PR Newswire | Oct 26, 2020 09:03AM EDT

for the quarter ended September 30, 2020, compared to $8.9 million for the quarter ended September 30, 2019

10/26 08:00 CDT

Southern National Bancorp of Virginia, Inc. announces earnings of $9.6 million for the quarter ended September 30, 2020, compared to $8.9 million for the quarter ended September 30, 2019Southern National Bancorp of Virginia, Inc. also declares a dividend of $0.10 per share, its thirty-sixth consecutive quarterly dividend. MCLEAN, Va., Oct. 26, 2020

MCLEAN, Va., Oct. 26, 2020 /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 $9.6 million for the quarter ended September 30, 2020, compared to $8.9 million for the quarter ended September 30, 2019. Earnings per share for the three months ended September 30, 2020 were $0.40 basic and $0.39 diluted compared to $0.37 basic and $0.36 diluted for the three months ended September 30, 2019.

Earnings for the nine months ended September 30, 2020 were $14.3 million compared to $24.2 million for the nine months ended September 30, 2019. Earnings per share for the nine months ended September 30, 2020 were $0.59 basic and diluted compared to $1.01 basic and $0.99 diluted for the nine months ended September 30, 2019.

The Board of Directors also announces and declares a dividend of $0.10 per share payable on November 20, 2020 to shareholders of record on November 9, 2020. This is Southern National's thirty-sixth consecutive quarterly dividend.

Commenting on the quarter, President and CEO Dennis J. Zember, Jr. said, "We finished an outstanding quarter with record net income and a substantially improved picture on deferrals. Compared to last year, we are seeing higher levels of pre-tax, pre-provision earnings thanks to modestly higher net interest income, solid results in fee income and an impressive efficiency ratio. Our credit team has worked diligently with each of our deferred loan customers, moving our current level of deferred loans down dramatically. As we work to finish out the year, we are going to stay focused on credit quality and credit trends and build an impressive story for loan and deposit growth in 2021."

Highlights for the three months ended September 30, 2020 include:

* Loans on deferral declined significantly. Management estimates that deferrals at the end of October, 2020 (end of our initial round of six month deferrals) to be approximately $115 million, or 4.2% of loans, compared to $707.8 million at the end of the second quarter and $429.7 million at the end of the third quarter. * Total revenue of $29.3 million, up 22% against same quarter in 2019. * Total deposits increased $37.7 million despite a $300.2 million decline in CD over the last 12 months. * Demand deposits (NIB, NOW, MMDA) increased to 66.6% of total deposits compared to 53.7% at same time in 2019. * Cost of deposits declined to 0.80% at the end of the third quarter of 2020 compared to 1.47% * The Company booked its first Panacea customers, a treasury deposit account. * Our operating efficiency ratio of 52.79% for the third quarter of 2020 compared to 52.76% in the same quarter of 2019. * Another sizable contribution from our mortgage investment of $3.8 million for the quarter. * Pretax preprovision (PTPP) earnings of $14.0 million or 1.78% of average assets for the quarter compared to $11.4 or 1.65% in the same quarter in 2019. * Total assets increased to approximately $3.2 billion at September 30, 2020. * Successful completion of a $60 million subordinated debt offering during the quarter. * Tangible book value per share of $11.53 at September 30, 2020 has increased 6.68% since a year ago despite significant build in loan loss reserves and steady dividends.

Net Interest Income

Net interest income increased to $23.0 million for the three months ended September 30, 2020 or $2.0 million due to higher levels of average earning assets compared to the three months ended September 30, 2019. The Company's reported net interest margin for the current quarter declined to 3.18% compared to 3.37% in the same quarter in 2019. Several temporary items account for substantially all of the decline in the margin. First, the impact of lending in the PPP program in the current quarter lowered the margin by 10 basis points and secondly, the impact of higher cash balances as a percentage of earning assets resulting from successful efforts on deposit sales reduced the margin by six basis points compared to the same quarter in 2019.

Loan yields in the current quarter were 4.60%, excluding the effect of PPP loans compared to 5.21% in the same quarter of 2019. Lower yields on loans are the results of the significant decline in interest rates in the first half of the year, which has also affected the Company's funding costs. Despite aggressive efforts to increase core deposits and shift the Company's deposit mix, total funding costs have still declined to 0.83%. Loan yields are expected to remain more stable and management believes that there is a likelihood for increased core margins and profitability levels from this global repricing activity.

