##### 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, 2010

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    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         |  | x
|                        |  |                                                | 
|Non-accelerated filer   |  |  ̈  (do not check if smaller reporting company) |  | 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   ̈    No  x

The number of shares outstanding of the issuers Common Stock as of August 10, 2010 was 22,153,445 shares, par value $0.625.









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##### Table of Contents

TABLE OF CONTENTS



|                               |  |                                                                                                                          |  |     
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------ |  | ----
|PART I  FINANCIAL INFORMATION |  |                                                                                                                         
|                               |  |                                                                                                                         
|                               |  | ITEM 1  FINANCIAL STATEMENTS                                                                                            |  | Page
|                               |  |                                                                                                                         
|                               |  | Consolidated Balance Sheets
 June 30, 2010
December 31, 2009                                                             |  | 3   
|                               |  |                                                                                                                         
|                               |  | Consolidated Statements of Operations
 Three months ended June 30, 2010 and 2009 Six months ended June 30, 2010 and 2009 |  | 4   
|                               |  |                                                                                                                         
|                               |  | Consolidated Statement of Changes in Shareholders Equity  Six months ended June 30, 2010                                |  | 5   
|                               |  |                                                                                                                         
|                               |  | Consolidated Statements of Cash Flows
 Six months ended June 30, 2010 and
2009                                           |  | 6   
|                               |  |                                                                                                                         
|                               |  | Notes to Consolidated Financial Statements                                                                               |  | 8   
|                               |  |                                                                                                                         
|                               |  | ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS                           |  | 30  
|                               |  |                                                                                                                         
|                               |  | ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                      |  | 46  
|                               |  |                                                                                                                         
|                               |  | ITEM 4  CONTROLS AND PROCEDURES                                                                                         |  | 47  
|                               | 
|PART II  OTHER INFORMATION    |  |                                                                                                                         
|                               |  |                                                                                                                         
|                               |  | ITEM 1  LEGAL PROCEEDINGS                                                                                               |  | 48  
|                               |  |                                                                                                                         
|                               |  | ITEM 1A  RISK FACTORS                                                                                                   |  | 48  
|                               |  |                                                                                                                         
|                               |  | ITEM 2  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                                     |  | 50  
|                               |  |                                                                                                                         
|                               |  | ITEM 3  DEFAULTS UPON SENIOR SECURITIES                                                                                 |  | 50  
|                               |  |                                                                                                                         
|                               |  | ITEM 4  REMOVED AND RESERVED                                                                                            |  | 50  
|                               |  |                                                                                                                         
|                               |  | ITEM 5  OTHER INFORMATION                                                                                               |  | 50  
|                               |  |                                                                                                                         
|                               |  | ITEM 6  EXHIBITS                                                                                                        |  | 50  
|                               | 
|SIGNATURES                     |  | 51                                                                                                                      



2



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##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                          |  |                          |           |   |                                       |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | --------- | - | ------------------------------------- | - | --------- | -
|(in thousands, except share and per share data)                                                                                                                           |  | (Unaudited)June 30, 2010 |           |   | As Restated(Audited)December 31, 2009 |  
|                                                                                                                                                                          |  |                         
|Assets:                                                                                                                                                                   |  |                          |           |   |                                       |   |           |  
|Cash and due from banks                                                                                                                                                   |  | $                        | 18,813    |   |                                       | $ | 16,995    |  
|Interest-bearing deposits in other banks                                                                                                                                  |  |                          | 1,255     |   |                                       |   | 43,821    |  
|Overnight funds sold and due from Federal Reserve Bank                                                                                                                    |  |                          | 306,812   |   |                                       |   | 139,228   |  
|Investment securities available for sale, at fair value                                                                                                                   |  |                          | 175,282   |   |                                       |   | 161,062   |  
|Restricted equity securities, at cost                                                                                                                                     |  |                          | 26,397    |   |                                       |   | 29,779    |  
|                                                                                                                                                                          |  |                         
|Loans held for sale                                                                                                                                                       |  |                          | 27,734    |   |                                       |   | 12,615    |  
|                                                                                                                                                                          |  |                         
|Loans                                                                                                                                                                     |  |                          | 2,251,937 |   |                                       |   | 2,426,692 |  
|Allowance for loan losses                                                                                                                                                 |  |                          | (173,226  | ) |                                       |   | (132,697  | )
|                                                                                                                                                                          |  |                          |           |   |                                       |   |           |  
|Net loans                                                                                                                                                                 |  |                          | 2,078,711 |   |                                       |   | 2,293,995 |  
|                                                                                                                                                                          |  |                         
|Premises and equipment, net                                                                                                                                               |  |                          | 95,206    |   |                                       |   | 97,512    |  
|Interest receivable                                                                                                                                                       |  |                          | 7,749     |   |                                       |   | 8,788     |  
|Foreclosed real estate and repossessed assets, net of valuation allowance                                                                                                 |  |                          | 30,307    |   |                                       |   | 8,867     |  
|Deferred tax asset, net                                                                                                                                                   |  |                          |          |   |                                       |   | 397       |  
|Intangible assets, net                                                                                                                                                    |  |                          | 11,848    |   |                                       |   | 12,839    |  
|Bank-owned life insurance                                                                                                                                                 |  |                          | 49,179    |   |                                       |   | 48,355    |  
|Other assets                                                                                                                                                              |  |                          | 47,818    |   |                                       |   | 45,323    |  
|                                                                                                                                                                          |  |                          |           |   |                                       |   |           |  
|                                                                                                                                                                          |  |                         
|Total assets                                                                                                                                                              |  | $                        | 2,877,111 |   |                                       | $ | 2,919,576 |  
|                                                                                                                                                                          |  |                          |           |   |                                       |   |           |  
|                                                                                                                                                                          |  |                         
|Liabilities and Shareholders Equity:                                                                                                                                     |  |                          |           |   |                                       |   |           |  
|Deposits:                                                                                                                                                                 |  |                          |           |   |                                       |   |           |  
|Noninterest-bearing demand                                                                                                                                                |  | $                        | 249,102   |   |                                       | $ | 248,682   |  
|Interest-bearing:                                                                                                                                                         |  |                          |           |   |                                       |   |           |  
|Demand                                                                                                                                                                    |  |                          | 871,265   |   |                                       |   | 916,865   |  
|Savings                                                                                                                                                                   |  |                          | 75,840    |   |                                       |   | 82,860    |  
|Time deposits:                                                                                                                                                            |  |                          |           |   |                                       |   |           |  
|Less than $100                                                                                                                                                            |  |                          | 768,960   |   |                                       |   | 889,788   |  
|$100 or more                                                                                                                                                              |  |                          | 583,214   |   |                                       |   | 356,845   |  
|                                                                                                                                                                          |  |                          |           |   |                                       |   |           |  
|Total deposits                                                                                                                                                            |  |                          | 2,548,381 |   |                                       |   | 2,495,040 |  
|                                                                                                                                                                          |  |                         
|Federal Home Loan Bank borrowings                                                                                                                                         |  |                          | 225,013   |   |                                       |   | 228,215   |  
|Other borrowings                                                                                                                                                          |  |                          | 49,553    |   |                                       |   | 49,254    |  
|Interest payable                                                                                                                                                          |  |                          | 3,658     |   |                                       |   | 3,573     |  
|Other liabilities                                                                                                                                                         |  |                          | 16,259    |   |                                       |   | 18,481    |  
|                                                                                                                                                                          |  |                          |           |   |                                       |   |           |  
|                                                                                                                                                                          |  |                         
|Total liabilities                                                                                                                                                         |  |                          | 2,842,864 |   |                                       |   | 2,794,563 |  
|                                                                                                                                                                          |  |                          |           |   |                                       |   |           |  
|                                                                                                                                                                          |  |                         
|Commitments and contingencies                                                                                                                                             |  |                          |          |   |                                       |   |          |  
|                                                                                                                                                                          |  |                         
|Shareholders equity:                                                                                                                                                     |  |                          |           |   |                                       |   |           |  
|Preferred stock - 1,000,000 shares authorized:                                                                                                                            |  |                          |           |   |                                       |   |           |  
|Series A non-convertible, non-cumulative perpetual preferred stock, $1,000 liquidation value, 23,266 shares issued and
outstanding on June 30, 2010 and December 31, 2009 |  |                          | 20,733    |   |                                       |   | 19,919    |  
|Series B non-convertible, non-cumulative perpetual preferred stock, $1,000 liquidation value, 37,550 shares issued and
outstanding on June 30, 2010 and December 31, 2009 |  |                          | 39,117    |   |                                       |   | 39,729    |  
|Series C fixed rate, cumulative preferred stock, $1,000 liquidation value, 80,347 shares issued and outstanding on June 30,
2010 and December 31, 2009                    |  |                          | 75,867    |   |                                       |   | 75,322    |  
|Common stock, $0.625 par value, 100,000,000 shares authorized; 22,149,594 shares issued and outstanding on June 30, 2010 and
22,154,320 on December 31, 2009              |  |                          | 13,843    |   |                                       |   | 13,846    |  
|Capital surplus                                                                                                                                                           |  |                          | 165,475   |   |                                       |   | 165,391   |  
|Retained deficit                                                                                                                                                          |  |                          | (283,013  | ) |                                       |   | (188,448  | )
|Noncontrolling interest                                                                                                                                                   |  |                          | 151       |   |                                       |   |          |  
|Accumulated other comprehensive income (loss), net of tax                                                                                                                 |  |                          | 2,074     |   |                                       |   | (746      | )
|                                                                                                                                                                          |  |                          |           |   |                                       |   |           |  
|                                                                                                                                                                          |  |                         
|Total shareholders equity                                                                                                                                                |  |                          | 34,247    |   |                                       |   | 125,013   |  
|                                                                                                                                                                          |  |                          |           |   |                                       |   |           |  
|                                                                                                                                                                          |  |                         
|Total liabilities and shareholders equity                                                                                                                                |  | $                        | 2,877,111 |   |                                       | $ | 2,919,576 |  
|                                                                                                                                                                          |  |                          |           |   |                                       |   |           |  

See accompanying notes to the consolidated financial statements.



3



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##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------ | ---------- | - | ---------------- | - | ---------- | ------------- |  | - | ------------- | - |  | - | ---------- | -
|(in thousands, except share and per share data)                                                                                                                                                                                                              |  | Three Months Ended |            |   | Six Months Ended |  
|(unaudited)                                                                                                                                                                                                                                                  |  | June 30, 2010      |            |   | June 30, 2009    |   |            | June 30, 2010 |  |   | June 30, 2009 |  
|                                                                                                                                                                                                                                                             |  |                    |            |  
|Interest Income:                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Loans, including fees                                                                                                                                                                                                                                        |  | $                  | 28,168     |   |                  | $ | 36,150     |               |  | $ | 60,422        |   |  | $ | 73,885     |  
|Investment securities                                                                                                                                                                                                                                        |  |                    | 1,705      |   |                  |   | 1,561      |               |  |   | 3,422         |   |  |   | 3,341      |  
|Overnight funds sold and due from Federal Reserve Bank                                                                                                                                                                                                       |  |                    | 152        |   |                  |   | 12         |               |  |   | 276           |   |  |   | 22         |  
|Interest-bearing deposits in other banks                                                                                                                                                                                                                     |  |                    |           |   |                  |   | 5          |               |  |   |              |   |  |   | 11         |  
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Total interest income                                                                                                                                                                                                                                        |  |                    | 30,025     |   |                  |   | 37,728     |               |  |   | 64,120        |   |  |   | 77,259     |  
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|                                                                                                                                                                                                                                                             |  |                    |            |  
|Interest Expense:                                                                                                                                                                                                                                            |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Deposits:                                                                                                                                                                                                                                                    |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Demand                                                                                                                                                                                                                                                       |  |                    | 3,865      |   |                  |   | 1,557      |               |  |   | 7,666         |   |  |   | 3,222      |  
|Savings                                                                                                                                                                                                                                                      |  |                    | 125        |   |                  |   | 295        |               |  |   | 254           |   |  |   | 722        |  
|Time deposits:                                                                                                                                                                                                                                               |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Less than $100                                                                                                                                                                                                                                               |  |                    | 3,693      |   |                  |   | 3,785      |               |  |   | 7,643         |   |  |   | 8,717      |  
|$100 or more                                                                                                                                                                                                                                                 |  |                    | 2,494      |   |                  |   | 3,420      |               |  |   | 4,732         |   |  |   | 6,720      |  
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Interest on deposits                                                                                                                                                                                                                                         |  |                    | 10,177     |   |                  |   | 9,057      |               |  |   | 20,295        |   |  |   | 19,381     |  
|Federal Home Loan Bank borrowings                                                                                                                                                                                                                            |  |                    | 1,406      |   |                  |   | 1,672      |               |  |   | 2,719         |   |  |   | 3,381      |  
|Other borrowings                                                                                                                                                                                                                                             |  |                    | 745        |   |                  |   | 966        |               |  |   | 1,476         |   |  |   | 2,185      |  
|Overnight funds purchased                                                                                                                                                                                                                                    |  |                    |           |   |                  |   | 134        |               |  |   |              |   |  |   | 339        |  
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Total interest expense                                                                                                                                                                                                                                       |  |                    | 12,328     |   |                  |   | 11,829     |               |  |   | 24,490        |   |  |   | 25,286     |  
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|                                                                                                                                                                                                                                                             |  |                    |            |  
|Net interest income                                                                                                                                                                                                                                          |  |                    | 17,697     |   |                  |   | 25,899     |               |  |   | 39,630        |   |  |   | 51,973     |  
|Provision for loan losses                                                                                                                                                                                                                                    |  |                    | 54,638     |   |                  |   | 33,706     |               |  |   | 100,251       |   |  |   | 34,895     |  
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Net interest income (expense) after provision for loan losses                                                                                                                                                                                                |  |                    | (36,941    | ) |                  |   | (7,807     | )             |  |   | (60,621       | ) |  |   | 17,078     |  
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Noninterest Income:                                                                                                                                                                                                                                          |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Service charges on deposit accounts                                                                                                                                                                                                                          |  |                    | 1,755      |   |                  |   | 2,073      |               |  |   | 3,420         |   |  |   | 4,132      |  
|Mortgage banking revenue                                                                                                                                                                                                                                     |  |                    | 2,604      |   |                  |   | 1,397      |               |  |   | 4,359         |   |  |   | 3,039      |  
|Gain on sale of investment securities available for sale                                                                                                                                                                                                     |  |                    | 390        |   |                  |   |           |               |  |   | 469           |   |  |   |           |  
|Gain (loss) on sale of premises and equipment                                                                                                                                                                                                                |  |                    | 18         |   |                  |   | (11        | )             |  |   | 43            |   |  |   | (6         | )
|Losses on foreclosed real estate and repossessed assets                                                                                                                                                                                                      |  |                    | (2,476     | ) |                  |   | (337       | )             |  |   | (3,214        | ) |  |   | (339       | )
|Other-than-temporary impairment of securities (includes total other-than-temporary impairment losses of $0 and $166, net of $0
and $34 recognized in other comprehensive income for the six months ended June 30, 2010 and 2009, respectively, before taxes) |  |                    |           |   |                  |   | (114       | )             |  |   | (44           | ) |  |   | (132       | )
|Insurance revenue                                                                                                                                                                                                                                            |  |                    | 1,279      |   |                  |   | 1,339      |               |  |   | 2,599         |   |  |   | 2,651      |  
|Brokerage revenue                                                                                                                                                                                                                                            |  |                    | 79         |   |                  |   | 85         |               |  |   | 153           |   |  |   | 131        |  
|Income from bank-owned life insurance                                                                                                                                                                                                                        |  |                    | 424        |   |                  |   | 405        |               |  |   | 824           |   |  |   | 805        |  
|Other                                                                                                                                                                                                                                                        |  |                    | 1,258      |   |                  |   | 818        |               |  |   | 2,323         |   |  |   | 1,814      |  
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Total noninterest income                                                                                                                                                                                                                                     |  |                    | 5,331      |   |                  |   | 5,655      |               |  |   | 10,932        |   |  |   | 12,095     |  
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Noninterest Expense:                                                                                                                                                                                                                                         |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Salaries and employee benefits                                                                                                                                                                                                                               |  |                    | 10,955     |   |                  |   | 10,546     |               |  |   | 20,705        |   |  |   | 21,780     |  
|Occupancy                                                                                                                                                                                                                                                    |  |                    | 2,150      |   |                  |   | 2,165      |               |  |   | 4,448         |   |  |   | 4,084      |  
|Data processing                                                                                                                                                                                                                                              |  |                    | 1,169      |   |                  |   | 1,295      |               |  |   | 2,649         |   |  |   | 2,493      |  
|Impairment of goodwill                                                                                                                                                                                                                                       |  |                    |           |   |                  |   | 27,976     |               |  |   |              |   |  |   | 27,976     |  
|FDIC insurance                                                                                                                                                                                                                                               |  |                    | 1,169      |   |                  |   | 2,661      |               |  |   | 2,225         |   |  |   | 3,301      |  
|Equipment                                                                                                                                                                                                                                                    |  |                    | 932        |   |                  |   | 1,462      |               |  |   | 2,023         |   |  |   | 2,491      |  
|Other                                                                                                                                                                                                                                                        |  |                    | 6,711      |   |                  |   | 4,225      |               |  |   | 11,985        |   |  |   | 8,053      |  
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Total noninterest expense                                                                                                                                                                                                                                    |  |                    | 23,086     |   |                  |   | 50,330     |               |  |   | 44,035        |   |  |   | 70,178     |  
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Loss before provision for income tax benefit                                                                                                                                                                                                                 |  |                    | (54,696    | ) |                  |   | (52,482    | )             |  |   | (93,724       | ) |  |   | (41,005    | )
|Provision for income tax benefit                                                                                                                                                                                                                             |  |                    | (2,196     | ) |                  |   | (9,253     | )             |  |   | (2,134        | ) |  |   | (5,143     | )
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Net loss before noncontrolling interest                                                                                                                                                                                                                      |  |                    | (52,500    | ) |                  |   | (43,229    | )             |  |   | (91,590       | ) |  |   | (35,862    | )
|                                                                                                                                                                                                                                                             |  |                    |            |  
|Noncontrolling interest                                                                                                                                                                                                                                      |  |                    | (139       | ) |                  |   |           |               |  |   | (170          | ) |  |   |           |  
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Net loss                                                                                                                                                                                                                                                     |  |                    | (52,639    | ) |                  |   | (43,229    | )             |  |   | (91,760       | ) |  |   | (35,862    | )
|Preferred stock dividend and accretion of discount                                                                                                                                                                                                           |  |                    | 1,423      |   |                  |   | 2,995      |               |  |   | 2,798         |   |  |   | 5,959      |  
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Net loss available to common shareholders                                                                                                                                                                                                                    |  | $                  | (54,062    | ) |                  | $ | (46,224    | )             |  | $ | (94,558       | ) |  | $ | (41,821    | )
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|                                                                                                                                                                                                                                                             |  |                    |            |  
|Per Common Share:                                                                                                                                                                                                                                            |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Cash dividends declared                                                                                                                                                                                                                                      |  | $                  |           |   |                  | $ | 0.11       |               |  | $ |              |   |  | $ | 0.22       |  
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Basic loss                                                                                                                                                                                                                                                   |  | $                  | (2.44      | ) |                  | $ | (2.13      | )             |  | $ | (4.27         | ) |  | $ | (1.92      | )
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Diluted loss                                                                                                                                                                                                                                                 |  | $                  | (2.44      | ) |                  | $ | (2.13      | )             |  | $ | (4.27         | ) |  | $ | (1.92      | )
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|                                                                                                                                                                                                                                                             |  |                    |            |  
|Basic weighted average shares outstanding                                                                                                                                                                                                                    |  |                    | 22,154,594 |   |                  |   | 21,741,879 |               |  |   | 22,154,557    |   |  |   | 21,746,505 |  
|Effect of dilutive stock options and non-vested stock                                                                                                                                                                                                        |  |                    |           |   |                  |   |           |               |  |   |              |   |  |   |           |  
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  
|Diluted weighted average shares outstanding                                                                                                                                                                                                                  |  |                    | 22,154,594 |   |                  |   | 21,741,879 |               |  |   | 22,154,557    |   |  |   | 21,746,505 |  
|                                                                                                                                                                                                                                                             |  |                    |            |   |                  |   |            |               |  |   |               |   |  |   |            |  

See accompanying notes to the consolidated financial statements.



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##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS EQUITY



|                                                                                                |  |                 |  |              |         |        |            |   |          |   |        |                 |  |                               |         |  |                    |          |             |  |   |        |  |   |       |   |  |   |         |  
|----------------------------------------------------------------------------------------------- |  | --------------- |  | ------------ | ------- | ------ | ---------- | - | -------- | - | ------ | --------------- |  | ----------------------------- | ------- |  | ------------------ | -------- | ----------- |  | - | ------ |  | - | ----- | - |  | - | ------- | -
|(in thousands, except share data)                                                               |  | Preferred Stock |  | Common Stock |         |        |            |   | Retained |   |        | Noncontrolling  |  | AccumulatedOtherComprehensive |         |  | TotalStockholders |         
|(unaudited)                                                                                     |  | Shares          |  | Amount       |         | Shares |            |   | Amount   |   |        | Capital Surplus |  | Deficit                       |         |  | Interest           |          | Gain (Loss) |  |   | Equity | 
|                                                                                                |  |                 |  |              |         |        |            |   |         
|Balance at December 31, 2009 (as restated)                                                      |  | 141,163         |  | $            | 134,970 |        | 22,154,320 |   |          | $ | 13,846 |                 |  | $                             | 165,391 |  | $                  | (188,448 | )           |  | $ |       |  | $ | (746  | ) |  | $ | 125,013 |  
|                                                                                                |  |                 |  |              |         |        |            |   |         
|Comprehensive loss:                                                                             |  |                 |  |              |         |        |            |   |          |   |        |                 |  |                               |         |  |                    |          |             |  |   |        |  |   |       |   |  |   |         |  
|Net loss                                                                                        |  |                |  |              |        |        |           |   |          |   |       |                 |  |                               |        |  |                    | (91,760  | )           |  |   |       |  |   |      |   |  |   | (91,760 | )
|Change in unrealized gain on securities available for sale, net of taxes of 1,675               |  |                |  |              |        |        |           |   |          |   |       |                 |  |                               |        |  |                    |         |             |  |   |       |  |   | 3,125 |   |  |   | 3,125   |  
|Reclassification adjustment for securities gains included in net income, net of taxes of $(164) |  |                |  |              |        |        |           |   |          |   |       |                 |  |                               |        |  |                    |         |             |  |   |       |  |   | (305  | ) |  |   | (305    | )
|                                                                                                |  |                 |  |              |         |        |            |   |          |   |        |                 |  |                               |         |  |                    |          |             |  |   |        |  |   |       |   |  |   |         |  
|Total comprehensive loss                                                                        |  |                 |  |              |         |        |            |   |          |   |        |                 |  |                               |         |  |                    |          |             |  |   |        |  |   |       |   |  |   | (88,940 | )
|Stock-based compensation                                                                        |  |                |  |              |        |        | (4,726     | ) |          |   | (3     | )               |  |                               | 84      |  |                    |         |             |  |   |       |  |   |      |   |  |   | 81      |  
|Noncontrolling interest                                                                         |  |                |  |              |        |        |           |   |          |   |       |                 |  |                               |        |  |                    | (7       | )           |  |   | 151    |  |   |      |   |  |   | 144     |  
|Amortization of fair market value adjustment                                                    |  |                |  |              | 201     |        |           |   |          |   |       |                 |  |                               |        |  |                    | (201     | )           |  |   |       |  |   |      |   |  |   |        |  
|Preferred stock dividend declared and amortization of preferred stock discount                  |  |                |  |              | 546     |        |           |   |          |   |       |                 |  |                               |        |  |                    | (2,597   | )           |  |   |       |  |   |      |   |  |   | (2,051  | )
|                                                                                                |  |                 |  |              |         |        |            |   |          |   |        |                 |  |                               |         |  |                    |          |             |  |   |        |  |   |       |   |  |   |         |  
|                                                                                                |  |                 |  |              |         |        |            |   |         
|Balance at June 30, 2010                                                                        |  | 141,163         |  | $            | 135,717 |        | 22,149,594 |   |          | $ | 13,843 |                 |  | $                             | 165,475 |  | $                  | (283,013 | )           |  | $ | 151    |  | $ | 2,074 |   |  | $ | 34,247  |  
|                                                                                                |  |                 |  |              |         |        |            |   |          |   |        |                 |  |                               |         |  |                    |          |             |  |   |        |  |   |       |   |  |   |         |  

See accompanying notes to the consolidated financial statements.



