##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE
ACT OF 1934

For the quarterly period ended June 30, 2008

Commission File Number: 001-32968





HAMPTON ROADS BANKSHARES,
INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Virginia                                                       |  | 54-2053718                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                  |  |           
|------------------------------------------------- |  | ----------
|999 Waterside Drive, Suite 200, Norfolk, Virginia |  | 23510     
|(Address of principal executive offices)          |  | (Zip Code)

(757) 217-1000

(Registrants telephone number, including area code)





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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   ̈    Accelerated filer  xNon-accelerated filer   ̈    Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ̈    Nox

Indicate the number of shares
outstanding of each of the issuers classes of common stock as of July 29, 2008.



|                               |  |                  
|------------------------------ |  | -----------------
|Common Stock, $0.625 Par Value |  | 13,155,199 Shares









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##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.

TABLE OF CONTENTS



|                                                                                               |  |     
|---------------------------------------------------------------------------------------------- |  | ----
|                                                                                               |  | Page
|PART I  FINANCIAL INFORMATION                                                                 |  |     
|                                                                                               | 
|ITEM  1 FINANCIAL STATEMENTS                                                                  |  |     
|                                                                                               | 
|Consolidated Balance Sheets                                                                    |  | 3   
|                                                                                               | 
|June 30, 2008                                                                                  |  |     
|December 31, 2007                                                                              |  |     
|                                                                                               | 
|Consolidated Statements of Income                                                              |  | 4   
|                                                                                               | 
|Three months ended June 30, 2008 and 2007                                                      |  |     
|Six months ended June 30, 2008 and 2007                                                        |  |     
|                                                                                               | 
|Consolidated Statements of Changes in Shareholders Equity                                     |  | 5   
|                                                                                               | 
|Six months ended June 30, 2008                                                                 |  |     
|Year ended December 31, 2007                                                                   |  |     
|                                                                                               | 
|Consolidated Statements of Cash Flows                                                          |  | 6   
|                                                                                               | 
|Six months ended June 30, 2008 and 2007                                                        |  |     
|                                                                                               | 
|Notes to Consolidated Financial Statements                                                     |  | 8   
|                                                                                               | 
|ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS |  | 12  
|                                                                                               | 
|ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  | 20  
|                                                                                               | 
|ITEM 4  CONTROLS AND PROCEDURES                                                               |  | 20  
|                                                                                               | 
|PART II  OTHER INFORMATION                                                                    |  | 21  
|                                                                                               | 
|ITEM 1  LEGAL PROCEEDINGS                                                                     |  | 21  
|                                                                                               | 
|ITEM 1A  RISK FACTORS                                                                         |  | 21  
|                                                                                               | 
|ITEM 2  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                           |  | 21  
|                                                                                               | 
|ITEM 3  DEFAULTS UPON SENIOR SECURITIES                                                       |  | 21  
|                                                                                               | 
|ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |  | 21  
|                                                                                               | 
|ITEM 5  OTHER INFORMATION                                                                     |  | 22  
|                                                                                               | 
|ITEM 6  EXHIBITS                                                                              |  | 22  
|                                                                                               | 
|SIGNATURES                                                                                     |  | 24  



2



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##### Table of Contents

PART I  FINANCIAL INFORMATION

ITEM 1  FINANCIAL STATEMENTS

HAMPTON ROADS BANKSHARES, INC.

Consolidated Balance Sheets



|                                                                                                                                             |  |                          |             |   |                   |   |             |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ----------- | - | ----------------- | - | ----------- | -
|                                                                                                                                             |  | (Unaudited)June 30, 2008 |             |   | December 31, 2007 |  
|Assets:                                                                                                                                      |  |                          |             |   |                   |   |             |  
|Cash and due from banks                                                                                                                      |  | $                        | 18,768,149  |   |                   | $ | 19,757,428  |  
|Overnight funds sold                                                                                                                         |  |                          | 333,192     |   |                   |   | 182,906     |  
|Interest-bearing deposits in other banks                                                                                                     |  |                          | 3,044,685   |   |                   |   | 5,623,271   |  
|Investment securities available-for-sale, at fair value                                                                                      |  |                          | 36,799,851  |   |                   |   | 42,377,325  |  
|Federal Home Loan Bank stock                                                                                                                 |  |                          | 4,692,400   |   |                   |   | 3,330,000   |  
|Federal Reserve Bank stock                                                                                                                   |  |                          | 1,499,950   |   |                   |   | 1,374,000   |  
|Loans                                                                                                                                        |  |                          | 723,205,571 |   |                   |   | 477,149,232 |  
|Allowance for loan losses                                                                                                                    |  |                          | (8,524,967  | ) |                   |   | (5,042,583  | )
|                                                                                                                                             |  |                          |             |   |                   |   |             |  
|Net loans                                                                                                                                    |  |                          | 714,680,604 |   |                   |   | 472,106,649 |  
|Premises and equipment, net                                                                                                                  |  |                          | 23,218,112  |   |                   |   | 11,967,151  |  
|Interest receivable                                                                                                                          |  |                          | 3,153,297   |   |                   |   | 2,431,347   |  
|Deferred tax assets, net                                                                                                                     |  |                          | 1,022,221   |   |                   |   | 2,658,404   |  
|Intangible assets                                                                                                                            |  |                          | 31,279,913  |   |                   |   |            |  
|Other assets                                                                                                                                 |  |                          | 6,997,224   |   |                   |   | 2,019,647   |  
|                                                                                                                                             |  |                          |             |   |                   |   |             |  
|Total assets                                                                                                                                 |  | $                        | 845,489,598 |   |                   | $ | 563,828,128 |  
|                                                                                                                                             |  |                          |             |   |                   |   |             |  
|Liabilities and Shareholders Equity:                                                                                                        |  |                          |             |   |                   |   |             |  
|Deposits:                                                                                                                                    |  |                          |             |   |                   |   |             |  
|Noninterest bearing demand                                                                                                                   |  | $                        | 119,531,739 |   |                   | $ | 100,553,404 |  
|Interest bearing:                                                                                                                            |  |                          |             |   |                   |   |             |  
|Demand                                                                                                                                       |  |                          | 108,689,912 |   |                   |   | 40,298,614  |  
|Savings                                                                                                                                      |  |                          | 99,029,244  |   |                   |   | 82,092,848  |  
|Time deposits:                                                                                                                               |  |                          |             |   |                   |   |             |  
|Less than $100,000                                                                                                                           |  |                          | 186,103,736 |   |                   |   | 114,832,724 |  
|$100,000 or more                                                                                                                             |  |                          | 122,326,134 |   |                   |   | 93,679,157  |  
|                                                                                                                                             |  |                          |             |   |                   |   |             |  
|Total deposits                                                                                                                               |  |                          | 635,680,765 |   |                   |   | 431,456,747 |  
|Federal Home Loan Bank borrowings                                                                                                            |  |                          | 71,303,690  |   |                   |   | 53,000,000  |  
|Other borrowings                                                                                                                             |  |                          | 23,000,000  |   |                   |   |            |  
|Interest payable                                                                                                                             |  |                          | 1,923,887   |   |                   |   | 1,636,231   |  
|Other liabilities                                                                                                                            |  |                          | 6,139,113   |   |                   |   | 4,075,136   |  
|                                                                                                                                             |  |                          |             |   |                   |   |             |  
|Total liabilities                                                                                                                            |  |                          | 738,047,455 |   |                   |   | 490,168,114 |  
|                                                                                                                                             |  |                          |             |   |                   |   |             |  
|Shareholders equity:                                                                                                                        |  |                          |             |   |                   |   |             |  
|Preferred stock, no par value. Authorized 1,000,000 shares; none issued and outstanding                                                      |  |                          |            |   |                   |   |            |  
|Common stock, $0.625 par value. Authorized 40,000,000 shares; issued and outstanding 13,128,523 shares in 2008 and 10,314,899 shares in 2007 |  |                          | 8,205,327   |   |                   |   | 6,446,812   |  
|Capital surplus                                                                                                                              |  |                          | 74,256,304  |   |                   |   | 42,677,083  |  
|Retained earnings                                                                                                                            |  |                          | 25,345,199  |   |                   |   | 24,486,335  |  
|Accumulated other comprehensive income (loss), net of tax                                                                                    |  |                          | (364,687    | ) |                   |   | 49,784      |  
|                                                                                                                                             |  |                          |             |   |                   |   |             |  
|Total shareholders equity                                                                                                                   |  |                          | 107,442,143 |   |                   |   | 73,660,014  |  
|                                                                                                                                             |  |                          |             |   |                   |   |             |  
|Total liabilities and shareholders equity                                                                                                   |  | $                        | 845,489,598 |   |                   | $ | 563,828,128 |  
|                                                                                                                                             |  |                          |             |   |                   |   |             |  

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



3



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##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.

Consolidated Statements of Income (Unaudited)



