Southern National Bancorp of Virginia Earnings 2020-09-30

Balance Sheet	Income Statement	Cash Flow

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2020

Commission File No. 001-33037

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

(Exact name of registrant as specified in its charter)


Virginia	20-1417448
(State or other jurisdiction	(I.R.S. Employer Identification No.)
of incorporation or organization)

6830 Old Dominion Drive

McLean, Virginia 22101

(Address of principal executive offices) (zip code)

(703) 893-7400

(Registrant’s telephone number, including area code)

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


Title of each class:	Trading symbol	Name of each exchange on which registered:
Common Stock, par value $0.01 per share	SONA	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b–2 of the Exchange Act:


Large accelerated filer ☐	Accelerated filer ☒	Smaller reporting company ☐

Non-accelerated filer ☐	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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of November 2, 2020, there were 24,368,612 shares of common stock, $0.01 par value, outstanding.

Table of Contents

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

FORM 10-Q

September 30, 2020

INDEX		PAGE
PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements
Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019		2
Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2020 and 2019		3
Consolidated Statement of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2020 and 2019		4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019		6
Notes to Unaudited Consolidated Financial Statements		7

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations		34

Item 3 – Quantitative and Qualitative Disclosures about Market Risk		47

Item 4 – Controls and Procedures		49

PART II - OTHER INFORMATION

Item 1 – Legal Proceedings		49

Item 1A – Risk Factors		50

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		51

Item 3 – Defaults Upon Senior Securities		51

Item 4 – Mine Safety Disclosures		51

Item 5 – Other Information		51

Item 6 - Exhibits		52

Signatures		54

Table of Contents

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.
CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share amounts)


	September 30,		December 31,
	2020		2019
	(unaudited)		*
ASSETS
Cash and cash equivalents:
Cash and due from financial institutions	$	7,186	$	7,909
Interest-bearing deposits in other financial institutions		142,086		24,019
Total cash and cash equivalents		149,272		31,928

Securities available for sale, at fair value		157,896		164,820

Securities held to maturity, at amortized cost (fair value of $50,551 and $72,666, respectively)		49,323		72,448

Total loans		2,523,709		2,186,047
Less allowance for loan losses		(25,779)		(10,261)
Net loans		2,497,930		2,175,786
Stock in Federal Reserve Bank and Federal Home Loan Bank		16,927		17,832
Equity investment in mortgage affiliate		13,238		5,020
Preferred investment in mortgage affiliate		3,305		3,305
Bank premises and equipment, net		30,679		31,184
Operating lease right-of-use assets		7,033		8,013
Goodwill		101,954		101,954
Core deposit intangibles, net		6,168		7,191
Bank-owned life insurance		65,015		63,850
Other real estate owned		5,388		6,224
Deferred tax assets, net		14,477		11,788
Accrued interest receivable		21,076		8,210
Other assets		14,892		12,617
Total assets	$	3,154,573	$	2,722,170

LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing demand deposits	$	467,581	$	339,153
Interest-bearing deposits:
NOW accounts		472,553		391,172
Money market accounts		534,899		466,867
Savings accounts		179,756		144,486
Time deposits		561,685		783,040
Total interest-bearing deposits		1,748,893		1,785,565
Total deposits		2,216,474		2,124,718

Securities sold under agreements to repurchase - short term		16,181		12,883
Paycheck Protection Program Liquidity Facility (PPPLF) borrowings		283,906		—
Federal Home Loan Bank (FHLB) advances		100,000		121,640
Junior subordinated debt - long term		9,669		9,632
Senior subordinated notes - long term		105,709		47,051
Operating lease liabilities		7,800		8,469
Other liabilities		25,851		20,536
Total liabilities		2,765,590		2,344,929
Commitments and contingencies (See Note 6)

