8-K
Primis Financial Corp. (FRST)
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): January 28, 2021
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 January 28, 2021, Southern National Bancorp of Virginia, Inc. (“Southern National” or the “Company”) issued a press release announcing its financial results for the three and twelve months ended December 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 7.01. Regulation FD Disclosure.
The Company has prepared presentation materials (the “Investor Presentation”) that management intends to use from time to time hereafter in presentations about the Company’s operations and performance. The Company may use the Investor Presentation, possibly with modifications, in presentations to current and potential investors, analysts, lenders, business partners, acquisition candidates, customers, employees and others with an interest in the Company and its business.
A copy of the Investor Presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K and incorporated herein by reference. The Investor Presentation is also available on the Company's website at www.sonabank.com. Materials on the Company’s website are not part of or incorporated by reference into this report.
In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 attached hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 8.01. Other Events.
On January 28, 2021, Southern National issued a press release announcing its rebranding initiatives and its plans to change its name to Primis Financial Corp. and it’s wholly-owned banking subsidiary Sonabank’s name to Primis Bank. The Company also announced the declaration of a dividend payable on February 26, 2021 to shareholders of record as of February 12, 2021. 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
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated January 28, 2021 |
| 99.2 | Southern National Bancorp of Virginia, Inc. Investor Presentation dated January 28, 2021. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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: January 28, 2021 | By: | /s/ Matthew A. Switzer |
| Matthew A. Switzer | ||
| Chief Financial Officer |
Exhibit 99.1
Southern National Bancorp of Virginia, Inc. Announces Earnings for the Fourth Quarter of 2020
Southern National Bancorp of Virginia, Inc. Announces Rebranding Initiatives and the Proposed Name Changes to Primis Financial Corp. and Primis Bank
Southern National Bancorp of Virginia, Inc. Declares Quarterly Cash Dividend of $0.10 Per Share
MCLEAN, Va., Jan. 28, 2021 /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 $9.0 million for the quarter ended December 31, 2020, compared to $9.0 million for the quarter ended December 31, 2019. Earnings per share for the three months ended December 31, 2020 were $0.37 on both a basic and diluted basis representing no change from the three months ended December 31, 2019.
Earnings for the twelve months ended December 31, 2020 were $23.3 million compared to $33.2 million for the twelve months ended December 31, 2019. Earnings per share for the twelve months ended December 31, 2020 were $0.96 on both a basic and diluted basis compared to $1.38 basic and $1.36 diluted for the twelve months ended December 31, 2019.
The Board of Directors also announced and declared a dividend of $0.10 per share payable on February 26, 2021 to shareholders of record on February 12, 2021. This is Southern National's thirty-seventh consecutive quarterly dividend.
Proposed Name Change
As part of the Company's rebranding initiatives, on January 28, 2021, the Board of Directors of the Company approved changing the Company's name to Primis Financial Corp., to be effective as of March 31, 2021. The Company's wholly-owned banking subsidiary, Sonabank, will also change its name to Primis Bank, effective March 31, 2021.
President and CEO Dennis J. Zember, Jr. commented on the rebranding initiatives and the proposed name changes, saying "Over the last year, we have focused hard on our culture. Our efforts have centered on building the foundation for a Company with higher expectations around innovation and technology. We want to deliver a better return for our shareholders and an experience for our customers that prompts them to brag about us. We are committed to train harder, develop more expertise in all areas and build relationships that will last. This kind of effort and commitment deserves a first class brand."
Mr. Zember continued, "Effective March 31, 2021, our ticker symbol will also change from SONA to FRST and our website will become www.primisbank.com."
Adjusted Recurring Profitability
In addition to a significant build in the allowance for credit losses related to the COVID-19 pandemic and the adoption of CECL, the Company incurred expenses for management restructuring and its newly announced branding initiative. Adjusted earnings^(1)^, after considering certain non-recurring items, totaled $6.39 million for the quarter or $0.26 per diluted share, compared to $8.96 million or $0.37 per diluted share for the same quarter in 2019. For the year, the Company reported adjusted earnings of approximately $25.0 million or $1.03 per diluted share, a decrease from $36.1 million or $1.48 per diluted share in 2019. The table below includes information on these revenues and expenses for the fourth quarter of 2020:
| Management Restructure / Recruiting Expenses | $ 843 |
|---|---|
| (Gain or Recovery) / Loss on Securities | (2,964) |
| Brand Initiative / Renaming Expenses | 1,000 |
| Net Extraordinary PPP Income and Expense | (2,177) |
| Total Pre-tax Adjustments | $ (3,298) |
| Tax Impact | 729 |
| Total After-tax Adjustments | $ (2,569) |
Highlights for the three and twelve months ended December 31, 2020
- Total assets ended the year at $3.09 billion.
- Loans on deferral were $122.0 million or 5.75% of total loans excluding PPP balances and in-line with expectations at the end of the fourth quarter. Approximately 59% of total deferrals were from the hotel portfolio while restaurant deferrals declined to approximately $0.5 million.
- Total deposits increased $216.1 million from the previous quarter despite a $71.6 million decline in CDs over the last three months.
- Demand deposits (NIB, NOW, MMDA) increased to 72.3% of total deposits compared to 56.3% at the end of 2019.
- Cost of deposits declined to 0.71% for the fourth quarter of 2020 compared to 1.37% for the fourth quarter of 2019.
- The Company booked its first Panacea loan customers in the quarter.
- Mortgage contribution of $2.57 million for the fourth quarter versus $16 thousand for the year-ago period.
- Pre-tax pre-provision operating earnings^(1)^ of $12.1 million or 1.56% of average assets for the quarter compared to $10.2 million or 1.50% in the same quarter in 2019.
- Allowance for credit losses to gross loans (excluding PPP balances) of 1.71% at December 31, 2020.
- Tangible book value per share^(1)^ of $11.60 at December 31, 2020, an increase of $0.51 from a year ago despite a significant build in reserves for credit losses and $0.40 in dividends paid in 2020.
Commenting on the quarter and year, President and CEO Dennis J. Zember, Jr. said, "We finished 2020 with another good quarter. We had strong net income while managing through a resurgence in the pandemic and implementing the CECL accounting standard. Our primary balance sheet accomplishments include the dramatic improvement in our deposit portfolio that went well beyond industry trends towards extra liquidity. Additionally, we grew tangible book value despite a dramatic increase in the reserve and a strong dividend. Long-term, the most impactful thing we did was our work on the Company's culture. Building an organization that attracts the best bankers and allows them to win is not an overnight assignment. Changing our name and our brand, and committing to an image that mirrors this attitude is critical and I believe our work here will pay dividends quickly."
Matthew A. Switzer, Executive Vice President and CFO, added "We are focused on growing our loan portfolio in 2021 and deploying excess liquidity. To that end, late in the fourth quarter of 2020 we hired a new market executive and a four person lending team in Northern Virginia from a large regional bank and plan to add to this team in the near future. We expect substantially more production and growth from this key market. We are excited about having these strong bankers on board and look forward to serving the customers they bring to the bank with our new brand and strategy."
Net Interest Income
Net interest income increased to $25.7 million for the three months ended December 31, 2020 from $20.7 million for the three months ended December 31, 2019 due to higher levels of average earning assets and extraordinary net accretion of certain deferred PPP loan fees and expenses as highlighted above. The Company's reported net interest margin for the fourth quarter increased to 3.58% compared to 3.18% in the third quarter of 2020 and 3.35% in the fourth quarter of 2019. Net interest margin excluding the effects of PPP loans^(1)^ was 3.23% in the fourth quarter of 2020, down 5 bps from 3.28% linked-quarter.
