Southern National Bancorp
Apr 24, 2014

Southern National Bancorp of Virginia Inc. Reports Earnings for the First Quarter of 2014 of $1.6 Million, Up From $1.5 Million the Prior Year, and Declares a Dividend of $.07

MCLEAN, Va., April 24, 2014 (GLOBE NEWSWIRE) -- Southern National Bancorp of Virginia Inc. (Nasdaq:SONA), the holding company for Sonabank, announced today that net income for the quarter ended March 31, 2014 was $1.6 million compared to $1.5 million during the quarter ended March 31, 2013.

The Board of Directors declared a dividend of $.07 per share payable May 23, 2014 to shareholders of record on May 12, 2014. This is our tenth consecutive quarterly dividend.

Strategic Transactions

During the quarter just ended we announced two important strategic transactions which have not yet closed. The first was the acquisition of the Prince Georges Federal Savings Bank (PGFSB), an 83 year old institution headquartered in Upper Marlboro, Maryland. We expect the PGFSB transaction to close July 31, 2014.

The second transaction is Sonabank's purchase of 44% of the common stock of Southern Trust Mortgage LLC (STM) from the Middleburg Bank. The CEO of STM, Jerry Flowers, and EVB will be purchasing the remainder of the stock held by Middleburg Bank. Upon consummation of the transaction, STM management will own 51.1%, Sonabank 44% and EVB 4.9%. We hope to close this transaction in the second quarter.

Net Interest Income

During the first quarter net interest income before the provision for loan losses was $7.6 million, down slightly from $7.8 million during the first quarter of 2013. Average loans during the first quarter of 2014 were $544.1 million compared to $514.0 million during the same period last year. The net interest margin was 4.72% in the first quarter of 2014, down from 4.94% in the first quarter of 2013. The loan discount accretion on the Greater Atlantic Bank (GAB) portfolio contributed $412 thousand to net interest income during the first quarter of 2014, compared to $447 thousand during the first quarter of 2013. The loan discount accretion on the HarVest Bank portfolio contributed $378 thousand during the first quarter of 2014, compared to $369 thousand during the same period last year. Before taking the discount accretion related to the GAB and HarVest acquisitions into account, the net interest margin was still strong at 4.29% in the first quarter of 2014 compared to 4.43% in the first quarter of 2013, despite the margin compression we experienced over the past year.

Noninterest income

Noninterest income was $541 thousand during the first quarter of 2014, compared to $536 thousand during the same quarter of 2013. During the first quarter of 2014, we sold part of our investment in CapitalSouth Partners Fund III, a Small Business Investment Company, for a gain of $202 thousand. We had a gain on the sale of available for sale FHLMC preferred stock in the amount of $142 thousand during the quarter ended March 31, 2013.

Noninterest Expense

Noninterest expense was $4.5 million for the first quarter of 2014 compared to $5.0 million for the first quarter of 2013. During the first quarter of 2014, we sold two properties in Other Real Estate Owned (OREO) resulting in gains of $637 thousand. We also sold two other OREO properties resulting in losses of $218 thousand, and the net gain for the quarter ended March 31, 2014 was $419 thousand. This compared to a loss on OREO of $56 thousand for the first quarter of 2013.

The efficiency ratio was 62.18% during the quarter ended March 31, 2014 compared to 59.94% during the first quarter of 2013. It continues to be a challenge to support the additional risk management costs mandated by the regulators.

Loan Portfolio

The composition of our loan portfolio consisted of the following at March 31, 2014 and December 31, 2013:

 Covered 
Loans (1)
Non-covered
Loans
Total 
Loans
Covered 
Loans(1)
Non-covered 
Loans
Total 
Loans
 March 31, 2014December 31, 2013
 Loans secured by real estate:             
 Commercial real estate - owner-occupied   $ 1,552  $ 105,121  $ 106,673  $ 1,603  $ 106,225  $ 107,828
 Commercial real estate - non-owner-occupied   5,769  148,962  154,731  5,829  150,008  155,837
 Secured by farmland   --   504  504  100  508  608
 Construction and land loans   --   39,872  39,872  1  39,068  39,069
 Residential 1-4 family   16,589  61,222  77,811  16,631  66,482  83,113
 Multi- family residential   580  21,414  21,994  585  21,496  22,081
 Home equity lines of credit   24,866  7,526  32,392  25,769  6,431  32,200
 Total real estate loans   49,356  384,621  433,977  50,518  390,218  440,736
             