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HAMPTON ROADS BANKSHARES, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                          |  |                  |          |   |               |   |          |  
|----------------------------------------------------------------------------------------- |  | ---------------- | -------- | - | ------------- | - | -------- | -
|(in thousands)                                                                            |  | Six Months Ended |         
|(unaudited)                                                                               |  | June 30, 2010    |          |   | June 30, 2009 |  
|                                                                                          |  |                 
|Operating Activities:                                                                     |  |                  |          |   |               |   |          |  
|Net loss                                                                                  |  | $                | (91,760  | ) |               | $ | (35,862  | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                  |          |   |               |   |          |  
|Depreciation and amortization                                                             |  |                  | 2,612    |   |               |   | 2,822    |  
|Amortization of intangible assets and fair value adjustments                              |  |                  | (64      | ) |               |   | (4,005   | )
|Provision for loan losses                                                                 |  |                  | 100,251  |   |               |   | 34,895   |  
|Proceeds from mortgage loans held for sale                                                |  |                  | 143,647  |   |               |   | 190,651  |  
|Originations of mortgage loans held for sale                                              |  |                  | (158,765 | ) |               |   | (196,696 | )
|Stock-based compensation expense                                                          |  |                  | 81       |   |               |   | 271      |  
|Net amortization of premiums and accretion of discounts on investment securities          |  |                  | 631      |   |               |   | 268      |  
|(Gain) loss on sale of premises and equipment                                             |  |                  | (43      | ) |               |   | 6        |  
|Losses on foreclosed real estate and repossessed assets                                   |  |                  | 3,214    |   |               |   | 339      |  
|Gain on sale of investment securities available for sale                                  |  |                  | (469     | ) |               |   |         |  
|Gain on sale of loans                                                                     |  |                  |         |   |               |   | (15      | )
|Earnings on bank-owned life insurance                                                     |  |                  | (824     | ) |               |   | (805     | )
|Other-than-temporary impairment of securities                                             |  |                  | 44       |   |               |   | 132      |  
|Other-than-temporary impairment of goodwill                                               |  |                  |         |   |               |   | 27,976   |  
|Deferred income tax benefit                                                               |  |                  | (35,128  | ) |               |   | (1,159   | )
|Deferred tax asset valuation allowance                                                    |  |                  | 34,014   |   |               |   |         |  
|Noncontrolling interest                                                                   |  |                  | 144      |   |               |   |         |  
|Changes in:                                                                               |  |                  |          |   |               |   |          |  
|Interest receivable                                                                       |  |                  | 1,039    |   |               |   | 607      |  
|Other assets                                                                              |  |                  | (2,495   | ) |               |   | (10,396  | )
|Interest payable                                                                          |  |                  | 85       |   |               |   | (892     | )
|Other liabilities                                                                         |  |                  | (5,020   | ) |               |   | (4,605   | )
|                                                                                          |  |                  |          |   |               |   |          |  
|                                                                                          |  |                 
|Net cash provided by (used in) operating activities                                       |  |                  | (8,806   | ) |               |   | 3,532    |  
|                                                                                          |  |                  |          |   |               |   |          |  
|                                                                                          |  |                 
|Investing Activities:                                                                     |  |                  |          |   |               |   |          |  
|Proceeds from maturities and calls of debt securities available for sale                  |  |                  | 10,697   |   |               |   | 26,351   |  
|Proceeds from sale of investment securities available for sale                            |  |                  | 1,802    |   |               |   |         |  
|Purchase of debt securities available for sale                                            |  |                  | (22,601  | ) |               |   |         |  
|Purchase of equity securities available for sale                                          |  |                  |         |   |               |   | (6       | )
|Purchase of restricted equity securities                                                  |  |                  | (28      | ) |               |   | (11,783  | )
|Proceeds from sales of restricted equity securities                                       |  |                  | 3,410    |   |               |   | 9,535    |  
|Proceeds from the sale of loans                                                           |  |                  |         |   |               |   | 697      |  
|Net decrease in loans                                                                     |  |                  | 86,572   |   |               |   | 5,279    |  
|Purchase of premises and equipment                                                        |  |                  | (343     | ) |               |   | (2,252   | )
|Proceeds from sale of premises and equipment                                              |  |                  | 140      |   |               |   | 139      |  
|Proceeds from sale of repossessed assets                                                  |  |                  | 3,118    |   |               |   | 537      |  
|                                                                                          |  |                  |          |   |               |   |          |  
|                                                                                          |  |                 
|Net cash provided by investing activities                                                 |  |                  | 82,767   |   |               |   | 28,497   |  
|                                                                                          |  |                  |          |   |               |   |          |  
|                                                                                          |  |                 
|Financing Activities:                                                                     |  |                  |          |   |               |   |          |  
|Net increase (decrease) in deposits                                                       |  |                  | 53,862   |   |               |   | (8,681   | )
|Proceeds from Federal Home Loan Bank borrowings                                           |  |                  |         |   |               |   | 11,500   |  
|Repayments of Federal Home Loan Bank borrowings                                           |  |                  | (1,533   | ) |               |   | (28,534  | )
|Net increase in overnight funds borrowed                                                  |  |                  |         |   |               |   | 65,400   |  
|Net decrease in other borrowings                                                          |  |                  |         |   |               |   | (28,000  | )
|Common stock repurchased                                                                  |  |                  |         |   |               |   | (545     | )
|Proceeds from exercise of stock options                                                   |  |                  |         |   |               |   | 82       |  
|Preferred stock dividends paid and amortization of preferred stock discount               |  |                  | 546      |   |               |   | (2,964   | )
|Common stock dividends paid, net of reinvestment                                          |  |                  |         |   |               |   | (3,731   | )
|                                                                                          |  |                  |          |   |               |   |          |  
|                                                                                          |  |                 
|Net cash provided by financing activities                                                 |  |                  | 52,875   |   |               |   | 4,527    |  
|                                                                                          |  |                  |          |   |               |   |          |  
|                                                                                          |  |                 
|Increase in cash and cash equivalents                                                     |  |                  | 126,836  |   |               |   | 36,556   |  
|Cash and cash equivalents at beginning of period                                          |  |                  | 200,044  |   |               |   | 48,312   |  
|                                                                                          |  |                  |          |   |               |   |          |  
|                                                                                          |  |                 
|Cash and cash equivalents at end of period                                                |  | $                | 326,880  |   |               | $ | 84,868   |  
|                                                                                          |  |                  |          |   |               |   |          |  



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HAMPTON ROADS BANKSHARES, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                   |  |                  |        |               |   |       
|-------------------------------------------------- |  | ---------------- | ------ | ------------- | - | ------
|                                                   |  | Six Months Ended
|                                                   |  | June 30, 2010    |        | June 30, 2009
|                                                   |  |                 
|Supplemental cash flow information:                |  |                  |        |               |   |       
|Cash paid for interest                             |  | $                | 24,405 |               | $ | 26,178
|Cash paid for income taxes                         |  |                  | 343    |               |   | 9,214 
|                                                   |  |                 
|Supplemental non-cash information:                 |  |                  |        |               |   |       
|Dividends reinvested                               |  | $                |       |               | $ | 531   
|Change in unrealized gain on securities            |  |                  | 4,331  |               |   | 15    
|Transfer between loans and other real estate owned |  |                  | 27,772 |               |   | 3,564 

See accompanying notes to the
consolidated financial statements.



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##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A  BASIS OF PRESENTATION

The
accompanying unaudited consolidated financial statements of Hampton Roads Bankshares, Inc. (the Company, we, us, or our) have been prepared in accordance with U.S. generally accepted accounting
principles (GAAP) 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 GAAP for complete financial statements. In the opinion of
management, the financial statements reflect all adjustments (consisting of a normal recurring nature) considered necessary for a fair presentation. The results of operations for the six months ended June 30, 2010 are not necessarily indicative
of the results to be expected for the full year. For further information, refer to the consolidated financial statements and footnotes, as restated, thereto included in the Companys restated annual report on Form 10-K for the year ended
December 31, 2009, as amended, (the 2009 Form 10-K) filed August 13, 2010.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (FASB) issued new guidance relating to the accounting for
transfers of financial assets. The new guidance, which was issued as Statement of Financial Accounting Standards (SFAS) No. 166, Accounting for Transfers of Financial Assets, an amendment to SFAS No. 140, was adopted
into Codification in December 2009 through the issuance of Accounting Standards Update (ASU) 2009-16. The new standard provides guidance to improve the relevance, representational faithfulness, and comparability of the information
that an entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferors continuing involvement, if any, in
transferred financial assets. The adoption of the new guidance did not have a material impact on the Companys consolidated financial statements.

In June 2009, the FASB issued new guidance relating to variable interest entities. The new guidance, which was issued as SFAS No. 167, Amendments
to FASB Interpretation No. 46(R), was adopted into Codification in December 2009. The objective of the guidance is to improve financial reporting by enterprises involved with variable interest entities and to provide more relevant and
reliable information to users of financial statements. SFAS No. 167 is effective as of January 1, 2010. The adoption of the new guidance did not have a material impact on the Companys consolidated financial statements.

In October 2009, the FASB issued ASU 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other
Financing. ASU 2009-15 amends Subtopic 470-20 to expand accounting and reporting guidance for own-share lending arrangements issued in contemplation of convertible debt issuance. ASU 2009-15 is effective for fiscal years beginning on or after
December 15, 2009 and interim periods within those fiscal years for arrangements outstanding as of the beginning of those fiscal years. The adoption of the new guidance did not have a material impact on the Companys consolidated financial
statements.

In January 2010, the FASB issued ASU 2010-04, Accounting for Various Topics  Technical Corrections to SEC
Paragraphs. ASU 2010-04 makes technical corrections to existing Security Exchange Commission (SEC) guidance including the following topics: accounting for subsequent investments, termination of an interest rate swap, issuance of
financial statements - subsequent events, use of residual method to value acquired assets other than goodwill, adjustments in assets and liabilities for holding gains and losses, and selections of discount rate used for measuring defined benefit
obligation. The adoption of the new guidance did not have a material impact on the Companys consolidated financial statements.

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value
Measurements. ASU 2010-06 amends Subtopic 820-10 to clarify existing disclosures, require new disclosures, and includes conforming amendments to guidance on employers disclosures about postretirement benefit plan assets. ASU 2010-06 is
effective for interim and annual periods beginning after December 15, 2009, except for disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are
effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The adoption of the new guidance did not have a material impact on the Companys consolidated financial statements.



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HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



In February 2010, the FASB issued ASU 2010-08, Technical Corrections to Various Topics. ASU
2010-08 clarifies guidance on embedded derivatives and hedging. ASU 2010-08 is effective for interim and annual periods beginning after December 15, 2009. The adoption of the new guidance did not have a material impact on the Companys
consolidated financial statements.

In February 2010, the FASB issued ASU 2010-09, Subsequent Events (Topic 855): Amendments to Certain
Recognition and Disclosure Requirements. ASU 2010-09 addresses both the interaction of the requirements of Topic 855 with the SECs reporting requirements and the intended breadth of the reissuance disclosures provisions related to
subsequent events. An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. ASU 2010-09 is effective immediately. The adoption of the new guidance did not have a material impact on the
Companys consolidated financial statements.

In April 2010, the FASB issued ASU 2010-18, Effect of a Loan Modification When the
Loan Is Part of a Pool That Is Accounted for as a Single Asset. ASU 2010-18 states that modifications of loans that are accounted for within a pool under ASC 310-30 do not result in the removal of those loans from the pool even if the
modification of those loans would otherwise be considered a troubled debt restructuring. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool
change. The amendments do not affect the accounting for loans under the scope of ASC 310-30 that are not accounted for within pools. Loans accounted for individually under ASC 310-30 continue to be subject to the troubled debt restructuring
accounting provisions within ASC 310-40, Receivables  Troubled Debt Restructurings by Creditors. The amendments are effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or
annual period ending on or after July 15, 2010. The Company does not expect that the adoption of this pronouncement will have a material impact on the Companys consolidated financial statements.

In July 2010, the FASB issued ASU 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit
Losses. The new disclosure guidance will significantly expand the existing requirements and will lead to greater transparency into a companys exposure to credit losses from lending arrangements. The extensive new disclosures of
information as of the end of a reporting period will become effective for both interim and annual reporting periods ending after December 15, 2010. Specific items regarding activity that occurred before the issuance of the ASU, such as the
allowance rollforward and modification disclosures, will be required for periods beginning after December 15, 2010. The Company is currently assessing the impact that ASU 2010-20 will have on its consolidated financial statements.

NOTE B  REGULATORY MATTERS AND GOING CONCERN CONSIDERATIONS

Effective June 17, 2010, the Company and BOHR entered into a written agreement (herein called the Written Agreement) with the Federal
Reserve Bank of Richmond (the FRB) and the Bureau of Financial Institutions of the Virginia State Corporation Commission (Bureau of Financial Institutions). The Companys other banking subsidiary, Shore Bank
(Shore), is not a party to the Written Agreement.

Written Agreement

Under the terms of the Written Agreement, Bank of Hampton Roads (BOHR) has agreed to develop and submit for approval, within the time periods
specified, plans to (a) strengthen board oversight of management and BOHRs operations, (b) strengthen credit risk management policies, (c) improve BOHRs position with respect to loans, relationships, or other assets in
excess of $2.5 million which are now, or may in the future become, past due more than 90 days, are on BOHRs problem loan list, or adversely classified in any report of examination of BOHRs, (d) review and revise, as appropriate,
current policy and maintain sound processes for determining, documenting, and recording an adequate allowance for loan and lease losses, (e) improve management of BOHRs liquidity position and funds management policies, (f) provide
contingency planning that accounts for adverse scenarios and identifies and quantifies available sources of liquidity for each scenario, (g) reduce BOHRs reliance on brokered deposits, and (h) improve BOHRs earnings and overall
condition.



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HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



In addition, BOHR has agreed that it will (a) not extend, renew, or restructure any credit that has
been criticized by the FRB or the Bureau of Financial Institutions absent prior board of directors approval in accordance with the restrictions in the Written Agreement, (b) eliminate all assets or portions of assets classified as
loss and thereafter charge off all assets classified as loss in a federal or state report of examination, unless otherwise approved by the FRB, (c) comply with legal and regulatory limitations on indemnification payments
and severance payments, and (d) appoint a committee to monitor compliance with the terms of the Written Agreement.

In addition, the
Company has agreed that it will (a) not take any other form of payment representing a reduction in BOHRs capital or make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities
absent prior regulatory approval, (b) take all necessary steps to correct certain technical violations of law and regulation cited by the FRB, (c) refrain from guaranteeing any debt without the prior written approval of the FRB and the
Bureau of Financial Institutions, and (d) refrain from purchasing or redeeming any shares of its stock without the prior written consent of the FRB or the Bureau of Financial Institutions.

Under the terms of the Written Agreement, both the Company and BOHR have agreed to submit for approval capital plans to maintain sufficient capital at
the Company, on a consolidated basis, and to refrain from declaring or paying dividends absent prior regulatory approval.

Going Concern
Considerations

The consolidated financial statements of Hampton Roads Bankshares, Inc. as of and for the year ended December 31,
2009, as restated, and its Form 10-Q as of and for the three and six month periods ended June 30, 2010 have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of
business for the foreseeable future. Due to the Companys financial results, the substantial uncertainty throughout the U.S. banking industry, the Written Agreement the Company and BOHR have entered into and described above and BOHRs
significantly undercapitalized status, doubt exists regarding the Companys ability to continue as a going concern. This concern is mitigated by the capital raise expected to close in the third quarter of 2010. With this new capital
the Company and BOHR are expected to return to well capitalized status.

Operating Losses

The Company incurred a net loss of $52.6 million and $91.8 million for the three and six months, respectively, ended June 30, 2010. This loss was
largely the result of dramatic increases in non-performing assets. Additionally, due to these recent significant losses, the Company was unable to ascertain it would generate sufficient net income in the near term to realize its deferred tax assets,
and therefore, established a deferred tax valuation allowance as reported in the December 31, 2009 restated Annual Report filed August 13, 2010.

Capital Adequacy

As of
June 30, 2010, the Company was considered critically undercapitalized and BOHR was considered significantly

undercapitalized under regulatory guidelines and must improve its capital in accordance with the Written Agreement.

In connection with this, the Company and affiliates of The Carlyle Group, Anchorage Advisors, L.L.C., CapGen Financial Group, and other financial
institutions have entered into a binding agreement (the Investment Agreement), which is anticipated to close on or before September 30, 2010, to purchase common stock of the Company, as part of an expected aggregate $255.0 million
capital raise by the Company from institutional investors in a private placement. The private placement is fully subscribed and will include the opportunity to raise an additional $20 to $40 million in common stock through a rights offering to the
Companys existing shareholders.

Prior to the Closing, the Company is required to conduct exchange offers for each outstanding share of
Series A and Series B Preferred Stock for Common Stock (collectively, the Exchange Offers) pursuant to which each share of Series A and B Preferred Stock will be exchanged for 375 shares of Common Stock (reflecting an exchange value of
$150.00 per share or 15% of its liquidation preference and a conversion price of $0.40 per share).

Additionally, the Company has entered into
an agreement with the Treasury pursuant to which Treasury will exchange all of the cumulative preferred stock it purchased from the Company in 2008 under Treasurys Capital Purchase program for a new series of mandatorily convertible preferred
stock, which will convert into the Companys common stock upon closing of the capital raise discussed above.

The above capital
transactions require shareholder approval.

Management believes the capital raise will greatly strengthen its balance sheet and return the
Company to well capitalized status under the regulatory capital standards.





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HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Liquidity

Our primary sources of liquidity are our deposits, the scheduled repayments on our loans, and interest and maturities of our investments. All securities
have been classified as available for sale, which means they are carried at fair value, and we have the ability to sell or pledge a portion of our unpledged investment securities to manage liquidity. Due to BOHRs significantly
undercapitalized status, we are unable to accept, rollover, or renew any brokered deposits. At June 30, 2010, the Company had approximately $326.9 million in available cash on hand and unpledged investment securities of approximately
$58.1 million.

NOTE C  STOCK-BASED COMPENSATION

Accounting Standards Codification (ASC) 718, Compensation  Stock Compensation,requires the use of the fair-value method, which
requires that compensation cost relating to stock-based transactions be recognized in the financial statements, to account for stock-based compensation. Fair value of stock options is estimated at the date of grant using a lattice option pricing
model. It requires recognition of the cost of employee services received in exchange for an award of equity instruments in the financial statements over the period the employee is required to perform the services in exchange for the award. Stock
options granted with pro-rata vesting schedules are expensed over the vesting period on a straight-line basis.

Stock-based compensation
expense recognized in the consolidated statements of operations and the options exercised, including the total intrinsic value and cash received, for the six months ended June 30, 2010 and 2009 were as follows.



|                                           |  |          |        |      |   |        
|------------------------------------------ |  | -------- | ------ | ---- | - | -------
|                                           |  | June 30,
|                                           |  | 2010     |        | 2009
|Expense recognized:                        |  |          |        |      |   |        
|Related to stock options                   |  | $        | 60,551 |      | $ | 130,803
|Related to share awards                    |  |          | 20,212 |      |   | 139,736
|Related tax benefit                        |  |          | 19,286 |      |   | 49,872 
|                                           |  |         
|Number of options exercised:               |  |          |        |      |   |        
|New shares                                 |  |          |       |      |   | 13,841 
|Previously acquired shares                 |  |          |       |      |   |       
|                                           |  |         
|Total intrinsic value of options exercised |  | $        |       |      | $ | 31,048 
|Cash received from options exercised       |  |          |       |      |   | 81,540 

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 terms that range from five to ten years and are either fully vested and exercisable at the
date of grant or vest ratably over periods that range from one to ten years. A summary of the Companys stock option activity and related information for the six months ended June 30, 2010 is as follows.



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PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                     |  |                    |   |  |                               |       |                       |   |  
|------------------------------------ |  | ------------------ | - |  | ----------------------------- | ----- | --------------------- | - | -
|                                     |  | OptionsOutstanding |   |  | WeightedAverageExercise Price |       | AverageIntrinsicValue
|                                     |  |                    |  
|Balance at December 31, 2009         |  | 1,420,213          |   |  | $                             | 12.60 |                       | $ | 
|Granted                              |  |                   |   |  |                               |      |                       |   | 
|Exercised                            |  |                   |   |  |                               |      |                       |   | 
|Expired                              |  | (100,605           | ) |  |                               | 11.50 |                       |   | 
|Forfeited                            |  |                   |   |  |                               |      |                       |   | 
|                                     |  |                    |   |  |                               |       |                       |   |  
|                                     |  |                    |  
|Balance at June 30, 2010             |  | 1,319,608          |   |  | $                             | 12.68 |                       | $ | 
|                                     |  |                    |   |  |                               |       |                       |   |  
|                                     |  |                    |  
|Options exercisable at June 30, 2010 |  | 1,230,818          |   |  | $                             | 12.50 |                       | $ | 
|                                     |  |                    |   |  |                               |       |                       |   |  

Information pertaining to options outstanding and options exercisable
as of June 30, 2010 is as follows.



|                         |  |                              |  |                                           |  |                                |       |                              |           |                                |   |      
|------------------------ |  | ---------------------------- |  | ----------------------------------------- |  | ------------------------------ | ----- | ---------------------------- | --------- | ------------------------------ | - | -----
|                         |  | Options Outstanding          |  | Options Exercisable                      
|Ranges 
ofExercisePrices |  | Number of OptionsOutstanding |  | WeightedAverage 
RemainingContractualLife |  | Weighted AverageExercise Price |       | Number of OptionsExercisable |           | Weighted AverageExercise Price
|$3.09 - $5.05            |  | 61,751                       |  | 1.97                                      |  | $                              | 4.13  |                              | 61,751    |                                | $ | 4.13 
|$6.53 - $8.84            |  | 297,255                      |  | 1.96                                      |  |                                | 8.02  |                              | 297,255   |                                |   | 8.02 
|$9.11 - $10.65           |  | 379,990                      |  | 3.36                                      |  |                                | 9.77  |                              | 378,200   |                                |   | 9.77 
|$12.00 - $12.49          |  | 184,128                      |  | 6.57                                      |  |                                | 12.03 |                              | 126,195   |                                |   | 12.03
|$19.43 - $22.07          |  | 343,051                      |  | 4.70                                      |  |                                | 20.02 |                              | 313,984   |                                |   | 19.86
|$23.60 - $24.67          |  | 53,433                       |  | 5.09                                      |  |                                | 24.22 |                              | 53,433    |                                |   | 24.22
|                         |  |                              |  |                                           |  |                                |       |                              |           |                                |   |      
|$3.09 - $24.67           |  | 1,319,608                    |  | 3.85                                      |  | $                              | 12.68 |                              | 1,230,818 |                                | $ | 12.50
|                         |  |                              |  |                                           |  |                                |       |                              |           |                                |   |      

The Company may issue new shares to satisfy stock option grants. As of
June 30, 2010, there were 765.5 thousand shares available under the existing stock incentive plan. Shares may be repurchased in the open market or, under certain circumstances, through privately negotiated transactions. As of June 30,
2010, there was $270 thousand of unrecognized compensation cost related to non-vested stock options. That cost is expected to be recognized over a weighted-average period of 3.1 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 one 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, 2010 is as follows:



|                             |  |                 |   |  |                                               |      
|---------------------------- |  | --------------- | - |  | --------------------------------------------- | -----
|                             |  | Number ofShares |   |  | Per ShareWeighted-AverageGrant-DateFair Value
|                             |  |                
|Balance at December 31, 2009 |  | 21,917          |   |  | $                                             | 10.12
|Granted                      |  |                |   |  |                                               |     
|Vested                       |  | (2,000          | ) |  |                                               | 8.54 
|Forfeited                    |  | (4,000          | ) |  |                                               | 8.30 
|                             |  |                 |   |  |                                               |      
|                             |  |                
|Balance at June 30, 2010     |  | 15,917          |   |  | $                                             | 10.78
|                             |  |                 |   |  |                                               |      



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PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



As of June 30, 2010, there was $120 thousand 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 3.2 years.