Yield on loans for the fourth quarter was 4.57%^(1)^, excluding the effect of PPP loans, compared to 5.06% in the same quarter of 2019. Lower yields on loans are the result of the significant decline in interest rates in the first half of the year. While lower rates also lowered funding costs, the Company aggressively pursued core deposits during the year to replace brokered time deposits and other sources of wholesale funding. Despite actively pursuing core deposits and positively shifting the Company's deposit mix, the cost of total deposits still declined to 0.71% in the fourth quarter of 2020 from 1.37% in the year-ago quarter. Management believes that there is a likelihood for increased core margins and profitability levels from this global repricing activity.
Commenting on the trends around net interest margin, Mr. Zember stated "We recognize that our deposit costs are higher than our peers and are committed to continue shifting our deposit mix away from CDs. We have already moved time deposits to approximately 20% of total deposits and will start working to lower deposit costs in a way that will not affect the stability of our deposit base. As previously articulated, our goal is to finish 2021 with the deposit side of our balance sheet mixed similarly to our peers with costs that are in-line with the industry."
Noninterest Income
During the three months ended December 31, 2020, Southern National had non-interest income of $8.0 million compared to $3.4 million for the three months ended December 31, 2019. Income on account maintenance and deposit service fees declined $147 thousand from the year-ago period primarily in account service charges and non-sufficient fund fees. Gains on our investment in Southern Trust Mortgage ("STM") increased to $2.6 million compared to $16 thousand in the same quarter in 2019, driven by higher margins on closed loans and materially higher volumes from refinance activity as well as production from new hires and teams that were on boarded in the second half of 2019. Recoveries on securities net of losses on securities sold totaled $2.96 million.
Noninterest Expense
Noninterest expense was $18.6 million for the three months ended December 31, 2020, compared to $13.8 million reported for the three months ended December 31, 2019. Employee compensation and benefits expense increased $2.5 million due to increased staffing in the commercial lending and Panacea divisions along with modified incentive and bonus plans and increased costs associated with recruitment. We recorded a net loss of $905 thousand on other real estate owned in the quarter versus no gains or losses in the year-ago period. Other expenses increased $1.3 million, largely due to initiatives associated with our pending name change and rebranding efforts.
Loan Portfolio and Asset Quality
Loans outstanding grew to $2.44 billion at December 31, 2020 compared to $2.19 billion at the same time in 2019. Excluding PPP loans, loans outstanding have decreased $65.0 million since December 31, 2019. The Company ended the fourth quarter of 2020 with $122.0 million of loans on deferral, or 5.75% of total loans excluding PPP loans. Hotels account for 58.9% of all deferrals with 27.1% of the hotel portfolio deferred at December 31, 2020. Of the hotel deferrals, 58.3% are paying interest with the remainder deferring both interest and principal.
Nonperforming assets, excluding portions guaranteed by the SBA, were 0.47% of total assets at December 31, 2020, compared to 0.40% at December 31, 2019. Total non-accrual loans (net of SBA guarantees) increased to $11.4 million at December 31, 2020 compared to $4.8 million at December 31, 2019 due to COVID-19 related issues. Loans rated substandard increased to $44.5 million in the fourth quarter of 2020 from $19.2 million linked-quarter largely due to one hotel relationship comprised of three hotels in Blacksburg, Virginia, that has been impacted by reduced travel and athletic events at Virginia Tech.
The Allowance for Credit Losses increased to $36.3 million at December 31, 2020, up substantially from $10.3 million at December 31, 2019, due to pandemic-related provisioning and the adoption of the Current Expected Credit Loss ("CECL") accounting standard. As a percentage of loans (excluding PPP), the allowance is 1.71% at the end of the current quarter in 2020. Annualized net charge-offs to average loans remained low at 13 basis points for the fourth quarter of 2020 versus 17 basis points in the year-ago period.
Deposits
Total deposits increased to $2.43 billion at December 31, 2020 compared to $2.12 billion at the same time in 2019. During the quarter, CDs declined by $71.6 million while core deposits (demand, NOW, money market and savings) increased $287.8 million linked-quarter. Time deposits now represent approximately 20% of total deposits. The Company is aggressively building sales and incentive cultures focused on growing and managing core deposits, with the primary attention on commercial and consumer checking accounts. Management expects continued improvement in the funding mix over the next several quarters with more material reductions in total funding costs to occur in the last several quarters of 2021.
Stockholders' Equity
Tangible common book value^(1)^ at the end of the fourth quarter of 2020 was $11.60 per share, an increase of $0.51 since the end of 2019. Tangible common equity^(1)^ at December 31, 2020 was $282.8 million, or 9.49% of tangible assets^(1)^.
About Southern National Bancorp of Virginia, Inc.
As of December 31, 2020, Southern National had $3.09 billion in total assets, $2.44 billion in total loans and $2.43 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-two full-service branches in Virginia and Maryland and through certain internet and mobile applications.
| Contacts: | Address: |
|---|---|
| Dennis J. Zember, Jr., President and CEO | Southern National Bancorp of Virginia, Inc. |
| Phone: (804) 997-2406 | 6830 Old Dominion Drive |
| McLean, VA 22101 | |
| Matthew A. Switzer, EVP and CFO | |
| Phone: (804) 528-4760 | |
| Southern National Bancorp of Virginia, Inc., NASDAQ Symbol SONA | |
| Website:<br>www.sonabank.com |
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. The measures entitled return on average assets – operating; net income adjusted for nonrecurring income and expenses; pre-tax pre-provision earnings – operating; pre-tax pre-provision return on average assets – operating; return on average equity- operating; return on average tangible equity – operating; efficiency ratio-operating; tangible common equity; tangible common equity to tangible assets; tangible book value per share; net interest margin excluding SBA PPP loans; and net interest margin – operating are not measures recognized under GAAP and therefore are considered non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is provided in the Reconciliation of Non-GAAP items table.
Management believes that these non-GAAP financial measures provide additional useful information about Southern National that allows management and investors to evaluate the ongoing operating results, financial strength and 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 and certain of our other filings with the Securities and Exchange Commission contain statements that constitute "forward-looking statements" within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements. Such statements can generally be identified by such words as "may," "plan," "contemplate," "anticipate," "believe," "intend," "continue," "expect," "project," "predict," "estimate," "could," "should," "would," "will," and other similar words or expressions of the future or otherwise regarding the outlook for the Company's future business and financial performance and/or the performance of the banking industry and economy in general. These forward-looking statements include, but are not limited to, our expectations regarding our future operating and financial performance, including our outlook and long-term goals for future growth; our expectations regarding net interest margin; expectations on our growth strategy, expense management, capital management and future profitability; expectations on credit quality and performance; statements regarding the potential effects of the COVID-19 pandemic on our business and financial results and conditions; and the assumptions underlying our expectations.
Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties which may cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on the information known to, and current beliefs and expectations of, the Company's management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. Factors that might cause such differences include, but are not limited to: the Company's ability to implement its various strategic and growth initiatives; competitive pressures among financial institutions increasing significantly; changes in economic or political conditions, either nationally or locally, particularly in areas in which the Company conducts operations; interest rate risk; changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to the COVID-19 pandemic; changes in management's plans for the future; credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values, or competition; changes in accounting principles, policies, or guidelines; adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company's participation in and execution of government programs related to the COVID-19 pandemic; the impact of the COVID-19 pandemic on the Company's assets, business, cash flows, financial condition, liquidity, prospects and results of operations; potential increases in the provision for loan losses resulting from the COVID-19 pandemic; and other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services.
