Xenith Bankshares, Inc. - FORM 8-K - EX-99.2

Attached files

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8-K - FORM 8-K - Xenith Bankshares, Inc.	d269582d8k.htm
EX-99.1 - EX-99.1 - Xenith Bankshares, Inc.	d269582dex991.htm

Exhibit 99.2

XENITH BANKSHARES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated financial statements and related notes are presented to show the effect on the historical financial position and results of operations of Xenith Bankshares, Inc. (the “Company”) of the following:

•

the sale by Xenith Bank (formerly known as The Bank of Hampton Roads), a wholly-owned subsidiary of the Company (“the Bank”), of certain assets of Gateway Bank Mortgage, Inc., a wholly-owned subsidiary of the Bank (“GBMI”), to Cornerstone Home Lending, Inc. (“CHL”) and the transition of GBMI’s operations, which include originating, closing, funding and selling first lien residential mortgage loans, to CHL, which was completed on October 17, 2016 (the “GBMI Sale”); and

•

the merger of the Company (formerly known as Hampton Roads Bankshares, Inc.) and pre-merger Xenith Bankshares, Inc. (“Legacy XBKS”), which was completed on July 29, 2016 (the “Merger” and, together with the GBMI Sale, the “Transactions”).

The unaudited pro forma condensed consolidated balance sheet as of June 30, 2016 is presented as if the Transactions had occurred on June 30, 2016. The unaudited pro forma condensed consolidated statements of income for the six months ended June 30, 2016 and the year ended December 31, 2015 are presented in each case as if the Transactions had occurred on January 1, 2015. In addition, because GBMI’s business has not been presented previously as discontinued operations in the Company’s audited financial statements, the Company is including unaudited pro forma condensed consolidated statements of income for the years ended December 31, 2014 and 2013 giving effect to the GMBI Sale. The unaudited pro forma condensed consolidated statements of income for the fiscal years ended December 31, 2014 and 2013 are presented as if the GMBI Sale had occurred on January 1, 2014 and 2013, respectively.

The historical consolidated financial statements have been adjusted to reflect factually supportable items that are directly attributable to the Transactions and, with respect to the income statements only, expected to have a continuing impact on consolidated results of operations.

The adjustments included in these unaudited pro forma condensed consolidated financial statements are preliminary and may be revised. The unaudited pro forma condensed consolidated financial statements also do not consider any potential impacts of potential revenue enhancements, anticipated cost savings and expense efficiencies, or other dispositions, among other factors.

The unaudited pro forma condensed consolidated financial statements are provided for illustrative and informational purposes only. The unaudited pro forma condensed consolidated financial statements are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the Transactions been completed as of the dates indicated or that may be achieved in the future. The preparation of the unaudited pro forma condensed consolidated financial statements and related adjustments required management to make certain assumptions and estimates, which it believes are reasonable under the circumstances. Actual amounts could differ materially from these estimates. The unaudited pro forma condensed consolidated financial statements should be read together with the accompanying notes to the unaudited pro forma condensed consolidated financial statements, the financial statements of the Company in its Annual Report on Form 10-K for the year ended December 31, 2015 and its Quarterly Report on Form 10-Q for the period ended June 30, 2016, and the financial statements of Legacy XBKS in its Annual Report on Form 10-K for the year ended December 31, 2015.

XENITH BANKSHARES, INC. (f/k/a Hampton Roads Bankshares, Inc.)

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

as of June 30, 2016

(unaudited)


	Xenith Bankshares, Inc. (f/k/a Hampton Roads Bankshares, Inc.)			GBMI			Legacy XBKS			GBMI Sale Pro Forma Adjustments				Legacy XBKS Merger Pro Forma Adjustments				Pro Forma
(in thousands, except share data)
Assets:
Cash and due from banks	$	16,166		$	14,758		$	27,761		$	73,041		A	$	(30,700	)	C	$	71,510
Interest-bearing deposits in other banks		705																	705
Overnight funds sold and due from Federal Reserve Bank		47,613						23,748											71,361
Investment securities available for sale, at fair value		200,427						131,166											331,593
Restricted equity securities, at cost		15,693						9,266											24,959
Loans held for sale		61,713			61,713														—
Loans		1,562,155			1,540			821,433							(14,800	)	D		2,367,248
Allowance for loan losses		(22,911	)		(8	)		(7,165	)						7,165		E		(22,903	)

