MCLEAN, Va., April 26, 2019 /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 $6.0 million after a
nonrecurring other loss and related legal expense for the quarter
ended March 31, 2019, compared to
$8.3 million for the quarter ended
March 31, 2018. Earnings per
share for the three months ended March 31,
2019 were $0.25 basic and
diluted after the nonrecurring other loss and related legal expense
compared to $0.34 basic and diluted,
for the same period in 2018. Excluding the nonrecurring other
loss and related legal expense, earnings would be $8.9 million or $0.37 per share, basic and diluted, for the three
months ended March 31, 2019.
The Board of Directors declared a dividend of $0.09 per share payable on May 24, 2019 to shareholders of record on
May 13, 2019. This is Southern
National's thirtieth consecutive quarterly dividend.
Highlights for the quarter ended March
31, 2019 include:
- In the first quarter of 2019, the Company had a nonrecurring
other loss of $3.2 million and
related legal expense of $502
thousand.
- Loans outstanding of $2.16
billion at March 31, 2019 are
down $20.6 million, or -1.32%
annualized, since December 31,
2018. Unanticipated large loan payoffs of $50.0 million were partially offset by growth of
$29.4 million during the
quarter. Net interest margin for the three months ended
March 31, 2019 was 3.41% compared to
3.66% for the three months ended December
31, 2018 and 3.82% for the three months ended March 31, 2018. During the first quarter,
the combination of large loan payoffs and deposit fluctuations
resulted in an unusually high average of $90.3 million in cash which decreased the net
interest margin by 8 basis points.
- Asset quality remains high as demonstrated by the 0.26% ratio
of nonperforming assets, net of SBA guarantees, to total assets at
March 31, 2019;
- Total deposits of $2.11 billion
at March 31, 2019 have increased
$13.5 million since December 31, 2018 or 0.86% annualized. The Bank's
net loan-to-deposit ratio improved to 101.62% down from 110.63% a
year ago;
- Tangible book value per share of $10.06 at March 31,
2019 has increased 10.67% since a year ago;
- Southern National is well capitalized at March 31, 2019 with a tier 1 risk-based capital
ratio of approximately 12.23%;
- A gain on our investment in Southern Trust Mortgage, LLC
("STM") of $18 thousand for the
quarter ended March 31, 2019,
compared to a loss of ($317) thousand
the year before; and
Net Interest Income
Net interest income was $21.0
million for the quarter ended March
31, 2019 compared to $22.5
million for the first quarter of 2018, which is a direct
result of the rising costs of funds including deposits and
borrowings.
Net interest margin for the three months ended March 31, 2019 was 3.41% compared to 3.66% for
the three months ended December 31,
2018 and 3.82% for the three months ended March 31, 2018. The combination of large
loan payoffs and deposit fluctuations resulted in an unusually high
average of $90.3 million in cash
which decreased the net interest margin by 8 basis points for the
first quarter of 2019. The Company's cost of funds increased 63
basis points to 1.61% since March 31,
2018 due to rising interest rates and competition for
deposits.
The acquired loan discount accretion on loans acquired in the
acquisitions of Eastern Virginia Bankshares, Inc. ("EVBS"), Greater
Atlantic Bank, HarVest and Prince Georges Federal Savings Bank
contributed $816 thousand to net
interest income during the three months ended March 31, 2019 compared to $1.1 million during the three months ended
March 31, 2018. The decrease in
accretion is due to the slowdown in acquired loan prepayments and
payoffs.
Noninterest Income
During the first quarter of 2019, Southern National has
noninterest income of $3.1 million
compared to $3.1 million during the
first quarter of 2018. Income improved on account maintenance
and deposit service fees by $279
thousand. Income from bank-owned life insurance
increased due to the purchase of an additional $12.0 million in bank-owned life insurance during
2018. Gain on our investment in STM increased to $18 thousand for the three months ended
March 31, 2019 compared to a loss of
($317) thousand the year before due
to strengthened management and operational improvements within STM.
For the three months ended March 31,
2019, other noninterest income has benefited, from
$591 thousand of recoveries of legacy
investment securities and loans charged off by EVBS premerger
compared to $1.5 million for the
three months ended March 31,
2018.
