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

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