Net loans		1,539,244			1,532			814,268			—				(7,635	)			2,344,345
Premises and equipment, net		50,941			101			7,840											58,680
Interest receivable		3,846						4,312											8,158
Other real estate owned and repossessed assets, net of valuation allowance		4,086						580											4,666
Goodwill		—													10,964		F		10,964
Other intangible assets, net		—													6,232		G		6,232
Net deferred tax assets, net of valuation allowance		88,760						4,437							66,029		H		159,226
Bank-owned life insurance		51,346						19,872											71,218
Other assets		11,908			1,832			27,748											37,824

Totals assets	$	2,092,448		$	79,936		$	1,070,998		$	73,041			$	44,890			$	3,201,441

Liabilities and Shareholders’ Equity:
Deposits:
Noninterest-bearing demand	$	306,627								$	13		A					$	306,640
Interest-bearing:
Demand		662,780						590,921			14,745		A						1,268,446
Savings		68,281						12,172											80,453
Time		606,071						314,311											920,382

Total deposits		1,643,759			—			917,404			14,758								2,575,921
Federal Home Loan Bank borrowings		98,000																	98,000
Other borrowings		29,936						36,290							(10,700	)	I		55,526
Interest payable		495						265											760
Other liabilities		22,358			66,061			8,689			58,283		A						23,269

Total liabilities		1,794,548			66,061			962,648			73,041				(10,700	)			2,753,476

Shareholders’ equity:
Preferred stock, 1,000,000 shares authorized; none issued and outstanding		—
Common stock, $0.01 par value; 1,000,000,000 shares authorized; 171,530,585 and 171,128,266 shares issued and outstanding on June 30, 2016 and December 31, 2015, respectively		1,715			1,500			13,171			1,500		B		(12,582	)	J		2,304
Capital surplus		590,982						87,110							30,719		K		708,811
Accumulated deficit (earnings)		(298,575	)		11,510			4,858			(1,500	)	B		40,664		L		(266,063	)
Accumulated other comprehensive income, net of tax		2,913						3,211							(3,211	)	M		2,913

Total shareholders’ equity before non-controlling interest		297,035			13,010			108,350			—				55,590				447,965
Non-controlling interest		865			865														—

Total shareholders’ equity		297,900			13,875			108,350			—				55,590				447,965

Total liabilities and shareholders’ equity	$	2,092,448		$	79,936		$	1,070,998		$	73,041			$	44,890			$	3,201,441

See accompanying notes to unaudited pro forma financial statements.

XENITH BANKSHARES, INC. (f/k/a Hampton Roads Bankshares, Inc.)

PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT

for the Six Months Ended June 30, 2016

(unaudited)


(in thousands, except share and per share data)	Xenith Bankshares, Inc. (f/k/a Hampton Roads Bankshares, Inc.)			GBMI			Legacy XBKS		GBMI Sale Pro Forma Adjustments			Legacy XBKS Merger Pro Forma Adjustments				Pro Forma
Interest Income:
Loans, including fees	$	33,577		$	890		$	16,832	$	598	N	$	2,077		R	$	52,194
Investment securities		2,713						1,922									4,635
Overnight funds sold and due from Federal Reserve Bank and interest-bearing deposits in other banks		83			14			206		14	O						289

Total interest income		36,373			904			18,960		612			2,077				57,118

Interest Expense:
Deposits:
Demand		1,669						3,011		14	O						4,694
Savings		40															40
Time		3,577															3,577

Interest on deposits		5,286			—			3,011		14							8,311
Federal Home Loan Bank borrowings		84															84
Other borrowings		972			598			703		598	N		(182	)	S		1,493

Total interest expense		6,342			598			3,714		612			(182	)			9,888

Net interest income		30,031			306			15,246		—			2,259				47,230
Provision for loan losses		—			(19	)		395					1,895		T		2,309

Net interest income after provision for loan losses		30,031			325			14,851		—			364				44,921

Noninterest Income:
Mortgage banking revenue		10,228			10,289					61	P						(0	)
Service charges on deposit accounts		2,256						315									2,571
Earnings from bank-owned life insurance		651						269									920
Gain on sale of investment securities available for sale		15						135									150
Visa check card income		1,348															1,348
Other		853						133		146	Q						1,132

