##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





Amendment No.
1

to

FORM 10-Q





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

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 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 May 10, 2010 was 22,154,320 shares, par value $0.625.

EXPLANATORY NOTE

This
Amendment No. 1 to the Quarterly Report on Form 10-Q (this Amendment No. 1) of Hampton Roads Bankshares, Inc. (the Company) amends the Companys Quarterly Report on Form 10-Q for the period ended March 31, 2010 that was
originally filed with the Securities and Exchange Commission (the SEC) on May 17, 2010 (the Original Form 10-Q and collectively with Amendment No. 1, this Form 10-Q).

This Amendment No. 1 is being filed to establish a valuation allowance against the Companys deferred tax asset and to revise certain regulatory
capital ratios that changed as a result of establishing the valuation allowance, as of December 31, 2009, and related disclosures contained in this Form 10-Q. Unless otherwise indicated, this Amendment No. 1 does not reflect events occurring after
May 17, 2010, which is the filing date of the Original Form 10-Q.









---

##### Table of Contents

TABLE OF CONTENTS



|                                                                                                |  |     
|----------------------------------------------------------------------------------------------- |  | ----
|                                                                                                |  | Page
|PART I  FINANCIAL INFORMATION                                                                  |  |     
|                                                                                                | 
|ITEM 1  FINANCIAL STATEMENTS                                                                   |  |     
|                                                                                                | 
|Consolidated Balance Sheets                                                                     |  | 3   
|                                                                                                | 
|March 31, 2010                                                                                  |  |     
|December 31, 2009                                                                               |  |     
|                                                                                                | 
|Consolidated Statements of Operations                                                           |  | 4   
|                                                                                                | 
|Three months ended March 31, 2010 and 2009                                                      |  |     
|                                                                                                | 
|Consolidated Statement of Changes in Shareholders Equity                                       |  | 5   
|                                                                                                | 
|Three months ended March 31, 2010                                                               |  |     
|                                                                                                | 
|Consolidated Statements of Cash Flows                                                           |  | 6   
|                                                                                                | 
|Three months ended March 31, 2010 and 2009                                                      |  |     
|                                                                                                | 
|Notes to Consolidated Financial Statements                                                      |  | 8   
|                                                                                                | 
|ITEM 
2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 27  
|                                                                                                | 
|ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                             |  | 41  
|                                                                                                | 
|ITEM 4  CONTROLS AND PROCEDURES                                                                |  | 42  
|                                                                                                | 
|PART II  OTHER INFORMATION                                                                     |  |     
|                                                                                                | 
|ITEM 1  LEGAL PROCEEDINGS                                                                      |  | 43  
|                                                                                                | 
|ITEM 1A  RISK FACTORS                                                                          |  | 43  
|                                                                                                | 
|ITEM 2  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                            |  | 45  
|                                                                                                | 
|ITEM 3  DEFAULTS UPON SENIOR SECURITIES                                                        |  | 45  
|                                                                                                | 
|ITEM 4  REMOVED AND RESERVED                                                                   |  | 45  
|                                                                                                | 
|ITEM 5  OTHER INFORMATION                                                                      |  | 45  
|                                                                                                | 
|ITEM 6  EXHIBITS                                                                               |  | 45  
|                                                                                                | 
|SIGNATURES                                                                                      |  | 46  



2



---

##### 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)                                                                                                                            |  | As
Restated(Unaudited)March 31, 2010 |           |   | As
Restated(Audited)December 31, 2009 |  
|                                                                                                                                                                           |  |                                     
|Assets:                                                                                                                                                                    |  |                                      |           |   |                                       |   |           |  
|Cash and due from banks                                                                                                                                                    |  | $                                    | 17,225    |   |                                       | $ | 16,995    |  
|Interest-bearing deposits in other banks                                                                                                                                   |  |                                      | 1,093     |   |                                       |   | 43,821    |  
|Overnight funds sold and due from Federal Reserve Bank                                                                                                                     |  |                                      | 267,704   |   |                                       |   | 139,228   |  
|Investment securities available for sale, at fair value                                                                                                                    |  |                                      | 178,880   |   |                                       |   | 161,062   |  
|Restricted equity securities, at cost                                                                                                                                      |  |                                      | 29,779    |   |                                       |   | 29,779    |  
|                                                                                                                                                                           |  |                                     
|Loans held for sale                                                                                                                                                        |  |                                      | 15,917    |   |                                       |   | 12,615    |  
|                                                                                                                                                                           |  |                                     
|Loans                                                                                                                                                                      |  |                                      | 2,350,398 |   |                                       |   | 2,426,692 |  
|Allowance for loan losses                                                                                                                                                  |  |                                      | (151,226  | ) |                                       |   | (132,697  | )
|                                                                                                                                                                           |  |                                      |           |   |                                       |   |           |  
|Net loans                                                                                                                                                                  |  |                                      | 2,199,172 |   |                                       |   | 2,293,995 |  
|                                                                                                                                                                           |  |                                     
|Premises and equipment, net                                                                                                                                                |  |                                      | 96,297    |   |                                       |   | 97,512    |  
|Interest receivable                                                                                                                                                        |  |                                      | 9,471     |   |                                       |   | 8,788     |  
|Foreclosed real estate and repossessed assets, net of valuation allowance                                                                                                  |  |                                      | 25,286    |   |                                       |   | 8,867     |  
|Deferred tax assets, net                                                                                                                                                   |  |                                      |          |   |                                       |   | 397       |  
|Intangible assets, net                                                                                                                                                     |  |                                      | 12,343    |   |                                       |   | 12,839    |  
|Bank-owned life insurance                                                                                                                                                  |  |                                      | 48,755    |   |                                       |   | 48,355    |  
|Other assets                                                                                                                                                               |  |                                      | 44,225    |   |                                       |   | 45,323    |  
|                                                                                                                                                                           |  |                                      |           |   |                                       |   |           |  
|                                                                                                                                                                           |  |                                     
|Total assets                                                                                                                                                               |  | $                                    | 2,946,147 |   |                                       | $ | 2,919,576 |  
|                                                                                                                                                                           |  |                                      |           |   |                                       |   |           |  
|                                                                                                                                                                           |  |                                     
|Liabilities and Shareholders Equity:                                                                                                                                      |  |                                      |           |   |                                       |   |           |  
|Deposits:                                                                                                                                                                  |  |                                      |           |   |                                       |   |           |  
|Noninterest-bearing demand                                                                                                                                                 |  | $                                    | 244,252   |   |                                       | $ | 248,682   |  
|Interest-bearing:                                                                                                                                                          |  |                                      |           |   |                                       |   |           |  
|Demand                                                                                                                                                                     |  |                                      | 936,927   |   |                                       |   | 916,865   |  
|Savings                                                                                                                                                                    |  |                                      | 79,278    |   |                                       |   | 82,860    |  
|Time deposits:                                                                                                                                                             |  |                                      |           |   |                                       |   |           |  
|Less than $100                                                                                                                                                             |  |                                      | 939,926   |   |                                       |   | 889,788   |  
|$100 or more                                                                                                                                                               |  |                                      | 364,771   |   |                                       |   | 356,845   |  
|                                                                                                                                                                           |  |                                      |           |   |                                       |   |           |  
|Total deposits                                                                                                                                                             |  |                                      | 2,565,154 |   |                                       |   | 2,495,040 |  
|                                                                                                                                                                           |  |                                     
|Federal Home Loan Bank borrowings                                                                                                                                          |  |                                      | 225,857   |   |                                       |   | 228,215   |  
|Other borrowings                                                                                                                                                           |  |                                      | 49,403    |   |                                       |   | 49,254    |  
|Interest payable                                                                                                                                                           |  |                                      | 3,503     |   |                                       |   | 3,573     |  
|Other liabilities                                                                                                                                                          |  |                                      | 16,044    |   |                                       |   | 18,481    |  
|                                                                                                                                                                           |  |                                      |           |   |                                       |   |           |  
|                                                                                                                                                                           |  |                                     
|Total liabilities                                                                                                                                                          |  |                                      | 2,859,961 |   |                                       |   | 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 March 31, 2010 and December 31, 2009 |  |                                      | 20,326    |   |                                       |   | 19,919    |  
|Series B non-convertible, non-cumulative perpetual preferred stock, $1,000 liquidation value, 37,550 shares issued and
outstanding on March 31, 2010 and December 31, 2009 |  |                                      | 39,423    |   |                                       |   | 39,729    |  
|Series C fixed rate, cumulative preferred stock, $1,000 liquidation value, 80,347 shares issued and outstanding on March 31,
2010 and December 31, 2009                    |  |                                      | 75,592    |   |                                       |   | 75,322    |  
|Common stock, $0.625 par value, 100,000,000 shares authorized; 22,154,320 shares issued and outstanding on March 31, 2010
and December 31, 2009                            |  |                                      | 13,846    |   |                                       |   | 13,846    |  
|Capital surplus                                                                                                                                                            |  |                                      | 165,502   |   |                                       |   | 165,391   |  
|Retained deficit                                                                                                                                                           |  |                                      | (228,944  | ) |                                       |   | (188,488  | )
|Accumulated other comprehensive income (loss), net of tax                                                                                                                  |  |                                      | 441       |   |                                       |   | (746      | )
|                                                                                                                                                                           |  |                                      |           |   |                                       |   |           |  
|                                                                                                                                                                           |  |                                     
|Total shareholders equity                                                                                                                                                 |  |                                      | 86,186    |   |                                       |   | 125,013   |  
|                                                                                                                                                                           |  |                                      |           |   |                                       |   |           |  
|                                                                                                                                                                           |  |                                     
|Total liabilities and shareholders equity                                                                                                                                 |  | $                                    | 2,946,147 |   |                                       | $ | 2,919,576 |  
|                                                                                                                                                                           |  |                                      |           |   |                                       |   |           |  

See accompanying notes to the consolidated financial statements.



3



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ---------- | - | -------------- | - | ---------- | -
|(in thousands, except share and per share data)                                                                                                                                                                                                                   |  | Three Months Ended |           
|                                                                                                                                                                                                                                                                  |  | As Restated        |            |   |                |  
|(unaudited)                                                                                                                                                                                                                                                       |  | March 31, 2010     |            |   | March 31, 2009 |  
|Interest Income:                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Loans, including fees                                                                                                                                                                                                                                             |  | $                  | 32,254     |   |                | $ | 37,735     |  
|Investment securities                                                                                                                                                                                                                                             |  |                    | 1,717      |   |                |   | 1,780      |  
|Overnight funds sold and due from Federal Reserve Bank                                                                                                                                                                                                            |  |                    | 95         |   |                |   |           |  
|Interest-bearing deposits in other banks                                                                                                                                                                                                                          |  |                    | 29         |   |                |   | 16         |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Total interest income                                                                                                                                                                                                                                             |  |                    | 34,095     |   |                |   | 39,531     |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Interest Expense:                                                                                                                                                                                                                                                 |  |                    |            |   |                |   |            |  
|Deposits:                                                                                                                                                                                                                                                         |  |                    |            |   |                |   |            |  
|Demand                                                                                                                                                                                                                                                            |  |                    | 3,801      |   |                |   | 1,665      |  
|Savings                                                                                                                                                                                                                                                           |  |                    | 129        |   |                |   | 427        |  
|Time deposits:                                                                                                                                                                                                                                                    |  |                    |            |   |                |   |            |  
|Less than $100                                                                                                                                                                                                                                                    |  |                    | 3,950      |   |                |   | 4,932      |  
|$100 or more                                                                                                                                                                                                                                                      |  |                    | 2,238      |   |                |   | 3,300      |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Interest on deposits                                                                                                                                                                                                                                              |  |                    | 10,118     |   |                |   | 10,324     |  
|Federal Home Loan Bank borrowings                                                                                                                                                                                                                                 |  |                    | 1,313      |   |                |   | 1,709      |  
|Other borrowings                                                                                                                                                                                                                                                  |  |                    | 731        |   |                |   | 1,219      |  
|Overnight funds purchased                                                                                                                                                                                                                                         |  |                    |           |   |                |   | 205        |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Total interest expense                                                                                                                                                                                                                                            |  |                    | 12,162     |   |                |   | 13,457     |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|                                                                                                                                                                                                                                                                  |  |                   
|Net interest income                                                                                                                                                                                                                                               |  |                    | 21,933     |   |                |   | 26,074     |  
|Provision for loan losses                                                                                                                                                                                                                                         |  |                    | 45,613     |   |                |   | 1,189      |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Net interest income (expense) after provision for loan losses                                                                                                                                                                                                     |  |                    | (23,680    | ) |                |   | 24,885     |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Noninterest Income:                                                                                                                                                                                                                                               |  |                    |            |   |                |   |            |  
|Service charges on deposit accounts                                                                                                                                                                                                                               |  |                    | 1,665      |   |                |   | 2,059      |  
|Mortgage banking revenue                                                                                                                                                                                                                                          |  |                    | 1,755      |   |                |   | 1,642      |  
|Gain on sale of investment securities available for sale                                                                                                                                                                                                          |  |                    | 79         |   |                |   |           |  
|Gain on sale of premises and equipment                                                                                                                                                                                                                            |  |                    | 25         |   |                |   | 5          |  
|Losses on foreclosed real estate                                                                                                                                                                                                                                  |  |                    | (738       | ) |                |   | (2         | )
|Other-than-temporary impairment of securities (includes total other-than-temporary impairment losses of $234 and $18, net of $190
and $0 recognized in other comprehensive income for the three months ended March 31, 2010 and 2009, respectively, before taxes) |  |                    | (44        | ) |                |   | (18        | )
|Insurance revenue                                                                                                                                                                                                                                                 |  |                    | 1,320      |   |                |   | 1,312      |  
|Brokerage revenue                                                                                                                                                                                                                                                 |  |                    | 74         |   |                |   | 46         |  
|Income from bank-owned life insurance                                                                                                                                                                                                                             |  |                    | 400        |   |                |   | 400        |  
|Other                                                                                                                                                                                                                                                             |  |                    | 1,065      |   |                |   | 996        |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Total noninterest income                                                                                                                                                                                                                                          |  |                    | 5,601      |   |                |   | 6,440      |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Noninterest Expense:                                                                                                                                                                                                                                              |  |                    |            |   |                |   |            |  
|Salaries and employee benefits                                                                                                                                                                                                                                    |  |                    | 9,750      |   |                |   | 11,234     |  
|Occupancy                                                                                                                                                                                                                                                         |  |                    | 2,298      |   |                |   | 1,919      |  
|Data processing                                                                                                                                                                                                                                                   |  |                    | 1,480      |   |                |   | 1,198      |  
|FDIC insurance                                                                                                                                                                                                                                                    |  |                    | 1,056      |   |                |   | 639        |  
|Equipment                                                                                                                                                                                                                                                         |  |                    | 1,091      |   |                |   | 389        |  
|Other                                                                                                                                                                                                                                                             |  |                    | 5,305      |   |                |   | 4,469      |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Total noninterest expense                                                                                                                                                                                                                                         |  |                    | 20,980     |   |                |   | 19,848     |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Income (loss) before provision for income taxes                                                                                                                                                                                                                   |  |                    | (39,059    | ) |                |   | 11,477     |  
|Provision for income taxes                                                                                                                                                                                                                                        |  |                    | 62         |   |                |   | 4,110      |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Net income (loss)                                                                                                                                                                                                                                                 |  |                    | (39,121    | ) |                |   | 7,367      |  
|Preferred stock dividend and accretion of discount                                                                                                                                                                                                                |  |                    | 1,375      |   |                |   | 2,964      |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Net income (loss) available to common shareholders                                                                                                                                                                                                                |  | $                  | (40,496    | ) |                | $ | 4,403      |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|                                                                                                                                                                                                                                                                  |  |                   
|Per Common Share:                                                                                                                                                                                                                                                 |  |                    |            |   |                |   |            |  
|Cash dividends declared                                                                                                                                                                                                                                           |  | $                  |           |   |                | $ | 0.11       |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Basic earnings (loss)                                                                                                                                                                                                                                             |  | $                  | (1.83      | ) |                | $ | 0.20       |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Diluted earnings (loss)                                                                                                                                                                                                                                           |  | $                  | (1.83      | ) |                | $ | 0.20       |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Basic weighted average shares outstanding                                                                                                                                                                                                                         |  |                    | 22,133,603 |   |                |   | 21,741,879 |  
|Effect of dilutive stock options and non-vested stock                                                                                                                                                                                                             |  |                    |           |   |                |   | 20,903     |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  
|Diluted weighted average shares outstanding                                                                                                                                                                                                                       |  |                    | 22,133,603 |   |                |   | 21,762,782 |  
|                                                                                                                                                                                                                                                                  |  |                    |            |   |                |   |            |  

