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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant  x                            Filed by a Party other than the Registrant  ¨

Check the appropriate box:

Hampton Roads Bankshares, Inc.

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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HAMPTON ROADS BANKSHARES, INC.

999 Waterside Dr., Suite 200

Norfolk, Virginia 23510

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To be Held December 10, 2009

To Our Shareholders:

NOTICE IS HEREBY GIVEN that a special meeting of the shareholders of Hampton Roads Bankshares, Inc. (the “Company”) will be held at the offices of Williams Mullen, P.C., Dominion Tower, 999 Waterside Drive, Suite 1700, Norfolk, VA 23510 on December 10, 2009, at 10:00 am (the “Special Meeting”). The meeting is limited to the following special purposes:

1. To grant shareholder approval, in accordance with NASDAQ rules, to potential transactions that would allow holders of our Series A preferred stock and Series B preferred stock to exchange their shares for newly issued shares of our common stock; and

2. To consider an increase in the Company’s authorized common stock from 70,000,000 to 100,000,000 shares.

Shareholders of record at the close of business on October 30, 2009, will be entitled to notice of and to vote at the Special Meeting and any adjournments thereof.

The Board of Directors recommends that you vote “FOR” each of the proposals described above.

IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE PROMPTLY OR, YOU MAY VOTE YOUR SHARES ONLINE AT HTTPS://WWW.PROXYVOTENOW.COM/HMPR OR BY CALLING 1-866-855-9702. IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON, EVEN THOUGH YOU HAVE PREVIOUSLY SIGNED AND RETURNED YOUR PROXY OR VOTED ONLINE OR BY TELEPHONE.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON DECEMBER 10, 2009: This Proxy Statement, the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and Quarterly Reports for the fiscal quarters ended March 31, 2009, June 30, 2009 and September 30, 2009 are available at http://www.bankofhamptonroads.com/pages/ir_stockholder_info.html.

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HAMPTON ROADS BANKSHARES, INC.

999 Waterside Dr., Suite 200

Norfolk, Virginia 23510

PROXY STATEMENT

This Proxy Statement is being furnished to the shareholders of Hampton Roads Bankshares, Inc. (the “Company”) in connection with the solicitation of proxies by the Board of Directors on behalf of the Company for use at a special meeting of Shareholders to be held on December 10, 2009 (the “Special Meeting”), at the time and place set forth in the accompanying Notice of a Special Meeting and at any adjournment thereof. This Proxy Statement and the enclosed proxy card are being mailed to the shareholders of the Company on or about November 13, 2009.

The holders of Company common stock, par value $0.625 per share (“Common Stock”), as of the close of business on October 30, 2009 will be entitled to be present and to vote at the meeting. Each share of our Common Stock is entitled to one vote on each matter to be voted at the meeting. There are no other classes of our stock entitled to vote at the meeting. On October 30, 2009, there were 21,868,924 shares of our Common Stock outstanding and entitled to vote. The Board of Directors requests that you execute and return the proxy promptly, whether or not you plan to attend the meeting. Instead of returning signed proxy cards, shareholders of record may vote their shares over the Internet, or by calling a specially designated telephone number. These Internet and telephone voting procedures are designed to authenticate shareholders’ identities, allow shareholders to give their voting instructions and confirm that shareholders’ instructions have been recorded properly. Specific instructions for shareholders of record that wish to use the Internet or telephone voting procedures are included on the proxy card, and this Proxy Statement and the proxy card are available at https://www.proxyvotenow.com/hmpr. Shareholders who vote via the Internet or by telephone do not need to mail their proxy cards. Any vote by proxy, Internet or telephone may be revoked by the person giving it at any time before the meeting by giving written notice of such revocation to the Corporate Secretary, by executing another proxy or using the Internet or telephone voting procedures as of a date subsequent to the prior proxy or Internet or telephone vote, or, if you are a shareholder of record or have a legal proxy from a shareholder of record, by voting in person at the Special Meeting.

The shares represented by properly executed proxies (including those properly voted by telephone or Internet) will be voted in accordance with the instructions provided therein and where no instructions are given, will be voted in favor of each of the proposals described in this proxy statement. Abstentions and broker non-votes are counted only for purposes of determining whether a quorum is present at the Special Meeting. “Broker non-votes” result when shareholders hold their shares in street name and do not provide voting instructions to their broker or other nominee. Those shares will not be voted on any proposal on which the broker or other nominee does not have discretionary authority to vote under applicable rules.

We will bear the cost of soliciting proxies, which will be solicited primarily by mail. We have retained Georgeson, Inc., specialist in proxy solicitation, to solicit proxies from brokers, bank nominees, and other institutional holders of our Common Stock at an anticipated cost of $10,000 plus certain out-of-pocket expenses. Proxies may also be solicited by our directors and employees personally, and by telephone, facsimile, or other means. No additional compensation will be paid to these individuals for proxy solicitation nor is it expected to result in more than a minimal cost to us. We may make arrangements directly with banks, brokerage houses, custodians, nominees and fiduciaries to forward solicitation material to the beneficial owners of our Common Stock held of record by them and to obtain authorization for the execution of proxies. We expect to reimburse these institutional holders for their reasonable expenses in connection with these activities.

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The Company’s accountants are not expected to attend the Special Meeting.

The persons named in the proxy to represent shareholders who are present by proxy at the meeting are John A.B. Davies, Jr., President and Chief Executive Officer and Emil A. Viola, Chairman of the Board of Directors.

The Company and its subsidiaries

On June 1, 2008, pursuant to the terms of the Agreement and Plan of Merger, dated as of January 8, 2008, by and between the Company and Shore Financial Corporation, the Company acquired all of the outstanding shares of Shore Financial Corporation (“Shore”) by merger. Shore Bank and its subsidiary, Shore Investments Inc., formerly wholly-owned subsidiaries of Shore, became wholly-owned subsidiaries of the Company.

On December 31, 2008, pursuant to the terms of the Agreement and Plan of Merger, dated as of September 23, 2008, by and between the Company and Gateway Financial Holdings, Inc. (“Gateway”), the Company acquired all of the outstanding shares of Gateway by merger. Gateway Bank & Trust Co. (“Gateway Bank”) and its subsidiaries, Gateway Insurance Services, Inc., Gateway Investment Services, Inc., Gateway Bank Mortgage, Inc. and Gateway Title Agency, Inc., formerly wholly-owned subsidiaries of Gateway, became wholly-owned subsidiaries of the Company.

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING

AND THIS PROXY STATEMENT

When is the Special Meeting?

Thursday, December 10, 2009 at 10:00 a.m., Eastern Time.

Where will the Special Meeting be held?

The offices of Williams Mullen, P.C., Dominion Tower, 999 Waterside Drive, Suite 1700, Norfolk, VA 23510.

What items will be voted upon at the Special Meeting?

You are voting on only the following two proposals and no other matters:

How do I vote by proxy?

We offer three alternative methods of voting your proxy:

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If you sign, date and return your proxy card before the Special Meeting, your shares will be voted as you direct. You may vote “for” or “against” or you may abstain from voting on each proposal identified herein. If you return your signed proxy card but do not specify how you want to vote your shares, your shares will be voted “FOR” each action to be voted on at the Special Meeting.

Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you had returned your proxy card. We encourage you to use these cost-effective and convenient methods of voting, 24 hours a day, 7 days a week.

How many votes are required?

The Preferred Exchange Proposal (and actions other than the Share Increase Proposal) will be approved if the votes cast (in person or by proxy by the shares of Common Stock entitled to vote at the meeting) favoring the action exceed the votes cast (in person or by proxy by the shares of Common Stock entitled to vote at the meeting) opposing the action. Accordingly, abstentions and broker non-votes will have no effect on this outcome.

The affirmative vote of a majority of the holders of outstanding shares of Common Stock is required to approve the Share Increase Proposal. As a result, abstentions, broker non-votes or the failure to submit a proxy or vote in person at the Special Meeting will have the same effect as a vote against the Share Increase Proposal.

What constitutes a “quorum” for the Special Meeting?

We require the presence, whether in person or through the prior submission of a proxy, of the holders of Common Stock representing a majority of the shares outstanding and entitled to vote on the record date. A quorum is necessary to conduct business at the Special Meeting. Because there were 21,868,924 shares of Common Stock issued and outstanding as of October 30, 2009, at least 10,934,463 shares must be present or represented by proxy for a quorum to exist.

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Why does the Company need to hold this vote?

Preferred Exchange Proposal

Like many financial institutions across the United States, we have been affected by deteriorating economic conditions. The recession has prompted us to pursue initiatives for increasing capital and strengthening our balance sheet. Among the initiatives being pursued are to give the holders of our Series A Preferred and Series B Preferred the right to exchange their preferred shares for our common stock (together, the “Exchange Offers”). Exchanging Series A and Series B preferred stock for Common Stock would have the effect of increasing the Company’s tangible common equity and strengthening our balance sheet.

