0001564590-20-019275.txt : 20200428 0001564590-20-019275.hdr.sgml : 20200428 20200428165036 ACCESSION NUMBER: 0001564590-20-019275 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20200428 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20200428 DATE AS OF CHANGE: 20200428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Southern National Bancorp of Virginia Inc CENTRAL INDEX KEY: 0001325670 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 201417448 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-33037 FILM NUMBER: 20825800 BUSINESS ADDRESS: STREET 1: 1770 TIMBERWOOD BOULEVARD STREET 2: SUITE 100 CITY: CHARLOTTESVILLE STATE: VA ZIP: 22911 BUSINESS PHONE: (434) 973-5242 MAIL ADDRESS: STREET 1: 1770 TIMBERWOOD BOULEVARD STREET 2: SUITE 100 CITY: CHARLOTTESVILLE STATE: VA ZIP: 22911 8-K 1 sona-8k_20200428.htm 8-K sona-8k_20200428.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 8-K

 

CURRENT REPORT

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

Date of Report (Date of earliest event Reported): April 28, 2020  

Southern National Bancorp of Virginia, Inc.

(Exact Name of Registrant as Specified in Charter)

 

Virginia

001-33037

20-1417448

(State or Other Jurisdiction of Incorporation)

(Commission File Number)

(I.R.S. Employer Identification Number)

 

6830 Old Dominion Drive, McLean, Virginia 22101

(Address of Principal Executive Offices) (Zip Code)

 

(703) 893-7400

(Registrant's telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[  ]

  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

[  ]

  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

[  ]

  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

 

 

[  ]

  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchanged on which registered

COMMON STOCK

 

SONA

 

NASDAQ

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [   ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]


Item 2.02. Results of Operations and Financial Condition.

On April 28, 2020, Southern National Bancorp of Virginia, Inc. (“Southern National”) issued a press release announcing its financial results for the three months ended March 31, 2020.  A copy of the press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.

Item 8.01. Other Events.

On April 28, 2020, Southern National issued a press release announcing the declaration of a dividend payable to shareholders of record as of May 11, 2020.  A copy of the press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

99.1 Press Release dated April 28, 2020


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Southern National Bancorp of Virginia, Inc.

 

 

 

 

 

 

Date: April 28, 2020

By: 

/s/ Jeffrey L. Karafa        

 

 

Jeffrey L. Karafa

 

 

Chief Financial Officer

 

 

 

 

EX-99.1 2 d924305dex991.htm EX-99.1
Exhibit 99.1

Southern National Bancorp of Virginia, Inc. announces earnings of $27 thousand for the quarter ended March 31, 2020, compared to $6.0 million for the quarter ended March 31, 2019.



Southern National Bancorp of Virginia, Inc. also declares a dividend of $0.10 per share, its thirty-fourth consecutive quarterly dividend.

MCLEAN, Va., April 28, 2020 /PRNewswire/ -- Southern National Bancorp of Virginia, Inc. (NASDAQ: SONA) ("Southern National" or the "Company"), and its wholly-owned subsidiary Sonabank (the "Bank"), today announced net income of $27 thousand for the quarter ended March 31, 2020, compared to $6.0 million for the quarter ended March 31, 2019. Earnings per share for the three months ended March 31, 2020 were $0.00 basic and diluted compared to $0.25 basic and diluted for the three months ended March 31, 2019.

Earnings for the three months ended March 31, 2020 include a pre-tax one-time charge of $5.3 million of salary and benefits expense related to the restructuring of executive management and a $479 thousand pre-tax one-time charge to occupancy for the pending closure of three underperforming branch offices. Earnings for the three months ended March 31, 2019 include a pre-tax one-time operational loss of $3.2 million and related legal expense of $502 thousand.

The following is a summary of our recurring earnings at March 31, 2020 and 2019:




For the Three Months Ended



(Dollars in thousands)

March 31,





2020


2019


Net income excluding the nonrecurring expenses (Non-GAAP)







Net income (GAAP)


$               27


$           6,020



Nonrecurring other loss and related legal expenses


-


3,702



Nonrecurring management restructure and branch closing expenses


5,378


-



Income tax effect of adjustment for the nonrecurring expenses


(1,076)


(777)









Net income excluding the nonrecurring expenses (Non-GAAP)


$           4,329


$           8,945


The Board of Directors also announces and declares a dividend of $0.10 per share payable on May 22, 2020 to shareholders of record on May 11, 2020. This is Southern National's thirty-fourth consecutive quarterly dividend.

