- Net income available to shareholders of $0.6 million, which includes a $2.8 million branch consolidation charge
- Successful money market campaign raises more than $60 million of deposits in quarter
- Loan originations increase by 72% year-over-year to $83 million
- Nonperforming assets decline for tenth consecutive quarter
VIRGINIA BEACH, Va., April 17, 2013 (GLOBE NEWSWIRE) -- Hampton Roads Bankshares, Inc. (the "Company") (Nasdaq:HMPR), the holding company of the Bank of Hampton Roads and Shore Bank, today announced financial results for the first quarter of 2013. The Company reported a net profit available to shareholders of $0.6 million, which includes a $2.8 million charge related to a previously-announced branch consolidation, compared to a net loss available to shareholders of $7.9 million for the first quarter of 2012 and a net loss available to shareholders of $5.6 million for the fourth quarter of 2012.
"The Company's return to profitability in the first quarter, and a year-over-year increase of greater than $8.5 million in earnings, which includes this quarter's $2.8 million branch consolidation charge, reflect strong progress on many fronts," said Doug Glenn, President and Chief Executive Officer. "We have positioned the Company for continuing improvement in performance through a sharp focus on our core community banking franchise, greater operating efficiency, and an improved balance sheet. Going forward, we will continue to implement and refine our One Bank strategy, which is designed to consistently deliver choice, convenience and outstanding service to our customers through a strong team of bankers and the right mix of branches and electronic banking services."
Net interest income for the first quarter of 2013 was $15.9 million compared to $16.7 million in the first quarter of 2012 and $16.3 million in the fourth quarter of 2012. The year over year decline in net interest income is the result of declines in average interest earning assets, partly offset by an increase in net interest margin. Net interest margin was 3.45% in the first quarter compared to 3.39%1 in the first quarter of last year and 3.42%2 in the fourth quarter of 2012. Net interest margin improvement on a year over year and linked quarter basis is attributable to a reduction in funding costs and a decline in nonperforming loans.
Due to continued improvement in overall loan quality, the Company did not record a provision for loan loss expense in the first quarter of 2013. The Company recorded a $7.3 million provision for loan loss expense in the first quarter of 2012 and a $0.9 million provision for loan loss expense in the fourth quarter of 2012. The decision not to record a provision for loan loss expense in the quarter reflected management's consideration of the qualitative and quantitative aspects of the allowance for loan losses. Ultimately, management concluded that the current level of the allowance for loan losses was appropriate given the Company's current expectations for known and inherent credit losses in the loan portfolio.
Nonperforming assets were $112.5 million as of March 31, 2013, a decline of $18.2 million from year-end 2012. This continues the trend of ten consecutive quarters of asset quality improvement. Nonperforming assets represented 5.53%, 6.36% and 8.90% of total assets at March 31, 2013, December 31, 2012 and March 31, 2012, respectively.
Noninterest income was $5.4 million during the first quarter of 2013 compared to $3.1 million during the first quarter of 2012 and $0.4 million during the fourth quarter of 2012. The increase reflected continued strong mortgage origination revenues resulting from the continued low interest rate environment, supplemented by a decline in losses and impairments on foreclosed real estate. Noninterest income would have been $8.4 million for the quarter but for the $2.8 million charge related to the consolidation of branches as previously announced during the quarter. This consolidation was part of the implementation of the Company's One Bank strategy and no additional consolidations are planned at this time.
During the first quarter of 2013, the Company recognized $0.4 million of other income from the final resolution of certain Internal Revenue Service examination issues related to the amendment of federal tax returns of Gateway Financial Holdings, Inc. from 2006 to 2008. As referenced in the Company's 10-K filed on March 25, 2013, the Company maintains a net deferred tax asset of $173.0 million as of December 31, 2012, against which the Company maintains a full valuation allowance.
Noninterest expense was $19.4 million during the first quarter, compared to $19.9 million in the first quarter of 2012 and $22.4 million in the fourth quarter of 2012. The decline in noninterest expense reflected reductions in data processing expense, legal fees and costs associated with lower levels of non-performing assets, partly offset by higher salary and benefit expense in our mortgage operations to meet higher loan demand and the expense accrued for incentive compensation plans at the subsidiary banks.
