November 6, 2014
Contact:Douglas J. Glenn
President and Chief Executive Officer
(757) 217-1000
Hampton Roads Bankshares Announces Third Quarter Financial Results
| · | | Third quarter net income available to common shareholders totaled $2.0 million |
| · | | Year-to-date earnings totaled $8.3 million, a $4.8 million or 73% increase over the comparable period in 2013 |
| · | | Asset quality initiatives result in 33% decline in non-performing assets over year-end 2013 |
| · | | Year-over-year average core deposit growth exceeds $20 million |
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 third quarter of 2014. Net income attributable to common shareholders for the three and nine months ended September 30, 2014 was $2.0 million and $8.3 million, respectively, as compared with net income for the three and nine months ended September 30, 2013 of $2.8 million and $3.5 million, respectively.
“I am pleased with the Company’s third quarter results.” said Douglas Glenn, President and Chief Executive Officer. "We adopted our One Bank strategic plan in early 2013 which committed us to achieving sustainable profitability without taking undue risk. This simple yet acute focus on improving our business fundamentals - credit quality, deposit composition, expense control and capitalization - has allowed for our continued investment in a culture that continues to attract talented bankers, in product and service solutions that appeal to our customers and in the overall geography of our franchise. Banking as a whole and community banking in particular is a highly competitive business at the moment and some discipline is being lost by our competitors as the pressure increases. We continue to concentrate our efforts on building long term value for our shareholders."
Net Interest Income
Net interest income decreased $628 thousand and $2.7 million in the three and nine months ended September 30, 2014 compared to the same periods in 2013. The decrease for the nine months ended September 30, 2014 was due primarily to the decrease in average interest-earning assets, and a decline in net interest margin, whereas the decrease for the three months ended September 30, 2014 was due primarily to a decline in net interest margin.
Credit Quality
Our non-performing assets ratio, 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 was 3.56% and 5.29% at September 30, 2014 and December 31, 2013, respectively. On September 30, 2014, less than 1% of our loans were 30 to 89 days delinquent.
Allowance for loan losses at September 30, 2014 decreased 18.0% to $28.7 million from $35.0 million at December 31, 2013 as net charge-offs of previously identified impaired loans exceeded additional provisions for loan losses. In particular, the specific component of the allowance for loan losses decreased to $5.5 million from $13.1 million.
Noninterest Income
Noninterest income for the three and nine months ended September 30, 2014 was $6.1 million and $19.0 million, respectively, a decline of 22.4% and 9.4% from the same periods in 2013. A major driver of this decline is mortgage banking revenue which had flat growth for the three months ended September 30, 2014 and decreased $5.2 million or 38.8% during the nine months ended September 30, 2014, 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 dramatic negative impact on refinance demand. Offsetting these declines were decreases in losses on premises and equipment associated with certain branch closings in 2013, and decreases in other than temporary impairment of other real estate owned and repossessed assets. For the nine months ended September 30, 2014, income from bank-owned life insurance increased $806 thousand or 26.7%, compared to the same period in 2013, mainly due to life insurance benefits received in excess of cash surrender value from the deaths of two former employees. Income from bank-owned life insurance declined $1.8 million, or 87.4%, during the three months ended September 30, 2014, compared to the same period in 2013, mainly due to timing and amounts of life insurance benefits received in excess of cash surrender value..
Noninterest Expense
Noninterest expense was $19.1 million and $55.4 million, for the three and nine months ended September 30, 2014, respectively, representing declines of $1.6 million or 7.9% and $7.0 million or 11.3%, compared to the same periods in 2013, primarily due to lower salary and employee benefits, occupancy, and FDIC insurance expenses.
Balance Sheet Trends
Assets were $2.0 billion at September 30, 2014. Total assets increased by $66.9 million or 3.4% from December 31, 2013. The increase in assets was primarily associated with a $59.6 million or 139.1% increase in overnight funds sold and due from the Federal Reserve Bank, a $26.6 million or 8.2% increase in investment securities available for sale, a $6.3 million or 18.0% decrease in the allowance for loan losses, a $726 thousand or 2.9% increase in loans held for sale, partially offset by
a $3.6 million or 0.3% decrease in gross loans, and a $13.9 million or 37.9% decrease in other real estate owned and repossessed assets.
Investment securities available for sale increased $26.6 million or 8.2% to $352.1 million as of September 30, 2014 from $325.5 million at December 31, 2013. The increase primarily resulted from the purchase of additional securities which was partially offset by a decline in the unrealized gain of the portfolio.
Gross loans decreased by $3.6 million or 0.3% during the nine months ended September 30, 2014, primarily due to normal loan pay down and charge off activity which exceeded new loan origination volume.
Deposits at September 30, 2014 increased $89.3 million or 5.9% from December 31, 2013 as a result of increases of $38.2 million or 15.6% in non-interest bearing demand deposits, increases of $16.8 million or 5.2% in time deposits less than $100 thousand, increases of $5.6 million or 1.9% in time deposits over $100 thousand, increases of $33.5 million or 5.6% in interest-bearing deposits, partially offset by decreases of $4.7 million or 7.5% in savings deposits. Seasonal inflows contributed to the 3.3% increase in deposits during the three months ended September 30, 2014.
Year-to-date average core deposits, which exclude brokered deposits and certificates of deposit greater than $100 thousand, have increased by $22.3 million reflecting continued progress in furthering the Company’s funding strategy.
Capitalization
Total shareholders’ equity increased $11.6 million or 6.3% from December 31, 2013 to $195.4 million at September 30, 2014.
As of September 30, 2014, our consolidated regulatory capital ratios were Tier 1 Leverage Ratio of 11.01%, Tier 1 Risk-Based Capital Ratio of 14.13%, and Total Risk-Based Capital of 15.38%. As of September 30, 2014, the Company exceeded the regulatory capital minimums, and BOHR and Shore were considered “well capitalized” under the risk-based capital standards. Their Tier 1 Leverage Ratio, Tier 1 Risk-Based Capital Ratio, and Total Risk-Based Capital Ratio were as follows: 10.03%, 12.83%, and 14.09%, respectively for BOHR and 10.68%, 13.90%, and 15.02%, respectively for Shore.
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, 2013, Quarterly Report on Form 10-Q for the quarter ended June 30, 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 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.