Commenting on the quarter, President and CEO Dennis J. Zember, Jr. said, "I am very proud of the Company and our employees for the tireless work in the first quarter. We made so many rapid decisions to continue serving our clients and our staff responded with so much enthusiasm. We are taking advantage of the rapid decline in interest rates to quickly shift our focus on funding away from time deposits, improving our funding costs and making real improvements to our balance sheet that will drive long-term value. On the loan side, we are working with customers to provide certain modifications as needed and to process more than 3,000 applications for the SBA's Payroll Protection Program."

Highlights for the three months ended March 31, 2020 include:

  • The Company completed a management restructure designed to streamline the Company's organization chart.  As a result, Dennis J. Zember, Jr. was appointed as President and CEO upon the retirement of several members of management.  One-time costs associated with this transaction totaled $4.4 million, after tax.
  • Sonabank is a preferred SBA lender and is participating aggressively in the SBA Payroll Protection Program with approximately 3,080 customer applications in our pipeline seeking approximately $340.0 million in total funding.
  • Loans outstanding of $2.21 billion at March 31, 2020 were up $26.5 million, or 4.85% annualized, since December 31, 2019;
  • Total deposits of $2.08 billion at March 31, 2020 have decreased $49.4 million since December 31, 2019 or 9.28% annualized with the decrease coming from reduced reliance on brokered funds and listing service accounts;
  • Net interest margin for the three months ended March 31, 2020 was 3.32% compared to 3.41% for the three months ended March 31, 2019.  The yield on earning assets was 4.61% for the first quarter of 2020, compared to 4.94% for the first quarter of 2019.  The cost of funds on interest bearing liabilities was 1.60% for the first quarter of 2020 compared to 1.86% for the first quarter of 2019;
  • Tangible book value per share of $11.11 at March 31, 2020 has increased 10.44% since a year ago;
  • The Company's tangible common equity ratio increased materially over the last year to 10.17% at March 31, 2020; and
  • The Company has elected to defer the implementation of CECL (current expected credit loss model) until later this year.  Provision for loan losses increased $3.5 million for the first quarter of 2020 primarily due to COVID-19 concerns.

Net Interest Income

Net interest income was $20.5 million for the three months ended March 31, 2020 compared to $21.0 million for the three months ended March 31, 2019. Net interest margin for the three months ended March 31, 2020 was 3.32% compared to 3.41% for the three months ended March 31, 2019. The yield on earning assets was 4.61% for the three months ended March 31, 2020 compared to 4.94% for the three months ended March 31, 2019. The cost of funds on interest bearing liabilities was 1.60% for the first quarter of 2020 compared to 1.86% for the first quarter of 2019.

Noninterest Income

During the first quarter of 2020, Southern National had noninterest income of $2.8 million compared to $3.1 million during the first quarter of 2019. Income on account maintenance and deposit service fees remained flat. Income from bank-owned life insurance decreased $137 thousand due to death benefits paid in the first quarter of 2019. Gain on our investment in Southern Trust Mortgage ("STM") increased to $231 thousand for the three months ended March 31, 2020 compared to $18 thousand the year before. For the three months ended March 31, 2020, noninterest income includes $184 thousand of recoveries of legacy investment securities and loans charged off by EVBS premerger compared to $591 thousand for the three months ended March 31, 2019. Other noninterest income benefited from $321 thousand in income on other equity investments during the first quarter of 2020 compared to $243 thousand the year before.

Noninterest Expense

Noninterest expense was $19.9 million during the first quarter of 2020 compared to $16.3 million during the same period in 2019. Both quarters had unusually large non-recurring items as detailed below:




For the Three Months Ended




March 31,

 (in thousands)


2020


2019







Total non-interest expense


$         19,852


$         16,290


Less:  Cost associated with management restructure


4,899


-


Less:  Early termination on branch leases


479


-


Less:  Operational loss and related legal expense


-


3,702

Recurring non-interest expense


$         14,474


$         12,588

The Company's recurring operating expenses increased over the past year by $1.8 million or 15.0%. During the first quarter of 2019, the Company experienced favorable reversals in incentive accruals and employee health benefit expense resulting in a $1.3 million increase for the first quarter of 2020. The remaining increase was due to improvements in our data processing systems and higher legal and professional services expense.