Depending on the numbers of preferred holders who elect to exchange their shares and the market price of our Common Stock, the shares of Common Stock needed for this initiative may equal or exceed 20% of our currently outstanding shares of Common Stock. Because this 20% threshold may be satisfied and the market value of our shares of Common Stock could be less than the book value of such shares at the time of the Exchange Offers, NASDAQ rules require us to seek shareholder approval. More details concerning the potential Exchange Offers can be found “Proposal 1: To Approve the Issuance of Common Stock in Exchange Offer Transactions — Reason for Seeking Shareholder Approval” on page 6.

Share Increase Proposal

The Share Increase Proposal would provide the Company with enough shares to conduct the Exchange Offers while pursuing its other initiatives to strengthen its capital position. As of the date of this Proxy Statement, our Articles of Incorporation authorize the issuance of 70,000,000 shares of Common Stock and 1,000,000 shares of preferred stock. As of October 30, 2009, there were 21,868,924 outstanding shares of Common Stock, 23,266 outstanding shares of Series A Preferred, 37,550 outstanding shares of Series B Preferred and 80,347 outstanding shares of Fixed Rate Cumulative Series C preferred stock (which was held by the U.S. Department of Treasury) (“Series C Preferred”). Also, as of that date 5,484,681 shares of Common Stock were reserved for issuance consisting of the following: 1,522,631 shares issuable upon exercise of options that were granted under our stock option plans with a weighted-average exercise price of $12.82, 836,535 shares registered for issuance under our employee benefit plans, 1,799,657 shares reserved for issuance under our Dividend Reinvestment and Optional Cash Purchase Plan and 1,325,858 shares issuable upon the exercise of a warrant held by the U.S. Department of the Treasury.

Various other initiatives to increase our capital and strengthen our balance sheet are also being considered, as described under “Proposal 2: Amendment of the Company’s Articles to Authorize the Issuance of Up to 100,000,000 Shares of Common Stock — Why We Are Seeking Shareholder Approval” on page 17. If pursued, a number of these initiatives could also involve the issuance of Common Stock or securities convertible into Common Stock.

Who can vote?

You are entitled to vote your Common Stock if our records show that you held your shares as of the close of business on October 30, 2009, the record date for the Special Meeting. On that date, we had 70,000,000 authorized shares of Common Stock, of which there were 21,868,924 shares outstanding and entitled to vote. The Common Stock is our only class of outstanding voting securities for purposes of the Special Meeting.

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How many votes do I have?

Each shareholder is entitled to one vote for each share of Common Stock held on October 30, 2009.

Who pays for the solicitation of proxies?

This Proxy Statement is being furnished in connection with the solicitation of proxies by our Board of Directors. We will pay the cost of preparing, printing and mailing material in connection with this solicitation of proxies. In addition to being solicited through the mails, proxies may be solicited personally or by telephone, facsimile or email by our officers, directors or employees who will receive no additional compensation for such activities. Arrangements will also be made with brokerage houses and other custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of shares held of record by such persons. Such brokerage houses and other custodians, nominees and fiduciaries will be reimbursed for their reasonable expenses incurred in such connection. We have engaged Georgeson, Inc. to aid in the solicitation of proxies of registered shareholders for the Special Meeting. The fees and expenses related to Georgeson’s engagement are estimated to be around $10,000, plus expenses.

Are there any dissenters’ rights or appraisal rights?

Pursuant to the Virginia Stock Corporation Act, the shareholders are not entitled to dissenters’ rights with respect to any of the proposals.

What is the voting recommendation of the board?

The Board of Directors recommends a vote “FOR” the Preferred Exchange Proposal and the Share Increase Proposal.

Where can I find the voting results?

We will publish the voting results in our Annual on Report on Form 10-K for the fiscal year ended December 31, 2009. You will be able to find such Form 10-K at the Investor Relations section of our website at http://www.bankofhamptonroads.com/pages/ir_stockholder_info.html.

Whom should I contact if I have any questions?

If you have any questions before you vote, please contact John A.B. Davies, Jr., President and Chief Executive Officer, 999 Waterside Dr., Suite 200, Norfolk, Virginia 23510 at (757) 217-1000.

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PROPOSAL 1: TO APPROVE THE ISSUANCE OF COMMON STOCK IN EXCHANGE

OFFER TRANSACTIONS IN ACCORDANCE WITH NASDAQ MARKETPLACE RULE 5635

The following description of the terms of the potential Exchange Offers and the reasons for contemplating the Exchange Offers are included for informational purposes to our common shareholders in connection with this proxy solicitation and do not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company.

Reason For Seeking Shareholder Approval

The Company is considering granting the right to its Series A and Series B preferred stockholders to exchange their shares for newly issued shares of the Company’s Common Stock. As contemplated, these Exchange Offers would be made at a fixed discount to the face value of the Series A and Series B preferred stock, while the value of the Common Stock would be determined from its market trading value. Depending on that market value of our Common Stock at the time of the exchange and the number of preferred stockholders who elect to participate, the number of shares of Common Stock issued in the Exchange Offers could exceed twenty percent of our currently outstanding common shares and their exchange value of our Common Stock could be less than book value per share. Under such circumstances, NASDAQ Marketplace Rule 5635 requires us to seek shareholder approval for the transactions. If the Exchange Offers described below are approved by the shareholders, the Company may undertake the Exchange Offers within 90 days without further shareholder approval.

The Proposed Exchange Offers

Each share of Series A and Series B Preferred Stock has a face value and liquidation preference of $1,000 per share (“Liquidation Value”). If the Company proceeds with the Exchange Offers, it will issue a certain number of shares of Common Stock having a value of $600 for each share of Series A Preferred, and $800 for each share of Series B Preferred, that may be tendered for exchange. This discount to face value was determined by a valuation approved by the Board of Directors. The Series A preferred stock was discounted more heavily than the Series B Preferred stock because it has a lower dividend rate. The number of shares of Common Stock issued for each preferred share is known as the “Exchange Ratio.” These valuations equal 60% and 80%, respectively, of each share’s Liquidation Value.

The maximum number of shares of Common Stock that would be approved for issuance in both potential Exchange Offers is 50,000,000 shares (the “Maximum Amount”). The dollar value per share of Common Stock used in determining the Exchange Ratio will be the volume-weighted average price of one share of Common Stock for the five days ending on the second business day prior to the expiration of each of the Exchange Offers (the “VWAP”).

As of October 30, 2009, there were 21,868,924 outstanding shares of Common Stock, and the following shares of Common Stock were reserved for issuance: 1,522,631 shares issuable upon exercise of options that were granted under our stock option plans with a weighted-average exercise price of $12.82, 836,535 shares registered for issuance under our employee benefit plans, 1,799,657 shares reserved for issuance under our Dividend Reinvestment and Optional Cash Purchase Plan and 1,325,858 shares issuable upon the exercise of a warrant held by the U.S. Department of the Treasury.

Set forth below is a table showing the approximate aggregate amount of Common Stock that may be issued in the Exchange Offers assuming the tender of all outstanding shares of Series A and Series B Preferred Stock. The table presents a range of hypothetical VWAP values for the Common Stock and the corresponding Exchange Ratios. Also shown are the Exchange Ratios based on the closing market price of the Company’s Common Stock on November 6, 2009. This table is for illustrative purposes only and the actual VWAP value may differ, resulting in other Exchange Ratios.

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NASDAQ Marketplace Rule 5635(d) requires stockholder approval of the issuance or potential issuance of common stock equal to 20% or more of the common stock outstanding before the issuance, when the common stock is issued for less than the greater of book or market value of such stock. Because of the uncertainty in the amount of Preferred Stock to be tendered for exchange, the current market value of the Common Stock in comparison to its book value per share and the number of shares of Common Stock to be exchanged, the exchange of securities in the Exchange Offers may result in the issuance of 20% or more of the outstanding Common Stock of the Company or 20% or more of the voting power of the Company’s outstanding Common Stock in exchange for Preferred Stock having a value that is less than the greater of the book value or market value of the shares. Therefore, to comply with NASDAQ Marketplace Rule 5635(d), the Company is seeking shareholder approval for issuance of shares of Common Stock in the Exchange Offers so that the Company will have the flexibility to enter into and close such transactions on a timely basis. The Company has the right, subject to applicable law, to modify the terms of the Exchange Offers at any time prior to the expiration date and may modify such terms if deemed to be in the Company’s best interests.

