REGULATORY MATTERS

12 Months Ended

Dec. 31, 2019

Regulatory Matters [Abstract]

REGULATORY MATTERS

17.         REGULATORY MATTERS

Southern National and its subsidiary bank are subject to various regulatory capital requirements administered by the federal banking agencies. 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 our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action (“PCA”), we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. At December 31, 2019 and 2018, the most recent regulatory notifications categorized the Bank as well capitalized under regulatory framework for PCA.

Quantitative measures established by regulation to ensure capital adequacy require Southern National to maintain minimum amounts and ratios of Total and Tier I capital (as defined in the regulations) to average assets (as defined). Management believes, as of December 31, 2019, that Southern National meets all capital adequacy requirements to which it is subject.

The capital amounts and ratios for Sonabank at year end are presented in the following table (in thousands):

					Required
					For Capital				To Be Categorized as
	Actual				Adequacy Purposes (1)				Well Capitalized (2)
	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2019
Sonabank
Common equity tier 1 capital ratio	$	313,354	14.81	%	$	95,229	4.50	%	$	137,553	6.50	%
Tier 1 risk-based capital ratio		313,354	14.81	%		126,972	6.00	%		169,296	8.00	%
Total risk-based capital ratio		323,615	15.29	%		169,296	8.00	%		211,619	10.00	%
Leverage ratio		313,354	12.07	%		103,838	4.00	%		105,810	5.00	%
December 31, 2018
Sonabank
Common equity tier 1 capital ratio	$	288,018	13.64	%	$	95,020	4.50	%	$	137,251	6.50	%
Tier 1 risk-based capital ratio		288,018	13.64	%		126,693	6.00	%		168,924	8.00	%
Total risk-based capital ratio		300,301	14.22	%		168,924	8.00	%		211,156	10.00	%
Leverage ratio		288,018	11.03	%		104,420	4.00	%		105,578	5.00	%

(1) Once fully phased-in on January 1, 2019, the Basel III capital rules included a capital conservation buffer of 2.5% that was added on top of each of the minimum risk-based capital ratios noted above. Implementation began on January 1, 2016 at the 0.625% level and increased each subsequent January 1, until it reached 2.5% on January 1, 2019.

(2) PCA provisions are not applicable at the bank holding company level.

Southern National’s principal source of funds for dividend payments is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above.