10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2008

Commission File Number 001-32968

HAMPTON ROADS BANKSHARES, INC.

(Exact name of registrant as specified in its charter)

Virginia	54-2053718
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
999 Waterside Dr., Suite 200 Norfolk, Virginia	23510
(Address of principal executive offices)	(Zip Code)

(757) 217-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $0.625 per share	The Nasdaq Stock Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x    

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x    

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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 the definitions 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 a 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 Act).    Yes  ¨    No  x    

The aggregate market value of the 11,177,119 voting shares held by non-affiliates based on the last sales price of $12.49 as of June 30, 2008 as recorded by Registrar and Transfer Company was $139,602,221.

The number of shares outstanding of the issuer’s common stock as of March 1, 2009 was 21,796,224 shares of Common Stock, par value $0.625 per share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Shareholders for the year ended December 31, 2008 are incorporated by reference into Part II, which excerpts from the Annual Report are filed herewith as Exhibit 13.1.

Portions of the proxy statement for the annual shareholders’ meeting to be held May 21, 2009 are incorporated by reference into Part III.

Hampton Roads, Bankshares, Inc.

Form 10-K Annual Report

For the Year Ended December 31, 2008

Table of Contents

		Page
Part I
Item 1.	Business	1
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	24
Item 2.	Properties	24
Item 3.	Legal Proceedings	25
Item 4.	Submission of Matters to a Vote of Security Holders	26
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26
Item 6.	Selected Financial Data	29
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 8.	Financial Statements and Supplementary Data	29
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	30
Item 9A.	Controls and Procedures	30
Item 9B.	Other Information	31
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	31
Item 11.	Executive Compensation	31
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	31
Item 13.	Certain Relationships and Related Transactions, and Director Independence	32
Item 14.	Principal Accounting Fees and Services	32
Part IV
Item 15.	Exhibits and Financial Statement Schedules	32
	Signatures	33

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PART 1

ITEM 1 - BUSINESS

Overview

Unless the context otherwise requires, the terms “we,” “us,” or “our” refer to Hampton Roads Bankshares, Inc. and its consolidated subsidiaries on a combined basis.

Hampton Roads Bankshares, Inc., a Virginia corporation (the “Company”), was incorporated under the laws of the Commonwealth of Virginia on February 28, 2001, primarily to serve as a holding company for the Bank of Hampton Roads. On July 1, 2001, all Bank of Hampton Roads common stock, par value $0.625 per share, converted into the common stock of Hampton Roads Bankshares, Inc., par value $0.625 per share, on a share for share exchange basis, making the Bank of Hampton Roads a wholly-owned subsidiary of the Company. In January 2004, we formed Hampton Roads Investments, Inc. (“HR Investments”), a wholly-owned subsidiary, to provide securities, brokerage and investment advisory services.

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

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

GFH acquired the Bank of Richmond, N.A., effective June 1, 2007. Consequently, through its acquisition of GFH, the Company operates six financial centers in the Richmond metropolitan area and one in Charlottesville, Virginia.

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

Shore Bank (“Shore”) is a Virginia state-chartered commercial bank with eight full service offices and an investment center located on the Delmarva Peninsula, otherwise know as the Eastern Shore. Shore operates on the Virginia and Maryland portions of the Eastern Shore, including the counties of Accomack and Northampton in Virginia and the Pocomoke City/Worcester County and Salisbury/Wicomico County market areas in Maryland. Shore’s subsidiary, Shore Investments, Inc., provides non-deposit investment products including stocks, bonds, mutual funds and insurance products through its location and Shore’s eight banking centers. Shore Investments has an investment in a Virginia title insurance agency that enables Shore to offer title insurance policies to its real estate loan customers. Shore Bank commenced operations in 1961.

Gateway Bank & Trust Co. (“Gateway”) is a North Carolina chartered commercial bank with thirty-three full-service offices, six insurance agency offices and investment, mortgage and title subsidiaries that support its banking operations in the Northeastern, Southeastern, and Research Triangle regions of North Carolina, the Hampton Roads region of southeastern Virginia, and Richmond, Virginia. Gateway has four

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wholly-owned operating subsidiaries. Gateway Insurance Services, Inc., an insurance agency with offices in Edenton, Hertford, Elizabeth City, Plymouth, Moyock, and Kitty Hawk, North Carolina, and the Hampton Roads area of Virginia, sells insurance products to businesses and individuals. Gateway Investment Services, Inc. assists Gateway Bank customers in their securities brokerage activities through an arrangement with an unaffiliated broker-dealer. As prescribed by this arrangement, Gateway Investment Services earns revenue through a commission sharing arrangement with the unaffiliated broker-dealer. Gateway Bank Mortgage, Inc. provides mortgage banking services with products that are sold on the secondary market. Gateway Title Agency, Inc. engages in title insurance and settlement services for real estate transactions. Gateway Bank and Trust began operations on December 1, 1998.

BOHR, Shore, and Gateway may be collectively referred to as the “Banks” throughout this document.

We do not participate in any industry segments outside of the financial services industry.

Our principal executive office is located at 999 Waterside Drive, Suite 200, Norfolk, VA 23510 and our telephone number is (757) 217-1000. Our common stock trades on the Nasdaq Global Select Market under the symbol “HMPR.”

Business

Principal Products or Services

We engage in a general community and commercial banking business, targeting the banking needs of individuals and small to medium sized businesses in our primary service areas which include South Hampton Roads, Virginia, the Northeastern, Southeastern and Research Triangle regions of North Carolina, the Eastern Shore of Virginia and Maryland, and Richmond, Virginia. Our principal business is to attract deposits and to loan or invest those deposits on profitable terms. We offer all traditional loan and deposit banking services, as well as telephone banking, Internet banking, remote deposit capture, and debit cards. We accept both commercial and consumer deposits. These deposits are in varied forms of both demand and time accounts including checking accounts, interest checking, money market accounts, savings accounts, certificates of deposit, and IRA accounts. Additionally, with the acquisitions of Shore and Gateway during 2008, we offer a network of eighty-four ATM machines to support our customers.

We are involved in the construction and real estate lending markets and extend both personal and commercial credit. Our loans consist of varying terms and can be secured or unsecured. Loans to individuals are for personal, household, and family purposes. Loans to businesses are for such purposes as working capital, plant expansion, and equipment purchases. Real estate loans are made for both residential and commercial properties. Loan revenues, in the form of interest income including fees, represented 83.53%, 85.50%, and 80.27% of our total consolidated operating revenues for the years ended December 31, 2008, 2007, and 2006, respectively.

Lending Activities

General. We offer a full range of commercial, real estate and consumer lending products and services, described in further detail below. Our loan portfolio is comprised of the following categories: commercial, construction, real estate-commercial mortgage, real estate-residential mortgage, and installment loans to individuals. Our primary lending objective is to meet business and consumer needs in our market areas while maintaining our standards of profitability and credit quality and enhancing client relationships. All lending decisions are based upon an evaluation of the financial strength and credit history of the borrower and the quality and value of the collateral securing the loan. With few exceptions, personal guarantees are required on all loans.

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Commercial loans. We make commercial loans to qualified businesses in our market areas. Commercial loans are loans to businesses which are typically not collateralized by real estate. Generally, the purpose of commercial loans is for the financing of accounts receivable, inventory, or equipment and machinery. Commercial loans generally have a higher degree of risk than real estate loans and therefore have commensurately higher yields. The value of collateral securing real estate loans is more readily ascertainable and generally does not depreciate over time as does the collateral securing commercial loans. Repayment of commercial loans may be more substantially dependent upon the success of the business itself and therefore must be monitored more frequently. In order to reduce our risk, the Banks require regular updates of the business’s financial condition, as well as that of the guarantors, and regularly monitor accounts receivable and payable of such businesses when deemed necessary. Commercial loans accounted for 17.33% of our loan portfolio at December 31, 2008.

Construction loans. We make construction and development loans to individuals and businesses for the purpose of construction of single family residential properties, multi-family properties, and commercial projects as well as the development of residential neighborhoods and commercial office parks. BOHR and Gateway have been, and continue to be, leaders in the Hampton Roads construction and development market, while Shore maintains a successful construction lending business on the Eastern Shore of Virginia and Maryland. Our success is partially attributable to the years of experience held by senior management and the construction and development lending team at the Banks. In order to reduce risk on construction and development loans, the Banks fund these loans on an “as-completed” basis with experienced loan officers inspecting the properties before funding the requested amount. Larger, more complicated projects require independent inspections by an architectural or engineering firm approved by the Banks prior to funding. Additionally, risk is reduced in the construction and development portfolio by limiting lending for speculative building of both residential and commercial properties, based upon the borrower’s history with the Banks, financial strength and the loan-to-value ratio of such speculative property. The Banks rarely exceed 80% loan-to-value on any construction loan with the average project below 75% loan-to-value. An individual who borrows with the purpose of building a personal residence must provide evidence of a permanent mortgage as well as proof of the ability to build a home or a contract with a builder before the closing of the loan. Construction loans accounted for 34.45% of our loan portfolio at December 31, 2008.

Real estate-commercial mortgage. The Banks make commercial mortgage loans for the purchase and re-financing of owner occupied commercial properties as well as non-owner occupied income producing properties. These loans are secured by various types of commercial real estate including office, retail, warehouse, industrial, storage facilities, and other non-residential types of properties. Commercial mortgage loans typically have maturities or are callable from one to five years. Underwriting criteria for owner occupied commercial mortgages involves examination of debt service coverage ratios, the borrower’s creditworthiness and past credit history, and the guarantor’s personal financial condition. Underwriting for non-owner occupied commercial mortgages also involves examination of the current leases and financial strength of the tenants. Real estate-commercial mortgage loans accounted for 25.85% of our loan portfolio at December 31, 2008.

Real estate-residential mortgage. We offer a wide range of residential mortgage loans through both our affiliate, Tidewater Home Funding, LLC (“THF”) and our subsidiary, Gateway Bank Mortgage, Inc. The Company owns 19% of THF and accounts for its ownership using the equity method. Our residential mortgage portfolio held by the Banks include first and second lien mortgage loans, home equity lines of credit, and other term loans secured by first and second lien mortgages. Residential mortgage loans have historically been the lowest risk loans in the Banks’ portfolios due to the ease in which the value of the collateral is ascertained, although the risks involved with these loans has been on the rise lately due to falling home prices. First mortgage loans are generally made for the purchase of permanent residences, second homes, or residential investment property. Second mortgages and home equity loans are generally for personal, family and household purposes such as home improvements, major purchases, education, and other personal needs. Mortgages which are secured by a borrower’s primary residence are made on the basis of the borrower’s ability

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to repay the loan from his or her salary and other regular income as well as the general creditworthiness of the borrower. Mortgages secured by residential investment property are made based upon the same guidelines as well as the borrower’s ability to cover any cash flow shortages during the marketing of such property for rent. We do not engage in sub-prime or alt-A lending. Real estate-residential mortgage loans accounted for 20.30% of our loan portfolio at December 31, 2008.

Installment loans to individuals. Installment loans to individuals are made on a regular basis for personal, family, and general household purposes. More specifically, we make automobile loans, home improvement loans, loans for vacations, and debt consolidation loans. Due to low interest rates offered by auto dealership financial programs, this segment of the loan portfolio has decreased in recent years. While consumer financing may entail greater individual risk than real estate financing on a per loan basis, the relatively small principal balances of each loan mitigates the risk associated with this category of the portfolio. Installment loans to individuals accounted for 1.92% of our loan portfolio at December 31, 2008.

Deposits

We offer a broad range of interest-bearing and non-interest-bearing deposit accounts, including commercial and retail checking accounts, money market accounts, individual retirement accounts, regular interest-bearing savings accounts, and certificates of deposit with a range of maturity date options. The primary sources of deposits are small and medium-sized businesses and individuals within our target markets. Additionally, we entered the national certificate of deposit market and the brokered certificate of deposit market during 2007. All deposits are insured by the FDIC up to the maximum amount permitted by law.

Telephone and Internet Banking

We believe there is a strong demand within our markets for telephone banking and Internet banking. These services allow both commercial and retail customers to access detailed account information and execute a wide variety of banking transactions, including balance transfers and bill payment. We believe these services are particularly attractive to our customers, as it enables them at any time to conduct their banking business and monitor their accounts. Telephone and Internet banking assist us in attracting and retaining customers and encourages our existing customers to consider us for all of their banking and financial needs.

Automatic Teller Machines

We have a network of eighty-four ATMs throughout our markets with all being accessible by the customers of our subsidiary banks. We also make other financial institutions’ ATMs available to our customers.

Other Products and Services

We offer other banking-related specialized products and services to our customers, such as travelers’ checks, coin counters, wire services, and safe deposit box services. Additionally, we offer our commercial customers various cash management products including remote deposit capture which allows them to make electronic check deposits from their offices. We issue letters of credit and standby letters of credit for some of our commercial customers, most of which are related to real estate construction loans. We have not engaged in any securitizations of loans.

The Company also offers other services that complement the core financial services offered by the Banks. Three of our wholly-owned subsidiaries, HR Investments, Shore Investments Inc., and Gateway Investment Services, Inc., provide securities, brokerage and investment advisory services and are capable of handling many aspects of wealth management including stocks, bonds, annuities, mutual funds, and financial consultation. Through our subsidiary, Gateway Title Agency, and via our investment in Bankers Title, LLC, we offer title insurance to our real estate loan customers. Additionally, the Company provides insurance products to businesses and individuals through its subsidiary insurance agency, Gateway Insurance Services, Inc.

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Competition

The financial services industry remains highly competitive and constantly evolving. We experience strong competition in all aspects of our business.

In our market areas, which include the Hampton Roads cities of Virginia Beach, Norfolk, Chesapeake, Suffolk, and Portsmouth, the Northeastern, Southeastern and Research Triangle regions of North Carolina, the Eastern Shore of Virginia and Maryland and Richmond, Virginia, we compete with large national and regional financial institutions, savings and loans and other independent community banks, as well as credit unions, consumer finance companies, mortgage companies, loan production offices, and insurance companies. Many of these institutions have substantially greater assets and capital than we do. In many instances, these institutions have greater lending limits than we do. As of December 31, 2008, the Banks’ combined legal lending limit to one borrower was $48.6 million, unless we could sell participations in such a loan to other financial institutions. Competition for deposits and loans is affected by factors such as interest rates offered, the number and location of branches, types of products offered, and reputation of the institution. We believe that our pricing of products has remained competitive, but our historical success is primarily attributable to high quality service and community involvement.

Government Supervision and Regulation

General

As a financial holding company, we are subject to regulation under the Bank Holding Company Act of 1956, as amended, and the examination and reporting requirements of the Board of Governors of the Federal Reserve System. Other federal and state laws govern the activities of our bank subsidiaries, including the activities in which they may engage, the investments they make, the aggregate amount of loans they may grant to one borrower, and the dividends they may declare and pay to us. Our bank subsidiaries are also subject to various consumer and compliance laws. As Virginia state-chartered banks, the BOHR and Shore are primarily subject to regulation, supervision, and examination by the Bureau of Financial Institutions of the Virginia State Corporation Commission, while Gateway, a North Carolina bank, is subject to regulation, supervision, and regular examination by the North Carolina Banking Commission.

As Federal Reserve Members, our bank subsidiaries also are subject to regulation, supervision, and examination by the Federal Deposit Insurance Corporation (“FDIC”). Deposits are insured by the Deposit Insurance Fund, as administered by the FDIC, to the maximum amount permitted by law.

The following description summarizes the more significant federal and state laws applicable to us. To the extent that statutory or regulatory provisions are described, the description is qualified in its entirety by reference to that particular statutory or regulatory provision.

The Bank Holding Company Act

Under the Bank Holding Company Act, we are subject to periodic examination by the Federal Reserve and required to file periodic reports regarding our operations and any additional information that the Federal Reserve may require. Our activities at the bank holding company level are limited to:

• banking, managing, or controlling banks;

• furnishing services to or performing services for our subsidiaries; and

• engaging in other activities that the Federal Reserve has determined by regulation or order to be so closely related to banking as to be a proper incident to these activities.

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Some of the activities that the Federal Reserve Board has determined by regulation to be closely related to the business of a bank holding company include making or servicing loans and specific types of leases, performing specific data processing services and acting in some circumstances as a fiduciary or investment or financial adviser.

With some limited exceptions, the Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve before:

• acquiring substantially all the assets of any bank; and

• acquiring direct or indirect ownership or control of any voting shares of any bank if after such acquisition it would own or control more than 5% of the voting shares of such bank (unless it already owns or controls the majority of such shares), or merging or consolidating with another bank holding company.

In addition, and subject to some exceptions, the Bank Holding Company Act and the Change in Bank Control Act, together with their regulations, require Federal Reserve approval prior to any person or company acquiring “control” of a bank holding company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of the bank holding company. Control is presumed to exist if a person acquires 10% or more, but less than 25%, of any class of voting securities and if the institution has registered securities under Section 12 of the Securities Exchange Act of 1934 or no other person owns a greater percentage of that class of voting securities immediately after the transaction. The regulations provide a procedure for challenging this rebuttable control presumption.

In November 1999, Congress enacted the Gramm-Leach-Bliley Act (“GLBA”), which made substantial revisions to the statutory restrictions separating banking activities from other financial activities. Under the GLBA, bank holding companies that are well-capitalized and well-managed and meet other conditions can elect to become “financial holding companies.” As financial holding companies, they and their subsidiaries are permitted to acquire or engage in previously impermissible activities, such as insurance underwriting and securities underwriting and distribution. In addition, financial holding companies may also acquire or engage in certain activities in which bank holding companies are not permitted to engage in, such as travel agency activities, insurance agency activities, merchant banking, and other activities that the Federal Reserve determines to be financial in nature or complementary to these activities. Financial holding companies continue to be subject to the overall oversight and supervision of the Federal Reserve, but the GLBA applies the concept of functional regulation to the activities conducted by subsidiaries. For example, insurance activities would be subject to supervision and regulation by state insurance authorities. We became a financial holding company in 2001.

Payment of Dividends

We are a legal entity separate and distinct from the Banks and our subsidiaries. Substantially all of our cash revenues will result from dividends paid to us by our bank subsidiaries and interest earned on short term investments. Our bank subsidiaries are subject to laws and regulations that limit the amount of dividends that they can pay. Under Virginia law, a bank may not declare a dividend in excess of its accumulated retained earnings, while under North Carolina banking law, dividends must be paid out of retained earnings and no cash dividends may be paid if payment of the dividend would cause the bank’s surplus to be less than 50% of its paid-in capital. Additionally, our bank subsidiaries may not declare a dividend if the total amount of all dividends, including the proposed dividend, declared by the bank in any calendar year exceeds the total of the bank’s retained net income of that year to date, combined with its retained net income of the two preceding years, unless the dividend is approved by the Federal Reserve. Our bank subsidiaries may not declare or pay any dividend if, after making the dividend, the bank would be “undercapitalized,” as defined in the banking regulations.

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The Federal Reserve and the states have the general authority to limit the dividends paid by insured banks if the payment is deemed an unsafe and unsound practice. Both the states and the Federal Reserve have indicated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsound and unsafe banking practice.

In addition, we are subject to certain regulatory requirements to maintain capital at or above regulatory minimums. These regulatory requirements regarding capital affect our dividend policies. Regulators have indicated that financial holding companies should generally pay dividends only if the organization’s net income available to common shareholders over the past year has been sufficient to fully fund the dividends, and the prospective rate of earnings retention appears consistent with the organization’s capital needs, asset quality, and overall financial condition.

Insurance of Accounts, Assessments and Regulation by the FDIC

The deposits of our bank subsidiaries are insured by the FDIC up to the limits set forth under applicable law and are subject to the deposit insurance assessments of the Bank Insurance Fund (“BIF”) of the FDIC.

The FDIC has implemented a risk-based deposit insurance assessment system under which the assessment rate for an insured institution may vary according to regulatory capital levels of the institution and other factors, including supervisory evaluations. In addition to being influenced by the risk profile of the particular depository institution, FDIC premiums are also influenced by the size of the FDIC insurance fund in relation to total deposits in FDIC insured banks. The FDIC has authority to impose special assessments.

In February 2006, The Federal Deposit Insurance Reform Act of 2005 and The Federal Deposit Insurance Reform Conforming Amendments Act of 2005 (collectively, “The Reform Act”) was signed into law. This legislation contained technical and conforming changes to implement deposit insurance reform, as well as a number of study and survey requirements.

The Reform Act provides for the following changes:

• Merging the BIF and the Savings Association Insurance Fund (“SAIF”) into a new fund, the Deposit Insurance Fund (“DIF”).

• Increasing the coverage limit for retirement accounts to $250,000 and indexing the coverage limit for retirement accounts to inflation as with the general deposit insurance coverage limit.

• Establishing a range of 1.15% to 1.50% within which the FDIC Board of Directors may set the Designated Reserve Ratio (“DRR”).

• Allowing the FDIC to manage the pace at which the reserve ratio varies within this range.

• If the reserve ratio falls below 1.15%—or is expected to within 6 months—the FDIC must adopt a restoration plan that provides that the DIF will return to 1.15% generally within 5 years.

• If the reserve ratio exceeds 1.35%, the FDIC must generally dividend to DIF members half of the amount above the amount necessary to maintain the DIF at 1.35%, unless the FDIC Board, considering statutory factors, suspends the dividends.

• If the reserve ratio exceeds 1.5%, the FDIC must generally dividend to DIF members all amounts above the amount necessary to maintain the DIF at 1.5%.

• Eliminating the restrictions on premium rates based on the DRR and granting the FDIC Board the discretion to price deposit insurance according to risk for all insured institutions regardless of the level of the reserve ratio.

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• Granting a one-time initial assessment credit (of approximately $4.7 billion) to recognize institutions’ past contributions to the fund.

• Requiring the FDIC to conduct studies of three issues: (1) further potential changes to the deposit insurance system, (2) the appropriate deposit base in designating the reserve ratio and (3) the Corporation’s contingent loss reserving methodology and accounting for losses.

• Requiring the Comptroller General to conduct studies of (1) federal bank regulators’ administration of the prompt corrective action program and recent changes to the FDIC deposit insurance system and (2) the organizational structure of the FDIC.

The FDIC is authorized to prohibit any insured institution from engaging in any activity that the FDIC determines by regulation or order to pose a serious threat to the DIF. Also, the FDIC may initiate enforcement actions against banks, after first giving the institution’s primary regulatory authority an opportunity to take such action. The FDIC may terminate the deposit insurance of any depository institution if it determines, after a hearing, that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, order or any condition imposed in writing by the FDIC. It also may suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance, if the institution has no tangible capital. If deposit insurance is terminated, the deposits at the institution at the time of termination, less subsequent withdrawals, shall continue to be insured for a period from six months to two years, as determined by the FDIC. We are unaware of any existing circumstances that could result in the termination of any of our bank subsidiaries’ deposit insurance.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 comprehensively revised the laws affecting corporate governance, accounting obligations, and corporate reporting for companies, such as the Company, with equity or debt securities registered under the Securities Exchange Act of 1934, as amended. In particular, the Sarbanes-Oxley Act established: (1) new requirements for audit committees, including independence, expertise, and responsibilities; (2) new certification responsibilities for the Chief Executive Officer and Chief Financial Officer with respect to the Company’s financial statements; (3) new standards for auditors and regulation of audits; (4) increased disclosure and reporting obligations for reporting companies and their directors and executive officers; and (5) new and increased civil and criminal penalties for violation of the federal securities laws.

Emergency Economic Stabilization Act of 2008

In response to recent unprecedented market turmoil, the Emergency Economic Stabilization Act of 2008 (“EESA”) was enacted on October 3, 2008. EESA authorizes the Secretary of Treasury (the “Secretary”) to purchase or guarantee up to $700 billion in troubled assets from financial institutions under the Troubled Asset Relief Program (“TARP”). Pursuant to authority granted under EESA, the Secretary has created the TARP Capital Purchase Program (“TARP CPP” or “CPP”) under which the Treasury Department will invest up to $250 billion in senior preferred stock of U.S. banks and savings associations or their holding companies. Qualifying financial institutions may issue senior preferred stock with a value equal to not less than 1% of risk-weighted assets and not more than the lesser of $25 billion or 3% of risk-weighted assets.

Institutions participating in the TARP or CPP are required to issue warrants for common or preferred stock or senior debt to the Secretary. If an institution participates in the CPP or if the Secretary acquires a meaningful equity or debt position in the institution as a result of TARP participation, the institution is required to meet certain standards for executive compensation and corporate governance, including a prohibition against incentives to take unnecessary and excessive risks, recovery of bonuses paid to senior executives based on materially inaccurate earnings or other statements and a prohibition against agreements for the payment of golden parachutes. Institutions that sell more than $300 million in assets under TARP auctions or participate in

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the CPP will not be entitled to a tax deduction for compensation in excess of $500,000 paid to its chief executive or chief financial official or any of its other three most highly compensated officers. In addition, any severance paid to such officers for involuntary termination or termination in connection with a bankruptcy or receivership will be subject to the golden parachute rules under the Internal Revenue Code. Additional standards with respect to executive compensation and corporate governance for institutions that have participated or will participate in the TARP (including the CPP) were enacted as part of the American Recovery and Reinvestment Act of 2009 (“ARRA”), described below.

CPP Participation

On December 31, 2008, and subsequent to the Company’s acquisition of Gateway Financial Holdings, Inc., as part of the CPP, the Company entered into a Letter Agreement and Securities Purchase Agreement (collectively, the “Purchase Agreement”) with the Treasury, pursuant to which the Company sold (i) 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 (ii) 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 $80,347,000 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.

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 issuances 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.

American Recovery and Reinvestment Act of 2009

The ARRA was enacted on February 17, 2009. The ARRA includes a wide variety of programs intended to stimulate the economy and provide for extensive infrastructure, energy, health, and education needs. In addition, the ARRA imposes certain new executive compensation and corporate governance obligations on all current and future TARP recipients, including the Company, until the institution has redeemed the preferred stock, which TARP recipients are now permitted to do under the ARRA without regard to the three year holding period and without the need to raise new capital, subject to approval of its primary federal regulator. The executive compensation restrictions under the ARRA (described below) are more stringent than those currently in effect under the CPP, but it is yet unclear how these executive compensation standards will relate to the similar standards recently announced by the Treasury Department, or whether the standards will be considered effective immediately or only after implementing regulations are issued by the Treasury Department. The ARRA amends Section 111 of the EESA to require the Secretary to adopt additional standards with respect to executive compensation and corporate governance for TARP recipients. The standards required to be established by the Secretary include, in part, (1) prohibitions on making golden parachute payments to senior executive officers and the next 5 most highly-compensated employees during such time as any obligation arising from financial assistance provided under the TARP remains outstanding (the “Restricted Period”), (2) prohibitions on paying or accruing bonuses or other incentive awards for certain senior executive officers and employees, except for awards of long-term restricted stock with a value equal to no greater than 1/3 of the subject employee’s annual compensation that do not fully vest during the Restricted Period or unless such compensation is pursuant to a valid written employment contract prior to February 11, 2009, (3) requirements that TARP CPP participants provide for 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,

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revenues, gains or other criteria later found to be materially inaccurate, with the Secretary having authority to negotiate for reimbursement, and (4) 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.

The ARRA also sets forth additional corporate governance obligations for TARP recipients, including requirements for the Secretary to establish standards that provide for semi-annual meetings of compensation committees of the board of directors to discuss and evaluate employee compensation plans in light of an assessment of any risk posed from such compensation plans. TARP recipients are further required by the ARRA to have in place company-wide policies regarding excessive or luxury expenditures, permit non-binding shareholder “say-on-pay” proposals to be included in proxy materials, as well as require written certifications by the chief executive officer and chief financial officer with respect to compliance. The Secretary is required to promulgate regulations to implement the executive compensation and certain corporate governance provisions detailed in the ARRA.

Federal Deposit Insurance Corporation

Pursuant to the EESA, the maximum deposit insurance amount per depositor has been increased from $100,000 to $250,000 until December 31, 2009. Additionally, on October 14, 2008, after receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, the Secretary of the Treasury signed the systemic risk exception to the FDIC Act, enabling the FDIC to establish its Temporary Liquidity Guarantee Program (“TLGP”). Under the transaction account guarantee program of the TLGP, the FDIC will fully guarantee, until the end of 2009, all non-interest-bearing transaction accounts, including NOW accounts with interest rates of 0.5 percent or less and IOLTAs (lawyer trust accounts). The TLGP also guarantees all senior unsecured debt of insured depository institutions or their qualified holding companies issued between October 14, 2008 and June 30, 2009 with a stated maturity greater than 30 days. All eligible institutions were permitted to participate in both of the components of the TLGP without cost for the first 30 days of the program. Following the initial 30 day grace period, institutions were assessed at the rate of ten basis points for transaction account balances in excess of $250,000 for the transaction account guarantee program and at the rate of either 50, 75, or 100 basis points of the amount of debt issued, depending on the maturity date of the guaranteed debt, for the debt guarantee program. Institutions were required to opt-out of the TLGP if they did not wish to participate. The Company and its applicable subsidiaries elected to participate in both of these programs.

Capital Requirements

Each of the FDIC and the Federal Reserve Board has issued risk-based and leverage capital guidelines applicable to banking organizations that it supervises. Under the risk-based capital requirements, we and our bank subsidiaries are each generally required to maintain a minimum ratio of total capital to risk-weighted assets (including specific off-balance sheet activities, such as standby letters of credit) of 8%. At least half of the total capital must be composed of “Tier 1 Capital,” which is defined as common equity, retained earnings, qualifying perpetual preferred stock, and minority interests in common equity accounts of consolidated subsidiaries, less certain intangibles. The remainder may consist of “Tier 2 Capital,” which is defined as specific subordinated debt, some hybrid capital instruments and other qualifying preferred stock, and a limited amount of the loan loss allowance and pretax net unrealized holding gains on certain equity securities. In addition, each of the federal banking regulatory agencies has established minimum leverage capital requirements for banking organizations. Under these requirements, banking organizations must maintain a minimum ratio of Tier 1 capital to adjusted average quarterly assets equal to 3% to 5%, subject to federal bank regulatory evaluation of an organization’s overall safety and soundness. In summary, the capital measures used by the federal banking regulators are:

• Total Risk-Based Capital ratio, which is the total of Tier 1 Capital (which includes common shareholders’ equity, trust preferred securities, minority interests and qualifying preferred stock, less goodwill and other adjustments) and Tier 2 Capital (which includes preferred stock not qualifying as Tier 1 capital, mandatory convertible debt, limited amounts of subordinated debt, other qualifying term debt and the allowance for loan losses up to 1.25% of risk-weighted assets and other adjustments) as a percentage of total risk-weighted assets

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• Tier 1 Risk-Based Capital ratio (Tier 1 capital divided by total risk-weighted assets), and

• the Leverage ratio (Tier 1 capital divided by adjusted average total assets)

• Under these regulations, a bank will be:

• “well capitalized” if it has a Total Risk-Based Capital ratio of 10% or greater, a Tier 1 Risk-Based Capital ratio of 6% or greater, a Leverage ratio of 5% or greater, and is not subject to any written agreement, order, capital directive, or prompt corrective action directive by a federal bank regulatory agency to meet and maintain a specific capital level for any capital measure

• “adequately capitalized” if it has a Total Risk-Based Capital ratio of 8% or greater, a Tier 1 Risk-Based Capital ratio of 4% or greater, and a Leverage ratio of 4% or greater (or 3% in certain circumstances) and is not well capitalized

• “undercapitalized” if it has a Total Risk-Based Capital ratio of less than 8%, a Tier 1 Risk-Based Capital ratio of less than 4% (or 3% in certain circumstances), or a Leverage ratio of less than 4% (or 3% in certain circumstances)

• “significantly undercapitalized” if it has a Total Risk-Based Capital ratio of less than 6%, a Tier 1 Risk-Based Capital ratio of less than 3%, or a Leverage ratio of less than 3%, or

• “critically undercapitalized” if its tangible equity is equal to or less than 2% of tangible assets.

The risk-based capital standards of each of the FDIC and the Federal Reserve Board explicitly identify concentrations of credit risk and the risk arising from non-traditional activities, as well as an institution’s ability to manage these risks, as important factors to be taken into account by the agency in assessing an institution’s overall capital adequacy. The capital guidelines also provide that an institution’s exposure to a decline in the economic value of its capital due to changes in interest rates be considered by the agency as a factor in evaluating a banking organization’s capital adequacy.

The FDIC may take various corrective actions against any undercapitalized bank and any bank that fails to submit an acceptable capital restoration plan or fails to implement a plan acceptable to the FDIC. These powers include, but are not limited to, requiring the institution to be recapitalized, prohibiting asset growth, restricting interest rates paid, requiring prior approval of capital distributions by any financial holding company that controls the institution, requiring divestiture by the institution of its subsidiaries or by the holding company of the institution itself, requiring new election of directors, and requiring the dismissal of directors and officers. We are considered “well-capitalized” at December 31, 2008 and, in addition, our bank subsidiaries maintain sufficient capital to remain in compliance with capital requirements and are considered “well-capitalized” at December 31, 2008.

Other Safety and Soundness Regulations

There are significant obligations and restrictions imposed on financial holding companies and their depository institution subsidiaries by federal law and regulatory policy that are designed to reduce potential loss exposure to the depositors of such depository institutions and to the FDIC insurance fund in the event that the depository institution is insolvent or is in danger of becoming insolvent. These obligations and restrictions are not for the benefit of investors. Regulators may pursue an administrative action against any financial holding company or bank which violates the law, engages in an unsafe or unsound banking practice, or which is about to engage in an unsafe or unsound banking practice. The administrative action could take the form of a cease and desist proceeding, a removal action against the responsible individuals or, in the case of a violation of law

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or unsafe and unsound banking practice, a civil monetary penalty action. A cease and desist order, in addition to prohibiting certain action, could also require that certain actions be undertaken. Under the policies of the Federal Reserve Board, we are required to serve as a source of financial strength to our subsidiary depository institutions and to commit resources to support the banks in circumstances where we might not do so otherwise.

The Bank Secrecy Act

Under the Bank Secrecy Act (“BSA”), a financial institution is required to have systems in place to detect certain transactions, based on the size and nature of the transaction. Financial institutions are generally required to report cash transactions involving more than $10,000 to the United States Treasury. In addition, financial institutions are required to file suspicious activity reports for transactions that involve more than $5,000 and which the financial institution knows, suspects or has reason to suspect, involves illegal funds, is designed to evade the requirements of the BSA, or has no lawful purpose. The USA PATRIOT Act of 2001, enacted in response to the September 11, 2001 terrorist attacks, requires bank regulators to consider a financial institution’s compliance with the BSA when reviewing applications from a financial institution. As part of its BSA program, the USA PATRIOT Act of 2001 also requires a financial institution to follow recently implemented customer identification procedures when opening accounts for new customers and to review U.S. government-maintained lists of individuals and entities that are prohibited from opening accounts at financial institutions.

Monetary Policy

The commercial banking business is affected not only by general economic conditions but also by the monetary policies of the Federal Reserve Board. The instruments of monetary policy employed by the Federal Reserve Board include open market operations in United States government securities, changes in the discount rate on member bank borrowings, and changes in reserve requirements against deposits held by federally insured banks. The Federal Reserve Board’s monetary policies have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. In view of changing conditions in the national and international economy and in the money markets, as well as the effect of actions by monetary and fiscal authorities, including the Federal Reserve System, no prediction can be made as to possible future changes in interest rates, deposit levels, loan demand, or the business and earnings of our bank subsidiaries, their subsidiaries, or any of our other subsidiaries.

Transactions with Affiliates

Transactions between banks and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act. An affiliate of a bank is any bank or entity that controls, is controlled by or is under common control with such bank. Generally, Sections 23A and 23B (i) limit the extent to which the bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of such institution’s capital stock and surplus, and maintain an aggregate limit on all such transactions with affiliates to an amount equal to 20% of such capital stock and surplus, and (ii) require that all such transactions be on terms substantially the same as, or at least as favorable to those that, the bank has provided to a non-affiliate. The term “covered transaction” includes the making of loans, purchase of assets, issuance of a guarantee, and similar other types of transactions. Section 23B applies to “covered transactions” as well as sales of assets and payments of money to an affiliate. These transactions must also be conducted on terms substantially the same as, or at least favorable to those that, the bank has provided to non-affiliates.

Loans to Insiders

The Federal Reserve Act and related regulations impose specific restrictions on loans to directors, executive officers and principal shareholders of banks. Under Section 22(h) of the Federal Reserve Act, loans to

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a director, an executive officer and to a principal shareholder of a bank, and to entities controlled by any of the foregoing, may not exceed, together with all other outstanding loans to such person and entities controlled by such person, the bank’s loan-to-one borrower limit. Loans in the aggregate to insiders and their related interests as a class may not exceed two times the bank’s unimpaired capital and unimpaired surplus until the bank’s total assets equal or exceed $100,000,000, at which time the aggregate is limited to the bank’s unimpaired capital and unimpaired surplus. Section 22(h) also prohibits loans above amounts prescribed by the appropriate federal banking agency to directors, executive officers, and principal shareholders of a bank or bank holding company, and to entities controlled by such persons, unless such loan is approved in advance by a majority of the board of directors of the bank with any “interested” director not participating in the voting. The FDIC has prescribed the loan amount, which includes all other outstanding loans to such person, as to which such prior board of director approval is required, as being the greater of $25,000 or 5% of capital and surplus (up to $500,000). Section 22(h) requires that loans to directors, executive officers, and principal shareholders be made on terms and underwriting standards substantially the same as offered in comparable transactions to other persons.

Community Reinvestment Act

Under the Community Reinvestment Act and related regulations, depository institutions have an affirmative obligation to assist in meeting the credit needs of their market areas, including low and moderate-income areas, consistent with safe and sound banking practice. The Community Reinvestment Act requires the adoption by each institution of a Community Reinvestment Act statement for each of its market areas describing the depository institution’s efforts to assist in its community’s credit needs. Depository institutions are periodically examined for compliance with the Community Reinvestment Act and are periodically assigned ratings in this regard. Banking regulators consider a depository institution’s Community Reinvestment Act rating when reviewing applications to establish new branches, undertake new lines of business, and/or acquire part or all of another depository institution. An unsatisfactory rating can significantly delay or even prohibit regulatory approval of a proposed transaction by a financial holding company or its depository institution subsidiaries.

The Gramm-Leach-Bliley Act and federal bank regulators have made various changes to the Community Reinvestment Act. Among other changes, Community Reinvestment Act agreements with private parties must be disclosed and annual reports must be made to a bank’s primary federal regulator. A financial holding company or any of its subsidiaries will not be permitted to engage in new activities authorized under the GLBA if any bank subsidiary received less than a “satisfactory” rating in its latest Community Reinvestment Act examination.

Consumer Laws Regarding Fair Lending

In addition to the Community Reinvestment Act described above, other federal and state laws regulate various lending and consumer aspects of our business. Governmental agencies, including the Department of Housing and Urban Development, the Federal Trade Commission and the Department of Justice, have become concerned that prospective borrowers may experience discrimination in their efforts to obtain loans from depository and other lending institutions. These agencies have brought litigation against depository institutions alleging discrimination against borrowers. Many of these suits have been settled, in some cases for material sums of money, short of a full trial.

These governmental agencies have clarified what they consider to be lending discrimination and have specified various factors that they will use to determine the existence of lending discrimination under the Equal Credit Opportunity Act and the Fair Housing Act, including evidence that a lender discriminated on a prohibited basis, evidence that a lender treated applicants differently based on prohibited factors in the absence of evidence that the treatment was the result of prejudice or a conscious intention to discriminate, and evidence that a lender applied an otherwise neutral non-discriminatory policy uniformly to all applicants, but the practice had a discriminatory effect, unless the practice could be justified as a business necessity.

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Banks and other depository institutions also are subject to numerous consumer-oriented laws and regulations. These laws, which include the Truth in Lending Act, the Truth in Savings Act, the Real Estate Settlement Procedures Act, the Electronic Funds Transfer Act, the Equal Credit Opportunity Act, and the Fair Housing Act, require compliance by depository institutions with various disclosure requirements and requirements regulating the availability of funds after deposit or the making of some loans to customers.

Gramm-Leach-Bliley Act of 1999

The Gramm-Leach-Bliley Act of 1999 covers a broad range of issues, including a repeal of most of the restrictions on affiliations among depository institutions, securities firms and insurance companies. The following description summarizes some of its significant provisions.

The GLBA repeals sections 20 and 32 of the Glass-Steagall Act, thus permitting unrestricted affiliations between banks and securities firms. It also permits bank holding companies to elect to become financial holding companies. A financial holding company may engage in or acquire companies that engage in a broad range of financial services, including securities activities such as underwriting, dealing, investment, merchant banking, insurance underwriting, sales, and brokerage activities. In order to become a financial holding company, the bank holding company and all of its affiliated depository institutions must be well-capitalized, well-managed, and have at least a satisfactory Community Reinvestment Act rating. We became a financial holding company in 2001.

The GLBA provides that the states continue to have the authority to regulate insurance activities, but prohibits the states in most instances from preventing or significantly interfering with the ability of a bank, directly or through an affiliate, to engage in insurance sales, solicitations, or cross-marketing activities. Although the states generally must regulate bank insurance activities in a nondiscriminatory manner, the states may continue to adopt and enforce rules that specifically regulate bank insurance activities in areas identified under the law. Under the law, the federal bank regulatory agencies adopted insurance consumer protection regulations that apply to sales practices, solicitations, advertising, and disclosures.

The GLBA adopts a system of functional regulation under which the Federal Reserve Board is designated as the umbrella regulator for financial holding companies, but financial holding company affiliates are principally regulated by functional regulators such as the FDIC for bank affiliates, the Securities and Exchange Commission for securities affiliates, and state insurance regulators for insurance affiliates. It repeals the broad exemption of banks from the definitions of “broker” and “dealer” for purposes of the Securities Exchange Act of 1934, as amended. It also identifies a set of specific activities, including traditional bank trust and fiduciary activities, in which a bank may engage without being deemed a “broker,” and a set of activities in which a bank may engage without being deemed a “dealer.” Additionally, GLBA makes conforming changes in the definitions of “broker” and “dealer” for purposes of the Investment Company Act of 1940, as amended, and the Investment Advisers Act of 1940, as amended.

The GLBA contains extensive customer privacy protection provisions. Under these provisions, a financial institution must provide to its customers, both at the inception of the customer relationship and on an annual basis, the institution’s policies and procedures regarding the handling of customers’ nonpublic personal financial information. The law provides that, except for specific limited exceptions, an institution may not provide such personal information to unaffiliated third parties unless the institution discloses to the customer that such information may be so provided and the customer is given the opportunity to opt out of such disclosure. An institution may not disclose to a non-affiliated third party, other than to a consumer credit reporting agency, customer account numbers or other similar account identifiers for marketing purposes. The GLBA also provides that the states may adopt customer privacy protections that are stricter than those contained in the act.

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Future Regulatory Uncertainty

Because federal and state regulation of financial institutions changes regularly and is the subject of constant legislative debate, we cannot forecast how federal and state regulation of financial institutions may change in the future and, as a result, impact our operations. Although Congress and the state legislature in recent years have sought to reduce the regulatory burden on financial institutions with respect to the approval of specific transactions, we fully expect that the financial institution industry will remain heavily regulated in the near future and that additional laws or regulations may be adopted further regulating specific banking practices.

Employees

As of December 31, 2008, we employed 721 people, of whom 678 were full time employees, including the Company’s Vice Chairman and eleven executive officers.

Subsequent Events

On January 27, 2009, the Company declared a cash dividend of $0.11 per share, payable March 15, 2009, to shareholders of record on February 27, 2009.

On January 29, 2009, the Company filed a Registration Statement on Form S-3 to fulfill its commitment to register the Series C Preferred Stock, the Warrant, the shares of Common Stock underlying the Warrant and Depositary Shares previously sold to the Treasury. This filing was subsequently declared effective on February 26, 2009.

Available Information

We maintain Internet websites at www.bankofhamptonroads.com, www.shorebank.com and www.trustgateway.com. These websites contain a link to our filings with the SEC on Form 10-K, Form 10-Q, and Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The reports are made available on this website as soon as practicable following the filing of the reports with the SEC. The information is free of charge and may be reviewed, downloaded and printed from the website at any time. You may also read and copy any material we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC at 1-800-SEC-0330. Copies of these materials may be obtained at prescribed rates from the SEC at such address. These materials can also be inspected on the SEC’s web site at www.sec.gov.

ITEM 1A. – RISK FACTORS

Risk Factors

An investment in our common stock involves risks. You should carefully consider the risks described below in conjunction with the other information in this Form 10-K, including our consolidated financial statements and related notes, before investing in our common stock. If any of the following risks or other risks that have not been identified or that we may believe are immaterial or unlikely to actually occur, were to occur, then our business, financial condition and results of operations could be harmed. This could cause the price of our stock to decline, and you may lose part or all of your investment. This Form 10-K contains forward-looking statements that involve risks and uncertainties, including statements about our future plans, objectives, intentions and expectations. Past results are not a reliable indicator of future results, and historical trends should not be used to anticipate results or trends in future periods. Many factors, including those described below, could cause actual results to differ materially from those discussed in forward-looking statements.

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Difficult market conditions have adversely affected our industry.

Dramatic declines in the housing market over the past year, with falling home prices and increasing foreclosures, unemployment and under-employment, have negatively impacted the credit performance of real estate related loans and resulted in significant write-downs of asset values by financial institutions. These write-downs, initially of asset-backed securities, but spreading to other securities and loans, have caused many financial institutions to seek additional capital, to reduce or eliminate dividends, to merge with larger and stronger institutions and, in some cases, to fail. Reflecting concern about the stability of the financial markets generally and the strength of counterparties, many lenders and institutional investors have reduced or ceased providing funding to borrowers, including to other financial institutions. This market turmoil and tightening of credit have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility and widespread reduction of business activity generally. The resulting economic pressure on consumers and lack of confidence in the financial markets could adversely affect our business, financial condition and results of operations. Market developments may affect consumer confidence levels and may cause adverse changes in payment patterns, causing increases in delinquencies and default rates, which may impact our charge-offs and provision for credit losses. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on us and others in the financial institutions industry.

Current levels of market volatility are unprecedented.

The capital and credit markets have been experiencing volatility and disruption for more than 12 months. Recently, the volatility and disruption has reached unprecedented levels. In some cases, the markets have produced downward pressure on stock prices and credit availability for certain issuers without regard to those issuers’ underlying financial strength. If current levels of market disruption and volatility continue or worsen, there can be no assurance that we will not experience an adverse effect, which may be material, on our ability to access capital and on our business, financial condition and results of operations.

The soundness of other financial institutions could adversely affect us.

Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. Many of these transactions expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the financial instrument exposure due us. There is no assurance that any such losses would not materially and adversely affect our results of operations.

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

On October 3, 2008, President Bush signed ESSA into law. The legislation was the result of a proposal by Treasury Secretary Henry Paulson to the U.S. Congress in response to the financial crises affecting the banking system and financial markets and threats to investment banks and other financial institutions. Pursuant to the EESA, the U.S. Treasury will have the authority to, among other things, purchase up to $700 billion of mortgages, mortgage-backed securities and certain other financial instruments from financial institutions for the purpose of stabilizing and providing liquidity to the U.S. financial markets. On October 14, 2008, the U.S.