|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|----------------------------------------------------- |  | ------------------ | ---------- | ---------------- | - | ------------- |  | ------------- | ---------- |  | - | ----------
|                                                      |  | Three Months Ended |            | Six Months Ended
|                                                      |  | June 30, 2008      |            | June 30, 2007    |   | June 30, 2008 |  | June 30, 2007
|Interest Income:                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Loans, including fees                                 |  | $                  | 9,235,617  |                  | $ | 8,799,335     |  | $             | 17,916,324 |  | $ | 16,871,838
|Investment securities                                 |  |                    | 417,783    |                  |   | 597,594       |  |               | 907,179    |  |   | 1,212,257 
|Overnight funds sold                                  |  |                    | 40,274     |                  |   | 6,328         |  |               | 46,415     |  |   | 29,056    
|Interest-bearing deposits in other banks              |  |                    | 99,422     |                  |   | 115,835       |  |               | 223,230    |  |   | 149,492   
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Total interest income                                 |  |                    | 9,793,096  |                  |   | 9,519,092     |  |               | 19,093,148 |  |   | 18,262,643
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Interest Expense:                                     |  |                    |            |                  |   |               |  |               |            |  |   |           
|Deposits:                                             |  |                    |            |                  |   |               |  |               |            |  |   |           
|Demand                                                |  |                    | 174,915    |                  |   | 167,843       |  |               | 314,037    |  |   | 336,896   
|Savings                                               |  |                    | 421,109    |                  |   | 688,622       |  |               | 1,034,117  |  |   | 1,365,007 
|Time deposits:                                        |  |                    |            |                  |   |               |  |               |            |  |   |           
|Less than $100,000                                    |  |                    | 1,511,198  |                  |   | 956,733       |  |               | 2,970,257  |  |   | 1,841,887 
|$100,000 or more                                      |  |                    | 1,170,376  |                  |   | 994,611       |  |               | 2,391,725  |  |   | 1,907,251 
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Interest on deposits                                  |  |                    | 3,277,598  |                  |   | 2,807,809     |  |               | 6,710,136  |  |   | 5,451,041 
|Federal Home Loan Bank borrowings                     |  |                    | 640,243    |                  |   | 590,127       |  |               | 1,225,272  |  |   | 1,025,629 
|Other borrowings                                      |  |                    | 84,333     |                  |   |              |  |               | 84,333     |  |   |          
|Overnight funds purchased                             |  |                    | 10,359     |                  |   | 1,152         |  |               | 10,359     |  |   | 12,368    
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Total interest expense                                |  |                    | 4,012,533  |                  |   | 3,399,088     |  |               | 8,030,100  |  |   | 6,489,038 
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Net interest income                                   |  |                    | 5,780,563  |                  |   | 6,120,004     |  |               | 11,063,048 |  |   | 11,773,605
|                                                      |  |                    |            |                 
|Provision for loan losses                             |  |                    | 274,326    |                  |   | 246,000       |  |               | 544,326    |  |   | 468,000   
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Net interest income after provision for loan losses   |  |                    | 5,506,237  |                  |   | 5,874,004     |  |               | 10,518,722 |  |   | 11,305,605
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Noninterest Income:                                   |  |                    |            |                  |   |               |  |               |            |  |   |           
|Service charges on deposit accounts                   |  |                    | 690,729    |                  |   | 496,716       |  |               | 1,140,773  |  |   | 984,344   
|Gain on sale of debt securities                       |  |                    | 108,344    |                  |   |              |  |               | 457,399    |  |   |          
|Other service charges and fees                        |  |                    | 895,297    |                  |   | 332,900       |  |               | 1,246,738  |  |   | 769,248   
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Total noninterest income                              |  |                    | 1,694,370  |                  |   | 829,616       |  |               | 2,844,910  |  |   | 1,753,592 
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Noninterest Expense:                                  |  |                    |            |                  |   |               |  |               |            |  |   |           
|Salaries and employee benefits                        |  |                    | 2,661,197  |                  |   | 2,591,772     |  |               | 5,054,870  |  |   | 5,146,259 
|Occupancy                                             |  |                    | 591,366    |                  |   | 400,638       |  |               | 1,032,953  |  |   | 814,617   
|Data processing                                       |  |                    | 244,469    |                  |   | 152,056       |  |               | 413,194    |  |   | 310,846   
|Other                                                 |  |                    | 1,161,723  |                  |   | 938,525       |  |               | 2,099,974  |  |   | 1,845,147 
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Total noninterest expense                             |  |                    | 4,658,755  |                  |   | 4,082,991     |  |               | 8,600,991  |  |   | 8,116,869 
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Income before provision for income taxes              |  |                    | 2,541,852  |                  |   | 2,620,629     |  |               | 4,762,641  |  |   | 4,942,328 
|Provision for income taxes                            |  |                    | 868,709    |                  |   | 891,938       |  |               | 1,628,219  |  |   | 1,681,315 
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Net income                                            |  | $                  | 1,673,143  |                  | $ | 1,728,691     |  | $             | 3,134,422  |  | $ | 3,261,013 
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Earnings Per Share:                                   |  |                    |            |                  |   |               |  |               |            |  |   |           
|Basic earnings per share                              |  | $                  | 0.15       |                  | $ | 0.17          |  | $             | 0.29       |  | $ | 0.32      
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Diluted earnings per share                            |  | $                  | 0.15       |                  | $ | 0.17          |  | $             | 0.29       |  | $ | 0.31      
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Basic weighted average shares outstanding             |  |                    | 11,193,694 |                  |   | 10,226,168    |  |               | 10,747,005 |  |   | 10,225,388
|Effect of dilutive stock options and non-vested stock |  |                    | 133,462    |                  |   | 225,262       |  |               | 97,816     |  |   | 192,700   
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           
|Diluted weighted average shares outstanding           |  |                    | 11,327,156 |                  |   | 10,451,430    |  |               | 10,844,821 |  |   | 10,418,088
|                                                      |  |                    |            |                  |   |               |  |               |            |  |   |           

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



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##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.

Consolidated Statements of Changes in Shareholders Equity

Six months ended June 30, 2008 and year ended December 31, 2007



|                                                                                                    |  |              |   |  |                |           |   |                  |   |            |                                            |  |   |            |   |  |   |          |   |  |   |             |  
|--------------------------------------------------------------------------------------------------- |  | ------------ | - |  | -------------- | --------- | - | ---------------- | - | ---------- | ------------------------------------------ |  | - | ---------- | - |  | - | -------- | - |  | - | ----------- | -
|                                                                                                    |  | Common Stock |   |  | CapitalSurplus |           |   | RetainedEarnings |   |            | AccumulatedOtherComprehensiveIncome
(Loss) |  |   | Total      |  
|                                                                                                    |  | Shares       |   |  | Amount         |           |   |                  |   |           
|Balance at December 31, 2006                                                                        |  | 10,251,336   |   |  | $              | 6,407,085 |   |                  | $ | 42,105,666 |                                            |  | $ | 22,091,191 |   |  | $ | (441,399 | ) |  | $ | 70,162,543  |  
|                                                                                                    |  |              |   |  |                |          
|Comprehensive income:                                                                               |  |              |   |  |                |           |   |                  |   |            |                                            |  |   |            |   |  |   |          |   |  |   |             |  
|Net income                                                                                          |  |             |   |  |                |          |   |                  |   |           |                                            |  |   | 6,810,613  |   |  |   |         |   |  |   | 6,810,613   |  
|Change in unrealized gain (loss) on securities available-for-sale, net of taxes of $253,033         |  |             |   |  |                |          |   |                  |   |           |                                            |  |   |           |   |  |   | 491,183  |   |  |   | 491,183     |  
|                                                                                                    |  |              |   |  |                |           |   |                  |   |            |                                            |  |   |            |   |  |   |          |   |  |   |             |  
|Total comprehensive income                                                                          |  |              |   |  |                |           |   |                  |   |            |                                            |  |   |            |   |  |   |          |   |  |   | 7,301,796   |  
|Shares issued related to:                                                                           |  |              |   |  |                |           |   |                  |   |            |                                            |  |   |            |   |  |   |          |   |  |   |             |  
|401(k) plan                                                                                         |  | 11,020       |   |  |                | 6,888     |   |                  |   | 130,311    |                                            |  |   |           |   |  |   |         |   |  |   | 137,199     |  
|Executive savings plan                                                                              |  | 11,686       |   |  |                | 7,304     |   |                  |   | 138,187    |                                            |  |   |           |   |  |   |         |   |  |   | 145,491     |  
|Regional board fees                                                                                 |  | 1,893        |   |  |                | 1,183     |   |                  |   | 22,807     |                                            |  |   |           |   |  |   |         |   |  |   | 23,990      |  
|Exercise of stock options                                                                           |  | 93,599       |   |  |                | 58,499    |   |                  |   | 648,108    |                                            |  |   |           |   |  |   |         |   |  |   | 706,607     |  
|Dividend reinvestment                                                                               |  | 165,991      |   |  |                | 103,744   |   |                  |   | 2,145,935  |                                            |  |   |           |   |  |   |         |   |  |   | 2,249,679   |  
|Stock-based compensation expense                                                                    |  | 11,864       |   |  |                | 7,415     |   |                  |   | 329,835    |                                            |  |   |           |   |  |   |         |   |  |   | 337,250     |  
|Common stock repurchased                                                                            |  | (232,490     | ) |  |                | (145,306  | ) |                  |   | (2,961,937 | )                                          |  |   |           |   |  |   |         |   |  |   | (3,107,243  | )
|Tax benefit of stock option exercises                                                               |  |             |   |  |                |          |   |                  |   | 118,171    |                                            |  |   |           |   |  |   |         |   |  |   | 118,171     |  
|Cash dividends ($0.43 per share)                                                                    |  |             |   |  |                |          |   |                  |   |           |                                            |  |   | (4,415,469 | ) |  |   |         |   |  |   | (4,415,469  | )
|                                                                                                    |  |              |   |  |                |           |   |                  |   |            |                                            |  |   |            |   |  |   |          |   |  |   |             |  
|Balance at December 31, 2007                                                                        |  | 10,314,899   |   |  | $              | 6,446,812 |   |                  | $ | 42,677,083 |                                            |  | $ | 24,486,335 |   |  | $ | 49,784   |   |  | $ | 73,660,014  |  
|                                                                                                    |  |              |   |  |                |           |   |                  |   |            |                                            |  |   |            |   |  |   |          |   |  |   |             |  
|(Unaudited)                                                                                         |  |              |   |  |                |           |   |                  |   |            |                                            |  |   |            |   |  |   |          |   |  |   |             |  
|Comprehensive income:                                                                               |  |              |   |  |                |           |   |                  |   |            |                                            |  |   |            |   |  |   |          |   |  |   |             |  
|Net income                                                                                          |  |             |   |  | $              |          |   |                  | $ |           |                                            |  | $ | 3,134,422  |   |  | $ |         |   |  | $ | 3,134,422   |  
|Change in unrealized gain (loss) on securities available-for-sale, net of taxes of ($62,014)        |  |             |   |  |                |          |   |                  |   |           |                                            |  |   |           |   |  |   | (112,591 | ) |  |   | (112,591    | )
|Reclassification adjustment for securities gains included in net income, net of taxes of ($155,519) |  |             |   |  |                |          |   |                  |   |           |                                            |  |   |           |   |  |   | (301,880 | ) |  |   | (301,880    | )
|                                                                                                    |  |              |   |  |                |           |   |                  |   |            |                                            |  |   |            |   |  |   |          |   |  |   |             |  
|Total comprehensive income                                                                          |  |              |   |  |                |           |   |                  |   |            |                                            |  |   |            |   |  |   |          |   |  |   | 2,719,951   |  
|Shares issued related to:                                                                           |  |              |   |  |                |           |   |                  |   |            |                                            |  |   |            |   |  |   |          |   |  |   |             |  
|Executive savings plan                                                                              |  | 11,582       |   |  |                | 7,239     |   |                  |   | 114,432    |                                            |  |   |           |   |  |   |         |   |  |   | 121,671     |  
|Regional board fees                                                                                 |  | 8,510        |   |  |                | 5,319     |   |                  |   | 104,670    |                                            |  |   |           |   |  |   |         |   |  |   | 109,989     |  
|Exercise of stock options                                                                           |  | 49,874       |   |  |                | 31,171    |   |                  |   | 296,108    |                                            |  |   |           |   |  |   |         |   |  |   | 327,279     |  
|Dividend reinvestment                                                                               |  | 95,197       |   |  |                | 59,498    |   |                  |   | 1,059,273  |                                            |  |   |           |   |  |   |         |   |  |   | 1,118,771   |  
|Stock-based compensation expense                                                                    |  |             |   |  |                |          |   |                  |   | 74,081     |                                            |  |   |           |   |  |   |         |   |  |   | 74,081      |  
|Acquisition of Shore Financial Corporation                                                          |  | 2,713,425    |   |  |                | 1,695,891 |   |                  |   | 29,508,497 |                                            |  |   |           |   |  |   |         |   |  |   | 31,204,388  |  
|Common stock repurchased                                                                            |  | (64,964      | ) |  |                | (40,603   | ) |                  |   | (763,267   | )                                          |  |   |           |   |  |   |         |   |  |   | (803,870    | )
|Options acquired in merger                                                                          |  |             |   |  |                |          |   |                  |   | 1,164,292  |                                            |  |   |           |   |  |   |         |   |  |   | 1,164,292   |  
|Tax benefit of stock option exercises                                                               |  |             |   |  |                |          |   |                  |   | 21,135     |                                            |  |   |           |   |  |   |         |   |  |   | 21,135      |  
|Cash dividends ($0.22 per share)                                                                    |  |             |   |  |                |          |   |                  |   |           |                                            |  |   | (2,275,558 | ) |  |   |         |   |  |   | (2,275,558  | )
|                                                                                                    |  |              |   |  |                |           |   |                  |   |            |                                            |  |   |            |   |  |   |          |   |  |   |             |  
|Balance at June 30, 2008                                                                            |  | 13,128,523   |   |  | $              | 8,205,327 |   |                  | $ | 74,256,304 |                                            |  | $ | 25,345,199 |   |  | $ | (364,687 | ) |  | $ | 107,442,143 |  
|                                                                                                    |  |              |   |  |                |           |   |                  |   |            |                                            |  |   |            |   |  |   |          |   |  |   |             |  

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



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HAMPTON ROADS BANKSHARES, INC.