Stockholders' equity:
Preferred stock, $0.01 par value. Authorized 5,000,000 shares; no shares issued and outstanding		—		—
Common stock, $0.01 par value. Authorized 45,000,000 shares; 24,368,853 and 24,181,534 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		243		241
Additional paid in capital		308,814		306,755
Retained earnings		76,486		69,462
Accumulated other comprehensive income		3,440		783
Total stockholders' equity		388,983		377,241
Total liabilities and stockholders' equity	$	3,154,573	$	2,722,170

* Derived from audited consolidated financial statements

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(dollars in thousands, except per share amounts) (Unaudited)


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Interest and dividend income:
Interest and fees on loans	$	27,266	$	28,340	$	81,051	$	84,692
Interest and dividends on taxable securities		1,006		1,375		3,382		4,275
Interest and dividends on tax exempt securities		123		145		355		453
Interest and dividends on other earning assets		312		614		1,072		1,750
Total interest and dividend income		28,707		30,474		85,860		91,170
Interest expense:
Interest on deposits		4,357		8,001		16,006		23,117
Interest on federal reserve board borrowings		180		—		201		—
Interest on repurchase agreements		24		20		65		65
Interest on junior subordinated debt		89		158		349		458
Interest on senior subordinated notes		968		711		2,392		2,135
Interest on other borrowings		91		569		861		2,464
Total interest expense		5,709		9,459		19,874		28,239
Net interest income		22,998		21,015		65,986		62,931
Provision for loan losses		2,000		150		16,349		350
Net interest income after provision for loan losses		20,998		20,865		49,637		62,581

Noninterest income:
Account maintenance and deposit service fees		1,633		1,837		4,820		5,312
Income from bank-owned life insurance		394		392		1,165		1,300
Equity gain from mortgage affiliate		3,826		599		8,218		1,175
Recoveries related to acquired charged-off loans and investment securities		288		145		2,707		1,060
Other		130		1		574		380
Total noninterest income		6,271		2,974		17,484		9,227

Noninterest expenses:
Salaries and benefits		7,817		6,567		27,464		19,523
Occupancy expenses		1,432		968		4,776		4,572
Furniture and equipment expenses		719		514		1,977		1,962
Amortization of core deposit intangible		341		352		1,023		1,077
Virginia franchise tax expense		615		563		1,844		1,689
Data processing expense		701		622		2,364		1,704
Telephone and communication expense		382		477		1,119		1,258
Net (gain) loss on other real estate owned		(16)		—		55		(38)
Professional fees		1,494		673		3,560		2,576
Other operating expenses		1,779		1,878		5,004		8,473
Total noninterest expenses		15,264		12,614		49,186		42,796
Income before income taxes		12,005		11,225		17,935		29,012
Income tax expense		2,417		2,361		3,611		4,809
Net income	$	9,588	$	8,864	$	14,324	$	24,203
Other comprehensive income:
Unrealized gain on available for sale securities	$	23	$	740	$	3,353	$	4,668
Accretion of amounts previously recorded upon transfer to held to maturity from available for sale		3		4		10		10
Net unrealized gain		26		744		3,363		4,678
Tax effect		5		157		706		983
Other comprehensive income		21		587		2,657		3,695
Comprehensive income	$	9,609	$	9,451	$	16,981	$	27,898
Earnings per share, basic	$	0.40	$	0.37	$	0.59	$	1.01
Earnings per share, diluted	$	0.39	$	0.36	$	0.59	$	0.99

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(dollars in thousands, except per share amounts) (Unaudited)


	For the Three Months Ended September 30, 2020
							Accumulated
			Additional				Other
	Common		Paid in		Retained		Comprehensive
	Stock		Capital		Earnings		Income		Total
Balance - June 30, 2020	$	243	$	308,672	$	69,335	$	3,419	$	381,669
Net income		—		—		9,588		—		9,588
Changes in other comprehensive income on investment securities (net of tax $5)		—		—		—		21		21
Dividends on common stock ($0.10 per share)		—		—		(2,437)		—		(2,437)
Issuance of common stock under Stock Incentive Plan (7,250 shares)		—		50		—		—		50
Stock-based compensation expense		—		92		—		—		92
Balance - September 30, 2020	$	243	$	308,814	$	76,486	$	3,440	$	388,983