Total noninterest income		15,351			10,289			852		207			—				6,120

Noninterest Expense:
Salaries and employee benefits		21,577			6,467			6,985									22,095
Professional and consultant fees		1,254			131			562									1,685
Occupancy		3,248			414			832		146	Q						3,812
FDIC insurance		845						376									1,221
Data processing		2,763			226			1,257									3,794
Problem loan and repossessed asset costs		202															202
Impairments and gains and losses on sales of other real estate owned and repossessed assets, net		(573	)					52									(521	)
Impairments and gains and losses on sale of premises and equipment, net		(1	)														(1	)
Equipment		546			42												504
Directors’ and regional board fees		640															640
Advertising and marketing		536			431												105
Merger-related expenses		2,646						1,553					(4,199	)	U		—
Other		4,862			953			2,016					206		V		6,131

Total noninterest expense		38,545			8,664			13,633		146			(3,993	)			39,667

Income before provision for income taxes		6,837			1,950			2,070		61			4,357				11,375
Provision for income taxes		2,082			36			793					1,577		W		4,416

Net income		4,755			1,914			1,277		61			2,780				6,959
Net income attributable to non-controlling interest		750			750												—

Net income attributable to Xenith Bankshares, Inc.	$	4,005		$	1,164		$	1,277	$	61		$	2,780			$	6,959

Per Share:
Earnings per share (basic and diluted)	$	0.02														$	0.03

See accompanying notes to unaudited pro forma financial statements.

XENITH BANKSHARES, INC. (f/k/a Hampton Roads Bankshares, Inc.)

PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT

for the Year Ended December 31, 2015

(unaudited)


(in thousands, except share and per share data)	Xenith Bankshares, Inc. (f/k/a Hampton Roads Bankshares, Inc.)			GBMI			Legacy XBKS			GBMI Sale Pro Forma Adjustments			Legacy XBKS Merger Pro Forma Adjustments				Pro Forma

Interest Income:
Loans, including fees	$	68,123		$	1,683		$	33,817		$	1,003	N	$	4,226		R	$	105,486
Investment securities		6,267						2,556										8,823
Overnight funds sold and due from Federal Reserve Bank		158			24			468			24	O						626

Total interest income		74,548			1,707			36,841			1,027			4,226				114,935

Interest Expense:
Deposits:
Demand		2,775						5,327			24	O						8,126
Savings		54																54
Time		7,709																7,709

Interest on deposits		10,538			—			5,327			24							15,889
Federal Home Loan Bank borrowings		680						389										1,069
Other borrowings		1,715			1,003			764			1,003	N		(444	)	S		2,035

Total interest expense		12,933			1,003			6,480			1,027			(444	)			18,993

Net interest income		61,615			704			30,361			—			4,670				95,942
Provision for loan losses		600			(26	)		2,599						1,982		T		5,207

Net interest income after provision for loan losses		61,015			730			27,762			—			2,688				90,735

Noninterest Income:
Mortgage banking revenue		19,969			20,014						45	P						0
Service charges on deposit accounts		4,989						618										5,607
Earnings from bank-owned life insurance		1,245						497										1,742
Gain on sale of investment securities available for sale		238						58										296
Visa check card income		2,652																2,652
Other		2,543						330			336	Q						3,209

Total noninterest income		31,636			20,014			1,503			380			—				13,506

Noninterest Expense:
Salaries and employee benefits		46,327			12,761			12,979										46,545
Professional and consultant fees		3,798			339			1,191										4,650
Occupancy		7,085			738			1,623			336	Q						8,306
FDIC insurance		1,765						719										2,484
Data processing		5,548			347			2,249										7,450
Problem loan and repossessed asset costs		1,486																1,486
Impairments and gains and losses on sales of other real estate owned and repossessed assets, net		5,140						95										5,235
Impairments and gains and losses on sale of premises and equipment, net		4,348						19										4,367
Equipment		1,392			104													1,288
Directors’ and regional board fees		1,183																1,183
Advertising and marketing		1,556			933													623
Other		10,639			1,417			4,753						412		V		14,388

Total noninterest expense		90,267			16,638			23,628			336			412				98,005

Income before provision for income taxes		2,384			4,106			5,637			45			2,276				6,237
Provision for income taxes		(92,312	)		103			1,454						824		W		(90,961	)

Net income		94,696			4,003			4,183			45			1,452				97,197
Net income attributable to non-controlling interest		1,741			1,741													(0	)
Preferred stock dividend								(42	)

Net income attributable to Xenith Bankshares, Inc.	$	92,955		$	2,262		$	4,141		$	45		$	1,452			$	97,198

Per Share:
Earnings per share (basic and diluted)	$	0.54															$	0.42

See accompanying notes to unaudited pro forma financial statements.

