Southern National Bancorp of Virginia Inc (Form: S-1, Received: 08/04/2006 06:08:18)

As filed with the Securities and Exchange Commission on August 4, 2006

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

(Exact Name of Registrant as Specified in Its Charter)

Virginia

6022

20-1417448

(State or Other Jurisdiction of

Incorporation or Organization)

(Primary Standard Industrial

Classification Number)

(IRS Employer

Identification Number)

1770 Timberwood Boulevard, Suite 100

Charlottesville, Virginia 22911

(434) 973-5242

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Georgia S. Derrico

Chairman and Chief Executive Officer

Southern National Bancorp of Virginia, Inc.

1770 Timberwood Boulevard, Suite 100

Charlottesville, Virginia 22911

(434) 973-5242 x2405

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies of Communications to:

Timothy B. Matz, Esq.

Jeffrey A. Koeppel, Esq.

Elias Matz Tiernan & Herrick L.L.P.

734 15 ^th Street, NW

12 ^th Floor

Washington, D.C. 20005

(202) 347-0300

James Fleischer, Esq.

Martin Meyrowitz, Esq.

Silver, Freedman & Taff, L.L.P.

1700 Wisconsin Avenue, N.W.

Washington, D.C. 20007

(202) 295-4500

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. ¨

CALCULATION OF REGISTRATION FEE

Title Of Each Class Of

Securities To Be Registered

Amount to be

Registered (1) (2)

Proposed
Maximum
Offering Price

Per Security (3)

Proposed Maximum
Aggregate Offering
Price (3)

Amount Of
Registration Fee

Common Stock, par value $0.01

2,000,000 shares

15.00

30,000,000.00

3,210.00

(1)	Includes shares of common stock which may be sold by the registrant if the offering is oversubscribed.

(2)	Pursuant to Rule 416 under the Securities Act of 1933, as amended, this registration statement includes any additional securities that may be offered or issued in connection with any stock split, stock dividend or similar transaction.

(3)	Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457 under the Securities Act of 1933, as amended.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS DATED , 2006, SUBJECT TO COMPLETION

1,786,000 Shares

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

Common Stock

We are offering 1,786,000 shares of our common stock. Prior to this offering there has been no public market for our common stock. It is currently estimated that the initial public offering price of our common stock will be between $ and $ per share. See “Underwriting” on page 95 for a discussion of the factors considered in determining the public offering price. The market price of the shares after the offering may be higher or lower than the public offering price.

We are offering the shares on a best efforts basis through the underwriter named below. We may sell up to an additional 214,000 shares through the underwriter if the offering is oversubscribed. Because the public offering is on a best efforts basis, we will not require the underwriter to sell any minimum number or dollar amount of shares, but the underwriter will use its best efforts to sell all of the shares being offered. The offering is not contingent upon the occurrence of any event or the sale of a minimum or maximum number of shares.

We have applied to have our common stock listed on The Nasdaq Capital Market under the symbol “SONA”.

Investing in our common stock involves risks. Please refer to the section titled “ Risk Factors ” beginning on page 8 of this prospectus.


	Per Share	Total
Public offering price	$	$
Underwriting commissions	$	$
Proceeds to us, before expenses	$	$

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

These securities are not savings accounts, deposits or other obligations of any bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.

The underwriter expects to deliver the shares to purchasers on or about , 2006, subject to customary closing conditions.

FIG PARTNERS [LOGO]

The date of this prospectus is , 2006.

LOGO

[INSIDE FRONT COVER PAGE.]

TABLE OF CONTENTS


		Page
SUMMARY		1
RISK FACTORS		8
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		18
USE OF PROCEEDS		19
PRICE RANGE OF OUR COMMON STOCK AND DIVIDENDS		20
CAPITALIZATION		21
DILUTION		22
SELECTED CONSOLIDATED FINANCIAL DATA		24
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		27
BUSINESS		54
THE MERGER		66
MANAGEMENT		71
PRINCIPAL STOCKHOLDERS		81
SUPERVISION AND REGULATION		83
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY		92
UNDERWRITING		95
SHARES ELIGIBLE FOR FUTURE SALE		97
LEGAL MATTERS		98
EXPERTS		98
WHERE YOU CAN FIND MORE INFORMATION		98
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

You should rely only on the information contained in this prospectus. We have not and the underwriter has not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriter is not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

In this prospectus we rely on and refer to information and statistics regarding the banking industry and the Virginia market. We obtained this market data from independent publications or other publicly available information. Although we believe these sources are reliable, we have not independently verified and do not guarantee the accuracy and completeness of this information.

No action is being taken in any jurisdiction outside the United States to permit a public offering of the common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to those jurisdictions.

Unless the context indicates otherwise, all references in this prospectus to “SNBV,” “we,” “us” and “our” refer to Southern National Bancorp of Virginia, Inc. Our wholly-owned subsidiary, Sonabank, National Association, is referred to herein as “Sonabank” or the “Bank.” References to “1 ^st Service” herein refer to 1 ^st Service Bank. Unless otherwise expressly stated or the context otherwise requires, all information contained in this prospectus assumes that the 214,000 additional shares available for sale if there is an oversubscription are not sold.

SUMMARY

This summary highlights selected information contained elsewhere in this prospectus including a description of the material terms of the offering, and may not contain all of the information that you should consider before investing in our common stock. To understand this offering fully, you should carefully read the entire prospectus, including the sections entitled “Risk Factors” beginning on page 8, and “Management’s Discussion And Analysis Of Financial Condition And Results Of Operations” beginning on page 27, together with our consolidated financial statements and the related notes, before making an investment decision.

Southern National Bancorp of Virginia, Inc.

We are a bank holding company headquartered in Charlottesville, Virginia, serving the banking and financial needs of the Charlottesville, Clifton Forge and Northern Virginia market areas. We operate two full service banking offices and three loan production offices through our wholly-owned bank subsidiary, Sonabank, National Association. In July 2006, we signed a definitive agreement and plan of merger (the merger agreement) where 1 ^st Service Bank, a federal savings bank located in Fairfax County, Virginia, will merge with and into Sonabank. Upon the closing of the merger agreement, we will acquire the three branch banking offices operated by 1 ^st Service. The offering is not contingent upon the closing of the merger and the merger is not contingent upon the sale of any shares in this offering.

We offer a wide range of commercial banking services. Our lending focuses upon loans secured primarily by commercial real estate, single family residential construction projects, single family real estate and other types of secured and unsecured commercial loans to many different types of small and medium-sized businesses and individuals for a variety of purposes. We also invest in real estate-related securities, including collateralized mortgage obligations and mortgage backed securities. Our principal sources of funds for loans and investing in securities are deposits and, to a lesser extent, borrowings. We offer a wide range of deposit products, including checking (NOW), savings, money market accounts and certificates of deposit. We currently obtain a substantial portion of our deposits from investment banking firms that offer them to their clients. We expect to increase our local in-market deposit base as our branch network matures and expands. We actively pursue business relationships by utilizing the business contacts of our directors, senior management and local bank officers, thereby capitalizing on our knowledge of our local market areas.

From June 30, 2005, only approximately ten weeks after the date Sonabank obtained its national bank charter, to June 30, 2006, we have achieved strong growth. Specifically, during this period we have:

•

increased our total assets from $45.3 million to $145.6 million;

•

increased our total deposits from $8.1 million to $104.4 million;

•

increased our total net loans from $12.7 million to $91.0 million;

•

expanded our branch network to two banking offices with the acquisition of the $42.5 million in deposits Clifton Forge, Virginia, branch in December 2005; and

•

entered into the merger agreement to acquire the $124.4 million in assets, 1 ^st Service in June, 2006. We anticipate that the 1 ^st Service merger will close late in the fourth quarter of 2006, subject to regulatory approval and the approval of 1 ^st Service’s stockholders.

Our historical financial results reflect the development of Sonabank in its early stages, primarily in connection with initial start-up costs and the raising and retention of capital to fund our planned growth. Because of this, we were not profitable in our first year of operation, which began in mid-April 2005 and ended on December 31, 2005. However, we did record net income of $25,721 for the three months ended December 31, 2005 and net income of $321,289 for the six months ended June 30, 2006.

Market Areas and Growth Strategy

We conduct business principally through the two banking offices (each of which have an automated teller machine) in Charlottesville and Clifton Forge, Virginia and the three loan production offices of Sonabank in Albemarle and Fauquier Counties, and Fredericksburg, Virginia, and focus primarily on the small to medium-sized businesses in these market areas.

On July 11, 2006, we signed the merger agreement to acquire 1 ^st Service Bank, a federal savings bank that provides banking services to the residents of Fairfax County, and, to a lesser extent, of the surrounding areas in Northern Virginia and Southern Maryland.

Currently our primary market areas are in Charlottesville and Clifton Forge, Virginia. Based upon data available on the FDIC website as of June 30, 2005, Sonabank’s total deposits in the Charlottesville Metropolitan Statistical Area (MSA) ranked 10 ^th among 13 financial institutions, and represented approximately 0.37% of the total deposits in that MSA. That same data showed that Sonabank’s deposits in Clifton Forge ranked first among five financial institutions and represented approximately 41.0% of the total deposits there. The merger of 1 ^st Service with and into Sonabank will significantly increase our deposits from Northern Virginia. Based on data available on the FDIC website as of June 30, 2005, 1 ^st Service ranked 25 ^th among 33 financial institutions in the Washington, D.C. MSA, and represented approximately 0.24% of the total deposits in that MSA.

We primarily market our products and services to small and medium-sized businesses, professional real estate developers and investors, and to retail consumers. We have developed a strategy that focuses on providing superior service through our employees, who are relationship-oriented and committed to their respective communities. Through this strategy we intend to grow our business, expand our customer base and improve profitability. The key elements of our strategy are:

•

Grow in the Metropolitan Areas of Charlottesville and Northern Virginia. We seek to increase our presence in our primary markets in the Charlottesville and Northern Virginia metropolitan areas through the opening of new branches in attractive high-growth metropolitan locations and possibly through additional branch or bank acquisitions. We closed the purchase of our Clifton Forge, Virginia branch in December 2005 where we acquired $42.5 million in deposits, $7.1 million in loans and $2.4 million in retail reverse repurchase agreements, as well as the branch banking center. We expect to obtain approximately $101.5 million in deposits, $118.6 million in loans and $14.0 million in borrowings when the merger with 1 ^st Service occurs.

•

Maintain Local Decision-Making and Accountability. We compete with larger national and regional financial institutions by providing superior customer service with experienced, knowledgeable management, localized decision-making capabilities and prompt credit decisions. We believe that our customers want to deal directly with the persons who make the credit decisions.

•

Focus on the Business Owner. It is our goal to be the bank that business owners in our markets turn to first as a result of our prompt personal service and the products and services that we provide. We:

•

have a standing credit committee that meets as often as necessary on a “when needed” basis, to review completed loan applications and that uses the Internet to facilitate our internal communications.

•

offer to our real estate development customers commitments to extend credit upon the occurrence of specified events, such as the purchase of a specified number of developed lots.

•

are a Small Business Administration (SBA) approved “Preferred” lender, permitting us to make SBA loan decisions at Sonabank rather than waiting for SBA processing, and we offer a number of different types of SBA loans designed for the small and medium-sized business owner. This product group is complex and “paper intensive,” not well utilized by our competitors and has become an important source of income for the Bank.

•

provide Internet business banking at www.sonabank.com that allows our business customers 24-hour web-based access to their accounts so they can confirm or transfer balances, pay bills, download statements, use our “Web Lockbox” or “Sona Cash Manager.”

•

provide our business customers with “Sona In-House,” a service that utilizes Check 21 technology to permit remote deposits from their business locations and gives them 24 to 48 hour access to those funds.

•

Build a Stable Deposit Base. We will continue to grow a stable deposit base of business and retail customers. To the extent that our asset growth outpaces this local deposit funding source, we will continue to borrow and raise deposits in the national market using deposit intermediaries. At June 30, 2006, the aggregate amount of local core deposits was $60.1 million or 58.3% of our total deposits. These deposits have come from our business and retail customers who also typically maintain transaction accounts at Sonabank.

•

Utilize the strength of our management team. The experience and market knowledge of our management team is one of our greatest strengths and competitive advantages. Our chairman, Georgia S. Derrico, was the founder, chairman of the board and chief executive officer, and our president, R. Roderick Porter, was the president and chief operating officer, of Southern Financial Bancorp, Inc. That $1.5 billion (assets), Nasdaq National Market System-listed bank holding company operated Southern Financial Bank in Warrenton, Virginia, and was acquired by Provident Bankshares, Inc. in April 2004. All of the members of our senior management team previously worked with our chairman and president at Southern Financial Bank which was founded in Fairfax County and subsequently expanded into central and southern Virginia.

•

Maintain High Asset Quality . We consider asset quality to be of primary importance and have taken measures to ensure that, despite the growth in our loan portfolio, we consistently maintain strong asset quality. At June 30, 2006, we had no impaired loans and our non-performing assets as a percentage of total assets were 0% compared to an average of 0.16% for all banks in the Virginia and Washington, D.C. market areas. We also seek to maintain a prudent allowance for loan losses. The ratio of our allowance for loan losses to total loans as of June 30, 2006 was 1.4% compared to an average of 0.89% for all banks in the Virginia and Washington, D.C. market areas.

•

Utilize Our Foundation for Growth. Based on our management’s depth of experience, we believe we will be able to take advantage of the economies of scale typically enjoyed by larger organizations as we expand our operations. We believe the investments we have made in our data processing, staff and branch network will be able to support a much larger asset base. Any additional growth, however, will be controlled to minimize the risk and to maintain strong capital ratios. We will continue to review branch and bank acquisition situations on an opportunistic basis and will pursue such acquisitions if they represent the most efficient use of our capital under the circumstances. We believe that the net proceeds raised in this offering will assist us in implementing our growth strategies by providing the capital necessary to support future loan production and asset growth. In addition, the increase in the float of our common stock and the listing of our shares on the Nasdaq Capital Market will allow us to use our shares as “currency” for the possible acquisition of other branch offices or financial institutions, should we desire to do so.

Acquisition of 1 ^st Service

1 ^st Service is a federally chartered stock savings bank that operates three branch offices in Fairfax County, Virginia. As of June 30, 2006, 1 ^st Service had approximately $124.4 million in assets, $101.5 million in deposits and $7.6 million in stockholders’ equity. 1 ^st Service offers retail deposit products, originates commercial real estate, residential construction and consumer loans. 1 ^st Service operated a residential mortgage banking division which began to incur losses in late 2005. This division was terminated in the second quarter of 2006 and

1 ^st Service recorded all losses relating thereto in that period. We will pay a purchase price of 676,000 shares of our common stock (valued at $12.50 per share) and $4.6 million in cash for the acquisition. See “The Merger” for more detail about this transaction. We intend to file our required regulatory applications in August, 2006. We expect to complete this acquisition late in the fourth quarter of 2006.

The 1 ^st Service acquisition will allow us to establish a significant presence in Fairfax County, Virginia, which has the second highest median family income levels of any county in the United States according to the 2000 U.S. Census. This market will provide us access to a large number of small to medium-sized businesses who may not be receiving the service and products they require from the large national and regional financial institutions located there. We intend to re-focus 1 ^st Service’s lending from the home mortgage market to our business banking and retail model.

Corporate Information

SNBV’s headquarters and Sonabank’s home office is located at 1770 Timberwood Boulevard, Suite 100, Charlottesville, Virginia 22911 and our telephone number there is (434) 973-5242. Our executive offices are located at 1002 Wisconsin Avenue, N.W., Washington, D.C. 20007, and our telephone number at that address is (202) 464-1130. We maintain a website at www.sonabank.com . Information on this website is not incorporated by reference and is not a part of this prospectus.

The Offering

Common stock offered ⁽¹⁾

1,786,000 shares

Common stock to be outstanding after this offering ⁽²⁾

5,286,000 shares

Use of proceeds

We expect to use the net proceeds of this offering to support our internal asset growth as well as the asset growth expected to result from the three branches to be acquired in the merger with 1 ^st Service. We will use the remaining net proceeds for general corporate purposes, which may include, among other things, our working capital needs. We may also use a portion of the net proceeds to finance future bank or branch acquisitions, though we have no present plans in that regard. See “Use Of Proceeds” on page 9.

Risk factors

See “Risk Factors” beginning on page 8 and other information included in this prospectus for a discussion of factors you should consider carefully before deciding to invest in our common stock.

Dividend policy

We have never paid a dividend and do not currently intend to pay any cash dividends on our common stock. We anticipate that, for the foreseeable future, all of our earnings, if any, will be used for working capital, to support our operations and to finance the growth and development of our business. Any future determination relating to dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including our future earnings, capital requirements, financial condition, future prospects, regulatory restrictions and other factors that our board of directors may deem relevant.

The Nasdaq Capital Market symbol

We have applied to have our common stock listed on the Nasdaq Capital Market under the symbol “SONA”.

⁽¹⁾	The number of our shares offered assumes that the offering is not oversubscribed and we do not offer or sell the additional 214,000 shares we have reserved for this offering. If this offering is oversubscribed, we will issue and sell up to an additional 214,000 shares.

⁽²⁾

The number of shares outstanding after this offering is based on the number of shares outstanding as of June 30, 2006, assumes that the offering is fully subscribed at 1,786,000 shares, but excludes shares to be issued in the merger with 1 ^st Service, 164,750 shares issuable upon the exercise of stock options, and 75,000 shares issuable upon the exercise of warrants outstanding as of June 30, 2006, both at an exercise price of $10.00 per share, 110,250 shares, as of June 30, 2006, that we may issue under our 2004 Stock Option Plan (the Option Plan), and up to 214,000 shares that may be issued if this offering is oversubscribed (see note 1, above).

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

SUMMARY CONSOLIDATED FINANCIAL DATA

Our summary consolidated financial data is presented below as of and for the six months ended June 30, 2006 and as of and for the period from inception at April 14, 2005 through the year ended December 31, 2005. The summary consolidated financial data presented below as of December 31, 2005 and for the period ended December 31, 2005, are derived from our audited financial statements and related notes included in this prospectus and should be read in conjunction with the consolidated financial statements and related notes, along with “Management’s Discussion And Analysis Of Financial Condition And Results Of Operations” on page 27. Our summary consolidated financial data as of and for the six months ended June 30, 2006 have not been audited but, in the opinion of our management, contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly our financial position and results of operations for such periods in accordance with accounting principles generally accepted in the United States of America (GAAP). The summary consolidated financial data for 1 ^st Service is presented below as of and for the six months ended June 30, 2006, which has not been audited but, in the opinion of management of 1 ^st Service, contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly 1 ^st Service’s financial position and results of operations for such periods under GAAP. The consolidated unaudited pro forma financial data set forth below as of and for the six months ended June 30, 2006 and as of and for the period from inception at April 14, 2005 through the year ended December 31, 2005 have been derived from our unaudited pro forma combined condensed consolidated financial statements included in this prospectus beginning on page F- 4. Our results for the six months ended June 30, 2006 are not necessarily indicative of our results of operations that may be expected for the year ending December 31, 2006.


	As of and for the Period Ended June 30,											As of and for the Period from Inception at April 14, 2005 through the Year Ended December 31, 2005
	SNBV 2006 Actual		1st Service Bank 2006 Actual			Adjustments (1)			2006 Pro Forma (1)			SNBV 2005 Actual			2005 Pro Forma (2)
	(Dollar amounts in thousands, except per share amounts)
SUMMARY CONSOLIDATED FINANCIAL DATA
Selected Balance Sheet Data:
Total Assets	$	145,561	$	124,410		$	(42,052	)	$	227,919		$	122,908			NA
Earning Assets		138,975		120,050			(51,799	)		207,226			115,081			NA
Loans, net of unearned income		92,363		118,652			(51,319	)		159,696			75,031			NA
Securities (3)		46,093		905						46,998			39,994			NA
Total deposits		104,408		101,483			(23,000	)		182,891			77,263			NA
Borrowings (4)		8,110		14,000			(22,110	)		—			12,406			NA
Stockholders’ equity		32,586		7,634			816			41,036			32,313			NA

Selected Results of Operations Data:
Interest income	$	4,448	$	4,004					$	8,452		$	2,395		$	8,901
Interest expense		1,843		2,194						4,037			605			3,563
Net interest income		2,605		1,810						4,415			1,790			5,338
Provision for loan losses		286		64						350			1,020			1,248
Net interest income after provision for loan losses		2,319		1,746						4,065			770			4,090
Noninterest income		119		240						359			51			1,422
Noninterest expense		2,117		2,901			180			5,198			3,077			7,931
Income (loss) before provision for income taxes		321		(915	)		(180	)		(774	)		(2,256	)		(2,419	)
Provision for income taxes		—		—						—			—			—
Net income (loss)	$	321	$	(915	)	$	(180	)	$	(774	)	$	(2,256	)	$	(2,419	)


	As of and for the Period Ended June 30,											As of and for the Period from Inception at April 14, 2005 through the Year Ended December 31, 2005
	SNBV 2006 Actual			1st Service Bank 2006 Actual			Adjustments (1)		2006 Pro Forma (1)			SNBV 2005 Actual			2005 Pro Forma (2)
	(Dollar amounts in thousands, except per share amounts)

Common Share Data:
Basic earnings per share	$	0.09		$	(1.05	)			$	(0.19	)	$	(0.64	)	$	(0.58	)
Diluted earnings per share		0.09			(1.05	)				(0.19	)		(0.64	)		(0.58	)
Book value per share		9.31			8.79					9.83			9.23			NA
Common shares outstanding		3,500,000			868,460		(192,460	)		4,176,000			3,500,000			NA
Basic weighted average shares outstanding		3,500,000			868,460		(192,460	)		4,176,000			3,500,000			NA
Diluted weighted average shares outstanding		3,568,500			868,460		(192,460	)		4,176,000			3,500,000			NA

Selected Financial Ratios and Other Data:(5)
Performance Ratios:
Return on average assets		0.49	%		(1.36	)%				(0.58	)%		(5.35	)%		NA
Return on average equity		2.00	%		(22.86	)%				(3.86	)%		(9.89	)%		NA
Net interest spread (6)		3.10	%		2.17	%				2.63	%		2.31	%		NA
Net interest margin (7)		4.15	%		2.76	%				3.45	%		4.40	%		NA
Efficiency ratio (8)		77.72	%		108.88	%				108.88	%		167.14	%		NA
Average loans to average deposits		93.37	%		125.39	%				109.76	%		118.94	%		NA
Asset Quality Ratios (9):
Provision for loan loss to average loans		0.69	%		0.10	%				0.34	%		5.09	%		NA
Allowance for loan losses to total loans		1.41	%		0.76	%				0.82	%		1.36	%		NA
Capital Ratios:
Tier 1 capital to average assets		22.04	%		5.64	%				11.49	%		35.38	%		NA
Tier 1 capital to risk adjusted assets		27.10	%		9.34	%				17.01	%		32.81	%		NA
Total capital to risk adjusted assets		28.28	%		10.44	%				17.76	%		33.96	%		NA

(1)

The pro forma balance sheet data as of June 30, 2006 reflects the proposed acquisition of 1st Service as if it had occurred on June 30, 2006. The pro forma selected results of operations data for the six months ended June 30, 2006 reflects the proposed acquisition of 1st Service as if it had occurred on January 1, 2005. Does not include the potential exercise of outstanding 1 ^st Service stock options to acquire 61,750 shares of 1 ^st Service common stock. If such options were exercised prior to the closing of the merger, SNBV would issue, in addition to the 676,000 shares of SNBV common stock to be issued in the merger, up to an additional approximately 32,000 shares to 1 ^st Service stockholders in the merger. Please see “Unaudited Pro Forma Combined Condensed Consolidated Financial Statements” beginning on page F-27 for additional information regarding our pro forma data and the other matters to which our pro forma data give effect.

(2)

The pro forma selected results of operations data for the period from inception at April 14, 2005 through December 31, 2005 reflects the proposed acquisition of 1st Service as if it had occurred on January 1, 2005 as it relates to the results of operations of 1st Service. The results of operations for SNBV are for the period from inception at April 14, 2005 through December 31, 2005. Please see “Unaudited Pro Forma Combined Condensed Consolidated Financial Statements” beginning on page F-27 for additional information regarding our pro forma data and other matters to which our pro forma data give effect.

(3)	Consists of investment securities available-for-sale, at fair value, investment securities held-to-maturity, at amortized cost, FHLB and Federal Reserve Bank of Atlanta (FRB) stock, at cost, and federal funds sold.

(4)	Consists of FHLB advances, securities sold under agreements to repurchase, and retail repurchase agreements.

(5)	Interim periods are annualized where applicable.

(6)	Net interest spread is the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities on a tax-equivalent basis.

(7)	Net interest margin is net interest income divided by average interest-earning assets on a tax-equivalent basis.

(8)	Efficiency ratio is noninterest expense divided by the sum of net interest income plus noninterest income.

(9)	We had no nonperforming loans at June 30, 2006 or December 31, 2005. Nonperforming loans consist of nonaccrual loans and accruing loans contractually past due 90 days or more.

RISK FACTORS

An investment in our common stock involves risks. Before making an investment decision, you should carefully consider the risks described below in conjunction with the other information in this prospectus, including our consolidated financial statements and the related notes. The discussion below presents the material risks associated with an investment in our common stock. If any of the following risks actually occurs, our business, financial condition and results of operations could be harmed. In such a case, the trading price of our common stock could decline, and you may lose all or part of your investment. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” on page 18.

Risks Related to Our Business

Our pending acquisition of 1 ^st Service is an important part of our growth strategy. If we do not complete this acquisition that could result in a significant delay in the implementation of our strategy and could significantly slow our growth.

We have signed a merger agreement to acquire 1 ^st Service by means of its merger with and into Sonabank. Assuming that we receive all required regulatory and 1 ^st Service stockholder approvals on a timely basis, we expect to close the merger late in the fourth quarter of 2006. This transaction is more fully described under “The Merger.” The merger agreement is subject to a number of conditions. In addition, each of us and 1 ^st Service has the right to terminate the merger agreement under limited circumstances. If we do not complete this acquisition, the implementation of our business strategy could be substantially delayed and our growth could slow significantly. This, in turn, could have an adverse effect on our expected earnings, financial condition and, possibly, on the market price of our common stock.

If we are unable to integrate 1 ^st Service or the branches or banks we acquire in the future with our existing operations, our business and earnings may be negatively affected.

Our ability to successfully integrate 1 ^st Service, and our ability to successfully integrate future transactions, will depend primarily on our ability to consolidate operations, systems and procedures and to eliminate redundancies and costs. We cannot assure you that we will be able to integrate our operations without encountering difficulties, such as the loss of key employees and customers, the imposition of regulatory restrictions, the disruption of our respective ongoing businesses or possible inconsistencies in standards, controls, procedures and policies. The integration process also may require significant time and attention from our management that would otherwise be directed at developing our existing business. If we have difficulties with this or any future integration, we might not achieve the economic benefits we expect to result from these acquisitions and this would likely hurt our business and our earnings. In addition, we may experience greater than expected costs or difficulties relating to the integration of this institution.

We have a limited operating history, which makes it difficult to predict our future prospects and financial performance.

We have only been operating as the holding company for Sonabank since April 14, 2005. Our financial statements for the year ended December 31, 2005 reflect only eight full months of operations, during which we spent part of our initial capitalization to fund our start-up costs. We have no full historical periods with which to make financial comparisons. Due to this limited operating history, it may be difficult to evaluate our business prospects.

Our recent results may not be indicative of our future results and may not provide guidance to assess the risk of an investment in our common stock.

Our recent financial results reflect the start-up of our operations and certain factors that are not under our control. In the future, we may not have the benefit of several recently favorable factors, such as a rising interest

rate environment. Various factors, such as economic conditions, regulatory and legislative considerations and competition, may also impede or prohibit our ability to expand our market presence. As a small commercial bank, we have different lending risks than larger banks. We provide services to our local communities; thus, our ability to diversify our economic risks is limited by our own local markets and economies. We lend primarily to small to medium-sized businesses, which may expose us to greater lending risks than those faced by banks lending to larger, better-capitalized businesses with longer operating histories. We manage our credit exposure through our loan approval and review procedures and the careful monitoring of loan applicants and of the loans we have made. Due to our limited operating history, our use of historical information in determining and managing credit exposure may not be accurate in assessing our risk.

We rely, in part, on external financing to fund our operations and the unavailability of such funds in the future could adversely affect our growth strategy and prospects.

Our ability to implement our business strategy will depend on our ability to obtain funding for acquisitions, loan originations, working capital and other general corporate purposes.

We do not anticipate that our retail and commercial deposits will be sufficient to meet our funding needs in the foreseeable future. We therefore rely on deposits obtained through intermediaries, Federal Home Loan Bank (FHLB) advances, securities sold under agreements to repurchase and other wholesale funding sources to obtain the funds necessary to implement our growth strategy.

To the extent we are not successful in obtaining such funding, we will be unable to implement our strategy as planned which could have a material adverse effect on our financial condition, results of operations and cash flows.

Our commercial real estate, construction and small business loan portfolios have significant type and geographic concentrations and an economic slowdown or depressed residential real estate market in our primary markets could be detrimental to our financial condition.

A substantial portion of our commercial real estate, construction and business loans are to customers located in Albemarle County and several counties in Northern Virginia, and, upon completion of the 1 ^st Service acquisition will be in Fairfax County, Virginia. We anticipate that our business in Northern Virginia will increase substantially after the merger. In addition, we have loan concentrations in certain types of loans, including land subdivision, lessors of non-residential buildings and new home builders. All of these loans are secured by real estate in these markets.

A deterioration in economic conditions in these markets or in the housing market could have a material adverse effect on the quality of these portfolios and the demand for our products and services. In addition, during periods of economic recession, we may experience a decline in collateral values and an increase in delinquencies. Accordingly, the ultimate collectability of a substantial portion of our commercial loan portfolio is susceptible to economic changes in these markets. A significant downturn in the commercial or residential real estate market in these areas would be detrimental to our financial condition.

In addition, if any of these developments were to result in losses that materially and adversely affected Sonabank’s capital, we and Sonabank might be subject to regulatory restrictions on operations and growth and to a requirement to raise additional capital. See “Supervision and Regulation.”

If the value of real estate in our market areas were to decline materially, a significant portion of our loan portfolio could become under-collateralized, which could have a material adverse effect on our asset quality, capital structure and profitability.

A significant portion of our loan portfolio is comprised of loans secured by either commercial real estate or single family homes which are under construction. At June 30, 2006, approximately 88% of our loans had real

estate as a component of collateral. In the majority of these loans, real estate was the primary collateral component. In some cases, and out of an abundance of caution, we take real estate as security for a loan even when it is not the primary component of collateral. The real estate collateral that provides an alternate source of repayment in the event of default may deteriorate in value during the term of the loan. If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, our earnings and capital could be adversely affected. We are subject to increased lending risks in the form of loan defaults as a result of the high concentration of real estate lending in our loan portfolio should the real estate market in Virginia turn downward.

Our business strategy includes strategic growth, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.

We expect to use the net proceeds from this offering to support the expected asset growth of our existing and acquired branches and for general corporate purposes, which may include, among other things, our working capital needs and investments to support our growth, including the development of additional branch offices. Additionally, we may use a portion of the proceeds from this offering to finance other branch or bank acquisitions, though we have no present plans in that regard. We intend to continue pursuing a growth strategy for our business. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by growing companies such as the continuing need for infrastructure and personnel, the time and costs inherent in integrating a series of different operations and the ongoing expense of acquiring and staffing new banks or branches. We may not be able to expand our presence in our existing markets or successfully enter new markets and any expansion could adversely affect our results of operations. Failure to manage our growth effectively could have a material adverse effect on our business, future prospects, financial condition or results of operations, and could adversely affect our ability to successfully implement our business strategy. Our ability to grow successfully will depend on a variety of factors, including the continued availability of desirable business opportunities, the competitive responses from other financial institutions in our market areas and our ability to manage our growth. There can be no assurance of success or the availability of branch or bank acquisitions in the future.

Our plans for future expansion and bank acquisitions depend, in some instances, on factors beyond our control, and an unsuccessful attempt to achieve growth through acquisitions could have a material adverse effect on our business, financial condition, results of operations and future prospects.

We expect to continue to engage in new branch expansion in the future. We may also seek to acquire other financial institutions, though we have no present plans in that regard. Expansion involves a number of risks, including:

•

the costs associated with establishing new locations and retaining experienced local management;

•

time lags between these activities and the generation of sufficient assets and deposits to support the costs of the expansion;

•

our potential inability to finance an acquisition without diluting the interests of our existing stockholders;

•

the diversion of our management’s attention to the negotiation of transactions, which may detract from their business productivity; and

•

our entry into new markets in which we may lack relationships or experience.

Our continued pace of growth may require us to raise additional capital in the future, and unavailability of additional capital could adversely affect our financial condition and results of operations.

We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. We anticipate our capital resources following this offering will satisfy our capital requirements for the foreseeable future. We may at some point, however, need to raise additional capital to support our continued growth.

Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control, and on our financial performance. Accordingly, we cannot assure you of our ability to raise additional capital if needed on terms acceptable to us. If we cannot raise additional capital when needed, our ability to further expand our operations through internal growth or acquisitions could be materially impaired.

A loss of our executive officers could impair our relationship with our customers and adversely affect our business.

Many community banks attract customers based on the personal relationships that the banks’ officers and customers establish with each other and the confidence that the customers have in the officers. As a relatively new enterprise, we depend on the performance of Ms. Georgia S. Derrico, chairman and chief executive officer, and R. Roderick Porter, who is the president of SNBV and Sonabank, respectively. Ms. Derrico and Mr. Porter are well-known bankers in our market areas, having operated a successful financial institution there for more than 20 years. We do not have an employment agreement with either individual. The loss of the services of either of these officers or their failure to perform management functions in the manner anticipated by our board of directors could have a material adverse effect on our business. Our success will be dependent upon the board’s ability to attract and retain quality personnel, including these officers. We have attempted to reduce our risk by providing Ms. Derrico and Mr. Porter with a change in control agreement that includes a non-competition covenant. See “Management-Change in Control Agreements.”

Market conditions may adversely affect our ability to continue to rely on brokered deposits as a source of funds and cause us to seek alternative sources that may not be on terms favorable to us.

We currently obtain a significant portion of our deposits from investment banking firms and other deposit brokers because our banking offices do not currently attract enough deposits to fund all of the loans that we make. These brokered or “institutional deposits” represent funds that intermediaries gather from third parties and package in order to locate marginally higher interest rates that are available for certificates of deposit with large balances. These deposit holders earn a higher rate on the money that they have invested, and the intermediary receives a fee for its service. Brokered deposits are available in bulk, and while they have been a relatively stable source of funds recently, they tend to gravitate towards the institutions that pay rates higher than what might be the average rate in the local market. At June 30, 2006, 44.2% of our deposits were brokered deposits, having a weighted average interest rate of 3.68%, and 55.8% of our deposits were “local” deposits having a weighted average interest rate of 2.93%.

Brokered deposits are normally more costly than local deposits, as they carry a higher blended interest rate. If market conditions change, deposit intermediaries may transfer deposited funds from us into other investments or demand higher interest rates for new deposits. Moreover, deposit intermediaries operate in a national market and will place funds with banks that offer to pay the highest interest rates. Unlike businesses and individuals who bank with us in our market, there is no basis for a business relationship with these entities that would provide a stable deposit base. There is a higher likelihood that, unlike deposits from our customers, the funds that these intermediaries provide us will not remain with us after maturity.

We could be confronted with the choice of curtailing our lending activity or paying above market interest rates in order to attract and retain deposits. Either action could reduce our net income. Any inability to keep our deposit growth on pace with our growth in our loan portfolio may affect our net income. In this situation, we may need to obtain alternative sources of funding, which may or may not be available to us on terms that we would consider favorable.

Government regulations may adversely affect our ability to continue to rely on brokered deposits as a source of funds and cause us to curtail our mortgage banking business.

Federal Deposit Insurance Corporation (FDIC) regulations could affect our ability to continue to accept brokered deposits. A well-capitalized bank (one that significantly exceeds specified capital ratios) may accept

brokered deposits without restriction. Undercapitalized banks (those that fail to meet minimum regulatory capital requirements) may not accept brokered deposits, and adequately capitalized banks (those that are not well-capitalized or undercapitalized) may only accept such deposits with the consent of the FDIC. Sonabank currently is well-capitalized and, therefore, may accept brokered deposits without restriction. If, as a result of rapid asset growth or unanticipated losses, we ceased to be well-capitalized, the FDIC might not permit us to maintain our desired level of brokered deposits. If we were required to reduce our level of brokered deposits, we also would have to reduce our assets. Any reduction in our assets could have an adverse effect on our revenues.

Our decisions regarding credit risk could be inaccurate and our allowance for loan losses may be inadequate, which would materially and adversely affect our business, financial condition, results of operations and future prospects.

Our loan customers may not repay their loans according to the terms of these loans, and the collateral securing the payment of these loans may be insufficient to assure repayment. We may experience significant loan losses, which could have a material adverse effect on our operating results. Management makes various assumptions and judgments about the collectibility of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. We maintain an allowance for loan losses that we consider adequate to absorb losses inherent in the loan portfolio based on our assessment of the information available. In determining the size of the allowance, we rely on an analysis of our loan portfolio based on volume and types of loans, trends in classification, volume and trends in delinquencies and non-accruals, national and local economic conditions and other pertinent information. At the present time, we have no historical loan loss experience on which to base our allowance. As we expand into new markets, our determination of the size of the allowance could be understated due to our lack of familiarity with market-specific factors.

If our assumptions are wrong, our current allowance may not be sufficient to cover our loan losses, and adjustments may be necessary to allow for different economic conditions or adverse developments in our loan portfolio. Material additions to our allowance would materially decrease our net income. Our allowance for loan losses as of June 30, 2006 was $1.3 million. In addition, federal regulators periodically review our allowance for loan losses and may require us to increase our allowance for loan losses or recognize further loan charge-offs based on judgments different than those of our management. Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory agencies could have a negative effect on our operating results.

Competition from other financial institutions may adversely affect our profitability.

The banking business is highly competitive, and we experience strong competition from many other financial institutions. We compete with commercial banks, credit unions, savings and loan associations, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market funds and other financial institutions which operate in our primary market areas and elsewhere.

We compete with these institutions both in attracting deposits and in making loans. In addition, we must attract our customer base from other existing financial institutions and from new residents. Many of our competitors are well-established and much larger financial institutions. In particular, our market areas are dominated by large national and regional financial institutions. While we believe we can and do successfully compete with these other financial institutions in our markets, we may face a competitive disadvantage as a result of our smaller size and lack of geographic diversification.

Although we compete by concentrating our marketing efforts in our primary market areas with personal contacts, local advertisements, and greater flexibility in working with local customers, we can give no assurance that this strategy will be successful. See “Business—Market Area” and “- Competition” on pages 62 and 64.

Increased competition due to an increased number of new bank formations may adversely affect our business, profitability and financial condition.

Recently, several new banks have been formed in the northern Virginia market area. We believe that the rise of new bank formations in this market area may be due in part to the number of mergers that have occurred over the past five years involving national and regional banks that have acquired many of the larger local financial institutions, leaving senior managers without employment opportunities and investors with large capital gains seeking reinvestment in growth opportunities in the banking sector. These new competitors are likely to cater to the same small business clientele and with similar relationship-based approaches as we do. Moreover, with their initial capital base to deploy, they could seek to rapidly gain market share by under-pricing the current market rates for loans and paying higher rates for deposits. This additional competition could have a material adverse effect on our business, profitability or financial condition.

Our ability to pay dividends is limited and we may be unable to pay future dividends.

We have never paid cash dividends in the past and do not expect to pay any cash dividends in the foreseeable future. The holders of our common stock are entitled to receive dividends when and if declared by our Board of Directors out of funds legally available therefor. As part of our consideration whether to pay cash dividends, we intend to retain adequate funds from future earnings to support the development and growth of our business. In addition, our ability to pay dividends is restricted by federal policies and regulations. It is the policy of the Board of Governors of the Federal Reserve System (Federal Reserve Board) that bank holding companies should pay cash dividends on common stock only out of net income available over the past year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. Further, our principal source of funds to pay dividends is cash dividends that we receive from Sonabank. The payment of dividends by our subsidiary bank to us is subject to restrictions imposed by federal banking laws, regulations and authorities. See “Price Range of Our Common Stock and Dividends” on page 20 and “Supervision and Regulation” on page 83.

Our directors and executive officers own a significant portion of our common stock and can exert some influence over our business and corporate affairs.

Our directors and executive officers, as a group, beneficially owned approximately 13.95% of our outstanding common stock (including exerciseable options and warrants) as of July 31, 2006. As a result of their ownership, the directors and executive officers will have the ability, by voting their shares in concert, to influence the outcome of all matters submitted to our stockholders for approval, including the election of directors.

We rely on information system technology from third party service providers, and we may not be able to obtain substitute providers on terms that are as favorable if our relationships with our existing service providers are interrupted.

We rely on third party service providers for much of our information technology systems, including customer relationship management, general ledger, deposit, servicing and loan origination systems. Any failure or interruption or breach in security of these systems could result in failures or interruptions in our customer relationship management, general ledger, deposit, servicing and/or loan origination systems. We cannot assure you that such failures or interruptions will not occur or, if they do occur, that they will adequately addressed by us or the third parties on which we rely. The occurrence of any failures or interruptions could have a material adverse effect on our financial condition, results of operations and cash flows. If any of these third party service providers experience financial, operational or technological difficulties, or if there is any other disruption in our relationships with them, we may be required to locate alternative sources of such services, and we cannot assure you that we could negotiate terms that are as favorable to us, or could obtain services with similar functionality as found in our existing systems without the need to expend substantial resources, if at all.

Anti-takeover provisions of our Articles of Incorporation and Bylaws could delay or prevent a takeover of us by a third party.

Certain provisions of our amended Articles of Incorporation and amended and restated Bylaws may be deemed to have the effect of making more difficult an acquisition of control of our company in a transaction not approved by our board of directors. Our amended Articles of Incorporation authorize the issuance of “blank check” preferred stock with such designations, rights and preferences as may be determined from time to time by our board of directors. Accordingly, our board of directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of common stock. In the event of such issuance, the preferred stock could also be used, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company. Although we do not currently intend to issue any shares of preferred stock, we may issue such shares in the future.

Our amended Articles of Incorporation also provide that our board of directors will be divided into three classes serving staggered three-year terms and that a director may only be removed for cause. These provisions could enable a minority of our stockholders to prevent the removal of a director sought to be removed by a majority of the stockholders and may tend to enhance management’s ability to retain control over our affairs and to preserve the director’s present position on the board.

The ability of our stockholders to act by written consent or call special meetings of stockholders is subject to restrictions. This reduces our stockholders’ ability to initiate or effect corporate actions independently of the board of directors.

Risks Related to Our Industry

Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance.

The majority of our assets and liabilities are monetary in nature and subject us to significant risk from changes in interest rates. Like most financial institutions, changes in interest rates can impact our net interest income as well as the valuation of our assets and liabilities. Based on our analysis of the interest rate sensitivity of our assets, an increase in the general level of interest rates may negatively affect the market value of the portfolio equity, but will positively affect our net interest income since most of our assets have floating rates of interest that adjust fairly quickly to changes in market rates of interest. In view of the historically low rates of return on savings, loans and investments that currently prevail, it is quite possible that significant changes in interest rates may take place in the future, although we cannot predict the nature or magnitude of such changes or how such changes may affect our business.

Additionally, an increase in interest rates may, among other things, reduce the demand for loans and our ability to originate loans. A decrease in the general level of interest rates may affect us through, among other things, increased prepayments on our loan and mortgage-backed securities portfolios and increased competition for deposits. Accordingly, changes in the level of market interest rates affect our net yield on interest-earning assets, loan origination volume, loan and mortgage-backed securities portfolios, and our overall results.

Our profitability is dependent to a large extent on our net interest income. Net interest income is the difference between:

•

interest income on interest-earning assets, such as loans and investment securities; and

•

interest expense on interest-bearing liabilities, such as deposits.

Fluctuations in interest rates are not predictable or controllable. Changes in interest rates can have differing effects on various aspects of our business, particularly on our net interest income and the pricing of our loans. In particular, changes in market interest rates, changes in the relationships between short-term and long-term market

interest rates, or changes in the relationships between different interest rate indices, can affect the interest rates charged on interest-earning assets differently than the interest rates paid on interest-bearing liabilities. This difference could result in an increase in interest expense relative to interest income and therefore reduce our net interest income.

Our profitability depends significantly on economic conditions in our market area.

Our success depends to a large degree on the general economic conditions in the Charlottesville, Virginia and northern Virginia market areas. The local economic conditions in both of these areas have a significant impact on the loans that we make to our borrowers, the ability of our borrowers to repay these loans, and the value of the collateral securing these loans. A significant decline in general economic conditions caused by inflation, recession, unemployment or other factors beyond our control would impact these local economic conditions and could negatively affect our financial condition and performance.

In recent years, there has been a proliferation of government contracting, technology and communication businesses in northern Virginia. The last recession in those industries had a significant adverse impact on a number of those businesses. While we do not have significant credit exposure to these businesses, the recession in these industries could have a negative impact on local economic conditions and real estate collateral values generally, which could negatively affect our profitability.

We are subject to extensive regulation that could limit or restrict our activities and impose financial requirements or limitations on the conduct of our business, which limitations or restrictions could adversely affect our profitability.

We are primarily regulated by the Federal Reserve Board by virtue of the fact that we are a registered bank holding company. Our subsidiary bank is primarily regulated by the Office of the Comptroller of the Currency (the OCC). The process of complying with Federal Reserve Board and OCC regulations is costly to us and may limit our growth and restrict certain of our activities, including payment of dividends, mergers and acquisitions, investments, loans and locations of our offices. We are also subject to capital requirements of our regulators. Violations of various laws or regulations, even if unintentional, may result in significant fines or other penalties, including restrictions on branching or bank acquisitions. Recently, banks generally have faced increased regulatory sanctions and scrutiny particularly with respect to the USA Patriot Act and other statutes relating to anti-money laundering compliance and customer privacy.

The laws and regulations applicable to the banking industry could change at any time, and we cannot predict the effects of these changes on our business and profitability. Because government regulation greatly affects the business and financial results of all commercial banks and bank holding companies, our cost of compliance could adversely affect our ability to operate profitably.

Upon completion of this offering, we will be a public company and, for the first time in our history, the reporting requirements of the Securities Exchange Act of 1934, as amended (the 1934 Act), the Sarbanes-Oxley Act of 2002 (SOX), and the related rules and regulations promulgated by the Securities and Exchange Commission (SEC) and Nasdaq will apply to our operations. These laws and regulations will increase the scope, complexity and cost of corporate governance, reporting and disclosure practices. Despite our conducting business in a highly regulated environment, these laws and regulations have different requirements for compliance than we have previously experienced. Our expenses related to services rendered by our accountants, legal counsel and consultants will increase in order to ensure compliance with these laws and regulations that we will be subject to as a public company. In addition, it is possible that the sudden application of these requirements to our business will result in some policy and procedure adjustments in and strain our management resources.

To date, we have not conducted a comprehensive review and confirmation of the adequacy of our existing systems and controls as will be required under Section 404 of SOX, and will not do so until after the completion of this offering. We may discover deficiencies in existing systems and controls. If that is the case, we intend to

take the necessary steps to correct any deficiencies, and these steps may be costly to us and may strain our management resources. Our inability to comply with SOX and subsequent public disclosure of that fact may result in a decline in the market price for our common stock.

Changes in monetary policies may have an adverse effect on our business.

Our results of operations are affected by policies of monetary authorities, particularly the Federal Reserve Board. Actions by monetary and fiscal authorities, including the Federal Reserve Board, could have an adverse effect on our deposit levels, loan demand or business and earnings. See “Supervision and Regulation” on page 83.

Risks Related to This Offering

There has been no prior active market for our common stock and our stock price may trade below the public offering price.

Prior to this offering, there has been no public market for our common stock. Our offering price was set principally by the judgment of, and through negotiations with, our underwriter. Our offering price is substantially higher than the net book value per share of our outstanding common stock and is higher than the value we set for it in the merger agreement. The price per share at which we sell our common stock in this offering may be more or less than the recent price at which our common stock may have been sold by existing stockholders in private transactions. (We are not aware of any such transactions, which may occur without our knowledge, from time to time.) If the offering price is less than the recent price at which our common stock may have been sold by existing stockholders in private transactions, some purchasers in the stock offering may be inclined to immediately sell shares of common stock to attempt to realize a profit. Any sales, depending on the volume and timing, could cause the market price of our common stock to decline. Additionally, because stock prices generally fluctuate over time, there is no assurance purchasers of common stock in this offering will be able to sell shares after the offering at a price equal to or greater than the actual purchase price. Purchasers should consider these possibilities in determining whether to purchase shares of common stock and the timing of any sale of shares of common stock.

There will be immediate and substantial dilution of the book value of your shares of our common stock and you may suffer future dilution of your share ownership due to the issuance of additional shares of our common stock in the future.

Purchasers in this offering will experience immediate dilution in the net tangible book value of our common stock from the assumed offering price of $14.00 per share. To the extent we raise additional capital by issuing equity securities in the future, our stockholders may experience additional dilution. Our board of directors may determine, from time to time, a need to obtain additional capital through the issuance of additional shares of common stock or other securities, which may be exchangeable for or convertible into shares of our common stock. We may issue additional securities at prices or on terms less favorable than or equal to the public offering price and terms of this offering. Preemptive rights are not available to the holders of our common stock; therefore, you may not have the opportunity to participate in future offerings of our common stock. Additional dilution may also occur upon the exercise of warrants previously granted to the organizers of Sonabank and of options granted by us under the Option Plan. See “Management—Executive Compensation” on page 76.

There is not a minimum number of shares that we must sell in order to complete the offering, so the actual number of shares we sell may not result in a significant increase in our capital.

The terms of the offering do not include any minimum number of shares which we must sell in order to complete the offering. Also, though FIG Partners, LLC (FIG Partners) is acting as our underwriter in the offering, it is not obligated to purchase any shares that are not sold to the public, and it is not required to sell any specific number or amount of shares for us. In other words, we may sell any number of shares up to the number being

offered, and the actual number of shares we sell may be small relative to the number we are offering. If relatively few shares are sold, then the offering will not result in a significant increase in our capital and that could have the effect of restricting our growth.

We cannot assure you that an active and liquid public trading market will develop in the future.

If an active trading market does not develop or continue after this offering, you may not be able to resell your shares at or above the price at which these shares are being offered to the public. We have applied to list our common stock for quotation on The Nasdaq Capital Market under the symbol “SONA.” The Nasdaq Capital Market prescribes continuing eligibility requirements for listed companies. If we are not able to continue to satisfy these requirements, our stock may be delisted. Moreover, an active public market may not develop or be sustained after the offering. A public trading market, which has the desired characteristics of depth, liquidity and orderliness, depends upon the presence in the marketplace of willing buyers and sellers of our common stock at any given time. The presence of willing buyers and sellers is dependent upon the individual decisions of investors over which neither we nor any market maker has any control. If an active trading market for our common stock does not develop, it may be difficult for you to sell your shares of common stock.

The market price of our common stock will fluctuate and could fluctuate significantly, causing our common stock to trade at prices below the public offering price.

If a market develops for our common stock after the offering, the market price of our common stock may experience significant volatility. The price of our common stock may be affected by factors, including the depth and liquidity of the market for our common stock, investor perception of our financial strength, conditions in the banking industry such as credit quality and monetary policies, and general economic and market conditions. Our quarterly operating results, changes in analysts’ earnings estimates, changes in general conditions in the economy or financial markets or other developments affecting us could cause the market price of our common stock to fluctuate substantially. In addition, from time to time the stock market experiences extreme price and volume fluctuations. This volatility may significantly affect the market price of our common stock for reasons unrelated to our operating performance.

Our profitability could be adversely affected if we are unable to promptly deploy the capital raised in the offering.

We still have not fully deployed the capital we raised in our private placement to capitalize Sonabank and we may not be able to immediately deploy all of the capital raised in the offering. We presently intend to invest the offering proceeds in short-term investment grade securities until we are able to deploy the proceeds. These investments typically provide lower margins than we generally earn on loans, potentially adversely affecting stockholder returns, including net income per share, return on assets and return on equity.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of our statements contained in this prospectus, including matters discussed under the caption “Management’s Discussion And Analysis Of Financial Condition And Results Of Operation” beginning on page 27, are “forward-looking statements.” Forward-looking statements relate to future events or our future financial performance and include statements about the competitiveness of the banking industry, potential regulatory obligations, our acquisitions of branches and other banks, our other business strategies and other statements that are not historical facts. Forward-looking statements are not guarantees of performance or results. When we use words like “may,” “plan,” “contemplate,” “anticipate,” “believe,” “intend,” “continue,” “expect,” “project,” “predict,” “estimate,” “could,” “should,” “would,” “will,” and similar expressions, you should consider them as identifying forward-looking statements, although we may also use other phrasing. These forward-looking statements involve risks and uncertainties and are based on our beliefs and assumptions, and on the information available to us at the time that these disclosures were prepared. These forward-looking statements involve risks and uncertainties and may not be realized due to a variety of factors, including, but not limited to, the following:

•

the risk that our proposed merger with 1 ^st Service may not close, could be delayed, could be subject to unusual conditions to regulatory approvals or if we fail to realize the anticipated benefits of the merger;

•

the effects of future economic conditions, including inflation or a decrease in local real estate values;

•

governmental monetary and fiscal policies, as well as legislative and regulatory changes;

•

the risks of changes in interest rates on the level and composition of deposits, loan demand and the values of loan collateral, securities and interest sensitive assets and liabilities;

•

credit risks;

•

the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market, other mutual funds and other financial institutions operating in our market area and elsewhere, including institutions operating regionally and nationally, together with competitors offering banking products and services by mail, telephone and the Internet;

•

the effect of any mergers, acquisitions or other transactions to which we or our subsidiaries may from time to time be a party, including our ability to successfully integrate any businesses that we acquire;

•

the failure of assumptions underlying the establishment of our allowance for loan losses; and

•

the effects of terrorism and efforts to combat it.

All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this Cautionary Note. Our actual results may differ significantly from those we discuss in these forward-looking statements. For other factors, risks and uncertainties that could cause our actual results to differ materially from estimates and projections contained in these forward-looking statements, please read the “Risk Factors” section of this prospectus beginning on page 8.

USE OF PROCEEDS

Our net proceeds from the sale of 1,786,000 shares of our common stock in this offering, assuming an initial public offering price of $14.00 per share, will be approximately $23.8 million after deducting underwriting commissions and estimated offering expenses payable by us. If the offering is oversubscribed, we intend to sell through the underwriter up to 214,000 additional shares, and if all such shares are sold, we estimate that our total net proceeds will be approximately $26.7 million. Because we have not conditioned the offering on the sale of a minimum number of shares and because the public offering is a best efforts offering and there is no minimum number of shares to be sold, we are presenting this information assuming that we sell 10%, 50% and 100% of the 1,786,000 shares of common stock that we are offering hereby.


	10%		50%		100%
Shares of common stock sold		178,600		893,000		1,786,000
Gross offering proceeds from the offering (1)	$	2,500,000	$	12,500,000	$	25,000,000

Underwriter’s commission (2)	$	87,500	$	437,500	$	875,000
Estimated costs of the offering		300,000		300,000		300,000

Net proceeds to us	$	2,112,500	$	11,762,500	$	23,825,000

(1)	Assumes the sale of 10%, 50% and 100%, as indicated, of the 1,786,000 shares offered at a price of $14.000 per share.

(2)	Represents a 3.5% underwriter’s commission on the gross public offering proceeds above payable to FIG Partners.

We intend to contribute all of the net proceeds of this offering to Sonabank to provide capital to support our internal asset growth as well as the asset growth expected to result from the three branches we will acquire in the merger with 1 ^st Service. We also plan to open a new branch in Warrenton, Virginia, in the fourth quarter of 2006, which should generate additional growth, requiring additional capital.

Sonabank will use any remaining net proceeds for general corporate purposes, which may include, among other things, our working capital needs to support its growth, including development of additional banking offices. Additionally, we may use a portion of the net proceeds to finance branch or bank acquisitions, though we have no present plans in that regard.

Until we use the proceeds, we will invest them temporarily in short-term U.S. government, U.S. government agency or other investment grade securities. The precise amounts and timing of our use of the net proceeds will depend upon market conditions and the availability of other funds, among other factors. From time to time, we may engage in additional capital financings as we determine to be appropriate based upon our needs and prevailing market conditions. These additional capital financings may include the sale of securities other than, or in addition to, common stock.

PRICE RANGE OF OUR COMMON STOCK AND DIVIDENDS

Prior to this offering, our common stock has not been traded on an established public trading market and quotations for our common stock were not reported on any market. As a result, there has been no market known to management for our common stock, and we are not aware of any sales or prices paid for our common stock. If sales transactions have occurred, any such prices would not necessarily reflect the price that would be paid for our common stock in an active market and would not necessarily be indicative of the value of our common stock in this offering. In 2005, we sold 3,500,000 shares of common stock in a private placement to accredited investors at a price of $10.00 per share.

We have applied to have our common stock listed for quotation on The Nasdaq Capital Market under the symbol “SONA,” which we believe will substantially enhance the trading market for our common stock. See “Risk Factors—Risks Related to This Offering—We cannot assure you that an active and liquid public trading market will develop” on page 16. As of June 30, 2006, there were 3,500,000 shares of our common stock outstanding, held by approximately 230 holders of record.

Dividends are paid at the discretion of our board of directors. We have never paid a dividend on our common stock, and our board of directors does not intend to pay a cash dividend for the foreseeable future. The amount and frequency of cash dividends, if any, will be determined by our board of directors after consideration of our earnings, capital requirements, our financial condition and our ability to service any equity or debt obligations senior to our common stock, and will depend on cash dividends paid to us by our subsidiary bank. As a result, our ability to pay future dividends will depend on the earnings of Sonabank, its financial condition and its need for funds.

There are a number of restrictions on our ability to pay cash dividends. It is the policy of the Federal Reserve Board that bank holding companies should pay cash dividends on common stock only out of net income available over the past year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. The policy provides that bank holding companies should not maintain a level of cash dividends that undermines the bank holding company’s ability to serve as a source of financial strength to its banking subsidiary. For a foreseeable period of time, our principal source of cash will be dividends paid by our subsidiary bank with respect to its capital stock. There are certain restrictions on the payment of these dividends imposed by federal banking laws, regulations and authorities. In addition, because Sonabank is a de novo bank, the Bank does not plan to pay us cash dividends for the first three years of its operations. See “Supervision And Regulation—Payment of Dividends” on page 86.

Regulatory authorities could administratively impose limitations on the ability of our subsidiary bank to pay dividends to us if such limits were deemed appropriate to preserve certain capital adequacy requirements or in the interests of “safety and soundness.”

CAPITALIZATION

The following table shows our capitalization as of June 30, 2006. Our capitalization is presented on an actual basis and on a pro forma basis to give effect to the acquisition of 1 ^st Service. This table should be read in conjunction with “Management’s Discussion And Analysis Of Financial Condition And Results Of Operations” on page 27 and the consolidated financial statements and the related notes included in this prospectus.


	June 30, 2006
	(Unaudited)
	Actual			Pro Forma(1)(2)
	(Dollar amounts in thousands, except per share data)
Indebtedness:
Borrowings—short term(3)	$	8,110		$	—

Stockholders’ Equity:
Preferred stock: $0.01 par value; 5,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock: $0.01 par value; 45,000,000 shares authorized; 3,500,000 shares issued and outstanding actual; 4,176,000 shares issued and outstanding as adjusted		35			42
Surplus		34,537			42,980
Accumulated deficit		(1,935	)		(1,935	)
Accumulated other comprehensive loss		(51	)		(51	)

Total stockholders’ equity		32,586			41,036

Total capitalization(4)	$	40,696		$	41,036

Book value per share	$	9.31		$	9.83

Capital Ratios:
Tier 1 capital to risk adjusted assets		27.10	%		17.01	%
Total capital to risk adjusted assets		28.28	%		17.76	%
Tier 1 capital to average assets		22.04	%		11.49	%

(1)	See the “Unaudited Pro Forma Combined Condensed Consolidated Financial Statements” beginning on page F-27 and the accompanying notes for more information on our pro forma financial data.

(2)	As adjusted to give effect for the net proceeds from the assumed issuance of 676,000 shares of common stock resulting from the merger with 1 ^st Service.

(3)	Consists of securities sold under agreements to repurchase, reverse repurchase agreements and FHLB advances.

(4)	Consists of short-term debt and total stockholders’ equity.

DILUTION

If you invest in our common stock in this offering, your ownership interest in SNBV will be diluted to the extent of the difference between the initial public offering price per share and the pro forma net tangible book value per share after this offering. Net tangible book value per share is determined by dividing our tangible net worth (net tangible assets less total liabilities) by the number of shares outstanding. Our net tangible book value as of June 30, 2006 was $29.8 million, or $8.52 per share, based on the number of shares of common stock outstanding at June 30, 2006.

After giving effect to our sale of shares in this offering at the assumed initial public offering price of $14.00 per share, assuming that we do not issue the additional 214,000 shares available for sale if the offering is oversubscribed, and after deducting the underwriting commissions and estimated offering expenses payable by us, our net tangible book value as of June 30, 2006 would have been $53.6 million, or $10.15 per share. This represents an immediate increase in net tangible book value to present shareholders of $1.63 per share and an immediate dilution in net tangible book value of $3.85 per share to new investors purchasing shares in this offering at the initial public offering price. Dilution is determined by subtracting pro forma net tangible book value per share after this offering from the initial offering price of $14.00 per share.

The following table shows the calculation of the amount of dilution that a purchaser of our shares in the offering will incur for each share purchased at an assumed initial public offering price of $14.00 per share after deducting estimated offering costs. Because the offering is to be conducted on a best efforts basis and there is no minimum number of shares that must be sold in order to complete the offering, the table presents this information based on our sale of 10%, 50% and 100% of the shares in the offering. The amount of dilution that purchasers incur will depend on the number of shares we actually sell and the amount of costs we actually incur.


	10%			50%			100%
Net tangible book value per share at June 30, 2006	$	8.52		$	8.52		$	8.52
Increase in net tangible book value per share attributable to new investors	$	0.16		$	0.82		$	1.63
Pro forma net tangible book value after the offering	$	8.68		$	9.34		$	10.15
Assumed initial public offering price	$	14.00		$	14.00		$	14.00
Dilution per share to new investors	$	5.32		$	4.66		$	3.85
Dilution as a percentage of purchase price in the offering		38.00	%		33.29	%		27.50	%

In October 2004, we issued to a group of founding accredited investors in a private placement ten year warrants to purchase up to 75,000 shares of our common stock at an exercise price of $10.00 per share. We have no obligation to register the warrants or any of the shares underlying the warrants for resale in the public market. We have an Option Plan that authorizes the board of directors to issue ten year options to directors, officers and employees of SNBV and its subsidiaries for up to a total of 275,000 shares of common stock. As of June 30, 2006, options for 164,750 shares had been granted under the Option Plan. To the extent any outstanding stock options or warrants are exercised, you will experience further dilution.

The following table summarizes the total number of shares, the total consideration paid to us and the average price paid per share by existing stockholders and new investors purchasing common stock in this offering. This information is presented on a pro forma basis as of June 30, 2006, after giving effect to the sale of the 1,786,000 shares of common stock in this offering at the assumed initial public offering price of $14.00 per share.


	Shares Purchased			Total Consideration				Average Price Per Share(1)
	Number	Percent		Amount(1)		Percent(1)		Average Price Per Share(1)
Shares previously issued	3,500,000	66.2	%	$	35,000,000	58.3	%	$	10.00
Shares issued this offering	1,786,000	33.8			25,000,000	41.7		$	14.00

Total	5,286,000	100.0	%	$	60,000,000	100.0	%

(1)

Before deducting underwriting commissions of $875,000 and estimated offering expenses of approximately $300,000. In addition, this table does not reflect the exercise of any outstanding warrants or stock options. As of June 30, 2006, there were warrants outstanding to purchase up to 75,000 shares of our common stock at an exercise price of $10.00 per share and options outstanding under our Option Plan to purchase a total of 164,750 shares of common stock at an exercise price of $10.00 per share.

SELECTED CONSOLIDATED FINANCIAL DATA

Our selected consolidated financial data is presented below as of and for the periods ended June 30, 2006 and June 30, 2005 and as of and for the period ended December 31, 2005. The selected consolidated financial data presented below as of December 31, 2005 are derived from our audited financial statements and related notes included in this prospectus and should be read in conjunction with the consolidated financial statements and related notes, along with “Management’s Discussion And Analysis Of Financial Condition And Results Of Operations” beginning on page 27. Our selected consolidated financial data as of and for the six months ended June 30, 2006 and as of and for the period from inception at April 14, 2005 to June 30, 2005 have not been audited but, in the opinion of our management, contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly our financial position and results of operations for such periods in accordance with GAAP. The selected consolidated financial data for 1 ^st Service is presented below as of and for the six months ended June 30, 2006, which has not been audited but, in the opinion of management of 1 ^st Service, contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly 1 ^st Service’s financial position and results of operations for such periods under GAAP. The consolidated unaudited pro forma data set forth below as of and for the six months ended June 30, 2006 and as of and for the period from inception at April 14, 2005 through the year ended December 31, 2005 have been derived from our unaudited pro forma combined condensed consolidated financial statements included in this prospectus beginning on page F- 27. Our results for the period ended June 30, 2006 are not necessarily indicative of our results of operations that may be expected for the year ending December 31, 2006.


	As of and for the Period Ended June 30,														As of and for the Period from Inception at April 14, 2005 through the Year Ended December 31, 2005
	SNBV 2006 Actual		1st Service Bank 2006 Actual			Adjustments (1)			2006 Pro Forma (1)			SNBV 2005 Actual			SNBV 2005 Actual			2005 Pro Forma (2)
	(Dollar amounts in thousands, except per share amounts)
Results of Operations:
Interest income	$	4,448	$	4,004					$	8,452		$	315		$	2,395		$	8,901
Interest expense		1,843		2,194						4,037			34			605			3,563

Net interest income		2,605		1,810						4,415			281			1,790			5,338
Provision for loan losses		286		64						350			327			1,020			1,248

Net interest income after provision for loan losses		2,319		1,746						4,065			(46	)		770			4,090
Noninterest income		119		240						359			2			51			1,422
Noninterest expense		2,117		2,901			180			5,198			1,743			3,077			7,931

Income loss before provision for income taxes		321		(915	)		(180	)		(774	)		(1,787	)		(2,256	)		(2,419	)
Provision for income taxes		—		—						—			—			—			—
Net income (loss)	$	321	$	(915	)	$	(180	)	$	(774	)	$	(1,787	)	$	(2,256	)	$	(2,419	)

Common Share Data:
Basic earnings (loss) per share	$	0.09	$	(1.05	)				$	(0.19	)	$	(0.51	)	$	(0.64	)	$	(0.58	)
Diluted earnings (loss) per share		0.09		(1.05	)					(0.19	)		(0.51	)		(0.64	)		(0.58	)
Book value per share		9.31		8.79						9.83			9.37			9.23			NA
Tangible book value per share		8.52		8.79						7.04			9.37			8.37			NA


	As of and for the Period Ended June 30,															As of and for the Period from Inception at April 14, 2005 through the Year Ended December 31, 2005
	SNBV 2006 Actual			1st Service Bank 2006 Actual			Adjustments (1)			2006 Pro Forma (1)			SNBV 2005 Actual			SNBV 2005 Actual			2005 Pro Forma (2)
	(Dollar amounts in thousands, except per share amounts)
Period End Balances:
Total Assets	$	145,561		$	124,410		$	(42,052	)	$	227,919		$	45,399		$	122,908		NA
Earning Assets		138,975			120,050			(51,799	)		207,226			41,041			115,081		NA
Loans, net of unearned income		92,363			118,652			(51,319	)		159,696			13,085			75,031		NA
Securities (3)		46,093			905						46,998			17,478			39,994		NA
Total deposits		104,408			101,483			(23,000	)		182,891			9,091			77,263		NA
Borrowings (4)		8,110			14,000			(22,110	)		—			—			12,406		NA
Stockholders’ equity		32,586			7,634			816			41,036			32,779			32,313		NA
Common shares outstanding		3,500,000			868,460			(192,460	)		4,176,000			3,500,000			3,500,000		NA

Average Balances:
Total Assets	$	133,012		$	135,314		$	(232	)	$	268,093		$	16,807		$	42,166		NA
Earning Assets		126,529			132,127			(286	)		258,370			15,979			40,716		NA
Loans, net of unearned income		84,113			124,558			(284	)		208,387			1,111			20,053		NA
Total deposits		90,086			99,900			(127	)		189,859			2,697			16,859		NA
Borrowings		10,140			26,367			(122	)		36,385			—			2,241		NA
Basic weighted average shares outstanding		3,500,000			868,460			(192,460	)		4,176,000			3,500,000			3,500,000		NA
Diluted weighted average shares outstanding		3,568,500			868,460			(192,460	)		4,176,000			3,500,000			3,500,000		NA

Performance Ratios (5) :
Return on average assets		0.49	%		(1.36	)%					(0.58	)%		(21.44	)%		(5.35	)%	NA
Return on average equity		2.00	%		(22.86	)%					(3.86	)%		(25.91	)%		(9.89	)%	NA
Return on average tangible assets		0.50	%		(1.36	)%					(0.59	)%		(21.44	)%		(5.35	)%	NA
Return on average tangible equity		2.19	%		(22.86	)%					(4.16	)%		(25.91	)%		(9.90	)%	NA
Net interest spread (6)		3.10	%		2.17	%					2.63	%		1.02	%		2.31	%	NA
Net interest margin (7)		4.15	%		2.76	%					3.45	%		3.55	%		4.40	%	NA
Efficiency ratio (8)		77.72	%		108.88	%					108.88	%		615.90	%		167.14	%	NA
Average loans to average deposits		93.37	%		125.39	%					109.76	%		41.19	%		118.94	%	NA

Capital Ratios :
Average equity to average assets		24.36	%		5.97	%					15.10	%		82.75	%		54.08	%	NA
Average tangible equity to average tangible assets		22.68	%		5.97	%					14.16	%		82.75	%		54.06	%	NA
Tier 1 capital to risk adjusted assets		27.10	%		9.34	%					17.01	%		167.25	%		32.81	%	NA
Tier 1 capital to average assets		22.04	%		5.64	%					11.49	%		98.07	%		35.38	%	NA
Total capital to risk adjusted assets		28.28	%		10.44	%					17.76	%		168.49	%		33.96	%	NA

Asset Quality Ratios (5) (9):
Provision for loan loss to average loans		0.69	%		0.10	%					0.34	%		29.45	%		5.09	%	NA
Allowance for loan losses to total loans		1.41	%		0.76	%					0.82	%		2.50	%		1.36	%	NA

(1)

The pro forma balance sheet data as of June 30, 2006 reflect the proposed acquisition of 1st Service as if it had occurred on June 30, 2006. The pro forma selected results of operations data for the six months ended June 30, 2006 reflect the proposed acquisition of 1st Service as if it had occurred on January 1, 2005. Does not include the potential exercise of outstanding 1 ^st Service stock options to acquire 61,750 shares of 1 ^st Service common stock. If such options were exercised prior to the closing of the merger, SNBV would issue, in addition to the 676,000 shares of SNBV common stock to be issued in the merger, up to an additional approximately 32,000 shares to 1 ^st Service stockholders in the merger. Please see “Unaudited Pro Forma Combined Condensed Consolidated Financial Statements” beginning on page F-27 for additional information regarding our pro forma data and the other matters to which our pro forma data give effect.

(2)

(3)	Consists of investment securities available-for-sale, at fair value, investment securities held-to-maturity, at amortized cost FHLB and FRB stock, at cost, and federal funds sold.,

(4)	Consists of FHLB advances, securities sold under agreements to repurchase, and retail repurchase agreements.

(5)	Interim periods are annualized where applicable.

(6)	Net interest spread is the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities on a tax-equivalent basis.

(7)	Net interest margin is net interest income divided by average interest-earning assets on a tax-equivalent basis.

(8)	Efficiency ratio is noninterest expense divided by the sum of net interest income plus noninterest income.

(9)	We had no nonperforming loans at June 30, 2006 or December 31, 2005. Nonperforming loans consist of nonaccrual loans and accruing loans contractually past due 90 days or more.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with “Selected Consolidated Financial Data” on page 24 and our consolidated financial statements and the related notes included in this prospectus. The discussion in this prospectus contains forward-looking statements that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. The cautionary statements made in this prospectus should be read as applying to all related forward-looking statements wherever they appear in this prospectus. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those discussed in this prospectus.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our accounting policies are in accordance with accounting principles generally accepted in the United States and with general practices within the banking industry. Management makes a number of estimates and assumptions relating to reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during periods presented. Different assumptions in the application of these methods or policies could result in material changes in our financial statements. As such, the following policies are considered “critical accounting policies” for us.

Allowance for Loan Losses

The allowance for loan losses is established and maintained at levels management deems adequate to absorb anticipated credit losses from identified and otherwise inherent risks in the portfolio as of the balance sheet date. In assessing the adequacy of the allowance, we review the quality of, and risks in, loans in the portfolio. We also consider such factors as:

•

composition of the loan portfolio;

•

value and adequacy of the collateral;

•

current economic conditions;

•

historical loan loss experience of banks in Virginia with $500.0 million to $5.0 billion in assets; and

•

other risk factors which management believes affect the allowance for loan losses.

An analysis of the credit quality of the loan portfolio and the adequacy of the allowance for loan losses is prepared by Sonabank’s executive credit officer and presented to Sonabank’s board of directors on a quarterly basis. We may determine, based on our analysis, which includes risk factors such as charge-off rates, past dues and loan growth, that our future loan loss provision needs to increase or decrease in order for us to maintain the allowance at a level sufficient to absorb inherent credit losses. If we become aware that any of these factors has materially changed, our estimate of credit losses in the loan portfolio and the related allowance could also change. The allowance consists of specific, general and unallocated components. The specific component relates to loans considered to be impaired. For such loans, a specific reserve is established when the discounted cash flows, collateral value, or observable market price of the impaired loan is lower than the carrying value of that loan. The general component is established for unimpaired loans and its value is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses.

While it is our policy to charge off loans in the current period when a loss is considered probable, there are additional risks of future losses which cannot be quantified precisely or attributed to particular loans or classes of loans. Because these risks include the state of the economy, management’s judgment as to the adequacy of the allowance is necessarily approximate and imprecise.

Carrying Value of Securities

Securities designated as available-for-sale are carried at fair value. However, the unrealized difference between amortized cost and fair value of securities available-for-sale is reported, with unrealized gains or losses, net of deferred taxes, included in accumulated other comprehensive income (loss) in stockholders’ equity. Securities held-to-maturity are carried at amortized cost, as we have the ability, and management has the positive intent, to hold these securities to maturity. Premiums and discounts on securities recognized in interest income using the interest method over the terms of the securities.

Goodwill and Intangible Assets

We use the purchase method of accounting for all business combinations in which we engage. For purchase acquisitions, we record the assets acquired, including identifiable intangible assets, and liabilities assumed at their fair value, which in many instances involves estimates based on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analysis or other valuation techniques. We have adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, which prescribes the accounting for goodwill and intangible assets subsequent to initial recognition. The provisions of SFAS No. 142 discontinue the amortization of goodwill and intangible assets with indefinite lives but require at least an annual impairment review, and more frequently if certain impairment indicators are in evidence. Management last reviewed our intangible assets in December, 2005.

Asset Prepayment Rates

We purchase amortizing investment securities in which the underlying assets are residential mortgage loans subject to prepayments. The actual principal reduction on these assets varies from the expected contractual principal reduction due to principal prepayments resulting from the borrowers’ election to refinance the underlying mortgage based on market and other conditions. The purchase premiums and discounts associated with these assets are amortized or accreted to interest income over the estimated life of the related assets. The estimated life is calculated by projecting future prepayments and the resulting principal cash flows until maturity. Prepayment rate projections utilize actual prepayment speed experience and available market information on like-kind instruments. The prepayment rates form the basis for income recognition of premiums and discounts on the related assets. Changes in prepayment estimates may cause the earnings recognized on these assets to vary over the term that the assets are held, creating volatility in the net interest margin. Prepayment rate assumptions are monitored and updated monthly to reflect actual activity and the most recent market projections.