Consolidated Statements of Cash Flows (Unaudited)



|                                                                                  |  |                  |             |   |               |   |             |  
|--------------------------------------------------------------------------------- |  | ---------------- | ----------- | - | ------------- | - | ----------- | -
|                                                                                  |  | Six Months Ended |            
|                                                                                  |  | June 30, 2008    |             |   | June 30, 2007 |  
|Operating Activities:                                                             |  |                  |             |   |               |   |             |  
|Net income                                                                        |  | $                | 3,134,422   |   |               | $ | 3,261,013   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                  |             |   |               |   |             |  
|Depreciation and amortization                                                     |  |                  | 525,506     |   |               |   | 445,143     |  
|Provision for loan losses                                                         |  |                  | 544,326     |   |               |   | 468,000     |  
|Regional board fees                                                               |  |                  | 109,989     |   |               |   | 11,591      |  
|Stock-based compensation expense                                                  |  |                  | 74,081      |   |               |   | 249,962     |  
|Net amortization of premiums and accretion of discounts on investment securities  |  |                  | (44,172     | ) |               |   | (2,146      | )
|Amortization of intangible assets                                                 |  |                  | 59,903      |   |               |   |            |  
|Gain on sale of premises and equipment                                            |  |                  | (511,052    | ) |               |   |            |  
|Gain on sale of debt securities                                                   |  |                  | (457,399    | ) |               |   |            |  
|Changes in:                                                                       |  |                  |             |   |               |   |             |  
|Interest receivable                                                               |  |                  | 316,198     |   |               |   | (62,903     | )
|Other assets                                                                      |  |                  | (895,185    | ) |               |   | (1,227,489  | )
|Interest payable                                                                  |  |                  | (363,545    | ) |               |   | 24,894      |  
|Other liabilities                                                                 |  |                  | (506,161    | ) |               |   | 1,420,414   |  
|                                                                                  |  |                  |             |   |               |   |             |  
|Net cash provided by operating activities                                         |  |                  | 1,986,911   |   |               |   | 4,588,479   |  
|                                                                                  |  |                  |             |   |               |   |             |  
|Investing Activities:                                                             |  |                  |             |   |               |   |             |  
|Proceeds from maturities and calls of debt securities available-for-sale          |  |                  | 4,041,500   |   |               |   | 7,050,614   |  
|Proceeds from sale of debt securities                                             |  |                  | 18,457,399  |   |               |   |            |  
|Purchase of equity securities available-for-sale                                  |  |                  | (812,896    | ) |               |   | (992,108    | )
|Proceeds from sales of Federal Home Loan Bank stock                               |  |                  | 2,029,500   |   |               |   | 157,500     |  
|Purchase of Federal Home Loan Bank stock                                          |  |                  | (1,256,200  | ) |               |   | (799,600    | )
|Proceeds from sales of Federal Reserve Bank stock                                 |  |                  |            |   |               |   | 5,150       |  
|Purchase of Federal Reserve Bank stock                                            |  |                  | (1,150      | ) |               |   |            |  
|Net increase in total loans                                                       |  |                  | (22,700,162 | ) |               |   | (53,575,428 | )
|Purchase of premises and equipment                                                |  |                  | (1,534,432  | ) |               |   | (73,925     | )
|Proceeds from sale of premises and equipment                                      |  |                  | 751,560     |   |               |   |            |  
|                                                                                  |  |                  |             |   |               |   |             |  
|Net cash used in investing activities                                             |  |                  | (1,024,881  | ) |               |   | (48,227,797 | )
|                                                                                  |  |                  |             |   |               |   |             |  
|Financing Activities:                                                             |  |                  |             |   |               |   |             |  
|Net increase (decrease) in deposits                                               |  |                  | (4,129,163  | ) |               |   | 27,430,531  |  
|Repayments of Federal Home Loan Bank borrowings                                   |  |                  | (22,900,000 | ) |               |   | (2,500,000  | )
|Proceeds from Federal Home Loan Bank borrowings                                   |  |                  | 7,000,000   |   |               |   | 17,500,000  |  
|Proceeds from other borrowings                                                    |  |                  | 23,000,000  |   |               |   |            |  
|Cash acquired in merger                                                           |  |                  | 16,165,634  |   |               |   |            |  
|Cash paid in merger                                                               |  |                  | (22,025,508 | ) |               |   |            |  
|Common stock repurchased                                                          |  |                  | (796,027    | ) |               |   | (1,404,706  | )
|Issuance of shares to 401(k) plan                                                 |  |                  |            |   |               |   | 137,199     |  
|Issuance of shares to executive savings plan                                      |  |                  | 121,671     |   |               |   | 145,491     |  
|Proceeds from exercise of stock options                                           |  |                  | 319,436     |   |               |   | 82,892      |  
|Excess tax benefit realized from stock options exercised                          |  |                  | 21,135      |   |               |   | 6,596       |  
|Dividends paid, net                                                               |  |                  | (1,156,787  | ) |               |   | (1,048,074  | )
|                                                                                  |  |                  |             |   |               |   |             |  
|Net cash provided by (used in) financing activities                               |  |                  | (4,379,609  | ) |               |   | 40,349,929  |  
|                                                                                  |  |                  |             |   |               |   |             |  
|Decrease in cash and cash equivalents                                             |  |                  | (3,417,579  | ) |               |   | (3,289,389  | )
|Cash and cash equivalents at beginning of period                                  |  |                  | 25,563,605  |   |               |   | 26,798,551  |  
|                                                                                  |  |                  |             |   |               |   |             |  
|Cash and cash equivalents at end of period                                        |  | $                | 22,146,026  |   |               | $ | 23,509,162  |  
|                                                                                  |  |                  |             |   |               |   |             |  



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|                                                       |  |   |             |  |   |          
|------------------------------------------------------ |  | - | ----------- |  | - | ---------
|Supplemental cash flow information:                    |  |   |             |  |   |          
|Cash paid during the period for interest               |  | $ | 8,320,275   |  | $ | 6,464,144
|Cash paid during the period for income taxes           |  |   | 2,000,000   |  |   | 1,785,000
|                                                       |  |  
|Supplemental noncash information:                      |  |   |             |  |   |          
|Dividends reinvested                                   |  | $ | 1,118,771   |  | $ | 1,107,708
|Value of shares exchanged in exercise of stock options |  |   | 7,843       |  |   | 206,455  
|Change in unrealized gain (loss) on securities         |  |   | 632,804     |  |   | 123,587  
|Transfer between loans and other real estate owned     |  |   | 354,659     |  |   | 77,937   
|                                                       |  |  
|Transactions related to acquisition of subsidiary      |  |   |             |  |   |          
|Increase in assets and liabilities                     |  |   |             |  |   |          
|Loans                                                  |  | $ | 222,373,928 |  | $ |         
|Securities                                             |  |   | 17,659,313  |  |   |         
|Other assets                                           |  |   | 18,096,865  |  |   |         
|Non interest bearing deposits                          |  |   | 33,331,029  |  |   |         
|Interest bearing deposits                              |  |   | 174,534,879 |  |   |         
|Borrowings                                             |  |   | 33,883,333  |  |   |         
|Other liabilities                                      |  |   | 3,221,339   |  |   |         
|Issuance of common stock and stock options             |  |   | 32,368,680  |  |   |         



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HAMPTON ROADS BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2008

NOTE A  BASIS OF PRESENTATION

Hampton Roads Bankshares, Inc., (the Company), is a multi-bank holding company incorporated under the laws of the Commonwealth of Virginia on
February 28, 2001. The Company owns Bank of Hampton Roads (Norfolk, Virginia), Shore Bank (Onley, Virginia) and its subsidiary Shore Investments, Inc. (Onley, Virginia), and Hampton Roads Investments, Inc. (Norfolk, Virginia). The consolidated
statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts have been eliminated.

The Companys principal executive office is located at 999 Waterside Drive, Suite 200, Norfolk, VA 23510 and the telephone number is (757) 217-1000. The Companys common stock trades on the Nasdaq Global Select Market under
the symbol HMPR.

Bank of Hampton Roads is a Virginia state-chartered commercial bank with 18 full service offices in the
Hampton Roads region of southeastern Virginia, including nine offices in the city of Chesapeake, four offices in each of the cities of Norfolk and Virginia Beach, and one office in the city of Suffolk. Bank of Hampton Roads commenced operations in
1987.

Shore Bank is a Virginia state-chartered commercial bank with eight full service offices and two investment centers located on the
Eastern Shore of Virginia and Maryland including the counties of Accomack and Northampton in Virginia and the Pocomoke City/Worcester County and Salisbury/Wicomico County market areas in Maryland. Shore Bank commenced operations in 1961.

In January 2004, Hampton Roads Investments, Inc., a wholly owned subsidiary, was formed to provide securities, brokerage, and investment advisory
services.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U. S. generally accepted
accounting principles for interim financial reporting and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U. S. generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and
footnotes thereto included in the Companys annual report on Form 10-K for the year ended December 31, 2007 (the 2007 Form 10-K). The results of operations for the six months ended June 30, 2008 are not necessarily
indicative of the results to be expected for the full year.

NOTE B  ACQUISITION OF SHORE FINANCIAL

On June 1, 2008 pursuant to the terms of the Agreement and Plan of Merger, dated as of January 8, 2008 (the Merger Agreement) by and
between the Company and Shore Financial Corporation (SFC) the Company acquired all of the outstanding shares of SFC. The shareholders of SFC received, for each share of SFC common stock that they owned immediately prior to the effective
time of the merger, either $22 per share in cash or 1.8 shares of common stock of the Company. Pursuant to the terms of the Merger Agreement, shareholders of SFC had the opportunity to elect to receive cash, shares of common stock of the Company, or
a combination of both, subject to allocation and proration procedures ensuring that no less than 25% and no more than 45% of the total merger consideration was cash and the remainder was common stock of the Company. In addition, at the effective
time of the merger, each outstanding option to purchase shares of SFCs common stock under any stock plans vested pursuant to its terms and was converted into an option to acquire the number of shares of the Companys common stock equal to
the number of shares of SFC common stock underlying the option multiplied by 1.8. The exercise price of each option was adjusted accordingly. The aggregate purchase price was approximately $55.2 million, including common stock valued at $31.2
million, SFC stock held as an investment of $0.8 million, stock options exchanged valued at $1.2 million, cash of $21.0 million and direct costs on the merger of $1.0 million.

The merger transaction was accounted for under the purchase method of accounting and is intended to qualify as a tax-free reorganization under
Section 368(a) of the Internal Revenue Code. The merger resulted in $22.1 million of goodwill and $9.1 million of core deposit intangibles. The core deposit intangible was based on an independent valuation and will be amortized over the
estimated life of the core deposits of nine years, based on undiscounted cash



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flows. In order to finance the merger transaction, the Company borrowed $23 million. The loan has a variable interest rate of prime minus one percent and
matures in July 2018. The loan requires that the Company meet certain covenants and as of June 30, 2008, all covenants were met.

The
Company is in the process of analyzing the effect of canceling certain contracts between Shore Bank and their vendors in order to produce efficiencies from the merger. Costs of canceling the contracts could be material and would change the amount of
goodwill associated with the merger. Additionally, the Company is still determining the value of the core deposit intangible. An estimate of the core deposit intangible has been used in the preparation of these consolidated financial statements,
however, that estimate may be revised once the final valuations have been performed.

