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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

HAMPTON ROADS BANKSHARES, INC.

(Exact name of registrant as specified in its charter)

201 Volvo Parkway, Chesapeake, VA 23320

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (757) 436-1000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No  ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of March 31, 2005.

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HAMPTON ROADS BANKSHARES, INC.

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HAMPTON ROADS BANKSHARES, INC.

Consolidated Balance Sheets

See accompanying notes to the consolidated financial statements (unaudited).

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HAMPTON ROADS BANKSHARES, INC.

Consolidated Statements of Income (Unaudited)

See accompanying notes to the consolidated financial statements (unaudited).

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HAMPTON ROADS BANKSHARES, INC.

Consolidated Statements of Shareholders’ Equity

Three Months ended March 31, 2005 and the Year ended December 31, 2004

See accompanying notes to the consolidated financial statements (unaudited).

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HAMPTON ROADS BANKSHARES, INC.

Consolidated Statements of Cash Flows (Unaudited)

See accompanying notes to the consolidated financial statements (unaudited).

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HAMPTON ROADS BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2005

NOTE A – BASIS OF PRESENTATION

Hampton Roads Bankshares, Inc., a Virginia corporation (the Company), was incorporated under the laws of the Commonwealth of Virginia on February 28, 2001, primarily to serve as a holding company for Bank of Hampton Roads (the Bank). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, the Bank and Hampton Roads Investments, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

Bank of Hampton Roads was organized in March of 1987 and commenced banking operation in December of 1987. The Bank engages in a general community and commercial banking business, emphasizing the needs of individuals as well as small and medium sized business in its primary service area.

In January 2004, the Company formed Hampton Roads Investments, Inc., a wholly owned subsidiary, to provide securities, brokerage, and investment advisory services. It is a full service investment company handling all aspects of wealth management including stocks, bonds, annuities, mutual funds and financial advice.

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the United States for interim financial reporting and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2004.

The Company adopted the disclosure only provision of SFAS No. 123, Accounting for Stock-Based Compensation and SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure. These statements allow an entity to continue to measure compensation cost for these plans using the intrinsic value-based method of accounting prescribed by the Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. The Company elected to follow APB No. 25 and related interpretations in accounting for its employee stock options.

Pro forma information regarding net income and earnings per share as required by SFAS No. 123 and SFAS No. 148 has been determined as if the Company had been accounting for its employee stock options under the fair-value method. The fair value of all currently outstanding options was estimated at the date of the grant using the binomial tree option-pricing model. Pro forma results and a summary of the assumptions used for the three months ended March 31, 2005 and March 31, 2004 were as follows:

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Option valuation models require the input of highly subjective assumptions. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a representative single measure of the fair value at which transactions may occur.

NOTE B – INVESTMENT SECURITIES

The amortized cost and estimated market values of investment securities available-for-sale were:

NOTE C – LOANS

Major classifications of loans are summarized as follows:

Non-performing assets were as follows:

Information on impaired loans was as follows:

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NOTE D – ALLOWANCE FOR LOAN LOSSES

Transactions affecting the allowance for loan losses during the three months ended March 31, 2005 and 2004 were as follows:

NOTE E – PREMISES AND EQUIPMENT

Premises and equipment consisted of the following:

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information about the important factors affecting the consolidated results of operations, financial condition, capital resources and liquidity of the Company. This report identifies trends and material changes that occurred during the reporting periods and should be read in conjunction with the Company’s 2004 Annual Report.

Financial Condition

Total average assets, a benchmark used by banks when comparing size, is the strongest indicator of our continuous growth. Average assets increased by $43.7 million, or 13.9%, to a new high of $357.7 million for the three months ended March 31, 2005 compared to the three months ended March 31, 2004. Total assets at March 31, 2005 were $371.3 million, an increase of $26.4 million, or 7.7%, over December 31, 2004 total assets of $345.0 million.

As a community bank, the Company has a primary objective of meeting the business and consumer credit needs within its market where standards of profitability, client relationships and credit quality can be met. The loan portfolio grew $17.2 million, or 6.2%, to $292.4 million as of March 31, 2005 compared to December 31, 2004. This growth can be attributed to the strong loan demand experienced in the construction and commercial categories of the loan portfolio. Both current customers and customers obtained through referrals account for the high loan demand, despite the increasing interest rate environment.

The Company continuously reviews its loan portfolio and maintains an allowance for loan losses sufficient to absorb losses inherent in the portfolio. In addition to the review of credit quality through ongoing credit review processes, the Company conducts an independent and comprehensive allowance analysis for its loan portfolio at least quarterly. The allowance for loan losses was $3.2 million, or 1.1% of outstanding loans, as of March 31, 2005 compared with $3.1 million, or 1.1% of outstanding loans, as of December 31, 2004. Management considers the allowance for loan losses to be adequate.