See accompanying notes to the consolidated financial statements.



4



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS EQUITY



|                                                                                               |  |                 |  |              |         |        |            |          |   |                 |                               |          |         |                    |             |          |   |        |   |       |   |  |   |         |  
|---------------------------------------------------------------------------------------------- |  | --------------- |  | ------------ | ------- | ------ | ---------- | -------- | - | --------------- | ----------------------------- | -------- | ------- | ------------------ | ----------- | -------- | - | ------ | - | ----- | - |  | - | ------- | -
|(in thousands, except share data)                                                              |  | Preferred Stock |  | Common Stock |         |        |            | Retained |   |                 | AccumulatedOtherComprehensive |          |         | TotalStockholders |            
|(unaudited)                                                                                    |  | Shares          |  | Amount       |         | Shares |            | Amount   |   | Capital Surplus |                               | Earnings |         |                    | 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 income:                                                                          |  |                 |  |              |         |        |            |          |   |                 |                               |          |         |                    |             |          |   |        |   |       |   |  |   |         |  
|Net loss (as restated)                                                                         |  |                |  |              |        |        |           |          |   |                |                               |          |        |                    |             | (39,121  | ) |        |   |      |   |  |   | (39,121 | )
|Change in unrealized gain on securities available for sale, net of taxes of $621               |  |                |  |              |        |        |           |          |   |                |                               |          |        |                    |             |         |   |        |   | 1,210 |   |  |   | 1,210   |  
|Reclassification adjustment for securities gains included in net income, net of taxes of ($12) |  |                |  |              |        |        |           |          |   |                |                               |          |        |                    |             |         |   |        |   | (23   | ) |  |   | (23     | )
|                                                                                               |  |                 |  |              |         |        |            |          |   |                 |                               |          |         |                    |             |          |   |        |   |       |   |  |   |         |  
|Total comprehensive income                                                                     |  |                 |  |              |         |        |            |          |   |                 |                               |          |         |                    |             |          |   |        |   |       |   |  |   | (37,934 | )
|Shares issued related to:                                                                      |  |                 |  |              |         |        |            |          |   |                 |                               |          |         |                    |             |          |   |        |   |       |   |  |   |         |  
|Stock-based compensation expense                                                               |  |                |  |              |        |        |           |          |   |                |                               |          | 111     |                    |             |         |   |        |   |      |   |  |   | 111     |  
|Amortization of fair market value adjustment                                                   |  |                |  |              | 101     |        |           |          |   |                |                               |          |        |                    |             | (101     | ) |        |   |      |   |  |   |        |  
|Preferred stock dividend declared and amortization of preferred stock discount                 |  |                |  |              | 270     |        |           |          |   |                |                               |          |         |                    |             | (1,274   | ) |        |   |      |   |  |   | (1,004  | )
|                                                                                               |  |                 |  |              |         |        |            |          |   |                 |                               |          |         |                    |             |          |   |        |   |       |   |  |   |         |  
|                                                                                               |  |                 |  |              |         |        |            |         
|Balance at March 31, 2010 as Restated                                                          |  | 141,163         |  | $            | 135,341 |        | 22,154,320 |          | $ | 13,846          |                               | $        | 165,502 |                    | $           | (228,944 | ) |        | $ | 441   |   |  | $ | 86,186  |  
|                                                                                               |  |                 |  |              |         |        |            |          |   |                 |                               |          |         |                    |             |          |   |        |   |       |   |  |   |         |  

See accompanying notes to the consolidated financial statements.



5



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                  |  |                           |         |   |                |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | -------------- | - | ------- | -
|(in thousands)                                                                    |  | Three Months Ended        |        
|(unaudited)                                                                       |  | As RestatedMarch 31, 2010 |         |   | March 31, 2009 |  
|                                                                                  |  |                          
|Operating Activities:                                                             |  |                           |         |   |                |   |         |  
|Net income (loss)                                                                 |  | $                         | (39,121 | ) |                | $ | 7,367   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                           |         |   |                |   |         |  
|Depreciation and amortization                                                     |  |                           | 1,333   |   |                |   | 1,427   |  
|Amortization of intangible assets and fair value adjustments                      |  |                           | (4      | ) |                |   | (1,650  | )
|Provision for loan losses                                                         |  |                           | 45,613  |   |                |   | 1,189   |  
|Proceeds from mortgage loans held for sale                                        |  |                           | 63,232  |   |                |   | 71,790  |  
|Originations of mortgage loans held for sale                                      |  |                           | (66,534 | ) |                |   | (79,737 | )
|Stock-based compensation expense                                                  |  |                           | 111     |   |                |   | 124     |  
|Net amortization of premiums and accretion of discounts on investment securities  |  |                           | 316     |   |                |   | 195     |  
|Gain on sale of premises and equipment                                            |  |                           | (25     | ) |                |   | (5      | )
|Losses on foreclosed real estate and repossessed assets                           |  |                           | 738     |   |                |   | 2       |  
|Gain on sale of investment securities available for sale                          |  |                           | (79     | ) |                |   |        |  
|Gain on sale of loans                                                             |  |                           |        |   |                |   | (15     | )
|Earnings on bank-owned life insurance                                             |  |                           | (400    | ) |                |   | (400    | )
|Other-than-temporary impairment of securities                                     |  |                           | 44      |   |                |   | 18      |  
|Deferred income tax benefit                                                       |  |                           | (14,576 | ) |                |   | (478    | )
|Deferred tax asset valuation allowance                                            |  |                           | 14,341  |   |                |   |        |  
|Changes in:                                                                       |  |                           |         |   |                |   |         |  
|Interest receivable                                                               |  |                           | (683    | ) |                |   | (558    | )
|Other assets                                                                      |  |                           | 1,097   |   |                |   | (1,127  | )
|Interest payable                                                                  |  |                           | (69     | ) |                |   | (1,059  | )
|Other liabilities                                                                 |  |                           | (3,812  | ) |                |   | 6,509   |  
|                                                                                  |  |                           |         |   |                |   |         |  
|                                                                                  |  |                          
|Net cash provided by operating activities                                         |  |                           | 1,522   |   |                |   | 3,592   |  
|                                                                                  |  |                           |         |   |                |   |         |  
|                                                                                  |  |                          
|Investing Activities:                                                             |  |                           |         |   |                |   |         |  
|Proceeds from maturities and calls of debt securities available for sale          |  |                           | 5,540   |   |                |   | 9,056   |  
|Proceeds from sale of investment securities available for sale                    |  |                           | 767     |   |                |   |         |  
|Purchase of debt securities available for sale                                    |  |                           | (22,591 | ) |                |   |        |  
|Proceeds from sales of restricted equity securities                               |  |                           |        |   |                |   | 853     |  
|Purchase of restricted equity securities                                          |  |                           |        |   |                |   | (1,672  | )
|Proceeds from the sale of loans                                                   |  |                           |        |   |                |   | 697     |  
|Net increase (decrease) in loans                                                  |  |                           | 30,555  |   |                |   | (1,643  | )
|Purchase of premises and equipment                                                |  |                           | (97     | ) |                |   | (1,694  | )
|Proceeds from sale of foreclosed real estate                                      |  |                           | 1,120   |   |                |   | 894     |  
|Proceeds from sale of premises and equipment                                      |  |                           | 34      |   |                |   | 57      |  
|                                                                                  |  |                           |         |   |                |   |         |  
|                                                                                  |  |                          
|Net cash provided by investing activities                                         |  |                           | 15,328  |   |                |   | 6,548   |  
|                                                                                  |  |                           |         |   |                |   |         |  
|                                                                                  |  |                          
|Financing Activities:                                                             |  |                           |         |   |                |   |         |  
|Net increase (decrease) in deposits                                               |  |                           | 70,374  |   |                |   | (2,182  | )
|Proceeds from Federal Home Loan Bank borrowings                                   |  |                           |        |   |                |   | 5,000   |  
|Repayments of Federal Home Loan Bank borrowings                                   |  |                           | (1,516  | ) |                |   | (11,517 | )
|Net increase in overnight funds borrowed                                          |  |                           |        |   |                |   | 14,350  |  
|Common stock repurchased                                                          |  |                           |        |   |                |   | (542    | )
|Proceeds from exercise of stock options                                           |  |                           |        |   |                |   | 82      |  
|Preferred stock dividends paid and amortization of preferred stock discount       |  |                           | 270     |   |                |   | (2,462  | )
|Common stock dividends paid, net of reinvestment                                  |  |                           |        |   |                |   | (1,863  | )
|                                                                                  |  |                           |         |   |                |   |         |  
|                                                                                  |  |                          
|Net cash provided by financing activities                                         |  |                           | 69,128  |   |                |   | 866     |  
|                                                                                  |  |                           |         |   |                |   |         |  
|                                                                                  |  |                          
|Increase in cash and cash equivalents                                             |  |                           | 85,978  |   |                |   | 11,006  |  
|Cash and cash equivalents at beginning of period                                  |  |                           | 200,044 |   |                |   | 48,312  |  
|                                                                                  |  |                           |         |   |                |   |         |  
|                                                                                  |  |                          
|Cash and cash equivalents at end of period                                        |  | $                         | 286,022 |   |                | $ | 59,318  |  
|                                                                                  |  |                           |         |   |                |   |         |  



6



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                   |  |                    |        |                |   |        |  
|-------------------------------------------------- |  | ------------------ | ------ | -------------- | - | ------ | -
|                                                   |  | Three Months Ended |       
|                                                   |  | March 31, 2010     |        | March 31, 2009 |  
|                                                   |  |                   
|Supplemental cash flow information:                |  |                    |        |                |   |        |  
|Cash paid for interest                             |  | $                  | 12,231 |                | $ | 14,516 |  
|Cash paid for income taxes                         |  |                    |       |                |   |       |  
|                                                   |  |                   
|Supplemental non-cash information:                 |  |                    |        |                |   |        |  
|Dividends reinvested                               |  | $                  |       |                | $ | 531    |  
|Change in unrealized gain (loss) on securities     |  |                    | 1,837  |                |   | (85    | )
|Transfer between loans and other real estate owned |  |                    | 18,277 |                |   | 1,786  |  

See accompanying notes to the
consolidated financial statements.



7



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



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 three months ended March 31, 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 thereto
included in the Companys annual report on Form 10-K for the year ended December 31, 2009 (the 2009 Form 10-K).

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 residential 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.



8



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



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.

NOTE B  RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

Subsequent to filing the Companys annual report on Form 10-K for the year ended December 31, 2009 and its Form 10-Q for the three months ended March
31, 2010, 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.

Accordingly, the December 31, 2009 consolidated balance sheet and the March 31, 2010 consolidated financial
statements have been restated to account for this determination. The effect of this change in the consolidated financial statements was as follows (in thousands, except per share amounts).

