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| 8-K - 8-K - Xenith Bankshares, Inc. | a8k-earningsreleasex4q2014.htm |
March 25, 2015
Contact: Douglas J. Glenn
President and Chief Executive Officer
(757) 217-1000
Hampton Roads Bankshares Announces Fourth Quarter and Full year 2014 Financial Results
• | Net income available to common shareholders for the quarter ended December 31, 2014 totaled $1.0 million, a $447 thousand increase over the comparable period in 2013 |
• | Net income available to common shareholders for the year ended December 31, 2014 totaled $9.3 million, a $5.2 million increase over 2013 |
• | Continued improvement in credit quality results in a 43.5% annual decline of non-performing assets |
• | Company returns to growth as gross loans increase by 2.8% in 2014 |
• | Year-to-date average core deposits increase 2.4% as the Company emphasizes a retail funding strategy |
• | Company improves regulatory standing with the termination of the FRB’s memorandum of understanding |
• | Company commits to major portfolio diversification and market expansion in 2014 by launching Shore Premier Finance, expanding Gateway Bank Mortgage throughout the geographic footprint, establishing a new lending presence in Raleigh, North Carolina and opening a Baltimore, Maryland loan production office |
Hampton Roads Bankshares, Inc. (the “Company”) (Nasdaq: HMPR), the holding company for the Bank of Hampton Roads ("BOHR") and Shore Bank ("Shore"), today announced net income attributable to common shareholders of $9.3 million for the year ended December 31, 2014 and $1.0 million for the three months ended December 31, 2014 as compared to net income for the year ended December 31, 2013 and three months ended December 31, 2013 of $4.1 million and $551 thousand, respectively.
“We think everyone will be pleased with the Company’s results for 2014,” said Douglas Glenn, President and Chief Executive Officer. "Against some strong headwinds for banking, we have established a strong capital base, an improved credit risk profile and an enhanced regulatory standing which has allowed us to
expand into new business lines and geographies. The vision we established through our One Bank strategy more than two years ago is now serving to propel our Company successfully into the future."
Net Interest Income
Net interest income decreased $3.5 million and $795 thousand for the year and quarter ended December 31, 2014, respectively, as compared to the same periods ended December 31, 2013. The decrease was due primarily to declines in average interest-earning assets, and a reduction in the net interest margin.
Credit Quality
Non-performing assets were reduced to $43.2 million at December 31, 2014 from $76.5 million on December 31, 2013. Non-performing assets consist of loans 90 days past due and still accruing interest, nonaccrual loans, and other real estate owned and repossessed assets. Our 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 2.95% and 5.29% at December 31, 2014 and 2013, respectively.
Allowance for loan losses at December 31, 2014 decreased 22.8% to $27.1 million from $35.0 million at December 31, 2013. New defaults during 2014 continued to decline as compared to prior year. In particular, the specific component of the allowance for loan losses decreased to $3.5 million from $13.1 million.
Noninterest Income
Noninterest income for 2014 was $24.6 million, compared to $25.5 million and $7.7 million in 2013 and 2012, respectively. Mortgage banking revenue continued to decline in 2014 as compared to 2013 and 2012, 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 as real estate values have mostly stabilized or improved. Income from bank-owned life insurance increased $798 thousand during 2014 to $4.1 million compared to $3.3 million and $1.6 million for 2013 and 2012, respectively.
Noninterest income increased $1.1 million in the fourth quarter 2014 compared to the same quarter in 2013. The increase was primarily due to a decline in the impairment of OREO as well as an increase in mortgage banking revenue.
Noninterest Expense
Noninterest expense in 2014 finished at $74.7 million, decreasing $7.7 million or 9.3%, compared to 2013, primarily due to lower salary and employee benefits, occupancy, and FDIC insurance expenses.
Noninterest expense decreased $654 thousand in the fourth quarter 2014, compared to the same quarter in 2013. The decrease was primarily due to a decline in occupancy, FDIC insurance, and problem loan and repossessed asset costs offset by an increase in salaries and employee benefits and professional and consultant fees.
