Southern National Bancorp
Jul 21, 2016

Southern National Bancorp of Virginia Inc. reports record earnings of $2.8 million for the second quarter and $5.4 million for the first half of 2016, up from $2.5 million and $4.5 million during the first quarter and half of 2015 

MCLEAN, Va., July 21, 2016 (GLOBE NEWSWIRE) -- Southern National Bancorp of Virginia Inc. (NASDAQ:SONA), the holding company for Sonabank, announced today that net income for the quarter ended June 30, 2016 was $2.8 million and $5.4 million for the first half of 2016. That compares to $2.5 million and $4.5 million for the three and six months ended June 30, 2015.  

The Board of Directors declared a dividend of $.08 per share payable August 19, 2016 to shareholders of record on August 8, 2016. This was Southern National's nineteenth consecutive quarterly dividend. Based on SONA's average stock price for the quarter ended June 30, 2016, that is an annualized dividend yield of 2.63%.

Overview

Net Interest Income

Net interest income was $10.2 million in the quarter ended June 30, 2016 compared to $9.0 million during the same period last year.  Average loans during the second quarter of 2016 were $888.1 million compared to $751.1 million during the same period last year. Sonabank's net interest margin was 4.06% in the second quarter of 2016 which was the same as the second quarter of 2015 and the first quarter of 2016. The accretion of the discount on loans acquired in the acquisitions of Greater Atlantic Bank, HarVest and Prince Georges Federal Savings Bank (PGFSB) contributed $490 thousand to net interest income during the three months ended June 30, 2016 compared to $723 thousand during the second quarter of 2015.

Net interest income was $19.9 million during the six months ended June 30, 2016, compared to $18.0 million during the comparable period in the prior year. Average loans during the six months ended June 30, 2016 were $865.6 million compared to $732.4 million during the same period last year. Sonabank's net interest margin was 4.06% during the first half of 2016 compared to 4.18% during the six months ended June 30, 2015. The loan discount accretions on our three acquisitions were $1.0 million in the first half of 2016 compared to $1.5 million in the same period last year.

Noninterest Income

During the second quarter of 2016 Sonabank had noninterest income of $1.0 million compared to noninterest income of $1.8 million during the second quarter of 2015. We recognized income from our investment in STM in the amount of $552 thousand compared to $793 thousand during the same quarter last year. Much of the non-interest income in the second quarter of 2015 resulted from the fact that we transferred from our held-to-maturity (HTM) portfolio all of the trust preferred securities and a non-government sponsored residential collateralized mortgage obligation (CMO) that had previously been classified as other than temporarily impaired to the available-for-sale (AFS) classification.  We sold five of these trust preferred securities and the CMO recognizing a net gain of $520 thousand.

Noninterest income decreased to $1.5 million in the first six months of 2016 from $2.2 million in the first six months of 2015. The decrease was primarily due to the income from the STM investment and the gain on the sale of securities mentioned above.   

Noninterest Expense

Noninterest expenses were $5.6 million and $11.7 million during the second quarter and the first half of 2016, respectively, compared to $5.6 million and $11.4 million during the same periods in 2015.  During the first half of 2016, we had losses of $275 thousand because of impairment recognized on three OREO properties.  This was partially offset by gains on the sale of three properties in the amount of $192 thousand, resulting in a net loss of $83 thousand.  During the six months ended June 30, 2015, we had losses on Other Real Estate Owned (OREO) of $540 thousand because of impairment recognized on four OREO properties.  This was partially offset by a gain on the sale of one property in the amount of $277 thousand, resulting in a net loss of $263 thousand.  Employee compensation increased by $415 thousand compared to the first half of 2015, due to increases in the normal course of business.