GENERAL

We commenced operations as the holding company for Sonabank in April 2005 and had our first profitable quarter in the period ended December 31, 2005.

In December 2005, we closed on the purchase of a branch in Clifton Forge where we acquired $42.5 million in deposits, $7.1 million in loans and $2.4 million in retail reverse repurchase agreements as well as the branch banking center.

In July, 2006, we announced a definitive agreement under which 1 ^st Service Bank will merge with Sonabank, N.A. in a stock and cash transaction valued at approximately $13.1 million. The transaction is expected to be completed in the fourth quarter of 2006. On June 30, 2006, 1 ^st Service had assets of $124.4 million, loans of $118.6 million of which $80.4 million were residential mortgages. At such date, 1 ^st Service had deposits of $101.5 million. During the first half of 2006, the 1 ^st Service mortgage department incurred over $377,000 in operating losses through April and 1 ^st Service decided to close that operation in April incurring a loss of $289,557. Also during that period, 1 ^st Service took a one time charge to reflect the amortization of deferred costs of paid-off loans of $285,877.

OVERVIEW

Net income for the six months ended June 30, 2006 was $321,289 compared with a loss of $1.8 million from the period from inception at April 14, to June 30, 2005. Organization costs during the period ending June 30, 2005 amounted to $1.2 million and we recorded a provision for loan losses of $327,000. During the six months ended June 30, 2006, total interest income amounted to $2.6 million as loans grew from $13 million to $92 million compared to the period ended June 30, 2005. For the six months ended June 30, 2006, our provision for loan losses decreased to $286,000, resulting in an allowance of 1.4% of total loans. Noninterest income increased to $118,736 for the six months ended June 30, 2006, mainly due to the increased amount of fees generated from deposit accounts.

As of December 31, 2005, we recorded a net loss for the period from inception at April 14, 2005 through December 31, 2005 of $2.3 million or $(0.64) per share (basic and diluted), primarily due to our organizational costs of $1.2 million.

Total assets increased to $145.0 million at June 30, 2006 from $45.0 million at June 30, 2005 mainly due to growth in loans. Deposits increased from $9.0 million at June 30, 2005 to $104.4 million at June 30, 2006. Of this increase of $100.0 million, $20.2 million were in checking (NOW), money market and savings accounts and $30.0 million were in local certificates of deposits. The remaining $46.1 million were institutional certificates of deposit which we obtain from investment banking firms and other deposit brokers to fund our loan growth which has, to date, outpaced our ability to garner deposits from our market areas.

Total assets at December 31, 2005 were $122.9 million. Net loans were $75.0 million which included $7.1 million of loans acquired with the acquisition of the Clifton Forge branch. The remaining loans were primarily generated by our loan officers in Virginia.

RESULTS OF OPERATIONS

We reported net income for the six month period ended June 30, 2006 of $321,000, or $0.09 per share (basic and diluted) versus a net loss of $1.8 million, or $(0.51) per share (basic and diluted) for the period from inception at April 14, 2005 to June 30, 2005.

The following table summarizes components of income and expense and the changes in those components for the period ended June 30, 2006 as compared to the period from inception at April 14, 2005 to June 30, 2005. Because the 2005 period represented less than six full months of operations, the two periods ending June 30, 2006 and 2005 are not comparable.


	Condensed Consolidated Statements of Income
			Change from the Prior Period ⁽¹⁾
	For the Six Months Ended June 30, 2006		Amount
	(Dollar amounts in thousands)
Interest income	$	4,448	$	4,133
Interest expense		1,843		1,809

Net interest income		2,605		2,324
Provision for loan losses		286		(41	)
Net interest income after provision for loan losses		2,319		2,365
Noninterest income		119		117
Noninterest expense		2,117		374

Income before provision for income taxes		321		2,108

Provision for income taxes		—		—

Net income (loss)	$	321	$	2,108

Footnote on following page

(1)

The “Prior Period” is from inception at April 14, 2005 to June 30, 2005. We believe that because the prior period represented less than half the number of business days and occurred immediately after the commencement of operations of Sonabank, that the comparison is not a meaningful period to period comparison.

We reported net income for the six months ended June 30, 2006 of $321,000 which was an increase of $2.1 million over the period from inception at April 14, 2005 to June 30, 2005. The net loss for the period from inception at April 14, 2005 to June 30, 2005 resulted from the costs incurred to organize Sonabank and the large investment we made in personnel and office space, furniture and equipment to commence and ramp up our business after receiving the national bank charter for Sonabank in April 2005. In contrast, we had net income of $26,000 in the fourth quarter of 2005 after the extraordinary spending to commence operations subsided.

We expect to continue to expand our banking office network and our employee base in 2006 with the integration of 1 ^st Service after the merger. Although growth and increasing the number of offices can increase expenses (such as administrative costs, occupancy, salaries and benefits expenses) before earnings are recorded, we expect that the 1 ^st Service merger will be accretive to earnings not later than the end of the first fiscal quarter after the closing.

Net Interest Income

Our operating results depend primarily on our net interest income, which is the difference between interest and dividend income on interest-earning assets such as loans and investments, and interest expense on interest-bearing liabilities such as deposits and borrowings. Operating results are also affected by the level of our non-interest income, including income or loss from the sale of loans and fees and service charges on deposit accounts, and by the level of our operating expenses, including compensation, premises and equipment, deposit insurance assessments and income taxes.

Net interest income before the provision for loan losses for the six months ended June 30, 2006 was $2.6 million, an increase of 9.27 times the $281,000 for the period from the inception through June 30, 2005. The increase was due to loan originations and securities purchases which resulted in average earning assets of $126.5 million during the period ended June 30, 2006 compared to $16.0 million during the period ended June 30, 2005.

Our yield on total interest-earning assets was 7.09% for the six months ended June 30, 2006 compared to 3.98% for the period ended June 30, 2005. The average yield on loans was 8.20% during the six months ended June 30, 2006, down from 8.35% during the period ended June 30, 2005 while the average yield on investment securities increased to 4.87% during the six months ended June 30, 2006, from 4.52% during the period ended June 30, 2005.

Our net interest margin increased from 3.55% in the period ended June 30, 2005 to 4.15% as cash was used to fund higher yielding loans and investment securities.

In 2005, net interest income was $1.8 million. Total interest income in 2005 was $2.4 million and was generated primarily from interest and fees on loans. A large percentage of our loans are tied to the prime rate. Such loans adjust immediately, or at the beginning of the following month. Other loans are tied to other indices such as the one, two or three year Constant Maturity Treasury rate (CMT). Depending on the index, the rates on those loans tend to lag changes in market interest rates. The average interest rate on our loans was 7.65% for 2005.

The following table details average balances of interest-earning assets and interest-bearing liabilities, the fully taxable equivalent amount of interest earned/paid thereon, and the fully taxable equivalent yield/rate for the six months ended June 30, 2006 and the period from inception at April 14, 2005 to June 30, 2005. Calculations for all periods have been made using daily average balances.

Average Consolidated Balance Sheets and Net Interest

Analysis on a Fully Tax-Equivalent Basis For the Six-Month

Period Ended June 30, 2006 and the Period From Inception

at April 14, 2005 Through June 30, 2005


	2006							2005
	Average Balance			Interest Earned/ Paid		Average Yield/ Rate(1)		Average Balance			Interest Earned/ Paid		Average Yield/ Rate(1)
	(Dollar amounts in thousands)
Assets
Interest-earning assets:
Loans, net of unearned income	$	84,113		$	3,421	8.20	%	$	1,111		$	46	8.35	%
Investment securities		40,223			972	4.87	%		6,738			151	4.52	%
Other earning assets		2,193			55	5.06	%		8,130			118	2.93	%

Total earning assets		126,529			4,448	7.09	%		15,979			315	3.98	%

Allowance for loan losses		(1,153	)						(29	)
Total non-earning assets		7,636							857

Total assets	$	133,012						$	16,807

Liabilities and stockholders’ equity
Interest-bearing liabilities:
Checking (NOW) accounts	$	6,415		$	8	0.25	%	$	54		$	—	0.25	%
Money market accounts		15,904			226	2.87	%		2,173			33	3.03	%
Savings accounts		2,364			6	0.49	%		1			—	0.50	%
Time deposits of $100,000 and over		43,914			997	4.58	%		54			1	2.99	%
Other time deposits		14,476			383	5.33	%		41			1	3.20	%

Total interest-bearing deposits		83,073			1,619	3.93	%		2,323			34	2.96	%
Borrowings		10,140			224	4.45	%		—			—

Total interest-bearing liabilities		93,213			1,843	3.99	%		2,323			34	2.96	%

Noninterest-bearing liabilities:
Demand deposits		7,013							374
Other liabilities		379							202

Total liabilities		100,605							2,899
Stockholders’ equity		32,407							13,908

Total liabilities and stockholders’ equity	$	133,012						$	16,807

Net interest income				$	2,605						$	281

Interest rate spread						3.10	%						1.02	%

Net interest margin						4.15	%						3.55	%

(1)	Annualized.

The following table details daily average balances of interest-earning assets and interest-bearing liabilities, the fully taxable equivalent amount of interest earned/paid thereon, and the fully taxable equivalent yield/rate for the period ended December 31, 2005.

Average Consolidated Balance Sheets

and Net Interest Analysis on a Fully Tax-Equivalent Basis

For the Period From Inception at April 14, 2005 Through

December 31, 2005


	Average Balance			Interest Earned/ Paid		Average Yield/Rate(1)
	(Dollar amounts in thousands)
Assets
Interest-earning assets:
Loans, net of unearned income	$	20,053		$	1,534	7.65	%
Investment securities		14,461			667	4.61	%
Other earning assets		6,202			194	3.13	%

Total earning assets		40,716			2,395	5.88	%

Allowance for loan losses		(345	)
Total non-earning assets		1,795

Total assets	$	42,166

Liabilities and stockholders’ equity
Interest-bearing liabilities:
Checking (NOW) accounts	$	522		$	1	0.26	%
Money market accounts		6,479			200	3.09	%
Savings accounts		184			1	0.51	%
Time deposits of $100,000 and over		6,290			251	3.99	%
Other time deposits		1,214			61	5.02	%

Total interest-bearing deposits		14,689			514	3.50	%

Borrowings		2,241			91	4.06	%

Total interest-bearing liabilities		16,930			605	3.58	%

Noninterest-bearing liabilities:
Demand deposits		2,170
Other liabilities		262
Total liabilities		19,362

Stockholders’ equity		22,804

Total liabilities and stockholders’ equity	$	42,166

Net interest income				$	1,790

Interest rate spread						2.31	%

Net interest margin						4.40	%

(1)	Annualized.

The following table presents information regarding changes in interest income and interest expense for the period indicated for each major category of interest-earning assets and interest-bearing liability which distinguishes between the changes attributable to changes in volume (changes in volume multiplied by old rate) and changes in rates (changes in rates multiplied by old volume). The dollar amount of changes in interest income and interest expense attributable to changes in rate/volume (change in rate multiplied by change in volume) have been allocated between rate and volume variances based on the percentage relationship of such variances to each other.

Change in Interest Income and Interest Expenses on a Tax-Equivalent Basis

For the Six Months Ended June 30, 2006 Compared to the

Period From Inception, April 14, 2005, to June 30, 2005


	Increase (Decrease) in Interest Income and Expense Due to Change in:
	Volume			Rate			Total
	(Dollar amounts in thousands)
Interest-earning assets:
Loans, net of unearned income	$	3,437		$	(62	)	$	3,375
Investment securities		750			71			821
Other earning assets		(86	)		23			(63	)

Total interest-earning assets		2,179			1,954			4,133

Interest-bearing liabilities:
Checking (NOW) accounts		8			—			8
Money market accounts		206			(13	)		193
Savings accounts		6			—			6
Time deposits of $100,000 and over		650			346			996
Other time deposits		229			153			382

Total interest-bearing deposits		1,184			401			1,585
Borrowings		224			—			224

Total interest-bearing liabilities		1,332			477			1,809

Increase in net interest income	$	847		$	1,477		$	2,324

Provisions for Loan Losses

The provision for loan losses is a current charge to earnings made in order to increase the allowance for loan losses to a level deemed appropriate by management based on an evaluation of the loan portfolio, current economic conditions, changes in the nature and volume of lending, historical loan experience and other relevant factors. Our loan loss allowance is calculated by stratifying the loan portfolio by risk classifications and applying risk factors to each category. The risk factors are derived by considering relevant loss factors from 1992 to 1999 of banks headquartered in Virginia, with $500 million to $5.0 billion in assets, as well as applying management’s judgment.

The provisions for loan losses charged to operations for the six months ended June 30, 2006, for the period from inception at April 14, 2005 to June 30, 2005 and for the period from inception at April 14, 2006 to December 31, 2005 were $286,000, $327,000 and $1.0 million, respectively. We have had no charge-offs since the Bank commenced operations on April 14, 2005 through June 30, 2006.

We increased the provision for loan losses in the first six months of 2006 relative to the 2005 period not based on any particular loan, but as a result of the general growth of our loan portfolio, and on general economic

conditions and on a rising interest rate environment which presents a general increase in repayment risk. At June 30, 2006, our loan portfolio had increased by $79.3 million or by 605.87%, compared to the loan portfolio at June 30, 2005.

Noninterest Income

For the six months ended June 30, 2006, noninterest income totaled $119,000, an increase of $117,000, or 585%, over the period from inception at April 14, 2005 to June 30, 2005. Because the period from inception to June 30, 2005 was not a full six month period and was our first period of operations (which involved the commencement of operations and heavy regulatory oversight), we do not believe that the periods are necessarily comparable.

The following table presents the primary components of non-interest income for the six months ended June 30, 2006, for the period from inception at April 14, 2005 to June 30, 2005 and for the period from inception at April 14, 2005 to December 31, 2005.


	Noninterest Income Components
	Periods Ended June 30,				For the Period Ended December 31, 2005 ⁽²⁾
	2006 ⁽¹⁾		2005 ⁽¹⁾		Amount
	(Dollar amounts in thousands)
Service charges and fees on deposit accounts	$	57	$	1	$	18
Other service charges and fees		62		1		33

Total noninterest income	$	119	$	2	$	51

⁽¹⁾	The 2006 period is for the six months ended June 30, 2006, while the 2005 period is from the date of inception at April 14, 2005 to June 30, 2005. We do not believe that the periods are comparable due to the shorter time period and the start up activities that occurred in 2005.

⁽²⁾	The period represented is from the date of inception at April 14, 2005 to December 31, 2005.

Service charges and fees on deposit accounts include account verification, insufficient fund charges, negative daily balance, online bill pay, overdraft protection, stop payment and dormant account fees.

Other service charges and fees include garnishment and levy, check copy, check image, foreign check collection, wire transfer and replacement debit card fees as well as late charges on loans which are billed on payments that do not arrive prior to the end of the applicable grace period.

For the six months ended June 30, 2006, total service charges on deposit accounts were $57,000, an increase of $56,000 or 5,600% over the June 30, 2005 period. The increase in fees is primarily attributable to an increased number of accounts and an increase in the amount of fees collected for our cash management products.

Noninterest Expense

For the six months ended June 30, 2006, noninterest expense increased $374,000, or 21%, to $2.1 million, compared to $1.7 million for the period from inception at April 14, 2005 to June 30, 2005. Total non-interest expense was $3.1 million for the period from inception at April 14, 2005 to December 31, 2005 including organizational costs of $1.2 million. We anticipate additional increases in non-interest expense throughout 2006 and into 2007 as a result of the integration of 1st Service into our operations after the merger closes and our continued growth.

The following table represents the components of noninterest expense for the periods ended June 30, 2006 and 2005 and December 31, 2005.


	Noninterest Expense Components
	Periods Ended June 30,						For the Period Ended December 31, 2005 ⁽²⁾
	2006 ⁽¹⁾		2005 ⁽¹⁾		Percent Change		Amount		Percent
Salaries and benefits	$	1,029	$	343	200.00	%	$	1,079	35.0	%
Occupancy expenses		182		35	420.00			154	5.0
Furniture and equipment expenses		145		24	504.17			135	4.0
Organizational costs		—		1,212	(1,212.00	)		1,212	40.0
Amortization of core deposit intangibles		218		—	218.00			36	1.0
Other operating expense		543		129	320.93			461	15.0

Total noninterest expense	$	2,117	$	1,743	21.46	%	$	3,077	100.0	%

⁽¹⁾

The 2006 period is for the six months ended June 30, 2006, while the 2005 period is from the date of inception at April 14, 2005 to June 30, 2005. We do not believe that the periods are comparable because the 2005 period has fewer business days and occurred immediately subsequent to the commencement of operation of Sonabank.

⁽²⁾	The period represented is from the date of inception at April 14, 2005 to December 31, 2005.

Salaries and benefits increased by $686,000 or 201% for the six months ended June 30, 2006, as compared to the period from inception at April 14, 2005 to June 30, 2005. The increase in salaries and benefits is related directly to staff additions to accommodate our growth. As of June 30, 2006, we had 31 full time equivalent employees compared to 20 full time equivalent employees as of June 30, 2005. We expect to increase our full-time equivalent employees to approximately 51 upon the closing of the 1 ^st Service merger and anticipate a concomitant increase in salaries and benefits as a result. Total salaries and benefits for 2005 increased due to increased staffing levels needed to operate the Bank as it has expanded from one branch and a loan production office at the commencement of its operations to two branches and three loan production offices at December 31, 2005, including the acquisition of our Clifton Forge branch in December 2005. As of December 31, 2005, we had 29 full-time equivalent employees.

Our occupancy expense increased by $147,000 or 420% for the six months ended June 30, 2006, as compared to the period from inception at April 14, 2005 to June 30, 2005, as a result of the opening of our administrative office in Warrenton, Virginia. Occupancy expense was $154,000 for the period ended December 31, 2005, reflecting the costs to open our branch and loan production offices.

Furniture and equipment expenses increased by $121,000 or 504% for the six months ended June 30, 2006, as compared to the period from inception at April 14, 2005 to June 30, 2005. This increase in expense was due to the depreciation expense resulting from the purchase of furniture and equipment for the occupancy of two banking offices, three loan production offices and our executive offices. We expect to perform nominal changes to the three branch offices we will acquire when the 1 ^st Service merger closes. A significant portion of the costs of such changes will be for signage. We leased five office locations in 2005 and we furnished and equipped all of them in 2005 at an average cost of approximately $250,000.

Total organization expenses for SNBV were $1.2 million at December 31, 2005.

Core deposit intangibles of $2.8 million as of June 30, 2006 are being amortized over their estimated useful lives of seven years. We acquired this asset with the Clifton Forge branch purchase in December 2005.

Other operating expense for the period ended June 30, 2006 and December 31, 2005 consisted of telephone, professional fees, data processing fees and other fees. The increased expense was due to the increased costs of operating two branches and the increased number of deposit accounts.

Income Taxes

We did not record a provision for income taxes for either the six months ended June 30, 2006 or for the period from inception at April 14, 2005 to December 31, 2005 due to our operating losses for each such period.

In lieu of an income tax, the Commonwealth of Virginia assesses a franchise tax based on our capital, subject to certain deductions. We incurred $107,000 in franchise taxes for the six months ended June 30, 2006 compared to $0 for the period from inception at April 14, 2005 to June 30, 2005. We incurred $0 in franchise tax for the period from inception at April 14, 2005 to December 31, 2005.

FINANCIAL CONDITION

Balance Sheet

Our total assets were $145.6 million at June 30, 2006 as compared to $122.9 million at December 31, 2005 and $45.4 million at June 30, 2005. Our asset growth has been primarily funded by our deposit growth and by securities sold under agreements to repurchase and other borrowings. We intend to replace brokered deposits and borrowings with local core deposits as soon as possible and have aggressively marketed deposits in our market area.

Loan Portfolio

As of June 30, 2006, total loans receivable increased by $17.4 million or 23.1%, from $75.3 million at December 31, 2005, to $92.7 million. Loan growth occurred in all categories aided by strong demand for commercial real estate, and commercial and residential construction loans. Commercial real estate loans grew 20.6% from $41.7 million at December 31, 2005 to $50.3 million at June 30, 2006. During the same period Construction and Development loans grew 34.2% from $16.0 million to $21.4 million and non-real estate commercial loans grew 17.9% from $6.7 million to $7.9 million.

Between December 31, 2005 and June 30, 2006, Sonabank closed loans totaling $1.8 million through the Small Business Administration’s 7(a) program and $3.8 million under the SBA’s 504 program.

Between the Bank’s inception in April 2005 and December 31, 2005, total loans grew to $75.3 million. Total loans at December 31, 2005 consisted primarily of loans secured by commercial real estate, representing $41.6 million or 56.0% of the total and construction, land and other loans totaled $16.0 million, or 21.0% of the total. Non-real estate commercial loans totaled $6.7 million or 8.0% of year end 2005 total loans.

During this same period, Sonabank closed loans under the Small Business Administration’s 7(a) program totaling $2.4 million as well as $935,000 under its 504 program.

Our commercial real estate lending program includes both loans closed under the SBA 7(a) and 504 loan programs and loans closed outside of the SBA programs that serve both the investor and owner occupied facility market. The 504 loan program is used to finance long-term fixed assets, primarily real estate and heavy equipment and gives borrowers access of up to 90% financing for a project. SBA 7(a) loans may be used for the purchase of real estate, construction, renovation or leasehold improvements, as well as machinery, equipment, furniture, fixtures, inventory and in some instances, working capital and debt refinancing. The SBA guarantees up to 85% of the loan balance in the 7(a) program, and start-up businesses are eligible to participate in the program. See “Business—Lending Activities” beginning on page 57.

The following table summarizes the composition of our loan portfolio as of June 30, 2006 and December 31, 2005.


	Loan Portfolio Composition
	At June 30, 2006				At December 31, 2005
	Amount		Percent		Amount		Percent
	(Dollar amounts in thousands)
Commercial	$	7,922	9.0	%	$	6,720	8.0	%
Consumer		2,757	3.0			2,011	3.0
Real estate:
Commercial		50,334	54.0			41,644	56.0
Construction, land and other		21,407	23.0			15,978	21.0
Residential, 1-4 family		7,462	8.0			7,814	11.0
Equity lines of credit		2,839	3.0			1,125	1.0

Total loans receivable		92,721	100.0	%	$	75,292	100.0	%

Less:
Deferred loan fees, net		358				261

Loans receivable, net	$	92,363			$	75,031

As of December 31, 2005, substantially all of our loans were to customers located in Virginia. We are not dependent on any single customer or group of customers whose insolvency would have a material adverse effect on operations.

The following tables set forth the contractual maturity ranges of the commercial business and construction loan portfolio and the amount of those loans with predetermined and floating interest rates in each maturity range as of June 30, 2006 and as of December 31, 2005.


	Maturities of Loan Portfolio
	As of June 30, 2006
	One Year or Less		After One Year Through Five Years				After Five Years				Total
	One Year or Less		Fixed Rate		Floating Rate		Fixed Rate		Floating Rate		Total
	(Dollar amounts in thousands)
Real estate construction	$	2,577	$	—	$	18,830	$	—	$	—	$	21,407
Commercial		4,051		1,359		169		—		2,343		7,922

Total	$	6,628	$	1,359	$	18,999	$	—	$	2,343	$	29,329


	As of December 31, 2005
	One Year or Less		After One Year Through Five Years				After Five Years				Total
	One Year or Less		Fixed Rate		Floating Rate		Fixed Rate		Floating Rate		Total
	(Dollar amounts in thousands)
Real estate construction	$	9,951	$	1,905	$	4,098	$	—	$	—	$	15,954
Commercial		2,688		939		1,480		67		1,546		6,720

Total	$	12,639	$	2,844	$	5,578	$	67	$	1,546	$	22,674

Scheduled contractual principal repayments do not reflect the actual maturities of loans. The average maturity of loans is substantially less than their average contractual term because of prepayments. The average life of mortgage loans tends to increase when the current mortgage loan rates are substantially higher than rates on existing mortgage loans and, conversely, decrease when current mortgage loan rates are substantially lower than rates on existing mortgage loans due to refinancings of adjustable rate and fixed rate loans at lower rates.

Past Due Loans and Non-performing Assets

We will generally place a loan on nonaccrual status when it becomes 90 days past due. Loans will also be placed on nonaccrual status in cases where we are uncertain whether the borrower can satisfy the contractual terms of the loan agreement. Cash payments received while a loan is categorized as nonaccrual will be recorded as a reduction of principal as long as doubt exists as to future collections.

We maintain appraisals on loans secured by real estate, particularly those categorized as non-performing loans and potential problem loans. In instances where appraisals reflect reduced collateral values, we make an evaluation of the borrower’s overall financial condition to determine the need, if any, for possible writedowns to their net realizable values. We record other real estate owned at the lower of our recorded investment in the loan or fair value less our estimated costs to sell.

Our loss and delinquency experience on our loan portfolio has been limited by a number of factors, including our underwriting standards and the relatively short period of time since the loans were originated. Whether our loss and delinquency experience in this area of our portfolio will increase significantly depends upon the value of the real estate securing loans and economic factors such as increases in unemployment as well as the overall economy of the region.

We had no past due loans or non-performing assets at June 30, 2006.

At June 30, 2006, no loans were considered potential problem loans. These loans are subject to management attention and their classification is reviewed on a quarterly basis.

Allowance for Loan Losses

We are very focused on the asset quality of our loan portfolio, both before and after the loan is made. We have established underwriting standards that have proven to be effective in maintaining high credit quality in our loan portfolio. We have experienced loan officers and who take personal responsibility for the loans they underwrite, a standing credit committee that vets each loan application carefully and a requirement that loans that are 60% or more of our legal lending limit must be approved by three executive members of our standing credit committee and an outside director. We have implemented standardized underwriting and credit analysis. We had no non-performing loans at June 30, 2006.

Our allowance for loan losses is established through charges to earnings in the form of a provision for loan losses. Management evaluates the allowance at least quarterly. In addition, on a quarterly basis our board of directors reviews our loan portfolio, conducts an evaluation of the credit quality and reviews the loan loss provision, recommending changes as may be required. In evaluating the allowance, management considers the growth, composition and industry diversification of the portfolio, historical loan loss experience, current delinquency levels and general economic conditions.

The allowance for loan losses represents management’s estimate of an amount appropriate to provide for known and inherent losses in the loan portfolio in the normal course of business. We make specific allowances for each loan based on its type and classification as discussed below. However, there are additional factors contributing to losses that cannot be quantified precisely or attributed to particular loans or categories of loans, including general economic and business conditions and credit quality trends. We have established an

unallocated portion of the allowance based on our evaluation of these factors, which management believes is prudent and consistent with regulatory requirements. Due to the uncertainty of risks in the loan portfolio, management’s judgment of the amount of the allowance necessary to absorb loan losses is approximate. See also, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Allowance for Loan Losses.” The allowance is also subject to regulatory examinations and determination by the regulatory agencies as to the appropriate level of the allowance.

We follow a loan review program designed to evaluate the credit risk in our loan portfolio. Through this loan review process, we maintain an internally classified watch list that helps management assess the overall quality of the loan portfolio and the level of the allowance for loan losses. In establishing the appropriate classification for specific assets, management considers, among other factors, the estimated value of the underlying collateral, the borrower’s ability to repay, the borrower’s payment history and the current delinquent status. As a result of this process, loans are categorized as substandard, doubtful, loss or special mention and reserves are allocated based on management’s judgment and historical experience.

Loans classified as “substandard” are those loans with clear and defined weaknesses such as a highly-leveraged position, unfavorable financial ratios, uncertain repayment sources or poor financial condition which may jeopardize the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some losses if the deficiencies are not corrected.

Loans classified as “doubtful” are those loans which have characteristics similar to substandard loans but with an increased risk that collection or liquidation in full is highly questionable and improbable.

Loans classified as “loss” are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value but rather it is not practical or desirable to defer a loss on this asset even though partial recovery may be effected in the future. Any loans considered to be impaired are accounted for in accordance with FAS 114.

In addition to the above classification categories, we also categorize certain loans as “special mention.” While special mention loans do not have all the characteristics of a substandard or doubtful loan, they have one or more deficiencies which warrant special attention and which corrective management action, such as accelerated collection practices, may remedy.

During the evaluation of the loan portfolio, any loans that are not classified or rated special mention are rated in accordance with the Bank’s risk rating. We also assign a general reserve allocation based on loan type.

The following table presents an analysis of the allowance for loan losses for the six months ended June 30, 2006, for the period from inception at April 14, 2005 through June 30, 2005 and for the period from inception at April 14, 2005 through December 31, 2005. We had no net charge-offs in any of those fiscal periods.


	Analysis of Allowance for Loan Losses
	For the Six Months Ended June 30, 2006		For the Period From Inception at April 14, 2005 Through June 30, 2005 ⁽¹⁾		For the Period From Inception at April 14, 2005 Through December 31, 2005
	(Dollar amounts in thousands)
Balance, beginning of period	$	1,020	$	—	$	—
Provision charged to operations		286		327		1,020
Recoveries credited to allowance		—		—		—

Total		1,306		327		1,020

Loans charged off		—		—		—

Balance, end of period	$	1,306	$	327	$	1,020

Footnote on following page

⁽¹⁾

The 2006 period is for the six months ended June 30, 2006, while the 2005 period is from the date of inception at April 14, 2005 to June 30, 2005. Comparisons may not be meaningful because the 2005 period represented less than half the business days than the 2006 period and occurred immediately after the commencement of operations of Sonabank.

The following table describes the allocation of the allowance for loan losses among various categories of loans and certain other information for the dates indicated. The allocation is made for analytical purposes only and is not necessarily indicative of the categories in which future losses may occur.


	Allocation of the Allowance for Loan Losses
	As of June 30, 2006				As of June 30, 2005				As of December 31, 2005
	Amount		Percent of Loans in Each Category to Total Loans		Amount		Percent of Loans in Each Category to Total Loans		Amount		Percent of Loans in Each Category to Total Loans
	(Dollar amounts in thousands)
Commercial	$	92	8.54	%	$	43	29.51	%	$	75	8.47	%
Consumer		30	2.97			9	6.51			21	2.63
Real estate—commercial		155	54.29			18	49.83			120	55.34
Real estate—construction, land and other		299	23.09			24	14.15			234	21.19
Real estate—residential 1-4 family		8	11.11			—	—			7	11.87
General		722	—			233	—			563	—

Total	$	1,306	100.00	%	$	327	100.00	%	$	1,020	100.00	%

The general allowance is available as an unallocated allowance against the entire loan portfolio and is related to factors which include, among others, current economic conditions in our market area, which are not directly associated with a specific loan category.

We believe that the allowance for loan losses at June 30, 2006 is sufficient to absorb losses inherent in our loan portfolio based on our assessment of the information available. Our assessment involves uncertainty and judgment; therefore, the adequacy of the allowance for loan losses cannot be determined with precision and may be subject to change in future periods. In addition, bank regulatory authorities, as part of their periodic examination, may require additional charges to the provision for loan losses in future periods if the results of their reviews warrant additions to the allowance for loan losses. The methodology used by bank regulatory authorities to assess our allowance for loan losses may take into account additional factors, such as comparisons of our methodology for determining, and amounts of, allowances for loan losses to a group of peer institutions identified by the regulators.

Investment Securities and Other Assets

Our securities portfolio composition is meant to provide a rate-sensitive, stable source of income until we can deploy a large portion of these assets into underwritten loans. Our securities portfolio also provides us with required liquidity and securities to pledge as required collateral for certain governmental deposits and borrowed funds.

Our securities portfolio is managed by our president and our treasurer, both of whom have significant experience in this area, with the concurrence of our Asset/Liability Committee. In addition to our president (who is chairman of the Asset/Liability Committee) and our treasurer, this committee is comprised of two outside directors. Investment management is performed in accordance with our investment policy, which is approved annually by the Asset/Liability Committee and the board of directors. Our investment policy addresses our investment strategies, approval process, approved securities dealers and authorized investments.

Our investment policy authorizes us to invest in:

•

Government National Mortgage Association (GNMA), Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC) mortgage-backed securities (MBS)

•

Collateralized mortgage obligations

•

Treasury securities

•

Agency securities

•

Pooled trust preferred securities comprised of a minimum of 80% bank collateral with an investment grade rating

Mortgage-backed securities are securities that have been developed by pooling a number of real estate mortgages and which are principally issued by federal agencies such as the GNMA, FNMA and FHLMC. These securities are deemed to have high credit ratings, and minimum regular monthly cash flows of principal and interest are guaranteed by the issuing agencies.

Unlike U.S. Treasury and U.S. government agency securities, which have a lump sum payment at maturity, mortgage-backed securities provide cash flows from regular principal and interest payments and principal prepayments throughout the lives of the securities. Mortgage-backed securities which are purchased at a premium will generally suffer decreasing net yields as interest rates drop because homeowners tend to refinance their mortgages. Thus, the premium paid must be amortized over a shorter period. Conversely, mortgage-backed securities purchased at a discount will obtain higher net yields in a decreasing interest rate environment. As interest rates rise, the opposite will generally be true. During a period of increasing interest rates, fixed rate mortgage-backed securities do not tend to experience heavy prepayments of principal, and consequently the average life of these securities will be lengthened. If interest rates begin to fall, prepayments will increase.

Collateralized mortgage obligations (CMOs) are bonds that are backed by pools of mortgages. The pools can be GNMA, FNMA or FHLMC pools or they can be private-label pools. The CMOs are designed so that the mortgage collateral will generate a cash flow sufficient to provide for the timely repayment of the bonds. The mortgage collateral pool can be structured to accommodate various desired bond repayment schedules, provided that the collateral cash flow is adequate to meet scheduled bond payments. This is accomplished by dividing the bonds into classes to which payments on the underlying mortgage pools are allocated. The bond’s cash flow, for example, can be dedicated to one class of bondholders at a time, thereby increasing call protection to bondholders. In private-label CMOs, losses on underlying mortgages are directed to the most junior of all classes and then to the classes above in order of increasing seniority, which means that the senior classes have enough credit protection to be given the highest credit rating by the rating agencies.

We classify our securities as either: “held-to-maturity” or “available-for-sale.” Securities totaling $31.5 million were in the held-to-maturity portfolio at June 30, 2006, compared to $31.7 million at December 31, 2005 and $13.5 million at June 30, 2005. Securities totaling $14.6 million were in the available-for-sale portfolio at June 30, 2006, compared to $8.3 million at December 31, 2005 and $4.0 million at June 30, 2005. The increase in the investment portfolio between December 31, 2005 and June 30, 2006 is the result of the purchase of floating rate pooled trust preferred securities with collateral of at least 80% bank related trust preferred securities and federal agency securities. The purchases were made to replace the securities in our portfolio that were being repaid prior to maturity.

At June 30, 2006, the available-for-sale portfolio had an unrealized net loss of approximately $78,000. The unrealized net loss is the result of changes in market values due to the rise in interest rates in the general market. We consider the overall quality of the securities portfolio to be high. Our securities portfolio at June 30, 2006 consisted primarily of federal agency issued pools and collateralized mortgage obligations (CMOs). The following table provides the amortized cost of our securities by their stated maturities (this maturity schedule excludes prepayment and call features of the securities), as well as the tax equivalent yields for each maturity range.

The following table sets forth the amortized cost, gross unrealized gains and losses and estimated fair value of our investment securities at June 30, 2006:


	Investment Securities Portfolio
	At June 30, 2006
	Amortized Cost		Gross Unrealized					Estimated Fair Value
	Amortized Cost		Gains		(Losses)			Estimated Fair Value
	(Dollar amounts in thousands)
Available for sale:
Collateralized mortgage obligations	$	6,562	$	—	$	(65	)	$	6,497
Corporate bonds		6,582		1		(13	)		6,570
Federal Reserve Bank stock		1,020		—		—			1,020
Federal Home Loan Bank stock		534		—		—			534

Total	$	14,698	$	1	$	(78	)	$	14,621


	Amortized Cost		Gross Unrealized					Estimated Fair Value
	Amortized Cost		Gains		(Losses)			Estimated Fair Value
	(Dollar amounts in thousands)
Held to maturity:
Mortgage-backed securities	$	15,046	$	—	$	(402	)	$	14,644
U.S. Government agency securities		1,000		—		—			1,000
Collateralized mortgage obligations		15,426		—		(147	)		15,279

Total	$	31,472	$	—	$	(549	)	$	30,923

The following table sets forth the amortized cost, gross unrealized gains and losses and estimated fair value of our investment securities at December 31, 2005:


	Investment Securities Portfolio
	At December 31, 2005
	Amortized Cost		Gross Unrealized					Estimated Fair Value
	Amortized Cost		Gains		(Losses)			Estimated Fair Value
	(Dollar amounts in thousands)
Available for sale:
Collateralized mortgage obligations	$	7,213	$	—	$	(5	)	$	7,208
Federal Reserve Bank stock		1,020		—		—			1,020
Federal Home Loan Bank stock		68		—		—			68

Total	$	8,301	$	—	$	(5	)	$	8,296


	Amortized Cost		Gross Unrealized					Estimated Fair Value
	Amortized Cost		Gains		(Losses)			Estimated Fair Value
	(Dollar amounts in thousands)
Held to maturity:
Mortgage-backed securities	$	15,812	$	—	$	(142	)	$	15,670
Collateralized mortgage obligations		15,886		7		(1	)		15,892

Total	$	31,698	$	7	$	(143	)	$	31,562

We currently have the ability to hold our available-for-sale investment securities to maturity. However, should conditions change, we may sell unpledged securities. All securities held are traded in liquid markets.

The following table sets forth the amortized cost and estimated fair value of our investment securities by contractual maturity at June 30, 2006. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Contractual Maturities of Investment Securities
	At June 30, 2006
	Securities Available for Sale
	Amortized Cost		Estimated Fair Value
	(Dollar amounts in thousands)
Due after one year through five years	$	1,628	$	1,628
Due after ten years		11,516		11,439

		13,144		13,067
Federal Reserve Bank stock-restricted		1,020		1,020
Federal Home Loan Bank stock-restricted		534		534

Total	$	14,698	$	14,621


	Securities Held to Maturity
	Amortized Cost		Estimated Fair Value
	(Dollar amounts in thousands)
Due after one year through five years	$	1,000	$	1,000
Due after ten years		30,472		29,923

Total	$	31,472	$	30,923

The following table sets forth the amortized cost and estimated fair value of our investment securities by contractual maturity at December 31, 2005. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Contractual Maturities of Investment Securities
	At December 31, 2005
	Securities Available for Sale
	Amortized Cost		Estimated Fair Value
	(Dollar amounts in thousands)
Due after one year through five years	$	2,296	$	2,296
Due after ten years		4,917		4,912

Subtotal		7,213		7,208
Federal Reserve Bank stock-restricted		1,020		1,020
Federal Home Loan Bank stock-restricted		68		68

Total	$	8,301	$	8,296


	Securities Held to Maturity
	Amortized Cost		Estimated Fair Value
	(Dollar amounts in thousands)
Due after ten years	$	31,698	$	31,562

Contractual maturity of mortgage-backed securities and CMOs is not a reliable indicator of their expected life because borrowers have the right to prepay their obligations at any time.

Securities with an unamortized cost of approximately $24.4 million at June 30, 2006 were pledged to secure a line of credit under a repurchase agreement and a line of credit for advances from the FHLB. There were $4.9 million of outstanding FHLB advances at June 30, 2006. As of such date, there was approximately $17.5 million unused and available lines of credit outstanding.

Securities with an amortized cost of approximately $34.0 million at December 31, 2005 were pledged to secure a line of credit under a repurchase agreement and a line of credit for advances from the FHLB. There were no outstanding FHLB advances at December 31, 2005. There was approximately $19.0 million unused and available under the lines of credit as of December 31, 2005.

There were no sales of our investment securities during the period from April 14, 2005 through June 30, 2006.

We evaluate our securities portfolio for other-than-temporary impairment at least on a quarterly basis and more frequently when economic or market concerns warrant such evaluation. Consideration is given to:

•

the length of time and the extent to which the fair value has been less than cost,

•

the financial condition and near-term prospects of the issuer, and

•

our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Because our securities portfolio includes mortgage-backed securities and collaterized mortgage obligations, whose prices move inversely with rates, we may incur unrealized gains and losses at the end of any accounting period. We closely monitor the securities portfolio to see if adjustments are needed based on our liquidity needs, market rate changes and credit risk changes of the issuer. There were nine securities totaling approximately $25.6 million and thirteen securities totaling approximately $33.6 million at December 31, 2005 and June 30, 2006, respectively, in our securities portfolio that we considered temporarily impaired. The temporary impairment was caused by higher market interest rates since the date of the purchase of those securities.

Deposits and Other Borrowings

The market for deposits is competitive. We offer a line of traditional deposit products that currently includes non-interest-bearing and interest-bearing checking (or NOW accounts), commercial checking, money market accounts, savings accounts and certificates of deposit. We compete for deposits through our banking branches with competitive pricing, advertising and online banking. We use deposits as a principal source of funding for our lending, purchasing of investment securities and for other business purposes.

As of June 30, 2006, deposits increased by $27.1 million or 35.1% compared to December 31, 2005, and by $95.3 million or 1,048% compared to June 30, 2005. Deposit growth was the result of an increase in the use of deposits provided by intermediaries or deposit brokers, the acquisition of the Clifton Forge branch, the expansion of our branch network and several targeted deposit campaigns focused on expanding our existing customer relationships as well as developing new customer relationships. We believe that our deposits will continue to increase throughout 2006 as a result of recently opened banking offices and offices to be acquired in the 1 ^st Service merger.

We also utilize brokered deposits and will continue to utilize these sources for deposits when they can be cost-effective. At June 30, 2006 and December 31, 2005, brokered deposits constituted approximately 44.2% and 22.9% of our total deposits, respectively. The brokered deposits we typically obtain consist primarily of 90 to 180 day certificates of deposit in excess of $100,000. These deposits generally have the effect of slightly increasing our cost of funds and slightly decreasing our net interest margin when compared to our local deposit base.

Total deposits increased by 749.88% from June 30, 2005 to December 31, 2005 due to the purchase of the Clifton Forge branch, the increase in brokered deposits and our focused marketing to develop our local core deposit base. Additionally, we concentrated on expanding the level of noninterest-bearing funding which represented 8.20% of total deposits at December 31, 2005. We expect that brokered deposits will remain a significant source of our deposit funding for the foreseeable future.

The following table sets forth the dollar amount of deposits in the various deposit products at June 30, 2006 and December 31, 2005.


	Deposit Products
	At the Period Ended
	June 30, 2006		December 31, 2005
	(Dollar amounts in thousands)
Noninterest bearing deposits	$	6,548	$	6,333
Savings accounts		2,354		2,373
Money market accounts		15,584		17,147
Checking (NOW) accounts		4,408		6,244
Certificates of deposit greater than $100,000		61,017		30,984
Certificates of deposit less than $100,000		14,497		14,182

Total interest bearing deposits		97,860		70,930

Total deposits	$	104,408	$	77,263

The following table sets forth the average balance and average rate paid on each of the deposits categories for the periods indicated.


	Average Balance/Average Rate on Deposit Products
	For the Period Ended
	June 30, 2006				December 31, 2005
	Average Balance		Average Rate Paid		Average Balance		Average Rate Paid
	(Dollar amounts in thousands)
Noninterest bearing deposits	$	7,013	0	%	$	2,170	0	%
Interest bearing deposits:
Savings accounts		2,364	0.49			184	0.51
Money market account		15,904	2.87			6,479	3.09
Checking (NOW) accounts		6,415	0.25			522	0.26
Certificates of deposit greater than $100,000		43,914	4.58			6,290	3.99
Certificates of deposit less than $100,000		14,476	5.33			1,214	5.02

Total interest bearing deposits		83,073	3.93			14,689	3.50

Total deposits	$	90,086	3.62	%	$	16,859	3.05	%

The following table sets forth the amount of our certificates of deposit by time remaining to maturity as of June 30, 2006.


	Maturities of Certificates of Deposit
	As of June 30, 2006
	3 Months or Less		Over 3 to 12 Months		Over 12 Months
Certificates of deposit greater than $100,000	$	49,034	$	3,454	$	8,528
Certificates of deposit less than $100,000		1,274		1,308		11,916

Total certificates of deposit	$	50,308	$	4,762	$	20,444

The following table sets forth the amount of our certificates of deposit by time remaining to maturity as of December 31, 2005.


	Maturities of Certificates of Deposit
	As of December 31, 2005
	3 Months or Less		Over 3 to 12 Months		Over 12 Months
Certificates of deposit greater than $100,000	$	20,971	$	3,654	$	6,359
Certificates of deposit less than $100,000		2,215		3,928		8,039

Total certificates of deposit	$	23,186	$	7,582	$	14,398

The variety of deposit accounts we offered has allowed us to be competitive in obtaining funds and in responding to the threat of disintermediation (the flow of funds away from depository institutions such as banking institutions into direct investment vehicles such as government and corporate securities). Our ability to attract and maintain deposits, and the effect of such retention on our cost of funds, has been, and will continue to be, significantly affected by the general economy and market rates of interest.

We use borrowed funds, primarily on a short term basis, to support our liquidity needs and to temporarily satisfy our funding needs from increased loan demand and for other shorter term purposes. The majority of these borrowed funds are securities sold under agreements to repurchase, which are reflected at the amount of cash received in connection with the transactions, and may require additional collateral based on the fair value of the underlying securities pledged. We engage in these transactions with retail customers and with established third parties, primarily large securities brokerage firms. We also are a member of the FHLB and are authorized to obtain advances from the FHLB from time to time to as needed. The FHLB has a credit program for members with different maturities and interest rates, which may be fixed or variable. We are required to collateralize our borrowings from the FHLB with our FHLB stock and other collateral acceptable to the FHLB. At June 30, 2006 and December 31, 2005, total borrowed funds were $8.1 million and $12.4 million, respectively. At June 30, 2006, we had $6.6 million of unused and available FHLB lines of credit.

The following table sets forth the maximum balances, average balances and weighted average rates paid for our borrowings for the periods indicated.


	Borrowings
	For the Period Ended
	June 30, 2006			December 31, 2005(1)
	(Dollar amounts in thousands)
Ending balance	$	8,110		$	12,406
Maximum month-end balance during the period	$	11,114		$	15,724
Average balance for the period	$	10,140		$	2,241
Average interest rate for the period		4.46	%		4.09	%

(1)	Represents the period from inception at April 14, 2005 to December 31, 2005.

The following table sets forth the balances and weighted average interest rate of our borrowings at the dates indicated.


	Balances and Interest Rates of Borrowings
	At
	June 30, 2006			December 31, 2005(1)
	(Dollar amounts in thousands)
Securities sold under agreements to repurchase	$	3,210		$	12,406
FHLB advances		4,900			—

Total borrowings	$	8,110		$	12,406

Weighted average interest rate of total borrowings at the end of the period		4.93	%		4.14	%

(1)	Represents the period from inception at April 14, 2005 to December 31, 2005.

Interest Rate Sensitivity and Market Risk

We are engaged primarily in the business of investing funds obtained from deposits and borrowings into interest-bearing loans and investments. Consequently, our earnings depend to a significant extent on our net interest income, which is the difference between the interest income on loans and investments and the interest expense on deposits and borrowing. To the extent that our interest-bearing liabilities do not reprice or mature at the same time as our interest-bearing assets, we are subject to interest rate risk and corresponding fluctuations in net interest income. We have employed asset/liability management policies that seek to manage our interest income, without having to incur unacceptable levels of credit or investment risk.

Our interest rate risk is managed by our president and our treasurer, both of whom have significant experience in this area, in accordance with policies approved by our board of directors. In determining the appropriate level of interest rate risk, management considers the impact on earnings and capital of the current outlook on interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors. Management regularly reviews, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings. Additionally, management reviews liquidity, cash flow flexibility, maturities of deposits and consumer and commercial deposit activity.

Management uses a duration gap of equity approach to manage our interest rate risk and reviews quarterly interest sensitivity reports prepared for us by FTN Financial, using the Sendero ALM Analysis System. This approach uses a model which generates estimates of the change in our market value of portfolio equity (MVPE) over a range of interest rate scenarios. MVPE is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts using standard industry assumptions about estimated loan prepayment rates, reinvestment rates and deposit decay rates.

Between the quarterly receipts of interest sensitivity reports from FTN Financial we manage our interest rate risk by adding to or subtracting from the most recent report any transaction that we are considering. For example, if we were considering purchasing a collateralized mortgage obligation, we would analyze the individual security to derive an estimate of the change in the market value of the security if interest rates were to move up or down by 100, 200 or 300 basis points. We would then take those values and add them to or subtract them from the numbers on the chart shown below to determine our revised interest rate risk profile.

The following tables are based on an analysis prepared by FTN Financial setting forth an analysis of our interest rate risk as measured by the estimated change in MVPE resulting from instantaneous and sustained parallel shifts in the yield curve (plus or minus 300 basis points, measured in 100 basis point increments) as of June 30, 2006 and December 31, 2005.


	Sensitivity of Market Value of Portfolio Equity As of June 30, 2006
Change in Interest Rates In Basis Points (Rate Shock)	Market Value of Portfolio Equity							Market Value of Portfolio Equity as a % of
	Amount		$ Change From Base			% Change From Base		Total Assets		Portfolio Equity Book Value
	(Dollar amounts in thousands)
Up 300	$	32,843	$	(1,982	)	(5.69	)%	22.56	%	100.79	%
Up 200		33,588		(1,237	)	(3.55	)	23.07		103.07
Up 100		34,231		(594	)	(1.71	)	23.52		105.05
Base		34,875		—		0.00		23.92		106.87
Down 100		35,168		343		0.98		24.16		107.92
Down 200		35,055		230		0.66		24.08		107.58
Down 300		34,694		(131	)	(0.38	)	23.83		106.47


	Sensitivity of Market Value of Portfolio Equity As of December 31, 2005
Change in Interest Rates In Basis Points (Rate Shock)	Market Value of Portfolio Equity							Market Value of Portfolio Equity as a % of
	Amount		$ Change From Base			% Change From Base		Total Assets		Portfolio Equity Book Value
	(Dollar amounts in thousands)
Up 300	$	33,687	$	(1,453	)	(4.13	)%	27.41	%	104.25	%
Up 200		34,238		(902	)	(2.57	)	27.86		105.96
Up 100		34,719		(421	)	(1.20	)	28.25		107.45
Base		35,140		—		0.00		28.59		108.75
Down 100		35,170		30		0.09		28.61		108.84
Down 200		34,696		(444	)	(1.26	)	28.23		107.37
Down 300		34,056		(1,084	)	(3.08	)	27.71		105.39

Our interest rate sensitivity is also monitored by management through the use of a model run by FTN Financial that generates estimates of the change in the net interest income over a range of interest rate scenarios. Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income also depends upon the relative amounts of interest-earning assets and interest bearing liabilities and the interest rate earned or paid on them. In this regard, the model assumes that the composition of our interest sensitive assets and liabilities existing at June 30, 2006 and December 31, 2005 remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assts and liabilities.


	Sensitivity of Net Interest Income As of June 30, 2006
Change in Interest Rates in Basis Points (Rate Shock)	Adjusted Net Interest Income					Net Interest Margin
	Amount		$ Change From Base			Percent		% Change From Base
	(Dollar amounts in thousands)
Up 300	$	5,996	$	143		4.26	%	0.10	%
Up 200		5,944		91		4.22		0.06
Up 100		5,899		46		4.20		0.04
Base		5,853		—		4.16		0.00
Down 100		5,738		(115	)	4.09		-0.07
Down 200		5,423		(430	)	3.87		-0.29
Down 300		5,091		(762	)	3.63		-0.53


	Sensitivity of Net Interest Income As of December 31, 2005
Change in Interest Rates in Basis Points (Rate Shock)	Adjusted Net Interest Income				Net Interest Margin
	Amount		$ Change From Base		Percent		% Change From Base
	(Dollar amounts in thousands)
Up 300	$	5,101	212		4.40	%	0.18	%
Up 200		5,031	142		4.34		0.12
Up 100		4,959	70		4.28		0.06
Base		4,889	—		4.22		0.00
Down 100		4,716	(173	)	4.07		-0.15
Down 200		4,442	(447	)	3.84		-0.38
Down 300		4,099	(790	)	3.54		-0.68

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in MVPE requires the making of certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. Accordingly, although the MVPE tables and Sensitivity of Net Interest Income tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on our net worth and net interest income.

Liquidity and Funds Management

The objective of our liquidity management is to assure the ability to meet our financial obligations. These obligations include the payment of deposits on demand or at maturity, the repayment of borrowings at maturity and the ability to fund commitments and other new business opportunities. We obtain funding from a variety of sources, including customer deposit accounts, customer certificates of deposit and payments on our loans and investments. Historically, our level of core deposits has been insufficient to fully fund our lending activities. As a result, we have sought funding from additional sources, including institutional certificates of deposit and available-for-sale investment securities. In addition, we maintain lines of credit from the Federal Home Loan Bank of Atlanta and utilize securities sold under agreements to repurchase and reverse repurchase agreement borrowings from approved securities dealers.

We prepare a monthly cash flow report which forecasts weekly cash needs and availability for the coming three months, based on forecasts of loan closings from our pipeline report and other factors.

During the six months ended June 30, 2006, we funded our financial obligations with deposits and borrowings from the Federal Home Loan Bank of Atlanta. At June 30, 2006, we had $19.6 million of unfunded lines of credit and undisbursed construction loan funds. Our approved loan commitments were $18.7 million at June 30, 2006. The amount of certificate of deposit accounts maturing in the remaining months of calendar year 2006 is $55.1 million as of June 30, 2006. Management anticipates that funding requirements for these commitments can be met from the normal sources of funds.

Stockholders’ Equity

Stockholders’ equity increased to $32.6 million at June 30, 2006 compared with $32.3 million at December 31, 2005, an increase of $274,000 or 0.8%. The increase was primarily due to net income of $321,000 partially offset by an unrealized loss on securities of $48,000. Stockholders’ equity decreased to $32.3 million at December 31, 2005 from $32.8 million at June 30, 2005, a decrease of $467,000 or 1.4%. The decrease was primarily the result of operating losses of $469,000 for the second half of 2005.

Capital Resources

Capital management consists of providing equity to support both current and future operations. We are subject to capital adequacy requirements imposed by the Federal Reserve and the Bank is subject to capital adequacy requirements imposed by the OCC. The Federal Reserve and the OCC have adopted risk-based capital requirements for assessing bank holding company and member bank capital adequacy. These standards define capital and establish minimum capital requirements in relation to assets and off-balance sheet exposure, adjusted for credit risk. The risk-based capital standards currently in effect are designed to make regulatory capital requirements more sensitive to differences in risk profiles among bank holding companies and banks, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk categories, each with appropriate relative risk weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items.

The risk-based capital standards issued by the Federal Reserve require all bank holding companies to have “Tier 1 capital” of at least 4.0% and “total risk-based” capital (Tier 1 and Tier 2) of at least 8.0% of total risk-adjusted assets. “Tier 1 capital” generally includes common stockholders’ equity and qualifying perpetual preferred stock together with related surpluses and retained earnings, less deductions for goodwill and various other intangibles. “Tier 2 capital” may consist of a limited amount of intermediate-term preferred stock, a limited amount of term subordinated debt, certain hybrid capital instruments and other debt securities, perpetual preferred stock not qualifying as Tier 1 capital, and a limited amount of the general valuation allowance for loan losses. The sum of Tier 1 capital and Tier 2 capital is “total risk-based capital.”

The Federal Reserve has also adopted guidelines which supplement the risk-based capital guidelines with a minimum ratio of Tier 1 capital to average total consolidated assets, or “leverage ratio,” of 3.0% for institutions with well diversified risk, including no undue interest rate exposure; excellent asset quality; high liquidity; good earnings; and that are generally considered to be strong banking organizations, rated composite 1 under applicable federal guidelines, and that are not experiencing or anticipating significant growth. Other banking organizations are required to maintain a leverage ratio of at least 4.0%. These rules further provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain capital positions substantially above the minimum supervisory levels and comparable to peer group averages, without significant reliance on intangible assets.

Pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), each federal banking agency revised its risk-based capital standards to ensure that those standards take adequate account of interest rate risk, concentration of credit risk and the risks of nontraditional activities, as well as reflect the actual performance and expected risk of loss on multifamily mortgages. As a national bank, the bank is subject to capital adequacy guidelines of the OCC. Also pursuant to FDICIA, the Federal Deposit Insurance Corporation

has promulgated regulations setting the levels at which an insured institution such as the bank would be considered “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” The bank is classified “well capitalized” for purposes of the FDIC’s prompt corrective action regulations. See “Supervision and Regulation—Capital Requirements.”

The following table provides a comparison of our leverage and risk-weighted capital ratios and the leverage and risk-weighted capital ratios of the bank at the periods indicated to the minimum and well-capitalized regulatory standards:


	Capital Ratios
	Minimum Required for Capital Adequacy Purposes		To be Well Capitalized Under Prompt Corrective Action Provisions		Actual Ratio at June 30, 2006		Actual Ratio at December 31, 2005
SNBV
Tier 1 risk-based capital ratio	4.00	%	N/A		27.10	%	32.81	%
Total risk-based capital ratio	8.00	%	N/A		28.28	%	33.96	%
Leverage ratio	4.00	%(1)	N/A		22.04	%	35.38	%
Sonabank
Tier 1 risk-based capital ratio	4.00	%	6.00	%	27.05	%	32.76	%
Total risk-based capital ratio	8.00	%	10.00	%	28.24	%	33.90	%
Leverage ratio	4.00	%(1)	5.00	%	22.01	%	35.32	%

(1)	The Federal Reserve Board may require SNBV and Sonabank to maintain a leverage ratio above the required minimum.

Impact of Inflation and Changing Prices

The financial statements and related financial data presented herein concerning SNBV have been prepared in accordance with accounting principles generally accepted in the United States of America, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, substantially all of the assets and liabilities of a financial institution are monetary in nature. As a result, changes in interest rates have a more significant impact on our performance than do the effects of changes in the general rate of inflation and changes in prices. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services.

Our interest rate risk management is the responsibility of Sonabank’s Asset/Liability Management Committee (the Asset/Liability Committee). The Asset/Liability Committee has established policies and limits for management to monitor, measure and coordinate our sources, uses and pricing of funds. The Asset/Liability Committee makes reports to the board of directors on a monthly basis.

Seasonality and Cycles

We do not consider our commercial banking business to be seasonal.

Contractual Obligations

The following table reflects the contractual maturities of our term liabilities as of June 30, 2006. The amounts shown do not reflect any early withdrawal or prepayment assumptions.


	Contractual Obligations As of June 30, 2006
	Total		Less Than One Year		One to Three Years		Three to Five Years		More Than Five Years
	(Dollars in thousands)
Certificates of deposit (1)	$	75,514	$	66,639	$	6,304	$	2,571	$	—
Securities sold under agreements to repurchase		3,210		3,210		—		—		—
Advances from FHLB		4,900		4,900		—		—		—
Operating leases		731		178		372		181		—

Total	$	84,355	$	74,927	$	6,676	$	2,752	$	—

(1)	Certificates of deposit give customers rights to early withdrawal. Early withdrawals may be subject to penalties. The penalty amount depends on the remaining time to maturity at the time of early withdrawal.

The following table reflects the contractual maturities of our term liabilities as of December 31, 2005. The amounts shown do not reflect any early withdrawal or prepayment assumptions.


	Contractual Obligations As of December 31, 2005
	Total		Less Than One Year		One to Three Years		Three to Five Years		More Than Five Years
	(Dollar amounts in thousands)
Certificates of deposit (1)	$	45,166	$	30,366	$	11,814	$	2,986	$	—
Securities sold under agreement to repurchase		12,406		12,406		—		—		—
Operating lease obligations		818		175		366		277		—

Total	$	58,390	$	42,947	$	12,180	$	3,263	$	—

(1)	Certificates of deposit give customers rights to early withdrawal. Early withdrawals may be subject to penalties. The penalty amount depends on the remaining time to maturity at the time of early withdrawal.

Off-Balance Sheet Arrangements

We are party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and letters of credit. These commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

Our exposure to credit loss is represented by the contractual amount of these commitments. We follow the same credit policies in making these commitments as we do for underwriting our loans.

Commitments to extend credit are agreements to lend to customers. Commitments generally have fixed expiration dates or other termination clauses and may require that our customer pay us a commitment fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. At December 31, 2005, we had unfunded loan commitments of approximately $23.1 million. While commitments are not collateralized, if the commitment is funded, the loan will be collateralized pursuant to our underwriting policies. The fair value of our loan commitments at December 31, 2005 was immaterial. The amount of collateral, if any, we obtain on an extension of credit is based on our credit evaluation of the customer. Letters of credit are conditional commitments issued by Sonabank to guarantee the performance of its customer to a third party. Sonabank had no letters of credit outstanding at December 31, 2005.

Recent Accounting Developments

The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 123 (Revised 2004) (referred to herein as SFAS No. 123R), “Share-Based Payment,” in December 2004. SFAS No. 123R is a revision of FASB Statement 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance. The Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award. This statement is effective as of the beginning of the first annual reporting period that begins after June 15, 2005 and SNBV adopted the standard in the first quarter of fiscal 2006. The adoption of this statement did not have a material effect on our consolidated financial statements.

AICPA Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP 03-3), addresses the accounting for differences between contractual cash flows and cash flows expected to be collected from the initial investment in loans acquired in a transfer if those differences are attributable, at least in part, to credit quality. It includes such loans acquired in purchase business combinations and does not apply to loans originated by the entity. The SOP prohibits carrying over or creation of valuation allowances in the initial accounting for loans acquired in a transfer. It is effective for loans acquired in fiscal years beginning after December 15, 2004. This new guidance had no material effect on our consolidated financial statements upon implementation.

In March 2006, FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140.” This statement amends FASB Statement No. 140 with respect to the accounting for separately recognized servicing assets and servicing liabilities. The statement is effective as of the beginning of the first fiscal year that begins after September 15, 2006. The adoption of this statement is not expected to have a material effect on our consolidated financial statements.

BUSINESS

Overview

SNBV raised $35.0 million in a private offering in March 2005. We are the holding company for Sonabank, a nationally chartered commercial bank. We opened Sonabank’s first branch on April 14, 2005. We are headquartered in our Charlottesville, Virginia branch, at 1770 Timberwood Boulevard in the Forest Lakes Shopping Center. We also have a loan production office at 230 Court Square in Charlottesville. Our administrative offices and a loan production office are located at 550 Broadview Avenue in Warrenton, Virginia, where we expect to open a full service branch later this year. We also have executive offices in Georgetown, Washington D.C. where senior management is located.

In December 2005, we closed on the purchase of the First Community Bancorp, Inc. branch in Clifton Forge, Virginia. As of June 30, 2006, the Clifton Forge branch had deposits of $44.0 million compared to $42.5 million at the time of the acquisition. Moreover, Clifton Forge has proven to be an attractive source of Small Business Administration (SBA) loans for which we are an approved SBA “Preferred” lender.

Our Chairman and Chief Executive Officer is Georgia Derrico and our President is Rod Porter. Georgia and Rod held the same positions at Southern Financial Bank until it was sold to Provident Bankshares, Inc. in April 2004. Southern Financial was a $1.4 billion (assets) bank with 34 branches at its time of sale. Southern Financial was founded by Georgia Derrico in 1986. Prior to the sale, Southern Financial had opened 14 de novo branches, and had bought two commercial banks and two thrifts.

General

Our principal business is the acquisition of deposits from the general public through our branch offices and deposit intermediaries and the use of these deposits to fund our loan and investment portfolios. We seek to be a full service community bank that provides a wide variety of financial services to our middle market corporate clients as well as to our retail clients. We are an active commercial lender, have been designated as a “Preferred SBA Lender” and participate in the Virginia Small Business Financing Authority lending program. In addition, we are an active residential construction lender and offer our retail clients permanent residential mortgage loan alternatives. We also invest funds in mortgage-backed securities, securities sold with an agreement to repurchase, reverse repurchase agreements and securities issued by agencies of the federal government.

The principal sources of funds for our lending and investment activities are deposits, amortization and repayment of loans, proceeds from the sales of loans, prepayments from mortgage-backed securities, repayments of maturing investment securities, Federal Home Loan Bank advances and other borrowed money.

Principal sources of revenue are interest and fees on loans and investment securities, as well as fee income derived from the maintenance of deposit accounts. Our principal expenses include interest paid on deposits and advances from the FHLB and other borrowings, and operating expenses.

Management

We were founded by our Chairman and Chief Executive Officer, Georgia S. Derrico, who was Chief Executive Officer and founder of Southern Financial Bank, which had become a $1.4 billion institution by the time of its sale to Provident Bankshares, Inc. in 2004. Ms. Derrico had also been an executive officer at Chemical Bank of New York for 13 years. As we have grown, we have assembled a cohesive and complimentary team of seasoned financial services professionals with diverse experience and varied backgrounds. Our senior management team, which has an average of 34 years of banking-related experience, includes the following senior officers:

•

Georgia S. Derrico, Chairman and Chief Executive Officer. Ms. Derrico has been involved in lending and credit administration her entire professional career. Prior to founding Southern Financial Bank, she

served as Senior Vice President, Chief Administrative and Credit Officer to the multinational Division at Chemical Bank. She also served at Chemical as the Vice President and District Head for the Mid-Atlantic Region of the United States for the Corporate Banking Division.

•

R. Roderick Porter, President. Mr. Porter was President and Chief Operating Officer of Southern Financial Bank from April 1998 to Southern Financial’s sale to Provident Bankshares, Inc. in 2004. Mr. Porter spent 15 years at Chemical Bank, where he was a Senior Vice President and responsible for Asset/Liability management, the U.S. Government and municipal securities portfolio, all U.S. dollar denominated funding for the bank and bank holding company, money market trading and discount brokerage. After leaving Chemical and prior to joining Sonabank, Mr. Porter’s financial services experience included having been a principal at Morgan Stanley, Chairman of Newmarket Capital Corp., a mortgage company, a Managing Director of WestCapital, Inc., a real estate advisory firm and President of FX Concepts, Ltd., an international money management firm.

•

William H. Stevens, Executive Vice President. Mr. Stevens was previously an Executive Vice President of Credit Administration for Southern Financial Bank from 1999 to 2004. From 1991 to 1999, he served as a senior analyst in the Office of the Inspector General, where he audited the FDIC’s loan review, credit policy, compliance and audit functions. From 1990 to 1991, he managed the commercial real estate and single family mortgage lending activities for Riggs Bank, N.A. His background also includes 18 years at Chemical Bank, where he was a Senior Vice President, Real Estate. Mr. Stevens and Ms. Derrico were colleagues in the lending division at Chemical.

•

William H. Lagos, Senior Vice President and Chief Financial Officer. He has worked in banking for 27 years. In 1986, Mr. Lagos joined Southern Financial Bank, where he was Senior Vice President and Controller from 1986 until its acquisition by Provident Bankshares Corporation in 2004. Mr. Lagos graduated from Ben Franklin University in 1979, where he received his B.S. in accounting. He passed the uniform CPA Examination in 1981 and is now a member of the D.C. Institute of Certified Public Accountants.

As indicated above, our senior management team provides us with a depth of knowledge and expertise not normally found in a community banking organization of our size, not only in lending, but also in areas such as funds management and investment strategy. Our senior management and board members are strongly committed to our franchise, and as of July 31, 2006, owned 13.95% of our outstanding shares of common stock (including exerciseable options and warrants). We believe that our experienced, seasoned management team provides us with a platform to grow substantially without requiring significant additional management personnel expenditures.

Our Strategy

Our objective is to become the premier provider of financial services to small to medium sized businesses in our market while maintaining steady asset growth, consistent core earnings and sound asset quality. To achieve this objective, we are focusing on the following business strategies:

We emphasize personal relationships in our customer driven service approach to commercial customers.

We are driven by the business needs of our customers. Our board of directors, key relationship managers, branch managers and lenders all actively help us develop full-service commercial banking relationships. In order to identify our customer’s needs and fashion the products and services tailored to meet those needs, we employ a relationship approach that draws on all of our management’s diverse expertise. Each customer deals with a relationship manager who specializes in one or more types of financial services. In order to fully address the customer’s needs, the relationship manager may call upon other of our financial services specialists. We strive to be the customer’s exclusive commercial banker by providing all of the financial services the customer requires. While we encourage customers to contact us directly, we also use technology to complement and enhance our personalized service, such as our Web Lockbox. We believe that in addition to the attractive growth profile of our primary markets, the consolidation of middle-market financial institutions in Virginia has created an unmet demand for personalized business services, which offers us significant growth potential.

We plan to continue to supplement our internal growth through the opening of de novo branches and, from time to time, acquisitions, while emphasizing profitability.

We plan to continue our aggressive pursuit of growth opportunities by opening de novo branches and making acquisitions. Historically, we have pursued sites for branch offices in areas where we have already developed loan volume. We will continue to look for branch opportunities in growth areas that will allow us to obtain deposits as well as loans. Similarly, the cultural and operational integration of the Clifton Forge branch in January 2006 gives us a track record of successful integration on which to build. In spite of our growth, we have been profitable in every quarter of our operation since the fourth quarter of 2005 (only five months after Sonabank commenced operations). We believe that the additional capital we receive from this offering will enable us to enhance our franchise value by positioning us to take advantage of the attractive expansion opportunities provided in our market areas. Our continued emphasis on technology has resulted in the implementation of systems, processes and procedures that will enable us to grow substantially without significant additional investment in infrastructure.

We manage our cost of funding in a sophisticated manner while we seek to grow our local core deposit base.

While we continue to seek a lower cost of funds in the form of local core deposits, we actively manage our “non-core” funding. The funds management expertise of our senior management enables us to manage our cost of funding.

We actively manage our investment portfolio to enhance earnings and enhance flexibility.

Our senior management has experienced several business cycles. There were several times when management perceived that the securities market offered opportunities to generate additional earnings which would augment the returns to our shareholders. We took advantage of those opportunities and believe that on balance the strategies we adopted generated good returns. Since the inception of Sonabank, however, we have not seen any significant opportunities in the securities portfolio. The risk/reward ratio has not been favorable to taking any risk. As a result, our securities investments have been small and conservative, and have been a function of our need to invest excess cash and have collateral for customer needs. Because of this differing strategy, our interest rate risks are minimal.

We have a strong credit culture, which has resulted in sound asset quality.

Our experienced credit administration team has developed comprehensive policies and procedures for credit underwriting and funding that has enabled us to maintain sound credit quality in spite of our rapid growth. With the addition of an experienced credit administrator to our senior management team in April 2005, we have streamlined our internal loan review and approval process. Combined with our significant lending experience, these procedures and controls enable us to provide responsive, customized service to our business customers. Our total loans have grown from zero when we opened in April 2005, to $92.3 million as of June 30, 2006. We intend to adhere to the practices and policies that have contributed to our sound asset quality. We had no non-performing loans as of June 30, 2006.

We prudently manage our capital.

Our goal is to operate at a capital level that supports our growth but does not unduly hamper our achievement of an attractive return on equity. In order to strike this balance, we deploy the capital management expertise of our management team to prudently manage our capital resources. We believe that this offering will not only provide us with capital to support future growth and expansion, but will provide more liquidity for shareholders and give us a more attractive currency to use for potential acquisitions.

Lending Activities

Our primary strategic objective is to serve small to medium-sized businesses in our market with a variety of unique and useful services, including a full array of commercial mortgage and non-mortgage loans. These loans include commercial real estate loans, construction to permanent loans, development and builder loans, accounts receivable financing, lines of credit, equipment and vehicle loans, leasing, and commercial overdraft protection. We strive to do business in the areas served by our branches, which is also where our marketing is focused, and the vast majority of our loan customers are located in existing market areas. Virtually all of our loans are from Virginia, Maryland, West Virginia, or Washington D.C. The Small Business Administration may from time to time come to us because of our reputation and expertise as an SBA lender and ask us to review a loan outside of our core counties but within our market area. Prior to making a loan, we obtain detailed loan applications to determine a borrower’s ability to repay, and the more significant items on these applications are verified through the use of credit reports, financial statements and confirmations. The following is a discussion of each of the major types of lending:

Commercial Real Estate Lending

Permanent. Commercial real estate lending includes loans for permanent financing and construction. Commercial real estate lending typically involves higher loan principal amounts and the repayment of loans is dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service. As a general practice, we require our commercial real estate loans to be secured by well-managed income producing properties with adequate margins and to be guaranteed by responsible parties. We look for opportunities where cash flow from the collateral properties provides adequate debt service coverage and the guarantor’s net worth is centered on assets other than the project we finance. It has been our experience that borrowers whose assets consist entirely of real estate, especially development projects, are particularly sensitive to real estate market cycles. In the event of a slowdown in the real estate market, real estate projects may come under pressure at the same time and the liquidity of the borrower may be strained. At June 30, 2006, our commercial real estate loans for permanent financing totaled $50.3 million.

Our underwriting guidelines for commercial real estate loans reflect all relevant credit factors, including, among other things, the income generated from the underlying property to adequately service the debt, the availability of secondary sources of repayment and the overall creditworthiness of the borrower. In addition, we look to the value of the collateral, while maintaining the level of equity invested by the borrower.

All valuations on property which will secure loans are performed by independent outside appraisers who are reviewed by our executive vice president of risk management and reported annually to our credit committee. We retain a valid lien on real estate and obtain a title insurance policy that insures the property is free of encumbrances.

Construction. We recognize that construction loans for commercial, multifamily and other non-residential properties can involve risk due to the length of time it may take to bring a finished real estate product to market. As a result, we will only make these types of loans when pre-leasing or pre-sales or other credit factors suggest that the borrower can carry the debt if the anticipated market and property cash flow projections change during the construction phase. At June 30, 2006, we had $21.4 million in commercial construction loans.

Income producing property loans are supported by evidence of the borrower’s capacity to service the debt. All of our commercial construction loans are guaranteed by the principals or general partners. Any interest reserves established on conventional construction loans are not funded with the proceeds of the loan.

Construction loan borrowers are generally pre-qualified for the permanent loan by us. We obtain a copy of the contract with the general contractor who must be acceptable to us. All plans, specifications and surveys must include proposed improvements. We review feasibility studies and sensitivity and risk analyses showing sensitivity of the project to variables such as interest rates, vacancy rates, lease rates and operating expenses for income producing properties and copies of any previous environmental site assessments, if applicable.

Commercial Business Lending

These loans consist of lines of credit, revolving credit facilities, demand loans, term loans, equipment loans, SBA loans, stand-by letters of credit and unsecured loans. Commercial business loans are generally secured by accounts receivable, equipment and other collateral, such as readily marketable stocks and bonds with adequate margins, cash value in life insurance policies and savings and time deposits at Sonabank. At June 30, 2006, our commercial business loans totaled $7.9 million.

In general, commercial business loans involve more credit risk than residential mortgage loans and real estate-backed commercial loans and, therefore, usually yield a higher return to us. The increased risk for commercial business loans is due to the type of collateral securing these loans. The increased risk also derives from the expectation that commercial loans will be serviced principally from the operations of the business, and that those operations may not be successful. Historical trends have shown that these types of loans do have higher delinquencies than mortgage loans. Because of this, we often utilize the SBA 7(a) program (which guarantees the repayment of up to 85% of the principal and accrued interest to us to reduce the inherent risk associated with commercial business lending.

Another way that we reduce risk in the commercial loan portfolio is by taking accounts receivable as collateral. Our accounts receivable financing facilities, which provide a relatively high yield with considerable collateral control, are lines of credit under which a company can borrow up to the amount of a borrowing base which covers a certain percentage of the company’s receivables. From our customer’s point of view, accounts receivable financing is an efficient way to finance expanding operations because borrowing capacity expands as sales increase. Customers can borrow from 75% to 90% of qualified receivables, less accounts over 60 days past due. In most cases, the borrower’s customers pay us directly. For borrowers with a good track record for earnings and quality receivables, we will consider pricing based on an increment above the prime rate for transactions in which we lend up to a percentage of qualified outstanding receivables based on reported agings of the receivables portfolio.