Commenting on the trends around net interest margin, Mr. Zember stated "We recognize that our deposit costs are higher than our peers and are using this in the short-term to continue shifting our deposit mix away from CDs. We expect that early in 2021, we will have moved time deposits to below 20% of total deposits and will start working to lower deposit costs in a way that will not affect the stability of our deposit base. As we have stated, we expect to finish 2021 with the deposit side of our balance sheet balanced more similarly to our peers with costs that are in-line with the industry."

Noninterest Income

During the three months ended September 30, 2020, Southern National had non-interest income of $6.3 million compared to $3.0 million for the three months ended September 30, 2019. Income on account maintenance and deposit service fees declined $204 thousand primarily in account service charges and NSF fees. Gains on our investment in Southern Trust Mortgage ("STM") increased to $3.8 million compared to $599 thousand in the same quarter in 2019, driven by higher margins on closed loans and materially higher volumes from refinance activity as well as production from new hires and teams that were on boarded in the second half of 2019.

Noninterest Expense

Noninterest expense was $15.3 million for the three months ended September 30, 2020, compared to the $12.6 million reported for the three months ended September 30, 2019. Employee compensation and benefits expense increased $1.3 million due to increased staffing in the commercial lending and Panacea divisions along with modified incentive and bonus plans. Occupancy and equipment expense increased $669 thousand. Professional Services increased $821 thousand due to consulting and legal services which are wholly centered on improving systems integration and technology or fees associated with recruiting additional talent on the commercial banking or risk management division of the business.

Loan Portfolio

Loans outstanding grew to $2.52 billion at September 30, 2020 compared to $2.14 billion at the same time in 2019. Loan production for the first nine months of 2020 centered mostly on PPP which totaled $348.0 million. Excluding PPP loans, loans outstanding have decreased $10.4 million since December 31, 2019.

The Company ended the third quarter of 2020 with a concentration in hotels totaling $265.5 million. The portfolio, prior to the pandemic, had debt weighted average debt coverage of approximately 147% and weighted average loan to value of approximately 68%. Substantially all of the Company's hotel loans are to national brands and approximately 93% of the portfolio are to limited service hotels, in non-leisure areas with historically lower operating costs. Commenting on the hospitality portfolio, Mr. Zember stated, "Our hospitality book has performed exceptionally well given the current circumstances. For the hotel book, we have seen steady increases in occupancy and room revenues to the point that all but 2.47% of our book can comfortably service interest costs. The pre-COVID loan to value ratio of the hotels asking for another deferral of principal and interest was 55.32%, respectively, which we believe speaks to the strength of this portfolio."

Credit Loss Provision and Asset Quality

The Allowance for Loan Losses (incurred loss model) increased to $25.8 million at September 30, 2020, up substantially from $10.3 million at December 31, 2019. In addition to the allowance, the Company has discounts and marks on acquired loans totaling $6.9 million at the end of the current quarter in 2020 and $9.9 million at the previous year end. As a percentage of loans (excluding PPP), the allowance plus discounts and marks has increased from 0.92% at the end of 2019 to 1.50% at the end of the current quarter in 2020.

During the third quarter, and through October 23, 2020, the Company saw a substantial amount of deferred loans go back to traditional loan terms. As of October 23, 2020, loans on any form of deferral totaled $202.9 million or 8.1% of total loans, compared to $707.8 million and 28.2% at the end of the second quarter of 2020. Additional information relative to COVID-19 deferrals is seen below as of September 30, 2020 with estimates for the end of October, 2020:

(000's) Entire Portfolio

2Q 2020 % of loans 3Q 2020 % of loans Est 10/2020 % of loans

Balances not modified $1,803,663 71.8% $2,094,038 83.0% $2,396,788 95.4%

Modified 707,841 28.2% 429,671 17.0% 115,113 4.6%

Total $2,511,504 $2,523,709 $2,511,901

Hotels

2Q 2020 % of loans 3Q 2020 % of loans Est 10/2020 % of loans

Balances not modified $43,518 16.5% $131,545 49.6% $225,745 84.5%

Modified 219,673 83.5% 133,933 50.4% 41,492 15.5%

Total $263,191 $265,478 $267,237

Restaurants

2Q 2020 % of loans 3Q 2020 % of loans Est 10/2020 % of loans

Balances not modified $32,390 32.0% $45,798 43.0% $105,254 98.7%

Modified 68,727 68.0% 60,824 57.0% 1,390 1.3%

Total $101,117 $106,622 $106,644

Nonperforming assets, excluding portions guaranteed by the SBA, were 0.53% of total assets at September 30, 2020, compared to 0.40% at December 31, 2019. Total non-accrual loans increased to $15.3 million at September 30, 2020 compared to $8.9 million at December 31, 2019 due to COVID-19 related issues.

