Southern National Bancorp of Virginia Inc. Reports Earnings of $1.2 Million for the Third Quarter and $5.3 Million for the First Nine Months of 2012; Dividend Increased From $.025 to $.04
MCLEAN, Va., Oct. 25, 2012 (GLOBE NEWSWIRE) -- Southern National Bancorp of Virginia Inc. (Nasdaq: SONA), the holding company for Sonabank, announced today that net income for the quarter and nine months ended September 30, 2012 was $1.2 million and $5.3 million compared to $1.4 million and $4.1 million during the third quarter and the first nine months of 2011.
The slight decline in net income during the quarter was largely attributable to an other than temporary impairment ("OTTI") charge on one trust preferred security which was partially offset by a gain on sale of SBA loan pooled securities. In addition, the provision for loan losses was elevated in the third quarter due to a charge off related to a short sale of a property in West Virginia.
The Board of Directors declared a dividend of $.04 per share, an increase of 60% over the prior quarter dividend, payable November 23, 2012 to shareholders of record on November 12, 2012. This was Southern National's fourth consecutive quarterly dividend.
Net Interest Income
Net interest income was $8.1 million in the quarter ended September 30, 2012 up from $7.2 million during the same period last year. Sonabank's net interest margin was 5.14% in the third quarter of 2012, down from 5.22% in the third quarter of 2011.
Net interest income was $23.6 million during the nine months ended September 30, 2012, compared to $20.3 million during the same period in the prior year. Average loans during the first nine months of 2012 were $523.2 million compared to $472.2 million during the same period last year. The Greater Atlantic Bank loan discount accretion contributed $2.9 million to net interest income during the first nine months of 2012, compared to $2.6 million during the nine months ended September 30, 2011. The loan discount accretion on the HarVest Bank portfolio contributed $412 thousand through the third quarter of 2012.
During the third quarter of 2012 Sonabank had noninterest income of $264 thousand compared to noninterest income of $366 thousand during the third quarter of 2011. The decline was primarily related to an OTTI charge on trust preferred securities in the amount of $480 thousand which was partially offset by a gain on the sale of SBA pooled securities in the amount of $287 thousand.
Noninterest income increased to $2.8 million in the first nine months of 2012 from $1.7 million in the first nine months of 2011. The increase resulted from the bargain purchase gain of $3.5 million from the HarVest transaction which was partially offset by the recognition of impairment in the values of five other real estate owned ("OREO") properties in the Charlottesville market and one in the Culpeper market during the second quarter of 2012. In addition, there was an OTTI of $235 thousand in one trust preferred security during the second quarter of 2012 compared to $38 thousand in OTTI charges during the second quarter of 2011. Also, during the first quarter of 2012 the bank sold the guaranteed portions of SBA loans and realized a $657 thousand gain.
Noninterest expenses were $4.8 million and $14.1 million during the third quarter and the first nine months of 2012, respectively, compared to $3.9 million and $11.2 million during the same periods in 2011. Occupancy expenses were $902 thousand during the quarter compared to $713 thousand during the third quarter of 2011. $134 thousand of the increase resulted from operating five more branches this quarter, and $43 thousand was a result of expenses related to the HarVest administrative office on a lease which has now been terminated. As a result of recasting estimated recoveries under the FDIC indemnification agreement for the Greater Atlantic Bank acquisition in the second quarter of 2012, amortization expense was $242 thousand for the quarter ended September 30, 2012, compared to accretion of $13 thousand for the same period last year. Audit and consulting fees were $137 thousand during the third quarter of 2012 compared to $93 thousand during the same period in 2011.
Audit and consulting fees were $977 thousand during the nine months ended September 30, 2012, compared to $306 thousand during the same period in 2011. Occupancy expenses were $2.5 million during the nine months ended September 30, 2012, compared to $2.1 million during the same period in 2011. Of this increase, $213 thousand resulted from operating five additional branches this quarter, and $67 thousand was a result of expenses related to the HarVest administrative office on a lease which has now been terminated. As a result of recasting estimated recoveries under the FDIC indemnification agreement in the second quarter of 2012, amortization expense was $481 thousand for the nine months ended September 30, 2012, compared to accretion of $85 thousand for the same period last year. The efficiency ratio was 55.03% during the nine months ended September 30, 2012, compared to 51.87% during the same period the prior year.