 Commercial loans   898  104,258  105,156  1,097  104,284  105,381
 Consumer loans   77  1,249  1,326  81  1,308  1,389
 Gross loans   50,331  490,128  540,459  51,696  495,810  547,506
             
 Less deferred fees on loans   4  (1,414)  (1,410)  5  (1,453)  (1,448)
 Loans, net of deferred fees   $ 50,335  $ 488,714  $ 539,049  $ 51,701  $ 494,357  $ 546,058
             
(1) Covered Loans were acquired in the Greater Atlantic transaction and are covered under an FDIC loss-share agreement.

After the strong loan closings in the fourth quarter of 2013, the momentum diminished somewhat in the first quarter of 2014, although going forward the pipeline remains strong. Margin pressure continues but is not as brutal as a year ago.

Total loans outstanding declined from $546.0 million at 12/31/13 to $539.0 million at the end of the quarter. The decline was largely attributable to prepayments on three residential mortgages aggregating $2.8 million and a foreclosure on a $2.4 million residence.

Loan Loss Provision/Asset Quality

Non-covered nonperforming assets continued to decline. From $20.8 million at December 31, 2012, nonperforming assets declined to $17.4 million at December 31, 2013 and further declined to $15.9 million as of March 31, 2014. Nonperforming assets excluding SBA guaranteed loans to total non-covered assets were 2.05% at March 31, 2014, down from 2.35% at year end.

Non-covered nonaccrual loans were $3.8 million (including $2.4 million of loans fully covered by SBA guarantees) at March 31, 2014 compared to $7.8 million (including $1.9 million of loans fully covered by SBA guarantees) at the end of last year. The decline is largely attributable to two loans which we foreclosed on and transferred to OREO.

Non-covered OREO as of March 31, 2014 was $12.1 million compared to $9.6 million as of the end of 2013. During the first quarter of 2014 we disposed of two non-covered properties in the aggregate amount of $1.9 million. In addition, OREO increased by an aggregate of $4.4 million as a result of the aforementioned foreclosures.

Southern National Bancorp of Virginia's allowance for loan losses as a percentage of non-covered total loans at March 31, 2014 was 1.49%, compared to 1.42% at the end of 2013. 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 $88.2 million at March 31, 2014 and $84.4 million at December 31, 2013. The increase was primarily due to the purchase of $5.0 million in a callable agency security net of repayments in the first quarter of 2014.

Securities in our investment portfolio are as follows:

Deposits

Total deposits were $556.3 million at March 31, 2014 compared to $540.4 million at December 31, 2013. Certificates of deposit increased $18.4 million during the first quarter. Noninterest-bearing deposits were $47.0 million at March 31, 2014 and $44.6 million at December 31, 2013.

Stockholders' Equity

Total stockholders' equity increased from $106.6 million at December 31, 2013 to $107.6 million at March 31, 2014 as a result of the retention of earnings. Our Tier 1 Risk Based Capital Ratios were 18.80% and 18.64% for Southern National Bancorp of Virginia, Inc. and Sonabank, respectively, as of March 31, 2014.

Southern National Bancorp of Virginia, Inc. is a bank holding company with assets of $713.2 million at March 31, 2014. 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 five branches in Maryland, in Rockville, Shady Grove, Germantown, Frederick and Bethesda.