Balance Sheet Trends
Assets were $2.0 billion at December 31, 2014. Total assets increased by $38.3 million or 2.0% from December 31, 2013. The increase in assets was primarily associated with a $42.7 million or 99.8% increase in overnight funds sold and due from FRB, a $38.4 million or 2.8% increase in gross loans, an $8.0 million or 22.8% decrease in the allowance for loan losses, offset by a $23.3 million or 7.1% decrease in investment securities available for sale, and a $14.9 million or 40.8% decrease in other real estate owned and repossessed
assets. The majority of the recent loan demand within our markets has come from the real estate - commercial mortgage and installment loan categories.
Deposits at December 31, 2014 increased $58.0 million or 3.8% from December 31, 2013, as a result of increases of $21.5 million or 8.8% in noninterest-bearing demand deposits, increases of $18.2 million or 5.6% in time deposits less than $100 thousand, increases of $3.7 million or 1.3% in time deposits over $100 thousand, increases of $20.8 million or 3.5% in interest-bearing demand deposits, partially offset by decreases of $6.1 million or 9.7% in savings deposits.
Year-to-date average core deposits, which exclude brokered deposits and certificates of deposit greater than $100 thousand, have increased by $28.7 million reflecting continued progress in furthering the Company’s funding strategy.
Loan Diversification and Market Expansion
The Company executed on a number of major commitments in 2014 to diversify its loan portfolio credit exposure and expand its market footprint. In May 2014, Shore launched Shore Premier Finance ("SPF"), a specialty finance unit that specializes in marine financing for U.S. Coast Guard documented vessels to customers throughout the United States. SPF was started by hiring a group of lending professionals with deep expertise in marine finance. The team at SPF has developed several strategic partnerships that will assist in SPF's future growth. The plan is for SPF to grow the marine loan portfolio through direct loan originations of dealer floor plan loans and consumer retail loans, as well as purchases of existing marine loan portfolios. In addition to SPF, in July 2014, Shore also launched a new loan production office for the Baltimore, Maryland metropolitan area, with a focus on commercial real estate and commercial and industrial lending relationships. Throughout 2014, Gateway Bank Mortgage, a subsidiary of BOHR, expanded in the markets we serve by opening mortgage loan offices in Maryland and North Carolina, and adding personnel to our team of mortgage lenders serving the Hampton Roads region of Virginia. In September 2014, BOHR, under its Gateway Bank brand, enhanced its prospects in Raleigh, North Carolina through the addition of a Market President dedicated to commercial banking business growth and development. The Company expects these strategic moves to have a significant impact to its growth in 2015 and in coming years.
Improved Regulatory Standing
On February 9, 2015, the Company received notice of the termination of the memorandum of understanding, entered into on March 27, 2014, by and among the Company, BOHR, Federal Reserve Bank of Richmond ("FRB") and the Virginia Bureau of Financial Institutions.
Capitalization
As of December 31, 2014, our consolidated regulatory capital ratios were Tier 1 Leverage Ratio of 11.08%, Tier 1 Risk-Based Capital Ratio of 13.90%, and Total Risk-Based Capital of 15.15%. As of December 31, 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: 10.16%, 12.73%, and 13.99%, respectively for BOHR and 10.70%, 13.67%, and 14.79%, 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 September 30, 2014, and other filings made with the SEC.
About Hampton Roads Bankshares
Hampton Roads Bankshares, Inc. is a multi-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 three loan production offices. Through various divisions, the Banks also offer 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.
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.