The composition of Sonabank's loan portfolio consisted of the following at September 30, 2012 and December 31, 2011:
|September 30, 2012||December 31, 2011|
|Mortgage loans on real estate:|
|Commercial real estate - owner-occupied||$ 4,276||$ 17,067||$ 77,731||$ 99,074||$ 4,854||$ 82,450||$ 87,304|
|Commercial real estate - non-owner-occupied||11,965||11,233||107,307||130,505||11,243||117,059||128,302|
|Secured by farmland||--||--||1,486||1,486||--||1,506||1,506|
|Construction and land loans||1,244||5,500||54,647||61,391||2,883||39,565||42,448|
|Residential 1-4 family||22,038||13,709||47,330||83,077||25,307||49,288||74,595|
|Multi- family residential||621||736||18,358||19,715||629||19,553||20,182|
|Home equity lines of credit||33,288||1,991||6,925||42,204||35,442||9,040||44,482|
|Total real estate loans||73,432||50,236||313,784||437,452||80,358||318,461||398,819|
|Less deferred fees on loans||6||(5)||(1,001)||(1,000)||--||(1,088)||(1,088)|
|Loans, net of deferred fees||$ 76,600||$ 57,347||$ 403,822||$ 537,769||$ 82,588||$ 409,180||$ 491,768|
|(1) Covered Loans are loans acquired in the Greater Atlantic transaction and are covered under an FDIC loss-share agreement.|
|(2) HarVest Loans are loans acquired in the HarVest transaction and are not covered under an FDIC loss-share agreement.|
Loan growth has been basically flat since the end of the year with the exception of the HarVest acquisition. In the Northern Virginia market, which is heavily dependent on defense spending and related government contracting, there is growing concern about the potential for sequestration. As a consequence, loan demand has been soft in Northern Virginia.
Net loans receivable increased from $491.8 million at the end of 2011 to $537.8 million at September 30, 2012. Within that total, covered loans declined by $6.0 million while the non-covered loan portfolio increased by $52.0 million. Non-covered loans included $57.3 million of loans acquired in the HarVest acquisition. We sold $5.7 million of SBA loans during the first quarter of 2012.
Loan Loss Provision/Asset Quality
The loan loss provision for the third quarter of 2012 was $1.8 million compared to $1.3 million for the second quarter of 2012 and $1.6 million during the third quarter of 2011. Charge-offs totaled $1.9 million, $1.8 million and $1.5 million, respectively, during those three quarters.
Non-covered OREO as of September 30, 2012 was $12.8 million compared to $13.6 million as of the end of the previous year. During the nine months ended September 30, 2012 we had two foreclosures in the amount of $2.0 million and OREO sales of $1.1 million.
Non-covered nonaccrual loans were $4.5 million (excluding $2.6 million of loans fully covered by SBA guarantees) at September 30, 2012 compared to $2.1 million (excluding $2.5 million of loans fully covered by SBA guarantees) at the end of last year. The ratio of non-covered non-performing assets to non-covered assets decreased from 2.98% (excluding the SBA guaranteed loans) at the end of 2011 to 2.75% (excluding the SBA guaranteed loans) at September 30, 2012. The portions of these SBA loans that were unguaranteed were charged off.
Southern National Bancorp of Virginia's allowance for loan losses as a percentage of non-covered loans at September 30, 2012 was 1.50%, compared to 1.54% at the end of 2011. Management believes the allowance is adequate at this time but monitors trends in past due and non-performing loans to determine whether the allowance should be increased.
Investment securities, available for sale and held to maturity, were $80.5 million at September 30, 2012 and $45.0 million at December 31, 2011. In the second quarter of 2012, we acquired securities with a fair value of $38.4 million in the HarVest transaction, and we sold $11.3 million of those securities. We retained mortgage-backed securities and collateralized mortgage obligations with a fair value of $27.1 million. We purchased $20.0 million of callable agency securities and $2.0 million of tax-exempt municipal securities during the third quarter of 2012. We also sold $8.0 million of SBA pooled securities which resulted in a gain of $287 thousand during the quarter.