NOTE D 
INVESTMENT SECURITIES

The amortized cost and estimated fair values of investment securities (in thousands) available for sale at
June 30, 2010 and December 31, 2009 were as follows.



|                                    |  |                   |         |                       |   |                        |  |                     |       |  |   |        
|----------------------------------- |  | ----------------- | ------- | --------------------- | - | ---------------------- |  | ------------------- | ----- |  | - | -------
|                                    |  | June 30, 2010    
|Description of Securities           |  | AmortizedCost     |         | Gross UnrealizedGains |   | Gross UnrealizedLosses |  | EstimatedFair Value
|                                    |  |                   |         |                      
|Agency securities                   |  | $                 | 15,172  |                       | $ | 257                    |  | $                   | 55    |  | $ | 15,374 
|Mortgage-backed securities          |  |                   | 153,804 |                       |   | 3,016                  |  |                     |      |  |   | 156,820
|State and municipal securities      |  |                   | 1,006   |                       |   | 8                      |  |                     |      |  |   | 1,014  
|Equity securities                   |  |                   | 2,103   |                       |   | 36                     |  |                     | 65    |  |   | 2,074  
|                                    |  |                   |         |                       |   |                        |  |                     |       |  |   |        
|                                    |  |                   |         |                      
|Total securities available for sale |  | $                 | 172,085 |                       | $ | 3,317                  |  | $                   | 120   |  | $ | 175,282
|                                    |  |                   |         |                       |   |                        |  |                     |       |  |   |        
|                                    | 
|                                    |  | December 31, 2009
|Description of Securities           |  | AmortizedCost     |         | Gross UnrealizedGains |   | Gross UnrealizedLosses |  | EstimatedFair Value
|                                    |  |                   |         |                      
|Agency securities                   |  | $                 | 11,376  |                       | $ | 173                    |  | $                   | 105   |  | $ | 11,444 
|Mortgage-backed securities          |  |                   | 146,583 |                       |   | 482                    |  |                     | 1,339 |  |   | 145,726
|State and municipal securities      |  |                   | 1,279   |                       |   | 27                     |  |                     |      |  |   | 1,306  
|Equity securities                   |  |                   | 2,966   |                       |   | 3                      |  |                     | 383   |  |   | 2,586  
|                                    |  |                   |         |                       |   |                        |  |                     |       |  |   |        
|                                    |  |                   |         |                      
|Total securities available for sale |  | $                 | 162,204 |                       | $ | 685                    |  | $                   | 1,827 |  | $ | 161,062
|                                    |  |                   |         |                       |   |                        |  |                     |       |  |   |        

Information pertaining to securities with gross unrealized losses (in
thousands) at June 30, 2010 and December 31, 2009, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position is as follows.



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PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                           |  |                     |        |                   |   |                     |  |                |       |                     |   |                |  |   |        |  |   |      
|-------------------------- |  | ------------------- | ------ | ----------------- | - | ------------------- |  | -------------- | ----- | ------------------- | - | -------------- |  | - | ------ |  | - | -----
|                           |  | June 30, 2010      
|                           |  | Less than 12 Months |        | 12 Months or More |   | Total              
|Description of Securities  |  | EstimatedFair Value |        | UnrealizedLoss    |   | EstimatedFair Value |  | UnrealizedLoss |       | EstimatedFair Value |   | UnrealizedLoss
|                           |  |                     |        |                   |   |                    
|Agency securities          |  | $                   | 4,737  |                   | $ | 55                  |  | $              |      |                     | $ |               |  | $ | 4,737  |  | $ | 55   
|Equity securities          |  |                     |       |                   |   |                    |  |                | 159   |                     |   | 65             |  |   | 159    |  |   | 65   
|                           |  |                     |        |                   |   |                     |  |                |       |                     |   |                |  |   |        |  |   |      
|                           |  |                     |        |                   |   |                    
|                           |  | $                   | 4,737  |                   | $ | 55                  |  | $              | 159   |                     | $ | 65             |  | $ | 4,896  |  | $ | 120  
|                           |  |                     |        |                   |   |                     |  |                |       |                     |   |                |  |   |        |  |   |      
|                           | 
|                           |  | December 31, 2009  
|                           |  | Less than 12 Months |        | 12 Months or More |   | Total              
|Description of Securities  |  | EstimatedFair Value |        | UnrealizedLoss    |   | EstimatedFair Value |  | UnrealizedLoss |       | EstimatedFair Value |   | UnrealizedLoss
|                           |  |                     |        |                   |   |                    
|Agency securities          |  | $                   | 4,711  |                   | $ | 105                 |  | $              |      |                     | $ |               |  | $ | 4,711  |  | $ | 105  
|Mortgage-backed securities |  |                     | 69,078 |                   |   | 1,339               |  |                |      |                     |   |               |  |   | 69,078 |  |   | 1,339
|Equity securities          |  |                     | 32     |                   |   | 13                  |  |                | 1,097 |                     |   | 370            |  |   | 1,129  |  |   | 383  
|                           |  |                     |        |                   |   |                     |  |                |       |                     |   |                |  |   |        |  |   |      
|                           |  |                     |        |                   |   |                    
|                           |  | $                   | 73,821 |                   | $ | 1,457               |  | $              | 1,097 |                     | $ | 370            |  | $ | 74,918 |  | $ | 1,827
|                           |  |                     |        |                   |   |                     |  |                |       |                     |   |                |  |   |        |  |   |      

Management evaluates securities for other-than-temporary impairment
(OTTI) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. Investment securities classified as available for sale are generally evaluated for OTTI in accordance with ASC 320,
Investment  Debt and Equity Securities.

In determining OTTI, management considers many factors, including (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, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the
Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of
subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the
OTTI recognized in earnings depends on whether an entity intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current period credit loss. If an
entity intends to sell or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, less any current period credit loss, the OTTI shall be recognized in earnings equal to the entire
difference between the investments amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security
before recovery of its amortized cost basis less any current period loss, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss
is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous
amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

The unrealized loss
positions on debt securities at June 30, 2010 were considered to be directly related to interest rate movements as there is minimal credit risk exposure in these investments. At June 30, 2010 one agency security was in an unrealized loss
position. Management does not believe that this debt security was other-than-temporarily impaired at June 30, 2010.

For equity
securities, our impairment analysis considered all available evidence including the length of time and the extent to which the market value of each security was less than cost, the financial condition of the issuer of each



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Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



equity security (based upon financial statements of the issuers), and the near term prospects of each issuer, as well as our intent and ability to retain these investments for a sufficient period
of time to allow for any anticipated recovery in their respective market values. During the first six months of 2010 and 2009, equity securities with an amortized cost basis of $91 thousand and $267 thousand, respectively, were determined to be
other-than-temporarily impaired. Impairment losses of $44 thousand and $132 thousand were recognized through noninterest income during the first six months of 2010 and 2009, respectively. An additional $34 thousand was included in accumulated other
comprehensive loss in the equity section of the balance sheet as of June 30, 2009. Management has evaluated the unrealized losses associated with the remaining equity securities as of June 30, 2010 and, in managements opinion, the
unrealized losses are temporary, and it is our intention to hold these securities until their value recovers. A rollforward of the cumulative other-than-temporary impairment losses (in thousands) recognized in earnings for all securities is as
follows.



|                                                         |  |   |        |  
|-------------------------------------------------------- |  | - | ------ | -
|December 31, 2009                                        |  | $ | 3,030  |  
|Less: Realized gains for securities sales                |  |   | (2,351 | )
|Add: Loss where impairment was not previously recognized |  |   | 30     |  
|Add: Loss where impairment was previously recognized     |  |   | 14     |  
|                                                         |  |   |        |  
|June 30, 2010                                            |  | $ | 723    |  
|                                                         |  |   |        |  

The Companys investment in Federal Home Loan Bank (FHLB) stock totaled $19.7 million at June 30,
2010. FHLB stock is generally viewed as a long-term investment and as a restricted investment security and is carried at cost as there is no market for the stock other than the FHLB or member institutions. Therefore, when evaluating FHLB stock for
impairment, its value is based on ultimate recoverability of the par value rather than by recognizing temporary declines in value. The FHLB has reinstated dividends and the repurchase of its stock thereby improving the value. The Company does not
consider this investment to be other-than-temporarily impaired at June 30, 2010, and no impairment has been recognized.

NOTE E 
ACCOUNTING FOR CERTAIN LOANS ACQUIRED IN A TRANSFER

ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit
Quality, requires acquired loans to be recorded at fair value and prohibits carrying over valuation allowances in the initial accounting period for acquired impaired loans. Loans carried at fair value, mortgage loans held for sale, and loans to
borrowers in good standing under revolving credit agreements are excluded from the scope of this pronouncement. It limits the yield that may be accreted to the excess of the undiscounted expected cash flows over the investors initial
investment in the loan. The excess of the contractual cash flows over expected cash flows may not be recognized as an adjustment of yield. Subsequent increases in cash flows expected to be collected are recognized prospectively through an adjustment
of the loans yield over its remaining life. Decreases in expected cash flows are recognized as impairments.

The Company acquired loans
pursuant to the acquisition of Gateway Financial Holdings (GFH) in December 2008. The Company reviewed the loan portfolio at acquisition to determine whether there was evidence of deterioration of credit quality since origination and if
it was probable that it will be unable to collect all amounts due according to the loans contractual terms. When both conditions existed, the Company accounted for each loan individually, considered expected prepayments, and estimated the
amount and timing of discounted expected principal, interest, and other cash flows (expected at acquisition) for each loan. The Company determined the excess of the loans scheduled contractual principal and contractual interest payments over
all cash flows expected at acquisition as an amount that should not be accreted into interest income (non-accretable difference). The remaining amount, representing the excess of the loans cash flows expected to be collected over the amount
paid, is accreted into interest income over the remaining life of the loan (accretable yield).

Over the life of the loan, the Company
continues to estimate cash flows expected to be collected. The Company evaluates at the balance sheet date whether the present value of its loans determined using the effective interest rates



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Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



has decreased, and if so, the Company establishes a valuation allowance for the loan. Valuation allowances for acquired loans reflect only those losses incurred after acquisition; that is, the
present value of cash flows expected at acquisition that are not expected to be collected. Valuation allowances are established only subsequent to acquisition of the loans.

Loans that were acquired in the GFH acquisition for which there was evidence of deterioration of credit quality since acquisition date and for which it
was probable that all contractually required payments would not be made as scheduled had an outstanding balance of $67.4 million and a carrying amount of $61.2 million at June 30, 2010. The carrying amount of these loans is included in the
balance sheet amount of loans receivable at June 30, 2010. Of these loans, $44.2 million have experienced further deterioration since the acquisition date and are included in the impaired loan amounts disclosed in Note G. The following table
depicts the accretable yield (in thousands) at the beginning and end of the period.



|                           |  |                 |       |  
|-------------------------- |  | --------------- | ----- | -
|                           |  | AccretableYield |      
|                           | 
|Balance, December 31, 2009 |  | $               | 1,042 |  
|Accretion                  |  |                 | (335  | )
|Disposals                  |  |                 | (426  | )
|Additions                  |  |                 | 528   |  
|                           |  |                 |       |  
|Balance, June 30, 2010     |  | $               | 809   |  
|                           |  |                 |       |  

NOTE F  LOANS

The Company grants commercial, construction, real estate, and consumer loans to customers throughout its lending areas. A substantial portion of
debtors abilities to honor their contracts is dependent upon the real estate and general economic environment of the lending area. The major classifications of loans (in thousands) are summarized as follows.



|                                     |  |               |           |   |                   |   |           |  
|------------------------------------ |  | ------------- | --------- | - | ----------------- | - | --------- | -
|                                     |  | June 30, 2010 |           |   | December 31, 2009 |  
|                                     |  |              
|Commercial                           |  | $             | 330,717   |   |                   | $ | 361,256   |  
|Construction                         |  |               | 653,184   |   |                   |   | 757,702   |  
|Real estate-commercial mortgage      |  |               | 709,428   |   |                   |   | 740,570   |  
|Real estate-residential mortgage     |  |               | 523,357   |   |                   |   | 524,853   |  
|Installment loans (to individuals)   |  |               | 35,727    |   |                   |   | 42,858    |  
|Deferred loan fees and related costs |  |               | (476      | ) |                   |   | (547      | )
|                                     |  |               |           |   |                   |   |           |  
|                                     |  |              
|Total loans                          |  | $             | 2,251,937 |   |                   | $ | 2,426,692 |  
|                                     |  |               |           |   |                   |   |           |  

Loans are made to the Companys executive officers and directors and their associates during the ordinary course of
business. In managements opinion, these loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with other persons and do not involve more than normal risk
of collectability or present other unfavorable features. At June 30, 2010 and December 31, 2009, loans to executive officers, directors, and their associates were $80.0 million and $90.9 million, respectively. Of these loans, $7.5 million
were made for the purpose of purchasing preferred stock in the Company and have been eliminated from both the loan and equity balances in the consolidated balance sheet.

BOHR and Shore had loans outstanding to the Company with aggregate balances of $21.5 million and $2.0 million, respectively, as of June 30, 2010
which are eliminated in consolidation. The loan from BOHR was inadequately secured in violation of Regulation W promulgated by the Federal Reserve. The Company has been in discussions with banking regulators regarding the potential for curing this
violation.



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Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE G  ALLOWANCE FOR LOAN LOSSES AND NON-PERFORMING ASSETS

The purpose of the allowance for loan losses is to provide for potential losses inherent in the loan portfolio. Management considers several factors,
including historical loan loss experience, the size and composition of the portfolio, and the value of collateral agreements, in determining the allowance for loan loss.

Transactions (in thousands) affecting the allowance for loan losses during the six months ended June 30, 2010 and 2009 were as follows.



|                               |  |      |         |   |      |   |        |  
|------------------------------ |  | ---- | ------- | - | ---- | - | ------ | -
|                               |  | 2010 |         |   | 2009 |  
|                               |  |     
|Balance at beginning of period |  | $    | 132,697 |   |      | $ | 51,218 |  
|Provision for loan losses      |  |      | 100,251 |   |      |   | 34,895 |  
|Loans charged off              |  |      | (61,890 | ) |      |   | (1,897 | )
|Recoveries                     |  |      | 2,168   |   |      |   | 275    |  
|                               |  |      |         |   |      |   |        |  
|Balance at end of period       |  | $    | 173,226 |   |      | $ | 84,491 |  
|                               |  |      |         |   |      |   |        |  

Non-performing assets consist of loans 90 days past due and still accruing interest, nonaccrual loans, and foreclosed real
estate and repossessed assets. Total non-performing assets were $335.9 million or 12% of total assets at June 30, 2010 compared with $257.2 million or 9% of total assets at December 31, 2009. Non-performing assets (in thousands) were as
follows.



|                                                   |  |               |         |                   |   |        
|-------------------------------------------------- |  | ------------- | ------- | ----------------- | - | -------
|                                                   |  | June 30, 2010 |         | December 31, 2009
|                                                   |  |              
|Loans 90 days past due and still accruing interest |  | $             |        |                   | $ |       
|Nonaccrual loans                                   |  |               | 305,609 |                   |   | 248,303
|Foreclosed real estate and repossessed assets      |  |               | 30,307  |                   |   | 8,867  
|                                                   |  |               |         |                   |   |        
|                                                   |  |              
|Total non-performing assets                        |  | $             | 335,916 |                   | $ | 257,170
|                                                   |  |               |         |                   |   |        

Estimated gross interest income that would have been recorded during
the six months ended June 30, 2010 if the foregoing nonaccrual loans had remained current in accordance with their contractual terms totaled $6.2 million. Information (in thousands) on impaired loans is as follows.



|                                                                                 |  |               |         |                   |   |        
|-------------------------------------------------------------------------------- |  | ------------- | ------- | ----------------- | - | -------
|                                                                                 |  | June 30, 2010 |         | December 31, 2009
|                                                                                 |  |              
|Impaired loans for which an allowance has been provided                          |  | $             | 364,705 |                   |   | 331,532
|Impaired loans for which no allowance has been provided                          |  |               | 108,437 |                   |   | 137,536
|                                                                                 |  |               |         |                   |   |        
|                                                                                 |  |              
|Total impaired loans                                                             |  | $             | 473,142 |                   | $ | 469,068
|                                                                                 |  |               |         |                   |   |        
|                                                                                 |  |              
|Allowance provided for impaired loans, included in the allowance for loan losses |  | $             | 115,552 |                   | $ | 91,488 
|                                                                                 |  |               |         |                   |   |        
|                                                                                 |  |              
|Average balance in impaired loans                                                |  | $             | 474,520 |                   | $ | 215,363
|                                                                                 |  |               |         |                   |   |        
|                                                                                 |  |              
|Interest income recognized from impaired loans                                   |  | $             | 4,529   |                   | $ | 17,440 
|                                                                                 |  |               |         |                   |   |        

The following table provides information (in thousands) related to the
loan category and method used to measure impairment at June 30, 2010 and December 31, 2009.



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PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                      |  |                                   |  |                   |         |  |   |        
|----------------------------------------------------- |  | --------------------------------- |  | ----------------- | ------- |  | - | -------
|Loan Category                                         |  | Method Used to
Measure Impairment |  | Impaired Loans   
|                                                      |  | June 30, 2010                     |  | December 31, 2009
|                                                      |  |                                   | 
|1-4 family residential construction                   |  | Estimated fair market value       |  | $                 | 16,219  |  | $ | 20,851 
|Other construction and development                    |  | Estimated fair market value       |  |                   | 247,075 |  |   | 237,313
|Secured by farm land                                  |  | Estimated fair market value       |  |                   | 4,959   |  |   | 1,318  
|Secured by 1-4 family, revolving                      |  | Estimated fair market value       |  |                   | 5,217   |  |   | 6,018  
|Secured by 1-4 family, 1st lien                       |  | Estimated fair market value       |  |                   | 36,346  |  |   | 32,532 
|Secured by 1-4 family, junior lien                    |  | Estimated fair market value       |  |                   | 1,851   |  |   | 1,502  
|Secured by multifamily                                |  | Estimated fair market value       |  |                   | 15,097  |  |   | 8,137  
|Secured by nonfarm nonresidential(owner occupied)     |  | Estimated fair market value       |  |                   | 29,377  |  |   | 29,309 
|Secured by nonfarm nonresidential(non-owner occupied) |  | Estimated fair market value       |  |                   | 81,681  |  |   | 75,947 
|Commercial and industrial                             |  | Estimated fair market value       |  |                   | 35,006  |  |   | 56,081 
|Other consumer loans to individuals                   |  | Estimated fair market value       |  |                   | 62      |  |   | 60     
|Other                                                 |  | Estimated fair market value       |  |                   | 252     |  |   |       
|                                                      |  |                                   |  |                   |         |  |   |        
|Total impaired loans                                  |  |                                   |  | $                 | 473,142 |  | $ | 469,068
|                                                      |  |                                   |  |                   |         |  |   |        

As of June 30, 2010 and December 31, 2009, loans classified
as troubled debt restructurings and included in impaired loans in the disclosure above totaled $94.0 million and $73.5 million, respectively. Of these amounts, $94.0 million and $56.6 million were on accrual status at June 30, 2010 and
December 31, 2009, respectively, and $16.9 million were on nonaccrual status at December 31, 2009. There were no troubled debt restructurings in nonaccrual status at June 30, 2010. Troubled debt restructurings in nonaccrual status are
returned to accrual status after a period of performance under which the borrower demonstrates the ability and willingness to repay the loan. None of the nonaccrual troubled debt restructurings were returned to accrual status during the quarter
ended June 30, 2010.

A loan is considered impaired when it is probable that all amounts due will not be collected according to the
contractual terms. For collateral dependent impaired loans, impairment is measured based upon the fair value of the underlying collateral. Management considers a loan to be collateral dependent when repayment of the loan is expected solely from the
sale or liquidation of the underlying collateral. The Companys policy is to charge off collateral dependent impaired loans at the earlier of foreclosure, repossession, or liquidation at the point it becomes 180 days past due. The
Companys policy is to reduce the carrying value of the loan to the estimated fair value of the collateral less estimated selling costs through a charge off to the allowance for loan losses. For loans that are not collateral dependent,
impairment is measured using discounted cash flows. Total impaired loans were $473.1 million and $469.1 million at June 30, 2010 and December 31, 2009, respectively, the majority of which were considered collateral dependent, and
therefore, measured at the fair value of the underlying collateral.

Impaired loans for which no allowance is provided totaled $108.4 million
and $137.5 million at June 30, 2010 and December 31, 2009. Loans written down to their estimated fair value of collateral less the costs to sell account for $46.9 and $22.1 of the impaired loans for which no allowance has been provided as
of June 30, 2010 and December 31, 2009, respectively. The average age of appraisals for these loans is 1.16 years at June 30, 2010. The remaining impaired loans for which no allowance is provided are fully covered by the value of the
collateral, and therefore, no loss is expected on these loans.



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PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



In the opinion of management, based on conditions reasonably known to them, the allowance was adequate
at June 30, 2010. The allowance may be increased or decreased in the future based on loan balances outstanding, changes in internally generated credit quality ratings of the loan portfolio, changes in general economic conditions, or other risk
factors.