Forward-looking statements speak only as of the date on which such statements are made. These forward-looking statements are based upon information presently known to the Company's management and are inherently subjective, uncertain and subject to change due to any number of risks and uncertainties, including, without limitation, the risks and other factors set forth in the Company's filings with the Securities and Exchange Commission, the Company's Annual Report on Form 10-K for the year ended December 31, 2019, under the captions "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors," and in the Company's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on these forward-looking statements.
(1) Non-GAAP financial measure. Please see "Reconciliation of Non-GAAP Items"in the financial tables.
| Southern National Bancorp of Virginia, inc. ($000's, except per share data) | For the ThreeMonth Period: | Year to date Period: | |||||
|---|---|---|---|---|---|---|---|
| Condensed Consolidated Balance Sheets (unaudited) | 4Q2020 | 3Q 2020 | 2Q 2020 | 1Q 2020 | 4Q 2019 | 4Q 2020 | 4Q 2019 |
| Assets | |||||||
| Cash and cash equivalents | $ <br>196,185 | $ 149,272 | $ 82,586 | $ 55,865 | $ 31,928 | $ 196,185 | $ <br> 31,928 |
| Investment securities-available for sale | 153,233 | 157,896 | 160,979 | 168,520 | 164,820 | 153,233 | 164,820 |
| Investment securities-held to maturity | 40,721 | 49,323 | 53,958 | 59,234 | 72,448 | 40,721 | 72,448 |
| Stock in Federal Reserve Bank and Federal Home Loan Bank | 16,927 | 16,927 | 16,927 | 21,396 | 17,832 | 16,927 | 17,832 |
| Loans receivable, net of deferred fees | 2,440,496 | 2,523,709 | 2,511,504 | 2,212,538 | 2,186,047 | 2,440,496 | 2,186,047 |
| Allowance for credit losses | (36,345) | (25,779) | -23,627 | -12,722 | (10,261) | (36,345) | (10,261) |
| Net loans | 2,404,151 | 2,497,930 | 2,487,877 | 2,199,816 | 2,175,786 | 2,404,151 | 2,175,786 |
| Loans held for sale | - | - | - | - | - | - | - |
| Intangible assets | 107,780 | 108,122 | 108,463 | 108,804 | 109,145 | 107,780 | 109,145 |
| Operating lease right-of-use assets | 7,511 | 7,033 | 7,111 | 7,664 | 8,013 | 7,511 | 8,013 |
| Bank premises and equipment, net | 30,306 | 30,679 | 31,087 | 31,079 | 31,184 | 30,306 | 31,184 |
| Bank-owned life insurance | 65,409 | 65,015 | 64,622 | 64,236 | 63,850 | 65,409 | 63,850 |
| Deferred tax assets, net | 14,646 | 14,477 | 11,087 | 11,154 | 11,788 | 14,646 | 11,788 |
| Other assets | 51,804 | 57,899 | 47,474 | 34,795 | 35,376 | 51,804 | 35,376 |
| Total assets | $ <br>3,088,673 | $ 3,154,573 | $ 3,072,171 | $ 2,762,563 | $ 2,722,170 | $ 3,088,673 | $ 2,722,170 |
| Liabilities and stockholders' equity | |||||||
| Demand deposits | $ <br>440,674 | $ 467,581 | $ 447,605 | $ 338,095 | $ 339,153 | $ 440,674 | $ <br> 339,153 |
| NOW accounts | 714,752 | 472,553 | 424,096 | 380,977 | 391,172 | 714,752 | 391,172 |
| Money market accounts | 603,318 | 534,899 | 488,229 | 477,660 | 466,867 | 603,318 | 466,867 |
| Savings accounts | 183,814 | 179,756 | 171,681 | 151,406 | 144,486 | 183,814 | 144,486 |
| Time deposits | 490,048 | 561,685 | 619,918 | 727,216 | 783,040 | 490,048 | 783,040 |
| Total deposits | 2,432,606 | 2,216,474 | 2,151,529 | 2,075,354 | 2,124,718 | 2,432,606 | 2,124,718 |
| Federal Home Loan Bank advances | 100,000 | 100,000 | 100,000 | 205,140 | 121,640 | 100,000 | 121,640 |
| PPPLF Advances | - | 283,906 | 333,574 | - | - | - | - |
| Subordinated notes | 115,329 | 115,378 | 56,689 | 56,686 | 56,683 | 115,329 | 56,683 |
| Operating lease liabilities | 8,238 | 7,800 | 7,896 | 8,509 | 8,469 | 8,238 | 8,469 |
| Other liabilities | 41,946 | 42,032 | 40,814 | 38,052 | 33,419 | 41,946 | 33,419 |
| Total liabilities | 2,698,119 | 2,765,590 | 2,690,502 | 2,383,741 | 2,344,929 | 2,698,119 | 2,344,929 |
| Stockholders' equity | 390,554 | 388,983 | 381,669 | 378,822 | 377,241 | 390,554 | 377,241 |
| Total liabilities and stockholders' equity | $ 3,088,673 | $ 3,154,573 | $ 3,072,171 | $ 2,762,563 | $ 2,722,170 | $ 3,088,673 | $ <br> 2,722,170 |
| Tangible common equity(1) | $ <br>282,774 | $ 280,861 | $ 273,206 | $ 270,018 | $ 268,096 | $ 282,774 | $ <br> 268,096 |
| Tangible common equity to tangible assets(1) | 9.49% | 9.22% | 9.22% | 10.17% | 10.26% | 9.49% | 10.26% |
| (1) See Reconciliation of Non-GAAP financial measures. | |||||||
| Southern National Bancorp of Virginia, inc. ($000's, except per share data) | For the Three Month Period: | Year to date Period: | |||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Condensed Consolidated Statement of Operations (unaudited) | 4Q2020 | 3Q 2020 | 2Q 2020 | 1Q 2020 | 4Q 2019 | 4Q 2020 | 4Q 2019 |
| Interest and dividend income | $ 31,919 | $ 28,707 | $ <br>28,672 | $ 28,481 | $ 29,354 | $ 117,779 | $ <br> 120,524 |
| Interest expense | 6,265 | 5,709 | 6,199 | 7,966 | 8,685 | 26,139 | 36,924 |
| Net interest income | 25,654 | 22,998 | 22,473 | 20,515 | 20,669 | 91,640 | 83,600 |
| Provision for credit losses | 3,101 | 2,000 | 10,899 | 3,450 | - | 19,450 | 350 |
| Net interest income after provision for credit losses | 22,553 | 20,998 | 11,574 | 17,065 | 20,669 | 72,190 | 83,250 |
| Account maintenance and deposit service fees | 1,700 | 1,633 | 1,489 | 1,698 | 1,847 | 6,520 | 7,159 |
| Income from bank-owned life insurance | 394 | 394 | 385 | 386 | 399 | 1,559 | 1,699 |
| Equity gain from mortgage affiliate | 2,571 | 3,826 | 4,161 | 231 | 16 | 10,789 | 1,191 |
| Recoveries on loans and securities charged-off prior to acquisition | 3,793 | 288 | 2,235 | 184 | 477 | 6,500 | 1,537 |
| Other | (491) | 130 | 123 | 321 | 620 | 83 | 1,000 |
| Noninterest income | 7,967 | 6,271 | 8,393 | 2,820 | 3,359 | 25,451 | 12,586 |
| Employee compensation and benefits | 9,211 | 7,817 | 7,338 | 12,309 | 6,738 | 36,675 | 26,261 |
