EX-99.1 2 hr6356ex991.txt EXHIBIT 99.1 Exhibit 99.1 PRESS RELEASE July 12, 2006 Contact: Tiffany Glenn (757) 217-1000 HAMPTON ROADS BANKSHARES REPORTS HIGHER SECOND QUARTER AND FIRST HALF EARNINGS NORFOLK, VA - Hampton Roads Bankshares, Inc. (OTC Bulletin Board: HMPR), parent company of Bank of Hampton Roads, today announced its financial results for the second quarter and first half of 2006. For the three months ended June 30, 2006, the company earned a record $1,574,110, which represented a 20.63% increase over second quarter 2005. Diluted earnings per share for the second quarter of 2006 was $.19, an increase of 18.75% compared with $.16 in the second quarter of 2005. Net income in the first half of 2006 was $2,894,011 or 15.34% higher than $2,509,181 in the first half of 2005. Diluted earnings per share increased 13.33% to $0.34 in the first half of 2006 compared with $0.30 in the first six months of 2005. The company's profitability ratios also increased in the second quarter and first half of 2006. Return on average assets was 1.52% in the second quarter of 2006, up 14 basis points from second quarter 2005. Return on average shareholders' equity was 12.69% in the 2006 quarter, up 101 basis points from second quarter 2005. After six months, the return on average assets was 1.42% in 2006 compared with 1.37% in 2005. The return on average shareholders' equity improved to 11.87% in the first half of 2006 compared with 11.51% in the first half of 2005. Higher net interest income was the primary factor in the higher second quarter and first half earnings in 2006. Net interest income increased 16.28% in the second quarter of 2006 and 17.40% in the first half of 2006 over the comparable periods in 2005. The increases were prompted by an 11.41% increase in total loans from June 30, 2005 and an increase in the net interest margin. Net interest margin for the second quarter of 2006 was 5.41% compared to 5.09% for the second quarter of 2005. In the first half, the net interest margin was 5.33% in 2006 compared with 5.04% in 2005. Rising interest rates in conjunction with loan growth contributed to the improvements in the net interest margin. For the third consecutive quarter, recoveries on loans previously charged off exceeded the amount of current period losses, thus increasing the allowance for loan losses. Based on the net recoveries and the strength of other measures of credit quality, the company did not record a provision for loan losses in the second quarter of 2006. At June 30, 2006, the company's allowance for loan losses was 1.13% of total loans, which was equivalent to the ratio at the same time last year. The company's nonperforming assets to total assets ratio was 0.40% on June 30, 2006. Higher non-interest expense partially offset the factors described above that increased net income. Non-interest expense increased 16.79% and 20.56% in the second quarter and first half of 2006, respectively, over the comparable periods in 2005. The increases were attributable to several factors, including higher employee benefits expense related to incentive programs designed to attract business and increased salary expense related to an increase in the number of employees and normal salary increases. In addition, the company incurred higher occupancy expense due primarily to the addition of two branch offices, the new corporate headquarters, and renovations at a number of branch locations. Other operating expense rose due to expenses associated with the new branch offices and a television advertising campaign conducted in the first half of 2006. Hampton Roads Bankshares is traded on the Over the Counter Bulletin Board under the symbol HMPR. The company has applied and is awaiting approval to have its common stock qualified for listing on the NASDAQ Capital Market under the same symbol. Bank of Hampton Roads has been in business since 1987 and operates seventeen locations throughout the cities of Norfolk, Chesapeake, Virginia Beach and Suffolk. Additional information about the Company and its subsidiaries can be found on the Web at www.bankofhamptonroads.com. HAMPTON ROADS BANKSHARES, INC. FINANCIAL HIGHLIGHTS Unaudited