In addition, under Marketplace Rule 5635(b), companies are required to obtain stockholder approval prior to the issuance of securities when the issuance or potential issuance would result in a “change of control” as defined by NASDAQ. NASDAQ generally characterizes a transaction whereby an investor or group of investors acquires, or obtains the right to acquire, 20% of more of the voting power of an issuer on a post-transaction basis as a “change of control” for purposes of Rule 5635(b). Although we do not believe that the issuance of Common Stock in the Exchange Offers would result in a change of control, in the event that it does, shareholder approval of this proposal will also constitute approval of any change in control or potential change in control for purposes of NASDAQ Marketplace Rule 5635(b) and no additional approval will be solicited.

Generally, under published NASDAQ interpretative guidance, blanket authorizations by the shareholders for purposes of NASDAQ Marketplace Rule 5635 will be effective only if limited to transactions which are completed within three months of the approval. The three month requirement only applies to the initial issuance of the shares of Common Stock or other securities exercisable for or convertible into Common Stock. NASDAQ interpretative guidance also requires us to include a maximum potential discount in shareholder proposals such as this one. As described above, the Exchange Ratio, offering price range contemplated was determined, and any modified price, if any,

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subject to the maximum discount, would be determined, by a committee of the Board of Directors and would likely depend upon discussions with holders of Preferred Stock and prevailing market conditions. However, for purposes of shareholder approval for the Preferred Exchange Proposals, the Board has set the Maximum Amount for common stock issuances in the Exchange Offers at 50,000,000 shares.

As of the date of this Proxy Statement, except as otherwise disclosed herein, the Company does not have any commitments, which alone or when aggregated with subsequent transactions, would contemplate or require the Company to issue shares of its Common Stock or other securities exercisable for or convertible into Common Stock in excess of 20% of its outstanding Common Stock or voting power and at a price that would be less than the book or market value of the Company’s Common Stock as of such date or that would result in a change in control of the Company. If any material plans, arrangements or contracts regarding securities issuances subject to this proposal arise after the date of this Proxy Statement and prior to the actual vote on this proposal, the Company will notify its shareholders and make revised proxy solicitation materials publicly available in accordance with SEC rules. These materials will include a new proxy card, if necessary.

Principal Effects on Outstanding Common Shares

The issuance of common shares in the Exchange Offers will have no effect on the current rights of shareholders of the Company’s common shares under Virginia law, including without limitation, voting rights, rights to dividend payments and rights upon liquidation. Holders of our Common Stock are not entitled to preemptive rights with respect to any share that may be issued in Exchange Offers.

Reasons for the Exchange Offers

As part of its exploration of a number of strategic alternatives, the Company is contemplating the potential Exchange Offers to help strengthen its balance sheet by increasing its tangible common equity. This measure of financial health is becoming more important to financial institution investors in the current economic environment. Participation by holders of Series A and Series B preferred stock in the Exchange Offers will have the effect of increasing tangible common equity, which we believe will positively influence the long-term market value of our Common Stock.

Additionally, the Series A and Series B preferred stock carry non-cumulative dividend obligations and a liquidation preference that is senior in priority to the Common Stock. While the Company has indefinitely suspended dividend payments on its stock to conserve capital, at any future point when dividend payments resume, the preferred shares would be entitled to dividends of $6.4 million annually, before dividends could be declared on common shares. Each share of preferred stock that is exchanged for common reduces the preferences in dividend and liquidation payments ahead of the common stock.

The Board of Directors and management believe that it is advisable and in the best interests of the Company to take proactive steps to put the Company in the position to increase available capital though rapid commencement of the Exchange Offers. If our shareholders do not approve the Preferred Exchange Proposal, the Company would be unable to propose Exchange Offers for all outstanding Series A and Series B preferred shares. The limitations imposed under NASDAQ rules would prevent exchange transactions at a level that would be meaningful to the Company, which could materially and adversely affect the Company’s business, financial results, and prospects.

Another reason for conducting the Exchange Offers is to better align the interests of all Company stockholders. We believe the interests of holders of Preferred Stock who tender their shares in the Exchange Offers will become better aligned with the interests of current holders of Common Stock if and when such transactions are consummated. Nevertheless, there can be no guarantee how many holders of Preferred Stock will tender their shares in the Exchange Offers.

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Reasons against the Exchange Offers

Depending on the level of participation by preferred holders in the Exchange Offers and the market value of the Common Stock at the time of the exchange, the issuance of Common Stock could result in substantial dilution to existing Common shareholders before the exchange, and current Common shareholders before the exchange would own a smaller percentage of the outstanding Common Stock. The issuance of these additional shares of Common Stock could cause a significant reduction in the percentage interests of Common shareholders before the exchange in the voting power and in its future earnings per Common share. This effect could be offset in whole or in part by the fact that the holders of Series A and Series B preferred stock would be converting their holdings to Common Stock at Exchange Ratios significantly below the face value of the Preferred Stock and eliminating their dividend and liquidation preference. The shares of Common Stock exchanged for the Preferred Stock will also be freely tradable for holders that are not affiliates of the Company, and tradable in accordance with SEC Rule 144 for those who are. The sale or resale of these securities could cause the market price of the Common Stock to decline.

Because the number of holders of Preferred Stock who will tender their shares in, and the final terms of, the potential Exchange Offers are not yet known, the specific level of dilution cannot be determined at this time. For illustrative purposes, however, the table below presents the pro forma increase or decrease in tangible book value per share (which was $3.92 as of September 30, 2009) based on the closing market price of the Company’s Common Stock on November 6, 2009 and several different hypothetical exchange scenarios.

Pro Forma Increase (Decrease) in Tangible Book Value Per Common Share

Price per Share of Common Stock Issued

(Exchange Ratio for Preferred Stock Series)

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The table below quantifies the percentages of the Company’s Common Stock that will be owned by the holders of the Preferred Stock subject to the Exchange Offers and the existing holders of the company’s Common Stock following the consummation of such offers.

Pro Forma Ownership Percentages

Price per Share of Common Stock Issued

(Exchange Ratio for Preferred Stock Series)

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The Exchange Offers may also increase the voting power of the Company’s insiders. If all of the holders of Preferred Stock who are officers and directors tender their shares, their holdings of Common Stock could significantly increase. As disclosed on page 33, as of October 2, 2009, the Company’s officers and directors beneficially owned approximately 16% of the issued and outstanding shares of the Company’s Common Stock. If the Maximum Amount of common shares were to be issued in the Exchange Offers, the Company’s officers and directors could beneficially own up to approximately 23% of the Company’s Common Stock after completion of such transactions, assuming a 100% level of participation by all preferred holders.

In addition, because the Preferred Stock redemption provisions do not apply to the Company’s Common Stock, the Company will lose the right to redeem the interests of holders of Preferred Stock who tender their shares in the Exchange Offers.

The increase in the number of issued shares of Common Stock in connection with potential financings may have an incidental anti-takeover effect in that additional shares may dilute the stock ownership of one or more parties seeking to obtain control of the Company. The increased number of issued shares could discourage the possibility of, or render more difficult, certain mergers, tender offers, proxy contests or other change of control or ownership.

The Company may also sell shares of authorized but unissued Common Stock at fair market value at any time without shareholder approval. The Company may also sell authorized but unissued shares of Common Stock (or warrants to purchase shares of Common Stock) at a discount to fair market value, provided that the issuance is less than 19.99% of the outstanding shares of Common Stock, without shareholder approval. In order to raise capital, the Company may sell Common Stock or warrants as described above, which may be dilutive. However, the Company would only do so if it believed that it was in the best interest of the shareholders.

Based on information currently available, the Board of Directors considered the possible negative impact that the Exchange Offers could have on the existing shareholders and concluded that any such impact would be outweighed by the positive effect on the shareholders resulting from potential increases in tangible common equity and earnings as a result of no longer having to pay dividends on the shares of Preferred Stock tendered and exchanged.

Effects of Failure to Approve the Preferred Exchange Proposal

If our shareholders do not approve this proposal, the Company would be able to conduct preferred exchange transactions provided the outstanding shares of common stock are not increased by 20% or more. This limited exchange may not be as helpful. If the Company is unable to generate additional capital or restructure its capital, it could have a material adverse impact on our financial condition and could adversely affect the price of our Common Stock.

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The foregoing description of the terms of the potential Exchange Offers and the reasons for contemplating the Exchange Offers are included for informational purposes to shareholders in connection with this proxy solicitation and do not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company. The Company cannot guarantee that any exchange transaction will be completed (or, if so, what the terms or timing may be) and, accordingly, cannot be certain that it will reacquire and cancel any shares of Preferred Stock.