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Department of Treasury announced TARP CPP, a program under the EESA pursuant to which it would make senior preferred stock investments in participating financial institutions. On October 14, 2008, the Federal Deposit Insurance Corporation announced the development of a guarantee program under the systemic risk exception to the Federal Deposit Act (“FDA”) pursuant to which the FDIC would offer a guarantee of certain financial institution indebtedness in exchange for an insurance premium to be paid to the FDIC by issuing financial institutions (the “FDIC Temporary Liquidity Guarantee Program”). Most recently, on February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the “ARRA”), which contains a wide array of provisions aimed at stimulating the U.S. economy.

There can be no assurance, however, as to the actual impact that the EESA, ARRA and their implementing regulations, the FDIC programs, or any other governmental program will have on the financial markets. The failure of the EESA, ARRA, the FDIC, or the U.S. government to stabilize the financial markets and a continuation or worsening of current financial market conditions could materially and adversely affect our business, financial condition, results of operations, access to credit or the trading price of our common stock.

The impact on us of recently enacted legislation, in particular the Emergency Economic Stabilization Act of 2008 and the Amrican Recovery and Reinvestment Act of 2009 and their implementing regulations, and actions by the FDIC, cannot be predicted at this time.

The programs established or to be established under the EESA, ARRA and Troubled Asset Relief Program may have adverse effects upon us. We may face increased regulation of our industry. Compliance with such regulation may increase our costs and limit our ability to pursue business opportunities. Also, participation in specific programs may subject us to additional restrictions. For example, participation in the TARP Capital Purchase Program will limit (without the consent of the Department of Treasury) our ability to increase our dividend or to repurchase our common stock for so long as any securities issued under such program remain outstanding. It will also subject us to additional executive compensation restrictions. Similarly, programs established by the FDIC under the systemic risk exception of the FDA, whether we participate or not, may have an adverse effect on us. Participation in the FDIC Temporary Liquidity Guarantee Program likely will require the payment of additional insurance premiums to the FDIC. We may be required to pay significantly higher Federal Deposit Insurance Corporation premiums even if we do not participate in the FDIC Temporary Liquidity Guarantee Program because market developments have significantly depleted the insurance fund of the FDIC and reduced the ratio of reserves to insured deposits. The affects of participating or not participating in any such programs and the extent of our participation in such programs cannot reliably be determined at this time.

We may incur losses if we are unable to successfully manage interest rate risk.

Our profitability will depend in substantial part upon the spread between the interest rates earned on investments and loans and the interest rates paid on deposits and other interest-bearing liabilities. These rates are normally in line with general market rates and rise and fall based on the asset liability committee’s view of our needs. However, we may pay above-market rates to attract deposits as we have done in some of our marketing promotions in the past. Changes in interest rates will affect our operating performance and financial condition in diverse ways including the pricing of securities, loans and deposits, and the volume of loan originations in our mortgage banking business. We attempt to minimize our exposure to interest rate risk, but we are unable to completely eliminate this risk. Our net interest spread will depend on many factors that are partly or entirely outside our control, including competition, federal economic, monetary and fiscal policies, and economic conditions generally. Our net interest income will be adversely affected if market interest rates change so that the interest we pay on deposits and borrowings increases faster than the interest we earn on loans and investments.

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Because of our business of lending for construction and land development, a downturn in real estate markets could increase our credit losses and negatively affect our financial results.

Our loan portfolio includes a substantial amount of loans for construction and land development. At December 31, 2008, we had loans of $897.3 million, or 34.45% of total loans, outstanding to finance construction and land development. Many of our loans are secured by real estate in our market area. Consequently, a further decline in local economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are geographically diverse.

In addition to the financial strength and cash flow characteristics of the borrower in each case, we often secure loans with real estate collateral. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, our earnings and capital could be adversely affected.

Risks of loan defaults and foreclosures are unavoidable in the banking industry, and we try to limit our exposure to these risks by monitoring our extensions of credit carefully. The economic implosion caused by the economic melt down in the last half of 2008 has increased the risk in our earning asset portfolios. The economy for the near-term is expected to be unsettled with the potential for more downturns. Since we cannot fully eliminate credit risk and impact of the current economy, credit losses may occur in the future.

We depend on the services of key personnel.

The loss of any of these personnel could disrupt our operations, and our business could suffer. Our success depends substantially on the banking relationships maintained with our customers and the skills and abilities of our executive officers and senior lending officers. We have entered into employment agreements with certain key personnel. The existence of such agreements, however, does not necessarily assure that we will be able to continue to retain their services. They provide valuable services to us and the unexpected loss of one or more of them could have an adverse impact on our business and possibly result in reduced revenues and earnings.

Our business success also is dependent upon our ability to continue to attract, hire, motivate, and retain skilled personnel to develop new customer relationships, as well as new financial products and services. Many experienced banking professionals employed by our competitors are covered by agreements not to compete or solicit their existing customers if they were to leave their current employment. These agreements make the recruitment of these professionals more difficult. The market for these people is competitive, and we cannot assure you that we will be successful in attracting, hiring, motivating, or retaining them.

Our future success is dependent on our ability to compete effectively in the highly competitive banking industry.

We face vigorous competition from other banks and other financial institutions, including savings and loan associations, savings banks, finance companies and credit unions for deposits, loans and other financial services in our market area. A number of these banks and other financial institutions are significantly larger than we are and have substantially greater access to capital and other resources, as well as larger lending limits and branch systems, and offer a wider array of banking services. Many of our non-bank competitors are not subject to the same extensive regulations that govern us. As a result, these non-bank competitors have advantages over us in providing certain services. While we believe we compete effectively with these other

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financial institutions in our primary markets, we may face a competitive disadvantage to larger banks. If we have to raise interest rates paid on deposits or lower interest rates charged on loans to compete effectively, our net interest margin and income could be negatively affected. Failure to compete effectively to attract new, or to retain existing, clients may reduce or limit our margins and our market share and may adversely affect our results of operations, financial condition and growth.

If our allowance for loan losses becomes inadequate, our results of operations may be adversely affected.

We maintain an allowance for loan losses that we believe is a reasonable estimate of probable and inherent losses in our loan portfolio. Through a periodic review and consideration of the loan portfolio, management determines the amount of the allowance for loan losses by considering general market conditions, credit quality of the loan portfolio, the collateral supporting the loans and performance of our customers relative to their financial obligations with us. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, which may be beyond our control, and these losses may exceed our current estimates.

Although we believe the allowance for loan losses is a reasonable estimate of probable and inherent losses in our loan portfolio, we cannot fully predict such losses or that our loan loss allowance will be adequate in the future. Excessive loan losses could have a material impact on our financial performance. Consistent with our loan loss reserve methodology, we expect to make additions to our loan loss reserve levels as a result of our loan growth, which may affect our short-term earnings.

Regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs, based on judgments different than those of our management. Any increase in the amount of our provision or loans charged-off as required by these regulatory agencies could have a negative effect on our operating results.

We may not be able to successfully manage our growth, which may adversely affect our results of operations and financial condition.

Our business strategy calls for continued growth. We anticipate being able to support this growth through the mergers we executed during 2008, as well as through the generation of additional deposits at new branch locations and through investment opportunities. However, we may need to raise capital in the future to support our continued growth and to maintain our capital levels. Our ability to raise capital through the sale of additional securities will depend primarily upon our financial condition and the condition of financial markets at that time. We may not be able to obtain capital in the amounts or on terms satisfactory to us. Our growth may be constrained if we are unable to raise capital as needed. Further, if we raise capital through the sale of additional securities, it is possible that such issuance may be dilutive to the interests of existing shareholders.

Our ability to continue to grow also depends, in part, upon our ability to:

• Open new branch offices or acquire existing branches or other financial institutions;

• Attract deposits to those locations; and

• Identify attractive loan and investment opportunities.

We may not be able to successfully implement our growth strategy if we are unable to identify attractive markets, locations or opportunities to expand in the future. Our ability to manage our growth successfully also will depend on whether we can maintain capital levels adequate to support our growth, maintain cost controls and asset quality and successfully integrate any businesses we acquire into our organization. As we continue to implement our growth strategy by opening new branches or acquiring branches or other banks, we expect to

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incur increased personnel, occupancy and other operating expenses. In the case of new branches, we must absorb those higher expenses while we begin to generate new deposits, and there is a further time lag involved in redeploying new deposits into attractively priced loans and other higher yielding earning assets. Thus, our plans for branch expansion could decrease our earnings in the short run, even if we efficiently execute our branching strategy.

We could sustain losses if our asset quality declines.

Our earnings are significantly affected by our ability to properly originate, underwrite and service loans. We could sustain losses if we incorrectly assess the creditworthiness of our borrowers or fail to detect or respond to deterioration in asset quality in a timely manner. Problems with asset quality could cause our interest income and net interest margin to decrease and our provisions for loan losses to increase, which could adversely affect our results of operations and financial condition.

Our recent results may not be indicative of our future results.

We may not be able to sustain our historical rate of growth or may not even be able to grow our business at all. In addition, our recent and rapid growth may distort some of our historical financial ratios and statistics. In the future, we may be subject to various factors that may influence our performance such as the interest rate environment which can have drastic swings that impact our revenue stream and cost of funds, the state of the real estate market and the valuations associated with property that is collateral on loans, or the ability to find suitable expansion opportunities. Other factors, such as economic conditions, regulatory and legislative considerations and competition, may also impede or prohibit our ability to expand our market presence. If we experience a significant decrease in our historical rate of growth, our results of operations and financial condition may be adversely affected due to a high percentage of our operating costs being fixed expenses.

We serve a limited market area, and an economic downturn in one of our market areas could adversely affect our business.

Our current market area consists primarily of the South Hampton Roads portion of Virginia, Northeastern and Southeastern North Carolina, Richmond, Virginia and the Delmarva Peninsula. In the event of a severe economic downturn in one of these markets, the lack of geographic diversification could adversely affect banking business and, consequently, our results of operations and financial condition. Although our local economies are somewhat diverse, the military has a significant presence and tourism plays a major role in fueling these economies. In 2005, the federal government considered the possibility of military base closures. Although the government ultimately decided not to close any significant military bases in our market at this time, there is no guarantee that it will not do so in the future. A significant reduction in the military presence in our market, however, whether due to base closures or large troop deployments out of the area, could have a materially adverse impact on the local economy and potentially on our customers and our business.

If the value of real estate in our core market areas were to decline materially, a significant portion of our loan portfolio could become under-collateralized, which could have a material adverse effect on us.

With most of our loans concentrated in the Greater Metropolitan Hampton Roads and Richmond areas of Virginia, the Eastern Shore of Virginia and Maryland and the coastal and eastern Piedmont region of North Carolina, a further decline in local economic conditions could adversely affect the values of our real estate collateral. Consequently, a further decline in local economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are geographically diverse.

In addition to the financial strength and cash flow characteristics of the borrower in each case, we often

20

secure loans with real estate collateral. At December 31, 2008, approximately 80.60% of our loans have real estate as a primary or secondary component of collateral. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, our earnings and capital could be adversely affected.

A significant part of GFH’s loan portfolio is unseasoned.

From the beginning of 2007 through September 30, 2008, GFH’s loan portfolio grew by approximately 30.9%, including approximately $168 million in loans acquired as a result of its acquisition of The Bank of Richmond, N.A., a Division of Gateway. It is difficult to assess the future performance of this part of GFH’s loan portfolio due to the recent origination of these loans. Industry experience shows that it takes several years for loan difficulties to become apparent. GFH can give no assurance that these loans will not become non-performing or delinquent, which could adversely affect our future performance.

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

Because a substantial portion of our loans are with customers and businesses located in the central and coastal portions of Virginia, North Carolina, and Maryland, catastrophic events, including natural disasters such as hurricanes which historically have struck the east coast of the United States with some regularity, or terrorist attacks, could disrupt our operations. Any of these natural disasters or other catastrophic events could have a negative impact on most or all of our offices and customer base, as well as the strength of our loan portfolio. Even though we carry business interruption insurance policies, make contingency plans and typically have provisions in our contracts that protect us in certain events, we might suffer losses as a result of business interruptions that exceed the coverage available under our insurance policies or for which we do not have coverage. Any natural disaster or catastrophic event affecting us could have a significant negative impact on our operations.

The decline in the fair market value of various investment securities available-for-sale could result in future impairment losses.

As of December 31, 2008, the total amortized cost of the Company’s portfolio of investment securities available-for-sale, which includes both debt and equity securities, was approximately $149.8 million while the fair market value of our investment securities available-for-sale was approximately $149.6 million. As of December 31, 2008, the difference between the estimated fair value and amortized cost of the equity securities included within our available-for-sale investment portfolio was a net unrealized loss of $175 thousand, and an approximate $114 thousand unrealized loss net of tax, which was included in accumulated other comprehensive loss as a reduction in shareholder’s equity on our balance sheet.

On September 7, 2008, the United States Treasury placed Freddie Mac and Fannie Mae into conservatorship, two companies many institutions, including us, held as equity investments in their securities portfolios. Because Freddie Mac and Fannie Mae have been placed into conservatorship, companies holding these securities recognized significant losses after concluding the decline in the fair market value of these securities constituted an other-than-temporary impairment. Even after this impairment loss, the Company cannot guarantee it will not have to recognize in one or more future reporting periods additional impairment losses which could have a material adverse effect on its financial condition and results of operation.

A number of factors could cause the Company to conclude in one or more future reporting periods that any difference between the fair value and the amortized cost of any of its investment securities available-for-sale constitutes an other-than-temporary impairment. These factors include, but are not limited to, an increase in

21

the severity of the unrealized loss on a particular security, an increase in the length of time unrealized losses continue without an improvement in value, a change in our intent or ability to hold the security for a period of time sufficient to allow for the forecasted recovery, or changes in market conditions or industry or issuer specific factors that would render us unable to forecast a full recovery in value.

Changes in interest rates could negatively impact our results of operations.

Our results of operations depend to a large extent on our net interest income, which is the difference between the interest income received on earning assets, such as loans, investment securities, and short-term investments, and interest expense incurred on deposit accounts and borrowings. The amount of net interest income we earn is influenced by market rates of interest, which in turn are influenced by monetary policy and other external factors, including competition. Net interest income also is influenced by our asset and liability management policies, the volume of our interest bearing assets and liabilities, and changes in the mix of those assets and liabilities, as well as growth in the respective categories. The relationship of interest rate changes to our financial condition and our results of operations is complex, however, and as a liability sensitive financial institution, our net interest income is likely to decline in a rising interest rate environment and to increase in a decreasing interest rate environment. We use various techniques to analyze the effects of changes in interest rates and utilize various strategies intended to mitigate any adverse effects. Due to the fact that most of our assets and liabilities are interest bearing instruments, our financial condition and results of operations are subject to interest rate risk. Although we attempt to manage interest rate risk, we cannot eliminate it.

Governmental and regulatory changes may adversely affect our cost structure.

We are subject to extensive regulation by state and federal regulatory authorities. In addition, as a public company we are subject to securities laws and standards imposed by the Sarbanes-Oxley Act. Because we are a relatively small company, the costs of compliance are disproportionate compared with much larger organizations. Continued growth of legal and regulatory compliance mandates could adversely affect our expenses and future results of operations. In addition, the government and regulatory authorities have the power to impose rules or other requirements, including requirements that we are unable to anticipate, that could have an adverse impact on our results of operations.

We face a variety of threats from technology based frauds and scams.

Financial institutions are a prime target of criminal activities through various channels of information technology. We attempt to mitigate risk from such activities through policies, procedures, and preventative and detective measures. In addition, we maintain insurance coverage designed to provide a level of financial protection to our business. However, risks posed by business interruption, fraud losses, business recovery expenses, and other potential losses or expenses that may be experienced from a significant event are not readily predictable and, therefore, could have an impact on our results of operations.

Banking regulators have broad enforcement power, but regulations are meant to protect depositors, and not investors.

We are subject to supervision by several governmental regulatory agencies. These regulations, and the interpretation and application of them by regulators, are beyond our control, may change rapidly and unpredictably, and can be expected to influence our earnings and growth. In addition, these regulations may limit our growth and the return to our investors by restricting activities such as the payment of dividends, mergers with, or acquisitions by, other institutions, investments, loans and interest rates, interest rates paid on deposits, and the creation of branch offices. Although these regulations impose costs on us, they are intended to protect depositors, and you should not assume that they protect your interests as a shareholder. The regulations to which we are subject may not always be in the best interests of investors.

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Trading in our common stock has been sporadic and volume has been light. As a result, shareholders may not be able to quickly and easily sell their common stock.

Although our common stock trades on the Nasdaq Global Select Market and a number of brokers offer to make a market in the common stock on a regular basis, trading volume to date has been limited and there can be no assurance that an active and liquid market for the common stock will develop.

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 articles of incorporation and bylaws contain provisions that may be deemed to have the effect of discouraging or delaying uninvited attempts by third parties to gain control of it. These provisions include the division of our board of directors into classes and the ability of our board to set the price, term and rights of, and to issue, one or more series of our preferred stock. Similarly, the Virginia Stock Corporation Act contains provisions designed to protect Virginia corporations and employees from the adverse effects of hostile corporate takeovers. These provisions reduce the possibility that a third party could effect a change in control without the support of our incumbent directors. These provisions may also strengthen the position of current management by restricting the ability of shareholders to change the composition of the board, to affect its policies generally and to benefit from actions which are opposed by the current board.

Our directors and officers have significant voting power.

As of March 1, 2009, our officers and directors beneficially owned 15.18% of our common stock. By voting against a proposal submitted to shareholders, the directors and officers may be able to make approval more difficult for proposals requiring the vote of shareholders such as mergers, share exchanges, asset sales, and amendments to our articles of incorporation.

We may fail to realize all of the anticipated benefits of the mergers with SFC and GFH.

The success of the mergers will depend, in part, on our ability to produce the anticipated positive effects on earnings, growth and operating efficiencies from combining the businesses of the Company, SFC, and GFH. If we are unable to achieve our objectives during and subsequent to the combination, the anticipated benefits of the mergers may not be fully realized at all or may take longer to realize than expected.

The long-term success of our recent merger with GFH will depend on a number of factors, including (but not limited to) Hampton Roads Bankshares’ ability to:

• Timely and successfully integrate the operations of Hampton Roads Bankshares and GFH;

• Maintain existing relationships with depositors in Gateway to minimize withdrawals of deposits subsequent to the merger;

• Retain and attract qualified personnel at Hampton Roads Bankshares and Gateway;

• Maintain and enhance existing relationships with borrowers;

• Limit unanticipated losses from loans;

• Control the incremental non-interest expense from Hampton Roads Bankshares to maintain overall operating efficiencies;

• The incurrence and possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on our results of operations; and

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• Compete effectively in the communities served by Hampton Roads Bankshares and Gateway and in nearby communities.

ITEM 1B. - UNRESOLVED STAFF COMMENTS

There were no unresolved staff comments as of December 31, 2008.

ITEM 2 - PROPERTIES

We lease our executive offices, which are located at 999 Waterside Dr., Suite 200, Norfolk, VA 23510. The initial lease term of eleven years and two months began on June 1, 2005. There is one seven year renewal term. We operate from the locations listed below:

Accomac, VA—23349 Counsel Drive (8)	Lease
Cape Charles, VA—22468 Lankford Highway (3)	Own
Chapel Hill, NC—504 Meadowmont Village Center (3)	Lease
Charlottesville, VA—204 Albemarle Square (3)	Lease
Chesapeake, VA—201 Volvo Parkway (3)	Own
Chesapeake, VA—852 N. George Washington Highway (3)	Own
Chesapeake, VA—712 Liberty Street (3)	Own
Chesapeake, VA—4108 Portsmouth Boulevard (3)	Own
Chesapeake, VA—4720 Battlefield Boulevard S. (3)	Own
Chesapeake, VA—239 Battlefield Boulevard S. (3)	Own
Chesapeake, VA—111 Gainsboro Square (5)	Own
Chesapeake, VA—575 Cedar Road (3)	Lease Land/Own Building
Chesapeake, VA—1500 Mount Pleasant Road (3)	Lease Land/Own Building
Chesapeake, VA—1400 Kempsville Road (3)	Lease
Chesapeake, VA—1403 Greenbrier Parkway (3)	Lease
Chesapeake, VA—204 Carmichael Way (3)	Own
Chincoteague, VA—6350 Maddox Boulevard (3)	Own
Edenton, NC—322 S Broad Street (4)	Own
Elizabeth City, NC—112 Corporate Drive (6)	Own
Elizabeth City, NC—1145 N Road Street (1)	Lease Land/Own Building
Elizabeth City, NC—1404 W Ehringhaus Street (3)	Own
Elizabeth City, NC – 400 W Ehringhaus Street (4)	Own
Elizabeth City, NC—802 W Ehringhaus Street (2)	Lease
Emporia, VA—520 Main Street (3)	Own
Emporia, VA—100 Dominion Drive (3)	Own
Exmore, VA—4071 Lankford Highway (3)	Own
Hertford, NC—147 N Church Street (2)	Own
Kitty Hawk, NC—3600 Croatan Highway (1)	Own
Kitty Hawk, NC—5406 Croatan Highway (1)	Lease Land/Own Building
Midlothian, VA—13804 Hull Street (3)	Own
Moyock, NC—100 Moyock Commons Drive (4)	Own
Nags Head, NC—2808 @ Croatan Highway (5)	Lease
Newport News, VA—753 Thimble Shoals Boulevard (2)	Lease
Norfolk, VA—4500 E. Princess Anne Road (3)	Own
Norfolk, VA—539 21st Street (3)	Lease
Norfolk, VA—500 Plume Street (3)	Lease
Norfolk, VA—4037 East Little Creek Road (3)	Lease

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Norfolk, VA—999 Waterside Drive, 1st Floor (3)	Lease
Norfolk, VA—999 Waterside Drive, 2nd Floor (6)	Lease
Onley, VA—25253 Lankford Highway (3)	Lease Land/Own Building
Onley, VA—25020 Shore Parkway (6)	Own
Parksley, VA—18426 Dunne Avenue (3)	Own
Plymouth, NC—433 US Highway 64 E (4)	Own
Pocomoke City, MD—103 Pocomoke Marketplace (3)	Lease
Raleigh, NC—2209 Century Drive (3)	Lease
Raleigh, NC—8470 Falls of Neuse Road (3)	Own
Raleigh, NC—2235 Gateway Access Point (3)	Own
Richmond, VA—5300 Patterson Avenue (3)	Own
Richmond, VA—2730 Buford Road (3)	Own
Richmond, VA—8905 Fargo Road (3)	Lease
Richmond, VA—8209 W Broad Street (3)	Own
Richmond, VA—12090 W Broad Street (3)	Own
Roper, NC—102 W Buncomb Street (3)	Own
Salisbury, MD—1503 S. Salisbury Boulevard (3)	Own
Salisbury, MD—100 West Main Street (3)	Own
Suffolk, VA—117 Market Street (3)	Own
Suffolk, VA—2825 Godwin Drive (3)	Own
Virginia Beach, VA—5472 Indian River Road (3)	Own
Virginia Beach, VA—1100 Dam Neck Road (3)	Own
Virginia Beach, VA—4460 Corporation Lane Suite 100 (3)	Lease
Virginia Beach, VA—713 Independence Boulevard (3)	Lease
Virginia Beach, VA—1580 Laskin Road (5)	Lease Land/Own Building
Virginia Beach, VA—641 Lynnhaven Parkway (7)	Own
Virginia Beach, VA—3801 Pacific Avenue (3)	Lease
Virginia Beach, VA—2098 Princess Anne Rd (3)	Lease Land/Own Building
Virginia Beach, VA—3001 Shore Dr (3)	Lease
Virginia Beach, VA—1316 N. Great Neck Road (3)	Lease
Virginia Beach, VA—281 Independence Boulevard (3)	Lease
Wake Forest, NC—152 Capcom Avenue (3)	Lease
Wilmington, NC—901 Military Cutoff Rd (3)	Own

(1) Includes banking, investment brokerage and insurance services.

(2) Insurance services only.

(3) Banking services only.

(4) Banking and insurance services.

(5) Banking and investment brokerage services.

(6) Operations center.

(7) Banking and title insurance services.

(8) Investment brokerage services only.

All of our properties are in good operating condition and are adequate for our present and anticipated future needs.

ITEM 3 - LEGAL PROCEEDINGS

In the ordinary course of our operations, we may become party to legal proceedings. Currently, we are not party to any material legal proceedings.

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

A special meeting of shareholders was held on December 18, 2008.

The shareholders of the Company voted in favor to adopt the Agreement and Plan of Merger, dated as of September 23, 2008, by and among Hampton Roads Bankshares, Inc. and Gateway Financial Holdings, Inc., and to approve the transactions contemplated by the merger agreement, including the merger of Gateway Financial Holdings, Inc. with and into Hampton Roads Bankshares, Inc. with 8,983,787 shares, representing 67.9% of the outstanding stock voting for, 106,064 shares, representing 0.8% of the outstanding stock voting against, and 227,564 shares abstained.

The shareholders of the Company voted in favor to adopt an amendment to the articles of incorporation of Hampton Roads Bankshares, Inc. to revise subsection (a) of Article VII of Hampton Roads Bankshares, Inc’s articles of incorporation to increase the maximum number of members of the board of directors from 18 to 24 with 8,819,378 shares, representing 66.7% of the outstanding stock voting for, 283,015 shares, representing 2.1% voting against, and 202,274 abstained.

PART II

ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Price of Common Stock and Dividend Payments

Our common stock began trading on the Nasdaq Global Select Market under the symbol “HMPR” on September 12, 2007. Prior to listing on the Nasdaq Global Select Market, our common stock traded on the Nasdaq Capital Market starting August 3, 2006, and before that, on the Over-the-Counter Bulletin Board, a Nasdaq sponsored and operated inter-dealer quotation system for equity securities. The following table sets forth for the periods indicated the high and low prices per share of our common stock as reported on the Nasdaq Global Select Market and the Nasdaq Global Market, as appropriate, along with the quarterly cash dividends per share declared. Per share prices do not include adjustments for markups, markdowns or commissions.

	Sales Price				Cash Dividend
	High		Low		Declared
2007
First Quarter	$	13.25	$	11.55	$	0.10
Second Quarter		15.25		12.10		0.11
Third Quarter		14.80		11.90		0.11
Fourth Quarter		13.24		11.01		0.11
2008
First Quarter	$	12.45	$	9.50	$	0.11
Second Quarter		13.92		9.51		0.11
Third Quarter		13.00		10.07		0.11
Fourth Quarter		12.00		6.25		0.11

Dividend Policy

We have historically paid cash dividends on a quarterly basis. However, we cannot assure you that we will continue to pay cash dividends on any particular schedule or that we will not reduce the amount of dividends we pay in the future.

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The primary source of funds for dividends paid by us to our shareholders is the dividends received from our subsidiaries. Our bank subsidiaries are subject to laws and regulations that limit the amount of dividends that they can pay. Under Virginia law, a bank may not declare a dividend in excess of its undivided profits. North Carolina banking law will permit the payment of dividends only out of retained earnings and will prohibit the payment of cash dividends if payment of the dividend would cause a bank’s surplus to be less than 50% of its paid-in capital. In addition, our bank subsidiaries may not declare a dividend if the total amount of all dividends, including the proposed dividend, declared by the respective bank in any calendar year exceeds the total of that bank’s year to date retained net income, combined with its retained net income of the two preceding years, unless the dividend is approved by the Federal Reserve. At December 31, 2008, the amount available for dividends under the above regulations was approximately $5.2 million. Our bank subsidiaries may not declare or pay any dividend if, after making the dividend, the bank would be “undercapitalized,” as defined in the banking regulations.

As a result of our issuance of preferred stock to the Treasury on December 31, 2008 some new requirements will be in effect. The Preferred Stock is in a superior ownership position compared to common stock. Dividends must be paid to the preferred stock holder before they can be paid to the common stock holder. The Company has issued 23,266 shares of Series A Preferred Stock, 37,550 shares of Series B Non-Convertible Non-Cumulative Perpetual Preferred Stock and 80,347 shares of Series C Preferred Stock. Each of the series of preferred stock of the Company issued is senior to its shares of common stock. As a result, the Company must make dividend payments on each series of the preferred stock before any dividends can be paid on its common stock and, in the event of its bankruptcy, dissolution or liquidation, the holders of each series of the preferred stock must be satisfied before any distributions can be made on its common stock. The Company has the right to defer distributions on its preferred stock for any period of time, during which time no dividends may be paid on its common stock. The dividends declared on the Series A Preferred Stock, Series B Non-Convertible Non-Cumulative Perpetual Preferred Stock and Series C Preferred Stock will reduce the net income available to common shareholders and the Company’s earnings per common share. Additionally, the ownership interest of the existing holders of common stock will be diluted to the extent the warrant the Company issued to Treasury in conjunction with the sale to Treasury of the Series C Preferred Stock is exercised. Although Treasury has agreed not to vote any of the shares of common stock it receives upon exercise of the warrant, a transferee of any portion of the warrant or of any shares of common stock acquired upon exercise of the warrant is not bound by this restriction.

The securities purchase agreement between the Company and Treasury provides that prior to the earlier of (i) December 31, 2011 and (ii) the date on which all of the shares of the Series C Preferred Stock have been redeemed by the Company or transferred by Treasury to third parties, the Company may not, without the consent of Treasury, (a) increase the cash dividend on its common stock or (b) subject to limited exceptions, redeem, repurchase or otherwise acquire shares of its common stock or preferred stock other than the Series C Preferred Stock or trust preferred securities. In addition, the Company is unable to pay any dividends on its common stock unless it is current in its dividend payments on the Series C.

Additionally, the Federal Reserve and the states have the general authority to limit the dividends paid by insured banks if the payment is deemed an unsafe and unsound practice. Both the states and the Federal Reserve have indicated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsound and unsafe banking practice.

We are also subject to certain federal regulatory requirements to maintain capital at or above regulatory minimums. These regulatory requirements regarding capital affect our dividend policies. Banking regulators have indicated that banking organizations should generally pay dividends only if the organization’s net income available to common shareholders over the past year has been sufficient to fully fund the dividends, and the prospective rate of earnings retention appears consistent with the organization’s capital needs, asset quality and overall financial condition.

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Performance Graph

The graph below presents five-year cumulative total return comparisons through December 31, 2008, in stock price appreciation and dividends for our common stock, the Standard & Poor’s 500 Total Return Index (“S & P 500”) and the Keefe, Bruyette & Woods 50 Total Return Index (“KBW 50”). Returns assume an initial investment of $100 at the market close on December 31, 2003 and reinvestment of dividends. The KBW 50 is a published industry index providing a market capitalization weighted measure of the total return of 50 money center and major regional U.S. banking companies. Values as of each year-end of the $100 initial investment are shown in the following table and graph.

	Period Ending
Index	12/31/03	12/31/04	12/31/05	12/31/06	12/31/07	12/31/08
Hampton Roads Bankshares, Inc.	100.00	91.82	87.03	102.54	110.96	80.41
KBW 50	100.00	109.60	111.20	132.80	103.84	54.46
S&P 500	100.00	110.88	116.33	134.70	142.10	89.53

Number of Shareholders of Record

As of March 1, 2009, we had 21,800,873 shares of common stock outstanding, which were held by 4,670 shareholders of record. In addition, we had approximately 4,623 beneficial owners who own their shares through brokers.

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers

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

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 1, 2008-October 31, 2008	4	$	9.86	4	—
November 1, 2008-November 30, 2008	—		—	—	—
December 1, 2008-December 31, 2008	58,714		9.51	58,714	—
Total	58,718	$	9.51	58,718	—

ITEM 6 - SELECTED FINANCIAL DATA

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

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

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

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

	Page in the excerpts from the Annual Report
Management’s Report on Internal Control Over Financial Reporting	28
Report of Independent Registered Public Accounting Firm	29
Consolidated Balance Sheets—December 31, 2008 and 2007	30
Consolidated Statements of Income—Years Ended December 31, 2008, 2007, and 2006	31
Consolidated Statements of Changes in Shareholders’ Equity—Years Ended December 31, 2008, 2007, and 2006	32
Consolidated Statements of Cash Flows—Years Ended December 31, 2008, 2007, and 2006	33
Notes to Consolidated Financial Statements—December 31, 2008, 2007, and 2006	34-67

29

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

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

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

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

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

ITEM 9A - CONTROLS AND PROCEDURES

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

30

Management’s Report on Internal Control Over Financial Reporting and the Report of Independent Registered Public Accounting Firm thereon are set forth on pages 28 and 29, respectively, in the excerpts from the Annual Report for the year ended December 31, 2008 and are incorporated herein by reference.

ITEM 9B - OTHER INFORMATION

None.

PART III

ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information concerning our directors, executive offices and corporate governance in the proxy statement for the annual shareholders meeting to be held May 21, 2009 is incorporated herein by reference.

ITEM 11 - EXECUTIVE COMPENSATION

Information concerning executive compensation in the proxy statement for the annual shareholders meeting to be held May 21, 2009 is incorporated herein by reference.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information concerning security ownership of certain beneficial owners and management and related stockholder matters in the proxy statement for the annual shareholders meeting to be held May 21, 2009 is incorporated herein by reference.

A summary of the information related to our existing equity compensation plans as of December 31, 2008, is given below:

Plan Category	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights		Weighted Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
Equity Compensation Plans Approved by Security Holders	1,995,484	(a)	$	12.49	839,383
Equity Compensation Plans not Approved by Security Holders	100,522	(b)		9.16	—
Total	2,096,006		$	11.96	839,383

(a) Equity compensation plans approved by security holders includes 216,183 stock options acquired through the Shore Merger and 1,084,496 stock options acquired through the Gateway Merger.

(b) Equity compensation plans not approved by security holders consists entirely of stock options acquired through the Gateway Merger.

The Compensation Committee of the board of directors adopted the 2006 Stock Incentive Plan on March 14, 2006. This plan was approved by the shareholders on April 25, 2006. The 2006 Stock Incentive Plan superseded a stock incentive plan adopted in 1993, although the 1993 plan remains in effect.

31

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information concerning certain relationships and related transactions, and director independence in the proxy statement for the annual shareholders meeting to be held May 21, 2009 is incorporated herein by reference.

ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES

Information concerning principal accountant fees and services in the proxy statement for the annual shareholders meeting to be held May 21, 2009 is incorporated herein by reference.

PART IV

ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1) and (2) Financial Statements and Financial Statement Schedules. The response to this portion of Item 15 are set forth on pages 28 through 67 of the Annual Report for the year ended December 31, 2008 and are incorporated herein by reference.

(a) (3) Exhibits. See Exhibit Index, which is incorporated in this item by reference.

(b) Exhibits. See Item 15 (a)(3) above.

(c) Financial Statement Schedules. See Item 15 (a)(2) above.

32

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

/s/ Jack W. Gibson

Jack W. Gibson, Vice Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

SIGNATURE	CAPACITY	DATE
/s/ Jack W. Gibson Jack W. Gibson	Vice Chairman and Chief Executive Officer (Principal Executive Officer)	March 27, 2009
/s/ Neal A. Petrovich Neal A. Petrovich	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	March 27, 2009
/s/ Lorelle L. Fritsch Lorelle L. Fritsch	Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)	March 27, 2009
/s/ Emil A. Viola	Chairman of the Board	March 27, 2009
/s/ Douglas J. Glenn Douglas J. Glenn	Director, Executive Vice President, Chief Operating Officer, and General Counsel	March 27, 2009
/s/ D. Ben Berry D. Ben Berry	Director and President	March 27, 2009
/s/ Scott C. Harvard Scott C. Harvard	Director and Executive Vice President for Delmarva Operations	March 27, 2009
/s/ William Brumsey, III William Brumsey, III	Director	March 27, 2009
/s/ Henry P. Custis, Jr. Henry P. Custis, Jr.	Director	March 27, 2009
/s/ Robert Y. Green, Jr. Robert Y. Green, Jr.	Director	March 27, 2009
/s/ Herman A. Hall, III Herman A. Hall, III	Director	March 27, 2009

33

/s/ Richard F. Hall, III Richard F. Hall, III	Director	March 27, 2009
/s/ Robert R. Kinser Robert R. Kinser	Director	March 27, 2009
/s/ Bobby L. Ralph Bobby L. Ralph	Director	March 27, 2009
/s/ Billy G. Roughton Billy G. Roughton	Director	March 27, 2009
/s/ Jordan E. Slone Jordan E. Slone	Director	March 27, 2009
/s/ Roland Carroll Smith, Sr. Roland Carroll Smith, Sr.	Director	March 27, 2009
/s/ Ollin B. Sykes Ollin B. Sykes	Director	March 27, 2009
/s/ Frank T. Williams Frank T. Williams	Director	March 27, 2009
/s/ W. Lewis Witt W. Lewis Witt	Director	March 27, 2009
/s/ Jerry T. Womack Jerry T. Womack	Director	March 27, 2009

34

Exhibit Index

Hampton Roads Bankshares, Inc.

2.1	Agreement and Plan of Merger by and between Hampton Roads Bankshares, Inc. and Shore Financial Corporation dated as of January 8, 2008, attached as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K dated January 9, 2008, incorporated herein by reference.
2.2	Agreement and Plan of Merger by and between Hampton Roads Bankshares, Inc. and Gateway Financial Holdings, Inc. dated as of September 23, 2008, attached as Exhibit 2.2 to the Registrant’s Current Report on Form 8-K dated September 24, 2008, incorporated herein by reference.
3.1	Articles of Incorporation of Hampton Roads Bankshares, Inc. and Amendment to Articles of Incorporation of Hampton Roads Bankshares, Inc.*
3.2	Bylaws of Hampton Roads Bankshares, Inc., as amended, attached as Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2007, incorporated herein by reference.
4.1	Specimen of Common Stock Certificate, attached as Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005, incorporated herein by reference.
10.1	Employment Agreement, dated as of March 28, 1988, between the Registrant and Jack Gibson, attached as Exhibit 7 of the Form F-1, incorporated herein by reference.
10.2	Supplemental Retirement Agreement, dated as of March 31, 1994, attached as Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1993, incorporated herein by reference.
10.3	Employment Agreement, dated as of December 18, 1996, between the Registrant and Renee` McKinney, attached as Exhibit 10.10 to the Registrant’s Annual Report on Form 10-KSB for the year ended December 31, 1996, incorporated herein by reference.
10.4	First Amendment to Employment Agreement, dated as of February 1, 1997, between the Registrant and Jack Gibson, attached as Exhibit 10.11 to the Registrant’s Annual Report on Form 10-KSB, incorporated herein by reference.
10.5	First Amendment to Employment Agreement, dated as of February 1, 1997, between the Registrant and Renee McKinney, attached as Exhibit 10.12 to the Registrant’s Annual Report on Form 10-KSB, incorporated herein by reference.
10.6	Employment Agreement, First Amendment to Employment Agreement and Second Amendment to Employment Agreement, each dated as of March 9, 1999, between the Registrant and Tiffany Glenn, attached as Exhibit 10.15 to the Registrant’s Annual Report on Form 10-KSB for the year ended December 31, 1999, incorporated herein by reference.
10.7	Employment Agreement, dated as of October 11, 2001, between the Registrant and Gregory Marshall, attached as Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001, incorporated herein by reference.

35

10.8	Employment Agreement, dated as of December 31, 2002, between the Registrant and Julie Anderson, attached as Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002, incorporated herein by reference.
10.9	First Amendment to Employment Agreement, dated as of December 31, 2002, between the Registrant and Julie Anderson, attached as Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002, incorporated herein by reference.
10.10	Second Amendment to Employment Agreement, dated as of December 31, 2002, between the Registrant and Julie Anderson, attached as Exhibit 10.21 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002, incorporated herein by reference.
10.11	Employment Agreement, dated as of July 16, 2003, between the Registrant and Donald Fulton, Jr., attached as Exhibit 10.26.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.12	First Amendment to the Employment Agreement, dated as of July 16, 2003, between the Registrant and Donald Fulton, Jr., attached as Exhibit 10.26.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.13	Second Amendment to the Employment Agreement, dated as of July 16, 2003, between the Registrant and Donald Fulton, Jr., attached as Exhibit 10.26.3 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.14	Third Amendment to the Employment Agreement, dated as of July 16, 2003, between the Registrant and Donald Fulton, Jr., attached as Exhibit 10.26.4 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.15	Third Amendment to Employment Agreement, dated as of June 24, 2003, between the Registrant and Jack Gibson, attached as Exhibit 10.24 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.16	Third Amendment to Employment Agreement, dated as of June 24, 2003, between the Registrant and Renee’ McKinney, attached as Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.17	Third Amendment to Employment Agreement, dated as of June 24, 2003, between the Registrant and Tiffany Glenn, attached as Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.18	Third Amendment to Employment Agreement, dated as of June 24, 2003, between the Registrant and Gregory Marshall, attached as Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.19	Third Amendment to Employment Agreement, dated as of June 24, 2003, between the Registrant and Julie Anderson, attached as Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.20	First Amendment to the Employment Agreement between the Registrant and Gregory Marshall, dated October 11, 2001, attached as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K dated June 27, 2006, incorporated herein by reference.

36

10.21	Second Amendment to the Employment Agreement between the Registrant and Gregory Marshall, dated October 11, 2001, attached as Exhibit 99.2 to the Registrant’s Current Report on Form 8-K dated June 27, 2006, incorporated herein by reference.
10.22	Amendment No. One to the Supplemental Retirement Agreement, dated as of December 9, 2003, between the Registrant and Jack Gibson, attached as Exhibit 99.4 to the Registrant’s Current Report on Form 8-K dated June 27, 2006, incorporated herein by reference.
10.23	Director Retirement Plan, dated as of November 28, 2006, attached as Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K dated March 1, 2008, incorporated herein by reference.
10.24	Employment Agreement, dated as of November 1, 2007, between the Registrant and Douglas J. Glenn, attached as Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K dated March 11, 2008, incorporated herein by reference.
10.25	Fourth Amendment to Employment Agreement by and between Hampton Roads Bankshares, Inc. and Jack W. Gibson, dated as of May 27, 2008, attached as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated June 2, 2008, incorporated herein by reference.
10.26	Fourth Amendment to Employment Agreement by and between Hampton Roads Bankshares, Inc. and Donald W. Fulton, Jr., dated as of May 27, 2008, attached as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated June 2, 2008, incorporated herein by reference.
10.27	First Amendment to Employment Agreement by and between Hampton Roads Bankshares, Inc. and Douglas J. Glenn, dated as of May 27, 2008, attached as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated June 2, 2008, incorporated herein by reference.
10.28	Amendment No. 2 to the Supplemental Retirement Agreement between Bank of Hampton Roads and Jack W. Gibson, dated May 27, 2008, attached as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K dated June 2, 2008, incorporated herein by reference.
10.29	Supplemental Retirement Agreement between Bank of Hampton Roads and Douglas J. Glenn, dated May 27, 2008, attached as Exhibit 10.5 to the Registrant’s Current Report on Form 8-K dated June 2, 2008, incorporated herein by reference.
10.30	Credit Agreement between Compass Bank and Hampton Roads Bankshares, Inc., dated May 29, 2008, attached as Exhibit 10.6 to the Registrant’s Current Report on Form 8-K dated June 2, 2008, incorporated herein by reference.
10.31	Pledge Agreement between Compass Bank and Hampton Roads Bankshares, Inc., dated May 29, 2008, attached as Exhibit 10.7 to the Registrant’s Current Report on Form 8-K dated June 2, 2008, incorporated herein by reference.
10.32	Employment Agreement by and between Shore Bank, Hampton Roads Bankshares, Inc. and Scott C. Harvard, dated as of June 1, 2008, attached as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated June 16, 2008, incorporated herein by reference.
10.33	Restrictive Covenant Agreement by and between Hampton Roads Bankshares, Inc. and Scott C. Harvard, dated as of June 1, 2008, attached as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated June 16, 2008, incorporated herein by reference.

37

10.34	Deferred Compensation Agreement by and between Shore Bank and Scott C. Harvard, dated as of June 1, 2008, attached as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated June 16, 2008, incorporated herein by reference.
10.35	Employment Agreement, dated as of August 28, 2006, between Hampton Roads Bankshares, Inc. and Lorelle L. Fritsch.*
10.36	First Amendment to Employment Agreement by and between Hampton Roads Bankshares, Inc. and Lorelle L. Fritsch, dated as of July 23, 2008.*
10.37	Bank of Hampton Roads Supplemental Executive Retirement Plan, dated as of January 1, 2005, attached as Exhibit 99.5 to the Registrant’s Current Report on Form 8-K dated June 27, 2006, incorporated herein by reference.
10.38	First Amendment to Bank of Hampton Roads Supplemental Executive Retirement Plan, dated as of December 30, 2008.*
10.39	Second Amendment to Bank of Hampton Roads Supplemental Executive Retirement Plan, dated as of December 30, 2008.*
10.40	Hampton Roads Bankshares, Inc. 2008 Director Deferred Compensation Plan dated as of January 1, 2008.*
10.41	Amended and Restated Hampton Roads Bankshares, Inc. Directors’ Deferred Compensation Plan.*
10.42	Hampton Roads Bankshares, Inc. Executive Savings Plan, dated as of July 23, 2006, attached as Exhibit 4 to the Registrant’s Registration Statement on Form S-8 (Registration No. 333-139968) dated January 12, 2007, incorporated herein by reference.
10.43	First Amendment to Hampton Roads Bankshares, Inc. Executive Savings Plan, dated as of December 30, 2008.*
10.44	Second Amendment to Hampton Roads Bankshares, Inc. Executive Savings Plan, dated as of December 30, 2008.*
10.45	Hampton Roads Bankshares, Inc. Executive Savings Plan Trust, dated as of July 23, 2006.*
10.46	Hampton Roads Bankshares, Inc. 2006 Stock Incentive Plan, dated as of March 14, 2006, attached as Exhibit 10.1 to the Registrant’s Registration Statement on Form S-8 (Registration No. 333-134583) dated May 31, 2006, incorporated herein by reference.
10.47	First Amendment to Hampton Roads Bankshares, Inc. 2006 Stock Incentive Plan, dated as of December 26, 2008.*
10.48	Non-Qualified Limited Stock Option Plan for Directors and Employees, dated March 31, 1994, attached as Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1994, incorporated herein by reference.
10.49	Dividend Reinvestment and Optional Cash Purchase Plan Prospectus, dated as of March 14, 2002, attached as Exhibit 99.1 to the Registrant’s Registration Statement on Form S-3 dated March 14, 2002, incorporated herein by reference.