Deposits

Total deposits increased to $2.22 billion at September 30, 2020 compared to $2.18 billion at the same time in 2019. During the quarter, the Company replaced $58 million of brokered, listing service and higher rate customer CDs with growth in checking, NOW and MMDA balances (core deposits). Since December 31, 2019, the Company has run off $221 million of brokered and listing service accounts and grown core deposits by $277.8 million. The Company is aggressively building sales and incentive cultures focused on growing and managing core deposits, with the primary attention on commercial and consumer checking accounts. Management expects continued improvement in the funding mix over the next several quarters with more material reductions in total funding costs to occur in the last several quarters of 2021.

Stockholders' Equity

Tangible common book value at the end of the third quarter of 2020 was $11.53 per share, an increase of 6.8% since the same time in 2019. Tangible common equity at September 30, 2020 was $280.9 million, or 9.22% of tangible assets. Excluding increases in the Company's tangible assets related to PPP, the Company's tangible common equity to tangible assets is approximately 10.36% at September 30, 2020. Sonabank's capital ratios were especially strong with tier one leverage and total risk based capital ratios estimated at 10.62% and 16.09%, respectively at the end of the third quarter of 2020.

About Southern National Bancorp of Virginia, Inc.

As of September 30, 2020, Southern National had $3.15 billion in total assets, $2.52 billion in total loans and $2.22 billion in total deposits. Sonabank, the Company's banking subsidiary provides a range of financial services to individuals and small and medium sized businesses through forty-two full-service branches in Virginia and Maryland and through certain internet and mobile applications.

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.

Southern National Bancorp of Virginia, inc. (000's, except share data) For the Three Month Period: Year to date Period:

Condensed Consolidated Balance Sheets (unaudited) 3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019 3Q 2020 3Q 2019

Assets

Cash and cash equivalents $ 149,272 $ 82,586 $ 55,865 $ 31,928 $ 48,572 $ 149,272 $ 48,572

Investment securities-available for sale 157,896 160,979 168,520 164,820 163,344 157,896 163,344

Investment securities-held to maturity 49,323 53,958 59,234 72,448 78,790 49,323 78,790

Stock in Federal Reserve Bank and Federal Home Loan Bank 16,927 16,927 21,396 17,832 14,602 16,927 14,602

Loans receivable, net of deferred fees 2,523,709 2,511,504 2,212,538 2,186,047 2,141,385 2,523,709 2,141,385

Allowance for loan losses (25,779) (23,627) (12,722) (10,261) (11,201) (25,779) (11,201)

Net loans 2,497,930 2,487,877 2,199,816 2,175,786 2,130,184 2,497,930 2,130,184

Loans held for sale - - - - - - -

Intangible assets 108,122 108,463 108,804 109,145 109,486 108,122 109,486

Operating lease right-of-use assets 7,033 7,111 7,664 8,013 8,374 7,033 8,374

Bank premises and equipment, net 30,679 31,087 31,079 31,184 31,265 30,679 31,265

Bank-owned life insurance 65,015 64,622 64,236 63,850 63,452 65,015 63,452

Deferred tax assets, net 14,477 11,087 11,154 11,788 14,319 14,477 14,319

Other assets 57,899 47,474 34,795 35,376 36,527 57,899 36,527

Total assets $ 3,154,573 $ 3,072,171 $ 2,762,563 $ 2,722,170 $ 2,698,915 $ 3,154,573 $ 2,698,915

Liabilities and stockholders' equity

Demand deposits $ 467,581 $ 447,605 $ 338,095 $ 339,153 $ 343,686 $ 467,581 $ 343,686