The Companys consolidated financial statements
include the results of operations of Shore Bank only from the date of acquisition.

NOTE C  STOCK-BASED COMPENSATION

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 123R, Share Based Payment,on January 1, 2006 and,
accordingly, uses the fair-value method to account for stock-based compensation. Fair-value of stock options is estimated at the date of grant using a lattice option pricing model.

Stock-based compensation expense recognized in the consolidated statements of income for the six months ended June 30, 2008 and June 30, 2007
was $74,081 and $249,962, respectively, with a related tax benefit of $13,887 and $62,417, respectively. During the first six months of 2008 and 2007, stock-based compensation expense was comprised of $42,355 and $98,196, respectively, related to
stock options which vested during the period, and $31,726 and $151,766, respectively, related to share awards.

The Company has granted
stock options to its directors and employees under stock compensation plans that have been approved by the Companys shareholders. All outstanding options have 10-year terms and are either fully vested and exercisable at the date of grant or
vest ratably over periods that range from one year to 10 years. A summary of the Companys stock option activity and related information for the six months ended June 30, 2008 is as follows:



|                             |  |                         |  |                               |       |                                     |      |                         |   |          
|---------------------------- |  | ----------------------- |  | ----------------------------- | ----- | ----------------------------------- | ---- | ----------------------- | - | ---------
|                             |  | StockOptionsOutstanding |  | WeightedAverageExercise Price |       | RemainingContractual Life(in years) |      | AggregateIntrinsicValue
|Balance at December 31, 2007 |  | 858,156                 |  | $                             | 9.48  |                                     | N/A  |                         |   | N/A      
|Acquired through merger      |  | 216,183                 |  |                               | 6.27  |                                     | N/A  |                         |   | N/A      
|Exercised                    |  | 49,874                  |  |                               | 6.56  |                                     | N/A  |                         |   | N/A      
|Expired                      |  | 1,651                   |  |                               | 10.36 |                                     | N/A  |                         |   | N/A      
|                             |  |                         |  |                               |       |                                     |      |                         |   |          
|Balance at June 30, 2008     |  | 1,022,814               |  | $                             | 8.94  |                                     | 5.48 |                         | $ | 3,627,738
|                             |  |                         |  |                               |       |                                     |      |                         |   |          

The stock options acquired through the merger with SFC in the second quarter of 2008 were valued
at the time of the merger with a weighted-average grant-date fair value of $5.38. The weighted-average grant-date fair value of stock options granted during the six months ended June 30, 2007 was $2.13. Option valuation models require the input
of highly subjective assumptions. Because the Companys employee stock options have characteristics significantly different from those of traded options, and because changes in the assumptions can materially affect the fair value estimate, in
managements opinion, the existing models do not necessarily provide a representative single measure of the fair value at which transactions may occur. The assumptions used to value the stock options acquired through the merger during the first
half of 2008 were as follows: risk-free interest rate of 3.34%, volatility of 34.30%, dividend yield of 3.93%, and expected option terms ranging from 1.3 years to 5.8 years. Expected volatility is based on historical volatility of the Companys
traded shares. The expected term is calculated by the lattice option pricing model using assumptions regarding the contractual term of the stock options, vesting periods, the exercise price to market stock price multiple experienced by the Company,
and the historical employee exit rate.

The total intrinsic value of stock options exercised during the six month periods ended
June 30, 2008 and 2007 was $170,109 and $105,052, respectively. Cash received from stock option exercises for the six month periods ended June 30, 2008 and 2007 was $319,438 and $82,902, respectively. The Company may issue new shares to
satisfy stock option grants and as of June 30, 2008 there were 2,072,559 shares available under the existing stock incentive plan that was approved by shareholders. However, shares may be repurchased in open market or privately negotiated



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transactions under certain circumstances. As of June 30, 2008, there was $285,387 of unrecognized compensation cost related to non-vested stock options.
That cost is expected to be recognized over a weighted-average period of 3.61 years.

The Company has granted non-vested shares of common
stock to certain directors and employees as part of incentive programs and to those directors who elected to use deferred directors fees to purchase non-vested shares of common stock. Non-vested shares of common stock awarded to employees and
directors as part of incentive programs have vesting schedules that range from four to nine years and are expensed over the same schedules. Non-vested shares of common stock issued to directors as a method of deferring their directors fees are
expensed at the time the fees are earned by the director. A summary of the Companys non-vested share activity and related information for the six months ended June 30, 2008 is as follows:



|                             |  |                 |  |                                      |      
|---------------------------- |  | --------------- |  | ------------------------------------ | -----
|                             |  | Number ofShares |  | Weighted-AverageGrant-DateFair
Value
|Balance at December 31, 2007 |  | 54,540          |  | $                                    | 11.23
|Granted                      |  |                |  |                                      |     
|Vested                       |  | 32,623          |  |                                      | 11.13
|                             |  |                 |  |                                      |      
|Balance at June 30, 2008     |  | 21,917          |  | $                                    | 11.38
|                             |  |                 |  |                                      |      

As of June 30, 2008, there was $199,604 of total unrecognized compensation cost related to
non-vested shares of common stock. That cost is expected to be recognized over a weighted-average period of 4.15 years.

NOTE D  INVESTMENT
SECURITIES

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



|                                    |  |               |            |                     |   |               |  |                     |            |  |   |           
|----------------------------------- |  | ------------- | ---------- | ------------------- | - | ------------- |  | ------------------- | ---------- |  | - | ----------
|                                    |  | June 30, 2008 |            | December 31, 2007  
|                                    |  | AmortizedCost |            | EstimatedFair Value |   | AmortizedCost |  | EstimatedFair Value
|U.S. Agency securities              |  | $             | 25,063,346 |                     | $ | 25,238,872    |  | $                   | 40,943,608 |  | $ | 41,272,656
|Mortgage-backed securities          |  |               | 1,582,337  |                     |   | 1,590,310     |  |                     | 641,785    |  |   | 641,174   
|State and Municipal securities      |  |               | 6,709,256  |                     |   | 6,622,620     |  |                     | 244,001    |  |   | 249,995   
|Equity securities                   |  |               | 4,006,738  |                     |   | 3,348,049     |  |                     | 472,500    |  |   | 213,500   
|                                    |  |               |            |                     |   |               |  |                     |            |  |   |           
|Total securities available-for-sale |  | $             | 37,361,677 |                     | $ | 36,799,851    |  | $                   | 42,301,894 |  | $ | 42,377,325
|                                    |  |               |            |                     |   |               |  |                     |            |  |   |           

The Company had securities in its portfolio at June 30, 2008 and December 31, 2007 that
reflected an unrealized loss in value. These unrealized losses have been evaluated and are considered to be temporary impairments of the value of the issues. Management evaluates securities for other-than-temporary impairments at least on a
quarterly basis, and more frequently when economic or market concerns warrant such evaluations. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition
and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

NOTE E - LOANS

Major classifications of loans are
summarized as follows:



|                                     |  |               |             |   |                   |   |             |  
|------------------------------------ |  | ------------- | ----------- | - | ----------------- | - | ----------- | -
|                                     |  | June 30, 2008 |             |   | December 31, 2007 |  
|Commercial                           |  | $             | 112,658,928 |   |                   | $ | 109,782,739 |  
|Construction                         |  |               | 173,674,321 |   |                   |   | 165,468,776 |  
|Real estate-commercial mortgage      |  |               | 236,052,933 |   |                   |   | 151,600,649 |  
|Real estate-residential mortgage     |  |               | 187,593,196 |   |                   |   | 38,523,593  |  
|Installment loans (to individuals)   |  |               | 13,384,787  |   |                   |   | 11,976,075  |  
|Deferred loan fees and related costs |  |               | (158,594    | ) |                   |   | (202,600    | )
|                                     |  |               |             |   |                   |   |             |  
|Total loans                          |  | $             | 723,205,571 |   |                   | $ | 477,149,232 |  
|                                     |  |               |             |   |                   |   |             |  



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Non-performing assets were as follows:



|                                                   |  |               |           |                   |   |          
|-------------------------------------------------- |  | ------------- | --------- | ----------------- | - | ---------
|                                                   |  | June 30, 2008 |           | December 31, 2007
|Loans 90 days past due and still accruing interest |  | $             | 1,436,069 |                   | $ | 851,846  
|Nonaccrual loans                                   |  |               | 1,629,323 |                   |   | 1,792,758
|Real estate acquired in settlement of loans        |  |               | 354,659   |                   |   |         
|                                                   |  |               |           |                   |   |          
|Total non-performing assets                        |  | $             | 3,420,051 |                   | $ | 2,644,604
|                                                   |  |               |           |                   |   |          

Information on impaired loans was as follows:



|                                                                                 |  |               |           |                   |   |          
|-------------------------------------------------------------------------------- |  | ------------- | --------- | ----------------- | - | ---------
|                                                                                 |  | June 30, 2008 |           | December 31, 2007
|Impaired loans for which an allowance has been provided                          |  | $             | 2,703,969 |                   | $ | 1,697,758
|Impaired loans for which no allowance has been provided                          |  |               | 521,166   |                   |   |         
|                                                                                 |  |               |           |                   |   |          
|Total impaired loans                                                             |  | $             | 3,225,135 |                   | $ | 1,697,758
|                                                                                 |  |               |           |                   |   |          
|Allowance provided for impaired loans, included in the allowance for loan losses |  | $             | 821,854   |                   | $ | 405,552  
|                                                                                 |  |               |           |                   |   |          
|Average balance in impaired loans                                                |  | $             | 2,823,912 |                   | $ | 1,782,143
|                                                                                 |  |               |           |                   |   |          
|Interest income recognized from impaired loans                                   |  | $             | 26,569    |                   | $ | 19,952   
|                                                                                 |  |               |           |                   |   |          

NOTE F  ALLOWANCE FOR LOAN LOSSES

Transactions affecting the allowance for loan losses during the six months ended June 30, 2008 and 2007 were as follows:



|                               |  |      |           |   |      |   |           |  
|------------------------------ |  | ---- | --------- | - | ---- | - | --------- | -
|                               |  | 2008 |           |   | 2007 |  
|Balance at beginning of period |  | $    | 5,042,583 |   |      | $ | 3,910,943 |  
|Provision for loan losses      |  |      | 544,326   |   |      |   | 468,000   |  
|Loans charged off              |  |      | (9,749    | ) |      |   | (10,775   | )
|Recoveries                     |  |      | 16,058    |   |      |   | 8,667     |  
|Allowance acquired in merger   |  |      | 2,931,749 |   |      |   |          |  
|                               |  |      |           |   |      |   |           |  
|Balance at end of period       |  | $    | 8,524,967 |   |      | $ | 4,376,835 |  
|                               |  |      |           |   |      |   |           |  

NOTE G  PREMISES AND EQUIPMENT

Premises and equipment consisted of the following:



|                                               |  |               |             |   |                   |   |            |  
|---------------------------------------------- |  | ------------- | ----------- | - | ----------------- | - | ---------- | -
|                                               |  | June 30, 2008 |             |   | December 31, 2007 |  
|Land                                           |  | $             | 7,407,006   |   |                   | $ | 4,321,467  |  
|Buildings and improvements                     |  |               | 13,120,039  |   |                   |   | 6,145,170  |  
|Leasehold improvements                         |  |               | 862,375     |   |                   |   | 847,453    |  
|Equipment, furniture and fixtures              |  |               | 11,852,400  |   |                   |   | 5,619,191  |  
|                                               |  |               |             |   |                   |   |            |  
|                                               |  |               | 33,241,820  |   |                   |   | 16,933,281 |  
|Less accumulated depreciation and amortization |  |               | (10,023,708 | ) |                   |   | (4,966,130 | )
|                                               |  |               |             |   |                   |   |            |  
|Premises and equipment, net                    |  | $             | 23,218,112  |   |                   | $ | 11,967,151 |  
|                                               |  |               |             |   |                   |   |            |  

NOTE H  SUPPLEMENTAL RETIREMENT AGREEMENTS

The Company has entered into supplemental retirement agreements with several key officers and recognizes expense each year related to these agreements
based on the present value of the benefits expected to be provided to the employees and any beneficiaries. The expense recognized during the first half of 2008 and 2007 was $330,000 and $252,818, respectively.