NOTE H  PREMISES AND EQUIPMENT

Premises and equipment (in thousands) at June 30, 2010 and December 31, 2009 are summarized as follows.



|                                               |  |               |         |   |                   |   |         |  
|---------------------------------------------- |  | ------------- | ------- | - | ----------------- | - | ------- | -
|                                               |  | June 30, 2010 |         |   | December 31, 2009 |  
|                                               |  |              
|Land                                           |  | $             | 31,248  |   |                   | $ | 31,335  |  
|Buildings and improvements                     |  |               | 58,255  |   |                   |   | 58,177  |  
|Leasehold improvements                         |  |               | 3,411   |   |                   |   | 3,411   |  
|Equipment, furniture, and fixtures             |  |               | 14,885  |   |                   |   | 14,828  |  
|Construction in process                        |  |               | 95      |   |                   |   | 7       |  
|                                               |  |               |         |   |                   |   |         |  
|                                               |  |               | 107,894 |   |                   |   | 107,758 |  
|                                               |  |              
|Less accumulated depreciation and amortization |  |               | (12,688 | ) |                   |   | (10,246 | )
|                                               |  |               |         |   |                   |   |         |  
|                                               |  |              
|Premises and equipment, net                    |  | $             | 95,206  |   |                   | $ | 97,512  |  
|                                               |  |               |         |   |                   |   |         |  

NOTE I  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 six months of 2010 and 2009 was $331 thousand and $603 thousand, respectively.

NOTE J  INTANGIBLE ASSETS

Intangible assets with an indefinite life are subject to impairment testing at least annually or more often if events or circumstances suggest potential
impairment. Other acquired intangible assets determined to have a finite life are amortized over their estimated useful life in a manner that best reflects the economic benefits of the intangible asset. Intangible assets with a finite life are
periodically reviewed for other-than-temporary impairment. The gross carrying amount and accumulated amortization (in thousands) for the Companys intangible assets follows.



|                                      |  |                |        |                         |   |                |  |                         |        |  |   |      
|------------------------------------- |  | -------------- | ------ | ----------------------- | - | -------------- |  | ----------------------- | ------ |  | - | -----
|                                      |  | June 30, 2010  |        | December 31, 2009      
|                                      |  | CarryingAmount |        | AccumulatedAmortization |   | CarryingAmount |  | AccumulatedAmortization
|Intangible assets:                    |  |                |        |                         |   |                |  |                         |        |  |   |      
|                                      |  |                |        |                        
|Core deposit intangible               |  | $              | 8,105  |                         | $ | 2,381          |  | $                       | 8,105  |  | $ | 1,703
|Employment contract intangibles       |  |                | 1,130  |                         |   | 811            |  |                         | 1,130  |  |   | 713  
|Insurance book of business intangible |  |                | 6,450  |                         |   | 645            |  |                         | 6,450  |  |   | 430  
|                                      |  |                |        |                         |   |                |  |                         |        |  |   |      
|                                      |  |                |        |                        
|Total intangible assets               |  | $              | 15,685 |                         | $ | 3,837          |  | $                       | 15,685 |  | $ | 2,846
|                                      |  |                |        |                         |   |                |  |                         |        |  |   |      



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HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE K  FORECLOSED REAL ESTATE AND REPOSSESSED ASSETS

Foreclosed assets are presented net of an allowance for losses. An analysis of the allowance for losses (in thousands) on foreclosed assets is as follows.



|                             |  |               |       |   |               |   |  
|---------------------------- |  | ------------- | ----- | - | ------------- | - | -
|                             |  | June 30, 2010 |       |   | June 30, 2009
|                             |  |              
|Balance at beginning of year |  | $             | 356   |   |               | $ | 
|Provision for losses         |  |               | 2,992 |   |               |   | 
|Charge-offs                  |  |               | (785  | ) |               |   | 
|                             |  |               |       |   |               |   |  
|Balance at end of year       |  | $             | 2,563 |   |               | $ | 
|                             |  |               |       |   |               |   |  

Expenses (in thousands) applicable to foreclosed assets include the
following.



|                                        |  |                               |      
|--------------------------------------- |  | ----------------------------- | -----
|                                        |  | Six Months EndedJune 30, 2010
|                                        | 
|Expenses incurred for foreclosed assets |  | $                             | 747  
|Net loss on sales of real estate        |  |                               | 222  
|Provision for losses                    |  |                               | 2,992
|                                        |  |                               |      
|Total                                   |  | $                             | 3,961
|                                        |  |                               |      

NOTE L  BUSINESS SEGMENT REPORTING

The Company has two community banks, BOHR and Shore, which provide loan and deposit services throughout 60 locations in Virginia, North Carolina, and
Maryland. In addition to its banking operations, the Company has three other reportable segments: Mortgage, Investment, and Insurance. The accounting policies of the reportable segments are the same as those described in the summary of significant
accounting policies in the Companys 2009 Form 10-K/A. Segment profit and loss is measured by net income prior to corporate overhead allocation. Intersegment transactions are recorded at cost and eliminated as part of the consolidation process.
Because of the interrelationships between the segments, the information is not indicative of how the segments would perform if they operated as independent entities. The following table shows certain financial information (in thousands) at
June 30, 2010, December 31, 2009, and June 30, 2009 for each segment and in total.



|                                                |  |       |           |             |   |          |         |  |          |           |            |   |           |  |   |       |  |   |       
|----------------------------------------------- |  | ----- | --------- | ----------- | - | -------- | ------- |  | -------- | --------- | ---------- | - | --------- |  | - | ----- |  | - | ------
|                                                |  | Total |           | Elimination |   |          | Banking |  | Mortgage |           | Investment |   | Insurance
|                                                |  |       |           |             |   |         
|Total Assets at June 30, 2010                   |  | $     | 2,877,111 |             | $ | (266,845 | )       |  | $        | 3,103,131 |            | $ | 29,681    |  | $ | 1,108 |  | $ | 10,036
|                                                |  |       |           |             |   |          |         |  |          |           |            |   |           |  |   |       |  |   |       
|                                                |  |       |           |             |   |         
|Total Assets at December 31, 2009 (as restated) |  | $     | 2,919,576 |             | $ | (303,100 | )       |  | $        | 3,197,510 |            | $ | 13,599    |  | $ | 1,163 |  | $ | 10,404
|                                                |  |       |           |             |   |          |         |  |          |           |            |   |           |  |   |       |  |   |       



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HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                           |  |       |         |   |             |   |         |  |   |          |   |  |            |       |   |           |   |     |   |  |   |      
|---------------------------------------------------------- |  | ----- | ------- | - | ----------- | - | ------- |  | - | -------- | - |  | ---------- | ----- | - | --------- | - | --- | - |  | - | -----
|Three Months Ended
June 30, 2010                           |  | Total |         |   | Elimination |   | Banking |  |   | Mortgage |   |  | Investment |       |   | Insurance
|                                                           |  |       |         |   |             |  
|Net interest income                                        |  | $     | 17,697  |   |             | $ |        |  | $ | 17,584   |   |  | $          | 109   |   |           | $ |    |   |  | $ | 4    
|Provision for loan losses                                  |  |       | 54,638  |   |             |   |        |  |   | 54,638   |   |  |            |      |   |           |   |    |   |  |   |     
|                                                           |  |       |         |   |             |   |         |  |   |          |   |  |            |       |   |           |   |     |   |  |   |      
|Net interest income (loss) after provision for loan losses |  |       | (36,941 | ) |             |   |        |  |   | (37,054  | ) |  |            | 109   |   |           |   |    |   |  |   | 4    
|Noninterest income                                         |  |       | 5,331   |   |             |   |        |  |   | 1,411    |   |  |            | 2,604 |   |           |   | 37  |   |  |   | 1,279
|Noninterest expense                                        |  |       | 23,086  |   |             |   |        |  |   | 20,183   |   |  |            | 1,735 |   |           |   | 42  |   |  |   | 1,126
|                                                           |  |       |         |   |             |   |         |  |   |          |   |  |            |       |   |           |   |     |   |  |   |      
|Net income (loss) before income taxes (benefit)            |  |       | (54,696 | ) |             |   |        |  |   | (55,826  | ) |  |            | 978   |   |           |   | (5  | ) |  |   | 157  
|Income tax expense (benefit)                               |  |       | (2,196  | ) |             |   |        |  |   | (2,601   | ) |  |            | 352   |   |           |   | (2  | ) |  |   | 55   
|                                                           |  |       |         |   |             |   |         |  |   |          |   |  |            |       |   |           |   |     |   |  |   |      
|Net income (loss) before noncontrolling interest           |  |       | (52,500 | ) |             |   |        |  |   | (53,225  | ) |  |            | 626   |   |           |   | (3  | ) |  |   | 102  
|Noncontrolling interest                                    |  |       | (139    | ) |             |   |        |  |   | (139     | ) |  |            |      |   |           |   |    |   |  |   |     
|                                                           |  |       |         |   |             |   |         |  |   |          |   |  |            |       |   |           |   |     |   |  |   |      
|Net income (loss)                                          |  | $     | (52,639 | ) |             | $ |        |  | $ | (53,364  | ) |  | $          | 626   |   |           | $ | (3  | ) |  | $ | 102  
|                                                           |  |       |         |   |             |   |         |  |   |          |   |  |            |       |   |           |   |     |   |  |   |      
|                                                           |  |       |         |   |             |  
|Three Months Ended
June 30, 2009                           |  | Total |         |   | Elimination |   | Banking |  |   | Mortgage |   |  | Investment |       |   | Insurance
|                                                           |  |       |         |   |             |  
|Net interest income                                        |  | $     | 25,899  |   |             | $ |        |  | $ | 25,776   |   |  | $          | 118   |   |           | $ |    |   |  | $ | 5    
|Provision for loan losses                                  |  |       | 33,706  |   |             |   |        |  |   | 33,706   |   |  |            |      |   |           |   |    |   |  |   |     
|                                                           |  |       |         |   |             |   |         |  |   |          |   |  |            |       |   |           |   |     |   |  |   |      
|Net interest income (loss) after provision for loan losses |  |       | (7,807  | ) |             |   |        |  |   | (7,930   | ) |  |            | 118   |   |           |   |    |   |  |   | 5    
|Noninterest income                                         |  |       | 5,655   |   |             |   |        |  |   | 2,839    |   |  |            | 1,397 |   |           |   | 85  |   |  |   | 1,334
|Noninterest expense                                        |  |       | 50,330  |   |             |   |        |  |   | 47,959   |   |  |            | 1,058 |   |           |   | 115 |   |  |   | 1,198
|                                                           |  |       |         |   |             |   |         |  |   |          |   |  |            |       |   |           |   |     |   |  |   |      
|Net income (loss) before income taxes (benefit)            |  |       | (52,482 | ) |             |   |        |  |   | (53,050  | ) |  |            | 457   |   |           |   | (30 | ) |  |   | 141  
|Income tax expense (benefit)                               |  |       | (9,253  | ) |             |   |        |  |   | (9,451   | ) |  |            | 160   |   |           |   | (11 | ) |  |   | 49   
|                                                           |  |       |         |   |             |   |         |  |   |          |   |  |            |       |   |           |   |     |   |  |   |      
|Net income (loss)                                          |  | $     | (43,229 | ) |             | $ |        |  | $ | (43,599  | ) |  | $          | 297   |   |           | $ | (19 | ) |  | $ | 92   
|                                                           |  |       |         |   |             |   |         |  |   |          |   |  |            |       |   |           |   |     |   |  |   |      
|                                                           |  |       |         |   |             |  
|Six Months Ended
June 30, 2010                             |  | Total |         |   | Elimination |   | Banking |  |   | Mortgage |   |  | Investment |       |   | Insurance
|                                                           |  |       |         |   |             |  
|Net interest income                                        |  | $     | 39,630  |   |             | $ |        |  | $ | 39,429   |   |  | $          | 194   |   |           | $ |    |   |  | $ | 7    
|Provision for loan losses                                  |  |       | 100,251 |   |             |   |        |  |   | 100,251  |   |  |            |      |   |           |   |    |   |  |   |     
|                                                           |  |       |         |   |             |   |         |  |   |          |   |  |            |       |   |           |   |     |   |  |   |      
|Net interest income (loss) after provision for loan losses |  |       | (60,621 | ) |             |   |        |  |   | (60,822  | ) |  |            | 194   |   |           |   |    |   |  |   | 7    
|Noninterest income                                         |  |       | 10,932  |   |             |   |        |  |   | 3,898    |   |  |            | 4,359 |   |           |   | 76  |   |  |   | 2,599
|Noninterest expense                                        |  |       | 44,035  |   |             |   |        |  |   | 38,618   |   |  |            | 3,071 |   |           |   | 94  |   |  |   | 2,252
|                                                           |  |       |         |   |             |   |         |  |   |          |   |  |            |       |   |           |   |     |   |  |   |      
|Net income (loss) before income taxes (benefit)            |  |       | (93,724 | ) |             |   |        |  |   | (95,542  | ) |  |            | 1,482 |   |           |   | (18 | ) |  |   | 354  
|Income tax expense (benefit)                               |  |       | (2,134  | ) |             |   |        |  |   | (2,771   | ) |  |            | 519   |   |           |   | (6  | ) |  |   | 124  
|                                                           |  |       |         |   |             |   |         |  |   |          |   |  |            |       |   |           |   |     |   |  |   |      
|Net income (loss) before noncontrolling interest           |  |       | (91,590 | ) |             |   |        |  |   | (92,771  | ) |  |            | 963   |   |           |   | (12 | ) |  |   | 230  
|Noncontrolling interest                                    |  |       | (170    | ) |             |   |        |  |   | (170     | ) |  |            |      |   |           |   |    |   |  |   |     
|                                                           |  |       |         |   |             |   |         |  |   |          |   |  |            |       |   |           |   |     |   |  |   |      
|Net income (loss)                                          |  | $     | (91,760 | ) |             | $ |        |  | $ | (92,941  | ) |  | $          | (963  | ) |           | $ | (12 | ) |  | $ | 230  
|                                                           |  |       |         |   |             |   |         |  |   |          |   |  |            |       |   |           |   |     |   |  |   |      



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HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                    |  |       |         |   |             |   |         |  |   |          |   |            |   |       |           |   |     |   |  |   |      
|--------------------------------------------------- |  | ----- | ------- | - | ----------- | - | ------- |  | - | -------- | - | ---------- | - | ----- | --------- | - | --- | - |  | - | -----
|Six Months Ended
June 30, 2009                      |  | Total |         |   | Elimination |   | Banking |  |   | Mortgage |   | Investment |   |       | Insurance
|                                                    |  |       |         |   |             |  
|Net interest income                                 |  | $     | 51,973  |   |             | $ |        |  | $ | 51,777   |   |            | $ | 188   |           | $ |    |   |  | $ | 8    
|Provision for loan losses                           |  |       | 34,895  |   |             |   |        |  |   | 34,895   |   |            |   |      |           |   |    |   |  |   |     
|                                                    |  |       |         |   |             |   |         |  |   |          |   |            |   |       |           |   |     |   |  |   |      
|Net interest income after provision for loan losses |  |       | 17,078  |   |             |   |        |  |   | 16,882   |   |            |   | 188   |           |   |    |   |  |   | 8    
|Noninterest income                                  |  |       | 12,095  |   |             |   |        |  |   | 6,274    |   |            |   | 3,039 |           |   | 131 |   |  |   | 2,651
|Noninterest expense                                 |  |       | 70,178  |   |             |   |        |  |   | 65,614   |   |            |   | 2,053 |           |   | 142 |   |  |   | 2,369
|                                                    |  |       |         |   |             |   |         |  |   |          |   |            |   |       |           |   |     |   |  |   |      
|Net income (loss) before income taxes (benefit)     |  |       | (41,005 | ) |             |   |        |  |   | (42,458  | ) |            |   | 1,174 |           |   | (11 | ) |  |   | 290  
|Income tax expense (benefit)                        |  |       | (5,143  | ) |             |   |        |  |   | (5,652   | ) |            |   | 411   |           |   | (4  | ) |  |   | 102  
|                                                    |  |       |         |   |             |   |         |  |   |          |   |            |   |       |           |   |     |   |  |   |      
|Net income (loss)                                   |  | $     | (35,862 | ) |             | $ |        |  | $ | (36,806  | ) |            | $ | 763   |           | $ | (7  | ) |  | $ | 188  
|                                                    |  |       |         |   |             |   |         |  |   |          |   |            |   |       |           |   |     |   |  |   |      

NOTE M  FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurements and Disclosures, establishes a framework for measuring fair value. It defines fair value as the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It also permits the measurement of transactions between market participants at the measurement date and the
measurement of selected eligible financial instruments at fair value at specified election dates.

The Company groups our financial assets and
liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The majority of instruments fall into the Level 1 or 2 fair
value hierarchy. Valuation methodologies for the fair value hierarchy are as follows:



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 1 |  | Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an
active exchange market, as well as certain U.S. Treasury securities that are highly liquid and are actively traded in over-the-counter markets.                                                                                                                                                                                                                                                                                                                 
|        | 
|Level 2 |  | Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are
observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded
instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.
|        | 
|Level 3 |  | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities
include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques as well as instruments for which the determination of fair value requires significant management judgment or
estimation.                                                                                                                                                                                                       

Recurring Basis

The Company measures or monitors certain of its assets and liabilities on a fair value basis. Fair value is used on a recurring basis for those assets and
liabilities that were elected as well as for certain assets and liabilities in which fair value is the primary basis of accounting. The following table reflects the fair value (in thousands) of assets and liabilities measured and recognized at fair
value on a recurring basis in the consolidated balance sheets at June 30, 2010 and December 31, 2009.



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HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                               |  |                                           |         |                                                             |   |                                             |  |                                        |         |  |   |      
|---------------------------------------------- |  | ----------------------------------------- | ------- | ----------------------------------------------------------- | - | ------------------------------------------- |  | -------------------------------------- | ------- |  | - | -----
|                                               |  |                                           |         | Fair Value Measurements atJune 30, 2010
Using              
|Description                                    |  | Assets / LiabilitiesMeasured
atFair Value |         | Quoted Pricesin Active Marketsfor Identical Assets(Level 1) |   | Significant 
OtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|                                               |  |                                           |         |                                                            
|Investment securities available for sale:      |  |                                           |         |                                                             |   |                                             |  |                                        |         |  |   |      
|Agency securities                              |  | $                                         | 15,374  |                                                             | $ |                                            |  | $                                      | 15,374  |  | $ |     
|Mortgage-backed securities                     |  |                                           | 156,820 |                                                             |   |                                            |  |                                        | 156,820 |  |   |     
|State and municipal securities                 |  |                                           | 1,014   |                                                             |   |                                            |  |                                        | 1,014   |  |   |     
|Equity securities                              |  |                                           | 2,074   |                                                             |   | 656                                         |  |                                        |        |  |   | 1,418
|                                               |  |                                           |         |                                                             |   |                                             |  |                                        |         |  |   |      
|Total investment securities available for sale |  |                                           | 175,282 |                                                             |   | 656                                         |  |                                        | 173,208 |  |   | 1,418
|                                               |  |                                           |         |                                                            
|Derivative loan commitments                    |  |                                           | 1,099   |                                                             |   |                                            |  |                                        |        |  |   | 1,099
|Loans held for sale                            |  |                                           | 27,734  |                                                             |   |                                            |  |                                        | 27,734  |  |   |     
|                                               |  |                                          
|                                               |  |                                           |         | Fair Value Measurements atDecember 31, 2009 Using          
|Description                                    |  | Assets / LiabilitiesMeasured atFair
Value |         | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   | Significant 
OtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|                                               |  |                                           |         |                                                            
|Investment securities available for sale:      |  |                                           |         |                                                             |   |                                             |  |                                        |         |  |   |      
|Agency securities                              |  | $                                         | 11,444  |                                                             | $ |                                            |  | $                                      | 11,444  |  | $ |     
|Mortgage-backed securities                     |  |                                           | 145,726 |                                                             |   |                                            |  |                                        | 145,726 |  |   |     
|State and municipal securities                 |  |                                           | 1,306   |                                                             |   |                                            |  |                                        | 1,306   |  |   |     
|Equity securities                              |  |                                           | 2,586   |                                                             |   | 1,358                                       |  |                                        |        |  |   | 1,228
|                                               |  |                                           |         |                                                             |   |                                             |  |                                        |         |  |   |      
|Total investment securities available for sale |  |                                           | 161,062 |                                                             |   | 1,358                                       |  |                                        | 158,476 |  |   | 1,228
|                                               |  |                                           |         |                                                            
|Derivative loan commitments                    |  |                                           | 201     |                                                             |   |                                            |  |                                        |        |  |   | 201  
|Loans held for sale                            |  |                                           | 12,615  |                                                             |   |                                            |  |                                        | 12,615  |  |   |     



|                                           |  |                                                                                             |       |                           |         |                   |         |  |         |       |         |   |       |  |   |       
|------------------------------------------ |  | ------------------------------------------------------------------------------------------- | ----- | ------------------------- | ------- | ----------------- | ------- |  | ------- | ----- | ------- | - | ----- |  | - | ------
|                                           |  | Fair Value Measurements Using Significant Unobservable InputsSix Months
Ended June 30, 2010
|                                           |  | Investment Securities Available for Sale                                                    |       | DerivativeLoanCommitments |         | LoansHeldfor Sale
|Description                                |  | Level 1                                                                                     |       |                           | Level 2 |                   | Level 3 |  | Level 3 |       | Level 2
|                                           |  |                                                                                             |       |                           |        
|Balance, December 31, 2009                 |  | $                                                                                           | 1,358 |                           |         | $                 | 158,476 |  | $       | 1,228 |         | $ | 201   |  | $ | 12,615
|Unrealized (gains) losses included in:     |  |                                                                                             |       |                           |         |                   |         |  |         |       |         |   |       |  |   |       
|Earnings                                   |  |                                                                                             | (44   | )                         |         |                   |        |  |         |      |         |   |      |  |   |      
|Other comprehensive gain (loss)            |  |                                                                                             | 77    |                           |         |                   | 3,295   |  |         | 190   |         |   |      |  |   |      
|Purchases, issuances, and settlements, net |  |                                                                                             | (735  | )                         |         |                   | 11,437  |  |         |      |         |   | 898   |  |   | 15,119
|Transfers in and/or out, net               |  |                                                                                             |      |                           |         |                   |        |  |         |      |         |   |      |  |   |      
|                                           |  |                                                                                             |       |                           |         |                   |         |  |         |       |         |   |       |  |   |       
|Balance, June 30, 2010                     |  | $                                                                                           | 656   |                           |         | $                 | 173,208 |  | $       | 1,418 |         | $ | 1,099 |  | $ | 27,734
|                                           |  |                                                                                             |       |                           |         |                   |         |  |         |       |         |   |       |  |   |       



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HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The following describes the valuation techniques used to measure fair value for our assets and
liabilities classified as recurring.

Investment Securities Available for Sale. 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 or quoted prices of securities with similar characteristics. 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 valued using third party quoted prices in markets that are not active. 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.

Derivative Loan Commitments. The Company enters into commitments to originate mortgage
loans whereby the interest rate is fixed prior to funding. These commitments, in which the Company intends to sell in the secondary market, are considered freestanding derivatives.

Loans Held For Sale. The Company sells loans to outside investors. Fair value of mortgage loans held for sale is estimated based on the
commitments into which individual loans will be delivered. As of June 30, 2010, mortgage loans held for sale had a net carrying value of $27.7 million which approximated its fair value. On December 31, 2009, mortgage loans held for sale
had a net carrying value of $12.6 million which approximated its fair value.

Non-recurring Basis

Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are
subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The adjustments are based on appraisals of underlying collateral or other observable market prices when current appraisals or observable
market prices are available. Where we do not have a current appraisal, an existing appraisal or other valuation would be utilized after discounting it to reflect current market conditions, and, as such, may include significant management assumptions
and input with respect to the determination of fair value.