NOW accounts 472,553 424,096 380,977 391,172 368,354 472,553 368,354

Money market accounts 534,899 488,229 477,660 466,867 458,737 534,899 458,737

Savings accounts 179,756 171,681 151,406 144,486 146,119 179,756 146,119

Time deposits 561,685 619,918 727,216 783,040 861,842 561,685 861,842

Total deposits 2,216,474 2,151,529 2,075,354 2,124,718 2,178,738 2,216,474 2,178,738

Federal Home Loan Bank advances 100,000 100,000 205,140 121,640 45,640 100,000 45,640

PPPLF Advances 283,906 333,574 - - - 283,906 -

Subordinated notes 115,378 56,689 56,686 56,683 56,681 115,378 56,681

Operating lease liabilities 7,800 7,896 8,509 8,469 8,830 7,800 8,830

Other liabilities 42,032 40,814 38,052 33,419 38,396 42,032 38,396

Total liabilities 2,765,590 2,690,502 2,383,741 2,344,929 2,328,285 2,765,590 2,328,285

Stockholders' equity 388,983 381,669 378,822 377,241 370,630 388,983 370,630

Total liabilities and stockholders' equity $ 3,154,573 $ 3,072,171 $ 2,762,563 $ 2,722,170 $ 2,698,915 $ 3,154,573 $ 2,698,915

Tangible common equity $ 280,861 $ 273,206 $ 270,018 $ 268,096 $ 261,144 $ 280,861 $ 261,144

Tangible common equity to tangible assets 9.22% 9.22% 10.17% 10.26% 10.09% 9.22% 10.09%

Tangible book value 11.53 11.21 11.11 11.09 10.80 11.53 10.80

Southern National Bancorp of Virginia, inc. (000's, except share data) For the Three Month Period: Year to date Period:

Condensed Consolidated Statement of Operations (unaudited) 3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019 3Q 2020 3Q 2019

Interest and dividend income $ 28,707 $ 28,672 $ 28,481 $ 29,354 $ 30,474 $ 85,860 $ 91,170

Interest expense 5,709 6,199 7,966 8,685 9,459 19,874 28,239

Net interest income 22,998 22,473 20,515 20,669 21,015 65,986 62,931

Provision for credit losses 2,000 10,899 3,450 - 150 16,349 350

Net interest income after provision for loan losses 20,998 11,574 17,065 20,669 20,865 49,637 62,581

Account maintenance and deposit service fees 1,633 1,489 1,698 1,847 1,837 4,820 5,312

Income from bank-owned life insurance 394 385 386 399 392 1,165 1,300

Equity gain from mortgage affiliate 3,826 4,161 231 16 599 8,218 1,175

Recoveries related to acquired charged-off

loans and investment securities 288 2,235 184 477 145 2,707 1,060

Other 130 123 321 620 1 574 380

Noninterest income 6,271 8,393 2,820 3,359 2,974 17,484 9,227

Employee compensation and benefits 7,817 7,338 12,309 6,738 6,567 27,464 19,523

Occupancy and equipment expenses 2,151 2,044 2,558 2,389 1,482 6,753 6,534

Amortization of core deposit intangible 341 341 341 341 352 1,023 1,077

Virginia franchise tax expense 615 659 570 562 563 1,844 1,689

Data processing expense 701 956 707 677 622 2,364 1,704

Telecommunication and communication expense 382 369 368 357 477 1,119 1,258

Net (gain) loss on other real estate owned (16) - 71 - - 55 (38)

Professional fees 1,494 873 1,193 1,036 673 3,560 2,576

Other expenses 1,779 1,490 1,735 1,696 1,878 5,004 8,473

Noninterest expense 15,264 14,070 19,852 13,796 12,614 49,186 42,796

Income before income taxes 12,005 5,897 33 10,232 11,225 17,935 29,012

Income tax expense 2,417 1,188 6 1,268 2,361 3,611 4,809

Net income $ 9,588 $ 4,709 $ 27 $ 8,964 $ 8,864 $ 14,324 $ 24,203

Non-GAAP adjustments to Net Income

Management Restructure $ - $ - $ 4,899 $ - $ - $ 4,899 $ -

Branch Closures - - 479 - - 479 -

Other loss and related legal expenses - - - - - - 3,702

Income tax effect - - (1,076) - - (1,076) (777)

Total Net Income adjusted for nonrecurring expenses $ 9,588 $ 4,709 $ 4,329 $ 8,964 $ 8,864 $ 18,626 $ 27,128