Hampton Roads Bankshares, Inc. | ||||||||
Financial Highlights | ||||||||
(in thousands) | December 31, | December 31, | ||||||
(unaudited) | 2014 | 2013 | ||||||
Assets: | ||||||||
Cash and due from banks | $ | 16,684 | $ | 18,806 | ||||
Interest-bearing deposits in other banks | 1,349 | 654 | ||||||
Overnight funds sold and due from Federal Reserve Bank | 85,586 | 42,841 | ||||||
Investment securities available for sale, at fair value | 302,221 | 325,484 | ||||||
Restricted equity securities, at cost | 15,827 | 17,356 | ||||||
Loans held for sale | 22,092 | 25,087 | ||||||
Loans | 1,422,935 | 1,384,531 | ||||||
Allowance for loan losses | (27,050) | (35,031) | ||||||
Net loans | 1,395,885 | 1,349,500 | ||||||
Premises and equipment, net | 63,519 | 67,146 | ||||||
Interest receivable | 4,503 | 4,811 | ||||||
Other real estate owned and repossessed assets, | ||||||||
net of valuation allowance | 21,721 | 36,665 | ||||||
Intangible assets, net | 842 | 1,437 | ||||||
Bank-owned life insurance | 49,536 | 50,802 | ||||||
Other assets | 8,841 | 9,683 | ||||||
Totals assets | $ | 1,988,606 | $ | 1,950,272 | ||||
Liabilities and Shareholders' Equity: | ||||||||
Deposits: | ||||||||
Noninterest-bearing demand | $ | 266,921 | $ | 245,409 | ||||
Interest-bearing: | ||||||||
Demand | 621,066 | 600,315 | ||||||
Savings | 56,221 | 62,283 | ||||||
Time deposits: | ||||||||
Less than $100 | 342,794 | 324,635 | ||||||
$100 or more | 294,346 | 290,686 | ||||||
Total deposits | 1,581,348 | 1,523,328 | ||||||
Federal Home Loan Bank borrowings | 165,847 | 194,178 | ||||||
Other borrowings | 29,224 | 28,983 | ||||||
Interest payable | 560 | 6,025 | ||||||
Other liabilities | 14,130 | 13,912 | ||||||
Total liabilities | 1,791,109 | 1,766,426 | ||||||
Shareholders' equity: | ||||||||
Common stock | 1,706 | 1,703 | ||||||
Capital surplus | 588,692 | 587,424 | ||||||
Retained deficit | (395,535) | (404,864) | ||||||
Accumulated other comprehensive income, net of tax | 2,134 | (865) | ||||||
Total shareholders' equity before non-controlling interest | 196,997 | 183,398 | ||||||
Non-controlling interest | 500 | 448 | ||||||
Total shareholders' equity | 197,497 | 183,846 | ||||||
Total liabilities and shareholders' equity | $ | 1,988,606 | $ | 1,950,272 | ||||
Non-performing Assets at Period-End: | ||||||||
Nonaccrual loans including nonaccrual impaired loans | $ | 21,507 | $ | 39,854 | ||||
Loans 90 days past due and still accruing interest | — | — | ||||||
Other real estate owned and repossessed assets | 21,721 | 36,665 | ||||||
Total non-performing assets | $ | 43,228 | $ | 76,519 | ||||
Composition of Loan Portfolio at Period-End: | ||||||||
Commercial | $ | 219,029 | $ | 225,492 | ||||
Construction | 136,955 | 158,473 | ||||||
Real-estate commercial | 639,163 | 590,475 | ||||||
Real-estate residential | 354,017 | 354,035 | ||||||
Installment | 74,821 | 57,623 | ||||||
Deferred loan fees and related costs | (1,050) | (1,567) | ||||||
Total loans | $ | 1,422,935 | $ | 1,384,531 | ||||
Hampton Roads Bankshares, Inc. | |||||||||||||||
Financial Highlights | |||||||||||||||
(in thousands, except share and per share data) | Three Months Ended | Twelve Months Ended | |||||||||||||