To assist in the discounting process, a valuation matrix was developed to provide
valuation guidance for collateral dependent loans and foreclosed real estate where it was deemed that an existing appraisal was outdated as to current market conditions. The matrix applies discounts to external appraisals depending on the type of
real estate and age of the appraisal. The discounts are generally specific point estimates; however in some cases, the matrix allows for a small range of values. The discounts were based in part upon externally derived data including but not limited
to Case-Shiller composite indices, Moodys REAL Commercial Property Prices Indices, and information from Zillow.com. The discounts were also based upon managements knowledge of market conditions and prices of sales of foreclosed real
estate. In addition, matrix value adjustments may be made by our independent appraisal group to reflect property value trends within specific markets as well as actual sales data from market transactions and/or foreclosed real estate sales. In the
case where an appraisal is greater than two years old for collateral dependent impaired loans and foreclosed real estate, it is the Companys policy to classify these as Level 3 within the fair value hierarchy; otherwise, they are classified as
Level 2. The average age of appraisals for Level 3 valuations of collateral dependent loans was 3.93 years as of June 30, 2010. Management periodically reviews the discounts in the matrix as compared to valuations from updated appraisals and
modifies the discounts should updated appraisals reflect valuations significantly different than those derived utilizing the matrix. To date, management believes the appraisal discount matrix has resulted in appropriate adjustments to existing
appraisals thereby providing management with reasonable valuations for the collateral underlying the loan portfolio. The following table presents the carrying amount (in thousands) for impaired loans and adjustments made to fair value during the
respective reporting periods.



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HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|               |  |                                           |         |                                                   |   |             |  |   |         |  |   |        |  |   |  
|-------------- |  | ----------------------------------------- | ------- | ------------------------------------------------- | - | ----------- |  | - | ------- |  | - | ------ |  | - | -
|Description    |  | Assets / LiabilitiesMeasured
atFair Value |         | Fair Value Measurements atJune 30, 2010 Using     |   | TotalLosses
|               |  | Level 1                                   |         | Level 2                                           |   | Level 3     | 
|               |  |                                           |         |                                                   |  
|Impaired loans |  | $                                         | 249,153 |                                                   | $ |            |  | $ | 219,159 |  | $ | 29,994 |  | $ | 
|               |  |                                           |        
|Description    |  | Assets / LiabilitiesMeasured
atFair Value |         | Fair Value Measurements atDecember 31, 2009 Using |   | TotalLosses
|               |  | Level 1                                   |         | Level 2                                           |   | Level 3     | 
|               |  |                                           |         |                                                   |  
|Impaired loans |  | $                                         | 240,044 |                                                   | $ |            |  | $ | 149,346 |  | $ | 90,698 |  | $ | 

Our nonfinancial assets
and nonfinancial liabilities that are recognized or disclosed at fair value on a nonrecurring basis relate to foreclosed real estate and repossessed assets and goodwill. The amounts below represent the carrying values (in thousands) for our
foreclosed real estate and repossessed assets and goodwill and impairment adjustments made to fair value during the respective reporting periods.



|                                              |  |                                            |        |                                                   |   |             |  |   |        |  |   |   |  |   |       
|--------------------------------------------- |  | ------------------------------------------ | ------ | ------------------------------------------------- | - | ----------- |  | - | ------ |  | - | - |  | - | ------
|Description                                   |  | Assets / LiabilitiesMeasured
atFair Value  |        | Fair Value Measurements atJune 30, 2010 Using     |   | TotalLosses
|                                              |  | Level 1                                    |        | Level 2                                           |   | Level 3     | 
|                                              |  |                                            |        |                                                   |  
|Foreclosed real estate and repossessed assets |  | $                                          | 30,307 |                                                   | $ |            |  | $ | 30,307 |  | $ |  |  | $ | 3,214 
|                                              |  |                                            |       
|Description                                   |  | Assets / 
LiabilitiesMeasured atFair Value |        | Fair Value Measurements atDecember 31, 2009 Using |   | TotalLosses
|                                              |  | Level 1                                    |        | Level 2                                           |   | Level 3     | 
|                                              |  |                                            |        |                                                   |  
|Foreclosed real estate and repossessed assets |  | $                                          | 8,867  |                                                   | $ |            |  | $ | 8,867  |  | $ |  |  | $ | 1,043 
|Goodwill                                      |  |                                            |       |                                                   |   |            |  |   |       |  |   |  |  |   | 84,837

The following describes the
valuation techniques used to measure fair value for our nonfinancial assets and liabilities classified as nonrecurring.

Foreclosed Real
Estate and Repossessed Assets. The adjustments to foreclosed real estate and repossessed assets are based primarily on appraisals of the real estate or other observable market prices. Our policy is that fair values for these assets are based on
current appraisals. In most cases, we maintain current appraisals for these items. Where we do not have a current appraisal, an existing appraisal would be utilized after discounting it to reflect current market conditions, and, as such, may include
significant management assumptions and input with the respect of the determination of fair value. As described above, we utilize a valuation matrix to assist in this process.

Goodwill. The adjustments to goodwill are made in accordance with ASC 320-20-35 and ASC 320-20-35-30 in which the prescribed two-step impairment
testing was performed on goodwill arising from mergers with SFC and GFH.

ASC 820 requires disclosure of fair value information about
financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate that value. It excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying fair value of the Company. The following methods and assumptions were used by the Company in estimating fair value for its financial instruments.



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HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | (a) | Cash and Cash Equivalents
| | --- | -------------------------

Cash and cash equivalents include cash and due from banks, overnight funds sold and due from FRB, and interest-bearing deposits in other
banks. The carrying amount approximates fair value.



| | (b) | Investment Securities Available for Sale
| | --- | ----------------------------------------

Fair values are based on published market prices where available. 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. Investment securities available for sale are carried at their aggregate fair value.



| | (c) | Loans Held for Sale
| | --- | -------------------

The
carrying value of loans held for sale is a reasonable estimate of fair value since loans are expected to be sold within a short period.



| | (d) | Loans
| | --- | -----

The fair value of
other loans is estimated by discounting the future cash flows using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.



| | (e) | Interest Receivable and Interest Payable
| | --- | ----------------------------------------

The carrying amount approximates fair value.



| | (f) | Bank-Owned Life Insurance
| | --- | -------------------------

The carrying amount approximates fair value.



| | (g) | Deposits
| | --- | --------

The fair values
disclosed for demand deposits (for example, interest and noninterest demand and savings accounts) are, by definition, equal to the amount payable on demand at the reporting date (this is, their carrying values). The carrying amounts of
variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies
market interest rates on comparable instruments to a schedule of aggregated expected monthly maturities on time deposits.



| | (h) | Borrowings
| | --- | ----------

The fair
value of borrowings is estimated using discounted cash flow analysis based on the interest rates currently offered for borrowings of similar remaining maturities and collateral requirements. These include other borrowings, overnight funds purchased,
and FHLB borrowings.



| | (i) | Commitments to Extend Credit and Standby Letters of Credit
| | --- | ----------------------------------------------------------

The only amounts recorded for commitments to extend credit and standby letters of credit are the deferred fees arising from these
unrecognized financial instruments. These deferred fees are not deemed significant at June 30, 2010 and December 31, 2009, and as such, the related fair values have not been estimated.

The estimated fair value (in thousands) of the Companys financial instruments required to be disclosed by ASC 825, Financial Instruments, at
June 30, 2010 and December 31, 2009 were as follows.



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HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                         |  |               |           |                   |   |               |  |           |           |  |   |          
|---------------------------------------- |  | ------------- | --------- | ----------------- | - | ------------- |  | --------- | --------- |  | - | ---------
|                                         |  | June 30, 2010 |           | December 31, 2009
|                                         |  | CarryingValue |           | FairValue         |   | CarryingValue |  | FairValue
|Assets:                                  |  |               |           |                   |   |               |  |           |           |  |   |          
|Cash and due from banks                  |  | $             | 18,813    |                   | $ | 18,813        |  | $         | 16,995    |  | $ | 16,995   
|Overnight funds sold and due from FRB    |  |               | 306,812   |                   |   | 306,812       |  |           | 139,228   |  |   | 139,228  
|Interest-bearing deposits in other banks |  |               | 1,255     |                   |   | 1,255         |  |           | 43,821    |  |   | 43,821   
|Investment securities available for sale |  |               | 175,282   |                   |   | 175,282       |  |           | 161,062   |  |   | 161,062  
|Loans held for sale                      |  |               | 27,734    |                   |   | 27,734        |  |           | 12,615    |  |   | 12,615   
|Loans, net                               |  |               | 2,078,711 |                   |   | 2,110,758     |  |           | 2,293,995 |  |   | 2,364,702
|Interest receivable                      |  |               | 7,749     |                   |   | 7,749         |  |           | 8,788     |  |   | 8,788    
|Bank-owned life insurance                |  |               | 49,179    |                   |   | 49,179        |  |           | 48,354    |  |   | 48,354   
|                                         |  |               |           |                  
|Liabilities:                             |  |               |           |                   |   |               |  |           |           |  |   |          
|Deposits                                 |  |               | 2,548,381 |                   |   | 2,561,476     |  |           | 2,495,040 |  |   | 2,486,449
|FHLB borrowings                          |  |               | 225,013   |                   |   | 237,835       |  |           | 228,215   |  |   | 233,356  
|Other borrowings                         |  |               | 49,553    |                   |   | 51,462        |  |           | 49,254    |  |   | 50,316   
|Interest payable                         |  |               | 3,658     |                   |   | 3,658         |  |           | 3,572     |  |   | 3,572    

NOTE N  TROUBLED ASSET
RELIEF PROGRAM (TARP)

On December 31, 2008, the Company entered into a Letter Agreement and Securities Purchase Agreement
(collectively, the Purchase Agreement) with the U.S. Treasury, pursuant to which the Company sold 80,347 shares of the Companys Fixed-Rate Cumulative Perpetual Preferred Stock, Series C, no par value per share, having a liquidation
preference of $1,000 per share (the Series C Preferred Stock) and a warrant (the Warrant) to purchase 1,325,858 shares of the Companys common stock, $0.625 par value per share (the Common Stock), at an
initial exercise price of $9.09 per share, subject to certain anti-dilution and other adjustments, for an aggregate purchase price of $80.3 million in cash. This preferred stock is redeemable at par plus accrued and unpaid dividends subject to the
approval of the Companys primary banking regulators. In the fourth quarter of 2009, the Company began to defer dividends on its Series C Preferred Stock.

The Warrant is immediately exercisable. The Warrant provides for the adjustment of the exercise price and the number of shares of Common Stock issuable
upon exercise pursuant to customary anti-dilution provisions, such as upon stock splits or distributions of securities or other assets to holders of Common Stock, and upon certain issues of Common Stock at or below a specified price relative to the
then-current market price of Common Stock. The Warrant expires ten years from the issuance date. Pursuant to the Purchase Agreement, the Treasury has agreed not to exercise voting power with respect to any shares of Common Stock issued upon exercise
of the Warrant.

The American Recovery and Reinvestment Act of 2009 (ARRA), enacted on February 17, 2009, imposes certain
executive compensation and corporate governance obligations on TARP recipients during the period of time any obligations arising from financial assistance provided under the TARP remains outstanding. The ARRA restricts golden parachute payments to
senior executive officers and the next five most highly compensated employees. It also prohibits paying and accruing bonuses for certain senior executive officers and employees, requires that TARP participants provide the recovery of any bonus or
incentive compensation paid to senior executive officers and the next 20 most highly compensated employees based on statements of earnings, revenues, gains, or other criteria later found to be materially inaccurate, and requires a review by the
Secretary of all bonuses and other compensation paid by TARP participants to certain senior executive officers and employees before the date of enactment of the ARRA to determine whether such payments were inconsistent with the purposes of ARRA.

The Treasury has consented to an exchange of its Series C Preferred Stock which would result in the issuance to the Treasury of 650 shares of
Common Stock valued at $0.40 per share for each such share of Series C Preferred



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HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Stock (the TARP Exchange), reflecting an exchange value of $260.00 per share of Series C preferred stock or 26% of its liquidation preference. Treasury has also agreed to adjust its
warrant to reduce the warrant exercise price to $0.40 per share but Treasury has agreed that it will not increase the number of shares subject to the warrant (as would be required under the original terms of the warrant).

NOTE O  NONINTEREST EXPENSE



|                                          |  |                            |        |                          |   |        |  |      |        |  |   |       
|----------------------------------------- |  | -------------------------- | ------ | ------------------------ | - | ------ |  | ---- | ------ |  | - | ------
|(in thousands)                            |  | Three Months EndedJune 30, |        | Six Months EndedJune 30,
|                                          |  | 2010                       |        | 2009                     |   | 2010   |  | 2009
|                                          |  |                            |        |                         
|Salaries and employee benefits            |  | $                          | 10,955 |                          | $ | 10,546 |  | $    | 20,705 |  | $ | 21,780
|Occupancy                                 |  |                            | 2,150  |                          |   | 2,266  |  |      | 4,448  |  |   | 4,280 
|Data processing                           |  |                            | 1,169  |                          |   | 1,295  |  |      | 2,649  |  |   | 2,493 
|Impairment of goodwill                    |  |                            |       |                          |   | 27,976 |  |      |       |  |   | 27,976
|FDIC insurance                            |  |                            | 1,169  |                          |   | 2,661  |  |      | 2,225  |  |   | 3,301 
|Equipment                                 |  |                            | 932    |                          |   | 1,361  |  |      | 2,023  |  |   | 2,295 
|Professional fees                         |  |                            | 1,227  |                          |   | 688    |  |      | 2,543  |  |   | 963   
|Problem loan and repossessed asset costs  |  |                            | 1,390  |                          |   | 96     |  |      | 2,003  |  |   | 160   
|Amortization of intangible assets         |  |                            | 442    |                          |   | 747    |  |      | 937    |  |   | 1,081 
|Bank franchise tax                        |  |                            | 439    |                          |   | 329    |  |      | 949    |  |   | 773   
|Telephone and postage                     |  |                            | 412    |                          |   | 477    |  |      | 803    |  |   | 917   
|Advertising and marketing                 |  |                            | 238    |                          |   | 64     |  |      | 386    |  |   | 207   
|Directors and regional board fees        |  |                            | 223    |                          |   | 298    |  |      | 360    |  |   | 582   
|Stationary, printing, and office supplies |  |                            | 148    |                          |   | 217    |  |      | 387    |  |   | 359   
|Other                                     |  |                            | 2,192  |                          |   | 1,309  |  |      | 3,617  |  |   | 3,011 
|                                          |  |                            |        |                          |   |        |  |      |        |  |   |       
|Total noninterest expense                 |  | $                          | 23,086 |                          | $ | 50,330 |  | $    | 44,035 |  | $ | 70,178
|                                          |  |                            |        |                          |   |        |  |      |        |  |   |       

NOTE P  SUBSEQUENT EVENTS

The Company established a valuation allowance against the deferred tax asset on its balance sheet as of December 31, 2009, which resulted in the
restatement of its financial statements for the fiscal year ended December 31, 2009 and the fiscal quarter ended March 31, 2010 (the Restatements). The Restatements were filed August 13, 2010.



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##### Table of Contents

LOGO

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

Hampton Roads Bankshares, Inc.

Norfolk,
Virginia

We have reviewed the accompanying consolidated balance sheet of Hampton Roads Bankshares, Inc. and subsidiaries as of June 30,
2010, the related consolidated statements of operations for the three-month and six-month periods ended June 30, 2010 and 2009, consolidated statement of changes in shareholders equity for the six-month period ended June 30, 2010 and
consolidated statements of cash flows for the six-month periods ended June 30, 2010 and 2009. These consolidated financial statements are the responsibility of the Companys management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying financial statements referred to above for
them to be in conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As discussed in Note B to the consolidated financial statements, quantitative measures established by regulation to ensure capital adequacy require the Company and its subsidiary
banks to maintain minimum amounts and ratios of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and Tier I capital (as defined) to average assets (as defined). The Company has suffered recurring losses
from operations and declining levels of capital that raise substantial doubt about the ability to continue as a going concern. The Company is in the process of implementing a capital plan, including receipt of definitive agreements for the purchase
of common shares that are contingent on certain shareholder approvals. Managements plans and the status of the capital raise are described in Note B. The financial statements do not include any adjustments that might result from the outcome of
this uncertainty.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board, the
consolidated balance sheet of Hampton Roads Bankshares, Inc. and subsidiaries as of December 31, 2009, and the related consolidated statements of operations, shareholders equity, and cash flows for the year then ended (not presented
herein); and in our report dated April 22, 2010, except for Notes 2 and 3, as to which the date is August 13, 2010, we expressed an unqualified opinion on those financial statements and included an explanatory paragraph concerning matters
that raise substantial doubt about the Companys ability to continue as a going concern. In our opinion, the information set forth in the accompanying balance sheet as of December 31, 2009, is fairly stated, in all material respects, in
relation to the balance sheet from which it has been derived.

LOGO

Winchester, Virginia

August 16, 2010



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##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS

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 involve various risks and uncertainties.

When or if used in this quarterly report or any Securities and Exchange Commission filings, 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 contained in our 2009 Form 10-K/A and this Form 10-Q, which are summarized below. Our risks include, without limitation, the following:



| |  |  | We incurred significant losses in 2009 and in the first half of 2010 and may continue to do so in the future, and we can make no assurances as to when
we will be profitable;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We may be unable to close on our previously announced capital raising transactions or carry out our recapitalization plan.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | We need to raise additional capital that may not be available to us;
| | - |  | --------------------------------------------------------------------



| |  |  | We have entered into a written agreement with the FRB and the Bureau of Financial Institutions, which requires us to dedicate a significant amount of
resources to complying with the agreement and may have a material adverse effect on our operations and the value of our securities.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | BOHR may be subject to additional regulatory restrictions or be placed in receivership in the event that its regulatory capital levels continue to
decline.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We may not be able to successfully increase our regulatory capital, which may adversely affect our results of operations and financial condition;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | BOHR is restricted from accepting brokered deposits and offering interest rates on deposits that are substantially higher than the prevailing rates in
our market;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We may become subject to additional regulatory restrictions in the event that our regulatory capital levels continue to decline;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | The uncertainty regarding our ability to continue as a going concern may affect our business relationships.
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | The company has restated its financial statements, which may have a future adverse affect.
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Our estimate for losses in our loan portfolio may be inadequate, which would cause our results of operations and financial condition to be adversely
affected;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have had and may continue to have large numbers of problem loans, which could increase our losses related to loans;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Our lack of eligibility to continue to use a short form registration statement on Form S-3 may affect our short-term ability to access the capital
markets;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We did not undergo a stress test under the Federal Reserves Supervisory Capital Assessment Program; our self-administered stress test
differed from the Supervisory Capital Assessment Program and the results of our test may be inaccurate;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have had significant turnover in our senior management team;
| | - |  | ---------------------------------------------------------------



| |  |  | Government regulation and regulatory actions against us may impair our operations or restrict our growth;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | If the value of real estate in our core market areas were to further decline materially, a significant portion of our loan portfolio could become
further under-collateralized;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our construction and land development, commercial real estate, and equity line lending may expose us to a greater risk of loss and hurt our earnings
and profitability;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our lending on vacant land may expose us to a greater risk of loss and may have an adverse effect on operations;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | Difficult market conditions may continue to adversely affect our industry;
| | - |  | --------------------------------------------------------------------------



| |  |  | A significant part of Gateways loan portfolio is unseasoned;
| | - |  | -------------------------------------------------------------



| |  |  | We are not paying dividends on our preferred stock or Common Stock and are deferring distributions on our Trust Preferred Securities, and we are
prevented in otherwise paying cash dividends on our Common Stock. The failure to resume paying dividends on our Series C Preferred Stock and Trust Preferred Securities may adversely affect us;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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PART I. FINANCIAL INFORMATION

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS



| |  |  | Our ability to maintain adequate sources of funding and liquidity may be negatively impacted by the current economic environment which may, among other
things, impact our ability to pay dividends or satisfy our obligations;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The current economic environment may continue to negatively impact our financial condition, required capital levels or otherwise negatively impact our
financial condition, which may, among other things, limit our access to certain sources of funding and liquidity;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We may face increasing deposit-pricing pressures, which may, among other things, reduce our profitability;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | We may incur additional losses if we are unable to successfully manage interest rate risk;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Certain built-in losses could be limited if we experience an ownership change as defined in the Internal Revenue Code;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | A substantial decline in the value of our equity investments including our FHLB Common Stock may result in an other-than-temporary impairment charge;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our future success is dependent on our ability to compete effectively in the highly competitive banking industry;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | Our operations and customers might be affected by the occurrence of a natural disaster or other catastrophic event in our market area;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We face a variety of threats from technology-based frauds and scams;
| | - |  | --------------------------------------------------------------------



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



| |  |  | Our directors and officers have significant voting power;
| | - |  | ---------------------------------------------------------



| |  |  | We may be unable to recruit, motivate, and retain qualified employees;
| | - |  | ----------------------------------------------------------------------



| |  |  | Current levels of market volatility are unprecedented;
| | - |  | ------------------------------------------------------



| |  |  | The Company has issued three series of preferred stock that have rights that are senior to those of its common shareholders;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | Because of our participation in TARP, we are subject to several restrictions including restrictions on compensation paid to our executives;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Because of our financial condition and the compensation restrictions due to our participation in TARP, we have had and may continue to have
difficulties recruiting and retaining qualified employees;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our business, financial condition, and results of operations are highly regulated and could be adversely affected by new or changed regulations and by
the manner in which such regulations are applied by regulatory authorities;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Current and future increases in FDIC insurance premiums, including the FDIC special assessment imposed on all FDIC-insured institutions, will decrease
our earnings. In addition, FDIC insurance assessments for BOHR will likely increase from not maintaining a well capitalized status, which would further decrease earnings;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | The fiscal, monetary, and regulatory policies of the Federal Government and its agencies could have a material adverse effect on our results of
operations;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | There can be no assurance that recently enacted legislation will stabilize the U.S. financial system;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | The impact on us of recently enacted legislation, in particular Emergency Economic Stabilization Act of 2008 (EESA) and ARRA and their
implementing regulations, and actions by the FDIC, cannot be predicted at this time; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The soundness of other financial institutions could adversely affect us.
| | - |  | ------------------------------------------------------------------------

Our forward-looking statements could be incorrect 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. We have no obligation to publicly update or revise our forward-looking statements after the date of this quarterly report and you should not expect us to do so.



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PART I. FINANCIAL INFORMATION

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS



Overview

Throughout 2009 and into the first half of 2010, economic conditions in the markets in which our borrowers operate continued to deteriorate and the levels
of loan delinquency and defaults that we experienced were substantially higher than historical levels. Our loan customers continue to operate in an economically stressed environment. The Company reported a net loss for the six-month period ended
June 30, 2010, primarily as a result of a significant increase to our provision for loan losses.

As of June 30, 2010, we believe
Shore remained well capitalized under applicable banking regulations while BOHR was significantly undercapitalized and the consolidated Company was critically undercapitalized. The Company continues to evaluate
additional capital management strategies, including infusions of additional capital, with the intention of enabling it and BOHR to return to well capitalized status.

Our primary source of revenue is net interest income earned by our bank subsidiaries. Net interest income represents interest and fees earned from
lending and investment activities, less the interest paid on deposits and borrowings. Net interest income may be impacted by variations in the volume and mix of interest-earning assets and interest-bearing liabilities, changes in the yields earned
and the rates paid, level of non-performing interest-earning assets, and the level of noninterest-bearing liabilities available to support earning assets. Our net interest income was negatively impacted by increasing levels of non-performing loans.
In addition to net interest income, noninterest income is another important source of revenue. Noninterest income is derived primarily from service charges on deposits and fees earned from bank services, investment, mortgage, and insurance
activities. Other factors that impact net income are the provision for loan losses, noninterest expense, and the provision for income taxes.