Pretax preprovision earnings $ 14,005 $ 16,796 $ 8,861 $ 10,232 $ 11,375 $ 38,586 $ 32,287

Pretax preprovision earnings to average assets 1.78% 2.28% 1.30% 1.50% 1.65% 1.74% 1.58%

Southern National Bancorp of Virginia, inc. (000's, except share data) For the Three Month Period: Year to date Period:

Per Share Data: 3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019 3Q 2020 3Q 2019

Earnings per share - Basic $ 0.40 $ 0.19 $ 0.00 $ 0.37 $ 0.37 $ 0.59 $ 1.01

Earnings per share - Diluted $ 0.39 $ 0.19 $ 0.00 $ 0.37 $ 0.36 $ 0.59 $ 0.99

Book value per share $ 15.96 $ 15.67 $ 15.59 $ 15.60 $ 15.33 $ 15.96 $ 15.33

Tangible book value per share $ 11.53 $ 11.21 $ 11.11 $ 11.09 $ 10.80 $ 11.53 $ 10.80

Weighted average shares outstanding - Basic 24,270,455 24,246,355 24,168,359 24,092,534 24,071,925 24,228,543 24,035,716

Weighted average shares outstanding - Diluted 24,375,383 24,352,708 34,388,085 24,411,147 24,374,163 24,349,995 24,334,789

Shares outstanding at end of period 24,368,853 24,361,603 24,297,703 24,181,534 24,171,776 24,368,853 24,171,776

Selected Performance Ratios:

Return on average assets 1.19% 0.61% 0.00% 1.31% 1.29% 0.65% 1.19%

Return on average equity 9.87% 4.92% 0.03% 9.49% 9.57% 4.89% 9.01%

Return on average tangible equity 13.72% 6.86% 0.04% 13.40% 13.64% 6.95% 12.98%

Yield on earning assets 3.97% 4.25% 4.61% 4.75% 4.89% 4.26% 4.93%

Cost of funds on interest bearing liabilities 0.83% 0.97% 1.60% 1.49% 1.60% 1.05% 1.61%

Net interest margin 3.18% 3.33% 3.32% 3.35% 3.37% 3.27% 3.40%

Net loans to deposits 112.70% 115.63% 106.00% 102.40% 97.77% 112.70% 97.77%

Operating efficiency ratio 52.79% 49.07% 85.84% 57.60% 52.76% 60.91% 60.06%

Overhead ratio 1.15% 0.77% 1.86% 1.54% 1.41% 1.24% 1.50%

Net charge-offs to average loans -0.01% 0.00% 0.04% 0.04% 0.03% 0.04% 0.07%

Reconciliation of Non-GAAP items:

Return on average assets 1.19% 0.61% 0.00% 1.31% 1.29% 0.65% 1.19%

Effect of adjustment for the nonrecurring expenses 0.00% 0.00% 0.63% 0.00% 0.00% 0.14% 0.14%

Return on average assets excluding the nonrecurring expenses (Non-GAAP) 0.61% 0.61% 0.63% 1.31% 1.29% 0.79% 1.33%

Return on average equity 9.87% 4.92% 0.03% 9.49% 9.57% 4.89% 9.01%

Effect of adjustment for the nonrecurring expenses 0.00% 0.00% 4.54% 0.00% 0.00% 1.12% 1.08%

Return on average equity excluding the nonrecurring expenses (Non-GAAP) 4.92% 4.92% 4.57% 0.00% 0.00% 6.01% 10.09%

Operating efficiency ratio 52.79% 49.07% 85.84% 57.60% 52.76% 60.91% 60.06%

Effect of adjustment for the nonrecurring expenses 0.00% 0.00% -23.34% 0.00% 0.00% -3.08% -5.19%

Operating efficiency ratio excluding the nonrecurring expenses (Non-GAAP) 52.79% 49.07% 62.50% 57.60% 52.76% 57.83% 54.87%

Tangible book value $ 11.53 $ 11.21 $ 11.11 $ 11.09 $ 10.80 $ 11.53 $ 10.80

Effect of adjustment for the nonrecurring expenses - - 0.18 - - 0.18 0.12

Tangible book value excluding the nonrecurring expenses (Non-GAAP) $ 11.53 $ 11.21 $ 11.29 $ 11.09 $ 10.80 $ 11.71 $ 10.92