Even if our shareholders approve this proposal, we may only issue shares of Common Stock authorized for issuance under our Articles of Incorporation. If the Preferred Exchange Proposal is adopted by our shareholders and the Exchange Offers are commenced, the Company could exchange up to a total of 50,000,000 shares of its Common Stock. As of the date of this Proxy Statement, our Articles of Incorporation provide for 70,000,000 shares of authorized Common Stock, of which, at October 30, 2009, 21,868,924 shares were issued and outstanding and 5,484,681 shares of Common Stock were reserved for issuance consisting of the following: 1,522,631 shares issuable upon exercise of options that were granted under our stock option plans with a weighted-average exercise price of $12.82, 836,535 shares registered for issuance under our employee benefit plans, 1,799,657 shares reserved for issuance under our Dividend Reinvestment and Optional Cash Purchase Plan and 1,325,858 shares issuable upon the exercise of a warrant held by the U.S. Department of the Treasury.

Differences between the Common Stock and Preferred Stock

The material differences between the rights of holders of Preferred Stock and the rights of holders of shares of Common Stock that are expected to be issued, if the Preferred Exchange Proposal is adopted and the Exchange Offers are completed, are described below. This section does not include a complete description of all differences between the rights of the holders of these respective securities, nor does it include a complete description of their specific rights.

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Pro Forma Financial Information

The following table sets forth the Company’s cash and cash equivalents and its capitalization as of, and for the three months ended, September 30, 2009:

The table should be read together with our consolidated historical financial statements and Management’s Discussion and Analysis, which appeared in our Annual Report on Form 10-K for the year ended December 31, 2008 and our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2009, June 30, 2009 and September 30, 2009, the applicable portions of which are contained in Annexes B-E, which are attached hereto.

Pro Forma Balance Sheet

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Pro Forma Income Statement

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Dissenters’ Rights

Pursuant to the Virginia Stock Corporation Act, shareholders are not entitled to dissenters’ rights with respect to the Preferred Exchange Proposal.

Required Vote

The Preferred Exchange Proposal will be approved if the votes cast (in person or by proxy by the shares of Common Stock entitled to vote at the meeting) favoring the action exceed the votes cast (in person or by proxy by the shares of Common Stock entitled to vote at the meeting) opposing the action. Abstentions and broker non-votes will have no effect on the outcome of these proposals. Abstentions and broker non-votes will not impact the vote on the Preferred Exchange Proposal.

The Board of Directors recommends that shareholders vote “FOR” the Preferred Exchange Proposal to authorize the Company to issue shares of Common Stock in the Exchange Offers for shares of Preferred Stock upon such terms as the Board of Directors shall deem to be in the best interests of the Company, provided that (i) not more than 50,000,000 shares of Common Stock may be issued in the Exchange Offers, (ii) the maximum aggregate dollar amount of the Exchange Offers shall be no more than $43,999,600 on a combined basis, (iii) the Company will issue Common Stock having a dollar value per each tendered share of Series A Preferred and Series B Preferred equal to $600 and $800, respectively, (iv) the dollar value per share of Common Stock used in determining the Exchange Ratio will be the average volume weighted average price of one share of Common Stock for the 5 days ending on the second business day prior to the expiration of each of the Exchange Offers, and (v) the issuance of shares of Common Stock pursuant to such Exchange Offers shall occur not later than the date three months after the date of the approval of the Preferred Exchange Proposal by the shareholders of the Company.

PROPOSAL 2: AMENDMENT OF THE COMPANY’S ARTICLES TO INCREASE THE

AUTHORIZED SHARES OF COMMON STOCK FROM 70,000,000 TO 100,000,000

Introduction

On October 27, 2009, our Board of Directors authorized and approved amending our Articles of Incorporation to increase the number of shares of Common Stock that we are authorized to issue from 70,000,000 to 100,000,000 (the “Amendment”). The Amendment is subject to approval by our shareholders. Our Board of Directors has recommended that our shareholders approve the Amendment and, therefore, we are asking shareholders to approve this Share Increase Proposal at the Special Meeting.

The complete text of the Amendment is attached hereto as Annex A. If the Share Increase Proposal is approved by the shareholders, the Amendment will become effective upon filing with the Virginia State Corporation Commission, which we expect to occur promptly after the Special Meeting or any adjournment thereof. The text of the Amendment may vary, however, for such changes that are consistent with this proposal that we may deem necessary or appropriate.

Why We are Seeking Shareholder Approval

Pursuant to the laws of our jurisdiction of incorporation, Virginia, our Board of Directors must approve any amendment to our Articles of Incorporation and submit such amendment to shareholders for their approval. The affirmative vote of a majority of the outstanding shares of our Common Stock is required to approve the Share Increase Proposal under our Amended and Restated Articles of Incorporation, as amended.

In light of the continuing financial pressures, the Board of Directors believes the Company needs additional flexibility to raise and restructure capital, which the Share Increase Proposal would provide.

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We, therefore, believe it is necessary and in the best interests of our shareholders to take steps now to authorize a sufficient number of additional shares, primarily for issuance in the Exchange Offers, the amount of which will depend on the final VWAP, with any additional remaining shares available for use in additional capital raising transactions or other corporate purposes.

We are considering various initiatives to increase our capital and strengthen our balance sheet through a variety of means, some of which could involve the issuance or potential issuance of Common Stock, including the following:

The additional authorized shares of Common Stock may also be available from time to time for other corporate purposes, including stock dividends, stock splits and other distributions, and in connection with equity-based benefit plans.

As of the date of this Proxy Statement, other than as disclosed herein, we do not have any commitments to issue additional shares of Common Stock, other than upon the exercise of outstanding stock options and future issuances under our compensation plans to the extent deemed appropriate by the Compensation Committee of our Board of Directors.

Authorized but unissued shares of our Common Stock may be issued from time to time upon the authorization by our Board of Directors, at such times, to such persons and for such consideration as the Board of Directors may determine in its discretion and generally without further approval by shareholders, except as may be required for a particular transaction by applicable law, regulation or stock exchange rule. When and if such shares are issued, they would have the same voting and other rights and privileges as the currently issued and outstanding shares of Common Stock.

Capital Stock of the Company

Currently, our Amended and Restated Articles of Incorporation, as amended, authorize the issuance of up to 70,000,000 shares of our Common Stock and 1,000,000 shares of preferred stock. In accordance with Virginia law, the Company’s Articles of Incorporation, bylaws and the NASDAQ Global Select Market rules, we have fixed October 30, 2009 as the record date for determining the shareholders entitled to notice of and to vote at the Special Meeting. Accordingly, you are only entitled to notice of, and to vote at, the Special Meeting if you were a record holder of Common Stock at the close of business on the record date. At that time, 21,868,924 shares of Common Stock were outstanding, held by 4,943 holders of record.

If this proposal is approved by our shareholders, we will be authorized to issue up to 100,000,000 shares of Common Stock. The additional authorized shares of Common Stock, if and when issued, would be part of the existing class of Common Stock and would have the same rights and privileges as the shares of Common Stock presently outstanding. There are no preemption rights related to the Common Stock.

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Description of Outstanding Securities

The following description is a summary of the material provisions of our outstanding securities derived from our Articles of Incorporation, as amended, and Bylaws, as amended. Copies of the Articles of Incorporation, as amended, and Bylaws, as amended, have been filed with the Securities and Exchange Commission.

General

Our authorized capital stock currently consists of 70,000,000 shares of Common Stock, $0.625 par value per share, and 1,000,000 shares of undesignated preferred stock, no par value per share. As of October 30, 2009, there were 21,868,924 shares of Common Stock outstanding, 23,266 shares of Series A Preferred Stock, which is non-convertible, non-cumulative and perpetual, 37,550 shares of Series B Preferred Stock, which is non-convertible, non-cumulative and perpetual, outstanding and 80,347 shares of Series C Preferred outstanding.

Common Stock

Voting Rights

Each holder of shares of Common Stock is entitled to one vote per share held on any matter submitted to a vote of shareholders. There are no cumulative voting rights in the election of directors.

Dividends

Holders of shares of Common Stock are entitled to receive dividends when and as declared by the Board of Directors out of funds legally available therefor. We are a corporation separate and distinct from The Bank of Hampton Roads and Shore Bank and the other subsidiaries. On July 30, 2009, our Board of Directors suspended cash dividends on our common shares indefinitely. In addition, on October 30, 2009, the Company announced that quarterly dividend payments on the Series A Preferred Stock and Series B Preferred Stock had been suspended until further notice. Our ability to distribute cash dividends in the future may be limited by regulatory restrictions and the need to maintain sufficient consolidated capital.

We pay quarterly dividends out of assets legally available for distribution. No dividend will be declared or paid during any calendar year on the Common Stock unless and until there has been paid in full (or set apart for purposes of such payment) to the holders of the Company’s Series A Preferred Stock, Series B Preferred Stock and Series C Preferred or any other series of preferred stock, at least a pro rata portion of the stated annual dividend on such shares of preferred stock for that calendar year, at their respective rates, through the date on which the Company proposes to pay the cash dividend on the Common Stock. See “Preferred Stock” below.

No Preemptive or Conversion Rights

Holders of shares of our Common Stock do not have preemptive rights to purchase additional shares of our Common Stock, and have no conversion or redemption rights.