Consolidated Balance Sheet at March 31, 2010



|                                           |  |             |           |   |            |   |         |             |  |   |           |  
|------------------------------------------ |  | ----------- | --------- | - | ---------- | - | ------- | ----------- |  | - | --------- | -
|                                           |  | As Reported |           |   | Adjustment |   |         | As Restated | 
|                                           |  |             |          
|Deferred tax assets, net                   |  | $           | 70,323    |   |            | $ | (70,323 | )           |  | $ |          |  
|Total assets                               |  |             | 3,016,470 |   |            |   | (70,323 | )           |  |   | 2,946,147 |  
|Retained earnings deficit                  |  |             | (158,621  | ) |            |   | (70,323 | )           |  |   | (228,944  | )
|Total shareholders equity                 |  |             | 156,509   |   |            |   | (70,323 | )           |  |   | 86,186    |  
|Total Liabilities and shareholders equity |  |             | 3,016,470 |   |            |   | (70,323 | )           |  |   | 2,946,147 |  

Consolidated Balance Sheet at
December 31, 2009



|                                           |  |             |           |   |            |   |         |             |  |   |           |  
|------------------------------------------ |  | ----------- | --------- | - | ---------- | - | ------- | ----------- |  | - | --------- | -
|                                           |  | As Reported |           |   | Adjustment |   |         | As Restated | 
|                                           |  |             |          
|Deferred tax assets, net                   |  | $           | 56,380    |   |            | $ | (55,983 | )           |  | $ | 397       |  
|Total assets                               |  |             | 2,975,559 |   |            |   | (55,983 | )           |  |   | 2,919,576 |  
|Retained earnings deficit                  |  |             | (132,465  | ) |            |   | (55,983 | )           |  |   | (188,488  | )
|Total shareholders equity                 |  |             | 180,996   |   |            |   | (55,983 | )           |  |   | 125,013   |  
|Total Liabilities and shareholders equity |  |             | 2,975,559 |   |            |   | (55,983 | )           |  |   | 2,919,576 |  

Consolidated Statement of
Operations for the three months ended March 31, 2010



|                                          |  |             |         |   |            |   |         |             |  |   |         |  
|----------------------------------------- |  | ----------- | ------- | - | ---------- | - | ------- | ----------- |  | - | ------- | -
|                                          |  | As Reported |         |   | Adjustment |   |         | As Restated | 
|                                          |  |             |        
|Provision for income taxes                |  | $           | (14,279 | ) |            | $ | 14,341  |             |  | $ | 62      |  
|Net loss                                  |  |             | (24,780 | ) |            |   | (14,341 | )           |  |   | (39,121 | )
|Net loss available to common shareholders |  |             | (26,155 | ) |            |   | (14,341 | )           |  |   | (40,496 | )
|Loss per share - basic                    |  |             | (1.18   | ) |            |   | (0.65   | )           |  |   | (1.83   | )
|Loss per share - diluted                  |  |             | (1.18   | ) |            |   | (0.65   | )           |  |   | (1.83   | )

Consolidated Statement of Cash Flows
for the three months ended March 31, 2010



|                                       |  |             |         |   |            |   |         |             |  |   |         |  
|-------------------------------------- |  | ----------- | ------- | - | ---------- | - | ------- | ----------- |  | - | ------- | -
|                                       |  | As Reported |         |   | Adjustment |   |         | As Restated | 
|                                       |  |             |        
|Operating activities                   |  |             |         |   |            |   |         |             |  |   |         |  
|Net loss                               |  | $           | (24,780 | ) |            | $ | (14,341 | )           |  | $ | (39,121 | )
|Deferred tax asset valuation allowance |  |             |        |   |            |   | 14,341  |             |  |   | 14,341  |  



9



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE C  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 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, is not a party to the Written Agreement.

Written Agreement

Under the terms of
the Written Agreement, the Bank has agreed to develop and submit for approval, within the time periods specified, plans to (a) strengthen board oversight of management and the Banks operations, (b) strengthen credit risk management policies,
(c) improve the Bank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 the Banks problem loan list, or adversely
classified in any report of examination of the Bank, (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 the Bank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 the
Banks reliance on brokered deposits, and (h) improve the Banks earnings and overall condition.

In addition, the Bank 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 the Bank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 the Bank 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 and its Form 10-Q for the three months ended March 31, 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 the Bank have entered into and described above and the Banks 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 $39.1 million for the quarter ended March 31, 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.

Capital Adequacy

As of March 31, 2010,
the Company was considered significantly undercapitalized and BOHR was considered to be undercapitalized under regulatory guidelines and must improve its capital in accordance with the Written Agreement.



10



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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.

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.

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

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 the Banks undercapitalized status, we are unable to accept, rollover, or renew any brokered deposits. At March 31, 2010 the Company had
approximately $286.0 million in available cash on hand and unpledged investment securities of approximately $100.1 million.

Based on our
current and expected liquidity needs and sources, management expects to be able to meet all of its obligations at least through March 31, 2011.

NOTE D  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 three months ended March 31, 2010 and 2009 were as follows.



|                                           |  |           |        |      |   |       
|------------------------------------------ |  | --------- | ------ | ---- | - | ------
|                                           |  | March 31,
|                                           |  | 2010      |        | 2009
|Expense recognized:                        |  |           |        |      |   |       
|Related to stock options                   |  | $         | 31,189 |      | $ | 38,327
|Related to share awards                    |  |           | 79,898 |      |   | 85,793
|Related tax benefit                        |  |           | 29,709 |      |   | 33,783
|                                           |  |          
|Number of options exercised:               |  |           |        |      |   |       
|New shares                                 |  |           |       |      |   |      
|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.



11



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



A summary of the Companys stock option activity and related information for the three months ended
March 31, 2010 is as follows:



|                                      |  |                    |   |  |                               |       |                       |   |  
|------------------------------------- |  | ------------------ | - |  | ----------------------------- | ----- | --------------------- | - | -
|                                      |  | OptionsOutstanding |   |  | WeightedAverageExercise Price |       | AverageIntrinsicValue
|                                      |  |                    |  
|Balance at December 31, 2009          |  | 1,420,213          |   |  | $                             | 12.60 |                       | $ | 
|Expired                               |  | (53,228            | ) |  |                               | 10.34 |                       |   | 
|                                      |  |                    |   |  |                               |       |                       |   |  
|                                      |  |                    |  
|Balance at March 31, 2010             |  | 1,366,985          |   |  | $                             | 12.68 |                       | $ | 
|                                      |  |                    |   |  |                               |       |                       |   |  
|                                      |  |                    |  
|Options exercisable at March 31, 2010 |  | 1,271,152          |   |  | $                             | 12.50 |                       | $ | 
|                                      |  |                    |   |  |                               |       |                       |   |  

Information pertaining to options outstanding and options exercisable
as of March 31, 2010 is as follows.



|                         |  |                              |  |                                          |  |                                |       |                              |           |                                |   |      
|------------------------ |  | ---------------------------- |  | ---------------------------------------- |  | ------------------------------ | ----- | ---------------------------- | --------- | ------------------------------ | - | -----
|                         |  | Options Outstanding          |  | Options Exercisable                     
|Ranges of ExercisePrices |  | Number of OptionsOutstanding |  | WeightedAverage RemainingContractualLife |  | Weighted AverageExercise Price |       | Number of OptionsExercisable |           | Weighted AverageExercise Price
|                         |  |                              |  |                                          | 
|$3.09 - $5.05            |  | 61,751                       |  | 2.22                                     |  | $                              | 4.13  |                              | 61,751    |                                | $ | 4.13 
|$6.53 - $8.84            |  | 307,951                      |  | 2.17                                     |  |                                | 8.04  |                              | 312,311   |                                |   | 8.04 
|$9.11 - $10.65           |  | 393,754                      |  | 3.54                                     |  |                                | 9.75  |                              | 391,964   |                                |   | 9.75 
|$12.00 - $14.33          |  | 194,884                      |  | 6.75                                     |  |                                | 12.08 |                              | 125,576   |                                |   | 12.11
|$19.43 - $22.07          |  | 355,212                      |  | 4.95                                     |  |                                | 20.04 |                              | 326,117   |                                |   | 19.89
|$23.60 - $24.67          |  | 53,433                       |  | 5.34                                     |  |                                | 24.22 |                              | 53,433    |                                |   | 24.22
|                         |  |                              |  |                                          |  |                                |       |                              |           |                                |   |      
|$3.09 - $24.67           |  | 1,366,985                    |  | 4.07                                     |  | $                              | 12.68 |                              | 1,271,152 |                                | $ | 12.50
|                         |  |                              |  |                                          |  |                                |       |                              |           |                                |   |      

The Company may issue new shares to satisfy stock option grants. As of
March 31, 2010, there were 786,535 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 March 31, 2010,
there was $301 thousand of unrecognized compensation cost related to non-vested stock options. That cost is expected to be recognized over a weighted-average period of 3.5 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 three months ended March 31, 2010 is as follows:



|                             |  |                 |   |  |                                               |      
|---------------------------- |  | --------------- | - |  | --------------------------------------------- | -----
|                             |  | Number ofShares |   |  | Per
ShareWeighted-AverageGrant-DateFair Value
|                             |  |                
|Balance at December 31, 2009 |  | 21,917          |   |  | $                                             | 10.12
|Vested                       |  | (2,000          | ) |  |                                               | 8.54 
|                             |  |                 |   |  |                                               |      
|                             |  |                
|Balance at March 31, 2010    |  | 19,917          |   |  | $                                             | 10.28
|                             |  |                 |   |  |                                               |      

As of March 31, 2010, there was $95 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 3.55 years.



12



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE E  INVESTMENT SECURITIES

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



|                                    |  |                   |         |                       |   |                        |  |                     |       |  |   |        
|----------------------------------- |  | ----------------- | ------- | --------------------- | - | ---------------------- |  | ------------------- | ----- |  | - | -------
|                                    |  | March 31, 2010   
|Description of Securities           |  | AmortizedCost     |         | Gross UnrealizedGains |   | Gross UnrealizedLosses |  | EstimatedFair Value
|                                    |  |                   |         |                      
|Agency securities                   |  | $                 | 15,507  |                       | $ | 230                    |  | $                   | 79    |  | $ | 15,658 
|Mortgage-backed securities          |  |                   | 159,020 |                       |   | 894                    |  |                     | 555   |  |   | 159,359
|State and municipal securities      |  |                   | 1,006   |                       |   | 8                      |  |                     |      |  |   | 1,014  
|Equity securities                   |  |                   | 2,652   |                       |   | 440                    |  |                     | 243   |  |   | 2,849  
|                                    |  |                   |         |                       |   |                        |  |                     |       |  |   |        
|                                    |  |                   |         |                      
|Total securities available for sale |  | $                 | 178,185 |                       | $ | 1,572                  |  | $                   | 877   |  | $ | 178,880
|                                    |  |                   |         |                       |   |                        |  |                     |       |  |   |        
|                                    | 
|                                    |  | 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 March 31, 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.



|                           |  |                     |        |                   |   |                     |  |                |       |                     |   |                |  |   |        |  |   |      
|-------------------------- |  | ------------------- | ------ | ----------------- | - | ------------------- |  | -------------- | ----- | ------------------- | - | -------------- |  | - | ------ |  | - | -----
|                           |  | March 31, 2010     
|                           |  | Less than 12 Months |        | 12 Months or More |   | Total              
|Description of Securities  |  | EstimatedFair Value |        | UnrealizedLoss    |   | EstimatedFair Value |  | UnrealizedLoss |       | EstimatedFair Value |   | UnrealizedLoss
|                           |  |                     |        |                   |   |                    
|Agency securities          |  | $                   | 4,726  |                   | $ | 79                  |  | $              |      |                     | $ |               |  | $ | 4,726  |  | $ | 79   
|Mortgage-backed securities |  |                     | 86,015 |                   |   | 555                 |  |                |      |                     |   |               |  |   | 86,015 |  |   | 555  
|Equity securities          |  |                     |       |                   |   |                    |  |                | 1,177 |                     |   | 243            |  |   | 1,177  |  |   | 243  
|                           |  |                     |        |                   |   |                     |  |                |       |                     |   |                |  |   |        |  |   |      
|                           |  | $                   | 90,741 |                   | $ | 634                 |  | $              | 1,177 |                     | $ | 243            |  | $ | 91,918 |  | $ | 877  
|                           |  |                     |        |                   |   |                     |  |                |       |                     |   |                |  |   |        |  |   |      
|                           | 
|                           |  | 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.



13



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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 March 31, 2010 were considered to be directly related to interest rate movements as there is minimal credit risk exposure in these investments. Debt securities with unrealized loss positions at March 31, 2010 included one agency
security and 24 mortgage-backed securities. Management does not believe that any of these debt securities were other-than-temporarily impaired at March 31, 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 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 three months of 2010 and 2009, equity securities with an amortized cost basis of $91 thousand and $49 thousand,
respectively, were determined to be other-than-temporarily impaired. Impairment losses of $44 thousand and $18 thousand were recognized through noninterest income during the first quarter of 2010 and 2009, respectively. An additional $190 thousand
was included in accumulated other comprehensive loss in the equity section of the balance sheet as of March 31, 2010. Management has evaluated the unrealized losses associated with the remaining equity securities as of March 31, 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                |  |   | (77   | )
|Add: Loss where impairment was not previously recognized |  |   | 44    |  
|                                                         |  |   |       |  
|March 31, 2010                                           |  | $ | 2,997 |  
|                                                         |  |   |       |  

The Companys investment in Federal Home Loan Bank (FHLB) stock totaled $19.7 million at March 31,
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. Despite the FHLBs change in policy relating to repurchases of excess capital stock in 2009, the Company does not
consider this investment to be other-than-temporarily impaired at March 31, 2010, and no impairment has been recognized.



14



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE F  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 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 origination and for which it was
probable that all contractually required payments would not be made as scheduled had an outstanding balance of $73.7 million and a carrying amount of $66.3 million at March 31, 2010. The carrying amount of these loans is included in the balance
sheet amount of loans receivable at March 31, 2010. Of these loans, $47.3 million have experienced further deterioration since the acquisition date and are included in the impaired loan amounts disclosed in Note F. 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                  |  |                 | (202  | )
|Disposals                  |  |                 | (494  | )
|Additions                  |  |                 | 623   |  
|                           |  |                 |       |  
|Balance, March 31, 2010    |  | $               | 969   |  
|                           |  |                 |       |  



15



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE G  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.



|                                     |  |                |           |   |                   |   |           |  
|------------------------------------ |  | -------------- | --------- | - | ----------------- | - | --------- | -
|                                     |  | March 31, 2010 |           |   | December 31, 2009 |  
|                                     |  |               
|Commercial                           |  | $              | 344,801   |   |                   | $ | 361,256   |  
|Construction                         |  |                | 708,244   |   |                   |   | 757,702   |  
|Real estate-commercial mortgage      |  |                | 736,592   |   |                   |   | 740,570   |  
|Real estate-residential mortgage     |  |                | 526,533   |   |                   |   | 524,853   |  
|Installment loans (to individuals)   |  |                | 34,744    |   |                   |   | 42,858    |  
|Deferred loan fees and related costs |  |                | (516      | ) |                   |   | (547      | )
|                                     |  |                |           |   |                   |   |           |  
|                                     |  |               
|Total loans                          |  | $              | 2,350,398 |   |                   | $ | 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 March 31, 2010 and December 31, 2009, loans to executive officers, directors, and their associates were $84.7 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.

Bank of Hampton Roads (BOHR) and Shore Bank (Shore) had loans outstanding to the Company with aggregate balances of $21.5 million
and $2.0 million, respectively, as of March 31, 2010. 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.

