PR Newswire | Jan 28, 2021 04:02PM EST

Quarter of 2020

01/28 15:01 CST

Southern National Bancorp of Virginia, Inc. Announces Earnings for the Fourth Quarter of 2020Southern National Bancorp of Virginia, Inc. Announces Rebranding Initiatives and the Proposed Name Changes to Primis Financial Corp. and Primis BankSouthern National Bancorp of Virginia, Inc. Declares Quarterly Cash Dividend of $0.10 Per Share MCLEAN, Va., Jan. 28, 2021

MCLEAN, Va., Jan. 28, 2021 /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 $9.0 million for the quarter ended December 31, 2020, compared to $9.0 million for the quarter ended December 31, 2019. Earnings per share for the three months ended December 31, 2020 were $0.37 on both a basic and diluted basis representing no change from the three months ended December 31, 2019.

Earnings for the twelve months ended December 31, 2020 were $23.3 million compared to $33.2 million for the twelve months ended December 31, 2019. Earnings per share for the twelve months ended December 31, 2020 were $0.96 on both a basic and diluted basis compared to $1.38 basic and $1.36 diluted for the twelve months ended December 31, 2019.

The Board of Directors also announced and declared a dividend of $0.10 per share payable on February 26, 2021 to shareholders of record on February 12, 2021. This is Southern National's thirty-seventh consecutive quarterly dividend.

Proposed Name Change

As part of the Company's rebranding initiatives, on January 28, 2021, the Board of Directors of the Company approved changing the Company's name to Primis Financial Corp., to be effective as of March 31, 2021. The Company's wholly-owned banking subsidiary, Sonabank, will also change its name to Primis Bank, effective March 31, 2021.

President and CEO Dennis J. Zember, Jr. commented on the rebranding initiatives and the proposed name changes, saying "Over the last year, we have focused hard on our culture. Our efforts have centered on building the foundation for a Company with higher expectations around innovation and technology. We want to deliver a better return for our shareholders and an experience for our customers that prompts them to brag about us. We are committed to train harder, develop more expertise in all areas and build relationships that will last. This kind of effort and commitment deserves a first class brand."

Mr. Zember continued, "Effective March 31, 2021, our ticker symbol will also change from SONA to FRST and our website will become www.primisbank.com."

Adjusted Recurring Profitability

In addition to a significant build in the allowance for credit losses related to the COVID-19 pandemic and the adoption of CECL, the Company incurred expenses for management restructuring and its newly announced branding initiative. Adjusted earnings(1), after considering certain non-recurring items, totaled $6.39 million for the quarter or $0.26 per diluted share, compared to $8.96 million or $0.37 per diluted share for the same quarter in 2019. For the year, the Company reported adjusted earnings of approximately $25.0 million or $1.03 per diluted share, a decrease from $36.1 million or $1.48 per diluted share in 2019. The table below includes information on these revenues and expenses for the fourth quarter of 2020:

Management Restructure / Recruiting Expenses $ 843

(Gain or Recovery) / Loss on Securities (2,964)

Brand Initiative / Renaming Expenses 1,000

Net Extraordinary PPP Income and Expense (2,177)

Total Pre-tax Adjustments $ (3,298)

Tax Impact 729

Total After-tax Adjustments $ (2,569)

Highlights for the three and twelve months ended December 31, 2020

* Total assets ended the year at $3.09 billion. * Loans on deferral were $122.0 million or 5.75% of total loans excluding PPP balances and in-line with expectations at the end of the fourth quarter. Approximately 59% of total deferrals were from the hotel portfolio while restaurant deferrals declined to approximately $0.5 million. * Total deposits increased $216.1 million from the previous quarter despite a $71.6 million decline in CDs over the last three months. * Demand deposits (NIB, NOW, MMDA) increased to 72.3% of total deposits compared to 56.3% at the end of 2019. * Cost of deposits declined to 0.71% for the fourth quarter of 2020 compared to 1.37% for the fourth quarter of 2019. * The Company booked its first Panacea loan customers in the quarter. * Mortgage contribution of $2.57 million for the fourth quarter versus $16 thousand for the year-ago period. * Pre-tax pre-provision operating earnings(1) of $12.1 million or 1.56% of average assets for the quarter compared to $10.2 million or 1.50% in the same quarter in 2019. * Allowance for credit losses to gross loans (excluding PPP balances) of 1.71% at December 31, 2020. * Tangible book value per share(1) of $11.60 at December 31, 2020, an increase of $0.51 from a year ago despite a significant build in reserves for credit losses and $0.40 in dividends paid in 2020.

Commenting on the quarter and year, President and CEO Dennis J. Zember, Jr. said, "We finished 2020 with another good quarter. We had strong net income while managing through a resurgence in the pandemic and implementing the CECL accounting standard. Our primary balance sheet accomplishments include the dramatic improvement in our deposit portfolio that went well beyond industry trends towards extra liquidity. Additionally, we grew tangible book value despite a dramatic increase in the reserve and a strong dividend. Long-term, the most impactful thing we did was our work on the Company's culture. Building an organization that attracts the best bankers and allows them to win is not an overnight assignment. Changing our name and our brand, and committing to an image that mirrors this attitude is critical and I believe our work here will pay dividends quickly."