Southern National Bancorp of Virginia, inc. (000's, except share data) For the Three Month Period: Year to date Period:

Asset Quality Information: 3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019 3Q 2020 3Q 2019

Loans secured by real estate:

Commercial real estate - owner occupied $ 416,717 $ 412,916 $ 409,739 $ 414,479 $ 399,105 $ 416,717 $ 399,105

Commercial real estate - non-owner occupied 605,053 591,229 599,987 559,195 542,909 605,053 542,909

Secured by farmland 16,608 16,845 16,608 17,622 17,504 16,608 17,504

Construction and loan loans 120,066 122,086 115,144 150,750 162,458 120,066 162,458

Residential 1-4 family 581,237 612,247 624,119 604,777 574,935 581,237 574,935

Multi-family residential 107,672 100,685 90,652 82,055 82,626 107,672 82,626

Home equity lines of credit 97,727 101,218 106,820 109,006 112,801 97,727 112,801

Total real estate loans 1,945,080 1,957,226 1,963,069 1,937,884 1,892,338 1,945,080 1,892,338

Commercial loans 216,711 204,160 223,433 221,447 220,707 216,711 220,707

SBA Paycheck Protection Program loans 348,022 335,612 - - - 348,022 -

Consumer loans 23,078 24,733 25,708 26,304 28,075 23,078 28,075

Gross loans 2,532,891 2,521,731 2,212,210 2,185,635 2,141,120 2,532,891 2,141,120

Plus (less) deferred costs (fees) on loans (9,182) (10,227) 328 412 265 (9,182) 265

Loan receivable, net of deferred costs (fees) $ 2,523,709 $ 2,511,504 $ 2,212,538 $ 2,186,047 $ 2,141,385 $ 2,523,709 $ 2,141,385

Allowance for Loan Losses (Incurred Loss Model):

Balance at beginning of period $ (23,626) $ (12,721) $ (10,260) $ (11,200) $ (11,613) $ (10,260) $ (12,283)

Provision for loan losses (2,000) (10,900) (3,450) - (150) (16,350) (350)

Charge-offs 86 34 1,098 974 648 1,218 2,305

Recoveries (239) (39) (109) (34) (85) (387) (872)

Net charge-offs (153) (5) 989 940 563 831 1,433

Ending balance $ (25,779) $ (23,626) $ (12,721) $ (10,260) $ (11,200) $ (25,779) $ (11,200)

Cummulative reconciliation to CECL (Not yet adopted):

CECL adoption impact on acquired loans $ (1,997) $ (1,997) $ (1,997) $ (1,997)

CECL adoption impact on retained earnings (5,429) (5,429) (5,429) (5,429)

CECL adoption impact on deferred tax assets (1,495) (1,495) (1,495) (1,495)

Cummulative additional provision for loan losses (1,649) (3,191) (11,016) (1,649)

Ending balance $ (36,349) $ (35,738) $ (32,658) $ (36,349)

Allowance for Unfunded Commitments (Incurred Loss Model):

Balance at beginning of period $ (55) $ (55) $ (55) $ (55) $ (55) $ (55) $ (55)

Cummulative reconciliation to CECL (Not yet adopted):

CECL adoption impact on retained earnings $ (239) $ (239) $ (239) $ (239)

CECL adoption impact on deferred tax assets (66) (66) (66) (66)

Cummulative additional provision for unfunded commitments (1,224) (817) (425) (1,224)

Ending balance $ (1,584) $ (1,177) $ (785) $ (1,584)

Southern National Bancorp of Virginia, inc. (000's, except share data) For the Three Month Period: Year to date Period:

Net Charge-off Information: 3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019 3Q 2020 3Q 2019

Charge-offs

Commercial, financial and agricultural $ 13 $ - $ 821 $ 188 $ 267 $ 834 $ 434

Real estate - construction and development - - - - - - -

Real estate - commercial and farmland - - - 403 - - 1,244

Real estate - residential 47 - 245 336 316 292 406

Consumer installment 26 34 32 47 65 92 221

Total charge-offs 86 34 1,098 974 648 1,218 2,305

Recoveries

Commercial, financial and agricultural (1) (18) (66) (14) (65) (85) (337)

Real estate - construction and development - - - - - - -

Real estate - commercial and farmland (4) (3) (6) (3) (4) (13) (210)