Noninterest Expense
Noninterest expense was $16.3
million during the first quarter of 2019 compared to
$13.6 million during the same period
in 2018. The primary increase in noninterest expense was due to a
nonrecurring other loss of $3.2
million with related legal expense of $502 thousand during the first quarter of
2019. Employee compensation and benefits expense totaled
$5.8 million for the first quarter of
2019, as compared to $6.8 million for
the same period of 2018 due to a reduction in staffing. Occupancy
and equipment expenses remain flat. The Company recognized a gain
of $2 thousand on the sale of other
real estate owned ("OREO") during the first quarter of 2019
compared to a $(200) thousand loss
for the first quarter of 2018. In other expenses, miscellaneous
lending and collection expenses are up $159
thousand. FDIC insurance is $0 for the first quarter as Sonabank is eligible
for $643 thousand worth of small bank
assessment credits that will be applied towards current and future
assessments in periods where the FDIC insurance reserve ratio
exceeds 1.38%.
Securities Portfolio
Investment securities totaled $246.8
million at March 31, 2019 and
represent 9.13% of total assets. Southern National utilizes
its securities portfolio to augment income and manage its interest
rate risk while serving as a source of liquidity. As a result
of excess cash liquidity, $15 million
of securities were purchased in the first quarter of 2019. No
securities were purchased or sold during 2018.
Loan Portfolio
Loan growth during the first quarter of 2019 was $29.4 million, but offset by $50.0 million of unanticipated loan payoffs,
bringing total loans to $2.16 billion
at March 31, 2019.
The composition of our loan portfolio consisted of the following
at March 31, 2019 and December 31, 2018 (in thousands):
|
March 31,
2019
|
|
December 31,
2018
|
Loans secured
by real estate:
|
|
|
|
Commercial real estate - owner occupied
|
$
416,750
|
|
$
407,031
|
Commercial real estate - non-owner occupied
|
549,891
|
|
540,698
|
Secured by farmland
|
10,018
|
|
20,966
|
Construction and land loans
|
149,054
|
|
146,654
|
Residential 1-4 family (1)
|
568,617
|
|
565,083
|
Multi-family residential
|
83,219
|
|
82,516
|
Home equity lines of credit (1)
|
121,136
|
|
128,225
|
Total real estate
loans
|
1,898,685
|
|
1,891,173
|
|
|
|
|
Commercial
loans
|
228,040
|
|
255,441
|
Consumer
loans
|
30,318
|
|
32,347
|
Gross
loans
|
2,157,043
|
|
2,178,961
|
|
|
|
|
Less deferred
costs (fees) on loans
|
173
|
|
(137)
|
Loans
receivable, net of deferred costs (fees)
|
$
2,157,216
|
|
$
2,178,824
|
|
|
|
|
(1) Includes
covered loans totaling $16.5 million and $18.3 million as of March
31, 2019 and
|
December 31,
2018, respectively. Covered loans were acquired in the acquisition
of Greater Atlantic Bank
|
and are covered
under a FDIC loss-share agreement. The agreement expires in
December 2019.
|
Loan Loss Provision and Asset Quality
Asset quality remained high during the first quarter of
2019. For the three months ended March
31, 2019, the provision for loan losses was $0.2 million compared to $1.6 million for the same period last year. Net
charge offs for the three months ended March
31, 2019 were $609 thousand
compared to $242 thousand for the
same period in 2018. Southern National's allowance for loan
losses as a percentage of total non-covered loans at March 31, 2019 was 0.56%, compared to 0.57% at
December 31, 2018. The
allowance for loan losses as a percentage of non-covered
non-acquired loans was 0.82% and 0.85% at March 31, 2019 and December 31, 2018, respectively.
Non-covered nonaccrual loans were $1.9
million (excluding $4.8
million of loans fully covered by SBA guarantees) at
March 31, 2019 compared to
$2.5 million (excluding $3.4 million of loans fully covered by SBA
guarantees) as of December 31,
2018. The ratio of non-covered nonperforming assets
(excluding the SBA guaranteed loans) to total assets decreased from
0.28% at March 31, 2018 to 0.26% at
March 31, 2019.
Other real estate owned at March 31,
2018 was $5.0 million compared
to $5.1 million at December 31, 2018.
Deposits
The competition for deposits in the Company's markets continues
while rates begin to flatten. Total deposits were $2.11 billion at March 31,
2019 compared to $2.10 billion
at December 31, 2018, an increase of
$13.5 million, or 0.86% annualized.