Loan Portfolio

Loans outstanding of $2.21 billion at March 31, 2020 are up $26.5 million, or 4.85% annualized, since December 31, 2019. Loan production in the quarter centered mostly on the Company's ARM offerings with 1-4 family mortgages. The Company experienced no overall growth in its combined commercial real estate portfolio and construction and development loans at the end of the quarter and totaled only $1.11 billion or 50.84% of loans.

The Company ended the first quarter of 2020 with a concentration in hotels with $279.7 million of outstandings. For the year ended 2019, the portfolio of hotel loans had debt coverage of approximately 147% and weighted average loan to value of approximately 68%. 99% of the Company's hotel loans are to national brands (Marriott, Hilton, Choice, IHG, Best Western, and Wyndham) with 93% of the portfolio being to limited service hotels with historically lower operating costs.

Loan Loss Provision and Asset Quality

During the quarter ended March 31, 2020, the Company made certain adjustments to its qualitative factors driven by issues associated with COVID-19 that increased the provision by $3.3 million. The total provision for loan losses during the first quarter of 2020 amounted to $3.5 million, compared to $0.2 million in the same quarter in 2019.

At March 31, 2020, the Company's loan loss reserve amounted to $12.7 million, compared to $10.3 million at the same time in 2019. In addition to the stated loan loss reserve, the Company has certain credit marks on acquired portfolios totaling $10.6 million and $14.5 million at March 31, 2020 and 2019, respectively. Reserves and credit marks as a percentage of total loans were 1.05% at the end of the first quarter of 2020 and 1.22% at the end of the same quarter in 2019.

The Company elected to defer adoption of CECL (current expected credit loss model) until the fourth quarter of 2020 as provided for by the CARES (coronavirus aid, relief, and economic security) Act. Mr. Zember commented on the decision, saying "Due to the uncertainty in economic conditions associated with the nation's health emergency, we have elected to postpone implementation of the CECL model. The Company's model is comprehensive and has been tested by numerous outside parties for validation and accuracy. The additional time to implementation will allow the new management team time to fully digest and be conversant on the model's assumptions and outputs."

The Company's credit quality remained strong through the quarter. Nonperforming assets, excluding portions guaranteed by the SBA, were 0.43% of total assets at March 31, 2020, compared to 0.41% at the same time in 2019. Total non-accrual loans were $8.9 million at the end of the first quarter of 2020 and 2019.

As the health crisis unfolded in the Company's markets and businesses experienced disruptions in normal operations, the Company provided certain modifications, including interest only or principal and interest deferments. Total modified loans or loans with requests for modifications at April 24, 2020 were $514.8 million and the Company anticipates additional amounts throughout the second quarter of 2020.

Lastly, the Company has participated extensively in the SBA's Payroll Protection Program. As the second round of funding became available on April 27, 2020, the Company had approved and secured funds for 172 customers totaling $43.9 million. The Company has lines in place to fund these loans at the Federal Reserve's discount window and does not anticipate any issues with liquidity. Additionally, the Company has contracted with certain firms with extensive experience in BSA, bank compliance, technology and underwriting to ensure the customer files are well documented and exceed the SBA's requirements for funding.

Deposits

Total deposits of $2.08 billion at March 31, 2020 have decreased $49.4 million since December 31, 2019 or 9.28% annualized. Demand deposits have decreased $1.1 million, NOW accounts have decreased $10.2 million, money market accounts have increased $10.8 million, and savings accounts have increased by $6.9 million. Time deposits have decreased $55.8 million due to the reduction of brokered and listing service accounts.

Given recent reductions in interest rates, the Company expects funding costs of deposits and other borrowings to significantly decrease for the remainder of 2020.

Stockholders' Equity

Tangible common book value at the end of the first quarter of 2020 was $11.11 per share, an increase of 10.4% since the same time in 2019. Tangible common equity at March 31, 2020 was $270.0 million, or 10.2% of tangible assets, compared to 9.34% at March 31, 2019. Sonabank's capital ratios were especially strong with tier one leverage and total risk based capital ratios estimated at 11.9% and 15.0%, respectively at the end of the first quarter of 2020, compared to 11.2% and 14.4% at the end of the first quarter of 2019.

About Southern National Bancorp of Virginia, Inc.