As of September 30, 2012 we owned pooled trust preferred securities as follows:
|When Purchased||Current Ratings|
|ALESCO VII A1B||Senior||Aaa||AAA||Baa3||BB|
|MMCF III B||Senior Sub||A3||A-||Ba1||CC|
|Other Than Temporarily Impaired:|
|TPREF FUNDING II||Mezzanine||A1||A-||Caa3||C|
|TRAP 2007-XII C1||Mezzanine||A3||A||C||C|
|TRAP 2007-XIII D||Mezzanine||NR||A-||NR||C|
|MMC FUNDING XVIII||Mezzanine||A3||A-||Ca||C|
|ALESCO V C1||Mezzanine||A2||A||C||C|
|ALESCO XV C1||Mezzanine||A3||A-||C||C|
|ALESCO XVI C||Mezzanine||A3||A-||C||C|
|ALESCO VII A1B||$ 6,904||$ 6,216||$ 4,211||$ 117,400||$ 296|
|MMCF III B||435||426||254||37,000||9|
|Other Than Temporarily Impaired:||
OTTI Related to
Credit Loss (2)
|TPREF FUNDING II||1,500||423||423||134,100||722||$ 355|
|TRAP 2007-XII C1||2,107||55||55||202,705||759||1,293|
|TRAP 2007-XIII D||2,039||--||83||214,000||7||2,032|
|MMC FUNDING XVIII||1,070||27||166||96,682||352||691|
|ALESCO V C1||2,138||473||426||84,000||1,004||661|
|ALESCO XV C1||3,175||30||641||249,100||586||2,559|
|ALESCO XVI C||2,113||117||472||86,150||816||1,180|
|14,142||1,125||2,266||$ 4,246||$ 8,771|
|Total||$ 21,481||$ 7,767||$ 6,731|
|(1) Pre-tax, and represents unrealized losses at date of transfer from available-for-sale to held-to-maturity, net of accretion|
Each of these securities has been evaluated for potential impairment. In performing a detailed cash flow analysis of each security, Sonabank works with independent third parties to identify the most reflective estimate of the cash flow estimated to be collected. If this estimate results in a present value of expected cash flows that is less than the amortized cost basis of a security (that is, credit loss exists), an OTTI is considered to have occurred. If there is no credit loss, any impairment is considered temporary.
The analyses resulted in OTTI charges related to credit on two trust preferred securities (TRAP 2007-XII C1 and TPREF FUNDING II) in the amount of $480 thousand during the third quarter of 2012, compared to OTTI charges related to credit on the trust preferred securities totaling $43 thousand for three months ended September 30, 2011. The OTTI charge on TRAP 2007-XII C1 was $479 thousand and was caused by the deferral of interest payments by a large issuer in the deal which has eroded the credit support below the tranche we own. This adverse credit development impacts the amount and timing of expected cash flows to the tranche, resulting in the recognition of OTTI.
Total deposits were $537.3 million at September 30, 2012 compared to $461.1 million at December 31, 2011. We acquired deposits in the amount of $140.5 million in the HarVest transaction. Total time deposits were $297.3 million at September 30, 2012, compared to $255.8 million at December 31, 2011. We acquired time deposits totaling $107.6 million in the HarVest acquisition. Noninterest-bearing deposits were $43.1 million at September 30, 2012 and $32.6 million at December 31, 2011.
Total stockholders' equity increased from $99.1 million as of December 31, 2011 to $104.0 million at September 30, 2012 as a result of the retention of earnings. Our Tier 1 Risk Based Capital Ratios were 18.25% and 17.70% for Southern National Bancorp of Virginia, Inc. and Sonabank, respectively, as of September 30, 2012.
Southern National Bancorp of Virginia, Inc. is a bank holding company with assets of $708.3 million at September 30, 2012. Sonabank provides a range of financial services to individuals and small and medium sized businesses. Sonabank has 15 branches in Virginia, located in Fairfax County (Reston, McLean and Fairfax), in Charlottesville, Warrenton (2), Middleburg, Leesburg (2), South Riding, Front Royal, New Market, Richmond, Haymarket and Clifton Forge, and five branches in Maryland (four in Montgomery County and one in Frederick County).