XENITH BANKSHARES, INC. (f/k/a Hampton Roads Bankshares, Inc.)

PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT

for the Year Ended December 31, 2014

(unaudited)


(in thousands, except share and per share data)	Xenith Bankshares, Inc. (f/k/a Hampton Roads Bankshares, Inc.)		GBMI		GBMI Sale Pro Forma Adjustments			Pro Forma

Interest Income:
Loans, including fees	$	63,132	$	1,053	$	554	N	$	62,633
Investment securities		9,018							9,018

Overnight funds sold and due from Federal Reserve Bank		193		19		19	O		193

Total interest income		72,343		1,072		573			71,844

Interest Expense:
Deposits:
Demand		2,667				19	O		2,686
Savings		31							31
Time deposits		6,563							6,563

Interest on deposits		9,261		—		19			9,280
Federal Home Loan Bank borrowings		1,531							1,531
Other borrowings		1,506		554		554	N		1,506

Total interest expense		12,298		554		573			12,317

Net interest income		60,045		517		—			59,528
Provision for loan losses		218		78					140

Net interest income after provision for loan losses		59,827		439		—			59,388

Noninterest Income:
Mortgage banking revenue		11,389		11,542		153	P		(0	)
Service charges on deposit accounts		4,703							4,703
Earnings from bank-owned life insurance		4,110							4,110
Gain on sale of investment securities available for sale		306							306
Visa check card income		2,635							2,635
Other		3,650				285	Q		3,935

Total noninterest income		26,793		11,542		438			15,689

Noninterest Expense:
Salaries and employee benefits		38,930		8,164					30,766
Professional and consultant fees		6,108		145					5,963
Occupancy		6,476		449		285	Q		6,312
FDIC insurance		2,366							2,366
Data processing		4,610		420					4,190
Problem loan and repossessed asset costs		1,788							1,788
Impairments and gains and losses on sales of other real estate owned and repossessed assets, net		2,045							2,045
Impairments and gains and losses on sale of premises and equipment, net		112							112
Equipment		1,726		84					1,642
Directors’ and regional board fees		1,591							1,591
Advertising and marketing		1,513		688					825
Other		9,549		1,070					8,479

Total noninterest expense		76,814		11,020		285			66,079

Income before provision for income taxes		9,806		961		153			8,998
Provision for income taxes		6		31					(25	)

Net income		9,800		930		153			9,023
Net income attributable to non-controlling interest		471		471					(0	)

Net income attributable to Xenith Bankshares, Inc.	$	9,329	$	459	$	153		$	9,023

Per Share:
Earnings per share (basic and diluted)	$	0.05						$	0.05

See accompanying notes to unaudited pro forma financial statements.

XENITH BANKSHARES, INC. (f/k/a Hampton Roads Bankshares, Inc.)

PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT

for the Year Ended December 31, 2013

(unaudited)


(in thousands, except share and per share data)	Xenith Bankshares, Inc. (f/k/a Hampton Roads Bankshares, Inc.)			GBMI		GBMI Sale Pro Forma Adjustments			Pro Forma

Interest Income:
Loans, including fees	$	68,954		$	1,644	$	943	N	$	68,253
Investment securities		7,710			—					7,710
Overnight funds sold and due from Federal Reserve Bank		239			19		18	O		238

Total interest income		76,903			1,662		961			76,201

Interest Expense:
Deposits:
Demand		2,156					18	O		2,174
Savings		36								36
Time		7,155								7,155

Interest on deposits		9,347			—		18			9,365
Federal Home Loan Bank borrowings		1,910								1,910
Other borrowings		2,145			943		943	N		2,145

Total interest expense		13,402			943		961			13,420

Net interest income		63,501			720		—			62,781
Provision for loan losses		1,000								1,000

Net interest income after provision for loan losses		62,501			720		—			61,781

Noninterest Income:
Mortgage banking revenue		15,832			15,854		22	P		0
Service charges on deposit accounts		5,014								5,014
Earnings from bank-owned life insurance		3,312								3,312
Gain on sale of investment securities available for sale		781								781
Visa check card income		2,556								2,556
Other		3,820					229	Q		4,049