As of March 31, 20, Southern National had $2.76 billion in total assets, $2.21 billion in total loans and $2.08 billion in total deposits. Sonabank, the Company's banking subsidiary provides a range of financial services to individuals and small and medium sized businesses through forty-five full-service branches in Virginia and Maryland and through certain internet and mobile applications.

Non-GAAP Measures

Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables. Southern National uses non-GAAP financial measures to analyze its performance.

Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of Southern National and provide meaningful comparison to its peers. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider Southern National's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of Southern National.

Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that relate to future events or the future performance of Southern National. Forward-looking statements are not guarantees of performance or results. These forward-looking statements are based on the current beliefs and expectations of the respective management of Southern National and Sonabank and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond their respective control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed or implied in these forward-looking statements because of numerous possible uncertainties. Words like "may," "plan," "contemplate," "anticipate," "believe," "intend," "continue," "expect," "project," "predict," "estimate," "could," "should," "would," "will," and similar expressions, should be considered as identifying forward-looking statements, although other phrasing may be used. Such forward-looking statements involve risks and uncertainties and may not be realized due to a variety of factors. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Registration Statements on Form S-4) filed by Southern National. You should consider such factors and not place undue reliance on such forward-looking statements. No obligation is undertaken by Southern National to update such forward-looking statements to reflect events or circumstances occurring after the issuance of this press release.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)









March 31,


December 31,





2020


2019(1)


Assets






Cash and cash equivalents


$                  55,865


$         31,928


Investment securities-available for sale


168,520


164,820


Investment securities-held to maturity


59,234


72,448


Stock in Federal Reserve Bank and Federal Home Loan Bank


21,396


17,832


Loans receivable, net of deferred fees


2,212,538


2,186,047


Allowance for loan losses


(12,722)


(10,261)



Net loans


2,199,816


2,175,786


Intangible assets


108,804


109,145


Operating lease right-of-use assets


7,664


8,013


Bank premises and equipment, net


31,079


31,184


Bank-owned life insurance


64,236


63,850


Deferred tax assets, net


11,154


11,788


Other assets


34,795


35,376



Total assets


$             2,762,563


$     2,722,170









Liabilities and stockholders' equity






Demand deposits


$                338,095


$       339,153


NOW accounts


380,977


391,172


Money market accounts


477,660


466,867


Savings accounts


151,406


144,486


Time deposits


727,216


783,040


    Total deposits


2,075,354


2,124,718


Federal Home Loan Bank advances


205,140


121,640


Subordinated notes


56,686


56,683


Operating lease liabilities


8,509


8,469


Other liabilities


38,052


33,419



Total liabilities


2,383,741


2,344,929


Stockholders' equity


378,822


377,241



Total liabilities and stockholders' equity


$             2,762,563


$     2,722,170









(1) Derived from audited financial statements.












Condensed Consolidated Statements of Operations

(Unaudited)

 (in thousands)








For the Three Months Ended




March 31,




2020


2019

Interest and dividend income


$         28,481


$         30,303

Interest expense


7,966


9,351


Net interest income


20,515


20,952

Provision for loan losses


3,450


200


Net interest income after provision for loan losses


17,065


20,752

Account maintenance and deposit service fees


1,698


1,687

Income from bank-owned life insurance


386


523

Equity gain from mortgage affiliate


231


18

Recoveries related to acquired charged-off 





   loans and  investment securities


184


591

Other 


321


243


Noninterest income


2,820


3,062

Employee compensation and benefits


12,309


5,812

Occupancy and equipment expenses


2,558


2,513

Amortization of core deposit intangible


341


363

Virginia franchise tax expense


570


563

Data processing expense


707


512

Telecommunication and communication expense


368


375

Net (gain) loss on other real estate owned


71


(2)

Professional fees


1,193


1,093

Other expenses


1,735


5,061


Noninterest expense


19,852


16,290


Income before income taxes


33


7,524

Income tax expense 


6


1,504


Net income 


$               27


$           6,020


Average Balance Sheets and Net Interest Analysis 


QTD


March 31, 2020


March 31, 2019



Interest




Interest



Average

Income/

Yield/


Average

Income/

Yield/


Balance

Expense

Rate


Balance

Expense

Rate


(Dollars in thousands)

Assets








Interest-earning assets:








Loans, net of deferred fees (1) (2)