The Company’s investment portfolio consists of available-for-sale U.S. Agency, U.S. Treasury and mortgage-backed securities. At March 31, 2005, the estimated market value of investment securities held by the Company was $40.2 million, up $3.5 million or 9.6%, from $36.7 million at December 31, 2004. The increase was the result of the purchase of investment securities with a par value of $4.0 million netted against the change in unrealized gains or losses on available-for-sale investment securities and unamortized premiums on the remaining investment securities.

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Deposits are the most significant source of the Company’s funds for use in lending and general business purposes. The Company’s balance sheet growth is largely determined by the availability of deposits in its market, the cost of attracting the deposits, and the prospects of profitability utilizing the available deposits by increasing the loan or investment portfolios. Total deposits at March 31, 2005 increased $14.2 million, or 5.2%, to $289.3 million compared to December 31, 2004. Significant changes in the deposit categories include a $11.0 million, or 17.0% decrease in interest bearing demand accounts, a $28.4 million or 186.2% increase in savings accounts and a $7.4 million, or 17.8%, decrease in time deposits $100,000 or more from December 31, 2004 to March 31, 2005. These trends in deposits can be attributed to the introduction by the Company of a new savings product with a premium interest rate. Customers with qualifying balances were able to transfer their funds into premium savings accounts to take advantage of the higher interest rate. The premium savings accounts explain the decrease in interest bearing demand accounts and a portion of the decrease in time deposits $100,000 or more. The premium savings accounts also attracted new deposits and new customers who moved their accounts from other institutions. The Company also allowed several high interest rate time deposits $100,000 or more to run off causing the remainder of the decrease in that deposit category.

Results of Operations

During the first three months of 2005, the Company had net income of $1.2 million, resulting in a return of 1.37% on average total assets and 11.33% on average shareholders’ equity. During the comparable period in 2004, the Company earned $1.2 million resulting in a return of 1.48% on average total assets and 11.28% on average equity. Diluted earnings per share remained unchanged at $0.14 per share for the first three months of 2005 and 2004.

Net interest income, the principal source of income for the Company, represents interest and fees earned from lending and investment activities less the interest paid to fund these activities. Variations in the volume and mix of interest earning assets and interest bearing liabilities and their relative sensitivity to interest rate movements impact net interest income. Net interest income for the first three months of 2005 was $4.0 million, an $829 thousand increase over the first three months of 2004.

The net interest margin, which is calculated by expressing net interest income as a percentage of average interest earning assets, is an indicator of effectiveness in generating income from earning assets. The Company’s net interest margin increased from 4.5% during the first three months of 2004 to 5.0% for the same period in 2005. This increase can be partially attributed to a shift in the mix of interest earning assets. Average loans, the Company’s highest interest earning asset category, accounted for 79.3% of average assets during the first three months of 2005 compared to 67.9% during the first three months of 2004. In addition, interest rates were also a factor in net interest income and net interest margin. The Federal Funds targeted rate was 2.25% and was increased to 2.50% during the first three months of 2005 compared to 1.00% during the first three months of 2004. The higher federal funds rate resulted in comparable increases in bank lending rates.

The Company’s interest earning assets consist primarily of loans, investment securities, interest bearing deposits in other banks, and overnight funds sold. Interest income on loans, including fees, increased $1.3 million to $5.0 million for the three months ended March 31, 2005 compared to the same time period during 2004. This increase resulted from the 18 basis point increase experienced in the average interest yield along with the $70.3 million increase in the average loan balance. Interest income on investment securities decreased $214 thousand, or 45.0%, to $261 thousand for the three months ended March 31, 2005 compared to the same time period during 2004. The $23.7 million decline in the average investment securities balance and a 34 basis point decrease in the average interest yield produced this decrease. Interest income on interest bearing deposits in other banks increased $10 thousand for the three months ended March 31, 2005 compared to the same time period during 2004. This increase was the result of the $1.4 million increase in average interest bearing deposits in other banks balance as well as the 180 basis point increase in the average interest yield. Interest income on overnight funds sold decreased $2 thousand, or 6.0%, to $30 thousand for the three months ended March 31, 2005 compared to the same time period during 2004. This decline was due to the $9.1 million decrease in the average overnight funds sold balance, partially offset by the 161 basis point increase experienced in the average interest yield.