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NOTE I  FAIR VALUE MEASUREMENTS

SFAS No. 157, Fair Value Measurements, defines fair value, establishes a framework for measuring fair value, establishes a three-level
valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the
measurement date. The three levels are defined as follow:



|            |  |                                                                                                                                                                                                                                                                       
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   Level 1 |  | inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.                                                                                                                                             
|            | 
|   Level 2 |  | inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or
indirectly, for substantially the full term of the financial instrument.
|            | 
|   Level 3 |  | inputs to the valuation methodology are unobservable and significant to the fair value measurement.                                                                                                                                                                   

Following is a description of the valuation methodologies used for instruments measured at fair
value, as well as the general classification of such instruments pursuant to the valuation hierarchy:

Securities

Where quoted prices are available in an active market, securities are classified within level 1 of the valuation hierarchy. Level 1 securities would
include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or
discounted cash flow. Level 2 securities would include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there
is limited activity or less transparency around inputs to the valuation, securities are classified within level 3 of the valuation hierarchy. As of June 30, 2008 the Company had $35.6 million in Level 2 securities and $1.2 million in Level 3
securities.

Impaired loans

SFAS
No. 157 applies to loans measured for impairment using the practical expedients permitted by SFAS No. 114, Accounting by Creditors for Impairment of a Loan, including impaired loans measured at an observable market price (if
available), or at the fair value of the loans collateral (if the loan is collateral dependent). Fair value of the loans collateral, when the loan is dependent on collateral, is determined by appraisals or independent valuation which is
then adjusted for the cost related to liquidation of the collateral.

Other Real Estate Owned

Certain assets such as other real estate owned are measured at fair value less cost to sell. We believe that the fair value component in its valuation
follows the provisions of SFAS No. 157.

NOTE J  GOODWILL AND OTHER INTANGIBLES

The Company accounts for goodwill under SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142). In accordance with SFAS
142, goodwill is not amortized, but is tested for impairment at least annually. Intangible assets with definite useful lives (such as core deposit intangibles) are amortized over their respective estimated useful lives to their estimated residual
values and reviewed for impairment at least annually.

ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information about the important factors affecting the
consolidated results of operations, financial condition, capital resources and liquidity of the Company. This report identifies trends and material changes that occurred during the reporting periods and should be read in conjunction with the 2007
Form 10-K.



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The Companys primary source of revenue is from net interest income earned by the banks. Net
interest income represents interest and fees earned from lending and investment activities less the interest paid to fund these activities. Variations in the volume and mix of interest earning assets and interest bearing liabilities, changes in the
yields earned and the rates paid, and the level of noninterest bearing liabilities available to support earning assets, all impact net interest income. In addition to net interest income, noninterest income is another important source of revenue for
the Company. Noninterest income is derived primarily from service charges on deposits and fees earned from bank services. Other factors that impact net income are the provision for loan losses and noninterest expense.

Financial Condition

Total assets, a benchmark used
by banks when comparing size, are the strongest indicator of the Companys continuous growth. Average assets increased $121.0 million, or 24.2%, to a new high of $620.4 million for the six months ended June 30, 2008 compared to the six
months ended June 30, 2007. Total assets at June 30, 2008 were $845.5 million, an increase of $281.7 million, or 50.0%, over December 31, 2007 total assets of $563.8 million. Shore Bank contributed total assets of $271.4 million at
June 30, 2008.

As a community bank, the Company has a primary objective of meeting the business and consumer credit needs within its
market where standards of profitability, client relationships and credit quality can be met. The loan portfolio grew $246.1 million, or 51.6%, to $723.2 million as of June 30, 2008 compared to December 31, 2007. Real estate commercial
mortgages increased 55.7% to $236.1 million at June 30, 2008 compared to $151.6 million at December 31, 2007. Real estate residential mortgages increased 387.0% to $187.6 million at June 30, 2008 compared with $38.5 million at
December 31, 2007. Commercial loans increased $2.9 million or 2.6% to $112.7 million at June 30, 2008 compared with $109.8 million at December 31, 2007. Installment loans to individuals increased 11.8% to $13.4 million at
June 30, 2008 compared with $12.0 million at December 31, 2007. Construction loans increased to $173.7 million at June 30, 2008 compared with $165.5 million at December 31, 2007. The concentration of construction loans was 24.0%
of the total loan portfolio at June 30, 2008 compared with 34.7% at December 31, 2007. Shore Bank contributed $223.7 million to the loan portfolio at June 30, 2008. The primary lending program for Shore Bank has been in residential
and commercial real estate loans. Of the loans acquired from Shore Bank, approximately 59.4% were residential real estate loans and 32.2% were commercial real estate loans.

The Company continuously reviews its loan portfolio and maintains an allowance for loan losses sufficient to absorb losses inherent in the portfolio. In
addition to the review of credit quality through ongoing credit review processes, the Company conducts an independent and comprehensive allowance analysis of its loan portfolio at least quarterly. The allowance for loan losses was $8.5 million, or
1.18% of outstanding loans, as of June 30, 2008 compared with $5.0 million, or 1.06% of outstanding loans, as of December 31, 2007. Shore Bank contributed $2.9 million to the allowance at June 30, 2008. The allowance increased due to
growth in the loan portfolio and uncertain economic conditions. Management considers the allowance for loan losses to be adequate. Management classifies as non-performing those loans in nonaccrual status, those loans on which payment has been
delinquent for 90 days or more, and real estate acquired in the settlement of loans. Total non-performing assets were $3.4 million or 0.40% of total assets at June 30, 2008 compared with $2.6 million or 0.47% of total assets at
December 31, 2007. Nonaccrual loans at June 30, 2008 were $1.6 million and consisted of one commercial loan and one residential real estate loan. Loans past due 90 days or more at June 30, 2008 were $1.4 million and consisted of four
real estate loans and three commercial loans. Other real estate owned was $355 thousand and consisted of one residential property.

The
Companys investment portfolio consists primarily of available-for-sale U.S. Agency, mortgage-backed securities, and equity securities. At June 30, 2008, the estimated market value of investment securities held by the Company was $36.8
million, down $5.6 million, or 13.2%, from $42.4 million at December 31, 2007. The decrease was the result of maturities of investment securities with a par value of $4.0 million netted against the purchase of investment securities with a par
value of $813 thousand along with the change in unrealized gains or losses on available-for-sale investment securities and amortization/accretion of premiums/discounts on the remaining investment securities. Additionally, in the first half of 2008,
the Company sold investment securities with a par value of $18.0 million and recorded a pre-tax gain on the sale of those investments of $457 thousand. Shore Bank contributed $16.5 million in investment securities at June 30, 2008.

Deposits are the primary source of the Companys funds for use in lending and general business purposes. The Companys balance sheet growth
is largely determined by the availability of deposits in its market, the cost of attracting the deposits, and the prospects of profitably utilizing the available deposits by increasing the loan or investment portfolios. Total deposits at
June 30, 2008 increased $204.2 million, or 47.3%, to $635.7 million compared to $431.5 million at December 31, 2007. Changes in the deposit categories include an increase of $19.0 million or 18.9% in noninterest bearing demand deposits, an
increase of $68.4 million or 169.7% in interest bearing demand deposits and an increase of $16.9 million or 20.6% in savings accounts from December 31, 2007 to June 30, 2008.



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##### Table of Contents

Total time deposits increased $99.9 million, or 47.9%, from December 31, 2007 to June 30, 2008. The overall increase in deposits was a result of
the acquisition of SFC, with Shore Bank contributing deposits of $205.5 million at June 30, 2008.

Federal Home Loan Bank borrowings
increased $18.3 million or 34.5% to $71.3 million at June 30, 2008 compared to $53.0 million at December 31, 2007. This increase was primarily a result of the acquisition of SFC as Shore Bank had outstanding Federal Home Loan Bank
borrowings of $27.7 million at June 30, 2008 netted against repayments of $9.4 million during the first half of 2008. In May 2008, the Company also borrowed $23.0 million to finance the purchase of SFC. This loan has a variable rate of prime
minus one percent with annual principal reduction payments. The loan requires that we maintain certain covenants and as of June 30, 2008 all of those covenants were met.

Results of Operations

During the first six months of 2008, the Company had net income of $3.13
million, a decrease of 3.3% over net income of $3.26 million in the first six months of 2007. The decrease in net income in the first six months of 2008 resulted primarily from the effects of the declining interest rate environment coupled with
expenses related to the integration of Shore Banks operations. Diluted earnings per share decreased to $0.29 per share for the first six months of 2008 compared with $0.31 per share for the six months ending June 30, 2007. Return on
average total assets for the first six months of 2008 decreased to 1.02% from 1.32% for the first six months of 2007. Return on average shareholders equity decreased in the first six months of 2008 to 7.95% from 9.29% for the first six months
of 2007. During the three months ended June 30, 2008, net income decreased $56 thousand or 3.2% over the same period in 2007. Diluted earnings per share decreased 11.8% to $0.15 per share for the three months ended June 30, 2008 compared
with $0.17 per share for the three months ended June 30, 2007. The decrease in diluted earnings per share reflected the issuance of 2.7 million shares related to the acquisition of SFC.

Net interest income for the first six months of 2008 was $11.1 million, a decrease of $711 thousand or 6.0% compared with the first six months of 2007.
Net interest income for the three months ended June 30, 2008 decreased $339 thousand or 5.6% over the same period in 2007. The net interest margin, which is calculated by expressing net interest income as a percentage of average interest
earning assets, is an indicator of effectiveness in generating income from earning assets. The Companys net interest margin decreased from 5.07% during the first six months of 2007 to 3.81% for the same period in 2008. During the period
beginning September 18, 2007 and ending March 18, 2008, the Federal Open Market Committee reduced the target federal funds rate by 300 basis points. This reduction in rates is expected to have an adverse effect on the net interest margin
throughout 2008. The Companys net interest margin for the three months ended June 30, 2008 was 3.73% compared with 5.08% for the three months ended June 30, 2007.