NOTE H  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 three months ended March 31, 2010 and 2009 were as follows.



|                               |  |      |         |   |      |   |        |  
|------------------------------ |  | ---- | ------- | - | ---- | - | ------ | -
|                               |  | 2010 |         |   | 2009 |  
|                               |  |     
|Balance at beginning of period |  | $    | 132,697 |   |      | $ | 51,218 |  
|Provision for loan losses      |  |      | 45,613  |   |      |   | 1,189  |  
|Loans charged off              |  |      | (28,119 | ) |      |   | (398   | )
|Recoveries                     |  |      | 1,035   |   |      |   | 189    |  
|                               |  |      |         |   |      |   |        |  
|Balance at end of period       |  | $    | 151,226 |   |      | $ | 52,198 |  
|                               |  |      |         |   |      |   |        |  

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 $276.7 million or 9% of total assets at March 31, 2010 compared with $257.2 million or 9% of total assets at December 31, 2009. Non-performing assets (in thousands) were as
follows.



|                                                   |  |                |         |                   |   |        
|-------------------------------------------------- |  | -------------- | ------- | ----------------- | - | -------
|                                                   |  | March 31, 2010 |         | December 31, 2009
|                                                   |  |               
|Loans 90 days past due and still accruing interest |  | $              |        |                   | $ |       
|Nonaccrual loans                                   |  |                | 251,421 |                   |   | 248,303
|Foreclosed real estate and repossessed assets      |  |                | 25,286  |                   |   | 8,867  
|                                                   |  |                |         |                   |   |        
|                                                   |  |               
|Total non-performing assets                        |  | $              | 276,707 |                   | $ | 257,170
|                                                   |  |                |         |                   |   |        



16



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Estimated gross interest income that would have been recorded during the three months ended
March 31, 2010 if the foregoing nonaccrual loans had remained current in accordance with their contractual terms totaled $6.1 million. Information (in thousands) on impaired loans is as follows.



|                                                                                 |  |                |         |                   |   |        
|-------------------------------------------------------------------------------- |  | -------------- | ------- | ----------------- | - | -------
|                                                                                 |  | March 31, 2010 |         | December 31, 2009
|                                                                                 |  |               
|Impaired loans for which an allowance has been provided                          |  | $              | 350,129 |                   |   | 331,532
|Impaired loans for which no allowance has been provided                          |  |                | 107,101 |                   |   | 137,536
|                                                                                 |  |                |         |                   |   |        
|Total impaired loans                                                             |  | $              | 457,230 |                   | $ | 469,068
|                                                                                 |  |                |         |                   |   |        
|                                                                                 |  |               
|Allowance provided for impaired loans, included in the allowance for loan losses |  | $              | 106,919 |                   | $ | 91,488 
|                                                                                 |  |                |         |                   |   |        
|Average balance in impaired loans                                                |  | $              | 472,727 |                   | $ | 215,363
|                                                                                 |  |                |         |                   |   |        
|Interest income recognized from impaired loans                                   |  | $              | 2,631   |                   | $ | 17,440 
|                                                                                 |  |                |         |                   |   |        

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



|                                    |  |                                   |  |                                         |         |                                            |   |        
|----------------------------------- |  | --------------------------------- |  | --------------------------------------- | ------- | ------------------------------------------ | - | -------
|Loan Category                       |  | Method Used to
Measure Impairment |  | March 31, 2010Impaired
LoansOutstanding |         | December 31, 2009Impaired
LoansOutstanding
|1-4 family residential construction |  | Estimated fair market value       |  | $                                       | 19,425  |                                            | $ | 20851  
|Other construction and development  |  | Estimated fair market value       |  |                                         | 228,392 |                                            |   | 237,313
|Secured by farm land                |  | Estimated fair market value       |  |                                         | 684     |                                            |   | 1,318  
|Secured by 1-4 family, revolving    |  | Estimated fair market value       |  |                                         | 5,193   |                                            |   | 6,018  
|Secured by 1-4 family, 1st lien     |  | Estimated fair market value       |  |                                         | 31,948  |                                            |   | 32,532 
|Secured by 1-4 family, junior lien  |  | Estimated fair market value       |  |                                         | 1,452   |                                            |   | 1,502  
|Secured by multifamily              |  | Estimated fair market value       |  |                                         | 11,342  |                                            |   | 8,137  
|Secured by nonfarm nonresidential   |  | Discounted Cash Flow              |  |                                         | 7,966   |                                            |   |       
|(owner occupied)                    |  | Estimated fair market value       |  |                                         | 24,469  |                                            |   | 29,309 
|                                    |  |                                   |  |                                         |         |                                            |   |        
|                                    |  | Subtotal                          |  |                                         | 32,435  |                                            |   | 29,309 
|Secured by nonfarm nonresidential   |  |                                   |  |                                         |         |                                            |   |        
|(non-owner occupied)                |  | Estimated fair market value       |  |                                         | 85,483  |                                            |   | 75,947 
|Commercial and industrial           |  | Estimated fair market value       |  |                                         | 40,808  |                                            |   | 56,081 
|Other consumer loans to individuals |  | Estimated fair market value       |  |                                         | 68      |                                            |   | 60     
|                                    |  |                                   |  |                                         |         |                                            |   |        
|Total impaired loans                |  |                                   |  | $                                       | 457,230 |                                            | $ | 469,068
|                                    |  |                                   |  |                                         |         |                                            |   |        

As of March 31, 2010 and December 31, 2009 loans classified as
troubled debt restructuring and include in the disclosure above totaled $85.9 million and $73.5 million respectively. Of these amounts $70.0 million and $56.6 million were on accrual status and $15.9 million and $16.9 million were non-accruing at
March 31, 2010 and December 31, 2010, respectively. 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 March 31, 2010.

A loan is
considered impaired when management believes the principal is uncollectible. For collateral dependent impaired loans, impaired 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 down 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 impairment loans were $457.2 million and $469.1 million at March 31, 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 $107.1 million and $137.5 million at March 31, 2010 and December 31, 2009, respectively. Loans written to their estimated fair value of collateral less the costs to sell account for $ 42.3 and $ 22.1 of the impaired loans for which
no allowance has been provided as of March 31, 2010 and December 31, 2009, respectively. The average age of appraisals for these loans is 1.20 years at March 31, 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.

In the opinion of management, based on conditions
reasonably known to them, the allowance was adequate at March 31, 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 I  PREMISES AND EQUIPMENT

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



|                                               |  |                |         |   |                   |   |         |  
|---------------------------------------------- |  | -------------- | ------- | - | ----------------- | - | ------- | -
|                                               |  | March 31, 2010 |         |   | December 31, 2009 |  
|                                               |  |               
|Land                                           |  | $              | 31,335  |   |                   | $ | 31,335  |  
|Buildings and improvements                     |  |                | 58,204  |   |                   |   | 58,177  |  
|Leasehold improvements                         |  |                | 3,411   |   |                   |   | 3,411   |  
|Equipment, furniture, and fixtures             |  |                | 14,794  |   |                   |   | 14,828  |  
|Construction in process                        |  |                | 15      |   |                   |   | 7       |  
|                                               |  |                |         |   |                   |   |         |  
|                                               |  |                | 107,759 |   |                   |   | 107,758 |  
|Less accumulated depreciation and amortization |  |                | (11,462 | ) |                   |   | (10,246 | )
|                                               |  |                |         |   |                   |   |         |  
|                                               |  |               
|Premises and equipment, net                    |  | $              | 96,297  |   |                   | $ | 97,512  |  
|                                               |  |                |         |   |                   |   |         |  



17



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE J  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 three months of 2010 and 2009 was $148 thousand and $195 thousand, respectively.

NOTE K  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.



|                                      |  |                |        |                         |   |                |  |                         |        |  |   |      
|------------------------------------- |  | -------------- | ------ | ----------------------- | - | -------------- |  | ----------------------- | ------ |  | - | -----
|                                      |  | March 31, 2010 |        | December 31, 2009      
|                                      |  | CarryingAmount |        | AccumulatedAmortization |   | CarryingAmount |  | AccumulatedAmortization
|Intangible assets:                    |  |                |        |                         |   |                |  |                         |        |  |   |      
|                                      |  |                |        |                        
|Core deposit intangible               |  | $              | 8,105  |                         | $ | 2,042          |  | $                       | 8,105  |  | $ | 1,703
|Employment contract intangibles       |  |                | 1,130  |                         |   | 762            |  |                         | 1,130  |  |   | 713  
|Insurance book of business intangible |  |                | 6,450  |                         |   | 538            |  |                         | 6,450  |  |   | 430  
|                                      |  |                |        |                         |   |                |  |                         |        |  |   |      
|                                      |  |                |        |                        
|Total intangible assets               |  | $              | 15,685 |                         | $ | 3,342          |  | $                       | 15,685 |  | $ | 2,846
|                                      |  |                |        |                         |   |                |  |                         |        |  |   |      

NOTE L  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.



|                             |  |                |      |   |                |   |  
|---------------------------- |  | -------------- | ---- | - | -------------- | - | -
|                             |  | March 31, 2010 |      |   | March 31, 2009
|                             |  |               
|Balance at beginning of year |  | $              | 356  |   |                | $ | 
|Provision for losses         |  |                | 724  |   |                |   | 
|Charge-offs                  |  |                | (449 | ) |                |   | 
|                             |  |                |      |   |                |   |  
|Balance at end of year       |  | $              | 631  |   |                | $ | 
|                             |  |                |      |   |                |   |  

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



|                                         |  |                |    
|---------------------------------------- |  | -------------- | ---
|                                         |  | March 31, 2010
|                                         | 
|Net loss on sales of real estate         |  | $              | 14 
|Provision for losses                     |  |                | 724
|Operating expenses, net of rental income |  |                |   
|                                         |  |                |    
|Total                                    |  | $              | 738
|                                         |  |                |    

There were no foreclosed asset expenses for the three month period
ended March 31, 2009.



18



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE M  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. 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
March 31, 2010, December 31, 2009, and March 31, 2009 for each segment and in total.



|                                                    |  |       |           |   |             |   |          |         |  |   |           |   |            |   |        |           |   |       |   |  |   |       
|--------------------------------------------------- |  | ----- | --------- | - | ----------- | - | -------- | ------- |  | - | --------- | - | ---------- | - | ------ | --------- | - | ----- | - |  | - | ------
|                                                    |  | Total |           |   | Elimination |   |          | Banking |  |   | Mortgage  |   | Investment |   |        | Insurance
|                                                    |  |       |           |   |             |  
|Total Assets at March 31, 2010 as Restated          |  | $     | 2,946,147 |   |             | $ | (35,664  | )       |  | $ | 2,952,313 |   |            | $ | 18,809 |           | $ | 1,152 |   |  | $ | 9,537 
|                                                    |  |       |           |   |             |   |          |         |  |   |           |   |            |   |        |           |   |       |   |  |   |       
|                                                    |  |       |           |   |             |  
|Total Assets at December 31, 2009 as Restated       |  | $     | 2,919,576 |   |             | $ | (303,100 | )       |  | $ | 3,197,510 |   |            | $ | 13,599 |           | $ | 1,163 |   |  | $ | 10,404
|                                                    |  |       |           |   |             |   |          |         |  |   |           |   |            |   |        |           |   |       |   |  |   |       
|                                                    |  |       |           |   |             |  
|Three Months Ended March 31, 2010 as Restated       |  | Total |           |   | Elimination |   |          | Banking |  |   | Mortgage  |   | Investment |   |        | Insurance
|                                                    |  |       |           |   |             |  
|Net interest income                                 |  | $     | 21,933    |   |             | $ |         |         |  | $ | 21,845    |   |            | $ | 85     |           | $ |      |   |  | $ | 3     
|Provision for loan losses                           |  |       | 45,613    |   |             |   |         |         |  |   | 45,613    |   |            |   |       |           |   |      |   |  |   |      
|                                                    |  |       |           |   |             |   |          |         |  |   |           |   |            |   |        |           |   |       |   |  |   |       
|Net interest income after provision for loan losses |  |       | (23,680   | ) |             |   |         |         |  |   | (23,768   | ) |            |   | 85     |           |   |      |   |  |   | 3     
|Noninterest income                                  |  |       | 5,601     |   |             |   |         |         |  |   | 2,487     |   |            |   | 1,755  |           |   | 39    |   |  |   | 1,320 
|Noninterest expense                                 |  |       | 20,980    |   |             |   |         |         |  |   | 18,467    |   |            |   | 1,336  |           |   | 52    |   |  |   | 1,126 
|                                                    |  |       |           |   |             |   |          |         |  |   |           |   |            |   |        |           |   |       |   |  |   |       
|Net income (loss) before income taxes (benefit)     |  |       | (39,059   | ) |             |   |         |         |  |   | (39,747   | ) |            |   | 504    |           |   | (13   | ) |  |   | 197   
|Income tax expense (benefit)                        |  |       | 62        |   |             |   |         |         |  |   | (178      | ) |            |   | 176    |           |   | (5    | ) |  |   | 69    
|                                                    |  |       |           |   |             |   |          |         |  |   |           |   |            |   |        |           |   |       |   |  |   |       
|Net income (loss)                                   |  | $     | (39,121   | ) |             | $ |         |         |  | $ | (39,569   | ) |            | $ | 328    |           | $ | (8    | ) |  | $ | 128   
|                                                    |  |       |           |   |             |   |          |         |  |   |           |   |            |   |        |           |   |       |   |  |   |       
|                                                    |  |       |           |   |             |  
|Three Months Ended March 31, 2009                   |  | Total |           |   | Elimination |   |          | Banking |  |   | Mortgage  |   | Investment |   |        | Insurance
|                                                    |  |       |           |   |             |  
|Net interest income                                 |  | $     | 26,074    |   |             | $ | (77      | )       |  | $ | 26,078    |   |            | $ | 70     |           | $ |      |   |  | $ | 3     
|Provision for loan losses                           |  |       | 1,189     |   |             |   |         |         |  |   | 1,189     |   |            |   |       |           |   |      |   |  |   |      
|                                                    |  |       |           |   |             |   |          |         |  |   |           |   |            |   |        |           |   |       |   |  |   |       
|Net interest income after provision for loan losses |  |       | 24,885    |   |             |   | (77      | )       |  |   | 24,889    |   |            |   | 70     |           |   |      |   |  |   | 3     
|Noninterest income                                  |  |       | 6,440     |   |             |   |         |         |  |   | 3,435     |   |            |   | 1,642  |           |   | 46    |   |  |   | 1,317 
|Noninterest expense                                 |  |       | 19,848    |   |             |   |         |         |  |   | 17,655    |   |            |   | 995    |           |   | 27    |   |  |   | 1,171 
|                                                    |  |       |           |   |             |   |          |         |  |   |           |   |            |   |        |           |   |       |   |  |   |       
|Net income before income taxes                      |  |       | 11,477    |   |             |   | (77      | )       |  |   | 10,669    |   |            |   | 717    |           |   | 19    |   |  |   | 149   
|Income tax expense                                  |  |       | 4,110     |   |             |   |         |         |  |   | 3,800     |   |            |   | 251    |           |   | 7     |   |  |   | 52    
|                                                    |  |       |           |   |             |   |          |         |  |   |           |   |            |   |        |           |   |       |   |  |   |       
|Net income                                          |  | $     | 7,367     |   |             | $ | (77      | )       |  | $ | 6,869     |   |            | $ | 466    |           | $ | 12    |   |  | $ | 97    
|                                                    |  |       |           |   |             |   |          |         |  |   |           |   |            |   |        |           |   |       |   |  |   |       