We also actively pursue for our customers equipment lease financing opportunities other than cars, trucks, and other on-road rolling stock. We provide financing and use a third party to service the leases. Payment is derived from the cash flow of the borrower, so credit quality may not be any lower than it would be in the case of an unsecured loan for a similar amount and term.

SBA Lending

We have developed an expertise in the federally guaranteed SBA program. The SBA program is an economic development program which finances the expansion of small businesses. We are a Preferred Lender in the Washington D.C. and Richmond Districts of the SBA. As an SBA Preferred lender, our pre-approved status allows us to quickly respond to customers’ needs. Under the SBA program, we originate and fund SBA 7(a) loans which qualify for guarantees up to 85% of principal and accrued interest. We also originate 504 chapter loans in which we generally provide 50% of the financing, taking a first lien on the real property as collateral.

We provide SBA loans to potential borrowers who are proposing a business venture, often with existing cash flow and a reasonable chance of success. We do not treat the SBA guarantee as a substitute for a borrower meeting our credit standards, and except for minimum capital levels or maximum loan terms, the borrower must meet our other credit standards as applicable to loans outside the SBA process.

Residential Mortgage Lending

Permanent. Residential mortgage loans are secured by single-family homes. We make fixed and adjustable rate first mortgage loans on residential properties with terms up to 30 years. We offer second mortgages in conjunction with our own mortgages or those of other lenders. In the case of conventional loans, we typically lend up to 80% of the appraised value of single-family residences and require mortgage insurance for loans exceeding that amount. At June 30, 2006, we had $10.3 million of permanent residential mortgage loans.

We retain a valid lien on real estate and obtain a title insurance policy that insures the property is free of encumbrances. We also require hazard insurance and flood insurance for all loans secured by real property if the real property is in a flood plain as designated by the Department of Housing and Urban Development. We also require most borrowers to advance funds on a monthly basis from which we make disbursements for items such as real estate taxes, private mortgage insurance and hazard insurance.

Construction

We typically make single family residential construction loans to builders/developers in our market areas. Construction loans generally have interest rates of prime plus one to two percent and fees of one to three points, loan-to-value ratios of 80% or less based on current appraisals and terms of generally nine months or less. In substantially all cases, when we make a residential construction loan to a builder, the residence is pre-sold. All plans, specifications and surveys must include proposed improvements. Borrowers must evidence the capacity to service the debt. At June 30, 2006, we had $3.7 million of residential construction loans.

Consumer Lending

We offer various types of secured and unsecured consumer loans. We make consumer loans primarily for personal, family or household purposes as a convenience to our customer base since these loans are not the focus of our lending activities. As a general guideline, a consumer’s debt service should not exceed 40% of his gross income or 45% of net income. For purposes of this calculation, debt includes house payment or rent, fixed installment payments, the estimated payment for the loan being requested and the minimum required payment on any revolving debt. At June 30, 2006, we had $2.7 million of consumer loans.

Credit Approval and Collection Policies

Because future loan losses are so closely intertwined with our underwriting policy, we have instituted what management believes is a stringent loan underwriting policy. Our underwriting guidelines are tailored for particular credit types, including lines of credit, revolving credit facilities, demand loans, term loans, equipment loans, real estate loans, SBA loans, stand-by letters or credit and unsecured loans. We will make extensions of credit based, among other factors, on the potential borrower’s creditworthiness, likelihood of repayment and proximity to market areas served.

We have a standing Credit Committee comprised of certain of our officers, each of whom has a defined lending authority as an individual and in combination with other officers. These individual lending authorities are determined by our chief executive officer and certain directors and are based on the individual’s technical ability and experience. These authorities must be approved by our board of directors and our credit committee. Our credit committee is comprised of four levels of members: junior, regular, senior, and executive, based on experience. Our executive members are Ms. Derrico and Messrs. Porter and Stevens. (See “Management.”) Under our loan approval process, the sponsoring loan officer’s approval is required on all credit submissions. This approval must be included in or added to the individual and joining authorities outlined below. The sponsoring loan officer is primarily responsible for the customer’s relationship with us, including, among other things, obtaining and maintaining adequate credit file information. We require each loan officer to maintain loan files in an order and detail that would enable a disinterested third party to review the file and determine the current status and quality of the credit.

In addition to approval of the sponsoring loan officer, we require approvals from one or more members of the Credit Committee on all loans. The approvals required differ based on the size of the borrowing relationship. At least one senior or one executive member must approve all loans in the amount of $100,000 or more. All three of the executive members of the Committee must approve all loans of $1 million or more. Regardless of the number of approvals needed, we encourage each member not to rely on another member’s approval as a basis for approval and to treat his approval as if it were the only approval necessary to approve the loan. Our legal lending

limit to one borrower is limited to 15% of our unimpaired capital and surplus. As of June 30, 2006, our lending limit was approximately $4.7 million, although we have no loans to one borrower that approach our legal lending limit to date.

The following collection actions are the minimal procedures which management believes are necessary to properly monitor past due loans and leases. When a borrower fails to make a payment, we contact the borrower in person, in writing or on the telephone. At a minimum, all borrowers are notified by mail when payments of principal and/or interest are five days past due and when payments are 10 days past due. Real estate and commercial loan borrowers are assessed a late charge when payments are 15 days past due. Customers are contacted by a loan officer before the loan becomes 60 days delinquent. After 90 days, if the loan has not been brought current or an acceptable arrangement is not worked out with the borrower, we will institute measures to remedy the default, including commencing foreclosure action with respect to mortgage loans and repossessions of collateral in the case of consumer expense.

If foreclosure is effected, the property is sold at a public auction in which we may participate as a bidder. If we are the successful bidder, we include the acquired real estate property in our real estate owned account until it is sold. These assets are carried at the lower of cost or the fair value net of estimated selling costs. To the extent there is a decline in value, that amount is charged to operating expense. At June 30, 2006, we had no other real estate owned.

Special Products and Services

To complement our array of loans, we also provide the following special products and services to our commercial customers:

Cash Management Services

Cash Management services are offered that enable the Bank’s business customer to maximize the efficiency of their cash management. Specific products offered pursuant to the cash management services program include the following:

•

Investment/sweep accounts

•

Wire Transfer services

•

Employer Services/Payroll processing services

•

Zero balance accounts

•

Night depository services

•

Web Lockbox services (third party)

•

Depository transfers

•

Merchant services (third party)

•

ACH originations

•

Business debit cards

•

Controlled disbursement accounts

•

Sona In-House (Check 21 processing)

Three of the products listed above are described in-depth below.

•

Sona In-House/Check 21: Sona In-House is ideal for landlords, property managers, medical professionals, and any other businesses that accept checks. Sonabank is a market leader in banking technology, and has created Sona In-House to empower its business customers. Now the customers of

Sonabank can have total control over how, when, and where their checks will be deposited. Sona In-House uses the new Check Truncation technology outlined by the “Check Clearing for the 21st Century Act”, passed in October 2004 (Check 21). This act allows banks to have a universal technique for processing checks. With Check Truncation, paper checks can now be converted to electronic images and processed between participating banks, vastly speeding up the check clearing process. Sona In-House passes on the benefits of Check Truncation directly to Sonabank’s business customers.

•

Web Lockbox Services: Sonabank will open a lockbox in the customer’s name, retrieve incoming checks, and deposit them directly into the customer’s account. The images of the checks will then be available to view online. This makes bookkeeping for the customer fast and easy, and because Sonabank is checking the lockbox daily, funds will often be available sooner. Big businesses have been using lockboxes for decades as a cash management tool. Now Sonabank is making this service cost effective for all small and medium sized businesses as well.

•

Employer Services: Employer services include direct deposit of payroll checks into accounts at the Bank which enables employees to receive several benefits including a checking account with no monthly maintenance fees, and automated teller machine (“ATM”)/Debit card and discounts on consumer loans.

•

Other Consumer/Retail Products and Services. Other products and services that are offered by the Bank are primarily directed toward the individual customer and will include the following:

•

Debit cards

•

ATM services

•

Travelers Checks

•

Savings bonds

•

Money Orders

•

Notary service

•

Wire transfers

•

Telephone banking

•

Online banking with bill payment services

Market Area

General. We currently conduct our business principally through our two branches and three loan production offices located in Charlottesville, Fredericksburg and Warrenton, Virginia. Our market area for deposit products has been in Albemarle County in the Charlottesville MSA as well as Alleghany County for the Clifton Forge MSA. Based on data available on the FDIC website as of June 30, 2005, our total deposits in the Charlottesville MSA ranked 10 ^th among 13 financial institutions and represented approximately 0.37% of the total deposits in that MSA. That same data showed that Sonabank’s deposits in Clifton Forge ranked first among five financial institutions and represented approximately 41.0% of the total deposits there. For our lending operation, we have served a broader area, encompassing most of Northern Virginia, including the counties of Fairfax, Loudon, Fauquier, and Prince William.

LOGO

Detailed Analysis. The features and demographics of our primary market areas are discussed below.

Charlottesville. Charlottesville is an independent city located within the confines of Albemarle County in the commonwealth of Virginia, United States. As of the 2003 census update, the city proper had a population of 39,162. In 2004, Charlottesville was ranked the best place to live in the United States in the book Cities Ranked and Rated by Bert Sperling and Peter Sander. It is best known as the home of the University of Virginia, founded by Thomas Jefferson.

As of the U.S. census of 2000, there were 79,236 people, 31,876 households, and 21,070 families residing in the county.

The median income for a household in the county was $50,749, and the median income for a family was $63,407. Males had a median income of $39,622 versus $30,645 for females. The per capita income for the county was $28,852.

Northern Virginia. When we open the Sonabank branch (for which we have received regulatory approval) in Warrenton, Virginia in the fourth quarter of 2006 our deposit market area will expand into Fauquier, Loudon, and Prince William Counties, all which have experienced rapid population and economic growth in recent years.

Since our commencement of operations, we have had a loan production office in Northern Virginia (Warrenton) with two loan officers, and a loan production office in Fredericksburg. As of June 30, 2006 loans in Fauquier, Loudon, and Prince William counties represented 12.0% of total loans. If we include loans made in Fairfax and Washington D.C. 35.17% of our total loans are made to borrowers located in Northern Virginia.

Our lending presence in Northern Virginia, particularly Fairfax County, will work as a jump off point to an expanded branch presence in this market. We anticipate having three more branches in Fairfax County upon the closing of our merger with 1 ^st Service. Fairfax County is one of the most desirable markets in Northern Virginia, marked by a wealthy and well educated population, and rapid growth.

The 1 ^st Service merger will give Sonabank three branches in Fairfax County, as mentioned above. These three branches are in Fairfax City, McLean and Reston. The demographics of these markets is discussed below.

Fairfax City. Fairfax City is an independent city forming an enclave within the confines of Fairfax County. The median income for a household in the city was $67,642, and the median income for a family was $78,921. Males had a median income of $50,348 versus $38,351 for females. The per capita income for the city was $31,247.

McLean. McLean is home to diplomats, federal government employees and government contractors. Several major companies are headquartered in McLean including Gannett Company, Inc., Federal Home Loan Mortgage Corporation, Capital One Financial Corporation, and NVR, Inc. It is also the headquarters of USA Today and the candymaker Mars, Incorporated.

As of the U.S. census of 2000, there are 38,929 people, 14,374 households and 11,053 families residing in the Census Designated Place (“CDP”).

The median income for a household in the CDP is $121,138, and the median income for a family is $137,610. Males have a median income of $93,065, versus $60,698 for females. The per capita income for the CDP is $63,209.

Reston. Reston is an internationally known “new town” and planned community. It is an unincorporated subdivision and CDP located in western Fairfax County, Virginia, in the Washington, DC metropolitan area. Reston straddles the booming Northern Virginia Technology Corridor and is home to the world headquarters of Sprint Nextel and Sallie Mae, as well as the United States Geological Survey and the National Wildlife Federation.

As of the U.S. census of 2000, there were 56,407 people, 23,320 households, and 14,481 families residing in the community.

The median income for a household in the community was $80,018, and the median income for a family was $94,061. Males had a median income of $70,192 versus $45,885 for females. The per capita income for the community was $42,747.

Clifton Forge. Clifton Forge is located in Alleghany County, which encompasses 452 square miles within the James River Basin. The largest city in Alleghany County is Covington. Other towns include Iron Gate and Clifton Forge.

Clifton Forge and Covington make up a large portion of the population of Alleghany County, with 4,289 and 6,303 residents, respectively. (Allegheny County has a total population of 12,926 residents) The age breakdown of Clifton Forge shows a larger concentration of older residents, with 2,624 residents over the age 35, and only 1,665 residents under the age of 35. The town’s income is in the range of $11,606 – $26,996, with a median income of $21,543. Although this may seem low, the cost of living there is also relatively low, and the town has a low unemployment rate of 4.4%. Nearly 50% of the town’s population is employed by the trade and manufacturing sectors.

Competition

The banking business is highly competitive, and our profitability depends principally on our ability to compete in the market areas in which our banking operations are located. We experience substantial competition in attracting and retaining savings deposits and in lending funds. The primary factors we encounter in competing for savings deposits are convenient office locations and rates offered. Direct competition for savings deposits comes from other commercial bank and thrift institutions, money market mutual funds and corporate and government securities which may offer more attractive rates than insured depository institutions are willing to pay. The primary factors we encounter in competing for loans include, among others, interest rate and loan origination fees and the range of services offered. Competition for origination of real estate loans normally comes from other commercial banks, thrift institutions, mortgage bankers, mortgage brokers and insurance companies. We have been able to compete effectively with other financial institutions by:

•

emphasizing customer service and technology;

•

by establishing long-term customer relationships and building customer loyalty; and

•

by providing products and services designed to address the specific needs of our customers.

Employees

At June 30, 2006, we had 31 full-time equivalent employees, four of whom were executive officers. Management considers its relations with its employees to be good. Neither we nor Sonabank are a party to any collective bargaining agreement.

Properties

We conduct business from our main branch in Charlottesville, Virginia, at our branch in Clifton Forge, Virginia, and at an administrative office and two loan production offices. We will add a third branch office in the fourth quarter of 2006 in Warrenton, Virginia. All of our leases, except for our lease in Fredericksburg, are for five years or more and the expiration dates range from February 2010 to October 2010, not including any optional renewal periods which may be available. We believe that our banking offices are in good condition and suitable to our needs. We are not aware of any environmental concerns relating to the properties we lease or will acquire in the 1 ^st Service merger. We intend to utilize the three branch offices that we will acquire from 1 ^st Service in the merger. They are located in McLean, Reston and Fairfax, Virginia.

The following table sets forth the date opened or acquired, ownership status and the total deposits, not including brokered deposits, for each of our banking locations:


Location	Date Opened or Acquired	Owned or Leased	Deposits at June 30, 2006
Home Office and Branch:
1770 Timberwood Boulevard	April 2005	Leased	$	18.2 million
Charlottesville, Virginia 22911

Branch Office:
511 Main Street	December 2005	Owned	$	40.1 million
Clifton Forge, Virginia 24422

Loan Production Offices:
230 Court Square	March 2005	Leased		N/A
Charlottesville, Virginia 22902

2217 Princess Anne Street	April 2005	Leased		N/A
Fredericksburg, Virginia 22401

550 Broadview Avenue	September 2005	Leased		N/A
Warrenton, Virginia 20186

Executive Offices
1002 Wisconsin Avenue, N.W.	April 2005	Leased		N/A
Washington, D.C. 20007

Legal Proceedings

While Sonabank may, from time to time, be a party to various legal proceedings arising in the ordinary course of its business, there are no proceedings pending, or to management’s knowledge, threatened, against SNBV or Sonabank as of the date of this prospectus.

Website Address

Our corporate website address is www.sonabank.com. After consummation of this offering we expect to have direct links to our filings with the SEC including but not limited to our future Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and any amendments to these reports. These reports will be accessible soon after we file them with the SEC. Prior to this offering we have not been required to make such filings with the SEC.

THE MERGER

On July 10, 2006, we signed a definitive Agreement and Plan of Merger with 1 ^st Service where, upon the closing of the merger agreement, 1 ^st Service will merge with and into Sonabank.

The Merger Consideration

Subject to the terms and conditions of the merger agreement, upon completion of the merger, each outstanding share of 1 ^st Service common stock (other than any dissenting shares) will automatically be converted into and cancelled in exchange for the right to receive (i) .76092 of a share of SNBV common stock and (ii) $5.26 in cash. We will not issue certificates or scrip for fractional shares of our common stock in the merger. Instead, each holder of 1 ^st Service common stock who otherwise would have been entitled to a fraction of a share of our common stock will receive in lieu thereof cash (without interest) in an amount determined by multiplying the fractional share interest to which such holder would otherwise be entitled (after taking into account all shares of 1 ^st Service common stock owned by such holder at the effective time of the merger) by $12.50, the assumed value of a share of our common stock for purposes of the merger agreement.

At the effective time of the merger, each outstanding 1st Service stock option, whether or not vested or exercisable, will be terminated and the holder thereof shall be entitled to receive from SNBV within five business days of such time the following:

•

the number of shares of our common stock (rounded down to the nearest whole share) determined by dividing (x) the product of the option spread amount (as defined below) and .65, by (y) 12.50; and

•

an amount of cash equal to the sum of (x) the product of the option spread amount and .35 and (y) the cash value of any fractional share interest resulting from the calculation set forth in the preceding bullet point, determined in the manner set forth in the merger agreement, less applicable tax withholding.

For purposes of the merger agreement the term “option spread amount” means, with respect to a 1 ^st Service stock option, the amount determined by multiplying (i) the excess, if any, of $14.77 (the value of the merger consideration, based on a $12.50 assumed value of a share of SNBV common stock) over the applicable per share exercise price of that option, by (ii) the number of shares of 1 ^st Service common stock that the holder could have purchased (assuming full vesting of that option) had that holder exercised that option immediately before the effective time of the merger.

In deciding to approve the merger agreement, the 1 ^st Service board of directors considered the opinion of its financial advisor, Milestone Advisors, L.L.C., which was delivered orally at the meeting of the board held on July 6, 2006 and in written form dated July 10, 2006, that, based upon and subject to certain matters stated in the opinion, the merger consideration was fair to the holders of 1 ^st Service common stock from a financial point of view.

Tax Consequences

Based on the opinion of tax counsel to SNBV and 1 ^st Service, we expect that the material United States federal income tax consequences of the merger to 1 ^st Service shareholders will be as follows.

•

1 ^st Service shareholders generally will recognize gain (but not loss) equal to the lesser of (1) the excess of the sum of the cash and the fair market value of the SNBV common stock received over the holder’s tax basis in the 1 ^st Service common stock surrendered or (2) the amount of cash received.

•

The 1 ^st Service shareholder’s holding period for the SNBV common stock received in the merger will include such shareholder’s holding period for the 1 ^st Service common stock exchanged in the merger.

Tax matters are complicated, and the tax consequences of the merger to 1 ^st Service shareholders will depend upon the facts of their particular situations. In addition, 1 ^st Service shareholders may be subject to state, local or foreign tax laws that are not discussed herein. Accordingly, 1 ^st Service shareholders will be urged to consult their own tax advisors for a full understanding of the tax consequences to them of the merger.

1 ^st Service Management Interests

The executive officers and directors of 1st Service have interests in the merger that are somewhat different from the interests of the other shareholders. These interests include the following.

Employment Agreements. Pursuant to existing employment agreements between 1 ^st Service and each of Ernest L. Tressler, President and Chief Executive Officer, and Gregory A. Murray, Executive Vice President and Chief Financial Officer, it is anticipated that upon completion of the merger Messrs. Tressler and Murray would be entitled to receive from Sonabank a cash amount equal to $513,945 and $312,268, respectively, plus continued medical, dental, disability and life insurance benefits until the earlier of (i) 24 months following termination of employment and (ii) the date the executive commences employment with another employer which provides substantially comparable benefits. Pursuant to a provision contained in each employment agreement, however, these benefits would be cut back by the minimum amount necessary to ensure that there are not adverse tax consequences to 1 ^st Service and the executives under Section 280G of the Internal Revenue Code. This would result in a cut back of approximately $158,070 in the case of Mr. Tressler, assuming the merger is completed in 2006. The 1 ^st Service shareholders will be asked to approve a proposal at the special meeting of shareholders where the merger will be considered that, if approved by the shareholders of 1 ^st Service at the special meeting, the amount to be paid to Mr. Tressler would be exempt from the operation of Section 280G and would be paid to Mr. Tressler without adverse tax consequences to 1 ^st Service or him under Section 280G.

Stock Options. As of the date of this document, the directors and executive officers of 1 ^st Service held vested options to acquire an aggregate of 61,750 shares of 1 ^st Service common stock at a price of $10.00 per share under the 1 ^st Service stock option plan, including options to purchase 12,000 and 8,000 shares held by Messrs. Tressler and Murray, respectively.

Stay Bonuses. Pursuant to the merger agreement, the president and chief executive officer of 1 ^st Service may pay up to an aggregate of $60,000 of bonuses to key employees who either are not offered a job with SNBV or Sonabank, or who are offered such a job and decline, to incent them to remain in the employ of 1 ^st Service until completion of the merger, or as otherwise authorized by the merger agreement.

Indemnification and Insurance. SNBV has agreed to indemnify existing and past directors, officers and employers of 1 ^st Service for acts and omissions prior to the merger and to purchase liability insurance for 1 ^st Service’s directors and officers covering the same for a three-year period following the merger, subject to the terms of the merger agreement.

1 ^st Service Stockholder Vote

Based on 1 ^st Service’s reasons for the merger, including the opinion of Milestone Advisors referred to above, the 1 ^st Service board of directors believes that the merger is fair to 1 ^st Service shareholders and in the best interests of 1 ^st Service and unanimously recommended that 1 ^st Service shareholders vote to approve the merger agreement at the special meeting of stockholders to be held for that purpose on , 2006. SNBV and 1 ^st Service intend to prepare a prospectus/proxy statement to be filed with the SEC on a registration statement Form S-4 prior to the special meeting. The prospectus/proxy statement will describe the terms and conditions of the merger agreement in detail. The board of directors of 1 ^st Service will also recommend that its shareholders vote to approve the Section 280G proposal described herein.

The affirmative vote of the holders of two thirds of the outstanding shares of 1 ^st Service common stock, voting in person or by proxy, is necessary to approve the merger agreement on behalf of 1 ^st Service. In addition to this required vote, in the event that the board of directors of 1 ^st Service changes its recommendation that 1 ^st Service shareholders vote to approve the merger agreement or takes certain other actions, the merger agreement also will have to be approved by the holders of a majority of the outstanding shares of 1 ^st Service common stock not held by persons who are a party to a shareholder agreement who vote, in person or by proxy, at the 1 ^st Service special meeting.

Pursuant to Section 280G of the Internal Revenue Code and the regulations thereunder, the affirmative vote of the holders of more than 75% of the outstanding shares of 1 ^st Service common stock (excluding any shares actually or constructively owned by Mr. Tressler, which will not be counted as outstanding and may not be voted for this purpose) is necessary to approve the payment or provision of all change-in-control severance benefits that otherwise would be cut back pursuant to Section 6(j) of the employment agreement between 1 ^st Service and Ernest L. Tressler so that such benefits will be exempt from the operation of Section 280G of the Internal Revenue Code. The approval of this proposal is not a condition to the completion of the merger and will not change the merger consideration which a 1 ^st Service shareholder will be eligible to receive upon completion of the merger.

The affirmative vote of a majority of the votes cast by the holders of shares of 1 ^st Service common stock voting, in person or by proxy, at the special meeting is necessary to approve any other matter properly submitted to shareholders for their consideration at the special meeting.

Each director of 1 ^st Service has entered into a shareholder agreement with SNBV pursuant to which he has agreed to vote all of his shares of 1 ^st Service common stock to approve the merger agreement, thus ensuring approval of this proposal by shareholders at the special meeting. Pursuant to his respective shareholder agreement with SNBV, each director of 1 ^st Service, other than Mr. Tressler, also has agreed to vote to approve the payment or provision of all change-in-control severance benefits that otherwise would be cut back pursuant to Section 6(j) of the employment agreement between 1 ^st Service and Mr. Tressler so that such benefits will be exempt from the operation of Section 280G of the Internal Revenue Code. The directors of 1 ^st Service beneficially own 619,900 shares or 71.4% of the outstanding 1 ^st Service common stock in the aggregate (614,900 shares or 70.8% excluding Mr. Tressler).

Stockholders of SNBV are not required to vote on the merger agreement.

Conditions to Each Party’s Obligations

The obligations of SNBV and 1 ^st Service to consummate the transactions contemplated by the merger agreement are subject to the satisfaction at or before the completion of the merger of the following conditions:

•

receipt of the required vote, and if applicable the supplemental required vote, of the shareholders of 1 ^st Service of the merger agreement;

•

the receipt and continued effectiveness of all regulatory approvals required to consummate the merger and the other transactions contemplated by the merger agreement and the expiration of all applicable statutory waiting periods;

•

the registration statement on Form S-4, which will include the proxy statement/prospectus, is effective under the Securities Act of 1933, as amended;

•

the absence of any injunction or other legal prohibition against the merger or the other transactions contemplated by the merger agreement; and

•

the receipt of an opinion of counsel that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code.

Conditions to SNBV’s and Sonabank’s Obligations

The obligations of SNBV and Sonabank to consummate the transactions contemplated by the merger agreement are subject to the satisfaction or waiver at or before the completion of the merger of the following conditions:

•

the representations and warranties of 1 ^st Service are true and correct as of the date of the Merger Agreement and as of the closing date for the merger (except that certain representations and warranties

will be read without materiality or material adverse effect qualifications), other than, in most cases, those failures to be true and correct that would not result or reasonably be expected to result, individually or in the aggregate, in a material adverse effect on 1 ^st Service;

•

performance in all material respects by 1 ^st Service of the obligations required to be performed by it at or prior to the closing date for the merger;

•

there is no noncustomary legal or regulatory restriction or condition applicable to the merger that would be reasonably likely to have a material adverse effect on the business or operations of SNBV following completion of the merger;

•

SNBV’s receipt of a certificate of certain officers of 1 ^st Service as to the number of shares of 1 ^st Service common stock and 1 ^st Service stock options outstanding on the closing date for the merger; and

•

dissenting shares shall not represent 10% or more of the outstanding 1 ^st Service common stock.

Conditions to 1 ^st Service’s Obligations

The obligation of 1 ^st Service to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction or waiver at or before the completion of the merger of the following conditions:

•

the representations and warranties of SNBV are true and correct as of the date of the merger agreement and as of the closing date for the merger (except that certain representations and warranties will be read without materiality or material adverse effect qualifications), other than, in most cases, those failures to be true and correct that would not result or reasonably be expected to result, individually or in the aggregate, in a material adverse effect on SNBV; and

•

performance in all material respects by SNBV of the obligations required to be performed by it at or prior to the closing date for the merger.

Unless prohibited by law, either SNBV or 1 ^st Service could elect to waive a condition that has not been satisfied and complete the merger. Although SNBV and 1 ^st Service anticipate completing the merger by the end of 2006, we cannot be certain whether or when any of the conditions to the merger will be satisfied, or waived where permissible, or that the merger will be completed during this period or at all.

Required Regulatory Approvals

The merger is subject to the prior approval of, or notice to, certain regulatory authorities, including the Federal Reserve Board, the Office of the Comptroller of the Currency of the United States and the Office of Thrift Supervision. The U.S. Department of Justice will have an opportunity to comment during the approval process of the Federal Reserve Board and will have at least 15 but no more than 30 days following the approval of the Federal Reserve Board to challenge the approval on antitrust grounds. SNBV and 1 ^st Service are in the process of preparing and filing all necessary applications and notices with the applicable regulatory agencies. We cannot predict, however, whether the required regulatory approvals will be obtained.

Termination

SNBV and 1 ^st Service can mutually agree at any time to terminate the merger agreement before completing the merger, even if shareholders of 1 ^st Service have already voted to approve it. Either party generally also can terminate the merger agreement if:

•

any governmental entity which must grant a required regulatory approval has denied approval of the merger or the other transactions contemplated by the merger agreement;

•

the merger has not been completed on or before April 30, 2007;

•

there is a breach by the other party to the merger agreement of its representations and warranties or obligations under the merger agreement which would prevent satisfaction of a closing condition and the breach is not reasonably capable of being cured or is not cured prior to 30 days after receipt of written notice of the breach; or

•

the shareholders of 1 ^st Service fail to approve the merger agreement at the 1 ^st Service shareholders meeting;

In addition, SNBV may terminate the merger agreement at any time prior to the 1 ^st Service special meeting if the board of directors of 1 ^st Service does not recommend approval of the merger agreement or changes its recommendation with respect to the merger agreement or does not call and hold a special meeting of 1 ^st Service shareholders to vote on approval of the merger agreement.

If the merger agreement is terminated under certain circumstances, including circumstances involving a change in recommendation with respect to the merger agreement by 1 ^st Service’s board of directors, and 1 ^st Service subsequently enters into an acquisition agreement with another party during the ensuing 15 months, 1 ^st Service will be required to pay us a termination fee of $585,000. The termination fee could discourage other companies from seeking to acquire or merge with 1 ^st Service.

No Solicitation

1 ^st Service has agreed that, while the merger is pending, it will not initiate or, subject to some limited exceptions, engage in discussions with any third party other than us regarding extraordinary transactions such as a merger, business combination or sale of a material amount of assets or capital stock.

Accounting Treatment

We will use the purchase method of accounting to account for the merger. Under this method, the total purchase price will be allocated to the assets acquired and liabilities assumed, based on their fair values. To the extent that this purchase price exceeds the fair value of the net tangible assets acquired at the effective time of the merger, we will allocate the excess purchase price to intangible assets, including goodwill. In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” the goodwill resulting from the merger will not be amortized to expense; however, core deposit and other intangibles with definite useful lives recorded by us in connection with the merger will be amortized to expense.

Dissenter’s Rights

Section 552.14 of the OTS Regulations for Federal Savings Associations (12 C.F.R. Section 552.14) provides that, if the merger is consummated, dissenting shareholders who comply with specified requirements shall have the right to receive payment of the fair or appraised value of their shares of 1 ^st Service common stock (exclusive of any element of value arising from the completion or expectation of the merger).

Risk Factors

There are a number of risk factors relating to the merger. See, for example, “Risk Factors—If we are unable to integrate 1 ^st Service or the branches or banks we acquire in the future with our existing operations, our business and earnings may be negatively affected;” and “- Our pending acquisition of 1 ^st Service is an important part of our growth strategy. If we do not complete this acquisition, that could result in a significant delay in the implementation of our strategy and could significantly slow our growth.”

MANAGEMENT

Directors and Executive Officers

The same directors serve on the board of directors of both SNBV and Sonabank. Directors of SNBV have staggered terms consisting of three groups of directors, and, at each annual meeting, members of one of the groups, on a rotating basis, are elected for a three-year term. Directors of Sonabank are elected annually.

The following table sets forth the name, age, primary occupation, business experience and term for our directors as of June 30, 2006. Except for Mr. Forch and Ms. Shield, each of our directors have held the position indicated with SNBV and Sonabank since inception at April 14, 2005.


Name (Age)	Term Ending	Position with SNBV and Sonabank and Business Experience
Georgia S. Derrico (61)	2009	Chairman of the Board and Chief Executive Officer of SNBV and the Bank. Prior to co-founding SNBV in July 2004, she was the Chairman of the Board and Chief Executive Officer of Southern Financial Bancorp, Inc. from 1986 until April 2004. Southern Financial Bancorp, Inc. was the Nasdaq National Market System-listed bank holding company for the $1.5 billion (assets) Southern Financial Bank, Warrenton, Virginia, which was acquired by Provident Bankshares, Inc. in April 2004. She founded Southern Financial Bank in 1986. Prior to that, she served as Senior Vice President, Chief Administrative and Credit Officer of the Multinational Division of Chemical Bank in New York City. She also served at Chemical Bank as the Vice President and District Head of the Mid-Atlantic region of the United States for the Corporate Banking Division. From 1993 to 2004, Ms. Derrico was a director of Oneida, Ltd. She is the wife of Mr. R. Roderick Porter.

R. Roderick Porter (61)	2007	President of SNBV and the Bank. Prior to co-founding SNBV in July 2004, he was the President and Chief Operating Officer of Southern Financial Bancorp, Inc. from April 1998 until April 2004. From 1994 to 1998, he was President of FX Concepts, Ltd., an international money management firm located in New York City. Prior to that, he served as a Principal of Morgan Stanley. Mr. Porter spent 15 years at Chemical Bank, including as a Senior Vice President in Chemical Bank’s treasury department where he was responsible for asset/liability management, the U.S. government and municipal securities portfolio, all U.S. dollar-denominated funding for the bank and the holding company, money market trading and the discount brokerage operation. Prior experience at Chemical Bank included tours as Vice President and General Manager for northern Europe, based in London, and for Chemical Japan, based in Tokyo. Mr. Porter is the husband of Ms. Georgia S. Derrico.

Neil J. Call (72)	2009	Director of SNBV and the Bank. Mr. Call, now retired, was an Executive Vice President of MacKenzie Partners, Inc., a New York City financial consulting company, since 1990. Mr. Call was formerly executive Vice President and co-founder of the Proxy/M&A Group at Dewe Rogerson, Inc., the predecessor firm to MacKenzie Partners. Mr. Call was a director of Southern Financial Bancorp, Inc. and Southern Financial Bank from 1986 until April 2004 and was chairman of that board’s Audit Committee. From 1986 to 1989 he


Name (Age)	Term Ending	Position with SNBV and Sonabank and Business Experience
		served as Executive Vice President of D.F. King and Co. Prior to that he was with Gulf + Western Industries (now Paramount Communications), most recently as Executive Vice President/Finance, and previously as Director of Corporate Communications and Investor Relations. He also spent six years with Ford Motor Company’s Finance Division. Mr. Call is a Certified Public Accountant in the State of Michigan.

Charles A. Kabbash (68)	2009	Director of SNBV and the Bank. Mr. Kabbash has been the owner of 414 Associates, a real estate investment company, operating primarily in the Charlottesville, Virginia, area, since 1984. He also manages Summit Realty, a commercial realty firm, and Summit Business Brokerage, which negotiates the purchase or sale of businesses. Both of these firms also operate primarily in the Charlottesville area. Mr. Kabbash is heavily involved in the business and civic community in Charlottesville, serving as a board member and board vice-chairman of the North Downtown Property Association.

Michael A. Gaffney (51)	2008	Director of SNBV and the Bank. Mr. Gaffney has been President of Gaffney Homes, LLC, a home builder located in the Charlottesville, Virginia area, for 18 years. Mr. Gaffney also develops and builds multi-family and commercial office space, and has earned a number of regional and national home building awards. Mr. Gaffney currently serves as the Chairman of the Board for the Rivanna Water and Sewer Authority and the Rivanna Solid Waste Authority, on the Board of Directors of M-CAM, Inc., an intellectual property management company based in Charlottesville. He is a Past-Chairman for the Charlottesville Regional Chamber of Commerce, which represents over 1,400 businesses in Charlottesville and the surrounding five counties.

Robin R. Shield (43)	2007	Director of SNBV and the Bank. She is currently a private investor. In addition, for the past eight years, Ms. Shield has been the Managing and General Partner of Clear View LLP, a real estate development and investment partnership and Chairman of Norwich Partners, LLC, a hotel development company, both in Norwich, Vermont. She is currently a member of the Board of Directors of the Vermont Institute of National Science and a non-voting board member of the Robins Foundation.

John J. Forch (56)	2008	Director of SNBV and the Bank. For the past four years, he has been the Managing Partner of Forch & Associates, LLC, a tax and financial services firm providing strategic and transactional financial and tax advice in Northern Virginia. Prior thereto, Mr. Forch retired as a Managing Partner of PricewaterhouseCoopers LLC, where he spent 14 years in various senior management and client service partner positions. Mr. Forch is a Certified Public Accountant in the Commonwealth of Virginia and the state of Florida.

Executive Officers Who Are Not Also Directors


Name (Age)		Position with SNBV and Sonabank
William H. Lagos (55)		Senior Vice President and Chief Financial Officer of SNBV and the Bank. From 1986 until April 2004, Senior Vice President and Controller of Southern Financial Bank, the operating subsidiary of Southern Financial Bancorp, Inc., which was acquired by Provident Bankshares, Inc. in April 2004. Mr. Lagos participated in SNBV’s organization commencing in November 2004.

William Stevens (62)		Executive Vice President-Lending of SNBV and the Bank. From 1999 until April 2004, Executive Vice President of Credit Administration for Southern Financial Bank, the operating subsidiary of Southern Financial Bancorp, Inc., which was acquired by Provident Bankshares, Inc. in April 2004. He resigned from Provident Bankshares, Inc. in April 2005 when he joined Sonabank.

Corporate Governance

There are currently seven members of SNBV’s Board of Directors: Georgia S. Derrico, R. Roderick Porter, Michael A. Gaffney, Charles A. Kabbash, Neil J. Call, Robin R. Shield and John J. Forch. Except for Ms. Shield and Mr. Forch, who joined the Board in July, 2005, each person has been a member of the Board since SNBV’s organization in July, 2004 and are the organizers of the Bank. Each member of the Board serves for a three year term unless that director resigns or is removed. One of the three classes of directors is elected annually. Our directors discharge their responsibilities throughout the year at board and committee meetings and also through telephone contact and other communications with the chairman and chief executive officer and other officers. We have no mandatory retirement age for directors and none of our directors has indicated an intention to retire or otherwise not stand for election in the future.

The Board met 11 times during fiscal 2005. Each director attended at least 73% of all of the meetings of the Board on which he or she served, and average attendance of Board meetings was 93%. Each director is expected to dedicate sufficient time, energy and attention to company matters to ensure the diligent performance of his or her duties, including by attending annual and special meetings of the stockholders of SNBV, the Board and Committees of which he or she is a member.

Chairman of the Board. Georgia S. Derrico has served as the Chairman of the Board and Chief Executive Officer of SNBV since January 2005 and of the Bank since it commenced operations in April 2005.

The Chairman of the Board organizes the work of the Board and ensures that the Board has access to sufficient information to enable the Board to carry out its functions, including monitoring SNBV’s and the Bank’s performance and the performance of management. In carrying out this role, the Chairman, among other things: (a) presides over all meetings of the Board of Directors and shareholders; (b) establishes the annual agenda of the Board and agendas of each meeting in consultation with the President of SNBV, R. Roderick Porter; (c) oversees the distribution of information to Directors; (d) advises with respect to the work of each Committee and reviews (with the Nominating Committee) changes in Board membership and the membership and chair of each Committee; (e) coordinates periodic review of management’s strategic plan for SNBV and the Bank; and, (f) coordinates the annual performance review of the key senior managers.

Committees of the Board

General. The Company has no operations other than holding 100% of the common stock of Sonabank. Accordingly, all operational matters are handled at the Bank level. All directors of SNBV are also members of the Board of Directors of Sonabank.

SNBV’s and the Bank’s Boards of Directors have four identical committees with identical membership: Audit, Asset-Liability Management and Compensation. Information regarding these committees is provided below.

Audit Committee. The members of the Audit Committee are: Neil J. Call (Chairman), John J. Forch and Michael A. Gaffney, all of whom we believe are “independent directors” as defined under The Nasdaq Capital Market listing standards. Our Board believes that all of the Audit Committee members have the financial knowledge, business experience and independent judgment necessary for service on the Audit Committee. The Board has further determined that Mr. Call, the Chairman of the Audit Committee, is the Board’s independent “audit committee financial expert” as that term is defined in SEC regulations, and has the financial literacy and accounting or financial qualifications and experience to provide effective oversight of the Audit Committee.

As set forth in the Audit Committee’s charter the functions of the Audit Committee are to assist the Board in its oversight of:

•

the integrity of the Bank’s financial statements;

•

the adequacy of the Bank’s system of internal controls;

•

the Bank’s compliance with regulatory requirements;

•

the qualifications and independence of the Bank’s independent registered public accountants; and

•

the performance of the Bank’s independent registered public accountants and of the Bank’s internal audit function.

In carrying out these responsibilities, the Audit Committee, among other things:

•

monitors the preparation of quarterly and annual financial reports by the Bank’s management;

•

supervises the relationship between the Bank and its independent registered public accountants, including: having direct responsibility for their appointment, compensation and retention; reviewing the scope of their audit services; approving audit and non-audit services; and confirming the independence of the independent registered public accountants; and

•

oversees management’s implementation and maintenance of effective systems of internal and disclosure controls, including review of the Bank’s policies relating to legal and regulatory compliance, ethics and conflicts of interests and review of the Bank’s internal auditing program.

The Audit Committee met once during fiscal 2005 and meets quarterly. The Committee schedules its meetings with a view to ensuring that it devotes appropriate attention to all of its tasks. The Committee’s meetings include, whenever appropriate, executive sessions with the Bank’s independent registered public accountants and with the Bank’s internal auditors, in each case without the presence of the Bank’s management.

As part of its oversight of the Bank’s financial statements, the Committee reviews and discusses with both management and the Bank’s independent registered public accountants all annual and quarterly financial statements prior to their issuance. During fiscal 2005, management advised the Committee that each set of financial statements reviewed had been prepared in accordance with generally accepted accounting principles, and reviewed significant accounting and disclosure issues with the Committee. These reviews included discussion with the independent registered public accountants of matters required to be discussed pursuant to Statement on Auditing Standards No. 61 (Communication with Audit Committees), including the quality of our accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. The Committee also discussed with BDO Seidman, LLP matters relating to its independence, including a review of audit and non-audit fees and the written disclosures.

Nominating Committee. The members of the Nominating Committee are: Charles A. Kabbash, Chairman, Neil J. Call, Georgia S. Derrico and R. Roderick Porter. The Nominating Committee is responsible for recommending nominees for SNBV’s and the Bank’s Boards of Directors . In regard to the latter, the Committee assists the Bank’s Board in developing criteria for open Board positions, reviews background information on potential candidates and makes recommendations to the Board regarding such candidates. The Committee did not meet during fiscal 2005 because banking operations began in April 2005, but did meet once in 2006 to recommend to SNBV’s Board of Directors the nominees for the 2006 Annual Meeting of Stockholders. The nominees were approved by a majority vote of the independent directors. Except for Ms. Derrico and Mr. Porter, the members of the Nominating Committee are deemed by the Bank’s Board to be independent. Both Ms. Derrico and Mr. Porter recuse themselves from the discussion and voting on matters relating to themselves that are relevant to the Committee’s function and purpose.

Compensation Committee. The members of the Compensation Committee are: Charles A. Kabbash (Chairman), Neil J. Call and Georgia S. Derrico. The Compensation Committee is responsible for reviewing and approving corporate goals and objectives relevant to the compensation of the Bank’s senior management (management is not compensated for their service to SNBV), evaluating the performance of senior management and, either as a committee or together with the other independent members of the Board, determining and approving the compensation level for the Chief Executive Officer (with Ms. Derrico recusing herself from such deliberations and voting), and making recommendations regarding compensation of other executive officers and certain compensation plans to the Board (with Ms. Derrico recusing herself from deliberations and voting on matters relating to herself, Mr. R. Roderick Porter and Mr. R. Devon Porter). In 2005, the Compensation Committee met one time. Except for Ms. Derrico, all of the members of the Committee are deemed by the Bank’s Board to be independent.

Asset-Liability Management Committee: The members of Asset-Liability Management Committee are: R. Roderick Porter (Chairman), Charles A. Kabbash and Robin R. Shield. The Asset-Liability Management Committee ensures that the Bank’s investment policies and procedures are adequate and that the Bank’s investments in securities are consistent with the guidelines established in the Bank’s policies and comply with applicable laws and regulations. The Committee evaluates the performance of the securities portfolio to ensure that the Bank’s objectives with respect to diversification, liquidity, and quality are met. While management is responsible for purchase decisions with respect to investment securities, the Asset-Liability Management Committee is responsible for reviewing and ratifying management’s investment transactions. The Asset-Liability Management Committee is also responsible for reviewing the entire balance sheet to ensure that products and funding sources meet with the Board’s policies relating to asset-liability and interest rate risk management. The Asset-Liability Management Committee met once in 2005 and will meet quarterly thereafter.

Code of Ethics. We have adopted a Code of Ethics (the Code), that applies to all of our directors, officers and employees. We believe the Code is reasonably designed to deter wrongdoing and to promote honest and ethical conduct, including the ethical handling of conflicts of interest, full, fair and accurate disclosure in filings and other public communications made by us, compliance with applicable laws, prompt internal reporting of violations of the Code, and accountability for adherence to the Code.

Director Independence

The Bank’s Board of Directors undertook a review of director independence in December 2005. During this review, the Board considered transactions and relationships between each director or any member of his or her immediate family and SNBV and its subsidiaries and affiliates, including those reported under “Certain Relationships and Related Party Transactions,” below. The Board also considered whether there were any transactions or relationships between directors or any member of their immediate family (or any entity of which a Director or an immediate family member is an executive officer, general partner or significant equity holder) and members of SNBV’s senior management or their affiliates. The purpose of this review was to determine whether any such relationships or transactions existed that were inconsistent with a determination that the director is independent.

As a result of this review, the Board affirmatively determined that all of the directors nominated for election at the 2006 Annual Meeting were independent of SNBV and its management, with the exception of Georgia S. Derrico and R. Roderick Porter. Both Ms. Derrico and Mr. Porter are considered to be “inside” directors because of their employment as senior executives of SNBV. Ms. Derrico and Mr. Porter are husband and wife, and their adult son, R. Devon Porter, is the Secretary of SNBV and is also employed by the Bank as the Bank’s Secretary and as a Senior Vice President.

The Audit Committee reviews and votes on all transactions between SNBV and any director or officer that would be required to be disclosed under applicable SEC rules or regulations.

Board Compensation

Director fees were not paid in 2004 or 2005 and will not be paid until the Bank has achieved sustainable profitability. At such time, it is contemplated that non-employee directors will receive a fee of $500.00 for each Board meeting attended and $250.00 for each Committee meeting attended, plus their travel, food and lodging expenses. Non-employee directors who attend either Board or Committee meetings by conference telephone will receive one-half of the fee for such meeting. Directors who are also employees of SNBV will receive no additional compensation for their service as a director.

Certain Relationships and Related Party Transactions

Some of the directors and executive officers of SNBV and the Bank and their associates are customers of the Bank. The Bank has had, and expects to have in the future, banking transactions in the ordinary course of its business with its directors, executive officers, principal shareholders and their associates, on substantially the same terms, including interest rates and collateral on loans, as those prevailing at the same time for comparable transactions with non-affiliated third parties. These transactions do not involve more than the normal risk of collectibility or present other unfavorable features. The balance of loans to associates of the directors totaled $684,115.00 at December 31, 2005, or 2.1% of SNBV’s equity capital at that date.

Ms. Derrico, Chairman of the Board and Chief Executive Officer, is married to Mr. Porter, President. Their son, R. Devon Porter, is the Secretary of SNBV and the Bank and a Senior Vice President of the Bank. All directors and executive officers of SNBV are covered by the indemnification provisions in SNBV’s Articles of Incorporation and by SNBV’s directors’ and officers’ liability insurance coverage.

None of our independent directors is now, or was during the last fiscal year, an officer or employee of Sonabank. During 2005, none of our executive officers served as a director or member of the compensation committee (or group performing equivalent functions) of any other entity for which any of our independent directors served as an executive officer. Ms. Derrico is a member of our Compensation Committee and recuses herself from the discussion and voting on compensation matters relating to herself, Mr. Porter or their son, R. Devon Porter, SNBV’s Secretary and the Bank’s Senior Vice President-Marketing.

Executive Compensation

No officer of SNBV is paid a salary, bonus or other form of compensation other than options to purchase shares of SNBV’s common stock as described in the section entitled “- Stock Options,” below. The executive officers of SNBV currently hold the same executive officer positions with the Bank. All executive compensation is paid by the Bank for services performed by executives of the Bank. Accordingly, the following discussion of executive compensation relates to the compensation by the Bank to executives of the Bank.

Summary Compensation Table

The table below provides information concerning total compensation earned or paid to the Chief Executive Officer and the three other executive officers of SNBV and the Bank who served in such capacities as of January 1, 2005 with respect to SNBV and from April 14, 2005 with respect to the Bank (the named executive officers) for services rendered to the Bank during 2005.


Name and Principal Occupation in 2005	Year ⁽¹⁾	Salary ⁽² ⁾			Cash Bonus ⁽²⁾		No. of Stock Options	Other Annual Compensation ⁽²⁾		All Other Compensation ^(2)(3)(4)
Georgia S. Derrico, Chairman of the Board and Chief Executive Officer	2005	$	120,000.00	⁽⁴⁾	$	0	27,500	$	0	$	0

R. Roderick Porter, Vice Chairman of the Board, President and Chief Operating Officer	2005	$	98,384.00	⁽⁴⁾	$	0	27,500	$	—	$	4,800

William H. Lagos, Senior Vice President	2005	$	101,485.00		$	0	13,000	$	—	$	4,800

William H. Stevens, Executive Vice President	2005	$	125,124.00		$	0	15,000	$	—	$	4,800

⁽¹⁾	SNBV was incorporated in July 2004. The Bank obtained its national bank charter and commenced business operations on April 14, 2005. Prior thereto, SNBV’s only activity was the organization of the Bank. No compensation was paid to the named executive officers in 2004.

⁽²⁾	All salary and other compensation, except for stock options, are paid by the Bank.

⁽³⁾	The Bank also provides to each such named executive officer, except Ms. Derrico, other personal benefits which did not, in 2005, exceed the lesser of $50,000.00 or 10% of each such person’s total salary and bonus for such year.

^(4

)

Does not include $24,000.00 paid in 2005 to Mr. Porter and Ms. Derrico for organizational consulting services performed in 2004.

Change in Control Agreements

None of the named executive officers have employment agreements. SNBV and Sonabank has entered into change in control agreements with two of the named executive officers. These agreements provide such officers certain lump sum cash payments in the event the officer’s employment is terminated without cause at any time or if such employment is terminated by the executive for “good reason” and the officer signs the form of mutual general release.

For purposes of the agreements, “cause” is defined as

•

the officer’s commission of a willful act (including, without limitation, a dishonest or fraudulent act which dishonest or fraudulent act results in personal gain to the officer) or a grossly negligent act, or the willful or grossly negligent omission to act by officer, which causes material financial or reputational harm to SNBV or an affiliate of SNBV;

•

the officer’s conviction of, or plea of nolo contendere to, any felony involving dishonesty or fraud or that causes significant material financial or reputational injury to SNBV or an affiliate; or

•

the officer’s willful neglect of, or continued failure to substantially perform, in any material respect, his or her duties (as assigned to the officer from time to time) or obligations including a material violation of SNBV’s or an affiliate’s policy or procedures) to SNBV or an affiliate other than any such failure resulting from the officer’s incapacity due to physical or mental illness. An act or omission is “willful”

if it was knowingly done, or knowingly omitted to be done, by the officer not in good faith and without reasonable belief that the act or omission was in the best interests of SNBV or an affiliate. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for SNBV or an affiliate shall be conclusively presumed to be done, or omitted to be done, in good faith and in the best interests of SNBV or an affiliate, as applicable. The Board of Directors of SNBV (the officer and any of his or her immediate family members recusing themselves from discussions, deliberations and voting) has the discretion, in other circumstances to determine in good faith, from all the facts and circumstances reasonably available to it, whether the officer’s act or omission was “willful.”

Under the change in control agreements, “good reason” is defined as

•

the assignment to the officer of duties materially inconsistent with the officer’s then-current level of authority or responsibilities, or any other action by SNBV or an affiliate that results in a material diminution in the officer’s position, compensation, authority, duties or responsibilities;

•

a breach by SNBV or an affiliate of any material term or covenant of any agreement with the officer;

•

a requirement that the officer be based at any office or location that is more than twenty-five (25) miles from the officer’s principal office location immediately preceding a change in control; or

•

a failure by any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of SNBV or the affiliate employing the officer to assume expressly and agree to perform the severance agreement in the same manner and to the same extent that SNBV or any affiliate would be required to perform it if no such succession had taken place.

A “Change in Control” is defined generally to mean: a change in the ownership of SNBV or Sonabank, a change in the effective control of SNBV or Sonabank or a change in the ownership of a substantial portion of the assets of SNBV or Sonabank as provided under Section 409A of the Internal Revenue Code of 1986, as amended from time to time (the Code), and any Internal Revenue Service guidance, including Notice 2005-1, and regulations issued in connection with Section 409A of the Code. In no event, however, will a Change in Control be deemed to have occurred as a result of any acquisition of securities or assets of SNBV, Sonabank, or a subsidiary of either of them, by SNBV, Sonabank, or any subsidiary of either of them, or by any employee benefit plan maintained by any of them.

The cash payments will be made in a lump sum and be a multiple (the multiple) of the sum of the named executive officer’s annual base salary and his or her targeted bonus, plus the continuation of health insurance for a period ending on the earlier of (x) the date of receipt of comparable benefits from a new employer or (y) 24 months. SNBV and Sonabank have also agreed to pay all taxes and penalties (including the excise tax that may be levied on “excess parachute payments” under Section 4999 of the Internal Revenue Code of 1986, as amended (the IRC), plus all taxes on such payments (known as a “gross-up payment”). In addition, if the provision of any of the benefits under these agreements would trigger the 20% excise tax and interest penalties under Section 409A of the Code, then such benefits will not be provided, and in lieu, thereof, SNBV or Sonabank will pay the named executive officer, in a lump sum, a cash amount equal to the cost of providing such benefit. The officers will also be entitled to the indemnity provided by SNBV’s amended Articles of Incorporation and amended and restated bylaws and to any directors and officers liability insurance to the same extent, upon a change in control, as other of SNBV’s or affiliate’s directors and officers are covered.

In consideration of these cash payments, the officers have agreed:

•

to maintain the confidentiality of SNBV’s and Sonabank’s trade secrets;

•

not compete with SNBV and Sonabank for the longer of 12 months after termination of employment or the period during which payments under the severance agreement are being made (the Restricted Period);

•

not to solicit SNBV’s or Sonabank’s employees during the Restricted Period;

•

not to solicit SNBV’s or Sonabank’s customers during the Restricted Period; and

•

to sign a mutual general release, releasing SNBV and Sonabank of all potential claims relating to the officer’s employment and covenanting not to sue SNBV or Sonabank on any such claims.

The multiples for the cash payment is: three times for Ms. Derrico and two times for Mr. Porter. No funds have been set aside or accrued to provide for the cash payments described in the agreements. All such payments are subject to any prohibitions, limitations and restrictions that may be applicable under the Federal Deposit Insurance Act and the regulations of the FDIC.

Stock Options

SNBV has adopted the 2004 Stock Option Plan (the Option Plan) under which options to purchase common stock of SNBV may be granted from time to time to directors, officers and employees of SNBV, Sonabank and any subsidiary corporation. The purpose of the Option Plan is to aid SNBV and the Bank in attracting capable directors, officers and employees and to provide a long range incentive for such persons to remain in the management of SNBV and Sonabank and to perform at increasing levels of effectiveness with an opportunity to acquire a proprietary interest in SNBV to promote its success. The Option Plan provides for the grants of both incentive stock options which qualify under Section 422 of the Internal Revenue Code and nonqualified stock options. The Option Plan is administered by the Compensation Committee of the Board of Directors of SNBV (the Committee), which consists of three independent members of the Board of Directors and Ms. Derrico. Ms. Derrico recuses herself from Committee discussions and voting on stock option grants to herself, Mr. R. Roderick Porter and Mr. R. Devon Porter.

The Option Plan by its terms will expire in 2014, ten years from the date on which the Option Plan was approved by the Board of Directors of SNBV. The duration of options granted under the Option Plan are determined by the Committee on a case-by-case basis, but may not be longer than 10 years from the date an option is granted. In the event an incentive stock option is granted to a ten percent shareholder of SNBV, the expiration date of such option may not be later than five years after the date such option is granted.

Options will become vested and exercisable at the rate determined by the Committee at the time of grant; provided, however, that options granted will generally vest in approximately equal percentages each year over a period no shorter than three years. However, all options granted under the Option Plan were fully vested as of December 31, 2005. Unless otherwise determined by the Committee, all options will become immediately vested and exercisable upon the optionee’s death or disability. Options granted under the Option Plan may not be transferred except by will or the laws of descent and distribution after the death of the optionee.

The per share exercise price of options granted under the Option Plan may not be less than the fair market value of a share of Common Stock on the date of grant. In the case of incentive stock options granted to a stockholder who owns more than 10% of the outstanding shares, the option exercise price cannot be less than 110% of the market value of the Common Stock on the date of grant.

If an optionee ceases to be a director, officer or employee of SNBV for any reason other than death or disability, he may, at any time within three months after his date of termination, or such longer period as may be determined by the Committee, exercise any option only to the extent it was vested and he was entitled to exercise the option on the date of termination. Any options which are not so exercised will terminate and be forfeited. If an optionee dies or ceases to be a director, officer or employee of SNBV due to his disability, all unvested options of such optionee will immediately become vested and exercisable and he, or the person or persons to whom the option is transferred by will or by the laws of descent and distribution, may, at any time within 12 months after the death or date of termination, or such longer period as may be determined by the Committee, exercise any option with respect to all shares subject thereto. Any options which are not so exercised will terminate and be forfeited. Any options which are not exercised by an optionee upon termination of service as director or employee that are not exercised within the periods described above (three months for termination other than death or disability and one year due to death or disability) will terminate and be forfeited.

The Option Plan authorized the issuance of up to 275,000 shares of SNBV common stock.

The following table provides information with respect to option grants during fiscal 2005 to the named executive officers. The options have an exercise price equal to the fair market value of a share of Common Stock on the grant date, have a ten-year life, and were fully vested as of December 31, 2005. The Compensation Committee, which administers SNBV’s Option Plan, has general authority to accelerate, extend or otherwise modify benefits under option grants in certain circumstances within overall plan limits. No options were granted in 2004.


Name	Number of Options Granted	% of Total Options Granted to Employees in Fiscal Year		Exercise Price ($/ Share)		Expiration Date	Potential Realizable Value at Annual Rates of Stock Price Appreciation for Option Term ⁽¹⁾
							5%		10%
Georgia S. Derrico	25,000	14.86	%	$	10.00	04/14/2015	$	407,224	$	648,436
	2,500	1.49	%	$	10.00	11/17/2015	$	40,722	$	64,844
R. Roderick Porter	25,000	14.86	%	$	10.00	04/14/2015	$	407,224	$	648,436
	2,500	1.49	%	$	10.00	11/17/2015	$	40,722	$	64,844
William H. Lagos	11,500	6.83	%	$	10.00	04/14/2015	$	187,323	$	298,280
	1,500	0.89	%	$	10.00	11/17/2015	$	24,433	$	38,906
William H. Stevens	15,000	8.92	%	$	10.00	04/14/2015	$	244,334	$	389,061

⁽¹⁾

The potential realizable value is calculated based on the term of the option at the time of its grant. It is calculated by assuming that the stock price on the date of grant appreciates at the indicated annual rate, compounded annually for the entire term of the option and that the option is exercised and sold on the last day of its term for the appreciated stock price. No gain to the option holder is possible unless the stock price increases over the option term. The 5% and 10% assumed rates of appreciation are derived from the rules of the SEC and do not represent SNBV’s estimate or projection of future common stock prices.

No options were exercised in 2005. None of the 83,000 unexercised options held by the named executive officers, all of which were exerciseable, were in-the-money because the exercise price was not greater than the fair market value of the securities underlying the options at December 31, 2005.

PRINCIPAL STOCKHOLDERS

The following table shows the amount of SNBV common stock beneficially owned (unless otherwise indicated) by persons known to us to own 5% or more of our outstanding shares of common stock, by our directors and executive officers, and by our directors and executive officers as a group. All information in the table below is as of July 31 2006. Information relating to beneficial ownership of our common stock is based upon “beneficial ownership” concepts described in the rules issued under the Securities Exchange Act of 1934, as amended. Under these rules a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of the security, or “investment power,” which includes the power to dispose or to direct the disposition of the security. Under the rules, more than one person may be deemed to be a beneficial owner of the same securities. A person is also deemed to be a beneficial owner of any security as to which that person has the right to acquire beneficial ownership within sixty (60) days from July 31, 2006. Unless otherwise indicated under “Amount and Nature of Beneficial Ownership,” each person is the owner of record and has sole voting and investment power with respect to his or her shares.


Name		Amount and Nature of Beneficial Ownership	Percent of Shares Beneficially Owned ⁽¹⁾
5% or greater holders:

Bay Pond Partners, LP 1221 Avenue of the Americas New York, New York, 10020		262,500	7.50	%

Endurance Partners, LP 4514 Cole Avenue Dallas, Texas 75205		257,900	7.37	%

Service Equity Partners, LP 1700 Pacific Avenue Dallas, Texas 75201		240,000	6.86	%

Seventh First Save Associates 437 Madison Avenue New York, New York 10022		185,000	5.29	%

Financial Stocks Capital 441 Vine Street Cincinnati, Ohio 45202		184,500	5.27	%

Directors:

Georgia S. Derrico ^*		135,000	3.82	% ⁽²⁾

R. Roderick Porter ^*		135,000	3.82	% ⁽³⁾

Neil J. Call		70,000	1.99	% ⁽⁴⁾

Charles A. Kabbash		34,000	0.97	% ⁽⁵⁾

Michael A. Gaffney		39,000	1.11	% ⁽⁶⁾

Robin R. Shield		35,000	1.00	% ⁽⁷⁾

John J. Forch		20,000	0.57	%

Executive officers who are not directors:

William H. Lagos	Senior Vice President and Chief Financial Officer of SNBV and the Bank	23,000	0.65	% ⁽⁸⁾

William H. Stevens	Executive Vice President and Chief Lending Officer of the Bank	15,000	0.43	% ⁽⁹⁾

All directors and executive officers as a group (9 persons)		506,000	13.95	% ⁽¹⁰⁾

Footnotes on following page

^*	Ms. Derrico and Mr. Porter are married. The business address for all directors and named executive officers is Southern National Bancorp of Virginia, Inc., 1770 Timberwood Boulevard, Suite 100, Charlottesville, Virginia 22911.

(1)

The percentage of our common stock beneficially owned was calculated based on 3,500,000 shares of common stock issued and outstanding as of July 31, 2006. The percentage assumes the exercise by the stockholder or group named in each row of all options for the purchase of our common stock held by such stockholder or group and exercisable within 60 days of July 31, 2006.

(2)

Includes 7,500 shares of common stock which may be acquired pursuant to the exercise of the warrants issued to this director who advanced funds to SNBV to pay organizational and pre-opening expenses, and 27,500 shares of common stock which may be acquired upon the exercise of stock options granted to this officer under SNBV’s Option Plan. Does not include shares attributed to Mr. Porter or 10,000 shares of common stock owned by R. Devon Porter, the adult son of this director who resides in the same home.

(3)

Includes 7,500 shares of common stock which may be acquired pursuant to the exercise of the warrants issued to this Director who advanced funds to SNBV to pay organizational and pre-opening expenses, and 27,500 shares of common stock which may be acquired upon the exercise of stock options granted to this officer under the Option Plan. Does not include shares attributed to Ms. Derrico or 10,000 shares of common stock owned by R. Devon Porter, the adult son of this director who resides in the same home.

(4)	Includes 10,000 shares of common stock which may be acquired pursuant to the exercise of the warrants issued to this director who advanced funds to SNBV to pay organizational and pre-opening expenses.

(5)	Includes 10,000 shares of common stock which may be acquired pursuant to the exercise of the warrants issued to this director who advanced funds to SNBV to pay organizational and pre-opening expenses.

(6)	Includes 10,000 shares of common stock which may be acquired pursuant to the exercise of the warrants issued to this director who advanced funds to SNBV to pay organizational and pre-opening expenses.

(7)	Does not include, and Ms. Shield disclaims beneficial ownership with respect to, 15,000 shares of common stock held in a trust for the benefit of her minor children of which her husband is the voting trustee.

(8)	Includes 13,000 shares of common stock which may be acquired upon the exercise of stock options granted to this officer under the Option Plan.

(9)	Includes 15,000 shares of common stock which may be acquired upon exercise of stock of stock options granted to this officer under the Option Plan.

(10)

Includes 45,000 shares of common stock which may be acquired pursuant to the exercise of the warrants issued to the above-named directors who advanced funds to SNBV to pay organizational and pre-opening expenses, and 83,000 shares of common stock which may be acquired upon the exercise of stock options granted to the above-named officers under SNBV’s Option Plan.

SUPERVISION AND REGULATION

The business of SNBV and the Bank are subject to extensive regulation and supervision under federal banking laws and other federal and state laws and regulations. In general, these laws and regulations are intended for the protection of the customers and depositors of the Bank and not for the protection of SNBV or its shareholders. Set forth below are brief descriptions of selected laws and regulations applicable to SNBV and the Bank. These descriptions are not intended to be a comprehensive description of all laws and regulations to which SNBV and the Bank are subject or to be complete descriptions of the laws and regulations discussed. The descriptions of statutory and regulatory provisions are qualified in their entirety by reference to the particular statutes and regulations. Changes in applicable statutes, regulations or regulatory policy may have a material effect on SNBV, the Bank and their business.

The Bank Holding Company Act of 1956

Under the Bank Holding Company Act of 1956, as amended (BHCA), SNBVis subject to periodic examination by the FRB and required to file periodic reports regarding its operations and any additional information that the FRB may require. Our activities at the bank holding company level will be limited to:

•

banking, managing or controlling banks;

•

furnishing services to or performing services for our bank subsidiary; and

•

engaging in other activities that the FRB has determined by regulation or order to be so closely related to banking as to be a proper incident to these activities.

Some of the activities that the FRB has determined by regulation to be proper incidents to the business of a bank holding company include making or servicing loans and specific types of leases, performing specific data processing services and acting in some circumstances as a fiduciary or investment or financial adviser. SNBV does not currently plan to perform any of these activities, but may do so in the future.

With some limited exceptions, the BHCA requires every bank holding company to obtain the prior approval of the FRB before: (i) acquiring substantially all the assets of any bank; (ii) acquiring direct or indirect ownership or control of any voting shares of any bank if after such acquisition it would own or control more than 5% of the voting shares of such bank (unless it already owns or controls the majority of such shares); or (iii) merging or consolidating with another bank holding company.

In addition, and subject to some exceptions, the BHCA and the Change in Bank Control Act, together with their regulations, require FRB approval prior to any person or company acquiring “control” of a bank holding company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of the bank holding company. Control is rebuttably presumed to exist if a person acquires 10% or more, but less than 25%, of any class of voting securities and either has registered securities under Section 12 of the Exchange Act or no other person owns a greater percentage of that class of voting securities immediately after the transaction. The regulations provide a procedure for challenging this rebuttable control presumption.

In November 1999, Congress enacted the Gramm-Leach-Bliley Act (GLBA), which made substantial revisions to the statutory restrictions separating banking activities from other financial activities. Under the GLBA, bank holding companies that are well-capitalized and well-managed and meet other conditions can elect to become “financial holding companies.” As financial holding companies, they and their subsidiaries are permitted to acquire or engage in previously impermissible activities such as insurance underwriting, securities underwriting and distribution, travel agency activities, insurance agency activities, merchant banking and other activities that the FRB determines to be financial in nature or complementary to these activities. Financial holding companies continue to be subject to the overall oversight and supervision of the FRB, but the GLBA applies the concept of functional regulation to the activities conducted by subsidiaries. For example, insurance

activities would be subject to supervision and regulation by state insurance authorities. Although SNBV has not elected to become a financial holding company in order to exercise the broader activity powers provided by the GLBA, SNBV may elect to do so in the future.

Insurance of Deposits. The Bank’s deposit accounts are insured by the FDIC up to a maximum of $100,000 per insured depositor ($250,000 for certain retirement accounts). Pursuant to deposit insurance reform legislation which became effective in February 2006, deposit insurance coverage will be increased for inflation every five years beginning in 2011. The FDIC issues regulations, conducts periodic examinations, requires the filing of reports and generally supervises the operations of its insured banks. Any insured bank which is not operated in accordance with, or does not conform to FDIC regulations, policies and directives may be sanctioned for non-compliance. Proceedings may be instituted against any insured bank or any director, officer or employee of such bank engaging in unsafe and unsound practices including the violation of applicable laws and regulations. The FDIC has the authority to terminate insurance of accounts pursuant to procedures established for that purpose.

Under current FDIC regulations, FDIC insured institutions are assigned to one of three capital groups which are based solely on the level of an institution’s capital—“well capitalized”, “adequately capitalized” and “undercapitalized”—which are defined in the same manner as the regulations establishing the prompt corrective action system discussed below. These three groups are then divided into three subgroups, which reflect varying levels of supervisory concern, from those which are considered to be healthy to those which are considered to be of substantial supervisory concern. The matrix results in nine assessment risk classifications, with premium rates during the third quarter of 2006 ranging from zero for well capitalized, healthy institutions to 27 basis points for undercapitalized institutions with substantial supervisory concerns.

Interstate Banking and Branching. Current federal law authorizes interstate acquisitions of banks and bank holding companies without geographic limitation. Effective June 1, 1997, a bank headquartered in one state is authorized to merge with a bank headquartered in another state, as long as neither of the states had opted out of such interstate merger authority prior to such date. For example, as a bank headquartered in Virginia, SNBV may acquire a bank or branch in Maryland, but it cannot simply establish a branch in Maryland. After a bank has acquired a branch in a state through an interstate merger transaction, the bank may establish and acquire additional branches at any location in the state where a bank headquartered in that state could have established or acquired branches under applicable federal or state law.

Safety and Soundness . The federal banking agencies, including the OCC and the FDIC have implemented rules and guidelines concerning standards for safety and soundness required pursuant to Section 39 of the Federal Deposit Insurance Act. In general, the standards relate to (i) operational and managerial matters; (ii) asset quality and earnings; and (iii) compensation. If an insured national bank fails to meet any of the standards promulgated by regulation, then such institution will be required to submit a plan within 30 days to the OCC specifying the steps it will take to correct the deficiency. In the event that an insured bank fails to submit or fails in any material respect to implement a compliance plan within the time allowed by the OCC, Section 39 of the FDIA provides that the OCC must order the institution to correct the deficiency and may:

•

restrict asset growth;

•

require the institution to increase its ratio of tangible equity to assets;

•

restrict the rates of interest that the bank may pay; or

•

take any other action that would better carry out the purpose of prompt corrective action.

There are a number of obligations and restrictions imposed on bank holding companies and their depository institution subsidiaries by federal law and regulatory policy that are designed to reduce potential loss exposure to the depositors of such depository institutions and to the FDIC insurance funds in the event that the depository institution is insolvent or is in danger of becoming insolvent. These obligations and restrictions are not for the

benefit of investors. Regulators may pursue an administrative action against any bank holding company or national bank which violates the law, engages in an unsafe or unsound banking practice or which is about to engage in an unsafe and unsound banking practice. The administrative action could take the form of a cease and desist proceeding, a removal action against the responsible individuals or, in the case of a violation of law or unsafe and unsound banking practice, a civil penalty action. A cease and desist order, in addition to prohibiting certain action, could also require that certain action be undertaken. Under the policies of the FRB, SNBV is required to serve as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances where SNBV might not do so otherwise.

Capital Requirements. Each of the OCC and the FRB has issued risk-based and leverage capital guidelines applicable to banking organizations that it supervises. Under the risk-based capital requirements, SNBV and the Bank are each generally required to maintain a minimum ratio of total capital to risk-weighted assets (including specific off-balance sheet activities, such as standby letters of credit) of 8%. At least half of the total capital must be composed of “Tier 1 Capital,” which is defined as common equity, retained earnings and qualifying perpetual preferred stock, less certain intangibles. The remainder may consist of “Tier 2 Capital,” which is defined as specific subordinated debt, some hybrid capital instruments and other qualifying preferred stock and a limited amount of the loan loss allowance. In addition, each of the federal banking regulatory agencies has established minimum leverage capital requirements for banking organizations. Under these requirements, banking organizations must maintain a minimum ratio of Tier 1 capital to adjusted average quarterly assets equal to 3% to 5%, subject to federal bank regulatory evaluation of an organization’s overall safety and soundness. In sum, the capital measures used by the federal banking regulators are:

•

the Total Risk-Based Capital ratio, which is the total of Tier 1 Risk-Based Capital and Tier 2 Capital;

•

the Tier 1 Risk-Based Capital ratio; and

•

the leverage ratio.

Under these regulations, a national bank will be:

•

“well capitalized” if it has a Total Risk-Based Capital ratio of 10% or greater, a Tier 1 Risk-Based Capital ratio of 6% or greater, a leverage ratio of 5% or greater, and is not subject to any written agreement, order, capital directive, or prompt corrective action directive by a federal bank regulatory agency to meet and maintain a specific capital level for any capital measure;

•

“adequately capitalized” if it has a Total Risk-Based Capital ratio of 8% or greater, a Tier 1 Risk-Based Capital ratio of 4% or greater, and a leverage ratio of 4% or greater—or 3% in certain circumstances—and is not well capitalized;

•

“undercapitalized” if it has a Total Risk-Based Capital ratio of less than 8% or greater, a Tier 1 Risk-Based Capital ratio of less than 4% (or 3% in certain circumstances), or a leverage ratio of less than 4% (or 3% in certain circumstances);

•

“significantly undercapitalized” if it has a Total Risk-Based Capital ratio of less than 6%, a Tier 1 Risk-Based Capital ratio of less than 3%, or a leverage ratio of less than 3%; or

•

“critically undercapitalized” if its tangible equity is equal to or less than 2% of tangible assets.

The risk-based capital standards of each of the OCC and the FRB explicitly identify concentrations of credit risk and the risk arising from non-traditional activities, as well as an institution’s ability to manage these risks, as important factors to be taken into account by the agency in assessing an institution’s overall capital adequacy. The capital guidelines also provide that an institution’s exposure to a decline in the economic value of its capital due to changes in interest rates be considered by the agency as a factor in evaluating a banking organization’s capital adequacy.

Prompt Corrective Action. Under Section 38 of the FDIA, each federal banking agency is required to implement a system of prompt corrective action for institutions which it regulates. The federal banking agencies

(including the OCC and the FDIC) have adopted substantially similar regulations to implement Section 38 of the FDIA. Section 38 of the FDIA and the regulations promulgated thereunder also specify circumstances under which the FDIC may reclassify a well capitalized bank as adequately capitalized and may require an adequately capitalized bank or an undercapitalized bank to comply with supervisory actions as if it were in the next lower category (except that the FDIC may not reclassify a significantly undercapitalized bank as critically undercapitalized).

The OCC and the FDIC may take various corrective actions against any undercapitalized bank and any bank that fails to submit an acceptable capital restoration plan or fails to implement a plan accepted by the OCC or the FDIC. These powers include, but are not limited to, requiring the institution to be recapitalized, prohibiting asset growth, restricting interest rates paid, requiring prior approval of capital distributions by any bank holding company that controls the institution, requiring divestiture by the institution of its subsidiaries or by the holding company of the institution itself, requiring a new election of directors, and requiring the dismissal of directors and officers.

Payment of Dividends. SNBV is a legal entity separate and distinct from Sonabank. The principal sources of SNBV’s cash flow, including cash flow to pay dividends to its stockholders, are dividends that Sonabank pays to its sole shareholder, SNBV. Statutory and regulatory limitations apply to Sonabank’s payment of dividends to us as well as to SNBV’s payment of dividends to its stockholders.

The policy of the Federal Reserve Board that a bank holding company should serve as a source of strength to its subsidiary banks also results in the position of the Federal Reserve Board that a bank holding company should not maintain a level of cash dividends to its stockholders that places undue pressure on the capital of its bank subsidiary or that can be funded only through additional borrowings or other arrangements that may undermine the bank holding company’s ability to serve as a source of strength. Since the Bank is a de novo institution, it has no plans to pay dividends to SNBV until after April 15, 2008.

