SEC launches inquiry into Hampton Roads Bankshares

NORFOLK

The SEC has launched an "informal inquiry" into some aspects of Hampton Roads Bankshares Inc.'s financial practices.

The Norfolk-based parent of Bank of Hampton Roads and Shore Bank disclosed the inquiry in a filing Friday with the Securities and Exchange Commission. The filing amended its registration statement offering 100 million shares of new stock to existing shareholders.

The SEC's Division of Enforcement notified Hampton Roads Bankshares on Nov. 22 that it is "conducting an informal inquiry into the company's provisions and allowances for loan losses and deferred tax asset valuation allowances contained in its annual and quarterly reports for fiscal years 2008 through 2010."

The banking company said it will cooperate with the inquiry and believes its financial practices will be found to be appropriate.

"However, we cannot predict the timing or eventual outcome of this inquiry," it said in the filing. "The inquiry could possibly result in penalties, sanctions or a restatement of our previously issued financial statements."

John Heine, an SEC spokesman, said he could not confirm the inquiry or comment on specific situations.

Doug Glenn, Hampton Roads Bankshares' general counsel, did not respond to an e-mail seeking comment.

The SEC inquiry adds to Hampton Roads Bankshares' list of woes as it attempts to raise $40 million from its shareholders. The stock offering is meant to supplement the $235 million it raised from private-equity investors at the end of September.

The company received a subpoena Nov. 2 from the Department of Justice for information related to its 2008 merger with Gateway Financial Holdings Inc. and loans that Gateway made before the merger. It is cooperating with that criminal investigation.

Then, on Nov. 17, it received a noncompliance notice from Nasdaq for its low stock price. The bid price for its stock has been below $1 a share for more than 30 days.

The notice gives Hampton Roads Bankshares until May 16 to bring up its stock value, or it could be delisted. If the stock does not rise, the company said it would consider options, including a 1-for-2 reverse stock split, to meet listing rules.

Hampton Roads Bankshares has struggled with mounting loan losses, which have eroded its capital and dragged down its earnings. It has lost $176.6 million in the first nine months of 2010. Its stock has plummeted from around $11 a share at the time of the Gateway merger to its closing price of 60 cents each on Monday.

Christopher Dinsmore, (757) 446-2271, chris.dinsmore@pilotonline.com.