38

10.50	Amended and Restated Dividend Reinvestment and Optional Cash Purchase Plan Prospectus, dated as of July 23, 2008, included in Registrant’s Prospectus on Form 424B3 filed August 15, 2008, incorporated herein by reference.
10.51	Supplement No. 1 to Amended and Restated Dividend Reinvestment and Optional Cash Purchase Plan Prospectus, dated as of January 27, 2009, included in Registrant’s Prospectus on Form 424B3 filed March 4, 2009, incorporated herein by reference.
10.52	Gateway Financial Holdings, Inc. 2005 Omnibus Stock Ownership and Long Term Incentive Plan, attached as Exhibit 4.2 to Gateway Financial Holdings, Inc.’s Registration Statement on Form S-8 (Registration No. 333-127978) dated August 31, 2005, incorporated herein by reference.
10.53	Gateway Financial Holdings, Inc. 2001 Nonstatutory Stock Option Plan, attached as Exhibit 4.2 to Gateway Financial Holdings, Inc.’s Registration Statement on Form S-8 (Registration No. 333-98021) dated August 13, 2002, incorporated herein by reference.
10.54	Gateway Financial Holdings, Inc. 1999 Incentive Stock Option Plan, attached as Exhibit 4.2 to Gateway Financial Holdings, Inc.’s Registration Statement on Form S-8 (Registration No. 333-98025) dated August 13, 2002, incorporated herein by reference.
10.55	Gateway Financial Holdings, Inc. 1999 Nonstatutory Stock Option Plan, attached as Exhibit 4.2 to Gateway Financial Holdings, Inc.’s Registration Statement on Form S-8 (Registration No. 333-98027) dated August 13, 2002, incorporated herein by reference.
10.56	Gateway Financial Holdings, Inc. 1999 BOR Stock Option Plan, attached as Exhibit 4.2 to Gateway Financial Holdings, Inc.’s Registration Statement on Form S-8 (Registration No. 333-144841) dated July 25, 2007, incorporated herein by reference.
10.57	Shore Financial Corporation 2001 Stock Incentive Plan, attached as Exhibit 99 to Shore Financial Corporation’s Registration Statement on Form S-8 (Registration No. 333-82838) dated February 15, 2002, incorporated herein by reference.
10.58	Shore Savings Bank, F.S.B. 1992 Stock Option Plan dated November 10, 1992, attached as Exhibit 10 to Shore Financial Corporation’s Registration Statement on Form S-4EF dated September 15, 1997, incorporated herein by reference.
13.1	Excerpts from the Annual Report for the year ended December 31, 2008, except to the extent incorporated by reference, is being furnished for informational purposes only and is not deemed to be filed as part of the Report on Form 10-K.
14.1	The Company has a Code of Ethics for its senior financial officers and the Chief Executive Officer. Any waivers of, or amendments to, the Code of Ethics will be disclosed through the timely filing of a Form 8-K with the Securities and Exchange Commission. A copy of the Company’s Code of Ethics can be obtained through written communications addressed to Neal A. Petrovich, Chief Financial Officer, Bank of Hampton Roads, 999 Waterside Dr., Suite 200, Norfolk, VA 23510.
21.1	A list of the subsidiaries of Hampton Roads Bankshares, Inc.*
23.1	Consent of Yount, Hyde & Barbour, P.C.*

39

23.2	Consent of KPMG LLP.*
31.1	Rule 13a-14(a) Certification of Chief Executive Officer.*
31.2	Rule 13a-14(a) Certification of Chief Financial Officer.*
32.1	Statement of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.*
99.1	Report of KPMG LLP.*

* Filed herewith.

40

Exhibit Index

Hampton Roads Bankshares, Inc.

2.1	Agreement and Plan of Merger by and between Hampton Roads Bankshares, Inc. and Shore Financial Corporation dated as of January 8, 2008, attached as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K dated January 9, 2008, incorporated herein by reference.
2.2	Agreement and Plan of Merger by and between Hampton Roads Bankshares, Inc. and Gateway Financial Holdings, Inc. dated as of September 23, 2008, attached as Exhibit 2.2 to the Registrant’s Current Report on Form 8-K dated September 24, 2008, incorporated herein by reference.
3.1	Articles of Incorporation of Hampton Roads Bankshares, Inc. and Amendment to Articles of Incorporation of Hampton Roads Bankshares, Inc.*
3.2	Bylaws of Hampton Roads Bankshares, Inc., as amended, attached as Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2007, incorporated herein by reference.
4.1	Specimen of Common Stock Certificate, attached as Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005, incorporated herein by reference.
10.1	Employment Agreement, dated as of March 28, 1988, between the Registrant and Jack Gibson, attached as Exhibit 7 of the Form F-1, incorporated herein by reference.
10.2	Supplemental Retirement Agreement, dated as of March 31, 1994, attached as Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1993, incorporated herein by reference.
10.3	Employment Agreement, dated as of December 18, 1996, between the Registrant and Renee` McKinney, attached as Exhibit 10.10 to the Registrant’s Annual Report on Form 10-KSB for the year ended December 31, 1996, incorporated herein by reference.
10.4	First Amendment to Employment Agreement, dated as of February 1, 1997, between the Registrant and Jack Gibson, attached as Exhibit 10.11 to the Registrant’s Annual Report on Form 10-KSB, incorporated herein by reference.
10.5	First Amendment to Employment Agreement, dated as of February 1, 1997, between the Registrant and Renee McKinney, attached as Exhibit 10.12 to the Registrant’s Annual Report on Form 10-KSB, incorporated herein by reference.
10.6	Employment Agreement, First Amendment to Employment Agreement and Second Amendment to Employment Agreement, each dated as of March 9, 1999, between the Registrant and Tiffany Glenn, attached as Exhibit 10.15 to the Registrant’s Annual Report on Form 10-KSB for the year ended December 31, 1999, incorporated herein by reference.
10.7	Employment Agreement, dated as of October 11, 2001, between the Registrant and Gregory Marshall, attached as Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001, incorporated herein by reference.

1

10.8	Employment Agreement, dated as of December 31, 2002, between the Registrant and Julie Anderson, attached as Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002, incorporated herein by reference.
10.9	First Amendment to Employment Agreement, dated as of December 31, 2002, between the Registrant and Julie Anderson, attached as Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002, incorporated herein by reference.
10.10	Second Amendment to Employment Agreement, dated as of December 31, 2002, between the Registrant and Julie Anderson, attached as Exhibit 10.21 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002, incorporated herein by reference.
10.11	Employment Agreement, dated as of July 16, 2003, between the Registrant and Donald Fulton, Jr., attached as Exhibit 10.26.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.12	First Amendment to the Employment Agreement, dated as of July 16, 2003, between the Registrant and Donald Fulton, Jr., attached as Exhibit 10.26.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.13	Second Amendment to the Employment Agreement, dated as of July 16, 2003, between the Registrant and Donald Fulton, Jr., attached as Exhibit 10.26.3 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.14	Third Amendment to the Employment Agreement, dated as of July 16, 2003, between the Registrant and Donald Fulton, Jr., attached as Exhibit 10.26.4 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.15	Third Amendment to Employment Agreement, dated as of June 24, 2003, between the Registrant and Jack Gibson, attached as Exhibit 10.24 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.16	Third Amendment to Employment Agreement, dated as of June 24, 2003, between the Registrant and Renee’ McKinney, attached as Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.17	Third Amendment to Employment Agreement, dated as of June 24, 2003, between the Registrant and Tiffany Glenn, attached as Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.18	Third Amendment to Employment Agreement, dated as of June 24, 2003, between the Registrant and Gregory Marshall, attached as Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.19	Third Amendment to Employment Agreement, dated as of June 24, 2003, between the Registrant and Julie Anderson, attached as Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, incorporated herein by reference.
10.20	First Amendment to the Employment Agreement between the Registrant and Gregory Marshall, dated October 11, 2001, attached as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K dated June 27, 2006, incorporated herein by reference.

2

10.21	Second Amendment to the Employment Agreement between the Registrant and Gregory Marshall, dated October 11, 2001, attached as Exhibit 99.2 to the Registrant’s Current Report on Form 8-K dated June 27, 2006, incorporated herein by reference.
10.22	Amendment No. One to the Supplemental Retirement Agreement, dated as of December 9, 2003, between the Registrant and Jack Gibson, attached as Exhibit 99.4 to the Registrant’s Current Report on Form 8-K dated June 27, 2006, incorporated herein by reference.
10.23	Director Retirement Plan, dated as of November 28, 2006, attached as Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K dated March 1, 2008, incorporated herein by reference.
10.24	Employment Agreement, dated as of November 1, 2007, between the Registrant and Douglas J. Glenn, attached as Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K dated March 11, 2008, incorporated herein by reference.
10.25	Fourth Amendment to Employment Agreement by and between Hampton Roads Bankshares, Inc. and Jack W. Gibson, dated as of May 27, 2008, attached as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated June 2, 2008, incorporated herein by reference.
10.26	Fourth Amendment to Employment Agreement by and between Hampton Roads Bankshares, Inc. and Donald W. Fulton, Jr., dated as of May 27, 2008, attached as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated June 2, 2008, incorporated herein by reference.
10.27	First Amendment to Employment Agreement by and between Hampton Roads Bankshares, Inc. and Douglas J. Glenn, dated as of May 27, 2008, attached as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated June 2, 2008, incorporated herein by reference.
10.28	Amendment No. 2 to the Supplemental Retirement Agreement between Bank of Hampton Roads and Jack W. Gibson, dated May 27, 2008, attached as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K dated June 2, 2008, incorporated herein by reference.
10.29	Supplemental Retirement Agreement between Bank of Hampton Roads and Douglas J. Glenn, dated May 27, 2008, attached as Exhibit 10.5 to the Registrant’s Current Report on Form 8-K dated June 2, 2008, incorporated herein by reference.
10.30	Credit Agreement between Compass Bank and Hampton Roads Bankshares, Inc., dated May 29, 2008, attached as Exhibit 10.6 to the Registrant’s Current Report on Form 8-K dated June 2, 2008, incorporated herein by reference.
10.31	Pledge Agreement between Compass Bank and Hampton Roads Bankshares, Inc., dated May 29, 2008, attached as Exhibit 10.7 to the Registrant’s Current Report on Form 8-K dated June 2, 2008, incorporated herein by reference.
10.32	Employment Agreement by and between Shore Bank, Hampton Roads Bankshares, Inc. and Scott C. Harvard, dated as of June 1, 2008, attached as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated June 16, 2008, incorporated herein by reference.
10.33	Restrictive Covenant Agreement by and between Hampton Roads Bankshares, Inc. and Scott C. Harvard, dated as of June 1, 2008, attached as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated June 16, 2008, incorporated herein by reference.

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10.34	Deferred Compensation Agreement by and between Shore Bank and Scott C. Harvard, dated as of June 1, 2008, attached as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated June 16, 2008, incorporated herein by reference.
10.35	Employment Agreement, dated as of August 28, 2006, between Hampton Roads Bankshares, Inc. and Lorelle L. Fritsch.*
10.36	First Amendment to Employment Agreement by and between Hampton Roads Bankshares, Inc. and Lorelle L. Fritsch, dated as of July 23, 2008.*
10.37	Bank of Hampton Roads Supplemental Executive Retirement Plan, dated as of January 1, 2005, attached as Exhibit 99.5 to the Registrant’s Current Report on Form 8-K dated June 27, 2006, incorporated herein by reference.
10.38	First Amendment to Bank of Hampton Roads Supplemental Executive Retirement Plan, dated as of December 30, 2008.*
10.39	Second Amendment to Bank of Hampton Roads Supplemental Executive Retirement Plan, dated as of December 30, 2008.*
10.40	Hampton Roads Bankshares, Inc. 2008 Director Deferred Compensation Plan dated as of January 1, 2008.*
10.41	Amended and Restated Hampton Roads Bankshares, Inc. Directors’ Deferred Compensation Plan.*
10.42	Hampton Roads Bankshares, Inc. Executive Savings Plan, dated as of July 23, 2006, attached as Exhibit 4 to the Registrant’s Registration Statement on Form S-8 (Registration No. 333-139968) dated January 12, 2007, incorporated herein by reference.
10.43	First Amendment to Hampton Roads Bankshares, Inc. Executive Savings Plan, dated as of December 30, 2008.*
10.44	Second Amendment to Hampton Roads Bankshares, Inc. Executive Savings Plan, dated as of December 30, 2008.*
10.45	Hampton Roads Bankshares, Inc. Executive Savings Plan Trust, dated as of July 23, 2006.*
10.46	Hampton Roads Bankshares, Inc. 2006 Stock Incentive Plan, dated as of March 14, 2006, attached as Exhibit 10.1 to the Registrant’s Registration Statement on Form S-8 (Registration No. 333-134583) dated May 31, 2006, incorporated herein by reference.
10.47	First Amendment to Hampton Roads Bankshares, Inc. 2006 Stock Incentive Plan, dated as of December 26, 2008.*
10.48	Non-Qualified Limited Stock Option Plan for Directors and Employees, dated March 31, 1994, attached as Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1994, incorporated herein by reference.
10.49	Dividend Reinvestment and Optional Cash Purchase Plan Prospectus, dated as of March 14, 2002, attached as Exhibit 99.1 to the Registrant’s Registration Statement on Form S-3 dated March 14, 2002, incorporated herein by reference.

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10.50	Amended and Restated Dividend Reinvestment and Optional Cash Purchase Plan Prospectus, dated as of July 23, 2008, included in Registrant’s Prospectus on Form 424B3 filed August 15, 2008, incorporated herein by reference.
10.51	Supplement No. 1 to Amended and Restated Dividend Reinvestment and Optional Cash Purchase Plan Prospectus, dated as of January 27, 2009, included in Registrant’s Prospectus on Form 424B3 filed March 4, 2009, incorporated herein by reference.
10.52	Gateway Financial Holdings, Inc. 2005 Omnibus Stock Ownership and Long Term Incentive Plan, attached as Exhibit 4.2 to Gateway Financial Holdings, Inc.’s Registration Statement on Form S-8 (Registration No. 333-127978) dated August 31, 2005, incorporated herein by reference.
10.53	Gateway Financial Holdings, Inc. 2001 Nonstatutory Stock Option Plan, attached as Exhibit 4.2 to Gateway Financial Holdings, Inc.’s Registration Statement on Form S-8 (Registration No. 333-98021) dated August 13, 2002, incorporated herein by reference.
10.54	Gateway Financial Holdings, Inc. 1999 Incentive Stock Option Plan, attached as Exhibit 4.2 to Gateway Financial Holdings, Inc.’s Registration Statement on Form S-8 (Registration No. 333-98025) dated August 13, 2002, incorporated herein by reference.
10.55	Gateway Financial Holdings, Inc. 1999 Nonstatutory Stock Option Plan, attached as Exhibit 4.2 to Gateway Financial Holdings, Inc.’s Registration Statement on Form S-8 (Registration No. 333-98027) dated August 13, 2002, incorporated herein by reference.
10.56	Gateway Financial Holdings, Inc. 1999 BOR Stock Option Plan, attached as Exhibit 4.2 to Gateway Financial Holdings, Inc.’s Registration Statement on Form S-8 (Registration No. 333-144841) dated July 25, 2007, incorporated herein by reference.
10.57	Shore Financial Corporation 2001 Stock Incentive Plan, attached as Exhibit 99 to Shore Financial Corporation’s Registration Statement on Form S-8 (Registration No. 333-82838) dated February 15, 2002, incorporated herein by reference.
10.58	Shore Savings Bank, F.S.B. 1992 Stock Option Plan dated November 10, 1992, attached as Exhibit 10 to Shore Financial Corporation’s Registration Statement on Form S-4EF dated September 15, 1997, incorporated herein by reference.
13.1	Excerpts from the Annual Report for the year ended December 31, 2008, except to the extent incorporated by reference, is being furnished for informational purposes only and is not deemed to be filed as part of the Report on Form 10-K.
14.1	The Company has a Code of Ethics for its senior financial officers and the Chief Executive Officer. Any waivers of, or amendments to, the Code of Ethics will be disclosed through the timely filing of a Form 8-K with the Securities and Exchange Commission. A copy of the Company’s Code of Ethics can be obtained through written communications addressed to Neal A. Petrovich, Chief Financial Officer, Bank of Hampton Roads, 999 Waterside Dr., Suite 200, Norfolk, VA 23510.
21.1	A list of the subsidiaries of Hampton Roads Bankshares, Inc.*

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23.1	Consent of Yount, Hyde & Barbour, P.C.*
23.2	Consent of KPMG LLP.*
31.1	Rule 13a-14(a) Certification of Chief Executive Officer.*
31.2	Rule 13a-14(a) Certification of Chief Financial Officer.*
32.1	Statement of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.*
99.1	Report of KPMG LLP.*

* Filed herewith.

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EX-3.1

Exhibit 3.1

ARTICLES OF AMENDMENT

TO THE ARTICLES OF INCORPORATION OF

HAMPTON ROADS BANKSHARES, INC.

1. The name of the Corporation is Hampton Roads Bankshares, Inc.

2. Article III of the Corporation’s Articles of Incorporation shall be amended to provide for the issuance, and to fix the preferences, limitations and relative rights, within the limits permitted by applicable law, of 80,347 shares of the Corporation’s Fixed Rate Cumulative Perpetual Preferred Stock, Series C, all as set forth in Exhibit A attached hereto.

3. Pursuant to Section 13.1-639 of the Virginia Stock Corporation Act (the “Act”), the Articles of Incorporation permit the Corporation’s Board of Directors to amend the Articles of Incorporation in order to establish the preferences, limitations and relative rights of one or more series of the corporation’s authorized class of Preferred Stock without the approval of the corporation’s shareholders. The foregoing amendment was adopted on December 18, 2008 by the Corporation’s Board of Directors without shareholder approval pursuant to such section of the Act. The Corporation has not issued any shares of the Fixed Rate Cumulative Perpetual Preferred Stock, Series C, as of the date hereof.

4. The Certificate of Amendment shall become effective immediately upon filing in accordance with Section 13.1-606 of the Act.

Date: December 24, 2008	HAMPTON ROADS BANKSHARES, INC.
	By:
		Jack W. Gibson
		Vice Chairman, President and Chief Executive Officer

EXHIBIT A

Certificate of Designations

CERTIFICATE OF DESIGNATIONS

OF

FIXED RATE CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES C

OF

HAMPTON ROADS BANKSHARES, INC.

Hampton Roads Bankshares, Inc., a corporation organized and existing under the laws of the Commonwealth of Virginia (the “Corporation”), in accordance with the provisions of Title 13.1 of Chapter 9 of the Code of Virginia thereof, does hereby certify:

The board of directors of the Corporation (the “Board of Directors”) or an applicable committee of the Board of Directors, in accordance with the Articles of Incorporation of the Corporation and applicable law, adopted the following resolution on December 18, 2008 creating a series of 80,347 shares of Preferred Stock of the Corporation designated as “Fixed Rate Cumulative Perpetual Preferred Stock, Series C”.

RESOLVED, that pursuant to the provisions of the Articles of Incorporation of the Corporation and applicable law, a series of Preferred Stock, no par value per share, of the Corporation be and hereby is created, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series, are as follows:

Article III of the Articles of Incorporation of Hampton Roads Bankshares, Inc. is hereby amended to include a new section (e) of Article III, which reads as follows:

(e) Fixed Rate Cumulative Perpetual Preferred Stock, Series C

(i) Designation and Number of Shares. There is hereby created out of the authorized and unissued shares of preferred stock of the Corporation a series of preferred stock designated as the “Fixed Rate Cumulative Perpetual Preferred Stock, Series C” (the “Series C Preferred Stock”). The authorized number of shares of Series C Preferred Stock shall be 80,347.

(ii) Standard Provisions. The Standard Provisions contained in Schedule A attached hereto are incorporated herein by reference in their entirety and shall be deemed to be a part of this Certificate of Designations to the same extent as if such provisions had been set forth in full herein.

(iii) Definitions. The following terms are used in this Certificate of Designations (including the Standard Provisions in Schedule A hereto) as defined below:

(A) “Common Stock” means the common stock, par value $0.625 per share, of the Corporation.

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(B) “Dividend Payment Date” means February 15, May 15, August 15 and November 15 of each year.

(C) “Junior Stock” means the Common Stock and any other class or series of stock of the Corporation the terms of which expressly provide that it ranks junior to Series C Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Corporation.

(D) “Liquidation Amount” means $1,000 per share of Series C Preferred Stock.

(E) “Minimum Amount” means $20,086,750.

(F) “Parity Stock” means any class or series of stock of the Corporation (other than Series C Preferred Stock) the terms of which do not expressly provide that such class or series will rank senior or junior to Series C Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Corporation (in each case without regard to whether dividends accrue cumulatively or non-cumulatively). Without limiting the foregoing, Parity Stock shall include the Corporation’s Series A Preferred Stock and Series B Preferred Stock.

(G) “Signing Date” means the Original Issue Date.

(iv) Certain Voting Matters. Holders of shares of Series C Preferred Stock will be entitled to one vote for each such share on any matter on which holders of Series C Preferred Stock are entitled to vote, including any action by written consent.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, Hampton Roads Bankshares, Inc. has caused this Certificate of Designations to be signed by Jack W. Gibson, its Vice Chairman, President and Chief Executive Officer, this 24th day of December, 2008.

HAMPTON ROADS BANKSHARES, INC.
By:
	Jack W. Gibson
	Vice Chairman, President and Chief Executive

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Schedule A

STANDARD PROVISIONS

Section 1. General Matters. Each share of Series C Preferred Stock shall be identical in all respects to every other share of Series C Preferred Stock. The Series C Preferred Stock shall be perpetual, subject to the provisions of Section 5 of these Standard Provisions that form a part of the Certificate of Designations. The Series C Preferred Stock shall rank equally with Parity Stock and shall rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Corporation.

Section 2. Standard Definitions. As used herein with respect to Series C Preferred Stock:

(a) “Applicable Dividend Rate” means (i) during the period from the Original Issue Date to, but excluding, the first day of the first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 5% per annum and (ii) from and after the first day of the first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 9% per annum.

(b) “Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Corporation as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), or any successor provision.

(c) “Business Combination” means a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Corporation’s shareholders.

(d) “Business Day” means any day except Saturday, Sunday and any day on which banking institutions in the State of New York generally are authorized or required by law or other governmental actions to close.

(e) “Bylaws” means the bylaws of the Corporation, as they may be amended from time to time.

(f) “Certificate of Designations” means the Certificate of Designations or comparable instrument relating to the Series C Preferred Stock, of which these Standard Provisions form a part, as it may be amended from time to time.

(g) “Charter” means the Corporation’s certificate or articles of incorporation, as amended and/or restated from time to time.

(h) “Dividend Period” has the meaning set forth in Section 3(a).

(i) “Dividend Record Date” has the meaning set forth in Section 3(a).

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(j) “Liquidation Preference” has the meaning set forth in Section 4(a).

(k) “Original Issue Date” means the date on which shares of Series C Preferred Stock are first issued.

(l) “Preferred Director” has the meaning set forth in Section 7(b).

(m) “Preferred Stock” means any and all series of preferred stock of the Corporation, including the Series C Preferred Stock.

(n) “Qualified Equity Offering” means the sale and issuance for cash by the Corporation to persons other than the Corporation or any of its subsidiaries after the Original Issue Date of shares of perpetual Preferred Stock, Common Stock or any combination of such stock, that, in each case, qualify as and may be included in Tier 1 capital of the Corporation at the time of issuance under the applicable risk-based capital guidelines of the Corporation’s Appropriate Federal Banking Agency (other than any such sales and issuances made pursuant to agreements or arrangements entered into, or pursuant to financing plans which were publicly announced, on or prior to October 13, 2008).

(o) “Share Dilution Amount” has the meaning set forth in Section 3(b).

(p) “Standard Provisions” mean these Standard Provisions that form a part of the Certificate of Designations relating to the Series C Preferred Stock.

(q) “Successor Preferred Stock” has the meaning set forth in Section 5(a).

(r) “Voting Parity Stock” means, with regard to any matter as to which the holders of Series C Preferred Stock are entitled to vote as specified in Sections 7(a) and 7(b) of these Standard Provisions that form a part of the Certificate of Designations, any and all series of Parity Stock upon which like voting rights have been conferred and are exercisable with respect to such matter.

Section 3. Dividends.

(a) Rate. Holders of Series C Preferred Stock shall be entitled to receive, on each share of Series C Preferred Stock if, as and when declared by the Board of Directors or any duly authorized committee of the Board of Directors, but only out of assets legally available therefor, cumulative cash dividends with respect to each Dividend Period (as defined below) at a rate per annum equal to the Applicable Dividend Rate on (i) the Liquidation Amount per share of Series C Preferred Stock and (ii) the amount of accrued and unpaid dividends for any prior Dividend Period on such share of Series C Preferred Stock, if any. Such dividends shall begin to accrue and be cumulative from the Original Issue Date, shall compound on each subsequent Dividend Payment Date (i.e., no dividends shall accrue on other dividends unless and until the first Dividend Payment Date for such other dividends has passed without such other dividends having been paid on such date) and shall be payable quarterly in arrears on each Dividend Payment Date, commencing with the first such Dividend Payment Date to occur at least 20 calendar days after the Original Issue Date. In the event that any Dividend Payment Date would otherwise fall

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on a day that is not a Business Day, the dividend payment due on that date will be postponed to the next day that is a Business Day and no additional dividends will accrue as a result of that postponement. The period from and including any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period”, provided that the initial Dividend Period shall be the period from and including the Original Issue Date to, but excluding, the next Dividend Payment Date.

Dividends that are payable on Series C Preferred Stock in respect of any Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable on Series C Preferred Stock on any date prior to the end of a Dividend Period, and for the initial Dividend Period, shall be computed on the basis of a 360-day year consisting of twelve 30-day months, and actual days elapsed over a 30-day month.

Dividends that are payable on Series C Preferred Stock on any Dividend Payment Date will be payable to holders of record of Series C Preferred Stock as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day immediately preceding such Dividend Payment Date or such other record date fixed by the Board of Directors or any duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day.

Holders of Series C Preferred Stock shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on Series C Preferred Stock as specified in this Section 3 (subject to the other provisions of the Certificate of Designations).

(b) Priority of Dividends. So long as any share of Series C Preferred Stock remains outstanding, no dividend or distribution shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than dividends payable solely in shares of Common Stock) or Parity Stock, subject to the immediately following paragraph in the case of Parity Stock, and no Common Stock, Junior Stock or Parity Stock shall be, directly or indirectly, purchased, redeemed or otherwise acquired for consideration by the Corporation or any of its subsidiaries unless all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Series C Preferred Stock have been or are contemporaneously declared and paid in full (or have been declared and a sum sufficient for the payment thereof has been set aside for the benefit of the holders of shares of Series C Preferred Stock on the applicable record date). The foregoing limitation shall not apply to (i) redemptions, purchases or other acquisitions of shares of Common Stock or other Junior Stock in connection with the administration of any employee benefit plan in the ordinary course of business (including purchases to offset the Share Dilution Amount (as defined below) pursuant to a publicly announced repurchase plan) and consistent with past practice, provided that any purchases to offset the Share Dilution Amount shall in no event exceed the Share Dilution Amount; (ii) purchases or other acquisitions by a broker-dealer subsidiary of the Corporation solely for the purpose of market-making, stabilization or customer facilitation transactions in

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Junior Stock or Parity Stock in the ordinary course of its business; (iii) purchases by a broker-dealer subsidiary of the Corporation of capital stock of the Corporation for resale pursuant to an offering by the Corporation of such capital stock underwritten by such broker-dealer subsidiary; (iv) any dividends or distributions of rights or Junior Stock in connection with a shareholders’ rights plan or any redemption or repurchase of rights pursuant to any shareholders’ rights plan; (v) the acquisition by the Corporation or any of its subsidiaries of record ownership in Junior Stock or Parity Stock for the beneficial ownership of any other persons (other than the Corporation or any of its subsidiaries), including as trustees or custodians; and (vi) the exchange or conversion of Junior Stock for or into other Junior Stock or of Parity Stock for or into other Parity Stock (with the same or lesser aggregate liquidation amount) or Junior Stock, in each case, solely to the extent required pursuant to binding contractual agreements entered into prior to the Signing Date or any subsequent agreement for the accelerated exercise, settlement or exchange thereof for Common Stock. “Share Dilution Amount” means the increase in the number of diluted shares outstanding (determined in accordance with generally accepted accounting principles in the United States, and as measured from the date of the Corporation’s consolidated financial statements most recently filed with the Securities and Exchange Commission prior to the Original Issue Date) resulting from the grant, vesting or exercise of equity-based compensation to employees and equitably adjusted for any stock split, stock dividend, reverse stock split, reclassification or similar transaction.

When dividends are not paid (or declared and a sum sufficient for payment thereof set aside for the benefit of the holders thereof on the applicable record date) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend Period related to such Dividend Payment Date) in full upon Series C Preferred Stock and any shares of Parity Stock, all dividends declared on Series C Preferred Stock and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) shall be declared pro rata so that the respective amounts of such dividends declared shall bear the same ratio to each other as all accrued and unpaid dividends per share on the shares of Series C Preferred Stock (including, if applicable as provided in Section 3(a) above, dividends on such amount) and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) (subject to their having been declared by the Board of Directors or a duly authorized committee of the Board of Directors out of legally available funds and including, in the case of Parity Stock that bears cumulative dividends, all accrued but unpaid dividends) bear to each other. If the Board of Directors or a duly authorized committee of the Board of Directors determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Corporation will provide written notice to the holders of Series C Preferred Stock prior to such Dividend Payment Date.

Subject to the foregoing, and not otherwise, such dividends (payable in cash, securities or other property) as may be determined by the Board of Directors or any duly authorized committee of the Board of Directors may be declared and paid on any securities, including Common Stock and other Junior Stock, from time to time out of any funds legally available for such payment, and holders of Series C Preferred Stock shall not be entitled to participate in any such dividends.

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Section 4. Liquidation Rights.

(a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Series C Preferred Stock shall be entitled to receive for each share of Series C Preferred Stock, out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to shareholders of the Corporation, subject to the rights of any creditors of the Corporation, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other stock of the Corporation ranking junior to Series C Preferred Stock as to such distribution, payment in full in an amount equal to the sum of (i) the Liquidation Amount per share and (ii) the amount of any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount), whether or not declared, to the date of payment (such amounts collectively, the “Liquidation Preference”).

(b) Partial Payment. If in any distribution described in Section 4(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay in full the amounts payable with respect to all outstanding shares of Series C Preferred Stock and the corresponding amounts payable with respect of any other stock of the Corporation ranking equally with Series C Preferred Stock as to such distribution, holders of Series C Preferred Stock and the holders of such other stock shall share ratably in any such distribution in proportion to the full respective distributions to which they are entitled.

(c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Series C Preferred Stock and the corresponding amounts payable with respect of any other stock of the Corporation ranking equally with Series C Preferred Stock as to such distribution has been paid in full, the holders of other stock of the Corporation shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.

(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 4, the merger or consolidation of the Corporation with any other corporation or other entity, including a merger or consolidation in which the holders of Series C Preferred Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.

Section 5. Redemption.

(a) Optional Redemption. Except as provided below, the Series C Preferred Stock may not be redeemed prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date. On or after the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Corporation, at its option, subject to the

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approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, out of funds legally available therefor, the shares of Series C Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption.

Notwithstanding the foregoing, prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Corporation, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, the shares of Series C Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption; provided that (x) the Corporation (or any successor by Business Combination) has received aggregate gross proceeds of not less than the Minimum Amount (plus the “Minimum Amount” as defined in the relevant certificate of designations for each other outstanding series of preferred stock of such successor that was originally issued to the United States Department of the Treasury (the “Successor Preferred Stock”) in connection with the Troubled Asset Relief Program Capital Purchase Program) from one or more Qualified Equity Offerings (including Qualified Equity Offerings of such successor), and (y) the aggregate redemption price of the Series C Preferred Stock (and any Successor Preferred Stock) redeemed pursuant to this paragraph may not exceed the aggregate net cash proceeds received by the Corporation (or any successor by Business Combination) from such Qualified Equity Offerings (including Qualified Equity Offerings of such successor).

The redemption price for any shares of Series C Preferred Stock shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any declared but unpaid dividends payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 3 above.

(b) No Sinking Fund. The Series C Preferred Stock will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Series C Preferred Stock will have no right to require redemption or repurchase of any shares of Series C Preferred Stock.

(c) Notice of Redemption. Notice of every redemption of shares of Series C Preferred Stock shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively

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presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Series C Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series C Preferred Stock. Notwithstanding the foregoing, if shares of Series C Preferred Stock are issued in book-entry form through The Depository Trust Corporation or any other similar facility, notice of redemption may be given to the holders of Series C Preferred Stock at such time and in any manner permitted by such facility. Each notice of redemption given to a holder shall state: (1) the redemption date; (2) the number of shares of Series C Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.

(d) Partial Redemption. In case of any redemption of part of the shares of Series C Preferred Stock at the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other manner as the Board of Directors or a duly authorized committee thereof may determine to be fair and equitable. Subject to the provisions hereof, the Board of Directors or a duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series C Preferred Stock shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.

(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been deposited by the Corporation, in trust for the pro rata benefit of the holders of the shares called for redemption, with a bank or trust company doing business in the Borough of Manhattan, The City of New York, and having a capital and surplus of at least $500 million and selected by the Board of Directors, so as to be and continue to be available solely therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company, without interest. Any funds unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.

(f) Status of Redeemed Shares. Shares of Series C Preferred Stock that are redeemed, repurchased or otherwise acquired by the Corporation shall revert to authorized but unissued shares of Preferred Stock (provided that any such cancelled shares of Series C Preferred Stock may be reissued only as shares of any series of Preferred Stock other than Series C Preferred Stock).

Section 6. Conversion. Holders of Series C Preferred Stock shares shall have no right to exchange or convert such shares into any other securities.

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Section 7. Voting Rights.

(a) General. The holders of Series C Preferred Stock shall not have any voting rights except as set forth below or as otherwise from time to time required by law.

(b) Preferred Stock Directors. Whenever, at any time or times, dividends payable on the shares of Series C Preferred Stock have not been paid for an aggregate of six quarterly Dividend Periods or more, whether or not consecutive, the authorized number of directors of the Corporation shall automatically be increased by two and the holders of the Series C Preferred Stock shall have the right, with holders of shares of any one or more other classes or series of Voting Parity Stock outstanding at the time, voting together as a class, to elect two directors (hereinafter the “Preferred Directors” and each a “Preferred Director”) to fill such newly created directorships at the Corporation’s next annual meeting of shareholders (or at a special meeting called for that purpose prior to such next annual meeting) and at each subsequent annual meeting of shareholders until all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Series C Preferred Stock have been declared and paid in full at which time such right shall terminate with respect to the Series C Preferred Stock, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned; provided that it shall be a qualification for election for any Preferred Director that the election of such Preferred Director shall not cause the Corporation to violate any corporate governance requirements of any securities exchange or other trading facility on which securities of the Corporation may then be listed or traded that listed or traded companies must have a majority of independent directors. Upon any termination of the right of the holders of shares of Series C Preferred Stock and Voting Parity Stock as a class to vote for directors as provided above, the Preferred Directors shall cease to be qualified as directors, the term of office of all Preferred Directors then in office shall terminate immediately and the authorized number of directors shall be reduced by the number of Preferred Directors elected pursuant hereto. Any Preferred Director may be removed at any time, with or without cause, and any vacancy created thereby may be filled, only by the affirmative vote of the holders a majority of the shares of Series C Preferred Stock at the time outstanding voting separately as a class together with the holders of shares of Voting Parity Stock, to the extent the voting rights of such holders described above are then exercisable. If the office of any Preferred Director becomes vacant for any reason other than removal from office as aforesaid, the remaining Preferred Director may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.

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(c) Class Voting Rights as to Particular Matters. So long as any shares of Series C Preferred Stock are outstanding, in addition to any other vote or consent of shareholders required by law or by the Charter, the vote or consent of the holders of at least 66  ²/3% of the shares of Series C Preferred Stock at the time outstanding, voting as a separate class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:

(i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of Designations for the Series C Preferred Stock or the Charter to authorize or create or increase the authorized amount of, or any issuance of, any shares of, or any securities convertible into or exchangeable or exercisable for shares of, any class or series of capital stock of the Corporation ranking senior to Series C Preferred Stock with respect to either or both the payment of dividends and/or the distribution of assets on any liquidation, dissolution or winding up of the Corporation;

(ii) Amendment of Series C Preferred Stock. Any amendment, alteration or repeal of any provision of the Certificate of Designations for the Series C Preferred Stock or the Charter (including, unless no vote on such merger or consolidation is required by Section 7(c)(iii) below, any amendment, alteration or repeal by means of a merger, consolidation or otherwise) so as to adversely affect the rights, preferences, privileges or voting powers of the Series C Preferred Stock; or

(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Series C Preferred Stock, or of a merger or consolidation of the Corporation with another corporation or other entity, unless in each case (x) the shares of Series C Preferred Stock remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of Series C Preferred Stock immediately prior to such consummation, taken as a whole;

provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized Preferred Stock, including any increase in the authorized amount of Series C Preferred Stock necessary to satisfy preemptive or similar rights granted by the Corporation to other persons prior to the Signing Date, or the creation and issuance, or an increase in the authorized or issued amount, whether pursuant to preemptive or similar rights or otherwise, of any other series of Preferred Stock, or any securities convertible into or exchangeable or exercisable for any other series of Preferred Stock, ranking equally with and/or junior to Series C Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers, and shall not require the affirmative vote or consent of, the holders of outstanding shares of the Series C Preferred Stock.

(d) Changes after Provision for Redemption. No vote or consent of the holders of Series C Preferred Stock shall be required pursuant to Section 7(c) above if, at or prior to the time when any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of the Series C Preferred Stock shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been deposited in trust for such redemption, in each case pursuant to Section 5 above.

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(e) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Series C Preferred Stock (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules of the Board of Directors or any duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Charter, the Bylaws, and applicable law and the rules of any national securities exchange or other trading facility on which Series C Preferred Stock is listed or traded at the time.

Section 8. Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for Series C Preferred Stock may deem and treat the record holder of any share of Series C Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.

Section 9. Notices. All notices or communications in respect of Series C Preferred Stock shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designations, in the Charter or Bylaws or by applicable law. Notwithstanding the foregoing, if shares of Series C Preferred Stock are issued in book-entry form through The Depository Trust Corporation or any similar facility, such notices may be given to the holders of Series C Preferred Stock in any manner permitted by such facility.

Section 10. No Preemptive Rights. No share of Series C Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.

Section 11. Replacement Certificates. The Corporation shall replace any mutilated certificate at the holder’s expense upon surrender of that certificate to the Corporation. The Corporation shall replace certificates that become destroyed, stolen or lost at the holder’s expense upon delivery to the Corporation of reasonably satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be reasonably required by the Corporation.

Section 12. Other Rights. The shares of Series C Preferred Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Charter or as provided by applicable law.

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AMENDED AND RESTATED ARTICLES OF INCORPORATION

OF

HAMPTON ROADS BANKSHARES, INC.

ARTICLE I

NAME

The name of the Corporation is:

Hampton Roads Bankshares, Inc.

ARTICLE II

PURPOSE

The purpose for which the Corporation is organized is to act as a bank holding company and to transact any and all lawful business, not required to be specifically stated in the Articles of Incorporation, for which corporations may be incorporated under the Virginia Stock Corporation Act (the “VSCA”).

ARTICLE III

CAPITAL STOCK

(a) The Corporation shall have the authority to issue 40,000,000 shares of Common Stock, par value $0.625 per share (the “Common Stock”), and 1,000,000 shares of Preferred Stock, no par value.

(b) Except as otherwise provided herein, the Board of Directors, by adoption of Articles of Amendment, may determine the preferences, limitations and relative rights, to the extent permitted by the VSCA, of any class of shares of Preferred Stock before the issuance of any shares of that class, or of one or more series within a class before the issuance of any shares of that series. Each class or series shall be appropriately designated by a distinguishing designation prior to the issuance of any share thereof. The Preferred Stock of all series shall have the preferences, limitations and relative rights identical with those of other shares of the same series and, except to the extent otherwise provided in the description of the series, with those of shares of other series in the same class. Dividends on outstanding shares of Preferred Stock shall be paid or declared and set apart for payment before any dividends shall be paid or declared and set apart for payment on outstanding shares of Common Stock with respect to the same dividend period. If upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the assets available for distribution to holders of shares of Preferred Stock of all series shall be insufficient to pay such holders the full preferential amount to which they are entitled, then such assets shall be distributed ratably among the shares of all series of Preferred Stock in accordance with the respective preferential amounts (including unpaid cumulative dividends, if any) payable with respect thereto.

(c) Pursuant to the provisions of these Articles of Incorporation and applicable law, 23,266 shares of Preferred Stock, no par value, of the Corporation be and hereby are designated as “Series A Preferred Stock”, and the number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series, are as follows:

(i) Designation and Number of Shares. There is hereby created out of the authorized and unissued shares of preferred stock of the Corporation a series of preferred stock designated as the “Series A Preferred Stock”. The authorized number of shares of Series A Preferred Stock shall be 23,266.

(ii) Ranking. The Series A Preferred Stock shall, with respect to dividend rights and with respect to rights upon liquidation, winding up or dissolution, rank (i) pari passu to the Series B Preferred Stock (as defined below), (ii) except to the extent otherwise provided in its description, pari passu with any other series of Preferred Stock and (iii) senior and prior in right to the Common Stock.

(iii) Dividends. The holders of shares of Series A Preferred Stock are entitled to receive stated cash dividends from the Corporation at an annual rate of 8.75%, and no more, subject to declaration by the Board of Directors, at its sole discretion, from funds legally available for the payment of dividends. Dividends will be computed on the basis of a 360-day year of twelve 30-day months. Dividends on the Series A Preferred Stock will not be cumulative on a year-to-year basis. Dividends will be payable as they are declared by the Board of Directors at such time or times as it elects, and no holder of Series A Preferred Stock will have any right to receive any dividend unless and until that dividend has been declared by the Board of Directors. The stated annual dividend may be declared and paid in increments during each calendar year. In connection with each dividend payment, the Board of Directors may set a record date in advance of the payment date for the purpose of determining the holders of shares of Series A Preferred Stock who are entitled to receive that dividend.

No dividend shall be declared or paid during any calendar year on the Common Stock unless and until there shall have been paid in full to the holders of Series A Preferred Stock (or set apart for purposes of such payment), without preference or priority as between such shares or other series of Preferred Stock, not less than a pro rata portion of the stated annual dividend thereon for that calendar year, at the rate provided therefore, through the date on which the Corporation proposes to pay the cash dividend on the Common Stock. Shares of Series A Preferred Stock shall not participate in dividends paid with respect to any other class or series of the Corporation’s capital stock.

(iv) Liquidation. In the event of liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (a “Corporate Event”), the holders of the Corporation’s Series A Preferred Stock, without preference or priority as between such shares or other series of Preferred Stock and on a pari passu basis with the Series B Preferred Stock, but prior to any distribution of assets to holders of the Common Stock, shall be entitled to receive from assets available for distribution to shareholders, for each such share held, a sum equal to $1,000.00 plus the amount of any dividend on such share which has been declared by the Board

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of Directors but has not yet been paid. Such distribution shall be considered full payment to the holders of Series A Preferred Stock, and such holders shall not participate with the holders of any other class or series of the Corporation’s capital stock in the distribution of any additional assets of the Corporation.

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

(vi) Redemption. After January 1, 2009, the Corporation shall have the right and option to redeem all or a portion of the outstanding shares of Series A Preferred Stock at the rate of $1,000.00 for each one whole share of Series A Preferred Stock. In the case of a redemption of less than all of the then outstanding shares of Series A Preferred Stock, the shares will be redeemed proportionately in such manner as its Board of Directors, at its sole discretion, considers reasonable and appropriate and, when made, the Board of Directors’ determination shall be final, conclusive and binding on all persons, including, without limitation, the Corporation and the holders of Series A Preferred Stock.

(d) Pursuant to the provisions of these Articles of Incorporation and applicable law, 37,550 shares of Preferred Stock, no par value, of the Corporation be and hereby are designated as “Series B Non-Convertible Non-Cumulative Perpetual Preferred Stock”, and the number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series, are as follows:

(i) Designation and Number of Shares. There is hereby created out of the authorized and unissued shares of preferred stock of the Corporation a series of preferred stock designated as the “Series B Non-Convertible Non-Cumulative Perpetual Preferred Stock” (the “Series B Preferred Stock”). The authorized number of shares of Series B Preferred Stock shall be 37,550.

(ii) Ranking. The Series B Preferred Stock shall, with respect to dividend rights and with respect to rights upon liquidation, winding up or dissolution, rank (i) pari passu to the Series A Preferred Stock, (ii) except to the extent otherwise provided in its description, pari passu with any other series of Preferred Stock and (iii) senior and prior in right to the Common Stock.

(iii) Dividends. The holders of shares of Series B Preferred Stock are entitled to receive stated cash dividends from the Corporation at an annual rate of 12.0% and no more, subject to declaration by the Board of Directors, at its sole discretion, from funds legally available for the payment of dividends. Dividends will be computed on the basis of a 360-day year of twelve 30-day months. Dividends on the Series B Preferred Stock will not be cumulative. Dividends will be payable as they are declared by the Board of Directors at such time or times as it elects, and no holder of Series B Preferred Stock will have any right to receive any dividend unless and until that dividend has been declared by the Board of Directors. The stated annual dividend may be declared and paid in increments during each calendar year. In connection with each dividend payment, the Board of Directors may set a record date in advance of the payment date for the purpose of determining the holders of shares of Series B Preferred Stock who are entitled to receive that dividend.

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No dividend shall be declared or paid during any calendar year on the Corporation’s Common Stock unless and until there shall have been paid in full to the holders of Series B Preferred Stock (or set apart for purposes of such payment), without preference or priority as between such shares or other series of Preferred Stock, not less than a pro rata portion of the stated annual dividend thereon for that calendar year, at the rate provided therefore, through the date on which the Corporation proposes to pay the cash dividend on the Common Stock. Shares of Series B Preferred Stock shall not participate in dividends paid with respect to any other class or series of the Corporation’s capital stock.

(iv) Liquidation. In the event of a Corporate Event, the holders of the Corporation’s Series B Preferred Stock, without preference or priority as between such shares or other series of Preferred Stock and on a pari passu basis with the Series A Preferred Stock, but prior to any distribution of assets to holders of the Common Stock, shall be entitled to receive from assets available for distribution to shareholders, for each such share held, a sum equal to $1,000.00 plus the amount of any dividend on such share which has been declared by the Board of Directors but has not yet been paid. Such distribution shall be considered full payment to the holders of Series B Preferred Stock, and such holders shall not participate with the holders of any other class or series of the Corporation’s capital stock in the distribution of any additional assets of the Corporation.

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

(vi) Redemption. After October 1, 2009, the Corporation shall have the right and option to redeem all or a portion of the outstanding shares of Series B Preferred Stock at the rate of $1,000.00 for each whole share of Series B Preferred Stock, subject to the prior approval of the Board of Governors of the Federal Reserve System, if necessary. In the case of a redemption of less than all of the then outstanding shares of Series B Preferred Stock, the shares will be redeemed proportionately in such manner as its Board of Directors, at its sole discretion, considers reasonable and appropriate and, when made, the Board of Directors’ determination shall be final, conclusive and binding on all persons, including, without limitation, the Corporation and the holders of Series B Preferred Stock.

ARTICLE IV

REGISTERED OFFICE AND REGISTERED AGENT

The post office address of the registered office shall be 999 Waterside Drive, Suite 200, Norfolk, Virginia 23510 in the City of Norfolk. The registered agent shall be Douglas J. Glenn, who is a resident of Virginia and a director of the Company, and whose business address is the same as the address of the registered office.

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ARTICLE V

NO PREEMPTIVE RIGHTS

Except as otherwise set forth in the terms, preferences and rights of any class of series of shares of Preferred Stock hereafter authorized and issued pursuant to Article III(b) of these Articles of Incorporation, no holder of any shares of any class of the Corporation shall have any preemptive of preferential right to purchase or subscribe to (i) any shares of any class of the Corporation whether now or hereafter authorized; (ii) any warrants, rights or options to purchase any shares; or (iii) any securities or obligations convertible into any such shares or into warrants, rights or options to purchase such shares.

ARTICLE VI

LIMIT ON LIABILITY AND INDEMNIFICATION

(a) To the full extent that the VSCA, as it exists on the date hereof or may hereafter be amended, permits the limitation or elimination of the liability of directors or officers, a director or officer of the Corporation shall not be liable to the Corporation or its shareholders for monetary damages.

(b) To the full extent permitted and in the manner prescribed by the VSCA and any other applicable law, the Corporation shall indemnify a director or officer of the Corporation who is or was a party to any proceeding by reason of the fact that he is or was such a director or officer or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.

(c) Reference herein to directors, officers, employees or agents shall include former directors, officers, employees and agents and their respective heirs, executors and administrators.