Capital adequacy requirements serve to limit the amount of dividends that may be paid by the Bank. Until capital surplus equals or exceeds capital stock, a national bank must transfer to surplus ten percent of its net income for the preceding four quarters in the case of an annual dividend or ten percent of its net income for the preceding two quarters in the case of a quarterly or semiannual dividend. Without prior approval, a national bank may not declare a dividend if the total amount of all dividends declared by the bank in any calendar year exceeds the total of the bank’s retained net income for the current year and retained net income for the preceding two years. Under federal law, the Bank cannot pay a dividend if, after paying the dividend, the bank will be “undercapitalized.” The OCC may declare a dividend payment to be unsafe and unsound even though the Bank would continue to meet its capital requirements after the dividend.

The ability of SNBV to pay dividends is also subject to the provisions of Virginia law. See “Description of Capital Stock of the Company—Common Stock—Dividends” on page 92.

The payment of dividends by SNBV and Sonabank may also be affected by other factors, such as the requirement to maintain adequate capital above regulatory guidelines. The federal banking agencies have indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound banking practice. Under the Federal Deposit Insurance Corporation Improvement Act of 1991, a depository institution may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. Moreover, the federal agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings.

Because we are a legal entity separate and distinct from our subsidiary Sonabank, our right to participate in the distribution of assets of any subsidiary upon the subsidiary’s liquidation or reorganization will be subject to the prior claims of the subsidiary’s creditors. In the event of a liquidation or other resolution of an insured

depository institution, the claims of depositors and other general or subordinated creditors are entitled to a priority of payment over the claims of holders of any obligation of the institution to its shareholders, arising as a result of their status as shareholders, including any depository institution holding company (such as us) or any shareholder or creditor thereof.

Change of Control. State and federal law restricts the amount of voting stock of a bank that a person may acquire without obtaining the prior approval of banking regulators. The overall effect of such laws is to make it more difficult to acquire a bank by tender offer or similar means than it might be to acquire control of another type of corporation. Consequently, shareholders of financial institutions are less likely to benefit from the rapid increases in stock prices that often result from tender offers or similar efforts to acquire control of other companies.

Under the federal Change in Bank Control Act and the regulations thereunder, a person or group must give advance notice to the OCC before acquiring control of any national bank. Upon receipt of such notice, the OCC may either approve or disapprove the acquisition. Federal law creates a rebuttable presumption of control if a member or group acquires 10% or more of a bank’s voting stock and if one or more other factors are present.

Gramm-Leach-Bliley Act of 1999. The Gramm-Leach-Bliley Act of 1999 was signed into law on November 12, 1999. The GLBA covers a broad range of issues, including a repeal of most of the restrictions on affiliations among depository institutions, securities firms and insurance companies. The following description summarizes some of its significant provisions.

The GLBA repeals sections 20 and 32 of the Glass-Steagall Act, thus permitting unrestricted affiliations between banks and securities firms. It also permits bank holding companies to elect to become financial holding companies. A financial holding company may engage in or acquire companies that engage in a broad range of financial services, including securities activities such as underwriting, dealing, investment, merchant banking, insurance underwriting, sales and brokerage activities. In order to become a financial holding company, the bank holding company and all of its affiliated depository institutions must be well-capitalized, well-managed and have at least a “satisfactory” Community Reinvestment Act rating.

The GLBA provides that the states continue to have the authority to regulate insurance activities, but prohibits the states in most instances from preventing or significantly interfering with the ability of a bank, directly or through an affiliate, to engage in insurance sales, solicitations or cross-marketing activities. Although the states generally must regulate bank insurance activities in a nondiscriminatory manner, the states may continue to adopt and enforce rules that specifically regulate bank insurance activities in specific areas identified under the law. Under the new law, the federal bank regulatory agencies adopted insurance consumer protection regulations that apply to sales practices, solicitations, advertising and disclosures.

The GLBA adopts a system of functional regulation under which the FRB is designated as the umbrella regulator for financial holding companies, but financial holding company affiliates are principally regulated by functional regulators such as the OCC for national bank affiliates, the SEC for securities affiliates, and state insurance regulators for insurance affiliates. It repeals the broad exemption of banks from the definitions of “broker” and “dealer” for purposes of the Exchange Act. It also identifies a set of specific activities, including traditional bank trust and fiduciary activities, in which a bank may engage without being deemed a “broker,” and a set of activities in which a bank may engage without being deemed a “dealer.” Additionally, the new law makes conforming changes in the definitions of “broker” and “dealer” for purposes of the Investment Company Act of 1940, as amended, and the Investment Advisers Act of 1940, as amended.

The GLBA contains extensive customer privacy protection provisions. Under these provisions, a financial institution must provide to its customers, both at the inception of the customer relationship and on an annual basis, the institution’s policies and procedures regarding the handling of customers’ nonpublic personal financial information. The new law provides that, except for specific limited exceptions, an institution may not provide

such personal information to unaffiliated third parties unless the institution discloses to the customer that such information may be so provided and the customer is given the opportunity to opt out of such disclosure. An institution may not disclose to a non-affiliated third party, other than to a consumer reporting agency, customer account numbers or other similar account identifiers for marketing purposes. The GLBA also provides that the states may adopt customer privacy protections that are more strict than those contained in the act.

Privacy

Under the GLBA, financial institutions are required to disclose their policies for collecting and protecting confidential information. Customers generally may prevent financial institutions from sharing nonpublic personal financial information with nonaffiliated third parties except under narrow circumstances, such as the processing of transactions requested by the consumer or when the financial institution is jointly sponsoring a product or service with a nonaffiliated third party. Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing to consumers. Sonabank has established policies and procedures to assure our compliance with all privacy provisions of the GLBA.

Consumer Credit Reporting

On December 4, 2003, President Bush signed the Fair and Accurate Credit Transactions Act amending the federal Fair Credit Reporting Act. These amendments to the Fair Credit Reporting Act (the FCRA Amendments) became effective in 2004.

The FCRA Amendments include, among other things:

•

requirements for financial institutions to develop policies and procedures to identify potential identity theft and, upon the request of a consumer, place a fraud alert in the consumer’s credit file stating that the consumer may be the victim of identity theft or other fraud;

•

consumer notice requirements for lenders that use consumer report information in connection with risk-based credit pricing programs;

•

for entities that furnish information to consumer reporting agencies (which would include Sonabank), requirements to implement procedures and policies regarding the accuracy and integrity of the furnished information and regarding the correction of previously furnished information that is later determined to be inaccurate; and

•

a requirement for mortgage lenders to disclose credit scores to consumers.

The FCRA Amendments also prohibit a business that receives consumer information from an affiliate from using that information for marketing purposes unless the consumer is first provided a notice and an opportunity to direct the business not to use the information for such marketing purposes (the opt-out), subject to certain exceptions. We do not share consumer information among our affiliated companies for marketing purposes, except as allowed under exceptions to the notice and opt-out requirements. Because no affiliate of SNBV is currently sharing consumer information with any other affiliate for marketing purposes, the limitations on sharing of information for marketing purposes do not have a significant impact on us.

Anti-Terrorism and Money Laundering Legislation

Sonabank is subject to the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism of 2001 (the USA PATRIOT Act), the Bank Secrecy Act and rules and regulations of the Office of Foreign Assets Control (the OFAC). These statutes and related rules and regulations impose requirements and limitations on specific financial transactions and account relationships intended to guard against money laundering and terrorism financing. Sonabank has established a customer identification program pursuant to Section 326 of the USA PATRIOT Act and the Bank Secrecy Act, and otherwise has implemented policies and procedures intended to comply with the foregoing rules.

Virginia Law. Certain state corporation laws may have an anti-takeover affect. Virginia law restricts transactions between a Virginia corporation and its affiliates and potential acquirers. The following discussion summarizes the two Virginia statutes that may discourage an attempt to acquire control of SNBV.

Virginia Code Sections 13.1-725 – 727.1 govern “Affiliated Transactions.” These provisions, with several exceptions discussed below, require approval by the holders of at least two-thirds of the remaining voting shares of material acquisition transactions between a Virginia corporation and any holder of more than 10% of any class of its outstanding voting shares. Affiliated Transactions include mergers, share exchanges, material dispositions of corporate assets not in the ordinary course of business, any dissolution of the corporation proposed by or on behalf of an interested shareholder, or any reclassification, including a reverse stock split, recapitalization, or merger of the corporation with its subsidiaries which increases the percentage of voting shares owned beneficially by any 10% shareholder by more than 5%.

For three years following the time that a shareholder becomes an owner of 10% of the outstanding voting shares, a Virginia corporation cannot engage in an Affiliated Transaction with that shareholder without approval of two-thirds of the voting shares other than those shares beneficially owned by that shareholder, and majority approval of the disinterested directors. A disinterested director is a member of the company’s board of directors who was (i) a member on the date the shareholder acquired more than 10%, and (ii) recommended for election by, or was elected to fill a vacancy and received the affirmative vote of, a majority of the disinterested directors then on the board. At the expiration of the three-year period, the statute requires approval of Affiliated Transactions by two-thirds of the voting shares other than those beneficially owned by the 10% shareholder.

The principal exceptions to the special voting requirement apply to transactions proposed after the three-year period has expired and require either that the transaction be approved by a majority of the corporation’s disinterested directors or that the transaction satisfy the fair-price requirement of the statute. In general, the fair-price requirement provides that in a two-step acquisition transaction, the 10% shareholder must pay the shareholders in the second step either the same amount of cash or the same amount and type of consideration paid to acquire the Virginia corporation’s shares in the first step.

None of the foregoing limitations and special voting requirements applies to a transaction with any 10% shareholder whose acquisition of shares taking him or her over 10% was approved by a majority of the corporation’s disinterested directors.

These provisions were designed to deter certain takeovers of Virginia corporations. In addition, the statute provides that, by affirmative vote of a majority of the voting shares other than shares owned by any 10% shareholder, a corporation can adopt an amendment to its articles of incorporation or bylaws providing that the Affiliated Transactions provisions shall not apply to the corporation. SNBV “opted out” of the Affiliated Transactions provisions when it incorporated.

Virginia law also provides that shares acquired in a transaction that would cause the acquiring person’s voting strength to meet or exceed any of the three thresholds (20%, 33 ¹ / 3 % or 50%) have no voting rights for those shares exceeding that threshold, unless granted by a majority vote of shares not owned by the acquiring person. This provision empowers an acquiring person to require the Virginia corporation to hold a special meeting of shareholders to consider the matter within 50 days of the request. SNBV also “opted out” of this provision at the time of its incorporation.

Federal Reserve Monetary Policy. The Bank will be directly affected by government monetary and fiscal policy and by regulatory measures affecting the banking industry and the economy in general. The actions of the FRB as the nation’s central bank can directly affect the money supply and, in general, affect the lending activities of banks by increasing or decreasing the cost and availability of funds. An important function of the FRB is to regulate the national supply of bank credit. Among the instruments of monetary policy used by the FRB to implement this objective are open market operations in United States government securities, changes in the

discount rate on member bank borrowings and changes in reserve requirements against bank deposits. These means are used in varying combinations to influence overall growth of bank loans, investments and deposits, and interest rates charged on loans or paid on deposits. The monetary policies of the FRB have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future.

Reserve Requirements. In 1980, Congress enacted legislation that imposed reserve requirements on all depository institutions that maintain transaction accounts or nonpersonal time deposits. NOW accounts, money market deposit accounts and other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to these reserve requirements, as are any nonpersonal time deposits at an institution. For net transaction accounts in 2006, the first $7.8 million will be exempt from reserve requirements. A 3.0% reserve ratio will be assessed on net transaction accounts over $7.8 million to and including $48.3 million. A 10.0% reserve ratio will be applied to net transaction accounts in excess of $48.3 million. These percentages are subject to adjustment by the FRB. Because required reserves must be maintained in the form of vault cash or in a non-interest-bearing account at, or on behalf of, a Federal Reserve Bank, the effect of the reserve requirement is to reduce the amount of the institution’s interest-earning assets.

Transactions with Affiliates. Transactions between banks and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act. An affiliate of a bank is any bank or entity that controls, is controlled by or is under common control with such bank. Generally, Sections 23A and 23B (i) limit the extent to which the bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of such institution’s capital stock and surplus, and maintain an aggregate limit on all such transactions with affiliates to an amount equal to 20% of such capital stock and surplus, and (ii) require that all such transactions be on terms substantially the same, or at least as favorable, to the bank as those provided to a nonaffiliate. The term “covered transaction” includes the making of loans, purchase of assets, issuance of a guarantee and similar other types of transactions. Section 23B applies to “covered transactions” as well as sales of assets and payments of money to an affiliate. These transactions must also be conducted on terms substantially the same, or at least favorable, to the bank as those provided to nonaffiliates.

Loans to Insiders. The Federal Reserve Act and related regulations impose specific restrictions on loans to directors, executive officers and principal shareholders of banks. Under Section 22(h) of the Federal Reserve Act, loans to a director, an executive officer and to a principal shareholder of a bank, and to entities controlled by any of the foregoing, may not exceed, together with all other outstanding loans to such person and entities controlled by such person, the bank’s loan-to-one borrower limit. Loans in the aggregate to insiders and their related interests as a class may not exceed two times the bank’s unimpaired capital and unimpaired surplus until the bank’s total assets equal or exceed $100 million, at which time the aggregate is limited to the bank’s unimpaired capital and unimpaired surplus. Section 22(h) also prohibits loans, above amounts prescribed by the appropriate federal banking agency, to directors, executive officers and principal shareholders of a bank or bank holding company, and to entities controlled by such persons, unless such loan is approved in advance by a majority of the board of directors of the bank with any “interested” director not participating in the voting. The OCC has prescribed the loan amount, which includes all other outstanding loans to such person, as to which such prior board of director approval is required, as being the greater of $25,000.00 or 5.0% of capital and surplus (up to $500,000.00). Section 22(h) requires that loans to directors, executive officers and principal shareholders be made on terms and underwriting standards substantially the same as offered in comparable transactions to other persons. Further, Section 402 of the Sarbanes-Oxley Act of 2002, with certain exceptions, prohibits loans to directors and executive officers.

Community Reinvestment Act. Under the Community Reinvestment Act and related regulations, depository institutions have an affirmative obligation to assist in meeting the credit needs of their market areas, including low and moderate-income areas, consistent with safe and sound banking practice. The Community Reinvestment Act requires the adoption by each institution of a Community Reinvestment Act statement for each of its market areas describing the depository institution’s efforts to assist in its community’s credit needs. Depository institutions are periodically examined for compliance with the Community Reinvestment Act and are

periodically assigned ratings in this regard. Banking regulators consider a depository institution’s Community Reinvestment Act rating when reviewing applications to establish new branches, undertake new lines of business, and/or acquire part or all of another depository institution. An unsatisfactory rating can significantly delay or even prohibit regulatory approval of a proposed transaction by a bank holding company or its depository institution subsidiaries.

The Gramm-Leach-Bliley Act and federal bank regulators have made various changes to the Community Reinvestment Act. Among other changes, Community Reinvestment Act agreements with private parties must be disclosed and annual reports must be made to a bank’s primary federal regulatory. A bank holding company will not be permitted to become a financial holding company and no new activities authorized under the GLBA may be commenced by a holding company or by a bank financial subsidiary if any of its bank subsidiaries received less than a “satisfactory” rating in its latest Community Reinvestment Act examination. The Bank has not yet been examined for Community Reinvestment Act compliances by the OCC.

Fair Lending; Consumer Laws. In addition to the Community Reinvestment Act, other federal and state laws regulate various lending and consumer aspects of the banking business. Governmental agencies, including the Department of Housing and Urban Development, the Federal Trade Commission and the Department of Justice, have become concerned that prospective borrowers experience discrimination in their efforts to obtain loans from depository and other lending institutions. These agencies have brought litigation against depository institutions alleging discrimination against borrowers. Many of these suits have been settled, in some cases for material sums, short of a full trial.

Recently, these governmental agencies have clarified what they consider to be lending discrimination and have specified various factors that they will use to determine the existence of lending discrimination under the Equal Credit Opportunity Act and the Fair Housing Act, including evidence that a lender discriminated on a prohibited basis, evidence that a lender treated applicants differently based on prohibited factors in the absence of evidence that the treatment was the result of prejudice or a conscious intention to discriminate, and evidence that a lender applied an otherwise neutral non-discriminatory policy uniformly to all applicants, but the practice had a discriminatory effect, unless the practice could be justified as a business necessity

Banks and other depository institutions also are subject to numerous consumer-oriented laws and regulations. These laws, which include the Truth in Lending Act, the Truth in Savings Act, the Real Estate Settlement Procedures Act, the Electronic Funds Transfer Act, the Equal Credit Opportunity Act, and the Fair Housing Act, require compliance by depository institutions with various disclosure requirements and requirements regulating the availability of funds after deposit or the making of some loans to customers.

The foregoing is only a brief summary of certain statutes, rules, and regulations that may affect SNBV and the Bank. Numerous other statutes and regulations also will have an impact on the operations of SNBV and the Bank. Supervision, regulation and examination of banks by the regulatory agencies are intended primarily for the protection of depositors, not shareholders.

Future Regulatory Uncertainty. Because federal regulation of financial institutions changes regularly and is the subject of constant legislative debate, we cannot forecast how federal regulation of financial institutions may change in the future and impact our operations. Although Congress in recent years has sought to reduce the regulatory burden on financial institutions with respect to the approval of specific transactions, SNBV fully expects that the financial institution industry will remain heavily regulated in the near future and that additional laws or regulations may be adopted further regulating specific banking practices.

DESCRIPTION OF CAPITAL STOCK OF THE COMPANY

General

SNBV is authorized to issue 50,000,000 shares of capital stock of which 45,000,000 are shares of common stock and 5,000,000 shares of preferred stock, par value $0.01 per share. We currently expect to issue 1,786,000 shares in this offering, and an additional 214,000 shares of common stock if the offering is oversubscribed. No shares of preferred stock will be issued in the offering. Each share of common stock will have the same relative rights as, and will be identical in all respects with, each other share of common stock. Upon payment of the purchase price for the common stock, all such stock will be duly authorized, fully paid and nonassessable.

The common stock will represent nonwithdrawable capital, will not be an account of an insurable type and will not be insured by the FDIC or any other governmental authority.

Common Stock

Dividends. We can pay dividends if, as and when declared by our Board of Directors, subject to compliance with limitations which are imposed by law. The holders of common stock will be entitled to receive and share equally in such dividends as may be declared by the Board of Directors of SNBV out of funds legally available therefor. If we issue preferred stock, the holders thereof may have a priority over the holders of the common stock with respect to dividends.

Voting Rights. The holders of SNBV common stock will possess exclusive voting rights in SNBV. They will elect SNBV’s board of directors and act on such other matters as are required to be presented to them under Virginia law or our Articles of Incorporation or as are otherwise presented to them by the board of directors. In general, each holder of common stock will be entitled to one vote per share and do not have any right to cumulate votes in the election of directors. If we issue preferred stock, holders of the preferred stock may also possess voting rights.

Liquidation. In the event of any liquidation, dissolution or winding up of SNBV, the holders of the then-outstanding common stock would be entitled to receive, after payment or provision for payment of all its debts and liabilities, all of our assets available for distribution. If preferred stock is issued, the holders thereof may have a priority over the holders of the common stock in the event of liquidation or dissolution.

Preemptive Rights. Holders of our common stock are not entitled to preemptive rights with respect to any shares which may be issued in the future. The common stock is not subject to redemption.

Preferred Stock

None of the shares of our authorized preferred stock will be issued in the Offering. Such stock may be issued in the future with such rights, privileges, preferences and designations as the Board of Directors may from time to time determine. The Board of Directors can, without stockholder approval, issue preferred stock with preferential voting, dividend, liquidation and conversion rights which could dilute the voting strength of the holders of the common stock and may assist management in impeding an unfriendly takeover or attempted change in control.

Warrants

Prior to inception, the organizers of Sonabank, which included all of our directors and senior executive officers (except for Mr. Lagos and Mr. Stevens), and certain other initial investors advanced to SNBV $1.5 million to cover the organizational and pre-opening expenses in connection with the organization of SNBV and the Bank. Those organizational expenses actually totaled $1.2 million. In the event that the Bank did not obtain a charter and commence operations, those persons bore the risk of loss with respect to their cash advances. In

recognition of the financial risks undertaken, those individuals received warrants to purchase shares of common stock. A warrant to purchase one share of common stock was issued for every $20.00 advanced by each such person. Warrants to purchase an aggregate of 75,000 shares of common stock were issued. The warrants are exercisable at a price of $10.00 per share (the initial subscription price) and may be exercised until April 14, 2015. The investors applied the funds advanced, plus 5% simple interest per annum, to the purchase price of the shares they acquired in our private placement that closed in March 2005 to fund the initial capitalization of the Bank.

Certain Takeover Considerations

Subject to the application of the Virginia Stock Corporation Act (VSCA), the affirmative vote of the holders of more than two thirds of all votes entitled to be cast is generally required with respect to a merger, exchange offer or the sale of all or substantially all of our assets. Under the VSCA and our amended Articles of Incorporation, any action required or permitted to be taken by our stockholders may be taken without a meeting and without a stockholder vote if a written consent is signed by the holders of the shares of outstanding stock having not less than the minimum number of votes that would be necessary to authorize such action at a meeting of stockholders at which all shares entitled to vote thereon were present and voted.

Virginia law provides for certain restrictions on extraordinary corporate transactions that may discourage the acquisition of control of Virginia corporations. We elected to “opt out” of those protective provisions. See “Supervision and Regulation—Virginia Law.”

One class of our three classes of directors is elected annually. Directors serve for three-year terms. There is no cumulative voting for directors provided for in the amended Articles of Incorporation. As permitted by Virginia law, our amended Articles of Incorporation provide that where a corporation’s directors are elected in classes that a director, or the entire board of directors, only may be removed for cause by the affirmative vote of not less than 75% of the shares entitled to vote generally in an election of directors. The provisions contained in the amended Articles of Incorporation of SNBV relating to election of directors in staggered three-year classes and the supermajority vote required to remove a director tend to discourage attempts by third parties to acquire us because of the extra time and expense involved and a greater possibility of failure. This also can affect the price that a potential purchaser would be willing to pay for SNBV stock, thereby reducing the amount a stockholder would receive in, for example, a tender offer for our common stock.

Our amended Articles of Incorporation also restricts the manner in which special meetings may be called. Under the Virginia law, a corporation is permitted to provide for calling of special meetings either in its bylaws or Articles of Incorporation. The amended Articles of Incorporation of SNBV specify that special meetings may be called by our Chairman of the Board or President or by the affirmative vote of three-fourths of the board of directors or by holders of record of not less than 40% of our then outstanding voting shares.

The amended Articles of Incorporation also provide that when evaluating any offer that may result in a change in control of SNBV, the board of directors may consider, consistent with the exercise of its fiduciary duties and in connection with the exercise of its judgment in determining what is in the best interests of SNBV and our stockholders, not only the price or other consideration being offered, but also all other relevant factors including, without limitation, the financial and management resources and future prospects of the other party, the possible effect on our business and the business of our subsidiaries and on our employees, customers, suppliers and creditors and those of our subsidiaries, the effects on the ability of SNBV to fulfill its corporate objectives as a holding company and on the ability of Sonabank to fulfill its objectives as a bank, and the effects on the communities in which our facilities are located.

In addition to common stock, the amended Articles of Incorporation of SNBV permit the board of directors to issue up to 5,000,000 shares of “blank check” preferred stock. Among other things, the board of directors in issuing a series of preferred stock has the power to determine voting powers, if any, of such series. Such issuance

of preferred stock having voting rights could dilute the voting and ownership interest of existing stockholders. Such issuance may have the effect of discouraging unilateral attempts by third parties to obtain control of SNBV, since the issuance of additional shares of capital stock could be used to dilute the voting power of, or increase the cost to, any person seeking to obtain control of us. This may occur by virtue of the fact that the preferred stock may be issued in a series having rights in excess of one vote per share or having the right to vote separately by class respecting some matters.

The provisions described above, to the extent applicable, will have the general effect of discouraging, or rendering more difficult, unfriendly takeover or acquisition attempts. Consequently, such provisions would be beneficial to current management in an unfriendly takeover attempt but could have an adverse effect on stockholders who might wish to participate in such a transaction. However, we believe that such provisions are advantageous to our stockholders in that they will permit management and the stockholders to carefully consider and understand a proposed acquisition, lead to higher offering prices, and require a higher level of stockholder participation in the decision if the transaction is not approved by our board of directors.

Indemnification and Insurance; Limitation on Liability

Section 13.1-692.1 of the VSCA permits a corporation to limit the amount of damages that a director or officer will be liable for in a suit brought by or in the right of the corporation or stockholders to the lesser of (x) the dollar amount stated in the corporation’s articles of incorporation, or if approved by the stockholders, the bylaws, or (y) the greater of $100,000 or the amount of cash compensation received by the director or officer from the corporation during the twelve months immediately preceding the act or omission for which liability was imposed. There can be no limitation of liability, however, where the director or officer engaged in willful misconduct or a knowing violation of the criminal law or of any federal or state securities law. SNBV’s amended Articles of Incorporation adopt this provision of the VSCA.

In addition, Sections 13.1-697 and 13.1-702 of the VSCA permits a corporation to indemnify certain of its directors and officers. Our amended Articles of Incorporation provide that we will indemnify, to the fullest extent permitted under Virginia law, each of our directors, officers, employees and agents and former directors, officers, employees and agents and any other person serving at the request of SNBV as a director, officer, employee or agent of another enterprise, against expenses incurred by such person in any action, suit or proceeding in which such person was or is made or threatened to be made a party or is otherwise involved by reason of the fact that such person is or was one of our directors, officers, employees or agents. We are also obligated to pay the expenses of the directors and officers incurred in defending such proceedings, subject to reimbursement if it is subsequently determined that such person is not entitled to indemnification.

We have obtained a policy of insurance under which our directors and officers will be insured, subject to the limits of the policy, against certain losses arising from claims made against such directors and officers by reason of any acts or omissions covered under such policy in their respective capacities as directors or officers, including certain liabilities under the Securities Act.

UNDERWRITING

FIG Partners, L.L.C., Atlanta, Georgia, has agreed, subject to the terms and conditions contained in a written underwriting agreement with us, to act as the underwriter of this offering and to sell, on a best effort basis, the 1,786,000 shares of our common stock offered by this prospectus. If the offering for such shares is oversubscribed, we have agreed to permit FIG Partners to sell up to an additional 214,000 shares, representing 12.0% of the offered number of shares, to cover additional demand. FIG Partners is registered with the SEC as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. We will pay FIG Partners a commission of 3.5% on the sales price of any and all shares sold in this offering. We have also agreed to indemnify FIG Partners against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that FIG Partners may be required to make in respect thereof. FIG Partners provides investment banking services to us from time to time in the ordinary course of our business and advised us on the merger with 1 ^st Service. We agreed to pay FIG Partners $25,000 upon the execution of the merger agreement, $5,000 if FIG Partners updates its fairness opinion to our board of directors and $75,000 upon the closing of the merger, plus certain of FIG Partners’ expenses, and agreed to indemnify FIG Partners under certain circumstances, including actions under the federal securities laws.

FIG Partners has informed us that it proposes to offer the shares as the underwriter, subject to prior sale, when, as and if issued by us, in part to the public at the public offering price and in part through certain selected dealers that are members of the National Association of Securities Dealers, Inc. to customers of those selected dealers at the offering price. Each selected dealer will receive a commission of $0. for each share it sells. Shares will be offered to directors, officers, current stockholders and their associates and/or affiliates on the terms set forth in this prospectus. FIG Partners reserves the right to reject any order for purchase of shares through it, in whole or in part. Shares may not be issued to any person or entity who, in our judgment, would be required to obtain prior clearance or approval from any federal banking regulatory authority to own or control our securities, or which, when added to their current holdings, would result in that person or entity owning more than 9.9% of our outstanding shares at the conclusion of the offering. Because the offering is being conducted on a best effort basis, FIG Partners is not obligated to sell any specific number or dollar amount of shares and it is not required to purchase any shares that are not sold to the public in the offering. Completion of the offering is not contingent upon the sale of a minimum number of shares or the occurrence of any other event.

FIG Partners has the right to terminate the underwriting agreement under certain defined circumstances. It could terminate the underwriting agreement if, for example, FIG Partners is not satisfied with its due diligence review of SNBV and Sonabank, or if there is a material adverse change in our financial condition or operations, adverse economic conditions or other conditions or circumstances which would render the sale of our common stock impracticable or inadvisable.

At the closing of the offering, FIG Partners will notify all prospective purchasers, directly or through a selected dealer, of the number of shares to be purchased. FIG Partners will not purchase or otherwise take ownership of any shares. Purchasers of shares will be required to have an account either with FIG Partners or with a selected dealer in order to purchase shares of our common stock in the offering. The closing of the offering is expected to occur on or about , 2006. However, we may extend the offering to a later date or close the offering on an earlier date.

We will pay our own expenses of the offering (including our legal, accounting, printing and other expenses, and expenses associated with qualifying our shares for sale under the “blue sky” laws of various states) and we will reimburse FIG Partners for its out-of-pocket costs and expenses, including the fees of its legal counsel, up to a maximum reimbursement of $75,000 (which may be increased with our consent), in connection with the offering.

We will register, qualify or obtain an exemption from registration or qualification, as applicable, in certain states of the United States under each such state’s securities or “blue sky” laws. We will not make any offers or sales to any residents of any states where the offering is not registered, qualified or exempt.

We expect that the total amount of offering expenses we pay (including our reimbursement to FIG Partners for its out-of-pocket expenses) will amount to approximately $300,000. Those expenses, as well as sales commissions, will be paid from the sales proceeds. If we withdraw the offering or if no shares of our common stock are sold in the offering, these offering expenses will be charged against our earnings.

The foregoing is a summary of the principal terms of the underwriting agreement and does not purport to be a complete description of such agreement. Reference is made to a copy of the underwriting agreement, filed as an exhibit to our registration statement.

There is no established trading market for our shares. The public offering price of our stock has been determined through negotiations between us and FIG Partners. A variety of factors were considered in determining the price, including:

•

price at which our shares were valued in the 1 ^st Service Merger;

•

our tangible book value per share;

•

trading prices of other community banks;

•

the price to earnings and price to book value of other publicly traded shares of comparable companies;

•

our financial history and prospects;

•

our past and present earnings and our prospects for future earnings;

•

the current performance and prospects of the banking industry in general and the banking market in which we compete; and,

•

the general condition of the securities market.

In determining the final offering price, the factors described above were not assigned any particular weight. Rather these factors were considered in totality in setting our offering price.

FIG Partners has informed us that it intends to make a market in our common stock following the offering, but it has no obligation to do so for any particular length of time or at all. We cannot assure you that an active trading market will develop for our common stock or that our common stock will trade in the market subsequent to the offering at or above the initial public offering price. We have applied to have our common stock approved for listing on The Nasdaq Capital Market under the symbol “SONA.” There are continuing eligibility requirements for companies listed on The Nasdaq Capital Market. If we are not able to continue to satisfy the eligibility requirements for The Nasdaq Capital Market, then our stock may be delisted. See “Risk Factors—Risks Related to This Offering—We cannot be sure that an active public trading market will develop to provide liquidity for your investment” on page 16.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Registrar and Transfer Company, Cranford, New Jersey.

Nasdaq Capital Market Listing

We have applied to have our common stock listed on the Nasdaq Capital Market under the symbol “SONA.”

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock. We cannot make any prediction as to the effect, if any, that sales of common stock or the availability of common stock for sale after the offering will have on the market price of our common stock. The market price of our common stock could decline because of the sale of a large number of shares of our common stock or the perception that such sales could occur. These factors could also make it more difficult to raise funds through future offerings of common stock.

After this offering, there will be 5,286,000 shares of our common stock outstanding if the offering is not oversubscribed. If the offering is oversubscribed, we may sell up to an additional 214,000 shares in this offering, resulting in a total of 5,500,000 shares of common stock outstanding immediately thereafter. In addition:

•

275,000 shares of our common stock are reserved for future issuance to directors and employees under our Option Plan, of which, as of June 30, 2006, options to purchase 164,750 shares had been granted are fully vested and exercisable in 2006. 110,250 additional shares will be available for future grant under this plan after the completion of this offering; and

•

75,000 shares of our common stock are reserved for exercise pursuant to ten year warrants granted to the organizers of Sonabank in 2005.

All the shares of our common stock to be sold by us in the offering will be freely tradable without restriction or further registration under the Securities Act except for shares owned by our affiliates, as described below. All of the shares of our common stock that are currently outstanding have not been registered for resale and are considered to be “restricted” shares because they were sold in a private placement in March 2005. In March of 2007, a significant number of these shares will become eligible for resale without restriction pursuant to Rule 144(k) under the Securities Act. The remaining shares of our outstanding common stock will be available for future sale subject to restrictions on the timing, manner and volume of sales imposed by the Securities Act, including Rule 144 under that Act.

In general, under Rule 144, as currently in effect, any person (or persons whose shares are required to be aggregated), including an “affiliate” of ours, who has beneficially owned restricted shares for a period of at least one year is entitled to sell, within any three-month period, a number of shares that does not exceed the greater of:

•

1% of the then outstanding shares of our common stock, or

•

the average weekly trading volume in the common stock during the four calendar weeks immediately preceding the date on which notice of such sale is filed with the SEC.

Sales under Rule 144 are also subject to provisions relating to notice and manner of sale and the availability of current public information about us during the 90 days immediately preceding a sale. In addition, a person who is not an affiliate of ours during the 90 days preceding a sale and who has beneficially owned the restricted shares proposed to be sold for at least two years would be entitled to sell such shares under Rule 144(k) without regard to the volume limitation and other conditions described above. Under Rule 144, “affiliates” generally include individuals or entities that control, are controlled by, or are under common control with, SNBV and may include directors or officers of SNBV as well as significant stockholders of SNBV.

Rule 701 provides that the shares of common stock acquired upon the exercise of currently outstanding options under our Option Plan may be resold by persons, other than affiliates, beginning 90 days after the effective date of the offering in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period, contained in Rule 144. The SEC has stated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, along with the shares acquired upon exercise of those options, including exercises after the effective date of the offering. Securities issued in reliance on Rule 701 are restricted securities and beginning 90 days after the effective date of this offering, may be sold by persons other than affiliates, as defined in

Rule 144, subject only to the manner of sale provisions of Rule 144. Securities issued in reliance on Rule 701 may be sold by affiliates under Rule 144 without compliance with its one-year minimum holding period requirement.

Shortly after the offering, we intend to file with the SEC a registration statement on Form S-8 to register the 275,000 shares of our common stock that are issuable under our Option Plan, as described under “Management.” Following such registration, all shares of common stock issuable upon exercise of options or other awards granted under our Option Plan will be freely tradable without restrictions under the Securities Act, except to the extent held by one of our affiliates (in which case they will be subject to the limitations of Rule 144 described above).

LEGAL MATTERS

Certain legal matters in connection with this offering will be passed upon for us by Elias Matz Tiernan & Herrick L.L.P., Washington, DC. As of June 30, 2006, the partners of Elias Matz Tiernan & Herrick L.L.P. beneficially owned approximately 67,500 shares of our outstanding common stock. Certain legal matters in connection with this offering will be passed upon for the underwriter by Silver, Freedman & Taff, L.L.P., Washington, D.C.

EXPERTS

The consolidated financial statements of Southern National Bancorp of Virginia, Inc. as of December 31, 2005 and for the period from inception at April 14, 2005 through December 31, 2005 included herein have been included herein in reliance upon the report of BDO Seidman, LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

The balance sheet of 1st Service at December 31, 2005 and the statements of operations, changes in stockholders equity and cash flows for the year ended December 31, 2005 have been included herein in reliance upon the report of Thompson, Greenspon & Co., P.C., independent registered public accountants, appearing elsewhere herein, and upon the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

You can review our electronically filed registration statement and exhibits on the SEC’s Internet site at http://www.sec.gov. We have filed with the SEC, Washington, D.C. 20549, a registration statement on Form S-1 under the Securities Act of 1933, as amended, with respect to our common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. Certain items are omitted in accordance with the rules and regulations of the SEC. For further information with respect to our company and our common stock, reference is made to the registration statement and the exhibits and any schedules filed with the registration statement. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance, if such contract or document is filed as an exhibit, reference is made to the copy of such contract or other documents filed as an exhibit to the registration statement, each statement being qualified in all respects by such reference. You can obtain a copy of the full registration statement, including the exhibits and schedules thereto, from the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at (202) 942–8090 for further information on the Public Reference Room.

Upon completion of this offering, we will become subject to information and periodic reporting requirements of the Securities Exchange Act of 1934, as amended, and we will file annual, quarterly and current reports, proxy statements and other information with the SEC. We intend to furnish our stockholders written annual reports containing financial statements audited by our independent auditors, and make available to our stockholders quarterly reports for the first three quarters of each year containing unaudited interim financial statements.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Southern National Bancorp of Virginia, Inc.


		Page
Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Balance Sheets as of June 30, 2006 (unaudited) and December 31, 2005		F-3

Consolidated Statements of Income for the Six Months Ended June 30, 2006 (unaudited), for the Period from Inception at April 14, 2005 Through June 30, 2005 (unaudited) and for the Period from Inception at April 14, 2005 through December 31, 2005		F-4

Consolidated Statement of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2006 (unaudited) and for the Period from Inception at April 14, 2005 Through December 31, 2005		F-5

Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2006 (unaudited) and for the Period from Inception at April 14, 2005 Through June 30, 2005 (unaudited) and for the Period from Inception At April 14, 2005 through December 31, 2005		F-6

Notes to Consolidated Financial Statements		F-7

Unaudited Pro Forma Combined Condensed Consolidated Financial Statements		F-27

Unaudited Pro Forma Combined Condensed Consolidated Balance Sheet as of June 30, 2006		F-28

Unaudited Pro Forma Combined Condensed Consolidated Statement of Income for the Six Months Ended June 30, 2006		F-29

Unaudited Pro Forma Combined Condensed Consolidated Statement of Income for the Year Ended December 31, 2005		F-30

Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Statements		F-31

1 ^st Service Bank


Consolidated Financial Statements

Independent Auditors’ Report		F-33

Consolidated Balance Sheet at December 31, 2005 and 2004		F-34

Consolidated Statements of Operations for the Years Ended December 31, 2005 and 2004		F-35

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2005 and 2004		F-36

Consolidated Statements of Cash Flows for the Years Ended December 31, 2005 and 2004		F-37

Notes to Financial Statements		F-38

Consolidated Balance Sheet at June 30, 2006 (unaudited), June 30, 2005 (unaudited) and December 31, 2005		F-49

Consolidated Statements of Operations for the Six Months Ended June 30, 2006 and 2005 (unaudited) and for the Year Ended December 31, 2005		F-50

Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2006 (unaudited) and for the Year Ended December 31, 2005		F-51

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2006 and 2005 (unaudited) and for the Year Ended December 31, 2005		F-52

Notes to Financial Statements		F-53

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Southern National Bancorp of Virginia, Inc.

Charlottesville, Virginia

We have audited the accompanying consolidated balance sheet of Southern National Bancorp of Virginia, Inc. as of December 31, 2005 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the period from inception (April 14, 2005) through December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Our audit included consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Southern National Bancorp of Virginia, Inc. at December 31, 2005, and the results of its operations and its cash flows for the period from inception (April 14, 2005) through December 31, 2005 in conformity with accounting principles generally accepted in the United States of America.

BDO Seidman, LLP

Richmond, Virginia

February 16, 2006

F-2

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)


	June 30, 2006			December 31, 2005
	(Unaudited)
*ASSETS*

Cash and cash equivalents:
Cash and due from banks	$	1,275		$	1,607
Interest-bearing deposits in other banks		519			56

Total cash and cash equivalents		1,794			1,663

Securities available for sale, at fair value		14,621			8,296

Securities held to maturity, at amortized cost		31,472			31,698

Loans, net of unearned income		92,363			75,031
Less allowance for loan losses		(1,306	)		(1,020	)

Net loans		91,057			74,011

Bank premises and equipment, net		2,827			2,924
Core deposit intangibles, net		2,773			3,024
Other assets		1,017			1,292

Total assets	$	145,561		$	122,908

*LIABILITIES AND STOCKHOLDERS’ EQUITY*

Noninterest-bearing demand deposits	$	6,548		$	6,333
Interest-bearing deposits:
NOW accounts		4,408			6,244
Money market accounts		15,584			17,147
Savings accounts		2,354			2,373
Time deposits of $100,000 and over		61,017			30,984
Other time deposits		14,497			14,182

Total interest-bearing deposits		97,860			70,930

Total deposits		104,408			77,263

Short-term borrowings		8,110			12,406
Other liabilities		457			926

Total liabilities		112,975			90,595

Commitments and contingencies
Stockholders’ equity:
Common stock, $.01 par value. Authorized 45,000,000 shares; issued and outstanding, 3,500,000 shares in all periods.		35			35
Surplus		34,537			34,537
Accumulated deficit		(1,935	)		(2,256	)
Accumulated other comprehensive loss		(51	)		(3	)

Total stockholders’ equity		32,586			32,313

Total liabilities and stockholders’ equity	$	145,561		$	122,908

See accompanying notes to consolidated financial statements.

F-3

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)


	For the Six Months Ended June 30, 2006		For the Period From Inception at April 14, 2005 Through June 30, 2005			For the Period From Inception at April 14, 2005 Through December 31, 2005
	(Unaudited)		(Unaudited)
Interest and dividend income :
Interest and fees on loans	$	3,421	$	46		$	1,534
Interest on deposits in other banks		55		118			194
Interest and dividends on securities:		972		151			667

Total interest and dividend income		4,448		315			2,395

Interest expense:
Interest on deposits		1,619		34			514
Interest on short-term borrowings		224		—			91

Total interest expense		1,843		34			605

Net interest income		2,605		281			1,790

Provision for loan losses		286		327			1,020

Net interest income (loss) after provision for loan losses		2,319		(46	)		770

Noninterest income:
Service charges on deposit accounts		57		1			18
Other service charges and fees		62		1			33

Total noninterest income		119		2			51

Noninterest expenses:
Salaries and benefits		1,029		343			1,079
Occupancy expenses		182		35			154
Furniture and equipment expenses		145		24			135
Organizational costs		—		1,212			1,212
Amortization of core deposit intangible		218		—			36
Other operating expenses		543		129			461

Total noninterest expenses		2,117		1,743			3,077

Income (loss) before income taxes		321		(1,787	)		(2,256	)
Income tax expense		—		—			—

Net income (loss)	$	321	$	(1,787	)	$	(2,256	)

Earnings (loss) per share, basic	$	0.09	$	(0.51	)	$	(0.64	)

Earnings (loss) per share, diluted	$	0.09	$	(0.51	)	$	(0.64	)

See accompanying notes to consolidated financial statements.

F-4

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND

FOR THE PERIOD FROM INCEPTION AT APRIL 14, 2005 THROUGH DECEMBER 31, 2005

(in thousands, except share amounts)


	Common Stock		Surplus		Accumulated Deficit			Accumulated Other Comprehensive Loss			Comprehensive Loss			Total
Balance—April 14, 2005	$	—	$	—	$	—		$	—					$	—
Comprehensive loss:
Net loss						(2,256	)				$	(2,256	)		(2,256	)
Unrealized holding losses arising during the period (net of tax, $2)									(3	)		(3	)		(3	)

Total comprehensive loss											$	(2,259	)

Issuance of common stock (3,500,000 shares), net		35		34,537											34,572

Balance—December 31, 2005		35		34,537		(2,256	)		(3	)					32,313
Comprehensive income:
Net income						321					$	321			321
Unrealized holding losses arising during the period (net of tax, $24)									(48	)		(48	)		(48	)

Total comprehensive income											$	273

Balance—June 30, 2006 (Unaudited)	$	35	$	34,537	$	(1,935	)	$	(51	)				$	32,586

See accompanying notes to consolidated financial statements.

F-5

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	For the Six Months Ended June 30, 2006			For the Period From Inception at April 14, 2005 Through June 30, 2005			For the Period From Inception at April 14, 2005 Through December 31, 2005
	(Unaudited)
Operating activities:
Net income (loss)	$	321		$	(1,787	)	$	(2,256	)
Adjustments to reconcile net income (loss) to net cash and cash equivalents provided (used) in operating activities:
Depreciation of bank premises and equipment		147			14			113
Amortization (accretion), net		198			(9	)		(2	)
Provision for loan losses		286			327			1,020
Other, net		(146	)		3,329			166

Net cash and cash equivalents provided (used) in operating activities		806			1,874			(959	)

Investing activities:
Purchases of securities available for sale		(7,054	)		(4,012	)		(8,923	)
Proceeds from paydowns of securities available for sale		687			—			669
Purchases of securities held to maturity		(1,967	)		(13,917	)		(33,697	)
Proceeds from paydowns of securities held to maturity		2,192			451			2,000
Net increase in loans		(17,332	)		(13,085	)		(67,941	)
Net increase (decrease) in short-term borrowings		—			—			32,464
Purchases of bank premises and equipment		(50	)		(1,029	)		(1,302	)

Net cash and cash equivalents used in investing activities		(23,524	)		(31,591	)		(76,730	)

Financing activities:
Net increase in noninterest-bearing deposits		215			985			2,669
Net increase in interest-bearing deposits		26,930			8,106			32,129
Net increase in short-term borrowings		(4,296	)		—			9,982
Issuance of common stock, net of issuance costs		—			34,572			34,572

Net cash and cash equivalents provided by financing activities		22,849			43,663			79,352

Increase in cash and cash equivalents		131			13,946			1,663
Cash and cash equivalents at beginning of period		1,663			—			—

Cash and cash equivalents at end of period	$	1,794		$	13,946		$	1,663

Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest	$	1,638		$	33		$	419
Income taxes	$	—		$	—		$	—
Supplemental schedule of noncash investing and financing activities:
Unrealized loss on securities available for sale	$	72		$	9		$	5

See accompanying notes to consolidated financial statements.

F-6

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Southern National Bancorp of Virginia, Inc.(“SNBV”) is a corporation formed on July 28, 2004 under the laws of the Commonwealth of Virginia and is the holding company for Sonabank, N. A. (“Sonabank”) a national bank chartered on April 14, 2005, under the laws of the United States of America. The principal activities of Sonabank are to attract deposits and originate loans as permitted for federally chartered national banks under the laws of the United States of America. Sonabank conducts full-service banking operations in Charlottesville and Clifton Forge in Virginia.

The accounting policies and practices of Southern National Bancorp of Virginia, Inc. and subsidiary (“Southern”) conform to U. S. generally accepted accounting principles and to general practice within the banking industry. Major policies and practices are described below:

(A) Principles Of Consolidation

The consolidated financial statements include the accounts of Southern National Bancorp of Virginia, Inc. and its wholly owned subsidiary. Southern National Bancorp of Virginia, Inc is a bank holding company that owns all of the outstanding common stock of its banking subsidiary, Sonabank, N. A. (“Sonabank”). All material intercompany balances and transactions have been eliminated in consolidation.

(B) Investment Securities

Debt securities that Southern has the positive intent and ability to hold to maturity are classified as held-to-maturity and reported at amortized cost.

Securities classified as available for sale are those debt and equity securities that management intends to hold for an indefinite period of time, including securities used as part of SNBV’s asset/liability strategy, and that may be sold in response to changes in interest rates, liquidity needs or other similar factors. Securities available for sale are reported at fair value, with unrealized gains or losses net of deferred taxes, included in accumulated other comprehensive income (loss) in stockholders’ equity.

Securities classified as held for trading are those debt and equity securities that are bought and held principally for the purpose of selling them in the near term and reported at fair value, with unrealized gains and losses included in earnings. Southern has no securities in this category.

Purchased premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of Southern to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

(C) Loans

Southern grants mortgage, commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by non-residential mortgage loans throughout its market area. The ability of SNBV’s debtors to honor their contracts is in varying degrees dependent upon the real estate market conditions and general economic conditions in this area.

F-7

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

The accrual of interest on all loans is discontinued at the time the loan is 90 days delinquent unless the credit is well secured and in process of collection. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal and interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual status or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

(D) Allowance For Loan and Lease Losses (ALLL)

The provision for loan and lease losses charged to operations is an amount sufficient to bring the ALLL to an estimated balance that management considers adequate to absorb potential losses in the portfolio. Loans are charged against the allowance when management believes the collection of the principal is unlikely. Recoveries of amounts previously charged-off are credited to the allowance. Management’s determination of the adequacy of the allowance is based on an evaluation of the composition of the loan portfolio, the value and adequacy of collateral, current economic conditions, historical loan loss experience, and other risk factors. Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions, particularly those affecting real estate values. In addition, regulatory agencies, as part of their examination process, periodically review Sonabank’s allowance for loan losses. Such agencies may require Sonabank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

The allowance consists of specific, general and unallocated components. The specific component relates to loans considered to be impaired. For such loans a specific reserve is established when the discounted cash flows, collateral value, or observable market price of the impaired loan is lower than the carrying value of that loan. The general component is established for unimpaired loans and its value is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses.

A loan is considered impaired when, based on current information and events, it is probable that Southern will be unable to collect the scheduled payments of principal or interest when due according to the terms of the loan documentation. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, Southern does not separately identify individual consumer and residential loans for impairment disclosures.

F-8

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(E) Bank Premises And Equipment

Bank premises and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method. It is the policy of Southern to capitalize additions and improvements and to depreciate the cost thereof over their estimated useful lives ranging from 3 to 30 years. Maintenance and repairs are expensed as they are incurred.

(F) Goodwill and Intangible Assets

SFAS No. 141, Business Combinations , requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. For purchase acquisitions, Southern is required to record assets acquired, including identifiable intangible assets, and liabilities assumed at their fair value, which in many instances involves estimates based on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analysis or other valuation techniques. Southern has adopted SFAS No. 142, Goodwill and Other Intangible Assets, which prescribes the accounting for goodwill and intangible assets subsequent to initial recognition. The provisions of SFAS No. 142 discontinue the amortization of goodwill and intangible assets with indefinite lives but require at least an annual impairment review, and more frequently if certain impairment indicators are in evidence. Southern has adopted SFAS 147, Acquisitions of Certain Financial Institutions , and determined that core deposit intangibles will be amortized over the estimated useful life.

(G) Income Taxes

Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of the net operating losses carryforward and allowance for loan losses. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets and liabilities are reflected at income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled.

As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

At December 31, 2005, a valuation allowance for the full amount of the gross deferred tax asset was recorded because of the uncertainties of the amount of taxable income that will be generated in future years.

Southern is subject to a state franchise tax in lieu of state income taxes.

(H) Consolidated Statements of Cash Flows

For purposes of reporting cash flows, Southern defines cash and cash equivalents as cash due from banks and interest-bearing deposits in other banks.

(I) Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the year. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by Southern relate solely to outstanding stock options and warrants and are determined using the treasury stock method.

F-9

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(J) Comprehensive Income (Loss)

Comprehensive income (loss) represents all changes in equity that result from recognized transactions and other economic events of the period. Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under accounting principles generally accepted in the United States of America are included in comprehensive income but excluded from net income, such as unrealized gains and losses on certain investments in debt and equity securities.

(K) Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of goodwill and intangible assets, foreclosed real estate and deferred tax assets and liabilities.

(L) Off Balance Sheet Credit Related Financial Instruments

In the ordinary course of business, Southern has entered into commitments to extend credit and standby letters of credit. Such financial instruments are recorded when they are funded.

(M) Asset Prepayment Rates

SNBV purchases amortizing investment securities in which the underlying assets are residential mortgage loans subject to prepayments. The actual principal reduction on these assets varies from the expected contractual principal reduction due to principal prepayments resulting from the borrowers’ election to refinance the underlying mortgage based on market and other conditions. The purchase premiums and discounts associated with these assets are amortized or accreted to interest income over the estimated life of the related assets. The estimated life is calculated by projecting future prepayments and the resulting principal cash flows until maturity. Prepayment rate projections utilize actual prepayment speed experience and available market information on like-kind instruments. The prepayment rates form the basis for income recognition of premiums and discounts on the related assets. Changes in prepayment estimates may cause the earnings recognized on these assets to vary over the term that the assets are held, creating volatility in the net interest margin. Prepayment rate assumptions are monitored and updated monthly to reflect actual activity and the most recent market projections.

F-10

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(N) Stock Compensation Plan

Through December 31, 2005, SNBV accounted for the Incentive Stock Option Plan under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based compensation cost is reflected in net income, as all options granted under the Plan have an exercise price equal to the market value of the underlying common stock on the date of grant. All options granted under the Plan are fully vested as of December 31, 2005. The following table illustrates the effect on net income and earnings per share if Southern had applied the fair value recognition provisions of FASB Statement No. 123R, Accounting for Stock-Based Compensation , to stock-based compensation during the period from inception at April 14, 2005 through December 31, 2005:


*(in thousands except per share data)*
Net loss, as reported	$	(2,256	)
Total stock-based compensation expense determined under fair value based method for all awards		(619	)

Pro forma net loss	$	(2,875	)

Net loss per share:
Basic—as reported	$	(0.64	)

Basic—pro forma	$	(0.82	)

Diluted—as reported	$	(0.64	)

Diluted—pro forma	$	(0.82	)

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:


Dividend yield	0.00	%
Expected life	10 years
Expected volatility	11.45	%
Risk-free interest rate	4.38	%

There have been no option grants during the six months ended June 30, 2006.

(O) Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 123 (Revised 2004) (“SFAS No. 123R”), “Share-Based Payment,” in December 2004. SFAS No. 123R is a revision of FASB Statement 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related implementation guidance. The Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award. This statement is effective as of the beginning of the first annual reporting period that begins after June 15, 2005 and SNBV adopted the standard in the first quarter of fiscal 2006. The adoption of this statement did not have a material effect on the consolidated financial statements.

AICPA Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP 03-3), addresses the accounting for differences between contractual cash flows and cash flows expected to

F-11

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

be collected from the initial investment in loans acquired in a transfer if those differences are attributable, at least in part, to credit quality. It includes such loans acquired in purchase business combinations and does not apply to loans originated by the entity. The SOP prohibits carrying over or creation of valuation allowances in the initial accounting for loans acquired in a transfer. It is effective for loans acquired in fiscal years beginning after December 15, 2004. This new guidance had no material effect on SNBV’s consolidated financial statements upon implementation.

(P) Branch Acquisition

On December 2, 2005, Sonabank completed its acquisition of a branch office located in Clifton Forge, Virginia from First Community Bank, N. A. Cash in the amount of $32.5 million was received in the acquisition. Sonabank acquired $42.5 million in deposits, $7.1 million in loans, and $2.4 million in retail reverse repurchase agreements. The branch banking center and other assets were also purchased in the amount of $2.2 million. As part of the purchase price allocation, Sonabank recorded $3.1 million in core deposit intangibles. The core deposit intangible assets are being amortized over 7 years.

(Q) Business Combination

On July 10, 2006, SNBV signified a definitive Agreement and Plan of Merger with 1 ^st Service Bank where, upon the closing of the merger agreement, 1 ^st Service will merge with and into Sonabank. SNBV will pay a purchase price of 676,000 shares of its common stock (valued at $12.50 per share) and $4.6 million in cash for the acquisition. 1 ^st Service is a federally chartered stock savings bank that operates three branch offices in Fairfax County, Virginia. As of June 30, 2006, 1 ^st Service had approximately $124.4 million in assets, $101.5 million in deposits and $7.6 million in stockholders’ equity. SNBV expects to complete this acquisition late in the fourth quarter of 2006.

2. SECURITIES

The amortized cost, gross unrealized gains and losses and estimated fair value of securities at June 30, 2006 (unaudited) are summarized as follows (in thousands):


	Amortized Cost		Gross Unrealized					Estimated Fair Value
	Amortized Cost		Gains		(Losses)			Estimated Fair Value
Available for sale:
Collateralized mortgage obligations	$	6,562	$	—	$	(65	)	$	6,497
Corporate Bonds	$	6,582		1	$	(13	)		6,570
Federal Reserve Bank stock		1,020		—		—			1,020
Federal Home Loan Bank stock		534		—		—			534

	$	14,698	$	1	$	(78	)	$	14,621

F-12

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)


	Amortized Cost		Gross Unrealized					Estimated Fair Value
	Amortized Cost		Gains		(Losses)			Estimated Fair Value
Held to maturity:
Mortgage-backed securities	$	15,046	$	—	$	(402	)	$	14,644
U. S. Government Agency Securities		1,000		—		—			1,000
Collateralized mortgage obligations		15,426		—		(147	)		15,279

	$	31,472	$	—	$	(549	)	$	30,923

The amortized cost, gross unrealized gains and losses and estimated fair value of securities at December 31, 2005 are summarized as follows (in thousands):


	Amortized Cost		Gross Unrealized					Estimated Fair Value
	Amortized Cost		Gains		(Losses)			Estimated Fair Value
Available for sale:
Collateralized mortgage obligations	$	7,213	$	—	$	(5	)	$	7,208
Federal Reserve Bank stock		1,020		—		—			1,020
Federal Home Loan Bank stock		68		—		—			68

	$	8,301	$	—	$	(5	)	$	8,296


	Amortized Cost		Gross Unrealized					Estimated Fair Value
	Amortized Cost		Gains		(Losses)			Estimated Fair Value
Held to maturity:
Mortgage-backed securities	$	15,812	$	—	$	(142	)	$	15,670
Collateralized mortgage obligations		15,886		7		(1	)		15,892

	$	31,698	$	7	$	(143	)	$	31,562

The amortized cost and estimated fair value (in thousands) of securities at June 30, 2006 (unaudited), by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Securities Available for Sale
	Amortized Cost		Estimated Fair Value
Due after one year through five years	$	1,628	$	1,628
Due after ten years		11,516		11,439

		13,144		13,067
Federal Reserve Bank stock—restricted		1,020		1,020
Federal Home Loan Bank stock—restricted		534		534

	$	14,698	$	14,621


	Securities Held to Maturity
	Amortized Cost		Estimated Fair Value
Due after one year through five years	$	1,000	$	1,000
Due after ten years		30,472		29,923

	$	31,472	$	30,923

F-13

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The amortized cost and estimated fair value (in thousands) of securities at December 31, 2005, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Securities Available for Sale
	Amortized Cost		Estimated Fair Value
Due after one year through five years	$	2,296	$	2,296
Due after ten years		4,917		4,912

		7,213		7,208
Federal Reserve Bank stock—restricted		1,020		1,020
Federal Home Loan Bank stock—restricted		68		68

	$	8,301	$	8,296


	Securities Held to Maturity
	Amortized Cost		Estimated Fair Value
Due after ten years	$	31,698	$	31,562

Securities with an amortized cost of approximately $38 million were pledged to secure retail repurchase agreements, a line of credit under a repurchase agreement, deposits of public funds, and a line of credit for advances from the Federal Home Loan Bank of Atlanta (“FHLB”) as of June 30, 2006. There were no advances outstanding under the repurchase agreement line of credit at June 30, 2006. As of December 31, 2005, securities with an amortized cost of approximately $34 million were pledged to secure a line of credit under a repurchase agreement and a line of credit for advances from the Federal Home Loan Bank of Atlanta (“FHLB”). There were no outstanding FHLB advances at December 31, 2005.

There were no sales of securities during the six months ended June 30, 2006 or during the period from April 14, 2005 through December 31, 2005.

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of Southern to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

F-14

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The primary purpose of the investment portfolio is to generate income and meet liquidity needs of Southern through readily saleable financial instruments. The portfolio includes mortgage-backed securities and collaterized mortgage obligations, whose prices move inversely with rates. At the end of any accounting period, the investment portfolio has unrealized gains and losses. Southern monitors the portfolio which is subject to liquidity needs, market rate changes and credit risk changes to see if adjustments are needed. The primary concern in an unrealized loss situation is the credit quality of the business behind the instrument. There are 13 securities totaling approximately $33.6 million in the portfolio that are considered temporarily impaired at June 30, 2006. There are nine securities totaling approximately $25.6 million in the portfolio that are considered temporarily impaired at December 31, 2005. The temporary impairment is caused by higher interest rates since the purchase of the securities and will reverse if interest rates decline in the future; conversely, the temporary impairment will increase if interest rates increase. The following tables present information regarding temporarily impaired securities as of June 30, 2006 (unaudited):


	Less than 12 months					More than 12 months					Total
	Fair value		Unrealized Losses			Fair value		Unrealized Losses			Fair value		Unrealized Losses
Available for sale:
Corporate Bonds	$	3,019	$	(13	)	$	—	$	—		$	3,019	$	(13	)
Collateralized mortgage obligations		4,869		(65	)		—		—			4,869		(65	)

	$	7,888	$	(78	)	$	—	$	—		$	7,888	$	(78	)


	Less than 12 months					More than 12 months					Total
	Fair value		Unrealized Losses			Fair value		Unrealized Losses			Fair value		Unrealized Losses
Held to maturity:
Mortgage-backed securities	$	12,767	$	(345	)	$	1,878	$	(57	)	$	14,645	$	(402	)
Collateralized mortgage obligations		11,050		(147	)							11,050		(147	)

	$	23,817	$	(492	)	$	1,878	$	(57	)	$	25,695	$	(549	)

The following tables present information regarding temporarily impaired securities as of December 31, 2005:


	Less than 12 months					More than 12 months				Total
	Fair value		Losses			Fair value		Losses		Fair value		Losses
	(Unaudited)					(Unaudited)				(Unaudited)
Available for sale:
Collateralized mortgage obligations	$	4,912	$	(5	)	$	—	$	—	$	4,912	$	(5	)

	$	4,912	$	(5	)	$	—	$	—	$	4,912	$	(5	)


	Less than 12 months					More than 12 months				Total
	Fair value		Unrealized Losses			Fair value		Unrealized Losses		Fair value		Unrealized Losses
Held to maturity:
Mortgage-backed securities	$	15,670	$	(142	)	$	—	$	—	$	15,670	$	(142	)
Collateralized mortgage obligations		4,993		(1	)						4,993		(1	)

	$	20,663	$	(143	)	$	—	$	—	$	20,663	$	(143	)

F-15

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

3. LOANS

Loans are stated at their face amount, net of unearned income, and consist of the following (in thousands):


	As of June 30, 2006		As of December 31, 2005
	(Unaudited)
Mortgage loans on real estate:
Commercial	$	49,723	$	41,644
Construction, land and other loans		21,407		15,978
Residential 1-4 family		7,462		7,814
Multi- family residential		611		—
Equity lines of credit		2,839		1,125

Total real estate loans		82,042		66,561

Commercial Loans		7,922		6,720
Consumer Loans		2,757		2,011

Gross loans		92,721		75,292
Less unearned income on loans		358		261

Loans, net of unearned income	$	92,363	$	75,031

At June 30, 2006 and December 31, 2005, there was no recorded investment in loans which have been identified as impaired loans, in accordance with Statement of Financial Accounting Standards No. 114, “Accounting by Creditors for Impairment of a Loan” (SFAS 114). There were no nonaccrual loans at June 30, 2006 and December 31, 2005, and there were no loans past due 90 days or more and accruing interest at June 30, 2006 and December 31, 2005.

4. ALLOWANCE FOR LOAN AND LEASE LOSSES

Activity in the allowance for loan and lease losses is summarized below (in thousands):


	For the Six Months Ended June 30, 2006		For the Period From Inception at April 14, 2005 Through June 30, 2005		For the Period From Inception at April 14, 2005 Through December 31, 2005
	(Unaudited)		(Unaudited)
Balance, beginning of period	$	1,020	$	—	$	—
Provision charged to operations		286		327		1,020
Recoveries credited to allowance		—		—		—

Total		1,306		327		1,020
Loans charged off		—		—		—

Balance, end of period	$	1,306	$	327	$	1,020

F-16

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. BANK PREMISES AND EQUIPMENT

Bank premises and equipment are as follows (in thousands):


	As of June 30, 2006		As of December 31, 2005
	(Unaudited)
Land	$	38	$	38
Building and improvements		1,542		1,522
Leasehold improvements		453		468
Furniture and equipment		1,054		1,009

		3,087		3,037
Less accumulated depreciation and amortization		260		113

Bank premises and equipment, net	$	2,827	$	2,924

Depreciation and amortization expense for the six months ended June 30, 2006 was $147 thousand, and for the period from April 14, 2005 through June 30, 2005, depreciation and amortization expense was $14 thousand. Depreciation and amortization expense for the period from April 14, 2005 through December 31, 2005 was $113 thousand. Future minimum rental payments required under non-cancelable operating leases for bank premises that have initial or remaining terms in excess of one year as of December 31, 2005 are as follows (in thousands):


2006	$	175
2007		180
2008		186
2009		192
2010		85
Thereafter		—

	$	818

The leases contain options to extend for periods of 2 to 6 years. Rental expense for the six months ended June 30, 2006 was $87 thousand, and for the period from April 14, 2005 through June 30, 2005, rental expense was $29 thousand. Rental expense for the period from April 14, 2005 through December 31, 2005 was $110 thousand.

6. GOODWILL AND INTANGIBLE ASSETS

Southern has adopted SFAS No. 142, Goodwill and Other Intangible Assets, which prescribes the accounting for goodwill and intangible assets subsequent to initial recognition. The provisions of SFAS No. 142 discontinue the amortization of goodwill and intangible assets with indefinite lives but require at least an annual impairment review, and more frequently if certain impairment indicators are in evidence. As part of the purchase price allocation for the acquisition of the Clifton Forge branch, Southern recorded approximately $3.1 million in core deposit intangible assets which are being amortized over 7 years. Information concerning intangible assets is presented in the following table:


	As of June 30, 2006
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value
	(Unaudited)
Amortizable core deposit intangibles	$	3,028	$	(255	)	$	2,773


	December 31, 2005
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value
Amortizable core deposit intangibles	$	3,060	$	(36	)	$	3,024

F-17

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Amortization expense of core deposit intangibles for the six months ended June 30, 2006 was $218 thousand, and there was no amortization expense for the period from April 14, 2005 through June 30, 2005. Amortization expense of core deposit intangibles for the period from April 14, 2005 through December 31, 2005 was $36 thousand. Estimated amortization expense of core deposit intangibles for the years ended December 31 follows (in thousands):


2006	$	437
2007		437
2008		437
2009		437
2010		437
Thereafter		839

	$	3,024

7. DEPOSITS

The aggregate amount of time deposits in denominations of $100,000 or more at June 30, 2006 and December 31, 2005 was $61.0 million and $31.0 million, respectively. At June 30, 2006 (unaudited), the scheduled maturities of time deposits are as follows (in thousands):


1 year or less	$	66,639
1 - 2 years		5,124
2 - 3 years		1,180
3 - 4 years		1,909
4 - 5 years		662
Thereafter		—

	$	75,514

At December 31, 2005, the scheduled maturities of time deposits are as follows (in thousands):


2006	$	30,366
2007		9,909
2008		1,905
2009		2,296
2010		690
Thereafter		—

	$	45,166

F-18

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8. OTHER BORROWINGS

Short-term borrowings consist of the following as of June 30, 2006 (unaudited):


FHLB advances	$	4,900
Securities sold under agreements to repurchase		3,210

	$	8,110

Weighted interest rate		4.93	%

Average for the Six-month period ended June 30, 2006:
Outstanding balance	$	10,140
Interest rate		4.46	%

Maximum month-end outstanding balance	$	11,114

Short-term borrowings consist of the following as of December 31, 2005:


Securities sold under agreements to repurchase	$	12,406

Weighted interest rate		4.14	%

Average for the period from inception at April 14, 2005 through December 31, 2005:
Outstanding balance	$	2,241
Interest rate		4.09	%

Maximum month-end outstanding balance	$	15,724

9. STOCKHOLDERS’ EQUITY

SNBV completed its common stock offering in a private placement on April 14, 2005. Southern issued 3,500,000 shares of common stock with a par value of $0.01 per share at a price of $10.00 per share. The proceeds to SNBV amounted to approximately $34.5 million, net of costs of $428 thousand.

The organizers of SNBV advanced to SNBV $1.5 million to cover a substantial portion of the organizational and pre-opening expenses. In the event that the bank did not open, these persons would have borne the risk of loss with respect to these advances. In recognition of the financial risks undertaken, these individuals have received warrants to purchase shares of SNBV’s common stock. Warrants to purchase an aggregate of 75,000 shares of SNBV’s common stock were issued. The warrants are exercisable at a price of $10.00 per share and must be exercised within 10 years of the date the bank opened. SNBV has no obligation to register the warrants or the shares for which the warrants may be exercisable under the Securities Act of 1933, as amended.

F-19

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

10. INCOME TAXES

Net deferred tax assets consist of the following components as of June 30, 2006 and December 31, 2005 (in thousands):


	For the Six Months Ended June 30, 2006			For the Period For Inception at April 14, 2005 Through December 31, 2005
Deferred tax assets:
Allowance for loan losses	$	408		$	339
Organizational and start-up costs		372			350
Deferred loan fees		166			89
Net operating loss carryforward		—			37
Unrecognized losses on securities available for sale		26			2

Total deferred tax assets		972			817

Deferred tax liabilities:
Depreciation		55			45

		917			772
Valuation allowance		(688	)		(772	)

Net deferred tax assets	$	229		$	—

The provision for income taxes consists of the following (in thousands):


	For the Six Months Ended June 30, 2006		For the Period From Inception at April 14, 2005 through December 31, 2005
Current tax expense	$	—	$	—
Deferred tax benefit		—		—

Income tax expense	$	—	$	—

Southern has net operating loss carryforward of approximately $108 thousand at December 31, 2005, which expires in 2025.

The income tax expense differed from the amount of income tax determined by applying the U.S. Federal income tax rate of 34% to pretax income for the period from inception at April 14, 2005 through December 31, 2005 due to the following (in thousands):


	For the Six Months Ended June 30, 2006		For the Period For Inception at April 14, 2005 Through December 31, 2005
Computed “expected” tax benefit	$	109	$	770
Reduction in tax benefit resulting from:
Valuation allowance		109		770

Income tax expense	$	—	$	—

F-20

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. EMPLOYEE BENEFITS

Southern has a 401(k) plan that allows employees to make pre-tax contributions for retirement. The 401(k) plan provides for discretionary matching contributions by Southern. In 2005 and for the six months ended June 30, 2006, there were no matching contributions made by Southern. The 401(k) does not provide for investment in SNBV’s stock.

Southern has a stock option plan adopted in 2004 that authorized the reservation of up to 275,000 shares of common stock and provided for the granting of incentive options to certain employees. Under the plans, the option price cannot be less than the fair market value of the stock on the date granted. An option’s maximum term is ten years from the date of grant. Options granted under the plans may be subject to a graded vesting schedule.

A summary of changes in outstanding stock options during 2005 follows:


	Shares		Weighted Average Exercise Price
Options outstanding, January 1	—		$	—
Granted	168,250			10.00
Forfeited	(3,500	)		10.00
Exercised	—			—

Options outstanding, December 31	164,750		$	10.00

Weighted average fair value per option of options granted during 2005			$	3.68

A summary of options outstanding at June 30, 2006 (unaudited) follows:

Options Outstanding

Options Exercisable

Range of Exercise Price

Number
Outstanding

Weighted
Average
Remaining
Contractual Life

Weighted
Average
Exercise
Price

Number
Outstanding

Weighted
Average
Remaining
Contractual Life

Weighted
Average
Exercise
Price

$ 10.00

164,750

8.9 yrs

10.00

164,750

8.9 yrs

10.00

A summary of options outstanding at December 31, 2005 follows:

Options Outstanding

Options Exercisable

Range of Exercise Price

Number
Outstanding

Weighted
Average
Remaining
Contractual Life

Weighted
Average
Exercise
Price

Number
Outstanding

Weighted
Average
Remaining
Contractual Life

Weighted
Average
Exercise
Price

$ 10.00

164,750

9.4 yrs

10.00

164,750

9.4 yrs

10.00

There were no options granted, forfeited or exercised during the six months ended June 30, 2006.

12. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

Sonabank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve elements of credit and funding risk in excess of the amount recognized in the consolidated balance sheet.

F-21

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

SNBV’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and letters of credit is based on the contractual amount of these instruments. Southern uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Unless noted otherwise, Southern does not require collateral or other security to support financial instruments with credit risk.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments may expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Southern evaluates each customer’s creditworthiness on a case-by-case basis. At June 30, 2006 and December 31, 2005, Southern had unfunded loan commitments approximating $38.3 million and $23.1 million, respectively.

Letters of credit written are conditional commitments issued by Southern to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Southern had no letters of credit outstanding as of June 30, 2006 and December 31, 2005.

13. EARNINGS PER SHARE

The following is a reconciliation of the denominators of the basic and diluted EPS computations (in thousands, except per share data):


	Income (Loss) (Numerator)			Weighted Average Shares (Denominator)	Per Share Amount
For the six months ended June 30, 2006
Basic EPS	$	321		3,500	$	0.09
Effect of Dilutive stock options and warrants		—		69		—

Diluted EPS (unaudited)	$	321		3,569	$	0.09

For the period from April 14, 2005 through June 30, 2005
Basic EPS	$	(1,787	)	3,500	$	(0.51	)
Effect of dilutive stock options and warrants		—		—		—

Diluted EPS (unaudited)	$	(1,787	)	3,500	$	(0.51	)

For the period from April 14, 2005 through December 31, 2005
Basic EPS	$	(2,256	)	3,500	$	(0.64	)
Effect of dilutive stock options and warrants		—		—		—
Diluted EPS	$	(2,256	)	3,500	$	(0.64	)

14. REGULATORY MATTERS

SNBV and its subsidiary bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and possibly additional discretionary—actions by regulators that, if undertaken, could have a direct material effect on SNBV’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action (PCA), Southern must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

F-22

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Quantitative measures established by regulation to ensure capital adequacy require Southern to maintain minimum amounts and ratios of Total and Tier I capital (as defined in the regulations) to average assets (as defined). Management believes, as of June 30, 2006 and as of December 31, 2005, that Southern meets all capital adequacy requirements to which it is subject.

The capital amounts and ratios for Southern and Sonabank are also presented in the following table:


	Consolidated				Sonabank, N. A.				Required for Capital Adequacy Purposes				Required in Order to Be Well Capitalized Under PCA
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
	*(dollars in thousands)*
As of June 30, 2006 (unaudited)
Total capital to risk weighted assets	$	31,170	28.28	%	$	31,120	28.24	%	$	8,817	8.00	%	$	11,022	10.00	%
Tier 1 capital to risk weighted assets		29,864	27.10	%		29,814	27.05	%		4,409	4.00	%		6,613	6.00	%
Tier 1 capital to average assets		29,864	22.04	%		29,814	22.01	%		5,419	4.00	%		6,774	5.00	%
As of December 31, 2005
Total capital to risk weighted assets	$	30,312	33.96	%	$	30,262	33.90	%	$	7,141	8.00	%	$	8,926	10.00	%
Tier 1 capital to risk weighted assets		29,292	32.82	%		29,242	32.76	%		3,571	4.00	%		5,356	6.00	%
Tier 1 capital to average assets		29,292	35.38	%		29,242	35.32	%		3,312	4.00	%		4,140	5.00	%

15. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based on quoted market prices. However, in many instances, there are no quoted market prices for SNBV’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instruments. Statement of Financial Accounting Statement (“SFAS”) No. 107, “Disclosures about Fair Value of Financial Instruments,” excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of Southern.

CASH AND CASH EQUIVALENTS

For those short-term instruments, the carrying amount is a reasonable estimate of fair value.

INVESTMENT SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY

For investment securities available for sale and held to maturity, fair value is determined by quoted market price. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

LOANS

The fair value of performing loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

DEPOSITS

The fair value of demand deposits, savings accounts, and money market deposits is the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.

F-23

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

BORROWINGS

The carrying value of short-term borrowings is a reasonable estimate of fair value.

ACCRUED INTEREST

The carrying amounts of accrued interest approximate fair value.

COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT

The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date. At June 30, 2006 and at December 31, 2005, the fair value of loan commitments and standby letters of credit was immaterial.