The Companys interest earning assets consist primarily of loans, investment securities, interest-bearing deposits in other banks, and overnight
funds sold. Interest income on loans, including fees, increased $1.0 million to $17.9 million for the six months ended June 30, 2008 compared to the same time period during 2007. This increase resulted from the $117.7 million increase in
average loans and was partially offset by a 151 basis point decrease experienced in the average interest yield. Interest income on loans increased 5.0% to $9.2 million for the three months ended June 30, 2008 compared with the same period in
2007. The valuation of Shore Banks loan portfolio, which is being amortized over forty months beginning in June 2008, reduced interest income on loans by $31 thousand in the second quarter of 2008. Interest income on investment securities
decreased $305 thousand to $907 thousand for the six months ended June 30, 2008 compared to the same time period during 2007. The $15.5 million decrease in the average investment securities balance netted against a 10 basis point increase in
the average interest yield produced this decrease. For the three months ended June 30, 2008, interest income on investment securities decreased 30.0% to $418 thousand compared with the same period in 2007. Interest income on interest-bearing
deposits in other banks increased $74 thousand for the six months ended June 30, 2008 compared to the same time period during 2007. This increase was the result of the $10.3 million increase in average interest-bearing deposits and was offset
by a 241 basis point decrease in the average interest yield. Interest income on interest bearing deposits decreased 14.2% to $99 thousand for the three months ended June 30, 2008 compared with the same period in 2007. Interest income on
overnight funds sold increased $17 thousand to $46 thousand for the six months ended June 30, 2008 compared to the same time period during 2007. This increase was due to the $3.0 million increase in average overnight funds sold netted against
the 297 basis point decrease experienced in the average interest yield. Interest income on overnight funds sold increased $34 thousand to $40 thousand for the three months ended June 30, 2008 compared with the same period in 2007.

The Companys interest bearing liabilities consist of deposit accounts and other borrowings. Interest expense from deposits increased $1.3
million to $6.7 million for the six months ended June 30, 2008 compared to the same time period during 2007. This increase resulted from the $100.3 million increase in average interest bearing deposits netted



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against a 39 basis point decrease in the average rate. Interest expense on deposits increased 16.7% to $3.3 million in the second quarter of 2008 compared
with the same period in 2007. The valuation of certain Shore Bank deposits, being amortized over eleven months beginning June 2008, decreased interest expense on deposits by $49 thousand in the second quarter of 2008. Interest expense from
borrowings, which consists of FHLB borrowings, other borrowings, and overnight funds purchased, increased $282 thousand to $1.3 million for the six months ended June 30, 2008 compared to the same time period during 2007. The $11.0 million
increase in average borrowings and the 12 basis point increase in the average interest rate on borrowings produced this result. Interest expense on borrowings increased 24.3% to $735 thousand during the second quarter of 2008 compared with the same
period in 2007. The valuation of Shore Banks borrowings, being amortized over fourteen months beginning in June 2008, decreased interest expense on borrowings by $25 thousand in the second quarter of 2008.

During the first six months of 2008, the Company recorded net loan recoveries of $6 thousand and a provision for loan losses in the amount of $544
thousand. The provision for loan losses increased due to an increase in total loans and an increase in non-performing assets of $1.8 million in the first six months of 2008 compared with the same period in 2007. During the first six months of 2007,
the Company recorded a provision for loan losses of $468 thousand. During the second quarter of 2008, the Company recorded net loan charge-offs of $1 thousand and a provision for loan losses of $274 thousand.

The Company reported an increase in total noninterest income of $1.1 million, or 62.3%, for the first six months of 2008 compared to the same period in
2007. Service charges on deposit accounts, the Companys primary source of noninterest income, increased $156 thousand or 15.9% to $1.1 million for the first six months of 2008 compared to the same period in 2007. Other service charges and fees
increased $477 thousand, or 62.0%, for the first six months of 2008 compared to the first six months of 2007. During the first half of 2008, the Company recorded a pre-tax gain on the sale of investment securities of $457 thousand resulting from the
sale of investment securities with a par value of $18 million. During the second quarter of 2008, the Company sold a piece of land originally intended for expansion prior to moving the corporate headquarters to downtown Norfolk, Virginia. A gain of
$511 thousand resulted from the sale of this property. Noninterest income comprised 13.0% of total revenue in the first six months of 2008 compared to 8.8% in the first six months of 2007. During the three months ended June 30, 2008,
noninterest income increased $865 thousand compared with the same period in 2007. Shore Bank contributed $306 thousand in noninterest income in the second quarter of 2008.

Noninterest expense represents the overhead expenses of the Company. Total noninterest expense increased $484 thousand, or 6.0%, for the first six months
of 2008 compared to the first six months of 2007. This increase was attributable primarily to a 26.8% increase in occupancy expense related to the opening of the Companys eighteenth branch location in the Edinburgh section of Chesapeake as
well as expenses related to Shore Banks locations during June 2008. Salaries and employee benefits decreased $91 thousand to $5.0 million in the first six months on 2008 compared with the same period in 2007. Data processing expense, another
category of noninterest expense, posted an increase of $102 thousand for the first six months of 2008 compared to the first six months of 2007, resulting from an upgrade to imaged file capture cash letter processing. Other noninterest expenses
posted an increase of 13.8% to $2.1 million which includes intangible assets amortization expense of $92 thousand, for the first six months of 2008 compared to the same time period during 2007. During the second quarter of 2008 noninterest expense
increased 14.1% to $4.7 million compared with $4.1 million for the same period in 2007. Shore Bank contributed $825 thousand in noninterest expense in the second quarter of 2008.

Income tax expense for the first six months of 2008 and 2007 was $1.6 million and $1.7 million, respectively. The Companys effective tax rate was
34.2% and 34.0% in 2008 and 2007, respectively, and differed in 2008 from the statutory rate of 34.0% due primarily to nondeductible expenses.

Average
Balance Sheet and Net Interest Margin Analysis

The table below presents the average interest earning assets and average interest
bearing liabilities, the average yields earned on such assets and rates paid on such liabilities, and the net interest margin for the six months ended June 30, 2008 and 2007.



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|                                           |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  
|------------------------------------------ |  | -------------------- | ------- | - | ---------------------- | - | ----------------- |  | ---- | -------------- |  | - | ---------------------- | - | ----------------- | - | ------ |  | ---- | -
|                                           |  | June 2008 Annualized |         |   | June 2007 Annualized   |  
|(In thousands)                             |  | AverageBalance       |         |   | InterestIncome/Expense |   | AverageYield/Rate |  |      | AverageBalance |  |   | InterestIncome/Expense |   | AverageYield/Rate |  
|Assets                                     |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  
|Interest Earning Assets                    |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  
|Loans                                      |  | $                    | 522,028 |   |                        | $ | 36,029            |  | 6.90 | %              |  | $ | 404,369                |   |                   | $ | 34,023 |  | 8.41 | %
|Investment Securities                      |  |                      | 41,752  |   |                        |   | 1,824             |  | 4.37 |                |  |   | 57,250                 |   |                   |   | 2,445  |  | 4.27 |  
|Interest Bearing Deposits with Banks       |  |                      | 16,049  |   |                        |   | 448               |  | 2.79 |                |  |   | 5,786                  |   |                   |   | 301    |  | 5.20 |  
|Overnight Funds Sold                       |  |                      | 4,084   |   |                        |   | 93                |  | 2.28 |                |  |   | 1,124                  |   |                   |   | 59     |  | 5.25 |  
|                                           |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  
|Total Interest Earning Assets              |  |                      | 583,913 |   |                        |   | 38,394            |  | 6.58 |                |  |   | 468,529                |   |                   |   | 36,828 |  | 7.86 |  
|                                           |  |                      |         |   |                        |  
|Noninterest Earning Assets                 |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  
|Cash and Due from Banks                    |  |                      | 15,390  |   |                        |   |                   |  |      |                |  |   | 16,031                 |   |                   |   |        |  |      |  
|Premises and Equipment                     |  |                      | 14,012  |   |                        |   |                   |  |      |                |  |   | 12,033                 |   |                   |   |        |  |      |  
|Other Assets                               |  |                      | 12,937  |   |                        |   |                   |  |      |                |  |   | 7,039                  |   |                   |   |        |  |      |  
|Less: Allowance for Loan Losses            |  |                      | (5,832  | ) |                        |   |                   |  |      |                |  |   | (4,166                 | ) |                   |   |        |  |      |  
|                                           |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  
|Total Assets                               |  | $                    | 620,420 |   |                        |   |                   |  |      |                |  | $ | 499,466                |   |                   |   |        |  |      |  
|                                           |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  
|Liabilities and Shareholders Equity       |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  
|Interest Bearing Liabilities               |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  
|Interest Bearing Demand Deposits           |  | $                    | 51,460  |   |                        | $ | 631               |  | 1.23 | %              |  | $ | 41,654                 |   |                   | $ | 679    |  | 1.63 | %
|Savings Deposits                           |  |                      | 87,594  |   |                        |   | 2,079             |  | 2.37 |                |  |   | 77,005                 |   |                   |   | 2,753  |  | 3.58 |  
|Time Deposits                              |  |                      | 239,035 |   |                        |   | 10,783            |  | 4.51 |                |  |   | 159,111                |   |                   |   | 7,561  |  | 4.75 |  
|                                           |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  
|Total Interest Bearing Deposits            |  |                      | 378,089 |   |                        |   | 13,493            |  | 3.57 |                |  |   | 277,770                |   |                   |   | 10,993 |  | 3.96 |  
|                                           |  |                      |         |   |                        |  
|Other Borrowings                           |  |                      | 57,831  |   |                        |   | 2,655             |  | 4.59 |                |  |   | 46,832                 |   |                   |   | 2,093  |  | 4.47 |  
|                                           |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  
|Total Interest Bearing Liabilities         |  |                      | 435,920 |   |                        |   | 16,148            |  | 3.70 |                |  |   | 324,602                |   |                   |   | 13,086 |  | 4.03 |  
|                                           |  |                      |         |   |                        |  
|Noninterest Bearing Liabilities            |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  
|Demand Deposits                            |  |                      | 97,404  |   |                        |   |                   |  |      |                |  |   | 97,754                 |   |                   |   |        |  |      |  
|Other Liabilities                          |  |                      | 7,763   |   |                        |   |                   |  |      |                |  |   | 6,358                  |   |                   |   |        |  |      |  
|Shareholders Equity                       |  |                      | 79,333  |   |                        |   |                   |  |      |                |  |   | 70,752                 |   |                   |   |        |  |      |  
|                                           |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  
|Total Liabilities and Shareholders Equity |  | $                    | 620,420 |   |                        |   |                   |  |      |                |  | $ | 499,466                |   |                   |   |        |  |      |  
|                                           |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  
|Net Interest Income                        |  |                      |         |   |                        | $ | 22,246            |  |      |                |  |   |                        |   |                   | $ | 23,742 |  |      |  
|                                           |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  
|Net Interest Spread                        |  |                      |         |   |                        |   |                   |  | 2.87 | %              |  |   |                        |   |                   |   |        |  | 3.83 | %
|                                           |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  
|Net Interest Margin                        |  |                      |         |   |                        |   |                   |  | 3.81 | %              |  |   |                        |   |                   |   |        |  | 5.07 | %
|                                           |  |                      |         |   |                        |   |                   |  |      |                |  |   |                        |   |                   |   |        |  |      |  

Note: Annualized interest income from loans included fees of $432,176 in 2008 and $705,680 in 2007.

Nonaccrual loans are not material and are included in loans above.