The Company’s interest bearing liabilities consist of deposit accounts and Federal Home Loan Bank (FHLB) borrowings. Interest expense from deposits increased $138 thousand, or 15.8%, to $1.0 million for the three months ended March 31, 2005 compared to the same time period during 2004. This increase resulted from the 25 basis point increment experienced in the average interest rate, as well as the $6.3 million increase in the average interest bearing deposit balance, most notably the premium savings account balance. Interest expense from FHLB borrowings

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increased $124 thousand, or 104.4%, to $243 thousand for the three months ended March 31, 2005 compared to the same time period during 2004. The $16.7 million increase in the average other borrowings balance and the 8 basis point increase in the average interest rate, produced this result.

The Company’s provision for loan losses for the first three months of 2005 was $147 thousand compared to $84 thousand for the same period in 2004. This increase was due to the increase in the loan portfolio.

The Company reported a decrease in total noninterest income of $343 thousand, or 27.3%, for the first three months of 2005 compared to the same period in 2004. In order to improve liquidity and allow for the growth in the loan portfolio, the Company sold investment securities and recognized a gain of $386 thousand during the first three months of 2004. There were no sales of investment securities during the first three months of 2005. Service charges on deposit accounts, the Company’s primary source of noninterest income, increased $58 thousand, or 10.8%, for the first three months of 2005 compared to the same period in 2004. Another significant component of noninterest income, ATM surcharge fees, remained unchanged at $50 thousand for the first three months of 2005 and 2004. Delinquent charges and extension fees on loans decreased $34 thousand, or 42.0%, for the first three months of 2005 compared to the first three months of 2004. Other service charges and fees increased $20 thousand, or 9.7%, for the first three months of 2005 compared to the first three months of 2004. Noninterest income comprised 14.6% of total revenue in the first three months of 2005 compared with 22.9% in the first three months of 2004.

Noninterest expense represents the overhead expenses of the Company. Total noninterest expense increased $348 thousand, or 13.2%, for the first three months of 2005 compared to the first three months of 2004. This increase was primarily attributable to a 13.1% increase in salaries and employee benefits resulting from the addition of several new positions early in 2005 and normal annual salary adjustments. Occupancy expense increased to $240 thousand for the three months ended March 31, 2005 compared to $224 thousand for the same time period in 2004 due to the addition of the Great Bridge branch on January 31, 2005. Data processing expense, another category of noninterest expense, posted an increase of 15.6% during this time frame associated with the upgrade of many components of the data processing department during the first quarter of 2005. Other noninterest expenses posted an increase of 15.1% for the first three months of 2005 compared to the same time period during 2004 primarily due to expenses associated with opening the new Great Bridge branch. The ratio of noninterest expense to average total assets was 0.83% for the first three months of 2005 compared with 0.84% for the first three months of 2004.

Capital Resources and Liquidity

Total shareholder’s equity increased $379 thousand, or 0.9%, to $44.0 million at March 31, 2005 compared to $43.6 million at December 31, 2004. As of March 31, 2005, the Company and the Bank were considered ‘well-capitalized”, the highest category of capitalization defined by the Federal Reserve Bank (FRB). The Company continually monitors current and projected capital adequacy positions of both the Company and the Bank. Maintaining adequate capital levels is integral to providing stability to the Company, resources to achieve the Company’s growth objectives, and returns to the stockholders in the form of dividends. On March 15, 2005, the Company paid a $0.18 per share dividend, totaling $1.5 million. On September 15, 2004, the Company paid a $0.18 per share dividend, totaling $1.4 million. On March 15, 2004, the Company paid a $0.15 per share dividend, totaling $1.2 million.

A key goal of asset/liability management is to maintain an adequate degree of liquidity without impairing long-term earnings. Liquidity represents the Company’s ability to meet present and future financial obligations through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. Short-term liquidity is provided primarily by access to the federal funds market through established correspondent banking relationships. Funds also can be obtained through the Company’s borrowing privileges at the FRB and FHLB. Additional liquidity is available through loan repayments and maturities of the Company’s investment portfolio. The Company maintains a liquid portfolio of both assets and liabilities and attempts to mitigate the risk inherent in changing rates in this manner. Management believes that the Company maintains overall liquidity sufficient to satisfy its depositors’ requirements and to meet is customers’ credit needs.

Off-Balance Sheet Arrangements

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. For more information on the Company’s off-balance sheet arrangements, see Footnote No. 8 in the Notes to Consolidated Financial Statements contained in the 2004 Annual Report.