During the three months ended March 31,
2019, demand deposits increased by $8.8 million, or 3.65%, NOW accounts increased by
$15.7 million, or 6.06%, while money
market accounts increased $70.6
million or 26.48%. Savings accounts decreased to
$148.5 million or (2.21%) at
March 31, 2019 from a balance of
$151.1 million at December 31, 2018. Time deposits decreased
$79.1 million, or (11.40%), from
$925.4 million at December 31, 2018, to $846.3 million at March
31, 2019 due to the reduction in brokered time accounts.
Adoption of ASC 842 - Leases
On January 1, 2019, the Company
adopted Financial Accounting Standards Board Accounting Standards
Update 2016-02, Leases (Topic 842). As of March 31, 2019, the Company has $7.9 million of right of use assets classified
within bank premises and equipment, $8.9
million of lease obligation liabilities classified within
other liabilities, and a net charge to retained earnings of
$534 thousand for the net difference
in newly recorded assets, liabilities and related accruals.
Stockholders' Equity
Total stockholders' equity increased to $355.2 million at March
31, 2019 from $348.3 million
at December 31, 2018. Our tier 1
risk-based capital ratios were approximately 12.36% and 14.15% for
Southern National and Sonabank, respectively, as of March 31, 2019.
About Southern National Bancorp of Virginia, Inc.
As of March 31, 2019, Southern
National had $2.70 billion in total
assets, $2.16 billion in total loans
and $2.11 billion in total deposits.
Sonabank provides a range of financial services to individuals and
small and medium sized businesses. At March 31, 2019, Sonabank had forty-five
full-service branches. Thirty-eight full-service retail branches
are in Virginia, located in the
counties of Chesterfield (2),
Essex (2), Fairfax (Reston, McLean and Fairfax), Gloucester (2), Hanover (3), King
William, Lancaster,
Middlesex (3), New Kent, Northumberland (3), Southampton, Surry, Sussex, and in Charlottesville, Clifton Forge, Colonial Heights, Front Royal, Hampton, Haymarket, Leesburg, Middleburg, New
Market, Newport News,
Richmond, South Riding, Warrenton, and Williamsburg, and seven full-service retail
branches in Maryland, in
Rockville, Shady Grove,
Bethesda, Upper Marlboro, Brandywine, Owings and Huntingtown.
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.
Management believes that non-GAAP financial measures provide
additional useful information that allows readers to evaluate the
ongoing 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 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. 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 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, and Registration Statements on Form S-4) filed by
Southern National. You should consider such factors and not place
undue reliance on such forward-looking statements. No obligation is
undertaken by Southern National to update such forward-looking
statements to reflect events or circumstances occurring after the
issuance of this press release.
Contacts:
|
Addresses:
|
Joe A. Shearin,
CEO
|
Southern National
Bancorp of Virginia, Inc.
|
Phone:
804-528-4752
|
6830 Old Dominion
Drive
|
|
McLean, VA
22101
|
Georgia S. Derrico,
Executive
Chairman
|
|
Phone: 202-464-1130
ext.
2405
|
Sonabank
|
|
10900 Nuckols Road,
Suite 325
|
R. Roderick Porter,
Executive Vice
Chairman
|
Glen Allen, VA
23060
|
Phone: 202-464-1130
ext. 2406
|
|
|
|
Southern National
Bancorp of Virginia, Inc., NASDAQ Symbol SONA
|
Website:
www.sonabank.com
|
Southern National
Bancorp of Virginia, Inc.