| Occupancy and equipment expenses | 2,114 | 2,151 | 2,044 | 2,558 | 2,389 | 8,867 | 8,923 |
| Amortization of core deposit intangible | 341 | 341 | 341 | 341 | 341 | 1,364 | 1,418 |
| Virginia franchise tax expense | 613 | 615 | 659 | 570 | 562 | 2,457 | 2,251 |
| Data processing expense | 814 | 701 | 956 | 707 | 677 | 3,178 | 2,381 |
| Telecommunication and communication expense | 378 | 382 | 369 | 368 | 357 | 1,497 | 1,615 |
| Net (gain) loss on other real estate owned | 905 | (16) | - | 71 | - | 960 | (38) |
| Professional fees | 1,166 | 1,494 | 873 | 1,193 | 1,036 | 4,726 | 3,612 |
| Other expenses | 3,012 | 1,779 | 1,490 | 1,735 | 1,696 | 8,016 | 10,169 |
| Noninterest expense | 18,554 | 15,264 | 14,070 | 19,852 | 13,796 | 67,740 | 56,592 |
| Income before income taxes | 11,966 | 12,005 | 5,897 | 33 | 10,232 | 29,901 | 39,244 |
| Income tax expense | 3,003 | 2,417 | 1,188 | 6 | 1,268 | 6,614 | 6,077 |
| Net income | $ <br> 8,963 | $ 9,588 | $ 4,709 | $ 27 | $ 8,964 | $ 23,287 | $ 33,167 |
| Non-GAAP adjustments to Net Income | |||||||
| Management Restructure / Recruiting | $<br> 843 | $ - | $ - | $ 4,899 | $ - | $ 5,742 | $<br> - |
| Branch Closures | - | - | - | 479 | - | 479 | - |
| (Gain or recovery) / loss on securities | (2,964) | - | - | - | - | (2,964) | - |
| Brand Initative / Renaming | 1,000 | - | - | - | - | 1,000 | - |
| Extraordinary PPP income and expense | (2,177) | - | - | - | - | (2,177) | - |
| Other loss and related legal expenses | - | - | - | - | - | - | 3,702 |
| Income tax effect | 729 | - | - | (1,076) | - | (347) | (777) |
| Net Income adjusted for nonrecurring income and expenses | $ 6,394 | $ 9,588 | $ 4,709 | $ 4,329 | $ 8,964 | $ 25,020 | $ 36,092 |
| CECL unfunded commitment expense (pre-tax) | 380 | - | - | - | - | 380 | - |
| Pre-tax pre-provision earnings - operating | $ <br> 12,149 | $ 14,005 | $ 16,796 | $ 8,861 | $ 10,232 | $ 51,811 | $ 43,296 |
| Southern National Bancorp of Virginia, inc. ($000's, except per share data) | For the Three Month Period: | Year to date Period: | |||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Per Share Data: | 4Q 2020 | 3Q 2020 | 2Q 2020 | 1Q 2020 | 4Q 2019 | 4Q 2020 | 4Q 2019 |
| Earnings per share - Basic | $ 0.37 | $ 0.40 | $ <br> 0.19 | $ 0.00 | $ 0.37 | $ 0.96 | $ 1.38 |
| Earnings per share - Diluted | $ 0.37 | $ 0.39 | $ 0.19 | $ 0.00 | $ 0.37 | $ 0.96 | $ 1.36 |
| Book value per share | $ 16.03 | $ 15.96 | $ 15.67 | $ 15.59 | $ 15.60 | $ 16.03 | $ 15.60 |
| Tangible book value per share(1) | $ 11.60 | $ 11.53 | $ 11.21 | $ 11.11 | $ 11.09 | $ 11.60 | $ 11.09 |
| Weighted average shares outstanding - Basic | 24,272,312 | 24,270,455 | 24,246,355 | 24,168,359 | 24,092,534 | 24,239,481 | 24,050,037 |
| Weighted average shares outstanding - Diluted | 24,401,037 | 24,375,383 | 24,352,708 | 34,388,085 | 24,411,147 | 24,362,665 | 24,325,182 |
| Shares outstanding at end of period | 24,368,612 | 24,368,853 | 24,361,603 | 24,297,703 | 24,181,534 | 24,368,612 | 24,181,534 |
| Selected Performance Ratios: | |||||||
| Return on average assets - operating(1) | 0.82% | 1.19% | 0.61% | 0.63% | 1.31% | 0.84% | 1.33% |
| Pre-tax pre-provision return on average assets - operating(1) | 1.56% | 1.78% | 2.28% | 1.30% | 1.50% | 1.74% | 1.59% |
| Return on average equity - operating(1) | 6.53% | 9.87% | 4.92% | 4.57% | 9.49% | 6.50% | 9.93% |
| Return on average tangible equity - operating(1) | 9.04% | 13.72% | 6.86% | 0.04% | 13.40% | 9.06% | 13.09% |
| Yield on earning assets | 4.46% | 3.97% | 4.25% | 4.61% | 4.75% | 4.31% | 4.88% |
| Cost of funds on interest bearing liabilities | 0.93% | 0.83% | 0.97% | 1.60% | 1.49% | 1.01% | 1.58% |
| Net interest margin | 3.58% | 3.18% | 3.33% | 3.32% | 3.35% | 3.35% | 3.39% |
| Gross loans to deposits | 100.32% | 113.86% | 116.73% | 106.61% | 102.89% | 100.32% | 102.89% |
| Efficiency ratio - operating(1) | 57.43% | 52.79% | 49.07% | 62.50% | 57.60% | 55.02% | 56.37% |
| Overhead to average capital ratio | 1.70% | 1.15% | 0.77% | 1.86% | 1.54% | 1.81% | 1.51% |
| Net charge-offs to average loans (annualized) | 0.13% | (0.02%) | (0.00%) | 0.18% | 0.17% | 0.09% | 0.11% |
| Loan Portfolio Composition: | |||||||
| Loans secured by real estate: | |||||||
| Commercial real estate - owner occupied | $ 436,600 | $ 416,717 | $ 412,916 | $ 409,739 | $ 414,479 | $ 436,600 | $ <br> 414,479 |
| Commercial real estate - non-owner occupied | 603,319 | 605,053 | 591,229 | 599,987 | 559,195 | 603,319 | 559,195 |
| Secured by farmland | 13,110 | 16,608 | 16,845 | 16,608 | 17,622 | 13,110 | 17,622 |
| Construction and development loans | 103,264 | 120,066 | 122,086 | 115,144 | 150,750 | 103,264 | 150,750 |
| Residential 1-4 family | 558,605 | 581,237 | 612,247 | 624,119 | 604,777 | 558,605 | 604,777 |
| Multi-family residential | 107,267 | 107,672 | 100,685 | 90,652 | 82,055 | 107,267 | 82,055 |
| Home equity lines of credit | 91,714 | 97,727 | 101,218 | 106,820 | 109,006 | 91,714 | 109,006 |
| Total real estate loans | 1,913,879 | 1,945,080 | 1,957,226 | 1,963,069 | 1,937,884 | 1,913,879 | 1,937,884 |
| Commercial loans | 188,885 | 216,711 | 204,160 | 223,433 | 221,447 | 188,885 | 221,447 |
| SBA Paycheck Protection Program loans | 319,428 | 348,022 | 335,612 | - | - | 319,428 | - |
| Consumer loans | 22,334 | 23,078 | 24,733 | 25,708 | 26,304 | 22,334 | 26,304 |
| Gross loans | 2,444,526 | 2,532,891 | 2,521,731 | 2,212,210 | 2,185,635 | 2,444,526 | 2,185,635 |
| Plus (less) deferred costs (fees) on loans | (4,030) | (9,182) | (10,227) | 328 | 412 | (4,030) | 412 |
| Loan receivable, net of deferred costs (fees) | $<br> 2,440,496 | $ 2,523,709 | $ 2,511,504 | $ 2,212,538 | $ 2,186,047 | $ 2,440,496 | $ 2,186,047 |
| (1) See Reconciliation of Non-GAAP financial measures. | |||||||