Matthew A. Switzer, Executive Vice President and CFO, added "We are focused on growing our loan portfolio in 2021 and deploying excess liquidity. To that end, late in the fourth quarter of 2020 we hired a new market executive and a four person lending team in Northern Virginia from a large regional bank and plan to add to this team in the near future. We expect substantially more production and growth from this key market. We are excited about having these strong bankers on board and look forward to serving the customers they bring to the bank with our new brand and strategy."

Net Interest Income

Net interest income increased to $25.7 million for the three months ended December 31, 2020 from $20.7 million for the three months ended December 31, 2019 due to higher levels of average earning assets and extraordinary net accretion of certain deferred PPP loan fees and expenses as highlighted above. The Company's reported net interest margin for the fourth quarter increased to 3.58% compared to 3.18% in the third quarter of 2020 and 3.35% in the fourth quarter of 2019. Net interest margin excluding the effects of PPP loans(1) was 3.23% in the fourth quarter of 2020, down 5 bps from 3.28% linked-quarter.

Yield on loans for the fourth quarter was 4.57%(1), excluding the effect of PPP loans, compared to 5.06% in the same quarter of 2019. Lower yields on loans are the result of the significant decline in interest rates in the first half of the year. While lower rates also lowered funding costs, the Company aggressively pursued core deposits during the year to replace brokered time deposits and other sources of wholesale funding. Despite actively pursuing core deposits and positively shifting the Company's deposit mix, the cost of total deposits still declined to 0.71% in the fourth quarter of 2020 from 1.37% in the year-ago quarter. 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 committed to continue shifting our deposit mix away from CDs. We have already moved time deposits to approximately 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 previously articulated, our goal is to finish 2021 with the deposit side of our balance sheet mixed similarly to our peers with costs that are in-line with the industry."

Noninterest Income

During the three months ended December 31, 2020, Southern National had non-interest income of $8.0 million compared to $3.4 million for the three months ended December 31, 2019. Income on account maintenance and deposit service fees declined $147 thousand from the year-ago period primarily in account service charges and non-sufficient fund fees. Gains on our investment in Southern Trust Mortgage ("STM") increased to $2.6 million compared to $16 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. Recoveries on securities net of losses on securities sold totaled $2.96 million.

Noninterest Expense

Noninterest expense was $18.6 million for the three months ended December 31, 2020, compared to $13.8 million reported for the three months ended December 31, 2019. Employee compensation and benefits expense increased $2.5 million due to increased staffing in the commercial lending and Panacea divisions along with modified incentive and bonus plans and increased costs associated with recruitment. We recorded a net loss of $905 thousand on other real estate owned in the quarter versus no gains or losses in the year-ago period. Other expenses increased $1.3 million, largely due to initiatives associated with our pending name change and rebranding efforts.

Loan Portfolio and Asset Quality

Loans outstanding grew to $2.44 billion at December 31, 2020 compared to $2.19 billion at the same time in 2019. Excluding PPP loans, loans outstanding have decreased $65.0 million since December 31, 2019. The Company ended the fourth quarter of 2020 with $122.0 million of loans on deferral, or 5.75% of total loans excluding PPP loans. Hotels account for 58.9% of all deferrals with 27.1% of the hotel portfolio deferred at December 31, 2020. Of the hotel deferrals, 58.3% are paying interest with the remainder deferring both interest and principal.

Nonperforming assets, excluding portions guaranteed by the SBA, were 0.47% of total assets at December 31, 2020, compared to 0.40% at December 31, 2019. Total non-accrual loans (net of SBA guarantees) increased to $11.4 million at December 31, 2020 compared to $4.8 million at December 31, 2019 due to COVID-19 related issues. Loans rated substandard increased to $44.5 million in the fourth quarter of 2020 from $19.2 million linked-quarter largely due to one hotel relationship comprised of three hotels in Blacksburg, Virginia, that has been impacted by reduced travel and athletic events at Virginia Tech.

The Allowance for Credit Losses increased to $36.3 million at December 31, 2020, up substantially from $10.3 million at December 31, 2019, due to pandemic-related provisioning and the adoption of the Current Expected Credit Loss ("CECL") accounting standard. As a percentage of loans (excluding PPP), the allowance is 1.71% at the end of the current quarter in 2020. Annualized net charge-offs to average loans remained low at 13 basis points for the fourth quarter of 2020 versus 17 basis points in the year-ago period.