The carrying amounts and estimated fair values of SNBV’s financial instruments are as follows (in thousands):


	June 30, 2006				December 31, 2005
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Unaudited)
Financial assets:
Cash and cash equivalents	$	1,794	$	1,794	$	1,663	$	1,663
Securities available for sale		14,621		14,621		8,296		8,296
Securities held to maturity		31,472		30,923		31,698		31,562
Net loans		91,057		91,413		74,011		73,991
Accrued interest receivable		592		592		480		480

Financial liabilities:
Deposits:
Checking accounts		10,956		10,596		12,577		12,577
Money market and savings accounts		17,938		17,938		19,520		19,520
Certificates of deposit		75,514		74,920		45,166		45,025
Short-term borrowings		8,110		8,110		12,406		12,406
Accrued interest payable		392		392		186		186

F-24

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16. PARENT COMPANY FINANCIAL INFORMATION

SNBV owns all of the outstanding shares of Sonabank. Summary financial statements of the parent company follow:

BALANCE SHEETS

(in thousands)


	As of
	June 30, 2006			December 31, 2005
	(Unaudited)
*ASSETS*
Cash	$	50		$	50
Investment in subsidiary		32,536			32,263

Total assets	$	32,586		$	32,313

*LIABILITIES AND STOCKHOLDERS’ EQUITY*
Stockholders’ equity:
Common stock	$	35		$	35
Surplus		34,537			34,537
Accumulated deficit		(1,935	)		(2,256	)
Accumulated other comprehensive loss		(51	)		(3	)

Total stockholders’ equity		32,586			32,313

Total liabilities and stockholders’ equity	$	32,586		$	32,313

STATEMENTS OF OPERATIONS

(in thousands)


	For the Six Months Ended June 30, 2006		For the Period From Inception at April 14, 2005 Through June 30, 2005			For the Period From Inception at April 14, 2005 Through December 31, 2005
	(Unaudited)		(Unaudited)
Equity in undistributed income (loss) of subsidiary	$	321	$	(1,787	)	$	(2,256	)

Net income (loss)	$	321	$	(1,787	)	$	(2,256	)

F-25

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

STATEMENTS OF CASH FLOWS

(in thousands)


	For the Six Months Ended June 30, 2006			For the Period From Inception at April 14, 2005 Through June 30, 2005			For the Period From Inception at April 14, 2005 Through December 31, 2005
	(Unaudited)			(Unaudited)
Operating activities:
Net income (loss)	$	321		$	(1,787	)	$	(2,256	)
Adjustments to reconcile net income (loss) to net cash cash equivalents provided by operating activities:
Equity in undistributed net income (loss) of subsidiary		(321	)		1,787			2,256

Net cash and cash equivalents provided by operating activities		—			—			—

Investing activities:
Investment in subsidiary		—			(33,579	)		(34,522	)

Net cash and cash equivalents used in investing activities		—			(33,579	)		(34,522	)

Financing activities:
Issuance of common stock		—			34,572			34,572

Net cash and cash equivalents provided by financing activities		—			34,572			34,572

Increase (decrease) in cash and cash equivalents		—			993			50
Cash and cash equivalents at beginning of period		50						—

Cash and cash equivalents at end of period	$	50		$	993		$	50

F-26

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The following tables present financial data after giving effect to the completion of: the proposed acquisition of 1 ^st Service Bank.

The pro forma financial data gives effect to the proposed acquisition under the purchase accounting method in accordance with accounting principles generally accepted in the United States. The unaudited pro forma combined condensed consolidated financial statements combine the historical condensed consolidated financial statements of Southern National Bancorp of Virginia, Inc. and 1 ^st Service Bank giving effect to the acquisition as if it had been effective on June 30, 2006, with respect to the unaudited pro forma combined condensed consolidated balance sheet, and as of January 1, 2005, with respect to the unaudited pro forma combined condensed statements of income.

The information for the year ended December 31, 2005 is derived from the audited consolidated financial statements, including the related notes, of Southern National Bancorp of Virginia, Inc. and 1 ^st Service Bank. You should read the unaudited pro forma combined condensed consolidated statement of income for the year ended December 31, 2005 in conjunction with the historical financial statements described above that have been included in this prospectus. The information as of and for the six months ended June 30, 2006 is derived from SNBV’s and 1 ^st Services’ unaudited condensed consolidated financial statements, including related notes, as of and for the six months ended June 30, 2006, included in this prospectus. You should read the unaudited pro forma combined condensed consolidated statement of income for the six months ended June 30, 2006 in conjunction with the historical financial statements described above that have been included in this prospectus.

We expect to incur reorganization and restructuring expenses as a result of the pending acquisition. The effect of the estimated merger and reorganization costs expected to be incurred in connection with the proposed acquisition has been reflected in the unaudited pro forma combined condensed consolidated balance sheet. We also anticipate that the acquisition will provide the combined company with certain future financial benefits that include reduced operation expenses and opportunities to earn more revenue. However, we do not reflect any of those anticipated cost savings or benefits in the pro forma financial information. Therefore, the pro forma financial information, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not attempt to predict or suggest future results. The pro forma financial information also does not attempt to show how the combined company would actually have performed had the companies been combined throughout the periods presented. We have included in the pro forma financial statements all the adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of results of the historical periods.

Given the information regarding the proposed acquisition, the actual consolidated financial position and results of operations will differ, perhaps significantly, from the pro forma amounts reflected herein because, among other reasons:

•

Assumptions used in preparing the pro forma financial data may be revised in the future due to changes in values of assets, including finalization of a core deposit intangible, and changes in operating results between the dates of the unaudited pro forma financial data and the date on which the acquisition takes place; and

•

Adjustments may need to be made to the unaudited historical financial data upon which such pro forma data are based.

F-27

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS—(Continued)

UNAUDITED PRO FORMA COMBINED CONDENSED

CONSOLIDATED BALANCE SHEET

As of June 30, 2006


	SOUTHERN NATIONAL BANCORP			1ST SERVICE BANK			ADJUSTMENTS			COMBINED PROFORMA 6/30/06
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	1,794		$	2,786		$	(480	)b	$	4,100
Securities available for sale, at fair value		14,621			900						15,521
Securities held to maturity, at amortized cost		31,472			5						31,477
Loans, net of unearned income		92,363			118,652			(51,319	)b,c		159,696
Allowance for loan losses		(1,306	)		(899	)		899	c		(1,306	)
Bank premises and equipment, net		2,827			705						3,532
Core deposit intangibles, net		2,773			—			2,497	d		5,270
Goodwill		—			—			6,351	d		6,351
Other assets		1,017			2,261						3,278

Total Assets	$	145,561		$	124,410		$	(42,052	)	$	227,919

Liabilities and Stockholders’ Equity:
Liabilities:
Noninterest-bearning deposits	$	6,548		$	13,654		$	—		$	20,202
Interest-bearing deposits		97,860			87,829			(23,000	)b		162,689
Short-term borrowings		8,110			14,000			(22,110	)b		—
Other liabilities		457			1,293			2,242	e		3,992

Total Liabilities		112,975			116,776			(42,868	)		186,883

Stockholders’ Equity:
Common stock		35			9			(2	)f		42
Surplus		34,537			8,687			(244	)f		42,980
Accumulated deficit		(1,935	)		(1,062	)		1,062	g		(1,935	)
Accumulated other comprehensive loss		(51	)		—						(51	)

Total Stockholders’ Equity		32,586			7,634			816			41,036

Total Liabilities and Stockholders’ Equity	$	145,561		$	124,410		$	(42,052	)	$	227,919

F-28

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS—(Continued)

UNAUDITED PRO FORMA COMBINED CONDENSED

CONSOLIDATED STATEMENT OF INCOME

For the Six Months Ended June 30, 2006


	SOUTHERN NATIONAL BANCORP		1ST SERVICE BANK			ADJUSTMENTS			COMBINED PROFORMA
	(In thousands, except per share data)
Interest and dividend income :
Interest and fees on loans	$	3,421		3,953			—			7,374
Interest on deposits in other banks		55		11			—			66
Interest and dividends on securities:		972		40			—			1,012

Total interest and dividend income		4,448		4,004			—			8,452

Interest expense:
Interest on deposits		1,619		1,497						3,116
Interest on short-term borrowings		224		697						921

Total interest expense		1,843		2,194			—			4,037

Net interest income		2,605		1,810			—			4,415

Provision for loan losses		286		64						350

Net interest income after provision for loan losses		2,319		1,746			—			4,065

Noninterest income:
Service charges and other income		119		125			—			244
Gain on sale of loans		—		205			—			205
Loss on sale of other assets		—		(90	)		—			(90	)

Total noninterest income		119		240			—			359

Noninterest expenses:
Salaries and benefits		1,029		1,918			—			2,947
Occupancy expenses		327		515			—			842
Organizational costs		—		—			—			—
Amortization of core deposit intangible		218		—			180	a		398
Other operating expenses		543		468			—			1,011

Total noninterest expenses		2,117		2,901			180			5,198

Income before income taxes		321		(915	)		(180	)		(774	)
Income tax expense		—

Net income (loss)	$	321	$	(915	)	$	(180	)	$	(774	)

Per share information:
Weighted average shares outstanding:
Basic		3,500,000		868,460			(192,460	)		4,176,000
Diluted		3,568,500		868,460			(192,460	)		4,176,000
Earnings (loss) per share, basic and diluted	$	0.09	$	(1.05	)		—		$	(0.19	)

F-29

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS—(Continued)

UNAUDITED PRO FORMA COMBINED CONDENSED

CONSOLIDATED STATEMENT OF INCOME

For the Year Ended December 31, 2005


	SOUTHERN NATIONAL BANCORP (1)			1ST SERVICE BANK		ADJUSTMENTS			COMBINED PROFORMA
	(In thousands, except per share data)
Interest and dividend income :
Interest and fees on loans	$	1,534			6,437					7,971
Interest on deposits in other banks		194			6					200
Interest and dividends on securities:		667			63					730

Total interest and dividend income		2,395			6,506		—			8,901

Interest expense:
Interest on deposits		514			1,989					2,503
Interest on short-term borrowings		91			969					1,060

Total interest expense		605			2,958		—			3,563

Net interest income		1,790			3,548		—			5,338

Provision for loan losses		1,020			228					1,248

Net interest income after provision for loan losses		770			3,320		—			4,090

Noninterest income:
Service charges and other income		51			186					237
Gain on sale of loans		—			1,185					1,185

Total noninterest income		51			1,371		—			1,422

Noninterest expenses:
Salaries and benefits		1,079			2,825					3,904
Occupancy expenses		289			689					978
Organizational costs		1,212			—					1,212
Amortization of core deposit intangible		36			—		360	a		396
Other operating expenses		461			980					1,441

Total noninterest expenses		3,077			4,494		360			7,931

Income before income taxes		(2,256	)		197		(360	)		(2,419	)
Income tax expense		—			—					—

Net income (loss)	$	(2,256	)	$	197	$	(360	)	$	(2,419	)

Per share information:
Weighted average shares outstanding basic and diluted		3,500,000			857,460		(181,460	)		4,176,000
Earnings (loss) per share, basic and diluted	$	(0.64	)	$	0.23				$	(0.58	)

(1)	For the period from inception at April 14, 2005 through December 31, 2005.

F-30

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: PURCHASE PRICE AND FUNDING OF 1 ^ST SERVICE ACQUISITION

Based on an estimated share price of $12.50 for SNBV’s common stock, the estimated total consideration to be paid in connection with the 1 ^st Service Bank acquisition is $13.1 million consisting of $8.45 million in stock consideration and $4.67 million in cash consideration. SNBV will use currently available funds as the source for the cash consideration. Does not include the potential exercise of outstanding 1 ^st Service stock options to acquire 61,750 shares of 1 ^st Service common stock. If such options were exercised prior to the closing of the merger, SNBV would issue, in addition to the 676,000 shares of SNBV common stock to be issued in the merger, up to an additional approximately 32,000 shares to 1 ^st Service stockholders in the merger.

NOTE 2: ALLOCATION OF PURCHASE PRICE

The purchase price of 1 ^st Service Bank has been allocated as follows (in thousands):


Cash and cash equivalents	$	2,786
Securities available for sale, at fair value		900
Securities held to maturity, at amortized cost		5
Loans, net of unearned income		117,532
Allowance for loan losses		(899	)
Bank premises and equipment, net		705
Core deposit intangibles, net		2,497
Goodwill		6,351
Other assets		2,261
Noninterest-bearning deposits		(14,114	)
Interest-bearing deposits		(87,829	)
Short-term borrowings		(14,000	)
Other liabilities		(3,075	)

Total purchase price	$	13,120

In allocating the purchase price, other liabilities were increased $2.2 million representing the estimated merger costs.

NOTE 3: KEY TO PRO FORMA ADJUSTMENTS

Summarized below are the pro forma adjustments necessary to reflect the acquisition of 1 ^st Service Bank based on the purchase method of accounting:

a. Amortization expense related to the estimated core deposit intangible. The core deposit intangible will be amortized over its estimated useful life of 7 years.

b. Cash is increased by $49.3 million reflecting the planned sale of residential mortgage loans; it is decreased by the $4.7 million used for the purchase price; and it is decreased by $45.1 million used to pay down borrowings and brokered certificates of deposit. $80 million of residential mortgage loans were written down to fair value of 98.6, resulting in a discount of $1.1 million.

c. Reclassify 1 ^st Service Bank allowance for loan loss to discount on loans.

d. Goodwill and core deposit intangibles resulting from the purchase method of accounting. See Note 2.

F-31

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

e. Adjustment of other liabilities related to accrued merger costs.

f. Issuance of common stock to 1 ^st Service Bank stockholders less the elimination of 1 ^st Service Bank common stock.

g. Elimination of 1 ^st Service Bank accumulated deficit.

NOTE 4: GENERAL

During the six months ended June 30, 2006, the mortgage division of 1 ^st Service Bank incurred over $377 thousand in operating losses through April 2006. 1 ^st Service Bank decided to close that division in April 2006 resulting in a loss of $290 thousand.

Also, during the six month period ended June 30, 2006, 1 ^st Service Bank recorded a one-time charge to reflect amortization of deferred costs related to loans that had been paid in full.

F-32

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholders

1st Service Bank

McLean, Virginia

We have audited the accompanying balance sheets of 1st Service Bank as of December 31, 2005 and 2004, and the related statements of operations, changes in stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of 1st Service Bank as of December 31, 2005 and 2004, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Thompson, Greenspon & Co., P.C.

Fairfax, Virginia

April 13, 2006, except for Note 15, as to which the date is June 12, 2006.

F-33

1st SERVICE BANK

BALANCE SHEETS

DECEMBER 31, 2005 AND 2004


	2005			2004
ASSETS
Cash and due from banks	$	2,864,989		$	2,276,907
Federal funds sold		41,000			—
Loans held for sale		10,445,718			12,599,536
Other investments		1,823,100			899,400
Loans receivable		111,392,158			81,596,564
Allowance for possible loan losses		(835,479	)		(607,710	)

Net Loans		110,556,679			80,988,854

Bank premises and equipment, net		498,963			417,343
Accrued interest receivable		408,174			259,746
Mortgage servicing rights, net		811,099			325,593
Prepaids and other assets		1,049,617			261,651

Total Assets	$	128,499,339		$	98,029,530

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits
Demand deposits
Non-interest bearing	$	12,867,029		$	7,191,501
Interest bearing		3,025,115			2,576,688
Money market and savings		20,785,689			26,261,667
Time deposits		45,355,979			33,865,230

Total Deposits		82,033,812			69,895,086
Federal funds purchased		1,500,000			2,167,000
FHLB advances		35,500,000			17,000,000
Accrued interest payable		240,161			84,018
Other accrued expenses		797,565			652,876

Total Liabilities		120,071,538			89,798,980

Stockholders’ Equity
Preferred stock, $.01 par value, 5,000,000 shares authorized: no shares issued and outstanding		—			—
Common stock, $.01 par value, 25,000,000 shares authorized: 857,460 shares issued and outstanding		8,575			8,575
Additional paid-in capital		8,566,025			8,566,025
Retained earnings (deficit)		(146,799	)		(344,050	)

Total Stockholders’ Equity		8,427,801			8,230,550

Total Liabilities and Stockholders’ Equity	$	128,499,339		$	98,029,530

The Notes to the Financial Statements are an integral part of these statements.

F-34

1st SERVICE BANK

STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2005 AND 2004


	2005		2004
Interest Income
Interest and fees on loans	$	6,437,194	$	4,585,988
Interest on investment securities		62,959		24,156
Interest on Federal funds sold		5,574		31,082

Total Interest Income		6,505,727		4,641,226

Interest Expense
Interest on deposits		1,988,718		1,567,838
Interest on borrowed funds		969,252		56,045

Total Interest Expense		2,957,970		1,623,883

Net Interest Income		3,547,757		3,017,343
Provision for Possible Loan Losses		227,769		254,865

Net Interest Income after Provision for Possible Loan Losses		3,319,988		2,762,478

Other Income
Gain on sale of loans		1,185,224		1,613,940
Service charges and other income		185,386		59,684

Total Other Income		1,370,610		1,673,624

Operating Expenses
Officer and employee compensation and benefits		2,825,458		2,647,429
Occupancy and equipment expense		689,209		549,045
Data processing		189,864		171,525
Mortgage division expense		30,443		51,057
Other operating expenses		758,373		643,269

Total Operating Expenses		4,493,347		4,062,325

Income before Income Taxes		197,251		373,777
Provision for Income Taxes		—		—

Net Income	$	197,251	$	373,777

Net Income Per Share, Basic and Diluted	$	0.23	$	0.44

Weighted Average Shares Outstanding, Basic and Diluted		857,460		857,460

The Notes to the Financial Statements are an integral part of these statement.

F-35

1st SERVICE BANK

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

YEARS ENDED DECEMBER 31, 2005 AND 2004


	Common Stock		Additional Paid-in Capital		Retained (Deficit) Earnings			Total Stockholders’ Equity
Balances, December 31, 2003	$	8,575	$	8,566,025	$	(717,827	)	$	7,856,773
Net income		—		—		373,777			373,777

Balances, December 31, 2004		8,575		8,566,025		(344,050	)		8,230,550
Net income		—		—		197,251			197,251

Balances, December 31, 2005	$	8,575	$	8,566,025	$	(146,799	)	$	8,427,801

The Notes to Financial Statements are an integral part of these statements.

F-36

1st SERVICE BANK

STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2005 AND 2004


	2005			2004
Cash Flows from Operating Activities
Net income	$	197,251		$	373,777
Noncash items included in net income
Provision for possible loan losses		227,769			254,865
Depreciation and amortization		129,660			104,634
Loss on disposal of bank asset		—			772
(Increase) decrease in
Loans held for sale		2,153,818			(1,641,848	)
Accrued interest receivable		(148,428	)		(117,309	)
Mortgage servicing rights		(485,506	)		(325,593	)
Prepaids and other assets		(787,966	)		(56,114	)
Increase (decrease) in
Accrued interest payable		156,143			(8,525	)
Other accrued expenses		144,689			(21,526	)

Net Cash Provided (Used) by Operating Activities		1,587,430			(1,436,867	)

Cash Flows from Investing Activities
Federal funds sold, net		(41,000	)		6,500,000
Loans made, net		(29,795,594	)		(34,863,301	)
Purchases of other investments		(923,700	)		(260,001	)
Acquisition of bank equipment		(210,780	)		(84,335	)
Proceeds from sale of asset		—			6,433

Net Cash Used by Investing Activities		(30,971,074	)		(28,701,204	)

Cash Flows from Financing Activities
Increase in deposits, net		12,138,726			10,954,831
Net (decrease) increase in Federal funds purchased		(667,000	)		2,167,000
Proceeds from FHLB advances		18,500,000			17,000,000

Net Cash Provided by Financing Activities		29,971,726			30,121,831

Net Increase (Decrease) in Cash and Due from Banks		588,082			(16,240	)
Cash and Due from Banks, beginning of year		2,276,907			2,293,147

Cash and Due from Banks, end of year	$	2,864,989		$	2,276,907

Supplemental Information
Cash paid during the year for interest	$	2,801,827		$	1,632,408

Cash paid during the year for income taxes	$	—		$	—

The Notes to the Financial Statements are an integral part of these statements.

F-37

1st SERVICE BANK

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2005 AND 2004

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of 1st Service Bank conform to generally accepted accounting principles and reflect practices of the banking industry. The policies are summarized below.

Nature of Operations

1st Service Bank (the Bank) is a Federal savings bank chartered under Section (5) of the Home Owner’s Loan Act. The Bank is subject to the rules and regulations of the Office of Thrift Supervision. The Bank provides banking services at its branch office in McLean, Virginia and mortgage division office in Annandale, Virginia. The Bank serves customers primarily in the Northern Virginia area.

Financial Statement Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Due to their prospective nature, actual results could differ from those estimates.

The determination of the adequacy of the allowance for possible loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans, management obtains independent appraisals for significant collateral.

Loans and Loan Fees

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay off generally are stated at the principal amount outstanding, less the allowance for possible loan losses and net of deferred loan fees and unearned discounts. Interest on loans is generally computed using the simple interest method. Unearned discounts on loans are recognized as income over the term of the loan using a method that approximates the interest method.

Loan fees and related direct loan origination costs are deferred and amortized as a yield adjustment over the estimated average life of the loan using the interest method. Amortization of deferred loan fees is discontinued when a loan is placed on non-accrual status.

The accrual of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days delinquent. In all cases, loans are placed on non-accrual status or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on non-accrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Possible Loan Losses

The allowance for possible loan losses is maintained at a level that, in management’s judgment, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectibility of the loan portfolio, including the nature of the portfolio, credit concentrations,

F-38

1st SERVICE BANK

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2005 AND 2004

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Allowance for Possible Loan Losses (continued)

trends in historical loss experience, specific impaired loans, economic conditions and other risks inherent in the portfolio. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. Although management uses available information to recognize losses on loans, because of uncertainties associated with local economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that a material change could occur in the allowance for possible loan losses in the near term. However, the amount of the change that is reasonably possible cannot be estimated. The allowance is increased by a provision for possible loan losses, which is charged to expense and reduced by charge-offs, net of recoveries. Changes in the allowance relating to impaired loans are charged or credited to the provision for possible loan losses. Past due status is determined based on contractual terms.

Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated market value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. Aggregate gains and fees on loans sold in 2005 and 2004 totaled $1,185,224 and $1,613,940, respectively.

Other Investments

Other investments consist of Federal Home Loan Bank stock, which is considered restricted investment securities, carried at cost, and are evaluated for impairment by management on an annual basis.

Mortgage Servicing Rights

Servicing assets are recognized as separate assets when rights are acquired through purchase or sale of financial assets. Generally, purchased servicing rights are capitalized at the cost to acquire the rights. For sales of mortgage loans, a portion of the cost of originating the loan is allocated to the servicing right based on relative fair value. Fair value is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds, and default rates and losses. Capitalized servicing rights are amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets.

Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights into tranches based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual tranche. If the Bank later determines that all or a portion of the impairment no longer exists for a particular tranche, a reduction of the allowance may be recorded as an increase to income.

Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal; or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income.

F-39

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Mortgage Servicing Rights (continued)

1st SERVICE BANK

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2005 AND 2004

Bank Premises and Equipment

Fixed assets are presented at cost, net of accumulated depreciation. Fixed assets, consisting primarily of furniture and equipment, are depreciated over estimated useful lives of five to ten years using the straight-line method. Leasehold improvements are amortized over the shorter of the asset life or the lease period using the straight-line method.

Expenditures for maintenance, repairs and improvements that do not materially extend the useful lives of property and equipment are charged to earnings. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts, and the effect is reflected in earnings.

Income Taxes

The Bank utilizes an asset and liability approach to accounting for income taxes. The objective is to recognize the amount of income taxes payable or refundable in the current year based on the income tax return and the deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Bank’s financial statements or tax returns. Deferred income taxes are adjusted to reflect changes in tax laws or rates in the year of enactment.

Income per Common Share

The Bank has adopted Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share, which establishes standards for computing and presenting earnings per share (EPS) for entities with publicly held common stock. The standard requires presentation of two categories of earnings per share, basic EPS and diluted EPS. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Bank. The Bank does not have any contracts or options with a dilutive effect, therefore basic EPS and diluted EPS are equal.

Stock Compensation Plans

Statement of Financial Accounting Standards No. 123 (SFAS No. 123), Accounting for Stock-Based Compensation, encourages all entities to adopt a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25), whereby compensation cost is the excess, if any, of the quoted market price at the stock grant date (or other measurement date) over the amount an employee must pay to acquire the stock. Stock options issued under the Bank’s stock option plan have no intrinsic value at the grant date, and under APB No. 25, no compensation cost is recognized for them. The Bank adopted the disclosure-only provisions of SFAS No. 123.

F-40

1st SERVICE BANK

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2005 AND 2004

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Stock Compensation Plans (continued)

In December 2004, the FASB issued SFAS No. 123(R), Shared-Based Payment , which is a revision of SFAS No. 123, SFAS No. 123(R) is effective for annual periods beginning after December 15, 2005, supersedes APB Opinion No. 25, and amends SFAS No. 95, Statement of Cash Flows . SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

Cash and Cash Equivalents

The Bank considers all cash and amounts due from depository institutions, excluding Federal funds sold, to be cash equivalents for purposes of the statements of cash flows.

The Bank is required by regulatory authorities to maintain a specific portion of its assets in the form of legal cash reserves, computed by applying prescribed percentages to its various types of deposits. When the Bank’s vault cash reserves and balances maintained at the Federal Reserve Bank are in excess of that required, it may lend the excess to other banks on a daily basis. The average balance required to be maintained at the Federal Reserve Bank was approximately $172,000 and $136,000 as of December 31, 2005 and 2004, respectively.

Off-Balance Sheet Credit Related Financial Instruments

In the ordinary course of business, the Bank has entered into commitments to extend credit, including commitments under line of credit arrangements and letters of credit. Such financial instruments are recorded when they are funded.

Rate Lock Commitments

The Bank enters into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (rate lock commitments). Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. Accordingly, such commitments, along with any related fees received from potential borrowers, are recorded at fair value in derivative assets or liabilities, with changes in fair value recorded in the net gain or loss on sale of mortgage loans. Fair value is based on fees currently charged to enter into similar agreements, and for fixed-rate commitments also considers the difference between current levels of interest rates and the committed rates. To minimize interest rate risk, it is the practice of the Bank to sell virtually all fixed rate second mortgage loans within 60 days of origination. At December 31, 2005, the effect on the Bank’s financial position was not material.

F-41

1st SERVICE BANK

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2005 AND 2004

2. LOANS RECEIVABLE

Loans receivable consist of the following at December 31:


	2005			2004
Residential real estate loans	$	80,177,054		$	60,264,725
Consumer loans		9,794,906			8,565,470
Small business loans		5,466,045			4,065,277
Construction and land acquisition loans		2,474,257			3,017,187
Commercial real estate loans		11,643,356			3,910,696
Multi-family residential		1,119,541			1,140,303
Deferred loan fees		(96,151	)		(57,220	)
Deferred loan costs		813,150			690,126

Subtotal		111,392,158			81,596,564
Allowance for possible loan losses		(835,479	)		(607,710	)

Net	$	110,556,679		$	80,988,854

An analysis of the allowance for possible loan losses is as follows at December 31:


	2005		2004
Balance beginning of period	$	607,710	$	352,887
Provision for possible loan losses		227,769		254,865
Loans charged-off		—		(42	)

Totals	$	835,479	$	607,710

The Bank has entered into transactions with certain directors, executive officers, significant stockholders, and their affiliates. Such transactions were made in the ordinary course of business on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other customers, and did not, in the opinion of management, involve more than normal credit risk or present other unfavorable features. The aggregate amounts of loans to such related parties were $1,229,360 and $1,247,714 at December 31, 2005 and 2004, respectively. New loans made to such related parties amounted to $345,000 and $744,500 during 2005 and 2004, respectively. Payments made by such related parties amounted to $363,354 and $566,982 during 2005 and 2004, respectively.

3. MORTGAGE SERVICING RIGHTS

The Bank began retaining servicing on certain loan pool sales during 2004. Mortgage loans serviced for others are not included in the accompanying balance sheets. The unpaid principal balances of loans serviced for others was $70,869,240 and $39,123,720 at December 31, 2005 and 2004, respectively.

The fair value of these rights were $811,099 and $325,593 at December 31, 2005 and 2004, respectively. The fair value of servicing rights was determined using discount rates ranging from 12 to 14 percent, prepayment speeds (PSA) ranging from 190 to 370 percent, depending upon the stratification of the specific right, and a weighted average default rate of 0 percent.

F-42

1st SERVICE BANK

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2005 AND 2004

The following summarizes the activity in mortgage servicing rights for the years ended December 31:


	2005			2004
Balance at beginning of year	$	325,593		$	—
Mortgage servicing rights capitalized		565,763			357,093
Mortgage servicing rights amortized		(80,257	)		(31,500	)
Provision for loss in fair value		—			—

Balance at end of year	$	811,099		$	325,593

4. BANK PREMISES AND EQUIPMENT

Bank premises and equipment include the following at December 31:


	2005			2004
Furniture and equipment	$	576,608		$	523,516
Leasehold improvements		213,925			151,896
Software		156,412			78,297
Vehicles		28,013			10,468

Total Cost		974,958			764,177
Less: accumulated depreciation and amortization		(475,995	)		(346,334	)

Net	$	498,963		$	417,843

Depreciation and amortization expense was $129,660 and $104,634 for the years ended December 31, 2005 and 2004, respectively.

5. DEPOSITS

Time certificates of deposit in denominations of $100,000 or more, totaled $21,933,379 and $13,520,960 as of December 31, 2005 and 2004, respectively.

At December 31, 2005, the schedule of maturities of time deposits is as follows:


2006	$	24,843,004
2007		16,668,937
2008		2,735,410
2009		963,237
2010		143,391

Total	$	45,355,979

The Bank held related party deposits of approximately $11,003,134 and $3,909,928 at December 31, 2005 and 2004, respectively.

F-43

3. MORTGAGE SERVICING RIGHTS (continued)

1st SERVICE BANK

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2005 AND 2004

6. BORROWINGS

The Bank had borrowings outstanding as follows:


December 31, 2005	Interest Rate	Maturity	Balance
Federal Funds Purchased	4.30% Variable Rate	Demand	$	1,500,000
FHLB Advances	4.40% Variable Rate	June 6, 2006		35,500,000

			$	37,000,000


December 31, 2004	Interest Rate	Maturity	Balance
Federal Funds Purchased	1.56% Variable Rate	Demand	$	2,167,000
FHLB Advances	1.30% Variable Rate	September 14, 2005		17,000,000

			$	19,167,000

The Bank has $5,500,000 of unsecured Federal fund lines of credit with various correspondent banks. The rate of interest charged fluctuates daily in response to market conditions.

Total mortgage loans pledged as available collateral for Federal Home Loan Bank (FHLB) advances were $79,627,587 and $58,821,987 at December 31, 2005 and 2004, respectively.

Interest expense on borrowed funds was $969,252 and $56,045 for the years ended December 31, 2005 and 2004, respectively.

7. REGULATORY MATTERS

The Bank is subject to various regulatory’ capital requirements administered by its primary Federal regulator, the Office of Thrift Supervision (OTS). Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under the regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines involving quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification under the prompt corrective action guidelines are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of: total risk-based capital and Tier 1 risk-based capital to risk-weighted assets (as defined in the regulations), Tier 1 capital to adjusted total assets (as defined), and tangible capital to adjusted total assets (as defined).

At December 31, 2005, based on regulatory capital ratios reported to the OTS, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as adequately capitalized, the Bank would have to maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as disclosed in the table below. There are no conditions or events since the most recent notification that management believes have changed the Bank’s prompt corrective action category.

F-44

1st SERVICE BANK

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2005 AND 2004

7. REGULATORY MATTERS (continued)


	Actual				For Capital Adequacy Purposes *
	Amount		Ratio		Amount		Ratio
	(dollars in thousands)				(dollars in thousands)
As of December 31, 2005
Total Risk-based Capital (to Risk-weighted Assets)	$	9,263	11.87	%	$	—	8.00	%
Tier 1 Risk-based Capital (to Risk-weighted Assets)	$	8,428	10.80	%	$	—	4.00	%
Tier 1 (Core) Capital (to Adjusted Total Assets)	$	8,428	6.57	%	$	5,140	4.00	%
Tangible Capital (to Adjusted Total Assets)	$	8,428	6.57	%	$	1,927	1.50	%


	Actual				For Capital Adequacy Purposes *
	Amount		Ratio		Amount		Ratio
	(dollars in thousands)				(dollars in thousands)
As of December 31, 2004
Total Risk-based Capital (to Risk-weighted Assets)	$	8,828	15.29	%	$	4,618	8.00	%
Tier 1 Risk-based Capital (to Risk-weighted Assets)	$	8,230	14.26	%	$	2,309	4.00	%
Tier 1 (Core) Capital (to Adjusted Total Assets)	$	8,230	8.42	%	$	3,911	4.00	%
Tangible Capital (to Adjusted Total Assets)	$	8,230	8.42	%	$	1,467	1.50	%

*	For Capital Adequacy Purposes and to be Adequately Capitalized under the Prompt Corrective Action Provisions.

8. INCOME TAXES

Net deferred tax assets and liabilities consisted of the following components as of December 31:


	2005			2004
Deferral Source
Organizational expenses	$	—		$	61,000
Net operating loss		131,000			176,000
Unearned loan costs, net		(327,000	)		(234,000	)
Loan loss reserve		282,000			205,000
Depreciation		(46,000	)		(90,000	)

		40,000			118,000
Less: Valuation allowance		(40,000	)		(118,000	)

Net	$	—		$	—

Net operating loss carryforwards of approximately $385,000 at December 31, 2005, expire in 2022.

9. OPERATING LEASES AND LEASE OPTION AGREEMENT

In November 2000, the Bank entered into a lease agreement for its main office and branch facility in McLean, Virginia. The lease provides for a term of five years that expired on October 31, 2005. The lease contains an option to extend for five additional five-year periods. The first of these renewal options was exercised during 2005 extending the lease through October 31, 2010. Total base annual lease payments are

F-45

1st SERVICE BANK

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2005 AND 2004

9. OPERATING LEASES AND LEASE OPTION AGREEMENT (continued)

approximately $215,000. Beginning with the first option period (years 6 - 10), the base annual lease payment will increase annually by the lessor of 3.5 percent or the average of the preceding 12 months Consumer Price Index (CPI). In addition to the base lease payments, the Bank is responsible for their portion of property taxes and building operating expenses, which are allocated on a square foot basis.

During 2001, the Bank entered into a lease agreement for its mortgage division in Annandale, Virginia. The lease term expired in June 2005 and was extended to June 30, 2007. Total base annual lease payments are approximately $103,000, increasing by a CPI adjustment of not less than two percent or more than five percent annually.

In July 2005, the Bank entered into a lease agreement for a branch facility located in Fairfax, Virginia. The agreement provides for a term of 120 months, ending August 31, 2015. Total base annual lease monthly payments are $11,784 for the first year, increasing three percent per annum, thereafter. In addition to the base lease payments, the Bank is responsible for their portion of property taxes and building operating expenses, which are allocated on a square foot basis.

In October 2005, the Bank entered into a lease agreement for a branch facility located in Reston, Virginia. The agreement provides for a term of 120 months, ending November 30, 2015. Total base annual lease payments are $75,000 for the first year, increasing three percent per annum, thereafter.

Rent expense was $432,735 and $341,093 for the years ended December 31, 2005 and 2004, respectively.

The following are the minimum lease payments:


Years ending December 31:
2006	$	537,500
2007		499,843
2008		462,647
2009		477,682
2010		450,741
2011 and thereafter		1,262,801

Total	$	3,691,214

10. RELATED PARTY TRANSACTIONS

The Bank paid $19,009 during 2005 and $16,488 during 2004 to the law firm of a director and stockholder of the Bank who serves as legal counsel for the Bank.

11. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF CREDIT

In the normal course of business, the Bank incurs certain contingent liabilities that are not reflected in the accompanying financial statements. Commitments under unfunded loan and standby letters of credit commitments approximated $17,755,000 and $22,290,000 as of December 31, 2005 and 2004, respectively. The Bank does not anticipate any material losses as a result of these commitments.

F-46

1st SERVICE BANK

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2005 AND 2004

11. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF CREDIT (continued)

The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include cash, securities, accounts receivable, inventory, property, plant and equipment and income-producing commercial properties and residential properties.

The concentrations of credit by type of loan are set forth in Note 2. The distribution of commitments to extend credit approximates the distribution of loans outstanding. The Bank does not extend credit to any single borrower or group of related borrowers in excess of their legal limit.

Loans Sold with Recourse

Loans sold with recourse totaling $6,787,000 and $6,654,000 at December 31, 2005 and 2004, respectively, represent off-balance-sheet risk in the normal course of business. At December 31, 2005 and 2004, a liability for credit losses applicable to loans sold with recourse has not been established as management feels that future losses are unlikely.

12. DEFINED CONTRIBUTION PLAN

The Bank adopted a Defined Contribution Plan that authorizes a maximum voluntary salary deferral of up to 25 percent of compensation. Employees are eligible to participate after one month of employment. The Bank reserves the right to make annual discretionary contributions to the accounts of eligible employees. Employer contributions were $29,554 and $0 for the years ended December 31, 2005 and 2004, respectively.

13. RESTRICTIONS ON DIVIDENDS

The Bank is subject to certain restrictions on the amount of dividends that it may pay without prior regulatory approval.

F-47

1st SERVICE BANK

NOTES TO FINANCIAL STATEMENTS—(Continued)

DECEMBER 31, 2005 AND 2004

14. STOCK OPTION PLAN

On January 12, 2001, the Bank and its stockholders adopted a Stock Option Plan (the Plan). The total number of shares of common stock granted under the Plan may not exceed 83,121 shares. This is ten percent of the number of shares of common stock issued by the Bank in connection with its initial public offering, less 2,500 shares that were granted by the Bank to organizers in connection with its initial public offering who are not directors or officers of the Bank. The Plan is to be administered by a committee of the Board of Directors of the Bank, which has the authority to grant shares to key employees, officers and directors. All stock options must be granted within ten years of the effective date of the Plan. Under the Plan, the option price of the shares must be granted at not less than the fair market value on the date of grant and the option terms may not exceed ten years.


	Number of Shares	Option Price Per Share
Outstanding, December 31, 2003	75,750	$	10 - 11
Grants	—		—
Exercised	—		—

Outstanding, December 31, 2004	75,750		10-11
Grants	—		—
Exercised	—		—
Forfeited	3,000		10

Outstanding, December 31, 2005	72,750	$	10 - 11

The vesting period of the outstanding options is as follows:


Vested and exercisable		72,250
2006		500

		72,750

Compensation costs under SFAS No. 123 are recognized when the options are vested and exercisable. There were no pro forma compensation costs for options in 2005 and 2004.

15. SUBSEQUENT EVENT

As part of continuing efforts to improve earnings, management decided to close the mortgage division of the bank in April 2006. The bank estimates the amount of the charge associated with this decision to be no more than approximately $350,000. The charge is principally comprised of severance payments to employees, losses on disposal of assets, and termination agreements with vendors. The charges will be reflected in second quarter of 2006, with all costs to be incurred by the third quarter.

F-48

1 ^st SERVICE BANK

BALANCE SHEETS


	As of
	June 30, 2006			December 31, 2005
	(unaudited)
ASSETS
Cash and due from banks	$	2,786,632		$	2,864,989
Federal funds sold		13,000			41,000
Loans held for sale		1,212,408			10,445,718
Other investments		891,624			1,823,100
Loans receivable		117,439,769			111,392,158
Allowance for possible loan losses		(899,393	)		(835,479	)

Net Loans		116,540,376			110,556,679
Bank premises and equipment, net		704,813			498,963
Accrued interest receivable		473,711			408,174
Mortgage servicing rights, net		764,849			811,099
Prepaids and other assets		1,022,541			1,049,617

Total Assets	$	124,409,954		$	128,499,339

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits
Demand deposits
Non-interest bearing	$	13,653,650		$	12,867,029
Interest bearing		4,227,063			3,025,115
Money market and savings		29,474,626			20,785,689
Time deposits		54,127,704			45,355,979

Total Deposits		101,483,043			82,033,812
Federal funds purchased		—			1,500,000
FHLB advances		14,000,000			35,500,000
Accrued interest payable		335,955			240,161
Other accrued expenses		957,198			797,565

Total Liabilities		116,776,196			120,071,538

Stockholders’ Equity
Preferred stock, $.01 par value, 5,000,000 shares authorized: no shares issued and outstanding		—			—
Common stock, $.01 par value, 25,000,000 shares authorized: 868,460 issued and outstanding in June, 2006 857,460 shares issued and outstanding in December 2005		8,685			8,575
Additional paid-in capital		8,686,915			8,566,025
Retained earnings (deficit)		(1,061,842	)		(146,799	)

Total Stockholders’ Equity		7,633,758			8,427,801

Total Liabilities and Stockholders’ Equity	$	124,409,954		$	128,499,339

The Notes to the Financial Statements are an integral part of these statements.

F-49

1 ^st SERVICE BANK

STATEMENTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2006 AND 2005


	June 30, 2006			June 30, 2005
	(unaudited)			(unaudited)
Interest Income
Interest and fees on loans	$	3,953,524		$	2,963,067
Interest on investment securities		47,430			26,934
Interest on Federal funds sold		3,578			562

Total Interest Income		4,004,532			2,990,563

Interest Expense
Interest on deposits		1,497,264			861,578
Interest on borrowed funds		696,803			336,689

Total Interest Expense		2,194,067			1,198,267

Net Interest Income		1,810,465			1,792,296
Provision for Possible Loan Losses		63,914			141,673

Net Interest Income after Provision for Possible Loan Losses		1,746,551			1,650,623

Other Income
Gain on sale of loans		205,310			665,473
Service charges and other income		34,366			72,541

Total Other Income		239,676			738,014

Operating Expenses
Officer and employee compensation and benefits		1,469,929			1,376,405
Occupancy and equipment expense		447,812			342,507
Data processing		103,826			90,425
Mortgage division expense		54,926			17,641
Other operating expenses		824,777			258,627

Total Operating Expenses		2,901,270			2,085,605

Income before Income Taxes		(915,043	)		303,032

Provision for Income Taxes		—			—

Net Income	$	(915,043	)	$	303,032

Net Income Per Share, Basic and Diluted	$	(1.05	)	$	0.35

Weighted Average Shares Outstanding, Basic and Diluted		868,460			857,460

The Notes to the Financial Statements are an integral part of these statements.

F-50

1 ^st SERVICE BANK

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2006


	Common Stock	Additional Paid-in Capital	Retained (Deficit) Earnings		Total Stockholders’ Equity
Balances, December 31, 2005	8,575	8,566,025	(146,799	)	8,427,801
Stock options exercised	110	120,890	—		121,000
Net (loss)			(915,043	)	(915,043	)

Balances, June 30, 2006	8,685	8,686,915	(1,061,842	)	7,633,758

The Notes to Financial Statements are an integral part of these statements.

F-51

1 ^st SERVICE BANK

STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2006 AND 2005


	June 30, 2006			June 30, 2005
	(unaudited)			(unaudited)
Cash Flows from Operating Activities
Net income	$	(915,043	)	$	303,032
Noncash items included in net income
Provision for possible loan losses		63,914			141,673
Depreciation and amortization		52,652			58,405
(Increase) decrease in
Loans held for sale		9,233,310			(2,652,406	)
Accrued interest receivable		(65,537	)		(106,911	)
Mortgage servicing rights		46,250			(246,682	)
Prepaids and other assets		27,076			(527,940	)
Increase (decrease) in
Accrued interest payable		95,794			77,481
Other accrued expenses		159,633			(43,082	)

Net Cash Provided (Used) by Operating Activities		8,698,049			(2,996,430	)

Cash Flows from Investing Activities
Federal funds sold, net		28,000			(11,000	)
Loans made, net		(6,047,611	)		(20,904,578	)
Purchases of other investments		—			(271,200	)
Proceeds from paydowns of other investments		931,476			—
Acquisition of bank equipment		(258,502	)		(121,371	)

Net Cash Used by Investing Activities		(5,346,637	)		(21,308,149	)

Cash Flows from Financing Activities
Increase in deposits, net		19,449,231			20,601,885
Net (decrease) increase in Federal funds purchased		(1,500,000	)		2,167,000
Proceeds from FHLB advances, net		(21,500,000	)		2,000,000
Proceeds from issuance of stock options		121,000			—

Net Cash (Used) Provided by Financing Activities		(3,429,769	)		24,768,885

Net Increase (Decrease) in Cash and Due from Banks		(78,357	)		464,306

Cash and Due from Banks, beginning of year		2,864,989			2,276,907

Cash and Due from Banks, end of year	$	2,786,632		$	2,741,213

Supplemental Information
Cash paid during the year for interest	$	2,098,273		$	1,120,876

Cash paid during the year for income taxes	$			$

The Notes to the Financial Statements are an integral part of these statements.

F-52

1 ^st SERVICE BANK

NOTES TO FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying financial statements, which should be read in conjunction with the audited financial statements of 1 ^st Service Bank (the Bank) as of December 31, 2005 and 2004. The June 30, 2006 and 2005 financial statements are unaudited but have been prepared in the ordinary course of business for the purpose of providing information with respect to the interim period. The Bank believes that all adjustments (none of which were other than normal recurring accruals) necessary for a fair presentation for such periods have been included.

2. MORTGAGE DIVISION

As part of continuing efforts to improve earnings, management decided to close the mortgage division of the Bank in April 2006. The charges in the 2 ^nd quarter of 2006 were comprised principally of severance payments to employees, losses on disposal of assets, and termination agreements with vendors.

F-53

1,786,000 Shares

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

Common Stock

Prospectus

FIG PARTNERS, LLC

, 2006

Until , 2006 (25 days after the date of this prospectus), all dealers that buy, sell or trade our common stock, whether or not participating in this offer, may be required to deliver a prospectus. This requirement is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth the costs and expenses, other than underwriting commissions, to be paid in connection with the sale of shares of our common stock being registered, all of which will be paid by us. All amounts are estimates except the registration fee, the Nasdaq listing fee and the NASD filing fee.


Securities and Exchange Commission registration fee	$	3,210.00
NASD filing fee		3,500.00
Nasdaq listing fee		25,000.00
Accounting fees and expenses		55,000.00
Legal fees and expenses		178,000.00
Transfer Agent and Registrar fees		5,000.00
Printing and engraving expenses		20,000.00
Miscellaneous		10,290.00

Total	$	300,000.00

Item 14. Indemnification of Directors and Officers.

Article 10 of Chapter 9 of Title 13.1 of the Virginia Stock Corporation Act (the “VSCA”) permits a Virginia corporation to indemnify any director or officer for reasonable expenses incurred in any legal proceeding in advance of final disposition of the proceeding, if the director or officer furnishes the corporation a written statement of his or her good faith belief that he or she has met the standard of conduct prescribed by the VSCA and furnishes the corporation a written undertaking to repay any funds advanced if it is ultimately determined that he or she did not meet the relevant standard of conduct. In addition, a corporation is permitted to indemnify a director or officer against liability incurred in a proceeding if a determination has been made by the disinterested members of the board of directors, special legal counsel or shareholders that the director or officer conducted himself or herself in good faith and otherwise met the required standard of conduct. In a proceeding by or in the right of the corporation, no indemnification shall be made in respect of any matter as to which a director or officer is adjudged to be liable to the corporation, except for reasonable expenses incurred in connection with the proceeding if it is determined that the director or officer has met the relevant standard of conduct. In any other proceeding, no indemnification shall be made if the director or officer is adjudged liable to the corporation on the basis that he or she improperly received a personal benefit. Corporations are given the power to make any other or further indemnity, including advancement of expenses, to any director or officer that may be authorized by the articles of incorporation or any bylaw made by the shareholders, or any resolution adopted, before or after the event, by the shareholders, except an indemnity against willful misconduct or a knowing violation of the criminal law. Unless limited by its articles of incorporation, indemnification against the reasonable expenses incurred by a director or officer is mandatory when he or she entirely prevails in the defense of any proceeding to which he or she is a party because he or she is or was a director or officer.

SNBV’s amended Articles of Incorporation and SNBV’s amended and restated Bylaws contain provisions indemnifying the directors and officers of SNBV to the full extent permitted by the VSCA. In addition, SNBV’s amended Articles of Incorporation eliminate the personal liability of SNBV’s directors and officers to SNBV or its shareholders for monetary damages to the full extent permitted by the VSCA.

The Federal Deposit Insurance Act (the “FDI Act”) provides that the Federal Deposit Insurance Corporation (“FDIC”) may prohibit or limit, by regulation or order, payments by any insured depository institution or its holding company for the benefit of directors and officers of the insured depository institution, or others who are or were “institution-affiliated parties,” as defined under the FDI Act, in order to pay or reimburse such person for

II-1

any liability or legal expense sustained with regard to any administrative or civil enforcement action which results in a final order against the person. FDIC regulations prohibit, subject to certain exceptions, insured depository institutions, their subsidiaries and affiliated holding companies from indemnifying officers, directors or employees from any civil money penalty or judgment resulting from an administrative or civil enforcement action commenced by any federal banking agency, or for that portion of the costs sustained with regard to such an action that results in a final order or settlement that is adverse to the director, officer or employee.

Item 15. Recent Sales of Unregistered Securities.

Set forth below are all of the Registrant’s sales of its securities within the past three years that were not registered under the Securities Act of 1933, as amended. None of these transactions involved any underwriters or any public offerings and we believe that each of these transactions was exempt from registration requirements pursuant to Section 4(2) of the Securities Act, Regulation D promulgated under the Securities Act or Rule 701 of the Securities Act. The recipients of the securities in these transactions represented their intention to acquire the securities for investment only and not with a view to, or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates issued in these transactions.

In September 2004, as a part of our organization procedure, we issued two shares of our common stock to executive officers of SNBV in a private placement. The issuance of our common stock to these two executive officers was made in reliance upon the exemption from compliance with the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and Regulation D promulgated thereunder.

In October 2004, we issued for $1.5 million ten year warrants to purchase up to 75,000 shares of our common stock to the nine organizers of Sonabank, N.A. to provide funds to pay for the Bank’s organizational and pre-opening expenses. The warrants have an exercise price of $10.00 per share, the same price as was offered to the private investors in the private placement for the Bank’s initial capitalization in March 2005. Each purchaser of the warrants was a sophisticated, “accredited” investor, six of whom were directors and/or officers of SNBV and the Bank. The issuance of the warrants to these organizers of the Bank was made in reliance upon the exemption from compliance with the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and Regulation D promulgated thereunder.

In March 2005, in order to provide the initial capitalization for our subsidiary, Sonabank, N.A., we issued 3,500,000 shares of our common stock at $10.00 per share to sophisticated, “accredited” investors (as such term is defined pursuant to Rule 501 of Regulation D under the Securities Act). At that time, we cancelled the two shares of common stock issued upon our organization. The issuance of our common stock to these private investors was made in reliance upon the exemption from compliance with in the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and Regulation D promulgated thereunder.

Beginning in April 2005, we have granted stock options to purchase 168,250 shares of our common stock at the exercise price of $10.00 per share to our employees under our 2004 Stock Option Plan. No options have been exercised as of June 30, 2006. Issuances of our common stock upon the exercise of any option granted to our employees may be made in reliance upon the exemption from compliance with the registration requirements of the Securities Act provided by Rule 701 of the Securities Act.

II-2

Item 16. Exhibits and Financial Schedules.

The following exhibits are filed as part of this registration statement.


Exhibit No.		Description
1.0		Form of Underwriting Agreement*

2.1		Agreement and Plan of Merger by and between Southern National Bancorp of Virginia, Inc., Sonabank, N.A. and 1 ^st Service Bank dated July 10, 2006

2.2		Form of Shareholders Agreement between the Shareholders of 1 ^st Service Bank, 1 ^st Service Bank and Southern National Bancorp of Virginia, Inc.

3.1		Articles of Incorporation

3.2		Certificate of Amendment to the Articles of Incorporation dated February 1, 2005

3.3		Certificate of Amendment to the Articles of Incorporation dated May 16, 2006

3.4		Amended and Restated Bylaws

4.1		Specimen Stock Certificate of SNBV

4.2		Form of Warrant Agreement

4.3		Form of Amendment to Warrant Agreement

5.0		Opinion of Elias Matz Tiernan & Herrick L.L.P. as to the validity of the shares of common stock being offered

10.1		2004 Stock Option Plan

10.2		Form of Change in Control Agreement with Ms. Derrico and Mr. Porter

21.0		Subsidiaries of SNBV

23.1		Consent of BDO Seidman, LLP

23.2		Consent of Thompson, Greenspon & Co., P.C.

23.3		Consent of Elias Matz Tiernan & Herrick L.L.P. (included in Exhibit 5)

24.0		Power of Attorney (included with signature pages to this Registration Statement)

*	To be filed by amendment.

II-3

Item 17. Undertakings.

(a) The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the provisions referenced in Item 14, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of our company in the successful defense of any action, suit or proceeding) is asserted by that director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether this indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Washington, D.C. on August 4, 2006.


SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

By:		/s/ G EORGIA S. D ERRICO
		Georgia S. Derrico Chief Executive Officer and Chairman of the Board of Directors

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Georgia S. Derrico his or her true and lawful attorney-in-fact, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments including post-effective amendments to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, hereby ratifying and confirming all that said attorney-in-fact or his or her substitute, each acting alone, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.


Signature	Title	Date

/s/ G EORGIA S. D ERRICO Georgia S. Derrico	Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)	August 4, 2006

/s/ R. R ODERICK P ORTER R. Roderick Porter	President and Director	August 4, 2006

/s/ W ILLIAM H. L AGOS William H. Lagos	Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	August 4, 2006

/s/ N EIL J. C ALL Neil J. Call	Director	August 4, 2006

/s/ C HARLES A. K ABBASH Charles A. Kabbash	Director	August 4, 2006

/s/ M ICHAEL A. G AFFNEY Michael A. Gaffney	Director	August 4, 2006

/s/ R OBIN R. S HIELD Robin R. Shield	Director	August 4, 2006

/s/ J OHN J. F ORCH John J. Forch	Director	August 4, 2006

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

among

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

SONABANK, NATIONAL ASSOCIATION

and

1 ^st SERVICE BANK

DATED AS OF JULY 10, 2006

TABLE OF CONTENTS


		Page
ARTICLE I CERTAIN DEFINITIONS		1

Section 1.1.	Certain Definitions	1

ARTICLE II THE MERGER		8

Section 2.1.	The Merger	8
Section 2.2.	Effective Date and Effective Time; Closing	10

ARTICLE III CONSIDERATION; EXCHANGE PROCEDURES		11

Section 3.1.	Effect on Capital Stock	11
Section 3.2.	No Fractional Shares	11
Section 3.3.	Dissenting Shares	11
Section 3.4.	Exchange Procedures	12
Section 3.5.	Treatment of 1 ^st Service Stock Options	14

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF 1 ^ST SERVICE		15

Section 4.1.	Corporate Organization.	15
Section 4.2.	Capitalization.	16
Section 4.3.	Authority; No Violation.	17
Section 4.4.	Consents and Approvals	18
Section 4.5.	Governmental Reports	18
Section 4.6.	Financial Statements; Undisclosed Liabilities; Internal Controls	19
Section 4.7.	Broker’s Fees	19
Section 4.8.	Absence of Certain Changes or Events	20
Section 4.9.	Legal Proceedings	20
Section 4.10.	Taxes	21
Section 4.11.	Employees; Employee Benefit Plans	22
Section 4.12.	Board Approval	23
Section 4.13.	Compliance With Applicable Law	23
Section 4.14.	Certain Contracts	24
Section 4.15.	Agreements With Regulatory Agencies	25
Section 4.16.	1 ^st Service Information	26
Section 4.17.	Title to Property	26
Section 4.18.	Insurance	26
Section 4.19.	Environmental Liability	27
Section 4.20.	Opinion of Financial Advisor	27
Section 4.21.	Patents, Trademarks, Etc	27
Section 4.22.	Labor Matters	27
Section 4.23.	Derivative Instruments and Transactions	28
Section 4.24.	Investment Companies and Investment Advisers	28
Section 4.25.	Loan Matters	28
Section 4.26.	Antitakeover Provisions	29
Section 4.27.	Books and Records	30
Section 4.28.	Disclosure	30


ARTICLE V REPRESENTATIONS AND WARRANTIES OF SNBV		30

Section 5.1.	Corporate Organization.	30
Section 5.2.	Capitalization.	31
Section 5.3.	Authority; No Violation.	31
Section 5.4.	Consents and Approvals	32
Section 5.5.	Governmental Reports	33
Section 5.6.	Financial Statements; Undisclosed Liabilities; Internal Controls	33
Section 5.7.	Broker’s Fees	34
Section 5.8.	Absence of Certain Changes or Events	34
Section 5.9.	Legal Proceedings	34
Section 5.10.	Taxes	35
Section 5.11.	Employees; Employee Benefit Plans	35
Section 5.12.	Board Approval	36
Section 5.13.	Compliance With Applicable Law	36
Section 5.14.	Agreements With Regulatory Agencies	37
Section 5.15.	SNBV Information	37
Section 5.16.	Environmental Liability	37
Section 5.17.	Labor Matters	38
Section 5.18.	Derivative Instruments and Transactions	38
Section 5.19.	Investment Companies	39
Section 5.20.	Loan Matters	39
Section 5.21.	Financing	40
Section 5.22.	Disclosure	40

ARTICLE VI COVENANTS RELATING TO CONDUCT OF BUSINESS		40

Section 6.1.	Conduct of Business Prior to the Effective Time	40
Section 6.2.	1 ^st Service Forbearances	40
Section 6.3.	SNBV Forbearances	44

ARTICLE VII ADDITIONAL AGREEMENTS		45

Section 7.1.	Regulatory Matters	45
Section 7.2.	Access to Information	46
Section 7.3.	Shareholder Approvals	47
Section 7.4.	Acquisition Proposals	48
Section 7.5.	Legal Conditions to the Merger	49
Section 7.6.	Indemnification; Directors’ and Officers’ Insurance	50
Section 7.7.	Advice of Changes	51
Section 7.8.	Financial Statements and Other Current Information	52
Section 7.9.	Transition Matters	52
Section 7.10.	Employee Benefit Plans	53
Section 7.11.	Publicity	54
Section 7.12.	Listing of the SNBV Common Stock	55
Section 7.13.	Tax Matters	55

ARTICLE VIII CONDITIONS PRECEDENT		55

Section 8.1.	Conditions to Each Party’s Obligation to Effect the Merger	55
Section 8.2.	Conditions to Obligations of SNBV and Sonabank	56


Section 8.3.	Conditions to Obligations of 1 ^st Service	57

ARTICLE IX TERMINATION AND AMENDMENT		57

Section 9.1.	Termination	57
Section 9.2.	Effect of Termination	58
Section 9.3.	Amendment	59
Section 9.4.	Extension; Waiver	60

ARTICLE X GENERAL PROVISIONS		60

Section 10.1.	Nonsurvival of Representations, Warranties and Agreements	60
Section 10.2.	Expenses	60
Section 10.3.	Notices	60
Section 10.4.	Interpretation	61
Section 10.5.	Counterparts	62
Section 10.6.	Entire Agreement	62
Section 10.7.	Governing Law	62
Section 10.8.	Severability	62
Section 10.9.	Assignment; Third Party Beneficiaries	62
Section 10.10.	Alternative Structure	62

iii

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of July 10, 2006 (as amended, supplemented, restated or otherwise modified from time to time, this “Agreement”), is entered into by and among Southern National Bancorp of Virginia, Inc. (“SNBV”), a Virginia corporation, Sonabank, National Association, a national bank and a wholly-owned subsidiary of SNBV (“Sonabank”), and 1 ^st Service Bank (“1 ^st Service”), a federally-chartered savings bank.

RECITALS

WHEREAS, the respective Boards of Directors of each of 1 ^st Service, SNBV and Sonabank have determined that it is in the best interests of their respective companies and shareholders to consummate the business combination transaction provided for herein, in which 1 ^st Service will, subject to the terms and conditions set forth herein, merge with and into Sonabank (the “Merger”); and

WHEREAS, as a material inducement to SNBV to enter into this Agreement, and simultaneously with the execution of this Agreement, each director of 1 ^st Service is entering into an agreement pursuant to which each such person has agreed, among other things, to vote his or her shares of 1 ^st Service Common Stock (as defined herein) in favor of this Agreement (a “Shareholder Agreement”); and

WHEREAS, the parties desire to make certain representations, warranties and agreements in connection with the transactions provided for herein and also to prescribe certain conditions to the consummation of such transactions;

NOW, THEREFORE, in consideration of the premises and of the mutual covenants, representations, warranties and agreements contained herein, and intending to be legally bound hereby, the parties agree as follows.

ARTICLE I

CERTAIN DEFINITIONS

1.1. Certain Definitions . The following terms are used in this Agreement with the meanings set forth below:

“1 ^st Service” has the meaning set forth in the preamble to this Agreement.

“1st Service Benefit Plans” has the meaning set forth in Section 4.11(a).

“1 ^st Service Board” means the Board of Directors of 1st Service.

“1 ^st Service Bylaws” means the Federal Stock Bylaws of 1st Service, as amended as of the date hereof.

“1 ^st Service Charter” means the Federal Stock Charter of 1st Service, as amended as of the date hereof.

“1 ^st Service Common Stock” means the common stock, $0.01 par value per share, of 1 ^st Service.

“1 ^st Service Contract” has the meaning set forth in Section 4.14(a).

“1 ^st Service Disclosure Schedule” has the meaning set forth in the first paragraph of Article IV.

“1 ^st Service Financial Statements” has the meaning set forth in Section 4.6(a).

“1 ^st Service Loans” has the meaning set forth in Section 4.25(a).

“1 ^st Service Preferred Stock” means the preferred stock, $0.01 par value per share, of 1 ^st Service.

“1 ^st Service Recommendation” has the meaning set forth in Section 7.3(a).

“1 ^st Service Regulatory Agreement” has the meaning set forth in Section 4.15.

“1 ^st Service Required Vote” has the meaning set forth in Section 4.3(a).

“1 ^st Service Shareholders Meeting” has the meaning set forth in Section 7.3(a).

“1 ^st Service Stock” means the 1st Service Common Stock and the 1st Service Preferred Stock.

“1 ^st Service Stock Options” means options to acquire shares of 1 ^st Service Common Stock granted under the 1 ^st Service Stock Plan.

“1 ^st Service Stock Plan” means the 1 ^st Service 2001 Stock Option Plan, as amended as of the date hereof.

1 ^st Service Supplemental Required Vote” has the meaning set forth in Section 7.3(c).

“Acquisition Proposal” means any proposal or offer by any Person or group of Persons with respect to any of the following: (i) any merger, consolidation, share exchange, business combination, recapitalization, liquidation or dissolution or other similar transaction involving 1 ^st Service or any Subsidiary of 1 ^st Service whose assets, individually or in the aggregate, constitute more than 10% of the consolidated assets of 1 ^st Service; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets (including for this purpose the outstanding capital stock of any Subsidiary of 1st Service and the capital stock of any entity surviving any merger or business combination involving any Subsidiary of 1st Service) and/or liabilities that constitute 10% or more of the net revenues, net income or assets of 1st Service and its Subsidiaries taken as a whole in a single transaction or series of transactions; or (iii) any purchase or other acquisition or tender offer or exchange offer that if consummated would result in such Person(s) beneficially owning 10% or more of the outstanding shares of the common stock of 1st

Service or any Subsidiary of 1st Service whose assets, individually or in the aggregate, constitute more than 10% of the consolidated assets of 1st Service, in each case other than (x) the transactions contemplated by this Agreement and (y) any transaction referred to in clause (i) or (ii) involving only 1st Service and one or more of its Subsidiaries, or involving two or more of its Subsidiaries, provided that any such transaction is not entered into in violation of the terms of this Agreement.

“Agreement” has the meaning set forth in the first paragraph of this document.

“Bank Secrecy Act” means the Bank Secrecy Act of 1970, as amended.

“BDO” means BDO Seidman, LLP.

“BHC Act” means the Bank Holding Company Act of 1956, as amended, and the rules and regulations thereunder.

“Business Day” means Monday through Friday of each week, except a legal holiday recognized as such by the U.S. Government or any day on which banking institutions in the Commonwealth of Virginia are authorized or obligated to close.

“Certificates” has the meaning set forth in Section 3.4(a).

“Change in 1 ^st Service Recommendation” has the meaning set forth in Section 7.3(a).

“Closing” and “Closing Date” have the meanings set forth in Section 2.2(b).

“Code” means the Internal Revenue Code of 1986, as amended.

“Confidentiality Agreement” means the Confidentiality Agreement between 1st Service and SNBV, dated as of February 17, 2006.

“Continuing Employees” has the meaning set forth in Section 7.10(a).

“CRA” means the Community Reinvestment Act of 1977, as amended, and the rules and regulations thereunder.

“Derivative Transaction” means any swap transaction, option, warrant, forward purchase or sale transaction, futures transaction, cap transaction, floor transaction or collar transaction relating to one or more currencies, commodities, bonds, equity securities, loans, interest rates, catastrophe events, weather-related events, credit-related events or conditions or any indexes, or any other similar transaction (including any option with respect to any of these transactions) or combination of any of these transactions, including collateralized mortgage obligations or other similar instruments or any debt or equity instruments evidencing or embedding any such types of transactions, and any related credit support, collateral or other similar arrangements related to such transactions.

“Dissenting Shares” has the meaning set forth in Section 3.3.

“Effective Time” has the meaning set forth in Section 2.2(a).

“Environmental Laws” means any federal, state or local law, regulation, order, decree, permit, authorization, opinion or agency requirement relating to (i) the protection or restoration of the environment, health, safety, or natural resources, (ii) the handling, use, presence, disposal, release or threatened release of any Hazardous Substance or (iii) wetlands, indoor air, pollution, contamination or any injury or threat of injury to persons or property in connection with any Hazardous Substance, as well as any common law standards relating to environmental protection, human health or safety.

“Equal Credit Opportunity Act” means the Equal Credit Opportunity Act, as amended, and the rules and regulations thereunder.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means any organization which is a member of a controlled group of organizations within the meaning of Sections 414(b), (c), (m) or (o) of the Code.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

“Exchange Agent” has the meaning set forth in Section 3.4(a).

“Exchange Fund” has the meaning set forth in Section 3.4(b).

“Exchange Ratio” has the meaning set forth in Section 3.1(a)(iii).

“Fair Housing Act” means the Fair Housing Act, as amended, and the rules and regulations thereunder.

“FDIC” means the Federal Deposit Insurance Corporation.

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System.

“GAAP” means accounting principles generally accepted in the United States.

“Governmental Entity” means any federal, state or local court, administrative agency or commission or other governmental authority or instrumentality.

“Hazardous Substance” means any substance that is (i) listed, classified or regulated pursuant to any Environmental Law, (ii) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials or radon or (iii) any other substance which is the subject of regulatory action by any Governmental Entity in connection with any Environmental Law.

“Home Mortgage Disclosure Act” means the Home Mortgage Disclosure Act of 1975, as amended, and the rules and regulations thereunder.

“Indemnified Party” has the meaning set forth in Section 7.6(a).

“Insurance Amount” has the meaning set forth in Section 7.6(c).

“Intellectual Property” means all patents, trademarks, trade names, service marks, domain names, database rights, copyrights and any applications therefore, mask works, technology, know-how, trade secrets, inventory, ideas, algorithms, processes, computer software programs or applications (in both source code and object code form), and tangible or intangible proprietary information or material and all other intellectual property or proprietary rights.

“Investment Advisers Act” means the Investment Advisers Act of 1940, as amended, and the rules and regulations thereunder.

“Investment Company Act” means the Investment Company Act of 1940, as amended, and the rules and regulations thereunder.

“IRS” means the Internal Revenue Service.

“Knowledge” as used with respect to a Party (including references to such Person being aware of a particular matter) means those facts that are known to a Party by the executive officers and directors of such Party, and includes any facts, matters or circumstances set forth in any written notice from any Governmental Authority received by that Party.

“Lien” means any lien, claim, charge, mortgage, pledge, security interest, restriction, encumbrance or security interest.

“Loans” means any loan, loan agreement, note or borrowing arrangement, including, without limitation, leases, credit enhancements, guarantees and similar interest-bearing assets, as well as commitments to extend any of the same.

“Material Adverse Effect” means, with respect to a Party, (A) a material adverse effect on the business, results of operations or financial condition of such Party and its Subsidiaries taken as a whole or (B) a material adverse effect on such Party’s ability to consummate the transactions contemplated hereby on a timely basis; provided, however, that in determining whether a Material Adverse Effect has occurred, there shall be excluded any effect on the referenced Party the cause of which is (i) any change after the date of this Agreement in (x) laws, rules or regulations of general applicability or published interpretations thereof by courts or governmental authorities, (y) GAAP or (z) regulatory accounting requirements, in any such case applicable to banks, savings institutions or their holding companies generally and not specifically relating to a Party,

(ii) the announcement of this Agreement or any action or omission of any Party or any Subsidiary thereof required under this Agreement or taken or omitted to be taken with the express written permission of the other Party or Parties, (iii) any changes after the date of this Agreement in general economic or capital market conditions affecting banks, savings institutions or their holding companies generally or (iv) changes or events, after the date hereof, affecting the financial services industry generally and not specifically relating to any Party or its Subsidiaries.

“Merger” has the meaning ascribed thereto in the recitals to this Agreement.

“Merger Consideration” has the meaning set forth in Section 3.1(a).

“Milestone Advisors” means Milestone Advisors, L.L.C., the financial advisor to 1 ^st Service.

“National Labor Relations Act” means the National Labor Relations Act, as amended.

“OCC” means the Office of the Comptroller of the Currency.

“Option Spread Amount” has the meaning set forth in Section 3.5(b).

“OREO” means other real estate owned.

“OTS” means the Office of Thrift Supervision.

“Party” means any of 1 ^st Service, SNBV or Sonabank, and “Parties” shall mean one or more of 1 ^st Service, SNBV or Sonabank, as the context shall require.

“PBGC” means the Pension Benefit Guaranty Corporation.

“Person” means any individual, bank, corporation, partnership, association, joint-stock company, business trust, limited liability company, unincorporated organization or other organization or firm of any kind or nature.

“Proxy Statement/Prospectus” has the meaning set forth in Section 7.1(a).

“Registration Statement” has the meaning set forth in Section 7.1(a).

“Requisite Regulatory Approvals” has the meaning set forth in Section 8.1(b).

“Rights” means, with respect to any Person, warrants, options, rights, convertible securities and other arrangements or commitments which obligate the Person to issue or dispose of any of its capital stock or other ownership interests or which provide payments or benefits measured by the value of its capital stock.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

“Shareholder Agreement” has the meaning ascribed to such term in the recitals to this Agreement.

“SNBV” has the meaning set forth in the preamble to this Agreement.

“SNBV Articles” means the Articles of Incorporation of SNBV, as amended.

“SNBV Benefit Plans” has the meaning set forth in Section 5.11(a).

“SNBV Board” means the Board of Directors of SNBV.

“SNBV Bylaws” means the Bylaws of SNBV, as amended.

“SNBV Common Stock” means the common stock, par value $0.01 per share, of SNBV.

“SNBV Disclosure Schedule” has the meaning set forth at the beginning of Article V.

“SNBV Preferred Stock” means the preferred stock, par value $0.01 per share, of SNBV.

“SNBV Financial Statements” has the meaning set forth in Section 5.6(a).

“SNBV Regulatory Agreement” has the meaning set forth for in Section 5.14.

“SNBV Stock Compensation Plan” means SNBV’s 2004 Stock Option Plan.

“Sonabank” has the meaning set forth in the preamble to this Agreement.

“Sonabank Loans” has the meaning set forth in Section 5.20(a).

“Subsidiary” means, with respect to any Person, any corporation, partnership, joint venture, limited liability company or other entity of which (i) such Person or a subsidiary of such Person is a general partner or (ii) at least a majority of the capital stock or other ownership interest having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person.

“Superior Proposal” means, with respect to 1st Service, a bona fide written Acquisition Proposal which the 1st Service Board concludes in good faith to be more favorable to the shareholders of 1st Service, from a financial point of view, than the Merger and the other transactions contemplated by this Agreement after (i) receiving the advice of its financial advisor, (ii) taking into account the likelihood of consummation of such transaction on the terms set forth therein (as compared to, and with due regard for, the terms herein) and (iii) taking into account all appropriate legal (with the advice of

outside counsel), financial (including the financing terms of any such proposal), regulatory and other aspects of such proposal and any other relevant factors permitted under applicable law; provided that, for purposes of this definition of “Superior Proposal,” the term Acquisition Proposal shall have the meaning assigned to such term in this Article I, except that the reference to “10% or more” in the definition of “Acquisition Proposal” shall be deemed to be a reference to “a majority” and “Acquisition Proposal” shall only be deemed to refer to a transaction involving voting securities of 1st Service or all or substantially all of the consolidated assets of 1st Service and its Subsidiaries.

“Surviving Institution” has the meaning set forth in Section 2.1(a).

“Taxes” means all taxes, charges, levies, penalties or other assessments imposed by any United States federal, state, local or non-U. S. taxing authority, including, but not limited to income, excise, property, sales, transfer, franchise, payroll, withholding, social security or other similar taxes, including any interest or penalties attributable thereto.

“Tax Returns” means any return, report, information return or other document (including any related or supporting information) required to be filed with any taxing authority with respect to Taxes, including all information returns relating to Taxes of third parties, any claims for refunds of Taxes and any amendments or supplements to any of the foregoing.

“Termination Fee” has the meaning set forth in Section 9.2(b).

“TG” means Thomson, Greenspon & Co., P.C.

“Treasury Stock” means all shares of 1st Service Stock that are (i) owned directly by 1st Service as treasury stock or (ii) owned directly by SNBV, other than in a fiduciary (including custodial or agency) capacity or as a result of debts previously contracted in good faith.

“USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.

“Voting Debt” means any bond, debenture, note or other indebtedness which has the right to vote on any matter on which a Person’s shareholders may vote.

ARTICLE II

THE MERGER

Section 2.1. The Merger .

(a) Subject to the terms and conditions of this Agreement, at the Effective Time, 1st Service shall merge with and into Sonabank pursuant to the Bank Merger Act (12 U.S.C. § 1828 (c)), 12 C.F.R. Sections 552.13 and 563.22 of the OTS regulations and 12 C.F.R. Section 5.33 of the OCC regulations. As a result of the Merger, the separate corporate existence of 1st Service shall cease and Sonabank shall survive and continue to exist as a national bank

incorporated under the National Bank Act (12 U.S.C. Section 21 et . seq .) (Sonabank as the surviving institution in the Merger, sometimes being referred to herein as the “Surviving Institution”).

(b) The name of the Surviving Institution shall be “Sonabank, National Association.”

(c) The Articles of Association of Sonabank as in effect immediately prior to the Effective Time shall be the Articles of Association of the Surviving Institution until amended in accordance with its terms. The bylaws of Sonabank as in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Institution until amended in accordance with its terms.

(d) The directors of the Surviving Institution immediately after the Merger shall be the directors of Sonabank immediately prior to the Effective Time, each of whom shall serve until such time as their successors are duly elected and qualified.

(e) The main office of the Surviving Institution shall be the main office of Sonabank immediately prior to the Effective Time. The main office of 1 ^st Service and all branch offices of 1 ^st Service and Sonabank which are in lawful operation immediately prior to the Effective Time shall be the branch offices of the Surviving Institution upon consummation of the Merger, subject to the opening or closing of any offices of Sonabank which may be authorized by Sonabank and/or applicable regulatory authorities after the Effective Date.

(f) At the Effective Time, the Surviving Institution shall have (i) as provided in its Articles of Association, the authority to issue 45,000,000 shares of common stock, par value $0.01 per share, and 5,000,000 shares of preferred stock, par value $0.01 per share, and (ii) shareholders’ equity equal to the combined shareholders’ equity of Sonabank and 1 ^st Service, which amounted to $32.3 million and $8.4 million, respectively, at December 31, 2005, subject to adjustment for the results of operations of these entities between January 1, 2006 and the Effective Time and adjustments which may be required in connection with the Surviving Institution recording of the Merger under accounting principles generally accepted in the United States (“GAAP”).