ARTICLE VII

BOARD OF DIRECTORS

(a) Number of Directors. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors, subject to any requirement of action by the Corporation’s shareholders under the VSCA, these Articles of Incorporation or the Corporation’s Bylaws, as each may be amended from time to time. The Board of Directors shall consist of not less than eight (8) nor more than twenty-four (24) persons. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the directors then in office.

(b) Classified Board of Directors. The Board of Directors shall be divided into three classes, Class A, Class B and Class C, as nearly equal in number as possible. Directors of the first class (Class A) shall be elected to hold office for a term expiring at the 2002 annual meeting of shareholders, directors of the second class (Class B) shall be elected to hold office for a term

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expiring at the 2003 annual meeting of shareholders, and directors of the third class (Class C) shall be elected to hold office for a term expiring at the 2004 annual meeting of shareholders. Beginning with the 2002 annual meeting of shareholders, the successors to the class of directors whose terms shall then expire shall be identified as being of the same class as the directors they succeed and elected to hold office for a term expiring at the third succeeding annual meeting of the shareholders. When and if the number of directors is changed, any newly created directorships or any decrease in directorships shall be apportioned among the classes by the Board of Directors as to make all classes as nearly equal in number as possible.

(c) Removal of Directors by Shareholders. Any director elected by the holders of the Corporation’s Common Stock may only be removed by shareholders for cause. For purposes of this Article VII(c), the term “cause” shall mean engaging in willful misconduct or a knowing violation of the criminal law or of any federal or state securities law, including, without limitation, any claim of unlawful insider trading or manipulation of the market for any security.

ARTICLE VIII

Any amendment to the Corporation’s Articles of Incorporation, a plan of merger or exchange, a transaction involving the sale of all substantially all of the Corporation’s assets other than in the regular course of business and a plan of dissolution shall be approved by the vote of a majority of all votes entitled to be cast on such transaction by each voting group entitled to vote on the transaction at a meeting at which a quorum of the voting group is present, provided that the transaction has been approved and recommended by at least two-thirds (2/3) of the directors in office at the time of such approval and recommendation. If the transaction is not so approved and recommended, then the transaction shall be approved by the vote of more than two-thirds of all votes entitled to be cast on such transactions by each voting group entitled to vote on the transaction. However, nothing in this Article VIII shall require a vote of the shareholders to approve any action in circumstances where the Virginia Stock Corporation Act permits the Board of Directors to take action without a shareholder vote.

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EX-10.35

Exhibit 10.35

EMPLOYMENT AGREEMENT

This Employment Agreement, (the “Agreement”) made this the          day of                     , 2006, by and between The Bank Of Hampton Roads, a banking corporation organized under the laws of the Commonwealth of Virginia (the “Bank” or “Employer”), with a principal address of 999 Waterside Drive, Suite 200, Norfolk, Virginia (23510), and Lorelle Fritsch (the “Officer”), with an address of 1026 Copperstone Circle in the City/County of Chesapeake, in the State of Virginia (23320)(Zip Code).

W I T N E S S E T H:

WHEREAS, the Officer currently is rendering or desires to render valuable services to the Employer and it is the desire of the Employer to have the benefit of the Officer’s continued and future loyalty, service and counsel; and

WHEREAS, the Officer wishes to continue or become in the employ of the Employer.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein set forth, the parties covenant and agree as follows;

1. Employment: The Employer agrees to continue to or employ the Officer to perform services for the Employer and the Officer agrees to continue to or serve the Employer upon the terms and conditions herein provided. The Officer agrees to perform such managerial duties and responsibilities as shall be assigned to him or her by the Chief Executive Officer of the Employer, which duties and responsibilities, if Officer is presently employed by Employer, shall be substantially those functions of the Officer on the date of this Agreement and the commencement date hereof. The Officer shall devote his or her time and attention on a full-time basis to the discharge of the duties undertaken by him or her hereunder.

2. Terms And Compensation:

(a) Term of Agreement. The term (the “Term”) of this Agreement shall commence on that date (the “Commencement Date”) upon which the Compensation Committee of the Bank’s Board of Directors approves the Agreement or, if previously authorized by the Bank’s Board of Directors, the date upon which Employer’s Chief Executive Officer acknowledges and accepts this Agreement for the Bank. Thereafter, the Agreement shall continue until the first to occur of (i) except as otherwise provided in Section 3 hereof, the end of the sixtieth (60^th) consecutive month following the Commencement Date, (ii) the Officer’s death, or (iii) except as provided in Paragraph (d) of this Section 2, the Officer’s disability. Notwithstanding the foregoing, however, in the event the Officer is not informed by the Bank, in writing, prior to the last day of the sixtieth (60^th) consecutive month following the Commencement Date of employment, or any subsequent renewal term, that this Agreement will not be renewed, this Agreement will automatically renew itself for additional periods of sixty (60) months (each a “Renewal Term”) from the original anniversary date or, as the case may be, any Renewal Term. For purposes of this Agreement, the “Term” shall include and refer to, as appropriate by the context, any Renewal Term.

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(b) Compensation. During the term of employment hereunder, the Officer shall receive for his or her services a base salary and incentive or bonus compensation in amounts determined by the (i) Bank’s Board of Directors, (ii) an appropriate committee of the Employer or (iii) the Bank’s Chief Executive Officer, in accordance with the salary administration program of the Employer as the same may from time to time be in effect.

(c) Benefits. The Officer shall be eligible for participation in any additional plans, programs or forms of compensation or benefits that the Employer’s Board of Directors might hereinafter provide to the class of employees that includes the Officer.

(d) Disability. In the event of the physical or mental disability of the Officer by reason of which the Officer is unable to perform the duties of his employment hereunder, the Employer shall continue to pay or provide to the Officer the compensation and benefits provided under Paragraphs (b) and (c) of this Section 2 for the first six (6) months of such disability. If, however, the disability continues beyond such six-month period, the Employer may, at its election, terminate the Officer’s employment under this Agreement, in which case the Officer shall receive any disability benefits payable the Employer’s plans in effect at that time.

(e) Death. In the event that the Officer’s death should occur during the Term of this Agreement, this Agreement shall terminate and the Officer or his estate or beneficiaries, as the case may be, shall be entitled only to income earned but not yet paid as of the date of death and any and all retirement or death benefits payable under the Employer’s plans in effect at that time and no further compensation will be paid under this Agreement.

3. Termination:

(a) Termination by the Employer. Nothing herein contained shall prevent the Employer from terminating the services of the Officer at any time prior to the expiration of this Agreement “for good cause”. For purposes of this Agreement, “for good cause” means a dismissal of the Officer by Employer because of (i) the material failure of the Officer, after written notice, for reasons other than disability, to render services to the Employer as provided herein; (ii) the Officer’s gross or willful neglect of duty, neglect or refusal to perform all duties assigned to him or her, in good faith, under this Agreement or by Employer; (iii) imprudent financial management of Employer by the Officer which causes Employer an extraordinary or material loss not otherwise authorized; (iv) conviction of or guilty plea to a felony or a crime involving moral turpitude; (v) habitual use of drugs or alcohol; (vi) conduct that adversely affects the Employer’s business reputation; (vi) the material breach of this Agreement; (vii) material waste or misuse of assets of Employer; (viii) embezzlement, dishonesty, fraud or other similar acts reflecting adversely upon Officer’s honesty and integrity, (ix) illegal or intentional acts by the Officer demonstrating bad faith toward the Employer, including, but not limited to, any conduct by Officer so as to permit, condone or acquiesce in any act or conduct of other persons, which could cause Employer, its parent or any of its subsidiaries, to be in material violation of any law, statute or regulation, or (x) commission by Officer of any other act which the Bank, in its sole discretion, determines to have an adverse impact on its standing in the community or with its customers, staff or shareholders. If the Employer shall terminate the Officer’s employment “for good cause”, the Officer shall be entitled only to receive his or her base salary in respect of services performed through the Date of Termination.

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(b) Termination by the Officer.

(i) The Officer shall be entitled to terminate his or her employment pursuant to this Agreement voluntarily at any time, provided, however, that in the event the Officer terminates his or her employment pursuant to this Agreement for any reason other than “a change of control” as described below, then the Officer shall be entitled to no termination allowance and/or no severance allowance and no further compensation after the “Date of Termination” as defined in part (d) of this Paragraph 3.

(ii) The Officer shall be entitled to terminate his or her employment pursuant to this Agreement if “a change of control” occurs with respect to the Bank, in which event the Employer shall be obligated to pay the Officer and furnish him or her the benefits provided in Section 4 hereof. For purposes of this Agreement, the term “a change in control” shall mean (a) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) who is, or who has entered into a definite agreement with the Bank to become, the beneficial owner, directly or indirectly, of securities of the Bank representing more than 50% of the combined voting power of the then outstanding securities of the Bank; or (b) a change in the composition of a majority of the Board of Directors of the Bank within twelve (12) months after any person (as defined above) is or becomes the beneficial owner, directly or indirectly, of securities of the Bank representing 25% of the combined voting power of the then outstanding securities of the Bank. The right herein conferred upon the Officer to terminate his employment “for good reason” may be exercised by the Officer at any time during the Term of this Agreement at his or her sole discretion, and any failure by the Officer to exercise this right after he or she has “good reason” to do so shall not be deemed a waiver of the right.

(c) Notice of Termination. Any termination of the Officer’s employment by the Employer or by the Officer shall be communicated by a written Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision(s) in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances providing the basis for termination.

(d) Date of Termination. The “Date of Termination” shall mean (i) if the Agreement is terminated by the Officer, the date on which the Notice of Termination is delivered to Employer, (ii) if the Agreement is terminated by the Employer because of the Officer’s disability, thirty (30) days after the Notice of Termination is given, or (iii) if the Officer’s employment is terminated by the Employer for any other reason, the date on which a Notice of Termination is given.

4. Compensation Upon Termination By Officer For A Change of Control Event. If the Officer terminates his or her employment pursuant to Section 3(b)(ii) hereof then:

(a) Accrued But Unpaid Compensation. The Employer shall pay the Officer’s full base salary through the Date of Termination at the rate then in effect and the amount, if any, of awards theretofore made which have not yet been paid.

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(b) Severance Allowance. The Employer shall pay the Officer a severance allowance in sixty (60) equal monthly payments commencing on the last day of the month in which the Date of Termination occurs, the total amount of which will equal and will not exceed the present value of three times (3x) the base amount minus $1.00 plus the present value of any other payments in the nature of compensation within the meaning of Section 280G(b)(2)(A)(ii) of the Internal Revenue Code of 1954, as amended (the “Code”).

For purposes of this Paragraph 4(b), the following definitions shall apply:

(i) Base Amount - The term “base amount” means the Officer’s average annualized includible compensation for the base period.

(ii) Annualized Includible Compensation for the Base Period - The term “annualized includible compensation for the base period” means the average annual compensation paid by the Bank, which was includible in the gross income of the officer for federal income tax purposes for taxable years in the base period.

(iii) Base Period - The term “base period” means the period consisting of the most recent three (3) taxable years ending before the date on which termination occurs, except for termination as a result of the operation of Paragraph 3(b) above in which case the date of termination shall be deemed to be the date a change in control occurs with respect to the Bank.

(iv) Present Value - Present value shall be determined in accordance with Section 1274(b)(2) of the Code.

(c) Employee Benefits. The Employer shall maintain in full force and effect, for the Officer’s continued benefit until the earlier of the third (3rd) anniversary of the Date of Termination or the date the Officer becomes a participant in similar plans, programs or arrangements provided by a subsequent employer, all life, accident, medical and dental insurance benefit plans and programs or arrangements in which the Officer was entitled to participate immediately prior to the Date of Termination, provided that the Officer’s continued participation is possible under the general terms and provisions of such plans and programs. In the event that the Officer’s participation in any such plan or program is barred, the Employer shall arrange to provide the Officer with benefits substantially similar to those which the Officer is entitled to receive under such plans and programs. At the end of the period of coverage, the Officer shall have the option to have assigned to him or her at no cost and with no apportionment of prepaid premiums, any assignable insurance policy owned by the Employer and relating specifically to the Officer.

(d) No Duty to Mitigate. The Officer shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 4 be reduced by any compensation earned by the Officer as the result of employment by another employer after the Date of Termination, or otherwise.

5. Return of Bank’s Property. When the Officer’s employment with the Bank ends, the Officer agrees to immediately deliver to the Bank (i) all documents, including, but not limited to, address and telephone records of customers, listings of customer names and/or account numbers, and any telephone records of customers, listings of customer names and/or account numbers, and any

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other items or records in the Officer’s possession, or subsequently coming into the Officer’s possession pertaining to the business of the Bank, including without limitation, confidential and proprietary information which the Officer would not possess but for his employment relationship with the Bank and (ii) any tangible personal property of the Bank or provided by the Bank to Officer, including, but not limited to, computer(s) and related peripherals, laptops, automobiles, cellular telephones, access cards and credit cards.

6. Prohibition of Competitive Activities. Except upon the termination of this Agreement by the Officer pursuant to Section 3(b)(ii) hereof, then:

(a) During the Officer’s employment with the Bank and for a period of two (2) years following the Officer’s termination or the expiration of this Agreement, the Officer agrees that he/she will not on his/her own behalf, or on behalf of any other person or entity, solicit, divert, take away, or attempt to solicit, divert, or take away the business or patronage of any client or customer of the Bank or from the Bank to any other individual, entity or institution providing banking, lending or similar financial services as those provided by the Bank as of the Date of Termination.

(b) During the Officer’s employment with the Bank and following termination of employment with the Bank pursuant to this Agreement, the Officer will preserve the confidentiality of, and will not reveal for any reason, or use to the detriment of the Bank, trade secrets, or other confidential, business, or proprietary information which the Officer has received in the course of the Officer’s employment with the Bank.

(c) During the period of the Officer’s employment and for a period of two (2) years after employment ends, the Officer agrees that he/she will not on his/her own behalf or on behalf of any person or entity, in any capacity, solicit, recruit or hire or assist others in soliciting, recruiting or hiring any person who is currently or was during the preceding twelve (12) months prior to the Officer’s termination of employment with the Bank, an employee or officer with the Bank.

Subsections (a), (b) and (c) of this Section 6 are intended by the parties hereto as separate and divisible provisions, and if for any reason either one is held to be invalid or unenforceable, neither the validity nor the enforceability of the other shall thereby be affected. If any court holds that the whole or any part of Subsections (a), (b) and (c) is unenforceable by reason of the extent, duration or geographic scope thereof, or otherwise, then the court making such determination shall have the right to reduce such extent, duration, geographic scope, or other provisions hereof and in its reduced form such Section shall be enforceable in the manner contemplated hereby.

7. Notice of Subsequent Employment. For a period of two (2) years after the Officer’s employment with the Bank ends, the Officer agrees to notify the Bank of the name and address of the Officer’s employer and the Officer hereby authorizes the Bank to contact any such employer during that period for the limited purpose of making the employer aware of this Agreement and protection against any disclosure of confidential and proprietary information, or unfair competition.

8. Remedies. The Officer acknowledges that if he/she breaches or threatens to breach this Agreement, in addition to any and all other rights and remedies it may have, the Bank shall be entitled to injunctive relief, both pendente lite and permanent, against the Officer, as the Officer recognizes

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that a remedy at law would be inadequate and insufficient. The Bank shall be entitled to recover from the Officer all costs and expenses, including but not limited to reasonable attorney’s fees and court costs, incurred by the Bank as a result of or arising out of any breach of threatened breach under or pursuant to this Agreement in addition to such other rights and remedies as the Bank may have under this Agreement or any other agreement, at law or in equity.

9. Section 4999 Gross-Up Payment. In the event it shall be determined that any payments and benefits called for under the Agreement and any Amendments thereto, together with any other payments and benefits (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Agreement (a “Payment”) would be subject to the excise tax imposed under Section 4999 of the Code, or any successor statute, or any interest or penalties are incurred by the Officer with respect to such excise tax (collectively, the “Excise Tax”), then the Officer shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Officer of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Officer retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the payments.

(a) Gross-Up Determination. Subject to the provision of Subsection (b) herein, all determinations required to be made under this Agreement, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by KPMG LLP or such other independent certified accounting firm (the “Accounting Firm”) selected by mutual consent of the Bank and the Officer, which shall provide detailed supporting calculations both to the Bank and the Officer within fifteen (15) business days of the receipt of notice from the Officer that there has been a Payment, or such earlier time as is requested by the Bank. The calculations under this Agreement will be made in a manner consistent with the requirements of Code Sections 280G and 4999 and any applicable related regulations and any related Internal Revenue Service rulings. All fees and expenses of the Accounting Firm for such determination shall be borne solely by the Bank. Any determination by the Accounting Firm shall be binding upon the Bank and the Officer. Any Gross-Up Payment, as determined pursuant to this Agreement shall be paid by the Bank to the Officer within five (5) days of the receipt of determination by the Accounting Firm that such payment is due. If it is determined that no Excise Tax is payable to the Officer, it shall so indicate to the Officer in writing.

(b) Notification to Bank. The Officer shall notify the Bank in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Bank of the Gross-Up Payment. Such notice shall be given as soon as practicable but no later than ten (10) business days after the Officer is informed in writing of such claim and said notice shall advise the Bank of the nature of such claim and the date on which such claim is requested to be paid. The Officer shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Bank (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Bank notifies the Officer in writing prior to the expiration of such period that it desires to contest such claim, the Officer shall:

(i) give the Bank any information reasonably requested by the Bank relating to such claim,

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(ii) take such action in connection with contesting such claim as the Bank shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonable selected by the Bank,

(iii) cooperate with the Bank in good faith in order to effectively contest such claim; and

(iv) permit the Bank to participate in any proceedings relating to such claim;

provided, however, that the Bank shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with any contest of a claim for payment of the Excise Taxes and the Bank shall indemnify and hold the Officer harmless, on an after tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses.

Without limitation on the foregoing provisions of this Agreement, the Bank shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Officer to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Officer agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Bank shall determine; provided, however, that if the Bank directs the Officer to pay such claim and sue for a refund, the Bank shall advance the amount of such payment to the Officer, on an interest-free basis and shall indemnify and hold the Officer harmless, on an after-tax-basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Officer with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Bank’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Officer shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(c) Underpayment of Gross-Up Payment. In the event there is an underpayment of the Gross-Up Payment due to the uncertainty in the application of Section 4999 of the Code at the time of the initial determination the Accounting Firm, and the Officer thereafter is required to make a payment of any Excise Tax, the Accounting Firm will determine the amount of any such underpayment that has occurred and such amount will be promptly paid by the Bank to or for the benefit of the Officer.

(d) Refund of Gross-Up Payment. If, after the receipt by the Officer of an amount advanced by the Bank pursuant to this Agreement, the Officer becomes entitled to receive any refund with respect to such claim, the Officer shall [subject to the Bank’s complying with the requirements of Subsection (b) above], promptly pay to the Bank the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Officer of an amount advanced by the Bank pursuant to Subsection (b) above, a determination is made that the Officer shall not be entitled to any refund with respect to such

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claim and the Bank does not notify the Officer in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

10. Litigation Expenses

(a) The Bank agrees to pay promptly as incurred, to the full extent permitted by law, all the legal fees and expenses which the Officer may reasonably incur as a result of any contest (regardless of the outcome thereof unless a court of competent jurisdiction determines that the Officer acted in bad faith in initiating the contest) by the Bank, the Officer or others of the validity or enforceability of, or liability under, any provision of the Employment Agreement or Amendments thereto, or any guarantee of performance thereof (including as a result of any contest by the Officer about the amount of any payment pursuant to the Agreement or its Amendments), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Code Section 7872(f)(2)(A); provided however, that the reasonableness of the fees and expenses must be determined by an independent arbitrator, using standard legal principles, mutually agreed upon by the Bank and the Officer in accordance with rules set forth by the American Arbitration Association.

(b) If there is any dispute between the Bank and the Officer in the event of any termination of the Officer’s employment by the Bank or by the Officer, then unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that the Officer is not entitled to benefits under the Agreement and Amendments thereto, the Bank will pay all amounts, and provide all benefits to the Officer and/or the Officer’s family or other beneficiaries, as the case may be, that the Bank would be required to pay or provide pursuant to the Agreement and its Amendments. The Bank will not be required to pay any disputed amounts pursuant to this paragraph except upon receipt of an undertaking (which may be unsecured) by or on behalf of the Officer to repay all such amounts to which the Officer is ultimately adjudged by such court not to be entitled.

11. Miscellaneous:

(a) Waiver. A waiver by any party of any of the terms and conditions of this Agreement in any instance shall not be deemed or construed to be a waiver of such terms and conditions for the future, or of any subsequent breach thereof.

(b) Severability. If any provision of this Agreement, as applied to any circumstances, shall be adjudged by a court to be void and unenforceable, the same shall in no way affect any other provision of this Agreement or the applicability of such provision to any other circumstances.

(c) Amendment. This Agreement may not be varied, altered, modified, changed, or in any way amended except by an instrument in writing, executed by the parties hereto or their legal representatives.

(d) Nonassignability of Payments. Neither the Officer nor his estate shall have any right to commute, sell, assign, transfer or otherwise convey the right to receive any payments hereunder, which payments and the right thereto are expressly declared to be nonassignable and nontransferable.

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(e) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Officer (and his personal representative), the Bank and any successor organization or organizations which shall succeed to substantially all of the business and property of the Bank, whether by means of merger, consolidation, acquisition of all or substantially all of the assets of the Bank or otherwise, including by operation of law.

(f) Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the Commonwealth of Virginia, whether statutory or decisional, applicable to agreements made and entirely to be performed within such state and such provisions of federal law as may be applicable. Venue for any dispute arising hereunder shall lie exclusively in the state or federal courts located in or having jurisdiction over the City of Norfolk, Virginia.

(g) Assignment. Officer shall not have the right to transfer or assign any or all of his or her rights or interest hereunder. Pursuant to the provisions of Section 3(b) hereof, Officer agrees that should Employer convey all or substantially all of Employer’s assets to a third-party, which assets include this Agreement, that Employer may assign this Agreement to such third-party without the prior consent of Officer, and, further, that such assignment shall be deemed to be undertaken with Officer’s consent with regard to the third-party.

(h) Background, Enumerations and Headings. The Background, enumerations and headings contained in this Agreement are for convenience of reference only and are not intended to have any substantive significance in interpreting this Agreement.

(i) Gender and Number. Unless the context otherwise requires, whenever used in this Agreement the singular shall include the plural, the plural shall include the singular, and the masculine gender shall include neuter or feminine gender and vice versa.

(j) Dispute Resolution. If a dispute arises out of or relates to this Agreement or the breach thereof, such dispute shall first be submitted to the Personnel Committee for the Bank’s Board of Directors for resolution whose decision shall be final.

[Signatures Follow Next Page]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

The Bank of Hampton Roads,
a Virginia banking corporation
By	/s/ Jack W. Gibson	(SEAL)

Print Name: Jack W. Gibson

Title:	President & CEO
Date:

Officer:
/s/ Lorelle Fritsch		(SEAL)
Print Name:	Lorelle Fritsch

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EX-10.36

Exhibit 10.36

First Amendment

To

Employment Agreement

THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (the “Amendment”) is made as of this 23rd day of July, 2008, by and between THE BANK OF HAMPTON ROADS, INC. (“BHR”), a banking corporation organized and existing under the laws of the Commonwealth of Virginia, its successors and assigns, HAMPTON ROADS BANKSHARES, INC. (“HRB”), a Virginia corporation, its successors and assigns (collectively BHR and HRB shall be the Bank or Employer and otherwise deemed synonymous as the context may require); and LORELLE FRITSCH (the “Executive”).

WHEREAS, BHR and the Executive entered into an Employment Agreement dated August 28, 2006, (as amended, the “Agreement”); and

WHEREAS, HRB was incorporated on February 28, 2001, and pursuant to a corporate reorganization (the “Reorganization”) became the parent company of BHR; and

WHEREAS, the Executive was elected an executive officer of both BHR and HRB by their respective Boards of Directors on July 22, 2008; and

WHEREAS, the Bank and Executive now desire to amend the Agreement to reflect the Executive’s employment relationship with BHR and HRB and to amend certain other provisions of the Agreement;

NOW, THEREFORE, the parties agree as follows:

1. HRB shall become a party to the Agreement and any reference in the Agreement to the term “Bank” shall collectively refer to HRB and/or BHR as the context may require.

2. Section 1 of the Agreement is deleted and replaced by the following:

1. EMPLOYMENT: The Employer agrees to employ the Executive to perform services for the Employer and the Executive agrees to serve the Employer upon the terms and conditions herein provided. The Executive shall be an executive officer of both HRB and BHR. She agrees to serve as the Senior Vice President and Chief Financial Officer of BHR and as the Senior Vice President and Chief Financial Officer, Principal Accounting Officer and Principal Financial Officer of HRB. The Executive shall perform such managerial duties and responsibilities as shall be assigned to her by the Chief Executive Officers of each of HRB and BHR, consistent with her positions and titles. The Executive shall devote her time and attention on a full-time basis to the discharge of the duties undertaken by her hereunder.

3. Section 3(b)(ii) of the Agreement is deleted and replaced by the following:

The Officer shall be entitled to terminate his or her employment pursuant to this Agreement if “a change of control” occurs with respect to the Bank, in which event the Employer shall be obligated to pay the Officer and furnish him or her the benefits provided in Section 4 hereof. For purposes of this Agreement, the term “a change in control” shall mean (a) the date that any one person, or more than one person, acting as a group, acquires ownership of stock of HRB (the “Parent Company”) that, together with stock held by such person or group constitutes more than 50% of the total fair

market value or total voting power of the stock of the Parent Company, (b) the date any one person, or more than one person, acting as a group, acquires (or has acquired ownership during the 12 month period ending on the date of the most recent acquisition be such person) ownership of stock of the Company possessing 30% or more of the total voting power of the stock, or (c) the date a majority of the members of the Company’s Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Parent Company’s Board before the date of the appointment or election. The right herein conferred upon the Executive to terminate her employment for good reason may be exercised by the Executive at any time during the terms of this Agreement at her sole discretion, and any failure by the Executive to exercise this right after she has “good reason” to do so shall not be deemed a waiver of the right.

3. The following is added at the end of Section 4(c) of the Agreement:

Any cash reimbursement that the Company may make to the Executive with respect to the Company’s obligation to provide substantially similar benefits, shall be paid before the last day of the calendar year following the calendar year in which the expense is incurred. The Executive may not exchange the right to reimbursement or to an in-kind benefit for another reimbursement or benefit and may not receive cash in lieu of an in-kind benefit or right to reimbursement.

4. Current Section 11 of the Agreement (“Miscellaneous”) is renumbered to be Section 12, and new Section 11 is added to the Agreement as follows:

11. Provisions Regarding Section 409A of the Internal Revenue Code.

(a) Compliance with Section 409A of the Internal Revenue Code (“Code”). Any benefit, payment or other right provided by the Plan shall be provided or made in a manner, and at such time, in such form and subject to such election procedures (if any), as complies with the applicable requirements of Code section 409A to avoid a plan failure described in Code section 409A(a)(l), including without limitation, deferring payment until the occurrence of a specified payment event described in Code section 409A(a)(2). Notwithstanding any other provision hereof or document pertaining hereto, the Plan shall be so construed and interpreted to meet the applicable requirements of Code section 409A to avoid a plan failure described in Code section 409A(a)(l).

(b) Delay in Distributions. To the extent required by Section 409A of the Code, in the event the Executive is a “specified employee” as provided in Section 409A(a)(2)B)(i) on his date of termination from employment, any amounts payable hereunder shall be paid no earlier than the first business day after the six month anniversary of the his date of termination. Whether the Executive is a specified employee and whether an amount payable to the Executive hereunder is subject to Section 409A of the Code shall be determined by the Company.

(c) Gross-Up Payments. The Agreement requires the Company to pay the Executive a Gross-Up Payment in certain events. Notwithstanding any contrary provision in Section 9, all Gross-Up Payments due to the Executive shall be paid no later than the end of the calendar year next following the calendar year in which the Executive remits the related taxes.

5. Except as amended by this Amendment, the Agreement as originally adopted and amended is hereby ratified and affirmed.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first above written.

THE BANK OF HAMPTON ROADS, INC.
By:	/s/ Jack W. Gibson	[SEAL]
	Jack W. Gibson, President and Chief Executive Officer
HAMPTON ROADS BANKSHARES, INC.
By:	/s/ Jack W. Gibson	[SEAL]
	Jack W. Gibson, Vice Chairman, President and Chief Executive Officer
EXECUTIVE:
/s/ Lorelle Fritsch
Lorelle Fritsch

EX-10.38

Exhibit 10.38

FIRST AMENDMENT

TO THE

BANK OF HAMPTON ROADS, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

THIS FIRST AMENDMENT (“Amendment”) to the Bank of Hampton Roads, Inc. Supplemental Executive Retirement Plan (“Plan”) made effective as of the 30th day of December 2008 by Bank of Hampton Roads, Inc. (“Corporation”). All capitalized terms in this Amendment not otherwise defined shall have their respective meanings under the Plan.

WHEREAS, the Corporation wishes to amend and conform the written terms of the Plan to the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Code”), and

WHEREAS, the Plan has operated in good faith compliance with the requirements of Section 409A of the Code for periods starting January 1, 2005 and through the effective date of this Amendment,

NOW, THEREFORE, the Corporation hereby adopts this Amendment upon the following terms and conditions:

1. The definition of Change in Control in Section 2(e) shall be replaced in its entirety with the following definition:

Change in Control means (a) the date that any one person, or more than one person, acting as a group, acquires ownership of stock of the Parent Corporation that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of the Parent Corporation, (b) the date any one person, or more than one person, acting as a group, acquires (or has acquired ownership during the 12 month period ending on the date of the most recent acquisition by such person) ownership of stock of the Parent Corporation possessing 30% or more of the total voting power of the stock, or (c) the date a majority of the members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election.

2. The definition of Specified Employee is added as Section 2(l) as follows:

Specified Employee A Specified Employee means an employee who, as of December 31 of any Plan Year, satisfies the requirements of Code Section 416(i) (without regard to Code section 416(i)(5)). Such employee will be considered a Specified Employee for purposes of the Plan for the 12-month period commencing on the next following April 1; provided, however, that an employee will not be considered a Specified Employee unless at the time of his or her termination of employment, the Corporation is a public company pursuant to Code section 409A.

3. The definition of Parent Corporation is added as Section 2(m) as follows:

Parent Corporation. Hampton Roads Bankshares, Inc., a Virginia corporation.

4. Section 6(f) is added as follows:

(f) Specified Employee. In the case of Participant who is a Specified Employee on his termination of employment and with respect to any payments payable upon termination of employment, the lump sum shall be made, or installments payments shall commence, on the first day of the month following the six-month anniversary of the Participant’s termination of employment. In the case of installment payments to a Specified Employee, the first payment shall include a “catch-up” amount equal to the sum of payments that would have been made to the Participant during the period preceding the first payment date if no 6-month delay had applied.

WITNESS the signature of the undersigned officer of Bank of Hampton Roads, Inc.

BANK OF HAMPTON ROADS, INC.

Date Signed

EX-10.39

Exhibit 10.39

SECOND AMENDMENT

TO

THE BANK OF HAMPTON ROADS

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

THIS SECOND AMENDMENT (“Amendment”) to The Bank of Hampton Roads Supplemental Executive Retirement Plan (“Plan”) made effective as of the 30th day of December 2008 by The Bank of Hampton Roads (“Corporation”). All capitalized terms in this Amendment not otherwise defined shall have their respective meanings under the Plan.

WHEREAS, the Corporation wishes to further amend and conform the written terms of the Plan to the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Code”), and

WHEREAS, the Corporation wishes to amend the terms of the Plan to comply with the Emergency Economic Stabilization Act of 2008,

NOW, THEREFORE, the Corporation hereby adopts this Amendment upon the following terms and conditions:

1. The definition of Change in Control in Section 2(e) shall be replaced in its entirety with the following definition:

The term “Change in Control” is hereby defined as the date that (i) any one person, or more than one person, acting as a group, acquires ownership of stock of Hampton Roads Bankshares, Inc. that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of Hampton Roads Bankshares, Inc., (b) during any period of twelve consecutive months, individuals who at the beginning of such period constituted the Board and any new directors, whose election by the Board or nomination for election by the Hampton Roads Bankshares, Inc.’s stockholders was approved by a vote of at least three-fourths ( ³/4ths) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board, or (c) during any period of twelve consecutive months, (i) any one person, or more than one person, acting as a group, acquires ownership of stock of Hampton Roads Bankshares, Inc. that, together with stock held by such person or group constitutes more than 30% of the total voting power of the stock of Hampton Roads Bankshares, Inc., and (ii) individuals who at the beginning of such period constituted the Board cease in connection with such 30% change in voting stock ownership, cease to constitute a majority of the Board. Anything herein to the contrary notwithstanding, the definition of “Change in Control” shall be interpreted so as to comply with the terms of Section 409A of the Internal Revenue Code and the regulations thereunder.

2. Section 9(i) is added to the Plan as follows:

(i) Emergency Economic Stablization Act of 2008 (“EESA”). For purposes of this Section 9(i), a parachute payment is defined in Q&A 3 of Notice 2008-TAAP as any payment in the nature of compensation paid on account of an applicable severance of employment to the extent that the aggregate present value of such payments equals or exceeds an amount equal to three times the base amount. A parachute payment shall be interpreted in a manner that is consistent with Notice 2008-TAAP, Notice 2008-94 and all other current or future guidance issued pursuant to Section 111(b)(2)(C) of EESA or Section 280G(e) of the Internal Revenue Code of 1986, as amended (“Code”).

To the extent that any payment under this Plan would be forfeited as a prohibited parachute payment under Section 111(b)(2)(C) of EESA, the Corporation agrees to pay the Participant an additional payment equal to the forfeited payment plus one dollar, on July 1, 2012, or if later, the earliest date when Section 111(b)(2)(C) of EESA no longer prohibits such payment. Such payment shall be made in a single lump sum in cash, without interest. The Participant may be entitled to severance payments from multiple agreements and plans. The Corporation, it its sole discretion, shall determine which payments shall be delayed. Notwithstanding anything in this paragraph to the contrary, the additional amounts due under the Plan shall not be paid if the Treasury Department or other governmental agency issues guidance subsequent to the date of this Agreement that would prohibit such payment.

[SIGNATURE PAGE FOLLOWS]

WITNESS the signature of the undersigned officer of The Bank of Hampton Roads.

THE BANK OF HAMPTON ROADS

Jack W. Gibson, Vice Chairman, President & CEO

Date Signed

EX-10.40

Exhibit 10.40

HAMPTON ROADS BANKSHARES, INC.

2008 DIRECTOR DEFERRED COMPENSATION PLAN

1. PLAN ADMINISTRATION AND ELIGIBILITY.

1.1. PURPOSE. The purpose of the Hampton Roads Bankshares, Inc. (the “Company”) 2008 Director Deferred Compensation Plan (the “Plan”) is to advance the interests of the Company and its shareholders by attracting and retaining the highest quality of experienced persons as directors and to further align the interests of the directors with the interests of the Company’s shareholders.

1.2. ELIGIBILITY. Each member of the Board of Directors of Hampton Roads Bankshares, Inc. is eligible to participate in the Plan. Additionally, the Board of Directors of the Company, in its sole discretion, may extend participation in this Plan to the Boards of its wholly owned subsidiaries. The members of the Board of Directors of the Company and the Boards of Directors of subsidiaries selected for participation are “Eligible Directors.”

1.3. ADMINISTRATION. The Plan shall be administered, construed and interpreted by the Board of Directors of the Company (“HRB Board”). Pursuant to such authorization, the HRB Board shall have the responsibility for carrying out the terms of the Plan, including but not limited to the determination of the amount and form of payment or any annual or monthly retainer and any additional fees payable by the Company or a subsidiary to an Eligible Director for his or her services as a director (the “Fees,” which shall not include reimbursements or other payments not for services rendered). To the extent permitted under the securities laws applicable to compensation plans including, without limitation, the requirements of Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or under the Internal Revenue Code of 1986, as amended (the “Code”), a committee of the HRB Board, or a subcommittee of any committee, may exercise the discretion granted to the HRB Board under the Plan, provided that the composition of such committee or subcommittee shall satisfy the requirements of Rule 16b-3 under the Exchange Act (i.e. comprised of independent and/or non-executive directors), or any successor rule or regulation. The HRB Board of Directors may also designate a plan administrator to manage the record keeping and other routine administrative duties under the Plan.

2. STOCK SUBJECT TO THE PLAN.

2.1. SHARE PURCHASE. To satisfy the requirements of Section 3, the Company shall direct the trustees (“Trustee”) of the Hampton Roads Bankshares, Inc. Executive Savings Plan Trust (the “ESP Trust”) to purchase shares of the Company’s common stock (“Shares”) on the open market or from the Company. The purchase, holding and distribution of Shares by the Trustee hereunder shall in all cases be conducted pursuant to applicable law (including the rules and regulations of the U.S. Securities and Exchange Commission) and any Company policies and procedures then in effect.

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2.2. GENERAL RESTRICTIONS. Delivery of Shares under Section 3 of the Plan shall be subject to the following:

(a) Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any Shares under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933), and the applicable requirements of any securities exchange or similar entity.

(b) To the extent that the Plan provides for delivery of stock certificates, the delivery may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

2.3. TAX WITHHOLDING. The HRB Board may condition the delivery of any shares or other benefits under the Plan on satisfaction of any applicable withholding obligations. The HRB Board, in its discretion, and subject to such requirements as the HRB Board may impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through cash payment by the participating Eligible Director (“Participant”), through the surrender of Shares which the Participant already owns, or through the surrender of Shares to which the participant is otherwise entitled under the Plan.

3. DEFERRED COMPENSATION.

3.1. DEFERRAL OF FEES.

(a) Any Eligible Director may elect to defer in either cash or Shares all or a portion of the Fees earned during any calendar year by delivering a deferral election to the Company not later than (i) December 31 of the year immediately preceding the year to which the deferral election relates, or (ii) with respect to an Eligible Director’s first year or partial year of service as a director, thirty days following the date on which such director first became a director, but only for Fees earned after such election is made. The election form shall specify the amount or portion of the Fees to be deferred; whether and to what extent such Fees are to be deferred in cash or in Shares; the manner of payment with respect to such deferred amounts; and the date on which the deferred amounts shall be paid and whether paid in a lump sum or in installment. Such election shall remain in force for such calendar year and for each year thereafter until changed or revoked by the director by written notice to the Company not later than December 31 immediately preceding the year to which such change or revocation relates. A deferral election may not be changed or revoked after the beginning of the calendar year to which it relates.

(b) For Fees to be earned in 2008, an Eligible Director’s deferral election pursuant to the Hampton Roads Bankshares, Inc. Directors’ Deferred Compensation Plan which was frozen as of December 31, 2007 and delivered to the Company before December 31, 2007 shall be a valid deferral election for purposes of this Plan.

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3.2. ACCOUNTS; INTEREST AND DIVIDEND CREDITS. On the first day of each calendar quarter (the “Credit Date”), an Eligible Director who elects to defer his or her Fees shall receive a credit to his or her deferred compensation accounts (the “Deferred Compensation Accounts”) under the Plan as hereinafter provided. Any portion of a Participant’s Fees which are deferred in cash shall be credited to the Participant’s Cash Deferral Account. The amount of the credit shall equal the amount of Fees deferred in cash by the Participant during the immediately preceding quarter. Any portion of a Participant’s Fees which are deferred in Shares shall be credited to the Participant’s Deferred Stock Account and such Fees shall be contributed to the ESP Trust. The Trustee shall use the contributed Fees to purchase Shares in the open market or from the Company and the Deferred Stock Account shall be credited with the number of shares purchased by the Trustee. Only whole shares shall be purchased and any residual Fees which remain shall be held until the next Credit Date and aggregated with Fees deferred during such quarter.

On the first day of each calendar quarter, an amount shall be credited to each Participant’s Cash Deferral Account equal to the Interest Rate (as hereinafter defined) on the balance credited to the Cash Deferral Account during the immediately preceding quarter. Interest shall accrue on the balance of each Participant’s Cash Deferral Account commencing with the date the first payment is credited thereto and ending with the final payment therefrom. For this purpose, “Interest Rate” shall mean the highest interest rate paid on any outstanding certificate of deposit held by customers at any of the Company’s subsidiary banks on the first day of the calendar year.

Each time any dividend is paid on the Stock, the funds from such dividend will be reinvested by the Trustee on behalf of the Participant in additional Shares in accordance with the terms of the Company’s dividend reinvestment plan then in effect.

3.3 INVESTMENT CHANGE

Subject to the prior approval of the Company and in its sole discretion, as of the first business day of a calendar quarter, a Participant may direct the Company to liquidate his Cash Deferral Account and invest such amount into a Deferred Stock Account. The Trustee shall use the contributed Fees to purchase Shares in the open market or from the Company and the Deferred Stock Account shall be credited with the number of shares purchased by the Trustee. Only whole shares shall be purchased and any residual Fees which remain shall be held until the next Credit Date and aggregated with Fees deferred during such quarter. A Participant may not direct the Company to liquidate his Deferred Stock Account.

3.4 DEEMED INVESTMENT.

Notwithstanding any provision of this Plan that may be interpreted to the contrary, the Cash Deferral and Deferred Stock Accounts are to be used for bookkeeping purposes only, and a Participant’s election with respect to his Deferred Compensation Accounts shall not be considered or construed in any manner as an actual investment of his Deferred Compensation Accounts. In the event that the Company or the Trustee of the ESP Trust, in its own discretion, decides to invest funds in Shares, no Participant shall have any rights to such Shares themselves.

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3.5. PAYMENT.

(a) An Eligible Director’s Deferred Compensation Accounts shall be paid to the director as follows: at the director’s option, either (i) in a single lump sum as soon as practicable following the earlier of (x) the date on which the director ceases to serve as a director of the Company or subsidiary of the Company or (y) the date specified by the director as the distribution date (such earlier date shall be referred to as the “Distribution Date”), or (ii) in annual installments over a period, to be specified by the director, not to exceed five years, commencing as soon as practicable after the Distribution Date. If an Eligible Director’s Cash Deferral Account is paid in installments, the amount of each installment shall be (l) the balance of the Cash Deferral Account on the Distribution Date divided by the number of installments plus (2) interest credits. If an Eligible Director’s Stock Deferral Account is paid in installments, the number of Shares in each installment shall be the number of Shares in the Stock Deferral Account on the Distribution Date divided by the number of installments, rounded to the nearest whole share. A cash payment will be made with the final installment for any fraction of a share of Common Stock credited to the Eligible Director’s Deferred Stock Account.

(b) Upon the death of an Eligible Director, the Company shall pay or distribute any remaining benefits as a single lump sum within 90 days following the date of death.

(c) A lump sum payment shall be paid no later than the end of the calendar year in which the Distribution Date occurs. The first payment in a series of installment payments shall be paid no later than the 15^th day of the third month following the Distribution Date. Subsequent installment payments shall be paid on the anniversary date of the first payment.

(d) An Eligible Director’s continued service as an employee of the Company is not taken into account in determining whether such director is entitled to a payment under this Plan upon his resignation from the Board.

(e) Except as provided in Treasury Regulation section 1.409A-3(j), no acceleration in the time or schedule of any payment or amount scheduled to be paid from an Eligible Director’s Account is permitted.

3.6. DESIGNATION OF BENEFICIARY. Each Eligible Director may designate in writing a beneficiary to receive such portion, if any, of the director’s Deferred Compensation Accounts as remains unpaid at the director’s death. In the absence of a valid beneficiary designation, that portion, if any, of an Account remaining unpaid at the director’s death shall be paid to his or her estate.

3.7. NATURE OF PROMISE. The Company shall not be required to segregate or earmark any funds or Shares in respect of its obligations under Section 3 of the Plan. No Eligible Director nor any other person shall have any rights to any assets of the Company by reason of amounts deferred or benefits accrued under this Plan, other than as a general unsecured creditor of the Company. The Plan constitutes a mere promise by the Company to make payments in the future and is unfunded for purposes of Title I of ERISA and for tax purposes. The Company shall make available as and when required a sufficient number of Shares to meet the requirements arising under the Plan.

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3.8. NO ASSIGNMENT. Rights to benefits under this Section 3 of the Plan may not be assigned, sold, transferred, encumbered, pledged or otherwise alienated, attached, garnished, or anticipated, other than in accordance with the beneficiary designation provisions of Section 3.4 above.

4. GENERAL PROVISIONS.

4.1. EFFECTIVE DATE OF THIS PLAN. This Plan shall be effective January 1, 2008 and remain in effect until terminated or superceded.

4.2. AMENDMENT OF THIS PLAN. The Plan may be terminated or amended at any time by the HRB Board, or its authorized delegate, effective as of any date specified. Any such action taken by the HRB Board, or its authorized delegate, shall be evidenced by a resolution. No amendment or termination shall decrease an Eligible Director’s Deferred Compensation Account. The Plan shall not be terminated unless such termination is permitted and administered in accordance with Treasury Regulation section 1.409A-3(j)(4)(ix).

4.3. CHANGE OF CONTROL. Upon a Change of Control (as defined below), any outstanding balance in an Eligible Director’s Cash Deferral Account shall be paid in a lump sum and any outstanding balance in an Eligible Director’s Deferred Stock Account shall be distributed in Shares if the Eligible Director ceases to serve as a director of the Company or a surviving company after the date of the Change of Control. For purposes of the Plan, the term “Change of Control” includes: (i) a change in the ownership of the Company, (ii) a change in effective control of the Company, or (iii) a change in the ownership of a substantial portion of the assets of the Company. A “change in the ownership of the Company” occurs on the date that any one person, or more than one person, acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of the Company. A “change in the effective control of the Company” occurs only on (i) the date any on person or group acquires ownership of stock of the Company possessing 40% or more of the total voting power of the stock, or (ii) the date a majority of the members of the Company’s Board is replaced during any 12 month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board before the date of the appointment or election. A “change in the ownership of a substantial portion of the assets of the Company” occurs on the date that any one person or group acquires assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all the assets of the Company immediately before such acquisition. This definition of Change in Control shall be interpreted in a manner that is consistent with Treasury Regulation section 1.409A-3(i)(5).

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4.4. LIMITATION OF RIGHTS.

(a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither this Plan, nor any other action taken pursuant to this Plan shall constitute or be evidence of any agreement or understanding, express or implied, that the Company will retain a director for any period of time, or at any particular rate of compensation.

(b) NO SHAREHOLDERS’ RIGHTS. Except as specifically provided by the Plan, a participant in the Plan shall have no rights as a shareholder with respect to the Deferred Stock Account until the date of the issuance to him or her of a stock certificate therefore.

4.5. NOTICE. Any written notice to the Company required by any of the provisions of this Plan shall be addressed to the secretary of the Company and shall become effective when it is received.

4.6. GOVERNING LAW. This Plan and all determinations made and actions taken pursuant hereto shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia.

4.7. SEVERABILITY. If any term or provision of this Plan or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, then the remainder of the Plan, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision hereof shall be valid and be enforced to the fullest extent permitted by applicable law.

4.8. SECTION 409A OF THE CODE.

(a) Any benefit, payment or other right provided by the Plan shall be provided or made in a manner, and at such time, in such form and subject to such election procedures (if any), as complies with the applicable requirements of Code section 409A to avoid a plan failure described in Code section 409A(a)(1), including without limitation, deferring payment until the occurrence of a specified payment event described in Code section 409A(a)(2). Notwithstanding any other provision hereof or document pertaining hereto, the Plan shall be so construed and interpreted to meet the applicable requirements of Code section 409A to avoid a plan failure described in Code section 409A(a)(1).