Deposits

Total deposits increased to $2.43 billion at December 31, 2020 compared to $2.12 billion at the same time in 2019. During the quarter, CDs declined by $71.6 million while core deposits (demand, NOW, money market and savings) increased $287.8 million linked-quarter. Time deposits now represent approximately 20% of total deposits. 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(1) at the end of the fourth quarter of 2020 was $11.60 per share, an increase of $0.51 since the end of 2019. Tangible common equity(1) at December 31, 2020 was $282.8 million, or 9.49% of tangible assets(1).

About Southern National Bancorp of Virginia, Inc.

As of December 31, 2020, Southern National had $3.09 billion in total assets, $2.44 billion in total loans and $2.43 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.

Contacts: Address:

Dennis J. Zember, Jr., President and Southern National Bancorp of Virginia,CEO Inc.

Phone: (804) 997-2406 6830 Old Dominion Drive

McLean, VA 22101

Matthew A. Switzer, EVP and CFO

Phone: (804) 528-4760

Southern National Bancorp of Virginia, Inc., NASDAQ Symbol SONA

Website: www.sonabank.com

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. The measures entitled return on average assets - operating; net income adjusted for nonrecurring income and expenses; pre-tax pre-provision earnings - operating; pre-tax pre-provision return on average assets - operating; return on average equity- operating; return on average tangible equity - operating; efficiency ratio-operating; tangible common equity; tangible common equity to tangible assets; tangible book value per share; net interest margin excluding SBA PPP loans; and net interest margin - operating are not measures recognized under GAAP and therefore are considered non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is provided in the Reconciliation of Non-GAAP items table.

Management believes that these non-GAAP financial measures provide additional useful information about Southern National that allows management and investors to evaluate the ongoing operating results, financial strength and 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 and certain of our other filings with the Securities and Exchange Commission contain statements that constitute "forward-looking statements" within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements. Such statements can generally be identified by such words as "may," "plan," "contemplate," "anticipate," "believe," "intend," "continue," "expect," "project," "predict," "estimate," "could," "should," "would," "will," and other similar words or expressions of the future or otherwise regarding the outlook for the Company's future business and financial performance and/or the performance of the banking industry and economy in general. These forward-looking statements include, but are not limited to, our expectations regarding our future operating and financial performance, including our outlook and long-term goals for future growth; our expectations regarding net interest margin; expectations on our growth strategy, expense management, capital management and future profitability; expectations on credit quality and performance; statements regarding the potential effects of the COVID-19 pandemic on our business and financial results and conditions; and the assumptions underlying our expectations.

Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties which may cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on the information known to, and current beliefs and expectations of, the Company's management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. Factors that might cause such differences include, but are not limited to: the Company's ability to implement its various strategic and growth initiatives; competitive pressures among financial institutions increasing significantly; changes in economic or political conditions, either nationally or locally, particularly in areas in which the Company conducts operations; interest rate risk; changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to the COVID-19 pandemic; changes in management's plans for the future; credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values, or competition; changes in accounting principles, policies, or guidelines; adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company's participation in and execution of government programs related to the COVID-19 pandemic; the impact of the COVID-19 pandemic on the Company's assets, business, cash flows, financial condition, liquidity, prospects and results of operations; potential increases in the provision for loan losses resulting from the COVID-19 pandemic; and other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services.

Forward-looking statements speak only as of the date on which such statements are made. These forward-looking statements are based upon information presently known to the Company's management and are inherently subjective, uncertain and subject to change due to any number of risks and uncertainties, including, without limitation, the risks and other factors set forth in the Company's filings with the Securities and Exchange Commission, the Company's Annual Report on Form 10-K for the year ended December 31, 2019, under the captions "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors," and in the Company's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events. Readers are cautioned not to place undue reliance on these forward-looking statements.

(1) Non-GAAP financial measure. Please see "Reconciliation of Non-GAAP Items"in the financial tables.

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

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

Assets

Cash and cash equivalents $ 196,185 $ 149,272 $ 82,586 $ 55,865 $ 31,928 $ 196,185 $ 31,928

Investment securities-available for sale 153,233 157,896 160,979 168,520 164,820 153,233 164,820

Investment securities-held to maturity 40,721 49,323 53,958 59,234 72,448 40,721 72,448

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

Loans receivable, net of deferred fees 2,440,496 2,523,709 2,511,504 2,212,538 2,186,047 2,440,496 2,186,047

Allowance for credit losses (36,345) (25,779) -23,627 -12,722 (10,261) (36,345) (10,261)

Net loans 2,404,151 2,497,930 2,487,877 2,199,816 2,175,786 2,404,151 2,175,786

Loans held for sale - - - - - - -

Intangible assets 107,780 108,122 108,463 108,804 109,145 107,780 109,145

Operating lease right-of-use assets 7,511 7,033 7,111 7,664 8,013 7,511 8,013

Bank premises and equipment, net 30,306 30,679 31,087 31,079 31,184 30,306 31,184

