NORFOLK, Va., Aug. 1, 2008 (PRIME NEWSWIRE) -- Hampton Roads Bankshares, Inc. (Nasdaq:HMPR), the financial holding company for Bank of Hampton Roads and Shore Bank, today announced its financial results for the second quarter and first half of 2008.
On June 1, 2008, Shore Financial Corporation was merged with and into Hampton Roads Bankshares. As a result, 2,713,425 new shares of the Company's common stock were issued to the former Shore Financial Corporation shareholders. The Company's results of operations for both the second quarter and the first half of 2008 include one month of Shore Bank's operational results.
Net income for the three months ended June 30, 2008, was $1,673,143, down $55,548 from the comparable period in 2007. For the first half of 2008, net income was $3,134,422; net income for the comparable period in 2007 was $3,261,013. For the second quarter of 2008, diluted earnings per share, inclusive of the new shares outstanding resulting from the Shore Financial Corporation acquisition was $0.15 compared to $0.17 in the second quarter of 2007. Diluted earnings per share for the first half of 2008 was $0.29 compared to $0.31 in the first half of 2007.
"Hampton Roads Bankshares has spent much of the last year formulating and executing a plan to further grow and expand our branch network. Through the acquisition of Shore Bank, our presence has grown beyond Hampton Roads to the Eastern Shore of Virginia and into Maryland," said Vice Chairman, President and Chief Executive Officer Jack W. Gibson. "Shore Bank is a market leader on the Eastern Shore and allows us to take advantage of future opportunities throughout the Delmarva Peninsula. In addition, I am excited to announce that Bank of Hampton Roads has just entered into a lease for a branch in Virginia Beach's thriving Hilltop market. Subject to regulatory approvals, I would expect the Hilltop branch, our 19th in South Hampton Roads, to be open and serving our customers before year end."
He went on to say, "I am extremely pleased with our financial results considering the unprecedented economic environment in which we are doing business. Despite an increase of more than $118 million in total average loans, our net interest income was off 6% from this time last year. That result alone summarizes the impact that 2008's Federal Reserve rate decreases have had on our industry. Our net interest margin for the first half of 2008 was 3.81%, down 126 basis points from the comparable period in 2007 -- this is the first time in the more than twenty year history of Bank of Hampton Roads that we have reported a net interest margin below 4.00%. Assuming that rates have stabilized, we expect that our margins will gradually increase throughout the second half of the year due to deposit and loan re-pricing as well as the further contribution of Shore Bank to our overall earnings. Shore Bank's business model adds diversification to our Company and will help to temper the effect of this year's rate decreases because the majority of their funding is short-term and less than twenty percent of their loans float with prime."
"Even though our earnings are off slightly from last year, I have never been more proud of our Company and the people that comprise our organization. We were able to close the Shore Bank merger on schedule as of June 1st and throughout the process, both banks continued to deliver the high level of service our customers have come to expect. Further, our Company is well capitalized by every customary measure and as I noted when we announced our latest quarterly dividend, is a safe, sound and strong organization. Bauer Financial has awarded Bank of Hampton Roads their highest 'Superior/5 Star Rating' for fifty-three consecutive quarters and TheStreet.com consistently assigns Bank of Hampton Roads a rating of 'A' or 'Excellent.' These are ratings that we always take great internal pride in, but have never really promoted to the public. Over the last several weeks, more and more consumers have asked about our safety and soundness ratings and we're experiencing growth in our deposit base as a result. Shore Bank is also recommended by Bauer Financial with a rating of '4 Stars,' which signifies excellent financial strength. We could not achieve these high ratings if our Board and management were not dedicated to preserving the strength of our organization and consistently taking measures that are intended to enhance the value of our shareholders' investments," Gibson said.
The Company's total assets as of June 30, 2008, were $845 million or 62.12% ahead of $522 million a year ago; at the time of the acquisition, Shore Bank's total assets were $267 million. Total deposits were up 62.71% from $391 million a year ago to end the quarter at $636 million; at the time of the acquisition, Shore Bank's total deposits were $208 million. The Company's total shareholders' equity on June 30, 2008 was $107,442,143.
Total interest income for the second quarter of 2008 was up 2.88% over second quarter 2007, but the Company's higher cost of funds coupled with declining interest rates led to a decrease in net interest income. Interest expense rose 18.05% in the second quarter of 2008 compared with the same period in 2007. Net interest income for second quarter 2008 was $5,780,563 compared to $6,120,004 in the same period last year. Gibson noted, "South Hampton Roads continues to be a highly competitive market for deposits which obviously contributes to increases in our cost of funds. However, Shore Bank introduces our Company to new markets and new customers where we expect to benefit through lower cost deposits."
Non-interest income for the second quarter of 2008 was $1,694,370, an increase of 104.24% over second quarter 2007. The increase was primarily attributable to gains from the sale of securities in the Company's investment portfolio and a gain on the sale of a piece of land that Bank of Hampton Roads had intended to use for expansion in Chesapeake prior to moving its corporate headquarters to the Dominion Tower in downtown Norfolk. Non-interest expense increased by 14.10% from second quarter 2007 to $4,658,755; contributing to the increase in non-interest expense were higher FDIC Insurance premiums and expenses related to the integration of Shore Bank's operations.
The Company's asset quality remains strong. On June 30, 2008, the nonperforming assets to total assets ratio was 0.40%, up slightly from the comparable period last year when the Company had no loans past due ninety days or more. The current economy has impacted some of Bank of Hampton Roads' customers and as a result, four relationships with outstanding loans totaling $1,383,272 were past due ninety days or more and still accruing interest on June 30, 2008. All but one of the credits are secured by real estate and no significant losses are expected. Shore Bank had only three loans past due more than ninety days and still accruing interest as of June 30, 2008 totaling $52,797. As of quarter-end, the Company's allowance for loan losses was $8,524,967, up 16 basis points to 1.18% of total loans.