The following is a summary of our condition as of June 30, 2010 and our financial performance for the three and six month period then ended.



| |  |  | Assets were $2.9 billion. They decreased by $42.4 million or 1% for the first six months of 2010 from December 31, 2009. This was primarily the
result of a decrease in average loans of 15% during that period.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Investment securities available for sale increased $14.2 million to $175.3 million for the first six months of 2010. The increase was driven by the
reinvestment of the funds obtained from deposit growth and the decline in our loan portfolio.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Loans decreased by $174.8 million or 7% for the six months ended June 30, 2010 as loan paydowns and charge-offs exceeded the volume of new
originations. New loan activity continues to be low as a result of our tighter underwriting criteria and economic conditions.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Deposits increased $53.3 million or 2% as new customer deposit activity more than offset the decline in brokered deposits.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | Net loss available to common shareholders for the three and six months ended June 30, 2010 was $54.1 million or $2.44 per common diluted share and
$94.6 million or $4.27 per common diluted share, respectively, as compared with net loss available to common shareholders of $46.2 million or $2.13 per common diluted share and $41.8 million or $1.92 per common diluted share for the three and six
months, respectively, ended June 30, 2009. The net loss for 2010 was primarily attributable to provision for loan losses expense of $100.3 million.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Net interest income decreased $8.2 million and $12.3 million for the three and six months, respectively, ended June 30, 2010 as compared to the
same period 2009. This was primarily the result of the decrease in interest income from loans.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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PART I. FINANCIAL INFORMATION

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS



| |  |  | Noninterest income for the three and six months ended June 30, 2010 was $5.3 million and $10.9 million, respectively, a 6% and 10% decrease over
the comparative periods in 2009. An increase in mortgage banking revenue partially offset this decrease.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Noninterest expense was $23.1 million and $44.0 million for the three and six months ended June 30, 2010, which was a decrease of $27.3 million or
54% and a decrease of $26.1 million or 37% over the comparable periods for 2009. In second quarter 2009, we had a $28.0 million impairment to our goodwill.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Critical Accounting Policies

GAAP
requires 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 and the accompanying footnotes. Actual results, in fact, could differ from those estimates. We consider our policies on allowance for loan losses, deferred income taxes, and estimates of fair value on financial instruments to be
critical accounting policies. Refer to our 2009 Form 10-K for further discussion of these policies.

Material Trends

The global and U.S. economies have experienced a protracted slowdown in business activity, including high levels of unemployment, resulting in a lack of
confidence in the worldwide credit markets and in the financial system. Currently, the U.S. economy appears to be slowly recovering from one of its longest economic recessions in recent history. It is not clear at this time how quickly the economy
will recover and whether regulatory and legislative efforts to stimulate job growth and spending will be successful.

We experienced a
significant deterioration in credit quality in 2009 that continues into 2010. Problem loans and non-performing assets rose and led us to significantly increase the allowance for loan losses. To bolster our allowance, we increased the provision for
loan losses to $100.3 million in the first half of 2010 from $34.9 million in the first half of 2009. The increased expense contributed to a net loss available to common shareholders of $94.6 million for the first half of 2010. In light of continued
economic weakness, problem credits may continue to rise and significant additional provisions for loan losses may be necessary to supplement the allowance for loan losses in the future. As a result, we may incur significant credit costs throughout
2010, which would continue to adversely impact our financial condition, our results of operations, and the value of our common stock.

The
Company determined that a valuation allowance on its deferred tax assets should be recognized as of December 31, 2009. The Company decided to establish a valuation allowance against the deferred tax asset because it is uncertain when it will
realize this asset.

ANALYSIS OF FINANCIAL CONDITION

Cash and Cash Equivalents. Cash and cash equivalents includes cash and due from banks, interest-bearing deposits in other banks, and
overnight funds sold and due from the FRB. Cash and cash equivalents are used for daily cash management purposes, management of short-term interest rate opportunities, and liquidity. Cash and cash equivalents as of June 30, 2010 were $326.9
million and consisted mainly of deposits with the FHLB and the FRB. These deposits increased $126.9 million in the first half of 2010, from $200.0 million at December 31, 2009.

Securities. Our investment portfolio consists primarily of available-for-sale U.S. Agency mortgage-backed securities. Our
available-for-sale securities are reported at estimated fair value. They are used primarily for liquidity, pledging,



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PART I. FINANCIAL INFORMATION

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS



earnings, and asset/liability management purposes and are reviewed quarterly for possible impairment. The mortgage-backed securities consisted of Government National Mortgage Association
pass-through securities or collateralized mortgage obligations.

At June 30, 2010, the estimated fair value of our investment securities
was $175.3 million, an increase of $14.2 million or 9% from $161.1 million at December 31, 2009. The increase during first six months of 2010 was driven by the reinvestment of loan paydowns and the increase in deposits. Our investment portfolio
was restructured during late 2009 to increase regulatory capital ratios by selling high risk-weighted securities and reinvesting the proceeds into lower risk-weighted securities.

Loan Portfolio. Our loan portfolio is comprised of commercial, construction, real estate-commercial mortgage, real estate-residential
mortgage, and installment loans to individuals. Lending decisions are based upon an evaluation of the repaying capacity, financial strength, and credit history of the borrower, the quality and value of the collateral securing each loan, and the
financial strength of guarantors. With few exceptions, personal guarantees are required on loans. Our loan portfolio decreased $174.8 million or 7% to $2.3 billion as of June 30, 2010 compared to December 31, 2009. Commercial loans
decreased 8% to $330.7 million at June 30, 2010 compared with $361.3 million at December 31, 2009. Real estate commercial mortgages decreased 4% to $709.4 million at June 30, 2010 compared to $740.6 million at December 31, 2009.
Real estate residential mortgages decreased $1.5 million to $523.4 million at June 30, 2010 as compared with $524.9 million at December 31, 2009. Installment loans to individuals decreased 17% to $35.7 million at June 30, 2010
compared with $42.9 million at December 31, 2009. Construction loans also decreased 14% to $653.2 million at June 30, 2010 as compared with $757.7 million at December 31, 2009, thus lowering the concentration of construction loans to
29% of the total loan portfolio at June 30, 2010 compared with 31% at December 31, 2009.

Within the construction segment of the
loan portfolio, BOHR has exposure to $70.1 million of loans in which interest payments are satisfied through the use of a reserve that was funded by BOHR upon origination and represents a portion of the borrowers total liability to
BOHR. In the instance of commercial construction, ultimate repayment is dependent upon stabilization of the funded project; whereas, in residential development, BOHR is assigned a certain percentage of each sale to retire a commensurate portion
of the outstanding debt. Each interest reserve transaction is monitored by the account officer, a senior credit officer, and credit administration to verify the continuation of project viability as it relates to remaining interest reserve and
additional financial capacity of the project sponsor. In certain instances, where either or both criteria have been deemed unsatisfactory, the borrowers access to any remaining interest reserve has been curtailed on at least a temporary
basis until the BOHRs special assets department has been engaged to further evaluate possible resolutions.

We have a high concentration
of construction and real estate, both commercial and residential, loans. Construction loans are made to individuals and businesses for the purpose of construction of single family residential properties, multi-family properties, and commercial
projects such as the development of residential neighborhoods and commercial office parks. Risk is reduced on these loans by limiting lending for speculative building of both residential and commercial properties based upon the borrowers
history with us, financial strength, and the loan-to-value ratio of such speculative property. We generally require new and renewed variable-rate commercial loans to have interest rate floors. Residential loans represent smaller dollar loans to more
customers, and therefore, have lower credit risk than other types of loans. The majority of our fixed-rate residential mortgage loans, which represent increased interest rate risk, are sold in the secondary market, as well as some variable rate
mortgage loans. The remainder of the variable-rate mortgage loans and a small number of fixed-rate mortgage loans are retained.

Allowance for Loan Losses. The purpose of the allowance for loan losses is to provide for potential losses inherent in our loan portfolio.
Management regularly reviews our loan portfolio to determine whether adjustments are necessary. Our review takes into consideration changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans,
and review of current economic conditions that may affect the borrowers ability to repay. In addition to the review of credit quality through ongoing credit review processes, we construct a comprehensive allowance analysis for our loan
portfolio at least quarterly. This allowance includes specific allowances for individual loans; general allowance for loan pools, which factor in our historical loan loss experience, loan portfolio growth and trends, and economic conditions; and
unallocated allowances predicated upon both internal and external factors.



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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS



The allowance for loan losses was $173.2 million or 7.69% of outstanding loans as of June 30, 2010
compared with $132.7 million or 5.47% of outstanding loans as of December 31, 2009. We increased the allowance for loan losses $40.5 million (net of charge-offs and recoveries) during the first six months of 2010. Pooled loan allocations
increased to $52.1 million at June 30, 2010 from $34.1 million at December 31, 2009. Allowance coverage for the non-impaired portfolio is determined using a methodology that incorporates historical loss rates and risk ratings by loan
category. Loss rates are based on a three-year weighted average with recent period loss rates weighted more heavily. We then apply an adjustment factor to each loss rate based on assessments of loss trends, collateral values, and economic and
business influences impacting expected losses. During the quarter, the weighted historical loss rates for most loan categories increased due to recent charge-off activity. Qualitative adjustment factors for most loan categories decreased due to
analyses of nonaccrual loan trends and other factors and reflect managements view that charge-offs used to calculate pooled reserves better reflect expected loss experience. In addition, based on third party review, management believes the
quality of its risk rating system has improved and requires less qualitative adjustment. The effect of these changes was an increase in the loss factors for most loan types and an increase in pooled loan allocations. Specific loan allocations
increased $24.2 million to $115.7 million at June 30, 2010 from $91.5 million at December 31, 2009. Specific loan allocations increased due to a decrease in collateral values of certain collateral dependent loans and due to the estimated
losses of new impaired loans. Unallocated allowances decreased $1.8 million. The following table provides a breakdown of the allowance for loan losses and other related information (in thousands) at June 30, 2010 and December 31, 2009.



|                                            |  |              |           |   |                  |   |           |  
|------------------------------------------- |  | ------------ | --------- | - | ---------------- | - | --------- | -
|                                            |  | June 30,2010 |           |   | December 31,2009 |  
|                                            |  |             
|Allowance for loan losses:                  |  |              |           |   |                  |   |           |  
|Pooled component                            |  | $            | 52,100    |   |                  | $ | 34,050    |  
|Specific component                          |  |              | 115,730   |   |                  |   | 91,488    |  
|Unallocated component                       |  |              | 5,396     |   |                  |   | 7,159     |  
|                                            |  |              |           |   |                  |   |           |  
|Total                                       |  | $            | 173,226   |   |                  | $ | 132,697   |  
|                                            |  |              |           |   |                  |   |           |  
|                                            |  |             
|Impaired loans                              |  | $            | 473,142   |   |                  | $ | 469,068   |  
|Non-impaired loans                          |  |              | 1,778,795 |   |                  |   | 1,957,624 |  
|                                            |  |              |           |   |                  |   |           |  
|Total loans                                 |  | $            | 2,251,937 |   |                  | $ | 2,426,692 |  
|                                            |  |              |           |   |                  |   |           |  
|                                            |  |             
|Pooled component as % of non-impaired loans |  |              | 2.93      | % |                  |   | 1.74      | %
|Specific component as % of impaired loans   |  |              | 24.46     | % |                  |   | 19.50     | %
|                                            |  |             
|Allowance as of % of loans                  |  |              | 7.69      | % |                  |   | 5.47      | %
|Allowance as of % of nonaccrual loans       |  |              | 56.68     | % |                  |   | 53.44     | %

The specific allowance for loan losses
necessary for impaired loans is based on a loan-by-loan analysis and varies between impaired loans largely due to the level of collateral. Additionally, pooled loan allocations vary depending on a number of assumptions and trends. As a result, the
ratio of allowance for loan losses to nonaccrual loans is not sufficient for measuring the adequacy of the allowance for loan losses. The following table provides additional ratios that measure our allowance for loan losses.



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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS



|                                                                                                             |  |               |   |  |                   |  
|------------------------------------------------------------------------------------------------------------ |  | ------------- | - |  | ----------------- | -
|                                                                                                             |  | June 30, 2010 |   |  | December 31, 2009 |  
|Non-performing loans for which full loss has been charged off to total loans                                 |  | 2.08          | % |  | 0.91              | %
|                                                                                                             |  |              
|Non-performing loans for which full loss has been charged off to non-performing loans                        |  | 15.36         | % |  | 8.91              | %
|                                                                                                             |  |              
|Charge off rate for nonperforming loans which the full loss has been charged off                             |  | 43.83         | % |  | 42.46             | %
|                                                                                                             |  |              
|Coverage ratio net of nonperforming loans for which the full loss has been charged off                       |  | 66.97         | % |  | 58.67             | %
|                                                                                                             |  |              
|Total allowance divided by total loans less nonperforming loans for which the full loss has been charged off |  | 7.86          | % |  | 5.52              | %
|                                                                                                             |  |              
|Allowance for individually impaired loans divided by impaired loans for which an allowance has been provided |  | 31.68         | % |  | 27.60             | %

A loan is considered impaired
when it is probable that all amounts due will not be collected according to the contractual terms. Subsequent recoveries, if any, are credited to the allowance. Impairment is evaluated in the aggregate for smaller balance loans of similar nature and
on an individual loan basis for other loans. If a loan is considered impaired, it is measured based on the present value of expected future cash flows discounted at the loans effective interest rate or at the loans observable market
price or the fair value of the collateral if the loan is collateral dependent. Total impaired loans were $473.1 million at June 30, 2010, an increase of $4.1 million or 1% over December 31, 2009. Of these loans, $305.6 million were on
nonaccrual status at June 30, 2010. Net charge-offs were $59.7 million for the six months ended June 30, 2010 as compared with $1.6 million for the six months ended June 30, 2009.

Non-Performing Assets.Non-performing assets as a percentage of total assets increased to 12% at June 30, 2010 from 9% at
December 31, 2009 and March 31, 2010. Total nonaccrual loans aggregated $305.6 million at June 30, 2010 as compared with $248.3 million at December 31, 2009.

The following chart summarizes our nonaccrual loans by loan type as of June 30, 2010 and December 31, 2009 (in thousands).



|                                   |  |               |         |                   |   |        
|---------------------------------- |  | ------------- | ------- | ----------------- | - | -------
|                                   |  | June 30, 2010 |         | December 31, 2009
|                                   |  |              
|Commercial                         |  | $             | 34,794  |                   | $ | 24,803 
|Construction                       |  |               | 167,530 |                   |   | 150,325
|Real estate - commercial mortgage  |  |               | 71,938  |                   |   | 50,858 
|Real estate - residential mortgage |  |               | 30,867  |                   |   | 22,146 
|Installment loans (to individuals) |  |               | 480     |                   |   | 171    
|                                   |  |               |         |                   |   |        
|                                   |  |              
|Total nonaccrual loans             |  | $             | 305,609 |                   | $ | 248,303
|                                   |  |               |         |                   |   |        

Loans Acquired with Deteriorated Credit Quality.Loans
acquired with evidence of credit quality deterioration since origination and for which it is probable at purchase that we will be unable to collect all contractually required payments are accounted for under ASC 310-30, Receivables  Loans
and Debt Securities Acquired with Deteriorated Credit Quality. Evidence of credit quality deterioration as of the purchase date may include statistics such as past due status and refreshed borrower credit scores, some of which were not
immediately available as of the purchase date. ASC 310-30 addresses accounting for differences between contractual and expected cash flows to be collected from our initial investment in loans if those differences are attributable, at least in part,
to credit quality. ASC 310-30 requires that acquired impaired loans be recorded at fair value and prohibits carrying over or the creation of valuation allowances in the initial accounting for loans acquired that are within the scope of
ASC 310-30.



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In accordance with ASC 310-30, certain acquired loans of GFH that were considered impaired were written
down to fair value at the acquisition date. As of June 30, 2010, the carrying value of these loans was $61.2 million and the unpaid principal balance on these loans was $67.4 million. ASC 310-30 does not apply to loans GFH previously
securitized as they are not held on our balance sheet. During 2009 and into 2010, the ASC 310-30 portfolio experienced further credit deterioration due to weakness in the housing markets and the impacts of a slowing economy. For further information
regarding loans accounted for in accordance with ASC 310-30, see Note E, Accounting for Certain Loans Acquired in a Transfer, of the Notes to the Consolidated Financial Statements.

Deposits.Deposits are the primary source of funding for the Company. Total deposits at June 30, 2010 increased $53.3 million
or 2% to $2.5 billion as compared with December 31, 2009. Total brokered deposits were $205.8 million or 8% of deposits at June 30, 2010, which was a decrease of $180.6 million from the total brokered deposits of $386.4 million at
December 31, 2009.

Changes in the deposit categories include an increase of $420 thousand or 0.17% in noninterest-bearing demand
deposits, a decrease of $45.6 million or 5% in interest-bearing demand deposits, and a decrease of $7.0 million or 8% in savings accounts from December 31, 2009 to June 30, 2010. Interest-bearing demand deposits included $18.2 million
brokered money market funds at June 30, 2010, which was $29.4 million lower than the balance of brokered money market funds outstanding at December 31, 2009. Therefore, core bank interest-bearing demand deposits increased by $16.2 million
over the last six months. Of this increase $17.1 million was related to a decrease in our NOW accounts; this was offset by a $19.1 million increase in MMDA accounts. Total time deposits under $100 thousand decreased $120.8 million from $889.8
million at December 31, 2009 to $769.0 million at June 30, 2010. Brokered CDs represented $205.8 million, which was a decrease of $133.0 million over the $338.8 million of brokered CDs outstanding at December 31, 2009. Therefore, core
bank CDs increased $12.2 million over the last six months. Time deposits over $100 thousand increased $226.4 million from $356.8 million at December 31, 2009 to $583.2 million at June 30, 2010. Going forward, management intends to focus on
core deposit growth as our primary source of funding.

Borrowings. We use short-term and long-term borrowings from various
sources including the FHLB, funds purchased from correspondent banks, reserve repurchase accounts, and trust preferred securities. Our FHLB borrowings on June 30, 2010 were $225.0 million compared to $228.2 million at December 31, 2009.

Capital Resources. Total shareholders equity decreased $90.8 million or 73% to $34.2 million at June 30, 2010
compared to $125.0 million at December 31, 2009. The decrease in shareholders equity was primarily a result of the $91.8 million net loss for the six months ended June 30, 2010 and accrual of Series C Preferred dividends (including
amortization of preferred stock discount) of approximately $2.8 million.

During 2009, we paid two quarterly cash dividends of $0.11 per share
on our common stock to shareholders of record as of February 27, 2009 and May 15, 2009. To preserve capital, on July 30, 2009 the Board of Directors voted to suspend the quarterly dividend on the Companys common stock. Our
ability to distribute cash dividends in the future may be limited by regulatory restrictions and the need to maintain sufficient consolidated capital.

We have taken additional actions to preserve capital. On October 30, 2009, we announced suspension of dividend payments on our Series A and B
Preferred Stock. We notified the U.S. Department of the Treasury (Treasury) of our intent to defer the third consecutive quarterly cash dividend on our Series C Preferred Stock issued to the Treasury in connection with our participation
in the TARP CPP. The total amount deferred as of June 30, 2010 was $3.0 million.

In January 2010, the Company exercised its right to
defer all quarterly distributions on the trust preferred securities (in thousands) it assumed in connection with its merger with GFH (collectively, the Trust Preferred Securities), which are identified below.



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PART I. FINANCIAL INFORMATION

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS



|                                    |  |                      |        |              |               |                       |                    |                     |                   
|----------------------------------- |  | -------------------- | ------ | ------------ | ------------- | --------------------- | ------------------ | ------------------- | ------------------
|                                    |  | Amount(in thousands) |        | InterestRate |               | RedeemableOn Or After |                    | MandatoryRedemption
|                                    |  |                      |        |             
|Gateway Capital Statutory Trust I   |  | $                    | 8,000  |              | LIBOR + 3.10% |                       | September 17, 2008 |                     | September 17, 2033
|Gateway Capital Statutory Trust II  |  |                      | 7,000  |              | LIBOR + 2.65% |                       | July 17, 2009      |                     | June 17, 2034     
|Gateway Capital Statutory Trust III |  |                      | 15,000 |              | LIBOR + 1.50% |                       | May 30, 2011       |                     | May 30, 2036      
|Gateway Capital Statutory Trust IV  |  |                      | 25,000 |              | LIBOR + 1.55% |                       | July 30, 2012      |                     | July 30, 2037     

Interest payable under the
Trust Preferred Securities continues to accrue during the deferral period and interest on the deferred interest also accrues, both of which must be paid at the end of the deferral period and totaled $737 thousand at June 30, 2010. Prior to the
expiration of the deferral period, the Company has the right to further defer interest payments, provided that no deferral period, together with all prior deferrals, exceeds 20 consecutive quarters and that no event of default (as defined by the
terms of the applicable Trust Preferred Securities) has occurred and is continuing at the time of the deferral. The Company was not in default with respect to the terms of the Trust Preferred Securities at the time the quarterly payments were
deferred and such deferrals did not cause an event of default under the terms of the Trust Preferred Securities.

On May 23, 2010, the
Company and affiliates of The Carlyle Group, Anchorage Advisors, L.L.C., CapGen Financial Group, and other financial institutions entered into binding agreements (the Investment Agreements) to purchase common stock of the Company, par
value $0.625 (Common Stock), as part of an expected aggregate $255 million capital raise by the Company from institutional investors in a private placement.

Prior to the Closing, the Company is required to conduct exchange offers for each outstanding share of Series A and Series B Preferred Stock for Common
Stock (collectively, the Exchange Offers) pursuant to which each share of Series A and B Preferred Stock will be exchanged for 375 shares of Common Stock (reflecting an exchange value of $150.00 per share or 15% of its liquidation
preference and a conversion price of $0.40 per share).

The exchange or conversion of the shares of Series A and Series B Preferred Stock is
required by the Investment Agreements. The Investment Agreements require either conversion of 100% of the shares or conversion of a majority of the shares and the amendment to the designations of the Series A and Series B Preferred Stock to, among
other things, make it mandatorily convertible at the Companys option into Common Stock. Holders of Series A and Series B Preferred Stock tendering it he Exchange Offers will be required to vote for amendments to the Series A and / or Series B
Preferred Stock (the Preferred Stock Amendments), as applicable. Among other things, the Preferred Stock Amendments will eliminate all dividend rights, reduce the liquidation preference from $1,000 to $100 per share, and, at the option
of the Company, provide for the mandatory conversion at the Companys option of all Series A and Series B Preferred Stock not voluntarily exchanged in the Exchange Offers. The Preferred Stock Amendments require approval by a majority of the
common shareholders as well as a majority of the holders of Series A and Series B Preferred Stock.

The Investment Agreements also require
that following the closing, the Company will commence a rights offering providing holders of Common Stock with a non-transferable right to purchase newly issued shares of Common Stock at $0.40 per share, the same price paid by the Investors and
Treasury. The rights offering is expected to raise an additional $20-$40 million.