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Contractual Obligations

The Company’s contractual obligations consist of FHLB borrowings, time deposits, and operating lease obligations. FHLB borrowings increased to $33.0 million at March 31, 2005 compared with $23.0 million at December 31, 2004. The increased borrowings were used by the Company to fund a portion of its loan growth.

Critical Accounting Policies

Certain critical accounting policies affect the more significant judgments and estimates used in the preparation of the consolidated financial statements. The Company’s most critical accounting policy relates to the Company’s allowance for loan losses, which reflects the estimated losses resulting from the inability of the Company’s borrowers to make required loan payments. If the financial condition of the Company’s borrowers were to deteriorate, resulting in an impairment of their ability to make payments, the Company’s estimates would be updated, and additional provisions for loan losses may be required.

New Accounting Pronouncements

In December 2004, the FASB issued a revision to SFAS No. 123, Accounting for Stock-Based Compensation, SFAS No. 123R, Share-Based Payment. SFAS No. 123R focuses primarily on transactions in which an entity exchanges its equity instruments for employee services and establishes accounting standards for transactions in which an entity obtains goods or services in share-based payment transactions. SFAS No. 123R is effective for the Company’s first quarter of fiscal 2006. Management is currently evaluating the effect of adoption of SFAS No. 123R on the Company’s financial condition and results of operations.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Productive Assets, an Amendment of Accounting Principles Board (APB) Opinion No. 29, Accounting for Nonmonetary Exchanges. Under SFAS No. 153, nonmonetary exchanges are required to be accounted for at fair value, recognizing any gains or losses, if the fair value is determinable within reasonable limits and the transaction has commercial substance. SFAS No. 153 is effective for fiscal periods beginning after June 15, 2005. The Company does not expect the adoption will have a material effect on its financial condition or results of operations.

Forward-Looking Statements

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, including, but not limited to, the effects and changes in: general economic conditions, the interest rate environment, legislative and regulatory requirements, competitive pressures, new products and delivery systems, and inflation.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s primary market risk is exposure to interest rate volatility. Fluctuations in interest rates will impact both the level of interest income and interest expense and the market value of the Company’s interest earning assets and interest bearing liabilities.

The primary goal of the Company’s asset/liability management strategy is to optimize net interest income while limiting exposure to fluctuations caused by changes in the interest rate environment. The Company’s ability to manage its interest rate risk depends generally on the Company’s ability to match the maturities and re-pricing characteristics of its assets and liabilities while taking into account the separate goals of maintaining asset quality and liquidity and achieving the desired level of net interest income.

The Company’s management, guided by the Asset/Liability Committee (ALCO), determines the overall magnitude of interest sensitivity risk and then formulates policies governing asset generation and pricing, funding sources and pricing, and off-balance sheet commitments. These decisions are based on management’s expectations regarding future interest rate movements, the state of the national and regional economy, and other financial and business risk factors.

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The primary method that the Company uses to quantify and manage interest rate risk is simulation analysis, which is used to model net interest income from assets and liabilities over a specified time period under various interest rate scenarios and balance sheet structures. This analysis measures the sensitivity of net interest income over a relatively short time horizon. Key assumptions in the simulation analysis relate to the behavior of interest rates and spreads, the changes in product balances and the behavior of loan and deposit customers in different rate environments.

The expected effect on net income for the twelve months following March 31, 2005 and December 31, 2004 due to a shock in interest rates is shown below. These estimates are dependent on material assumptions, such as those previously discussed.

A decrease in interest rates would reduce the Company’s net income, while an increase would tend to enhance the Company’s net income. Thus, the Company’s interest rate sensitivity position is asset-sensitive. It should be noted, however, that the simulation analysis is based upon equivalent changes in interest rates for all categories of assets and liabilities. In normal operating conditions interest rate changes rarely occur in such a uniform manner. Many factors affect the timing and magnitude of interest rate changes on financial instruments. Consequently, variations should be expected from the projections resulting from the controlled conditions of the simulation analysis.

The Company had no derivative financial instruments, foreign currency exposure, or trading portfolio as of March 31, 2005 or 2004.

ITEM 4 – CONTROLS AND PROCEDURES

As of March 31, 2005, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s Exchange Act filings. In addition, no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the quarter ended March 31, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

As of March 31, 2005, there were no significant legal proceedings against the Company.

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ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During 2004, the Company repurchased 35,110 shares of its common stock in open market and privately negotiated transactions, in accordance with the Board of Director approved open ended stock repurchase program. During the first three months of 2005, the Company repurchased 21,597 shares of its common stock in open market and privately negotiated transactions. Detail for the transactions conducted during the first quarter of 2005 appears below.