(b) It is specifically intended that all elections, consents and modifications thereto under the Plan will comply with the requirements of Code section 409A (including any transition or grandfather rules thereunder). The Company is authorized to adopt rules or regulations deemed necessary or appropriate in connection therewith to anticipate and/or comply the requirements of Code section 409A (including any transition or grandfather rules thereunder and to declare any election, consent or modification thereto void if non-compliant with Code section 409A.

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(c) Pursuant to Section 3.01(B)(1).02 of Internal Revenue Notice 2007-86 (“Transition Relief”), the Company may permit Participants to modify their existing deferral elections previously made pursuant to the Plan to reflect new deferral elections regarding the time and form of payment of benefits under the Plan to the full extent permitted by, and in accordance with, the Transition Relief.

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EX-10.41

Exhibit 10.41

AMENDED AND RESTATED

HAMPTON ROADS BANKSHARES, INC.

DIRECTORS’ DEFERRED COMPENSATION PLAN

1. PLAN ADMINISTRATION AND ELIGIBILITY.

1.1. PURPOSE AND PLAN FREEZE. The Hampton Roads Bankshares, Inc. Directors’ Deferred Compensation Plan (“Plan”) permitted the members of the Board of Directors of the Hampton Roads Bankshares, Inc. (“Company”) and its wholly owned subsidiary, Bank of Hampton Roads, Inc. to defer their Fees (as defined below) into a deferred cash account, restricted stock or into nonqualified stock options. Effective December 31, 2007, this Plan was frozen; fees deferred for 2007 and prior years will be paid according to the terms of this Plan and executed deferral elections. There will be no acceleration of the payment of deferred amounts. Effective December 31, 2007, the Company shall establish a Deferred Stock Account (as defined in Section 3) for Eligible Directors (as defined in Section 1.2) holding restricted stock. The Deferred Stock Account shall be credited with a number of shares of common stock of the Company (“Shares”), including fractional shares, equal to the restricted stock held by such director.

1.2. ELIGIBILITY. Each member of the Board of Directors of Hampton Roads Bankshares, Inc. and Bank of Hampton Roads, Inc., its wholly owned subsidiary, is eligible to participate in the Plan (“Eligible Director”).

1.3. ADMINISTRATION. The Plan shall be administered, construed and interpreted by the Board of Directors of the Company (“Board”). Pursuant to such authorization, the Board of Directors shall have the responsibility for carrying out the terms of the Plan, including but not limited to the determination of the amount and form of payment of annual or monthly retainer and any additional fees payable by the Company or a subsidiary to an Eligible Director for his or her services as a director (the “Fees,” which shall not include reimbursements or other payments not for services rendered). To the extent permitted under the securities laws applicable to compensation plans including, without limitation, the requirements of Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or under the Internal Revenue Code of 1986, as amended (the “Code”), a committee of the Board of Directors, or a subcommittee of any committee, may exercise the discretion granted to the Board under the Plan, provided that the composition of such committee or subcommittee shall satisfy the requirements of Rule 16b-3 under the Exchange Act (i.e., comprised of independent and/or non-executive directors), or any successor rule or regulation. The Board of Directors may also designate a plan administrator to manage the record keeping and other routine administrative duties under the Plan.

2. STOCK SUBJECT TO THE PLAN.

2.1. SHARE PURCHASE. To satisfy the requirements of Section 3, the Company shall direct the trustees (“Trustees”) of the Hampton Roads Bankshares, Inc. Executive Savings

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Plan Trust (the “ESP Trust”) to receive shares of restricted stock contributed to such trust and to purchase Shares on the open market or from the Company. The purchase, holding and distribution of Shares by the Trustee hereunder shall in all cases be conducted pursuant to applicable law (including the rules and regulations of the U.S. Securities and Exchange Commission) and any Company policies and procedures then in effect.

2.2. GENERAL RESTRICTIONS. Delivery of Shares under Section 3 of the Plan shall be subject to the following:

(a) Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any Shares under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933), and the applicable requirements of any securities exchange or similar entity.

(b) To the extent that the Plan provides for delivery of stock certificates, the delivery may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

2.3. TAX WITHHOLDING. The Board may condition the delivery of any shares or other benefits under the Plan on satisfaction of any applicable withholding obligations. The Board, in its discretion, and subject to such requirements as the Board may impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through cash payment by the participating Eligible Director (“Participant”), through the surrender of Shares which the Participant already owns, or through the surrender of Shares to which the participant is otherwise entitled under the Plan.

3. DEFERRED COMPENSATION.

3.1. DEFERRAL OF FEES.

For Fees earned and deferred prior to December 31, 2007, an Eligible Director elected to defer in either cash or Shares all or a portion of the Fees earned during any calendar year by delivering a deferral election to the Company not later than (i) December 31 of the year immediately preceding the year to which the deferral election relates, or (ii) with respect to an Eligible Director’s first year or partial year of service as a director, thirty days following the date on which such director first became a director, but only for Fees earned after such election is made.

3.2. ACCOUNTS; INTEREST AND DIVIDEND CREDITS. On the first day of each calendar year (the “Credit Date”), an Eligible Director who elects to defer his or her Fees shall receive a credit to his or her deferred compensation accounts (the “Deferred Compensation Accounts”) under the Plan as hereinafter provided. Any portion of a Participant’s Fees which are deferred in cash shall be credited to the Participant’s Cash Deferral Account. The amount of the credit shall equal the amount of Fees deferred in cash by the Participant during the immediately preceding year. Any portion of a Participant’s Fees which are deferred in Shares shall be credited

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to the Participant’s Deferred Stock Account and such Fees shall be contributed to the ESP Trust. The Trustee shall use the contributed Fees to purchase Shares in the open market or from the Company and the Deferred Stock Account shall be credited with the number of shares purchased by the Trustee. Only whole shares shall be purchased and any residual Fees which remain shall be held until the next Credit Date.

On the first day of each calendar year, an amount shall be credited to each Participant’s Cash Deferral Account equal to the Interest Rate (as hereinafter defined) on the balance credited to the Cash Deferral Account during the immediately preceding year. Interest shall accrue on the balance of each Participant’s Cash Deferral Account commencing with the date the first payment is credited thereto and ending with the final payment therefrom. For this purpose, “Interest Rate” shall mean the highest interest rate paid on any outstanding certificate of deposit held by customers at any of the Company’s subsidiary banks on the first day of the calendar year.

Each time any dividend is paid on the Stock, the funds from such dividend will be reinvested by the Trustee on behalf of the Participant in additional Shares in accordance with the terms of the Company’s dividend reinvestment plan then in effect.

3.3 INVESTMENT CHANGE

Subject to the prior approval of the Company and in its sole discretion, as of the first business day of a calendar quarter, a Participant may direct the Company to liquidate his Cash Deferral Account and invest such amount into a Deferred Stock Account. The Trustee shall use the contributed Fees to purchase Shares in the open market or from the Company and the Deferred Stock Account shall be credited with the number of shares purchased by the Trustee. Only whole shares shall be purchased and any residual Fees which remain shall be held until the next Credit Date. A Participant may not direct the Company to liquidate his Deferred Stock Account.

3.4 DEEMED INVESTMENT.

Notwithstanding any provision of this Plan that may be interpreted to the contrary, the Cash Deferral and Deferred Stock Accounts are to be used for bookkeeping purposes only, and a Participant’s election with respect to his Deferred Compensation Accounts shall not be considered or construed in any manner as an actual investment of his Deferred Compensation Accounts. In the event that the Company or the Trustee of the ESP Trust, in its own discretion, decides to invest funds in Shares, no Participant shall have any rights to such Shares themselves.

3.5. PAYMENT.

(a) Subject to Sections 3.6 and 5.10(c) below, an Eligible Director’s Deferred Compensation Accounts shall be paid to the director in five annual installments beginning on the fifth anniversary of the Credit Dates. If an Eligible Director’s Cash Deferral Account is paid in installments, the amount of each installment shall be (l) the balance of the Cash Deferral Account on the Distribution Date divided by the number of installments plus (2) interest credits. If an Eligible Director’s Stock Deferral Account is paid in installments, the number of Shares in each

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installment shall be the number of Shares in the Stock Deferral Account on the Distribution Date divided by the number of installments, rounded to the nearest whole share. A cash payment will be made with the final installment for any fraction of a share of Common Stock credited to the Eligible Director’s Deferred Stock Account.

(b) Upon the death of an Eligible Director, the Company shall pay any remaining benefits as a single lump sum within 90 days following the date of death.

(c) A lump sum payment and the first payment in a series of installment payments shall be paid no later than: (i) the end of the calendar year in which the Distribution Date occurs, or (ii) if later, the 15^th day of the third month following the Distribution Date. Subsequent installment payments shall be paid on the anniversary date of the first payment.

(d) An Eligible Director’s continued service as an employee of the Company is not taken into account in determining whether such director is entitled to a payment under this Plan upon his resignation from the Board.

(e) Except as provided in Treasury Regulation section 1.409A-3(j), no acceleration in the time or schedule of any payment or amount scheduled to be paid from an Eligible Director’s Account is permitted.

3.6. CUSTODY OF SHARES. The Company shall retain custody of all Shares that are transferred from the ESP Trust in payment of an Eligible Directors’ Deferred Compensation Account as provided in Section 3.5(a) above. An Eligible Director shall not be entitled to obtain custody of stock certificates until resignation from the Board of the Company or its subsidiary. The stock certificates shall bear a legend referencing this Plan and describing the terms and conditions of the applicable restrictions in Transfer.

3.7. DESIGNATION OF BENEFICIARY. Each Eligible Director may designate in writing a beneficiary to receive such portion, if any, of the director’s Deferred Compensation Accounts as remains unpaid at the director’s death. In the absence of a valid beneficiary designation, that portion, if any, of an Account remaining unpaid at the director’s death shall be paid to his or her estate.

3.8. NATURE OF PROMISE. The Company shall not be required to segregate or earmark any funds or Shares in respect of its obligations under Section 3 of the Plan. No Eligible Director nor any other person shall have any rights to any assets of the Company by reason of amounts deferred or benefits accrued under this Plan, other than as a general unsecured creditor of the Company. The Plan constitutes a mere promise by the Company to make payments in the future and is unfunded for purposes of Title I of ERISA and for tax purposes. The Company shall make available as and when required a sufficient number of shares of Common Stock to meet the requirements arising under the Plan.

3.9. NO ASSIGNMENT. Rights to benefits under this Section 3 of the Plan may not be assigned, sold, transferred, encumbered, pledged or otherwise alienated, attached, garnished, or anticipated, other than in accordance with the beneficiary designation provisions of Section 3.4 above.

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4. STOCK OPTIONS.

4.1 ELECTION TO RECEIVE OPTIONS. An Eligible Director may elect that any portion of his or her Fees not deferred under Section 3 above shall be paid in the form of options to purchase the Company’s Common Stock (“Options”).

4.2 TIME AND METHOD OF ELECTION, CHANGE OR REVOCATION. An election pursuant to Section 4.1 or any decision to change or revoke such election shall be governed by the same timing and other requirements set forth in Section 3 with respect to deferral of Fees.

4.3 OPTION TERMS. Options shall be “non-qualified” stock options made under, and pursuant to the terms and conditions of the Bank of Hampton Roads Non-Qualified Stock Option Plan for Directors and Employees. Options shall be issued as of the Credit Date and reflect an exercise price and other terms established according to the provisions of such plans. The Options shall be fully vested when issued and the term of such Options shall be ten (10) years.

4.4 DETERMINATION OF OPTION AMOUNT. The number of Options issued to an Eligible Director under this Section 4 as of any Credit Date shall be the number of Shares stated in the Stock Option Agreement.

5. GENERAL PROVISIONS.

5.1 EFFECTIVE DATE OF THIS PLAN. This Plan was effective April 22, 1997.

5.2 DURATION OF THIS PLAN. This Plan was frozen effective December 31, 2007.

5.3 AMENDMENT OF THIS PLAN. The Plan may be terminated or amended at any time by the Board, or its authorized delegate, effective as of any date specified. No amendment or termination shall decrease an Eligible Director’s Deferred Compensation Account The Plan shall not be terminated unless such termination is permitted and administered in accordance with Treasury Regulation section 1.409A-3(j)(4)(ix).

5.4 CHANGES IN SHARES. To prevent the dilution or enlargement of benefits or potential benefits intended to be made available under the Plan, in the event of any corporate transaction or event such as a stock dividend, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, spin-off, combination or other similar corporate transaction or event affecting the Shares which have been or may be issued under the Plan (any such transaction or event, a “Transaction”), then the Board shall, in such manner as the Board deems equitable: (A) make a proportionate adjustment in 1) the maximum number and type of securities which may be issued under this Plan, and 2) the number and type of securities subject to outstanding accounts (any such adjustment, an “Antidilution Adjustment”); provided, in each case, that the number of Shares subject to any account denominated in shares shall always be a

Page 5 of 7

whole number; or (B) cause any right to receive Shares outstanding as of the effective date of the Transaction to be cancelled in consideration of a cash payment or alternate form of equity settlement (whether from the Company or another entity that is a participant in the Transaction) or a combination thereof made to the holder of such cancelled right substantially equivalent in value to the fair market value of such cancelled right. The determination of fair market value shall be made by the Board of Directors in their sole discretion. Any adjustments made hereunder shall be binding on all Participants. Notwithstanding the foregoing, any Antidilution Adjustments to be made to outstanding Options shall be as provided for in the terms of the appropriate plan. A cancellation of a stock right or shares in exchange for a cash payment or other settlement is only permitted if such payment or settlement does not result in an impermissible acceleration of benefits under Section 409A.

5.5 CHANGE OF CONTROL. Upon a Change of Control (as defined below), any outstanding balance in an Eligible Director’s Cash Deferral Account shall be paid in a lump sum and any outstanding balance in an Eligible Director’s Deferred Stock Account shall be distributed in shares of Common Stock if the Eligible Director ceases to serve as a director of the Company or a surviving company after the date of the Change of Control. For purposes of the Plan, the term Change of Control includes: (i) a change in the ownership of the Company, (ii) a change in effective control of the Company, or (iii) a change in the ownership of a substantial portion of the assets of the Company. A change in the ownership of the Company occurs on the date that any one person, or more than one person, acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of the Company. A change in the effective control of the Company occurs only on (i) the date any on person or group acquires ownership of stock of the Company possessing 40% or more of the total voting power of the stock, or (ii) the date a majority of the members of the Company’s Board is replaced during any 12 month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board before the date of the appointment or election. A change in the ownership of a substantial portion of the assets of the Company occurs on the date that any one person or group acquires assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all the assets of the Company immediately before such acquisition. This definition of Change in Control shall be interpreted in a manner that is consistent with Treasury Regulation section 1.409A-3(i)(5).

5.6 LIMITATION OF RIGHTS.

(a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither this Plan, nor the granting of an Option under this Plan, nor any other action taken pursuant to this Plan shall constitute or be evidence of any agreement or understanding, express or implied, that the Company will retain a director for any period of time, or at any particular rate of compensation.

(b) NO SHAREHOLDERS’ RIGHTS. Except as specifically provided by the Plan, a participant in the Plan shall have no rights as a shareholder with respect to the Deferred Stock Account until the date of the issuance to him or her of a stock certificate therefore.

Page 6 of 7

5.7 NOTICE. Any written notice to the Company required by any of the provisions of this Plan shall be addressed to the secretary of the Company and shall become effective when it is received.

5.8 GOVERNING LAW. This Plan and all determinations made and actions taken pursuant hereto shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia.

5.9 SEVERABILITY. If any term or provision of this Plan or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, then the remainder of the Plan, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision hereof shall be valid and be enforced to the fullest extent permitted by applicable law.

5.10 SECTION 409A OF THE CODE.

(a) Any benefit, payment or other right provided by the Plan shall be provided or made in a manner, and at such time, in such form and subject to such election procedures (if any), as complies with the applicable requirements of Code section 409A to avoid a plan failure described in Code section 409A(a)(1), including without limitation, deferring payment until the occurrence of a specified payment event described in Code section 409A(a)(2). Notwithstanding any other provision hereof or document pertaining hereto, the Plan shall be so construed and interpreted to meet the applicable requirements of Code section 409A to avoid a plan failure described in Code section 409A(a)(1).

(b) It is specifically intended that all elections, consents and modifications thereto under the Plan will comply with the requirements of Code section 409A (including any transition or grandfather rules thereunder). The Company is authorized to adopt rules or regulations deemed necessary or appropriate in connection therewith to anticipate and/or comply the requirements of Code section 409A (including any transition or grandfather rules thereunder and to declare any election, consent or modification thereto void if non-compliant with Code section 409A.

(c) Pursuant to Section 3.01(B)(1).02 of Internal Revenue Notice 2007-86 (“Transition Relief”), the Company may permit Participants to modify their existing deferral elections previously made pursuant to the Plan to reflect new deferral elections regarding the time and form of payment of benefits under the Plan to the full extent permitted by, and in accordance with, the Transition Relief.

Page 7 of 7

EX-10.43

Exhibit 10.43

FIRST AMENDMENT

TO THE

HAMPTON ROADS BANKSHARES, INC.

EXECUTIVE SAVINGS PLAN

THIS FIRST AMENDMENT (“Amendment”) to the Hampton Roads Bankshares, Inc. Executive Savings Plan (“Plan”) made effective as of the 30th day of December 2008 by Hampton Roads Bankshares, Inc. (“Company”). All capitalized terms in this Amendment not otherwise defined shall have their respective meanings under the Plan.

WHEREAS, the Company wishes to amend and conform the written terms of the Plan to the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Code”), and

WHEREAS, the Plan has operated in good faith compliance with the requirements of Section 409A of the Code for periods starting January 1, 2005 and through the effective date of this Amendment,

NOW, THEREFORE, the Company hereby adopts this Amendment upon the following terms and conditions:

1. The definition of Change in Control in Section 1.07 shall be replaced in its entirety with the following definition:

Change in Control means (a) the date that any one person, or more than one person, acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of the Company, (b) the date any one person, or more than one person, acting as a group, acquires (or has acquired ownership during the 12 month period ending on the date of the most recent acquisition by such person) ownership of stock of the Company possessing 30% or more of the total voting power of the stock, or (c) the date a majority of the members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election.

2. The definition of Specified Employee in Section 1.20 is replaced in its entirety with the following definition:

A Specified Employee means an employee who, as of December 31 of any Plan Year, satisfies the requirements of Code Section 416(i) (without regard to Code section 416(i)(5)). Such employee will be considered a Specified Employee for purposes of the Plan for the 12-month period

commencing on the next following April 1; provided, however, that an employee will not be considered a Specified Employee unless at the time of his or her termination of employment, the Company is a public company pursuant to Code section 409A.

3. The following sentence shall be added to the end of Section 4.01:

Payment made on a date or event specified in this Plan shall be treated as made upon such date or event if it is made by the end of the calendar year in which such date or event occurs, or, if later, by the 15^th day of the third month following such date or event.

4. The following sentence shall be added to the end of Section 6.02:

The Plan termination shall comply with the applicable provisions of Section 409A of the Code.

WITNESS the signature of the undersigned officer of Hampton Roads Bankshares, Inc.

HAMPTON ROADS BANKSHARES, INC.

Date Signed

EX-10.44

Exhibit 10.44

SECOND AMENDMENT

TO THE

HAMPTON ROADS BANKSHARES, INC.

EXECUTIVE SAVINGS PLAN

THIS SECOND AMENDMENT (“Amendment”) to the Hampton Roads Bankshares, Inc. Executive Savings Plan (“Plan”) made effective as of the 30th day of December 2008 by Hampton Roads Bankshares, Inc. (“Company”). All capitalized terms in this Amendment not otherwise defined shall have their respective meanings under the Plan.

WHEREAS, the Company wishes to further amend and conform the written terms of the Plan to the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Code”), and

WHEREAS, the Plan has operated in good faith compliance with the requirements of Section 409A of the Code for periods starting January 1, 2005 and through the effective date of this Amendment,

NOW, THEREFORE, the Company hereby adopts this Amendment upon the following terms and conditions:

1. The definition of Change in Control in Section 1.07 shall be replaced in its entirety with the following definition:

The term “Change in Control” is hereby defined as the date that (i) any one person, or more than one person, acting as a group, acquires ownership of stock of Hampton Roads Bankshares, Inc. that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of Hampton Roads Bankshares, Inc., (b) during any period of twelve consecutive months, individuals who at the beginning of such period constituted the Board and any new directors, whose election by the Board or nomination for election by the Hampton Roads Bankshares, Inc.’s stockholders was approved by a vote of at least three-fourths ( ³ /4ths) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board, or (c) during any period of twelve consecutive months, (i) any one person, or more than one person, acting as a group, acquires ownership of stock of Hampton Roads Bankshares, Inc. that, together with stock held by such person or group constitutes more than 30% of the total voting power of the stock of Hampton Roads Bankshares, Inc., and (ii) individuals who at the beginning of such period constituted the Board cease in connection with such 30% change in voting stock ownership, cease to constitute a majority of the Board. Anything herein to the contrary notwithstanding, the definition of “Change in Control” shall be interpreted so as to comply with the terms of Section 409A of the Internal Revenue Code and the regulations thereunder.

[SIGNATURE PAGE FOLLOWS]

WITNESS the signature of the undersigned officer of Hampton Roads Bankshares, Inc.

HAMPTON ROADS BANKSHARES, INC.

Jack W. Gibson, Vice Chairman, President & CEO

Date Signed

EX-10.45

Exhibit 10.45

HAMPTON ROADS BANKSHARES, INC.

EXECUTIVE SAVINGS PLAN TRUST

Effective July 23, 2006

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

TABLE OF CONTENTS

Section	Page
ARTICLE I ESTABLISHMENT OF TRUST	2
ARTICLE II PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES	3
ARTICLE III TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN THE COMPANY IS INSOLVENT	4
ARTICLE IV PAYMENTS TO THE COMPANY	6
ARTICLE V INVESTMENT AUTHORITY	7
ARTICLE VI ACCOUNTING BY TRUSTEE	8
ARTICLE VII RESPONSIBILITY OF TRUSTEE	9
ARTICLE VIII COMPENSATION AND EXPENSES OF TRUSTEE	10
ARTICLE IX RESIGNATION AND REMOVAL OF TRUSTEE	11
ARTICLE X APPOINTMENT OF SUCCESSOR	12
ARTICLE XI AMENDMENT OR TERMINATION	13
ARTICLE XII MISCELLANEOUS	14
ARTICLE XIII EFFECTIVE DATE	15
ARTICLE XIV SIGNATURE PAGE	16
EXHIBIT I CHANGE IN CONTROL DEFINITION

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

This Agreement authorized by the Board of Directors of Hampton Roads Bankshares, Inc. on July 23, 2006, and made effective July 23, 2006, by and between Hampton Roads Bankshares, Inc. (the Company) and Jack W. Gibson and Donald W. Fulton, Jr., Trustee (collectively referred to as the “Trustee”).

RECITALS:

WHEREAS, the Company has adopted the Executive Savings Plan (the “Plan”);

WHEREAS, the Company has incurred or expects to incur liability under the terms of the Plan with respect to the individuals participating therein;

WHEREAS, the Company wishes to establish a trust (hereinafter called the “Trust”) and to contribute to the Trust assets that shall be held hereunder, subject to the claims of the Company’s creditors in the event of the Company’s Insolvency (as defined herein), until paid to the Plan participants, and their beneficiaries in such manner and at such times as specified in the Plan;

WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as unfunded Plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended (ERISA); and

WHEREAS, it is the intention of the Company that the assets of the Trust be comprised solely of shares of common stock of the Company to be distributed to certain Plan Participants;

NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed as of follows:

1

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

ARTICLE I

ESTABLISHMENT OF TRUST

1.01. The Company hereby deposits with the Trustee in trust $1.00, which shall become the principal of the Trust to be held, administered and disposed of by the Trustee as provided in this Trust Agreement. Capitalized terms that are not defined in this Trust, are defined in the Plan.

1.02. The Trust hereby established is revocable by the Company; it shall become irrevocable upon a Change of Control.

1.03. The Trust is intended to be a grantor trust, of which the Company is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended (the Code), and shall be construed accordingly.

1.04. The portion of the Trust principal that represents the Company Matching Contributions, and any earnings allocated to the Account of Participant shall be held separate and apart from other funds of the Company and shall be used exclusively for the uses and purposes of the Plan participants and general creditors as herein set forth. Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any asset of the Trust except for the Trust assets that are After-Tax Contributions. Rights created under the Plan and this Trust Agreement for the Company Matching Contributions and earnings allocated to a Participant’s Account shall be mere unsecured contractual rights of Plan participants and their beneficiaries against the Company and shall be subject to the claims of the Company’s general creditors under federal and state law in the event of Insolvency, as defined in Trust section 3.01.

1.05. The Company, may in its sole discretion, at any time, and from time to time, make deposits of cash or of shares of its common stock in trust with the Trustee to augment the principal to be held, administered and disposed of by Trustee as provided in this Trust Agreement. Neither the Trustee nor any of the Plan participants or beneficiaries shall have any right to compel such deposits.

2

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

ARTICLE II

PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES

2.01. The Company shall deliver to Trustee annually a schedule (the “Payment Schedule”) that indicates the number of shares payable in respect of each of the Plan participants (and their beneficiaries), that provides a formula or other instructions acceptable to the Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plan), and the time of commencement for payment of such amounts. Except as otherwise provided herein, the Trustee shall make payments to each of the Plan participants and their beneficiaries in accordance with such Payment Schedule. The Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plan and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by the Company.

2.02. The entitlement of a Plan participant or his or her beneficiaries to benefits under the Plan shall be determined by the Company or such party as it shall designate under the Plan, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plan.

2.03. The Company may make payment of benefits directly to the Plan participants or their beneficiaries as they become due under the terms of the Plan. The Company shall notify the Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to participants or their beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plan, the Company shall make the balance of each such payment as it falls due. The Trustee shall notify the Company when principal and earnings are not sufficient. In such case when the principal of the Trust, and any earnings thereon are insufficient to make payments in accordance with the terms of the Plan, the Trustee shall make payments first to those participants and beneficiaries in pay status (on a pro rata basis if necessary) and on a pro rata basis to any additional participants and beneficiaries in the order in which they become entitled to benefits.

3

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

ARTICLE III

TRUSTEE RESPONSIBILITY REGARDING PAYMENTS

TO TRUST BENEFICIARY WHEN THE COMPANY IS INSOLVENT

3.01. The Trustee shall cease payment of benefits to the Plan participants and their beneficiaries if the Company is Insolvent. The Company shall be considered “Insolvent” for purposes of this Trust Agreement if (i) the Company is unable to pay its debts as they become due, (ii) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code, or (iii) the Company (including its subsidiary bank) has its assets seized or frozen under regulatory action.

3.02. At all times during the continuance of this Trust, as provided in Trust section 1.04, the principal and income of the Trust shall be subject to claims of general creditors of the Company under federal and state law as set forth below except for Trust assets that represent the After-Tax contributions.

(a) The Board of Directors and the Chief Executive Officer of the Company shall have the duty to inform the Trustee in writing of the Company’s Insolvency. If a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent, the Trustee shall determine whether the Company is Insolvent and, pending such determination, Trustee shall discontinue payment of benefits to the Plan participants and their beneficiaries. The insolvency of any member of the controlled group (as defined in Code Section 414) of the Company, shall not in and of itself, cause the Company or any other member of the Company’s controlled group, to be deemed Insolvent.

(b) Unless the Trustee has actual knowledge of the Company’s Insolvency, or has received notice from the Company or a person claiming to be a creditor alleging that the Company is Insolvent, the Trustee shall have no duty to inquire whether the Company is Insolvent. The Trustee may in all events rely on such evidence concerning the Company’s solvency as may be furnished to the Trustee and that provides the Trustee with a reasonable basis for making a determination concerning the Company’s solvency.

(c) If at any time the Trustee has determined that the Company is Insolvent, the Trustee shall discontinue payments to the Plan participants or their beneficiaries and shall hold the assets of the Trust for the benefit of the Company’s general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of the Plan participants or their beneficiaries to pursue their rights as general creditors of the Company with respect to benefits due under the Plan or otherwise.

(d) The Trustee shall resume the payment of benefits to the Plan participants or their beneficiaries in accordance with Article II of this Trust Agreement only after the Trustee has determined that the Company is not Insolvent (or is no longer Insolvent).

3.03. Provided that there are sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant to Trust section 3.02 hereof and subsequently resumes such

4

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to the Plan participants or their beneficiaries under the terms of the Plan for the period of such discontinuance, less the aggregate amount of any payments made to the Plan participants or their beneficiaries by the Company in lieu of the payments provided for hereunder during any such period of discontinuance plus earnings on such difference.

5

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

ARTICLE IV

PAYMENTS TO THE COMPANY

Except as provided in Article III hereof, after the Trust has become irrevocable, the Company shall have no right or power to direct the Trustee to return to the Company or to divert to others any of the Trust assets before all payment of benefits have been made to the Plan participants and their beneficiaries pursuant to the terms of the Plan.

6

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

ARTICLE V

INVESTMENT AUTHORITY

The Trustee may invest only in the Company’s common stock. The Trustee may acquire the Company’s Stock through a purchase on the open market or a purchase at fair market value from a Participant or the Company. All rights associated with assets of the Trust shall be exercised by the Trustee or the person designated by the Trustee, and shall in no event be exercisable by or rest with Plan participants, except that Participants may direct how the Trustee shall vote the shares allocated to a Participant. Dividends paid on the Company’s common stock shall be reinvested by the Trustee in additional shares of common stock. The Trustee shall not sell the securities. The Trustee shall distribute the securities to a Plan participant in accordance with the provisions of the Plan.

7

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

ARTICLE VI

ACCOUNTING BY TRUSTEE

The Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including such specific records as shall be agreed upon in writing between the Company and the Trustee. Within sixty (60) days following the close of each calendar year and within thirty (30) days after the removal or resignation of the Trustee, the Trustee shall deliver to the Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be.

8

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

ARTICLE VII

RESPONSIBILITY OF TRUSTEE

7.01. The Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that the Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by the Company which is contemplated by, and in conformity with, the terms of the Plan or this Trust and is given in writing by an authorized employee of the Company. Moreover, the Trustee shall incur no liability to any person if there is a decline in the value of the securities held by the Trustee. In the event of a dispute between the Company and a party, the Trustee may apply to a court of competent jurisdiction to resolve the dispute.

7.02. If the Trustee undertakes or defends any litigation arising in connection with this Trust, other than litigation arising from actions taken by the Trustee in conflict with the terms of this Trust or as a result of the Trustee’s negligence or willful misconduct, the Company agrees to indemnify the Trustee against the Trustee’s costs, expenses and liabilities (including, without limitation, attorneys’ fees and expenses) relating thereto and to be primarily liable for such payments. If the Company does not pay such costs, expenses and liabilities in a reasonably timely manner, the Trustee may obtain payment from the Trust.

7.03. The Trustee may consult with legal counsel (who may also be counsel for the Company generally) with respect to any of its duties or obligations hereunder.

7.04. The Trustee may hire and rely on advice given by agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder.

7.05. The Trustee shall have, without exclusion, all powers conferred on trustees by applicable law, unless expressly provided otherwise herein.

7.06. Notwithstanding any powers granted to the Trustee pursuant to this Trust Agreement or applicable law, the Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Code.

9

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

ARTICLE VIII

COMPENSATION AND EXPENSES OF TRUSTEE

The Company shall pay all administrative and Trustees’ fees and expenses. If not so paid, the fees and expenses shall be paid from the Trust.

10

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

ARTICLE IX

RESIGNATION AND REMOVAL OF TRUSTEE

9.01. The Trustee may resign at any time by written notice to the Company, which shall be effective thirty (30) days after receipt of such notice unless the Company and the Trustee agree otherwise.

9.02. The Trustee may be removed by the Company on thirty (30) days notice or upon shorter notice accepted by Trustee; provided, however, that upon a Change in Control, as defined herein, the Trustee may not be removed by the Company for three (3) years without the written approval of 75% of the Plan participants and beneficiaries in interests in the Trust.

9.03. If the Trustee resigns or is removed within three (3) years of a Change in Control, as defined herein, the Company, with the written approval of 75% of the Plan participants and beneficiaries in interests in the Trust, shall select a successor trustee in accordance with the provisions of Trust section 10.02 prior to the effective date of the Trustee’s resignation or removal.

9.04. Upon resignation or removal of the Trustee and appointment of a successor trustee, all assets shall subsequently be transferred to the successor trustee. The transfer shall be completed within sixty (60) days after receipt of notice of resignation, removal or transfer, unless the Company extends the time limit.

9.05. If the Trustee resigns or is removed, a successor shall be appointed, in accordance with Article X hereof, by the effective date of resignation or removal under Trust section 9.01 or 9.02. If no such appointment has been made, the Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of the Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust.

11

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

ARTICLE X

APPOINTMENT OF SUCCESSOR

10.01. If the Trustee resigns or is removed in accordance with the provisions of Trust sections 9.01 or 9.02, the Company may appoint any third party, such as a national bank with market-capitalization of $100,000,000 or more and with trust powers under state law or other party that may validly exercise trustee powers under state law, as a successor to replace the Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the new trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the Company or the successor trustee to evidence the transfer.

10.02. If the Trustee resigns or is removed pursuant to the provisions of Trust section 9.03, the Company, with the written approval of 75% of the Plan participants and beneficiaries in interests in the Trust may appoint any third party such as a bank trust department or other party that may validly exercise trustee powers under state law as a successor trustee. The appointment of a successor Trustee shall be effective when accepted in writing by the new Trustee. The new Trustee shall have all the rights and powers of the former Trustee, including ownership rights in Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the successor Trustee to evidence the transfer.

10.03. The successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets, subject to Articles VI and VII hereof. A successor Trustee shall not be responsible for and the Company shall indemnify and defend a successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor Trustee.

12

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

ARTICLE XI

AMENDMENT OR TERMINATION

11.01. The Trust Agreement may be amended by a written instrument executed by the Trustee and the Company. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plan or shall make the Trust revocable after it has become irrevocable in accordance with Trust section 1.02.

11.02. The Trust shall not terminate until the date on which Plan participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the Plan and all administrative expenses of the Trust shall have been paid, unless sooner revoked in accordance with Trust section 1.02. Upon termination of the trust any assets remaining in the Trust shall be returned to the Company.

11.03. Upon written approval of all participants or beneficiaries entitled to payment of benefits pursuant to the terms of the Plan, the Company may terminate this Trust prior to the time all benefit payments under the Plan have been made. All assets in the Trust at termination shall be returned to the Company.

12.04. Any other provision of this Trust to the contrary notwithstanding, the Trust may not be amended by the Company for three (3) years following a Change in Control without the prior written consent of 75% of the Plan participants and beneficiaries in interests in the Trust, except to the extent necessary to satisfy any legal or regulatory requirements under federal or state law and to retain current tax status with respect to payments to the Plan participants and beneficiaries.

13

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

ARTICLE XII

MISCELLANEOUS

12.01. Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof.

12.02. Benefits payable to Plan participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process.

12.03. This Trust Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia.

14

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

ARTICLE XIII

EFFECTIVE DATE

The effective date of this Trust Agreement shall be July 23, 2006.

15

Hampton Roads Bankshares, Inc.

Executive Savings Plan Trust

Effective July 23, 2006

ARTICLE XIV

SIGNATURE PAGE

As evidence of its adoption of the Trust, the Company and the Trustee have caused this document to be executed by their duly authorized officers as of the 23^rd day of July, 2006.

HAMPTON ROADS BANKSHARES, INC.

By:

Date:

JACK W. GIBSON

By:

Date:

DONALD W. FULTON, JR.

By:

Date:

16

EX-10.47

Exhibit 10.47

FIRST AMENDMENT

TO THE HAMPTON ROADS BANKSHARES, INC.

2006 STOCK INCENTIVE PLAN

THIS FIRST AMENDMENT (“Amendment”) to the Hampton Roads Bankshares, Inc. 2006 Stock Incentive Plan (“Plan”) made effective as of the 26th day of December 2008 by Hampton Roads Bankshares, Inc. (“Company”). All capitalized terms in this Amendment not otherwise defined shall have their respective meanings under the Plan.

WHEREAS, the Company wishes to amend the Plan to provide that all nonstatutory options shall be granted at no less than fair market value on the date of grant which has been consistent with the Company’s practice since January 1, 2005,

NOW, THEREFORE, the Company hereby adopts this Amendment upon the following terms and conditions:

1. The last sentence of section 6(b) shall be replaced with the following:

The exercise price of a Nonstatutory Stock Option Award shall not be less than 100% of the Fair Market Value of the shares of Company Stock covered by the Option on the Date of Grant.

2. Section 15(f) is added as follows:

(f) No Award shall be granted, deferred, accelerated, extended, paid out or modified under the Plan in a manner that would result in the imposition of an additional tax under Section 409A of the Code upon a Participant. In the event that (i) it is reasonably determined by the Committee that, as a result of Section 409A of the Code, payments in respect of any Award under the Plan may not be made at the time contemplated by the terms of the Plan or the relevant Award agreement, as the case may be, without causing Participant holding such Award to be subject to taxation under Section 409A of the Code, the Company will make such payment on the first day that would not result in the Participant incurring any tax liability under Section 409A of the Code, and (ii) at the time of a Participant’s termination of employment with the Company, such Participant is a “specified employee” as defined in Section 409A of the Code and the deferral of the commencement of any payments or benefits otherwise payable under the Plan as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits under the Plan (without any reduction in such payments or benefits ultimately paid or provided to the Participant) until the date that is six months following the Participant’s termination of employment with the Company (or the earliest date permitted under Section 409A of the Code).

WITNESS the signature of the undersigned officer of Hampton Roads Bankshares, Inc.

HAMPTON ROADS BANKSHARES, INC.

Date Signed

EX-13.1

Exhibit 13.1

Excerpts From The 2008 Annual Report

Table of Contents

Selected Financial Data	2
Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Management’s Report on Internal Control Over Financial Reporting	28
Report of Independent Registered Public Accounting Firm	29
Consolidated Balance Sheets	30
Consolidated Statements of Income	31
Consolidated Statements of Changes in Shareholders’ Equity	32
Consolidated Statements of Cash Flows	33
Notes to Consolidated Financial Statements	34

1

Selected Financial Data

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

(Dollars in thousands except per share data)	2008			2007			2006			2005			2004
Operating Results:
Interest income	$	45,177		$	38,203		$	30,021		$	24,558		$	18,068
Interest expense		17,917			14,016			9,123			5,869			3,911
Net interest income		27,260			24,187			20,898			18,689			14,157
Provision for loan losses		1,418			1,232			180			486			926
Noninterest income		5,980			3,440			3,398			3,214			3,791
Noninterest expense		20,987			15,994			14,946			13,040			10,794
Income taxes		3,660			3,590			3,134			2,870			2,140
Income before cumulative effect of change in accounting principle		7,175			6,811			6,036			5,507			4,088
Cumulative effect of change in accounting principle, net		—			—			—			—			46
Net income	$	7,175		$	6,811		$	6,036		$	5,507		$	4,134
Per Share Data:
Basic earnings	$	0.60		$	0.67		$	0.66		$	0.68		$	0.52
Diluted earnings		0.59			0.65			0.65			0.66			0.50
Book value per common share		9.70			7.14			6.84			5.96			5.41
Tangible book value per common share		5.18			7.14			6.84			5.96			5.41
Basic weighted average shares outstanding		11,960,604			10,228,638			9,092,980			8,137,244			7,973,844
Diluted weighted average shares outstanding		12,074,725			10,431,554			9,275,788			8,407,821			8,236,169
Shares outstanding at year-end		21,777,937			10,314,899			10,251,336			8,242,822			8,059,528
Year-End Balances:
Assets	$	3,085,711		$	563,828		$	476,299		$	409,517		$	344,969
Loans		2,604,590			477,149			375,044			285,330			275,190
Investment securities		177,432			47,081			59,545			73,826			38,995
Deposits		2,296,146			431,457			363,261			327,447			275,115
Borrowings		429,588			53,000			38,000			30,500			23,000
Shareholders’ equity		344,809			73,660			70,163			49,131			43,626
Average Balances:
Assets	$	759,264		$	519,175		$	432,716		$	382,821		$	324,485
Loans		646,211			428,874			325,506			287,979			236,082
Investment securities		41,711			53,946			67,130			52,706			57,455
Deposits		562,390			389,055			333,242			302,167			260,110
Borrowings		94,101			51,336			36,968			30,944			18,734
Shareholders’ equity		94,030			71,545			57,640			44,855			41,960
Ratios:
Return on average assets		0.95	%		1.31	%		1.39	%		1.44	%		1.27	%
Return on average equity		7.63			9.52			10.47			12.28			9.85
Average equity to average assets		12.38			13.78			13.32			11.72			12.93
Allowance for loan losses to year-end loans		1.97			1.06			1.04			1.26			1.12
Net interest margin		3.89			4.95			5.20			5.26			4.71
Dividend payout ratio		73.33			64.18			75.76			52.94			63.46
Efficiency ratio		63.14			57.89			61.52			59.54			60.14

2

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

Introduction

Hampton Roads Bankshares, Inc. (the “Company”) is headquartered in Norfolk, Virginia and conducts its primary operations through its wholly-owned subsidiaries, Bank of Hampton Roads, Gateway Bank & Trust, and Shore Bank, collectively referred to as the “Banks.” Unless the context otherwise requires, the term the “Company” is also used to refer to Hampton Roads Bankshares, Inc. and its consolidated subsidiaries on a combined basis.

The Company is a financial services holding company with $3.09 billion in total assets providing a variety of community banking services in the Southeastern portion of Virginia known as South Hampton Roads, the Northeastern, Southeastern and Research Triangle regions of North Carolina, Richmond, Virginia, and the Eastern Shore of Virginia and Maryland. Through the Banks, the Company owns Shore Investments Inc., Gateway Investment Services, Inc., Gateway Insurance Services, Inc., Gateway Bank Mortgage, Inc., and Gateway Title Agency, Inc. The Company also owns Hampton Roads Investments, Inc. (“HRI”). These non-bank subsidiaries provide clients with a variety of non-deposit investment, insurance and mortgage products.

The Company acquired Shore Financial Corporation and Subsidiaries (“SFC”) on June 1, 2008 and, therefore, the financial information discussed throughout the Management Discussion and Analysis includes the operations of Shore Bank and its subsidiary, Shore Investments Inc., for the seven months ended December 31, 2008. The Company’s acquisition of Gateway Financial Holdings, Inc. and Subsidiaries (“GFH”) occurred on December 31, 2008, so the Company’s 2008 consolidated financial statements only include ending balance information thus excluding GFH’s results from operations during the year. Accordingly, the following discussion and analysis does not reflect the impact a full year of operations by the acquired companies will have on the Company.

The following commentary provides information about the major components of our results of operations and financial condition, liquidity, and capital resources. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements presented elsewhere in this Annual Report. It should also be read in conjunction with the “Caution About Forward Looking Statements” section at the end of this discussion.

Executive Overview

The year 2008 was not a normal year in the banking industry. It showed the falling domino impact of loan instruments that are used to collateralize investment instruments and then sold to various institutions. Although we did not deal in subprime loans as a matter of direct business, we still were impacted. The year began with the financial industry, not just banks, continuing to deal with the subprime fallout. The Federal Reserve continued to lower interest rates throughout the year which put a squeeze on margins, the largest contributor to our net income, as variable rate loans and investments re-priced quickly while fixed rate deposits and borrowings re-priced over a longer period of time. Finally in late summer, the impact of the decreased value of asset backed securities, the high rate of defaulted mortgagesm and a liquidity crunch blended to cause massive write-downs of securities, the takeover by the U.S. Government of its mortgage agencies FNMA and FHLMC, and the buy out or failure of many financial institutions. This brought in the U.S. Treasury to assist the Federal Reserve and other government supervisory agencies in stabilizing the economy. As we enter 2009, the financial industry is working hard to right itself.

The Company is not immune to these impacts as loan volume in nonaccrual status and subject to foreclosure risks has increased due to the GFH acquisition. However, the Company has maintained a conservative strategy; risks within its markets are diversified; net income increased over the previous year; and, most importantly, the Company and its subsidiary banks are well capitalized with enough liquidity to meet most turns in the economic market.

3

The Company’s primary source of revenue is net interest income earned by the Banks. Net interest income represents interest and fees earned from lending and investment activities, less the interest paid to fund these activities. In addition to net interest income, noninterest income is another important source of revenue for the Company. Noninterest income is derived primarily from service charges on deposits and fees earned from bank services, but with the addition of SFC and GFH, fees earned from investment, mortgage, and insurance activities will represent a more significant component of noninterest income in future periods. Other factors that impact net income are the provision for loan losses, noninterest expense, and the provision for income taxes.

The Company’s net income during the year ended December 31, 2008 was $7.18 million, representing a 5.43% increase over 2007’s net income of $6.81 million. This increase was achieved with the help of our acquisition of SFH. Shore Bank contributed $2.06 million in net income during 2008. Diluted earnings per share were $0.59 compared to $0.65 per share during 2007. Earnings per share were impacted by the increase in average shares outstanding resulting from the issuance of 2,713,425 shares in conjunction with the SFC acquisition during 2008. The Company’s tangible book value per common share at December 31, 2008 was $5.18 compared to $7.14 for 2007 with the decrease primarily resulting from goodwill and preferred stock acquired in the SFC and GFH mergers. Net income for 2006 was $6.04 million with diluted earnings per share of $0.65 and tangible book value per share of $6.84. In the third quarter of 2006, the Company raised $19.05 million in capital through a rights offering to existing shareholders and a public offering, resulting in the issuance of 1,849,200 new shares of common stock.

The increase in equity from the SFC merger transaction also explains the decrease in return on average equity experienced during 2008 to 7.63% from 9.52% in 2007 and 10.47% in 2006. Return on average assets was 0.95%, 1.31% and 1.39% for 2008, 2007, and 2006, respectively.

The Company’s 2008 results were also impacted by a decrease in its net interest margin to 3.89% from 4.95% in 2007 and 5.20% in 2006. Since September 2007, the Federal Open Market Committee has reduced the target federal funds rate by 500—525 basis points. Due to the asset sensitive nature of the Company’s balance sheet during this time, with assets such as variable rate loans repricing more quickly than liabilities such as certificates of deposit, a decreasing interest rate environment tends to cause a decline in net interest margin. While Shore Bank’s more risk neutral balance sheet mitigates the effect of interest rate swings on the Company, it contains a larger percentage of mortgage loans that historically produce lower margins. The Company manages interest rate risk associated with assets and liabilities repricing in several ways including using floors and caps on variable interest rate loans and keeping the terms on both assets and liabilities short with most maturing or repricing within five years.

Despite the continued decline in its net interest margin, the Company’s net interest income grew during 2008 to $27.26 million, representing a 12.71% increase over 2007. Net interest income benefited from the acquisition of Shore Bank and fairly strong loan growth experienced during the year.

During 2008, the Company experienced a significant increase in its balance sheet including loans and deposits, primarily resulting from the SFC and GFH acquisitions. Total assets were $3.09 billion at December 31, 2008, compared to $563.83 million at year-end 2007. At year-end 2008, Shore Bank accounted for approximately $318 million of total assets, while Gateway Bank & Trust and its related entities represented $2.20 billion of the Company’s assets on hand. Total loans increased to $2.60 billion at December 31, 2008 from $477.15 million at year-end 2007 with Shore Bank and Gateway Bank& Trust accounting for approximately $252 million and $1.82 billion, respectively, in loan balances at year-end. Deposit balances also benefited from the Company’s acquisitions during 2008 with an increase in total deposits to $2.30 billion at December 31, 2008, compared to total deposits of $431.46 million at year-end 2007. Shore Bank and Gateway Bank & Trust contributed $195 million and $1.68 billion, respectively, to year-end deposit balances.