Bank-owned life insurance 65,409 65,015 64,622 64,236 63,850 65,409 63,850

Deferred tax assets, net 14,646 14,477 11,087 11,154 11,788 14,646 11,788

Other assets 51,804 57,899 47,474 34,795 35,376 51,804 35,376

Total assets $ 3,088,673 $ 3,154,573 $ 3,072,171 $ 2,762,563 $ 2,722,170 $ 3,088,673 $ 2,722,170

Liabilities and stockholders' equity

Demand deposits $ 440,674 $ 467,581 $ 447,605 $ 338,095 $ 339,153 $ 440,674 $ 339,153

NOW accounts 714,752 472,553 424,096 380,977 391,172 714,752 391,172

Money market accounts 603,318 534,899 488,229 477,660 466,867 603,318 466,867

Savings accounts 183,814 179,756 171,681 151,406 144,486 183,814 144,486

Time deposits 490,048 561,685 619,918 727,216 783,040 490,048 783,040

Total deposits 2,432,606 2,216,474 2,151,529 2,075,354 2,124,718 2,432,606 2,124,718

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

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

Subordinated notes 115,329 115,378 56,689 56,686 56,683 115,329 56,683

Operating lease liabilities 8,238 7,800 7,896 8,509 8,469 8,238 8,469

Other liabilities 41,946 42,032 40,814 38,052 33,419 41,946 33,419

Total liabilities 2,698,119 2,765,590 2,690,502 2,383,741 2,344,929 2,698,119 2,344,929

Stockholders' equity 390,554 388,983 381,669 378,822 377,241 390,554 377,241

Total liabilities and stockholders' equity $ 3,088,673 $ 3,154,573 $ 3,072,171 $ 2,762,563 $ 2,722,170 $ 3,088,673 $ 2,722,170

Tangible common equity(1) $ 282,774 $ 280,861 $ 273,206 $ 270,018 $ 268,096 $ 282,774 $ 268,096

Tangible common equity to tangible assets(1) 9.49% 9.22% 9.22% 10.17% 10.26% 9.49% 10.26%

(1) See Reconciliation of Non-GAAP financial measures.

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

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

Interest and dividend income $ 31,919 $ 28,707 $ 28,672 $ 28,481 $ 29,354 $ 117,779 $ 120,524

Interest expense 6,265 5,709 6,199 7,966 8,685 26,139 36,924

Net interest income 25,654 22,998 22,473 20,515 20,669 91,640 83,600

Provision for credit losses 3,101 2,000 10,899 3,450 - 19,450 350

Net interest income after provision for credit losses 22,553 20,998 11,574 17,065 20,669 72,190 83,250

Account maintenance and deposit service fees 1,700 1,633 1,489 1,698 1,847 6,520 7,159

Income from bank-owned life insurance 394 394 385 386 399 1,559 1,699

Equity gain from mortgage affiliate 2,571 3,826 4,161 231 16 10,789 1,191

Recoveries on loans and securities charged-off prior to acquisition 3,793 288 2,235 184 477 6,500 1,537

Other (491) 130 123 321 620 83 1,000

Noninterest income 7,967 6,271 8,393 2,820 3,359 25,451 12,586

Employee compensation and benefits 9,211 7,817 7,338 12,309 6,738 36,675 26,261

Occupancy and equipment expenses 2,114 2,151 2,044 2,558 2,389 8,867 8,923

Amortization of core deposit intangible 341 341 341 341 341 1,364 1,418

Virginia franchise tax expense 613 615 659 570 562 2,457 2,251

Data processing expense 814 701 956 707 677 3,178 2,381

Telecommunication and communication expense 378 382 369 368 357 1,497 1,615

Net (gain) loss on other real estate owned 905 (16) - 71 - 960 (38)

Professional fees 1,166 1,494 873 1,193 1,036 4,726 3,612

Other expenses 3,012 1,779 1,490 1,735 1,696 8,016 10,169

Noninterest expense 18,554 15,264 14,070 19,852 13,796 67,740 56,592

Income before income taxes 11,966 12,005 5,897 33 10,232 29,901 39,244

Income tax expense 3,003 2,417 1,188 6 1,268 6,614 6,077

Net income $ 8,963 $ 9,588 $ 4,709 $ 27 $ 8,964 $ 23,287 $ 33,167

Non-GAAP adjustments to Net Income

Management Restructure / Recruiting $ 843 $ - $ - $ 4,899 $ - $ 5,742 $ -

Branch Closures - - - 479 - 479 -

(Gain or recovery) / loss on securities (2,964) - - - - (2,964) -

Brand Initative / Renaming 1,000 - - - - 1,000 -

Extraordinary PPP income and expense (2,177) - - - - (2,177) -

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

Income tax effect 729 - - (1,076) - (347) (777)

Net Income adjusted for nonrecurring income and expenses $ 6,394 $ 9,588 $ 4,709 $ 4,329 $ 8,964 $ 25,020 $ 36,092

CECL unfunded commitment expense (pre-tax) 380 - - - - 380 -

Pre-tax pre-provision earnings - operating $ 12,149 $ 14,005 $ 16,796 $ 8,861 $ 10,232 $ 51,811 $ 43,296