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Calls and Assessments

All of the issued and outstanding shares of our Common Stock are non-assessable and non-callable.

Liquidation Rights

In the event of our liquidation, dissolution or winding up, the holders of shares of our Common Stock shall be entitled to receive, in cash or in kind, our assets available for distribution remaining after payment or provision for payment of our debts and liabilities, including the payments on the Company’s Series A Preferred Stock, Series B Preferred Stock and Series C Preferred and any other outstanding series of preferred stock described below.

Preferred Stock

Summarized below are the material terms of our outstanding preferred stock, including the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred.

Series A Preferred Stock

Designation

In connection with our merger with Gateway, the Company established the Series A Preferred Stock. There are currently 23,266 shares of the Company’s Series A Preferred Stock outstanding.

Dividends

The holders of shares of the Company’s Series A Preferred Stock are entitled to receive cash dividends at an annual rate of 8.75%, subject to declaration by the board of directors, at its sole discretion, from funds legally available for the payment of dividends. Dividends on the Series A Preferred Stock are not cumulative on a year-to-year basis. Dividends are payable as they are declared by the Company’s board of directors at such time or times as it elects, and no holder of Series A Preferred Stock has any right to receive any dividend unless and until that dividend has been declared by the board of directors.

Liquidation

In the event of liquidation, dissolution or winding up of the Company, the holders of Series A Preferred Stock are entitled to be paid first out of the assets of the Company available for distribution to holders of capital stock of all classes (whether such assets are capital, surplus or earnings), an amount equal to $1,000.00 per share of Series A Preferred Stock, plus the amount of any dividend on such share which has been declared by the board of directors:

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After payment in full of the liquidation preference to the holders of Series A Preferred Stock, holders of the Series A Preferred Stock will have no right or claim to any of the remaining available assets.

Voting

Shares of Series A Preferred Stock are non-voting shares, and holders of Series A Preferred Stock have no right to vote on matters submitted to a vote of the Company’s shareholders except to the extent such voting rights are required by applicable law.

Redemption

The Company has the right and option to redeem all or a portion of the outstanding shares of Series A Preferred Stock at the rate of $1,000.00 for each share of Series A Preferred Stock.

Series B Preferred Stock

Designation

In connection with our merger with Gateway, the Company established the Series B Preferred Stock. There are currently 37,550 shares of the Company’s Series B Preferred Stock outstanding.

Dividends

The holders of shares of the Company’s Series B Preferred Stock are entitled to receive cash dividends at an annual rate of 12.0%, subject to declaration by the Board of Directors, at its sole discretion, from funds legally available for the payment of dividends. Dividends on the Series B Preferred Stock are not cumulative on a year-to-year basis. Dividends are payable as they are declared by the Company’s board of directors at such time or times as it elects, and no holder of Series B Preferred Stock has any right to receive any dividend unless and until that dividend has been declared by the board of directors.

Liquidation

In the event of liquidation, dissolution or winding up of the Company, the holders of Series B Preferred Stock are entitled to be paid first out of the assets of the Company available for distribution to holders of capital stock of all classes (whether such assets are capital, surplus or earnings), an amount equal to $1,000.00 per share of Series B Preferred Stock, plus the amount of any dividend on such share which has been declared by the board of directors:

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After payment in full of the liquidation preference to the holders of Series B Preferred Stock, holders of the Series B Preferred Stock will have no right or claim to any of the remaining available assets.

Voting

Shares of Series B Preferred Stock are non-voting shares, and holders of Series B Preferred Stock have no right to vote on matters submitted to a vote of the Company’s shareholders except to the extent such voting rights are required by applicable law.

Redemption

The Company has the right and option to redeem all or a portion of the outstanding shares of Series B Preferred Stock at the rate of $1,000.00 for each share of Series B Preferred Stock.

Series C Preferred

Designation

In connection with the Letter Agreement dated December 31, 2008, and the related Securities Purchase Agreement — Standard Terms with the United States Department of the Treasury, the Company established the Series C Preferred. There are currently 80,347 shares Company’s Series C Preferred outstanding.

Dividends

Holders of shares of Series C Preferred are entitled to receive if, as and when declared by our board of directors or a duly authorized committee of the board, out of assets legally available for payment, cumulative cash dividends at a rate per annum of 5% per share on a liquidation preference of $1,000.00 per share of Series C Preferred with respect to each dividend period from December 31, 2008 to, but excluding, February 15, 2014. From and after February 15, 2014, holders of shares of Series C Preferred are entitled to receive cumulative cash dividends at a rate per annum of 9% per share on a liquidation preference of $1,000.00 per share of Series C Preferred with respect to each dividend period thereafter.

Dividends are payable quarterly in arrears on each February 15, May 15, August 15 and November 15, each a dividend payment date, starting with February 15, 2009. If any dividend payment date is not a business day, then the next business day will be the applicable dividend payment date, and no additional dividends will accrue as a result of the postponement of the dividend payment date. Dividends payable during any dividend period are computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable with respect to the Series C Preferred are payable to holders of record of shares of Series C Preferred on the date that is 15 calendar days immediately preceding the applicable dividend payment date or such other record date as the board of directors or any duly authorized committee of the board determines, so long as such record date is not more than 60 nor less than 10 days prior to the applicable dividend payment date.

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If we determine not to pay any dividend or a full dividend with respect to the Series C Preferred, we must provide written notice to the holders of shares of Series C Preferred prior to the applicable dividend payment date.

We are subject to various regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. The Board of Governors of the Federal Reserve System, or the Federal Reserve Board, is authorized to determine, under certain circumstances relating to the financial condition of a bank holding company, such as us, that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof.

Priority of Dividends and Payments Upon Liquidation

With respect to the payment of dividends and the amounts to be paid upon liquidation, the Series C Preferred will rank:

So long as any shares of Series C Preferred remain outstanding, unless all accrued and unpaid dividends for all prior dividend periods have been paid or are contemporaneously declared and paid in full, we may not pay or declare any dividends on our Common Stock or other junior stock, other than a dividend payable solely in Common Stock. We and our subsidiaries also may not purchase, redeem or otherwise acquire for consideration any shares of our Common Stock or other junior stock unless we have paid in full all accrued dividends on the Series C Preferred for all prior dividend periods, other than:

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On any dividend payment date for which full dividends are not paid, or declared and funds set aside therefore, on the Series C Preferred and any other parity stock, all dividends paid or declared for payment on that dividend payment date (or, with respect to parity stock with a different dividend payment date, on the applicable dividend date therefor falling within the dividend period and related to the dividend payment date for the Series C Preferred), with respect to the Series C Preferred and any other parity stock shall be declared ratably among the holders of any such shares who have the right to receive dividends, in proportion to the respective amounts of the undeclared and unpaid dividends relating to the dividend period.

Subject to the foregoing, holders of Series C Preferred shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on Series C Preferred.

Redemption

The Series C Preferred may be redeemed with approval of the Federal Reserve Board, in whole or in part, subject to notice as described below. In any redemption, the redemption price is an amount equal to the per share liquidation amount plus accrued and unpaid dividends to but excluding the date of redemption.

The Series C Preferred will not be subject to any mandatory redemption, sinking fund or similar provisions. Holders of shares of Series C Preferred have no right to require the redemption or repurchase of the Series C Preferred.

If we seek to redeem fewer than all of the outstanding shares of Series C Preferred, we will select the shares we will redeem either pro rata from the holders of record of shares of Series C Preferred in proportion to the number of shares held by those holders or in such other manner as our board of directors or a committee thereof may determine to be fair and equitable.

We will mail notice of any redemption of Series C Preferred by first class mail, postage prepaid, addressed to the holders of record of the shares of Series C Preferred to be redeemed at their respective last addresses appearing on our books. This mailing will be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed or otherwise given as described in this paragraph will be conclusively presumed to have been duly given, whether or not the holder receives the notice, and failure duly to give the notice by mail or otherwise, or any defect in the notice or in the mailing or provision of the notice, to any holder of Series C Preferred designated for redemption will not affect the redemption of any other Series C Preferred. Each notice of redemption will set forth the applicable redemption date, the redemption price, the place of redemption and the number of shares of Series C Preferred we will redeem (and, if less than all shares of Series C Preferred held by the applicable holder, the number of shares we will redeem from the holder).

Shares of Series C Preferred that we redeem, repurchase or otherwise acquire will revert to authorized but unissued shares of our preferred stock.

Liquidation Rights

In the event that we voluntarily or involuntarily liquidate, dissolve or wind up our affairs, holders of Series C Preferred will be entitled to receive an amount per share, referred to as the total liquidation

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amount, equal to the fixed liquidation preference of $1,000.00 per share, plus any accrued and unpaid dividends, whether or not declared, to the date of payment. Holders of the Series C Preferred will be entitled to receive the total liquidation amount out of our assets that are available for distribution to shareholders, after payment or provision for payment of our debts and other liabilities but before any distribution of assets is made to holders of our Common Stock or any other shares ranking, as to that distribution, junior to the Series C Preferred.