Real estate - residential (225) (6) (31) (6) (8) (262) (300)

Consumer installment (9) (12) (6) (11) (8) (27) (25)

Total recoveries (239) (39) (109) (34) (85) (387) (872)

Net charge-offs $ (153) $ (5) $ 989 $ 940 $ 563 $ 831 $ 1,433

Non-Performing Assets:

Accruing loans delinquent 90 days or more $ - $ - $ - $ - $ - $ - $ -

Nonaccrual loans 15,270 14,930 8,941 8,900 3,842 15,270 3,842

Other real estate owned 5,388 6,006 5,876 6,224 5,835 5,388 5,835

Total non-performing assets $ 20,658 $ 20,936 $ 14,817 $ 15,124 $ 9,677 $ 20,658 $ 9,677

SBA guaranteed portion of non-performing loans $ 4,076 $ 3,513 $ 2,889 $ 4,129 $ 3,309 $ 4,076 $ 3,309

Troubled debt restructuring $ 1,629 $ 1,667 $ 694 $ 697 $ 679 $ 1,629 $ 679

Loans deferred under COVID-19 modifications $ 436,591 $ 707,841 $ 24,308 $ - $ - $ 436,591 $ -

Asset Quality Ratios:

Non-performing assets as a percent of total assets, excluding SBA guarantees 0.53% 0.57% 0.43% 0.40% 0.24% 0.53% 0.24%

Net charge-offs as a percent of average loans (annualized) -0.02% 0.00% 0.18% 0.17% 0.10% 0.05% 0.09%

Allowance for loan losses to total loans 1.02% 0.94% 0.57% 0.47% 0.52% 1.02% 0.52%

Loans by Risk Grade:

Pass, not graded $ 574,954 $ 653,943 $ 630,827 $ 611,160 $ 568,101 $ 574,954 $ 568,101

Pass Grade 1 - Highest Quality 891 306 538 374 271 891 271

Pass Grade 2 - Good Quality 375,861 323,512 28,583 27,855 25,852 375,861 25,852

Pass Grade 3 - Satisfactory Quality 878,031 837,606 866,316 871,463 856,087 878,031 856,087

Pass Grade 4 - Pass 660,630 662,534 664,124 652,464 666,958 660,630 666,958

Pass Grade 5 - Special Mention 14,132 14,006 11,622 12,235 13,093 14,132 13,093

Grade 6 - Substandard 19,210 19,597 10,528 10,496 11,023 19,210 11,023

Grade 7 - Doubtful - - - - - - -

Grade 8 - Loss - - - - - - -

Total loans $ 2,523,709 $ 2,511,504 $ 2,212,538 $ 2,186,047 $ 2,141,385 $ 2,523,709 $ 2,141,385

Southern National Bancorp of Virginia, inc. (000's, except share data) For the Three Month Period: Year to date Period:

Average Balances: 3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019 3Q 2020 3Q 2019

Assets

Interest-earning assets:

Loans, net of deferred fees $ 2,501,614 $ 2,401,620 $ 2,200,926 $ 2,156,174 $ 2,165,717 $ 2,368,541 $ 2,160,863

Investment securities 213,039 222,124 231,794 238,563 242,916 222,285 242,891

Other earning assets 163,159 91,230 54,800 54,826 65,707 103,283 70,543

Total earning assets 2,877,812 2,714,974 2,487,520 2,449,563 2,474,340 2,694,109 2,474,297

Other assets 256,284 250,897 252,700 255,916 254,550 253,304 251,232

Total assets $ 3,134,096 $ 2,965,871 $ 2,740,220 $ 2,705,479 $ 2,728,890 $ 2,947,413 $ 2,725,529

Liabilities and stockholders' equity

Demand deposits $ 452,500 $ 418,382 $ 333,408 $ 345,191 $ 334,435 $ 401,616 $ 328,790

Interest-bearing liabilities:

NOW and other demand accounts 451,583 404,700 379,531 374,328 362,564 412,083 355,511

Money market accounts 504,887 488,648 469,651 464,471 456,492 487,791 430,546

Savings accounts 176,305 163,574 147,697 145,532 144,266 162,575 145,964

Time deposits 590,263 710,483 756,055 832,246 867,533 685,253 880,610

Total Deposits 2,175,538 2,185,787 2,086,342 2,161,768 2,165,290 2,149,318 2,141,421