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

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

Earnings per share - Basic $ 0.37 $ 0.40 $ 0.19 $ 0.00 $ 0.37 $ 0.96 $ 1.38

Earnings per share - Diluted $ 0.37 $ 0.39 $ 0.19 $ 0.00 $ 0.37 $ 0.96 $ 1.36

Book value per share $ 16.03 $ 15.96 $ 15.67 $ 15.59 $ 15.60 $ 16.03 $ 15.60

Tangible book value per share(1) $ 11.60 $ 11.53 $ 11.21 $ 11.11 $ 11.09 $ 11.60 $ 11.09

Weighted average shares outstanding - Basic 24,272,312 24,270,455 24,246,355 24,168,359 24,092,534 24,239,481 24,050,037

Weighted average shares outstanding - Diluted 24,401,037 24,375,383 24,352,708 34,388,085 24,411,147 24,362,665 24,325,182

Shares outstanding at end of period 24,368,612 24,368,853 24,361,603 24,297,703 24,181,534 24,368,612 24,181,534

Selected Performance Ratios:

Return on average assets - operating(1) 0.82% 1.19% 0.61% 0.63% 1.31% 0.84% 1.33%

Pre-tax pre-provision return on average assets - operating(1) 1.56% 1.78% 2.28% 1.30% 1.50% 1.74% 1.59%

Return on average equity - operating(1) 6.53% 9.87% 4.92% 4.57% 9.49% 6.50% 9.93%

Return on average tangible equity - operating(1) 9.04% 13.72% 6.86% 0.04% 13.40% 9.06% 13.09%

Yield on earning assets 4.46% 3.97% 4.25% 4.61% 4.75% 4.31% 4.88%

Cost of funds on interest bearing liabilities 0.93% 0.83% 0.97% 1.60% 1.49% 1.01% 1.58%

Net interest margin 3.58% 3.18% 3.33% 3.32% 3.35% 3.35% 3.39%

Gross loans to deposits 100.32% 113.86% 116.73% 106.61% 102.89% 100.32% 102.89%

Efficiency ratio - operating(1) 57.43% 52.79% 49.07% 62.50% 57.60% 55.02% 56.37%

Overhead to average capital ratio 1.70% 1.15% 0.77% 1.86% 1.54% 1.81% 1.51%

Net charge-offs to average loans (annualized) 0.13% (0.02%) (0.00%) 0.18% 0.17% 0.09% 0.11%

Loan Portfolio Composition:

Loans secured by real estate:

Commercial real estate - owner occupied $ 436,600 $ 416,717 $ 412,916 $ 409,739 $ 414,479 $ 436,600 $ 414,479

Commercial real estate - non-owner occupied 603,319 605,053 591,229 599,987 559,195 603,319 559,195

Secured by farmland 13,110 16,608 16,845 16,608 17,622 13,110 17,622

Construction and development loans 103,264 120,066 122,086 115,144 150,750 103,264 150,750

Residential 1-4 family 558,605 581,237 612,247 624,119 604,777 558,605 604,777

Multi-family residential 107,267 107,672 100,685 90,652 82,055 107,267 82,055

Home equity lines of credit 91,714 97,727 101,218 106,820 109,006 91,714 109,006

Total real estate loans 1,913,879 1,945,080 1,957,226 1,963,069 1,937,884 1,913,879 1,937,884

Commercial loans 188,885 216,711 204,160 223,433 221,447 188,885 221,447

SBA Paycheck Protection Program loans 319,428 348,022 335,612 - - 319,428 -

Consumer loans 22,334 23,078 24,733 25,708 26,304 22,334 26,304

Gross loans 2,444,526 2,532,891 2,521,731 2,212,210 2,185,635 2,444,526 2,185,635

Plus (less) deferred costs (fees) on loans (4,030) (9,182) (10,227) 328 412 (4,030) 412

Loan receivable, net of deferred costs (fees) $ 2,440,496 $ 2,523,709 $ 2,511,504 $ 2,212,538 $ 2,186,047 $ 2,440,496 $ 2,186,047

(1) See Reconciliation of Non-GAAP financial measures.