$ 2,200,926

$ 26,741

4.89%


$ 2,155,252

$ 27,974

5.26%

Investment securities

231,794

1,361

2.36%


237,420

1,581

2.70%

Other earning assets

54,800

379

2.79%


90,370

748

3.36%









Total earning assets

2,487,520

28,481

4.61%


2,483,041

30,303

4.94%

Allowance for loan losses

(10,928)




(12,296)



Total non-earning assets

263,627




257,217



Total assets

$ 2,740,220




$ 2,727,963











Liabilities and stockholders' equity








Interest-bearing liabilities:








NOW and other demand accounts

$    379,531

786

0.83%


$    345,935

642

0.75%

Money market accounts

469,651

1,575

1.35%


401,615

1,828

1.85%

Savings accounts

147,697

116

0.32%


147,589

115

0.32%

Time deposits 

756,055

4,026

2.14%


926,137

4,877

2.14%

Total interest-bearing deposits

1,752,934

6,503

1.49%


1,821,276

7,462

1.66%

Borrowings

251,830

1,463

2.34%


213,929

1,889

3.59%

Total interest-bearing liabilities

2,004,764

7,966

1.60%


2,035,205

9,351

1.86%

Noninterest-bearing liabilities:








  Demand deposits

333,408




320,299



  Other liabilities

21,781




19,414



Total liabilites

2,359,953




2,374,919



Stockholders' equity

380,267




353,044



Total liabilities and stockholders' equity

$ 2,740,220




2,727,963



Net interest income


$ 20,515




$ 20,952


Interest rate spread



3.01%




3.08%

Net interest margin



3.32%




3.41%









(1)  Includes loan fees in both interest income and the calculation of the yield on loans.





(2)  Calculations include non-accruing loans in average loan amounts outstanding.





Loan Portfolio Composition

 (Dollars in thousands) 






March 31, 2020


December 31, 2019

 Loans secured by real estate: 




    Commercial real estate - owner occupied 

$                  409,739


$                   414,479

    Commercial real estate - non-owner occupied 

599,987


559,195

    Secured by farmland 

16,608


17,622

    Construction and land loans 

115,144


150,750

    Residential 1-4 family 

624,119


604,777

    Multi-family residential 

90,652


82,055

    Home equity lines of credit 

106,820


109,006

     Total real estate loans 

1,963,069


1,937,884





 Commercial loans  

223,433


221,447

 Consumer loans 

25,708


26,304

      Gross loans 

2,212,210


2,185,635





 Less deferred costs (fees) on loans 

328


412

 Loans receivable, net of deferred costs (fees) 

$                2,212,538


$                2,186,047













Loan Portfolio Delinquency

 (Dollars in thousands) 






March 31, 2020


December 31, 2019





 Loans 90 plus days delinquent 

-


-

 Nonaccural loans 

$                      8,941


$                      8,900

           Total nonperforming loans 

8,941


8,900

 Other real estate owned 

5,876


6,224

           Total nonperforming assets 

$                    14,817


$                     15,124

 SBA guaranteed portion of nonperforming loans 

$                      2,889


$                      4,129





 Troubled debt restructuring 

$                        694


$                         697

 Loans deferred under COVID-19 

$                    24,308


$                             -

Loans with COVID-19 Modifications

 (Dollars in thousands) 








April 24, 2020

 Count 


March 31, 2020

 Count 

 Loans secured by real estate: 






    Commercial real estate - owner occupied 

$             133,510

105


$                  5,289

9

    Commercial real estate - non-owner occupied 

266,613

64


14,466

1

    Secured by farmland 

418

1


-

-

    Construction and land loans 

8,504

8


94

1

    Residential 1-4 family

49,382

79


837

2

    Multi-family residential 

21,509

7


-

-

    Home equity lines of credit

655

3


215

1

     Total real estate loans 

480,590

267


20,902

14







 Commercial loans  

33,302

121


3,278

15

 Consumer loans 

947

10


128

2

      Total COVID-19 modifications 

$             514,839

398


$                24,308

31







 Percentage of loans outstanding 

22.86%



1.10%


Financial Highlights


(Unaudited)


(Dollars in thousands except per share data)


















For the Three Months Ended






March 31,






2020


2019



Per Share Data:







Earnings per share - Basic


$            0.00


$            0.25



Earnings per share - Diluted


$            0.00


$            0.25



Book value per share


$          15.59


$          14.63



Tangible book value per share (1)