NOTE N  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



19



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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 sheet at March 31, 2010 and December 31, 2009.



|                                               |  |                                           |         |                                                             |   |                                             |  |                                         |         |  |   |      
|---------------------------------------------- |  | ----------------------------------------- | ------- | ----------------------------------------------------------- | - | ------------------------------------------- |  | --------------------------------------- | ------- |  | - | -----
|                                               |  |                                           |         | Fair Value Measurements
atMarch 31, 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                              |  | $                                         | 15,658  |                                                             | $ |                                            |  | $                                       | 15,658  |  | $ |     
|Mortgage-backed securities                     |  |                                           | 159,359 |                                                             |   |                                            |  |                                         | 159,359 |  |   |     
|State and municipal securities                 |  |                                           | 1,014   |                                                             |   |                                            |  |                                         | 1,014   |  |   |     
|Equity securities                              |  |                                           | 2,849   |                                                             |   | 1,621                                       |  |                                         |        |  |   | 1,228
|                                               |  |                                           |         |                                                             |   |                                             |  |                                         |         |  |   |      
|Total investment securities available for sale |  |                                           | 178,880 |                                                             |   | 1,621                                       |  |                                         | 176,031 |  |   | 1,228
|                                               |  |                                           |         |                                                            
|Derivative loan commitments                    |  |                                           | 549     |                                                             |   |                                            |  |                                         |        |  |   | 549  
|Loans held for sale                            |  |                                           | 15,917  |                                                             |   |                                            |  |                                         | 15,917  |  |   |     



20



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                               |  |                                            |         |                                                              |   |                                            |  |                                        |         |  |   |      
|---------------------------------------------- |  | ------------------------------------------ | ------- | ------------------------------------------------------------ | - | ------------------------------------------ |  | -------------------------------------- | ------- |  | - | -----
|                                               |  |                                            |         | Fair Value Measurements
atDecember 31, 2009 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                              |  | $                                          | 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
InputsThree Months Ended March 31
|                                           |  | 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 losses included in:             |  |                                                                                          |      |                           |         |                   |        |  |         |      |         |   |     |  |   |       
|Earnings                                   |  |                                                                                          | (44   | )                         |         |                   |        |  |         |      |         |   |    |  |   |      
|Other comprehensive loss                   |  |                                                                                          | 586   |                           |         |                   | 878     |  |         |      |         |   |    |  |   |      
|Purchases, issuances, and settlements, net |  |                                                                                          | (279  | )                         |         |                   | 16,677  |  |         |      |         |   | 348 |  |   | 3,302 
|Transfers in and/or out, net               |  |                                                                                          |      |                           |         |                   |        |  |         |      |         |   |    |  |   |      
|                                           |  |                                                                                          |       |                           |         |                   |         |  |         |       |         |   |     |  |   |       
|Balance, March 31, 2010                    |  | $                                                                                        | 1,621 |                           |         | $                 | 176,031 |  | $       | 1,228 |         | $ | 549 |  | $ | 15,917
|                                           |  |                                                                                          |       |                           |         |                   |         |  |         |       |         |   |     |  |   |       

The following describe 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 a 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 March 31, 2010, mortgage loans held for sale had a net carrying value of $15.9 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.



21



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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 of 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 is situated on both a temporal and collateral type axis in an
attempt to compensate for value fluctuations within the respective asset classes situated in the captured time period. 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. To address the changing economic conditions prevalent during 2009, 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 3.13 years as of March 31, 2010. Management periodically reviews the discounts in the matrix as compared to valuations from updated
appraisals and modifes 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.



|               |  |                                            |         |                            |   |         |  |             |         |  |   |        |  |   |  
|-------------- |  | ------------------------------------------ | ------- | -------------------------- | - | ------- |  | ----------- | ------- |  | - | ------ |  | - | -
|Description    |  | Assets / 
LiabilitiesMeasured atFair Value |         | Fair Value Measurements at |   |        
|               |  | March 31, 2010 Using                       |         |                           
|               |  | Level 1                                    |         | Level 2                    |   | Level 3 |  | TotalLosses
|               |  |                                            |         |                            |  
|Impaired loans |  | $                                          | 243,210 |                            | $ |        |  | $           | 165,371 |  | $ | 77,839 |  | $ | 
|               |  |                                            |        
|Description    |  | Assets / 
LiabilitiesMeasured atFair Value |         | Fair Value Measurements at |   |        
|               |  | December 31, 2009 Using                    |         |                           
|               |  | Level 1                                    |         | Level 2                    |   | Level 3 |  | TotalLosses
|               |  |                                            |         |                            |  
|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.



22



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                              |  |                                            |         |                            |         |   |         |   |        |  |   |   |  |   |       
|--------------------------------------------- |  | ------------------------------------------ | ------- | -------------------------- | ------- | - | ------- | - | ------ |  | - | - |  | - | ------
|                                              |  | Assets / 
LiabilitiesMeasured atFair Value |         | Fair Value Measurements at |         |  
|                                              |  | March 31, 2010 Using                       |         | Total                     
|Description                                   |  |                                            | Level 1 |                            | Level 2 |   | Level 3 |   | Losses
|                                              |  |                                            |         |                            |        
|Foreclosed real estate and repossessed assets |  | $                                          | 25,286  |                            | $       |  |         | $ | 25,286 |  | $ |  |  | $ | 738   
|                                              |  |                                            |        
|                                              |  | Assets / 
LiabilitiesMeasured atFair Value |         | Fair Value Measurements at |         |  
|                                              |  | December 31, 2009 Using                    |         | Total                     
|Description                                   |  |                                            | Level 1 |                            | Level 2 |   | Level 3 |   | Losses
|                                              |  |                                            |         |                            |        
|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.



| | (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.



23



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | (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 March 31, 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
March 31, 2010 and December 31, 2009 were as follows.



|                                         |  |                |           |                   |   |           |  |       |           |  |   |          
|---------------------------------------- |  | -------------- | --------- | ----------------- | - | --------- |  | ----- | --------- |  | - | ---------
|                                         |  | March 31, 2010 |           | December 31, 2009
|                                         |  | Carrying       |           | Fair              |   | Carrying  |  | Fair 
|                                         |  | Value          |           | Value             |   | Value     |  | Value
|Assets:                                  |  |                |           |                   |   |           |  |       |           |  |   |          
|Cash and due from banks                  |  | $              | 17,225    |                   | $ | 17,225    |  | $     | 16,995    |  | $ | 16,995   
|Overnight funds sold and due from FRB    |  |                | 229,583   |                   |   | 229,583   |  |       | 139,228   |  |   | 139,228  
|Interest-bearing deposits in other banks |  |                | 39,214    |                   |   | 39,214    |  |       | 43,821    |  |   | 43,821   
|Investment securities available for sale |  |                | 178,880   |                   |   | 178,880   |  |       | 161,062   |  |   | 161,062  
|Loans held for sale                      |  |                | 15,917    |                   |   | 15,917    |  |       | 12,615    |  |   | 12,615   
|Loans, net                               |  |                | 2,199,172 |                   |   | 2,251,233 |  |       | 2,293,995 |  |   | 2,364,702
|Interest receivable                      |  |                | 9,471     |                   |   | 9,471     |  |       | 8,788     |  |   | 8,788    
|Bank-owned life insurance                |  |                | 48,755    |                   |   | 48,755    |  |       | 48,354    |  |   | 48,354   
|                                         |  |                |           |                  
|Liabilities:                             |  |                |           |                   |   |           |  |       |           |  |   |          
|Deposits                                 |  |                | 2,565,154 |                   |   | 2,556,745 |  |       | 2,495,040 |  |   | 2,486,449
|FHLB borrowings                          |  |                | 225,857   |                   |   | 231,003   |  |       | 228,215   |  |   | 233,356  
|Other borrowings                         |  |                | 49,403    |                   |   | 50,404    |  |       | 49,254    |  |   | 50,316   
|Interest payable                         |  |                | 3,503     |                   |   | 3,503     |  |       | 3,572     |  |   | 3,572    

NOTE O  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.



24



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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 new executive compensation and corporate governance obligations on all current and future TARP recipients until the institution has redeemed the preferred stock. This Act
restricts golden parachute payments to senior executive officers and the next five most highly compensated employees during the period of time any obligations arising from financial assistance provided under the TARP remains outstanding. 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 senior
executive employees and the next 20 most highly compensated employees before the date of enactment of the ARRA to determine whether such payments were inconsistent with the purposes of the Act.

NOTE P  OTHER NONINTEREST EXPENSE



|                                          |  |                    |        |      |   |       
|----------------------------------------- |  | ------------------ | ------ | ---- | - | ------
|                                          |  | Three Months Ended
|                                          |  | March 31,         
|                                          |  | 2010               |        | 2009
|Salaries and employee benefits            |  | $                  | 9,750  |      | $ | 11,234
|Occupancy                                 |  |                    | 2,298  |      |   | 1,919 
|Data processing                           |  |                    | 1,480  |      |   | 1,198 
|FDIC insurance                            |  |                    | 1,056  |      |   | 639   
|Equipment                                 |  |                    | 1,091  |      |   | 389   
|Professional fees                         |  |                    | 1,316  |      |   | 275   
|Bank franchise tax                        |  |                    | 510    |      |   | 444   
|Stationary, printing, and office supplies |  |                    | 239    |      |   | 142   
|Telephone and postage                     |  |                    | 391    |      |   | 440   
|Amortization of intangible assets         |  |                    | 495    |      |   | 334   
|Advertising and marketing                 |  |                    | 148    |      |   | 143   
|Directors and regional board fees        |  |                    | 137    |      |   | 284   
|Other                                     |  |                    | 2,069  |      |   | 2,407 
|                                          |  |                    |        |      |   |       
|Total noninterest expense                 |  | $                  | 20,980 |      | $ | 19,848
|                                          |  |                    |        |      |   |       

NOTE Q  SUBSEQUENT EVENTS

On April 9, 2010, the Company exercised its right to continue the deferral of all quarterly distributions on the Trust Preferred Securities it
assumed in connection with its merger with GFH.



25



---

##### 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 March 31,
2010, the related consolidated statements of operations for the three-month periods ended March 31, 2010 and 2009, consolidated statement of changes in shareholders equity for the three-month period ended March 31, 2010 and the
consolidated statements of cash flows for the three-month periods ended March 31, 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 consolidated financial statements referred
to above for them to be in conformity with U.S. generally accepted accounting principles.

As discussed in Note B to the consolidated
financial statements, the March 31, 2010 and December 31, 2009 consolidated financial statements have been restated to correct a misstatement.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note C
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 C. 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

May 17, 2010, except for Notes B and C, as to which the date is August 13, 2010



26



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Hampton Roads Bankshares, Inc. was incorporated under the laws of the Commonwealth of Virginia and serves as a holding company for BOHR and Shore. In
addition to our retail and commercial banking services, we offer insurance, title, mortgage, and investment services.

Our Managements
Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to assist readers in understanding and evaluating our consolidated results of operations and financial condition. The following should be
read in conjunction with our 2009 audited Consolidated Financial Statements and our 2009 Form 10-K.

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 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 quarter of 2010 and may continue to do so in the future, and we can make no assurances as to
when we will be profitable;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



| |  |  | 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 expect to enter into a written agreement with our regulators, which will require us to designate a significant amount of resources to complying with
the agreement that could impair our operations or restrict our growth;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company may not be able to meet federal regulatory requirements regarding the restoration of capital of BOHR.
| | - |  | -----------------------------------------------------------------------------------------------------------------



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



| |  |  | 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;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



27



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



Managements Discussion and Analysis of
Financial Condition and Results of Operations



| |  |  | 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;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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;
| | - |  | ---------------------------------------------------------



| |  |  | Our management has identified a material weakness in our internal control over financial reporting, which if not properly remediated, could result in
material misstatements in our future interim and annual financial statements and have a material adverse effect on our business, financial condition, and results of operations and the price of our Common Stock;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | If we are unable to redeem the Series C Preferred Stock prior to January 1, 2014, the cost of this capital to us will increase substantially;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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;
| | - |  | -------------------------------------------------------------------------------------------------------------------



28



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



Managements Discussion and Analysis of
Financial Condition and Results of Operations



| |  |  | 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.

Overview

Throughout 2009 and into the
first quarter 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 quarter ended March 31, 2010, primarily as a result of a significant increase to our provision for loan losses.

As of March 31, 2010, we believe Shore remained well capitalized under applicable banking regulations while BOHR was
undercapitalized and the consolidated Company was significantly 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 and financial performance as of March 31, 2010 and for the three month period then ended:



| |  |  | Assets were $2.9 billion. They increased by $26.6 million or 1% for the first three months of 2010 from December 31, 2009. The increase in assets
was driven by an $86.0 million increase in cash and cash equivalents, offset by a $76.3 million decrease in loans.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Investment securities available for sale increased $17.8 million to $178.9 million for the first three 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 $76.3 million or 3% for the three months ended March 31, 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 $70.1 million or 3% as new customer deposit activity more than offset the decline in brokered deposits.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



29



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



Managements Discussion and Analysis of
Financial Condition and Results of Operations



| |  |  | Net loss available to common shareholders for the quarter ended March 31, 2010 was $(40.5) million or $(1.83) per common diluted share as compared
with net income available to common shareholders of $4.4 million or $0.20 per common diluted share for the quarter ended March 31, 2009. The net loss was primarily attributable to provision for loan losses expense of $45.6 million.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Net interest margin was 3.39% at March 31, 2010 compared to 3.77% and 4.01% for the quarter ended March 31, 2009 and December 31, 2009,
respectively.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Net interest income decreased $4.1 million for the three months ended March 31, 2010 as compared to the same period 2009.
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | Noninterest income for the three months ended March 31, 2010 was $5.6 million, a 13% decrease over the comparative period in 2009.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Noninterest expense was $21.0 million for the three months ended March 31, 2010, which was an increase of $1.1 million or 6% over the comparable
periods for 2009.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 $45.6 million in the first quarter of 2010 from $1.2 million in the first quarter of 2009. The
increased expense contributed to a net loss available to common shareholders of $26.2 million for the first quarter 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.