Loan Portfolio

The composition of Sonabank's loan portfolio consisted of the following at June 30, 2016 and December 31, 2015:

         
 Covered Non-coveredTotal  Covered Non-coveredTotal  
 Loans (1)LoansLoans Loans (1)LoansLoans 
 June 30, 2016 December 31, 2015 
Loans secured by real estate:         
Commercial real estate - owner-occupied $- $140,587 $140,587  $- $141,521 $141,521  
Commercial real estate - non-owner-occupied  -  306,671  306,671   -  256,513  256,513  
Secured by farmland  -  561  561   -  578  578  
Construction and land loans  -  68,477  68,477   -  67,832  67,832  
Residential 1-4 family  11,876  188,144  200,020   12,994  165,077  178,071  
Multi- family residential  -  32,513  32,513   -  25,501  25,501  
Home equity lines of credit  19,757  12,529  32,286   21,379  13,798  35,177  
Total real estate loans  31,633  749,482  781,115   34,373  670,820  705,193  
         
Commercial loans  -  125,969  125,969   -  124,985  124,985  
Consumer loans  -  1,325  1,325   -  1,366  1,366  
Gross loans  31,633  876,776  908,409   34,373  797,171  831,544  
         
Less deferred fees on loans  -  (2,073) (2,073)  -  (2,119) (2,119) 
Loans, net of deferred fees $31,633 $874,703 $906,336  $34,373 $795,052 $829,425  
         
(1) Covered Loans were acquired in the Greater Atlantic transaction and are covered under an FDIC loss-share agreement. The agreement covering non-single family loans expired in December 2014.
         

Net loan growth has been strong as seen below at over 17% annualized for the past six quarters:

      
   1-4 Family  
   Purchases Growth
  Non-residentialfrom STMTotal%
2nd Quarter 2016 21,426$14,271 $35,697  4.10%
1st Quarter 2016 29,038 12,176  41,214  4.97%
4th Quarter 2015 28,698 11,172  39,870  5.05%
3rd Quarter 2015 8,449 20,899  29,348  3.90%
2nd Quarter 2015 20,137 10,429  30,566  4.24%
1st Quarter 2015 15,828 9,607  25,435  3.65%
        

Loan Loss Provision/Asset Quality

The loan loss provision for the quarter ended June 30, 2016 was $1.4 million, compared to $1.5 million for the same period last year.  For the six months ended June 30, 2016, the loan loss provision was $2.0 million compared to $2.0 million for the same period last year. Charge offs for the three and six months ended June 30, 2016 were $1.7 million and $2.1 million, respectively. Charge offs for the three and six months ended June 30, 2015 were $1.3 million and $1.6 million, respectively.  The increased level of charge-offs in the second quarter of 2016 was mainly due to a single borrower, who was current, but experiencing serious cash flow problems. We believe that our remaining exposure is protected by the value of our collateral which includes receivables and real estate.

Non-covered OREO as of June 30, 2016 was $9.4 million compared to $10.1 million as of the end of the previous year. During the first six months of 2016 we disposed of two non-covered properties, and there were no transfers from loans to OREO.

Non-covered nonaccrual loans were $2.3 million, of which $1.7 million were fully covered by SBA guarantees at June 30, 2016 compared to $4.2 million ($3.5 million of which were loans fully covered by SBA guarantees) at the end of last year.  The ratio of non-covered non-performing assets (excluding the SBA guaranteed loans) to non-covered assets improved from 1.07% at the end of 2015 to 0.92% at June 30, 2016. The portions of these SBA loans that were unguaranteed were charged off.

Southern National Bancorp of Virginia's allowance for loan losses as a percentage of non-covered total loans at June 30, 2016 was 0.96%, compared to 1.06% at the end of 2015.  Management believes the allowance is adequate at this time but continues to monitor trends in environmental factors which may potentially affect future losses.

Securities Portfolio

Investment securities, available for sale and held to maturity, were $96.0 million at June 30, 2016 down from $101.0 million at December 31, 2015. 

Securities in our investment portfolio as of June 30, 2016 were as follows:

During the first six months of 2016, we purchased $23.0 million of callable agency securities and a fixed rate residential government-sponsored mortgage-backed security in the amount of $2.0 million. Callable agency securities in the amount of $27.1 million were called during the six months ended June 30, 2016.