| Southern National Bancorp of Virginia, inc. ($000's, except per share data) | For the Three Month Period: | Year to date Period: | |||||
| --- | --- | --- | --- | --- | --- | ||
| Asset Quality Information: | 4Q 2020 | 3Q 2020 | 2Q 2020 | 1Q 2020 | 4Q 2020 | ||
| Allowance for Credit Losses: | CECL | Incurred | Incurred | Incurred | CECL | ||
| Balance at beginning of period | $ (25,779) | $ (23,627) | $ <br> (12,722) | (10,261) | (10,261) | ||
| Adoption of CECL | (8,292) | - | - | - | (8,292) | ||
| Provision for loan losses | (3,101) | (2,000) | (10,899) | (3,450) | (19,450) | ||
| Charge-offs | 1,125 | 86 | 33 | 1,099 | 2,343 | ||
| Recoveries | (298) | (238) | (39) | (110) | (685) | ||
| Net charge-offs | 827 | (152) | (6) | 989 | 1,658 | ||
| Ending balance | $ (36,345) | $ (25,779) | $ (23,627) | (12,722) | (36,345) | ||
| Cummulative reconciliation to CECL: | |||||||
| CECL adoption impact on acquired loans | $ (1,997) | $<br> (1,997) | (1,997) | ||||
| CECL adoption impact on retained earnings, pretax | (6,924) | (6,924) | (6,924) | ||||
| Cummulative additional provision for loan losses | (1,649) | (3,191) | (11,016) | ||||
| CECL Ending balance | $ (36,349) | $ (35,739) | (32,659) | ||||
| Reserve for Unfunded Commitments: | CECL | Incurred | Incurred | Incurred | CECL | ||
| Balance at beginning of period | $ <br>(55) | $ (55) | $ (55) | (55) | (55) | ||
| Adoption of CECL | (305) | (305) | |||||
| Unfunded loan commitment expense | (380) | (380) | |||||
| Total Reserve for Unfunded Commitments | $ <br> (740) | $ (55) | $ (55) | (55) | (740) | ||
| Cummulative reconciliation to CECL: | |||||||
| CECL adoption impact on retained earnings, pretax | $ (305) | $ (305) | (305) | ||||
| Cummulative additional provision for unfunded commitments | (1,224) | (817) | (425) | ||||
| CECL Ending balance | $ (1,639) | $ (1,232) | (840) | ||||
| Net Charge-off Information: | |||||||
| Charge-offs: | |||||||
| Commercial, financial and agricultural | $ <br> 900 | $ 12 | $ - | 822 | 1,734 | ||
| Real estate - construction and development | - | - | - | - | - | ||
| Real estate - commercial and farmland | 52 | - | - | - | 52 | ||
| Real estate - residential | 141 | 47 | - | 245 | 433 | ||
| Consumer installment | 32 | 27 | 33 | 32 | 124 | ||
| Total charge-offs | 1,125 | 86 | 33 | 1,099 | 2,343 | ||
| Recoveries: | |||||||
| Commercial, financial and agricultural | (9) | - | (20) | (65) | (94) | ||
| Real estate - construction and development | - | - | - | - | - | ||
| Real estate - commercial and farmland | (126) | (4) | (3) | (7) | (140) | ||
| Real estate - residential | (157) | (225) | (5) | (31) | (418) | ||
| Consumer installment | (6) | (9) | (11) | (7) | (33) | ||
| Total recoveries | (298) | (238) | (39) | (110) | (685) | ||
| Net charge-offs | $ 827 | $ (152) | $ (6) | 989 | 1,658 |
All values are in US Dollars.
| Southern National Bancorp of Virginia, inc. ($000's, except per share data) | For the Three Month Period: | Year to date Period: | |||||
|---|---|---|---|---|---|---|---|
| Non-Performing Assets: | 4Q 2020 | 3Q 2020 | 2Q 2020 | 1Q 2020 | 4Q 2019 | 4Q 2020 | 4Q 2019 |
| Accruing loans delinquent 90 days or more | $ <br> - | $ - | $ - | $ - | $ - | $ - | $ - |
| Nonaccrual loans | 14,462 | 15,270 | 14,930 | 8,941 | 8,900 | 14,462 | 8,900 |
| Other real estate owned | 3,078 | 5,388 | 6,006 | 5,876 | 6,224 | 3,078 | 6,224 |
| Total non-performing assets | $ <br>17,540 | $ 20,658 | $ 20,936 | $ 14,817 | $ 15,124 | $ 17,540 | $ 15,124 |
| SBA guaranteed portion of non-performing loans | $ 3,076 | $ 4,076 | $ 3,513 | $ 2,889 | $ 4,129 | $ 3,076 | $ 4,129 |
| Troubled debt restructuring | $ <br> 987 | $ 1,629 | $ 1,667 | $ 694 | $ 697 | $ 987 | $ 697 |
| Loans deferred under COVID-19 modifications | $ 122,010 | $ 436,591 | $ 707,841 | $ 24,308 | $ - | $ 122,010 | $ <br> - |
| Asset Quality Ratios: | |||||||
| Non-performing assets as a percent of total assets, excluding SBA guarantees | 0.47% | 0.53% | 0.57% | 0.43% | 0.40% | 0.47% | 0.40% |
| Net charge-offs as a percent of average loans (annualized) | 0.13% | (0.02%) | 0.00% | 0.18% | 0.17% | 0.09% | 0.11% |
| Allowance for credit losses to total loans | 1.49% | 1.02% | 0.94% | 0.57% | 0.47% | 1.49% | 0.47% |
| Allowance for credit losses to total loans (excluding PPP loans) | 1.71% | 1.18% | 1.09% | 0.57% | 0.47% | 1.71% | 0.47% |
| Loans by Risk Grade: | |||||||
| Pass, not graded | $ <br>533,287 | $ 574,954 | $ 653,943 | $ 630,827 | $ 611,160 | $ 533,287 | $ <br> 611,160 |
| Pass Grade 1 - Highest Quality | 778 | 891 | 306 | 538 | 374 | 778 | 374 |
| Pass Grade 2 - Good Quality | 332,251 | 375,861 | 323,512 | 28,583 | 27,855 | 332,251 | 27,855 |
| Pass Grade 3 - Satisfactory Quality | 627,270 | 878,031 | 837,606 | 866,316 | 871,463 | 627,270 | 871,463 |
| Pass Grade 4 - Pass | 872,604 | 660,630 | 662,534 | 664,124 | 652,464 | 872,604 | 652,464 |
| Pass Grade 5 - Special Mention | 29,809 | 14,132 | 14,006 | 11,622 | 12,235 | 29,809 | 12,235 |
| Grade 6 - Substandard | 44,497 | 19,210 | 19,597 | 10,528 | 10,496 | 44,497 | 10,496 |
| Grade 7 - Doubtful | - | - | - | - | - | - | - |
| Grade 8 - Loss | - | - | - | - | - | - | - |
| Total loans | $ 2,440,496 | $ 2,523,709 | $ 2,511,504 | $ 2,212,538 | $ 2,186,047 | $ 2,440,496 | $ 2,186,047 |
| Southern National Bancorp of Virginia, inc. ($000's, except per share data) | For the Three Month Period: | Year to date Period: | |||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Average Balances: | 4Q 2020 | 3Q 2020 | 2Q 2020 | 1Q 2020 | 4Q 2019 | 4Q 2020 | 4Q 2019 |
| Assets | |||||||
| Interest-earning assets: | |||||||
| Loans, net of deferred fees | $ <br>2,497,259 | $ 2,501,614 | $<br> 2,401,620 | $ 2,200,926 | $ 2,156,174 | $ 2,400,896 | $ <br> 2,159,681 |
