- 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.