If our assets are not sufficient to pay the total liquidation amount in full to all holders of Series C Preferred and all holders of any shares of outstanding parity stock, the amounts paid to the holders of Series C Preferred and other shares of parity stock including our Series A Preferred Stock and Series B Preferred Stock, will be paid pro rata in accordance with the respective total liquidation amount for those holders. If the total liquidation amount per share of Series C Preferred has been paid in full to all holders of Series C Preferred and other shares of parity stock, the holders of our Common Stock or any other shares ranking, as to such distribution, junior to the Series C Preferred will be entitled to receive all of our remaining assets according to their respective rights and preferences.

For purposes of the liquidation rights, neither the sale, conveyance, exchange or transfer of all or substantially all of our property and assets, nor the consolidation or merger by us with or into any other corporation or by another corporation with or into us, will constitute a liquidation, dissolution or winding-up of our affairs.

Voting Rights

Except as indicated below or otherwise required by law, the holders of Series C Preferred will not have any voting rights.

Election of Two Directors upon Non-Payment of Dividends. If the dividends on the Series C Preferred have not been paid for an aggregate of six quarterly dividend periods or more (whether or not consecutive), the authorized number of directors then constituting our board of directors will be increased by two. Holders of Series C Preferred, together with the holders of any outstanding parity stock with like voting rights, referred to as voting parity stock, voting as a single class, will be entitled to elect the two additional members of our board of directors, referred to as the preferred stock directors, at the next annual meeting (or at a special meeting called for the purpose of electing the preferred stock directors prior to the next annual meeting) and at each subsequent annual meeting until all accrued and unpaid dividends for all past dividend periods have been paid in full. The election of any preferred stock director is subject to the qualification that the election would not cause us to violate the corporate governance requirement of the NASDAQ Global Select Market (or any other exchange on which our securities may be listed) that listed companies must have a majority of independent directors.

Upon the termination of the right of the holders of Series C Preferred and voting parity stock to vote for preferred stock directors, the preferred stock directors will immediately cease to be qualified as directors, their term of office shall terminate immediately and the number of authorized directors of the Company will be reduced by the number of preferred stock directors that the holders of Series C Preferred and voting parity stock had been entitled to elect. The holders of a majority of shares of Series C Preferred and voting parity stock, voting as a class, may remove any preferred stock director, with or without cause, and the holders of a majority of the shares Series C Preferred and voting parity stock, voting as a class, may fill any vacancy created by the removal of a preferred stock director. If the office of a preferred stock director becomes vacant for any other reason, the remaining preferred stock director may choose a successor to fill such vacancy for the remainder of the unexpired term.

Other Voting Rights. So long as any shares of Series C Preferred are outstanding, in addition to any other vote or consent of shareholders required by law or by our articles of organization, the vote or

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consent of the holders of at least 66 ²/3% of the shares of Series C Preferred at the time outstanding, voting separately as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:

To the extent of the voting rights of the Series C Preferred, each holder of Series C Preferred will have one vote for each $1,000.00 of liquidation preference to which such holder’s shares of Series C Preferred are entitled.

The foregoing voting provisions will not apply if, at or prior to the time when the vote or consent would otherwise be required, all outstanding shares of Series C Preferred have been redeemed or called for redemption upon proper notice and sufficient funds have been set aside by us for the benefit of the holders of Series C Preferred to effect the redemption.

Certain Provisions of the Articles of Incorporation, Bylaws and Virginia Law

General

Our articles of incorporation and bylaws contain provisions that could make more difficult an acquisition of us by means of a tender offer, a proxy contest or otherwise. These provisions are expected to discourage specific types of coercive takeover practices and inadequate takeover bids as well as to encourage persons seeking to acquire control to first negotiate with us. Although these provisions may have the effect of delaying, deferring or preventing a change in control, we believe that the benefits of increased protection through the potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure the company outweigh the disadvantages of discouraging these proposals because, among other things, negotiation of such proposals could result in an improvement of their terms.

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Classified Board of Directors

Our articles and bylaws divide the board of directors into three classes of directors serving staggered three-year terms. As a result, approximately one-third of the board of directors will be elected at each annual meeting of shareholders. The classification of directors, together with the provisions in the articles and bylaws described below that limit the ability of shareholders to remove directors and that permit the remaining directors to fill any vacancies on the board of directors, will have the effect of making it more difficult for shareholders to change the composition of the board of directors. As a result, at least two annual meetings of shareholders may be required for the shareholders to change a majority of the directors, whether or not a change in the board of directors would be beneficial and whether or not a majority of shareholders believe that such a change would be desirable.

Increasing the Number of Directors

Under Virginia law, the articles of incorporation or bylaws may establish a variable range for the size of the board of directors by fixing a minimum and maximum number of directors. If a variable range is established, the number of directors may be fixed or changed from time to time, within the minimum and maximum, by the shareholders or by the board of directors. Pursuant to our articles of incorporation, our board of directors shall consist of not less than eight nor more than 24 persons.

Action of Shareholders by Written Consent

Under Virginia law, the articles of incorporation may provide that any action required to be adopted or taken at a shareholders’ meeting may be adopted or taken without a meeting, and without prior notice, if consents in writing setting forth the action so adopted or taken are signed, by the holders of outstanding shares having not less than the minimum number of votes that would be required to adopt or take the action at a meeting. Our articles of incorporation do not provide for such action and our bylaws specifically provide that any action which may be taken at a meeting of the shareholders may only be taken without a meeting if one or more consents, in writing, setting forth the action so taken, is signed by all of the shareholders entitled to vote with respect to the subject matter thereof. Therefore, any action of the shareholders by written consent requires the action of all shareholders entitled to vote.

Inability of Shareholders to Call Special Meetings

Pursuant to our bylaws, special meetings of shareholders may be called only by our president, the chairman of our board of directors or the board of directors. As a result, shareholders are not able to act on matters other than at annual shareholders meetings unless they are able to persuade the president, the chairman or a majority of the board of directors to call a special meeting.

Advance Notification Requirements

Our bylaws also require a shareholder who desires to nominate a candidate for election to the board of directors at an annual shareholders meeting to provide us advance notice of at least 45 days before the date the proxy statement for the last annual meeting was first mailed.

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Affiliated Transactions

The Virginia Stock Corporation Act contains provisions governing “Affiliated Transactions.” Affiliated Transactions include certain mergers and share exchanges, material dispositions of corporate assets not in the ordinary course of business, any dissolution of the corporation proposed by or on behalf of an Interested Shareholder (as defined below), or reclassifications, including reverse stock splits, recapitalizations or mergers of the corporation with its subsidiaries which have the effect of increasing the percentage of voting shares beneficially owned by an Interested Shareholder by more than 5%. For purposes of the Virginia Stock Corporation Act, an “Interested Shareholder” is defined as any beneficial owner of more than 10% of any class of the voting securities of a Virginia corporation.

Subject to certain exceptions discussed below, the provisions governing Affiliated Transactions require that, for three years following the date upon which any shareholder becomes an Interested Shareholder, a Virginia corporation cannot engage in an Affiliated Transaction with such Interested Shareholder unless approved by the affirmative vote of the holders of two-thirds of the voting shares of the corporation, other than the shares beneficially owned by the Interested Shareholder, and by a majority (but not less than two) of the “Disinterested Directors.” A Disinterested Director means, with respect to a particular Interested Shareholder, a member of a corporation’s board of directors who (i) was a member before the later of January 1, 1988 and the date on which an Interested Shareholder became an Interested Shareholder and (ii) was recommended for election by, or was elected to fill a vacancy and received the affirmative vote of, a majority of the Disinterested Directors then on the board. At the expiration of the three-year period, these provisions require approval of Affiliated Transactions by the affirmative vote of the holders of two-thirds of the voting shares of the corporation, other than those beneficially owned by the Interested Shareholder.

The principal exceptions to the special voting requirement apply to Affiliated Transactions occurring after the three-year period has expired and require either that the transaction be approved by a majority of the Disinterested Directors or that the transaction satisfy certain fair price requirements of the statute. In general, the fair price requirements provide that the shareholders must receive the highest per share price for their shares as was paid by the Interested Shareholder for his shares or the fair market value of their shares, whichever is higher. They also require that, during the three years preceding the announcement of the proposed Affiliated Transaction, all required dividends have been paid and no special financial accommodations have been accorded the Interested Shareholder unless approved by a majority of the Disinterested Directors.

None of the foregoing limitations and special voting requirements apply to an Affiliated Transaction with an Interested Shareholder whose acquisition of shares making such person an Interested Shareholder was approved by a majority of the corporation’s Disinterested Directors.