| Investment securities | 204,968 | 213,039 | 222,124 | 231,794 | 238,563 | 217,932 | 241,800 |
| Other earning assets | 147,014 | 163,159 | 91,230 | 54,800 | 54,826 | 114,275 | 66,582 |
| Total earning assets | 2,849,241 | 2,877,812 | 2,714,974 | 2,487,520 | 2,449,563 | 2,733,103 | 2,468,063 |
| Other assets | 252,231 | 256,284 | 250,897 | 252,700 | 255,916 | 253,035 | 252,412 |
| Total assets | $ 3,101,472 | $ 3,134,096 | $ 2,965,871 | $ 2,740,220 | $ 2,705,479 | $ 2,986,138 | $ 2,720,475 |
| Liabilities and stockholders' equity | |||||||
| Demand deposits | $ <br>459,830 | $ 452,500 | $ 418,382 | $ 333,408 | $ 345,191 | $ 416,249 | $ <br> 332,924 |
| Interest-bearing liabilities: | |||||||
| NOW and other demand accounts | 688,125 | 451,583 | 404,700 | 379,531 | 374,328 | 481,470 | 360,254 |
| Money market accounts | 569,223 | 504,887 | 488,648 | 469,651 | 464,471 | 508,260 | 439,097 |
| Savings accounts | 182,434 | 176,305 | 163,574 | 147,697 | 145,532 | 167,567 | 145,855 |
| Time deposits | 525,607 | 590,263 | 710,483 | 756,055 | 832,246 | 645,123 | 868,420 |
| Total Deposits | 2,425,219 | 2,175,538 | 2,185,787 | 2,086,342 | 2,161,768 | 2,218,669 | 2,146,550 |
| Borrowings | 260,493 | 547,182 | 371,836 | 251,830 | 144,664 | 358,087 | 188,647 |
| Total Funding | 2,685,712 | 2,722,720 | 2,557,623 | 2,338,172 | 2,306,432 | 2,576,756 | 2,335,197 |
| Other Liabilities | 26,588 | 25,869 | 24,495 | 21,781 | 24,398 | 24,693 | 22,115 |
| Stockholders' equity | 389,172 | 385,507 | 383,753 | 380,267 | 374,649 | 384,689 | 363,163 |
| Total liabilities and stockholders' equity | $ 3,101,472 | $ 3,134,096 | $ 2,965,871 | $ 2,740,220 | $ 2,705,479 | $ 2,986,138 | $ 2,720,475 |
| Memo: SBA PPP loans | $ <br> 332,080 | $ 335,653 | $ 192,751 | $ - | $ - | $ 215,770 | $ <br> - |
| Net Interest Income | |||||||
| Loans | $ 30,596 | $ <br> 27,266 | $ 27,044 | $ 26,741 | $ 27,489 | $ 111,647 | $ <br> 112,181 |
| Investment securities | 993 | 1,129 | 1,247 | 1,361 | 1,496 | 4,730 | 6,224 |
| Other earning assets | 330 | 312 | 381 | 379 | 370 | 1,402 | 2,119 |
| Total Earning Assets | 31,919 | 28,707 | 28,672 | 28,481 | 29,355 | 117,779 | 120,524 |
| Non-interest bearing DDA | - | - | - | - | - | - | - |
| NOW and other demand accounts | 1,167 | 807 | 745 | 786 | 792 | 3,505 | 2,989 |
| Money market accounts | 984 | 800 | 830 | 1,575 | 1,779 | 4,188 | 7,745 |
| Savings accounts | 137 | 130 | 107 | 116 | 116 | 490 | 461 |
| Time deposits | 2,038 | 2,620 | 3,464 | 4,026 | 4,799 | 12,149 | 19,407 |
| Total Deposit Costs | 4,326 | 4,357 | 5,146 | 6,503 | 7,486 | 20,332 | 30,602 |
| Other Borrowings | 1,939 | 1,352 | 1,053 | 1,463 | 1,200 | 5,807 | 6,322 |
| Total Funding Costs | 6,265 | 5,709 | 6,199 | 7,966 | 8,686 | 26,139 | 36,924 |
| Net Interest Income | $ <br>25,654 | $ 22,998 | $ 22,473 | $ 20,515 | $ 20,669 | $ 91,640 | $ 83,600 |
| Memo: SBA PPP loan interest and fee income | $ <br> 5,725 | $ 2,233 | $ 512 | $ - | $ - | $ 8,470 | $<br> - |
| Southern National Bancorp of Virginia, inc. | For the Three Month Period: | Year to date Period: | |||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Net Interest Margin | 4Q 2020 | 3Q 2020 | 2Q 2020 | 1Q 2020 | 4Q 2019 | 4Q 2020 | 4Q 2019 |
| Loans | 4.87% | 4.34% | 4.53% | 4.89% | 5.06% | 4.65% | 5.19% |
| Investments | 1.93% | 2.11% | 2.26% | 2.36% | 2.49% | 2.17% | 2.57% |
| Other Earning Assets | 0.89% | 0.76% | 1.68% | 2.78% | 2.68% | 1.23% | 3.18% |
| Total Earning Assets | 4.46% | 3.97% | 4.25% | 4.60% | 4.75% | 4.31% | 4.88% |
| NOW | 0.67% | 0.71% | 0.74% | 0.83% | 0.84% | 0.73% | 0.83% |
| MMDA | 0.69% | 0.63% | 0.68% | 1.35% | 1.52% | 0.82% | 1.76% |
| Savings | 0.30% | 0.29% | 0.26% | 0.32% | 0.32% | 0.29% | 0.32% |
| CDs | 1.54% | 1.77% | 1.96% | 2.14% | 2.29% | 1.88% | 2.23% |
| Interest Bearing Deposits | 0.88% | 1.01% | 1.17% | 1.49% | 1.63% | 1.13% | 1.69% |
| Total Cost of Deposits | 0.71% | 0.80% | 0.95% | 1.25% | 1.37% | 0.92% | 1.43% |
| Other Funding | 2.96% | 0.98% | 1.14% | 2.34% | 3.29% | 1.62% | 3.35% |
| Total Cost of Funds | 0.93% | 0.83% | 0.97% | 1.37% | 1.49% | 1.01% | 1.58% |
| Net Interest Margin | 3.58% | 3.18% | 3.33% | 3.32% | 3.35% | 3.35% | 3.39% |
| Net Interest Spread | 3.53% | 3.14% | 3.27% | 3.23% | 3.26% | 3.29% | 3.30% |
| Memo: Excluding SBA PPP loans | |||||||
| Loans | 4.57% | 4.60% | 4.83% | 4.89% | 5.06% | 4.72% | 5.19% |
| Total Earning Assets | 4.14% | 4.14% | 4.49% | 4.60% | 4.75% | 4.34% | 4.88% |
| Net Interest Margin* | 3.23% | 3.28% | 3.51% | 3.32% | 3.35% | 3.33% | 3.39% |
| *Net interest margin excluding the effect of SBA PPP loans assumes a funding cost of 35bps on average PPP balances in all applicable periods | |||||||
| Southern National Bancorp of Virginia, inc. ($000's, except per share data) | For the Three Month Period: | Year to date Period: | |||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Reconciliation of Non-GAAP items: | 4Q 2020 | 3Q 2020 | 2Q 2020 | 1Q 2020 | 4Q 2019 | 4Q 2020 | 4Q 2019 |
| Return on average assets | 1.15% | 1.19% | 0.61% | 0.00% | 1.31% | 0.78% | 1.22% |
| Effect of adjustment for nonrecurring income and expenses | (0.33%) | 0.00% | 0.00% | 0.63% | 0.00% | 0.06% | 0.11% |
| Return on average assets - operating | 0.82% | 1.19% | 0.61% | 0.63% | 1.31% | 0.84% | 1.33% |
| Net Income | $ 8,963 | $ 9,588 | $ 4,709 | $ 27 | $ 8,964 | $ 23,287 | $<br> 33,167 |
| Income tax expense | 3,003 | 2,417 | 1,188 | 6 | 1,268 | 6,614 | 6,077 |
| Provision for credit losses (incl. unfunded commitments) | 3,481 | 2,000 | 10,899 | 3,450 | - | 19,830 | 350 |
| Pre-tax pre-provision earnings | $ <br>15,447 | $ 14,005 | $ 16,796 | $ 3,483 | $ 10,232 | $ 49,731 | $ 39,594 |
| Effect of adjustment for nonrecurring income and expenses | (3,298) | - | - | 5,378 | - | 2,080 | 3,702 |