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 Federal Reserve Bank (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
March 31, 2010 were $286.0 million and consisted mainly of deposits with the FHLB and the FRB. These deposits increased $86.0 million in the first quarter of 2010, from $200.0 million at December 31, 2009.



30



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



Managements Discussion and Analysis of
Financial Condition and Results of Operations



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, 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 March 31, 2010, the estimated fair value of our investment securities was $178.9 million, an increase of $17.8 million or 11% from $161.1 million
at December 31, 2009. The increase during first quarter 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. The average balance for first quarter 2010 was $206.2 million compared to $172.7 million for the first quarter of 2009.

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 $76.3 million or 3% to $2.4 billion as of March 31, 2010 compared to December 31, 2009. Commercial loans
decreased 5% to $344.8 million at March 31, 2010 compared with $361.3 million at December 31, 2009. Real estate commercial mortgages decreased 1% to $736.6 million at March 31, 2010 compared to $740.6 million at December 31,
2009. Real estate residential mortgages increased $1.6 million to $526.5 million at March 31, 2010 as compared with $524.9 million at December 31, 2009. Installment loans to individuals decreased 19% to $34.7 million at March 31, 2010
compared with $42.9 million at December 31, 2009. Construction loans also decreased 7% to $708.2 million at March 31, 2010 as compared with $757.7 million at December 31, 2009, thus lowering the concentration of construction loans to
30% of the total loan portfolio at March 31, 2010 compared with 31% at December 31, 2009.

Within the construction segment of the
loan portfolio, the Bank has exposure to $110 million of loans in which interest payments are satisfied through the use of a reserve that was funded by the Bank upon origination and represents a portion of the borrowers total liability to the
Bank. In the instance of commercial construction, ultimate repayment is dependent upon stabilization of the funded project; whereas, in residential development, the Bank 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 Bank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



31



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



Managements Discussion and Analysis of
Financial Condition and Results of Operations



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.

The allowance for loan losses was $151.2 million or 6.43% of outstanding loans
as of March 31, 2010 compared with $132.7 million or 5.47% of outstanding loans as of December 31, 2009. We increased the allowance for loan losses $18.5 million (net of charge-offs and recoveries) during the first three months of 2010.
Pooled loan allocations increased slightly to $35.6 million at March 31, 2010 from $34.1 million at December 31, 2009. Allowance coverage for the non-impaired portfolio is determined using a methodology that incorporate 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 $15.4 million to $106.9 million at March 31, 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 increased $1.6 million. The following table provides a breakdown of the allowance for loan losses and other related information (in thousands) at March 31, 2010 and 2009.



|                                            |  |           |           |   |              |   |           |  
|------------------------------------------- |  | --------- | --------- | - | ------------ | - | --------- | -
|                                            |  | March 31, |           |   | December 31, |  
|                                            |  | 2010      |           |   | 2009         |  
|Allowance for loan losses:                  |  |           |           |   |              |   |           |  
|Pooled component                            |  | $         | 35,578    |   |              | $ | 34,050    |  
|Specific component                          |  |           | 106,919   |   |              |   | 91,488    |  
|Unallocated component                       |  |           | 8,729     |   |              |   | 7,159     |  
|                                            |  |           |           |   |              |   |           |  
|Total                                       |  | $         | 151,226   |   |              | $ | 132,697   |  
|                                            |  |           |           |   |              |   |           |  
|                                            |  |          
|Impaired loans                              |  | $         | 457,230   |   |              | $ | 469,068   |  
|Non-impaired loans                          |  |           | 1,893,168 |   |              |   | 1,957,624 |  
|                                            |  |           |           |   |              |   |           |  
|Total loans                                 |  | $         | 2,350,398 |   |              | $ | 2,426,692 |  
|                                            |  |           |           |   |              |   |           |  
|                                            |  |          
|Pooled component as % of non-impaired loans |  |           | 1.87      | % |              |   | 1.74      | %
|Specific component as % of impaired loans   |  |           | 23.38     | % |              |   | 19.50     | %
|                                            |  |          
|Allowance as of % of loans                  |  |           | 6.43      | % |              |   | 5.47      | %
|Allowance as of % of nonaccrual loans       |  |           | 60.15     | % |              |   | 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.



32



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



Managements Discussion and Analysis of
Financial Condition and Results of Operations



|                                                                                                             |  |               |   |  |                  |  
|------------------------------------------------------------------------------------------------------------ |  | ------------- | - |  | ---------------- | -
|                                                                                                             |  | March 31,2010 |   |  | December 31,2009 |  
|Non-performing loans for which full loss has been charged off to total loans                                 |  | 1.80          | % |  | 0.91             | %
|                                                                                                             |  |              
|Non-performing loans for which full loss has been charged off to non-performing loans                        |  | 16.84         | % |  | 8.91             | %
|                                                                                                             |  |              
|Charge off rate for nonperforming loans which the full loss has been charged off                             |  | 37.22         | % |  | 42.46            | %
|                                                                                                             |  |              
|Coverage ratio net of nonperforming loans for which the full loss has been charged off                       |  | 72.33         | % |  | 58.67            | %
|                                                                                                             |  |              
|Total allowance divided by total loans less nonperforming loans for which the full loss has been charged off |  | 6.55          | % |  | 5.52             | %
|                                                                                                             |  |              
|Allowance for individually impaired loans divided by impaired loans for which an allowance has been provided |  | 30.54         | % |  | 27.60            | %

A loan is considered impaired
when management believes the principal is uncollectible. 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 $457.2 million at March 31, 2010, a decrease of $11.8 million or 3% over December 31, 2009. Of these loans, $251.4 million were on nonaccrual status at March 31, 2010.

Non-Performing Assets. Non-performing assets as a percentage of total assets remained at 9% at March 31, 2010 as
nonaccrual loans increased $3.1 million. Total nonaccrual loans aggregated $251.4 million at March 31, 2010 as compared with $248.3 million at December 31, 2009. Net charge-offs were $27.1 million for the quarter ended March 31, 2010
as compared with $32.1 million for the quarter ended December 31, 2009.

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



|                                   |  |               |         |                   |   |        
|---------------------------------- |  | ------------- | ------- | ----------------- | - | -------
|                                   |  | March 31,2010 |         | December 
31,2009
|                                   |  |              
|Commercial                         |  | $             | 24,571  |                   | $ | 24,803 
|Construction                       |  |               | 137,835 |                   |   | 150,325
|Real estate - commercial mortgage  |  |               | 64,356  |                   |   | 50,858 
|Real estate - residential mortgage |  |               | 24,606  |                   |   | 22,146 
|Installment loans (to individuals) |  |               | 53      |                   |   | 171    
|                                   |  |               |         |                   |   |        
|Total nonaccrual loans             |  | $             | 251,421 |                   | $ | 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,



33



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



Managements Discussion and Analysis of
Financial Condition and Results of Operations



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.

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 a result, there were no reported net charge-offs in 2008 on these loans as the initial fair value at acquisition date would have already
considered the estimated credit losses on these loans. As of March 31, 2010, the carrying value was $66.3 million and the unpaid balance on these loans was $73.7 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 5, 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 March 31, 2010 increased $70.1 million
or 3% to $2.6 billion as compared with December 31, 2009. Total brokered deposits were $416.9 million or 16% of deposits at March 31, 2010, which was an increase of $30.5 million from the total brokered deposits of $386.4 million at
December 31, 2009.

Changes in the deposit categories include a decrease of $4.4 million or 2% in noninterest-bearing demand deposits, an
increase of $20.1 million or 2% in interest-bearing demand deposits, and a decrease of $3.6 million or 4% in savings accounts from December 31, 2009 to March 31, 2010. Interest-bearing demand deposits included $5.0 million of brokered
money market funds at March 31, 2010, which was $42.6 million lower than the balance of brokered money market funds of $47.6 million outstanding at December 31, 2009. Therefore, core bank interest-bearing demand deposits increased by $62.7
million over the last three months. Of this increase $10.4 million was related to an increase in our business sweep account and $69.7 million was related to an increase in our money market products; this was offset by a $17.4 million decrease in NOW
accounts. Total time deposits under $100 thousand increased $50.1 million from $889.8 million at December 31, 2009 to $939.9 million at March 31, 2010. Brokered CDs represented $411.9 million, which was an increase of $73.1 million over
the $338.8 million of brokered CDs outstanding at December 31, 2009. Therefore, core bank CDs decreased $23.0 million over the last three months. Time deposits over $100 thousand increased $8.0 million from $356.8 million at December 31,
2009 to $364.8 million at March 31, 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 March 31, 2010 were $225.9 million compared to $228.2 million at December 31, 2009.

Capital Resources. Total shareholders equity decreased $38.8 million or 31% to $86.2 million at March 31, 2010 compared to
$125.0 million at December 31, 2009. The decrease in shareholders equity was primarily a result of the $39.1 million net loss for the three months ended March 31, 2010 and accrual of Series C Preferred dividends (including
amortization of preferred stock discount) of approximately $1.4 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. On February 17, 2010, we notified the U.S. Department of the



34



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



Managements Discussion and Analysis of
Financial Condition and Results of Operations



Treasury (Treasury) of our intent to defer the payment, the second consecutive quarter we have deferred this payment, of our 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 March 31, 2010 was $2.0 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.



|                                    |  |                |        |          |              |   |             |                    |            |                   
|----------------------------------- |  | -------------- | ------ | -------- | ------------ | - | ----------- | ------------------ | ---------- | ------------------
|                                    |  | Amount         |        | Interest |              |   | Redeemable  |                    | Mandatory 
|                                    |  | (in thousands) |        | Rate     |              |   | On Or After |                    | Redemption
|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 $417 thousand at March 31, 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.

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 March 31, 2010, our consolidated regulatory capital ratios are Tier 1 Leverage Ratio of 3.36%,
Tier 1 Risk-Based Capital Ratio of 4.50%, and Total Risk-Based Capital of 5.82%.

As of March 31, 2010, we believe Shore remained
well capitalized under applicable banking regulations while BOHR was undercapitalized and the consolidated Company was significantly 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.

The Companys independent registered public accounting firm has included a going concern emphasis paragraph in their report on the December 31,
2009 consolidated financial statements due to the Companys 2009 financial results, the substantial uncertainty throughout the U.S. banking industry, the Written Agreement the Company and BOHR have entered into and BOHRs
undercapitalized status. See Note 3 to the consolidated financial statements. Nevertheless, the Company contemplates that it will close on a capital raise of at least $275 million in the third quarter of 2010 (the Capital
Raise). The Capital Raise is expected to return the Company and BOHR to significantly above well-capitalized status. However, there can be no assurances that we will be able to close on the Capital Raise or that the Company or BOHR
will return to well capitalized status in 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 13, 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.



35



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



Managements Discussion and Analysis of
Financial Condition and Results of Operations



ANALYSIS OF RESULTS OF
OPERATIONS

Overview. During the first three months of 2010, we incurred a net loss available to common
shareholders of $40.5 million, a decrease of $44.9 million from the net income available to common shareholders of $4.4 million for the first three months of 2009. The loss for the three months ended March 31, 2010 was driven by provision for
loan losses expense of $45.6 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 $1.83 for the three months ended March 31,
2010, a decrease of $2.03 over the diluted earnings per common share of $0.20 for the three months ended March 31, 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 March 31, 2010 was $21.9 million, a decrease of $4.1 million over the three months ended March 31, 2009. The decrease in net interest income was primarily the result of a decrease in interest income from loans due primarily to
a decline in average loans of $452 thousand from March 31, 2009 to March 31, 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. The net interest margin was 3.39% for the three months ended March 31, 2010 compared to 3.77% and 4.01% for the three months ended
March 31, 2009 and December 31, 2009, respectively. The decline in net interest margin from prior periods is due primarily to a $2.4 million favorable adjustment to fair market value amortization of FHLB advance payoffs during the fourth
quarter of 2009, increased levels of nonaccrual loans, and to an increase in low yielding balances at the FRB during the first quarter of 2010, and the effect of purchase accounting adjustments recorded in 2009.

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 $5.5 million for the three months ended March 31, 2010 compared to the three months ended December 31, 2009 as a result of a $113.7 million decrease in average loan balances and an
increase in nonaccrual loans. Interest income on investment securities decreased $63 thousand for the three months ended March 31, 2010 compared to the same time period during 2009. Interest income on interest-bearing deposits in other banks
increased $13 thousand for the three month period ended March 31, 2010 compared to the same time period during 2009. Interest income on overnight funds sold and due from FRB increased $95 thousand for the three months ended March 31, 2010
compared to the same time period during 2009.

Our interest-bearing liabilities consist of deposit accounts and borrowings. Interest expense
on deposits decreased $206 thousand to $10.1 million for the three months ended March 31, 2010 compared to the same time period during 2009. This decrease resulted from a $325.1 million increase in average interest-bearing deposits, offset by a
33 basis point decrease in the average interest rate on deposits. This decrease in our average deposit rates resulted in large part from declining rates on certificates of deposits and savings deposits. These factors contributed significantly toward
a reduction of our average rate on time deposits from 2.69% for the first quarter of 2009 to 1.95% for the first quarter of 2010. Interest expense on borrowings, which consisted of FHLB borrowings, other borrowings, and overnight funds purchased
decreased $1.1 million to $2.0 million for the three months ended March 31, 2010 compared to the same time period during 2009. The $234.6 million decrease in average borrowings netted against a 51 basis point increase in the average interest
rate on borrowings produced this result.

The table below presents the average interest-earning assets and average interest-bearing
liabilities (in thousands), the average yields earned on such assets and rates paid on such liabilities (in thousands), and the net interest margin for the three months ended March 31, 2010, December 31, 2009, and March 31, 2009.