|
McLean,
Virginia
|
Condensed
Consolidated Balance Sheets
|
(Unaudited)
|
(in
thousands)
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
|
|
|
2019
|
|
2018
(1)
|
|
Assets
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
31,841
|
|
$
28,611
|
|
Investment
securities-available for sale
|
|
156,192
|
|
143,377
|
|
Investment
securities-held to maturity
|
|
90,592
|
|
92,462
|
|
Stock in Federal
Reserve Bank and Federal Home Loan Bank
|
|
18,427
|
|
19,522
|
|
Loans receivable, net
of deferred fees
|
|
2,157,216
|
|
2,178,824
|
|
Allowance for loan
losses
|
|
(11,874)
|
|
(12,283)
|
|
|
Net loans
|
|
2,145,341
|
|
2,166,541
|
|
Intangible
assets
|
|
110,200
|
|
110,563
|
|
Bank premises and
equipment, net
|
|
39,343
|
|
32,352
|
|
Bank-owned life
insurance
|
|
62,674
|
|
62,495
|
|
Deferred tax assets,
net
|
|
13,876
|
|
14,104
|
|
Other
assets
|
|
35,709
|
|
31,267
|
|
|
Total
assets
|
|
$
2,704,195
|
|
$
2,701,294
|
|
|
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
Demand
deposits
|
|
$
328,808
|
|
$
320,043
|
|
NOW
accounts
|
|
361,301
|
|
345,597
|
|
Money market
accounts
|
|
426,072
|
|
355,469
|
|
Savings
accounts
|
|
148,548
|
|
151,050
|
|
Time
deposits
|
|
846,325
|
|
925,441
|
|
Total deposits
|
|
2,111,054
|
|
2,097,600
|
|
Federal Home Loan
Bank advances-short term
|
|
135,640
|
|
163,340
|
|
Subordinated
notes
|
|
56,676
|
|
56,673
|
|
Other
liabilities
|
|
48,137
|
|
35,392
|
|
|
Total
liabilities
|
|
2,351,506
|
|
2,353,005
|
|
Stockholders'
equity
|
|
352,689
|
|
348,290
|
|
|
Total liabilities and
stockholders' equity
|
|
$
2,704,195
|
|
$
2,701,294
|
|
|
|
|
|
|
|
|
(1) Derived from
audited financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations
|
(Unaudited)
|
(in
thousands)
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2019
|
|
2018
|
Interest and dividend
income
|
|
$
30,303
|
|
$
28,020
|
Interest
expense
|
|
9,351
|
|
5,520
|
|
Net interest
income
|
|
20,952
|
|
22,500
|
Provision for loan
losses
|
|
200
|
|
1,600
|
|
Net interest income
after provision for loan losses
|
|
20,752
|
|
20,900
|
Account maintenance
and deposit service fees
|
|
1,687
|
|
1,408
|
Income from
bank-owned life insurance
|
|
523
|
|
307
|
Equity (loss) from
mortgage affiliate
|
|
18
|
|
(317)
|
Recoveries related to
acquired charged-off loans and investment
securities
|
591
|
|
1,483
|
Other
|
|
243
|
|
198
|
|
Noninterest
income
|
|
3,062
|
|
3,079
|
Employee compensation
and benefits
|
|
5,812
|
|
6,772
|
Occupancy and
equipment expenses
|
|
2,513
|
|
2,447
|
Amortization of core
deposit intangible
|
|
363
|
|
362
|
FDIC
assessments
|
|
-
|
|
335
|
Amortization of FDIC
indemnification asset
|
|
148
|
|
173
|
Net (gain) loss on
other real estate owned
|
|
(2)
|
|
200
|
Other
expenses
|
|
7,456
|
|
3,330
|
|
Noninterest
expense
|
|
16,290
|
|
13,619
|
|
Income before income
taxes
|
|
7,524
|
|
10,360
|
Income tax
expense
|
|
1,504
|
|
2,101
|
|
Net
income
|
|
$
6,020
|
|
$
8,259
|
|
|
|
|
|
|
|
|
Financial
Highlights
|
|
(Unaudited)
|
|
(Dollars in
thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
|
|
|
|
|
March
31,
|
|
|
|
|
|
2019
|
|
2018
|
|
|
Per Share
Data:
|
|
|
|
|
|
|
Earnings (loss)
per share - Basic
|
|
$
0.25
|
|
$
0.34
|
|
|
Earnings (loss) per
share - Diluted
|
|
$
0.25
|
|
$
0.34
|
|
|
Book value per
share
|
|
$
14.63
|
|
$
13.68
|
|
|
Tangible book value
per share (1)
|
|
$
10.06
|
|
$
9.09
|
|
|
Weighted average
shares outstanding - Basic
|
|
24,012,011
|
|
23,961,546
|
|
|
Weighted average
shares outstanding - Diluted
|
|
24,311,047
|
|
24,232,188
|
|
|
Shares outstanding at
end of period
|
|
24,107,103
|
|
23,987,653
|
|
|
|
|
|
|
|
|
|
|
Selected
Performance Ratios (2):
|
|
|
|
|
|
|
Return on average
assets
|
|
0.89%
|
|
1.27%
|
|
|
Return on average
equity