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

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

Allowance for Credit Losses: CECL Incurred Incurred Incurred Incurred CECL Incurred

Balance at beginning of period $ (25,779) $ (23,627) $ (12,722) $ (10,261) $ (11,201) $ (10,261) $ (12,283)

Adoption of CECL (8,292) - - - - (8,292) -

Provision for loan losses (3,101) (2,000) (10,899) (3,450) - (19,450) (350)

Charge-offs 1,125 86 33 1,099 974 2,343 3,278

Recoveries (298) (238) (39) (110) (34) (685) (906)

Net charge-offs 827 (152) (6) 989 940 1,658 2,372

Ending balance $ (36,345) $ (25,779) $ (23,627) $ (12,722) $ (10,261) $ (36,345) $ (10,261)

Cummulative reconciliation to CECL:

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

CECL adoption impact on retained earnings, pretax (6,924) (6,924) (6,924)

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

CECL Ending balance $ (36,349) $ (35,739) $ (32,659)

Reserve for Unfunded Commitments: CECL Incurred Incurred Incurred Incurred CECL Incurred

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

Adoption of CECL (305) $ (305)

Unfunded loan commitment expense (380) $ (380)

Total Reserve for Unfunded Commitments $ (740) $ (55) $ (55) $ (55) $ (55) $ (740) $ (55)

Cummulative reconciliation to CECL:

CECL adoption impact on retained earnings, pretax $ (305) $ (305) $ (305)

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

CECL Ending balance $ (1,639) $ (1,232) $ (840)

Net Charge-off Information:

Charge-offs:

Commercial, financial and agricultural $ 900 $ 12 $ - $ 822 $ 188 $ 1,734 $ 621

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

Real estate - commercial and farmland 52 - - - 403 52 1,648

Real estate - residential 141 47 - 245 336 433 741

Consumer installment 32 27 33 32 47 124 268

Total charge-offs 1,125 86 33 1,099 974 2,343 3,278

Recoveries:

Commercial, financial and agricultural (9) - (20) (65) (14) (94) (351)

Real estate - construction and development - - - - - - 1

Real estate - commercial and farmland (126) (4) (3) (7) (3) (140) (213)

Real estate - residential (157) (225) (5) (31) (6) (418) (306)

Consumer installment (6) (9) (11) (7) (11) (33) (37)

Total recoveries (298) (238) (39) (110) (34) (685) (906)

Net charge-offs $ 827 $ (152) $ (6) $ 989 $ 940 $ 1,658 $ 2,372

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

Non-Performing Assets: 4Q 2020 3Q 2020 2Q 2020 1Q 2020 4Q 2019 4Q 2020 4Q 2019

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

Nonaccrual loans 14,462 15,270 14,930 8,941 8,900 14,462 8,900

Other real estate owned 3,078 5,388 6,006 5,876 6,224 3,078 6,224

Total non-performing assets $ 17,540 $ 20,658 $ 20,936 $ 14,817 $ 15,124 $ 17,540 $ 15,124

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

Troubled debt restructuring $ 987 $ 1,629 $ 1,667 $ 694 $ 697 $ 987 $ 697

Loans deferred under COVID-19 modifications $ 122,010 $ 436,591 $ 707,841 $ 24,308 $ - $ 122,010 $ -

Asset Quality Ratios:

Non-performing assets as a percent of total assets, excluding SBA guarantees 0.47% 0.53% 0.57% 0.43% 0.40% 0.47% 0.40%

Net charge-offs as a percent of average loans (annualized) 0.13% (0.02%) 0.00% 0.18% 0.17% 0.09% 0.11%

Allowance for credit losses to total loans 1.49% 1.02% 0.94% 0.57% 0.47% 1.49% 0.47%

Allowance for credit losses to total loans (excluding PPP loans) 1.71% 1.18% 1.09% 0.57% 0.47% 1.71% 0.47%

Loans by Risk Grade:

Pass, not graded $ 533,287 $ 574,954 $ 653,943 $ 630,827 $ 611,160 $ 533,287 $ 611,160

Pass Grade 1 - Highest Quality 778 891 306 538 374 778 374

Pass Grade 2 - Good Quality 332,251 375,861 323,512 28,583 27,855 332,251 27,855

Pass Grade 3 - Satisfactory Quality 627,270 878,031 837,606 866,316 871,463 627,270 871,463

Pass Grade 4 - Pass 872,604 660,630 662,534 664,124 652,464 872,604 652,464

Pass Grade 5 - Special Mention 29,809 14,132 14,006 11,622 12,235 29,809 12,235

Grade 6 - Substandard 44,497 19,210 19,597 10,528 10,496 44,497 10,496

Grade 7 - Doubtful - - - - - - -

Grade 8 - Loss - - - - - - -

Total loans $ 2,440,496 $ 2,523,709 $ 2,511,504 $ 2,212,538 $ 2,186,047 $ 2,440,496 $ 2,186,047

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

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

Assets

Interest-earning assets:

Loans, net of deferred fees $ 2,497,259 $ 2,501,614 $ 2,401,620 $ 2,200,926 $ 2,156,174 $ 2,400,896 $ 2,159,681

Investment securities 204,968 213,039 222,124 231,794 238,563 217,932 241,800

Other earning assets 147,014 163,159 91,230 54,800 54,826 114,275 66,582

Total earning assets 2,849,241 2,877,812 2,714,974 2,487,520 2,449,563 2,733,103 2,468,063

Other assets 252,231 256,284 250,897 252,700 255,916 253,035 252,412

Total assets $ 3,101,472 $ 3,134,096 $ 2,965,871 $ 2,740,220 $ 2,705,479 $ 2,986,138 $ 2,720,475