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HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS



We are subject to regulatory risk-based capital guidelines that measure capital relative to
risk-weighted assets and off-balance sheet financial instruments. Tier I capital is comprised of shareholders equity, net of unrealized gains or losses on available-for-sale securities, less intangible assets, while total risk-based capital
adds certain debt instruments and qualifying allowances for loan losses. As of June 30, 2010, our consolidated regulatory capital ratios are Tier 1 Leverage Ratio of 1.05%, Tier 1 Risk-Based Capital Ratio of 1.52%, and Total Risk-Based Capital
of 2.86%.

As of June 30, 2010, we believe Shore remained well capitalized under applicable banking regulations while BOHR
was significantly undercapitalized and the consolidated Company was critically undercapitalized. Although there can be no assurance that we will be successful, the Board and management are continuing to explore options for
raising additional capital and improving the capital adequacy of the Company and BOHR. BOHR could become critically undercapitalized if the Companys expected capital raising transactions do not close by September 30, 2010.

Off-Balance Sheet Arrangements. We are a party to financial instruments with off-balance sheet risk in the normal course of business to
meet our customers financing needs. For more information on our off-balance sheet arrangements, see Note 15, Financial Instruments with Off-Balance-Sheet Risk, of the Notes to Consolidated Financial Statements contained in the 2009 Form
10-K.

Contractual Obligations.Our contractual obligations consist of time deposits, borrowings, and operating lease
obligations. There have not been any significant changes in our contractual obligations from those disclosed in the 2009 Form 10-K.

ANALYSIS OF RESULTS OF OPERATIONS

Overview.Our net loss available to common shareholders for the three months ended June 30, 2010 was $54.0 million as compared with net
loss available to common shareholders of $46.2 million for the three months ended June 30, 2009. During the first six months of 2010, we incurred a net loss available to common shareholders of $94.6 million, compared to the net loss available
to common shareholders of $41.8 million for the first six months of 2009. The loss for the six months ended June 30, 2010 was driven by provision for loan losses expense of $100.3 million necessary to maintain the allowance for loan losses at a
level necessary to cover expected losses inherent in the loan portfolio. Diluted loss per common share was $2.44 and $4.27 for the three and six months ended June 30, 2010, an increased loss of $0.31 and $2.35 over the diluted loss per common
share of $2.13 and $1.92 for the three and six months, respectively, ended June 30, 2009.

Net Interest Income. Net
interest income, a major component of our earnings, is the difference between the income generated by interest-earning assets reduced by the cost of interest-bearing liabilities. Net interest income for the three months ended June 30, 2010 was
$17.7 million, a decrease of $8.2 million from the three months ended June 30, 2009. Net interest income for the six months ended June 30, 2010 was $39.6 million, a decrease of $12.3 million from the six months ended June 30, 2009.
The decrease in net interest income was primarily the result of a decrease in interest income from loans of $13.5 million for the six months ended June 30, 2009 compared to the six months ended June 30, 2010 and an increase in nonaccrual
loans. The net interest margin, which is calculated by expressing annualized net interest income as a percentage of average interest-earning assets, is an indicator of effectiveness in generating income from earning assets. Our net interest margin
decreased to 3.16% for the first six months ended June 30, 2010 from 3.75% during the first six months of 2009. The net interest margin was 2.84% for the three months ended June 30, 2010 compared to 3.39% and 3.71% for the three months
ended March 31, 2010 and June 30, 2009, respectively. The decline in net interest margin from prior periods is due primarily to increased levels of nonaccrual loans, an increase in low yielding balances at the FRB during the first quarter
of 2010, and the effect of purchase accounting adjustments.

Our interest-earning assets consist of loans, investment securities, overnight
funds sold and due from FRB, and interest-bearing deposits in other banks. Interest income on loans, including fees, decreased $8.0 million and $13.5 million to $28.2 million and $60.4 million for the three and six months, respectively, ended
June 30, 2010, as compared to the same time periods during 2009. This decrease was a result of a decrease in average loan balances and an increase in nonaccrual loans. Interest income on investment securities increased $144 thousand and $81



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HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS



thousand for the three and six months, respectively, ended June 30, 2010 compared to the same time period during 2009. Interest income on interest-bearing deposits in other banks decreased
$5 thousand and $11 thousand for the three and six month periods, respectively, ended June 30, 2010 compared to the same time period during 2009. Interest income on overnight funds sold and due from FRB increased $140 thousand and $254 thousand
for the three and six months, respectively, ended June 30, 2010 compared to the same time period during 2009.

Our interest-bearing
liabilities consist of deposit accounts and borrowings. Interest expense on deposits increased $1.1 million and $914 thousand to $10.2 million and $20.3 million for the three and six months, respectively, ended June 30, 2010 compared to the
same time periods during 2009. This increase resulted from a $299.5 million increase in average interest-bearing deposits, offset by a 17 basis point decrease in the average interest rate on deposits for the six months ended June 30, 2010
compared to the six months ended June 30, 2009. This decrease in our average deposit rates resulted in large part from declining rates on certificates of deposits and savings deposits. A reduction of our average rate on time deposits to 1.93%
for the first half of 2010 from 2.49% for the first half of 2009 contributed significantly toward the decrease in overall deposit rates. Interest expense on borrowings, which consisted of FHLB borrowings, other borrowings, and overnight funds
purchased decreased $621 thousand and $1.7 million for the three and six months, respectively, ended June 30, 2010 compared to the same time periods during 2009. The $200.7 million decrease in the six month average borrowings netted against a
57 basis point increase in the average interest rate on borrowings produced this result.

The tables below present 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 three months ended June 30, 2010, March 31, 2010, and
June 30, 2009 and six months ended June 30, 2010 and 2009.



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HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS



|                                           |  |                                 |           |                                  |                                  |                   |  |                                 |                |  |                                  |           |                   |   |         |                |      |                                  |  |                   |           |  |   |         |  |      |  
|------------------------------------------ |  | ------------------------------- | --------- | -------------------------------- | -------------------------------- | ----------------- |  | ------------------------------- | -------------- |  | -------------------------------- | --------- | ----------------- | - | ------- | -------------- | ---- | -------------------------------- |  | ----------------- | --------- |  | - | ------- |  | ---- | -
|                                           |  | Three Months EndedJune 30, 2010 |           |                                  | Three Months EndedMarch 31, 2010 |                   |  | Three Months EndedJune 30, 2009 |               
|(in thousands)                             |  | AverageBalance                  |           | AnnualizedInterestIncome/Expense |                                  | AverageYield/Rate |  |                                 | AverageBalance |  | AnnualizedInterestIncome/Expense |           | AverageYield/Rate |   |         | AverageBalance |      | AnnualizedInterestIncome/Expense |  | AverageYield/Rate |          
|                                           |  |                                 |           |                                  |                                  |                   |  |                                 |               
|Assets:                                    |  |                                 |           |                                  |                                  |                   |  |                                 |                |  |                                  |           |                   |   |         |                |      |                                  |  |                   |           |  |   |         |  |      |  
|Interest-earning assets                    |  |                                 |           |                                  |                                  |                   |  |                                 |                |  |                                  |           |                   |   |         |                |      |                                  |  |                   |           |  |   |         |  |      |  
|Loans                                      |  | $                               | 2,005,022 |                                  | $                                | 112,981           |  | 5.63                            | %              |  | $                                | 2,173,606 |                   | $ | 130,809 |                | 6.02 | %                                |  | $                 | 2,609,810 |  | $ | 144,999 |  | 5.56 | %
|Investment securities                      |  |                                 | 204,998   |                                  |                                  | 6,838             |  | 3.34                            | %              |  |                                  | 206,203   |                   |   | 6,964   |                | 3.38 | %                                |  |                   | 159,740   |  |   | 6,260   |  | 3.92 | %
|Interest-bearing deposits in other banks   |  |                                 | 54,877    |                                  |                                  | 133               |  | 0.24                            | %              |  |                                  | 48,178    |                   |   | 117     |                | 0.24 | %                                |  |                   | 11,229    |  |   | 20      |  | 0.18 | %
|Overnight funds sold and due from FRB      |  |                                 | 236,675   |                                  |                                  | 477               |  | 0.20                            | %              |  |                                  | 198,947   |                   |   | 384     |                | 0.19 | %                                |  |                   | 21,790    |  |   | 48      |  | 0.22 | %
|                                           |  |                                 |           |                                  |                                  |                   |  |                                 |                |  |                                  |           |                   |   |         |                |      |                                  |  |                   |           |  |   |         |  |      |  
|Total interest-earning assets              |  |                                 | 2,501,572 |                                  |                                  | 120,429           |  | 4.81                            | %              |  |                                  | 2,626,934 |                   |   | 138,274 |                | 5.26 | %                                |  |                   | 2,802,569 |  |   | 151,327 |  | 5.40 | %
|Noninterest-earning assets                 |  |                                 | 503,058   |                                  |                                  |                   |  |                                 |                |  |                                  | 417,358   |                   |   |         |                |      |                                  |  |                   | 284,323   |  |   |         |  |      |  
|                                           |  |                                 |           |                                  |                                  |                   |  |                                 |                |  |                                  |           |                   |   |         |                |      |                                  |  |                   |           |  |   |         |  |      |  
|Total assets                               |  |                                 | 3,004,630 |                                  |                                  |                   |  |                                 |                |  |                                  | 3,044,292 |                   |   |         |                |      |                                  |  |                   | 3,086,892 |  |   |         |  |      |  
|                                           |  |                                 |           |                                  |                                  |                   |  |                                 |                |  |                                  |           |                   |   |         |                |      |                                  |  |                   |           |  |   |         |  |      |  
|                                           |  |                                 |           |                                  |                                  |                   |  |                                 |               
|Liabilities and Shareholders Equity:      |  |                                 |           |                                  |                                  |                   |  |                                 |                |  |                                  |           |                   |   |         |                |      |                                  |  |                   |           |  |   |         |  |      |  
|Interest-bearing liabilities               |  |                                 |           |                                  |                                  |                   |  |                                 |                |  |                                  |           |                   |   |         |                |      |                                  |  |                   |           |  |   |         |  |      |  
|Interest-bearing demand deposits           |  |                                 | 918,835   |                                  |                                  | 15,501            |  | 1.69                            | %              |  |                                  | 954,939   |                   |   | 15,416  |                | 1.61 | %                                |  |                   | 642,179   |  |   | 6,245   |  | 0.97 | %
|Savings deposits                           |  |                                 | 77,812    |                                  |                                  | 502               |  | 0.64                            | %              |  |                                  | 80,221    |                   |   | 525     |                | 0.65 | %                                |  |                   | 118,979   |  |   | 1,181   |  | 0.99 | %
|Time deposits                              |  |                                 | 1,304,485 |                                  |                                  | 24,816            |  | 1.90                            | %              |  |                                  | 1,284,574 |                   |   | 25,095  |                | 1.95 | %                                |  |                   | 1,268,661 |  |   | 28,900  |  | 2.28 | %
|                                           |  |                                 |           |                                  |                                  |                   |  |                                 |                |  |                                  |           |                   |   |         |                |      |                                  |  |                   |           |  |   |         |  |      |  
|Total interest-bearing deposits            |  |                                 | 2,301,132 |                                  |                                  | 40,819            |  | 1.77                            | %              |  |                                  | 2,319,734 |                   |   | 41,036  |                | 1.77 | %                                |  |                   | 2,029,819 |  |   | 36,326  |  | 1.79 | %
|Borrowings                                 |  |                                 | 274,946   |                                  |                                  | 8,626             |  | 3.14                            | %              |  |                                  | 276,890   |                   |   | 8,290   |                | 2.99 | %                                |  |                   | 434,208   |  |   | 11,120  |  | 2.56 | %
|                                           |  |                                 |           |                                  |                                  |                   |  |                                 |                |  |                                  |           |                   |   |         |                |      |                                  |  |                   |           |  |   |         |  |      |  
|Total interest-bearing liabilities         |  |                                 | 2,576,078 |                                  |                                  | 49,445            |  | 1.92                            | %              |  |                                  | 2,596,624 |                   |   | 49,326  |                | 1.90 | %                                |  |                   | 2,464,027 |  |   | 47,446  |  | 1.93 | %
|Noninterest-bearing liabilities            |  |                                 |           |                                  |                                  |                   |  |                                 |                |  |                                  |           |                   |   |         |                |      |                                  |  |                   |           |  |   |         |  |      |  
|Demand deposits                            |  |                                 | 249,272   |                                  |                                  |                   |  |                                 |                |  |                                  | 236,947   |                   |   |         |                |      |                                  |  |                   | 259,754   |  |   |         |  |      |  
|Other liabilities                          |  |                                 | 22,350    |                                  |                                  |                   |  |                                 |                |  |                                  | 21,082    |                   |   |         |                |      |                                  |  |                   | 32,804    |  |   |         |  |      |  
|                                           |  |                                 |           |                                  |                                  |                   |  |                                 |                |  |                                  |           |                   |   |         |                |      |                                  |  |                   |           |  |   |         |  |      |  
|Total noninterest-bearing liabilities      |  |                                 | 271,622   |                                  |                                  |                   |  |                                 |                |  |                                  | 258,029   |                   |   |         |                |      |                                  |  |                   | 292,558   |  |   |         |  |      |  
|                                           |  |                                 |           |                                  |                                  |                   |  |                                 |                |  |                                  |           |                   |   |         |                |      |                                  |  |                   |           |  |   |         |  |      |  
|Total liabilities                          |  |                                 | 2,847,700 |                                  |                                  |                   |  |                                 |                |  |                                  | 2,854,653 |                   |   |         |                |      |                                  |  |                   | 2,756,585 |  |   |         |  |      |  
|Shareholders equity                       |  |                                 | 156,930   |                                  |                                  |                   |  |                                 |                |  |                                  | 189,639   |                   |   |         |                |      |                                  |  |                   | 330,307   |  |   |         |  |      |  
|                                           |  |                                 |           |                                  |                                  |                   |  |                                 |                |  |                                  |           |                   |   |         |                |      |                                  |  |                   |           |  |   |         |  |      |  
|Total liabilities and shareholders equity |  | $                               | 3,004,630 |                                  |                                  |                   |  |                                 |                |  | $                                | 3,044,292 |                   |   |         |                |      |                                  |  | $                 | 3,086,892 |  |   |         |  |      |  
|                                           |  |                                 |           |                                  |                                  |                   |  |                                 |                |  |                                  |           |                   |   |         |                |      |                                  |  |                   |           |  |   |         |  |      |  
|Net interest income                        |  |                                 |           |                                  | $                                | 70,984            |  |                                 |                |  |                                  |           |                   | $ | 88,948  |                |      |                                  |  |                   |           |  | $ | 103,881 |  |      |  
|                                           |  |                                 |           |                                  |                                  |                   |  |                                 |                |  |                                  |           |                   |   |         |                |      |                                  |  |                   |           |  |   |         |  |      |  
|Net interest spread                        |  |                                 |           |                                  |                                  |                   |  | 2.89                            | %              |  |                                  |           |                   |   |         |                | 3.36 | %                                |  |                   |           |  |   |         |  | 3.47 | %
|Net interest margin                        |  |                                 |           |                                  |                                  |                   |  | 2.84                            | %              |  |                                  |           |                   |   |         |                | 3.39 | %                                |  |                   |           |  |   |         |  | 3.71 | %

Note: Interest income from
loans included fees of $57 at June 30, 2010, $206 at March 31, 2010, and $1,456 at June 30, 2009. Average nonaccrual loans of $269,284 and $251,421 are excluded from average loans at June 30, 2010 and March 31, 2010,
respectively. Average nonaccrual loans for June 30, 2009 were not material and are included in average loans above.



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##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS



|                                         |  |                                                                               |         |   |                                                                              |   |        |        |  |   |                         |   |  |      |         |   |        |   |        |   |  |   |         |  
|---------------------------------------- |  | ----------------------------------------------------------------------------- | ------- | - | ---------------------------------------------------------------------------- | - | ------ | ------ |  | - | ----------------------- | - |  | ---- | ------- | - | ------ | - | ------ | - |  | - | ------- | -
|                                         |  | Three Months Ended June 30, 2010 Compared toThree Months Ended
March 31, 2010 |         |   | Three Months Ended June 30, 2010 Compared toThree Months Ended
June 30, 2009 |  
|                                         |  |                                                                               |         |   | VarianceAttributable to                                                      |   |        |        |  |   | VarianceAttributable to |  
|                                         |  | Total                                                                         |         |   | Rate                                                                         |   |        | Volume |  |   | Total                   |   |  | Rate |         |   | Volume |  
|Interest-Earning Assets:                 |  |                                                                               |         |   |                                                                              |   |        |        |  |   |                         |   |  |      |         |   |        |   |        |   |  |   |         |  
|Loans                                    |  | $                                                                             | (17,828 | ) |                                                                              | $ | (8,114 | )      |  | $ | (9,714                  | ) |  | $    | (32,018 | ) |        | $ | 1,840  |   |  | $ | (33,858 | )
|Investment securities                    |  |                                                                               | (126    | ) |                                                                              |   | (84    | )      |  |   | (42                     | ) |  |      | 578     |   |        |   | (631   | ) |  |   | 1,209   |  
|Interest-bearing deposits in other banks |  |                                                                               | 16      |   |                                                                              |   |       |        |  |   | 16                      |   |  |      | 113     |   |        |   | 8      |   |  |   | 105     |  
|Overnight funds sold and due from FRB    |  |                                                                               | 93      |   |                                                                              |   | 21     |        |  |   | 72                      |   |  |      | 429     |   |        |   | (5     | ) |  |   | 434     |  
|                                         |  |                                                                               |         |   |                                                                              |   |        |        |  |   |                         |   |  |      |         |   |        |   |        |   |  |   |         |  
|Total interest-earning assets            |  |                                                                               | (17,845 | ) |                                                                              |   | (8,177 | )      |  |   | (9,668                  | ) |  |      | (30,898 | ) |        |   | 1,212  |   |  |   | (32,110 | )
|Interest-Bearing Liabilities:            |  |                                                                               |         |   |                                                                              |   |        |        |  |   |                         |   |  |      |         |   |        |   |        |   |  |   |         |  
|Deposits                                 |  |                                                                               | (217    | ) |                                                                              |   |       |        |  |   | (217                    | ) |  |      | 4,493   |   |        |   | (409   | ) |  |   | 4,902   |  
|Borrowings                               |  |                                                                               | 336     |   |                                                                              |   | 390    |        |  |   | (54                     | ) |  |      | (2,494  | ) |        |   | 4,031  |   |  |   | (6,525  | )
|                                         |  |                                                                               |         |   |                                                                              |   |        |        |  |   |                         |   |  |      |         |   |        |   |        |   |  |   |         |  
|Total interest-bearing liabilities       |  |                                                                               | 119     |   |                                                                              |   | 390    |        |  |   | (271                    | ) |  |      | 1,999   |   |        |   | 3,622  |   |  |   | (1,623  | )
|                                         |  |                                                                               |         |   |                                                                              |   |        |        |  |   |                         |   |  |      |         |   |        |   |        |   |  |   |         |  
|Net interest income                      |  | $                                                                             | (17,964 | ) |                                                                              | $ | (8,567 | )      |  | $ | (9,397                  | ) |  | $    | (32,897 | ) |        | $ | (2,410 | ) |  | $ | (30,487 | )
|                                         |  |                                                                               |         |   |                                                                              |   |        |        |  |   |                         |   |  |      |         |   |        |   |        |   |  |   |         |  

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 amounts of change in each.



42



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##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS



|                                           |  |                               |           |                                  |                               |                   |  |                       |                |  |                                  |           |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|------------------------------------------ |  | ----------------------------- | --------- | -------------------------------- | ----------------------------- | ----------------- |  | --------------------- | -------------- |  | -------------------------------- | --------- | ----------------- | - | ------- | ------------------------------ | ---- | - | ----------------------- | - | ------- | - |  | - | ------ | - |  | - | ------- | -
|                                           |  | Six Months EndedJune 30, 2010 |           |                                  | Six Months EndedJune 30, 2009 |                   |  | 2010 Compared to 2009 |               
|(in thousands)                             |  | AverageBalance                |           | AnnualizedInterestIncome/Expense |                               | AverageYield/Rate |  |                       | AverageBalance |  | AnnualizedInterestIncome/Expense |           | AverageYield/Rate |   |         | InterestIncome/ExpenseVariance |      |   | VarianceAttributable to |  
|                                           |  |                               |           |                                  |                               |                   |  | Rate                  |                |  | Volume                           |          
|Assets:                                    |  |                               |           |                                  |                               |                   |  |                       |                |  |                                  |           |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|Interest-earning assets                    |  |                               |           |                                  |                               |                   |  |                       |                |  |                                  |           |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|Loans                                      |  | $                             | 2,051,213 |                                  | $                             | 121,846           |  | 5.94                  | %              |  | $                                | 2,601,379 |                   | $ | 148,995 |                                | 5.73 | % |                         | $ | (27,149 | ) |  | $ | 5,692  |   |  | $ | (32,841 | )
|Investment securities                      |  |                               | 205,652   |                                  |                               | 6,901             |  | 3.36                  | %              |  |                                  | 168,041   |                   |   | 6,738   |                                | 4.01 | % |                         |   | 163     |   |  |   | (428   | ) |  |   | 591     |  
|Interest-bearing deposits in other banks   |  |                               | 51,546    |                                  |                               | 125               |  | 0.24                  | %              |  |                                  | 5,563     |                   |   | 22      |                                | 0.39 | % |                         |   | 103     |   |  |   | (5     | ) |  |   | 108     |  
|Overnight funds sold and due from FRB      |  |                               | 217,915   |                                  |                               | 431               |  | 0.20                  | %              |  |                                  | 20,849    |                   |   | 45      |                                | 0.22 | % |                         |   | 386     |   |  |   | (4     | ) |  |   | 390     |  
|                                           |  |                               |           |                                  |                               |                   |  |                       |                |  |                                  |           |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|Total interest-earning assets              |  |                               | 2,526,326 |                                  |                               | 129,303           |  | 5.12                  | %              |  |                                  | 2,795,832 |                   |   | 155,800 |                                | 5.57 | % |                         |   | (26,497 | ) |  |   | 5,255  |   |  |   | (31,752 | )
|Noninterest-earning assets                 |  |                               | 498,026   |                                  |                               |                   |  |                       |                |  |                                  | 321,309   |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|                                           |  |                               |           |                                  |                               |                   |  |                       |                |  |                                  |           |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|Total assets                               |  |                               | 3,024,352 |                                  |                               |                   |  |                       |                |  |                                  | 3,117,141 |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|                                           |  |                               |           |                                  |                               |                   |  |                       |                |  |                                  |           |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|                                           |  |                               |           |                                  |                               |                   |  |                       |               
|Liabilities and Shareholders Equity:      |  |                               |           |                                  |                               |                   |  |                       |                |  |                                  |           |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|Interest-bearing liabilities               |  |                               |           |                                  |                               |                   |  |                       |                |  |                                  |           |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|Interest-bearing demand deposits           |  |                               | 936,787   |                                  |                               | 15,459            |  | 1.65                  | %              |  |                                  | 639,103   |                   |   | 6,497   |                                | 1.02 | % |                         |   | 8,962   |   |  |   | 5,109  |   |  |   | 3,853   |  
|Savings deposits                           |  |                               | 79,010    |                                  |                               | 513               |  | 0.65                  | %              |  |                                  | 121,180   |                   |   | 1,455   |                                | 1.20 | % |                         |   | (942    | ) |  |   | (535   | ) |  |   | (407    | )
|Time deposits                              |  |                               | 1,294,584 |                                  |                               | 24,955            |  | 1.93                  | %              |  |                                  | 1,250,628 |                   |   | 31,130  |                                | 2.49 | % |                         |   | (6,175  | ) |  |   | (7,319 | ) |  |   | 1,144   |  
|                                           |  |                               |           |                                  |                               |                   |  |                       |                |  |                                  |           |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|Total interest-bearing deposits            |  |                               | 2,310,381 |                                  |                               | 40,927            |  | 1.77                  | %              |  |                                  | 2,010,911 |                   |   | 39,082  |                                | 1.94 | % |                         |   | 1,845   |   |  |   | (2,746 | ) |  |   | 4,590   |  
|Borrowings                                 |  |                               | 275,913   |                                  |                               | 8,459             |  | 3.07                  | %              |  |                                  | 476,621   |                   |   | 11,909  |                                | 2.50 | % |                         |   | (3,450  | ) |  |   | 4,076  |   |  |   | (7,525  | )
|                                           |  |                               |           |                                  |                               |                   |  |                       |                |  |                                  |           |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|Total interest-bearing liabilities         |  |                               | 2,586,294 |                                  |                               | 49,386            |  | 1.91                  | %              |  |                                  | 2,487,532 |                   |   | 50,991  |                                | 2.05 | % |                         |   | (1,605  | ) |  |   | 1,330  |   |  |   | (2,935  | )
|Noninterest-bearing liabilities            |  |                               |           |                                  |                               |                   |  |                       |                |  |                                  |           |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|Demand deposits                            |  |                               | 243,144   |                                  |                               |                   |  |                       |                |  |                                  | 245,588   |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|Other liabilities                          |  |                               | 21,720    |                                  |                               |                   |  |                       |                |  |                                  | 40,689    |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|                                           |  |                               |           |                                  |                               |                   |  |                       |                |  |                                  |           |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|Total noninterest-bearing liabilities      |  |                               | 264,864   |                                  |                               |                   |  |                       |                |  |                                  | 286,277   |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|                                           |  |                               |           |                                  |                               |                   |  |                       |                |  |                                  |           |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|Total liabilities                          |  |                               | 2,851,158 |                                  |                               |                   |  |                       |                |  |                                  | 2,773,809 |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|Shareholders equity                       |  |                               | 173,194   |                                  |                               |                   |  |                       |                |  |                                  | 343,332   |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|                                           |  |                               |           |                                  |                               |                   |  |                       |                |  |                                  |           |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|Total liabilities and shareholders equity |  | $                             | 3,024,352 |                                  |                               |                   |  |                       |                |  | $                                | 3,117,141 |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|                                           |  |                               |           |                                  |                               |                   |  |                       |                |  |                                  |           |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|Net interest income                        |  |                               |           |                                  | $                             | 79,917            |  |                       |                |  |                                  |           |                   | $ | 104,809 |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|                                           |  |                               |           |                                  |                               |                   |  |                       |                |  |                                  |           |                   |   |         |                                |      |   |                         |   |         |   |  |   |        |   |  |   |         |  
|Net interest spread                        |  |                               |           |                                  |                               |                   |  | 3.21                  | %              |  |                                  |           |                   |   |         |                                | 3.52 | % |                         |   |         |   |  |   |        |   |  |   |         |  
|Net interest margin                        |  |                               |           |                                  |                               |                   |  | 3.16                  | %              |  |                                  |           |                   |   |         |                                | 3.75 | % |                         |   |         |   |  |   |        |   |  |   |         |  