|
|
6.92%
|
|
10.14%
|
|
|
Return on average
tangible equity (3)
|
|
10.07%
|
|
15.23%
|
|
|
Yield on earning
assets
|
|
4.94%
|
|
4.75%
|
|
|
Cost of
funds
|
|
1.61%
|
|
0.98%
|
|
|
Net interest
margin
|
|
3.41%
|
|
3.82%
|
|
|
Net loans to
deposits
|
|
101.62%
|
|
110.63%
|
|
|
Operating efficiency
ratio (4)
|
|
69.37%
|
|
55.69%
|
|
|
Net charge-offs to
average loans
|
|
0.03%
|
|
0.01%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
|
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity
to total assets
|
|
13.04%
|
|
12.89%
|
|
|
Tier 1 risk-based
capital ratio (approximate for March 31, 2019)
|
|
12.23%
|
|
12.06%
|
|
|
Intangible
assets:
|
|
|
|
|
|
|
|
Goodwill
|
|
$
101,954
|
|
$
101,954
|
|
|
|
Core deposit
intangible, net
|
|
8,246
|
|
8,609
|
|
|
|
Total
|
|
$
110,200
|
|
$
110,563
|
|
|
|
|
|
|
|
|
|
|
Loans and other real
estate owned (5):
|
|
|
|
|
|
|
Nonaccrual loans
(6)
|
|
$
6,661
|
|
$
5,916
|
|
|
Loans past due 90
days and accruing interest
|
|
-
|
|
-
|
|
|
Other real estate
owned
|
|
5,041
|
|
5,077
|
|
|
Total nonperforming
assets
|
|
$
11,702
|
|
$
10,993
|
|
|
Allowance for loan
losses to total non-covered loans
|
|
0.56%
|
|
0.57%
|
|
|
Nonperforming assets
excluding SBA guaranteed loans to
|
|
|
|
|
|
|
total assets
|
|
0.26%
|
|
0.28%
|
|
|
|
|
|
|
|
|
|
|
(1) Non-GAAP measure
defined as stockholders' equity less goodwill and other
intangibles divided by common shares outstanding.
|
(2) Selected
performance ratios are annualized except the operating efficiency
ratio and net charge-offs to average loans.
|
|
|
(3) Non-GAAP measure
defined as average stockholders' equity less average goodwill and
other intangibles.
|
|
|
(4) Non-GAAP measure
excludes gains/losses and write-downs on OREO, gains/losses on sale
of loans, gains/losses on sale of
securities,
|
merger expenses, and
recoveries related to acquired charged-off loans and securities
that are recognized in other noninterest income.
|
(5) Applies only to
non-covered loans and other real estate owned.
|
|
|
|
|
|
|
(6) Nonaccrual loans
include SBA guaranteed amounts totaling $4.8 million and $3.4
million at March 31, 2018 and
|
|
|
December
31, 2018, respectively.
|
|
|
|
|
|
|
Reconciliation of
Non-GAAP Financial Measures
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
|
(Dollars in
thousands)
|
March
31
|
|
|
|
2019
|
|
2018
|
Net income
excluding the nonrecurring other loss
|
|
|
|
|
|
and related legal
adjustment (Non-GAAP)
|
|
|
|
|
Net income
(GAAP)
|
|
$
6,020
|
|
$
8,259
|
Nonrecurring other
loss and related legal expense
|
|
3,702
|
|
-
|
Income tax effect of
adjustment for the nonrecurring other loss
|
|
|
|
|
and related legal
adjustment
|
|
(777)
|
|
-
|
Net income excluding
the nonrecurring other loss
|
|
|
|
|
|
and related legal
adjustment (Non-GAAP)
|
|
$
8,945
|
|
$
8,259
|
|
|
|
|
|
|
Return on average
assets excluding the nonrecurring other loss
|
|
|
|
|
and related legal
adjustment (Non-GAAP)
|
|
|
|
|
Return on average
assets
|
|
0.89%
|
|
1.27%
|
Effect of adjustment
for the nonrecurring other loss
|
|
|
|
|
|
and related legal
adjustment
|
|
0.42%
|
|
-
|
Return on average
assets excluding the nonrecurring other loss
|
|
|
|
|
and related legal
adjustment (Non-GAAP)
|
|
1.31%
|
|
1.27%
|
|
|
|
|
|
|
Return on average
equity excluding merger expenses and
|
|
|
|
|
and related legal
adjustment (Non-GAAP)
|
|
|
|
|
Return on average
equity
|
|
6.92%
|
|
10.14%
|
Effect of adjustment
for the nonrecurring other loss
|
|
|
|
|
|
and related legal
adjustment
|
|
3.21%
|
|
-
|
Return on average
equity excluding merger expenses and
|
|
|
|
|
|
and related legal
adjustment (Non-GAAP)
|
|
10.13%
|
|
10.14%
|
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SOURCE Southern National Bancorp of Virginia, Inc.