Liabilities and stockholders' equity

Demand deposits $ 459,830 $ 452,500 $ 418,382 $ 333,408 $ 345,191 $ 416,249 $ 332,924

Interest-bearing liabilities:

NOW and other demand accounts 688,125 451,583 404,700 379,531 374,328 481,470 360,254

Money market accounts 569,223 504,887 488,648 469,651 464,471 508,260 439,097

Savings accounts 182,434 176,305 163,574 147,697 145,532 167,567 145,855

Time deposits 525,607 590,263 710,483 756,055 832,246 645,123 868,420

Total Deposits 2,425,219 2,175,538 2,185,787 2,086,342 2,161,768 2,218,669 2,146,550

Borrowings 260,493 547,182 371,836 251,830 144,664 358,087 188,647

Total Funding 2,685,712 2,722,720 2,557,623 2,338,172 2,306,432 2,576,756 2,335,197

Other Liabilities 26,588 25,869 24,495 21,781 24,398 24,693 22,115

Stockholders' equity 389,172 385,507 383,753 380,267 374,649 384,689 363,163

Total liabilities and stockholders' equity $ 3,101,472 $ 3,134,096 $ 2,965,871 $ 2,740,220 $ 2,705,479 $ 2,986,138 $ 2,720,475

Memo: SBA PPP loans $ 332,080 $ 335,653 $ 192,751 $ - $ - $ 215,770 $ -

Net Interest Income

Loans $ 30,596 $ 27,266 $ 27,044 $ 26,741 $ 27,489 $ 111,647 $ 112,181

Investment securities 993 1,129 1,247 1,361 1,496 4,730 6,224

Other earning assets 330 312 381 379 370 1,402 2,119

Total Earning Assets 31,919 28,707 28,672 28,481 29,355 117,779 120,524

Non-interest bearing DDA - - - - - - -

NOW and other demand accounts 1,167 807 745 786 792 3,505 2,989

Money market accounts 984 800 830 1,575 1,779 4,188 7,745

Savings accounts 137 130 107 116 116 490 461

Time deposits 2,038 2,620 3,464 4,026 4,799 12,149 19,407

Total Deposit Costs 4,326 4,357 5,146 6,503 7,486 20,332 30,602

Other Borrowings 1,939 1,352 1,053 1,463 1,200 5,807 6,322

Total Funding Costs 6,265 5,709 6,199 7,966 8,686 26,139 36,924

Net Interest Income $ 25,654 $ 22,998 $ 22,473 $ 20,515 $ 20,669 $ 91,640 $ 83,600

Memo: SBA PPP loan interest and fee income $ 5,725 $ 2,233 $ 512 $ - $ - $ 8,470 $ -

Southern National Bancorp of Virginia, inc. For the Three Month Period: Year to date Period:

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

Loans 4.87% 4.34% 4.53% 4.89% 5.06% 4.65% 5.19%

Investments 1.93% 2.11% 2.26% 2.36% 2.49% 2.17% 2.57%

Other Earning Assets 0.89% 0.76% 1.68% 2.78% 2.68% 1.23% 3.18%

Total Earning Assets 4.46% 3.97% 4.25% 4.60% 4.75% 4.31% 4.88%

NOW 0.67% 0.71% 0.74% 0.83% 0.84% 0.73% 0.83%

MMDA 0.69% 0.63% 0.68% 1.35% 1.52% 0.82% 1.76%

Savings 0.30% 0.29% 0.26% 0.32% 0.32% 0.29% 0.32%

CDs 1.54% 1.77% 1.96% 2.14% 2.29% 1.88% 2.23%

Interest Bearing Deposits 0.88% 1.01% 1.17% 1.49% 1.63% 1.13% 1.69%

Total Cost of Deposits 0.71% 0.80% 0.95% 1.25% 1.37% 0.92% 1.43%

Other Funding 2.96% 0.98% 1.14% 2.34% 3.29% 1.62% 3.35%

Total Cost of Funds 0.93% 0.83% 0.97% 1.37% 1.49% 1.01% 1.58%

Net Interest Margin 3.58% 3.18% 3.33% 3.32% 3.35% 3.35% 3.39%

Net Interest Spread 3.53% 3.14% 3.27% 3.23% 3.26% 3.29% 3.30%

Memo: Excluding SBA PPP loans

Loans 4.57% 4.60% 4.83% 4.89% 5.06% 4.72% 5.19%

Total Earning Assets 4.14% 4.14% 4.49% 4.60% 4.75% 4.34% 4.88%

Net Interest Margin* 3.23% 3.28% 3.51% 3.32% 3.35% 3.33% 3.39%

*Net interest margin excluding the effect of SBA PPP loans assumes a fundingcost of 35bps on average PPP balances in all applicable periods

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

Reconciliation of Non-GAAP items: 4Q 2020 3Q 2020 2Q 2020 1Q 2020 4Q 2019 4Q 2020 4Q 2019