36



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



Managements Discussion and Analysis of
Financial Condition and Results of Operations



|                                           |  |                    |           |                                  |                    |                   |  |                    |                |  |                                  |           |  |                   |         |   |                |       |                                  |  |                   |           |  |   |         |  |      |  
|------------------------------------------ |  | ------------------ | --------- | -------------------------------- | ------------------ | ----------------- |  | ------------------ | -------------- |  | -------------------------------- | --------- |  | ----------------- | ------- | - | -------------- | ----- | -------------------------------- |  | ----------------- | --------- |  | - | ------- |  | ---- | -
|                                           |  | Three Months Ended |           |                                  | Three Months Ended |                   |  | Three Months Ended |               
|                                           |  | March 31, 2010     |           |                                  | December 31, 2009  |                   |  | March 31, 2009     |               
|                                           |  | AverageBalance     |           | AnnualizedInterestIncome/Expense |                    | AverageYield/Rate |  |                    | AverageBalance |  | AnnualizedInterestIncome/Expense |           |  | AverageYield/Rate |         |   | AverageBalance |       | AnnualizedInterestIncome/Expense |  | AverageYield/Rate |          
|Assets:                                    |  |                    |           |                                  |                    |                   |  |                    |                |  |                                  |           |  |                   |         |   |                |       |                                  |  |                   |           |  |   |         |  |      |  
|Interest-earning assets                    |  |                    |           |                                  |                    |                   |  |                    |                |  |                                  |           |  |                   |         |   |                |       |                                  |  |                   |           |  |   |         |  |      |  
|Loans                                      |  | $                  | 2,173,606 |                                  | $                  | 130,809           |  | 6.02               | %              |  | $                                | 2,287,351 |  | $                 | 131,620 |   |                | 5.75  | %                                |  | $                 | 2,625,115 |  | $ | 153,034 |  | 5.83 | %
|Investment securities                      |  |                    | 206,203   |                                  |                    | 6,964             |  | 3.38               | %              |  |                                  | 164,780   |  |                   | 6,133   |   |                | 3.72  | %                                |  |                   | 172,736   |  |   | 7,221   |  | 4.18 | %
|Interest-bearing deposits in other banks   |  |                    | 48,178    |                                  |                    | 117               |  | 0.24               | %              |  |                                  | 32,963    |  |                   | 69      |   |                | 0.21  | %                                |  |                   | 9,280     |  |   | 64      |  | 0.69 | %
|Overnight funds sold and due from FRB      |  |                    | 198,947   |                                  |                    | 384               |  | 0.19               | %              |  |                                  | 155,827   |  |                   | 238     |   |                | 0.15  | %                                |  |                   | 198       |  |   | 1       |  | 0.51 | %
|                                           |  |                    |           |                                  |                    |                   |  |                    |                |  |                                  |           |  |                   |         |   |                |       |                                  |  |                   |           |  |   |         |  |      |  
|Total interest-earning assets              |  |                    | 2,626,934 |                                  |                    | 138,274           |  | 5.26               | %              |  |                                  | 2,640,921 |  |                   | 138,060 |   |                | 5.23  | %                                |  |                   | 2,807,329 |  |   | 160,320 |  | 5.71 | %
|Noninterest-earning assets                 |  |                    | 377,358   |                                  |                    |                   |  |                    |                |  |                                  | 426,747   |  |                   |         |   |                |       |                                  |  |                   | 308,704   |  |   |         |  |      |  
|                                           |  |                    |           |                                  |                    |                   |  |                    |                |  |                                  |           |  |                   |         |   |                |       |                                  |  |                   |           |  |   |         |  |      |  
|Total assets                               |  |                    | 3,004,292 |                                  |                    |                   |  |                    |                |  |                                  | 3,067,668 |  |                   |         |   |                |       |                                  |  |                   | 3,116,033 |  |   |         |  |      |  
|                                           |  |                    |           |                                  |                    |                   |  |                    |                |  |                                  |           |  |                   |         |   |                |       |                                  |  |                   |           |  |   |         |  |      |  
|                                           |  |                    |           |                                  |                    |                   |  |                    |               
|Liabilities and Shareholders Equity:      |  |                    |           |                                  |                    |                   |  |                    |                |  |                                  |           |  |                   |         |   |                |       |                                  |  |                   |           |  |   |         |  |      |  
|Interest-bearing liabilities               |  |                    |           |                                  |                    |                   |  |                    |                |  |                                  |           |  |                   |         |   |                |       |                                  |  |                   |           |  |   |         |  |      |  
|Interest-bearing demand deposits           |  |                    | 954,939   |                                  |                    | 15,416            |  | 1.61               | %              |  |                                  | 777,682   |  |                   | 11,171  |   |                | 1.44  | %                                |  |                   | 631,472   |  |   | 6,751   |  | 1.07 | %
|Savings deposits                           |  |                    | 80,221    |                                  |                    | 525               |  | 0.65               | %              |  |                                  | 92,480    |  |                   | 628     |   |                | 0.68  | %                                |  |                   | 121,482   |  |   | 1,733   |  | 1.43 | %
|Time deposits                              |  |                    | 1,284,574 |                                  |                    | 25,095            |  | 1.95               | %              |  |                                  | 1,306,103 |  |                   | 20,630  |   |                | 1.58  | %                                |  |                   | 1,241,662 |  |   | 33,385  |  | 2.69 | %
|                                           |  |                    |           |                                  |                    |                   |  |                    |                |  |                                  |           |  |                   |         |   |                |       |                                  |  |                   |           |  |   |         |  |      |  
|Total interest-bearing deposits            |  |                    | 2,319,734 |                                  |                    | 41,036            |  | 1.77               | %              |  |                                  | 2,176,265 |  |                   | 32,429  |   |                | 1.49  | %                                |  |                   | 1,994,616 |  |   | 41,869  |  | 2.10 | %
|Borrowings                                 |  |                    | 276,890   |                                  |                    | 8,290             |  | 2.99               | %              |  |                                  | 300,100   |  |                   | (303    | ) |                | -0.10 | %                                |  |                   | 511,495   |  |   | 12,706  |  | 2.48 | %
|                                           |  |                    |           |                                  |                    |                   |  |                    |                |  |                                  |           |  |                   |         |   |                |       |                                  |  |                   |           |  |   |         |  |      |  
|Total interest-bearing liabilities         |  |                    | 2,596,624 |                                  |                    | 49,326            |  | 1.90               | %              |  |                                  | 2,476,365 |  |                   | 32,126  |   |                | 1.30  | %                                |  |                   | 2,506,111 |  |   | 54,575  |  | 2.18 | %
|Noninterest-bearing liabilities            |  |                    |           |                                  |                    |                   |  |                    |                |  |                                  |           |  |                   |         |   |                |       |                                  |  |                   |           |  |   |         |  |      |  
|Demand deposits                            |  |                    | 236,947   |                                  |                    |                   |  |                    |                |  |                                  | 285,481   |  |                   |         |   |                |       |                                  |  |                   | 237,564   |  |   |         |  |      |  
|Other liabilities                          |  |                    | 21,082    |                                  |                    |                   |  |                    |                |  |                                  | 25,524    |  |                   |         |   |                |       |                                  |  |                   | 30,299    |  |   |         |  |      |  
|                                           |  |                    |           |                                  |                    |                   |  |                    |                |  |                                  |           |  |                   |         |   |                |       |                                  |  |                   |           |  |   |         |  |      |  
|Total noninterest-bearing liabilities      |  |                    | 258,029   |                                  |                    |                   |  |                    |                |  |                                  | 311,005   |  |                   |         |   |                |       |                                  |  |                   | 267,863   |  |   |         |  |      |  
|                                           |  |                    |           |                                  |                    |                   |  |                    |                |  |                                  |           |  |                   |         |   |                |       |                                  |  |                   |           |  |   |         |  |      |  
|Total liabilities                          |  |                    | 2,854,653 |                                  |                    |                   |  |                    |                |  |                                  | 2,787,370 |  |                   |         |   |                |       |                                  |  |                   | 2,773,974 |  |   |         |  |      |  
|Shareholders equity                       |  |                    | 189,639   |                                  |                    |                   |  |                    |                |  |                                  | 280,298   |  |                   |         |   |                |       |                                  |  |                   | 342,059   |  |   |         |  |      |  
|                                           |  |                    |           |                                  |                    |                   |  |                    |                |  |                                  |           |  |                   |         |   |                |       |                                  |  |                   |           |  |   |         |  |      |  
|Total liabilities and shareholders equity |  | $                  | 3,004,292 |                                  |                    |                   |  |                    |                |  | $                                | 3,067,668 |  |                   |         |   |                |       |                                  |  | $                 | 3,116,033 |  |   |         |  |      |  
|                                           |  |                    |           |                                  |                    |                   |  |                    |                |  |                                  |           |  |                   |         |   |                |       |                                  |  |                   |           |  |   |         |  |      |  
|Net interest income                        |  |                    |           |                                  | $                  | 88,948            |  |                    |                |  |                                  |           |  | $                 | 105,934 |   |                |       |                                  |  |                   |           |  | $ | 105,745 |  |      |  
|                                           |  |                    |           |                                  |                    |                   |  |                    |                |  |                                  |           |  |                   |         |   |                |       |                                  |  |                   |           |  |   |         |  |      |  
|Net interest spread                        |  |                    |           |                                  |                    |                   |  | 3.36               | %              |  |                                  |           |  |                   |         |   |                | 3.93  | %                                |  |                   |           |  |   |         |  | 3.53 | %
|Net interest margin                        |  |                    |           |                                  |                    |                   |  | 3.39               | %              |  |                                  |           |  |                   |         |   |                | 4.01  | %                                |  |                   |           |  |   |         |  | 3.77 | %

Note: Interest income from
loans included fees of $206 at March 31, 2010, $2,777 at March 31, 2009, and $1,121 at December 31, 2009. Average nonaccrual loans of $251,421 and $201,621 are excluded from average loans at March 31, 2010 and December 31,
2009, respectively. Average nonaccrual loans for March 31, 2009 were not material and are included in average loans above.



37



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



Managements Discussion and Analysis of
Financial Condition and Results of Operations



|                                         |  |                                            |         |   |                                            |   |        |        |  |   |                 |   |  |      |         |   |        |   |        |   |  |   |         |  
|---------------------------------------- |  | ------------------------------------------ | ------- | - | ------------------------------------------ | - | ------ | ------ |  | - | --------------- | - |  | ---- | ------- | - | ------ | - | ------ | - |  | - | ------- | -
|                                         |  | Three Months Ended March 31, 2010 Compared |         |   | Three Months Ended March 31, 2010 Compared |  
|                                         |  | to Three Months Ended December 31, 2009    |         |   | to Three Months Ended March 31, 2009       |  
|                                         |  |                                            |         |   | Variance                                   |   |        |        |  |   | Variance        |  
|                                         |  |                                            |         |   | Attributable to                            |   |        |        |  |   | Attributable to |  
|                                         |  | Total                                      |         |   | Rate                                       |   |        | Volume |  |   | Total           |   |  | Rate |         |   | Volume |  
|Interest-Earning Assets:                 |  |                                            |         |   |                                            |   |        |        |  |   |                 |   |  |      |         |   |        |   |        |   |  |   |         |  
|Loans                                    |  | $                                          | (811    | ) |                                            | $ | 5,937  |        |  | $ | (6,748          | ) |  | $    | (22,225 | ) |        | $ | 4,812  |   |  | $ | (27,037 | )
|Investment securities                    |  |                                            | 831     |   |                                            |   | (603   | )      |  |   | 1,434           |   |  |      | (257    | ) |        |   | (1,521 | ) |  |   | 1,264   |  
|Interest-bearing deposits in other banks |  |                                            | 48      |   |                                            |   | 11     |        |  |   | 37              |   |  |      | 53      |   |        |   | (64    | ) |  |   | 117     |  
|Overnight funds sold and due from FRB    |  |                                            | 146     |   |                                            |   | 75     |        |  |   | 71              |   |  |      | 383     |   |        |   | (1     | ) |  |   | 384     |  
|                                         |  |                                            |         |   |                                            |   |        |        |  |   |                 |   |  |      |         |   |        |   |        |   |  |   |         |  
|Total interest-earning assets            |  |                                            | 214     |   |                                            |   | 5,420  |        |  |   | (5,206          | ) |  |      | (22,046 | ) |        |   | 3,226  |   |  |   | (25,272 | )
|Interest-Bearing Liabilities:            |  |                                            |         |   |                                            |   |        |        |  |   |                 |   |  |      |         |   |        |   |        |   |  |   |         |  
|Deposits                                 |  |                                            | 8,607   |   |                                            |   | 6,365  |        |  |   | 2,242           |   |  |      | (833    | ) |        |   | (7,111 | ) |  |   | 6,278   |  
|Borrowings                               |  |                                            | 8,593   |   |                                            |   | 8,572  |        |  |   | 21              |   |  |      | (4,416  | ) |        |   | 2,238  |   |  |   | (6,654  | )
|                                         |  |                                            |         |   |                                            |   |        |        |  |   |                 |   |  |      |         |   |        |   |        |   |  |   |         |  
|Total interest-bearing liabilities       |  |                                            | 17,200  |   |                                            |   | 14,937 |        |  |   | 2,263           |   |  |      | (5,249  | ) |        |   | (4,873 | ) |  |   | (376    | )
|                                         |  |                                            |         |   |                                            |   |        |        |  |   |                 |   |  |      |         |   |        |   |        |   |  |   |         |  
|Net interest income                      |  | $                                          | (16,986 | ) |                                            | $ | (9,517 | )      |  | $ | (7,469          | ) |  | $    | (16,797 | ) |        | $ | 8,099  |   |  | $ | (24,896 | )
|                                         |  |                                            |         |   |                                            |   |        |        |  |   |                 |   |  |      |         |   |        |   |        |   |  |   |         |  

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.

Noninterest Income.For the quarter ended March 31, 2010, total noninterest income was $5.6 million, a decrease of $839 thousand or 13% as compared to first quarter 2009. Noninterest income comprised 14% of total revenue for both the first quarter of 2010 and
the first quarter of 2009. Service charges on deposit accounts decreased $394 thousand or 19% to $1.7 million for the first quarter 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 $1.8 million in the period ended
March 31, 2010 compared to $1.6 million in the prior year period. This increase was driven by the higher levels of loan originations in 2010.

We generated gains on sales of investment securities of $79 thousand during the first quarter of 2010 and none for comparative 2009. The deteriorating
economy during 2009 and 2010 caused other-than-temporary impairments in our foreclosed real estate and investment securities portfolios. Other-than-temporary impairment of securities of $44 thousand was incurred during first quarter 2010. Losses on
foreclosed real estate for the first quarter of 2010 and 2009 were $738 thousand and $2 thousand, respectively. Both the foreclosed real estate impairments and the other-than-temporary impairment of securities were included as a reduction to
noninterest income. The following tables provide an analysis of noninterest income (in thousands).