(g) At the Effective Time, the effects of the Merger shall be as provided under law and applicable regulation, including 12 U.S.C. Section 215a. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time: (A) all rights, franchises and interests of 1 ^st Service in and to every type of property (real, personal and mixed), tangible and intangible, and choses in action shall be transferred to and vested in the Surviving Institution by virtue of the Merger without any deed or other transfer, and the Surviving Institution, without any order or other action on the part of any court or otherwise, shall hold and enjoy all rights of property, franchises and interests, including appointments, designations and nominations, and all other rights and interests as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver and committee of estates of lunatics, and in every other fiduciary capacity, in the same manner and to the same extent as such rights, franchises and interests were held or enjoyed by 1 ^st Service immediately prior to the Effective Time; and (B) the Surviving Institution shall be liable for all liabilities of 1 ^st Service, known or unknown and fixed

or contingent, including all deposits, accounts, debts, obligations and contracts thereof, matured or unmatured, whether accrued, absolute, contingent or otherwise, and whether or not reflected or reserved against on balance sheets, books of account or records thereof, and all rights of creditors or obligees and all liens on the property of 1 ^st Service shall be preserved unimpaired.

(h) It is intended that the Merger shall constitute a “reorganization” within the meaning of Section 368(a)(2)(D) of the Code and that this Agreement shall constitute a “plan of reorganization” for purposes of Sections 354 and 361 of the Code.

(i) If, at any time after the Effective Time, the Surviving Institution shall consider that any further assignments or assurances in law or any other acts are necessary or desirable to (i) vest, perfect or confirm, of record or otherwise, in the Surviving Institution its right, title or interest in, to or under any of the rights, properties or assets of 1 ^st Service acquired or to be acquired by the Surviving Institution as a result of, or in connection with, the Merger, or (ii) otherwise carry out the purposes of this Agreement, 1 ^st Service, and its proper officers and directors, shall be deemed to have granted to the directors and executive officers of the Surviving Institution an irrevocable power of attorney to execute and deliver all such proper deeds, assignments and assurances in law and to do all acts necessary or proper to vest, perfect or confirm title to and possession of such rights, properties or assets in the Surviving Institution and otherwise to carry out the purposes of this Agreement, and the proper officers and directors of the Surviving Institution are fully authorized in the name of the Surviving Institution or otherwise to take any and all such action, provided that any such action shall not adversely affect the 1 ^st Service shareholders existing as of the Effective Time.

Section 2.2. Effective Date and Effective Time; Closing .

(a) Subject to the satisfaction or waiver of the conditions set forth in Article VIII (other than those conditions that by their nature are to be satisfied at the consummation of the Merger, but subject to the fulfillment or waiver of those conditions), the Parties shall consummate the Merger on (i) a date selected by Sonabank after such satisfaction or waiver which is no later than the later of (A) five Business Days following such satisfaction or waiver and (B) the first month end following such satisfaction or waiver or (ii) such other date to which Sonabank and 1 ^st Service may mutually agree in writing. The Merger shall become effective upon the issuance of a certification of merger by the OCC or such later time as may be specified therein (the “Effective Time”).

(b) A closing (the “Closing”) shall take place prior to the Effective Time at 10:00 a.m., Eastern Time, at the offices of Sonabank, or at such other place, at such other time, or on such other date as the Parties may mutually agree upon (such date, the “Closing Date”). At the Closing, there shall be delivered to the Parties the opinions, certificates and other documents required to be delivered under Article VIII hereof.

ARTICLE III

CONSIDERATION; EXCHANGE PROCEDURES

Section 3.1. Effect on Capital Stock .

(a) At the Effective Time, automatically by virtue of the Merger and without any action on the part of any Person:

(i)

each share of Sonabank Common Stock that is issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and shall be unchanged by the Merger;

(ii)

each share of 1 ^st Service Common Stock held as Treasury Stock immediately prior to the Effective Time shall be cancelled and retired at the Effective Time and no consideration shall be issued in exchange therefor; and

(iii)

subject to Sections 3.2 and 3.3, each outstanding share of 1 ^st Service Common Stock shall be converted into and cancelled in exchange for the right to receive (i) .76092 of a share of SNBV Common Stock (the “Exchange Ratio”) and (ii) $5.26 in cash.

The consideration provided for in Section 3.1(a)(iii), as well as the consideration referred to in Section 3.2, is referred to collectively herein as the “Merger Consideration.”

(b) The Exchange Ratio shall be subject to appropriate adjustments in the event that, subsequent to the date of this Agreement but prior to the Effective Time, the outstanding SNBV Common Stock shall have been increased, decreased, changed into or exchanged for a different number or kind of shares or securities through reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other like changes in SNBV’s capitalization.

Section 3.2. No Fractional Shares . Notwithstanding any other provision of this Agreement to the contrary, neither certificates nor scrip for fractional shares of SNBV Common Stock shall be issued in the Merger. Each holder of 1 ^st Service Common Stock who otherwise would have been entitled to a fraction of a share of SNBV Common Stock shall receive in lieu thereof cash (without interest) in an amount determined by multiplying the fractional share interest to which such holder would otherwise be entitled (after taking into account all shares of 1 ^st Service Common Stock owned by such holder at the Effective Time) by $12.50. No such holder shall be entitled to dividends, voting rights or any other rights in respect of any fractional share.

Section 3.3 Dissenting Shares . Each outstanding share of 1 ^st Service Common Stock the holder of which has perfected his or her right to dissent from the Merger under the Section 552.14 of the OTS regulations and has not effectively withdrawn or lost such right as of

the Effective Time (the “Dissenting Shares”) shall not be converted into, or represent a right to receive, the Merger Consideration hereunder, and the holder thereof shall be entitled only to such rights as are granted by such regulation. If any holder of Dissenting Shares shall fail to perfect or shall have effectively withdrawn or lost the right to dissent, the Dissenting Shares held by such holder shall thereupon be treated as though such Dissenting Shares had been converted into the right to receive the Merger Consideration to which such holder would be entitled pursuant to this Article III. 1 ^st Service shall give SNBV prompt notice upon receipt by 1 ^st Service of any such written demands for payment of the fair value of shares of 1 ^st Service Common Stock and of withdrawals of such demands and any other instruments provided pursuant to Section 552.14 of the OTS regulations. Any payments made in respect of Dissenting Shares shall be made by SNBV.

Section 3.4. Exchange Procedures .

(a) SNVB shall appoint an agent, who shall be reasonably acceptable to 1 ^st Service (the “Exchange Agent”), for the purpose of exchanging certificates that immediately prior to the Effective Time evidenced shares of 1 ^st Service Common Stock (the “Certificates”) for the Merger Consideration.

(b) Immediately prior to the Effective Time, for the benefit of the holders of Certificates, (i) SNBV shall deliver to the Exchange Agent evidence of the number of shares of SNBV Common Stock issuable pursuant to Section 3.1(a)(iii) and (ii) SNBV shall deliver, or cause Sonabank to deliver, to the Exchange Agent an amount of cash sufficient to make all payments pursuant to Sections 3.1(a)(iii) and 3.2, in exchange for Certificates representing outstanding shares of 1 ^st Service Common Stock in accordance with this Article III (such cash and evidence of shares of SNBV Common Stock, together with any dividends or distributions with respect thereto, are hereinafter referred to as the “Exchange Fund”). The Exchange Agent shall invest such deposited cash as directed by SNBV, provided that such investments shall be in obligations of or guaranteed by the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation, respectively, or in certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital exceeding $500 million. Any net profit resulting from, or interest or income produced by, such investments will be payable to SNBV or Sonabank, as directed by SNBV. The Exchange Agent shall not be entitled to vote or exercise any rights of ownership with respect to the shares of SNBV Common Stock held by it from time to time hereunder, except that it shall receive and hold all dividends or other distributions paid or distributed with respect to such shares for the account of the Persons entitled thereto.

(c) As soon as reasonably practicable (but in no event later than five Business Days) after the Effective Time, the Exchange Agent shall mail to each holder of record of a Certificate or Certificates a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent) and instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration into which the shares of 1 ^st Service Common Stock represented by such Certificate or Certificates shall have been converted pursuant to Article III. Upon a holder’s proper surrender of a Certificate or Certificates for

exchange and cancellation to the Exchange Agent, together with a properly completed letter of transmittal, duly executed, such holder shall be entitled to receive in exchange therefor (1) a stock certificate representing the number of shares of SNBV Common Stock to which such holder shall have become entitled to receive pursuant to Section 3.1(a)(iii) and (2) a check representing the amount of cash to which such holder shall have become entitled to receive pursuant to Section 3.1(a)(iii), plus any amount payable in lieu of any fractional share of SNBV Common Stock pursuant to Section 3.2, and the Certificate or Certificates so surrendered shall forthwith be cancelled. Until surrendered as contemplated by this Section 3.4(c), each Certificate (other than Certificates representing Treasury Stock and any Dissenting Shares) shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration provided in this Article III and, if applicable, any unpaid dividends and distributions on any SNBV Common Stock included therein as provided in paragraph (d) of this Section 3.4. No interest shall be paid or accrued on any cash constituting Merger Consideration (including any cash in lieu of fractional shares) and any unpaid dividends and distributions, if any, payable to holders of Certificates.

(d) No dividends or other distributions with respect to SNBV Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate entitled to receive SNBV Common Stock hereunder until the holder thereof shall surrender such Certificate in accordance with this Section 3.4. After the surrender of a Certificate in accordance with this Section 3.4, the record holder thereof shall be entitled to receive any such dividends or other distributions, without any interest thereon, which theretofore had become payable with respect to any such shares of SNBV Common Stock represented by such Certificate.

(e) If payment of the Merger Consideration is to be made to a Person other than the registered holder of the Certificate surrendered in exchange therefor, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed (or accompanied by an appropriate form of assignment separate from the Certificate) and otherwise in proper form for transfer, and the Person requesting such payment shall pay to the Exchange Agent in advance any transfer or other Taxes required by reason of the payment of the Merger Consideration to a Person other than that of the registered holder of the Certificate surrendered or otherwise establish to the satisfaction of the Exchange Agent that such Taxes have been paid or are not payable.

(f) At and after the Effective Time, the stock transfer books of 1 ^st Service shall be closed and there shall be no transfers on the stock transfer books of 1 ^st Service of the shares of 1 ^st Service Common Stock which were issued and outstanding immediately prior to the Effective Time. At the Effective Time, holders of 1 ^st Service Common Stock shall cease to be, and shall have no rights as, shareholders of 1 ^st Service other than to receive the Merger Consideration provided under this Article III. On or after the Effective Time, any Certificates presented to SNBV or the Exchange Agent for transfer shall be cancelled and exchanged for the Merger Consideration or as otherwise provided in Section 3.4.

(g) Any portion of the Exchange Fund that remains unclaimed by the shareholders of 1 ^st Service for six months after the Effective Time (as well as any proceeds from

any investment thereof) shall be delivered by the Exchange Agent to SNBV. Any shareholders of 1 ^st Service who have not theretofore complied with Section 3.4(c) shall thereafter look only to SNBV for the Merger Consideration deliverable in respect of each share of 1 ^st Service Common Stock such shareholder holds as determined pursuant to this Agreement, in each case without any interest thereon. If outstanding Certificates for shares of 1 ^st Service Common Stock are not surrendered or the payment for them is not claimed prior to the date on which the applicable Merger Consideration would otherwise escheat to or become the property of any Governmental Entity, the unclaimed items shall, to the extent permitted by abandoned property and any other applicable law, become the property of SNBV (and to the extent not in its possession shall be delivered to it), free and clear of all claims or interest of any Person previously entitled to such property. Neither the Exchange Agent nor any party to this Agreement shall be liable to any holder of stock represented by any Certificate for any consideration paid to a public official pursuant to applicable abandoned property, escheat or similar laws. SNBV and the Exchange Agent shall be entitled to rely upon the stock transfer books of 1 ^st Service to establish the identity of those Persons entitled to receive the Merger Consideration specified in this Agreement, which books shall be conclusive with respect thereto. In the event of a dispute with respect to ownership of stock represented by any Certificate, SNBV and the Exchange Agent shall be entitled to deposit any Merger Consideration represented thereby in escrow with an independent third party and thereafter be relieved with respect to any claims thereto.

(h) SNBV (through the Exchange Agent, if applicable) shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of 1 ^st Service Common Stock such amounts as SNBV or the Exchange Act are required to deduct and withhold under applicable law. Any amounts so withheld shall be treated for all purposes of this Agreement as having been paid to the holder of 1 ^st Service Common Stock in respect of which such deduction and withholding was made by SNBV or the Exchange Agent.

(i) In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit reasonably acceptable to SNBV and the Exchange Agent of that fact by the Person claiming such Certificate to be lost, stolen or destroyed, and, if required by SNBV, the posting by such Person of a bond in such amount as SNBV may determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration deliverable in respect thereof pursuant to this Agreement.

Section 3.5. Treatment of 1 ^st Service Stock Options .

(a) At the Effective Time, each 1st Service Stock Option, whether or not vested or exercisable, shall be terminated and the holder thereof shall be entitled to receive from SNBV within five Business Days of the Effective Time, the following:

(i)

the number of shares of SNBV Common Stock (rounded down to the nearest whole share) determined by dividing (x) the product of the Option Spread Amount and .65, by (y) 12.50; and

(ii)

an amount of cash equal to the sum of (x) the product of the Option Spread Amount and .35 and (y) the cash value of any fractional share interest resulting from the calculation set forth in clause (i), determined in the manner set forth in Section 3.2, less applicable tax withholding.

(b) For purposes of this Agreement the term “Option Spread Amount” means, with respect to a 1 ^st Service Stock Option, the amount determined by multiplying (i) the excess, if any, of $14.77 (the value of the Merger Consideration, based on a $12.50 assumed value of a share of SNBV Common Stock) over the applicable per share exercise price of that option, by (ii) the number of shares of 1 ^st Service Common Stock that the holder could have purchased (assuming full vesting of that option) had that holder exercised that option immediately before the Effective Time.

(c) Subject to the terms of Section 3.5(a), the 1st Service Stock Plan and all 1st Service Stock Options issued thereunder shall terminate at the Effective Time. Prior to the Effective Time, 1st Service shall take such actions as may be necessary to give effect to the transactions contemplated by this Section 3.5, including, without limitation, the provision of any notices to holders of 1st Service Stock Options as may be provided for in the 1st Service Stock Plan and the adoption of any necessary amendments to such plan. 1st Service also shall use its reasonable best efforts to obtain the written acknowledgement of each holder of a then-outstanding 1st Service Stock Option with respect to the termination of such 1st Service Stock Option and the payment therefor in accordance with the terms of this Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF 1 ^st SERVICE

At least one day prior to the execution and delivery of this Agreement, 1 ^st Service has delivered to SNBV a schedule (the “1 ^st Service Disclosure Schedule”) setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more of 1 ^st Service’s representations or warranties contained in this Article IV, or to one of 1 ^st Service’s covenants contained in Article VI. Except as set forth in the corresponding section of the 1 ^st Service Disclosure Schedule, 1 ^st Service hereby represents and warrants to SNBV and Sonabank as follows:

Section 4.1. Corporate Organization .

(a) 1 ^st Service is a savings bank which is duly organized and validly existing under the laws of the United States. 1 ^st Service has all requisite corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted. 1 ^st Service is duly licensed or qualified to do business and is in good standing in each jurisdiction (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so licensed or qualified, except where the failure to be so licensed or qualified or in good standing would not have or reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on 1 ^st Service. The deposit

accounts of 1 ^st Service are insured by the FDIC to the maximum extent provided by applicable law, and 1 ^st Service has paid all deposit insurance premiums and assessments required by applicable laws and regulations.

(b) The copies of the 1 ^st Service Charter and Bylaws that previously have been made available by 1 ^st Service to SNBV are true, complete and correct copies of such documents as in effect as of the date of this Agreement.

(c) Each Subsidiary of 1 ^st Service (i) is duly organized and validly existing and is in good standing under the laws of its jurisdiction of organization, (ii) is duly licensed or qualified to do business and is in good standing in each jurisdiction (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so licensed or qualified, except where the failure to be so licensed or qualified or in good standing would not have or reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on 1 ^st Service and (iii) has all requisite corporate or other power and authority to own or lease its properties and assets and to carry on its business as it is now being conducted. The certificate of incorporation, bylaws and similar organizational documents of each Subsidiary of 1 ^st Service, copies of which have been made available to SNBV, are true, complete and correct as of the date of this Agreement.

Section 4.2. Capitalization .

(a) At the date of this Agreement, the authorized capital stock of 1 ^st Service consists of 25,000,000 shares of 1 ^st Service Common Stock and 5,000,000 shares of 1 ^st Service Preferred Stock. At the date of this Agreement, there were 868,460 shares of 1 ^st Service Common Stock issued and outstanding, no shares of 1 ^st Service Preferred Stock outstanding and no shares of 1 ^st Service Common Stock held in 1 ^st Service’s treasury. As of the date hereof, no shares of 1 ^st Service Stock were reserved for issuance, except for an aggregate of no more than 61,750 shares of 1 ^st Service Common Stock reserved for issuance upon the exercise of outstanding 1 ^st Service Stock Options granted pursuant to the 1 ^st Service Stock Plan. All of the issued and outstanding shares of 1 ^st Service Common Stock are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. Except as set forth above in this Section 4.2(a), there are no Rights authorized, issued or outstanding with respect to the capital stock or any other equity security of 1 ^st Service. No Subsidiary of 1 ^st Service owns any shares of 1 ^st Service Common Stock (other than shares in trust accounts, managed accounts and the like for the benefit of customers or shares held in satisfaction of a debt previously contracted).

(b) Section 4.2(b) of the 1 ^st Service Disclosure Schedule contains a list setting forth as of the date of this Agreement all outstanding 1 ^st Service Stock Options, the names of the optionees, the date each such option was granted, the number of shares subject to each such option, the expiration date of each such option, any vesting schedule with respect to an option which is not yet fully vested, and the price at which each such option may be exercised.

(c) Section 4.2(c) of the 1 ^st Service Disclosure Schedule lists the name, jurisdiction of incorporation, authorized and outstanding shares of capital stock and record and beneficial owners of such capital stock for each Subsidiary of 1 ^st Service. 1 ^st Service owns, directly or indirectly, all of the issued and outstanding shares of capital stock of or all other

equity interests in each of 1 ^st Service’s Subsidiaries, free and clear of any Liens, and all of such shares are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. Neither 1 ^st Service nor any Subsidiary thereof has or is bound by any Right with respect to the capital stock or any other equity security of any Subsidiary of 1 ^st Service.

(d) Except for (i) 1 ^st Service’s ownership in its Subsidiaries set forth in Section 4.2(c) of the 1 ^st Service Disclosure Schedule, (ii) securities held for the benefit of third parties in trust accounts, managed accounts and the like for the benefit of customers and (iii) securities acquired after the date of this Agreement in satisfaction of debts previously contracted in good faith, neither 1 ^st Service nor any of its Subsidiaries beneficially owns or controls, directly or indirectly, any shares of stock or other equity interest in any corporation, firm, partnership, joint venture or other entity.

(e) Neither 1 ^st Service nor any 1 ^st Service Subsidiary has any Voting Debt outstanding.

Section 4.3. Authority; No Violation .

(a) 1 ^st Service has the requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and, subject to the approval of this Agreement by the affirmative vote of two-thirds of the outstanding 1 ^st Service Common Stock at the 1 ^st Service Shareholders Meeting (the “1 ^st Service Required Vote”), to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the performance and consummation of the transactions contemplated hereby have been duly and validly approved by all requisite corporate and, subject to obtainment of the 1 ^st Service Required Vote, shareholder action of 1 ^st Service, and no other corporate or shareholder proceedings on the part of 1 ^st Service are necessary pursuant to the 1 ^st Service Charter, 1 ^st Service Bylaws, the regulations of the OTS or otherwise to approve this Agreement or to perform and consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by 1 ^st Service and (assuming due authorization, execution and delivery by the other Parties) constitutes a valid and binding obligation of 1 ^st Service, enforceable against 1 ^st Service in accordance with its terms, except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors’ rights and remedies generally.

(b) Neither the execution and delivery of this Agreement by 1 ^st Service nor the performance and consummation by 1 ^st Service of the transactions contemplated hereby, nor compliance by 1 ^st Service with any of the terms or provisions hereof, will (i) violate any provision of the 1 ^st Service Charter, 1 ^st Service Bylaws or any of the similar governing documents of any of its Subsidiaries or (ii) assuming that the consents and approvals referred to in Section 4.4 are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to 1 ^st Service, any of its Subsidiaries or any of their respective properties or assets, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of 1 ^st Service or any of its

Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which 1 ^st Service or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except (in the case of clauses (x) and (y) above) for such violations, conflicts, breaches, defaults or other events which, either individually or in the aggregate, will not have and would not reasonably be expected to have a Material Adverse Effect on 1 ^st Service.

Section 4.4. Consents and Approvals . Except for (i) the 1 ^st Service Required Vote and, if applicable, the 1 ^st Service Supplemental Required Vote, (ii) the filing of applications and notices, as applicable, with the Federal Reserve Board under the BHC Act, the OCC under the National Bank Act and the OTS under Section 563.22 of the OTS Regulations and approval of such applications and notices and the expiration of all required waiting periods; (iii) the filing with the SEC in definitive form of the Proxy Statement/Prospectus, and the filing with, and declaration of effectiveness by, the SEC of the Registration Statement, and any related filings or approvals under applicable state securities or blue sky laws, (iv) the consents and approvals set forth in Section 4.4 of the 1 ^st Service Disclosure Schedule (if any) and (v) the consents and approvals of third parties which are not Governmental Entities, the failure of which to be obtained will not have and would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on 1 ^st Service, no consents or approvals of, or filings or registrations with, any Governmental Entity, domestic or foreign, or with any other third party are necessary in connection with (A) the execution, delivery and performance by 1 ^st Service of this Agreement and (B) the consummation by 1 ^st Service of the Merger. As of the date of this Agreement, 1 ^st Service knows of no reason relating to it why all regulatory approvals from any Governmental Entity required to consummate the transactions contemplated hereby should not be obtained on a timely basis without the imposition of a condition or restriction of the type referred to in Section 8.2(c).

Section 4.5. Governmental Reports .

(a) Neither 1 ^st Service nor any of 1 ^st Service’s Subsidiaries is required to file periodic reports with the SEC or the OTS pursuant to Section 13 or 15(d) of the Exchange Act.

(b) 1 ^st Service and each of its Subsidiaries have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file since December 31, 2000 with any Governmental Entity and have paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by a Governmental Entity in the regular course of the business of 1 ^st Service and its Subsidiaries, no Governmental Entity has initiated any proceeding or, to the Knowledge of 1 ^st Service, threatened an investigation into the business or operations of 1 ^st Service or any of its Subsidiaries since December 31, 2000. There is no material unresolved violation, criticism or exception by any Governmental Entity with respect to any report, notice, application, registration or statement filed by, or relating to any examinations by any such Governmental Entity of, 1 ^st Service or any of its Subsidiaries.

Section 4.6. Financial Statements; Undisclosed Liabilities; Internal Controls .

(a) 1 ^st Service has previously made available to SNBV copies of (i) the balance sheets of 1 ^st Service at December 31, 2003, 2004 and 2005, and the related statements of operations, changes in stockholders’ equity and cash flows for the years then ended, in each case accompanied by the audit reports of TG, independent auditors with respect to 1 ^st Service, and (ii) the unaudited balance sheet of 1 ^st Service at May 31, 2006 and the related unaudited statements of operations for the five months then ended (the “1 ^st Service Financial Statements”). The 1 ^st Service financial statements (including any related notes thereto) were, and the financial statements of 1 ^st Service to be delivered pursuant to Section 7.8 will be, prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be disclosed therein), and fairly present or will fairly present, as applicable, in all material respects, the consolidated financial position of 1 ^st Service and its consolidated Subsidiaries and the consolidated results of operations, changes in stockholders’ equity and cash flows of such companies as of the dates and for the periods shown. The books and records of 1 ^st Service and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements (including those required by Governmental Entities) and reflect only actual transactions. TG has not resigned or been dismissed as independent auditors of 1 ^st Service as a result of or in connection with any disagreements with 1 ^st Service on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

(b) Except for (i) those liabilities that are fully reflected or reserved for in accordance with GAAP in the consolidated financial statements of 1 ^st Service for the year ended December 31, 2005 or (ii) liabilities incurred since December 31, 2005 in the ordinary course of business, neither 1 ^st Service nor any of its Subsidiaries has incurred any material liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due), and, to 1 ^st Service’s Knowledge, there is no existing condition, situation or set of circumstances that could reasonably be expected to result in such a liability other than pursuant to or as contemplated by this Agreement.

(c) 1 ^st Service has devised and maintains a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including that (i) transactions are executed only in accordance with management’s authorization; (ii) transactions are recorded as necessary to permit preparation of the financial statements of 1 ^st Service and to maintain accountability for 1 ^st Service’s assets; (iii) access to 1 ^st Service’s assets is permitted only in accordance with management’s authorization; (iv) the reporting of 1 ^st Service’s assets is compared with existing assets at regular intervals; and (v) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis.

Section 4.7. Broker’s Fees . Except for Milestone Advisors, neither 1 ^st Service nor any 1 ^st Service Subsidiary nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with the Merger or any of the other transactions contemplated by this Agreement. A true, complete and correct copy of the agreement with Milestone Advisors relating to any such fees has previously been furnished to SNBV.

Section 4.8. Absence of Certain Changes or Events . Since December 31, 2005, no event has occurred which has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on 1 ^st Service, and prior to the date hereof, neither 1 ^st Service nor any of its Subsidiaries has (i) effected or authorized any adjustment, split, combination or reclassification of any of its capital stock, or redeemed, purchased or otherwise acquired, any shares of its capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock or stock appreciation rights (except pursuant to the exercise of stock options); (ii) declared, set aside or paid any dividend; (iii) sold, licensed, leased, encumbered, mortgaged, transferred, assigned or otherwise disposed of any of its material assets, properties or other rights or agreements other than in the ordinary course of business consistent with past practice; (iv) increased the compensation or fringe benefits of any present or former director or officer of 1 ^st Service or its Subsidiaries (except for increases in salary or wages of nonexecutive officers or employees in the ordinary course of business consistent with past practice), or granted any severance or termination pay to any present or former director, officer or employee of 1 ^st Service or its Subsidiaries except in connection with terminations of employment of non-officer employees in the ordinary course of business consistent with past practice; (v) amended or terminated any 1 ^st Service Benefit Plan; (vi) made any material change in its policies and practices with respect to (x) underwriting, pricing, originating, acquiring, selling, servicing, or buying or selling rights to service Loans or (y) hedging its Loan positions or commitments; (vii) made any changes in its accounting methods or method of Tax accounting, practices or policies, except as may be required by GAAP or the Code; (viii) made or changed any material Tax election or settled or compromised any material Tax liability of 1 ^st Service or any of its Subsidiaries; or (ix) agreed to, or made any commitment to, take any of the foregoing actions.

Section 4.9. Legal Proceedings .

(a) Neither 1 ^st Service nor any of its Subsidiaries is a party to any, and there are no pending or, to 1 ^st Service’s Knowledge, threatened legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against 1 ^st Service or any of its Subsidiaries (including under or in respect of the USA PATRIOT Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act or any other fair lending law or other law relating to discriminatory banking practices or the Bank Secrecy Act) or challenging the validity or propriety of this Agreement or the transactions contemplated hereby.

(b) There is no injunction, order, judgment, decree or regulatory restriction specifically imposed upon 1 ^st Service, any of its Subsidiaries or the assets of 1 ^st Service or any of its Subsidiaries that has had, or would reasonably be expected to have, a Material Adverse Effect on 1 ^st Service.

Section 4.10. Taxes .

(a) Each of 1 ^st Service and its Subsidiaries has (i) duly and timely filed (including pursuant to any extension of the filing deadline) all Tax Returns required to be filed by it, and such Tax Returns are true, correct and complete in all material respects, and (ii) paid in full or made adequate provision in the 1 ^st Service Financial Statements (in accordance with GAAP) for all Taxes, whether or not shown as due on such Tax Returns. To the Knowledge of 1 ^st Service, no material deficiencies for any Taxes have been proposed, asserted or assessed in writing against or with respect to any Taxes due by or Tax Returns of 1 ^st Service or any of its Subsidiaries, except for any such deficiencies that have been fully reflected or reserved for in the 1 ^st Service Financial Statements. There are no Liens for Taxes upon the assets of either 1 ^st Service or any of its Subsidiaries except for statutory liens for current Taxes not yet due or Liens for Taxes that are being contested in good faith by appropriate proceedings or for which adequate reserves in accordance with GAAP have been provided in the 1 ^st Service Financial Statements.

(b) Neither 1 ^st Service nor any of its Subsidiaries (i) is or has ever been a member of an affiliated group (other than a group the common parent of which is 1 ^st Service) filing a consolidated tax return or (ii) has any material liability for Taxes of any Person arising from the application of Treasury Regulation Section 1.1502-6 or any analogous provision of state, local or foreign law, or as a transferee or successor, by contract, or otherwise.

(c) None of 1 ^st Service or any of its Subsidiaries is a party to, is bound by or has any obligation under any Tax sharing or Tax indemnity agreement or similar contract or arrangement, other than with each other.

(d) No closing agreement pursuant to Section 7121 of the Code (or any similar provision of state, local or foreign law) has been entered into by or with respect to 1 ^st Service or any of its Subsidiaries.

(e) None of 1 ^st Service or any of its Subsidiaries has been either a “distributing corporation” or a “controlled corporation” in a distribution occurring during the last two years in which the parties to such distribution treated the distribution as one to which Section 355 of the Code is applicable.

(f) All Taxes required to be withheld, collected or deposited by or with respect to 1 ^st Service and each Subsidiary have been timely withheld, collected or deposited as the case may be, and to the extent required, have been paid to the relevant taxing authority.

(g) Neither 1 ^st Service nor any of its Subsidiaries has granted any currently-effective waiver of any U.S. federal, state, local or non-U.S. statute of limitations with respect to, or any currently-effective extension of a period for the assessment of, any Tax.

(h) Neither 1 ^st Service nor any of its Subsidiaries has filed a consent to the application of Section 341(f) of the Code for tax years beginning before December 31, 2005.

(i) 1 ^st Service is not aware of any fact or circumstances that could reasonably be expected to prevent the Merger from qualifying as a tax-free reorganization within the meaning of Section 368(a)(2)(D) of the Code.

Section 4.11. Employees; Employee Benefit Plans .

(a) Section 4.11(a) of the 1 ^st Service Disclosure Schedule contains a true and complete list of each “employee benefit plan” (within the meaning of ERISA, including multiemployer plans within the meaning of ERISA Section 3(37)), stock purchase, stock option, severance, employment, loan, change-in-control, fringe benefit, collective bargaining, bonus, incentive, deferred compensation and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA (including any funding mechanism therefor now in effect or required in the future as a result of the transaction contemplated by this Agreement or otherwise) under which any current or former employee, director or independent contractor of 1 ^st Service or any of its Subsidiaries has any present or future right to benefits and under which 1 ^st Service or any of its Subsidiaries has any present or future liability. All such plans, agreements, programs, policies and arrangements shall be collectively referred to as the “1 ^st Service Benefit Plans.”

(b) With respect to each 1 ^st Service Benefit Plan, 1 ^st Service has delivered to SNBV a current, accurate and complete copy (or, to the extent no such copy exists, an accurate description) thereof and, to the extent applicable: (i) any related trust agreement or other funding instrument; (ii) the most recent determination letter, if applicable; (iii) any summary plan description provided by 1 ^st Service or any of its Subsidiaries to their employees concerning the extent of the benefits provided under a 1 ^st Service Benefit Plan; and (iv) for the most recent year (A) the Form 5500 and attached schedules, (B) audited financial statements and (C) actuarial valuation reports.

(c) Except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on1st Service, (i) each of the 1 ^st Service Benefit Plans has been established and administered in accordance with its terms, and in compliance with the applicable provisions of ERISA, the Code and other applicable laws, rules and regulations; (ii) each 1 ^st Service Benefit Plan which is intended to be qualified within the meaning of Code Section 401(a) has received a favorable determination letter as to its qualification, and nothing has occurred, whether by action or failure to act, that would reasonably be expected to cause the loss of such qualification; (iii) no “reportable event” (as such term is defined in ERISA Section 4043), “prohibited transaction” (as such term is defined in ERISA Section 406 and Code Section 4975) or “accumulated funding deficiency” (as such term is defined in ERISA section 302 and Code Section 412 (whether or not waived)) has occurred with respect to any 1 ^st Service Benefit Plan; (iv) no 1 ^st Service Benefit Plan provides retiree welfare benefits and neither 1 ^st Service nor any of its Subsidiaries have any obligation to provide any retiree welfare benefits other than as required by Section 4980B of the Code; and (v) neither 1 ^st Service nor any ERISA Affiliate has engaged in, or is a successor or parent corporation to an entity that has engaged in, a transaction described in Sections 4069 or 4212(c) of ERISA.

(d) None of the 1 ^st Service Benefit Plans is a multiemployer plan (within the meaning of ERISA Section 4001(a)(3)), and none of 1 ^st Service, its Subsidiaries or any ERISA Affiliate has any liability with respect to a multiemployer plan that remains unsatisfied.

(e) With respect to any 1 ^st Service Benefit Plan, except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on 1 ^st

Service, (i) no actions, suits or claims (other than routine claims for benefits in the ordinary course) are pending or, to the Knowledge of 1 ^st Service or any of its Subsidiaries, threatened, (ii) no written communication has been received from the PBGC in respect of any 1 ^st Service Benefit Plan subject to Title IV of ERISA concerning the funded status of any such plan or any transfer of assets and liabilities from any such plan in connection with the transactions contemplated herein and (iii) to the knowledge of 1 ^st Service, no administrative investigation, audit or other administrative proceeding by the Department of Labor, the PBGC, the IRS or other governmental agencies are pending, in progress (including any routine requests for information from the PBGC) or threatened.

(f) No 1 ^st Service Benefit Plan exists that could result in the payment to any present or former employee, director or independent consultant of 1 ^st Service or any of its Subsidiaries of any money or other property or accelerate or provide any other rights or benefits to any present or former employee of 1 ^st Service or any of its Subsidiaries as a result of the transactions contemplated by this Agreement. There is no contract, plan or arrangement (written or otherwise) covering any current or former employee or director of 1 ^st Service or any of its Subsidiaries that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to the terms of Sections 280G or 162(m) of the Code.

(g) In connection with the transactions contemplated by this Agreement or otherwise, no current or former employee or director of 1 ^st Service or its Subsidiaries has the right to compel 1 ^st Service or any of its Subsidiaries to fund (by reason of, or pursuant to, a grantor trust or any other funding mechanism) any benefit provided, or to be provided, to such employee or director.

(h) Neither 1 ^st Service nor any 1 ^st Service Subsidiary (i) has taken any action, or has failed to take any action, that has resulted or is likely to result in the interest and tax penalties specified in Section 409A(a)(1)(B) of the Code being owed by any participant in a 1 ^st Service Benefit Plan or (ii) has agreed to reimburse or indemnify any participant in a 1 ^st Service Benefit Plan for any of the interest and the penalties specified in Section 409A(a)(1)(B) of the Code that may be currently due or triggered in the future.

Section 4.12. Board Approval . On or prior to the date hereof, the 1 ^st Service Board, by resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held, (i) determined that this Agreement and the Merger are fair to and in the best interests of 1 ^st Service and its shareholders and declared the Merger and the other transactions contemplated hereby to be advisable, (ii) approved this Agreement, the Merger and the other transactions contemplated hereby and (iii) agreed to recommend that the shareholders of 1 ^st Service approve this Agreement at the 1 ^st Service Shareholders Meeting, subject to the terms of this Agreement.

Section 4.13. Compliance With Applicable Law .

(a) Each of 1 ^st Service and its Subsidiaries is in compliance with, and is not in violation of, its respective charter or articles of incorporation and bylaws or equivalent constituent documents. 1 ^st Service and each of its Subsidiaries hold, and have at all times held, all licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses and ownership of their respective properties and assets under and pursuant

to, and have complied with and are not in violation in any material respect under, any applicable law, statute, order, rule, regulation, policy or guideline of any Governmental Entity relating to 1 ^st Service or any of its Subsidiaries (including, without limitation, to the extent applicable, the USA PATRIOT Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act or any other fair lending law or other law relating to discriminatory banking practices and the Bank Secrecy Act), except where the failure to hold such license, franchise, permit or authorization or such noncompliance or violation would not, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect on 1 ^st Service, and neither 1 ^st Service nor any of its Subsidiaries knows of, or has received notice of, any violations of any of the above which, individually or in the aggregate, would have or would reasonably be expected to have a Material Adverse Effect on 1 ^st Service. 1 ^st Service is in compliance with the CRA and received a CRA rating of not less than “satisfactory” from the OTS in its most recently completed exam.

(b) 1 ^st Service and each of its Subsidiaries has properly administered all accounts for which it acts as a fiduciary, including accounts for which it serves as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the documents governing such accounts, applicable state and federal law and regulation and common law, except where the failure to so administer such accounts would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on 1 ^st Service. None of 1 ^st Service, any of its Subsidiaries, or any director, officer or employee of 1 ^st Service or of any of its Subsidiaries, has committed any breach of trust or fiduciary duty with respect to any such fiduciary account that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on 1 ^st Service, and, except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on 1 ^st Service, the accountings for each such fiduciary account are true and correct and accurately reflect the assets of such fiduciary account.

Section 4.14. Certain Contracts .

(a) Except as set forth in Section 4.14 of the 1 ^st Service Disclosure Schedule, neither 1 ^st Service nor any of its Subsidiaries is a party to or is bound by any contract, arrangement, commitment or understanding (whether written or oral) (i) which is a material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed in whole or in part after the date of this Agreement, (ii) which relates to the incurrence of indebtedness (other than deposit liabilities, advances and loans from the Federal Home Loan Bank and sales of securities subject to repurchase, in each case incurred in the ordinary course of business) by 1 ^st Service or any of its Subsidiaries in the principal amount of $25,000 or more, including any sale and leaseback transactions, capitalized leases and other similar financing transactions, (iii) which grants any right of first refusal, right of first offer or similar right with respect to any material assets or properties of 1 ^st Service and its Subsidiaries, (iv) which provides for material payments to be made by 1 ^st Service or any of its Subsidiaries upon a change in control thereof, (v) which is a consulting agreement (including data processing, software programming and licensing contracts) not terminable on 60 days or less notice and involving the payment of more than $10,000 per annum, (vi) which limits the freedom of 1 ^st Service or any of its Subsidiaries to compete in any line of business, in any geographic area or with any person, or (vii) which

involved payments by, or to, 1 ^st Service or any of its Subsidiaries in 2006 of more than $25,000 or which could reasonably be expected to involve payments during 2006 of more than $25,000 (other than pursuant to Loans originated or purchased by 1 ^st Service and its Subsidiaries in the ordinary course of business consistent with past practice). Each contract, arrangement, commitment or understanding of the type described in this Section 4.14(a) is set forth in Section 4.14(a) of the 1 ^st Service Disclosure Schedule and is referred to herein as a “1 ^st Service Contract.”

(b) Each 1 ^st Service Contract is valid and binding on 1 ^st Service or its applicable Subsidiary and in full force and effect, and, to the Knowledge of 1 ^st Service, is valid and binding on the other parties thereto, except as may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors’ rights and remedies generally. 1 ^st Service and each of its Subsidiaries and, to the Knowledge of 1 ^st Service, each of the other parties thereto, has in all material respects performed all obligations required to be performed by such party to date under each 1 ^st Service Contract. No event or condition exists which constitutes or, after notice or lapse of time or both, would constitute a material breach or default on the part of 1 ^st Service or any of its Subsidiaries or, to the Knowledge of 1 ^st Service, any other party thereto, under any such 1 ^st Service Contract, except, in each case, where such invalidity, failure to be binding, failure to so perform or breach or default, individually or in the aggregate, would not have or reasonably be expected to have a Material Adverse Effect on 1 ^st Service.

(c) Section 4.14(c) of the 1 ^st Service Disclosure Schedule contains a schedule showing the present value of the monetary amounts payable as of the date specified in such schedule, whether individually or in the aggregate (including good faith estimates of all amounts not subject to precise quantification as of the date of this Agreement, such as tax indemnification payments in respect of income or excise taxes), under any employment, change-in-control, severance or similar contract or plan with or which covers any present or former director, officer or employee of 1 ^st Service or any of its Subsidiaries who may be entitled to any such amount and identifying the types and estimated amounts of the in-kind benefits due under any 1 ^st Service Benefit Plans or 1 ^st Service Contract (other than a tax-qualified plan) for each such person, specifying the assumptions in such schedule.

Section 4.15. Agreements With Regulatory Agencies . Neither 1 ^st Service nor any of its Subsidiaries is subject to any cease-and-desist or other order issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is a recipient of any extraordinary supervisory letter from, or is subject to any order or directive by, or has adopted any board resolutions at the request of, any Governmental Entity (each, a “1 ^st Service Regulatory Agreement”) that currently restricts or by its terms will in the future restrict the conduct of its business or relates to its capital adequacy, its credit or risk management policies, its asset quality, its dividend policies, its management or its business, nor has 1 ^st Service or any of its Subsidiaries been advised by any Governmental Entity that it is considering issuing or requesting any 1 ^st Service Regulatory Agreement.

Section 4.16. 1 ^st Service Information . The information relating to 1 ^st Service to be provided by 1 ^st Service for inclusion in the Proxy Statement/Prospectus, the Registration Statement, any filing pursuant to Rule 165 or Rule 425 under the Securities Act or in any other document filed with any Governmental Entity in connection herewith will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading.

Section 4.17. Title to Property .

(a) 1 ^st Service and its Subsidiaries have good, valid and marketable title to all real property owned by them free and clear of all Liens, except Liens for current Taxes not yet due and payable and other standard exceptions commonly found in title policies in the jurisdiction where such real property is located, or such encumbrances and imperfections of title, if any, as do not materially detract from the value of the properties and do not materially interfere with the present or proposed use of such properties or otherwise materially impair such operations. All real property and fixtures material to the business, operations or financial condition of 1 ^st Service and its Subsidiaries are in good condition and repair except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on 1 ^st Service.

(b) 1 ^st Service and its Subsidiaries have good, valid and marketable title to all tangible personal property owned by them, free and clear of all Liens except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on 1 ^st Service.

(c) All leases of real property and all other leases material to 1 ^st Service and its Subsidiaries under which 1 ^st Service or a Subsidiary, as lessee, leases personal property are valid and binding in accordance with their respective terms, there is not under such lease any material existing default by 1 ^st Service or such Subsidiary or, to the Knowledge of 1 ^st Service, any other party thereto, or any event which with notice or lapse of time would constitute such a default, and, in the case of leased premises, 1 ^st Service or such Subsidiary quietly enjoys the premises provided for in such lease, except in any such case as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on 1 ^st Service.

Section 4.18. Insurance . 1 ^st Service and its Subsidiaries are insured with reputable insurers against such risks and in such amounts as in the reasonable opinion of 1 ^st Service constitute reasonably adequate coverage against all risks customarily insured against by federal stock savings banks and their subsidiaries of comparable size and operations to 1 ^st Service and its Subsidiaries. Section 4.18 of the 1 ^st Service Disclosure Schedule contains a true and complete list and a brief description (including name of insurer, agent, coverage and expiration date) of all insurance policies in force on the date hereof with respect to the business and assets of 1 ^st Service and its Subsidiaries (other than insurance policies under which 1 ^st Service or any Subsidiary thereof is named as a loss payee, insured or additional insured as a result of its position as a secured lender on specific loans and mortgage insurance policies on specific loans or pools of loans). 1 ^st Service and its Subsidiaries are in material compliance with their insurance policies and are not in default under any of the material terms thereof. Each such policy is outstanding and in full force and effect and, except as set forth in Section 4.18 of the 1 ^st Service Disclosure Schedule, 1 ^st Service Benefit Plans which are funded with insurance (as

identified in such schedule) and policies insuring against potential liabilities of officers, directors and employees of 1 ^st Service and its Subsidiaries, 1 ^st Service or the relevant Subsidiary thereof is the sole beneficiary of such policies. All premiums and other payments due under any such policy have been paid, and all claims thereunder have been filed in due and timely fashion.

Section 4.19. Environmental Liability . There are no known legal, administrative, arbitral or other proceedings, claims, actions, causes of action, private environmental investigations or remediation activities or governmental investigations of any nature seeking to impose, or that reasonably could be expected to result in the imposition, on 1 ^st Service or any of its Subsidiaries of any liability or obligation arising under any Environmental Law pending or, to the Knowledge of 1 ^st Service, threatened against 1 ^st Service or any of its Subsidiaries, which liability or obligation would have or would reasonably be expected to have a Material Adverse Effect on 1 ^st Service. To the Knowledge of 1 ^st Service, there is no reasonable basis for any such proceeding, claim, action or governmental investigation that would impose any liability or obligation that would have or would reasonably be expected to have a Material Adverse Effect on 1 ^st Service. To the Knowledge of 1 ^st Service, during or prior to the period of (i) its or any of its Subsidiaries’ ownership or operation of any of their respective current properties, (ii) its or any of its Subsidiaries’ participation in the management of any property or (iii) its or any of its Subsidiaries’ holding of a security interest or other interest in any property, there were no releases or threatened releases of any Hazardous Substance in, on, under or affecting any such property which would reasonably be expected to have a Material Adverse Effect on 1 ^st Service. Neither 1 ^st Service nor any of its Subsidiaries is subject to any agreement, order, judgment, decree, letter or memorandum by or with any court, governmental authority, regulatory agency or third party imposing any material liability or obligation pursuant to or under any Environmental Law that would have or would reasonably be expected to have a Material Adverse Effect on 1 ^st Service.

Section 4.20. Opinion of Financial Advisor . 1 ^st Service has received the opinion of Milestone Advisors, dated as of the date of this Agreement, to the effect that, as of such date, the Merger Consideration is fair to the shareholders of 1 ^st Service from a financial point of view.

Section 4.21. Patents, Trademarks, Etc . 1 ^st Service and each of its Subsidiaries owns or possesses, or is licensed or otherwise has the right to use, all proprietary rights, including all trademarks, trade names, service marks, copyrights and Internet domain names, that are material to the conduct of their existing businesses. Neither 1 ^st Service nor any of its Subsidiaries is bound by or a party to any licenses or agreements of any kind with respect to any trademarks, service marks or trade names which it claims to own. Neither 1 ^st Service nor any of its Subsidiaries has received any communications alleging that any of them has violated any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other Person.

Section 4.22. Labor Matters . Neither 1 ^st Service nor any of its Subsidiaries is a party to or is bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor is 1 ^st Service or any of its Subsidiaries the subject of a proceeding asserting that it or any such Subsidiary has committed an unfair labor practice (within the meaning of the United States National Labor Relations Act) or

seeking to compel 1 ^st Service or any such Subsidiary to bargain with any labor organization as to wages or conditions of employment, nor is there any labor strike, slowdown or work stoppage or other material labor dispute or disputes involving it or any of its Subsidiaries pending, or to 1 ^st Service’s Knowledge, threatened against 1 ^st Service or any of its Subsidiaries, nor is 1 ^st Service aware of any activity involving its or any of its Subsidiaries’ employees seeking to certify a collective bargaining unit or engaging in other organizational activity.

Section 4.23. Derivative Instruments and Transactions .

(a) Except as would not be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect on 1 ^st Service, (i) all Derivative Transactions whether entered into for the account of 1 ^st Service or any of its Subsidiaries or for the account of a customer of 1 ^st Service or any of its Subsidiaries, were entered into in the ordinary course of business consistent with past practice and in accordance with prudent banking practice and applicable rules, regulations and policies of all applicable Governmental Entities and with counterparties believed to be financially responsible at the time and are legal, valid and binding obligations of 1 ^st Service or one of its Subsidiaries and, to the Knowledge of 1 ^st Service, each of the counterparties thereto, and are enforceable in accordance with their terms, and are in full force and effect, (ii) 1 ^st Service or its Subsidiaries and, to the Knowledge of 1 ^st Service, the counterparties thereto, have duly performed their obligations thereunder to the extent that such obligations to perform have accrued, and (iii) to 1 ^st Service’s Knowledge, there are no breaches, violations or defaults or allegations or assertions of such by any party thereunder.

(b) At May 31, 2006, no Derivative Transaction, were it to be a Loan (as hereinafter defined) held by 1 ^st Service or any of its Subsidiaries, would be classified as “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import. The financial position of 1 ^st Service and its Subsidiaries on a consolidated basis under or with respect to each such Derivative Transaction has been reflected in the books and records of 1 ^st Service and such Subsidiaries in accordance with GAAP consistently applied.

Section 4.24. Investment Companies and Investment Advisers .

(a) Neither 1 ^st Service nor any of its Subsidiaries is an “investment company” as defined under the Investment Company Act.

(b) None of 1 ^st Service, any Subsidiary of 1 ^st Service or any division of 1 ^st Service Bank is required to register as an “investment adviser” with the SEC under the Investment Advisers Act or with any Governmental Entity under any state law or regulation.

Section 4.25. Loan Matters .

(a) Each outstanding Loan (including Loans held for resale to investors) held by 1 ^st Service or its Subsidiaries (the “1 ^st Service Loans”) has been solicited and originated and is administered and, where applicable, serviced, and the relevant 1 ^st Service Loan files are being maintained, in all material respects in accordance with the relevant loan documents, 1 ^st Service’s

underwriting standards (and, in the case of 1 ^st Service Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all applicable requirements of federal, state and local laws, regulations and rules, except for such exceptions as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on 1 ^st Service.

(b) Each 1 ^st Service Loan (i) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (ii) to the extent secured, has been secured by valid Liens which have been perfected and (iii) to 1 ^st Service’s Knowledge, is a legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles. Except as would not be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect on 1 ^st Service, the loan documents with respect to each 1 ^st Service Loan were in compliance with applicable laws and regulations at the time of origination or purchase by 1 ^st Service or its Subsidiaries and are complete and correct.

(c) (i) Section 4.25(c) of the 1 ^st Service Disclosure Schedule sets forth a list of all Loans at May 31, 2006 by 1st Service and its Subsidiaries to any directors, executive officers and principal stockholders (as such terms are defined in Regulation O promulgated by the Federal Reserve Board (12 CFR Part 215)) of 1st Service or any of its Subsidiaries; (ii) there are no employee, officer, director or other affiliate Loans on which the borrower is paying a rate other than that reflected in the note or the relevant credit agreement or on which the borrower is paying a rate which was below market at the time the Loan was made; and (iii) all such Loans are and were made in compliance with all applicable laws and regulations, except for such exceptions as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on 1st Service.

(d) Section 4.25(d) of the 1st Service Disclosure Schedule identifies (A) each 1 ^st Service Loan that at May 31, 2006 was classified as “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import by 1st Service, any of its Subsidiaries or any bank examiner, together with the principal amount of and accrued and unpaid interest on each such 1 ^st Service Loan and the identity of the borrower thereunder, and (B) each asset of 1 ^st Service or any of its Subsidiaries that as of March 31, 2006 was classified as OREO and the book value thereof as of such date, and there has been no material adverse changes in any such information between May 31, 2006 and the date hereof.

(e) None of the agreements pursuant to which 1 ^st Service or any of its Subsidiaries has sold Loans or pools of Loans or participations in Loans or pools of Loans contains any obligation to repurchase such Loans or interests therein solely on account of a payment default by the obligor on any such Loan.

Section 4.26. Antitakeover Provisions . 1 ^st Service has taken all action required to be taken by it in order to exempt this Agreement and the transactions contemplated hereby from the requirements of any “control share acquisition,” “business combination moratorium,” “fair price,” “affiliate transaction,” “anti-greenmail” or other form of antitakeover statute or regulation of the OTS or any jurisdiction.

Section 4.27. Books and Records . The minute books of 1 ^st Service and each of its Subsidiaries contain in all material respects true, complete and accurate records of all meetings and other corporate actions held or taken since 1 ^st Service’s incorporation of their respective shareholders and boards of directors (including committees of their respective boards of directors).

Section 4.28. Disclosure . The representations and warranties contained in this Article IV, when considered as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Article IV not misleading.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SNBV

At least one day prior to the execution and delivery of this Agreement, SNBV has delivered to 1 ^st Service a schedule (the “SNBV Disclosure Schedule”) setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more of SNBV’s representations or warranties contained in this Article V, or to one of SNBV’s covenants contained in Article VI. Except as set forth in the corresponding section of the SNBV Disclosure Schedule, SNBV hereby represents and warrants to 1st Service as follows:

Section 5.1. Corporate Organization .

(a) SNBV is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia. SNBV is a bank holding company registered under the BHC Act. SNBV has all requisite corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted. SNBV is duly licensed or qualified to do business and is in good standing in each jurisdiction (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so licensed or qualified, except where the failure to be so licensed or qualified or in good standing would not have or reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on SNBV.

(b) The copies of the SNBV Articles and SNBV Bylaws that have previously been made available to 1 ^st Service are true, complete and correct copies of such documents as in effect as of the date of this Agreement.

(c) Each Subsidiary of SNBV (i) is duly organized and validly existing and is in good standing under the laws of its jurisdiction of organization, (ii) is duly licensed or qualified to do business and is in good standing in each jurisdiction (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so licensed or qualified, except where the failure to be so licensed or qualified or in good

standing would not have or reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on SNBV and (iii) has all requisite corporate or other power and authority to own or lease its properties and assets and to carry on its business as now conducted. The articles of incorporation, bylaws and similar organizational documents of each Subsidiary of SNBV, copies of which have been made available to 1 ^st Service, are true, complete and correct as of the date of this Agreement.

(d) Sonabank is a national bank and is the only Subsidiary of SNBV that is a depository institution (as defined at 12 U.S.C. Section 1813(c)(1)). The deposit accounts of Sonabank are insured by the FDIC to the maximum extent provided by applicable law, and Sonabank has paid all deposit insurance premiums and assessments required by applicable laws and regulations.

Section 5.2. Capitalization .

(a) At the date of this Agreement, the authorized capital stock of SNBV consists of 45,000,000 shares of SNBV Common Stock and 5,000,000 shares of SNBV Preferred Stock. At March 31, 2006, there were 3,500,000 shares of SNBV Common Stock issued and outstanding, no shares of SNBV Preferred Stock outstanding and no shares of SNBV Common Stock held in SNBV’s treasury. As of the date of this Agreement, no shares of SNBV Stock were reserved for issuance, except (i) an aggregate of 164,750 shares of SNBV Common Stock reserved for issuance upon the exercise of stock options granted pursuant to the SNBV Stock Compensation Plan, and (ii) shares of SNBV Common Stock issuable in connection with the Merger pursuant to this Agreement. As of the date of this Agreement, except as set forth in the preceding sentence, there are no Rights authorized, issued or outstanding with respect to the capital stock or any other equity security of SNBV. All of the issued and outstanding shares of SNBV Common Stock are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. At the Effective Time, the shares of SNBV Common Stock to be issued in the Merger will be duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. No Subsidiary of SNBV owns any shares of SNBV Common Stock (other than shares in trust accounts, managed accounts and the like for the benefit of customers or shares held in satisfaction of a debt previously contracted).

(b) Section 5.2(b) of the SNBV Disclosure Schedule lists the name, jurisdiction of incorporation, authorized and outstanding shares of capital stock and record and beneficial owners of such capital stock for each Subsidiary of SNBV. SNBV owns, directly or indirectly, all of the issued and outstanding shares of capital stock of or all other equity interests in each of SNBV’s Subsidiaries, free and clear of any Liens, and all of such shares are duly authorized, validly issued, fully paid, nonassessable (except, in the case of Sonabank, as provided in 12 U.S.C. Section 55) and free of preemptive rights. Neither SNBV nor any Subsidiary thereof has or is bound by any Right with respect to the capital stock or any other equity security of any Subsidiary of SNBV.

Section 5.3. Authority; No Violation .

(a) Each of SNBV and Sonabank has the requisite corporate power and authority to execute and deliver this Agreement and to perform their respective obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the performance and consummation of the transactions contemplated hereby have been duly and validly approved by all requisite corporate action of SNBV and Sonabank and no other corporate or shareholder proceedings on the part of SNBV or Sonabank (except for the consent of SNBV as the sole stockholder of Sonabank to approve the Agreement, the Merger and the transactions contemplated thereby) are necessary pursuant to the SNBV Articles, the SNBV Bylaws, Sonabank’s Articles of Association or Bylaws, the Bank Merger Act or otherwise to approve and adopt this Agreement or to perform and consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by SNBV and Sonabank and (assuming due authorization, execution and delivery by the other Parties) constitutes the valid and binding obligation of SNBV and Sonabank, enforceable against SNBV and Sonabank in accordance with its terms, except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors’ rights and remedies generally.

(b) Neither the execution and delivery of this Agreement by SNBV or Sonabank nor the performance and consummation by SNBV or Sonabank of the transactions contemplated hereby, nor compliance by SNBV or Sonabank with any of the terms or provisions hereof, will (i) violate any provision of the SNBV Articles, SNBV Bylaws, Sonabank’s Articles of Association or Bylaws or any of the similar governing documents of any of SNBV’s Subsidiaries or (ii) assuming that the consents and approvals referred to in Section 5.4 are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to SNBV or Sonabank, any of SNBV’s Subsidiaries or any of their respective properties or assets, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of SNBV or Sonabank or any of SNBV’s Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which SNBV, Sonabank or any of SNBV’s Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except (in the case of clauses (x) and (y) above) for such violations, conflicts, breaches, defaults or other events which, either individually or in the aggregate, will not have and would not reasonably be expected to have a Material Adverse Effect on SNBV.

Section 5.4. Consents and Approvals . Except for (i) the filing of applications and notices, as applicable, with the Federal Reserve Board under the BHC Act, the OCC under the National Bank Act and the OTS under Section 563.22 of the Regulations of the OTS and approval of such applications and notices and the expiration of all required waiting periods; (ii) the filing with the SEC in definitive form of the Proxy Statement/Prospectus, and the filing with, and declaration of effectiveness by, the SEC of the Registration Statement, and any related filings or approvals under applicable state securities or blue sky laws, (iii) the consents and approvals set forth in Section 5.4 of the SNBV Disclosure Schedule (if any) and (iv) the consents and approvals of third parties which are not Governmental Entities, the failure of which to be

obtained will not have and would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on SNBV, no consents or approvals of, or filings or registrations with, any Governmental Entity, domestic or foreign, or with any other third party are necessary in connection with (A) the execution, delivery and performance by SNBV and Sonabank of this Agreement and (B) the consummation by SNBV and Sonabank of the Merger and the other transactions contemplated hereby. As of the date of this Agreement, SNBV knows of no reason relating to it why all regulatory approvals from any Governmental Entity required to consummate the transactions contemplated hereby should not be obtained on a timely basis without the imposition of a condition or restriction of the type referred to in Section 8.2(c).

Section 5.5. Governmental Reports .

(a) As of the date hereof, neither SNBV nor Sonabank is required to file periodic reports with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.

(b) SNBV and each of its Subsidiaries have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file since inception on April 14, 2005 with any Governmental Entity and have paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by a Governmental Entity in the regular course of the business of SNBV or Sonabank and SNBV’s Subsidiaries, no Governmental Entity has initiated any proceeding or, to the Knowledge of SNBV, threatened an investigation into the business or operations of SNBV or Sonabank or any of SNBV’s Subsidiaries since inception on April 14, 2005. There is no material unresolved violation, criticism or exception by any Governmental Entity with respect to any report, notice, application, registration or statement filed by, or relating to any examinations by any such Governmental Entity of, SNBV, Sonabank or any of SNBV’s Subsidiaries.

Section 5.6. Financial Statements; Undisclosed Liabilities; Internal Controls .

(a) SNBV has previously made available to 1 ^st Service copies of (i) the balance sheet of SNBV at December 31, 2005, and the related statements of operations, changes in stockholders’ equity and cash flows for the period from inception at April 14, 2005 through December 31, 2005, accompanied by the audit report of BDO, independent auditors with respect to SNBV, and (ii) the unaudited balance sheet of SNBV at May 31, 2006 and the related unaudited statements of operations for the five months then ended (the “SNBV Financial Statements”). The SNBV financial statements (including any related notes thereto) were, and the financial statements of SNBV to be delivered pursuant to Section 7.8 will be, prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be disclosed therein), and fairly present or will fairly present, as applicable, in all material respects, the consolidated financial position of SNBV and its consolidated Subsidiaries and the consolidated results of operations, changes in stockholders’ equity and cash flows of such companies as of the dates and for the periods shown. The books and records of SNBV and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements (including those required by Governmental Entities) and reflect only actual transactions. BDO has not resigned or been dismissed as independent auditors of SNBV as a result of or in connection with any disagreements with SNBV on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

(b) Except for (i) those liabilities that are fully reflected or reserved for in the consolidated financial statements of SNBV for the year ended December 31, 2005, or (ii) liabilities incurred since December 31, 2005 in the ordinary course of business, neither SNBV nor any of its Subsidiaries has incurred any material liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due), and, to SNBV’s Knowledge, there is no existing condition, situation or set of circumstances that could reasonably be expected to result in such a liability other than pursuant to or as contemplated by this Agreement.

(c) SNBV and its Subsidiaries have devised and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP, including that (i) transactions are executed only in accordance with management’s authorization; (ii) transactions are recorded as necessary to permit preparation of the financial statements of SNBV and to maintain accountability for SNBV’s assets; (iii) access to SNBV’s assets is permitted only in accordance with management’s authorization; (iv) the reporting of SNBV’s assets is compared with existing assets at regular intervals; and (v) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis.

Section 5.7. Broker’s Fees . Except for FIG Partners, L.L.C., whose fees and expenses will be paid by SNBV, none of SNBV, Sonabank or any affiliate or Subsidiary of SNBV or any of their respective directors or officers has employed any broker or finder or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with the Merger or any of the other transactions contemplated by this Agreement for which 1 ^st Service, any of its Subsidiaries or any of their respective directors or officers would be liable.

Section 5.8. Absence of Certain Changes or Events . Since December 31, 2005, no event has occurred which has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on SNBV.

Section 5.9. Legal Proceedings .

(a) Neither SNBV nor any of its Subsidiaries is a party to any, and there are no pending or, to SNBV’s Knowledge, threatened legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against SNBV or any of its Subsidiaries (including under or in respect of the Sarbanes-Oxley Act, the USA PATRIOT Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act or any other fair lending law or other law relating to discriminatory banking practices or the Bank Secrecy Act) or challenging the validity or propriety of this Agreement or the transactions contemplated hereby.

(b) There is no injunction, order, judgment, decree or regulatory restriction specifically imposed upon SNBV, Sonabank, any of SNBV’s Subsidiaries or the assets of SNBV, Sonabank or any of its Subsidiaries that has had, or would reasonably be expected to have, a Material Adverse Effect on SNBV.

Section 5.10. Taxes .

(a) Each of SNBV and its Subsidiaries has (i) duly and timely filed (including pursuant to any extension of the filing deadline) all material Tax Returns required to be filed by it, and such Tax Returns are true, correct and complete in all material respects, and (ii) paid in full or made adequate provision in the SNBV Financial Statements (in accordance with GAAP) for all material Taxes, whether or not shown as due on such Tax Returns. To the Knowledge of SNBV, no material deficiencies for any Taxes have been proposed, asserted or assessed in writing against or with respect to any Taxes due by or Tax Returns of SNBV or any of its Subsidiaries, except for any such deficiencies that have been fully reflected or reserved for in the SNBV Financial Statements. There are no Liens for Taxes upon the assets of either SNBV or any of its Subsidiaries except for statutory liens for current Taxes not yet due or Liens for Taxes that are being contested in good faith by appropriate proceedings or for which adequate reserves in accordance with GAAP have been provided in the SNBV Financial Statements.

(b) SNBV is not aware of any fact or circumstances that could reasonably be expected to prevent the Merger from qualifying as a tax-free reorganization within the meaning of Section 368(a)(2)(D) of the Code.

Section 5.11. Employees; Employee Benefit Plans .

(a) Section 5.11(a) of the SNBV Disclosure Schedule contains a true and complete list of each “employee benefit plan” (within the meaning of ERISA, including multiemployer plans within the meaning of ERISA Section 3(37)), stock purchase, stock option, severance, employment, loan, change-in-control, fringe benefit, collective bargaining, bonus, incentive, deferred compensation and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA (including any funding mechanism therefor now in effect or required in the future as a result of the transaction contemplated by this Agreement or otherwise) under which any current or former employee, director or independent contractor of SNBV or any of its Subsidiaries has any present or future right to benefits and under which SNBV or any of its Subsidiaries has any present or future liability. All such plans, agreements, programs, policies and arrangements shall be collectively referred to as the “SNBV Benefit Plans.”

(b) None of the SNBV Benefit Plans is a multiemployer plan (within the meaning of ERISA Section 4001(a)(3)), and none of SNBV, its Subsidiaries or any ERISA Affiliate has any liability with respect to a multiemployer plan that remains unsatisfied.

(c) Except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on SNBV, (i) each of the SNBV Benefit Plans has been established and administered in accordance with its terms, and in compliance with the applicable provisions of ERISA, the Code and other applicable laws, rules and regulations; (ii) each SNBV

Benefit Plan which is intended to be qualified within the meaning of Code Section 401(a) has received a favorable determination letter as to its qualification, and nothing has occurred, whether by action or failure to act, that would reasonably be expected to cause the loss of such qualification; (iii) no “reportable event” (as such term is defined in ERISA Section 4043), “prohibited transaction” (as such term is defined in ERISA Section 406 and Code Section 4975) or “accumulated funding deficiency” (as such term is defined in ERISA section 302 and Code Section 412 (whether or not waived)) has occurred with respect to any SNBV Benefit Plan; (iv) no SNBV Benefit Plan provides retiree welfare benefits and neither SNBV nor any of its Subsidiaries have any obligation to provide any retiree welfare benefits other than as required by Section 4980B of the Code; and (v) neither SNBV nor any ERISA Affiliate has engaged in, or is a successor or parent corporation to an entity that has engaged in, a transaction described in Sections 4069 or 4212(c) of ERISA.

(d) With respect to any SNBV Benefit Plan, except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on SNBV (i) no actions, suits or claims (other than routine claims for benefits in the ordinary course) are pending or, to the Knowledge of SNBV or any of its Subsidiaries, threatened, (ii) no written communication has been received from the PBGC in respect of any SNBV Benefit Plan subject to Title IV of ERISA concerning the funded status of any such plan or any transfer of assets and liabilities from any such plan in connection with the transactions contemplated herein and (iii) to the Knowledge of SNBV, no administrative investigation, audit or other administrative proceeding by the Department of Labor, the PBGC, the IRS or other governmental agencies are pending, in progress (including any routine requests for information from the PBGC) or threatened.

Section 5.12. Board Approval . On or prior to the date hereof, the SNBV Board, by resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held, (i) determined that this Agreement and the Merger are fair to and in the best interests of SNBV and its shareholders and declared the Merger and the other transactions contemplated hereby to be advisable, (ii) approved this Agreement, the Merger and the other transactions contemplated hereby and (iii) approved this Agreement, the Merger and the other transactions contemplated hereby in SNBV’s capacity as the sole shareholder of Sonabank.

Section 5.13. Compliance With Applicable Law .

(a) Each of SNBV and its Subsidiaries is in compliance with, and is not in violation of, its respective articles of incorporation, articles of association and bylaws or equivalent constituent documents. SNBV and each of its Subsidiaries hold, and have at all times held, all licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses and ownership of their respective properties and assets under and pursuant to, and have complied with and are not in violation in any material respect under any, applicable law, statute, order, rule, regulation, policy or guideline of any Governmental Entity relating to SNBV, Sonabank or any of SNBV’s Subsidiaries (including, without limitation, the USA PATRIOT Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act or any other fair lending law or other law relating to discriminatory banking practices), except where the failure to hold such license, franchise, permit or authorization or such noncompliance or violation would not, individually or in the aggregate, have or reasonably

be expected to have a Material Adverse Effect on SNBV, and neither SNBV nor any of its Subsidiaries knows of, or has received notice of, any violations of any of the above which, individually or in the aggregate, would have or would reasonably be expected to have a Material Adverse Effect on SNBV. Sonabank is in compliance with the CRA and Sonabank received a CRA rating of not less than “satisfactory” from the OCC in its most recently completed exam.

(b) SNBV and each of its Subsidiaries has properly administered all accounts for which it acts as a fiduciary, including accounts for which it serves as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the documents governing such accounts, applicable state and federal law and regulation and common law, except where the failure to so administer such accounts would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on SNBV. None of SNBV, any of its Subsidiaries, or any director, officer or employee of SNBV or of any of its Subsidiaries, has committed any breach of trust or fiduciary duty with respect to any such fiduciary account that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on SNBV, and, except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on SNBV, the accountings for each such fiduciary account are true and correct and accurately reflect the assets of such fiduciary account.

Section 5.14. Agreements With Regulatory Agencies . Neither SNBV nor any of its Subsidiaries is subject to any cease-and-desist or other order issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is a recipient of any extraordinary supervisory letter from, or is subject to any order or directive by, or has adopted any board resolutions at the request of, any Governmental Entity (each, a “SNBV Regulatory Agreement”) that currently restricts or by its terms will in the future restrict the conduct of its business or relates to its capital adequacy, its credit or risk management policies, its asset quality, its dividend policies, its management or its business, nor has SNBV or any of its Subsidiaries been advised by any Governmental Entity that it is considering issuing or requesting any SNBV Regulatory Agreement.

Section 5.15. SNBV Information . The information relating to SNBV and its Subsidiaries to be provided by SNBV for inclusion in the Proxy Statement/Prospectus, the Registration Statement, any filing pursuant to Rule 165 or Rule 425 under the Securities Act or in any other document filed with any Governmental Entity in connection herewith will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. The Registration Statement (except for such portions thereof as relate only to 1 ^st Service or any of its Subsidiaries) will comply as to form in all material respects with the provisions of the Securities Act and the rules and regulations thereunder.

Section 5.16. Environmental Liability . There are no legal, administrative, arbitral or other proceedings, claims, actions, causes of action, private environmental investigations or remediation activities or governmental investigations of any nature seeking to impose, or that reasonably could be expected to result in the imposition, on SNBV or any of its

Subsidiaries of any liability or obligation arising under any Environmental Law pending or, to the Knowledge of SNBV, threatened against SNBV or any of its Subsidiaries, which liability or obligation would have or would reasonably be expected to have a Material Adverse Effect on SNBV. To the Knowledge of SNBV, there is no reasonable basis for any such proceeding, claim, action or governmental investigation that would impose any liability or obligation that would have or would reasonably be expected to have a Material Adverse Effect on SNBV. To the Knowledge of SNBV, during or prior to the period of (i) its or any of its Subsidiaries’ ownership or operation of any of their respective current properties, (ii) its or any of its Subsidiaries’ participation in the management of any property, or (iii) its or any of its Subsidiaries’ holding of a security interest or other interest in any property, there were no releases or threatened releases of any Hazardous Substance in, on, under or affecting any such property which would reasonably be expected to have a Material Adverse Effect on SNBV. Neither SNBV nor any of its Subsidiaries is subject to any agreement, order, judgment, decree, letter or memorandum by or with any court, governmental authority, regulatory agency or third party imposing any material liability or obligation pursuant to or under any Environmental Law that would have or would reasonably be expected to have a Material Adverse Effect on SNBV.

Section 5.17. Labor Matters . Neither SNBV nor any of its Subsidiaries is a party to or is bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor is SNBV or any of its Subsidiaries the subject of a proceeding asserting that it or any such Subsidiary has committed an unfair labor practice (within the meaning of the United States National Labor Relations Act) or seeking to compel SNBV or any such Subsidiary to bargain with any labor organization as to wages or conditions of employment, nor is there any labor strike, slowdown or work stoppage or other material labor dispute or disputes involving it or any of its Subsidiaries pending, or to SNBV’s Knowledge, threatened against SNBV or any of its Subsidiaries, nor is SNBV aware of any activity involving its or any of its Subsidiaries’ employees seeking to certify a collective bargaining unit or engaging in other organizational activity.

Section 5.18. Derivative Instruments and Transactions .

(a) Except as would not be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect on SNBV, (i) all Derivative Transactions whether entered into for the account of Sonabank or any of SNBV’s Subsidiaries or for the account of a customer of Sonabank or any of SNBV’s Subsidiaries, were entered into in the ordinary course of business consistent with past practice and in accordance with prudent banking practice and applicable rules, regulations and policies of all applicable Governmental Entities and with counterparties believed to be financially responsible at the time and are legal, valid and binding obligations of Sonabank or one of SNBV’s Subsidiaries and, to the Knowledge of SNBV, each of the counterparties thereto, and are enforceable in accordance with their terms, and are in full force and effect, (ii) Sonabank or SNBV’s Subsidiaries and, to the Knowledge of SNBV, the counterparties thereto, have duly performed their obligations thereunder to the extent that such obligations to perform have accrued, and (iii) to SNBV’s Knowledge, there are no breaches, violations or defaults or allegations or assertions of such by any party thereunder.

(b) At May 31, 2006, no Derivative Transaction, were it to be a Loan (as hereinafter defined) held by Sonabank or any of SNBV’s Subsidiaries, would be classified as “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import. The financial position of Sonabank and SNBV’s Subsidiaries on a consolidated basis under or with respect to each such Derivative Transaction has been reflected in the books and records of SNBV and such Subsidiaries in accordance with GAAP consistently applied.

Section 5.19. Investment Companies . Neither SNBV nor any of its Subsidiaries is an “investment company” as defined under the Investment Company Act.

Section 5.20. Loan Matters .

(a) Each outstanding Loan (including Loans held for resale to investors) held by Sonabank or its Subsidiaries (the “Sonabank Loans”) has been solicited and originated and is administered and, where applicable, serviced, and the relevant Sonabank Loan files are being maintained, in all material respects in accordance with the relevant loan documents, Sonabank’s underwriting standards (and, in the case of Sonabank Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with all applicable requirements of federal, state and local laws, regulations and rules, except for such exceptions as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on SNBV.

(b) Each Sonabank Loan (i) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (ii) to the extent secured, has been secured by valid Liens which have been perfected and (iii) to SNBV’s Knowledge, is a legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles. Except as would not be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect on Sonabank, the loan documents with respect to each Sonabank Loan were in compliance with applicable laws and regulations at the time of origination or purchase by Sonabank and are complete and correct.

(c) (i) At May 31, 2006, there were no loans by Sonabank to any directors, executive officers and principal stockholders (as such terms are defined in Regulation O promulgated by the Federal Reserve Board (12 CFR Part 215)) of SNBV or any of its Subsidiaries; (ii) there are no employee, officer, director or other affiliate Loans on which the borrower is paying a rate other than that reflected in the note or the relevant credit agreement or on which the borrower is paying a rate which was below market at the time the Loan was made; and (iii) all such Loans are and were made in compliance with all applicable laws and regulations, except for such exceptions as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on SNBV.

(d) Section 5.20(d) of the SNBV Disclosure Schedule identifies (A) each Sonabank Loan that at May 31, 2006 was classified as “Special Mention,” “Substandard,”

“Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned Loans,” “Watch List” or words of similar import by Sonabank or any bank examiner, together with the principal amount of and accrued and unpaid interest on each such Sonabank Loan and the identity of the borrower thereunder, and (B) each asset of Sonabank that as of March 31, 2006 was classified as OREO and the book value thereof as of such date.

Section 5.21. Financing . At the Effective Time, SNBV will have sufficient funds to pay all cash amounts set forth in Sections 3.1, 3.2, 3.3, 3.4 and 3.5 hereof.

Section 5.22. Disclosure . The representations and warranties contained in this Article V, when considered as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Article V not misleading.