Return on average assets 1.15% 1.19% 0.61% 0.00% 1.31% 0.78% 1.22%

Effect of adjustment for nonrecurring income and expenses (0.33%) 0.00% 0.00% 0.63% 0.00% 0.06% 0.11%

Return on average assets - operating 0.82% 1.19% 0.61% 0.63% 1.31% 0.84% 1.33%

Net Income $ 8,963 $ 9,588 $ 4,709 $ 27 $ 8,964 $ 23,287 $ 33,167

Income tax expense 3,003 2,417 1,188 6 1,268 6,614 6,077

Provision for credit losses (incl. unfunded commitments) 3,481 2,000 10,899 3,450 - 19,830 350

Pre-tax pre-provision earnings $ 15,447 $ 14,005 $ 16,796 $ 3,483 $ 10,232 $ 49,731 $ 39,594

Effect of adjustment for nonrecurring income and expenses (3,298) - - 5,378 - 2,080 3,702

Pre-tax pre-provision earnings - operating $ 12,149 $ 14,005 $ 16,796 $ 8,861 $ 10,232 $ 51,811 $ 43,296

Return on average assets 1.15% 1.19% 0.61% 0.00% 1.31% 0.78% 1.22%

Effect of tax expense 0.39% 0.31% 0.16% 0.00% 0.19% 0.22% 0.22%

Effect of provision for credit losses 0.45% 0.25% 1.48% 0.51% 0.00% 0.66% 0.01%

Pre-tax pre-provision return on average assets 1.98% 1.78% 2.28% 0.51% 1.50% 1.67% 1.46%

Effect of adjustment for nonrecurring income and expenses (0.42%) 0.00% 0.00% 0.78% 0.00% 0.07% 0.14%

Pre-tax pre-provision return on average assets - operating 1.56% 1.78% 2.28% 1.30% 1.50% 1.74% 1.59%

Return on average equity 9.16% 9.87% 4.92% 0.03% 9.49% 6.04% 9.13%

Effect of adjustment for nonrecurring income and expenses (2.63%) 0.00% 0.00% 4.54% 0.00% 0.46% 0.80%

Return on average equity - operating 6.53% 9.87% 4.92% 4.57% 9.49% 6.50% 9.93%

Effect of goodwill and other intangible assets 2.51% 3.85% 1.94% (4.53%) 3.91% 2.56% 3.16%

Return on average tangible equity - operating 9.04% 13.72% 6.86% 0.04% 13.40% 9.06% 13.09%

Efficiency ratio 59.43% 52.79% 49.07% 85.84% 57.60% 60.51% 59.44%

Effect of adjustment for nonrecurring income and expenses (2.00%) 0.00% 0.00% (23.34%) 0.00% (5.49%) (3.07%)

Efficiency ratio - operating 57.43% 52.79% 49.07% 62.50% 57.60% 55.02% 56.37%

Stockholders' equity $ 390,554 $ 388,983 $ 381,669 $ 378,822 $ 377,241 $ 390,554 $ 377,241

Less goodwill and other intangible assets -107,780 -108,122 -108,463 -108,804 -109,145 -107,780 -109,145

Tangible common equity $ 282,774 $ 280,861 $ 273,206 $ 270,018 $ 268,096 $ 282,774 $ 268,096

Equity to Assets 12.64% 12.33% 12.42% 13.71% 13.86% 12.64% 13.86%

Effect of goodwill and other intangible assets (3.16%) (3.11%) (3.21%) (3.54%) (3.60%) (3.16%) (3.60%)

Tangible common equity to tangible assets 9.49% 9.22% 9.22% 10.17% 10.26% 9.49% 10.26%

Book value per share $ 16.03 $ 15.96 $ 15.67 $ 15.59 $ 15.60 $ 16.03 $ 15.60

Effect of goodwill and other intangible assets (4.42) (4.44) (4.45) (4.48) (4.51) (4.42) (4.51)

Tangible book value per share $ 11.60 $ 11.53 $ 11.21 $ 11.11 $ 11.09 $ 11.60 $ 11.09

Net Interest Margin 3.58% 3.18% 3.33% 3.32% 3.35% 3.35% 3.39%

Effect of adjustment for PPP associated balances* (0.35%) 0.10% 0.18% 0.00% 0.00% (0.02%) 0.00%

Net Interest Margin excluding PPP associated balances 3.23% 3.28% 3.51% 3.32% 3.35% 3.33% 3.39%

Effect of adjustment for accretion (0.12%) (0.17%) (0.30%) (0.10%) (0.19%) (0.17%) (0.16%)

Net Interest Margin - Adjusted 3.11% 3.11% 3.21% 3.22% 3.16% 3.16% 3.23%

*Net interest margin excluding the effect of SBA PPP loans assumes a fundingcost of 35bps on average PPP balances in all applicable periods

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SOURCE Southern National Bancorp of Virginia, Inc.