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)
 March 31,December 31,
 20142013
Assets    
Cash and cash equivalents  $ 19,382  $ 20,856
Investment securities-available for sale  2,135  1,993
Investment securities-held to maturity  86,106  82,443
Stock in Federal Reserve Bank and Federal Home Loan Bank  4,793  5,915
Loans receivable, net of unearned income  539,049  546,058
Allowance for loan losses  (7,356)  (7,090)
Net loans  531,693  538,968
Intangible assets  9,928  9,973
Bank premises and equipment, net  6,260  6,324
Bank-owned life insurance  20,514  18,374
FDIC indemnification asset  5,066  5,804
Other assets  27,351  25,535
Total assets  $ 713,228  $ 716,185
     
Liabilities and stockholders' equity    
Demand deposits  $ 69,432  $ 68,940
Money market accounts  127,445  130,855
Savings accounts  17,410  16,999
Time deposits  342,004  323,565
Securities sold under agreements to repurchase and other short-term borrowings  19,727  39,795
Federal Home Loan Bank advances  25,000  25,000
Other liabilities  4,563  4,417
Total liabilities  605,581  609,571
Stockholders' equity  107,647  106,614
Total liabilities and stockholders' equity  $ 713,228  $ 716,185
     
Condensed Consolidated Statements of Income
(Unaudited)
 (in thousands)    
 For the Quarters Ended
 March 31,
 20142013
     
     
Interest and dividend income  $ 8,641  $ 9,023
Interest expense  1,054  1,253
Net interest income  7,587  7,770
Provision for loan losses  1,175  1,093
Net interest income after provision for loan losses  6,412  6,677
Account maintenance and deposit service fees  178  193
Income from bank-owned life insurance  140  149
Gain on other assets  202  -- 
Gain on sale of available for sale securities  --   142
Net impairment losses recognized in earnings  (16)  (3)
Other   37  55
Noninterest income  541  536
Employee compensation and benefits  2,389  2,246
Occupancy expenses  959  916
FDIC assessments  125  234
Change in FDIC indemnification asset  124  130
Net (gain) loss on other real estate owned  (419)  56
Other expenses  1,341  1,369
Noninterest expense  4,519  4,951
Income before income taxes  2,434  2,262
Income tax expense  792  736
Net income  $ 1,642  $ 1,526
     
Financial Highlights
(Unaudited)
(Dollars in thousands except per share data)
     
     
 For the Quarters Ended
 March 31,
 20142013
     
Per Share Data:    
Earnings per share - Basic  $ 0.14  $ 0.13
Earnings per share - Diluted  $ 0.14  $ 0.13
Book value per share  $ 9.28  $ 8.99
Tangible book value per share  $ 8.43  $ 8.10
Weighted average shares outstanding - Basic  11,591,281  11,590,212
Weighted average shares outstanding - Diluted  11,657,357  11,616,194
Shares outstanding at end of period  11,594,912  11,590,212
     
Selected Performance Ratios and Other Data:    
Return on average assets 0.93% 0.88%
Return on average equity 6.21% 5.96%
Yield on earning assets 5.37% 5.74%
Yield on earning assets excluding discount accretion on loans acquired in GAB and HarVest acquistions 4.94% 5.22%
Cost of funds 0.77% 0.93%
Cost of funds including non-interest bearing deposits 0.71% 0.86%
Net interest margin 4.72% 4.94%
Net interest margin excluding discount accretion on loans acquired in GAB and HarVest acquistions 4.29% 4.43%
Efficiency ratio (1) 62.18% 59.94%
Net charge-offs (recoveries) to average loans 0.17% 0.18%
Amortization of intangibles  $ 45  $ 123
 
     
 As of
 March 31,December 31,
 20142013
     
Stockholders' equity to total assets 15.09% 14.89%
Tier 1 risk-based captial ratio 18.80% 18.56%
Intangible assets:    
Goodwill  $ 9,160  $ 9,160
Core deposit intangible  768  813
Total  $ 9,928  $ 9,973
     
Non-covered loans and other real estate owned (2):    
Nonaccrual loans (3)  $ 3,828  $ 7,814
Loans past due 90 days and accruing interest  --   -- 
Other real estate owned  12,099  9,579
Total nonperforming assets   $ 15,927  $ 17,393
Allowance for loan losses to total non-covered loans 1.49% 1.42%
Nonperforming assets excluding SBA guaranteed loans to total non-covered assets 2.05% 2.35%
     
(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 $2.4 million and $1.9 million at March 31, 2014 and December 31, 2013, respectively.
     
CONTACT: R. Roderick Porter, President

         Phone: 202-464-1130 ext. 2406

         Fax: 202-464-1134

         Southern National Bancorp, NASDAQ Symbol SONA

         Website: www.sonabank.com