ARTICLE VI

COVENANTS RELATING TO CONDUCT OF BUSINESS

Section 6.1. Conduct of Business Prior to the Effective Time . Except as otherwise expressly contemplated or permitted by this Agreement or with the prior written consent of SNBV, during the period from the date of this Agreement to the Effective Time, 1 ^st Service shall, and shall cause each of its Subsidiaries to, (i) conduct its business in the usual, regular and ordinary course consistent with past practice, (ii) use reasonable best efforts to maintain and preserve intact its business organization, and its rights, authorizations, franchises and other authorizations issued by Governmental Entities, preserve its advantageous business relationships with customers, vendors and others doing business with it and retain the services of its officers and key employees and (iii) take no action which would reasonably be expected to adversely affect the receipt of any approvals of any Governmental Entity required to consummate the transactions contemplated hereby or to consummate the transactions contemplated hereby or delay the receipt of such approvals subsequent to the date set forth in Section 9.1(c).

Section 6.2. 1 ^st Service Forbearances . Except as set forth in Section 6.2 of the 1 ^st Service Disclosure Schedule or as expressly contemplated or permitted by this Agreement, during the period from the date of this Agreement to the Effective Time, 1 ^st Service shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of SNBV:

(a) (i) adjust, split, combine or reclassify any capital stock; (ii) set any record or payment dates for the payment of any dividends or distributions on its capital stock or make, declare or pay any dividend or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock; (iii) issue or commit to issue (A) any additional shares of capital stock, or any Rights with respect to shares of its capital stock, except pursuant to the exercise of 1 ^st Service Stock Options outstanding as of the date hereof and disclosed in Section 4.2(c) of the 1 ^st Service Disclosure Schedule, or (B) any Voting Debt;

(b) enter into any new line of business or change its lending, investment, risk and asset-liability management and other material banking or operating policies in any material respect, except as required by law or by policies imposed by a Governmental Entity;

(c) except in connection with the discontinuance of 1 ^st Service Bank’s mortgage banking division, sell, license, lease, encumber, mortgage, transfer, assign or otherwise dispose of, or abandon or fail to maintain, any of its material assets, properties or other rights or agreements other than in the ordinary course of business, provided that in no event shall 1 ^st Service or any of its Subsidiaries sell, license, lease, encumber, mortgage, transfer, assign or otherwise dispose of any Subsidiary, other business division, branch or other operating business without, in any such case, receiving the prior written consent of SNBV;

(d) make any acquisition of or investment in any other person, by purchase or other acquisition of stock or other equity interests (other than in a fiduciary capacity in the ordinary course of business), by merger, consolidation, asset purchase or other business combination, or by formation of any joint venture or other business organization or by contributions to capital; or make any purchases or other acquisitions of any debt securities, property or assets (including any investments or commitments to invest in real estate or any real estate development project) in or from any other individual, corporation, joint venture or other entity, other than a wholly-owned Subsidiary of 1 ^st Service, except for (i) foreclosures, settlements in lieu of foreclosures, troubled debt or Loan restructurings and other similar acquisitions in connection with securing or collecting debts previously contracted in the ordinary course of business, (ii) purchases of investment securities in the ordinary course of business consistent with past practice and (iii) Loans originated or acquired as permitted by Section 6.2(k);

(e) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse or otherwise become responsible for the obligations of any Person, except in the ordinary course of business consistent with past practice;

(f) create, renew, amend or terminate, fail to perform any obligations under, waive or release any rights under or give notice of a proposed renewal, amendment, waiver, release or termination of, any material contract, agreement or lease to which 1 ^st Service or any of its Subsidiaries is a party or by which 1 ^st Service or any of its Subsidiaries or their respective properties is bound, including any contract or agreement of the type described in Section 4.14(a)(vi), other than any of the foregoing arising in the ordinary course of business consistent with past practice;

(g) foreclose on or take a deed or title to any multi-family residential or commercial real estate without first conducting a Phase I environmental assessment of the property, or foreclose on or take a deed or title to any multi-family residential or commercial real estate if such environmental assessment indicates the presence of a Hazardous Substance;

(h) other than as required pursuant to existing agreements or as otherwise required by applicable law, (i) increase the compensation or fringe benefits of or pay any incentive or bonus payments to any present or former director, officer or employee of 1 ^st Service or any of its Subsidiaries, except for (A) increases in salary or wages of non-executive officers or

employees in the ordinary course of business consistent with past practice, provided that no such individual increase shall result in an annual adjustment of more than 3%, and further provided that no such individual increase, other than promotional increases in the ordinary course of business, may be effective earlier than January 1, 2007 in the case of any employee with a title of Vice President or above, and (B) an aggregate of $60,000 of bonuses which may be payable in discretion of the chief executive officer of 1 ^st Service (i) to key employees who either are not offered a job with the Surviving Institution or who are offered such a job and decline, to incent them to remain in the employ of 1 ^st Service Bank until the Effective Time, and (ii) in the manner set forth in Section 6.2(h) of the 1 ^st Service Disclosure Schedule, provided that any such stay bonuses are not paid until immediately prior to the Effective Time; (ii) grant any severance or termination pay to any present or former director, officer or employee of 1 ^st Service; (iii) establish, adopt or enter into any plan, agreement, program, policy, trust, fund or other arrangement that would be a 1 ^st Service Benefit Plan if it were in existence as of the date of this Agreement; (iv) amend or terminate any 1 ^st Service Benefit Plan; (v) increase the funding obligation or contribution rate of any 1 ^st Service Benefit Plan subject to Title IV of ERISA, except as required by GAAP or the terms of any such plan; or (vi) increase the size of the 1 ^st Service Board;

(i) make any capital expenditures in excess of $25,000 in the aggregate, other than expenditures budgeted in the capital expenditure budget delivered to SNBV prior to the date of this Agreement;

(j) make application for the opening, relocation or closing of any, or open, relocate or close any, executive, administrative or branch office or loan production or servicing facility;

(k) except for Loans or commitments for Loans that have previously been approved by 1 ^st Service prior to the date of this Agreement, make or acquire any Loan or issue a commitment for any Loan except for Loans and commitments that are made in the ordinary course of business consistent with past practice and which (i) have been approved by the chief executive officer of 1 ^st Service and (ii) individually do not exceed a principal balance to one borrower or to a group of affiliated borrowers of $250,000 (it being agreed that any Loan or Loan commitment with a principal balance in excess of this amount may be pursued by 1 ^st Service after it has provided SNBV with two Business Days notice thereof and the information relating thereto provided to the Board of Directors of 1 ^st Service unless otherwise communicated by SNBV to 1 ^st Service within such period);

(l) except as otherwise expressly permitted elsewhere in this Section 6.2, engage or participate in any material transaction or incur or sustain any material obligation or liability, in each case other than in the ordinary course of business consistent with past practice;

(m) except pursuant to agreements or arrangements in effect on the date hereof, pay, loan or advance any amount to, or sell, transfer or lease any properties or assets (real, personal or mixed, tangible or intangible) to, or enter into any agreement or arrangement with, any of its officers or directors or any of their immediate family members or any affiliates or associates (as such terms are defined under the Exchange Act) of any of its officers or directors other than in the ordinary course of business consistent with past practice and, in the case of any such agreements or arrangements relating to compensation, fringe benefits, severance or termination pay or related matters, only as otherwise permitted pursuant to this Section 6.2;

(n) pay, discharge, settle, compromise or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), including taking any action to settle or compromise any litigation, in each case, (i) relating to this Agreement or the transactions contemplated hereby or (ii) that requires the payment by 1 ^st Service of an amount, individually or in the aggregate, in excess of $25,000, or if not requiring the payment of money, otherwise restricts the business of 1 ^st Service or any of its Subsidiaries in any material respect, other than, in the case of matters covered by clause (ii), the payment, discharge, settlement, compromise or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, the most recent consolidated financial statements (or the notes thereto) or incurred since December 31, 2005 in the ordinary course of business consistent with past practice;

(o) amend its charter, bylaws or similar organizational documents or enter into a plan of consolidation, merger, share exchange, reorganization or complete or partial liquidation with any Person, or a letter of intent or agreement in principle with respect thereto;

(p) materially change its investment securities portfolio policy or the manner in which the portfolio is classified or reported; or invest in any mortgage-backed or mortgage related securities which would be considered “high-risk” securities under applicable regulatory pronouncements;

(q) except as may be required by law and applicable regulations, make any material change in its policies and practices with respect to Loans, including without limitation policies relating to underwriting, pricing, originating, acquiring, selling, servicing, or buying or selling rights to service, Loans;

(r) take any action that is intended or would reasonably be expected to result in any of the conditions to the Merger set forth in Section 8.1 or 8.2 not being satisfied or in a Requisite Regulatory Approval not being obtained without imposition of a condition of the type referred to in Section 8.2(c), or in a material violation of any provision of this Agreement;

(s) make any changes in its accounting methods or method of Tax accounting, practices or policies, except as may be required under law, rule, regulation or GAAP, in each case as concurred in by 1 ^st Service’s independent auditors;

(t) enter into any securitizations of any Loans or create any special purpose funding or variable interest entity;

(u) make or change any material Tax election (unless required by applicable law), file any material amended Tax Returns, settle or compromise any material Tax liability of 1 ^st Service or any of its Subsidiaries or surrender any right to claim a material Tax refund, in each case other than in the ordinary course of business consistent with past practice (for purposes of this clause (u), material means $10,000 or more of Taxes); or

(v) agree to, or make any commitment to, take, or authorize or adopt any resolution of its board of directors in support of, any of the actions prohibited by this Section 6.2.

Section 6.3. SNBV Forbearances . Except as expressly contemplated or permitted by this Agreement or with the prior written consent of 1 ^st Service, during the period from the date of this Agreement to the Effective Time, SNBV shall, and shall cause each of its Subsidiaries to, (i) use reasonable best efforts to maintain and preserve intact its business organization, and its rights, authorizations, franchises and other authorizations issued by Governmental Entities, preserve its advantageous business relationships with customers, vendors and others doing business with it and retain the services of its officers and key employees, and (ii) take no action which would reasonably be expected to materially adversely affect the receipt of any approvals of any Governmental Entity required to consummate the transactions contemplated hereby or to consummate the transactions contemplated hereby or delay the receipt of such approvals subsequent to the date set forth in Section 9.1(c).

Without limiting the generality of the foregoing, and except as otherwise contemplated or permitted by this Agreement, or as required by law or regulation or any Governmental Entity, during the period from the date of this Agreement to the Effective Time, SNBV shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of 1 ^st Service:

(a) amend, repeal or otherwise modify its articles of incorporation, bylaws or similar governing documents in a manner that would materially and adversely affect the economic benefits of the Merger to the holders of 1 ^st Service Common Stock;

(b) declare or pay any extraordinary or special dividends on or make any other extraordinary or special distributions in respect of any of its capital stock;

(c) except in satisfaction of debts previously contracted, make any material acquisition of, or investment in, assets or stock of any other Person;

(d) implement or adopt any change in its accounting methods, practices or policies, except as may be required by GAAP or regulatory accounting principles or applicable law, in each case as concurred in by SNBV’s independent public accountants;

(e) take any action that is intended or would reasonably be expected to result in any of the conditions to the Merger set forth in Sections 8.1 and 8.3 not being satisfied or in a Requisite Regulatory Approval not being obtained without imposition of a condition of the type referred to in Section 8.2(c), or in a material violation of any provision of this Agreement; or

(f) agree to, or make any commitment to, take, or authorize or adopt any resolution of its board of directors in support of, any of the actions prohibited by this Section 6.3.

ARTICLE VII

ADDITIONAL AGREEMENTS

Section 7.1. Regulatory Matters .

(a) SNBV agrees to prepare a registration statement on Form S-4 or other applicable form (as may be amended, the “Registration Statement”) to be filed by SNBV with the SEC in connection with the issuance of SNBV Common Stock in the Merger (including the prospectus of SNBV and the proxy statement and other proxy solicitation materials of 1 ^st Service constituting a part thereof (as may be amended, the “Proxy Statement/Prospectus”) and all related documents). Provided that 1 ^st Service has fulfilled its obligations under Section 7.1(d) in all material respects, SNBV agrees to file, or cause to be filed, the Registration Statement and the Proxy Statement/Prospectus with the SEC as promptly as reasonably practicable. Each of SNBV and 1 ^st Service agrees to use its reasonable best efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as reasonably practicable after the filing thereof. SNBV also agrees to use its reasonable best efforts to obtain all necessary state securities law or “blue sky” permits and approvals required to carry out the transactions contemplated by this Agreement. After the Registration Statement is declared effective under the Securities Act, 1 ^st Service shall promptly mail the Proxy Statement/Prospectus to its shareholders. If at any time prior to the Effective Time any information relating to 1 ^st Service, SNBV or their respective affiliates, officers or directors, should be discovered by 1 ^st Service or SNBV which should be set forth in an amendment or supplement to either the Registration Statement or the Proxy Statement/Prospectus so that such documents would not include any misstatement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Party which discovers such information shall promptly notify the other Parties and, to the extent required by law, rules or regulations, an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and disseminated to the shareholders of 1 ^st Service.

(b) Each of 1 ^st Service and SNBV shall cooperate with each other and use their reasonable best efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, and to obtain as promptly as practicable all permits, consents, approvals and authorizations of all Governmental Entities and other third parties which are necessary or advisable to consummate the transactions contemplated by this Agreement (including the Merger) and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all such third parties and Governmental Entities. Notwithstanding the foregoing, nothing contained herein shall be deemed to require SNBV to take any action, or commit to take any action, or agree to any conditions or restrictions, in connection with obtaining the foregoing permits, consents, approvals and authorizations of Governmental Entities or other third parties that would reasonably be expected to result in the imposition of a condition or restriction of the type referred to in Section 8.2(c).

(c) 1 ^st Service and SNBV shall promptly inform each other of any material communication from, and shall give the other a reasonable opportunity to review in advance any material communication intended to be given by it to, any Governmental Entity regarding any of

the transactions contemplated by this Agreement (other than any confidential portion thereof that relates solely to the party receiving such communication from or providing such communication to such Governmental Entity).

(d) Each of 1 ^st Service and SNBV shall, upon request, furnish the other with all information concerning itself, its Subsidiaries, directors, officers and shareholders and such other matters as may be reasonably necessary or advisable in connection with the preparation of the Registration Statement, the Proxy Statement/Prospectus or any other statement, filing, notice or application to be made by or on behalf of any Party or any of its Subsidiaries to any Governmental Entity in connection with the Merger and the other transactions contemplated by this Agreement. 1 ^st Service further agrees to cooperate with SNBV and SNBV’s counsel and accountants in requesting and obtaining appropriate opinions, consents and letters from its financial advisor and independent registered public accounting firm in connection with the Registration Statement, the Proxy Statement/Prospectus and any other such statement, filing, notice or application.

Section 7.2. Access to Information .

(a) Upon reasonable notice and subject to applicable laws relating to the exchange of information, each of 1 ^st Service and SNBV shall, and shall cause each of its Subsidiaries to, afford to the officers, employees, accountants, counsel and other representatives of the other access, during normal business hours during the period prior to the Effective Time, to all its properties, books, contracts, commitments and records, and to its officers, employees, accountants, counsel and other representatives, in each case in a manner not unreasonably disruptive to the operation of the business of it and its Subsidiaries, and, during such period, 1 ^st Service and SNBV shall, and shall cause its respective Subsidiaries to, make available to the other (i) a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of federal or state banking, mortgage lending, real estate or consumer finance or protection laws (other than reports or documents which it is not permitted to disclose under applicable law) and (ii) all other information concerning its business, properties and personnel as the other may reasonably request. Neither 1 ^st Service or any of its Subsidiaries nor SNBV or any of its Subsidiaries shall be required to provide access to or to disclose information where such access or disclosure would jeopardize the attorney-client privilege of the institution in possession or control of such information or contravene any law, rule or regulation applicable to the institution in possession or control of such information. 1 ^st Service and SNBV shall make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply.

(b) All information furnished to SNBV by 1 ^st Service and to 1 ^st Service by SNBV pursuant to Section 7.2(a) or Section 7.8 shall be subject to, and each such party shall hold all such information in accordance with, the terms of the Confidentiality Agreement.

(c) No investigation by SNBV or 1 ^st Service or its respective Representatives shall constitute a waiver of or otherwise affect the representations, warranties, covenants or agreements of such party set forth herein.

Section 7.3. Shareholder Approvals .

(a) 1 ^st Service shall duly take all lawful action to call, give notice of, convene and hold a meeting of its shareholders promptly after the Registration Statement is declared effective (the “1 ^st Service Shareholders Meeting”) for the purpose of obtaining the 1 ^st Service Required Vote and, subject to Section 7.3(b), shall take all lawful action to solicit the approval of this Agreement by such shareholders. The 1st Service Board shall recommend approval of this Agreement by the shareholders of 1 ^st Service (the “1st Service Recommendation”) and shall not (x) withdraw, modify or qualify in any manner adverse to SNBV such recommendation or (y) take any other action or make any other public statement in connection with the 1 ^st Service Shareholders Meeting inconsistent with such recommendation (collectively, a “Change in 1 ^st Service Recommendation”), except as and to the extent expressly permitted by Section 7.3(b). Notwithstanding any Change in 1 ^st Service Recommendation, this Agreement shall be submitted to the shareholders of 1 ^st Service at the 1 ^st Service Shareholders Meeting for the purpose of approving this Agreement and nothing contained in this Section 7.3 or Section 7.4 shall be deemed to relieve 1 ^st Service of such obligation. In addition to the foregoing, 1 ^st Service shall not submit to the vote of its shareholders at the 1st Service Shareholders Meeting any Acquisition Proposal other than the Merger, but shall submit to the vote of its shareholders the proposal contemplated by paragraph (d) of this Section 7.3.

(b) Notwithstanding the foregoing, prior to obtaining the Required 1 ^st Service Vote, 1 ^st Service and the 1 ^st Service Board may effect a Change in 1 ^st Service Recommendation if and only to the extent that:

(i)

1 ^st Service has complied in all material respects with its obligations under Section 7.4,

(ii)

the 1 ^st Service Board, after consultation with its outside counsel, determines in good faith that failure to take such action would result in a violation of its fiduciary duties under applicable law, and

(iii)

1 ^st Service or the 1 ^st Service Board (A) has received an unsolicited bona fide written Acquisition Proposal from a third party which the 1 ^st Service Board concludes in good faith constitutes a Superior Proposal after giving effect to all of the adjustments which may be offered by SNBV pursuant to clause (C) below, (B) has notified SNBV, at least five Business Days in advance, of its intention to effect a Change in 1 ^st Service Recommendation, specifying the material terms and conditions of any such Superior Proposal and furnishing to SNBV a copy of the relevant proposed transaction agreements, if such exist, with the Person making such Superior Proposal and (C) during the period of not less than five Business Days following 1 ^st Service’s delivery of the notice referred to in clause (B) above and prior to effecting such a Change in 1 ^st Service Recommendation, has negotiated, and has used reasonable best efforts to cause its financial and legal advisors to negotiate, with SNBV in good faith (to the extent that SNBV desires to negotiate) to make such adjustments in the terms and conditions of this Agreement so that such Acquisition Proposal ceases to constitute a Superior Proposal.

(c) In the event that the 1 ^st Service Board effects a Change in 1 ^st Service Recommendation, it shall, when it notifies the shareholders of 1 ^st Service of such, disclose to such shareholders that this Agreement, in addition to the 1 ^st Service Required Vote, must be approved by the holders of a majority of the outstanding shares of 1 ^st Service Common Stock not held by the persons who are party to a Shareholder Agreement who vote, in person or by proxy, at the 1 ^st Service Shareholders Meeting (the “1 ^st Service Supplemental Required Vote”).

(d) In order to avoid the limitation set forth in Section 6(j) of the Employment Agreement, dated as of November 1, 2004, between Mr. Ernest L. Tressler, President and Chief Executive Officer of 1 ^st Service (the “Executive”), and 1 ^st Service (the “Employment Agreement”), which limits the severance payments which may be made to the Executive under the Employment Agreement to an amount which would not result in adverse tax consequences to 1 ^st Service or the Executive under Section 280G of the Code, 1 ^st Service shall request and recommend that 1 ^st Service shareholders approve, at the 1 ^st Service Shareholders Meeting, in addition to the proposal to approve this Agreement, a proposal to approve the payment or provision of all change-in-control severance benefits to the Executive that otherwise would be cut back by Section 6(j) of the Employment Agreement so that such benefits will be exempt from Section 280G and the regulations thereunder and may be paid or provided to the Executive without adverse tax consequences to 1 ^st Service and the Executive. Such proposal shall be approved in the manner required by Section 280G and the regulations thereunder.

Section 7.4. Acquisition Proposals .

(a) 1 ^st Service agrees that neither it nor any of its Subsidiaries nor any of the officers and directors of it or its Subsidiaries shall, and that it shall use its reasonable best efforts to cause its and its Subsidiaries’ employees, agents and representatives (including any investment banker, attorney or accountant retained by it or any of its Subsidiaries) not to, directly or indirectly, (i) initiate, solicit or knowingly encourage or knowingly facilitate any inquiries or the making of any proposal or offer with respect to, or a transaction that could reasonably be expected to lead to, an Acquisition Proposal, (ii) have any discussions with or provide any confidential information or data to any person relating to an Acquisition Proposal, or engage in any negotiations concerning an Acquisition Proposal, or knowingly facilitate any effort or attempt to make or implement an Acquisition Proposal, (iii) approve or recommend, or propose to approve or recommend, any Acquisition Proposal or (iv) approve or recommend, or propose to approve or recommend, or execute or enter into, any letter of intent, agreement in principle, merger agreement, asset purchase or share exchange agreement, option agreement or other similar agreement related to any Acquisition Proposal or propose or agree to do any of the foregoing. Notwithstanding the foregoing provisions of this Section 7.4(a), in the event that, prior to obtaining the 1 ^st Service Required Vote, 1 ^st Service receives an unsolicited bona fide Acquisition Proposal and the 1 ^st Service Board concludes in good faith that such Acquisition Proposal constitutes or could reasonably be expected to lead to a Superior Proposal, 1 ^st Service may, and may permit its Subsidiaries and its and their representatives to, furnish or cause to be furnished confidential information or data to the third party making such Acquisition Proposal and participate in negotiations or discussions with such third party regarding such Acquisition

Proposal to the extent that the 1 ^st Service Board concludes in good faith (after consultation with its outside counsel) that failure to take such actions would result in a violation of its fiduciary duties under applicable law, provided that prior to providing (or causing to be provided) any confidential information or data permitted to be provided pursuant to this sentence, 1 ^st Service shall have entered into a confidentiality agreement with such third party on terms no less favorable to 1 ^st Service than the Confidentiality Agreement, and provided further that 1 ^st Service also shall provide to SNBV a copy of any such confidential information or data that it is providing to any third party pursuant to this Section 7.4 to the extent not previously provided or made available to SNBV.

(b) Upon the execution of this Agreement, 1 ^st Service will, and will cause its Subsidiaries and its and their employees, agents and representatives to, immediately cease and cause to be terminated any activities, discussions or negotiations conducted before the date of this Agreement with any Person other than SNBV with respect to any Acquisition Proposal and will use its reasonable best efforts to enforce (and will not release any third party from its obligations under) any standstill, confidentiality or similar agreement relating to an Acquisition Proposal, including by requiring the other parties thereto to promptly return or destroy any confidential information previously furnished by 1 ^st Service thereunder and by using its reasonable best efforts to obtain injunctions or other equitable remedies to prevent or restrain any breaches of such agreements and to enforce specifically the terms and provisions thereof in a court of competent jurisdiction. 1 ^st Service will promptly (within one Business Day) following receipt of any Acquisition Proposal advise SNBV of the substance thereof (including the identity of the Person making such Acquisition Proposal), and will keep SNBV apprised of any related developments, discussions and negotiations (including the terms and conditions of the Acquisition Proposal) on a current basis (and, in any event, within 24 hours of the occurrence of such developments, discussions or negotiations).

(c) 1 ^st Service agrees that any violation of the restrictions set forth in this Section 7.4 by any director, officer, employee, agent or representative (including any investment banker, financial advisor, attorney, accountant or other retained representative) of 1 ^st Service or its Subsidiaries, at the direction or with the consent or prior Knowledge of 1 ^st Service or its Subsidiaries, shall be deemed to be a breach of this Section 7.4 by 1 ^st Service.

Section 7.5. Legal Conditions to the Merger .

(a) Subject to the terms and conditions of this Agreement, each Party shall, and shall cause its respective Subsidiaries to, use their reasonable best efforts (i) to take, or cause to be taken, all actions necessary, proper or advisable to comply promptly with all legal requirements which may be imposed on such Party or its Subsidiaries in connection with the Merger and the other transactions contemplated hereby and, subject to the conditions set forth in Article VIII hereof, to consummate the transactions contemplated by this Agreement, and (ii) to obtain (and to cooperate with the other Parties to obtain) any consent, authorization, order or approval of, or any exemption by, any Governmental Entity and any other third party which is required to be obtained by any Party or any of its Subsidiaries in connection with the Merger and the other transactions contemplated by this Agreement, provided, however, that no Party shall be required to take any action pursuant to the foregoing sentence if the taking of such action or the obtaining of such consents, authorizations, orders, approvals or exemptions is reasonably likely to result in a condition or restriction having an effect of the type referred to in Section 8.2(c).

(b) Subject to the terms and conditions of this Agreement (including the proviso in Section 7.5(a)), each Party agrees to use reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective, as soon as practicable after the date of this Agreement, the transactions contemplated hereby, including using reasonable best efforts to (i) modify or amend any contracts, plans or arrangements to which it is a party (to the extent permitted by the terms thereof) if necessary in order to satisfy the conditions to closing set forth in Article VIII hereof, (ii) lift or rescind any injunction or restraining order or other order adversely affecting the ability of the Parties to consummate the transactions contemplated hereby and (iii) defend any litigation seeking to enjoin, prevent or delay the consummation of the transactions contemplated hereby or seeking material damages in connection therewith (in which litigation 1 ^st Service shall provide SNBV the reasonable opportunity to participate).

Section 7.6. Indemnification; Directors’ and Officers’ Insurance .

(a) From and after the Effective Time, SNBV shall indemnify and hold harmless each present and former director, officer and employee of 1 ^st Service or a Subsidiary of 1 ^st Service, as applicable, determined as of the Effective Time (the “Indemnified Parties”) against any costs or expenses (including reasonable and documented attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, arising in whole or in part out of or pertaining to the fact that he or she is or was a director, officer or employee of 1 ^st Service or, while a director, officer or employee of 1 ^st Service, is or was serving at the request of 1 ^st Service as a director, officer, employee or agent of another corporation, association, partnership, joint venture, trust or other enterprise, including without limitation matters related to the negotiation, execution and performance of this Agreement or any of the transactions contemplated hereby, to the fullest extent provided in the Virginia Stock Corporation Act (which right to indemnification shall include the advancement of reasonable attorneys’ fees and expenses in advance of the final disposition of any claim, action, suit, proceeding or investigation upon receipt from an Indemnified Party of any required undertaking).

(b) Any Indemnified Party wishing to claim indemnification under this Section 7.6, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify SNBV, but the failure to so notify shall not relieve SNBV of any liability it may have to such Indemnified Party except to the extent that such failure actually prejudices SNBV. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) SNBV shall have the right to assume the defense thereof and SNBV shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if SNBV elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues which raise conflicts of interest between SNBV and the Indemnified Parties, the Indemnified Parties may retain counsel which is reasonably satisfactory

to SNBV, and SNBV shall pay, promptly as statements therefor are received, the reasonable and documented fees and expenses of such counsel for the Indemnified Parties (which may not exceed one firm in any jurisdiction), (ii) SNBV and the Indemnified Parties will cooperate reasonably in the defense of any such matter and keep each other reasonably apprised of developments with respect thereto, (iii) SNBV shall not be liable for any settlement effected without its prior written consent and (iv) SNBV shall have no obligation hereunder to the extent that indemnification of an Indemnified Party in the manner contemplated hereby is prohibited by applicable laws and regulations or by an applicable federal or state banking agency or a court of competent jurisdiction.

(c) Prior to the Effective Time, SNBV shall use its reasonable best efforts to cause the persons serving as directors and officers of 1 ^st Service immediately prior to the Effective Time to be covered by the directors’ and officers’ liability insurance policy maintained by 1 ^st Service (provided that SNBV may substitute therefor policies of at least the same coverage and amounts containing comparable terms and conditions as such policy or single premium tail coverage with policy limits equal to 1 ^st Service’s existing coverage limits and which is not less advantageous to such directors and officers) for a three-year period following the Effective Time with respect to acts or omissions occurring prior to the Effective Time which were committed by such directors and officers in their capacities as such, provided that in no event shall SNBV be required to expend for any one year more than an amount equal to 200% of the current annual amount expended by 1 ^st Service to maintain such insurance (the “Insurance Amount”), and further provided that if SNBV is unable to maintain or obtain the insurance called for by this Section 7.6(d) as a result of the preceding provision, SNBV shall use its reasonable best efforts to obtain as much comparable insurance as is available for the Insurance Amount.

(d) If after the Effective Time SNBV or any of its successors or assigns shall consolidate with or merge into any other entity and shall not be the continuing or surviving entity of such consolidation or merger or shall transfer all or substantially all of its assets to any other entity, then and in each case, proper provision shall be made so that the successors and assigns of SNBV shall assume the obligations of SNBV set forth in this Section 7.6 and under Section 7.10.

(e) Following the Effective Time, SNBV shall not knowingly take, directly or indirectly, any action that would or would reasonably be expected to materially impair the ability of SNBV to fulfill its obligations under this Section 7.6 or under Section 7.10.

(f) The provisions of this Section 7.6 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives.

Section 7.7. Advice of Changes . Each of 1 ^st Service and SNBV shall promptly advise the other of any change or event which, individually or in the aggregate with other such changes or events, has or would reasonably be expected to have a Material Adverse Effect on it or which it believes would or would be reasonably likely to cause or constitute a material breach of any of its representations, warranties or covenants contained herein, provided, however, that any noncompliance with the foregoing shall not constitute the failure to be satisfied of a condition set forth in Article VIII or give rise to any right of termination under Article IX unless the underlying breach shall independently constitute such a failure or give rise to such a right.

Section 7.8. Financial Statements and Other Current Information .

(a) As soon as reasonably practicable after they become available, but in no event more than 20 days after the end of each calendar month ending after the date of this Agreement, 1 ^st Service shall furnish to SNBV (i) unaudited financial statements (including a balance sheet, and statement of operations) of 1 ^st Service as of and for such month then ended, (ii) internal management financial control reports showing actual financial performance against plan and previous period and (iii) any reports provided to the 1 ^st Service Board or any committee thereof relating to the financial and risk performance of 1 ^st Service. In addition, 1 ^st Service shall furnish SNBV with a copy of each report filed by 1 ^st Service or any of its Subsidiaries with a Governmental Entity within two Business Days following the filing thereof. 1 ^st Service shall use its reasonable best efforts to have TG review (i) the monthly unaudited statements of 1 ^st Service referred to in clause (i) of the first sentence of this Section 7.8(a) promptly after they are delivered pursuant to this Agreement and (ii) such financial information relating to 1 ^st Service as may be required to be included in the Registration Statement, and 1 ^st Service shall give TG access to such financial and other information as it may reasonably request for this purpose.

(b) 1 ^st Service shall, promptly after the date hereof, prepare and file with the OTS any amendments that may be required to ensure that all Thrift Financial Reports or other regulatory filings previously filed by 1 ^st Service with the OTS are in compliance with OTS regulations. 1 ^st Service shall furnish SNBV with a copy of any such amended filing two Business Days prior to the filing thereof.

(c) As soon as practicable after they become available, but in no event more than 20 days after the end of each calendar month ending after the date of this Agreement, SNBV shall furnish to 1 ^st Service unaudited consolidated financial statements (including a balance sheet and statement of operations) of SNBV and its Subsidiaries as of and for such month then ended. In addition, SNBV shall furnish 1 ^st Service with a copy of each report filed by it and Sonabank with a Governmental Entity within two Business Days following the filing thereof.

(d) In the event that the Merger is not completed by March 15, 2007, on the first Business Day after such date, 1 ^st Service shall deliver to SNBV a balance of sheet of 1 ^st Service as of December 31, 2006, and the related statements of operations, changes in stockholder’s equity and cash flows for the year ended December 31, 2006, accompanied by the audit report of TG, and SNBV shall deliver to 1 ^st Service a balance sheet of SNBV as of December 31, 2006, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 2006, accompanied by the report of BDO. All information furnished by 1 ^st Service or SNBV pursuant to this Section 7.8 shall be held in confidence to the same extent as the receiving party’s obligations under Section 7.2(c).

Section 7.9. Transition Matters .

(a) Commencing following the date hereof, SNBV and 1 ^st Service shall, and shall cause their respective Subsidiaries to, use their reasonable best efforts to facilitate the integration of the businesses and operating systems of 1 ^st Service and its Subsidiaries with those of SNBV and its Subsidiaries following the Effective Time.

(b) Prior to the Effective Time, each of 1 ^st Service and its Subsidiaries shall, consistent with GAAP, applicable banking laws and regulations and applicable rules and regulations of the SEC, modify or change its loan, OREO, accrual, reserve, tax, litigation and real estate valuation policies and practices (including loan classifications and levels of reserves) so as to be applied on a basis that is consistent with that of SNBV, provided, however, that no such modifications or changes need be made prior to the satisfaction of the conditions set forth in Sections 8.1(a) and 8.1(b), as evidenced by a written certificate issued by SNBV to such effect, which shall be signed by the Chief Executive Officer and Chief Financial Officer of SNBV; and provided further that in any event, no accrual or reserve made by 1 ^st Service or any of its Subsidiaries pursuant to this Section 7.9(b) shall constitute or be deemed to be a breach, violation of or failure to satisfy any representation, warranty, covenant, agreement, condition or other provision of this Agreement or otherwise be considered in determining whether any such breach, violation or failure to satisfy shall have occurred. The recording of any such adjustments shall not be deemed to imply any misstatement of previously furnished financial statements or information and shall not be construed as concurrence of 1 ^st Service or its management with any such adjustments.

Section 7.10. Employee Benefit Plans .

(a) Prior to the Effective Time, SNBV shall take all reasonable action so that employees of 1 ^st Service and its Subsidiaries who become employees of SNBV and its Subsidiaries (the “Continuing Employees”) shall be entitled to participate, effective as soon as administratively practicable following the Effective Time, in each SNBV Benefit Plan of general applicability to the same extent as similarly-situated employees of SNBV and its Subsidiaries (it being understood that inclusion of the employees of 1 ^st Service and its Subsidiaries in the SNBV Benefit Plans may occur at different times with respect to different plans and that any grants to any former employee of 1 ^st Service or its Subsidiaries under any equity compensation plan of SNBV shall be discretionary with SNBV). To the extent that Continuing Employees are not entitled to participate in any SNBV Benefit Plan effective as of the Effective Time, such employees shall continue to participate in the corresponding employee benefit plan, program or arrangement of 1 ^st Service and its Subsidiaries so as to ensure that there is not a lapse in participation or coverage (but in no event to provide duplicate participation or coverage), as applicable, prior to participation in such SNBV Benefit Plan, provided that in no event shall SNBV be required to continue any employee benefit plan, program or arrangement of 1 ^st Service for which there is no corresponding SNBV Benefit Plan. SNBV shall cause each SNBV Benefit Plan in which Continuing Employees are eligible to participate to take into account for purposes of eligibility, vesting and benefit accruals under the SNBV Benefit Plans (but not for purposes of benefit accruals under any qualified or nonqualified defined benefit plan maintained by SNBV or its Subsidiaries) the service of such employees with 1 ^st Service and its Subsidiaries (and any predecessor entities) to the same extent as such service was credited generally for such purpose by 1 ^st Service and its Subsidiaries, provided, however, that such service shall not be recognized to the extent that such recognition would result in a duplication of benefits with respect to the same period of service.

(b) If Continuing Employees become eligible to participate in a medical, dental, health or disability plan of SNBV or its Subsidiaries, SNBV shall use its reasonable efforts to cause each such plan to (i) waive any preexisting condition limitations to the extent such conditions are covered under the applicable medical, health, dental or disability plans of SNBV, (ii) honor under such plans any deductible, co-payment and out-of-pocket expenses incurred by the employees and their beneficiaries during the portion of the plan year prior to such participation and (iii) waive any waiting period limitation or evidence of insurability requirement which would otherwise be applicable to such employee on or after the Effective Time, unless such employee had not yet satisfied any similar limitation or requirement under an analogous 1 ^st Service Benefit Plan prior to the Effective Time.

(c) As of the Effective Time, SNBV shall assume and honor and shall cause the appropriate Subsidiaries of SNBV to assume and honor in accordance with their terms all 1 ^st Service Benefit Plans, including all written employment agreements, existing immediately prior to the execution of this Agreement which have been disclosed in Section 4.11(a) of the 1 ^st Service Disclosure Schedule. SNBV acknowledges and agrees that the consummation of the Merger constitutes a “change in control” for purposes of the 1 ^st Service Benefit Plans.

(d) With respect to each 1 ^st Service Benefit Plan subject to Section 409A of the Code, 1 ^st Service agrees to amend each such plan or cause each such plan to be amended to the extent necessary to comply with Section 409A of the Code (or to cause such plan, in whole or in part, to avoid the application of Section 409A of the Code by preserving the terms of such plan, and the law in effect, for benefits vested as of December 31, 2004) prior to the earlier of the Effective Time or the deadline imposed by the IRS. Such amendments shall be provided to SNBV and its counsel at least ten days prior to their proposed adoption by 1 ^st Service and shall be subject to the prior approval of SNBV, which shall not be unreasonably withheld.

(e) Except as otherwise provided in this Section 7.10, nothing contained in this Section 7.10 shall be interpreted as preventing the Surviving Institution from amending, modifying or terminating any 1 ^st Service Benefit Plan, SNBV Benefit Plan or other contracts, arrangements, commitments or understandings in accordance with their terms and applicable law, provided that no such amendment, modification or termination shall reduce or eliminate a vested benefit.

Section 7.11. Publicity . SNBV and 1 ^st Service shall consult with each other before issuing any press release with respect to the Merger or this Agreement and shall not issue any such press release or make any such public statement without the prior consent of the other, which shall not be unreasonably withheld, provided, however, that SNBV and 1 ^st Service may, without the prior consent of the other (but after prior consultation, to the extent practicable in the circumstances) issue such press release or make such public statement as may upon the advice of outside counsel be required by applicable law or regulation. Without limiting the reach of the preceding sentence, SNBV and 1 ^st Service shall (a) cooperate to develop all public announcement materials and (b) make appropriate management available at presentations related to the transactions contemplated by this Agreement as reasonably requested by the other. In addition, 1 ^st Service and its Subsidiaries shall (i) consult with SNBV regarding communications with customers, shareholders, prospective investors and employees related to the transactions contemplated hereby, (ii) provide SNBV with the shareholder list of 1 ^st Service and (iii) use reasonable best efforts, at the expense of SNBV, to facilitate contact by SNBV with shareholders of 1st Service and other prospective investors.

Section 7.12. Listing of the SNBV Common Stock . SNBV shall use its reasonable best efforts to cause the shares of SNBV Common Stock to be issued in the Merger to be approved for listing on each stock exchange or trading market as any other outstanding shares of SNBV Common Stock may be listed in the future at the time such other shares are so listed or, if applicable, upon the later issuance of the shares of SNBV Common Stock to be issued in the Merger.

Section 7.13 Tax Matters . Each of SNBV and 1 ^st Service shall use its reasonable best efforts to cause the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Code. Each of 1 ^st Service and SNBV shall execute and deliver to the law firm referred to in Section 8.1(e) certificates containing appropriate representations at such time or times as may be reasonably requested by such law firm in connection with its delivery of the opinion referred to in Sections 8.1(e) with respect to the tax treatment of the Merger.

ARTICLE VIII

CONDITIONS PRECEDENT

Section 8.1. Conditions to Each Party’s Obligation to Effect the Merger . The respective obligations of each Party to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Effective Time of the following conditions:

(a) Shareholder Approvals . The 1 ^st Service Required Vote and, if applicable, the 1 ^st Service Supplemental Required Vote, shall have been obtained.

(b) Regulatory Approvals . All regulatory approvals required to consummate the transactions contemplated hereby shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired or been terminated (all such approvals and the expiration or termination of all such waiting periods being referred to herein as the “Requisite Regulatory Approvals”).

(c) No Injunctions or Restraints; Illegality . No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Merger or the other transactions contemplated hereby shall be in effect. No statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits or makes illegal the consummation of the Merger or the other transactions contemplated hereby.

(d) Registration Statement Effectiveness . The Registration Statement shall have been declared effective under the Securities Act, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC.

(e) Tax Opinion . Each of SNBV and 1 ^st Service shall have received an opinion of Elias, Matz, Tiernan & Herrick L.L.P., dated the Closing Date, in form and substance reasonably satisfactory to SNBV and 1 ^st Service, based upon facts, representations and assumptions set forth in such opinion, substantially to the effect that, for federal income tax purposes, the Merger will qualify as a “reorganization” within the meaning of Section 368(a)(2)(D) of the Code. In rendering such opinion, such counsel may require and shall be entitled to rely upon customary representations contained in certificates of officers of 1 ^st Service, SNBV and their respective Subsidiaries, reasonably satisfactory in form and substance to such counsel.

Section 8.2. Conditions to Obligations of SNBV and Sonabank . The obligations of SNBV and Sonabank to consummate the transactions contemplated by this Agreement are also subject to the satisfaction, or the waiver by SNBV, at or prior to the Effective Time of the following conditions:

(a) Representations and Warranties of 1 ^st Service . The representations and warranties of 1 ^st Service set forth in this Agreement shall be true and correct in all respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, provided, however, that for purposes of determining the satisfaction of this condition, no effect shall be given to any exception in such representations and warranties (other than the representation and warranty set forth in Section 4.8) relating to materiality or a Material Adverse Effect, and provided further that, for purposes of this condition, such representations and warranties (other than those set forth in Sections 4.2(a) through (e), which shall be true and correct in all material respects, and Section 4.8) shall be deemed to be true and correct in all respects unless the failure or failures of such representations and warranties to be so true and correct, individually or in the aggregate, results or would reasonably be expected to result in a Material Adverse Effect on 1 ^st Service. SNBV shall have received a certificate signed on behalf of 1 ^st Service by the Chief Executive Officer and Chief Financial Officer of 1 ^st Service to the foregoing effect.

(b) Performance of Obligations of 1 ^st Service . 1 ^st Service shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and SNBV shall have received a certificate signed on behalf of 1 ^st Service by the Chief Executive Officer and the Chief Financial Officer of 1 ^st Service to the foregoing effect.

(c) Burdensome Condition . There shall not be any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the transactions contemplated by this Agreement by any Governmental Entity, in connection with the grant of a Requisite Regulatory Approval or otherwise, which imposes any noncustomary restriction or condition which would be reasonably likely to have or result in a Material Adverse Effect on the business or operations of SNBV following the Effective Time.

(d) Certificate as to Shares Outstanding . SNBV shall have received a certificate signed on behalf of 1 ^st Service by the Chief Executive Officer and the Chief Financial Officer of 1 ^st Service specifying the number of shares of 1 ^st Service Common Stock and 1 ^st Service Stock Options outstanding immediately prior to the Effective Time.

(e) Limitation on Dissenting Shares . Dissenting Shares shall not represent 10% or more of the outstanding 1 ^st Service Common Stock.

Section 8.3. Conditions to Obligations of 1 ^st Service . The obligations of 1 ^st Service to consummate the transactions contemplated by this Agreement are also subject to the satisfaction, or the waiver by 1 ^st Service, at or prior to the Effective Time of the following conditions:

(a) Representations and Warranties of SNBV and Sonabank . The representations and warranties of SNBV set forth in this Agreement shall be true and correct in all respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, provided, however, that for purposes of determining the satisfaction of this condition, no effect shall be given to any exception in such representations and warranties (other than the representation and warranty set forth in Section 5.8) relating to materiality or a Material Adverse Effect, and provided further that, for purposes of this condition, such representations and warranties (other than those set forth in Section 5.2(a) through (c), which shall be true and correct in all material respects, and Section 5.8) shall be deemed to be true and correct in all respects unless the failure or failures of such representations and warranties to be so true and correct, individually or in the aggregate, results or would reasonably be expected to result in a Material Adverse Effect on SNBV. 1 ^st Service shall have received a certificate signed on behalf of SNBV by the Chief Executive Officer and Chief Financial Officer of SNBV to the foregoing effect.

(b) Performance of Obligations of SNBV and Sonabank . SNBV shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and 1 ^st Service shall have received a certificate signed on behalf of SNBV by its Chief Executive Officer and Chief Financial Officer to the foregoing effect.

ARTICLE IX

TERMINATION AND AMENDMENT

Section 9.1. Termination . This Agreement may be terminated at any time prior to the Effective Time:

(a) by mutual consent of SNBV and 1 ^st Service in a written instrument, if the Board of Directors of each of SNBV and 1 ^st Service so determines;

(b) by SNBV or 1 ^st Service if (i) any Governmental Entity which must grant a Requisite Regulatory Approval has denied approval of the Merger or the other transactions contemplated by this Agreement and such denial has become final and nonappealable, or (ii) any Governmental Entity of competent jurisdiction shall have issued a final nonappealable order enjoining or otherwise prohibiting the consummation of the Merger or the other transactions contemplated by this Agreement;

(c) by SNBV or 1 ^st Service if the Effective Time shall not have occurred on or before April 30, 2007, unless the failure of the Effective Time to occur by such date shall be due to the failure of the Party seeking to terminate this Agreement to perform or observe the covenants and agreements of such Party set forth herein;

(d) by SNBV or 1 ^st Service (provided that the terminating Party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if in the case of SNBV, 1 ^st Service, and in the case of 1 ^st Service, SNBV, shall have breached (i) any of the covenants or agreements made by such other Party herein or (ii) any of the representations or warranties made by such other Party herein, and in either case, such breach (x) is not cured within 30 days following written notice to the Party committing such breach, or which breach, by its nature, cannot be cured prior to the Closing and (y) would entitle the non-breaching Party not to consummate the transactions contemplated hereby under Article VIII hereof;

(e) by SNBV or 1 ^st Service if the 1 ^st Service Required Vote or, if applicable, the 1 ^st Service Supplemental Required Vote shall not have been obtained upon a vote taken thereon at the 1 ^st Service Shareholders Meeting or at any adjournment or postponement thereof; or

(f) by SNBV if (i) the 1 ^st Service Board shall have failed to recommend approval of this Agreement by the shareholders of 1 ^st Service or shall have effected a Change in 1 ^st Service Recommendation (or shall have publicly disclosed its intention to do so), whether or not permitted by this Agreement, or (ii) 1 ^st Service shall have materially breached its obligations under Section 7.3(a) by failing to call, give notice of, convene and hold the 1 ^st Service Shareholders Meeting in accordance with Section 7.3(a).

Section 9.2. Effect of Termination . In the event of termination of this Agreement by SNBV or 1 ^st Service as provided in Section 9.1, this Agreement shall forthwith become void and have no effect, and no Party, any of its Subsidiaries or any of its officers or directors shall have any liability of any nature whatsoever hereunder, or in connection with the transactions contemplated hereby, except that (i) Section 7.2(b), the confidentiality obligations of Section 7.8, this Section 9.2, Section 10.2 and Section 10.7 shall survive any termination of this Agreement and (ii) notwithstanding anything to the contrary contained in this Agreement, no Party shall be relieved or released from any liabilities or damages arising out of its willful breach of any provision of this Agreement.

(b) 1 ^st Service shall pay SNBV the sum of $585,000 (the “Termination Fee”) if this Agreement is terminated as follows:

(i)

if this Agreement is terminated by SNBV pursuant to Section 9.1(f) and, within 15 months after such termination, 1 ^st Service or any of its Subsidiaries enters into a definitive agreement with respect to, or consummates, an Acquisition Proposal, then 1 ^st Service shall pay the Termination Fee to SNBV on the date of such execution or consummation; and

(ii)

if (1) this Agreement is terminated by (A) SNBV pursuant to Section 9.1(d) because of 1 ^st Service’s willful breach of any representation, warranty, covenant or agreement under this Agreement, (B) SNBV or 1 ^st Service pursuant to Section 9.1(e), or (C) SNBV or 1 ^st Service pursuant to Section 9.1(c) without a vote of the shareholders of 1 ^st Service contemplated by this Agreement at the 1 ^st Service Shareholders Meeting having occurred, and in any such case an Acquisition Proposal with respect to 1 ^st Service shall have been publicly announced or otherwise communicated or made known to the senior management or the 1 ^st Service Board (or any Person shall have publicly announced, communicated or made known an intention, whether or not conditional, to make an Acquisition Proposal) at any time after the date of this Agreement and on or prior to the date of the 1 ^st Service Shareholders Meeting, in the case of clause (B), or the date of termination, in the case of clauses (A) or (C), and (2) within 15 months after such termination, 1 ^st Service or any of its Subsidiaries enters into a definitive agreement with respect to, or consummates, an Acquisition Proposal, then 1 ^st Service shall pay the Termination Fee to SNBV on the date of such execution or consummation.

(c) Any Termination Fee or portion thereof that becomes payable pursuant to Section 9.2(b) shall be paid by wire transfer of immediately available funds to an account designated by SNBV in writing to 1 ^st Service.

(d) 1 ^st Service acknowledges that the agreement contained in paragraph (b) above is an integral part of the transactions contemplated by this Agreement, that without such agreement by 1 ^st Service, SNBV would not have entered into this Agreement, and that such amounts do not constitute a penalty. If 1 ^st Service fails to pay the amounts due under paragraph (b) above within the time periods specified in such paragraph (b), 1 ^st Service shall pay the costs and expenses (including reasonable and documented legal fees and expenses) incurred by SNBV in connection with any action, including the filing of any lawsuit, taken to collect payment of such amounts, together with interest on the amount of any such unpaid amounts at the prime lending rate prevailing during such period as published in The Wall Street Journal , calculated on a daily basis from the date such amounts were required to be paid until the date of actual payment.

(e) Notwithstanding anything to the contrary contained herein, 1 ^st Service shall be obligated, subject to the terms of this Section 9.2, to pay only one Termination Fee.

Section 9.3. Amendment . Subject to compliance with applicable law, this Agreement may be amended by the Parties, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with this Agreement by the shareholders of 1 ^st Service, provided, however, that after any such approval, no amendment shall be made which by law requires further approval by such shareholders without such further approval, and further provided that after any such approval by shareholders of 1 ^st Service, no amendment shall be made which reduces the amount or changes the form of the consideration to be delivered to the 1 ^st Service shareholders hereunder other than

as contemplated by this Agreement or which negatively impacts the intended tax treatment of the holders of 1 ^st Service Common Stock. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the Parties.

Section 9.4. Extension; Waiver . At any time prior to the Effective Time, the Parties may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other Parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a Party to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such Party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

ARTICLE IX

GENERAL PROVISIONS

Section 10.1. Nonsurvival of Representations, Warranties and Agreements . None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, except as expressly set forth herein or except for those covenants and agreements contained herein and therein which by their terms apply or are to be performed in whole or in part after the Effective Time.

Section 10.2. Expenses . All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such expense, except (a) as provided in Section 9.2 hereof and (b) that 1 ^st Service and SNBV shall share equally all costs and expenses incurred in connection with the printing and mailing of the Proxy Statement/Prospectus.

Section 10.3. Notices . All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (upon telephonic confirmation of receipt), on the first Business Day following the date of dispatch if delivered by a recognized next day courier service, or on the third Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice.

(a) if to SNBV or Sonabank, to:

Southern National Bancorp of Virginia, Inc.

1002 Wisconsin Avenue, NW

Washington, D.C. 20007

Attn: Georgia S. Derrico

Chairman of the Board

Fax: (202) 464-1134

with a copy (which shall not constitute notice) to:

Elias, Matz, Tiernan & Herrick L.L.P.

734 15 ^th Street, N.W.

Washington, D.C. 20005

Attn: Timothy B. Matz, Esq.

Fax: (202) 347-2172

(b) if to 1 ^st Service, to:

1 ^st Service Bank

6830 Old Dominion Drive

McLean, VA 22101

Attn: Ernest L. Tressler

President and Chief Executive Officer

Fax: (703) 893-7489

with a copy (which shall not constitute notice) to:

Elias, Matz, Tiernan & Herrick L.L.P.

734 15 ^th Street, N.W.

Washington, D.C. 20005

Attn: Gerard L. Hawkins, Esq.

Fax: (202) 347-2172

and

Galland, Kharasch, Greenberg, Fellman and Swirsky, P.C.

1054 31 ^st Street, Suite 200

Washington, DC 20007

Att: Keith G. Swirsky, Esq.

Fax: (202) 965-5725

Section 10.4. Interpretation . The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section references are to this Agreement unless otherwise specified. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. In this Agreement all references to “dollars” or “$” are to United States dollars. No provision of this Agreement shall be construed to require a Party or any of their respective Subsidiaries or affiliates to take any action which would violate or conflict with any applicable law (whether statutory or common), rule or regulation.

Section 10.5. Counterparts . This Agreement may be executed by facsimile and in counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.

Section 10.6. Entire Agreement . This Agreement (including the exhibits and the disclosure schedules hereto and the other documents and instruments referred to herein, including without limitation the Registration Rights Agreement and the Confidentiality Agreement) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.

Section 10.7. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the Commonwealth of Virginia (except to the extent that mandatory provisions of federal law are applicable).

Section 10.8. Severability . Any term or provision of this Agreement which is determined by a court of competent jurisdiction to be invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction, and if any provision of this Agreement is determined to be so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable, in all cases so long as neither the economic nor legal substance of the transactions contemplated hereby is affected in any manner materially adverse to any Party or its shareholders. Upon any such determination, 1 ^st Service and SNBV shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.

Section 10.9. Assignment; Third Party Beneficiaries . Neither this Agreement nor any of the rights, interests or obligations of 1 ^st Service, SNBV or Sonabank hereunder shall be assigned by 1 ^st Service, SNBV or Sonabank (whether by operation of law or otherwise) without the prior written consent of the other Parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns. This Agreement (including the documents and instruments referred to herein) is not intended to confer upon any Person other than the Parties hereto any rights or remedies hereunder other than with respect to the provisions of Section 7.3(d) and Section 7.6, which shall inure to the benefit of the directors and officers of 1 ^st Service referred to therein and their respective heirs and personal representatives, who are intended to be third-party beneficiaries thereof.

Section 10.10. Alternative Structure . Notwithstanding any provisions of this Agreement to the contrary, SNBV may at any time change the structure of the Merger, provided that in any such case no such change shall (i) alter or change the amount or kind of the Merger Consideration, (ii) adversely affect the anticipated tax consequences of the Merger to the holders of 1 ^st Service Common Stock as a result of receiving the Merger Consideration or (iii) materially impede or delay consummation of the Merger. In the event SNBV elects to make such a change, the Parties agree to execute appropriate documents to reflect the change.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their respective officers hereunto duly authorized as of the date first above written.


SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

By:		/s/ Georgia S. Derrico
Name:		Georgia S. Derrico
Title:		Chairman of the Board
		and Chief Executive Officer

SONABANK, NATIONAL ASSOCIATION

By:		/s/ Georgia S. Derrico
Name:		Georgia S. Derrico
Title:		Chairman of the Board
		and Chief Executive Officer

1 ^ST SERVICE BANK

By:		/s/ Ernest L. Tressler
Name:		Ernest L. Tressler
Title:		President and Chief Executive Officer

Exhibit 2.2

SHAREHOLDER AGREEMENT

SHAREHOLDER AGREEMENT (the “Agreement”), dated as of July 10, 2006, by and between the undersigned, a shareholder (“Shareholder”) of 1 ^st Service Bank, a federally-chartered savings bank (“1 ^st Service”), and Southern National Bancorp of Virginia, Inc., a Virginia corporation (“SNBV”). All terms used herein and not defined herein shall have the meanings assigned thereto in the Merger Agreement (defined below).

WHEREAS, SNBV, Sonabank, National Association, a wholly-owned subsidiary of SNBV (“Sonabank”) and 1 ^st Service are simultaneously entering into an Agreement and Plan of Merger, dated as of the date hereof (as may be amended from time to time pursuant to its terms, the “Merger Agreement”), pursuant to which 1 ^st Service will merge with and into Sonabank on the terms and conditions set forth therein (the “Merger”); and

WHEREAS, Annex I hereto sets forth all shares of 1 ^st Service Common Stock over which the Shareholder has voting and dispositive power, including shares that may be obtained by the exercise of 1 ^st Service Stock Options (such shares, together with all shares of 1 ^st Service Common Stock subsequently acquired by Shareholder during the term of this Agreement, being referred to as the “Shares”); and

WHEREAS, in order to induce SNBV to enter into the Merger Agreement, Shareholder, solely in such Shareholder’s capacity as a shareholder of 1 ^st Service and not in any other capacity, has agreed to enter into and perform this Agreement;

NOW, THEREFORE, for good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

1. Agreement to Vote Shares . Provided that SNBV has not failed to cure a breach of the Merger Agreement of which it has been notified by 1 ^st Service pursuant to Section 9.1(d) of the Merger Agreement within the time period specified therein, Shareholder agrees that at any meeting of the shareholders of 1 ^st Service, or in connection with any written consent of the shareholders of 1 ^st Service at which a proposal of the type set forth in clause (ii) below is presented for consideration by the shareholders of 1 ^st Service, Shareholder shall:

(i) appear at each such meeting in person or by proxy or otherwise cause the Shares to be counted as present thereat for purposes of calculating a quorum;

(ii) vote (or cause to be voted), in person or by proxy, all the Shares (whether acquired heretofore or hereafter) that are beneficially owned by Shareholder or as to which Shareholder has, directly or indirectly, the right to vote or direct the voting, (x) in favor of approval of the Merger Agreement and the Merger; (y) against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of 1 ^st Service contained in the Merger Agreement or of the Shareholder contained in this Agreement; and (z) against any Acquisition Proposal or any other action, agreement or transaction that is intended, or could reasonably be

expected, to materially impede, interfere or be inconsistent with, delay, postpone, discourage or materially and adversely affect consummation of the Merger, the Merger Agreement or this Agreement; and

(iii) vote (or cause to be voted), in person or by proxy, all the Shares (whether acquired heretofore or hereafter) that are beneficially owned by Shareholder or as to which Shareholder has, directly or indirectly, the right to vote or direct the voting, in favor of the proposal to approve any change-in-control severance benefits which may be cut back pursuant to Section 6(j) of the Employment Agreement between 1 ^st Service and Ernest L. Tressler (the “Executive”) so that such payments will be exempt from the operation of Section 280G of the Internal Revenue Code and the regulations thereunder and thus may be paid to the Executive without adverse tax consequences to 1 ^st Service and the Executive thereunder.

2. No Transfers . After the date hereof and prior to the 1 ^st Service Shareholders Meeting (as defined in the Merger Agreement), Shareholder agrees not to, directly or indirectly, sell transfer, pledge, assign or otherwise dispose of, or enter into any contract option, commitment or other arrangement or understanding with respect to the sale, transfer, pledge, assignment or other disposition of, any of the Shares if such sale, transfer, pledge, assignment or disposition could occur prior to the 1 ^st Service Shareholders Meeting, except for pledges or other transactions effected with the prior consent of SNBV and except the following transfers shall be permitted: (i) transfers by will or operation of law, in which case this Agreement shall bind the transferee, subject to applicable law, (ii) transfers pursuant to any pledge agreement, subject to the pledgee agreeing in writing to be bound by the terms of this Agreement, (iii) transfers in connection with estate and tax planning purposes, including transfers to relatives, trusts and charitable organizations, subject to the transferee agreeing in writing to be bound by the terms of this Agreement, (iv) transfers to any other shareholder of 1 ^st Service who has executed a copy of this Agreement on the date hereof with respect to some or all of the Shares held by such shareholder, and (v) such transfers as SNBV may otherwise permit in its sole discretion. Any transfer or other disposition in violation of the terms of this Section 2 shall be null and void.

3. Delivery of Shares . On the Closing Date of the Merger Agreement, Shareholder agrees that Shareholder will deliver to SNBV all of the Shares over which he has the power of disposition, duly endorsed to SNBV or Sonabank, as instructed, together with any necessary or appropriate stock powers or other documents, instruments or certificates to facilitate transfer of the record and beneficial ownership, free and clear of all Liens, regardless of any duty such Shareholder may have to others in any capacity other than as a shareholder and regardless of any change in the structure of the transaction.

4. Representations and Warranties of Shareholder . Shareholder represents and warrants to and agrees with SNBV as follows:

A. Capacity . Shareholder has all requisite capacity and authority to enter into and perform his, her or its obligations under this Agreement.

B. Binding Agreement . This Agreement has been duly executed by the Shareholder and constitutes the valid and legally binding obligation of Shareholder, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

C. Non-Contravention . The execution and delivery of this Agreement by Shareholder does not, and the performance by Shareholder of his, her or its obligations hereunder and the consummation by Shareholder of the transactions contemplated hereby will not, violate or conflict with, or constitute a default under, any agreement, instrument, contract or other obligation or any order, arbitration award, judgment or decree to which Shareholder is a party or by which Shareholder is bound, or any statute, rule or regulation to which Shareholder is subject or, in the event that Shareholder is a corporation, partnership, trust or other entity, any charter, bylaw or other organizational document of Shareholder.

D. Ownership of Shares . Shareholder (or an affiliate of shareholder) owns and has good title to all of the Shares as of the date hereof, and, except as set forth on Annex I hereto, the Shares are so owned free and clear of any liens, security interests, charges or other encumbrances. On the Closing Date, Shareholder will have an unqualified right to surrender the certificates for the Shares to SNBV as may be required by the Merger Agreement. Other than this Agreement, the Shares are not subject to any stockholders agreement, voting trust agreement, mortgage, pledge, note, indenture, guarantee, lease, license, contract, deed of trust, proxy, purchase, sale or other agreement, written or oral, relating to the voting or disposition of the Shares.

E. No Consents Required . No consents or approvals of, or waivers by, or filings or registrations with, any Governmental Entity or with any third party are required to be made or obtained by Shareholder in connection with the execution, delivery or performance by Shareholder of this Agreement or consummation of the transactions contemplated by the Agreement. legal expenses incurred by the Shareholder in connection with the actions.

5. Specific Performance and Remedies . Shareholder acknowledges that it will be impossible to measure in money the damage to SNBV if Shareholder fails to comply with the obligations imposed by this Agreement and that, in the event of any such failure, SNBV will not have an adequate remedy at law or in equity. Accordingly, Shareholder agrees that injunctive relief or other equitable remedy, in addition to remedies at law or in damages, is the appropriate remedy for any such failure and will not oppose the granting of such relief on the basis that SNBV has an adequate remedy at law. Shareholder agrees that Shareholder will not seek, and agrees to waive any requirement for, the securing or posting of a bond in connection with SNBV’s seeking or obtaining such equitable relief. In addition, SNBV shall have the right to inform any third party that SNBV reasonably

believes to be, or to be contemplating, participating with Shareholder or receiving from Shareholder assistance in violation of this Agreement, of the terms of this Agreement and of the rights of SNBV hereunder, and that participation by any such persons with Shareholder in activities in violation of Shareholder’s agreement with SNBV set forth in this Agreement may give rise to claims by SNBV against such third party.

6. Term of Agreement; Termination .

A. The term of this Agreement shall commence on the date hereof.

B. This Agreement shall terminate at the Effective Time of the Merger or the earlier of (i) at any time prior to consummation of the Merger by the written consent of the parties hereto and (ii) termination of the Merger Agreement in accordance with its terms. Upon such termination, no party shall have any further obligations or liabilities hereunder; provided, however, that such termination shall not relieve any party from liability for any willful breach of this Agreement prior to such termination.

7. Entire Agreement . This Agreement supersedes all prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof and contains the entire agreement among the parties with respect to the subject matter hereof. This Agreement may not be amended, supplemented or modified, and no provisions hereof may be modified or waived, except by an instrument in writing signed by each party hereto. No waiver of any provisions hereof by either party shall be deemed a waiver of any other provisions hereof by any such party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such party. No party hereto may assign any rights or obligations hereunder to any other person, except as permitted by Section 2 or upon the prior written consent of each other party. Nothing in this Agreement, expressed or implied, is intended to or shall confer upon any other person or entity, other than the parties hereto or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

8. Notices . Notices may be provided to SNBV and the Shareholder in the manner specified in the Merger Agreement, with all notices to the Shareholder being provided to him or her at the address set forth in Annex I hereto.

9. Miscellaneous .

A. Severability . If any provision of this Agreement or the application of such provision to any person or circumstances shall be held invalid or unenforceable by a court of competent jurisdiction, such provision or application shall be unenforceable only to the extent of such invalidity or unenforceability, and the remainder of this Agreement shall not be affected.

B. Capacity . The covenants contained herein shall apply to Shareholder solely in his or her capacity as a shareholder of 1 ^st Service, and no covenant contained herein shall apply to Shareholder in his or her capacity as a director, officer or employee of

1 ^st Service or in any other fiduciary capacity. Nothing contained in this Agreement shall be deemed to apply to, or limit in any manner, the obligations of the Shareholder to comply with his or her fiduciary duties as a director of 1 ^st Service.

C. Counterparts . This Agreement may be executed by facsimile and in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

D. Headings . All Section headings herein are for convenience of reference only and are not part of this Agreement, and no construction or reference shall be derived therefrom.

E. Choice of Law . This Agreement shall be deemed a contract made under, and for all purposes shall be construed in accordance with, the laws of the Commonwealth of Virginia, without reference to its conflicts of law principles.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first written above.


SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.:

By:		/s/ Georgia S. Derrico
Name:		Georgia S. Derrico
Title:		Chairman of the Board and
		Chief Executive Officer

SHAREHOLDER:

ANNEX I

SHAREHOLDER AGREEMENT

Name and Address of Shareholder

Shares of 1 ^st Service

Common Stock

Beneficially Owned

(exclusive of unexercised

stock options)

Options on 1 ^st Service

Common Stock

Exhibit 3.1

ARTICLES OF INCORPORATION

SOUTHERN COMMERCE BANCORP, INC.

Article 1. Name. The name of the corporation is Southern Commerce Bancorp, Inc. (hereinafter referred to as the “Corporation”).

Article 2. Duration. The period of duration of the Corporation shall be perpetual.

Article 3. Registered Office and Registered Agent. The address of the registered office of the Corporation in the Commonwealth of Virginia is 1685 Wellesley Knolles, Keswick, Virginia 22947, which is located in Albemarle County. The name of the registered agent at such address is Thomas P. Baker, who is a resident of the Commonwealth of Virginia and, upon incorporation, will be a director of the Corporation.

Article 4. Purpose of Corporation. The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Stock Corporation Act of the Commonwealth of Virginia.

Article 5. Capital Stock.

A. Total Capital Stock. The total number of shares of capital stock which the Corporation has authority to issue is 50,000,000, of which 5,000,000 shall be preferred stock, $.01 par value per share (hereinafter the “Preferred Stock”), and 45,000,000 shall be common stock, par value $.01 per share (hereinafter the “Common Stock”). Each share of Common Stock shall be entitled to one (1) vote on any matter on which stockholders are entitled to vote.

B. The Preferred Stock. The Board of Directors is hereby expressly authorized, by resolution or resolutions to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock. Before any shares of any such series are issued, the Board of Directors shall fix, and hereby is expressly empowered to fix, by resolution or resolutions, the following provisions of the shares thereof:

(a) the designation of such series, the number of shares to constitute such series and the stated value thereof if different from the par value thereof;

(b) whether the shares of such series shall have voting rights, in addition to any voting rights provided by law, and, if so, the terms of such voting rights, which may be general or limited;

(c) the dividends, if any, payable on such series, whether any such dividends shall be cumulative, and, if so, from what dates, the conditions and dates upon which such dividends shall be payable, and the preference or relation which such dividends shall bear to the dividends payable on any shares of stock of any other class or any other series of this class;

(d) whether the shares of such series shall be subject to redemption by the Corporation, and, if so, the times, prices and other conditions of such redemption;

(e) the amount or amounts payable upon shares of such series upon, and the rights of the holders of such series in, the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, or upon any distribution of the assets of the Corporation;

(f) whether the shares of such series shall be subject to the operation of a retirement or sinking fund and, if so, the extent to and manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the shares of such series for retirement or other corporate purposes and the terms and provisions relative to the operation thereof;

(g) whether the shares of such series shall be convertible into, or exchangeable for, shares of stock of any other class or any other series of this class or any other securities, and, if so, the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same, and any other terms and conditions of conversion or exchange;

(h) the limitations and restrictions, if any, to be effective while any shares of such series are outstanding upon the payment of dividends or the making of other distributions on, and upon the purchase, redemption or other acquisition by the Corporation of, the Common Stock or shares of stock of any other class or any other series of this class;

(i) the conditions or restrictions, if any, upon the creation of indebtedness of the Corporation or upon the issue of any additional stock, including additional shares of such series or of any other series of this class or of any other class; and

(j) any other powers, preferences and relative, participating, optional and other special rights, and any qualifications, limitations and restrictions thereof.

The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding. All shares of any one series of Preferred Stock shall be identical in all respects with all other shares of such series, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall accrue and/or be cumulative.

Shares of the capital stock of the Corporation may be issued from time to time as authorized by the Board of Directors without further approval of the stockholders except to the extent such approval is required by governing law, rule or regulation.

Article 6. Incorporator. The name and mailing address of the sole incorporator of the Corporation is Mr. Timothy B. Matz, 734 15 ^th Street, N.W., 12 ^th Floor, Washington, D.C. 20005.

Article 7. Preemptive Rights. No holder of the capital stock of the Corporation shall be entitled as such, as a matter of right, to subscribe for or purchase any part of any new or additional issue of stock of any class whatsoever of the Corporation, or of treasury shares, or of securities convertible into stock of any class whatsoever, whether now or hereafter authorized, or whether issued for cash or other consideration or by way of a dividend.

Article 8. Directors. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors. Except as otherwise fixed pursuant to the provisions of Article 5B. hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional directors, the number of directors shall be determined as stated in the Corporation’s Bylaws, as may be amended from time to time. The number of initial directors of the Corporation shall be one (1). The initial director of the Corporation shall be Mr. Timothy B. Matz, whose address is 734 15 ^th Street, N.W., 12 ^th Floor, Washington, D.C. 20005.

A. Term. The full Board of Directors, other than those who may be elected by the holders of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation, shall be elected annually. At each annual meeting of stockholders, directors elected to succeed those whose terms are expiring shall be elected for a term of office to expire at the next succeeding annual meeting of stockholders and until their respective successors are elected and qualified. Stockholders of the Corporation shall not be permitted to cumulate their votes for the election of directors.

B. Vacancies. Except as otherwise fixed pursuant to the provisions of Article 5B. hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors, any vacancy occurring in the Board of Directors, including any vacancy created by reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the directors then in office, whether or not a quorum is present, or by a sole remaining director, and any director so chosen shall hold office for the remainder of the term to which the director has been selected and until such director’s successor shall have been elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director.

C. Removal. Subject to the rights of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation to elect directors, any director (including persons elected by the directors to fill vacancies in the Board of Directors) may be

removed from office only with cause by an affirmative vote of not less than 75% of the shares of the Corporation entitled to vote generally in an election of directors (the “Voting Shares”) at a duly constituted meeting of stockholders called expressly for such purpose. Cause for removal shall exist only if the director whose removal is proposed has been either declared incompetent by an order of a court, convicted of a felony or of an offense punishable by imprisonment for a term of more than one year by a court of competent jurisdiction, or deemed liable by a court of competent jurisdiction for gross negligence or misconduct in the performance of such director’s duties to the Corporation. At least 30 days prior to such meeting of stockholders, written notice shall be sent to the director whose removal will be considered at the meeting.

D. Evaluation of Acquisition Proposals . The Board of Directors of the Corporation, when evaluating any offer to the Corporation or to the stockholders of the Corporation from another party to (a) purchase for cash, or exchange any securities or property for, any outstanding equity securities of the Corporation, (b) merge or consolidate the Corporation with another corporation or (c) purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation, may, consistent with the exercise of its fiduciary duties and in connection with the exercise of its judgment in determining what is in the best interest of the Corporation and its stockholders, give due consideration to the extent permitted by law not only to the price or other consideration being offered, but also to all other relevant factors including, without limitation, the financial and managerial resources and future prospects of the other party, the possible effects on the business of the Corporation and its subsidiaries and on the employees, customers, suppliers and creditors of the Corporation and its subsidiaries, the effects on the ability of the Corporation to fulfill its corporate objectives as a holding company and on the ability of its subsidiary bank to fulfill its objectives as a bank, and the effects on the communities in which the Corporation’s and its subsidiaries’ facilities are located.

Article 9. Liability of Directors and Officers. The personal liability of the directors and officers of the Corporation for monetary damages shall be eliminated to the fullest extent permitted by the Stock Corporation Act of the Commonwealth of Virginia. No amendment, modification or repeal of this Article 9 shall adversely affect the rights provided hereby with respect to any claim, issue or matter in any proceeding that is based in any respect on any alleged action or failure to act prior to such amendment, modification or repeal.

Article 10. Indemnification. The Corporation shall indemnify its directors, officers, employees, agents and former directors, officers, employees and agents, and any other persons serving at the request of the Corporation as a director, officer, employee or agent of another corporation, association, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees, judgments, fines and amounts paid in settlement) incurred in connection with any pending or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, with respect to which such director, officer, employee, agent or other person is a party, or is threatened to be made a party, to the full extent permitted by the Stock Corporation Act of the Commonwealth of Virginia. The indemnification provided herein (i) shall not be deemed exclusive of any other right to which any person seeking indemnification may be entitled under any

bylaw, agreement or vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in any other capacity, and (ii) shall inure to the benefit of the heirs, executors and administrators of any such person. The Corporation shall have the power, but shall not be obligated, to purchase and maintain insurance on behalf of any person or persons enumerated above against any liability asserted against or incurred by them or any of them arising out of their status as corporate directors, officers, employees, or agents whether or not the Corporation would have the power to indemnify them against such liability under the provisions of this Article 10.

Article 11. Special Meetings of Stockholders. Except as otherwise required by law and subject to the rights of the holders of any class or series of Preferred Stock, special meetings of the stockholders may be called only by the Chairman of the Board, by the President, by the Board of Directors pursuant to a resolution approved by the affirmative vote of at least three-fourths of the directors then in office, or by the holders of record of not less than forty percent (40%) of the then outstanding Voting Shares.

Article 12. Consent of Stockholders in Lieu of a Meeting. Any action required to be taken by the stockholders at any annual or special meeting of such stockholders, or any action which may be taken at any annual or special meeting of stockholders of this Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its principal office.

Article 13. Election By Corporation. The Corporation expressly elects not to be governed by Article 14, Section 13.1-725 et seq. (“Affiliated Transactions”) and Article 14, Section 13.1-728.1 et seq . (“Control Share Acquisitions”), both of the Stock Corporation Act of the Commonwealth of Virginia (or any successor to such statute).

Article 14. Amendment of Articles of Incorporation and Bylaws.

A. Articles of Incorporation. The Corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation, in the manner now or hereafter prescribed by law, and all rights conferred upon stockholders herein are granted subject to this reservation. Except as otherwise permitted by statute, no amendment, addition, alteration, change or repeal of these Articles of Incorporation shall be made unless it is first approved by the Board of Directors of the Corporation pursuant to a resolution adopted by the affirmative vote of a majority of the directors then in office, and is thereafter approved by the affirmative vote of a majority of the Voting Shares, voting together as a single class, as well as such additional vote of the Preferred Stock as may be required by the provisions of any series thereof.

B. Bylaws. The Board of Directors or stockholders may adopt, alter, amend or repeal the Bylaws of the Corporation. Such action by the Board of Directors shall require the affirmative vote of a majority of the directors then in office at any regular or special meeting of the Board of Directors. Such action by the stockholders shall require the affirmative vote of at least a majority of the Voting Shares, as well as such additional vote of the Preferred Stock as may be required by the provisions of any series thereof.