Gibson pointed out, "Bank of Hampton Roads 'cut its teeth' making construction loans with some of our area's best builders and developers. However, most of our customers had the foresight to cut back on their inventories of lots, speculative homes and new subdivisions well before current market conditions arose; thus, while Bank of Hampton Roads still enjoys a well deserved reputation for its construction lending experience and expertise, construction and development loans account for only 23% of our outstanding loans at this time. Shore Bank's loan portfolio generally has a very small percentage of real estate construction loans. Shore Bank does make residential mortgages, something Bank of Hampton Roads has not traditionally done. However, Shore Bank's customers are local to its market; Shore Bank does not make so-called Alt-A or subprime loans nor does it originate residential mortgages outside of its market."
The Board of Directors of Hampton Roads Bankshares recently declared a quarterly dividend in the amount of $0.11 per share on the Company's common stock, payable on September 15, 2008, to shareholders of record as of August 15, 2008. This will be the Company's 27th consecutive dividend payment to shareholders.
About Hampton Roads Bankshares
Hampton Roads Bankshares, Inc. is a financial holding company that was formed in 2001 and is headquartered in Norfolk, Virginia. The Company's primary subsidiaries are Bank of Hampton Roads, which opened for business in 1987, and Shore Bank, which opened in 1961. The Banks engage in general community and commercial banking business, targeting the needs of individuals and small to medium-sized businesses. Currently, Bank of Hampton Roads operates eighteen banking offices in the Hampton Roads region of southeastern Virginia. Shore Bank serves the Eastern Shore of Maryland and Virginia through eight banking offices and twenty-two ATMS. Through its affiliates, Shore Bank also offers title insurance and investment products. Shares of Hampton Roads Bankshares' 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 on the Web at www.hamptonroadsbanksharesinc.com.
Hampton Roads Bankshares, Inc.
Financial Highlights
Unaudited
Three Months Six Months
Operating Ended Ended
Results June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007
Interest
income $ 9,793,096 $ 9,519,092 $ 19,093,148 $ 18,262,643
Interest
expense 4,012,533 3,399,088 8,030,100 6,489,038
Net interest
income 5,780,563 6,120,004 11,063,048 11,773,605
Provision for
loan losses 274,326 246,000 544,326 468,000
Noninterest
income 1,694,370 829,616 2,844,910 1,753,592
Noninterest
expense 4,658,755 4,082,991 8,600,991 8,116,869
Income taxes 868,709 891,938 1,628,219 1,681,315
Net income $ 1,673,143 $ 1,728,691 $ 3,134,422 $ 3,261,013
Earnings
per share:
Basic $ 0.15 $ 0.17 $ 0.29 $ 0.32
Diluted 0.15 0.17 0.29 0.31
Book value
per share 8.18 6.96 8.18 6.96
Balance Sheet
at Period-End
Total assets $845,489,598 521,535,704 $845,489,598 521,535,704
Total Loans 723,205,571 428,539,544 723,205,571 428,539,544
Total
securities 42,992,201 54,001,693 42,992,201 54,001,693
Total deposits 635,680,765 390,691,860 635,680,765 390,691,860
Other
borrowings 94,303,690 53,000,000 94,303,690 53,000,000
Shareholder's
equity 107,442,143 71,522,940 107,442,143 71,522,940
Daily Averages
Total assets $667,230,374 $514,225,395 $620,420,626 $499,465,975
Total Loans 563,410,206 418,174,877 522,028,133 404,368,918
Total
securities 37,932,645 55,884,879 41,751,715 57,250,072
Total deposits 508,173,328 384,455,724 475,492,948 375,524,360
Other
borrowings 66,177,751 52,037,912 57,830,634 46,831,657
Shareholder's
equity 84,556,946 71,078,395 79,332,310 70,752,176
Interest
-earning
assets 623,586,200 483,384,531 583,912,785 468,528,672
Interest
-bearing
liabilities 471,785,534 335,292,898 435,919,446 324,602,359
Financial
Ratios
Return on
average assets 1.01% 1.35% 1.02% 1.32%
Return on
average equity 7.96% 9.76% 7.95% 9.29%
Net interest
margin 3.73% 5.08% 3.81% 5.07%
Efficiency
ratio 62.33% 58.75% 61.84% 60.00%
Three Months Six Months
Allowance for Ended Ended
Loan Losses June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007
Beginning
balance $ 5,320,086 $ 4,133,702 $ 5,042,583 $ 3,910,943
Provision
for losses 274,326 246,000 544,326 468,000
Charge-offs (9,749) (10,775) (9,749) (10,775)
Recoveries 8,555 7,908 16,058 8,667
Allowance
acquired
through merger 2,931,749 -- 2,931,749 --
Ending balance 8,524,967 4,376,835 8,524,967 4,376,835
Nonperforming
Assets
Nonaccrual
loans $ 1,629,323 $ 1,560,014 $ 1,629,323 $ 1,560,014
Loans 90 days
past due and
still accruing
interest 1,436,069 -- 1,436,069 --
Other real
estate owned 354,659 77,937 354,659 77,937
Total
nonperforming
assets 3,420,051 1,637,951 3,420,051 1,637,951
Asset Quality
Ratios
Nonperforming
assets to
total assets 0.40% 0.31% 0.40% 0.31%
Allowance for
loan losses to
total loans 1.18% 1.02% 1.18% 1.02%
Allowance for
loan losses to
nonperforming
assets 265.58% 267.21% 265.58% 267.21%
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. For an explanation of the risks and uncertainties associated with forward-looking statements, please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2007, and other reports filed and furnished to the Securities and Exchange Commission.