Liquidity demands from merger related activities, organic growth within the Company, and the instability of the financial markets created an environment where liquidity management was crucial during 2008. The Company further expanded its sources of funding to include the Federal Reserve Discount Window and continued to use the brokered and national certificates of deposit markets.

4

Aggressive retail deposit pricing by our competitors continued during 2008 with certificate of deposit rates often exceeding those offered in the brokered and national markets. With the wholesale funding markets becoming more cost effective, the Company became more reliant on this funding mechanism during 2008 as an alternative to paying up for local deposits. The Company monitors its wholesale funding portfolios and policy limits exist concerning the types and amounts of this funding it may incur.

The Company’s earnings were impacted by an increase in noninterest expense and the provision for loan losses during the period. Noninterest expense was $20.99 million for the year ended December 31, 2008, compared to $15.99 million for 2007. The increase primarily related to the inclusion of Shore Bank’s operations for the seven months ended December 31, 2008, as well as integration expenses associated with the SFC and GFH acquisitions. The provision for loan losses increased to $1.42 million in 2008 compared to $1.23 million in 2007 and $180 thousand in 2006. The increase in the loan loss provision reflected the growth in the loan portfolio during 2008 and the nature of the economic environment. Nonperforming assets to total assets were 1.34% at year-end 2008 compared to 0.47% at year-end 2007. Allowance for loan losses to nonperforming assets was 124.33% at year-end 2008 compared to 190.67% at year-end 2007.

The acquisitions of Shore Bank and Gateway Bank & Trust significantly increased the Company’s loan portfolio at December 31, 2008. The Company’s long-range objective continues to be profitable growth in the loan portfolio, while its short-term focus will be on absorbing the acquired companies’ loan portfolios and managing the entire loan portfolio through the challenging economic conditions. Until the economy reverses direction, growth may be limited. Additionally, in light of current economic conditions, management remains committed to strengthening the Company through community involvement, relationships with existing customers, enhancement of the Company’s image as a community asset and management’s strengthened efforts to offer competitively-priced products, while offering high quality, personalized service.

Results of Operations

Net Interest Income

Net interest income is the difference between interest income and interest expense. The following influences may significantly impact net interest income and net interest margin:

• Variations in the volume and mix of interest earning assets and interest bearing liabilities;

• Changes in the yields earned and rates paid; and

• The level of noninterest bearing liabilities available to support earning assets.

Table 1 presents the average interest earning assets and average interest bearing liabilities, the average yields earned on such assets and rates paid on such liabilities, and the net interest margin for the indicated periods. The variance in interest income and expense caused by differences in average balances and rates is shown in Table 2.

2008 Compared to 2007

Net interest income was $27.26 million during the year ended December 31, 2008, representing an increase of $3.07 million or 12.71% as compared with 2007. The 2008 increase in net interest income resulted from growth in interest earning assets during the period, primarily due to the Shore Bank merger. Additionally, the Company benefited from an 83 basis point decrease in the average rate paid on interest bearing liabilities from 4.11% in 2007 to 3.28% in 2008. Net interest income was negatively affected by a decline in the average yield on interest earning assets from 7.82% in 2007 to 6.45% in 2008. These changes in average yield and rate produced a net interest spread which compressed from 3.71% in 2007 to 3.17% in 2008.

5

The net interest margin, which is calculated by expressing net interest income as a percentage of average interest earning assets, is an indicator of effectiveness in generating income from earning assets. The Company’s net interest margin was 3.89% in 2008, compared to 4.95% in 2007, and 5.20% in 2006. The Federal Open Market Committee’s 500—525 basis point reduction in the target federal funds rate since September 2007 put continued downward pressure on interest rates which negatively impacted the Company’s asset sensitive balance sheet, resulting in the net interest margin decline.

The Company’s interest earning assets consist primarily of loans, investment securities, interest-bearing deposits in other banks, and overnight funds sold. Interest income on loans, including fees, increased $7.60 million to $43.20 million for the year ended December 31, 2008, compared to the same time period during 2007. This increase resulted from a $217.34 million increase in average loans and was partially offset by a 161 basis point decline in the average yield on loans. The merger valuation adjustment of Shore Bank’s loan portfolio, which is being amortized over approximately thirty-eight months beginning in June 2008, reduced interest income on loans by $221 thousand in 2008. Interest income on investment securities decreased $639 thousand to $1.68 million for the year ended December 31, 2008 compared to the same time period during 2007. The Company experienced a $12.24 million decline in average investment securities, primarily resulting from maturing investments used to fund other liquidity needs and the existence of a relatively unfavorable investment security market during the year. Interest income on interest-bearing deposits in other banks and overnight funds sold had a nominal impact on the Company’s interest income during 2008 and 2007.

The Company’s interest bearing liabilities consist of deposit accounts and borrowings. Interest expense from deposits increased $2.44 million to $14.09 million for the year ended December 31, 2008 compared to the same time period during 2007. This increase resulted from the $161.98 million increase in average interest bearing deposits offset by a 90 basis point decrease in the average interest rate on deposit liabilities. The merger valuation adjustment of certain Shore Bank deposits, being amortized over eleven months beginning June 2008, decreased interest expense on deposits by $341 thousand in 2008. Interest expense from borrowings, which consists of FHLB borrowings, other borrowings and overnight funds purchased increased $1.47 million to $3.83 million for the year ended December 31, 2008 compared to the same time period during 2007. The $42.77 million increase in average borrowings netted against the 54 basis point decrease in the average interest rate on borrowings produced this result. The merger valuation adjustment of Shore Bank’s borrowings, being amortized over fourteen months beginning in June 2008, decreased interest expense on borrowings by $173 thousand in 2008.

2007 Compared to 2006

Net interest income increased 15.74% in 2007 to $24.19 million, or $3.29 million over the 2006 total. The increase in net interest income during 2007 was attained by strong increases in the average balance of interest earning assets, most notably in average loans. Interest rates also were a factor in net interest income and the net interest margin in 2007. The average yield on interest earning assets increased from 7.47% in 2006 to 7.82% in 2007 and the average rate paid on interest bearing liabilities increased from 3.37% in 2006 to 4.11% in 2007. These changes in average yield and rate produced a net interest spread which compressed from 4.10% in 2006 to 3.71% in 2007.

The Company’s net interest margin was 4.95% in 2007, as compared to 5.20% in 2006. The net interest margin decreased in 2007 as a result of a declining rate environment. Interest income from loans, including loan fees, rose to $35.60 million for the year 2007, an increase of $8.78 million over 2006. During 2007, average loans increased $103.37 million, or 31.76%, while the average interest yield increased 6 basis points. New loan production was strong throughout 2007. At December 31, 2007, approximately 54.43% of the loan portfolio consisted of variable rate loans, compared with 49.73% at December 31, 2006.

Interest income from investment securities decreased $405 thousand from 2006 to 2007. This decrease is related to a decrease in average investment securities of $13.18 million partially offset by an increase in the average interest yield of 24 basis points. As investments matured during 2007, the proceeds were used to fund loan growth.

6

A shift in the mix of funding sources was a factor in the Company’s net interest margin in 2007. Average noninterest bearing demand deposits made up only 25.53% of the average deposit portfolio in 2007 compared to 29.97% in 2006. Time deposits, a higher cost funding source, made up 43.41% of the average deposit portfolio in 2007 compared to 35.09% in 2006. Savings deposits, including the premium savings account product, made up 20.56% of the average deposit portfolio in 2007 compared to 21.10% in 2006. The Company also increased rates on deposit accounts in order to attract deposits to fund loan growth. Interest expense on deposits increased $4.03 million from 2006 to 2007 as average interest bearing deposits increased $56.38 million or 24.06% and the average rate paid on interest bearing deposits increased 75 basis points. Interest on borrowings increased $865 thousand from 2006 to 2007 resulting from an increase in average borrowings of $14.37 million and a 56 basis point increase in the average rate paid on borrowings.

7

Table 1: Average Balance Sheet and Net Interest Margin Analysis

	2008							2007							2006
(In thousands)	Average Balance			Interest Income/ Expense		Average Yield/ Rate		Average Balance			Interest Income/ Expense		Average Yield/ Rate		Average Balance			Interest Income/ Expense		Average Yield/ Rate
Assets:
Interest earning assets
Loans	$	646,211		$	43,201	6.69	%	$	428,874		$	35,604	8.30	%	$	325,506		$	26,827	8.24	%
Investment securities		41,711			1,677	4.02			53,946			2,316	4.29			67,130			2,721	4.05
Interest-bearing deposits in other banks		9,632			246	2.55			4,870			248	5.09			4,761			244	5.12
Overnight funds sold		3,030			53	1.75			691			35	5.07			4,558			229	5.02
Total interest earning assets		700,584			45,177	6.45			488,381			38,203	7.82			401,955			30,021	7.47
Noninterest earning assets
Cash and due from banks		17,218							15,907							16,194
Premises and equipment		19,398							11,961							11,808
Other assets		29,356							7,354							6,527
Less: Allowance for loan losses		(7,292	)						(4,428	)						(3,768	)
Total assets	$	759,264						$	519,175						$	432,716
Liabilities and Shareholders’ Equity:
Interest bearing liabilities
Interest bearing demand	$	81,014		$	1,030	1.27	%	$	40,863		$	678	1.66	%	$	46,132		$	522	1.13	%
Savings deposits		88,559			1,741	1.97			79,994			2,866	3.58			70,315			2,180	3.10
Time deposits		282,150			11,321	4.01			168,886			8,113	4.80			116,918			4,927	4.21
Borrowings		94,101			3,825	4.06			51,336			2,359	4.60			36,968			1,494	4.04
Total interest bearing liabilities		545,824			17,917	3.28			341,079			14,016	4.11			270,333			9,123	3.37
Noninterest bearing liabilities
Demand deposits		110,667							99,312							99,877
Other liabilities		8,743							7,239							4,866
Shareholders’ equity		94,030							71,545							57,640
Total liabilities and shareholders’ equity	$	759,264						$	519,175						$	432,716
Net interest income				$	27,260						$	24,187						$	20,898
Net interest spread						3.17	%						3.71	%						4.10	%
Net interest margin						3.89	%						4.95	%						5.20	%

Note: Interest income from loans included fees of $816,736 in 2008, $1,414,086 in 2007, and $1,359,262 in 2006. Average nonaccrual loans are not material and are included in average loans above.

Table 2: Effect of Changes in Rate and Volume on Net Interest Income

	2008 Compared to 2007									2007 Compared to 2006									2006 Compared to 2005
(In thousands)	Interest Income/ Expense Variance			Variance Attributable to						Interest Income/ Expense Variance			Variance Attributable to						Interest Income/ Expense Variance			Variance Attributable to
				Rate			Volume						Rate			Volume						Rate		Volume
Interest Earning Assets:
Loans	$	7,597		$	(4,741	)	$	12,338		$	8,777		$	197		$	8,580		$	4,485		$	1,451	$	3,034
Investment securities		(639	)		(140	)		(499	)		(405	)		175			(580	)		1,001			470		531
Interest-bearing deposits in other banks		(2	)		1			(3	)		4			(2	)		6			(2	)		4		(6	)
Overnight funds sold		18			(4	)		22			(194	)		4			(198	)		(21	)		102		(123	)
Total interest earning assets	$	6,974		$	(4,884	)	$	11,858		$	8,182		$	374		$	7,808		$	5,463		$	2,027	$	3,436
Interest Bearing Liabilities:
Deposits	$	2,435		$	(1,636	)	$	4,071		$	4,028		$	1,967		$	2,061		$	2,763		$	1,708	$	1,055
Borrowings		1,466			(236	)		1,702			865			226			639			491			275		216
Total interest bearing liabilities		3,901			(1,872	)		5,773			4,893			2,193			2,700			3,254			1,983		1,271
Net interest income	$	3,073		$	(3,012	)	$	6,085		$	3,289		$	(1,819	)	$	5,108		$	2,209		$	44	$	2,165

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 the change in each.

8

Noninterest Income

2008 Compared to 2007

As shown in Table 3, the Company reported an increase in total noninterest income of $2.54 million, or 73.84%, in 2008 over 2007. Noninterest income comprised 11.69% of total revenue in 2008, 8.26% in 2007 and 10.17% in 2006.

The Company’s primary source of noninterest income is service charges on deposit accounts which increased $1.38 million, or 69.29%, to $3.38 million for the year ended December 31, 2008 compared to the same period in 2007. During the first and third quarters of 2008, the Company sold investment securities available-for-sale and recorded a gain of $457 thousand. Gain on sale of premises and equipment primarily consists of a gain recorded on the sale of a piece of property originally intended for expansion prior to moving the corporate headquarters to downtown. During 2008, equity securities originally owned by SFH were deemed to be other-than-temporarily impaired and an impairment loss of $561 thousand was recognized through noninterest income. Other service charges and fees increased $753 thousand, or 52.55%, during 2008 compared 2007. Contributing to this increase was a gain from the sale of the Company’s credit card portfolio as well as the introduction of a non sufficient funds (“NSF”) protection product that generates fees in return for honoring NSF checks up to a predetermined limit. The addition of Shore Bank represented $1.22 million and $937 thousand of the increase to service charges on deposit accounts and other service chares and fees, respectively.

2007 Compared to 2006

The Company’s noninterest income increased $42 thousand, or 1.24%, in 2007 over 2006. Service charges on deposit accounts increased 6.51% from 2006 to 2007. This increase was due to an increase in NSF fees and service charges on commercial checking accounts. Other service charges and fees decreased $91 thousand or 5.97% from 2006 to 2007 due primarily to equity method losses on the Company’s investment in a financial services equity fund and decreases in the commission income earned by the Company’s investment services subsidiary, HRI.

Table 3: Noninterest Income

December 31,								2008 Compared to 2007					2007 Compared to 2006
(In thousands)	2008			2007		2006		Amount			%		Amount			%
Service charges on deposit accounts	$	3,379		$	1,996	$	1,874	$	1,383		69.29	%	$	122		6.51	%
Gain on sale of investment securities available-for-sale		457			—		—		457		—			—		—
Gain on sale of premises and equipment		519			11		—		508		4618.18			11		—
Impairment of securities		(561	)		—		—		(561	)	—			—		—
Other service charges and fees		2,186			1,433		1,524		753		52.55			(91	)	(5.97	)
Total noninterest income	$	5,980		$	3,440	$	3,398	$	2,540		73.84	%	$	42		1.24	%

Noninterest Expense

2008 Compared to 2007

Noninterest expense represents the overhead expenses of the Company. One of the core operating principles of management continues to be the careful monitoring and control of these expenses. The efficiency ratio, calculated by dividing noninterest expense by the sum of net interest income and noninterest income, was 63.14% in 2008 compared to 57.89% in 2007 and 61.52% in 2006. The addition of Shore Bank and related merger integration costs impacted the Company’s efficiency ratio during 2008.

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As shown in Table 4, total noninterest expense increased $4.99 million, or 31.22%, during the year ended December 31, 2008 compared to the same period of 2007, primarily resulting from the addition of Shore Bank in June which contributed $5.29 million in noninterest expense during the year. The change in noninterest expense included a 35.55% increase in occupancy expense which resulted from the opening of the Company’s new branch location in the Edinburgh section of Chesapeake, the relocation of Shore Bank’s Cape Charles and Salisbury, Maryland locations, and expenses related to Shore Bank’s operations since the acquisition in June 2008. Salaries and employee benefits increased $1.56 million to $11.52 million during 2008 compared with the same period in 2007, primarily related to the addition of Shore Bank’s employee costs. Data processing expense realized an increase of $577 thousand for the year compared to 2007, resulting from an upgrade to imaged file capture cash letter processing and the addition of Shore Bank for seven months of 2008. All other noninterest expenses posted an increase of 60.11% to $6.02 million for the year ended December 31, 2008 compared to the same period of 2007. The increase in all other noninterest expense categories resulted from an increase in FDIC assessment of $220 thousand and other expenses relating to the addition of Shore Bank during the year.

Table 4: Noninterest Expense

December 31,							2008 Compared to 2007				2007 Compared to 2006
(In thousands)	2008		2007		2006		Amount		%		Amount			%
Salaries and employee benefits	$	11,518	$	9,954	$	9,106	$	1,564	15.71	%	$	848		9.31	%
Occupancy		2,261		1,668		1,678		593	35.55			(10	)	(0.60	)
Data processing		1,189		612		598		577	94.28			14		2.34
Directors’ and regional board fees		443		307		284		136	44.30			23		8.10
Bank franchise tax		621		464		280		157	33.84			184		65.71
Equipment		663		343		304		320	93.29			39		12.83
Professional fees		383		279		367		104	37.28			(88	)	(23.98	)
Telephone and postage		481		305		294		176	57.70			11		3.74
ATM and VISA Check Card		551		500		423		51	10.20			77		18.20
Advertising and marketing		412		326		481		86	26.38			(155	)	(32.22	)
FDIC assessment		262		42		39		220	523.81			3		7.69
Other		2,203		1,194		1,092		1,009	84.51			102		9.34
Total noninterest expense	$	20,987	$	15,994	$	14,946	$	4,993	31.22	%	$	1,048		7.01	%

2007 Compared to 2006

Noninterest expense increased $1.05 million, or 7.01%, for the year ended December 31, 2007 to $15.99 million, compared to $14.95 million in 2006. Salaries and employee benefits accounted for the largest portion of noninterest expense during each of the years in the three-year period ended December 31, 2007. During 2007, salaries and benefits were $9.95 million, an increase of $848 thousand over 2006. This increase was driven by annual incentive increases and an increase in the number of full-time equivalent employees, including one executive officer.

Occupancy expense decreased $10 thousand for the year ended December 31, 2007 to $1.67 million. This decrease was primarily due to a decrease in building maintenance expense netted against an increase in rent expense.

Data processing expense increased $14 thousand, or 2.34%, to $612 thousand from 2006 to 2007. This increase is due to costs associated with improvements made to the online banking product and implementation of deposit capture in the branches.

All other expenses combined to cause an increase of $196 thousand from 2006 to 2007. The largest change occurred in the bank franchise tax category which increased $184 thousand from 2006 to 2007 as a result of higher Bank equity after the rights and public offerings in 2006.

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Provision for Income Taxes

Income tax expense for 2008, 2007, and 2006 was $3.66 million, $3.59 million, and $3.13 million, respectively. The Company’s effective tax rate for the years ended December 31, 2008, 2007, and 2006 was 33.78%, 34.52% and 34.18%, respectively, and differed from the statutory rate of 34.23% in 2008, 34.18% in 2007 and 34.00% in 2006 primarily due to the tax impact of interest and dividends derived from certain investment securities and nondeductible expenses.

Financial Condition

Loans

As a holding company of multiple community banks, the Company has a primary objective of meeting the business and consumer credit needs within its markets where standards of profitability, client relationships and credit quality can be met. As shown in Table 5, the overall loan portfolio grew $2.13 billion, or 445.87%, from year-end 2007 to year-end 2008. The growth primarily resulted from the acquisitions of Shore Bank, with $252.07 million in loans at December 31, 2008, and Gateway Bank and Trust, with $1.84 billion in loans at December 31, 2008.

Table 5: Loans by Classification

December 31,	2008					2007					2006					2005					2004
(In thousands)	Balance			%		Balance			%		Balance			%		Balance			%		Balance			%
Loan Classification:
Commercial	$	451,426		17.33	%	$	109,783		23.01	%	$	72,133		19.23	%	$	60,972		21.37	%	$	58,501		21.26	%
Construction		897,288		34.45			165,469		34.68			116,812		31.15			85,205		29.86			73,508		26.71
Real estate - commercial mortgage		673,351		25.85			151,601		31.77			140,260		37.40			104,313		36.56			108,314		39.36
Real estate - residential mortgage		533,824		20.50			38,523		8.07			25,523		6.81			20,011		7.01			17,900		6.50
Installment loans to individuals		50,085		1.92			11,976		2.51			20,599		5.49			15,107		5.30			17,251		6.27
Deferred loan fees and related costs		(1,384	)	(0.05	)		(203	)	(0.04	)		(283	)	(0.08	)		(278	)	(0.10	)		(284	)	(0.10	)
Total loans	$	2,604,590		100.00	%	$	477,149		100.00	%	$	375,044		100.00	%	$	285,330		100.00	%	$	275,190		100.00	%

Commercial loans consist of loans to businesses which typically are not collateralized by real estate. Generally the purpose of commercial loans is for the financing of accounts receivable, inventory, or equipment and machinery. The commercial loan portfolio increased $341.64 million from the 2007 year-end balance of $109.78 million to the 2008 year-end balance of $451.43 million. Shore Bank and Gateway Bank and Trust represented $19.56 million and $334.58 million, respectively, of this loan category at year-end. The commercial loan category grew 52.20% from year-end 2006 to year-end 2007.

Construction and development loans increased $731.82 million from the year-end 2007 balance of $165.47 million to the year-end 2008 balance of $897.29 million. Shore Bank and Gateway Bank and Trust represented $40.48 million and $693.43 million, respectively, of balances outstanding at year-end. Construction and development loans are made to individuals and businesses for the purpose of construction of single family residential properties, multi-family properties, and commercial projects, as well as the development of residential neighborhoods and commercial office parks. The construction loan category grew 41.65% from year-end 2006 to year-end 2007.

The Company makes real estate-commercial mortgage loans for the purchase and re-financing of owner occupied commercial properties as well as non-owner occupied income producing properties. These loans are secured by various types of commercial real estate including office, retail, warehouse, industrial, storage facilities and other non-residential types of properties. The real estate-commercial mortgage loan portfolio increased $521.75 million from the 2007 year-end balance of $151.60 million to the 2008 year-end balance of $673.35 million. Shore Bank and Gateway Bank and Trust represented $45.34 million and $445.78 million, respectively, of year-end balances in this category. The real estate-commercial mortgage loan category increased 8.09% from year-end 2006 to year-end 2007.

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The real estate-residential mortgage portfolio includes first and second mortgage loans, home equity lines of credit, and other term loans secured by first and second mortgages. Mortgage loans held for sale of $5.06 million are included in this category at December 31, 2008. First mortgage loans are generally for the purchase of permanent residences, second homes, or residential investment property. Second mortgages and home equity loans are generally for personal, family, and household purposes such as home improvements, major purchases, education, and other personal needs. The Bank of Hampton Roads and Gateway Bank and Trust refer a substantial portion of their residential real estate business to their mortgage corporation affiliate, Tidewater Home Funding, and their subsidiary, Gateway Bank Mortgage, Inc. Historically, Shore Bank has typically retained its nonconforming residential real estate mortgage products, but does operate a mortgage banking division in which it refers longer-term, fixed rate, conforming mortgages on a pre-sold basis. The real estate-residential mortgage loan portfolio increased $495.30 million from the 2007 year-end balance of $38.52 million to the 2008 year-end balance of $533.82 million. Shore Bank and Gateway Bank and Trust accounted for the majority of this growth with $140.46 million and $335.55 million, respectively, at year-end. The real estate-residential mortgage loan category increased 50.93% from year-end 2006 to year-end 2007.

Installment loans to individuals are made on a regular basis for personal, family, and general household purposes. More specifically, the Company makes automobile loans, home improvement loans, loans for vacations and debt consolidation loans. The installment loan portfolio increased $38.11 million from the 2007 year-end balance of $11.98 million to the 2008 year-end balance of $50.09 million. Shore Bank and Gateway Bank and Trust represented $6.08 million and $19.01 million, respectively, of this increase. The installment loan category decreased 41.86% from year-end 2006 to year-end 2007.

The Company’s specialization in construction and development lending has resulted in a loan concentration, defined as 10.00% of the total loan portfolio, in loans to real estate developers. As of year-end 2008, the Company had $897.29 million, or 34.45% of total loans, in loans outstanding to finance construction and development. These loans are collateralized by the underlying real estate.

The acquisitions of Shore Bank and Gateway Bank and Trust significantly increased the Company’s loan portfolio at December 31, 2008. The Company’s long-range objective continues to be profitable growth in the loan portfolio, while its short-term focus will be on absorbing the acquired companies’ loan portfolios and managing the entire loan portfolio through the current challenging economic conditions. Additionally, management remains committed to strengthening the Company through community involvement, relationships with existing customers, enhancement of the Company’s image as a community asset, and management’s strengthened efforts to offer competitively-priced products, while offering high quality, personalized service. Additionally, the Company’s prudent business practices and internal guidelines and underwriting standards will continue to be followed in making lending decisions in order to manage exposure to loan losses.

Table 6 sets forth the maturity periods of the Company’s loan portfolio as of December 31, 2008. Demand loans are reported as due within one year. Loans are included in the period in which they contractually mature. Variable rate loans with floors are considered fixed rate are considered fixed rate loans for the purpose of this report once the floors have been reached. Since the majority of the Company’s loan portfolio is short-term the Company can re-price its portfolio frequently to adjust the portfolio to current market rates.

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Table 6: Loan Maturities Schedule

December 31, 2008
(In thousands)	Commercial		Construction		R/E Commercial		R/E Residential		Installment		Total
Variable Rate:
Within 1 year	$	86,758	$	310,836	$	96,168	$	159,431	$	8,784	$	661,977
1 to 5 years		7,998		12,649		40,077		63,230		815		124,769
After 5 years		1,502		15,157		16,969		101,804		250		135,682
Total variable rate	$	96,258	$	338,642	$	153,214	$	324,465	$	9,849	$	922,428
Fixed Rate:
Within 1 year	$	168,433	$	437,403	$	144,473	$	52,209	$	8,636	$	811,154
1 to 5 years		169,884		105,435		329,835		104,415		30,424		739,993
After 5 years		16,851		15,808		45,829		52,735		1,176		132,399
Total fixed rate	$	355,168	$	558,646	$	520,137	$	209,359	$	40,236	$	1,683,546
Total maturities	$	451,426	$	897,288	$	673,351	$	533,824	$	50,085	$	2,605,974

Non-Performing Assets

Total non-performing assets were $41.20 million, or 1.34% of total assets at year-end 2008, as compared to $2.64 million, or 0.47% of total assets at year-end 2007 and $1.63 million, or 0.34% of total assets at year-end 2006. Management classifies non-performing assets as those loans in nonaccrual status, those loans on which payments have been delinquent 90 days or more, but are still accruing interest, and real estate acquired in settlement of loans. Management closely reviews the composition of non-performing assets and related collateral values.

Loans categorized as 90 days or more past due, but still accruing interest, were $3.22 million and $852 thousand at December 31, 2008 and 2007, respectively. The Company did not have any loans categorized as 90 days or more past due at December 31, 2006.

Nonaccrual loans were $32.89 million at December 31, 2008 compared to $1.79 million and $1.63 million at December 31, 2007 and 2006, respectively. As a general rule, loans are placed in nonaccrual status when principal or interest is 90 days or more past due, or when management deems collection of all principal and interest doubtful. Had income on nonaccrual loans been recorded under original terms, $98,586, $164,006, and $153,128 of additional interest income would have been recorded in 2008, 2007, and 2006, respectively. There were no interest payments recorded in 2008 as interest income for nonaccrual loans.

The Company had $5.09 million of real estate acquired in settlement of loans at December 31, 2008, while it did not have any such real estate at year-end 2007 and 2006.

Allowance for Loan Losses and Provision for Loan Losses

The Company continuously reviews its loan portfolio and maintains an allowance for loan losses sufficient to absorb incurred losses inherent in the portfolio. In addition to the review of credit quality through ongoing credit review processes, the Company constructs a comprehensive allowance analysis for its loan portfolio at least quarterly. This analysis includes two basic elements: specific allowances for individual loans, and general allowances for loan pools which factor in historical loan loss experience for the Company, loan portfolio growth and trends, and economic conditions.

As part of the loan loss reserve methodology, loans are categorized into one of five pools: commercial, construction, commercial real estate, residential real estate, and consumer installment. These categories are further subdivided by assigned asset quality. Loss factors are calculated using the above mentioned qualitative data and then are applied to each of the loan pools to determine a reserve level for each of the five pools of loans. In addition, special allocations may be assigned to nonaccrual or other problem credits.

After considering these factors, the allowance for loan losses was $51.22 million, or 1.97% of outstanding loans at year-end 2008. This compares to an allowance of $5.04 million, or 1.06% of total loans and $3.91 million, or 1.04% of total loans at year-end 2007 and 2006, respectively, as seen in

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Table 7. At present, management believes the allowance for loan losses is commensurate with the risk existing in the Company’s loan portfolio. However, the allowance is subject to regulatory examinations and determination as to adequacy, which may take into account such factors as the methodology used to calculate the allowance and the size of the allowance in comparison to peer banks identified by regulatory agencies. Such agencies may require the Company to recognize additions to the allowance for loan losses based on their judgments about information available at the time of their examinations.

The Company’s provision for loan losses in 2008 was $1.42 million compared to $1.23 million in 2007 and $180 thousand in 2006. The increased provision for loan losses during 2007 was attributable to the growth in the loan portfolio and the current economic environment. Additionally, during 2006, recoveries on loans exceeded charge-offs, which resulted in a lower provision for loan losses that year. Management will continue to adjust the allowance for loan losses in 2009 as the portfolio risks dictate. In addition, any new initiatives the U.S. government implements that may offer relief to the Company’s borrowers will be reviewed.

Table 7: Allowance for Loan Losses Analysis

December 31,
(In thousands)	2008			2007			2006			2005			2004
Allowance for Loan Losses:
Balance at beginning of year	$	5,043		$	3,911		$	3,597		$	3,071		$	2,948
Acquired through Shore Bank merger		2,932			—			—			—			—
Acquired through Gateway Bank & Trust merger		42,060			—			—			—			—
Charge-offs:
Commercial		(37	)		—			—			(24	)		(845	)
Construction		—			(91	)		—			—			—
Real estate - commercial mortgage		—			—			—			—			—
Real estate - residential mortgage		(157	)		—			—			—			—
Installment loans to individuals		(143	)		(18	)		(59	)		(75	)		(95	)
Total charge-offs		(337	)		(109	)		(59	)		(99	)		(940	)
Recoveries:
Commercial		—			—			166			119			110
Construction		4			—			—			—			—
Real estate - commercial mortgage		—			—			—			—			—
Real estate - residential mortgage		—			—			—			—			—
Installment loans to individuals		98			9			27			20			27
Total recoveries		102			9			193			139			137
Net (charge-offs) recoveries		(235	)		(100	)		134			40			(803	)
Provision for loan losses		1,418			1,232			180			486			926
Balance at end of year	$	51,218		$	5,043		$	3,911		$	3,597		$	3,071
Allowance for loan losses to year-end loans		1.97	%		1.06	%		1.04	%		1.26	%		1.12	%
Ratio of net (charge-offs) recoveries to average loans		(0.04	)%		(0.02	)%		0.04	%		0.01	%		(0.34	)%

The Company has allocated the allowance for loan losses to the categories as shown in Table 8. Notwithstanding these allocations, the entire allowance for loan losses is available to absorb charge-offs in any category of loan.

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Table 8: Allocation of Allowance for Loan Losses

December 31,
(In thousands)	2008		2007		2006		2005		2004
Commercial	$	10,374	$	1,447	$	1,058	$	1,068	$	1,040
Construction		18,529		1,522		993		767		588
Real estate - commercial mortgage		10,959		1,395		1,192		978		961
Real estate - residential mortgage		8,009		264		160		130		118
Installment loans to individuals		506		166		290		307		310
Unallocated		2,841		249		218		347		54
Total allowance for loan losses	$	51,218	$	5,043	$	3,911	$	3,597	$	3,071

Investment Securities and Overnight Funds Sold

The Company’s investment portfolio primarily consists of available-for-sale U.S. Agency securities. At year-end 2008, the estimated market value of available-for-sale investment securities held by the Company was $149.64 million, an increase of 253.11% over the $42.38 million at year-end 2007. This increase resulted primarily from the acquisitions of Shore Bank and Gateway Bank and Trust, accounting for $11.56 million and $115.89 million, respectively, of available for sale securities at December 31, 2008. At year-end 2007, investment securities available-for-sale decreased 23.74% to $42.38 million from $55.57 million at year-end 2006. The 2007 decrease resulted from the maturity of investment securities with proceeds of $15.17 million, netted against the purchase of investment securities with a cost of $1.24 million, the change in unrealized gains and losses and unamortized premiums/unaccreted discounts on the remaining securities. As securities matured during 2007 and 2008, the proceeds were used to fund loan growth and other liquidity needs to the extent that they were not replaced to fulfill pledging requirements.

Table 9 displays the contractual maturities and weighted average yields from investment securities at year-end 2008. Actual maturities may differ from contractual maturities because certain issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

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Table 9: Investment Maturities and Yields

December 31, 2008 (In thousands)	Amortized Cost		Market Value		Weighted Average Yield
Maturities:
U.S. agency securities:
Within 1 year	$	16,023	$	16,256	3.97	%
After 1 year, but within 5 years		5,020		5,202	4.62
After 5 years but within 10 years		3,541		3,541	5.44
Total U.S. agency securities		24,584		24,999	4.32
State and municipal securities
Within 1 year		454		453	3.75
After 1 year, but within 5 years		4,185		4,213	4.84
After 5 years but within 10 years		3,398		3,406	5.35
After 10 years		10,149		10,145	5.95
Total state and municipal securities		18,186		18,217	5.53
Mortgage-backed securities
After 1 year, but within 5 years		747		755	4.49
After 5 years, but within 10 years		336		355	4.50
After 10 years		94,119		94,138	5.50
Total mortgage-backed securities		95,202		95,248	5.49
Corporate debt securities
Within 1 year		685		685	3.28
After 1 year, but within 5 years		4,408		4,408	5.44
Total corporate debt securities		5,093		5,093	5.15
Equity securities		6,747		6,080	—
Total investment securities available-for-sale	$	149,812	$	149,637	5.04	%

The Company’s investment portfolio serves as a source of liquidity to fund future loan growth and to meet the necessary collateral requirements of the State Treasury Department, Federal Reserve Bank (“FRB”), and Federal Home Loan Bank (“FHLB”). As part of the Company’s asset/liability management policy, management has invested in high quality securities with varying maturity dates which reduces the impact of changes in interest rates.

The Company does not use derivatives or other off-balance sheet transactions, such as futures contracts, forward obligations, interest rate swaps, or options.

Overnight funds sold are temporary investments used for daily cash management purposes, as well as management of short-term interest rate opportunities and interest rate risk, and as a result, daily balances vary. As of year-end 2008, overnight funds sold were $510 thousand compared to $183 thousand as of year-end 2007, with the increase primarily resulting from the SFC and GFH acquisitions during 2008. Overnight funds are comprised of federal funds sold and high quality money market instruments consisting of short-term debt securities that are U.S. Government issued or guaranteed.

Deposits

Deposits are the most significant source of the Company’s funds for use in lending and general business purposes. The Company’s balance sheet growth is largely determined by the availability of deposits in its markets, the cost of attracting the deposits, and the prospects of profitably utilizing the available deposits by increasing the loan or investment portfolios. In 2008, average deposits increased $173.33 million, or 44.55%, to a new high of $562.39 million, primarily resulting from the addition of Shore Bank and organic growth at the Bank of Hampton Roads. This increase was a continuation of the growth experienced in 2007 of $55.81 million, or 16.75%, to $389.06 million.

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See Table 10 for a comparison of year-end deposits by classification for the previous three years. Total deposits at December 31, 2008 increased $1.86 billion, or 432.18%, to $2.30 billion as compared to year-end 2007 total deposits of $431.46 million. Shore Bank and Gateway Bank and Trust accounted for $195.36 million and $1.68 billion, respectively, of the year-end 2008 balances. Year-end 2007 total deposits grew $68.20 million, or 18.77%, to $431.46 million as compared to year-end 2006 total deposits of $363.26 million.

In addition to the affect of acquiring Shore Bank and Gateway Bank & Trust, the Company has experienced a shift in the composition of deposits in recent years resulting from the strong competition for deposit accounts within the local market. During 2008, noninterest bearing demand deposits increased $140.26 million to $240.81 million, interest bearing demand deposits increased $643.71 million to $684.00 million, and savings accounts increased $35.91 million to $118.00 million. Time deposits with balances less than $100,000 increased $743.95 million, or 647.86%, during 2008 over the 2007 balance of $114.83 million, while time deposits with balances of $100,000 or more increased $300.86 million, or 321.16%, during 2008 over the 2007 balance of $93.68 million. The increase in total time deposits resulted from the two acquisitions and the Company’s continued effort to remain competitive in its local markets. During 2007 and 2008, the Company also used the national certificate of deposit market by posting certificate of deposit rates on a rate board viewed on-line by registered depositors nation-wide and acquired funds through the brokered certificate of deposit market. Using these funding mechanisms, the Company can better control the type and amount of deposits generated and the interest rates paid. Due to strong local competition for deposits, the deposits generated via the brokered and national markets are frequently obtained at lower interest rates than local deposits of similar terms. While the Company incurs a broker fee using the brokered market, it communicates directly with the depositors and does not pay a fee to a broker to obtain the national rate board certificates of deposit funds. The Company had $405.57 million and $5.00 million in brokered funds as of December 31, 2008 and 2007, respectively.

Table 10: Deposits by Classification

December 31,	2008				2007				2006
(In thousands)	Balance		%		Balance		%		Balance		%
Deposit Classifications:
Noninterest bearing demand	$	240,813	10.49	%	$	100,553	23.31	%	$	97,559	26.87	%
Interest bearing demand		684,009	29.79			40,299	9.34			42,486	11.70
Savings		118,001	5.14			82,093	19.03			73,831	20.32
Time deposits less than $100,000		858,787	37.40			114,833	26.62			76,757	21.13
Time deposits $100,000 or more		394,536	17.18			93,679	21.71			72,628	19.99
Total deposits	$	2,296,146	100.00	%	$	431,457	100.00	%	$	363,261	100.00	%

The Company will continue funding assets with deposit liability accounts and focus on core deposit growth as its primary source of liquidity and stability. Core deposits typically are non-brokered and consist of noninterest bearing demand accounts, interest checking accounts, money market accounts, savings accounts, and time deposits of less than $100,000. Core deposits totaled $1.50 billion, or 65.15% of total deposits at year-end 2008 compared to $332.78 million, or 77.13% of total deposits at year-end 2007 and $290.63 million, or 80.01% of total deposits at year-end 2006.

Borrowings

Additional sources of funds used by the Company are short-term and long-term borrowings from various sources including the Federal Reserve Bank discount window, Federal Home Loan Bank of Atlanta, purchased funds from correspondent banks, reverse repurchase accounts, and subordinated debentures.

17

At December 31, 2008 and 2007, the Company had advances from the FHLB totaling $279,064,674 and $53,000,000, respectively. Interest only is payable on a monthly or quarterly basis until maturity. Maturities of FHLB borrowings at December 31, 2008 were as follows:

(in thousands)	Balance
2009	$	32,000
2010		11,948
2011		15,000
2012		199,531
2014		350
2017		20,236
	$	279,065

FHLB borrowings carry a weighted average interest rate of 4.18% and are all at fixed interest rates except for five variable rate or convertible advances that total $48,350,000. The FHLB borrowings were collateralized with 1-4 family residential real estate loans, commercial real estate loans, and investment securities.

The Company acquired two reverse repurchase agreements in the Gateway Merger. Each repurchase agreement is for $10.0 million and is collateralized with mortgage backed securities with a similar fair market value. The first repurchase agreement has a five year term with an interest rate fixed at 4.99% until it is repurchased by the counterparty on August 1, 2011. The second repurchase agreement has a seven year term with a repurchase date of August 1, 2013. The interest rate of this agreement is a variable rate of 9.85%, minus three month LIBOR (1.83% at December 31, 2008), not to exceed 5.85%. The applicable interest rate in effect at December 31, 2008 was 5.85%. Both agreements are callable by the counterparty on a quarterly basis. The estimated fair value of these agreements as of the merger on December 31, 2008 was $22 million.

As part of the Gateway Merger, the Company acquired four placements of trust preferred securities as follows:

	Amount (in thousands)		Interest Rate	Redeemable on or After	Mandatory 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

LIBOR in the table above refers to 3 month LIBOR. In all four trusts, the trust issuer has invested the total proceeds from the sale of the trust preferred securities in junior subordinated deferrable interest debentures issued by the Company. The trust preferred securities pay cumulative cash distributions quarterly at an annual rate, reset quarterly. The dividends paid to holders of the trust preferred securities, which are recorded as interest expense, are deductible for income tax purposes. The Company has fully and unconditionally guaranteed the trust preferred securities through the combined operation of the debentures and other related documents. The Company’s obligation under the guarantee is unsecured and subordinate to senior and subordinated indebtedness of the Company. The estimated fair value of these debentures as of the merger on December 31, 2008 was $27 million.

The Company has borrowed $28 million from another bank. This borrowing has a variable interest rate of prime minus 1% with a floor of 4% (4% at December 31, 2008) and is payable in full on July 1, 2009.

Capital

Total shareholders’ equity increased $271.15 million, or 368.11%, to $344.81 million at December 31, 2008. This increase primarily resulted from the additional capital generated by the two

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acquisitions, equity received in conjunction with the Company’s participation in the U.S. Treasury’s Capital Purchase Program (discussed below) and current year net income. Other factors affecting stockholders’ equity included stock option exercises, dividends paid, dividends reinvested, common stock repurchased, change in unrealized gains and losses on securities available-for-sale, and stock issued as a part of the employee benefit plans.

On December 31, 2008, as part of the Capital Purchase Program established by the U.S. Department of the Treasury (the “Treasury”) under the Emergency Economic Stabilization Act of 2008 (“EESA”), the Company entered into a Letter Agreement and Securities Purchase Agreement—Standard Terms (collectively, the “Purchase Agreement”) with the Treasury, pursuant to which the Company sold (i) 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 (ii) 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 $80,347,000 in cash.

The Series C Preferred Stock qualifies as Tier 1 capital and will pay cumulative dividends at a rate of 5% per annum for the first five years, and thereafter at a rate of 9% per annum. The Series C Preferred Stock is generally non-voting. Prior to December 31, 2011, unless the Company has redeemed the Series C Preferred Stock or the Treasury has transferred the Series C Preferred Stock to a third party, the consent of the Treasury will be required for the Company to increase its common stock dividend or repurchase the Common Stock or other equity or capital securities, other than certain circumstances specified in the Purchase Agreement.

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 distribution of securities or other assets to holders of Common Stock, and upon certain issuances 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.

Upon the request of the Treasury at any time, the Company has agreed to promptly enter into a deposit arrangement to which the Series C Preferred Stock may be deposited and depositary shares (“Depositary Shares”), representing fractional shares of Series C Preferred Stock, may be issued. The Company has agreed to register the Series C Preferred Stock, the Warrant, the shares of Common Stock underlying the Warrant and Depositary Shares, if any, as soon as practicable after the date of the issuance of the Series C Preferred Stock and the Warrant.

The Company and the Banks 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.

Management believes that the Company and the Banks were “well-capitalized,” the highest category of capitalization defined by the regulators, as of December 31, 2008. For more information on the Company’s regulatory capital requirements, see Note No. 20 in the accompanying Notes to Consolidated Financial Statements. The Company continually monitors current and projected capital adequacy positions of both the Company and the Banks. Maintaining adequate capital levels is integral to providing stability to the Company, resources to achieve the Company’s growth objectives, and returns to the shareholders in the form of dividends.

During 2008, the Company repurchased 131,406 shares of its common stock in open market and privately negotiated transactions at prices ranging from $9.51 to $13.13. During 2007, the Company repurchased 232,490 shares of its common stock in open market and privately negotiated transactions at prices ranging from $12.14 to $14.62. During 2006, the Company repurchased 380,613 shares of its common stock in open market and privately negotiated transactions at prices ranging from $10.00 to $12.18.

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Liquidity

Liquidity represents an institution’s ability to meet present and future financial obligations through either the sale or maturity of existing assets or the acquisition of additional funds through liability management. At December 31, 2008, cash and due from banks, overnight funds sold, interest-bearing deposits in other banks, and investment securities and loans maturing within one year were $1.65 billion, or 53.70% of total assets. As a result of the Company’s management of liquid assets and the ability to generate liquidity through liability funding, management believes the Company maintains overall liquidity sufficient to satisfy its depositors’ requirements and meet its customers’ credit needs.

The Company also possesses additional sources of liquidity through a variety of borrowing arrangements. The Banks maintain federal funds lines with large regional and national banking institutions and through the Federal Reserve Discount Window. These available lines totaled approximately $430.66 million at December 31, 2008, of which $73.30 million was outstanding. Federal funds purchased during 2008 averaged $3.41 million compared to an average of $609 thousand during 2007.

The Banks have credit lines in the amount of $366.35 million at the FHLB. These lines may be utilized for short and/or long term borrowing. The Banks have utilized the credit lines for overnight funding throughout 2008 and 2007 with average balances of $7.89 million and $1.06 million, respectively. At December 31, 2008, the Banks had $34.30 million of these short-term credit lines outstanding, while none were outstanding at year-end 2007. Long-term FHLB borrowings were $279.07 million and $53.00 million at year-end 2008 and 2007, respectively.

Off-Balance Sheet Arrangements

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. For more information on the Company’s off-balance sheet arrangements, see Note No. 12 in the accompanying Notes to Consolidated Financial Statements.

Interest Rate Sensitivity

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

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

The Company’s management, guided by the Asset/Liability Committee (“ALCO”), 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.

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Table 11 illustrates the expected effect on net interest income for the twelve months following each of the two year-ends 2008 and 2007 due to an immediate change in interest rates. Estimated changes set forth below are dependent on material assumptions, such as those previously discussed.

Table 11: Effect on Net Interest Income

December 31, (in thousands)	2008 Change in Net Interest Income					2007 Change in Net Interest Income
	Amount			%		Amount			%
Change in Interest Rates:
+200 basis points	$	(4,338	)	(4.08	)%	$	4,494		19.39	%
+ 100 basis points		(2,382	)	(2.24	)		2,249		9.70
- 100 basis points		N/A		N/A			(2,230	)	(9.62	)
- 200 basis points		N/A		N/A			(4,333	)	(18.69	)

As indicated in Table 11, the Company’s interest rate sensitivity shifted from asset-sensitive to liability-sensitive during 2008. This shift was caused by the acquisition of Gateway Bank & Trust with its large portfolio of short-term funding sources and a conscious effort by management to take advantage of the low interest rate funding available in the overnight markets. 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.

The interest sensitivity gap is defined as the difference between the amount of interest earning assets anticipated, based upon certain assumptions, to mature or re-price within a specific time period and the amount of interest bearing liabilities anticipated, based upon certain assumptions, to mature or re-price within that time period. At December 31, 2008, the Company’s one year “negative gap” (interest bearing liabilities maturing or re-pricing within a defined period exceed interest earning assets maturing or re-pricing within the same period) was approximately $395.14 million, or 12.62% of total assets. Thus, during periods of rising interest rates, this implies that the Company’s net interest income would be negatively affected because the cost of the Company’s interest bearing liabilities is likely to rise more quickly than the yield of its interest earning assets. In periods of falling interest rates, the opposite effect on net interest income is likely to occur. At December 31, 2007, the Company’s one year “positive gap” was $67.77 million, or 12.02% of total assets.

Table 12 sets forth the amounts of interest earning assets and interest bearing liabilities outstanding at December 31, 2008 that are subject to re-pricing or that mature in each of the future time periods shown. Loans and securities with call or balloon provisions are included in the period in which they balloon or may first be called. Except as stated above, the amount of assets and liabilities shown that re-price or mature during a particular period were determined in accordance with the contractual terms of the asset or liability.