Total noninterest income		31,315			15,854		251			15,712

Noninterest Expense:
Salaries and employee benefits		41,223			9,575					31,648
Professional and consultant fees		5,786			221					5,565
Occupancy		9,092			593		229	Q		8,728
FDIC insurance		4,762								4,762
Data processing		4,198			500					3,698
Problem loan and repossessed asset costs		2,429								2,429
Impairments and gains and losses on sales of other real estate owned and repossessed assets, net		3,558								3,558
Impairments and gains and losses on sale of premises and equipment, net		2,245								2,245
Equipment		1,730			71					1,659
Directors’ and regional board fees		1,493								1,493
Advertising and marketing		1,431			838					593
Other		10,204			1,346					8,858

Total noninterest expense		88,151			13,144		229			75,236

Income before provision for income taxes		5,665			3,430		22			2,258
Provision for income taxes		(90	)		344					(434	)

Net income		5,755			3,086		22			2,691
Net income attributable to non-controlling interest		1,679			1,679					0

Net income attributable to Xenith Bankshares, Inc.	$	4,076		$	1,407	$	22		$	2,691

Per Share:
Earnings per share (basic and diluted)	$	0.02							$	0.02

See accompanying notes to unaudited pro forma financial statements.

XENITH BANKSHARES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The unaudited pro forma condensed consolidated financial statements of the Company, presented herein, show the effect on the historical financial position and results of operations of the Company giving effect to the following:

•

the GBMI Sale; and

•

the Merger.

The unaudited pro forma condensed consolidated balance sheet as of June 30, 2016 is presented as if the Transactions occurred as of the balance sheet date. The unaudited pro forma condensed consolidated statements of income for the six months ended June 30, 2016 and for the year ended December 31, 2015 are presented as if the Transactions occurred on January 1, 2015. With respect to the Merger, costs incurred by the Company and Legacy XBKS in connection with the Merger have been eliminated from the unaudited pro forma condensed consolidated statements of income as these costs are nonrecurring. The unaudited pro forma condensed consolidated balance sheet does include a pro forma adjustment to reduce cash and shareholders’ equity to reflect the payment of certain Merger and integration costs, including amounts paid for systems conversion costs, legal, investment banking and accounting fees, fees paid to regulatory agencies, severance costs, and other Merger-related costs. The unaudited pro forma condensed consolidated statements of income for the years ended December 31, 2014 and 2013 are presented as if the GBMI Sale had occurred on January 1, 2014 and 2013, respectively.

Note 2. Pro Forma Adjustments

The following summarizes the pro forma adjustments made to reflect the Transactions. With respect to the GBMI Sale, GBMI operated as a segment of the Company; however, its operations were integrated into the Company. With respect to the Merger, the Merger is accounted for under the acquisition method of accounting, whereby the acquired assets and assumed liabilities of Legacy XBKS are recorded by the Company at their estimated fair values as of the date of the Merger, which was July 29, 2016. The unaudited pro forma condensed consolidated balance sheets include the effect of preliminary estimated adjustments to record the assets of Legacy XBKS acquired and liabilities of Legacy XBKS assumed at their respective fair values based on management’s best estimate using information available at this time. The final determination of estimated fair values of Legacy XBKS’s assets and liabilities cannot be made until information is available on which to base the estimated fair value adjustments. Consequently, fair value adjustments and amounts preliminarily allocated to assets, including identifiable intangible assets and goodwill, and liabilities could change significantly from adjustments preliminarily allocated in the unaudited pro forma condensed consolidated financial statements presented herein.

Balance Sheet Adjustments

(A)

Eliminates the borrowings by GBMI pursuant to the intercompany warehouse line of credit between the Bank and GBMI in the amount of $58.3 million at June 30, 2016 and GBMI funds held at the Bank in deposit accounts of $14.8 million at June 30, 2016.

(B)

Adds back the elimination of the GBMI common shares to properly reflect shares outstanding of the Company.

(C)

Reflects the payment of $20.0 million in estimated costs related to the Merger and $10.7 million to repay Legacy XBKS’s senior term loan. Merger-related costs include systems conversion costs, legal, investment banking and accounting fees, fees paid to regulatory agencies, severance costs, and other Merger-related expenses. Legacy XBKS’s senior term loan was repaid in full prior to the completion of the Merger.

(D)

Reflects Legacy XBKS’s loan portfolio at estimated fair value, including adjustments for credit and interest rates.