THREE MONTHS ENDED SIX MONTHS ENDED ----------------------------------------------- ----------------------------------------------- JUNE 30, JUNE 30, % JUNE 30, JUNE 30, % OPERATING RESULTS 2006 2005 CHANGE 2006 2005 CHANGE ---------------------------- ------------- ------------- ------------- ------------- ------------- ------------- Interest income $ 7,149,441 $ 5,902,209 21.13% $ 13,665,841 $ 11,214,312 21.86% Interest expense 1,951,543 1,432,015 36.28% 3,666,281 2,696,959 35.94% ------------- ------------- ------------- ------------- Net interest income 5,197,898 4,470,194 16.28% 9,999,560 8,517,353 17.40% Provision for loan losses -- 162,000 -100.00% -- 309,000 -100.00% Noninterest income 799,597 770,588 3.76% 1,714,055 1,680,941 1.97% Noninterest expense 3,604,487 3,086,284 16.79% 7,314,924 6,067,420 20.56% Income taxes 818,898 687,566 19.10% 1,504,680 1,312,693 14.63% ------------- ------------- ------------- ------------- Net income $ 1,574,110 $ 1,304,932 20.63% $ 2,894,011 $ 2,509,181 15.34% ============= ============= ============= ============= Earnings per share: Basic $ 0.19 $ 0.16 18.75% $ 0.35 $ 0.31 12.90% Diluted 0.19 0.16 18.75% 0.34 0.30 13.33% Book value per share 6.01 5.56 8.14% 6.01 5.56 8.14% BALANCE SHEET AT PERIOD-END --------------------------- Total loans $ 330,622,034 $ 296,768,545 11.41% $ 330,622,034 $ 296,768,545 11.41% Total securities 62,643,478 50,581,543 23.85% 62,643,478 50,581,543 23.85% Total deposits 331,737,325 308,955,742 7.37% 331,737,325 308,955,742 7.37% Other borrowings 39,300,000 30,500,000 28.85% 39,300,000 30,500,000 28.85% Shareholders' equity 49,839,132 44,899,497 11.00% 49,839,132 44,899,497 11.00% Total assets 424,276,832 388,433,191 9.23% 424,276,832 388,433,191 9.23% DAILY AVERAGES -------------- Total loans $ 312,255,757 $ 293,025,049 6.56% $ 301,872,919 $ 288,341,128 4.69% Total securities 70,513,927 46,112,153 52.92% 72,865,653 42,812,246 70.20% Total deposits 324,308,301 298,695,432 8.57% 321,116,049 288,461,563 11.32% Other borrowings 38,963,736 31,076,923 25.38% 35,696,685 31,394,392 13.70% Shareholders' equity 49,751,790 44,816,347 11.01% 49,159,625 43,974,522 11.79% Interest-earning assets 385,381,945 352,302,521 9.39% 378,662,040 341,034,664 11.03% Interest-bearing liabilities 257,897,474 235,191,086 9.65% 255,001,893 225,393,743 13.14% Total assets 416,612,862 379,063,126 9.91% 409,910,437 368,441,657 11.26% FINANCIAL RATIOS ---------------- Return on average assets 1.52% 1.38% 0.14 1.42% 1.37% 0.05 Return on average equity 12.69% 11.68% 1.01 11.87% 11.51% 0.36 Net interest margin 5.41% 5.09% 0.32 5.33% 5.04% 0.29 Efficiency ratio 60.10% 58.89% 1.21 62.45% 59.49% 2.96

THREE MONTHS ENDED SIX MONTHS ENDED ----------------------------------------------- ----------------------------------------------- JUNE 30, JUNE 30, % JUNE 30, JUNE 30, % ALLOWANCE FOR LOAN LOSSES 2006 2005 CHANGE 2006 2005 CHANGE ---------------------------- ------------- ------------- ------------- ------------- ------------- ------------- Beginning balance $ 3,716,998 $ 3,180,195 16.88% $ 3,597,497 $ 3,070,600 17.16% Provision for losses -- 162,000 -100.00% -- 309,000 -100.00% Charge-offs (3,500) (2,003) 74.74% (53,914) (50,035) 7.75% Recoveries 12,853 7,943 61.82% 182,768 18,570 884.21% Ending balance 3,726,351 3,348,135 11.30% 3,726,351 3,348,135 11.30% NONPERFORMING ASSETS -------------------- Nonaccrual loans $ 1,700,473 $ 1,872,772 -9.20% $ 1,700,473 $ 1,872,772 -9.20% Loans 90 days past due and still accruing Interest 14,119 63,805 -77.87% 14,119 63,805 -77.87% Other real estate owned -- -- -- -- Total nonperforming assets 1,714,592 1,936,577 -11.46% 1,714,592 1,936,577 -11.46% ASSET QUALITY RATIOS -------------------- Nonperforming assets to total assets 0.40% 0.50% -0.10 0.40% 0.50% -0.10 Allowance for loan losses to total loans 1.13% 1.13% -- 1.13% 1.13% -- Allowance for loan losses to nonperforming assets 217.33% 172.89% 44.44 217.33% 172.89% 44.44

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. ###