As of March 31, 2013, total assets were $2.03 billion, compared to $2.05 billion at December 31, 2012. During the first quarter, loans outstanding decreased slightly from $1.43 billion to $1.41 billion due primarily to the continued resolutions of problem loans. Origination volumes were offset by principal paydowns and scheduled amortization in the portfolio. Total deposits declined during the quarter to $1.60 billion from $1.62 billion at December 31, 2012 as the Company saw an increase in interest bearing deposits resulting from a successful money market account campaign, offset by declines in time deposits and non interest bearing demand deposits. Total assets, loans and deposits at March 31, 2012 were $2.13 billion, $1.47 billion and $1.77 billion, respectively.
At March 31, 2013, 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.
1 Previously reported as 3.62%, the Company elected during the first quarter of 2013 to include nonperforming loan balances in the calculation of interest earning assets when computing the net interest margin. During the first quarter of 2012, $126.2 million of average nonperforming loan balances were excluded from the interest earning asset total.
2 Previously reported as 3.62%, the Company elected during the first quarter of 2013 to include nonperforming loan balances in the calculation of interest earning assets when computing the net interest margin. During the fourth quarter of 2012, $102.0 million of average nonperforming loan balances were excluded from the interest earning asset total.
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, 2012 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 33 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 Maryland and Virginia through seven banking offices and two loan production offices in West Ocean City, Maryland and Rehoboth Beach, Delaware. Through various affiliates, the Banks also offer mortgage banking services and investment products. 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, except per share data) | |||
| Operating Results | Q1 2013 | Q4 2012 | Q1 2012 |
| Interest income | $ 19,530 | $ 20,093 | $ 21,606 |
| Interest expense | 3,600 | 3,804 | 4,906 |
| Net interest income | 15,930 | 16,289 | 16,700 |
| Provision for loan losses | -- | 870 | 7,302 |
| Noninterest income | 5,428 | 366 | 3,109 |
| Noninterest expense | 19,432 | 22,356 | 19,911 |
| Income tax benefit | -- | (2,182) | -- |
| Net income/(loss) | 1,926 | (4,389) | (7,404) |
| Net income attributable to noncontrolling interest | 1,294 | 1,210 | 502 |
| Net income/(loss) attributable to Hampton Roads Bankshares, Inc. | $ 632 | $ (5,599) | $ (7,906) |
| Per Share Data | |||
| Loss per share: | |||
| Basic | $ -- | $ (0.03) | $ (0.23) |
| Diluted | -- | (0.03) | (0.23) |
| Common dividends declared | -- | -- | -- |
| Book value per common share | 1.09 | 1.08 | 3.05 |
| Book value per common share - tangible | 1.08 | 1.07 | 2.95 |
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| Balance Sheet at Period-End | Q1 2013 | Q4 2012 | Q1 2012 |
| Total assets | $ 2,032,342 | $ 2,054,092 | $ 2,133,027 |
| Gross loans | 1,412,650 | 1,432,275 | 1,471,998 |
| Allowance for loan losses | 43,709 | 48,382 | 68,917 |
| Total investment securities | 309,992 | 294,521 | 334,622 |
| Intangible assets | 2,075 | 2,410 | 3,415 |
| Total deposits | 1,595,164 | 1,617,774 | 1,772,122 |
| Total borrowings | 235,942 | 236,062 | 236,431 |
| Shareholders' equity | 185,362 | 184,723 | 105,298 |
| Shareholders' equity - tangible | 183,287 | 182,313 | 101,883 |
| Daily Averages | Q1 2013 | Q4 2012 | Q1 2012 |
| Total assets | $ 2,031,259 | $ 2,057,454 | $ 2,159,488 |
| Gross loans | 1,427,245 | 1,399,480 | 1,484,814 |
| Total investment securities | 303,947 | 314,924 | 305,855 |
| Intangible assets | 2,235 | 2,560 | 3,574 |
| Total deposits | 1,594,867 | 1,615,975 | 1,791,570 |
| Total borrowings | 236,003 | 236,112 | 236,524 |