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Table 12: Interest Rate Sensitivity

December 31, 2008 (In thousands)	1 - 90 Days			91 Days - 1 Year			1 - 3 Years			3 - 5 Years			Over 5 Years			Total
Interest Earning Assets:
Loans	$	931,307		$	609,856		$	461,453		$	464,690		$	137,284		$	2,604,590
Investments		36,526			20,312			23,989			19,354			77,251			177,432
Interest-bearing deposits in other banks		4,975			—			—			—			—			4,975
Overnight funds sold		510			—			—			—			—			510
Total	$	973,318		$	630,168		$	485,442		$	484,044		$	214,535		$	2,787,507
Cummulative total	$	973,318		$	1,603,486		$	2,088,928		$	2,572,972		$	2,787,507
Interest Bearing Liabilities:
Interest checking	$	215,223		$	—		$	—		$	—		$	—		$	215,223
Money market		468,786			—			—			—			—			468,786
Savings		118,001			—			—			—			—			118,001
Time deposits		468,094			591,072			157,474			35,680			1,003			1,253,323
Borrowings		110,446			27,000			60,967			210,417			20,758			429,588
Total	$	1,380,550		$	618,072		$	218,441		$	246,097		$	21,761		$	2,484,921
Cumulative total	$	1,380,550		$	1,998,622		$	2,217,063		$	2,463,160		$	2,484,921
Interest sensitivity gap	$	(407,232	)	$	12,096		$	267,001		$	237,947		$	192,774		$	302,586
Cumulative interest sensitivity gap	$	(407,232	)	$	(395,136	)	$	(128,135	)	$	109,812		$	302,586
Cumulative interest sensitivity gap as a percentage of total assets		(13.02	)%		(12.62	)%		(3.95	)%		3.78	%		10.05	%

Contractual Obligations

The Company’s contractual obligations consist of time deposits, borrowings, and operating lease obligations. Table 13 shows payment detail for these contractual obligations as of December 31, 2008.

Table 13: Contractual Obligations

December 31, 2008 (In thousands)	Less than 1 Year		1 - 3 Years		3 - 5 Years		Over 5 Years		Total
Time deposits	$	1,059,166	$	157,474	$	35,680	$	1,003	$	1,253,323
FHLB borrowings		32,000		26,948		199,881		20,236		279,065
Other borrowings		28,000		11,019		11,058		27,146		77,223
Overnight funds purchased		73,300		—		—		—		73,300
Operating lease obligations		2,720		4,880		3,790		13,114		24,504
Total contractual obligations	$	1,195,186	$	200,321	$	250,409	$	61,499	$	1,707,415

Critical Accounting Policies

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

Allowance for Loan Losses

The allowance for loan losses reflects the estimated losses resulting from the inability of our borrowers to make required loan payments. The allowance for loan losses is established through a

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provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when management believes that collectibility of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance.

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

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

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

Goodwill and Other Intangible Assets

Intangible assets include goodwill and other identifiable assets, such as core deposit premiums, resulting from acquisitions. Core deposit premiums are amortized primarily on a straight-line basis over the estimated life of the deposits. Intangible assets related to insurance agency acquisitions are amortized over the expected life of the book of business acquired. Intangible assets related to employee contracts are amortized over the life of the contracts. Goodwill is not amortized but is tested annually for impairment or at any time an event occurs or circumstances change that may trigger a decline in the value of the reporting unit. Examples of such events or circumstances include adverse changes in legal factors, business climate, unanticipated competition, changes in regulatory environment or loss of key personnel.

The Company tests for impairment in accordance with FASB SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”). Potential impairment of goodwill exists when the carrying amount of a reporting unit exceeds its fair value. The fair value of a reporting unit is computed using one or a combination of the following three methods: income, market value, or cost method. The income method uses a discounted cash flow analysis to determine fair value by considering a reporting unit’s capital structure and applying a risk-adjusted discount rate to forecast earnings based on a capital asset pricing model. The market value method uses recent transaction analysis or publicly traded comparable analysis for similar assets and liabilities to determine fair value. The cost method assumes the net assets of a recent business combination accounted for under the purchase method of accounting will be recorded at fair value if no event or circumstance has occurred triggering a decline in the value. To the extent a reporting unit’s carrying amount exceeds its fair value, an indication exists that the reporting unit’s goodwill may be impaired, and a second step of impairment testing will be performed. In the second step, the implied fair value of the reporting unit’s goodwill is determined by allocating the

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reporting unit’s fair value to all its assets (recognized and unrecognized) and liabilities as if the reporting unit had been acquired in a business combination at the date of the impairment test. If the implied fair value of reporting unit goodwill is lower than its carrying amount, goodwill is impaired and is written down to its implied fair value. The loss recognized is limited to the carrying amount of goodwill. Once an impairment loss is recognized, future increases in fair value will not result in the reversal of previously recognized losses.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) reached a consensus on Emerging Issues Task Force (“EITF”) Issue 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements, (“EITF Issue 06-4”). In March 2007, the FASB reached a consensus on EITF Issue 06-10, Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements, (“EITF Issue 06-10”). Both of these standards require a company to recognize an obligation over an employee’s service period based upon the substantive agreement with the employee such as the promise to maintain a life insurance policy or provide a death benefit postretirement. The Company adopted the provisions of these standards effective January 1, 2008. The adoption of these standards was not material to the consolidated financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements, but rather, provides enhanced guidance to other pronouncements that require or permit assets or liabilities to be measured at fair value. This Statement was effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those years. The FASB has approved a one-year deferral for the implementation of the Statement for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The Company adopted SFAS 157 effective January 1, 2008. The adoption of SFAS 157 was not material to the consolidated financial statements.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of this Statement is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The fair value option established by this Statement permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The fair value option may be applied instrument by instrument and is irrevocable. SFAS 159 was effective as of the beginning of an entity’s first fiscal year that began after November 15, 2007, with early adoption available in certain circumstances. The Company adopted SFAS 159 effective January 1, 2008. The Company decided not to report any existing financial assets or liabilities at fair value that are not already reported, thus the adoption of this statement did not have a material impact on the consolidated financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), Business Combinations (“SFAS 141(R)”). The Standard will significantly change the financial accounting and reporting of business combination transactions. SFAS 141(R) establishes principles for how an acquirer recognizes and measures the identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) is effective for acquisition dates on or after the beginning of an entity’s first year that begins after December 15, 2008. The Company does not expect the implementation of SFAS 141(R) to have a material impact on the consolidated financial statements, at this time.

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In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements an Amendment of ARB No. 51 (“SFAS 160”). The Standard will significantly change the financial accounting and reporting of noncontrolling (or minority) interests in consolidated financial statements. SFAS 160 is effective as of the beginning of an entity’s first fiscal year that begins after December 15, 2008, with early adoption prohibited. The Company does not expect the implementation of SFAS 160 to have a material impact on the consolidated financial statements, at this time.

In November 2007, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 109, Written Loan Commitments Recorded at Fair Value Through Earnings (“SAB 109”). SAB 109 expresses the current view of the staff that the expected net future cash flows related to the associated servicing of the loan should be included in the measurement of all written loan commitments that are accounted for at fair value through earnings. SEC registrants are expected to apply the views in Question 1 of SAB 109 on a prospective basis to derivative loan commitments issued or modified in fiscal quarters beginning after December 15, 2007. Implementation of SAB 109 did not have a material impact on the consolidated financial statements.

In December 2007, the SEC issued Staff Accounting Bulletin No. 110, Use of a Simplified Method in Developing Expected Term of Share Options (“SAB 110”). SAB 110 expresses the current view of the staff that it will accept a company’s election to use the simplified method discussed in SAB 107 for estimating the expected term of “plain vanilla” share options regardless of whether the company has sufficient information to make more refined estimates. The staff noted that it understands that detailed information about employee exercise patterns may not be widely available by December 31, 2007. Accordingly, the staff will continue to accept, under certain circumstances, the use of the simplified method beyond December 31, 2007. Implementation of SAB 110 did not have a material impact on the consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of SFAS No. 133 (“SFAS No. 161”). SFAS No. 161 requires that an entity provide enhanced disclosures related to derivative and hedging activities. SFAS No. 161 is effective for the Company on January 1, 2009 and is not expected to have a material impact on the consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position (“FSP”) No. 142-3, Determination of the Useful Life of Intangible Assets (“FSP No. 142-3”). FSP No. 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under SFAS No. 142. The intent of FSP No. 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the assets under SFAS No. 141(R). FSP No. 142-3 is effective for the Company on January 1, 2009, and applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. The adoption of FSP No. 142-3 is not expected to have a material impact on the Company’s consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles. SFAS No. 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. Management does not expect the adoption of the provision of SFAS No. 162 to have any impact on the consolidated financial statements.

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In September 2008, the FASB issued FSP FAS 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161 (“FSP 133-1 and FIN 45-4”). FSP 133-1 and FIN 45-4 require a seller of credit derivatives to disclose information about its credit derivatives and hybrid instruments that have embedded credit derivatives to enable users of financial statements to assess their potential effect on its financial position, financial performance and cash flows. The disclosures required by FSP 133-1 and FIN 45-4 were effective for the Company on December 31, 2008 and did not have a material impact on the consolidated financial statements.

In October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (“FSP 157-3”). FSP 157-3 clarifies the application of SFAS No. 157 in determining the fair value of a financial asset during periods of inactive markets. FSP 157-3 was effective as of September 30, 2008 and did not have a material impact on the Company’s consolidated financial statements.

In December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities. FSP No. FAS 140-4 and FIN 46(R)-8 requires enhanced disclosures about transfers of financial assets and interests in variable interest entities. The FSP is effective for interim and annual periods ending after December 15, 2008. Since the FSP requires only additional disclosures concerning transfers of financial assets and interest in variable interest entities, adoption of the FSP will not affect the Company’s financial condition, results of operations or cash flows.

In January 2009, the FASB reached a consensus on EITF Issue 99-20-1. This FSP amends the impairment guidance in EITF Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets, to achieve more consistent determination of whether an other-than-temporary impairment has occurred. The FSP also retains and emphasizes the objective of an other-than-temporary impairment assessment and the related disclosure requirements in FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, and other related guidance. The FSP is effective for interim and annual reporting periods ending after December 15, 2008 and shall be applied prospectively. The FSP was effective as of December 31, 2008 and did not have a material impact on the consolidated financial statements.

Caution About Forward-Looking Statements

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

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

For a discussion of the risks, uncertainties and assumptions that could affect our future events, developments or results, you should carefully review the risk factors summarized below and the more detailed discussions in the “Risk Factors” and “Business” sections in the 2008 Form 10-K. Our risks include, without limitation, the following:

• Difficult market conditions in our industry;

• Unprecedented levels of market volatility;

• Effects of the soundness of other financial institutions;

• Uncertain outcome of recently enacted legislation to stabilize the U.S. financial institution;

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• Losses that may be incurred if we are unable to manage interest rate risk;

• Our dependence on key personnel;

• Potential lack of resources of our smaller target business market;

• The high level of competition within the banking industry;

• The adequacy of our estimate for known and inherent losses in our loan portfolio;

• Our ability to manage our growth;

• Potential declines in asset quality;

• Potential affect of an identification of a material weakness or a significant deficiency in our internal control over financial reporting;

• Potential affect of our liquidity needs on our results of operations and financial condition;

• Possibility that our recent results may not be indicative of our future results;

• Potential affect of our dependence on the accuracy and completemess of information about clients and counterparties;

• Our dependence on construction and land development loans that could be negatively affected by a downturn in the real estate market;

• We serve a limited market area, and an economic downturn in our market area could adversely affect our business;

• If the value of real estate in the Company’s core market areas were to decline materially, a significant portion of its loan portfolio could become under-collaterlized, which could have a material adverse effect on it;

• A significant part of Gateway’s loan portfolio is unseasoned;

• Our operations and customers might be affected by the occurrences of natural disaster or other catastrophic event in its market area;

• The decline in the fair market value of various investment securities available for sale could result in future impairment losses;

• Changes in interest rate;

• Governmental and regulatory changes that may adversely affect our expenses and cost structure;

• The threat from technology based frauds and scams;

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

• Trading in our common stock has been sporadic and volume has been light so shareholders may not be able to quickly and easily sell their common stock;

• Virginia law and the provisions of 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; and

• We may fail to realize all of the anticipated benefits of the mergers with SFC and GFH.

Our forward-looking statements could be wrong in light of these and other risks, uncertainties and assumptions. The future events, developments or results described in this report could turn out to be materially different. We have no obligation to publicly update or revise our forward-looking statements after the date of this report and you should not expect us to do so.

27

Management’s Report on Internal Control Over Financial Reporting

Management of Hampton Roads Bankshares, Inc. and its subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. As of the end of the Company’s 2008 fiscal year, management, including the chief executive and chief financial officers, conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). This assessment did not include internal control over financial reporting related to Gateway Financial Holdings, Inc. because it was acquired by the Company on December 31, 2008 in a purchase business combination. The total assets of Gateway Financial Holdings, Inc. represented $2.2 billion of the Company’s total assets on December 31, 2008. Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2008 is effective.

Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the firm’s assets that could have a material effect on the Company’s financial statements.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2008 has been audited by Yount, Hyde & Barbour, P.C., the independent registered public accounting firm who also audited the Company’s consolidated financial statements included in this Annual Report on Form 10-K. Yount, Hyde & Barbour, P.C.’s attestation report on the Company’s internal control over financial reporting appears herein.

28

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

Hampton Roads Bankshares, Inc.

Norfolk, Virginia

We have audited the accompanying consolidated balance sheets of Hampton Roads Bankshares, Inc. and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. The consolidated financial statements of Hampton Roads Bankshares, Inc. for the year ended December 31, 2006, were audited by other auditors whose report, dated March 1, 2007, expressed an unqualified opinion on those statements.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the 2008 and 2007 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hampton Roads Bankshares, Inc. and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows the years then ended, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Hampton Roads Bankshares, Inc. and subsidiaries’ internal control over financial reporting (excluding Gateway Financial Holdings and subsidiaries) as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 27, 2009 expressed an unqualified opinion on the effectiveness of Hampton Roads Bankshares, Inc.’s internal control over financial reporting.

Winchester, Virginia

March 27, 2009

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Hampton Roads Bankshares, Inc.

Norfolk, Virginia

We have audited Hampton Roads Bankshares, Inc. and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Gateway Financial Holdings, Inc. and subsidiaries from its assessment of internal control over financial reporting as of December 31, 2008, because it was acquired by the Company in a purchase business combination on December 31, 2008. We have also excluded Gateway Financial Holdings, Inc and subsidiaries from our audit of internal control over financial reporting. Gateway Financial Holdings, Inc and subsidiaries are wholly owned subsidiaries whose total assets represent approximately 71% of the related consolidated financial statement amount as of December 31, 2008.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Hampton Roads Bankshares, Inc. and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for the years then ended and our report dated March 27, 2009 expressed an unqualified opinion.

Winchester, Virginia

March 27, 2009

29

Consolidated Balance Sheets

December 31, 2008 and 2007

(in thousands, except share data)	2008			2007
Assets:
Cash and due from banks	$	42,827		$	19,758
Overnight funds sold		510			183
Interest-bearing deposits in other banks		4,975			5,623
Investment securities available-for-sale, at fair value		149,637			42,377
Restricted equity securities, at cost		27,795			4,704
Loans		2,604,590			477,149
Allowance for loan losses		(51,218	)		(5,043	)
Net loans		2,553,372			472,106
Premises and equipment, net		101,335			11,967
Interest receivable		12,272			2,431
Other real estate owned		5,092			—
Deferred tax assets, net		32,616			2,658
Intangible assets		98,367			—
Bank owned life insurance		46,603			773
Other assets		10,310			1,248
Total assets	$	3,085,711		$	563,828
Liabilities and Shareholders’ Equity:
Deposits:
Noninterest bearing demand	$	240,813		$	100,553
Interest bearing:
Demand		684,009			40,299
Savings		118,001			82,093
Time deposits:
Less than $100		858,787			114,833
$100 or more		394,536			93,679
Total deposits		2,296,146			431,457
Federal Home Loan Bank borrowings		279,065			53,000
Other borrowings		77,223			—
Overnight funds purchased		73,300			—
Interest payable		5,814			1,636
Other liabilities		9,354			4,075
Total liabilities		2,740,902			490,168
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 at December 31, 2008		18,292			—
Series B non-convertible non-cumulative perpetual preferred stock, $1,000 liquidation value, 37,550 shares issued and outstanding at December 31, 2008		40,953			—
Series C fixed rate cumulative preferred stock, $1,000 liquidation value, 80,347 shares issued and outstanding at December 31, 2008		74,297			—
Common stock, $0.625 par value. Authorized 40,000,000 shares; issued and outstanding 21,777,937 shares in 2008 and 10,314,899 shares in 2007		13,611			6,447
Capital surplus		171,284			42,677
Retained earnings		26,482			24,486
Accumulated other comprehensive income (loss), net of tax		(110	)		50
Total shareholders’ equity		344,809			73,660
Total liabilities and shareholders’ equity	$	3,085,711		$	563,828

See accompanying notes to consolidated financial statements.

30

Consolidated Statements of Income

Years ended December 31, 2008, 2007 and 2006

(in thousands, except share and per share data)	2008			2007		2006
Interest Income:
Loans, including fees	$	43,201		$	35,604	$	26,827
Investment securities		1,677			2,316		2,721
Overnight funds sold		53			35		229
Interest-bearing deposits in other banks		246			248		244
Total interest income		45,177			38,203		30,021
Interest Expense:
Deposits:
Demand		1,030			678		522
Savings		1,741			2,866		2,180
Time deposits:
Less than $100		6,536			4,061		2,619
$100 or more		4,785			4,052		2,308
Interest on deposits		14,092			11,657		7,629
Federal Home Loan Bank borrowings		3,160			2,274		1,377
Other borrowings		609			—		—
Overnight funds purchased		56			85		117
Total interest expense		17,917			14,016		9,123
Net interest income		27,260			24,187		20,898
Provision for loan losses		1,418			1,232		180
Net interest income after provision for loan losses		25,842			22,955		20,718
Noninterest Income:
Service charges on deposit accounts		3,379			1,996		1,874
Gain on sale of investment securities available-for-sale		457			—		—
Gain on sale of premises and equipment		519			11		—
Impairment of securities		(561	)		—		—
Other service charges and fees		2,186			1,433		1,524
Total noninterest income		5,980			3,440		3,398
Noninterest Expense:
Salaries and employee benefits		11,518			9,954		9,106
Occupancy		2,261			1,668		1,678
Data processing		1,189			612		598
Other		6,019			3,760		3,564
Total noninterest expense		20,987			15,994		14,946
Income before provision for income taxes		10,835			10,401		9,170
Provision for income taxes		3,660			3,590		3,134
Net Income	$	7,175		$	6,811	$	6,036
Basic earnings per share	$	0.60		$	0.67	$	0.66
Diluted earnings per share	$	0.59		$	0.65	$	0.65
Basic weighted average shares outstanding		11,960,604			10,228,638		9,092,980
Effect of dilutive stock options and non-vested stock		114,121			202,916		182,808
Diluted weighted average shares outstanding		12,074,725			10,431,554		9,275,788

See accompanying notes to consolidated financial statements.

31

Consolidated Statements of Changes in Shareholders’ Equity

Years ended December 31, 2008, 2007 and 2006

	Preferred Stock			Common Stock					Capital Surplus			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
(in thousands, except share data)	Shares	Amount		Shares		Amount
Balance at December 31, 2005	—	$	—	8,242,822		$	5,152		$	23,852		$	20,770		$	(644	)	$	49,130
Comprehensive income:
Net income	—		—	—			—			—			6,036			—			6,036
Change in unrealized gain (loss)on securities available-for-sale, net of taxes of $104	—		—	—			—			—			—			203			203
Total comprehensive income																			6,239
Shares issued related to:
401(k) plan	—		—	11,333			7			115			—			—			122
Regional board fees	—		—	2,332			1			24			—			—			25
Exercise of stock options	—		—	277,041			173			1,433			—			—			1,606
Dividend reinvestment	—		—	229,090			143			2,513			—			—			2,656
Stock-based compensation	—		—	20,131			13			167			—			—			180
Stock offering, net of issuance costs of $1,110	—		—	1,849,200			1,156			17,891			—			—			19,047
Common stock repurchased	—		—	(380,613	)		(238	)		(4,036	)		—			—			(4,274	)
Tax benefit of stock option exercises	—		—	—			—			147			—			—			147
Cash dividends ($0.50 per share)	—		—	—			—			—			(4,715	)		—			(4,715	)
Balance at December 31, 2006	—		—	10,251,336			6,407			42,106			22,091			(441	)		70,163
Comprehensive income:
Net income	—		—	—			—			—			6,811			—			6,811
Change in unrealized gain (loss)on securities available-for-sale, net of taxes of $253	—		—	—			—			—			—			491			491
Total comprehensive income																			7,302
Shares issued related to:
401(k) plan	—		—	11,020			7			130			—			—			137
Executive savings plan	—		—	11,686			7			138			—			—			145
Regional board fees	—		—	1,893			1			23			—			—			24
Exercise of stock options	—		—	93,599			59			648			—			—			707
Dividend reinvestment	—		—	165,991			104			2,146			—			—			2,250
Stock-based compensation	—		—	11,864			7			330			—			—			337
Common stock repurchased	—		—	(232,490	)		(145	)		(2,962	)		—			—			(3,107	)
Tax benefit of stock option exercises	—		—	—			—			118			—			—			118
Cash dividends ($0.43 per share)	—		—	—			—			—			(4,416	)		—			(4,416	)
Balance at December 31, 2007	—		—	10,314,899			6,447			42,677			24,486			50			73,660
Comprehensive income:
Net income	—		—	—			—			—			7,175			—			7,175
Change in unrealized gain (loss) on securities available-for-sale, net of taxes of ($118)	—		—	—			—			—			—			(229	)		(229	)
Reclassification adjustment for securities gains included in net income, net of taxes of $35	—		—	—			—			—			—			69			69
Total comprehensive income																			7,015
Shares issued related to:
Executive savings plan	—		—	11,582			7			114			—			—			121
Regional board fees	—		—	8,510			5			105			—			—			110
Exercise of stock options	—		—	112,964			71			509			—			—			580
Dividend reinvestment	—		—	201,460			126			2,117			—			—			2,243
Stock-based compensation	—		—	32,908			20			129			—			—			149
Acquisition of Shore Financial Corporation	—		—	2,713,425			1,696			29,509			—			—			31,205
Acquisition of Gateway Financial Holdings	—		—	8,513,595			5,321			88,839			—			—			94,160
Series A non-cumulative perpetual preferred stock	23,266		18,292	—			—			—			—			—			18,292
Series B non-cumulative perpetual preferred stock	37,550		40,953	—			—			—			—			—			40,953
Series C fixed rate cumulative preferred stock and warrant	80,347		74,297	—			—			6,050			—			—			80,347
Common stock repurchased	—		—	(131,406	)		(82	)		(1,372	)		—			—			(1,454	)
Options acquired in mergers	—		—	—			—			2,587			—			—			2,587
Tax benefit of stock option exercises	—		—	—			—			20			—			—			20
Cash dividends ($0.44 per share)	—		—	—			—			—			(5,179	)		—			(5,179	)
Balance at December 31, 2008	141,163	$	133,542	21,777,937		$	13,611		$	171,284		$	26,482		$	(110	)	$	344,809

See accompanying notes to consolidated financial statements.

32

Consolidated Statements of Cash Flows

Years ended December 31, 2008, 2007 and 2006

(in thousands)	2008			2007			2006
Operating Activities:
Net income	$	7,175		$	6,811		$	6,036
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,407			886			876
Provision for loan losses		1,418			1,232			180
Regional board fees		110			24			25
Stock-based compensation expense		149			337			180
Net amortization of premiums and accretion of discounts on investment securities		(62	)		7			32
Gain on sale of investment securities available-for-sale		(457	)		—			—
Other than temporary impairment		561			—			—
Amortization of intangible assets		133			—			—
Gain on sale of premises and equipment		(519	)		(11	)		—
Deferred income tax expense (benefit)		1,215			(702	)		(362	)
Changes in:
Interest receivable		20			(149	)		(520	)
Other assets		(1,944	)		128			(99	)
Interest payable		304			163			983
Other liabilities		787			672			1,452
Net cash provided by operating activities		10,297			9,398			8,783
Investing Activities:
Proceeds from maturities and calls of debt securities available-for-sale		11,215			15,171			18,131
Proceeds from sales of debt securities available-for-sale		18,457			—			—
Purchase of debt securities available-for-sale		(2,000	)		(1,242	)		(1,839	)
Purchase of equity securities available-for-sale		(1,006	)		—			(473	)
Proceeds from sales of restricted equity securities		5,024			1,040			2,228
Purchase of restricted equity securities		(6,885	)		(1,769	)		(3,491	)
Net increase in total loans		(111,879	)		(102,195	)		(90,317	)
Purchase of premises and equipment		(4,499	)		(720	)		(868	)
Proceeds from sales of other real estate owned		—			15			—
Proceeds from sales of premises and equipment		764			37			—
Net cash used in investing activities		(90,809	)		(89,663	)		(76,629	)
Financing Activities:
Net increase (decrease) in deposits		(37,499	)		68,196			35,815
Proceeds from Federal Home Loan Bank borrowings		226,912			23,000			10,000
Repayments of Federal Home Loan Bank borrowings		(218,445	)		(8,000	)		(2,500	)
Proceeds from other borrowings		28,000			—			—
Net increase in overnight funds purchased		16,000			—			—
Stock issuance costs		—			—			(1,110	)
Cash acquired in mergers		39,021			—			—
Cash paid in mergers		(27,407	)		—			—
Common stock repurchased		(1,446	)		(2,877	)		(3,424	)
Issuance of shares to 401(k) plan		—			137			122
Issuance of shares to executive savings plan		121			146			—
Issuance of shares in rights and public offerings		—			—			20,156
Issuance of series C preferred stock and warrant		80,347			—			—
Proceeds from exercise of stock options		572			476			757
Excess tax benefit realized from stock options exercised		20			118			147
Dividends paid, net		(2,936	)		(2,166	)		(2,059	)
Net cash provided by financing activities		103,260			79,030			57,904
Increase (decrease) in cash and cash equivalents		22,748			(1,235	)		(9,942	)
Cash and cash equivalents at beginning of year		25,564			26,799			36,741
Cash and cash equivalents at end of year	$	48,312		$	25,564		$	26,799
Supplemental cash flow information:
Cash paid during the year for interest	$	17,613		$	13,852		$	8,141
Cash paid during the year for income taxes		4,600			4,085			3,370
Supplemental non-cash information:
Dividends reinvested	$	2,243		$	2,250		$	2,656
Value of shares exchanged in exercise of stock options		8			231			849
Receipt of land in payment of loan		—			—			736
Transfer between loans and other real estate owned		1,372			50			—
Transfer between premises and equiment and loans		—			25			—
Unrealized gain (loss) on securities		(243	)		744			307
Transactions related to acquisition of subsidiaries:
Increase in assets and liabilities:
Loans, net	$	1,972,398		$	—		$	—
Securities		155,507			—			—
Other assets		267,637			—			—
Deposits		1,902,462			—			—
Borrowings		324,293			—			—
Other liabilities		8,366			—			—
Issuance of preferred stock		59,245			—			—
Issuance of common stock and stock options		127,952			—			—

See accompanying notes to consolidated financial statements.

33

Notes to Consolidated Financial Statements

December 31, 2008, 2007 and 2006

(1) Organization and Operations

Hampton Roads Bankshares, Inc. (the “Company”), is a multi-bank holding company incorporated under the laws of the Commonwealth of Virginia in February 2001. The Company owns Bank of Hampton Roads (Norfolk, Virginia), Shore Bank (Onley, Virginia), Gateway Bank & Trust Co. (Elizabeth City, North Carolina), Hampton Roads Investments, Inc. (Norfolk, Virginia), Gateway Capital Statutory Trust I, Gateway Capital Statutory Trust II, Gateway Capital Statutory Trust III, and Gateway Capital Statutory Trust IV.

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

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

Gateway Bank & Trust Co. is a North Carolina state-chartered commercial and retail bank with 37 full service offices located in Eastern and Central North Carolina and in the Richmond and Hampton Roads region of southeastern Virginia. Gateway Bank & Trust Co. has four wholly owned subsidiaries: Gateway Investment Services, Inc., whose principal activity is to engage in brokerage services as an agent for non-bank investment products and services; Gateway Insurance Services, Inc., an independent insurance agency with offices in Edenton, Hertford, Elizabeth City, Moyock, Plymouth, and Kitty Hawk, North Carolina and Chesapeake and Newport News, Virginia; Gateway Bank Mortgage, Inc. with offices in Raleigh, Elizabeth City, and Kitty Hawk, North Carolina and Norfolk and Virginia Beach, Virginia whose principal activity is to engage in originating, processing, and sale of mortgage loans; and Gateway Title Agency, Inc., with offices in Newport News, Hampton, and Virginia Beach, Virginia whose principal activity is to engage in title services for real estate transactions. Gateway Bank & Trust Co. commenced operations in 1998.

The Company formed Hampton Roads Investments, Inc., a wholly owned subsidiary, to provide securities, brokerage, and investment advisory services.

In accordance with FASB Interpretation No. (“FIN”) 46, Consolidation of Variable Interest Entities, the Gateway Capital Trusts are not consolidated as part of the Company’s consolidated financial statements. However, the junior subordinated debentures issued by the Company to the trusts are included in long-term borrowings and the Company’s equity interest in the trusts is included in other assets.

(2) Summary of Significant Accounting Policies

The consolidated financial statements of the Company are prepared in conformity with U.S. generally accepted accounting principles and prevailing practices of the banking industry. The following is a summary of the significant accounting and reporting policies used in preparing the consolidated financial statements.

34

Basis of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Bank of Hampton Roads, Hampton Roads Investments, Inc., Shore Bank, Shore Investments, Inc., Gateway Bank & Trust, Gateway Investment Services, Inc., Gateway Insurance Services, Inc., Gateway Bank Mortgage, Inc., and Gateway Title Agency, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates. Material estimates that are particularly susceptible to changes in the near term are the allowance for loan losses, the valuation of deferred tax assets, the fair value of stock options, and the estimated fair value of financial instruments.

Restrictions on Cash and Due from Bank Accounts

The Company is required to maintain average reserve balances in cash with the Federal Reserve Bank (“FRB”). The amounts of daily average required reserves for the final weekly reporting period were $4,124,000 and $3,067,000 at December 31, 2008 and 2007, respectively.

Investment Securities

Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity and reported at amortized cost. The Company has no securities in this category.

Securities classified as available-for-sale are those debt and equity securities that management intends to hold for an indefinite period of time, including securities used as part of the Company’s asset/liability strategy, and that may be sold in response to changes in interest rates, liquidity needs, or other similar factors. Securities in this classification are reported at fair value, with unrealized gains and losses excluded from earnings and reported as other comprehensive income, a separate component of shareholders’ equity.

Securities classified as held for trading are those debt and equity securities that are bought and held principally for the purpose of selling them in the near term and are reported at fair value, with unrealized gains and losses included in earnings. The Company has no securities in this category.

Gains and losses on sales of securities are computed based on specific identification of the adjusted cost of each security and included in noninterest income. Amortization of premiums and accretion of discounts are computed by the effective yield method and included in interest income. Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other than temporary impairment losses, management considers (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 for the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

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Restricted Equity Securities

As a requirement for membership, the Company invests in stock of the Federal Home Loan Bank of Atlanta (“FHLB”), Community Bankers’ Bank (“CBB”), and FRB. These investments are carried at cost due to the redemption provisions of these entities and the restricted nature of the securities.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred over the life of the loan and recognized as an adjustment of the related loan yield using the interest method. Net fees related to standby letters of credit are recognized over the commitment period. In those instances when a loan prepays, the remaining deferred fee is recognized in the income statement. As a general rule, loans are placed in nonaccrual status when principal or interest is 90 days or more past due, or when management deems collection of all principal and interest doubtful after an evaluation of the collateral pledged and the financial strength of the borrower. The delinquency status of the loan is determined by the contractual terms of the loan.

All interest accrued but not collected for loans that are placed on nonaccrual status or charged-off is reversed against interest income. Cash payments received on loans in nonaccrual status are generally applied to reduce the outstanding principal balance. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

A loan is deemed impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are measured at the present value of their expected future cash flows by discounting those cash flows at the loan’s effective interest rate, or at the loan’s observable market price or the fair value of collateral if the loan is collateral dependent. The difference between this discounted amount and the loan balance is recorded as an allowance for loan losses. Impairment is measured on a loan by loan basis. Interest on impaired loans is accrued and recorded as income based upon the principal amount outstanding, except for nonaccrual loans, for which interest is not accrued.

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance consisting of the cumulative effect of the provision for loan losses, minus loans charged off, plus any amounts recovered on loans previously charged off. The provision for loan losses is the amount necessary in management’s judgment to maintain the allowance for loan losses at a level it believes sufficient to cover incurred losses in the collection of the Company’s loans. Loans are charged against the allowance when, in management’s opinion, they are deemed uncollectible, although the Company continues to pursue collection.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical loss experience, risk characteristics of the various categories of loans, adverse situations affecting individual loans, loan risk grades, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

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

Loans Held for Sale

The Company originates single family, residential, first lien mortgage loans that have been approved by secondary market investors. The Company classifies loans originated with the intent of selling in the secondary market as held for sale. Loans originated for sale are primarily sold in the secondary market as whole loans. Whole loan sales are executed with the servicing rights being released to the buyer upon the sale, with the gain or loss on the sale equal to the difference between the proceeds received and the carrying value of the loans sold.

Mortgage loans held for sale are carried at the lower of cost or fair value in the aggregate. The fair value of mortgage loans held for sale is determined using current secondary market prices for loans with similar coupons, maturities, and credit quality. The fair value of mortgage loans held for sale is impacted by changes in market interest rates.

The Company enters into commitments to originate or purchase loans whereby the interest rate of the loan was determined prior to funding (“interest rate lock commitments”). Interest rate lock commitments on mortgage loans that the Company intended to sell in the secondary market were considered freestanding derivatives. These derivatives were carried at fair value with changes in fair value reported as a component of gain on sale of the loans in accordance with the Securities and Exchange Commission’s Staff Account Bulletin No. 109, Written Loan Commitments Recorded at Fair Value Through Earnings.

Premises and Equipment

Premises and equipment are stated at cost, less accumulated depreciation and amortization. Land is carried at cost. Depreciation of buildings and improvements and equipment, furniture, and fixtures is computed by the straight-line method over the estimated useful lives of the assets. Amortization of leasehold improvements is computed using the straight-line method over the estimated useful lives of the improvements or the lease term, whichever is shorter. Useful lives range from 9 to 15 years for leasehold improvements, from 10 to 50 years for buildings and improvements, and from 3 to 15 years for substantially all equipment, furniture, and fixtures.

Long-Lived Assets

The Company accounts for long-lived assets in accordance with the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During 2007, Bankers Investment Group, LLP (“BI”) agreed to be sold to Infinex Investments, Inc. (“Infinex”). The Company had a 4% ownership in BI which it accounted for as a cost method investment. The sale transaction resulted in a reduction in the value of the asset held by the Company. Therefore, the investment in BI was written down $103,774 during 2007 to the estimated value after the sale. The loss was included as part of other noninterest expense. No long-lived assets were deemed to be impaired during 2008 or 2006.

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Other Real Estate Owned

Real estate acquired in settlement of loans is stated at the lower of the recorded loan balance or fair market value less estimated disposal costs. At foreclosure any excess of the loan balance over the fair value of the property is charged to the allowance for loan losses. Such carrying value is periodically reevaluated and written down if there is an indicated decline in fair value. Costs to bring a property to salable condition are capitalized up to the fair value of the property while costs to maintain a property in salable condition are expensed as incurred.

Goodwill and Other Intangibles

The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”), effective January 1, 2002. Accordingly, goodwill is not subject to amortization over its estimated useful life, but is subject to an annual assessment for impairment by applying a fair value based test. Intangible assets with definite useful lives are amortized over their respective estimated useful lives. The Company has identified other intangible assets related to core deposit premiums, employment agreements, and insurance agency books of business.

Credit Related Financial Instruments

In the ordinary course of business, the Company has entered into commitments to extend credit including commitments under home equity lines of credit, overdraft protection arrangements, commercial lines of credit, and standby letters of credit. Such financial instruments are recorded when they are funded.

Income Taxes

Deferred income tax assets and liabilities are determined using the balance sheet method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.

The Company adopted the Financial Accounting Standards Board’s Interpretation No. 48 Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (“FIN 48”), effective January 1, 2007. FIN 48 clarifies the accounting for uncertainly in income taxes recognized in the financial statement and requires the impact of a tax position to be recognized in the financial statements if that position is more likely than not of being sustained by the taxing authority. The adoption of FIN 48 did not have a material effect on the Company’s consolidated financial position or results of operations. The Company classifies interest and penalties related to income tax assessments, if any, in income tax expense in the consolidated statements of income.

Per Share Data

Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the dilutive effect of stock options and non-vested stock using the treasury stock method. For the year ended December 31, 2008, there were 249,288 options that were anti-dilutive since the exercise price for those options exceeded the average market price of the Company’s common stock. There were no anti-dilutive stock options for the years ended December 31, 2007 and 2006.

Advertising Costs

Advertising costs are expensed as incurred.

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Stock-Based Compensation

The Company adopted SFAS No. 123R, Share-Based Payment (“SFAS 123R”), on January 1, 2006, using the modified prospective method which applies SFAS 123R to new awards and to the portion of existing awards that have not completely vested as of January 1, 2006. The Company uses the fair value method to account for stock-based compensation and the fair value of stock options is estimated at the date of grant using a lattice option pricing model. Stock options granted with pro rata vesting schedules are expensed over the vesting period on a straight line basis.

Comprehensive Income (Loss)

Comprehensive income (loss) represents all changes in equity that result from recognized transactions and other economic events of the period. Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under U.S. generally accepted accounting principles are included in comprehensive income but excluded from net income, such as unrealized gains and losses on investment securities available-for-sale.

Cash and Cash Equivalents

For the purpose of presentation in the consolidated statements of cash flows, the Company considers cash and due from banks, overnight funds sold, and interest-bearing deposits in other banks as cash and cash equivalents. Generally, overnight funds sold include federal funds sold and high quality money market instruments, which hold short-term debt securities that are U.S. Government issued or guaranteed.

Concentrations of Credit Risk

Construction and mortgage loans represented 81% and 75% of the total loan portfolio at December 31, 2008 and 2007, respectively. Substantially all such loans are collateralized by real property or other assets. Loans in these categories and their collateral values are continuously monitored by management.

At times the Company may have cash and cash equivalents at a financial institution in excess of insured limits. The Company places its cash and cash equivalents with high credit quality financial institutions whose credit rating is monitored by management to minimize credit risk. The amount on deposit with correspondent institutions at December 31, 2008 exceeded the insurance limits of the Federal Deposit Insurance Corporation by $736,715.

Reclassification

Certain 2007 and 2006 amounts have been reclassified to conform to the 2008 presentation.

(3) Acquisition of Shore Financial Corporation

On June 1, 2008 pursuant to the terms of the Agreement and Plan of Merger, dated as of January 8, 2008 (the “Shore Merger Agreement”) by and between the Company and Shore Financial Corporation (“SFC”) the Company acquired all of the outstanding shares of SFC (the “Shore Merger”). The shareholders of SFC received, for each share of SFC common stock that they owned immediately prior to the effective time of the merger, either $22 per share in cash or 1.8 shares of common stock of the Company. Pursuant to the terms of the Shore Merger Agreement, shareholders of SFC had the opportunity to elect to receive cash, shares of common stock of the Company, or a combination of both, subject to allocation and proration procedures ensuring that no less than 25% and no more than 45% of the total merger consideration was cash and the remainder was common stock of the Company. In addition, at the effective time of the merger, each outstanding option to purchase shares of SFC’s common stock under any stock plans vested pursuant to its terms and was converted into an option to acquire the number of shares

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of the Company’s common stock equal to the number of shares of SFC common stock underlying the option multiplied by 1.8. The exercise price of each option was adjusted accordingly. The aggregate purchase price was approximately $55.2 million, including common stock valued at $31.2 million calculated by multiplying the 2,713,425 shares issued, by the Company’s stock price on the day the merger was announced of $11.50, SFC stock held by the Company as an investment of $0.8 million, stock options exchanged valued at $1.2 million, cash of $21.0 million, and direct costs of the merger of $1.0 million.

Net assets acquired are shown in the table below (in thousands).

Securities available for sale	$	16,250
Loans, net		220,450
Goodwill		25,081
Core deposit intangible		4,755
Employment agreement intangible		160
Other assets		33,587
Total assets acquired		300,283
Deposits		208,402
Borrowings		34,228
Other liabilities		2,409
Total liabilities assumed		245,039
Net assets acquired	$	55,244

The merger transaction was accounted for under the purchase method of accounting and is intended to qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code. The merger resulted in the recording of $25.1 million of estimated goodwill and $4.8 million of core deposit intangible assets. The estimated goodwill is subject to possible adjustments during the one year period from the date of the merger. The core deposit intangible asset was adjusted from the initial fair value estimate of $9.1 million to the current fair value of $4.8 million based on the final independent valuation and will be amortized over the estimated life of the core deposits of eight years, based on undiscounted cash flows. In order to finance the merger transaction, the Company borrowed $23 million. The loan has a variable interest rate of prime minus one percent with a four percent floor and matures in July 2009. The loan requires that the Company meet certain covenants.

The Company is in the process of analyzing the effect of canceling certain contracts between Shore Bank and their vendors in order to produce efficiencies from the merger. Costs of canceling the contracts could be material and would change the amount of goodwill associated with the merger.

The Company’s consolidated financial statements include the results of operations of Shore Bank only from the date of acquisition. Pro forma condensed consolidated income statements for the years ended December 31, 2008, 2007, and 2006 are shown as if the merger occurred at the beginning of each year as follows:

(in thousands)	2008		2007		2006
Interest income	$	51,682	$	54,081	$	44,755
Interest expense		20,426		20,637		14,909
Net interest income		31,256		33,444		29,846
Provision for loan losses		1,674		1,159		239
Noninterest income		7,963		6,840		6,790
Noninterest expense		26,084		25,010		23,261
Income before provision for income taxes		11,461		14,115		13,136
Provision for income taxes		3,873		4,654		4,248
Net income	$	7,588	$	9,461	$	8,888
Basic earnings per share	$	0.58	$	0.73	$	0.75
Diluted earnings per share	$	0.57	$	0.71	$	0.74

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(4) Acquisition of Gateway Financial Holdings

On December 31, 2008 pursuant to the terms of the Agreement and Plan of Merger, dated as of September 23, 2008 (the “Gateway Merger Agreement”) by and between the Company and Gateway Financial Holdings, Inc. (“GFH”) the Company acquired all of the outstanding shares of GFH (the “Gateway Merger”). The shareholders of GFH received, for each share of GFH common stock that they owned immediately prior to the effective time of the merger 0.67 shares of common stock of the Company. Each of GFH’s preferred shares outstanding immediately prior to the effective time of the merger converted into new preferred shares of the Company that have substantially identical rights. In addition, at the effective time of the merger, each outstanding option to purchase shares of GFH’s common stock under any stock plans were converted into an option to acquire the number of shares of the Company’s common stock equal to the number of shares of GFH common stock underlying the option multiplied by 0.67. The exercise price of each option was adjusted accordingly. The aggregate purchase price was approximately $160.4 million, including common stock valued at $94.2 million calculated by multiplying the 8,513,595 shares issued, by the Company’s average stock price on the day the merger was announced and the two days prior to and after the day the merger was announced of $11.06, preferred stock valued at $59.3 million, GFH stock held by the Company as an investment of $0.2 million, stock options exchanged valued at $1.4 million, and direct costs of the merger of $5.3 million.

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Net assets acquired, based on preliminary fair value adjustments, are shown in the table below (in thousands).

Securities available for sale	$	118,026
Loans, net		1,751,948
Goodwill		57,589
Core deposit intangible		3,282
Other intangibles		7,797
Other assets		210,801
Total assets acquired		2,149,443
Deposits		1,694,060
Borrowings		290,065
Other liabilities		4,950
Total liabilities assumed		1,989,075
Net assets acquired	$	160,368

The merger transaction was accounted for under the purchase method of accounting and is intended to qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code. The merger resulted in the recording of $57.6 million of estimated goodwill and $3.3 million of core deposit intangible assets. The estimated goodwill is subject to possible adjustments during the one year period from the date of the merger. The core deposit intangible assets were based on an independent valuation and will be amortized over the estimated life of the core deposits of 4.5 years, based on undiscounted cash flows.

The Company is in the process of analyzing the effect of canceling certain contracts between Gateway Bank & Trust and their vendors in order to produce efficiencies from the merger. Costs of canceling the contracts could be material and would change the amount of goodwill associated with the merger. Additionally, the Company is still determining the value of the intangible assets and the fair value of assets, liabilities, and preferred stock used to calculate goodwill in the transaction. An estimate of the intangible assets and the fair value of assets, liabilities, and preferred stock has been used in the preparation of these consolidated financial statements, however, those estimates may be revised once the final valuations have been preformed.

The Company’s consolidated financial statements include the results of operations of Gateway Bank & Trust only from the date of acquisition. Pro forma condensed consolidated income statements for the years ended December 31, 2008, 2007, and 2006 are shown as if the merger occurred at the beginning of each year as follows:

(in thousands)	2008			2007		2006
Interest income	$	164,791		$	147,035	$	102,391
Interest expense		74,954			67,951		38,683
Net interest income		89,837			79,084		63,708
Provision for loan losses		49,618			6,132		3,580
Noninterest income		(12,878	)		21,205		12,668
Noninterest expense		80,902			61,844		50,829
Income (loss) before provision for income taxes		(53,561	)		32,313		21,967
Provision for (benefit from) income taxes		(20,539	)		11,296		7,475
Net income (loss)	$	(33,022	)	$	21,017	$	14,492
Basic earnings (loss) per share	$	(1.77	)	$	1.12	$	0.82
Diluted earnings (loss) per share	$	(1.77	)	$	1.10	$	0.81

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(5) Investment Securities

The amortized cost and estimated fair values of investment securities available-for-sale at December 31, 2008 and 2007 were as follows:

	2008
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Investment Securities Available-for-Sale:
State and municipal securities	$	18,186	$	39	$	8	$	18,217
U.S. agency securities		24,584		415		—		24,999
Mortgage backed securities		95,202		46		—		95,248
Corporate bonds		5,093		—		—		5,093
Equity securities		6,747		19		686		6,080
Total investment securities available-for-sale	$	149,812	$	519	$	694	$	149,637
	2007
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Investment Securities Available-for-Sale:
State and municipal securities	$	244	$	6	$	—	$	250
U.S. agency securities		40,944		356		27		41,273
Mortgage backed securities		642		—		1		641
Equity securities		472		—		259		213
Total investment securities available-for-sale	$	42,302	$	362	$	287	$	42,377

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Information pertaining to securities with gross unrealized losses at December 31, 2008 and 2007, aggregated by investment category and length of time that the individual securities have been in a continuous loss position is as follows:

	2008
	Less than 12 Months				12 Months or More				Total
(in thousands)	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
State and municipal securities	$	2,713	$	8	$	—	$	—	$	2,713	$	8
Mortgage backed securities		—		—		5		—		5		—
Equity securities		1,281		360		147		326		1,428		686
	$	3,994	$	368	$	152	$	326	$	4,146	$	694

	2007
	Less than 12 Months				12 Months or More				Total
(in thousands)	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
U.S. agency securities	$	—	$	—	$	13,461	$	27	$	13,461	$	27
Mortgage backed securuties		—		—		635		1		635		1
Equity securities		—		—		213		259		213		259
	$	—	$	—	$	14,309	$	287	$	14,309	$	287

During 2008, equity securities with an amortized cost of $612,579 were determined to be other than temporarily impaired. An impairment loss of $561,011 was recognized through noninterest income. In evaluating the possible impairment of securities, consideration is given to the length of time and the extent to which the fair value has been less than book value, the financial conditions and near-term prospects of the issuer, and the ability and intent of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Management has evaluated the unrealized losses associated with the remaining equity securities as of December 31, 2008 and, in management’s belief, the unrealized losses are temporary and will recover in a reasonable amount of time.