In the second quarter of 2015, we transferred seven of the trust preferred securities and a non-government sponsored residential CMO that had been other than temporarily impaired from the held-to-maturity classification to the available-for-sale classification.  We sold five of these trust preferred securities and the CMO recognizing a net gain of $520 thousand.  The two trust preferred securities we retained in the AFS classification have a fair value of $1.4 million as of June 30, 2016.  We also have two trust preferred securities that we retained in the HTM classification in the amount of $4.2 million, one of which is the above-mentioned Alesco VII.  These two securities have never been other than temporarily impaired.

Deposits

Total deposits were $902.8 million at June 30, 2016 compared to $825.3 million at December 31, 2015. Demand deposits and NOW accounts were $131.8 million at June 30, 2016 up from $111.8 million at December 31, 2015. This appears to be our efforts bearing fruit. Our savings accounts were up from $49.9 million to $53.0 million, after a promotion. On the other hand our money market accounts were down from $131.7 million to $126.7 million as one of our high profile competitors began paying 1.00% on internet money market accounts marketed through their branches.

Stockholders' Equity

Total stockholders' equity increased from $119.6 million at December 31, 2015 to $123.0 million at June 30, 2016 as a result of the retention of earnings. Our Tier 1 Risk Based Capital Ratios were 12.57% and 12.43% for Southern National Bancorp of Virginia, Inc. and Sonabank, respectively, as of June 30, 2016.

Southern National Bancorp of Virginia, Inc. is a bank holding company with assets of $1.1 billion at June 30, 2016.  Sonabank provides a range of financial services to individuals and small and medium sized businesses. Sonabank has fifteen branches in Virginia, located in Fairfax County (Reston, McLean and Fairfax), in Charlottesville, Warrenton (2), Middleburg, Leesburg (2), South Riding, Front Royal, New Market, Haymarket,  Richmond and Clifton Forge, and eight branches in Maryland, in Rockville, Shady Grove, Frederick, Bethesda, Upper Marlboro, Brandywine, Owings and Huntingtown.

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 Bancorp of Virginia, Inc. 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 Bancorp of Virginia, Inc. 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) filed by Southern National Bancorp of Virginia, Inc. You should consider such factors and not place undue reliance on such forward-looking statements. No obligation is undertaken by Southern National Bancorp of Virginia, Inc. to update such forward-looking statements to reflect events or circumstances occurring after the issuance of this press release.

Southern National Bancorp of Virginia, Inc.     
McLean, Virginia     
          
          
Condensed Consolidated Balance Sheets     
(Unaudited)     
(in thousands)         
  June 30, December 31,     
   2016   2015      
Assets         
Cash and cash equivalents $  41,705  $  30,336      
Investment securities-available for sale    3,722     4,209      
Investment securities-held to maturity    92,285     96,780      
Stock in Federal Reserve Bank and Federal Home Loan Bank    7,610     6,929      
Loans receivable, net of unearned income    906,336     829,425      
Allowance for loan losses    (8,421)    (8,421)     
Net loans    897,915     821,004      
Intangible assets    11,483     11,607      
Bank premises and equipment, net    8,560     8,882      
Bank-owned life insurance    23,475     23,126      
FDIC indemnification asset    2,503     2,922      
Other assets    31,435     30,312      
Total assets $  1,120,693  $  1,036,107      
          
Liabilities and stockholders' equity         
Demand deposits and NOW accounts $  131,770  $  111,849      
Money market accounts    126,693     131,731      
Savings accounts    52,971     49,939      
Time deposits    591,316     531,775      
Total deposits    902,750     825,294      
Securities sold under agreements to repurchase     -      10,381      
Federal Home Loan Bank advances - short term    67,500     59,000      
Federal Home Loan Bank advances - long term    20,000     15,000      
Other liabilities    7,486     6,796      
Total liabilities    997,736     916,471      
Stockholders' equity    122,957     119,636      
Total liabilities and stockholders' equity $  1,120,693  $  1,036,107      
          
          
          
Condensed Consolidated Statements of Income 
(Unaudited) 
 (in thousands)         
  For the Quarters Ended For the Six Months Ended 
  June 30, June 30, 
   2016   2015   2016   2015  
          
