,048
Noninterest Income:
Mortgage banking revenue 5,722 3,215 15,444 8,169
Service charges on deposit accounts 1,273 1,196 3,713 3,550
Income from bank-owned life insurance 302 278 956 3,823
Gain on sale of investment securities available for sale 58 238 243
Loss on sale of premises and equipment (82) (14) (113)
Gain on sale of other real estate owned and repossessed assets 34 173 53 317
Impairment of other real estate owned and repossessed assets (259) (426) (1,524) (1,852)
Visa check card income 677 710 1,994 1,957
Other 666 1,012 2,032 2,863
Total noninterest income 8,415 6,134 22,892 18,957
Noninterest Expense:
Salaries and employee benefits 13,688 10,210 35,604 28,886
Professional and consultant fees 1,542 1,146 3,810 4,296
Occupancy 1,664 1,712 4,919 4,933
FDIC insurance 339 601 1,361 1,755
Data processing 1,516 1,248 4,554 3,414
Problem loan and repossessed asset costs 538 489 1,150 1,296
Equipment 349 490 1,034 1,254
Directors' and regional board fees 433 325 1,028 1,255
Advertising and marketing 386 423 1,090 1,026
Other 2,696 2,505 7,710 7,263
Total noninterest expense 23,151 19,149 62,260 55,378
Income before provision for income taxes 855 2,141 6,053 8,627
Provision for income taxes (benefit) 51 (45) 126 (1)
Net income 804 2,186 5,927 8,628
Net income attributable to non-controlling interest 501 190 1,563 297
Net income attributable to Hampton Roads Bankshares, Inc. $ 303 $ 1,996 $ 4,364 $ 8,331
Per Share:
Basic and diluted income per share $ - $ 0.01 $ 0.03 $ 0.05
Basic weighted average shares outstanding 171,529,138 170,985,123 171,420,024 170,966,023
Effect of dilutive shares and warrants 1,254,359 1,064,154 1,068,077 1,087,435
Diluted weighted average shares outstanding 172,783,497 172,049,277 172,488,101 172,053,458


Hampton Roads Bankshares, Inc.
Financial Highlights
(in thousands) Three Months Ended Nine Months Ended
(unaudited) September 30, September 30, September 30, September 30,
Daily Averages: 2015 2014 2015 2014
Total assets $ 1,976,181 $ 1,996,790 $ 2,015,130 $ 1,963,418
Gross loans (excludes loans held for sale) 1,527,366 1,371,976 1,517,928 1,362,901
Investment and restricted equity securities 218,561 361,745 241,435 345,951
Total deposits 1,681,327 1,588,734 1,661,642 1,543,697
Total borrowings 72,871 198,924 131,565 210,461
Shareholders' equity * 205,603 194,438 203,350 191,008
Interest-earning assets 1,848,266 1,856,190 1,883,101 1,818,280
Interest-bearing liabilities 1,434,294 1,520,941 1,499,416 1,502,295
Financial Ratios:
Return on average assets 0.06% 0.40% 0.29% 0.57%
Return on average equity * 0.58% 4.07% 2.87% 5.83%
Net interest margin 3.35% 3.24% 3.27% 3.32%
Efficiency ratio 96.44% 90.12% 90.66% 86.69%
Allowance for Loan Losses:
Beginning balance $ 27,736 $ 26,062 $ 27,050 $ 35,031
Provision for losses 16 600 116
Charge-offs (5,638) (2,573) (7,335) (14,151)
Recoveries 776 5,213 2,559 7,722
Ending balance $ 22,874 $ 28,718 $ 22,874 $ 28,718
Asset Quality Ratios:
Annualized net charge-offs to average loans 1.26% (0.76)% 0.42% 0.63%
Non-performing loans to total loans 2.24% 2.04% 2.24% 2.04%
Non-performing assets ratio 2.94% 3.56% 2.94% 3.56%
Allowance for loan losses to total loans 1.49% 2.08% 1.49% 2.08%
* Equity amounts exclude non-controlling interest


Contact: Thomas B. Dix III Chief Financial Officer (757) 217-1000

Source:Hampton Roads Bankshares, Inc.