| Shareholders' equity | 185,361 | 187,592 | 112,283 |
| Shareholders' equity - tangible | 183,126 | 185,032 | 108,709 |
| Interest-earning assets | 1,874,746 | 1,889,491 | 1,979,889 |
| Interest-bearing liabilities | 1,592,562 | 1,601,172 | 1,805,115 |
| Financial Ratios | Q1 2013 | Q4 2012 | Q1 2012 |
| Return on average assets | 0.13% | -1.08% | -1.47% |
| Return on average common equity | 1.38% | -11.87% | -28.32% |
| Return on average common equity - tangible | 1.40% | -12.04% | -29.25% |
| Net interest margin | 3.45% | 3.42% | 3.39% |
| Efficiency ratio | 80.35% | 135.43% | 100.45% |
| Tangible common equity to tangible assets | 9.03% | 8.89% | 4.78% |
| Allowance for Loan Losses | Q1 2013 | Q4 2012 | Q1 2012 |
| Beginning balance | $ 48,382 | $ 54,444 | $ 74,947 |
| Provision for losses | -- | 870 | 7,302 |
| Charge-offs | (6,091) | (9,619) | (15,285) |
| Recoveries | 1,418 | 2,687 | 1,953 |
| Ending balance | $ 43,709 | $ 48,382 | $ 68,917 |
| Nonperforming Assets at Period-End | Q1 2013 | Q4 2012 | Q1 2012 |
| Nonaccrual loans including nonaccrual impaired loans | $ 78,633 | $ 97,411 | $ 128,805 |
| Loans 90 days past due and still accruing interest | -- | 1,024 | -- |
| Other real estate owned and repossessed assets | 33,834 | 32,215 | 61,028 |
| Total nonperforming assets | $ 112,467 | $ 130,650 | $ 189,833 |
| Asset Quality Ratios | Q1 2013 | Q4 2012 | Q1 2012 |
| Annualized net (chargeoffs) recoveries to average loans | -1.33% | -1.97% | -3.61% |
| Nonperforming loans to total loans | 5.57% | 6.87% | 8.75% |
| Nonperforming assets to total assets | 5.53% | 6.36% | 8.90% |
| Allowance for loan losses to total loans | 3.09% | 3.38% | 4.68% |
| Composition of Loan Portfolio at Period-End | Q1 2013 | Q4 2012 | Q1 2012 |
| Commercial | $ 239,563 | $ 267,080 | $ 244,619 |
| Construction | 199,782 | 206,391 | 271,623 |
| Real-estate commercial | 553,349 | 530,042 | 531,734 |
| Real-estate residential | 364,743 | 372,591 | 400,451 |
| Installment | 56,297 | 56,302 | 23,591 |
| Deferred loan fees and related costs | (1,084) | (131) | (20) |
| Total loans | $ 1,412,650 | $ 1,432,275 | $ 1,471,998 |
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. Tangible common equity to tangible assets ratio is not a measure recognized under GAAP and, therefore, is considered a non-GAAP financial measure. The most comparable GAAP measure is the ratio of total common shareholders' equity to total assets.
Management uses this non-GAAP financial measure to assess the strength of the Company's capital position. The Company believes that this non-GAAP financial measure provides meaningful additional information about the Company to assist investors in evaluating the Company's financial strength and capitalization. The tangible common equity to tangible assets ratio is used by management and investment analysts to assess the strength of the Company's capital position absent the effects of intangible assets. Management, banking regulators and many stock analysts use the tangible common equity ratio in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of intangible assets.
Below is a reconciliation of this non-GAAP financial measure to the most directly comparable financial measure calculated and presented in accordance with GAAP.
| Non-GAAP Measurement | |||
| March 31, 2013 | |||
| (dollars in thousands) |
As of March 31, 2013 |
As of December 31, 2012 |
As of March 31, 2012 |
| Total assets | $ 2,032,342 | $ 2,054,092 | $ 2,133,027 |
| Less: intangible assets | 2,075 | 2,410 | 3,415 |
| Tangible assets | $ 2,030,267 | $ 2,051,682 | $ 2,129,612 |
| Total shareholders' equity | $ 185,362 | $ 184,723 | $ 105,298 |
| Less: intangible assets | 2,075 | 2,410 | 3,415 |
| Common shareholders' equity - tangible | $ 183,287 | $ 182,313 | $ 101,883 |
| Tangible common equity to tangible assets | 9.03 % | 8.89 % | 4.78 % |
| Total common shareholders' equity to total assets | 9.12 % | 8.99 % | 4.94 % |