Borrowings 547,182 371,836 251,830 144,664 173,867 390,856 203,469

Total Funding 2,722,720 2,557,623 2,338,172 2,306,432 2,339,157 2,540,174 2,344,890

Other Liabilities 25,869 24,495 21,781 34,398 22,385 24,055 21,347

Stockholders' equity 385,507 383,753 380,267 374,649 367,349 383,184 359,292

Total liabilities and stockholders' equity $ 3,134,096 $ 2,965,871 $ 2,740,220 $ 2,705,479 $ 2,728,890 $ 2,947,413 $ 2,725,529

Memo: SBA PPP loans $ 335,653 $ 192,751 $ - $ - $ - $ 176,717 $ -

Southern National Bancorp of Virginia, inc. (000's, except share data) For the Three Month Period: Year to date Period:

Net Interest Margin: 3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019 3Q 2020 3Q 2019

Loans $ 27,266 $ 27,044 $ 26,741 $ 27,489 $ 28,340 $ 81,051 $ 84,692

Investment securities 1,129 1,247 1,361 1,496 1,520 3,737 4,728

Other earning assets 312 381 379 370 614 1,072 1,750

Total Earning Assets 28,707 28,672 28,481 29,355 30,474 85,860 91,170

NIB DDA

NOW and other demand accounts 807 745 786 792 783 2,338 2,198

Money market accounts 800 830 1,575 1,779 2,080 3,204 5,966

Savings accounts 130 107 116 116 115 353 345

Time deposits 2,620 3,464 4,026 4,799 5,023 10,111 14,608

Total Deposit Costs 4,357 5,146 6,503 7,486 8,001 16,006 23,117

Other Borrowings 1,352 1,053 1,463 1,200 1,458 3,868 5,122

Total Funding 5,709 6,199 7,966 8,686 9,459 19,874 28,239

Net Interest Income $ 22,998 $ 22,473 $ 20,515 $ 20,669 $ 21,015 $ 65,986 $ 62,931

Memo: SBA PPP loan interest and fee income $ 2,233 $ 512 $ - $ - $ - $ 2,745 $ -

Southern National Bancorp of Virginia, inc. (000's, except share data) For the Three Month Period: Year to date Period:

Asset and Liability Yields 3Q 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019 3Q 2020 3Q 2019

Loans 4.34% 4.53% 4.89% 5.07% 5.21% 4.57% 5.25%

Investments 2.11% 2.26% 2.36% 2.49% 2.49% 2.25% 2.61%

Short term assets 0.76% 1.68% 2.78% 2.68% 3.72% 1.39% 3.33%

Total Earning Assets 3.97% 4.25% 4.60% 4.77% 4.90% 4.26% 4.94%

NOW 0.71% 0.74% 0.83% 0.84% 0.86% 0.76% 0.83%

MMDA 0.63% 0.68% 1.35% 1.52% 1.81% 0.88% 1.86%

Savings 0.29% 0.26% 0.32% 0.32% 0.32% 0.29% 0.32%

CDs 1.77% 1.96% 2.14% 2.29% 2.30% 1.97% 2.22%

Interest Bearing Deposits 1.01% 1.17% 1.49% 1.64% 1.74% 1.22% 1.71%

(total cost of deposits) 0.80% 0.95% 1.25% 1.38% 1.47% 0.99% 1.45%

Other Funding 0.98% 1.14% 2.34% 3.30% 3.34% 1.32% 3.37%

Total Cost of Funding 0.83% 0.97% 1.37% 1.50% 1.61% 1.05% 1.61%

Net Interest Margin 3.18% 3.33% 3.32% 3.36% 3.38% 3.27% 3.41%

Net Interest Spread 3.14% 3.27% 3.23% 3.27% 3.29% 3.21% 3.33%

Memo: Yields without SBA PPP loans

Loans 4.60% 4.83% 4.77%

Total Earning Assets 4.14% 4.49% 4.41%

Net Interest Margin 3.25% 3.50% 3.36%

Net Interest Spread 3.31% 3.52% 3.37%

Contacts:

Dennis J. Zember, Jr., President and CEO Phone: 804-997-2406

Jeffrey L. Karafa, EVP and CFO Phone: 804-997-2404

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SOURCE Southern National Bancorp of Virginia, Inc.