Effect of Changes in Rate and Volume on Net Interest Income



|                                           |  |                                |        |   |                         |        |        |                                |  |      |                         |   |        |   |       |   |  |   |        |   |  |   |       |  
|------------------------------------------ |  | ------------------------------ | ------ | - | ----------------------- | ------ | ------ | ------------------------------ |  | ---- | ----------------------- | - | ------ | - | ----- | - |  | - | ------ | - |  | - | ----- | -
|                                           |  | 2008 Compared to 2007          |        |   | 2007 Compared to 2006   |       
|                                           |  | InterestIncome/ExpenseVariance |        |   | VarianceAttributable to |        |        | InterestIncome/ExpenseVariance |  |      | VarianceAttributable to |  
|(In thousands)                             |  |                                | Rate   |   |                         | Volume |        |                                |  | Rate |                         |   | Volume |  
|Interest Earning Assets                    |  |                                |        |   |                         |        |        |                                |  |      |                         |   |        |   |       |   |  |   |        |   |  |   |       |  
|Loans                                      |  | $                              | 2,006  |   |                         | $      | (3,241 | )                              |  | $    | 5,247                   |   |        | $ | 8,777 |   |  | $ | 197    |   |  | $ | 8,580 |  
|Investment Securities                      |  |                                | (621   | ) |                         |        | 58     |                                |  |      | (679                    | ) |        |   | (405  | ) |  |   | 175    |   |  |   | (580  | )
|Interest-Bearing Deposits with Other Banks |  |                                | 147    |   |                         |        | (52    | )                              |  |      | 199                     |   |        |   | 4     |   |  |   | (2     | ) |  |   | 6     |  
|Overnight Funds Sold                       |  |                                | 34     |   |                         |        | (10    | )                              |  |      | 44                      |   |        |   | (194  | ) |  |   | 4      |   |  |   | (198  | )
|                                           |  |                                |        |   |                         |        |        |                                |  |      |                         |   |        |   |       |   |  |   |        |   |  |   |       |  
|Total Interest Earning Assets              |  |                                | 1,566  |   |                         |        | (3,245 | )                              |  |      | 4,811                   |   |        |   | 8,182 |   |  |   | 374    |   |  |   | 7,808 |  
|                                           |  |                                |        |   |                         |        |        |                                |  |      |                         |   |        |   |       |   |  |   |        |   |  |   |       |  
|Interest Bearing Liabilities               |  |                                |        |   |                         |        |        |                                |  |      |                         |   |        |   |       |   |  |   |        |   |  |   |       |  
|Deposits                                   |  |                                | 2,500  |   |                         |        | (934   | )                              |  |      | 3,434                   |   |        |   | 4,028 |   |  |   | 1,967  |   |  |   | 2,061 |  
|Other Borrowings                           |  |                                | 562    |   |                         |        | 58     |                                |  |      | 504                     |   |        |   | 865   |   |  |   | 226    |   |  |   | 639   |  
|                                           |  |                                |        |   |                         |        |        |                                |  |      |                         |   |        |   |       |   |  |   |        |   |  |   |       |  
|Total Interest Bearing Liabilities         |  |                                | 3,062  |   |                         |        | (876   | )                              |  |      | 3,938                   |   |        |   | 4,893 |   |  |   | 2,193  |   |  |   | 2,700 |  
|                                           |  |                                |        |   |                         |        |        |                                |  |      |                         |   |        |   |       |   |  |   |        |   |  |   |       |  
|Net Interest Income                        |  | $                              | (1,496 | ) |                         | $      | (2,369 | )                              |  | $    | 873                     |   |        | $ | 3,289 |   |  | $ | (1,819 | ) |  | $ | 5,108 |  
|                                           |  |                                |        |   |                         |        |        |                                |  |      |                         |   |        |   |       |   |  |   |        |   |  |   |       |  

Note: The change in interest due to both rate and volume has been allocated to variance attributable to rate and
variance attributable to volume in proportion to the relationship for the absolute dollar amounts of the change in each.



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Capital Resources and Liquidity

Total shareholders equity increased $33.8 million, or 45.9%, to $107.4 million at June 30, 2008 compared to $73.7 million at December 31, 2007. As of June 30, 2008, the Company, Bank of Hampton
Roads, and Shore Bank were all considered well-capitalized, the highest category of capitalization defined by the Federal Reserve Bank. The Company continually monitors current and projected capital adequacy positions of the Company,
Bank of Hampton Roads, and Shore Bank. Maintaining adequate capital levels is integral to providing stability to the Company, resources to achieve the Companys growth objectives, and returns to the shareholders in the form of dividends.

Liquidity represents an institutions ability to meet present and future financial obligations through either the sale or maturity of
existing assets or the acquisition of additional funds through liability management. At June 30, 2008, cash and due from banks, overnight funds sold, interest-bearing deposits in other banks, and investment securities and loans maturing within
one year were $498.4 million, or 58.9% of total assets. As a result of the Companys management of liquid assets and the ability to generate liquidity through liability funding, management believes the Company maintains overall liquidity
sufficient to satisfy its depositors requirements and meet its customers credit needs.

The Company also maintains additional
sources of liquidity through a variety of borrowing arrangements including federal funds lines with large regional and national banking institutions. These available lines total approximately $25.5 million, none of which were outstanding at
June 30, 2008 or December 31, 2007. Federal funds purchased during the first six months of 2008 and 2007 averaged $81 thousand and $301 thousand, respectively.

The Company has a credit line in the amount of $235.4 million at Federal Home Loan Bank (FHLB). This line may be utilized for short and/or long term borrowing. The Company utilized the credit line for
overnight funding during the first six months of 2008 and 2007 with average balances of $1.0 million and $133 thousand, respectively. Long-term FHLB borrowings were $71.3 million and $53.0 million at June 30, 2008 and December 31, 2007,
respectively.

Off-Balance Sheet Arrangements

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. For more information on the Companys off-balance sheet arrangements, see Note 8
of the Notes to Consolidated Financial Statements contained in the 2007 Form 10-K. Total financial instruments with off-balance-sheet risk as of June 30, 2008 were $$166 million, a 25% increase from December 31, 2007. Shore Bank
contributed $52 million of the June 30, 2008 total.

Contractual Obligations

The Companys contractual obligations consist of FHLB borrowings, other borrowings, time deposits, and operating lease obligations. The most
significant changes in the Companys contractual obligations since December 31, 2007 were the time deposits contributed by Shore Bank of $93 million and the $23 million borrowing from Compass Bank utilized to fund the cash portion of the
merger consideration to the former shareholders of SFC.

Critical Accounting Policies

U.S. generally accepted accounting principles are complex and require management to apply significant judgment to various accounting, reporting, and
disclosure matters. Management must use assumptions, judgments, and estimates when applying these principles where precise measurements are not possible or practical. These policies are critical because they are highly dependent upon subjective or
complex judgments, assumptions and estimates. Changes in such judgments, assumptions and estimates may have a significant impact on the consolidated financial statements. Actual results, in fact, could differ from those estimates.

Goodwill and Other Intangible Assets

The Company
adopted FAS No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002. Accordingly, goodwill is no longer subject to amortization over its estimated useful life, but is subject to at least an annual assessment for
impairment by applying a fair value based test. Additionally, under FAS No. 142, acquired intangible assets (such as core deposit intangibles) are separately recognized if the benefit of the asset can be sold, transferred, licensed, rented, or
exchanged, and amortized over their useful life. The cost of purchased deposit relationships and other intangible assets, based on independent valuation, are being amortized over their estimated lives not to exceed fifteen years. Amortization
expense charged to operations was $59,903 for the three months ended June 30, 2008. There was no amortization expense charged to operations in previous periods.



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##### Table of Contents

Allowance for Loan Losses

The allowance for loan losses reflects the estimated losses resulting from the inability of borrowers to make required loan payments. The allowance for loan losses is established through a provision for loan losses
charged to expense. Loans are charged against the allowance for loan losses when management believes that collectibility of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance.

The allowance is an amount that management believes will be adequate to absorb estimated losses relating to specifically identified loans, as well as
probable credit losses inherent in the balance of the loan portfolio, based on an evaluation of the collectibility of existing loans and prior loss experience. This evaluation also takes into consideration such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality, credit concentrations, trends in historical loss experience, review of specific problem loans, and current economic conditions.

The allowance consists of specific, general, and unallocated components. The specific component relates to loans that are classified as impaired,
doubtful, substandard or special mention. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect
managements estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the
portfolio.

A loan is impaired when it is probable the creditor will be unable to collect all contractual principal and interest payments
due in accordance with the terms of the loan agreement. Impaired loans are measured based on the present value of payments expected to be received, using the historical effective loan rate as the discount rate. Alternatively, measurement also may be
based on observable market prices or, for loans that are solely dependent on the collateral for repayment, measurement may be based on the fair value of the collateral. The Company does not aggregate loans for risk classification. Loans that are to
be foreclosed are measured based on the fair value of the collateral. If the recorded investment in the impaired loan exceeds the measure of fair value, a valuation allowance is established as a component of the allowance for loan losses. Changes in
the allowance for loan losses relating to impaired loans are charged or credited to the provision for loan losses.

Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards
No. 141(R), Business Combinations (SFAS 141(R)). The Standard will significantly change the financial accounting and reporting of business combination transactions. SFAS 141(R) establishes the criteria for how an acquiring
entity in a business combination recognizes the assets acquired and liabilities assumed in the transaction; establishes the acquisition date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the
acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. Acquisition related costs including finders fees, advisory, legal,
accounting valuation and other professional and consulting fees are required to be expensed as incurred. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008 and early implementation is not permitted. The Company does not
expect the implementation to have a material impact on its consolidated financial statements.

In December 2007, the FASB issued Statement
of Financial Accounting Standards No.160, Noncontrolling Interests in Consolidated Financial Statements(SFAS 160). SFAS 160 requires Company to establish accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The Company does not
expect the implementation of SFAS 160 to have a material impact on its consolidated financial statements.

In March 2008, the FASB issued
Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities  an amendment of FASB Statement No. 133(SFAS 161). SFAS 161 changes the disclosure requirements
for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for
under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entitys financial position, financial performance and cash flows. SFAS 161 is effective for fiscal years and
interim periods beginning after November 15, 2008, with early application permitted. The Company does not expect the implementation of SFAS 161 to have a material impact on its consolidated financial statements.



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In June 2008, the FASB finalized Staff Position (FSP) No. EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities.This FSP affects entities that accrue cash dividends on share-based payment awards during the awards service period when the dividends do not need to be
returned if the employees forfeit the awards. The FASB concluded that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common shareholders. Because the
awards are considered participating securities, the issuing entity is required to apply the two-class method of computing basic and diluted earnings per share. The FASB also concluded that because the FSP applies to all outstanding unvested
share-based payment awards that contain right to nonforfeitable dividends, changes in an entitys forfeiture estimates from one reporting period to the next do not affect the computation of earnings per share, other than for the increase or
decrease in compensation cost as a result of the application of SFAS 123(R), Share-Based Payment.The transition guidance in the FSP requires an entity to retroactively adjust all prior-period earnings-per-share computations to reflect the
FSPs provisions. The retroactive adjustments encompass earnings-per-share computations included in interim financial statements. Early adoption of the FSP is not permitted. The FSP is effective for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. The Company is currently evaluating the effect that this FSP will have on its financial statements when implemented.

Forward-Looking Statements

Where appropriate,
statements in this report may contain the insights of management into known events and trends that have or may be expected to have a material effect on our operations and financial condition. The information presented may also contain certain
forward-looking statements regarding future financial performance, which are not historical facts and which involve various risks and uncertainties.

When or if used in this quarterly report or any Securities and Exchange Commission filings, or other public or shareholder communications, or in oral statements made with the approval of an authorized executive
officer, the words or phrases anticipate, would be, will allow, intends to, will likely result, are expected to, will continue, is anticipated, is
estimated, is projected, or similar expressions are intended to identify forward-looking statements.