Note: Interest income from loans included fees of $363 at June 30, 2010 and $2,116 at June 30, 2009.
Average nonaccrual loans of $319,673 are excluded from average loans at June 30, 2010. Average nonaccrual loans for June 30, 2009 were not material and are included in average loans above.

Noninterest Income. For the quarter ended June 30, 2010, total noninterest income was $5.3 million, a decrease of $324 thousand or 6%
as compared to second quarter 2009. Noninterest income comprised 15% of total revenue for the second quarter of 2010 and 13% for the second quarter of 2009. For the six months ended June 30, 2010, we reported total noninterest income of $10.9
million, a $1.2 million or 10% decrease over the same period in 2009. Service charges on deposit accounts decreased $712 thousand or 17% to $3.4 million for the first six months of 2010 compared to the same period in 2009 due to reduced overdraft
activity along with a change in policy reducing the number of overdraft charges a customer can incur on any given day. Mortgage banking revenue, which is primarily the income associated with originating and selling first lien residential real estate
loans, was $4.4 million in the six month period ended June 30, 2010 compared to $3.0 million in the prior year period. This increase was driven by the higher levels of loan originations in 2010.



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##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS



We generated gains on sales of investment securities of $469 thousand during the first half of 2010 and
none for comparative 2009. The deteriorating economy during 2009 and 2010 caused losses on foreclosed real estate. Losses on foreclosed real estate for the first half of 2010 and 2009 were $3.2 million and $339 thousand, respectively, and were
included as a reduction to noninterest income. The following tables provide an analysis of noninterest income (in thousands).



|                                              |  |                            |        |   |                          |   |       |      |  |   |        |   |  |   |        |  
|--------------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ----- | ---- |  | - | ------ | - |  | - | ------ | -
|                                              |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                              |  | 2010                       |        |   | 2009                     |   |       | 2010 |  |   | 2009   |  
|                                              |  |                            |        |  
|Service charges on deposit accounts           |  | $                          | 1,755  |   |                          | $ | 2,073 |      |  | $ | 3,420  |   |  | $ | 4,132  |  
|Mortgage banking revenue                      |  |                            | 2,604  |   |                          |   | 1,397 |      |  |   | 4,359  |   |  |   | 3,039  |  
|Gain on sale of investment securities         |  |                            | 390    |   |                          |   |      |      |  |   | 469    |   |  |   |       |  
|Gain on sale of premises and equipment        |  |                            | 18     |   |                          |   | (11   | )    |  |   | 43     |   |  |   | (6     | )
|Losses on foreclosed real estate              |  |                            | (2,476 | ) |                          |   | (337  | )    |  |   | (3,214 | ) |  |   | (339   | )
|Other-than-temporary impairment of securities |  |                            |       |   |                          |   | (114  | )    |  |   | (44    | ) |  |   | (132   | )
|Insurance revenue                             |  |                            | 1,279  |   |                          |   | 1,339 |      |  |   | 2,599  |   |  |   | 2,651  |  
|Brokerage revenue                             |  |                            | 79     |   |                          |   | 85    |      |  |   | 153    |   |  |   | 131    |  
|Income from bank-owned life insurance         |  |                            | 424    |   |                          |   | 405   |      |  |   | 824    |   |  |   | 805    |  
|Visa check card income                        |  |                            | 590    |   |                          |   | 243   |      |  |   | 1,019  |   |  |   | 658    |  
|ATM surcharge fee                             |  |                            | 99     |   |                          |   | 121   |      |  |   | 185    |   |  |   | 179    |  
|Wire fees                                     |  |                            | 49     |   |                          |   | 36    |      |  |   | 86     |   |  |   | 72     |  
|Rental income                                 |  |                            | 48     |   |                          |   | 41    |      |  |   | 84     |   |  |   | 107    |  
|Other                                         |  |                            | 472    |   |                          |   | 377   |      |  |   | 949    |   |  |   | 798    |  
|                                              |  |                            |        |   |                          |   |       |      |  |   |        |   |  |   |        |  
|Total noninterest income                      |  | $                          | 5,331  |   |                          | $ | 5,655 |      |  | $ | 10,932 |   |  | $ | 12,095 |  
|                                              |  |                            |        |   |                          |   |       |      |  |   |        |   |  |   |        |  

Noninterest Expense. Noninterest expense represents our overhead expenses.Total noninterest expense
decreased $27.3 million or 54% for the three months ended June 30, 2010 compared to the three months ended June 30, 2009. During the second quarter of 2009, we incurred a non-cash impairment charge associated with the goodwill created from
the Shore acquisition of $28.0 million. Salaries and employee benefits expense increased $409 thousand for the second quarter of 2010 from the second quarter of 2009. Occupancy expense decreased $15 thousand for the second quarter of 2010 compared
to the second quarter of 2009. Data processing expense decreased $126 thousand for the second quarter of 2010 compared to the second quarter of 2009. FDIC insurance was $1.2 million for the second quarter ended June 30, 2010 as compared with
$2.7 million for the same period in 2009; the decrease was due to the special assessment charged during the second quarter of 2009. Equipment expense decreased 36% to $932 thousand for the three months ended June 30, 2010 as compared to the
same period in 2009. For the second quarter of 2010, professional fees were $1.2 million compared to $688 thousand for comparative 2009. Professional fees increased primarily due to legal and consultant fees associated with loan collection
activities. The following table provides an analysis of total noninterest expense (in thousands) by line item for the three and six months ended June 30, 2010 and 2009.



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HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS



|                                          |  |                            |        |                          |   |        |  |      |        |  |   |       
|----------------------------------------- |  | -------------------------- | ------ | ------------------------ | - | ------ |  | ---- | ------ |  | - | ------
|                                          |  | Three Months EndedJune 30, |        | Six Months EndedJune 30,
|                                          |  | 2010                       |        | 2009                     |   | 2010   |  | 2009
|                                          |  |                            |        |                         
|Salaries and employee benefits            |  | $                          | 10,955 |                          | $ | 10,546 |  | $    | 20,705 |  | $ | 21,780
|Occupancy                                 |  |                            | 2,150  |                          |   | 2,266  |  |      | 4,448  |  |   | 4,280 
|Data processing                           |  |                            | 1,169  |                          |   | 1,295  |  |      | 2,649  |  |   | 2,493 
|Impairment of goodwill                    |  |                            |       |                          |   | 27,976 |  |      |       |  |   | 27,976
|FDIC insurance                            |  |                            | 1,169  |                          |   | 2,661  |  |      | 2,225  |  |   | 3,301 
|Equipment                                 |  |                            | 932    |                          |   | 1,361  |  |      | 2,023  |  |   | 2,295 
|Professional fees                         |  |                            | 1,227  |                          |   | 688    |  |      | 2,543  |  |   | 963   
|Amortization of intangible assets         |  |                            | 442    |                          |   | 747    |  |      | 937    |  |   | 1,081 
|Problem loan and repossessed asset costs  |  |                            | 1,390  |                          |   | 96     |  |      | 2,003  |  |   | 160   
|Bank franchise tax                        |  |                            | 439    |                          |   | 329    |  |      | 949    |  |   | 773   
|Telephone and postage                     |  |                            | 412    |                          |   | 477    |  |      | 803    |  |   | 917   
|Advertising and marketing                 |  |                            | 238    |                          |   | 64     |  |      | 386    |  |   | 207   
|Directors and regional board fees        |  |                            | 223    |                          |   | 298    |  |      | 360    |  |   | 582   
|Stationary, printing, and office supplies |  |                            | 148    |                          |   | 217    |  |      | 387    |  |   | 359   
|Other                                     |  |                            | 2,192  |                          |   | 1,309  |  |      | 3,617  |  |   | 3,011 
|                                          |  |                            |        |                          |   |        |  |      |        |  |   |       
|Total noninterest expense                 |  | $                          | 23,086 |                          | $ | 50,330 |  | $    | 44,035 |  | $ | 70,178
|                                          |  |                            |        |                          |   |        |  |      |        |  |   |       

Total noninterest expense decreased $26.1 million or 37% for the first
six months of 2010 compared to the first six months of 2009. During the second quarter of 2009, we incurred a non-cash impairment charge associated with the goodwill created from the Shore acquisition of $28.0 million. Salaries and employee benefits
expense decreased $1.1 million for the first six months of 2010 from the first six months of 2009. Salaries and employee benefits expense in the first half of 2010 was positively impacted by the natural attrition in our workforce. Occupancy expense
increased $168 thousand for the first six months of 2010 compared to the first six months of 2009 as a result of rental increases on existing leases and one new lease entered into during the first quarter of 2010. Data processing expense increased
$156 thousand for the first six months of 2010 compared to the first six months of 2009 due to an increase in outsourced data processing fees charged from the outsource provider. FDIC insurance was $2.2 million for the six months ended June 30,
2010 as compared with $3.3 million for the same period in 2009; the decrease was due to the special assessment charged in 2009. Equipment expense decreased $272 thousand to $2.0 million for the six months ended June 30, 2010 as compared to the
same period in 2009. For the first six months of 2010, professional fees were $2.5 million compared to $963 thousand for comparative 2009. Professional fees increased primarily due to legal and consultant fees associated with loan collection
activities.

The efficiency ratio, calculated by dividing noninterest expense by the sum of net interest income and noninterest income
excluding securities gains was 88% for the first six months of 2010 compared to 110% for the first half of 2009. Excluding the goodwill impairment charge, the efficiency ratio for the six months ended June 30, 2009 was 66%.

Income Tax Provision.Income tax benefit for the second quarter of 2010 was $2.2 million. We recorded a provision for income tax
benefit of $2.1 million for the first six months of 2010. Management assesses the realizability of the deferred tax asset on a quarterly basis, considering both positive and negative evidence in determining whether it is more likely than not that
some portion or all of the gross deferred tax asset would not be realized. A valuation allowance for the entire net deferred tax asset has been established as of June 30, 2010.



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##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

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 manage 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, 2010 and December 31, 2009 due to an immediate change in interest rates is shown below. These estimates are dependent on material assumptions, such as those previously discussed.



|                          |  |                               |       |   |                               |   |        |   |        |   |  |       |   
|------------------------- |  | ----------------------------- | ----- | - | ----------------------------- | - | ------ | - | ------ | - |  | ----- | --
|                          |  | June 30, 2010                 |       |   | December 31, 2009             |  
|(in thousands)            |  | Change in Net Interest Income |       |   | Change in Net Interest Income |  
|                          |  | Amount                        |       | % |                               |   | Amount |   |        | % | 
|Change in Interest Rates: |  |                               |       |   |                               |   |        |   |        |   |  |       |   
|+200 basis points         |  | $                             | 4,778 |   | 6.34                          | % |        | $ | (4,861 | ) |  | (5.07 | )%
|+100 basis points         |  |                               | 1,566 |   | 2.08                          | % |        |   | (2,129 | ) |  | (2.22 | )%
|-100 basis points         |  |                               | N/A   |   | N/A                           |   |        |   | N/A    |   |  | N/A   |   
|-200 basis points         |  |                               | N/A   |   | N/A                           |   |        |   | N/A    |   |  | N/A   |   

The above analysis
suggests that we project an increase in net interest income assuming an immediate increase in interest rates. 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. In addition, management may deploy
strategies that offset some of the impact of changes in interest rates. Consequently, variations should be expected from the projections resulting from the controlled conditions of the simulation analysis. Management maintains a simulation model
where it is assumed that interest rate changes occur gradually, that rate increases for interest-bearing liabilities lag behind the rate increases of interest-earning assets, and that the level of deposit rate increases will be less than the level
of rate increases for interest-earning assets. In this model, we project an increase in net interest income due to rising rates, during the twelve months following June 30, 2010.



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##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 4. Controls and Procedures

The
Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Companys disclosure controls and procedures as of the end of the period covered by
this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures as of the end of the period covered by this report were designed and functioning
effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commissions rules and forms, and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding disclosure.

The status of the Companys internal controls over financial reporting (as defined in
Rule 13a-15(f) and 15d-15(f) under the Exchange Act) have changed materially from their status as of March 31, 2010. As of March 31, 2010, the Companys management concluded that its internal controls over financial reporting
were not effective as a whole, and that all of the significant deficiencies reported as of December 31, 2009 continued to exist, except for the deficiency related to inadequate controls over the accounting for income taxes. As of June 30,
2010, however, the Company had implemented new procedures that remediated all of the remaining significant deficiencies and the material weakness that previously existed.



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HAMPTON ROADS BANKSHARES, INC.



PART II. OTHER INFORMATION

ITEM 1  LEGAL PROCEEDINGS

In the ordinary course of operations, the Company may become a party to legal proceedings. Based upon information currently available, management believes
that such legal proceedings, in the aggregate, will not have a material adverse effect on our business, financial conditions, or results of operations.

ITEM 1A  RISK FACTORS

Except as discussed below, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K/A for the year ended
December 31, 2009 or Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2010.

We may be unable to close on
our previously announced capital raising transactions or carry out our recapitalization plan.

Regulatory authorities require us to
maintain certain levels of capital to support our operations. As of June 30, 2010, the Company is critically undercapitalized and BOHR is significantly undercapitalized. Accordingly, we have an immediate need to raise
capital. We believe that our previously-announced capital infusion of at least $275 million, which is expected to close in the third quarter of this year, will restore BOHR to well capitalized status. However, we may be unable to close
on our previously-announced capital raising transactions, which are vital to our recapitalization plan. We may be unable to close these transactions in a timely manner, or at all, because of the failure to obtain required regulatory approvals,
shareholder approvals or satisfy other closing requirements, which would adversely affect our financial position, results of operations and ability to restore our capital ratios.

BOHR may become subject to additional regulatory restrictions or be placed in receivership in the event that its regulatory capital levels continue
to decline.

As of June 30, 2010, BOHR was significantly undercapitalized under the prompt corrective action provision of
the Federal Deposit Insurance Act (the FDI Act) and related regulations. However, if we are unable to raise capital, BOHR is at risk of becoming critically undercapitalized in the near future. Under the FDI Act, depository
institutions that are critically undercapitalized must be placed into conservatorship or receivership within 90 days of becoming critically undercapitalized, unless the institutions primary federal regulator (in our case, the
Federal Reserve) determines and documents that other action would better achieve the purposes of FDI Act. If an institution remains critically undercapitalized on average during the calendar quarter beginning 270 days after it became
critically undercapitalized, the FDI Act requires the appointment of a receiver unless the Federal Reserve and the FDIC can certify that the institution is viable and not expected to fail and also affirmatively can determine that the institution has
positive net worth, is in compliance with an approved capital restoration plan, is profitable or shows a sustainable upward trend in earnings and is reducing its ratio of nonperforming loans to total loans. We believe that our previously-announced
capital infusion, will prevent BOHR from being placed into conservatorship or receivership. However, if this transaction does not close, it is possible that BOHR we will be placed into conservatorship or receivership. If BOHR is placed into
conservatorship or receivership, the Company would suffer a complete loss of the value of its ownership interest in BOHR. Further, if one of our subsidiary banks fails and is placed into receivership, it is highly likely the FDIC will exercise its
cross guarantee rights and close the other subsidiary banks in order to reduce any loss or cost to the FDIC. Such a course of events could cause the Company to file for bankruptcy or become subject to an involuntary bankruptcy filing and
could result in a loss of all of the value of the Companys outstanding securities.

We have entered into a written agreement with
the FRB and the Bureau of Financial Institutions, which requires us to dedicate a significant amount of resources to complying with the agreement and may have a material adverse effect on our operations and the value of our securities.

We have entered into a written agreement with the FRB and the Bureau of Financial Institutions. The Agreement could, among other
things, inhibit our ability to grow our assets and further inhibit our ability pay dividends.

In addition, the written agreement requires us
to implement plans to improve our credit risk management, operating and financial management and capital plans. While subject to the written agreement, we expect that our management and board of directors will be required to focus considerable time
and attention on taking corrective actions to comply with its terms. There can be no assurance that we will be able to successfully address the regulators concerns in the written agreement or that we will be able to comply with the terms of
the written agreement. If we do not comply with the written agreement, we could be subject to the assessment of civil money penalties, further regulatory sanctions, or other regulatory enforcement actions.

For more information regarding our written agreement with the FRB and the Bureau of Financial Institutions, see Note B  Regulatory Matters
and Going Concern ConsiderationsWritten Agreement.



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HAMPTON ROADS BANKSHARES, INC.



PART II. OTHER INFORMATION



The Company has restated its financial statements, which may have a future adverse effect.

The Company may continue to suffer adverse effects from the restatement of its previously issued financial statements that were
included in its annual report on Form 10-K for the year ended December 31, 2009, as amended, and its quarterly report on Form 10-Q for the quarter ended March 31, 2010.

As a result of this matter, the Company may become subject to civil litigation or regulatory actions. Any of these matters may contribute to further
ratings downgrades, negative publicity and difficulties in attracting and retaining customers, employees and management personnel.



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HAMPTON ROADS BANKSHARES, INC.



PART II. OTHER INFORMATION



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 the open market and through privately negotiated transactions. The Company did not repurchase any shares of common stock other than through this publicly announced plan. There were no
share repurchase transactions conducted during the second quarter of 2010.

ITEM 3  DEFAULTS UPON
SENIOR SECURITIES

None.

ITEM 4  REMOVED AND RESERVED

None.

ITEM 5  OTHER INFORMATION

None.

ITEM 6
 EXHIBITS



|      |  |                                                                                                                                                                                                                                      
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1   |  | Amended and Restated Articles of Incorporation of Hampton Roads Bankshares, Inc., attached as Exhibit 3.1 to the Registrants Current Report on Form 8-K dated
December 16, 2009, incorporated herein by reference.                  
|      | 
|3.2   |  | Bylaws of Hampton Roads Bankshares, Inc., as amended, incorporated by reference from the Registrants Form 8-K, filed September 24, 2009.                                                                                            
|      | 
|4.1   |  | Specimen of Common Stock Certificate, incorporated by reference from the Registrants Annual Report on Form 10-K for the year ended December 31, 2005.                                                                               
|      | 
|10.1  |  | Amended and Restated Investment Agreement, dated June 30, 2010, incorporated by reference from the Registrants Form 8-K,
filed July 7, 2010                                                                                         
|      | 
|10.2  |  | CapGen Investment Agreement, dated June 30, 2010, incorporated by reference from the Registrants Form 8-K, filed
July 7, 2010                                                                                                       
|      | 
|10.3  |  | Form of Amended and Restated Securities Purchase Agreement, incorporated by reference from the Registrants Form 8-K, filed
July 7, 2010                                                                                             
|      | 
|10.4  |  | Securities Purchase Agreement, dated June 30, 2010, incorporated by reference from the Registrants Form 8-K, filed
July 7, 2010                                                                                                     
|      | 
|10.5  |  | Carlyle Investor Letter, dated June 30, 2010, incorporated by reference from the Registrants Form 8-K, filed
July 7, 2010                                                                                                           
|      | 
|10.6  |  | Anchorage Investor Letter, dated June 30, 2010, incorporated by reference from the Registrants Form 8-K, filed
July 7, 2010                                                                                                         
|      | 
|10.7  |  | CapGen Investor Letter, dated June 30, 2010, incorporated by reference from the Registrants Form 8-K, filed July 7,
2010                                                                                                            
|      | 
|10.8  |  | Consent Letter with affiliate of Davidson Kempner, dated June 30, 2010, incorporated by reference from the Registrants
Form 8-K, filed July 7, 2010                                                                                 
|      | 
|10.9  |  | Consent Letter with affiliates of Fir Tree, dated June 30, 2010, incorporated by reference from the Registrants
Form 8-K, filed July 7, 2010                                                                                        
|      | 
|10.10 |  | Material Definitive Agreement between Hampton Roads Bankshares, Inc. and Bank of Hampton Roads and Federal Reserve Bank of Richmond and
Virginia Bureau of Financial Institutions, filed June 17, 2010 and incorporated 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.                                                                                                               



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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 16, 2010 |  |  |  | /s/ Lorelle Fritsch                                             
|                      |  |  |  | Lorelle Fritsch                                                 
|                      |  |  |  | Chief Financial Officer                                         
|                      |  |  |  | (On behalf of the Registrant and as
Principal Financial Officer)



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