$          11.11


$          10.06



Weighted average shares outstanding - Basic


24,168,359


24,012,011



Weighted average shares outstanding - Diluted


24,388,085


24,311,047



Shares outstanding at end of period


24,297,703


24,107,103











Selected Performance Ratios (2):







Return on average assets


0.00%


0.89%



Return on average equity


0.03%


6.92%



Return on average tangible equity (3)


0.04%


10.07%



Yield on earning assets


4.61%


4.94%



Cost of funds on interest bearing liabilities


1.60%


1.86%



Net interest margin


3.32%


3.41%



Net loans to deposits


106.00%


101.62%



Operating efficiency ratio (4)


85.84%


69.37%



Net charge-offs to average loans


0.04%


0.03%














As of






March 31,


December 31,






2020


2019











Stockholders' equity to total assets


13.71%


13.86%



Tangible common equity ratio (5)


10.17%


9.35%



Tier 1 risk-based capital ratio 


12.89%


13.11%



Intangible assets:








Goodwill


$       101,954


$       101,954




Core deposit intangible, net


6,850


7,191




   Total


$       108,804


$       109,145











Allowance for loan losses to total loans


0.58%


0.47%



Nonperforming assets excluding SBA guaranteed loans to







    total assets


0.43%


0.40%











(1) Non-GAAP measure defined as stockholders' equity less  goodwill and other intangibles divided by common shares outstanding.

(2) Selected performance ratios are annualized except the operating efficiency ratio and net charge-offs to average loans.



(3) Non-GAAP measure defined as average stockholders' equity less average goodwill and other intangibles.




(4) Non-GAAP measure excludes gains/losses and write-downs on OREO, gains/losses on sale of loans, gains/losses on sale of securities,  

      merger expenses, and recoveries related to acquired charged-off loans and securities that are recognized in other noninterest income.

(5) Non-GAAP measure defined as stockholders' equity less goodwill and other intangibles divided by the sum of total assets less


      goodwill and other intangible assets.







Reconciliation of Non-GAAP Financial Measures

(Unaudited)










For the Three Months Ended


(Dollars in thousands)

March 31,




2020


2019

Net income excluding the nonrecurring expenses (Non-GAAP)






Net income (GAAP)


$               27


$           6,020


Nonrecurring other loss and related legal expenses


-


3,702


Nonrecurring management restructure and branch closing expenses


5,378


-


Income tax effect of adjustment for the nonrecurring expenses


(1,076)


(777)







Net income excluding the nonrecurring expenses (Non-GAAP)


$           4,329


$           8,945













Return on average assets excluding the nonrecurring expenses (Non-GAAP)





Return on average assets 


0.00%


0.89%


Effect of adjustment for the nonrecurring expenses


0.63%


0.42%







Return on average assets excluding the nonrecurring expenses (Non-GAAP)


0.63%


1.31%













Return on average equity excluding the nonrecurring expense (Non-GAAP)





Return on average equity 


0.03%


6.92%


Effect of adjustment for the nonrecurring expenses


4.54%


3.21%







Return on average equity excluding the nonrecurring expense (Non-GAAP)


4.57%


10.13%













Operating Efficiency Ratio excluding the nonrecurring expenses (Non-GAAP)





Operating Efficiency Ratio


85.84%


69.37%


Effect of adjustment for the nonrecurring expenses


-23.34%


-12.46%







Operating Efficiency Ratio excluding the nonrecurring expenses (Non-GAAP)

62.50%


56.91%













Tangible Book Value excluding the nonrecurring expenses (Non-GAAP)





Tangible Book Value


$          11.11


$          10.06


Effect of adjustment for the nonrecurring expenses


0.18


0.12







Tangible Book Value excluding the nonrecurring expenses (Non-GAAP)


$          11.29


$          10.18

Contacts:                                                           

Addresses:

Dennis J. Zember, Jr., President and CEO         

Southern National Bancorp of Virginia, Inc.

Phone: 804-997-2406                                           

6830 Old Dominion Drive


McLean, VA 22101

Jeffrey L. Karafa, EVP and CFO                  


Phone: 804-997-2404                                         

Sonabank        


10900 Nuckols Road, Suite 325


Glen Allen, VA 23060


Southern National Bancorp of Virginia, Inc., NASDAQ Symbol SONA

Website: www.sonabank.com




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