Price	15.59	EPS	1
Shares	24	P/E	12
MCap	380	P/FCF	14
Net Debt	-49	EBIT	65
TEV	331	TEV/EBIT	5
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-11-09
10-Q	2020-06-30	Filed 2020-08-10
10-Q	2020-03-31	Filed 2020-05-08
10-K	2019-12-31	Filed 2020-03-16
10-Q	2019-09-30	Filed 2019-11-07
10-Q	2019-06-30	Filed 2019-08-08
10-Q	2019-03-31	Filed 2019-05-09
10-K	2018-12-31	Filed 2019-03-15
10-Q	2018-09-30	Filed 2018-11-09
10-Q	2018-06-30	Filed 2018-08-09
10-Q	2018-03-31	Filed 2018-05-10
10-K	2017-12-31	Filed 2018-03-16
10-Q	2017-09-30	Filed 2017-11-09
10-Q	2017-06-30	Filed 2017-08-09
10-Q	2017-03-31	Filed 2017-05-09
10-K	2016-12-31	Filed 2017-03-16
10-Q	2016-09-30	Filed 2016-11-09
10-Q	2016-06-30	Filed 2016-08-08
10-Q	2016-03-31	Filed 2016-05-10
10-K	2015-12-31	Filed 2016-03-15
10-Q	2015-09-30	Filed 2015-11-09
10-Q	2015-06-30	Filed 2015-08-10
10-Q	2015-03-31	Filed 2015-05-11
10-K	2014-12-31	Filed 2015-03-13
10-Q	2014-09-30	Filed 2014-11-10
10-Q	2014-06-30	Filed 2014-08-06
10-Q	2014-03-31	Filed 2014-05-09
10-K	2013-12-31	Filed 2014-03-12
10-Q	2013-09-30	Filed 2013-11-12
10-Q	2013-06-30	Filed 2013-08-09
10-Q	2013-03-31	Filed 2013-05-10
10-K	2012-12-31	Filed 2013-03-05
10-Q	2012-09-30	Filed 2012-11-08
10-Q	2012-06-30	Filed 2012-08-09
10-Q	2012-05-08	Filed 2012-05-10
10-K	2011-12-31	Filed 2012-04-17
10-Q	2011-09-30	Filed 2011-11-09
10-Q	2011-06-30	Filed 2011-08-09
10-Q	2011-03-31	Filed 2011-05-09
10-K	2010-12-31	Filed 2011-03-15
10-Q	2010-09-30	Filed 2010-11-08
10-Q	2010-06-30	Filed 2010-08-12
10-Q	2010-03-31	Filed 2010-05-14
10-K	2009-12-31	Filed 2010-03-08

8-K	2020-10-26
8-K	2020-10-22
8-K	2020-10-01
8-K	2020-08-20
8-K	2020-08-17
8-K	2020-07-27
8-K	2020-05-21
8-K	2020-04-28
8-K	2020-04-23
8-K	2020-04-08
8-K	2020-03-31
8-K	2020-02-19
8-K	2020-01-30
8-K	2019-10-24
8-K	2019-10-02
8-K	2019-07-25
8-K	2019-06-20
8-K	2019-05-23
8-K	2019-04-26
8-K	2019-02-28
8-K	2019-01-24
8-K	2018-11-27
8-K	2018-10-29
8-K	2018-10-25
8-K	2018-09-19
8-K	2018-09-06
8-K	2018-07-26
8-K	2018-05-24
8-K	2018-04-26
8-K	2018-04-20
8-K	2018-04-16
8-K	2018-04-02
8-K	2018-03-12
8-K	2018-01-26

EX-31.1	sona-20200930xex31d1.htm
EX-31.2	sona-20200930xex31d2.htm
EX-32.1	sona-20200930xex32d1.htm

SONA 10Q Quarterly Report

Southern National Bancorp of Virginia Earnings 2020-09-30