(E)

Reflects the elimination of Legacy XBKS’s allowance for loan and lease losses.

(F)

Reflects the elimination of Legacy XBKS’s existing goodwill ($13.0 million) and the addition of estimated goodwill ($24.0 million) resulting from the allocation of the total purchase price in excess of the estimated fair value of identifiable net assets acquired.

(G)

Reflects the elimination of Legacy XBKS’s existing core deposit intangible asset ($2.5 million) and the addition of a new core deposit intangible asset at an estimated fair value of $8.7 million.

(H)

Reflects three components related to the net deferred tax asset of the pro forma combined company. One component is $508 thousand of net deferred tax asset resulting from the estimated fair value adjustments. The second component reflects $4.8 million of net deferred tax asset resulting from the deduction of a portion of Merger-related costs. It is assumed that $13.3 million of the $20.0 million of Merger-related costs will be deductible for tax purposes, resulting in an addition of $13.3 million to the pro forma combined company’s net operating loss and an increase of $4.8 million to the pro forma combined company’s net deferred tax asset. These tax-related adjustments assume a 36.2% annual effective income tax rate. The third component of the adjustment reflects the reversal of substantially all of the valuation allowance on the Company’s net deferred tax asset ($60.7 million), based on management’s belief that it is more likely than not that the net deferred tax asset will be utilized in future years as a result of the Merger.

(I)

Represents the reduction of Legacy XBKS’s senior term loan outstanding, which was repaid in full prior to the completion of the Merger.

(J)

Reflects the elimination of 13,171,293 outstanding shares of Legacy XBKS common stock, $1.00 par value, and the issuance of 58,915,439 shares of the Company’s common stock, $0.01 par value, to Legacy XBKS shareholders.

(K)

Eliminates Legacy XBKS’s additional paid-in capital and records the Merger consideration less the portion of the consideration recorded as common stock issued at par value.

(L)

Reflects three components. One component is to eliminate Legacy XBKS’s retained earnings ($4.9 million). The second component reflects $20.0 million in estimated Merger-related costs, net of tax of $4.8 million. The third component reflects the reversal of substantially all of the valuation allowance on the Company’s net deferred tax asset ($60.7 million), as discussed above.

(M)

Eliminates Legacy XBKS’s accumulated other comprehensive income, net of tax, as of the balance sheet date.

Income Statement Adjustments

(N)

Eliminates interest income earned and interest expense incurred on the intercompany warehouse line of credit between the Bank and GBMI.

(O)

Eliminates interest income earned and interest expense incurred on GBMI funds held in interest-bearing demand deposit accounts at the Bank.

(P)

Reflects the net adjustment for deferred loan costs reflected on loans sold to the Bank by GBMI. GBMI recorded a 1% premium on loans sold to the Bank and the Bank recorded deferred loan costs for the 1% paid.

(Q)

Reflects rental income earned and rent expense incurred from intercompany transactions for office spaces rented by GBMI from the Bank.

(R)

Reflects interest income resulting from the accretion of the estimated credit and interest rate fair value adjustments associated with Legacy XBKS’s loan portfolio. The accretion pro forma adjustments for the six and twelve months ended June 30, 2016 and December 31, 2015 were calculated on a straight-line basis using an accretion period of approximately three years.

(S)

Reflects the interest expense associated with Legacy XBKS’s senior term loan that would not have been incurred had the Merger occurred as of January 1, 2015 and the senior term loan had been repaid in full.

(T)

Reflects the elimination of Legacy XBKS’s provision for loan losses for the six and twelve months ended June 30, 2016 and December 31, 2015 ($395 thousand and $2.6 million, respectively) and the pro forma provision for loan losses as a result of accretion of credit fair value adjustments for the six and twelve months ended June 30, 2016 and December 31, 2015 ($2.3 million and $4.6 million, respectively). Credit adjustments on loans result in acquired loan discounts, thus reducing the carrying value in the loans. As accretion is recognized, the carrying value of the loans increases and provision for loan loss is recorded in a similar amount.

(U)

Reflects the elimination of Merger-related costs.

(V)

Adjustment represents the amortization of the core deposit intangible asset resulting from the Merger, offset by the elimination of amortization of Legacy XBKS’s existing core deposit intangible.

(W)

Represents income taxes associated with the pre-tax pro forma adjustments assuming a 36.2% annual effective tax rate.

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Xenith Bankshares, Inc. Reports