(unaudited) | December 31, | December 31, | December 31, | December 31, | |||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Interest Income: | |||||||||||||||
Loans, including fees | $ | 15,889 | $ | 16,471 | $ | 63,132 | $ | 68,954 | |||||||
Investment securities | 2,154 | 2,225 | 9,018 | 7,710 | |||||||||||
Overnight funds sold and due from FRB | 65 | 63 | 193 | 238 | |||||||||||
Interest-bearing deposits in other banks | — | 1 | — | 1 | |||||||||||
Total interest income | 18,108 | 18,760 | 72,343 | 76,903 | |||||||||||
Interest Expense: | |||||||||||||||
Deposits: | |||||||||||||||
Demand | 689 | 566 | 2,667 | 2,156 | |||||||||||
Savings | 7 | 8 | 31 | 36 | |||||||||||
Time deposits: | |||||||||||||||
Less than $100 | 901 | 819 | 3,351 | 3,592 | |||||||||||
$100 or more | 866 | 783 | 3,212 | 3,563 | |||||||||||
Interest on deposits | 2,463 | 2,176 | 9,261 | 9,347 | |||||||||||
Federal Home Loan Bank borrowings | 346 | 468 | 1,531 | 1,910 | |||||||||||
Other borrowings | 418 | 440 | 1,506 | 2,145 | |||||||||||
Total interest expense | 3,227 | 3,084 | 12,298 | 13,402 | |||||||||||
Net interest income | 14,881 | 15,676 | 60,045 | 63,501 | |||||||||||
Provision for loan losses | 102 | — | 218 | 1,000 | |||||||||||
Net interest income after provision for loan losses | 14,779 | 15,676 | 59,827 | 62,501 | |||||||||||
Noninterest Income: | |||||||||||||||
Mortgage banking revenue | 3,220 | 2,479 | 11,389 | 15,832 | |||||||||||
Service charges on deposit accounts | 1,153 | 1,233 | 4,703 | 5,014 | |||||||||||
Income from bank-owned life insurance | 288 | 296 | 4,110 | 3,312 | |||||||||||
Gain on sale of investment securities available for sale | 63 | 18 | 306 | 781 | |||||||||||
Gain (loss) on sale of premises and equipment | — | 457 | (112) | 580 | |||||||||||
Impairment of premises and equipment | — | — | — | (2,825) | |||||||||||
Gain (loss) on other real estate owned and repossessed assets | 43 | (13) | 360 | 356 | |||||||||||
Other than temporary impairment of other real estate owned and repossessed assets | (552) | (1,489) | (2,405) | (3,914) | |||||||||||
Visa check card income | 677 | 649 | 2,635 | 2,556 | |||||||||||
Other | 787 | 968 | 3,650 | 3,820 | |||||||||||
Total noninterest income | 5,679 | 4,598 | 24,636 | 25,512 | |||||||||||
Noninterest Expense: | |||||||||||||||
Salaries and employee benefits | 10,044 | 9,370 | 38,930 | 41,223 | |||||||||||
Professional and consultant fees | 1,812 | 1,574 | 6,108 | 5,910 | |||||||||||
Occupancy | 1,543 | 2,001 | 6,476 | 9,092 | |||||||||||
FDIC insurance | 611 | 1,939 | 2,366 | 4,762 | |||||||||||
Data processing | 1,196 | 1,176 | 4,610 | 4,198 | |||||||||||
Problem loan and repossessed asset costs | 491 | 696 | 1,788 | 2,429 | |||||||||||
Equipment | 472 | 389 | 1,726 | 1,730 | |||||||||||
Directors' and regional board fees | 336 | 421 | 1,591 | 1,493 | |||||||||||
Advertising and marketing | 488 | 434 | 1,513 | 1,431 | |||||||||||
Other | 2,286 | 1,933 | 9,549 | 10,080 | |||||||||||
Total noninterest expense | 19,279 | 19,933 | 74,657 | 82,348 | |||||||||||
Income before provision for income taxes | 1,179 | 341 | 9,806 | 5,665 | |||||||||||
Provision for income taxes (benefit) | 7 | (247) | 6 | (90) | |||||||||||
Net income | 1,172 | 588 | 9,800 | 5,755 | |||||||||||
Net income attributable to non-controlling interest | 174 | 37 | 471 | 1,679 | |||||||||||