| Pre-tax pre-provision earnings - operating | $ <br>12,149 | $ 14,005 | $ 16,796 | $ 8,861 | $ 10,232 | $ 51,811 | $ 43,296 |
| Return on average assets | 1.15% | 1.19% | 0.61% | 0.00% | 1.31% | 0.78% | 1.22% |
| Effect of tax expense | 0.39% | 0.31% | 0.16% | 0.00% | 0.19% | 0.22% | 0.22% |
| Effect of provision for credit losses | 0.45% | 0.25% | 1.48% | 0.51% | 0.00% | 0.66% | 0.01% |
| Pre-tax pre-provision return on average assets | 1.98% | 1.78% | 2.28% | 0.51% | 1.50% | 1.67% | 1.46% |
| Effect of adjustment for nonrecurring income and expenses | (0.42%) | 0.00% | 0.00% | 0.78% | 0.00% | 0.07% | 0.14% |
| Pre-tax pre-provision return on average assets - operating | 1.56% | 1.78% | 2.28% | 1.30% | 1.50% | 1.74% | 1.59% |
| Return on average equity | 9.16% | 9.87% | 4.92% | 0.03% | 9.49% | 6.04% | 9.13% |
| Effect of adjustment for nonrecurring income and expenses | (2.63%) | 0.00% | 0.00% | 4.54% | 0.00% | 0.46% | 0.80% |
| Return on average equity - operating | 6.53% | 9.87% | 4.92% | 4.57% | 9.49% | 6.50% | 9.93% |
| Effect of goodwill and other intangible assets | 2.51% | 3.85% | 1.94% | (4.53%) | 3.91% | 2.56% | 3.16% |
| Return on average tangible equity - operating | 9.04% | 13.72% | 6.86% | 0.04% | 13.40% | 9.06% | 13.09% |
| Efficiency ratio | 59.43% | 52.79% | 49.07% | 85.84% | 57.60% | 60.51% | 59.44% |
| Effect of adjustment for nonrecurring income and expenses | (2.00%) | 0.00% | 0.00% | (23.34%) | 0.00% | (5.49%) | (3.07%) |
| Efficiency ratio - operating | 57.43% | 52.79% | 49.07% | 62.50% | 57.60% | 55.02% | 56.37% |
| Stockholders' equity | $ <br>390,554 | $ 388,983 | $ 381,669 | $ 378,822 | $ 377,241 | $ 390,554 | $ <br> 377,241 |
| Less goodwill and other intangible assets | -107,780 | -108,122 | -108,463 | -108,804 | -109,145 | -107,780 | -109,145 |
| Tangible common equity | $ <br>282,774 | $ 280,861 | $ 273,206 | $ 270,018 | $ 268,096 | $ 282,774 | $ 268,096 |
| Equity to Assets | 12.64% | 12.33% | 12.42% | 13.71% | 13.86% | 12.64% | 13.86% |
| Effect of goodwill and other intangible assets | (3.16%) | (3.11%) | (3.21%) | (3.54%) | (3.60%) | (3.16%) | (3.60%) |
| Tangible common equity to tangible assets | 9.49% | 9.22% | 9.22% | 10.17% | 10.26% | 9.49% | 10.26% |
| Book value per share | $ <br>16.03 | $ 15.96 | $ 15.67 | $ 15.59 | $ 15.60 | $ 16.03 | $ 15.60 |
| Effect of goodwill and other intangible assets | (4.42) | (4.44) | (4.45) | (4.48) | (4.51) | (4.42) | (4.51) |
| Tangible book value per share | $ <br>11.60 | $ 11.53 | $ 11.21 | $ 11.11 | $ 11.09 | $ 11.60 | $ 11.09 |
| Net Interest Margin | 3.58% | 3.18% | 3.33% | 3.32% | 3.35% | 3.35% | 3.39% |
| Effect of adjustment for PPP associated balances* | (0.35%) | 0.10% | 0.18% | 0.00% | 0.00% | (0.02%) | 0.00% |
| Net Interest Margin excluding PPP associated balances | 3.23% | 3.28% | 3.51% | 3.32% | 3.35% | 3.33% | 3.39% |
| Effect of adjustment for accretion | (0.12%) | (0.17%) | (0.30%) | (0.10%) | (0.19%) | (0.17%) | (0.16%) |
| Net Interest Margin - Adjusted | 3.11% | 3.11% | 3.21% | 3.22% | 3.16% | 3.16% | 3.23% |
| *Net interest margin excluding the effect of SBA PPP loans assumes a funding cost of 35bps on average PPP balances in all applicable periods |
NASDAQ|SONA Fourth Quarter 2020 Exhibit 99.2
Forward-Looking Statements This presentation and certain of our other filings with the Securities and Exchange Commission contain statements that constitute “forward-looking statements” within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements. Such statements can generally be identified by such words as "may," "plan," "contemplate," "anticipate," "believe," "intend," "continue," "expect," "project," "predict," "estimate," "could," "should," "would," "will," and other similar words or expressions of the future or otherwise regarding the outlook for the Company’s future business and financial performance and/or the performance of the banking industry and economy in general. These forward-looking statements include, but are not limited to, our expectations regarding our future operating and financial performance, including our outlook and long-term goals for future growth; our expectations regarding net interest margin; expectations on our growth strategy, expense management, capital management and future profitability; expectations on credit quality and performance; statements regarding the potential effects of the COVID-19 pandemic on our business and financial results and conditions; and the assumptions underlying our expectations.
Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties which may cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on the information known to, and current beliefs and expectations of, the Company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. Factors that might cause such differences include, but are not limited to: the Company’s ability to implement its various strategic and growth initiatives; competitive pressures among financial institutions increasing significantly; changes in economic or political conditions, either nationally or locally, particularly in areas in which the Company conducts operations; interest rate risk; changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to the COVID-19 pandemic; changes in management’s plans for the future; credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values, or competition; changes in accounting principles, policies, or guidelines; adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the COVID-19 pandemic; the impact of the COVID-19 pandemic on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations; potential increases in the provision for loan losses resulting from the COVID-19 pandemic; and other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services.
