Southern National Bancorp of Virginia Earnings 2020-06-30

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 June 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 July 31, 2020, there were 24,368,853 shares of common stock, $0.01 par value, outstanding.

Table of Contents

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

FORM 10-Q

June 30, 2020

INDEX		PAGE
PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements
Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019		2
Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2020 and 2019		3
Consolidated Statement of Changes in Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019		4
Consolidated Statements of Cash Flows for the six months ended June 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		33

Item 3 – Quantitative and Qualitative Disclosures about Market Risk		45

Item 4 – Controls and Procedures		47

PART II - OTHER INFORMATION

Item 1 – Legal Proceedings		47

Item 1A – Risk Factors		48

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		49

Item 3 – Defaults Upon Senior Securities		49

Item 4 – Mine Safety Disclosures		49

Item 5 – Other Information		49

Item 6 - Exhibits		50

Signatures		52

Table of Contents

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.
CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share amounts)


	June 30,		December 31,
	2020		2019
	(unaudited)		*
ASSETS
Cash and cash equivalents:
Cash and due from financial institutions	$	8,212	$	7,909
Interest-bearing deposits in other financial institutions		74,374		24,019
Total cash and cash equivalents		82,586		31,928

Securities available for sale, at fair value		160,979		164,820

Securities held to maturity, at amortized cost (fair value of $55,352 and $72,666, respectively)		53,958		72,448

Total loans		2,511,504		2,186,047
Less allowance for loan losses		(23,627)		(10,261)
Net loans		2,487,877		2,175,786
Stock in Federal Reserve Bank and Federal Home Loan Bank		16,927		17,832
Equity investment in mortgage affiliate		9,412		5,020
Preferred investment in mortgage affiliate		3,305		3,305
Bank premises and equipment, net		31,087		31,184
Operating lease right-of-use assets		7,111		8,013
Goodwill		101,954		101,954
Core deposit intangibles, net		6,509		7,191
Bank-owned life insurance		64,622		63,850
Other real estate owned		6,006		6,224
Deferred tax assets, net		11,087		11,788
Other assets		28,751		20,827
Total assets	$	3,072,171	$	2,722,170

LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing demand deposits	$	447,605	$	339,153
Interest-bearing deposits:
NOW accounts		424,096		391,172
Money market accounts		488,229		466,867
Savings accounts		171,681		144,486
Time deposits		619,918		783,040
Total interest-bearing deposits		1,703,924		1,785,565
Total deposits		2,151,529		2,124,718

Securities sold under agreements to repurchase - short term		16,412		12,883
Paycheck Protection Program Liquidity Facility (PPPLF) borrowings		333,574		—
Federal Home Loan Bank (FHLB) advances		100,000		121,640
Junior subordinated debt - long term		9,657		9,632
Senior subordinated notes - long term		47,032		47,051
Operating lease liabilities		7,896		8,469
Other liabilities		24,402		20,536
Total liabilities		2,690,502		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; 24,361,603 and 24,181,534 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively		243		241
Additional paid in capital		308,672		306,755
Retained earnings		69,335		69,462
Accumulated other comprehensive income		3,419		783
Total stockholders' equity		381,669		377,241
Total liabilities and stockholders' equity	$	3,072,171	$	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 Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Interest and dividend income:
Interest and fees on loans	$	27,044	$	28,378	$	53,785	$	56,352
Interest and dividends on taxable securities		1,132		1,475		2,376		2,900
Interest and dividends on tax exempt securities		115		152		232		308
Interest and dividends on other earning assets		381		388		760		1,136
Total interest and dividend income		28,672		30,393		57,153		60,696
Interest expense:
Interest on deposits		5,146		7,654		11,649		15,116
Interest on federal reserve board borrowings		21		—		21		—
Interest on repurchase agreements		22		22		41		45
Interest on junior subordinated debt		121		150		260		300
Interest on senior subordinated notes		712		712		1,424		1,424
Interest on other borrowings		177		891		770		1,895
Total interest expense		6,199		9,429		14,165		18,780
Net interest income		22,473		20,964		42,988		41,916
Provision for loan losses		10,899		—		14,349		200
Net interest income after provision for loan losses		11,574		20,964		28,639		41,716

Noninterest income:
Account maintenance and deposit service fees		1,489		1,788		3,187		3,475
Income from bank-owned life insurance		385		385		771		908
Equity gain from mortgage affiliate		4,161		558		4,392		576
Recoveries related to acquired charged-off loans and investment securities		2,235		324		2,419		915
Other		123		136		444		379
Total noninterest income		8,393		3,191		11,213		6,253

Noninterest expenses:
Salaries and benefits		7,338		7,144		19,647		12,956
Occupancy expenses		1,405		1,801		3,344		3,604
Furniture and equipment expenses		639		738		1,258		1,448
Amortization of core deposit intangible		341		362		682		725
Virginia franchise tax expense		659		563		1,229		1,126
Data processing expense		956		571		1,663		1,083
Telephone and communication expense		369		406		737		781
Net (gain) loss on other real estate owned		—		(36)		71		(38)
Professional fees		873		1,381		2,066		1,902
Other operating expenses		1,490		962		3,225		6,595
Total noninterest expenses		14,070		13,892		33,922		30,182
Income before income taxes		5,897		10,263		5,930		17,787
Income tax expense		1,188		944		1,194		2,448
Net income	$	4,709	$	9,319	$	4,736	$	15,339
Other comprehensive income:
Unrealized gain on available for sale securities	$	316	$	2,844	$	3,330	$	3,928
Accretion of amounts previously recorded upon transfer to held to maturity from available for sale		3		3		7		6
Net unrealized gain		319		2,847		3,337		3,934
Tax effect		67		597		701		826
Other comprehensive income		252		2,250		2,636		3,108
Comprehensive income	$	4,961	$	11,569	$	7,372	$	18,447
Earnings per share, basic	$	0.19	$	0.39	$	0.20	$	0.64
Earnings per share, diluted	$	0.19	$	0.38	$	0.19	$	0.63

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 SIX MONTHS ENDED JUNE 30, 2020 AND 2019

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


	For the Three Months Ended June 30, 2020
							Accumulated
			Additional				Other
	Common		Paid in		Retained		Comprehensive
	Stock		Capital		Earnings		Income		Total
Balance - March 31, 2020	$	242	$	308,352	$	67,061	$	3,167	$	378,822
Net income		—		—		4,709		—		4,709
Changes in other comprehensive income on investment securities (net of tax $67)		—		—		—		252		252
Dividends on common stock ($0.10 per share)		—		—		(2,435)		—		(2,435)
Issuance of common stock under Stock Incentive Plan (41,400 shares)		1		331		—		—		332
Stock-based compensation expense		—		(11)		—		—		(11)
Balance - June 30, 2020	$

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	2020-06-30	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	2020-08-20	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2020-08-17	Regulation FD, Exhibits
8-K	2020-07-27	Earnings, Regulation FD, Other Events, Exhibits
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-20200630xex31d1.htm
EX-31.2	sona-20200630xex31d2.htm
EX-32.1	sona-20200630xex32d1.htm

SONA 10Q Quarterly Report

Southern National Bancorp of Virginia Earnings 2020-06-30