38



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



Managements Discussion and Analysis of
Financial Condition and Results of Operations



|                                                      |  |                    |       |   |      |   |       |  
|----------------------------------------------------- |  | ------------------ | ----- | - | ---- | - | ----- | -
|                                                      |  | Three Months Ended |      
|                                                      |  | March 31,          |      
|                                                      |  | 2010               |       |   | 2009 |  
|Service charges on deposit accounts                   |  | $                  | 1,665 |   |      | $ | 2,059 |  
|Mortgage banking revenue                              |  |                    | 1,755 |   |      |   | 1,642 |  
|Gain on sale of premises and equipment                |  |                    | 25    |   |      |   | 5     |  
|Losses on foreclosed real estate                      |  |                    | (738  | ) |      |   | (2    | )
|Other-than-temporary impairment of securities         |  |                    | (44   | ) |      |   | (18   | )
|Insurance revenue                                     |  |                    | 1,320 |   |      |   | 1,312 |  
|Brokerage revenue                                     |  |                    | 74    |   |      |   | 46    |  
|Income from bank-owned life insurance                 |  |                    | 400   |   |      |   | 400   |  
|Visa check card income                                |  |                    | 429   |   |      |   | 415   |  
|ATM surcharge fee                                     |  |                    | 86    |   |      |   | 58    |  
|Wire fees                                             |  |                    | 37    |   |      |   | 36    |  
|Rental income                                         |  |                    | 36    |   |      |   | 66    |  
|Other                                                 |  |                    | 477   |   |      |   | 421   |  
|                                                      |  |                    |       |   |      |   |       |  
|Subtotal before gain on sale of investment securities |  |                    | 5,522 |   |      |   | 6,440 |  
|Gain on sale of investment securities                 |  |                    | 79    |   |      |   |      |  
|                                                      |  |                    |       |   |      |   |       |  
|Total noninterest income                              |  | $                  | 5,601 |   |      | $ | 6,440 |  
|                                                      |  |                    |       |   |      |   |       |  

Noninterest Expense.Noninterest expense represents our overhead expenses.Total noninterest
expense increased $1.1 million or 6% for the first three months of 2010 compared to the first three months of 2009. Salaries and employee benefits expense decreased $1.5 million for the first quarter of 2010 from the first quarter of 2009. Salaries
and employee benefits expense in the first quarter of 2010 was positively impacted by the reduction of certain personnel expense accruals. Occupancy expense increased $379 thousand for the first three months of 2010 compared to the first three
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 $282 thousand for the first three months of 2010 compared to the first three months
of 2009 due to an increase in outsourced data processing fees charged from the outsource provider. FDIC insurance was $1.1 million for the three months ended March 31, 2010 as compared with $639 thousand for the same period in 2009; the
increase was due to increases in required insurance rates. Equipment expense increased 180% to $1.1 million for the three months ended March 31, 2010 as compared to the same period in 2009. This increase in equipment expense was primarily due
to differences in the way the expenses were accounted for after the data processing conversion of the Banks. For the first quarter of 2010, professional fees were $1.3 million compared to $275 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 quarterly total noninterest expense (in thousands) by line item.



39



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



Managements Discussion and Analysis of
Financial Condition and Results of Operations



|                                          |  |                    |        |      |   |       
|----------------------------------------- |  | ------------------ | ------ | ---- | - | ------
|                                          |  | Three Months Ended
|                                          |  | March 31,         
|                                          |  | 2010               |        | 2009
|Salaries and employee benefits            |  | $                  | 9,750  |      | $ | 11,234
|Occupancy                                 |  |                    | 2,298  |      |   | 1,919 
|Data processing                           |  |                    | 1,480  |      |   | 1,198 
|FDIC insurance                            |  |                    | 1,056  |      |   | 639   
|Equipment                                 |  |                    | 1,091  |      |   | 389   
|Professional fees                         |  |                    | 1,316  |      |   | 275   
|Bank franchise tax                        |  |                    | 510    |      |   | 444   
|Stationary, printing, and office supplies |  |                    | 239    |      |   | 142   
|Telephone and postage                     |  |                    | 391    |      |   | 440   
|Amortization of intangible assets         |  |                    | 495    |      |   | 334   
|Advertising and marketing                 |  |                    | 148    |      |   | 143   
|Directors and regional board fees        |  |                    | 137    |      |   | 284   
|Other                                     |  |                    | 2,069  |      |   | 2,407 
|                                          |  |                    |        |      |   |       
|Total noninterest expense                 |  | $                  | 20,980 |      | $ | 19,848
|                                          |  |                    |        |      |   |       

The efficiency ratio, calculated by dividing noninterest expense by
the sum of net interest income and noninterest income excluding securities gains was 76% for the first quarter of 2010 compared to 61% for the first quarter of 2009.

Income Tax Provision.We recorded a provision for income tax expense of $62 thousand for the quarter ended March 31, 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 deferred tax asset would not be
realized. A valuation allowance for the entire net deferred tax asset has been established as of March 31, 2010.



40



---

##### 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
March 31, 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.



|                          |  |                               |        |   |                               |       |    |        |   |        |   |  |       |   
|------------------------- |  | ----------------------------- | ------ | - | ----------------------------- | ----- | -- | ------ | - | ------ | - |  | ----- | --
|                          |  | March 31, 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         |  | $                             | (4,178 | ) |                               | (4.09 | )% |        | $ | (4,861 | ) |  | (5.07 | )%
|+100 basis points         |  |                               | (2,440 | ) |                               | (2.39 | )% |        |   | (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 a decrease 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 increased for interest-bearing liabilities lag behind the rate increases of interest-earning assets, and that the level of deposit rate increased will be less than the level
of deposit rate increased 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 March 31, 2010.



41



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



PART I. FINANCIAL INFORMATION

Item 4. Controls and Procedures

The Companys management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated
the effectiveness of the design and operation of the Companys disclosure controls and procedures as of March 31, 2010, in accordance with Rule 13a-15 of the Securities Exchange Act of 1934 (the Exchange Act). Based on their
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Companys disclosure controls and procedures were not effective to provide reasonable assurance that we
are able to record, process, summarize, and report in a timely manner the information required to be disclosed in reports we file under the Exchange Act because of the prior material weakness resulting from the significant deficiencies identified by
management as of December 31, 2009, which were disclosed in our annual report on Form 10-K for the period then ended.

The significant
deficiencies continued to exist as of March 31, 2010, except for:



| |  |  | Inadequate controls over the accounting for income taxes. The Company lacked sufficient personnel with adequate technical skills related to accounting
for income taxes. This deficiency resulted in misstatements in the Companys preliminary consolidated financial statements. These errors were corrected by management in the Companys consolidated financial statements as of and for the year
ended December 31, 2009.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Management has implemented controls to address the remaining significant deficiencies,
however, additional time is needed to determine whether the weaknesses have been effectively remediated.



42



---

##### Table of Contents

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 for the year ended
December 31, 2009.

We need to raise additional capital that may not be available to us.

Regulatory authorities require us to maintain certain levels of capital to support our operations. As of March 31, 2010, the Company is
significantly undercapitalized and BOHR is undercapitalized. Accordingly, we have an immediate need to raise capital. In addition, even if we succeed in raising this capital, we may need to raise additional capital in the
future due to additional losses or regulatory mandates. The ability to raise additional capital, if needed, will depend in part on conditions in the capital markets at that time, which are outside our control, and on our financial performance.

Accordingly, additional capital may not be raised, if and when needed, on terms acceptable to us, or at all. If we cannot raise additional
capital when needed, our ability to increase our capital ratios could be materially impaired, and we could face additional regulatory challenges. In addition, if we issue additional equity capital, it may be at a lower price than current market
value and, in the case of all such issuances, our existing shareholders interest would be diluted.

The Company may not be able to
meet federal regulatory requirements regarding the restoration of capital of BOHR.

As indicated above, as of March 31, 2010,
BOHR is undercapitalized by regulatory capital standards. As a result, BOHR is required to submit a detailed, written capital restoration plan (CRP), specifying the steps it and the Company will take to bring BOHRs
capital ratios back into compliance with minimum applicable capital ratios. The CRP will be submitted to BOHRs federal bank regulator, the Federal Reserve Bank of Richmond (the Federal Reserve), for approval. If the Federal Reserve
does not approve the CRP submitted by BOHR or BOHR fails to implement the CRP in any material respect, then BOHR could be subject to possible future regulatory enforcement actions and subject to the additional restrictions applicable to
significantly undercapitalized banks until such time that a new CRP is approved. Achievement of the CRP depends on future events and circumstances, the outcome of which cannot be assured.

BOHR is restricted from accepting brokered deposits and offering interest rates on deposits that are substantially higher than the prevailing rates
in our market; and BOHR anticipates no longer accepting uninsured deposits.

During the fourth quarter of 2009, the regulatory
risk-based capital ratios of BOHR declined significantly largely due to significant additional provisions to our allowance for loan losses and the establishment of a valuation allowance against our net deferred tax asset. As of March 31, 2010,
BOHR was not considered well-capitalized under regulatory guidelines. The impact of not maintaining a well-capitalized status is of concern in that it could jeopardize the ability to acquire needed funding through sources
such as brokered deposits, FHLB advances, or unsecured federal funds credit lines and could tighten liquidity through damage to our reputation in our deposit service areas. This could also lead to increased scrutiny by regulatory agencies and
possible sanctions. In response to our declining capital position, we could improve our capital position with additional issuances of equity securities. We may also limit or postpone future asset growth or even shrink our assets in order to maintain
appropriate regulatory capital levels. In addition, BOHR anticipates not accepting uninsured deposits and intends to consult with customers with uninsured deposits to restructure their funds so that all deposits will be insured. These efforts,
however, may not be successful. Current and future restrictions on the conduct of our business could have a material adverse effect on our ability to attract deposits and liquidity.

Section 29 of the Federal Deposit Insurance Act (FDIA) limits the use of brokered deposits by institutions that are less than
well-capitalized and allows the FDIC to place restrictions on interest rates that institutions may pay. Because BOHR is no longer considered well capitalized for regulatory purposes, it is, among other restrictions,
prohibited from paying rates in excess of 75 basis points above the national market average on deposits of comparable maturity. Effective January 1, 2010, financial institutions that are not well capitalized will be prohibited from
paying yields for deposits in excess of 75 basis points above a new national average rate for deposits of comparable maturity,



43



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



PART II. OTHER INFORMATION



as calculated by the FDIC, except in very limited circumstances. If a restriction on the rates that BOHR is able to pay on deposit accounts negatively impacts its ability to compete for deposits
in our market area, BOHR may be unable to attract or maintain core deposits, and its liquidity and ability to support demand for loans could be adversely affected.

Because we believe Shore met the definition of well capitalized at March 31, 2010, it is not subject to these restrictions.

We may become subject to additional regulatory restrictions in the event that BOHRs regulatory capital levels continue to decline.

The additional regulatory restrictions resulting from the decline in BOHRs capital category, or any further decline, could have a
material adverse effect on our business, financial condition, results of operations, cash flows, and/or future prospects.

If a state member
bank is classified as undercapitalized, that bank is required to submit a capital restoration plan to the Federal Reserve. Pursuant to Federal Deposits Insurance Corporation Improvement Act of 1991 (FDICIA), an
undercapitalized bank is prohibited from increasing its assets, engaging in a new line of business, acquiring any interest in any company or insured depository institution, or opening or acquiring a new branch office, except under
certain circumstances, including the acceptance by the Federal Reserve of a capital restoration plan for the bank.

Furthermore, if a bank is
classified as significantly undercapitalized or critically undercapitalized, the Federal Reserve would be required to take one or more prompt corrective actions. These actions would include, among other things, requiring
sales of new securities to bolster capital, improvements in management, limits on interest rates paid, prohibitions on transactions with affiliates, termination of certain risky activities, and restrictions on compensation paid to executive
officers. If a bank is classified as critically undercapitalized, FDICIA requires the bank to be placed into conservatorship or receivership within 90 days, unless the Federal Reserve determines that other action would better achieve the
purposes of FDICIA regarding prompt corrective action with respect to undercapitalized banks.

Under FDICIA, banks may be restricted in their
ability from accepting broker deposits, depending on their capital classification. Well-capitalized banks are permitted to accept broker deposits, but all banks that are not well-capitalized could be restricted to accept such
deposits. These restrictions could materially and adversely affect the ability to access lower cost funds and thereby decrease our future earnings capacity.

Our financial flexibility could be severely constrained if we are unable to renew BOHRs wholesale funding or if adequate financing is not available
in the future at acceptable rates of interest. We may not have sufficient liquidity to continue to fund new loan originations, and we may need to liquidate loans or other assets unexpectedly in order to repay obligations as they mature. BOHRs
inability to obtain regulatory consent to accept or renew brokered deposits could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or future prospects.

Finally, the capital classification of a bank affects the frequency of examinations of the bank, the deposit insurance premiums paid by such bank, and
the ability of the bank to engage in certain activities, all of which could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or future prospects.

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 will likely increase from the inability to maintain a well capitalized status, which would further decrease earnings.

The EESA temporarily increased the limit on FDIC coverage to $250,000 for all accounts through December 31, 2013. In addition, in May of 2009, the
FDIC announced that it had voted to levy a special assessment on insured institutions in order to facilitate the rebuilding of the Deposit Insurance Fund. The assessment is equal to five basis points of the Companys total assets minus
Tier 1 capital as of June 30, 2009. This represented a charge of approximately $1.4 million, which was recorded as a pre-tax charge during the second quarter of 2009. The FDIC has indicated that future special assessments are possible.



44



---

##### Table of Contents

HAMPTON ROADS BANKSHARES, INC.



PART II. OTHER INFORMATION



In addition, the regulatory capital ratios of BOHR decreased below well capitalized status
during the fourth quarter of 2009, based on regulatory standards. FDIC insurance assessments for BOHR will likely increase due to this change in regulatory capital status. Any increases in FDIC insurance assessments would decrease our earnings.

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 first 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.                                                             
|     | 
|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.                                                                                             



45



---

##### Table of Contents

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 13, 2010 |  | /s/ Lorelle L. Fritsch                                          
|                      |  | Lorelle L. Fritsch                                              
|                      |  | Senior Vice President and Chief Financial Officer               
|                      |  | (On behalf of the Registrant and as Principal Financial Officer)



46