Forward-looking statements speak only as of the date on which such statements are made. These forward-looking statements are based upon information presently known to the Company’s management and are inherently subjective, uncertain and subject to change due to any number of risks and uncertainties, including, without limitation, the risks and other factors set forth in the Company’s filings with the Securities and Exchange Commission, the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, under the captions “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors,” and in the Company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on these forward-looking statements.
Non-GAAP Measures Statements included in this presentation 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. The measures entitled pre-tax pre-provision earnings – operating; pre-tax pre-provision return on average assets – operating; tangible common equity; tangible common equity to tangible assets; tangible book value per share; net interest margin excluding SBA PPP loans; and net interest margin – adjusted are not measures recognized under GAAP and therefore are considered non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is provided in the Reconciliation of Non-GAAP items table.
Management believes that these non-GAAP financial measures provide additional useful information about Southern National that allows management and investors to evaluate the ongoing operating results, financial strength and 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.
SONA Company Snapshot Corp. Headquarters: McLean, VA Bank Headquarters: Glen Allen, VA Branches: 42 Ticker (NASDAQ): SONA Balance Sheet Assets: $3.1 billion Loans: $2.4 billion Deposits: $2.4 billion TCE/TA(1): 9.49% TBV/Share(1): $11.60
Second largest community bank headquartered in Virginia (<$10 billion in assets)(2) (1) See reconciliation of Non-GAAP financial measures on slide 18. (2) Source: S&P Global Market Intelligence.
Operating & Strategic Focus Manage through the pandemic and resulting economic effects Aggressively managing and monitoring relationships and loan portfolios greater than $5 million (65% of total portfolio). Cautiously evaluating strategic opportunities to improve the Company’s long-term growth in earnings per share.
Improve the Operating Results of the Company Improve the deposit mix, focusing less on brokered and higher cost retail CDs, substantially lowering the Company’s cost of funds. Establish sales culture that focuses on and rewards growth in core deposits. Position the Company for a more substantial growth rate in loans in 2021 through key hires in 2020.
Diversify the Company’s lines of business and non-interest income sources Greatly expand the Company’s mortgage opportunity and earnings contribution. Increase the production and sales of Government guaranteed loans. Capitalize on the Panacea opportunity to expand our technology and product offerings, improve our growth rates and demonstrate the creative and entrepreneurial energy to drive shareholder value long term.
Operating Highlights – 4Q 2020 Net income of $9.0 million or $0.37 per diluted share Pre-tax, pre-provision operating return on average assets of 1.56% in Q4 ‘20 versus 1.78% in Q3 ’20 and 1.50% in Q4 ‘19 Net interest margin ex PPP(1) of 3.23%, down 5 basis points linked-quarter Cost of deposits was 71 basis points in Q4 ’20, a decline of 9 bps linked-quarter, while core loan yields, ex PPP, declined 3 bps to 4.57% Mortgage contribution of $2.57 million in Q4 ‘20 versus $3.83 million in Q3 ’20 and $16 thousand in Q4 ‘19
Total assets, loans and deposits of $3.09 billion, $2.44 billion and $2.43 billion, respectively Total loans, excluding PPP, declined 2.5% linked-quarter in Q4 ’20 Total deposits increased 9.75% linked-quarter with core deposits increasing 17.4% and CDs declining 12.8% Panacea loans totaled approximately $1.0 million at December 31, 2020
Implementation of CECL with allowance for credit losses of $36.3 million at December 31, 2020 Allowance/Loans (excluding PPP) of 1.71% at December 31, 2020 Net charge-offs remain low at 13 bps of average loans in Q4 ‘20 Nonperforming assets decreased to $11.4 million with NPAs/Loans+OREO of 0.68% in Q4 Loans in deferral of $122.0 million at December 31, 2020
Proposed Name Change - Effective March 31, 2021, the Company will be known as Primis Financial Corp, and its wholly-owned banking subsidiary Sonabank will be known as Primis Bank Nonperforming assets exclude guaranteed portion of SBA loans. (1) See reconciliation of Non-GAAP financial measures on slide 18.
Total Assets & Capital Levels See reconciliation of Non-GAAP financial measures on slide 18.
Loan Portfolio Total loans, excluding PPP, declined $54.6 million in Q4 ‘20, almost half of which was due to one credit line that paid off at year-end and will draw again in Q1 ‘21
Loan growth expected in 2021 as activity resumes and recent hires in commercial and SBA lending gain traction
Approximately $26 million of PPP loans were paid off or forgiven in Q4 ‘20.
Approximately 44.1%, or $141.2 million, of PPP balances are from loans less than $150K and expected to receive expedited forgiveness in Q1 ‘21
Deposits Deposits continued to grow in Q4 ’20 while overall deposit mix improved
Time deposits are now approximately 20% of total deposits, down from 37% in the year-ago period
Total cost of deposits declined 9 bps to 71 bps in Q4 ’20 compared to Q3 ‘20
Asset Quality
12 hotels currently on deferral and represent the majority of loan deferrals by value 73% of the overall hotel portfolio is not deferred and paying as agreed
Approximately 76% of the consumer deferrals are tied to one residential property with an LTV of approximately 40%
Almost all deferred loans are in the process of applying for additional PPP loans Deferred Loans Dollars in millions.
NPAs / Loans + OREO (%) NCOs / Average Loans (%) Special Mention and Substandard loans increased largely due to 6 hotels that were downgraded in the quarter All 6 are affiliated with major brands, have an average LTV of 53% and DSC over 1% (pre-pandemic) 3 of the hotels are located at a major college campus and have been impacted by the lack of sports All 6 loans are on deferral and pursuing PPP
Migration to nonaccruals and realized losses remain muted Asset Quality Trends Criticized & Classified Loans / Total Loans (%) Classified assets and NPAs exclude guaranteed portion of SBA loans. Total loans excludes PPP loan balances.
Allowance / Classified Loans (%) Allowance / Loans (%) CECL implemented December 31, 2020
Allowance for credit losses increased to 1.71% of loans excluding PPP balances (CECL) from 0.47% at December 31, 2019 (incurred loss)
ACL is 319% of nonperforming loans (excluding SBA guarantees) and approximately 88% of classified loans Allowance for Credit Losses Classified assets and NPAs exclude guaranteed portion of SBA loans. Total loans excludes PPP loan balances.
Profitability
Pre-tax Pre-Provision Operating Earnings(1) PTPP operating earnings remain strong with PTPP ROAA of 1.56% for Q4 ‘20
Mortgage contribution of $2.57 million in Q4 ‘20, down from $3.83 million in Q3 ‘20 and up from $16 thousand a year ago (1) See reconciliation of Non-GAAP financial measures on slide 18.
Net Interest Margin (1) Adjusted NIM excludes acquired loan accretion and PPP associated balances, interest income and interest expense. PPP loans assumed funded at PPPLF cost of 35 basis points in all periods. See reconciliation of Non-GAAP financial measures on slide 18. GAAP and Adjusted(1) Margin (%) Maturing Deposits with Costs Reported NIM increased quarter over quarter primarily on PPP related fee income $4.45 million of deferred PPP fees remain, $2.41 million of which are tied to loans <$150K
Adjusted NIM (excluding effects of PPP and accretion from acquired loans) flat versus Q3 ‘20 Asset yields have remained relatively stable while cost of deposits have continued to fall Excess liquidity continues to weigh on margin with cash balances approaching $200 million at 12/31/20
Steady declines in cost of interest bearing deposits expected to continue in 2021 Approximately $490 million of high cost deposits repricing in 2021 at an overall rate of 1.63%
Appendix
GAAP Reconciliation Tables *Net interest margin excluding the effect of SBA PPP loans assumes a funding cost of 35bps on average PPP balances in all applicable periods