These provisions were designed to deter certain takeovers of Virginia corporations. In addition, the statute provides that, by affirmative vote of a majority of the voting shares other than shares owned by any Interested Shareholder, a corporation may adopt, by meeting certain voting requirements, an amendment to its articles of incorporation or bylaws providing that the Affiliated Transactions provisions shall not apply to the corporation. Hampton Roads Bankshares has not adopted such an amendment.

Control Share Acquisitions

The Virginia Stock Corporation Act also contains provisions regulating certain “control share acquisitions,” which are transactions causing the voting strength of any person acquiring beneficial ownership of shares of a public corporation in Virginia to meet or exceed certain threshold percentages (20%, 33 ¹/3% or 50%) of the total votes entitled to be cast for the election of directors. Shares acquired in a control share acquisition have no voting rights unless: (i) the voting rights are granted by a majority

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vote of all outstanding shares other than those held by the acquiring person or any officer or employee director of the corporation, or (ii) the articles of incorporation or bylaws of the corporation provide that these Virginia law provisions do not apply to acquisitions of its shares. The acquiring person may require that a special meeting of the shareholders be held to consider the grant of voting rights to the shares acquired in the control share acquisition. These provisions were designed to deter certain takeovers of Virginia public corporations. However, the bylaws of the Company contain a provision that makes these provisions inapplicable to acquisitions of our Common Stock.

TARP Warrant

The following is a brief description of the warrant that was issued to the U.S. Department of Treasury through its TARP Capital Purchase Program investment (“TARP Warrant”). This summary does not purport to be complete in all respects. This description is subject to and qualified in its entirety by reference to the TARP Warrant, a copy of which has been filed with the SEC and is also available upon request from us.

Shares of Common Stock Subject to the TARP Warrant

The TARP Warrant is initially exercisable for 1,325,858 shares of our Common Stock. If we complete one or more qualified equity offerings on or prior to December 31, 2009 that result in our receipt of aggregate gross proceeds of not less than $80.347 million, which is equal to 100% of the aggregate liquidation preference of the Series C Preferred, the number of shares of Common Stock underlying the TARP Warrant then held by the selling security holders will be reduced by 50% to 662,929 shares. The number of shares subject to the TARP Warrant are subject to the further adjustments described below under the heading “—Adjustments to the TARP Warrant.”

Exercise of the TARP Warrant

The initial exercise price applicable to the TARP Warrant is $9.09 per share of Common Stock for which the TARP Warrant may be exercised. The TARP Warrant may be exercised at any time on or before December 31, 2018 by surrender of the TARP Warrant and a completed notice of exercise attached as an annex to the TARP Warrant and the payment of the exercise price for the shares of Common Stock for which the TARP Warrant is being exercised. The exercise price may be paid either by the withholding by the Company of such number of shares of Common Stock issuable upon exercise of the TARP Warrant equal to the value of the aggregate exercise price of the TARP Warrant determined by reference to the market price of our Common Stock on the trading day on which the TARP Warrant is exercised or, if agreed to by us and the TARP Warrant holder, by the payment of cash equal to the aggregate exercise price. The exercise price applicable to the TARP Warrant is subject to the further adjustments described below under the heading “—Adjustments to the TARP Warrant.”

Upon exercise of the TARP Warrant, certificates for the shares of Common Stock issuable upon exercise will be issued to the TARP Warrant holder. We will not issue fractional shares upon any exercise of the TARP Warrant. Instead, the TARP Warrant holder will be entitled to a cash payment equal to the market price of our Common Stock on the last day preceding the exercise of the TARP Warrant (less the pro-rated exercise price of the TARP Warrant) for any fractional shares that would have otherwise been issuable upon exercise of the TARP Warrant. We will at all times reserve the aggregate number of shares of our Common Stock for which the TARP Warrant may be exercised. We have listed the shares of Common Stock issuable upon exercise of the TARP Warrant with the NASDAQ Global Select Market.

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Rights as a Shareholder

The TARP Warrant holder shall have no rights or privileges of the holders of our Common Stock, including any voting rights, until (and then only to the extent) the TARP Warrant has been exercised.

Transferability

The initial selling security holder may not transfer a portion of the TARP Warrant with respect to more than 1,325,858 shares of Common Stock until the earlier of the date on which the Company has received aggregate gross proceeds from a qualified equity offering of at least $80.347 million and December 31, 2009. The TARP Warrant, and all rights under the TARP Warrant, are otherwise transferable.

Adjustments to the TARP Warrant

Adjustments in Connection with Stock Splits, Subdivisions, Reclassifications and Combinations. The number of shares for which the TARP Warrant may be exercised and the exercise price applicable to the TARP Warrant will be proportionately adjusted in the event we pay stock dividends or make distributions of our Common Stock, subdivide, combine or reclassify outstanding shares of our Common Stock.

Anti-dilution Adjustment. Until the earlier of December 31, 2011 and the date the initial selling security holder no longer holds the TARP Warrant (and other than in certain permitted transactions described below), if we issue any shares of Common Stock (or securities convertible or exercisable into Common Stock) for less than 90% of the market price of the Common Stock on the last trading day prior to pricing such shares, then the number of shares of Common Stock into which the TARP Warrant is exercisable and the exercise price will be adjusted. Permitted transactions include issuances:

Other Distributions. If we declare any dividends or distributions other than our historical, ordinary cash dividends, the exercise price of the TARP Warrant will be adjusted to reflect such distribution.

Certain Repurchases. If we affect a pro rata repurchase of Common Stock both the number of shares issuable upon exercise of the TARP Warrant and the exercise price will be adjusted.

Business Combinations. In the event of a merger, consolidation or similar transaction involving the Company and requiring shareholder approval, the TARP Warrant holder’s right to receive shares of our Common Stock upon exercise of the TARP Warrant shall be converted into the right to exercise the TARP Warrant for the consideration that would have been payable to the TARP Warrant holder with respect to the shares of Common Stock for which the TARP Warrant may be exercised, as if the TARP Warrant had been exercised prior to such merger, consolidation or similar transaction.

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Possible Effects on Holders of Common Stock and Board Consideration

Existing shareholders would experience dilution of their ownership interests if additional shares of Common Stock are issued, which may be substantial. The issuance of these securities could cause a significant reduction in the percentage interests of current shareholders, their voting power, the liquidation value, book and market value of their shares and the future earnings per share of the Company. For examples of how consummation of the Exchange Offers may cause dilution, see “Proposal 1: To Approve the Issuance of Common Stock in Exchange Offer Transactions in Accordance with NASDAQ Marketplace Rule 5635 — Reasons Against the Exchange Offers” above. The sale or resale of the additional securities could also cause the market price of the Common Stock to decline.

In addition to the foregoing, the increase in the number of issued shares of Common Stock in connection with potential financings may have an incidental anti-takeover effect in that additional shares may dilute the stock ownership of one or more parties seeking to obtain control of the Company, as more fully discussed below.

The Company may also sell shares of authorized but unissued Common Stock at fair market value at any time without shareholder approval. The Company may also sell authorized but unissued shares of Common Stock (or warrants to purchase shares of Common Stock) at a discount to fair market value, provided that the issuance is less than 19.99% of the outstanding shares of Common Stock, without shareholder approval. In order to raise capital, the Company may sell Common Stock or warrants as described above, which may be dilutive. However, the Company would only do so if it believed that it was in the best interest of the shareholders.

The Board of Directors considered the possible negative impact the increase in the number of authorized shares of Common Stock could have on the existing shareholders and concluded that any such impact would be outweighed by the positive effect on the shareholders resulting from the increase in our available capital, which could put us in a better financial position.

Possible Anti-Takeover Effects

The Share Increase Proposal could adversely affect the ability of third parties to take us over or change our control by, for example, permitting issuances that would dilute the stock ownership of a person seeking to effect a change in the composition of our Board of Directors or contemplating a tender offer or other transaction for the combination of us with another company that the board determines is not in our best interests or in the best interests of our shareholders. The ability of our Board of Directors to cause us to issue substantial amounts of Common Stock without the need for shareholder approval, except as may be required by law, regulation or stock exchange rules, upon such terms and conditions as our Board of Directors may determine from time to time in the exercise of its business judgment may, among other things, be used to create voting impediments with respect to changes in our control or to dilute the stock ownership of holders of Common Stock seeking to obtain control of us. The issuance of Common Stock, while providing desirable flexibility in connection with potential financings and other corporate transactions, may have the effect of discouraging, delaying or preventing a change in our control. Our Board of Directors, however, does not intend or view the increase in our authorized Common Stock as an anti-takeover measure.

Dissenters’ Rights

Pursuant to the Virginia Stock Corporation Act, shareholders are not entitled to dissenters’ rights with respect to the Share Increase Proposal.