Interest and dividend income $  12,291  $  10,732  $  23,964  $  21,167  
Interest expense    2,117     1,708     4,078     3,216  
Net interest income    10,174     9,024     19,886     17,951  
Provision for loan losses    1,387     1,500     2,012     2,025  
Net interest income after provision for loan losses    8,787     7,524     17,874     15,926  
Account maintenance and deposit service fees    228     239     451     460  
Income from bank-owned life insurance    175     154     349     304  
Equity income from mortgage affiliate    552     793     632     778  
Net gain on sale of available for sale securities    -      520     -      520  
Gain on sale of other assets    -      7     -      7  
Other     47     46     81     95  
Noninterest income     1,002     1,759     1,513   2,164  
Employee compensation and benefits    2,926     2,836     6,054     5,639  
Occupancy expenses    1,033     1,050     2,031     2,131  
FDIC assessment    168     156     313     328  
Amortization of FDIC indemnification asset    203     117     419     246  
Net (gain) loss on other real estate owned, net    (38)    (57)    83     263  
Other expenses    1,315     1,487     2,750     2,803  
Noninterest expense    5,607     5,589     11,650     11,410  
Income before income taxes    4,182     3,694     7,737     6,680  
Income tax expense     1,393     1,228     2,382     2,210  
Net income $  2,789  $  2,466  $  5,355  $  4,470  
          
          
          
          
          
          
Financial Highlights 
(Unaudited) 
(Dollars in thousands except per share data)         
          
          
          
  For the Quarters Ended For the Six Months Ended 
  June 30, June 30, 
   2016   2015   2016   2015  
          
Per Share Data :         
Earnings  per share - Basic $  0.23  $  0.20  $  0.44  $  0.37  
Earnings  per share - Diluted $  0.23  $  0.20  $  0.43  $  0.36  
Book value per share     $  10.04  $  9.73  
Tangible book value per share     $  9.10  $  8.77  
Weighted average shares outstanding - Basic    12,248,635     12,240,183     12,242,847     12,228,777  
Weighted average shares outstanding - Diluted    12,395,430     12,358,887     12,394,312     12,343,223  
Shares outstanding at end of period        12,248,943     12,232,409  
          
Selected Performance Ratios and Other Data:         
Return on average assets  1.04%  1.02%  1.02%  0.96% 
Return on average equity  9.18%  8.43%  8.87%  7.77% 
Yield on earning assets  4.90%  4.83%  4.89%  4.93% 
Cost of funds  0.98%  0.75%  0.97%  0.87% 
Net interest margin  4.06%  4.06%  4.06%  4.18% 
Efficiency ratio (1)  50.51%  55.05%  54.05%  56.91% 
Net charge-offs to average loans  0.19%  0.17%  0.23%  0.20% 
Amortization of intangibles $  62  $  65  $  124  $  130  
          
          
      As of 
      June 30, December 31, 
       2016   2015  
          
Stockholders' equity to total assets      10.97%  11.55% 
Tier 1 risk-based captial ratio      12.57%  13.13% 
Intangible assets:         
Goodwill     $  10,514  $  10,514  
Core deposit intangible        969     1,093  
Total     $  11,483  $  11,607  
          
Non-covered loans and other real estate owned (2):         
Nonaccrual loans (3)     $  2,318  $  4,173  
Loans past due 90 days and accruing interest        -      -   
Other real estate owned        9,368     10,096  
Total nonperforming assets      $  11,686  $  14,269  
Allowance for loan losses to total non-covered  loans      0.96%  1.06% 
Nonperforming assets excluding SBA guaranteed loans to total non-covered assets      0.92%  1.07% 
          
(1) Excludes gains and write-downs on OREO, gains on sale of loans, gains/losses on sale of securities and impairment losses recognized in earnings. 
(2) Applies only to non-covered Sonabank loans and other real estate owned. 
(3) Nonaccrual loans include SBA guaranteed amounts totaling $1.7 million and $3.5 million at June 30, 2016 and December 31, 2015, respectively.

 

 

Contact: R. Roderick Porter, President 
Phone: 202-464-1130 ext. 2406
Fax: 202-464-1134
Southern National Bancorp of Virginia Inc.
NASDAQ Symbol SONA
Website: www.sonabank.com