Net income attributable to Hampton Roads Bankshares, Inc. | $ | 998 | $ | 551 | $ | 9,329 | $ | 4,076 | |||||||
Per Share: | |||||||||||||||
Cash dividends declared | $ | - | $ | - | $ | - | $ | - | |||||||
Basic Income | $ | 0.01 | $ | - | $ | 0.05 | $ | 0.02 | |||||||
Diluted Income | $ | 0.01 | $ | - | $ | 0.05 | $ | 0.02 | |||||||
Basic weighted average shares outstanding | 171,065,163 | 170,370,406 | 170,841,420 | 170,371,336 | |||||||||||
Effect of dilutive shares and warrant | 1,080,929 | 729,051 | 1,086,447 | 699,401 | |||||||||||
Diluted weighted average shares outstanding | 172,146,092 | 171,099,457 | 171,927,867 | 171,070,737 | |||||||||||
Hampton Roads Bankshares, Inc. | ||||||||||||||||
Financial Highlights | ||||||||||||||||
(in thousands, except share and per share data) | Three Months Ended | Twelve Months Ended | ||||||||||||||
(unaudited) | December 31, | December 31, | December 31, | December 31, | ||||||||||||
Daily Averages: | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Total assets | $ | 2,000,622 | $ | 1,973,557 | $ | 1,973,880 | $ | 2,006,793 | ||||||||
Gross loans (excludes loans held for sale) | 1,394,930 | 1,361,072 | 1,370,952 | 1,394,723 | ||||||||||||
Investment and restricted equity securities | 334,225 | 330,664 | 342,996 | 308,161 | ||||||||||||
Intangible assets | 933 | 1,509 | 1,151 | 1,824 | ||||||||||||
Total deposits | 1,594,122 | 1,547,533 | 1,556,386 | 1,575,427 | ||||||||||||
Total borrowings | 195,632 | 223,213 | 206,832 | 231,012 | ||||||||||||
Shareholders' equity * | 197,899 | 185,349 | 193,761 | 183,328 | ||||||||||||
Shareholders' equity - tangible * | 196,966 | 183,840 | 192,610 | 181,504 | ||||||||||||
Interest-earning assets | 1,866,259 | 1,818,693 | 1,830,461 | 1,850,692 | ||||||||||||
Interest-bearing liabilities | 1,518,811 | 1,503,824 | 1,506,566 | 1,550,026 | ||||||||||||
Financial Ratios: | ||||||||||||||||
Return on average assets | 0.20 | % | 0.11 | % | 0.47 | % | 0.20 | % | ||||||||
Return on average equity * | 2.00 | % | 1.18 | % | 4.81 | % | 2.22 | % | ||||||||
Return on average equity - tangible * | 2.01 | % | 1.19 | % | 4.84 | % | 2.25 | % | ||||||||
Net interest margin | 3.16 | % | 3.42 | % | 3.28 | % | 3.43 | % | ||||||||
Efficiency ratio | 94.01 | % | 98.41 | % | 88.47 | % | 93.33 | % | ||||||||
Tangible equity to tangible assets * | 9.87 | % | 9.34 | % | 9.87 | % | 9.34 | % | ||||||||
Allowance for Loan Losses: | ||||||||||||||||
Beginning balance | $ | 28,718 | $ | 37,701 | $ | 35,031 | $ | 48,382 | ||||||||
Provision for losses | 102 | — | 218 | 1,000 | ||||||||||||
Charge-offs | (3,594) | (4,573) | (17,745) | (21,539) | ||||||||||||
Recoveries | 1,824 | 1,903 | 9,546 | 7,188 | ||||||||||||
Ending balance | $ | 27,050 | $ | 35,031 | $ | 27,050 | $ | 35,031 | ||||||||
Asset Quality Ratios: | ||||||||||||||||
Annualized net charge-offs to average loans | 0.50 | % | 0.78 | % | 0.60 | % | 1.03 | % | ||||||||
Non-performing loans to total loans | 1.51 | % | 2.88 | % | 1.51 | % | 2.88 | % | ||||||||
Non-performing assets ratio | 2.95 | % | 5.29 | % | 2.95 | % | 5.29 | % | ||||||||
Allowance for loan losses to total loans | 1.90 | % | 2.53 | % | 1.90 | % | 2.53 | % | ||||||||
* Equity amounts exclude non-controlling interest | ||||||||||||||||