The unrealized loss positions on debt securities at December 31, 2008 were directly related to interest rate movements as there is minimal credit risk exposure in these investments. Debt securities with unrealized loss positions at 2008 year-end included 1 mortgage backed security and 5 state and municipal securities. Management does not believe that any of these debt securities were other-than-temporarily impaired at December 31, 2008.

Proceeds from sales of investment securities available-for-sale during 2008 were $18,457,399. From those transactions, the Company realized gross gains of $457,399 and no gross losses, resulting in tax expense of $156,568. There were no sales of securities in 2007 or 2006.

The amortized cost and estimated fair value of investment securities available-for-sale at December 31, 2008 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Equity securities do not have contractual maturities.

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(in thousands)	Amortized Cost		Estimated Fair Value
Due in one year or less	$	17,162	$	17,395
Due after one year through five years		14,361		14,578
Due after five years through ten years		7,275		7,302
Due after ten years		104,267		104,282
Equity securities		6,747		6,080
	$	149,812	$	149,637

Investment securities at estimated fair value that were pledged to secure deposits or outstanding borrowings, or available to secure future borrowings at December 31, 2008 and 2007 were as follows:

(in thousands)	2008		2007
Public deposits	$	32,116	$	12,157
Treasury, tax and loan deposits		3,605		1,489
Federal Home Loan Bank borrowings		26,528		21,578
Federal Reserve Bank borrowings		7,755		2,019
Repurchase agreements		22,923		—
Housing and Urban Development		413		—
	$	93,340	$	37,243

(6) Loans and Allowance for Loan Losses

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.

Major classifications of loans at December 31, 2008 and 2007, were as follows:

(in thousands)	2008			2007
Commercial	$	451,426		$	109,783
Construction		897,288			165,469
Real estate - commercial mortgage		673,351			151,601
Real estate - residential mortgage		528,760			38,523
Installment loans to individuals		50,085			11,976
Loans held for sale		5,064			—
Deferred loan fees and related costs		(1,384	)		(203	)
	$	2,604,590		$	477,149

Non-performing assets at December 31, 2008 and 2007 were as follows:

(in thousands)	2008		2007
Loans 90 days past due and still accruing interest	$	3,219	$	852
Nonaccrual loans, including nonaccrual impaired loans		32,885		1,793
Real estate acquired in settlement of loans		5,092		—
	$	41,196	$	2,645

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If interest on nonaccrual loans had been accrued, such income would have amounted to $98,586, $164,006, and $153,128 in 2008, 2007, and 2006, respectively, none of which was recognized in income.

Information on impaired loans at December 31, 2008, 2007, and 2006 is as follows:

(in thousands)	2008		2007		2006
Impaired loans for which an allowance has been provided	$	2,161	$	1,698	$	1,855
Impaired loans for which no allowance has been provided		2,130		—		—
Total impaired loans	$	4,291	$	1,698	$	1,855
Allowance provided for impaired loans, included in the allowance for loan losses	$	545	$	406	$	439
Average balance in impaired loans	$	3,883	$	1,782	$	1,936
Interest income recognized from impaired loans	$	131	$	20	$	1

Excluded from the impaired loan totals above are 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. These loans had an outstanding balance of $130,013,258 and a carrying amount of $112,319,931 at December 31, 2008. Included in this impaired loan balance were $31,301,903 of nonaccrual loans which are included in the nonaccrual loan balance shown above. The carrying amount of these loans is included in the balance sheet amount of loans receivable at December 31, 2008. No such loans were identified as part of the acquisition of SFC on June 1, 2008.

Transactions affecting the allowance for loan losses for the years ended December 31, 2008, 2007, and 2006 were as follows:

(in thousands)	2008			2007			2006
Balance at beginning of year	$	5,043		$	3,911		$	3,597
Provision for loan losses		1,418			1,232			180
Acquired through Shore Merger		2,932			—			—
Acquired through Gateway Merger		42,060			—			—
Loans charged off		(337	)		(109	)		(59	)
Recoveries		102			9			193
Balance at end of year	$	51,218		$	5,043		$	3,911

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(7) Premises, Equipment, and Leases

Premises and equipment at December 31, 2008 and 2007 are summarized as follows:

(in thousands)	2008			2007
Land	$	26,357		$	4,322
Buildings and improvements		59,731			6,145
Leasehold improvements		3,224			847
Equipment, furniture, and fixtures		15,101			5,619
Construction in progress		2,768			—
		107,181			16,933
Less accumulated depreciation and amortization		(5,846	)		(4,966	)
	$	101,335		$	11,967

The Company leases land and buildings upon which certain of its operating facilities and financial center facilities are located. These leases expire at various dates through January 31, 2034. The Company has the option to purchase the land upon which the Gateway Bank & Trust Co. headquarters building is affixed at the end of the twenty-year lease term at a cost of $300,000.

The estimated cost to complete construction in progress at December 31, 2008 is $1,500,000.

Total rent expense was $1,077,612 in 2008, $906,944 in 2007, and $845,744 in 2006.

Future minimum lease payments, by year and in the aggregate, under noncancelable operating leases with initial or remaining terms of one year or more at December 31, 2008 were as follows (in thousands):

2009	$	2,720
2010		2,548
2011		2,332
2012		1,952
2013		1,838
Thereafter		13,114
	$	24,504

In addition to the above lease obligations, the Company has assumed, through Gateway Bank & Trust Co., a full service office lease for approximately 50,000 square feet of shell building at $24.00 per square foot. The lease will commence when the landlord has substantially completed the office space, which is presently estimated to be no later than July 1, 2011. The lease is contingent upon the landlord substantially completing the shell building no later than December 31, 2010; however, due to current economic conditions, the Company and landlord are discussing landlord completion of the interior office space and the possible extension of the delivery and completion dates.

(8) Deposits

The scheduled maturities of time deposits at December 31, 2008 and 2007 were as follows:

	2008				2007
(In thousands)	Time Deposits Less than $100,000		Time Deposits $100,000 or More		Time Deposits Less than $100,000		Time Deposits $100,000 or More
Maturity of:
3 months or less	$	357,126	$	110,968	$	18,240	$	16,208
3 months - 6 months		144,912		91,286		18,809		29,460
6 months - 12 months		237,761		117,113		29,353		17,405
1 year - 2 years		67,170		43,298		12,539		6,777
2 years - 3 years		29,209		17,797		24,359		14,890
3 years - 4 years		13,845		10,546		9,893		7,070
4 years - 5 years		7,761		3,528		1,640		1,869
Over 5 years		1,003		—		—		—
	$	858,787	$	394,536	$	114,833	$	93,679

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(9) Borrowings

At December 31, 2008 and 2007, the Company had advances from the FHLB totaling $279,064,674 and $53,000,000, respectively. Interest only is payable on a monthly basis until maturity. Maturities of FHLB borrowings at December 31, 2008 were as follows:

(in thousands)	Balance
2009	$	32,000
2010		11,948
2011		15,000
2012		199,531
2014		350
2017		20,236
	$	279,065

FHLB borrowings carry a weighted average interest rate of 4.18% and are all at fixed interest rates except for five variable rate or convertible advances that total $48,350,000. The FHLB borrowings were collateralized with 1-4 family residential real estate loans, commercial real estate loans, and investment securities.

The Company acquired two reverse repurchase agreements in the Gateway Merger. Each repurchase agreement is for $10.0 million and is collateralized with mortgage backed securities with a similar fair market value. The first repurchase agreement has a five year term with an interest rate fixed at 4.99% until it is repurchased by the counterparty on August 1, 2011. The second repurchase agreement has a seven year term with a repurchase date of August 1, 2013. The interest rate of this agreement is a variable rate of 9.85% minus three month LIBOR (1.83% at December 31, 2008), not to exceed 5.85%. The applicable interest rate in effect at December 31, 2008 was 5.85%. Both agreements are callable by the counterparty on a quarterly basis. The estimated fair value of these agreements as of December 31, 2008 was $22.077 million.

As part of the Gateway Merger, the Company acquired four placements of trust preferred securities as follows:

	Amount		Interest Rate		Redeemable on or After	Mandatory Redemption
	(in thousands)
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

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LIBOR in the table above refers to 3 month LIBOR. In all four trusts, the trust issuer has invested the total proceeds from the sale of the trust preferred securities in junior subordinated deferrable interest debentures issued by the Company. The trust preferred securities pay cumulative cash distributions quarterly at an annual rate, reset quarterly. The dividends paid to holders of the trust preferred securities, which are recorded as interest expense, are deductible for income tax purposes. The Company has fully and unconditionally guaranteed the trust preferred securities through the combined operation of the debentures and other related documents. The Company’s obligation under the guarantee is unsecured and subordinate to senior and subordinated indebtedness of the Company. The estimated fair value of these debentures as December 31, 2008 was $27.146 million.

The Company has borrowed $28 million from another bank. This borrowing has a variable interest rate of prime minus 1% with a floor of 4% (4% at December 31, 2008) and is payable in full on July 1, 2009.

(10) Preferred Stock and Warrant

In conjunction with the acquisition of GFH, the Company issued 23,266 shares of Series A Non-Convertible Non-Cumulative Perpetual Preferred Stock (“Series A Preferred Stock”) and 37,550 shares of Series B Non-Convertible Non-Cumulative Perpetual Preferred Stock (“Series B Preferred Stock”). Both series are non-voting except as may otherwise be required under applicable law.

The Series A Preferred Stock has no par value and a liquidation amount equal to $1,000 per share. Dividends are payable quarterly, if declared, at an annual rate of 8.75%, and are non-cumulative. After January 1, 2009, the Company will have the right and option to redeem all or a portion of the Series A Preferred Stock at the rate of $1,000 per share.

The Series B Preferred Stock has no par value and a liquidation amount equal to $1,000 per share. Dividends are payable quarterly, if declared, at a rate of 12%, and are non-cumulative. After October 1, 2009, the Company will have the right and option to redeem all or a portion of the Series B Preferred Stock at the rate of $1,000 per share.

On December 31, 2008, the Company issued 80,347 shares of Series C Fixed Rate Cumulative Preferred Stock (“Series C Preferred Stock”) to the United States Department of the Treasury (“U.S. Treasury”) for an aggregate price of $80.3 million. The shares were issued in connection with the Company’s participation in the Capital Purchase Program (“CPP”) as authorized under the Emergency Stabilization Act of 2008. The Series C Preferred Stock has no par value and a liquidation amount equal to $1,000 per share. The Series C Preferred Stock pays cumulative dividends at an annual rate of 5% for the first five years and 9% thereafter. This preferred stock is redeemable at par plus accrued and unpaid dividends subject to the approval of the Company’s primary regulators.

In addition, the Company issued to the U.S. Treasury a warrant to purchase 1,325,858 shares of the Company’s common stock at an initial exercise price of $9.09 per share. The warrant is immediately exercisable and 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

49

distributions of securities or other assets to holders of common stock, and upon certain issuances 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. If, on or prior to December 31, 2009, the Company receives aggregate gross cash proceeds of not less than the purchase price of the Series C Preferred Stock from one or more “qualified equity offerings” announced after October 31, 2009, the number of shares of common stock issuable pursuant to the U.S. Treasury’s exercise of the warrant will be reduced by one-half of the original number of shares, taking into account all adjustments, underlying the warrant. The U.S. Treasury has agreed not to exercise voting power with respect to any shares of common stock issued upon exercise of the warrant.

Shares of the Series A Preferred Stock, the Series B Preferred Stock, and the Series C Preferred Stock have priority over the Company’s common stock with regard to the payment of dividends. As such, the Company may not pay dividends on, or repurchase, redeem, or otherwise acquire for consideration shares of its common stock unless dividends for these classes of preferred stock are current.

(11) Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and the states of Virginia, Maryland, and North Carolina. With few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years prior to 2005. The current and deferred components of income tax expense for the years ended December 31, 2008, 2007, and 2006 were as follows:

(in thousands)	2008			2007			2006
Current	$	4,496		$	4,158		$	3,496
Deferred		(836	)		(568	)		(362	)
Provision for income taxes	$	3,660		$	3,590		$	3,134

The provisions for income taxes for the years ended December 31, 2008, 2007, and 2006 differ from the amount computed by applying the statutory federal income tax rate to income before taxes due to the following:

(in thousands)	2008			2007			2006
Income taxes at statutory rates	$	3,709		$	3,555		$	3,118
Increase (decrease) resulting from:
Nondeductible expenses		31			30			8
Dividends and tax exempt interest		(77	)		—			—
Officers’ life insurance		(24	)		11			10
Other		21			(6	)		(2	)
Provision for income taxes	$	3,660		$	3,590		$	3,134

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Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2008 and 2007 were as follows:

(in thousands)	2008		2007
Deferred tax assets:
Allowance for loan losses	$	22,804	$	1,438
Impairment of securities		14,567		—
Unrealized loss on securities available-for-sale		—		108
Nonaccrual loan interest		183		154
Accrued expenses		501		185
Nonqualified deferred compensation		2,925		1,601
Other		15		—
Total deferred tax assets		40,995		3,486
Deferred tax liabilities:
Prepaid expenses		328		—
Deferred loan costs		1,027		—
Fair value adjustment to net assets acquired in business combinations		1,794		—
Unrealized gain on securities available-for-sale		335		—
Unrealized fair value gains on trust preferred securities		2,463		—
Depreciation		2,087		766
Other		345		62
Total deferred tax liabilities		8,379		828
Net deferred tax asset	$	32,616	$	2,658

The Company adopted the provisions of FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, which was effective January 1, 2007. FIN 48 provides a comprehensive model for how the Company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on its tax return. There was no material effect on the Company’s financial position or results of operations as a result of implementing FIN 48.

(12) Financial Instruments with Off-Balance-Sheet Risk

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk which have not been recognized in the consolidated balance sheets. The contract amount of these instruments reflects the extent of the Company’s involvement or “credit risk.” The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. Contractual amounts at December 31, 2008 and 2007 were:

(in thousands)	2008		2007
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit	$	523,179	$	115,473
Standby letters of credit		29,030		17,425
	$	552,209	$	132,898

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other

51

termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counter party. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, income-producing commercial properties, and real estate.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of the contractual obligation by a customer to a third party. The majority of these guarantees extend until satisfactory completion of the customer’s contractual obligation. Management does not anticipate any material losses will arise from additional funding of the aforementioned commitments or letters of credit.

(13) Profit Sharing Plans

The Company has defined contribution 401(k) plans at each of its subsidiary banks. Under the Bank of Hampton Roads 401(k) plan, all employees who are 21 years of age and have completed one year of service are eligible to participate. Participants may contribute up to 20% of their compensation, subject to statutory limitations and the Company matches 100% of the employees’ contributions up to 4% of salary. Under the Shore Bank 401(k) plan, all employees who are 18 years of age and have completed 3 months of service are eligible to participate. Participants may contribute up to 15% of their compensation and the Company matches 100% up to 3% of the employees’ contributions and 50% of the next 3%. The Company may also make an additional discretionary contribution to both plans. Participants are fully vested in their contributions and the Company’s match immediately and become fully vested in the Company’s discretionary contributions after 3 years of service. The Company made discretionary contributions of $209,000, $119,000, and $119,000 for the years ended December 31, 2008, 2007, and 2006, respectively. The Company also made matching contributions of $257,297, $202,307, and $185,031 for the years ended December 31, 2008, 2007, and 2006, respectively. The Company offers its stock as an investment option under the Bank of Hampton Roads 401(k) plan.

(14) Supplemental Retirement Agreements and Executive Savings Plan

The Company has entered into supplemental retirement agreements with several key officers. Under these agreements, all but four of the officers are each eligible to receive an annual benefit payable in fifteen installments each equal to $50,000 following the attainment of their Plan Retirement Date. Two of the other four officers are eligible to receive an annual benefit payable in fifteen installments each equal to 50% of his Benefit Computation Base following the attainment of his Plan Retirement Date. The remaining two officers are eligible to receive an annual benefit payable in fifteen installments each equal to 70% of their Benefit Computation Base following the attainment of their Plan Retirement Date. The Benefit Computation Base is calculated as the average compensation from the Company over the three consecutive completed calendar years just prior to the year of retirement or termination. The Company 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 change in benefit obligation and funded status for the years ended December 31, 2008, 2007, and 2006 were as follows:

(in thousands)	2008			2007			2006
Benefit obligation at beginning of year	$	2,153		$	1,650		$	1,125
Acquired in Gateway merger		1,098			—			—
Service cost		516			388			423
Interest cost		148			115			102
Benefit obligation at end of year		3,915			2,153			1,650
Fair value of plan assets		—			—			—
Funded status	$	(3,915	)	$	(2,153	)	$	(1,650	)

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The amounts recognized in the consolidated balance sheets as of December 31, 2008 and 2007 consisted of:

(in thousands)	2008			2007
Accrued benefit cost included in other liabilities	$	(3,915	)	$	(2,153	)

The components of net periodic benefit cost for the years ended December 31, 2008, 2007, and 2006 consisted of:

(in thousands)	2008		2007		2006
Service cost	$	516	$	388	$	423
Interest cost		148		115		102
Net periodic benefit cost	$	664	$	503	$	525

The weighted-average assumptions used to determine benefit obligations and net periodic benefit cost at December 31, 2008, 2007, and 2006, were as follows:

	2008		2007		2006
Discount rate	7.00	%	7.00	%	7.00	%
Rate of compensation increase	3.00% - 5.00	%	3.00	%	3.00	%

The rate of compensation increase only applies to the officer agreements with a Benefit Computation Base.

The Company does not expect to make contributions to fund the supplemental retirement agreements in 2009. As of December 31, 2008, the following benefit payments are expected to be paid over the next ten years (in thousands):

2009	$	—
2010		358
2011		358
2012		358
2013		358
2014 - 2018		1,789
	$	3,221

In November 2006, the Company entered into retirement agreements with the members of the Board of Directors at that time. Participants are eligible for compensation under the plan upon the sixth anniversary of the participant’s first board meeting. Benefits are to be paid in monthly installments commencing at retirement and ending upon the death, disability, or mutual consent of both parties to the agreement. Under the plan, the participants continue to serve the Company after retirement by performing certain duties as outlined in the plan document. During 2008 and 2007, the Company expensed $68,478 and $63,228, respectively, related to this plan.

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The Company has implemented an Executive Savings Plan with certain officers whereby an initial contribution made by the officers will be matched each year by the Company as long as the officers’ employment continues. Contributions into the plan may be used to purchase employer stock or may be placed in savings accounts for the benefit of each individual participant and earn interest at the highest rate currently being paid on a Company certificate of deposit. Company contributions to the Executive Savings Plan during 2008, 2007, and 2006 were $241,759, $268,300, and $217,000, respectively.

(15) Dividend Reinvestment and Optional Cash Purchase Plan

The Company has a Dividend Reinvestment and Optional Cash Purchase Plan. The plan enables shareholders to receive cash payment or reinvest their dividends. The stock purchased through the plan directly from the Company, is valued at the weighted average sales price of the Company’s common stock in transactions occurring during the 60 calendar days immediately prior to the purchase date. The purchase price of shares purchased on the open market is the current market price of the shares purchased on the applicable purchase dates.

(16) Director and Employee Stock Compensation Plans

During 2008, 2007, and 2006 the Company authorized the grant of options to employees and directors for 18,000, 34,968, and 210,131 shares, respectively, of the Company’s common stock under stock compensation plans that have been approved by the Company’s shareholders. All outstanding options granted previous to December 31, 2006 have 10-year terms and are fully vested and exercisable at the date of grant. The options granted on December 31, 2006 have 10-year terms and vest ratably over periods that range from 1 year to 5 years. Of the stock options granted during 2007, 14,968 have terms that range from 1 to 8 years and are fully vested and exercisable at the date of grant and 20,000 have 10-year terms and vest after 6 to 10 years of service. The options granted during 2008 have 10-year terms and vest ratably over 5 years. During 2008, the Company acquired 216,183 stock options as part of the Shore Merger and 1,185,018 stock options as part of the Gateway Merger. A summary of the Company’s stock option activity and related information is as follows:

	Options Outstanding		Weighted Average Exercise Price
Balance at December 31, 2005	1,024,559		$	7.70
Granted	210,131			11.93
Exercised	(277,041	)		5.80
Expired	(27,679	)		8.94
Balance at December 31, 2006	929,970			9.19
Granted	34,968			12.91
Exercised	(93,599	)		7.55
Forfeited	(10,992	)		12.00
Expired	(2,191	)		10.85
Balance at December 31, 2007	858,156			9.48
Acquired through Shore Merger	216,183			6.27
Acquired through Gateway Merger	1,185,018			14.12
Granted	18,000			11.41
Exercised	(112,964	)		5.13
Forfeited	(2,750	)		12.00
Expired	(65,637	)		11.33
Balance at December 31, 2008	2,096,006		$	11.96

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Stock-based compensation expense recognized in the consolidated statements of income for the years ended December 31, 2008, 2007, and 2006 was $149,608, $337,250, and $179,811, respectively, with a related tax benefit of $29,014, $115,276, and $61,136, respectively. During 2008, 2007, and 2006, stock-based compensation expense was comprised of $86,156, $160,229, and $13,372, respectively, related to stock options which vested during the period. During 2008, 2007, and 2006, the remaining stock-based compensation expense of $63,452, $177,021, and $166,439, respectively, related to share awards.

In 2008, 2007, and 2006, 112,964, 93,599, and 277,041 options were exercised, respectively; however, only 112,282, 76,700, and 198,158 new shares, respectively, were issued since 682, 16,899, and 78,883 shares, respectively, of previously acquired stock were used to exercise some of the options.

Information pertaining to fully vested options outstanding and exercisable as of December 31, 2008 is as follows:

Range of Exercise Prices			Aggregate Intrinsic Value		Number of Options	Remaining Contractual Life (in years)	Weighted Average Exercise Price
$     3.09	-	$    5.90	$	853,166	247,964	1.69	$	5.29
6.53	-	8.84		386,538	482,169	3.22		7.92
9.11	-	11.80		—	583,969	3.76		10.06
12.00	-	15.37		—	103,299	7.38		12.36
19.43	-	22.07		—	350,221	5.93		19.75
23.60	-	24.67		—	74,069	6.62		24.23
$     3.09	-	$  24.67	$	1,239,704	1,841,691	4.07	$	11.40

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The total intrinsic value of stock options exercised during 2008, 2007, and 2006 was $642,619, $487,004, and $1,441,223, respectively. Cash received from stock option exercises during 2008, 2007, and 2006 was $571,222, $476,076, and $756,648, respectively. The Company has 839,383 shares available under shareholder approved stock incentive plans. As of December 31, 2008, there was $732,983 of unrecognized compensation cost related to non-vested stock options. That cost is expected to be recognized over a weighted average period of 4.64 years.

The weighted-average grant-date fair value of stock options granted and acquired through mergers during 2008, 2007, and 2006 was $1.86, $2.34, and $1.96, respectively. The following assumptions were used to arrive at the fair value of stock options:

	2008	2007	2006
Risk-free interest rate	2.25% - 3.34%	4.36% - 4.68%	4.68	%
Volatility	34.30% - 40.56%	18.40% - 27.27%	18.40	%
Dividend yield	3.93% - 5.04%	3.33% - 3.43%	3.33	%
Expected term (in years)	0.10 - 8.30	1.90 - 9.50	8.72

Option valuation models require the input of highly subjective assumptions. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a representative single measure of the fair value at which transactions may occur. Expected volatility is based on historical volatility of the Company’s traded shares. The expected term is calculated by the lattice option pricing model using assumptions regarding the contractual term of the stock options, vesting periods, the exercise price to market stock price multiple experienced by the Company, and the historical employee exit rate. The weighted-average expected term for stock options granted and acquired through mergers during 2008 was 3.64 years.

The Company has granted non-vested shares to certain directors and employees as part of incentive programs. These non-vested shares have vesting schedules that range from one to nine years and are expensed over the same schedules. A summary of the Company’s non-vested share activity and related information was as follows:

	Number of Shares		Weighted Average Grant Date Fair Value
Balance at December 31, 2005	30,045		$	10.71
Granted	20,131			10.81
Vested	(3,000	)		10.65
Balance at December 31, 2006	47,176			10.76
Granted	20,364			12.12
Vested	(4,500	)		10.76
Forfeited	(8,500	)		10.98
Balance at December 31, 2007	54,540			11.23
Granted	32,908			8.50
Vested	(37,623	)		11.16
Balance at December 31, 2008	49,825		$	9.49

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As of December 31, 2008, there was $447,596 of total unrecognized compensation cost related to non-vested share awards. That cost is expected to be recognized over a weighted average period of 2.06 years. The total fair value of shares vested during the years ended December 31, 2008, 2007, and 2006 was $418,355, $57,045, and $36,000, respectively.

(17) Employment Agreements

The Company and its subsidiaries have entered into employment agreements with 22 officers to ensure a stable and competent management base. Two of the agreements expire in 2009, one expires in 2010, twelve expire in 2011, two expire in 2012, and five expire in 2013. All but one of the agreements will automatically renew at the end of their terms unless the officer is notified in writing prior to expiration. Among other things, the agreements provide for severance benefits payable to the officers upon termination of employment following a change of control in the Company.

(18) Other Noninterest Expense

A summary of other noninterest expense for the years ended December 31, 2008, 2007, and 2006 is as follows:

(in thousands)	2008		2007		2006
Advertising and marketing	$	412	$	326	$	481
Telephone and postage		481		305		294
Professional		383		279		367
Bank franchise tax		621		464		280
Equipment		663		343		304
ATM and VISA Check Card		551		500		423
Director and regional board fees		443		307		284
FDIC assessment		262		42		39
Other		2,203		1,194		1,092
	$	6,019	$	3,760	$	3,564

(19) Restrictions on Loans and Dividends from Subsidiaries

Regulatory agencies place certain restrictions on dividends paid and loans or advances made by the Banks to the Company. The amount of dividends the Banks may pay to the Company, without prior approval, is limited to current year earnings plus retained net profits for the two preceding years. At December 31, 2008, the amount available was approximately $5.2 million. Loans and advances are limited to 10% of the Banks’ common stock and capital surplus. As of December 31, 2008, funds available for loans or advances by the Banks to the Company were approximately $3.0 million.

(20) Regulatory Capital Requirements

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. The Company’s and the Banks’ capital amounts and classification are subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies. Management believes that, as of December 31, 2008, the Company and the Banks met all capital adequacy requirements to which they are subject and to be considered well-capitalized under these capital adequacy guidelines. To be categorized as well-capitalized, minimum amounts and ratios, as set forth in the table that follows, must be maintained.

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A summary of the Company’s and the Banks’ required and actual capital components follows:

(in thousands)	Actual				For Capital Adequacy Purposes				To Be Well-Capitalized Under Prompt Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2008
Tier 1 Capital:
Consolidated Company	$	265,468	9.89	%	$	107,386	4.00	%		N/A	N/A
Bank of Hampton Roads		70,499	12.43			22,690	4.00		$	34,035	6.00	%
Shore Bank		24,483	11.42			8,578	4.00			12,867	6.00
Gateway Bank & Trust Co.		169,321	8.79			77,076	4.00			115,614	6.00
Total Risk-Based Capital:
Consolidated Company		299,235	11.15			214,772	8.00			N/A	N/A
Bank of Hampton Roads		76,931	13.56			45,380	8.00			56,725	10.00
Shore Bank		27,164	12.67			17,156	8.00			21,445	10.00
Gateway Bank & Trust Co.		193,629	10.05			154,152	8.00			192,690	10.00
Leverage Ratio:
Consolidated Company		265,468	32.06			33,120	4.00			N/A	N/A
Bank of Hampton Roads		70,499	11.77			23,953	4.00			29,942	5.00
Shore Bank		24,483	8.44			11,607	4.00			14,508	5.00
Gateway Bank & Trust Co.		169,321	8.04			84,281	4.00			105,351	5.00
As of December 31, 2007
Tier 1 Capital:
Consolidated Company	$	73,610	14.58	%	$	20,195	4.00	%		N/A	N/A
Bank of Hampton Roads		71,349	14.17			20,147	4.00		$	30,220	6.00	%
Total Risk-Based Capital:
Consolidated Company		78,653	15.58			40,389	8.00			N/A	N/A
Bank of Hampton Roads		76,392	15.17			40,293	8.00			50,367	10.00
Leverage Ratio:
Consolidated Company		73,610	13.44			21,908	4.00			N/A	N/A
Bank of Hampton Roads		71,349	13.05			21,863	4.00			27,329	5.00

(21) Fair Value of Assets and Liabilities

SFAS No. 107, Disclosures About Fair Value of Financial Instruments, 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. SFAS No. 107 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, as defined by SFAS No. 107:

(a) Cash and Cash Equivalents

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

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(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) Restricted Equity Securities

The carrying amount approximates fair value.

(d) Loans

For credit card and other loan receivables with short-term and/or variable characteristics, the carrying value approximates fair value. 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. The carrying value of loans held for sale is a reasonable estimate of fair value since the loans are expected to be sold within a short period.

(e) Interest Receivable and Interest Payable

The carrying amount approximates fair value.

(f) Bank Owned Life Insurance

The carrying amount approximates fair value.

(g) Deposits

The fair value of noninterest bearing deposits and deposits with no defined maturity, by SFAS No. 107 definition, is the amount payable on demand at the reporting date. The fair value of time deposits is estimated by discounting the future cash flows using the current rates at which similar deposits would be made.

(h) Borrowings

The fair value of borrowings is estimated using discounted cash flow analysis based on the 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 December 31, 2008 and 2007, and as such, the related fair values have not been estimated.

The estimated fair value of the Company’s financial instruments required to be disclosed under SFAS No. 107 at December 31, 2008 and 2007 were:

	2008				2007
(in thousands)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Assets:
Cash and due from banks	$	42,827	$	42,827	$	19,758	$	19,758
Overnight funds sold		510		510		183		183
Interest-bearing deposits in other banks		4,975		4,975		5,623		5,623
Investment securities available-for-sale		149,637		149,637		42,377		42,377
Restricted equity securities		27,795		27,795		4,704		4,704
Loans, net		2,553,372		2,555,082		472,106		469,465
Interest receivable		12,272		12,272		2,431		2,431
Bank owned life insurance		46,603		46,603		773		773
Liabilities:
Deposits		2,296,146		2,299,179		431,457		431,327
FHLB borrowings		279,065		282,005		53,000		53,975
Other borrowings		77,223		77,223		—		—
Overnight funds purchased		73,300		73,300		—		—
Interest payable		5,814		5,814		1,636		1,636

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The Company adopted SFAS No. 157, Fair value Measurements (“SFAS 157”), on January 1, 2008, and there was no material impact to the consolidated financial statements. This statement applies to all assets and liabilities that are being measured and reported on a fair value basis. SFAS 157 requires new disclosures that establish a framework for measuring fair value, expands disclosure about fair value measurements, and establishes a hierarchy for ranking the quality and reliability of the information used to determine fair values. The statement requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1 – Quoted market prices in active markets for identical assets or liabilities.

Level 2 – Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3 – Unobservable inputs that are not corroborated by market data.

In February 2008, the FASB issued Staff Position No. 157-2 (“FSP 157-2”) which delayed the effective date of SFAS 157 for certain nonfinancial assets and nonfinancial liabilities except for those items that are recognized or disclosed at fair value in the financial statements on a recurring basis. FSP 157-2 defers the effective date of SFAS 157 for such nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. Thus, the Company has only partially applied SFAS 157. Those items affected by FSP 157-2 include other real estate owned, goodwill, and core deposit intangibles.

In October 2008, the FASB issued Staff Position No. 157-3 (“FSP 157-3”) to clarify the application of SFAS 157 in a market that is not active and to provide key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP 157-3 was effective upon issuance, including prior periods for which financial statements were not issued.

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, quoted prices of securities with similar characteristics, or discounted cash flow. Level 2 securities would include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions, and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

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Impaired loans Loans are designated as impaired when, in the judgment of management based on current events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral. Fair value is measured based on the value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral is a house or building in the process of construction or if an appraisal of the real property is over two years old, then the fair value is considered level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’ financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Impaired loans are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income. At December 31, 2008, the Company had impaired loans totaling $2.16 million for which an allowance was provided in the amount of $545 thousand and included in the allowance for loan losses.

Other Real Estate Owned Certain assets such as other real estate owned are measured at fair value less cost to sell. The Company believes that the fair value component in its valuation follows the provisions of SFAS No. 157.

Loans Held for Sale Loans held for sale are carried at the lower of cost or market value based on what secondary markets are currently offering for portfolios with similar characteristics. As such, the Company classifies loans subject to recurring fair value adjustment as Level 2.

Derivative Loan Commitments The Company enters into commitments to originate or purchase 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. These are carried at fair value and are included in other assets at December 31, 2008.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table reflects the fair value of assets and liabilities measured and recognized at fair value on a recurring basis in the consolidated balance sheet.

(in thousands)	December 31, 2008
	Assets/Liabilities Measured at Fair Value		Fair Value Measurements Using
			Level 1		Level 2		Level 3
Investment securities available-for-sale	$	149,637	$	6,080	$	142,387	$	1,170
Derivative loan commitments		173		—		—		173

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(in thousands)	Fair Value Measurements Using Significant Unobservable Inputs
	Investment Securities Available-for-Sale		Derivative Loan Commitments
Balance at December 31, 2007	$	—	$	—
Purchases through acquisition		1,170		173
Balance at December 31, 2008	$	1,170		173

Assets Measured at Fair Value on a Nonrecurring 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 following table presents the assets carried on the balance sheet by caption and by level within the SFAS 157 valuation hierarchy, for which a nonrecurring change in fair value has been recorded during the year ended December 31, 2008.

(in thousands)	December 31, 2008
	Assets Measured at Fair Value		Fair Value Measurements Using						Total Losses
			Level 1		Level 2		Level 3
Investment securities available-for-sale	$	52	$	52	$	—	$	—	$	561

(22) Subsequent Event

On January 27, 2009, the Company declared a cash dividend of $0.11 per share payable March 15, 2009, to shareholders of record on February 27, 2009.

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(23) Condensed Parent Company Only Financial Statements

The condensed financial position as of December 31, 2008 and 2007, and the condensed results of operations and cash flows for each of the years in the three-year period ended December 31, 2008, of Hampton Roads Bankshares, Inc., parent company only, are presented below.

Condensed Balance Sheets

(in thousands)	2008			2007
Assets:
Cash on deposit with subsidiaries	$	55,605		$	1,048
Equity securities available-for-sale		5,104			213
Investment in subsidiaries		372,703			71,676
Other assets		4,206			728
Total assets	$	437,618		$	73,665
Liabilities:
Borrowings	$	78,646		$	—
Other liabilities		14,163			5
Total liabilities		92,809			5
Shareholders’ equity:
Preferred stock		133,542			—
Common stock		13,611			6,447
Capital surplus		171,284			42,677
Retained earnings		26,482			24,486
Accumulated other comprehensive income (loss)		(110	)		50
Total shareholders’ equity		344,809			73,660
Total liabilities and shareholders’ equity	$	437,618		$	73,665

Condensed Statements of Income

(in thousands)	2008		2007		2006
Income:
Dividends from subsidiaries	$	7,429	$	4,420	$	3,564
Interest income		668		—		17
Other income		58		—		142
Total income		8,155		4,420		3,723
Expenses:
Interest expense		891		—		—
Other expense		637		280		86
Total expense		1,528		280		86
Income before income taxes and equity in undistributed earnings of subsidiaries		6,627		4,140		3,637
Provision for income tax benefit (expense)		275		96		(24	)
Equity in undistributed earnings of subsidiaries		273		2,575		2,423
Net income	$	7,175	$	6,811	$	6,036

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Condensed Statements of Cash Flows

(in thousands)	2008			2007			2006
Operating Activities:
Net income	$	7,175		$	6,811		$	6,036
Adjustments:
Equity in undistributed earnings of subsidiaries		(273	)		(2,575	)		(2,423	)
Stock-based compensation expense		149			337			180
Regional board fees		110			24			25
Other than temporary impairment		427			—			—
Change in other assets		33			648			217
Change in other liabilities		3,240			(1	)		(12	)
Net cash provided by operating activities		10,861			5,244			4,023
Investing Activities:
Purchase of equity securities available-for-sale		(1,006	)		—			(472	)
Net (increase) decrease in loans		(429	)		—			800
Investment in subsidiaries		(36,000	)		(788	)		(22,366	)
Investment in affiliates		—			210			(64	)
Net cash used in investing activities		(37,435	)		(578	)		(22,102	)
Financing Activities:
Net increase in borrowings		20,529			—			—
Issuance of shares in rights and public offering		—			—			20,156
Stock issuance costs		—			—			(1,110	)
Common stock repurchased		(1,446	)		(2,877	)		(3,424	)
Dividends paid, net		(2,936	)		(2,166	)		(2,059	)
Cash acquired in mergers		(27,407	)		—			—
Cash paid in mergers		11,331			—			—
Issuance of Series C preferred stock and warrant		80,347			—			—
Excess tax benefit realized from stock options exercised		20			118			147
Proceeds from exercise of stock options		572			476			757
Issuance of shares to 401(k) plan		—			137			122
Issuance of shares to executive savings plan		121			146			—
Net cash provided by (used in) financing activities		81,131			(4,166	)		14,589
Increase (decrease) in cash and cash equivalents		54,557			500			(3,490	)
Cash and cash equivalents at beginning of year		1,048			548			4,038
Cash and cash equivalents at end of year	$	55,605		$	1,048		$	548

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(24) Intangible Assets

A summary of intangible assets as of December 31, 2008 is as follows:

(in thousands)	2008
Intangible assets subject to future amortization:
Core deposit intangible, gross	$	8,105
Less accumulated amortization		(347	)
Core deposit intangible, net	$	7,758
Employment contract intangible, gross	$	1,957
Less accumulated amortization		(19	)
Employment contract intangible, net	$	1,938
Insurance book of business intangible, gross	$	6,000
Less accumulated amortization		—
Insurance book of business intangible, net	$	6,000
Total intangibles subject to future amortization, net	$	15,696
Intangible assets not subject to future amortization:
Goodwill	$	82,671

There were no intangible assets as of December 31, 2007.

The following table presents the estimated amortization expense (in thousands) for intangible assets for each of the five years ending December 31, 2013 and the estimated amount amortizable thereafter. These estimates are subject to change in future periods to the extent management determines it is necessary to make adjustments to the carrying value or estimated useful life of amortizing intangible assets.

2009	$	2,353
2010		2,353
2011		2,353
2012		1,754
2013		1,377
Thereafter		5,506
	$	15,696

(25) Related Party Transactions

The Company has a 19% interest in Tidewater Home Funding, LLC (“THF”). The Company accounts for this investment under the equity method. The Bank of Hampton Roads has established a warehouse credit facility for THF for up to $10,000,000. As of December 31, 2008 and 2007, THF had drawn $3,599,442 and $1,338,165 on this warehouse line of credit, at a variable rate of 7.25% and 8.25%, respectively.

The Company has a 9% ownership in Davenport Financial Fund, LLC. This investment is accounted for under the equity method.

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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 collectibility or present other unfavorable features. At December 31, 2008 and 2007, loans to executive officers, directors, and their associates amounted to $88,345,146 and $26,671,391, respectively. During 2008, additional loans and repayments of loans by executive officers, directors, and their associates were $68,143,003 and $6,469,248, respectively.

Deposits are taken from the Company’s executive officers and directors and their associates during the ordinary course of business. In management’s opinion, these deposits are taken on substantially the same terms, including interest rates, as those prevailing at the time for comparable deposits from other persons. At December 31, 2008 and 2007, deposits from executive officers, directors, and their associates amounted to $16,026,028 and $6,298,583, respectively.

Gateway Bank & Trust Co. leases its Nags Head and one of its Kitty Hawk branches from a director and his wife for monthly payments of $6,000 and $16,679, respectively. The term of the Nags Head lease is for five years, with one five-year renewal. Kitty Hawk is a land lease that commenced in April 2006 for a term of twenty years, with three five-year renewals.

One of the directors is the managing member of two limited liability companies that serve as the managers for the legal entities which own and manage the Dominion Tower at 999 Waterside Drive, Norfolk, Virginia 23510. The Company has leased the second floor of the Dominion Tower for its executive offices and a first floor branch since August 2005. The lease expires in September 2016, with one renewal option for a period of seven years. Rent payments made in 2008, 2007, and 2006 totaled $624,951, $582,579, and $536,241.

(26) Quarterly Financial Data (Unaudited)

Summarized unaudited quarterly financial data for the years ended December 31, 2008 and 2007 is as follows:

(in thousands)	2008
	Fourth		Third		Second		First
Interest income	$	13,610	$	12,370	$	9,793	$	9,404
Interest expense		5,039		4,848		4,012		4,018
Net interest income		8,571		7,522		5,781		5,386
Provision for loan losses		594		280		274		270
Noninterest income		1,264		1,801		1,694		1,221
Noninterest expense		5,671		6,541		4,659		4,116
Income before provision for income taxes		3,570		2,502		2,542		2,221
Provision for income taxes		1,225		806		869		760
Net income	$	2,345	$	1,696	$	1,673	$	1,461
Basic earnings per share	$	0.18	$	0.13	$	0.15	$	0.14
Diluted earnings per share	$	0.18	$	0.13	$	0.15	$	0.14

66

(in thousands)	2007
	Fourth		Third		Second		First
Interest income	$	9,999	$	9,941	$	9,519	$	8,744
Interest expense		3,891		3,635		3,399		3,090
Net interest income		6,108		6,306		6,120		5,654
Provision for loan losses		494		270		246		222
Noninterest income		863		824		830		924
Noninterest expense		3,825		4,053		4,083		4,034
Income before provision for income taxes		2,652		2,807		2,621		2,322
Provision for income taxes		939		971		892		790
Net income	$	1,713	$	1,836	$	1,729	$	1,532
Basic earnings per share	$	0.17	$	0.18	$	0.17	$	0.15
Diluted earnings per share	$	0.16	$	0.17	$	0.17	$	0.15

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EX-21.1

Exhibit 21.1

Subsidiaries of the Registrant

Bank of Hampton Roads, a Virginia corporation, is a wholly-owned subsidiary of Hampton Roads Bankshares, Inc.

(1) Bank of Hampton Roads Service Corporation, a Virginia corporation, is a wholly-owned subsidiary of the Bank of Hampton Roads.

(2) Hampton Roads Investments, Inc., a Virginia corporation, is a wholly-owned subsidiary of Hampton Roads Bankshares, Inc.

Shore Bank, a Virginia corporation, is a wholly-owned subsidiary of Hampton Roads Bankshares, Inc.

(1) Shore Investments Service Corporation (Shore Investments Inc.), a Virginia corporation, is a wholly-owned subsidiary of Shore Bank.

(2) Shore Bank owns a 5.83% interest in Bankers Title, LLC, which was organized in Virginia.

Gateway Bank & Trust, a North Carolina corporation, is a wholly-owned subsidiary of Hampton Roads Bankshares, Inc.

(1) Gateway Insurance Services, Inc, a North Carolina corporation, is a wholly-owned subsidiary of Gateway Bank & Trust.

(2) Gateway Investment Services, Inc, a North Carolina corporation, is a wholly-owned subsidiary of Gateway Bank & Trust.

(3) Gateway Bank Mortgage, Inc, a North Carolina corporation, is a wholly-owned subsidiary of Gateway Bank & Trust.

(4) Gateway Title Agency, Inc, a North Carolina corporation, is a wholly-owned subsidiary of Gateway Bank & Trust.

Hampton Roads Bankshares, Inc. owns a 19% interest in Tidewater Home Funding, LLC, which was organized in Virginia.

Hampton Roads Bankshares, Inc. owns an 9% interest in Davenport Financial Fund, LLC, which was organized in Virginia.

41

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (No. 333-157029 and No. 333-84304) on Form S-3 and (No. 333-64346, No. 333-134583, and No. 333-139968) on Form S-8 of Hampton Roads Bankshares, Inc. and subsidiaries of our reports dated March 27, 2009, relating to our audits of the consolidated financial statements and internal control over financial reporting, which appear in the Annual Report to shareholders, included in and incorporated by reference in the Annual Report on Form 10-K of Hampton Roads Bankshares Inc. for the year ended December 31, 2008.

Winchester, Virginia

March 27, 2009

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Hampton Roads Bankshares, Inc.

We consent to the incorporation by reference in the Registration Statements (No. 333-84304 and No. 333-157029) on Form S-3 and (No. 333-64346, No. 333-134583, No. 333-139968, and No. 333-154959) on Form S-8 of Hampton Roads Bankshares, Inc. of our report dated March 1, 2007, with respect to the consolidated statements of income, changes in shareholders’ equity, and cash flows of Hampton Roads Bankshares, Inc. and subsidiaries for the year ended December 31, 2006, which report appears in the December 31, 2008 annual report on Form 10-K of Hampton Roads Bankshares, Inc. Our report refers to the Company’s adoption of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, on January 1, 2006.

/s/    KPMG LLP

Norfolk, Virginia

March 27, 2009

EX-31.1

Exhibit 31.1

Certifications under Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Chief Executive Officer

I, Jack W. Gibson, certify that:

1. I have reviewed this Annual Report on Form 10-K of Hampton Roads Bankshares, Inc. for the period ended December 31, 2008;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 27, 2009	/s/ Jack W. Gibson
	Jack W. Gibson
	Vice Chairman and Chief Executive Officer

42

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

I, Neal A. Petrovich, certify that:

1. I have reviewed this Annual Report on Form 10-K of Hampton Roads Bankshares, Inc. for the period ended December 31, 2008;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 27, 2009	/s/ Neal A. Petrovich
	Neal A. Petrovich
	Executive Vice President and Chief Financial Officer

43

EX-32.1

Exhibit 32.1

Certification under Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of Hampton Roads Bankshares, Inc. (the “Company”) for the period ended December 31, 2008 to be filed with the Securities and Exchange Commission (“Report”), we, Jack W. Gibson, Chief Executive Officer, and Neal A. Petrovich, Chief Financial Officer, hereby certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

(a) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jack W. Gibson
Jack W. Gibson
Chief Executive Officer
Date:	March 27, 2009
/s/ Neal A. Petrovich
Neal A. Petrovich
Chief Financial Officer
Date:	March 27, 2009

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EX-99.1

Exhibit 99.1

Report of Independent Registered Public Accounting Firm

The Board of Directors

Hampton Roads Bankshares, Inc.

We have audited the accompanying consolidated statements of income, changes in shareholders’ equity, and cash flows of Hampton Roads Bankshares, Inc. and subsidiaries (the Company) for the year ended December 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Hampton Roads Bankshares, Inc. and subsidiaries for the year ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

As discussed in note 2 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, on January 1, 2006.

/s/    KPMG LLP

Norfolk, Virginia

March 1, 2007