For a
discussion of the risks, uncertainties and assumptions that could affect these statements and our future events, developments or results, you should carefully review the risk factors summarized below and the more detailed discussions in the
Risk Factors and Business sections in the 2007 Form 10-K. The Companys risks include, without limitation, the following:



| |  |  | The dependence on key personnel;
| | - |  | --------------------------------



| |  |  | The high level of competition within the banking industry;
| | - |  | ----------------------------------------------------------



| |  |  | Dependence on construction and land development loans that could be negatively affected by a downturn in the real estate market;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company serves a limited market area, and an economic downturn in its market area could adversely affect its business;
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | The adequacy of the estimate for known and inherent losses in the Companys loan portfolio;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | Changes in interest rate;
| | - |  | -------------------------



| |  |  | Ability to manage growth;
| | - |  | -------------------------



| |  |  | Governmental and regulatory changes that may adversely affect the Companys expenses and cost structure;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | The threat from technology based frauds and scams;
| | - |  | --------------------------------------------------



| |  |  | If the Company needs capital in the future to continue its growth, it may not be able to obtain capital on terms that are favorable and capital transactions may be
dilutive to existing shareholders;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Banking regulators have broad enforcement power, but regulations are meant to protect depositors, and not investors;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | Trading in the Companys common stock has been sporadic and volume has been light so shareholders may not be able to quickly and easily sell their common
stock;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Virginia law and the provisions of the Companys articles of incorporation and bylaws could deter or prevent takeover attempts by a potential purchaser of the
Companys common stock that would be willing to pay you a premium for your shares;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Directors and officers have significant voting power; and
| | - |  | ---------------------------------------------------------



| |  |  | The Company may not be able to realize all of the anticipated benefits of the merger with SFC.
| | - |  | ----------------------------------------------------------------------------------------------

The Companys forward-looking statements could be wrong in light of these and other risks, uncertainties and assumptions. The future events,
developments or results described in this report could turn out to be materially different. The Company has no obligation to publicly update or revise its forward-looking statements after the date of this quarterly report and you should not expect
it to do so.



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ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

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

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

The expected effect on net interest income for the twelve months
following June 30, 2008 and December 31, 2007 due to a shock in interest rates is shown below. These estimates are dependent on material assumptions, such as those previously discussed.



|                          |  |                                            |        |   |                                                |       |   |        |   |        |   |  |        |  
|------------------------- |  | ------------------------------------------ | ------ | - | ---------------------------------------------- | ----- | - | ------ | - | ------ | - |  | ------ | -
|(in thousands)            |  | June 30, 2008Change in Net Interest Income |        |   | December 31, 2007Change in Net Interest Income |      
|                          |  | Amount                                     |        |   | %                                              |       |   | Amount |   |        | % | 
|Change in Interest Rates: |  |                                            |        |   |                                                |       |   |        |   |        |   |  |        |  
|+200 basis points         |  | $                                          | 3,927  |   |                                                | 13.04 | % |        | $ | 4,494  |   |  | 19.39  | %
|+ 100 basis points        |  |                                            | 1,813  |   |                                                | 6.02  |   |        |   | 2,249  |   |  | 9.70   |  
|- 100 basis points        |  |                                            | (1,262 | ) |                                                | (4.19 | ) |        |   | (2,230 | ) |  | (9.62  | )
|- 200 basis points        |  |                                            | N/A    |   |                                                | N/A   |   |        |   | (4,333 | ) |  | (18.69 | )

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

The Company had no derivative financial instruments, foreign currency exposure, or
trading portfolio as of June 30, 2008.

ITEM 4  CONTROLS AND PROCEDURES

As of June 30, 2008, the Company carried out an evaluation, under the supervision and with the participation of the Companys management,
including the Companys Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures pursuant to Rule 13a-15(e) of the Securities Exchange Act of
1934, as amended (the Exchange Act). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company (including its consolidated



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##### Table of Contents

subsidiaries) required to be included in the Companys Exchange Act filings pursuant to the Securities Exchange Act of 1934. In addition, no change in
its internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the quarter ended June 30, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control
over financial reporting.

PART II  OTHER INFORMATION

ITEM 1  LEGAL PROCEEDINGS

In the ordinary course of operations,
the Company may become a party to legal proceedings. Currently, the Company is not party to any material legal proceedings.

ITEM 1A  RISK FACTORS

There have been no material changes from the risk factors as
previously disclosed in the 2007 Form 10-K.

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

The Company announced an open ended program on August 13, 2003 by which management was authorized to repurchase an unlimited
number of shares of the Companys common stock in open market and privately negotiated transactions. During the first six months of 2008, the Company repurchased 64,964 shares of its common stock. The Company did not repurchase any shares of
common stock other than through this publicly announced plan. Detail for the share repurchase transactions conducted during the second quarter of 2008 appears below.



|                               |  |                               |  |                             |       |                                                                              |       |                                                                            |  
|------------------------------ |  | ----------------------------- |  | --------------------------- | ----- | ---------------------------------------------------------------------------- | ----- | -------------------------------------------------------------------------- | -
|Period                         |  | Total NumberofSharesPurchased |  | Average Price PaidPer Share |       | Total Number ofShares Purchased asPart of PubliclyAnnounced Plans orPrograms |       | Maximum Numberof Shares that MayYet be
PurchasedUnder the Plans orPrograms
|April 1, 2008 - April 30, 2008 |  | 682                           |  | $                           | 11.50 |                                                                              | 682   |                                                                            | 
|May 1, 2008 - May 31, 2008     |  |                              |  |                             |      |                                                                              |      |                                                                            | 
|June 1, 2008 - June 30, 2008   |  | 7,972                         |  |                             | 13.13 |                                                                              | 7,972 |                                                                            | 
|Total                          |  | 8,654                         |  | $                           | 13.00 |                                                                              | 8,654 |                                                                            | 

ITEM 3  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Companys annual meeting of shareholders was held on May 22, 2008.

The shareholders of the Company voted in favor to adopt the Agreement and Plan of Merger, dated as of January 8, 2008, by and among
Hampton Roads Bankshares, Inc, and Shore Financial Corporation, and to approve the transactions contemplated by the merger agreement, including the merger of Shore Financial Corporation with and into Hampton Roads Bankshares, Inc. with 7,483,250
shares, representing 72.2% of the outstanding stock voting for, 64,069 shares voting against, and 3,736 shares abstained.

The shareholders
of the Company voted in favor to adopt an amendment to the articles of incorporation of Hampton Roads Bankshares, Inc. to revise Article VIII to allow for shareholder approval of certain transactions by majority vote provided that the board of
directors had approved and recommended such action by at least two-thirds vote with 7,475,378 shares, representing 72.1% of the outstanding stock voting for, 28,274 shares voting against, and 47,402 shares abstained.



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##### Table of Contents

The shareholders of the Company elected the following individuals as directors of the Company: Roland
Carroll Smith, Sr. with 8,035,103 shares, representing 77.5% of shares voting for the election and 85,772 shares withheld, Bobby L. Ralph with 8,020,501 shares, representing 77.4% of shares voting for the election and 100,374 shares withheld, and
Emil A. Viola with 8,055,156 shares, representing 77.7% of shares voting for the election and 65,719 shares withheld.

The shareholders of
the Company voted for the election of Yount, Hyde & Barbour, P.C. as the Companys independent registered public accounting firm for 2008 with 8,082,533 shares, representing 78.0% of the outstanding stock ratifying the election, 16,608
shares voting against, and 21,733 shares abstained.

ITEM 5  OTHER INFORMATION

None.

ITEM 6 
EXHIBITS



|     |  |                                                                                                                                                                                                                                                         
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1  |  | Articles of Incorporation of Hampton Roads Bankshares, Inc., as amended, are filed herewith.                                                                                                                                                            
|     | 
|3.2  |  | Bylaws of Hampton Roads Bankshares, Inc., as amended, attached as Exhibit 3.2 to the Registrants Quarterly Report of Form 10-Q for the period ended September 30, 2007, incorporated
herein by reference.                                              
|     | 
|4.1  |  | Specimen of Common Stock Certificate, attached as Exhibit 4.1 to the Registrants Annual Report on Form 10-K for the year ended December 31, 2005, incorporated herein by
reference.                                                                    
|     | 
|10.1 |  | Fourth Amendment to Employment Agreement by and between Hampton Roads Bankshares, Inc. and Jack W. Gibson, dated as of May 27, 2008, attached as Exhibit 10.1 to the Registrants Current
Report on Form 8-K, incorporated herein by reference. *       
|     | 
|10.2 |  | Fourth Amendment to Employment Agreement by and between Hampton Roads Bankshares, Inc. and Donald W. Fulton, Jr., dated as of May 27, 2008, attached as Exhibit 10.2 to the Registrants
Current Report on Form 8-K, incorporated herein by reference. *
|     | 
|10.3 |  | First Amendment to Employment Agreement by and between Hampton Roads Bankshares, Inc. and Douglas J. Glenn, dated as of May 27, 2008, attached as Exhibit 10.3 to the Registrants Current
Report on Form 8-K, incorporated herein by reference. *      
|     | 
|10.4 |  | Amendment No. 2 to the Supplemental Retirement Agreement between Bank of Hampton Roads and Jack W. Gibson, dated May 27, 2008, attached as Exhibit 10.4 to the Registrants Current Report
on Form 8-K, incorporated herein by reference. *             
|     | 
|10.5 |  | Supplemental Retirement Agreement between Bank of Hampton Roads and Douglas J. Glenn, dated May 27, 2008, attached as Exhibit 10.5 to the Registrants Current Report on Form 8-K,
incorporated herein by reference. *                                  
|     | 
|10.6 |  | Credit Agreement between Compass Bank and Hampton Roads Bankshares, Inc., dated May 29, 2008, attached as Exhibit 10.6 to the Registrants Current Report on Form 8-K, incorporated herein
by reference.                                                
|     | 
|10.7 |  | Pledge Agreement between Compass Bank and Hampton Roads Bankshares, Inc., dated May 29, 2008, attached as Exhibit 10.7 to the Registrants Current Report on Form 8-K, incorporated herein
by reference.                                                
|     | 
|10.8 |  | Employment Agreement by and between Shore Bank, Hampton Roads Bankshares, Inc. and Scott C. Harvard, dated as of June 1, 2008, attached as Exhibit 10.1 to the Registrants Current Report
on Form 8-K, incorporated herein by reference. *             
|     | 
|10.9 |  | Restrictive Covenant Agreement by and between Hampton Roads Bankshares, Inc. and Scott C. Harvard, dated as of June 1, 2008, attached as Exhibit 10.2 to the Registrants Current Report
on Form 8-K, incorporated herein by reference. *               



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|      |  |                                                                                                                                                                                                                       
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.10 |  | Deferred Compensation Agreement by and between Shore Bank and Scott C. Harvard, dated as of June 1, 2008, attached as Exhibit 10.3 to the Registrants Current Report on Form 8-K,
incorporated herein by reference. *
|      | 
|31.1  |  | The Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer is filed herewith.                                                                                                                              
|      | 
|31.2  |  | The Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer is filed herewith.                                                                                                                              
|      | 
|32.1  |  | Statement of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, is filed herewith.                                                                                               



|* | Management contracts and compensatory plans and arrangements.
|- | -------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                      |  |                                                                                                                   
|--------------------- |  | ------------------------------------------------------------------------------------------------------------------
|                      |  | HAMPTON ROADS BANKSHARES, INC.                                                                                    
|                      |  | (Registrant)                                                                                                      
|                      | 
|DATE: August 11, 2008 |  | /s/ Lorelle L. Fritsch,                                                                                           
|                      |  | Lorelle L. Fritsch                                                                                                
|                      |  | Senior Vice President and Chief Financial Officer (On behalf of the Registrant and as principal financial officer)



24