After merger, Hampton Roads Bankshares plans to buckle down

NORFOLK

When its merger with Gateway Financial Holdings Inc. takes effect at the end of the month, Hampton Roads Bankshares Inc. will become one of the largest banking organizations based in Virginia.

But the parent of Bank of Hampton Roads and Shore Bank will concentrate next year on preserving its credit quality and capital rather than pursuing continued growth, its president and chief executive officer told shareholders Thursday.

Turmoil in the financial sector and a deteriorating economy have made for "really trying times" that will continue during 2009, Jack W. Gibson, president and CEO of Hampton Roads Bankshares, told about 125 shareholders, employees and directors during a special meeting to vote on the merger.

The company, which held the meeting at its headquarters in the Dominion Tower office building, said more than 8.98 million of its shares, or 67.9 percent, were cast in favor of the merger. Slightly more than 100,000 shares voted against it.

Virginia Beach-based Gateway, whose shareholders voted during a separate meeting at the company's headquarters on Laskin Road, said 8.78 million of its shares were cast in favor of the transaction. That amounted to 69 percent in favor. Slightly more than 128,000 Gateway shares voted against the merger.

The Hampton Roads Bankshares-Gateway combination will have assets of $3.2 billion and $2.5 billion in deposits.

Merger-related job losses are likely to be negligible because only three of the banks' 58 branches overlap, Gibson said. The consolidation process will take 12 to 18 months, he said.

The merger received the needed approvals from the Federal Reserve Bank of Richmond and Virginia and North Carolina regulators on Wednesday.

The biggest challenge, Gibson said, will involve consolidating Hampton Roads Bankshares' three banks, a move that will reduce its regulatory costs and other overhead. Given that the company's "Hampton Roads" name will have little appeal outside this region, a name change is "something that needs to be discussed," he said.

Hampton Roads Bankshares approached Gateway in September about a merger after Gateway suffered heavy losses on its investments in the giant mortgage-finance companies Fannie Mae and Freddie Mac. Its losses produced a serious erosion in Gateway's capital.

Their merger agreement calls for an exchange of 0.67 of a common share of Hampton Roads Bankshares for each of Gateway's 12.7 million common shares. At the market's close on Thursday, that worked out to a value of $6.62 a share, or slightly more than $84 million for Gateway.

Tom Shean, (757) 446-2379, tom.shean@pilotonline.com