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Required Vote

Assuming the presence of a quorum at the Special Meeting, the affirmative vote of a majority of the holders of outstanding shares of Common Stock is required to approve the Share Increase Proposal. Abstentions and broker non-votes will have the same effect as a vote against that proposal.

The Board of Directors recommends that our shareholders vote

“FOR” approval of the Share Increase Proposal.

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Beneficial Ownership of Directors, Executive Officers and Principal Shareholders of the Company

The following table sets forth for (1) each director and executive officer of the Company, (2) all directors and executive officers as a group, and (3) each beneficial owner of more than 5% of Common Stock: (i) the number of shares of Common Stock beneficially owned on October 2, 2009, and (ii) such person’s or group’s percentage ownership of outstanding shares of Common Stock on such date. The Company is not aware of any shareholder that beneficially owns 5% or more of the outstanding shares of Common Stock. All of the Company’s directors and executive officers receive mail at the Company’s principal executive office at Attn: John A.B. Davies, Jr., President and Chief Executive Officer, 999 Waterside Dr., Suite 200, Norfolk, Virginia 23510

This table is based upon information supplied by officers, directors, and principal shareholders and Schedules 13D and 13G filed with the SEC. Unless indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that each of the shareholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.

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FORWARD-LOOKING AND CAUTIONARY STATEMENTS

Certain statements contained in this Proxy Statement constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of invoking these safe harbor provisions. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based. The words “believes,” “expects,” “may,” “will,” “should,” “projects,” “contemplates,” “anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward-looking statements. These forward-looking statements are subject to significant uncertainties because they are based upon or are affected by risk factors described in the “Risk Factors” section of our Quarterly Report on Form 10-Q for the fiscal quarters ended June 30, 2009 and September 30, 2009, including:

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Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from our expectations of future results, performance or achievements expressed or implied by these forward-looking statements. In addition, our past results of operations do not necessarily indicate our future results. We undertake no obligation to update publicly any of these statements in light of future events.

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and file with the Securities and Exchange Commission (the “SEC”) proxy statements, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as required of a U.S. listed company. You may read and copy any document we file at the SEC’s public reference room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. Please call the SEC at 1-888-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public from the SEC’s web site at www.sec.gov or our website at http://www.bankofhamptonroads.com/pages/ir_stockholder_info.html. Written requests for copies of the documents we file with the SEC should be directed to Hampton Roads Bankshares, Inc., John A.B. Davies, Jr., President and Chief Executive Officer, Hampton Roads Bankshares, Inc., 999 Waterside Dr., Suite 200, Norfolk, Virginia 23510.

CERTAIN ITEMS

Certain items required by Regulation S-K are derived from the Company’s Annual Report on Form 10-K, as amended, and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009, June 30, 2009 and September 30, 2009, the requisite portions of which are attached hereto as Annexes B-E. Namely, financial statements meeting the requirements of Regulation S-K (other than the pro forma information which appears under “PROPOSAL 1: TO APPROVE THE ISSUANCE OF COMMON STOCK IN EXCHANGE OFFER TRANSACTIONS IN ACCORDANCE WITH NASDAQ MARKETPLACE RULE 5635 – Pro Forma Financial Information”) are contained in Annexes B-E, Item 302 supplementary financial information is contained in Annex B, Item 303 management’s discussion and analysis of financial condition and results of operations is contained in Annexes B-E, Item 304 changes in and disagreements with accountants on accounting and financial disclosure is contained in Annex B and Item 305 quantitative and qualitative disclosures about market risk is contained in Annexes B-E. These annexes are specifically deemed to be part of this Proxy Statement.

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You should rely only upon the information provided in this document, or attached hereto. We have not authorized anyone to provide you with different information. You should not assume that the information in this document, including any information contained in the attached annexes, is accurate as of any date other than the date indicated on the front cover or the date given in the applicable document.

OTHER MATTERS

No other matters may come before the Special Meeting. Currently, in accordance with our bylaws, the only matters to be acted on at the Special Meeting are those described in this Proxy Statement, along with any necessary procedural matters related to the Special Meeting. As to procedural matters, or any other matters that are determined to be properly brought before the Special Meeting calling for a vote of the shareholders, it is the intention of the persons named in the accompanying proxy, unless otherwise directed in that proxy, to vote on those matters in accordance with their best judgment.

The next Annual Meeting of Shareholders will be held by the Company on or about April 26, 2010. Any shareholder who wishes to submit a proposal for consideration at that meeting, and who wishes to have such proposal included in the Company’s proxy statement, must comply with SEC Rule 14a-8 and must submit the proposal in writing no later than November 25, 2009. All such proposals and notifications should be sent to John A.B. Davies, Jr., President and Chief Executive Officer at Hampton Roads Bankshares, Inc., 999 Waterside Dr., Suite 200, Norfolk, Virginia 23510.

The Company’s Bylaws also prescribe the procedure that a shareholder must follow to nominate directors for election. Such nominations require that written notice be delivered to the Secretary of the Company at our principal executive office not later than (i) 45 days before the date on which we first mailed proxy materials for the prior year’s annual meeting of shareholders or, (ii) in the case of special meetings, at the close of business on the seventh day following the date on which notice of such meeting is first given to shareholders. The written notice must provide certain information and representations regarding both the nominee and the shareholder making the nomination and a written consent of the nominee to be named in a proxy statement as a nominee and to serve as a director if elected. Any shareholder may obtain a copy of the Bylaws, without charge, upon written request to the Secretary of the Company. Based upon the mailing date of our definitive proxy statement related to our 2009 Annual Meeting of Shareholders, June 2, 2009, the Company must receive proper notice of any such shareholder nomination no later than April 18, 2010.

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ANNEX A

ARTICLES OF AMENDMENT

TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION, AS AMENDED,

OF HAMPTON ROADS BANKSHARES, INC.

Pursuant to §13.1-710 of the Code of Virginia of 1950, as amended, the following is provided:

(a) The Corporation shall have the authority to issue 100,000,000 shares of Common Stock, par value $0.625 per share (the “Common Stock”), and 1,000,000 shares of Preferred Stock, no par value.

Dated the      day of             , 2009.

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ANNEX B

EXCERPTS FROM HAMPTON ROADS BANKSHARES, INC. FORM 10-K

for the fiscal year ended December 31, 2008

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We announced an open ended program on August 13, 2003 by which we were authorized to repurchase an unlimited number of our own shares of common stock in open market and privately negotiated transactions. During 2008, we repurchased a total of 131,406 shares of our common stock. We did not repurchase any shares of common stock other than through this publicly announced plan. Details for the transactions conducted during the last quarter of 2008 appear below.

ITEM 6 - SELECTED FINANCIAL DATA

The Selected Financial Data on page 2 in the excerpts from the Annual Report for the year ended December 31, 2008 is incorporated herein by reference.

ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 3 through 27 in the excerpts from the Annual Report for the year ended December  31, 2008 is incorporated herein by reference.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information on the Quantitative and Qualitative Disclosures About Market Risk included in the Interest Rate Sensitivity section on pages 20 through 22 in the excerpts from the Annual Report for the year ended December 31, 2008 is incorporated herein by reference.

We had no derivative financial instruments, foreign currency exposure, or trading portfolio as of December 31, 2008, other than freestanding derivatives associated with interest rate lock commitments on mortgage loans which the Company intends to sell in the secondary market.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following consolidated financial statements of the Company and the Report of Independent Registered Public Accounting Firm set forth on pages 28 through 67 in the excerpts from the Annual Report for the year ended December 31, 2008 are incorporated herein by reference or as noted and included as part of this Form 10-K:

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All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There were no changes in or disagreements with accountants on accounting and financial disclosure during 2008.

As discussed in our current report on Form 8-K filed on March 20, 2007, we engaged Yount, Hyde & Barbour, P.C. as our independent auditors for the fiscal year ended December 31, 2007, and chose not to renew the engagement of KPMG LLP (“KPMG”), which served as the Company’s independent auditors for the fiscal year ended December 31, 2006.

We have agreed to indemnify and hold KPMG harmless against and from any and all legal costs and expenses incurred by KPMG in successful defense of any legal action or proceeding that arises as a result of KPMG’s consent to the incorporation by reference of its audit report on our past financial statements incorporated by reference in this Annual Report on Form 10-K.

ITEM 9A - CONTROLS AND PROCEDURES

As of December 31, 2008, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our 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, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to our Company (including its consolidated subsidiaries) required to be included in our Exchange Act filings pursuant to the Securities Exchange Act of 1934. In addition, no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the fourth quarter of our fiscal year ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Selected Financial Data

The financial information presented below has been derived from our audited consolidated financial statements. This information is only a summary and should be read together with our consolidated historical financial statements and management’s discussion and analysis appearing elsewhere in this annual report.