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that relate to future events or the future performance of Southern National Bancorp of Virginia, Inc. Forward-looking statements are not guarantees of performance or results. These forward-looking statements are based on the current beliefs and expectations of the respective management of Southern National Bancorp and are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond their respective control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed or implied in these forward-looking statements because of numerous possible uncertainties. Words like "may," "plan," "contemplate," "anticipate," "believe," "intend," "continue," "expect," "project," "predict," "estimate," "could," "should," "would," "will," and similar expressions should be considered as identifying forward-looking statements, although other phrasing may be used. Such forward-looking statements involve risks and uncertainties and may not be realized due to a variety of factors. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q) filed by Southern National Bancorp. These factors should be considered, and undue reliance should not be placed on such forward-looking statements. No obligation is undertaken by Southern National Bancorp 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.|
|Condensed Consolidated Balance Sheets|
|Cash and cash equivalents||$ 22,288||$ 5,035|
|Investment securities-available for sale||49||9,905|
|Investment securities-held to maturity||80,496||35,075|
|Stock in Federal Reserve Bank and Federal Home Loan Bank||6,190||6,653|
|Loans receivable, net of unearned income||537,769||491,768|
|Allowance for loan losses||(6,911)||(6,295)|
|Bank premises and equipment, net||6,476||6,350|
|Bank-owned life insurance||17,633||17,575|
|FDIC indemnification asset||7,006||7,537|
|Total assets||$ 708,262||$ 611,373|
|Liabilities and stockholders' equity|
|Noninterest-bearing deposits||$ 43,096||$ 32,582|
|Securities sold under agreements to repurchase and other short-term borrowings||32,713||17,736|
|Federal Home Loan Bank advances||30,250||30,000|
|Total liabilities and stockholders' equity||$ 708,262||$ 611,373|
|Condensed Consolidated Statements of Income|
For the Quarters Ended
For the Nine Months Ended
|Interest and dividend income||$ 9,600||$ 8,688||$ 28,035||$ 24,919|
|Net interest income||8,131||7,199||23,604||20,318|
|Provision for loan losses||1,830||1,550||4,605||5,140|
|Net interest income after provision for loan losses||6,301||5,649||18,999||15,178|
|Account maintenance and deposit service fees||222||218||624||636|
|Income from bank-owned life insurance||148||129||649||1,196|
|Bargain purchase gain on acquisition||--||--||3,484||--|
|Gain on sale of loans||--||--||657||--|
|Gain (loss) on other real estate owned, net||24||--||(2,362)||(147)|
|OTTI losses recognized in earnings||(480)||(43)||(717)||(113)|
|Net gain on sale of available for sale securities||287||--||274||--|
|Employee compensation and benefits||2,073||1,759||5,868||5,066|
|Change in FDIC indemnification asset||242||(13)||481||(85)|
|Income before income taxes||1,787||2,101||7,753||5,748|
|Income tax expense||579||692||2,487||1,602|
|Net income||$ 1,208||$ 1,409||$ 5,266||$ 4,146|
|(Dollars in thousands except per share data)|
For the Quarters Ended
For the Nine Months Ended
|Per Share Data :|
|Earnings per share - Basic||$ 0.10||$ 0.12||$ 0.45||$ 0.36|
|Earnings per share - Diluted||$ 0.10||$ 0.12||$ 0.45||$ 0.36|
|Book value per share||$ 8.98||$ 8.52|
|Tangible book value per share||$ 8.06||$ 7.57|
|Weighted average shares outstanding - Basic||11,590,212||11,590,212||11,590,212||11,590,212|
|Weighted average shares outstanding - Diluted||11,597,540||11,590,928||11,594,349||11,592,017|
|Shares outstanding at end of period||11,590,212||11,590,212|
|Selected Performance Ratios and Other Data:|
|Return on average assets||0.69%||0.92%||1.06%||0.94%|
|Return on average equity||4.62%||5.69%||6.90%||5.73%|
|Yield on earning assets||6.07%||6.30%||6.24%||6.23%|
|Cost of funds||1.08%||1.25%||1.15%||1.34%|
|Cost of funds including non-interest bearing deposits||1.00%||1.17%||1.06%||1.25%|
|Net interest margin||5.14%||5.22%||5.26%||5.08%|
|Efficiency ratio (1)||55.79%||51.45%||55.03%||51.87%|
|Net charge-offs (recoveries) to average loans||0.29%||0.31%||0.75%||0.99%|
|Amortization of intangibles||$ 236||$ 230||$ 694||$ 689|
|Stockholders' equity to total assets||14.69%||16.20%|
|Tier 1 risk-based capital ratio||18.25%||19.37%|
|Goodwill||$ 9,160||$ 9,160|
|Core deposit intangible||1,480||1,995|
|Total||$ 10,640||$ 11,155|
|Non-covered loans and other real estate owned (2):|
|Nonaccrual loans (3)||$ 7,099||$ 4,541|
|Loans past due 90 days and accruing interest||--||32|
|Other real estate owned||12,815||13,620|
|Total nonperforming assets||$ 19,914||$ 18,193|
|Allowance for loan losses to total non-covered loans||1.50%||1.54%|
|Nonperforming assets to total non-covered assets||3.16%||3.44%|
|Nonperforming assets excluding SBA guaranteed loans to total non-covered assets||2.75%||2.98%|
|Nonperforming assets excluding SBA guaranteed loans to total non-covered loans and OREO||3.65%||3.72%|
|(1) Excludes gains and write-downs on OREO, gains on sale of loans, gains/losses on sale of securities, impairment losses recognized in earnings and nonrecurring income on bank-owned life insurance.|
|(2) Applies only to non-covered loans and other real estate owned .|
|(3) Nonaccrual loans include SBA guaranteed amounts totaling $2.6 million and $2.5 million at September 30, 2012 and December 31, 2011, respectively.|