* * *

The undersigned, being the sole Incorporator herein before named, for the purpose of forming a corporation pursuant to the Stock Corporation Act of the Commonwealth of Virginia, does make these Articles of Incorporation, hereby declaring and certifying that this is the Incorporator’s act and deed and that the facts herein stated are true, and accordingly has caused these Articles to be signed on its behalf by the undersigned, thereunto duly authorized, on the 26 ^th day of July, 2004.


SOUTHERN COMMERCE BANCORP, INC.

By:		/s/ Timothy B. Matz
Name:		Timothy B. Matz
Title:		Incorporator

Exhibit 3.2

ARTICLES OF AMENDMENT

SOUTHERN COMMERCE BANCORP, INC.

The undersigned corporation, pursuant to Title 13.1, Chapter 9, Article 11 of the Code of Virginia, hereby executes the following articles of amendment and sets forth:

1. The name of the corporation is Southern Commerce Bancorp, Inc. (the “Corporation”).

2. Article 1 of the Corporation’s Articles of Incorporation shall be deleted in its entirety and replaced with the following:

“ Article 1. Name. The name of the corporation is “Southern National Bancorp of Virginia, Inc.” (hereinafter referred to as the “Corporation”).”

3. The foregoing amendment was adopted on January 31, 2005.

4. The foregoing amendment was adopted by the unanimous consent of the shareholders.

Executed in the name of the Corporation by:


/s/ Georgia S. Derrico				January 31, 2005
Georgia S. Derrico, Chairman of the Board and Chief Executive Officer

Corporation’s SCC Corporate ID No.: 0622658-3

Exhibit 3.3

ARTICLES OF AMENDMENT

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

The undersigned corporation, pursuant to Title 13.1. Chapter 9, Article 11 of the Code of Virginia, hereby executes the following articles of amendment and sets forth:

The name of the corporation is “Southern National Bancorp of Virginia, Inc.”

The corporation hereby amends its Articles of Incorporation as follows:

RESOLVED , that the Articles of Incorporation shall be amended by deleting the last two sentences of the first paragraph of Article 8 and by deleting Article 8.A. in their entirety and inserting a new Article 8.A. as follows:

Commencing with the 2006 annual meeting of stockholders, the directors shall be divided, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, with the term of office of the first class, which will consist of Robin R. Shield and R. Roderick Porter, to expire at the 2007 annual meeting of stockholders, the term of office of the second class, which will consist of Michael A. Gaffney and John J. Forch, to expire at the 2008 annual meeting of stockholders, and the term of office of the third class, which will consist of Neil J. Call, Georgia S. Derrico and Charles A. Kabbash, to expire at the 2009 annual meeting of stockholders, with each director to hold office until his successor shall have been duly elected and qualified. At each annual meeting of stockholders commencing with the 2007 annual meeting of stockholders, directors elected to succeed those directors whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his successor shall have been duly elected and qualified. Stockholders of the Corporation shall not be permitted to cumulate their votes for the election of directors.

The forgoing amendment was adopted on April 13, 2006.

4. The amendment was proposed by the board of directors and submitted to the shareholders in accordance with the provisions of Chapter 9 of Title 13.1 of the Code of Virginia, and:

(a) The designation, number of outstanding shares, and number of votes entitled to be cast by each voting group entitled to vote separately on the amendment(s) were:


Designation	Number of outstanding shares	Number of votes
Common Stock	3,500,000	3,500,000

(b) The total number of votes cast for and against the amendment by each voting group entitled to vote separately on the amendment was:


Voting group	Total votes *FOR*	Total votes *AGAINST*
Common Stock	2,133,000	479,500

Executed in the name of the corporation by:


/s/ Georgia S. Derrico		April 13, 2006
(Signature)		(Date)

		Chairman of the Board and Chief
Georgia S. Derrico		Executive Officer
(Printed Name)		(Title)

0622658		(540) 347-4521
(Corporation’s SCC ID #)		(Telephone No.)

Exhibit 3.4

AMENDED AND RESTATED

BY LAWS

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

TABLE OF CONTENTS


			Page
ARTICLE I. OFFICES			1

	1.1	Registered Office and Registered Agent	1
	1.2	Other Offices	1

ARTICLE II. STOCKHOLDERS’ MEETING			1

	2.1	Meeting Place	1
	2.2	Annual Meeting	1
	2.3	Organization	1
	2.4	Special Meetings	2
	2.5	Notice	2
	2.6	Record List of Stockholders	2
	2.7	Quorum; Actions of Stockholders	2
	2.8	Voting of Shares	3
	2.9	Closing of Transfer Books and Fixing of the Record Date	3
	2.10	Proxies	3
	2.11	Waiver of Notice	3
	2.12	Voting Shares in the Name of Two or More Persons	3
	2.13	Voting of Shares by Certain Holders	4
	2.14	Inspectors	4
	2.15	Consent of Stockholders in Lieu of a Meeting	5

ARTICLE III. CAPITAL STOCK			5

	3.1	Certificates	5
	3.2	Transfers	5
	3.3	Registered Owner	6
	3.4	Lost, Stolen or Destroyed Certificates	6
	3.5	Fractional Shares or Scrip	6
	3.6	Shares of Another Corporation	6

ARTICLE IV. BOARD OF DIRECTORS			6

	4.1	Powers	6
	4.2	Classification, Term and Qualifications	6
	4.3	Number of Directors	7
	4.4	Vacancies	7
	4.5	Removal of Directors	7
	4.6	Regular Meetings	7

- i -


4.7 Special Meetings		7
4.8 Waiver of Notice		7
4.9 Quorum; Actions of the Board of Directors		8
4.10 Action by Directors Without a Meeting		8
4.11 Action by Directors by Communications Equipment		8
4.12 Registering Dissent		8
4.13 Executive and Other Committees		8
4.14 Remuneration		9

ARTICLE V. OFFICERS		9

5.1 Designations		9
5.2 Powers and Duties		9
5.3 Delegation		9
5.4 Vacancies		9
5.5 Term – Removal		9
5.6 Bonds		10

ARTICLE VI. INDEMNIFICATION, ETC. OF DIRECTORS, OFFICERS, AND EMPLOYEES		10

6.1 Indemnification		10
6.2 Advancement of Expenses		10
6.3 Other Rights and Remedies		10
6.4 Insurance		10
6.5 Modification		11

ARTICLE VII. DIVIDENDS; FINANCE; AND FISCAL YEAR		11

7.1 Dividends		11
7.2 Disbursements		11
7.3 Depositories		11
7.4 Fiscal Year		11

ARTICLE VIII. NOTICES		11

ARTICLE IX. SEAL		12

ARTICLE X. BOOKS AND RECORDS		12

ARTICLE XI. AMENDMENTS		12

ARTICLE XII. USE OF PRONOUNS		12

SIGNATURES		12

- ii -

AMENDED AND RESTATED

BYLAWS

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

ARTICLE I. OFFICES

1.1 Registered Office and Registered Agent . The registered office of Southern National Bancorp of Virginia, Inc. (“Corporation”) shall be located in the Commonwealth of Virginia at such place as may be fixed from time to time by the Board of Directors upon filing of such notices as may be required by law, and the registered agent, who is either a resident of this state and a director or officer of the Corporation, or a member of the Virginia State Bar, shall have a business office identical with such registered office.

1.2 Other Offices . The Corporation may have other offices within or without the Commonwealth of Virginia at such place or places as the Board of Directors may from time to time determine.

ARTICLE II. STOCKHOLDERS’ MEETINGS

2.1 Meeting Place . All meetings of the stockholders shall be held at the principal place of business of the Corporation, or at such other place within or without the Commonwealth of Virginia as shall be determined from time to time by the Board of Directors, and the place at which any such meeting shall be held shall be stated in the notice of the meeting. Any meeting of stockholders may be held by means of remote communications pursuant to the requirements of Section 2.24 of the Stock Corporation Act of the Commonwealth of Virginia (the “SCA”) or any successor statute.

2.2 Annual Meeting . The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year on the third Wednesday of May of each year, or on such other date and time as determined by the Board of Directors and stated in the notice of such meeting.

2.3 Organization . Each meeting of the stockholders shall be presided over by the Chairman of the Board, or in his absence by the President, or in their absences, any other individual selected by the Board of Directors. The Secretary, or in his absence a temporary Secretary, shall act as secretary of each meeting of the stockholders. In the absence of the Secretary and any temporary Secretary, the chairman of the meeting may appoint any person present to act as secretary of the meeting. The chairman of any meeting of the stockholders shall announce the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting and, unless prescribed by law or regulation or unless the Board of Directors has otherwise determined, shall determine the order of the business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussions as seem to him in order.

2.4 Special Meetings . Special meetings of stockholders may be called as set forth in the Articles of Incorporation.

2.5 Notice .

(a) Notice of the date, time and place, if any, of the annual meeting of stockholders and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, shall be given by delivering personally, or by mailing a written notice of the same, not less than ten days and not more than sixty days prior to the date of the meeting (except that a notice of a stockholders meeting to act on an amendment of the Articles of Incorporation, plan of merger, share exchange, domestication or entity conversion, a sale of assets or dissolution (an “Extraordinary Event”) shall be given not less than twenty five nor more than sixty days prior to the meeting date), to each stockholder of record entitled to vote at such meeting. When any stockholders’ meeting, either annual or special, is adjourned for thirty days or more, or if a new record date is fixed for an adjourned meeting of stockholders, notice of the adjourned meeting shall be given as in the case of an original meeting. It shall not be necessary to give any notice of the time and place of any meeting adjourned for less than thirty days (unless a new record date is fixed therefor), other than an announcement at the meeting at which such adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting.

(b) Not less than ten days and not more than sixty days prior to the meeting (and not less than twenty five and not more than sixty days in the case of an Extraordinary Event), a written notice of each special meeting of stockholders, stating the place, day and hour of such meeting, and the purpose or purposes for which the meeting is called, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, shall be either delivered personally, or mailed to each stockholder of record entitled to vote at such meeting.

2.6 Record List of Stockholders . At least ten days before each meeting of stockholders, a complete record of the stockholders entitled to vote at such meeting, or any adjournment thereof, shall be made, arranged in alphabetical order, with the address of and number of shares registered in the name of each, arranged by voting group, and within each voting group by class or series of shares, in written form, which record shall be kept open to the inspection of any stockholder in accordance with the SCA. The record also shall be kept open during the whole time and at the place of such meeting for the inspection of any stockholder.

2.7 Quorum; Actions of Stockholders . Except as otherwise required by law or the Corporation’s Articles of Incorporation:

(a) A quorum at any annual or special meeting of stockholders shall consist of stockholders representing, either in person or by proxy, a majority of the outstanding capital stock of the Corporation entitled to vote at such meeting.

(b) In all matters other than the election of directors, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on that matter shall be the act of the stockholders. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. If, at any meeting of the stockholders, due to a vacancy or vacancies or otherwise, directors of more than one class of the Board of Directors are to be elected, each class of directors to be elected at the meeting shall be elected in a separate election by a plurality vote. Cumulative voting shall not be permitted in the election of directors.

2.8 Voting of Shares . Except as otherwise provided in these Bylaws or to the extent that voting rights of the shares of any class or classes are limited or denied by the Articles of Incorporation, each stockholder, on each matter submitted to a vote at a meeting of stockholders, shall have one vote for each share of stock registered in his name on the books of the Corporation.

2.9 Closing of Transfer Books and Fixing of the Record Date . For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or entitled to receive payment of any dividend, the Board of Directors may provide that the stock transfer books shall be closed for a stated period not to exceed 70 days nor less than ten days preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a record date for any such determination of stockholders, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than seventy days and, in case of a meeting of stockholders, not less than ten days prior to the date on which the particular action requiring such determination of stockholders is to be taken.

2.10 Proxies . A stockholder may vote either in person or by proxy executed in writing by the stockholder or his duly authorized attorney-in-fact, or by electronic transmission. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy.

2.11 Waiver of Notice . A waiver of any notice required to be given any stockholder, signed by the person or persons entitled to such notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein for the meeting, shall be equivalent to the giving of such notice. The attendance of any stockholder at a meeting, in person or by proxy, shall constitute a waiver of notice by such stockholder, except where a stockholder attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or commenced.

2.12 Voting of Shares in the Name of Two or More Persons . When ownership stands in the name of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary of the Corporation is given written

notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, at any meeting of the stockholders of the Corporation any one or more of such stockholders may cast, in person or by proxy, all votes to which such ownership is entitled. In the event an attempt is made to cast conflicting votes, in person or by proxy, by the several persons in whose names shares of stock stand, the vote or votes to which those persons are entitled shall be cast as directed by a majority of those holding such stock and present in person or by proxy at such meeting, but no votes shall be cast for such stock if a majority cannot agree.

2.13 Voting of Shares by Certain Holders . Shares standing in the name of another corporation may be voted by an officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority to do so is contained in an appropriate order of the court or other public authority by which such receiver was appointed. A stockholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

2.14 Inspectors . For each meeting of stockholders, the Board of Directors shall appoint one or more inspectors of election, who shall make a written report of such meeting. If for any meeting the inspector(s) appointed by the Board of Directors shall be unable to act or the Board of Directors shall fail to appoint any inspector, one or more inspectors shall be appointed at the meeting by the chairman thereof. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath to faithfully execute the duties of inspector with strict impartiality and according to the best of his ability. An inspector or inspectors shall (a) ascertain the number of shares outstanding and the voting power of each, (b) determine the shares represented at a meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, (e) certify their determination of the number of shares represented at the meeting and their count of all votes and ballots, and (f) perform such other duties as are permitted by the SCA. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the chairman thereof. An inspector or inspectors shall not accept a ballot, proxy or vote, nor any revocations thereof or changes thereto, after the closing of the polls (unless a court having jurisdiction in the Commonwealth of Virginia upon application by a stockholder shall determine otherwise) and may appoint or retain other persons or entities to assist them in the performance of their duties. Inspectors need not be stockholders and may not be nominees for election as directors.

2.15 Consent of Stockholders in Lieu of a Meeting . Any action required to be taken by the stockholders at any annual or special meeting of such stockholders, or any action which may be taken at any annual or special meeting of stockholders of this Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its principal office or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.

ARTICLE III. CAPITAL STOCK

3.1 Certificates . Certificates of stock shall be issued in numerical order, and each stockholder shall be entitled to a certificate signed by the Chairman of the Board or the President, and the Secretary or the Treasurer, and may be sealed with the seal of the Corporation or facsimile thereof. The signatures of such officers may be facsimiles if the certificate is manually signed on behalf of a transfer agent, or registered by a registrar, other than the Corporation itself or an employee of the Corporation. If an officer who has signed or whose facsimile signature has been placed upon such certificate ceases to be an officer before the certificate is issued, it may be issued by the Corporation with the same effect as if the person were an officer on the date of issue. Each certificate of stock shall state: (a) the name of the Corporation and that the Corporation is organized under the laws of the Commonwealth of Virginia; (b) the name of the person to whom issued; and (c) the number and class of shares and the designation of the series, if any, which such certificate represents.

3.2 Transfers .

(a) Transfers of stock shall be made only upon the stock transfer books of the Corporation, kept at the registered office of the Corporation or at its principal place of business, or at the office of its transfer agent or registrar, and before a new certificate is issued the old certificate shall be surrendered for cancellation. The Board of Directors may, by resolution, open a share register in any state of the United States, and may employ an agent or agents to keep such register, and to record transfers of shares therein.

(b) Shares of stock shall be transferred by delivery of the certificates therefor, accompanied either by an assignment in writing on the back of the certificate or an assignment separate from the certificate, or by a written power of attorney to sell, assign and transfer the same, signed by the holder of said certificate. No shares of stock shall be transferred on the books of the Corporation until the outstanding certificates therefor have been surrendered to the Corporation.

(c) A written restriction on the transfer or registration of transfer of a certificate evidencing stock of the Corporation, if permitted by the SCA and noted conspicuously on such certificate, may be enforced against the holder of the restricted certificate or any successor or transferee of the holder, including an executor, administrator, trustee, guardian or other fiduciary entrusted with like responsibility for the person or estate of the holder.

3.3 Registered Owner . Registered stockholders shall be treated by the Corporation as the holders in fact of the stock standing in their respective names and the Corporation shall not be bound to recognize any equitable or other claim to or interest in any share on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided by the laws of the Commonwealth of Virginia.

3.4 Lost, Stolen or Destroyed Certificates . The Corporation may issue a new certificate of stock in place of any certificate previously issued by it which is alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

3.5 Fractional Shares or Scrip . The Corporation may (a) issue fractions of a share which shall entitle the holder to exercise voting rights, to receive dividends thereon and to participate in any of the assets of the Corporation in the event of liquidation; (b) arrange for the disposition of fractional interests by those entitled thereto; (c) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such shares are determined; or (d) issue scrip in registered form which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip aggregating a full share.

3.6 Shares of Another Corporation . Shares owned by the Corporation in another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the Board of Directors may determine or, in the absence of such determination, by the President of the Corporation.

ARTICLE IV. BOARD OF DIRECTORS

4.1 Powers . The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors, which may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by law, the Articles of Incorporation or these Bylaws directed or required to be exercised or done by the stockholders.

4.2 Classification, Term and Qualifications . The Board of Directors shall be of a single class which will be elected annually. No person shall be eligible for election, reelection, appointment or reappointment to the Board of Directors if such person is 75 years of age or older; provided, however, that any person serving as an initial director of the Corporation shall be eligible for reelection subsequent to his or her 75th birthday.

4.3 Number of Directors . The Board of Directors shall consist of seven persons. The number of directors may at any time be increased or decreased by a vote of a majority of the Board of Directors, provided that no decrease shall have the effect of shortening the term of any incumbent director. Notwithstanding anything to the contrary contained within these Bylaws, except for the initial director, the number of directors may not be less than five nor more than 15.

4.4 Vacancies . All vacancies in the Board of Directors shall be filled in the manner provided in the Corporation’s Articles of Incorporation.

4.5 Removal of Directors . Directors may be removed in the manner provided in the Corporation’s Articles of Incorporation.

4.6 Regular Meetings . Regular meetings of the Board of Directors or any committee thereof may be held without notice at the principal place of business of the Corporation or at such other place or places, either within or without the Commonwealth of Virginia, as the Board of Directors or such committee, as the case may be, may from time to time designate. Unless otherwise determined by the Board of Directors, the annual meeting of the Board of Directors shall be held without notice immediately after the adjournment of the annual meeting of stockholders. Notice of such meetings shall be provided to directors in accordance with the provisions of the SCA.

4.7 Special Meetings .

(a) Special meetings of the Board of Directors may be called at any time by the Chairman of the Board, the President or by a majority of the authorized number of directors, to be held at the principal place of business of the Corporation or at such other place or places as the Board of Directors or the person or persons calling such meeting may from time to time designate. Notice of all special meetings of the Board of Directors shall be given to each director at least twenty-four (24) hours prior to such meeting if notice is given in person or by telephone, telegraph, telex, facsimile or other electronic transmission and at least three (3) days prior to such meeting if notice is given in writing and delivered by postage prepaid mail. Such notice need not specify the business to be transacted at, nor the purpose of, the meeting.

(b) Special meetings of any committee of the Board of Directors may be called at any time by any committee member or by the Chairman of the Board, and with such notice as shall be specified for such committee by the Board of Directors, or in the absence of such specification, in the manner and with the notice required for special meetings of the Board of Directors.

4.8 Waiver of Notice . Attendance of a director at a regular or special meeting of the Board or of a committee thereof, shall constitute a waiver of notice of such meeting, except where a director attends for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. A waiver of notice signed by the director or directors, whether before or after the time stated for the regular or special meeting of the Board or of a committee thereof, shall be equivalent to the giving of notice.

4.9 Quorum; Actions of the Board of Directors . Except as may be otherwise specifically provided by law, the Articles of Incorporation or these Bylaws, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

4.10 Action by Directors Without a Meeting . Any action required or which may be taken at a meeting of the directors, or of a committee thereof, may be taken without a meeting if a consent in writing or by electronic transmission, setting forth the action so taken or to be taken, shall be signed by all of the directors, or all of the members of the committee, as the case may be, and such consents or electronic transmissions (in paper form) are filed with the minutes of proceedings of the Board of Directors or committee, as the case may be. Such consent shall have the same effect as a unanimous vote.

4.11 Action by Directors by Communications Equipment . Any action required or which may be taken at a meeting of directors, or of a committee thereof, may be taken by means of a conference telephone or similar communications equipment subject to any applicable provisions of the SCA.

4.12 Registering Dissent . A director who is present at a meeting of the Board of Directors at which action on a corporate matter is taken shall be presumed to have assented to such action unless he objects at the beginning of the meeting, or promptly upon his arrival, to the holding of the meeting, or promptly upon his arrival, to holding it or transacting specified business at the meeting or he votes against or abstains from action taken at the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.

4.13 Executive and Other Committees . The Board of Directors may, by resolution passed by a majority of the full Board, designate one or more committees which in each case consist of one or more directors of the Corporation, and may from time to time invest such committees with such powers as it may see fit, subject to such conditions as may be prescribed by the Board. An Executive Committee may be appointed by resolution passed by a majority of the full Board of Directors. It shall have and exercise all of the authority of the Board of Directors, except in reference to approving or recommending to stockholders action that is required by the SCA to be approved by the stockholders, amending the Articles of Incorporation, adopting a plan of merger not requiring stockholder approval, authorizing a distribution except according to a general formula or method prescribed by the Board of Directors, filling vacancies on the Board or any committee, authorizing or approving the issuance or sale or contract for sale of shares, or determining the designation and relative rights, preferences and limitations of a class or series of shares unless

within limits specifically prescribed by the Board, or adopting, amending or repealing any Bylaws or any other action or matter expressly required by the SCA to be submitted to stockholders for approval. The designation of any such committee, and the delegation of authority thereto, shall not relieve the Board of Directors, or any member thereof, of any responsibility imposed by law.

4.14 Remuneration . The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors, a stated salary as director and/or such other compensation as may be fixed by the Board of Directors. Members of special or standing committees may be allowed like compensation for serving on committees of the Board of Directors. No such payments shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.

ARTICLE V. OFFICERS

5.1 Designations . The officers of the Corporation shall be a Chairman of the Board, a Vice Chairman of the Board, a President, a Secretary and a Treasurer appointed by the Board of Directors, as well as such Executive Vice Presidents, Vice Presidents, Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other officers as the Board of Directors or the Chairman of the Board and President may designate. Officers of the Corporation shall be elected for one year by the directors at their first meeting after the annual meeting of stockholders, and officers of the Corporation shall hold office until their successors are elected and qualified. Any two or more offices may be held by the same person, except the offices of President and Secretary.

5.2 Powers and Duties . The officers of the Corporation shall have such authority and perform such duties as the Board of Directors or, in the case of officers with a title of Executive Vice President or lower, the Chairman of the Board and President, may from time to time authorize or determine. In the absence of action by the Board of Directors or the Chairman of the Board and President, as applicable, the officers shall have such powers and duties as generally pertain to their respective offices.

5.3 Delegation . In the case of absence or inability to act of any officer of the Corporation and of any person herein authorized to act in his place, the Board of Directors may from time to time delegate the powers or duties of such officer to any other officer or any director or other person whom it may select.

5.4 Vacancies . Vacancies in any office arising from any cause may be filled by the Board of Directors at any regular or special meeting of the Board.

5.5 Term - Removal . The officers of the Corporation shall hold office until their successors are chosen and qualified. Any officer or agent elected or appointed by the Board of Directors or by the Chairman and the President may be removed at any time, with or without cause, by the affirmative vote of a majority of the Board of Directors, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.

5.6 Bonds . The Board of Directors may, by resolution, require any and all of the officers to give bonds to the Corporation, with sufficient surety or sureties, conditions for the faithful performance of the duties of their respective offices, and to comply with such other conditions as may from time to time be required by the Board of Directors.

ARTICLE VI. INDEMNIFICATION, ETC. OF DIRECTORS,

OFFICERS AND EMPLOYEES

6.1 Indemnification . The Corporation shall provide indemnification to its directors, officers, employees, agents and former directors, officers, employees and agents and to others in accordance with the Corporation’s Articles of Incorporation.

6.2 Advancement of Expenses . Reasonable expenses (including attorneys’ fees) incurred by a director, officer or employee of the Corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding described in Section 6.1 may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors only upon receipt of an affirmation by the person that it is his good faith belief that he has met the standard of conduct necessary for indemnification and an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that the person is not entitled to be indemnified by the Corporation, and the Board determines that the facts then known to the Board (or others making the decision to indemnify) would not preclude indemnification under Article 10 of the SCA (or any successor statute).

6.3 Other Rights and Remedies . The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Corporation’s Articles of Incorporation, any agreement, vote of stockholders or disinterested directors or otherwise, both as to actions in their official capacity and as to actions in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer or employee and shall inure to the benefit of the heirs, executors and administrators of such person.

6.4 Insurance . Upon resolution passed by the Board of Directors, the Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer of employee of the Corporation, or is or was serving at the request of the corporation as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him or incurred by him in any such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of its Articles of Incorporation or this Article VI.

6.5 Modification . The duties of the Corporation to indemnify and to advance expenses to a director, officer or employee provided in this Article VI shall be in the nature of a contract between the Corporation and each such person, and no amendment or repeal of any provision of this Article VI shall alter, to the detriment of such person, the right of such person to the advance of expenses or indemnification related to a claim based on an act or failure to act which took place prior to such amendment or repeal.

ARTICLE VII. DIVIDENDS; FINANCE; AND FISCAL YEAR

7.1 Dividends . Subject to the applicable provisions of the SCA, dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in property or in shares of the capital stock of the Corporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, may deem proper as a reserve or reserves to meet contingencies, or for dividends, or for repairing or maintaining any property of the Corporation, or for any other proper purpose, and the Board of Directors may modify or abolish any such reserve.

7.2 Disbursements . All checks or demand for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

7.3 Depositories . The monies of the Corporation shall be deposited in the name of the Corporation in such bank or banks or trust company or trust companies as the Board of Directors shall designate, and shall be drawn out by wire transfer, check or other order for payment of money signed by such persons, or in any other such manner as may be determined by resolution of the Board of Directors.

7.4 Fiscal Year . The fiscal year of the Corporation shall end on the 31st day of December of each year.

ARTICLE VIII. NOTICES

Except as may otherwise be required by law, any notice to any stockholder or director may be delivered personally, by mail or by means of electronic transmission. If mailed, the notice shall be deemed to have been delivered when deposited in the United States mail, addressed to the addressee at his last known address in the records of the Corporation, with postage thereon prepaid. If by means of electronic transmission, notice shall be effective if given by the form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (i) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (ii) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or the transfer agent or other person responsible for the giving of notice; provided, however, that the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

ARTICLE IX. SEAL

The corporate seal of the Corporation shall be in such form and bear such inscription as may be adopted by resolution of the Board of Directors.

ARTICLE X. BOOKS AND RECORDS

The Corporation shall keep correct and complete books and records of account and shall keep minutes of meetings and proceedings of its stockholders and Board of Directors (including committees thereof); and it shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its stockholders, giving the names and addresses of all stockholders and the number and class of the shares held by each. Any books, records and minutes may be in written form or any other form capable of being converted into written form within a reasonable time.

ARTICLE XI. AMENDMENTS

These Bylaws may be altered, amended or repealed only as set forth in the Corporation’s Articles of Incorporation, which provisions are incorporated herein with the same effect as if they were set forth herein.

ARTICLE XII. USE OF PRONOUNS

Use of the masculine gender in these Bylaws shall be considered to represent either masculine or feminine gender whenever appropriate.

These amended and restated Bylaws have been approved and adopted by the Board of Directors this 10 ^th day of March, 2005:


SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

By:		/s/ R. Devon Porter
Name:		R. Devon Porter
Title:		Secretary

Exhibit 4.1

[SEE LEGENDS ON REVERSE SIDE]


								SEE REVERSE FOR
								CERTAIN
								DEFINITIONS

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

COMMON STOCK

INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF VIRGINIA

THIS CERTIFIES THAT is the owner of FULLY PAID AND NON ASSESSABLE SHARES OF COMMON STOCK OF $0.01 PAR VALUE EACH OF SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC., transferable on the books of the Corporation in person or by attorney upon surrender of this certificate duly endorsed or assigned. This certificate and the shares represented hereby are subject to the laws of the Commonwealth of Virginia, and to the Articles of Incorporation and Bylaws of the Corporation, as now or hereafter amended. The capital stock evidenced by this certificate is not an account of an insurable type and is not insured by the Federal Deposit Insurance Corporation.


		WITNESS the facsimile seal of the Corporation and the signatures of its duly authorized officers.
		Dated: April 14, 2005
		/s/ Georgia S. Derrico		/s/ R. Devon Porter
		Georgia S. Derrico		R. Devon Porter
		Chairman of the Board		Secretary

SOUTHERN NATIONAL

BANCORP OF VIRGINIA, INC.

April 14, 2005

THE SHARES OF COMMON STOCK REPRESENTED BY THIS STOCK CERTIFICATE HAVE BEEN ISSUED PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF FEDERAL AND STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED WITHOUT REGISTRATION OR PURSUANT TO AN APPLICABLE EXEMPTION THEREFROM.

Southern National Bancorp of Virginia, Inc.

Charlottesville, Virginia

Common Stock, $0.01 Par Value Per Share

The shares represented by this Stock Certificate are subject to limitations and restrictions as set forth in the Articles of Incorporation of the Corporation which is on file in the office of the State Corporation Commission of the Commonwealth of Virginia, and the Bylaws of the Corporation, which are on file with the Secretary of the Corporation. The Corporation will furnish to any stockholder upon request and without charge a full statement of the designations, preferences, limitations and relative rights of the shares of each class authorized to be issued. In particular, the Articles of Incorporation deny preemptive rights to shareholders to acquire unissued or treasury shares of the Corporation.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM - as tenants in common

TEN ENT - as tenants by the entireties

JT TEN as joint tenants with right of survivorship and not

tenants in common

UNIF GIFT MIN ACT -

. . . . . Custodian . . . . . . . .under Uniform Gifts

(Cust) (Minor)

to Minors Act. . . . . . . . . . . . . . . . . . . . . . . . .

(State)

Additional abbreviations may also be used though not in the above list.

Exhibit 4.2

WARRANT AGREEMENT

This Warrant Agreement (“Agreement”) is entered into as of this 21 ^st day of October 2004 by Southern Commerce Bancorp, Inc. a Virginia corporation (the “Company”), in favor of the organizers, directors and initial investors listed on Exhibit A (each, a “Warrant Holder”), in accordance with the terms and subject to the conditions set forth in this Agreement.

WHEREAS , the Warrant Holders have advanced to the Company funds to cover the expenses incurred in connection with the organization of the Company and its to-be-formed subsidiary, Southern Commerce National Bank (the “Bank”);

WHEREAS, in the event that the Bank does not open, the Warrant Holders will bear the risk of loss with respect to such advances;

WHEREAS, the Warrant Holders have also expended a significant amount of time, effort and financial resources in connection with the organization of the Company and the Bank; and

WHEREAS, in recognition of the financial risks undertaken as well as their efforts in organizing the Company and the Bank, the Company desires to grant to each Warrant Holder warrants to purchase shares of common stock of the Company (each, a “Warrant” and, collectively, the “Warrants”) in the amounts set forth herein.

NOW, THEREFORE, in consideration of the foregoing and the agreements hereinafter set forth, the receipt and sufficiency of which are hereby acknowledged, the Company and, by acceptance of a Warrant, each Warrant Holder agree as follows:

1. Grant of Warrants. Subject to the terms, restrictions, limitations and conditions stated in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the Company hereby grants to each Warrant Holder the number of Warrants set forth beside his name on Exhibit A. Each Warrant initially shall be exercisable for one fully paid and nonassessable share of common stock, par value $.10 per share, of the Company (“Share”), subject to adjustment as provided in Section 12 of this Agreement. The Warrant Holders and all subsequent registered holders of the Warrants shall have the rights and obligations set forth in this Agreement.

2. Warrant Certificates. Each Warrant shall be evidenced by a warrant certificate, which shall be substantially in the form attached to this Agreement as Exhibit B (“Warrant Certificate”). Each Warrant Certificate shall have such marks of identification or designation and such legends or endorsements thereon as the Company deems appropriate, so long as they are not inconsistent with the provisions of this Agreement, or as are required to comply with any applicable law, rule or regulation applicable to the Company or the Shares. The Warrant Certificates shall be executed on behalf of the Company by the manual, facsimile or imprinted signature of its Chairman of the Board, its President or any vice president and shall be attested by the manual, facsimile or imprinted signature its Secretary or any assistant secretary.

3. Term of Warrants.

(a) The term for the exercise of the Warrants shall begin on the date that the Bank opens for business (the “Issue Date”). The term for the exercise of the Warrants shall expire at 5:00 p.m., Eastern Time on the earlier to occur of (i) the tenth anniversary of the Issue Date, or (ii) the date provided in Section 3(b) of this Agreement (the “Expiration Time”).

(b) Notwithstanding any provision of this Agreement or any Warrant Certificate to the contrary, the Warrants shall expire, to the extent not exercised, within 45 days following the receipt of notice from the Bank’s primary federal regulator (“Regulator”) that (i) the Bank has not maintained its minimum capital requirements (as determined by the Regulator); and (ii) the Regulator is requiring exercise or forfeiture of warrants. Upon receipt of such notice from the Regulator, the Company shall promptly notify each Warrant Holder that he must exercise the Warrants granted to him prior to the end of the 45-day period or such earlier period as may be specified by the Regulator or forfeit such Warrant(s). In case of forfeiture, no Warrant Holder shall have any cause of action, of any kind or nature, against the Company, the Bank or any of their respective officers or directors with respect to the forfeiture. In addition, the Company shall not be liable to any Warrant Holder due to the failure or inability of the Company to provide adequate notice to the Warrant Holder.

4. Exercise of Warrants. The purchase price per Share to be paid by a Warrant Holder for Shares subject to the Warrants shall be $10.00, subject to adjustment as set forth in Section 12 of this Agreement (the “Exercise Price”). A Warrant Holder may exercise Warrants evidenced by a Warrant Certificate in whole or in part at any time prior to the Expiration Time by delivering to the secretary of the Company (i) the Warrant Certificate; (ii) a written notice to the Company specifying the number of Shares with respect to which Warrants are being exercised; and (iii) a check for the full amount of the aggregate Exercise Price of the Shares being acquired.

5. Delivery of Shares; Partial Exercise. Upon receipt of the items set forth in Section 4, and subject to the terms of this Agreement, the Company shall promptly deliver to, and register in the name of, the Warrant Holder a certificate or certificates representing the number of Shares acquired by exercise of a Warrant. In the event of a partial exercise of Warrant(s), a new Warrant Certificate evidencing the number of Shares that remain subject to the Warrant shall be issued by the Company to such Warrant Holder or to his duly authorized assigns.

6. Restrictions on Transferability. The Warrants and the Shares issuable thereunder have not been registered for sale under the Securities Act of 1933 or registered or qualified under the securities laws of any state, in reliance upon available exemptions from such registration and qualification requirements. Therefore, the Warrants and the Shares cannot be transferred or sold unless they are subsequently registered and/or qualified, or there are available exemptions from such registration and/or qualification requirements. A restrictive legend will be placed on all Warrant Certificates and Shares issued upon exercise of Warrants to ensure the effectiveness of these restrictions The Company reserves the right to require an opinion, satisfactory to the Company, of legal counsel satisfactory to it regarding the availability of exemptions in connection with any sale or transfer of the Warrants or Shares.

7. Registration of Transfer and Exchange.

(a) The Company shall keep, or cause to be kept, at its principal place of business or at such other location designated by the Company, a register or registers in which, subject to such reasonable regulations as the Company may prescribe, the registrar and transfer agent for the Shares (the “Securities Registrar”) shall register the Warrant Certificates and the transfers thereof as provided herein. The initial Securities Registrar shall be the Company or the Bank, and thereafter, the Securities Registrar may be removed and/or appointed as authorized by the Company.

(b) Upon surrender for registration of transfer of any Warrant Certificate, the Company shall issue and deliver to the Warrant Holder or his duly authorized assigns, one or more new Warrant Certificates of like tenor and in like aggregate amount.

(c) At the option of the Warrant Holder, Warrant Certificates may be exchanged for other Warrant Certificates of like tenor and in like aggregate amount upon surrender of the Warrant Certificates to be exchanged. Upon such surrender, the Company shall issue and deliver to the Warrant Holder or his duly authorized assigns, one or more new Warrant Certificates of like tenor and in like aggregate amount.

(d) Every Warrant Certificate presented or surrendered for registration of transfer or exchange shall be accompanied (if so required by the Company or the Securities Registrar) by a written instrument or instruments of transfer, in form satisfactory to the Company or the Securities Registrar, duly executed by the registered Warrant Holder or by such Warrant Holder’s duly authorized attorney in writing.

8. Replacement of Warrant Certificates.

(a) Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of a Warrant Certificate and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, surrender and cancellation of such Warrant Certificate, the Company shall issue and deliver to the Warrant Holder or his duly authorized assigns, one or more new Warrant Certificates of like tenor and in like aggregate amount. In the case of loss, theft or destruction of a Warrant Certificate, prior to the issuance of a replacement Warrant Certificate, the Company may also require that a bond be posted in such amount as the Company may determine is necessary as indemnity against any claim that may be made against it with respect to such Warrant Certificate.

(b) All Warrants shall be held and owned under the express condition that the provisions of this Section are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Warrant Certificates and shall preclude (to the extent lawful) all other rights and remedies, notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.

(c) Upon the issuance of any new Warrant Certificate under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Company and its agents and counsel) connected therewith.

(d) Every new Warrant Certificate issued pursuant to this Section shall constitute an additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Warrant Certificate shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Agreement equally and proportionately with any and all other Warrant Certificates duly issued hereunder.

9. Persons Deemed Holders. Prior to the due presentment of a Warrant Certificate for registration of transfer or exchange, the Company, any Securities Registrar and any other agent of the Company may treat the person in whose name such Warrant Certificate is registered in the Securities Register as the sole holder of such Warrant Certificate and of the Warrant represented by such Warrant Certificate for all purposes whatsoever, and shall not be bound to recognize any equitable or other claim to or interest in such Warrant Certificate or in the Warrant represented by such Warrant Certificate on the part of any person and shall be unaffected by any notice to the contrary.

10. Cancellation. All Warrant Certificates surrendered for the purpose of exercise, exchange or registration of transfer shall be cancelled by the Securities Registrar, and no Warrant Certificates shall be issued in lieu thereof, except as expressly permitted by the provisions of this Agreement.

11. Fractional Shares. The Company shall not be required to issue Warrant Certificates exercisable for fractional Shares or to issue fractional Shares upon the exercise of Warrants. Warrant Certificates exercisable for fractional Shares shall expire as of the Expiration Date, and a holder of such Warrant Certificates shall not be entitled to any consideration of any kind or nature in respect of such Warrant or Warrant Certificate.

12. Stock Dividends, Splits, Etc.

(a) If, prior to the Expiration Time, the Company shall subdivide its outstanding Shares into a greater number of Shares, or declare and pay a dividend of its Shares payable in additional Shares, the Exercise Price, as then in effect, shall be proportionately reduced, and the Company shall proportionately increase the number of Shares then subject to exercise under this Warrant (and not previously exercised.)

(b) If, prior to the Expiration Time, the Company shall combine its outstanding Shares into a lesser number of Shares, the Exercise Price, as then in effect, shall be proportionately increased, and the Company shall proportionately reduce the number of Shares then subject to exercise under this Warrant (and not previously exercised.)

13. Reorganization, Reclassifications, Consolidation or Merger. If, prior to the Expiration Time, there shall be a reorganization or reclassification of the Shares (other than as provided in Section 12 of this Agreement), or any consolidation or merger of the Company with another entity, the Warrant Holder shall be entitled to receive, during the remainder of the term of this Agreement and upon payment of the Exercise Price, the number of shares of stock or other securities or property of the Company or of the successor entity (or its parent company) resulting from such consolidation or merger, as the case may be, to which a holder of Shares, deliverable upon the exercise of a Warrant, would have been entitled upon such reorganization, reclassification, consolidation or merger; and, in any case, the Company shall make appropriate adjustments (as determined by the board of directors of the Company in its sole discretion) in the application of the provisions with respect to the rights and interests of the Warrant Holders so that the provisions set forth in this Agreement (including the adjustment to the Exercise Price and the number of Shares issuable upon exercise of the Warrants) shall be applicable, as nearly as may be practicable, to any shares or other property thereafter deliverable upon the exercise of a Warrant.

14. Certificate as to Adjustments; Issuance of New Warrant Certificates . Within thirty (30) days following any adjustment provided for in Section 12 or 13 of this Agreement, the Company shall give written notice of the adjustment to the Warrant Holders as provided in Section 15(a) of this Agreement. The notice shall state the Exercise Price as adjusted and the increased or decreased number of shares purchasable upon the exercise of the Warrant(s) and shall set forth in reasonable detail the method of calculation for each. Notwithstanding anything to the contrary set forth herein or in the Warrant Certificates, the Company may, at its option, issue new Warrant Certificates evidencing the Warrants, in such form as may be approved by the Company, to reflect any adjustment or change in the Exercise Price and the number or kind of stock or other securities or property purchasable upon exercise of the Warrants.

15. Miscellaneous.

(a) Any notice or other communication required or permitted to be made hereunder shall be in writing, duly signed by the party giving such notice or communication and shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid as follows (or at such other address for a party as shall be specified by like notice): (i) if given to the Company, at 687 Berkmar Court, Charlottesville, Virginia 22901; and (ii) if given to a Warrant Holder, at the address set forth for the Warrant Holder on the books and records of the Company. A notice given to the Company by a Warrant Holder with respect to the exercise of a Warrant shall not be effective until received by the Company.

(b) The Company shall, at all times, reserve and keep available out of its authorized and unissued Shares or out of any Shares held in treasury that number of Shares that will from time to time be sufficient to permit the exercise in full of all outstanding Warrants. The Company shall take all such action as may be necessary to ensure that all Shares delivered upon exercise of any Warrants shall, at the time of delivery of the Warrant Certificates for such Shares, be duly authorized, validly issued, fully paid and nonassessable.

(c) The Company shall pay when due and payable any and all federal and state transfer taxes and charges (other any applicable income taxes) that may be payable in respect of the issuance and delivery of Warrant Certificates or of certificates for Shares receivable upon the exercise of any Warrants; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of the issuance and delivery (i) of any Warrant Certificate or stock certificate registered in a name other than that of the Warrant Holder of the Warrant Certificate that has been surrendered, or (ii) of any Warrant Certificate under Section 8.

(d) No Warrant Holder, in his capacity as such, shall be entitled to vote or receive dividends or shall be deemed from any other purpose the holder of the Shares or other securities which may at any time be issuable upon the exercise of such Warrant. Nothing contained herein or in any Warrant Certificate shall be construed to confer upon any Warrant Holder, in his capacity as such, any of the rights of a shareholder of the Company, including any right to vote for the election of directors or upon any matter submitted to shareholders of the Company at any meeting thereof, to give or withhold consent to any corporation action, or to receive notices of meeting or other actions affecting shareholders.

(e) Each Warrant Holder, by accepting a Warrant Certificate, accepts and agrees to the terms of this Agreement. The terms of this Agreement shall be binding upon the Company and the Warrant Holders and their respective heirs, successors, representatives and permitted assigns. Nothing expressed or referred to herein is intended or will be construed to give any person other than the Company or the Warrant Holders any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provision herein contained, it being the intention of the Company and the Warrant Holders that this Agreement, the assumption of obligations and statements of responsibilities hereunder, and all other conditions and provisions hereof are for the sole benefit of the Company and the Warrant Holders and for the benefit of no other person.

(f) This Agreement constitutes the full understanding of the Company and the Warrant Holders, a complete allocation of risks between them and a complete and exclusive statement of the terms and conditions of their agreement relating to the subject matter hereof and supersedes any and all prior agreements, whether written or oral, that may exist between the Company and any Warrant Holder with respect thereto. Except as otherwise specifically provided in this Agreement, no conditions, usage of trade, course of dealing or performance, understanding or agreement purporting to modify, vary, explain or supplement the terms or conditions of this Agreement will be binding unless hereafter or contemporaneously herewith made in writing and signed by the party to be bound, and no modification will be effected by the acknowledgment or acceptance of documents containing terms or conditions at variance with or in addition to those set forth in this Agreement.

(g) The headings contained in this Agreement are for convenience of reference only and will not affect in any way the meaning or interpretation of this Agreement. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement will refer to this Agreement as a whole and not to any particular provision in this Agreement. Each use herein of the masculine, neuter or feminine gender will be deemed to include the other genders. Each use herein of the plural will include the singular and vice versa, in each case as the

context requires or as is otherwise appropriate. The word “or” is used in the inclusive sense. References to a person are also to its permitted successors or assigns. No provision of this Agreement is to be construed to require, directly or indirectly, any person to take any action, or omit to take any action, which action or omission would violate applicable law (whether statutory or common law), rule or regulation.

(h) This Agreement shall terminate upon the earlier of (i) the Expiration Time, or (ii) the close of business on the date on which all Warrants shall have been exercised.

(i) THIS AGREEMENT, EACH WARRANT AND EACH WARRANT CERTIFICATE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF VIRGINIA WITHOUT REGARD TO THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer as of the date first above written.


SOUTHERN COMMERCE BANCORP, INC.

By:		/s/ Thomas P. Baker
		Thomas P. Baker, President

EXHIBIT A

LIST OF WARRANT HOLDERS


Name of Warrant Holder		Number of Warrants

EXHIBIT B

FORM OF WARRANT CERTIFICATE

THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE RESTRICTIONS SPECIFIED IN THAT CERTAIN WARRANT AGREEMENT DATED AS OF OCTOBER 21, 2004, BY SOUTHERN COMMERCE BANCORP, INC., A VIRGINIA CORPORATION (THE “COMPANY”), IN FAVOR OF THE WARRANT HOLDERS LISTED ON EXHIBIT A THERETO, AS THE SAME MAY BE AMENDED FROM TIME TO TIME (“AGREEMENT”). A COPY OF THE FORM OF THE AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY DURING NORMAL BUSINESS HOURS. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF THE AGREEMENT.

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT BUT ONLY UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE COMPANY, OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY APPLICABLE “BLUE SKY” OR SIMILAR SECURITIES LAW.”


No. W-		Number of Warrants:

SOUTHERN COMMERCE BANCORP, INC.

WARRANT CERTIFICATE

This Warrant Certificate certifies that , or registered assigns, is the registered holder of a warrant to purchase the number of fully-paid and non-assessable shares of common stock, $.10 par value of the Company (“Shares”) set forth above, at the exercise price, subject to adjustment in certain events (“Exercise Price”), of $10.00 per share (“Warrant”).

The Warrant evidenced by this Warrant Certificate is part of a duly authorized issue of Warrants issued pursuant to the Agreement, which is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the Warrant

Holder. All terms used, but not otherwise defined, in this Warrant Certificate shall have the meanings assigned to them in the Agreement. If any provision of this Warrant Certificate conflicts with a provision of the Agreement, the provision of the Agreement shall supercede.

This Warrant may not be exercised after 5:00 p.m., Eastern Time, on the earlier to occur of (i) the tenth anniversary of the date that Southern Commerce National Bank opens for business, or (ii) the date provided in Section 3(b) of the Agreement (the “Expiration Time”).

The Warrant Holder may exercise the Warrant evidenced by this Warrant Certificate in whole or in part at any time prior to the Expiration Time by delivering to the secretary of the Company (i) the Warrant Certificate; (ii) a written notice to the Company specifying the number of Shares with respect to which Warrants are being exercised; and (iii) a check for the full amount of the aggregate Exercise Price of the Shares being acquired.

Upon receipt of the items set forth above, and subject to the terms of the Agreement, the Company shall promptly deliver to, and register in the name of, the Warrant Holder a certificate or certificates representing the number of Shares acquired by exercise of this Warrant. In the event of a partial exercise of this Warrant, a new Warrant Certificate evidencing the number of Shares that remain subject to this Warrant shall be issued by the Company to such holder or to his duly authorized assigns.

The Agreement provides that upon the occurrence of certain events the Exercise Price and the type and/or number of the Company’s securities issuable thereupon may, subject to certain conditions, be adjusted. In such event, the Company may, at its option, issue a new Warrant Certificate evidencing the adjustment in the Exercise Price and the number and/or type of securities issuable upon the exercise of the Warrants.

Upon surrender for registration of transfer of this Warrant Certificate, subject to the terms of the Agreement, the Company shall issue and deliver to the Warrant Holder or his duly authorized assigns, one or more new Warrant Certificates of like tenor and in like aggregate amount.

Prior to the due presentment of this Warrant Certificate for registration of transfer or exchange, the Company, any Securities Registrar and any other agent of the Company may treat the person in whose name this Warrant Certificate is registered in the Securities Register as the sole holder of this Warrant Certificate and of the Warrant represented by this Warrant Certificate for all purposes whatsoever, and shall not be bound to recognize any equitable or other claim to or interest in this Warrant Certificate or in the Warrant represented by this Warrant Certificate on the part of any person and shall be unaffected by any notice to the contrary.

The Warrant Holder, in his capacity as such, shall not be entitled to vote or receive dividends or shall be deemed from any other purpose the holder of the Shares or other securities which may at any time be issuable upon the exercise of this Warrant. Nothing contained in this Warrant Certificate shall be construed to confer upon the Warrant Holder, in his capacity as such, any of the rights of a shareholder of the Company, including any right to vote for the election of directors or upon any matter submitted to shareholders of the Company at any meeting thereof, to give or withhold consent to any corporation action, or to receive notices of meeting or other actions affecting shareholders.

Any notice or other communication required or permitted to be made by the Warrant Holder to the Company shall be in writing, duly signed by the Warrant Holder and shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid to the Company, at 687 Berkmar Court, Charlottesville, Virginia 22901 (or such other address as designated in writing to the Warrant Holder by the Company). A notice given to the Company by a Warrant Holder with respect to the exercise of this Warrant shall not be effective until received by the Company.

IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed under its corporate seal.


SOUTHERN COMMERCE BANCORP, INC.

By:		/s/ Thomas P. Baker
		Thomas P. Baker, President

Dated as of October 21, 2004.

[SEAL]

Attest:


/s/ Donna W. Richards
Name:		Donna W. Richards
Title:		Secretary

Exhibit 4.3

AMENDMENT TO

WARRANT AGREEMENT

THIS AMENDMENT is made this day of , 2005, by and among Southern Commerce Bancorp, Inc., a Virginia corporation (the “Company”), and the undersigned (“Warrant Holder”), a party to a warrant agreement dated , 2004 (the “Warrant Agreement”), as follows:

1. The Warrant Holder hereby agrees that the following language shall be inserted as Section 10 to the Warrant Agreement:

“10. Notwithstanding any provision of this Warrant Agreement or any Warrant Certificate to the contrary, the Warrants shall expire, to the extent not exercised, within 45 days following the receipt of notice from the Bank’s primary federal regulator (“Regulator”) that (i) the Bank has not maintained its minimum capital requirements (as determined by the Regulator); and (ii) the Regulator is requiring exercise or forfeiture of the Warrants. Upon receipt of such notice from the Regulator, the Company shall promptly notify each Warrant Holder that he must exercise the Warrants granted to him prior to the end of the 45-day period or such earlier period as may be specified by the Regulator or forfeit such Warrant(s). In case of forfeiture, no Warrant Holder shall have any cause of action, of any kind or nature, against the Company, the Bank or any of their respective officers or directors with respect to the forfeiture. In addition, the Company shall not be liable to any Warrant Holder due to the failure or inability of the Company to provide adequate notice to the Warrant Holder.”

2. This Amendment modifies the Warrant Agreement only to the extent set forth herein. Except as so modified, the Warrant Agreement remains unchanged and is in full force and effect.

3. This Amendment may be executed in counterparts and a facsimile signature shall be treated as an original for all purposes.

IN WITNESS WHEREOF , the parties have executed this Amendment as of this 18 ^th day of January, 2005.


SOUTHERN COMMERCE BANCORP, INC.

By:
		Georgia S. Derrico
		Chairman of the Board


WARRANT HOLDERS

By:
		Neil J. Call
		Warrants for: 10,000 shares

By:
		Georgia S. Derrico
		Warrants for: 7,500 shares

By:
		Michael A Gaffney
		Warrants for: 10,000 shares

By:
		Charles A. Kabbash
		Warrants for: 10,000 shares

FAK Trust

By:
Name:
Warrants for: 10,000 shares

Westhampton Partners Bank 1, LLC

By:
Name:		, President/Manager
		Warrants for: 10,000 shares

By:
		R. Devon Porter
		Warrants for: 5,000 shares

By:
		R. Roderick Porter
		Warrants for: 7,500 shares

By:
		David DeGive
		Warrants for: 5,000 shares

Exhibit 5.0

LAW OFFICES

E LIAS , M ATZ , T IERNAN & H ERRICK L.L.P.

12 TH FLOOR

734 15 TH STREET , N . W .

WASHINGTON , D . C . 20005

TELEPHONE: (202) 347-0300

FACSIMILE: (202) 347-2172

WWW.EMTH.COM

August 4, 2006

Board of Directors

Southern National Bancorp of Virginia, Inc.

1770 Timberwood Boulevard, Suite 100

Charlottesville, Virginia 22911

Re:

Registration Statement on Form S-1

Ms. Derrico and Gentlemen:

We have acted as counsel to Southern National Bancorp of Virginia, Inc., a Virginia corporation (the “Company”), in connection with the preparation and filing with the Securities and Exchange Commission (the “Commission”) of the Company’s Registration Statement on Form S-1 (the “Registration Statement”) under the Securities Act of 1933, as amended (the “Act”), regarding the issuance by the Company of up to 2,000,000 shares of the Company’s common stock, par value $0.01 per share (the “Shares”).

In this capacity, we have examined the Registration Statement, the Company’s Articles of Incorporation, as amended, its amended and restated Bylaws, resolutions of the Board of Directors and the originals, or duplicates or conformed copies, certified to our satisfaction, of such corporate records, agreements, documents and other instruments of the Company relating to the authorization and issuance of the Shares, and such other matters as we have deemed relevant and necessary in connection with the opinions hereinafter set forth. As to certain factual matters, we have relied upon certificates or comparable documents of public officials and of officers and representatives of the Company.

In rendering the opinions set forth below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies, and the authenticity of the originals of such latter documents.

The opinions set forth herein are limited to the laws of the Commonwealth of Virginia and applicable federal laws and regulations.

Southern National Bancorp of Virginia, Inc.

August 4, 2006

Page 2

Based upon the foregoing, and in reliance thereon, and subject to the qualifications, assumptions and limitations stated herein, we are of the opinion that upon the issuance and sale of the Shares in the manner, and upon receipt of the consideration described, in the Registration Statement, the Shares will be validly issued, fully paid and nonassessable.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the caption “Legal Matters” in the Registration Statement. In giving such consent, we do not admit thereby that we are acting within the category of persons whose consent is required under Section 7 of the Act and the rules and regulations of the Commission thereunder. This opinion is rendered as of the date first written above, and we disclaim any obligation to advise you of facts, circumstances, events or developments, which hereafter may be brought to our attention and which may alter, affect or modify the opinion expressed herein. Our opinion is expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise, as to any other matters relating to the Company or the Shares.


Very truly yours,

ELIAS, MATZ, TIERNAN & HERRICK L.L.P.

By:		/s/ Timothy B. Matz,
		Timothy B. Matz, Partner

Exhibit 10.1

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

2004 STOCK OPTION PLAN

Southern National Bancorp of Virginia, Inc. (formerly known as “Southern Commerce Bancorp, Inc.”) (the “Company”), a Virginia corporation and the proposed holding company for SonaBank, National Association (the “Bank”), a national bank, hereby adopts this 2004 Stock Option Plan (the “Plan”), under which options may be granted from time to time to directors, officers and employees of the Company and of any subsidiary corporation (as defined in Section 424(f) of the Internal Revenue Code of 1986, as amended (the “Code”)), including the Bank, and any subsidiary corporation of the Company which may be established in the future, to purchase shares of common stock of the Company, par value $0.01 per share (the “Common Stock”).

l. PURPOSE OF THE PLAN . The purpose of the Plan is to aid the Company in attracting and retaining capable directors, officers and employees and to provide a long range incentive for such persons to remain in the management of the Company, to perform at increasing levels of effectiveness and to acquire a permanent stake in the Company with the interest and outlook of an owner. These objectives will be promoted through the granting of options to acquire shares of Common Stock pursuant to the terms of this Plan.

2. ADMINISTRATION .

(a) The Plan shall be administered by a committee (the “Committee”), which shall consist of not less than two independent members of the Board of Directors of the Company (the “Board”). Members of the Committee shall serve at the pleasure of the Board. In the absence at any time of a duly appointed Committee, this Plan shall be administered by the Board, in which case all references to the Committee in this Plan shall be deemed to refer to the Board. The Committee may designate any officers or employees of the Company to assist in the administration of the Plan and to execute documents on behalf of the Committee and perform such other ministerial duties as may be delegated to them by the Committee.

(b) Subject to the provisions of the Plan, the determinations or the interpretation and construction of any provision of the Plan by the Committee shall be final and conclusive upon all persons affected thereby. By way of illustration and not of limitation, the Committee shall have the discretion (a) to construe and interpret the Plan and all options granted hereunder and to determine the terms and provisions (and amendments thereof) of the options granted under the Plan (which need not be identical); (b) to define the terms used in the Plan and in the options granted hereunder; (c) to prescribe, amend and rescind the rules and regulations relating to the Plan; (d) to determine the individuals to whom and the time or times at which such options shall be granted, the number of shares to be subject to each option, the option price, and the determination of leaves of absence which may be granted to participants without constituting a termination of their employment for the purposes of the Plan; and (e) to make all other determinations necessary or advisable for the administration of the Plan.

(c) It shall be in the discretion of the Committee to grant options which qualify as “incentive stock options,” as that term is defined in Section 422 of the Code (“Incentive Stock Options”), or which do not qualify as Incentive Stock Options (“Nonqualified Stock Options”)

(herein referred to collectively as “Options;” however, whenever reference is specifically made only to “Incentive Stock Options” or “Nonqualified Stock Options,” such reference shall be deemed to be made to the exclusion of the other). Any options granted which fail to satisfy the requirements for Incentive Stock Options shall become Nonqualified Stock Options.

3. STOCK AVAILABLE FOR OPTIONS . Common Stock issued upon exercise of Options granted under the Plan may be authorized but unissued shares of Common Stock and/or shares of Common Stock which are acquired by the Company from shareholders of the Company in public or private transactions. The total number of shares of Common Stock for which Options may be granted under this Plan is 275,000. Such total number of shares is subject to any capital adjustments as provided in Section 13. In the event that an Option granted under the Plan is forfeited, released, expires or is terminated unexercised as to any shares covered thereby, such shares thereafter shall be available for the granting of Options under the Plan; provided that if the forfeiture, expiration, release or termination date of an Option is beyond the term of existence of the Plan as described in Section 18, then any shares covered by forfeited, unexercised, released or terminated options shall not reactivate the existence of the Plan and therefore may not be available for additional grants under the Plan. The Company, during the term of the Plan, will reserve and keep available a number of shares of Common Stock sufficient to satisfy the requirements of the Plan.

4. ELIGIBILITY . Options may be granted to such directors, officers and/or employees of the Company as may be designated from time to time by the Committee, provided that a member of the Board of Directors of the Company who is not an officer or employee of the Company shall be eligible to receive only Nonqualified Stock Options under the Plan. In determining the directors, officers and employees to whom Options shall be granted and the number of shares to be covered by each Option, the Committee shall take into account the nature of the services rendered by such persons, their present and potential contributions to the success of the Company and such other factors as the Committee shall deem relevant. A director, officer or employee who has been granted an Option under the Plan may be granted an additional Option or Options under the Plan if the Committee shall so determine.

5. OPTION GRANTS . The proper officers on behalf of the Company and each Optionee shall execute a Stock Option Agreement (the “Option Agreement”) which shall set forth the total number of shares of Common Stock to which it pertains, the exercise price, whether it is a Nonqualified Stock Option or an Incentive Stock Option, and such other terms, conditions, restrictions and privileges as the Committee in each instance shall deem appropriate, provided that they are not inconsistent with the terms, conditions and provisions of this Plan. Each Optionee shall receive a copy of his executed Option Agreement. Any Option granted with the intention that it will be an Incentive Stock Option but which fails to satisfy a requirement for Incentive Stock Options shall continue to be valid and shall be treated as a Nonqualified Stock Option.

6. OPTION PRICE .

(a) The option price of each Option granted under the Plan shall be not less than 100% of the market value of the stock on the date of grant of the Option. In the case of incentive stock options granted to a shareholder who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (a “ten percent shareholder”), the option price of each Option granted under the Plan shall not be less than 110% of the market value of the stock on the date of grant of the Option. The market value per share of the Common Stock shall be its fair market value as determined by the Committee, in its sole and absolute discretion. The Committee shall maintain a written record of its method of determining such value.

(b) Payment in full of the purchase price for shares of Common Stock purchased pursuant to the exercise of any Option shall be made to the Company upon exercise of the Option. All shares sold under the Plan shall be fully paid and nonassessable. Payment for shares may be made by the optionee (i) in cash or by check, or (ii) at the discretion of the Committee, by delivery of a properly executed exercise notice, together with irrevocable instructions to a broker to sell the shares and then to properly deliver to the Company the amount of sale proceeds to pay the exercise price, all in accordance with applicable laws and regulations, or any combination of the foregoing.

7. EXPIRATION OF OPTIONS . The Committee shall determine the expiration date or dates of each Option, but such expiration date shall be not later than 10 years after the date such Option is granted. In the event an Incentive Stock Option is granted to a ten percent shareholder, the expiration date or dates of each Option shall be not later than five years after the date such Option is granted. The Committee, in its discretion, may extend the expiration date or dates of an Option after such date was originally set; however, such expiration date may not exceed the maximum expiration date described in this Section 7.

8. TERMS AND CONDITIONS OF OPTIONS .

(a) All Options must be granted within 10 years of the Effective Date of this Plan, as defined in Section 17.

(b) Subject to Section 4 hereof, the Committee may grant Options which are intended to be Incentive Stock Options and Nonqualified Stock Options, either separately or jointly, to an eligible director, officer or employee.

(c) The grant of Options shall be evidenced by a written Option Agreement containing terms and conditions established by the Committee consistent with the provisions of this Plan.

(d) Unless otherwise determined by the Committee, not less than 100 shares may be purchased upon exercise of an Option at any one time unless the number purchased is the total number at that time purchasable under the Plan or Option Agreement.

(e) The recipient of an Option shall have no rights as a shareholder with respect to any shares covered by his Option until payment in full by him for the shares being purchased. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock is fully paid for.

(f) Notwithstanding any contrary provisions contained in this Plan, and as long as required by Section 422 of the Code, the aggregate fair market value of the Common Stock (determined as of the time the Option is granted) with respect to which Incentive Stock Options are exercisable for the first time by any optionee during any calendar year (under this Plan or any other stock option plan maintained by the Company) shall not exceed $100,000.

(g) All stock obtained pursuant to an Option which qualifies as an Incentive Stock Option may, in the discretion of the Committee, be held in escrow for a period which ends on the later of (i) two years from the date of the granting of the Option or (ii) one year after the transfer of the stock pursuant to the exercise of the Option. The stock shall be held by the Company or its designee. The employee who has exercised the Option shall during such holding period have all rights of a shareholder, including but not limited to the rights to vote, receive dividends and sell the stock. The sole purpose of the escrow is to inform the Company of a disqualifying disposition of the stock within the meaning of Section 422 of the Code, and it shall be administered solely for that purpose.

(h) No more than 40% of the shares which are reserved for issuance upon exercise of Options granted hereunder may be issued to any one participant under the Plan.

9. EXERCISE OF OPTIONS .

(a) Options granted hereunder shall vest in approximately equal percentages each year over a period no shorter than three years.

(b) The exercise of any Option must be evidenced by written notice to the Company that the optionee intends to exercise his Option. In no event shall an Option be deemed granted by the Company or exercisable by a recipient prior to the mutual execution by the Company and the recipient of an Option Agreement which comports with the requirements of Section 5 and Section 8(c) hereof.

(c) Any right to exercise Options in annual installments shall be cumulative and any vested installments may be exercised, in whole or in part, at the election of the optionee.

(d) The inability of the Company to obtain approval from any regulatory body or authority deemed by counsel to be necessary to the lawful issuance and sale of any shares of Common Stock hereunder shall relieve the Company of any liability in respect of the non-issuance or sale of such shares. As a condition to the exercise of an Option, the Company may require the person exercising the Option to make such representations and warranties as may be necessary to ensure compliance with federal or state securities laws.

(e) The Committee shall have the discretionary authority to impose in the Option Agreements such restrictions on shares of Common Stock as it may deem appropriate or desirable, including but not limited to the authority to impose a right of first refusal or to establish repurchase rights or both of these restrictions.

10. TERMINATION OF DIRECTORSHIP OR EMPLOYMENT - EXCEPT BY DISABILITY OR DEATH . If an optionee ceases to be a director, officer or employee of the Company for any reason other than death or disability (as defined in Section 11), he may, at any time within three months after his date of termination, or such longer period as may be determined by the Committee in its discretion but not later than the date of expiration of the Option, exercise any Option only to the extent it was vested and he was entitled to exercise the Option on the date of termination. Any Options or portions of Options of such optionees which are not so exercised shall terminate and be forfeited.

11. TERMINATION OF DIRECTORSHIP OR EMPLOYMENT – DISABILITY OR DEATH . If an optionee dies or ceases to be a director, officer or employee of the Company due to his becoming disabled within the meaning of Section 22(e)(3) of the Code, all unvested and forfeitable Options of such optionee shall immediately become vested and exercisable and he, or the person or persons to whom the Option is transferred by will or by the laws of descent and distribution, may, at any time within twelve months after the death or date of termination, or such longer period as may be determined by the Committee in its discretion but not later than the date of expiration of the Option, exercise any Option with respect to all shares subject thereto. Any Options or portions of Options of such optionees which are not so exercised shall terminate and be forfeited.

12. RESTRICTIONS ON TRANSFER . An Option granted under this Plan may not be transferred except by will or the laws of descent and distribution and, during the lifetime of the optionee to whom it was granted, may be exercised only by such optionee.

13. CAPITAL ADJUSTMENTS AFFECTING COMMON STOCK .

(a) The aggregate number of shares of Common Stock available for issuance under the Plan, the number of shares to which any outstanding Option relates and the exercise price per share of Common Stock under any outstanding Option shall be proportionately adjusted for any increase or decrease in the total number of outstanding shares of Common Stock issued subsequent to the Effective Date (as defined in Section 17) resulting from a split, subdivision or consolidation of shares or any other capital adjustment, the payment of a stock dividend or other increase or decrease in such shares effected without receipt or payment of consideration by the Company. If, upon a merger, consolidation, reorganization, liquidation, recapitalization or the like of the Company, the shares of the Common Stock shall be exchanged for other securities of the Company or of another corporation, each recipient of an Option shall be entitled, subject to the conditions herein stated, to purchase or acquire such number of shares of Common Stock or amount of other securities of the Company or such other corporation as were exchangeable for the number of shares of Common Stock of the Company which such optionees would have been entitled to purchase or acquire except for such action, and appropriate adjustments shall be made to the per share exercise price of outstanding Options.

(b) To the extent that the foregoing adjustments described in Section 13(a) above relate to particular Options or to particular stock or securities of the Company subject to Option under this Plan, such adjustments shall be made by the Committee, whose determination in that respect shall be final and conclusive.

(c) The grant of an Option pursuant to this Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets.

(d) No fractional shares of Common Stock shall be issued under the Plan for any adjustment made pursuant to this Section 13 or otherwise.

(e) Any adjustment made pursuant to this Section 13 shall be made, to the extent practicable, in such manner as not to constitute a modification of any outstanding Incentive Stock Options within the meaning of Section 424(h) of the Code.

14. INVESTMENT PURPOSE . At the discretion of the Committee, any Option Agreement may provide that the optionee shall, by accepting the Option, represent and agree, for himself and his transferees by will or the laws of descent and distribution, that all shares of Common Stock purchased upon the exercise of the Option will be acquired for investment and not for resale or distribution, and that upon each exercise of any portion of an Option, the person entitled to exercise the same shall furnish evidence of such facts which is satisfactory to the Company. Certificates for shares of Common Stock acquired under the Plan may be issued bearing such restrictive legends as the Company and its counsel may deem necessary to ensure, among other things, that the optionee is not an “underwriter” within the meaning of the federal securities laws.

15. APPLICATION OF FUNDS . The proceeds received by the Company from the sale of Common Stock pursuant to Options will be used for general corporate purposes.

16. NO OBLIGATION TO EXERCISE . The granting of an Option shall impose no obligation upon the optionee to exercise such Option. Notwithstanding the foregoing, the Bank’s primary federal regulator can direct the Company to require Plan participants to exercise or forfeit their Options if the Bank’s capital falls below the minimum regulatory requirements as determined by the Bank’s state or primary federal regulator. In such event, any options not so exercised shall terminate and be forfeited.

17. EFFECTIVE DATE OF THE PLAN . The Plan shall be effective as of the date of adoption of the Plan by the Board of Directors of the Company (the “Effective Date”). The Plan, and any previously granted Options thereunder, shall be subject to the approval of the shareholders of the Company at a meeting held or by written consent within 12 months of the Effective Date in order to meet the requirements of Section 422 of the Code and regulations thereunder.

18. TERM OF THE PLAN . Unless sooner terminated, this Plan shall remain in effect for a period of ten years ending on the tenth anniversary of the Effective Date. Termination of the Plan shall not affect any Options previously granted and such Options shall remain valid and in effect until they have been fully exercised or earned, are surrendered or by their terms expire or are forfeited.

19. TIME OF GRANTING OF OPTIONS . Nothing contained in the Plan or in any resolution adopted or to be adopted by the Committee or the shareholders of the Company and no action taken by the Committee shall constitute the granting of any Option hereunder. The granting of an Option pursuant to the Plan shall take place only when an Option Agreement shall have been duly executed and delivered by and on behalf of the Company at the direction of the Committee.

20. WITHHOLDING TAXES . Whenever the Company proposes or is required to cause to be issued or transferred shares of stock, cash or other assets pursuant to this Plan, the Company shall have the right to require the optionee to remit to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the issuance of any certificate or certificates for such shares or delivery of such cash or other assets. Alternatively, the Company may issue or transfer such shares of stock or make other distributions of cash or other assets net of the number of shares or other amounts sufficient to satisfy the withholding tax requirements. For withholding tax purposes, the shares of stock, cash and other assets to be distributed shall be valued on the date the withholding obligation is incurred.

21. TERMINATION AND AMENDMENT . The Board may at any time alter, suspend, terminate or discontinue the Plan, subject to any applicable regulatory requirements and any required shareholder approval or any shareholder approval which the Board may deem advisable for any reason, such as for the purpose of obtaining or retaining any statutory or regulatory benefits under tax, securities or other laws or satisfying applicable stock exchange or quotation system listing requirements. The Board may not, without the consent of the holder of an Option previously granted, make any alteration which would deprive the optionee of his rights with respect thereto.

22. CAPTIONS AND HEADINGS; GENDER AND NUMBER . Captions and paragraph headings used herein are for convenience only, do not modify or affect the meaning of any provision herein, and are not a part, and shall not serve as a basis for interpretation or construction of, this Plan. As used herein, the masculine gender shall include the feminine and neuter, and the singular number shall include the plural, and vice versa, whenever such meanings are appropriate.

23. COST OF PLAN; EXCULPATION AND INDEMNIFICATION . All costs and expenses incurred in the operation and administration of the Plan shall be borne by the Company. In connection with this Plan, no member of the Board and no member of the Committee shall be personally liable for any act or commission to act, or for any mistake in judgment made in good faith, unless arising out of, or resulting from, such person’s own bad faith, willful misconduct or criminal acts. To the extent permitted by applicable laws and

regulations, the Company shall indemnify, defend and hold harmless the members of the Board and members of the Committee, and each other officer or employee of the Company or of subsidiary corporation to whom any power or duty relating to the administration or interpretation of this Plan may be assigned or delegated, from and against any and all liabilities (including any amount paid in settlement of a claim with the approval of the Board), and any costs or expenses (including counsel fees) incurred by such persons arising out of or as a result of, any act or omission to act, in connection with the performance of such person’s duties, responsibilities and obligations under this Plan, other than such liabilities, costs and expenses as may arise out of, or result from, the bad faith, willful misconduct or criminal acts of such persons.

24. EXERCISE OR FORFEITURE . Notwithstanding any provision of this Plan or any Option Agreement to the contrary, the Options shall expire, to the extent not exercised, within 45 days following the receipt of notice from the Bank’s primary federal regulator (“Regulator”) that (i) the Bank has not maintained its minimum capital requirements (as determined by the Regulator); and (ii) the Regulator is requiring exercise or forfeiture of the Options. Upon receipt of such notice from the Regulator, the Company shall promptly notify each Option holder that he must exercise the Options granted to him prior to the end of the 45-day period or such earlier period as may be specified by the Regulator or forfeit such Option(s). In case of forfeiture, no Option holder shall have cause of action, of any kind or nature, against the Company, the Bank or any of their respective officers or directors with respect to the forfeiture. In addition the Company shall not be liable to any Option holder due to the failure or inability of the Company to provide adequate notice to the Option holder.

25. GOVERNING LAW . Without regard to the principles of conflicts of laws, the laws of the Commonwealth of Virginia shall govern and control the validity, interpretation, performance and enforcement of this Plan.

APPROVED BY THE BOARD OF DIRECTORS ON

January 31, 2005.

/s/ R. Devon Porter

R. Devon Porter

Secretary

APPROVED BY THE STOCKHOLDERS OF THE COMPANY ON

January 31, 2005.

/s/ R. Devon Porter

R. Devon Porter

Secretary

Exhibit 10.2

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

CHANGE IN CONTROL AGREEMENT

THIS CHANGE IN CONTROL AGREEMENT (the “Agreement”) is made and entered into by and between Southern National Bancorp of Virginia, Inc., a Virginia corporation (the “Company”), and Sonabank, National Association, a national bank and the wholly-owned subsidiary of the Company (“Sonabank”) on the one hand, and Georgia S. Derrico (“Executive”) on the other hand, as of August , 2006 (the “Effective Date”). Each of the Company, Sonabank and Executive is a “Party” to this Agreement, and, together, they are the “Parties” hereto.

WHEREAS, it is in the best interests of the Company, Sonabank and the Company’s stockholders to assure Executive’s continued dedication to the Company; and

WHEREAS, any consideration by the Company or Sonabank of strategic transactions, such as mergers and acquisitions, would inevitably create personal uncertainties for Executive, and could distract Executive from the business of the Company or Sonabank; and

WHEREAS, it is in the best interests of Sonabank, the Company and the Company’s stockholders to provide Executive with compensation and benefits arrangements in the event of a possible termination of Executive’s employment, including a termination in connection with a strategic transaction, as more fully provided herein; and

WHEREAS, the Company, Sonabank and Executive have determined that it is in their mutual best interests that this Agreement be executed by the Parties in order to set forth the terms and conditions for severance benefits in the event of such a termination as provided for herein;

NOW, THEREFORE, in consideration of the covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company, Sonabank and the Executive hereby agree as follows:

1. DEFINITIONS.

Certain terms used in this Agreement are defined in the body of this Agreement. Other terms are defined as set forth in this Section 1, as follows:

1.1 “Affiliate” shall mean Sonabank or any other corporation or other business entity that is a parent or subsidiary of the Company, including ownership of 50% or more of the voting or profits interests of the corporation or other business entity.

1.2 “Base Salary” shall mean Executive’s highest paid or payable annual base salary for any consecutive twelve (12) month period during her employment with the Company or an Affiliate. Any increase in base salary shall not serve to limit or reduce any other obligation to Executive under this Agreement or under any other plan or agreement with the Company or an Affiliate. The term Base Salary as utilized in this Agreement shall refer to her Base Salary as it may be increased, from time to time, but no decrease in her annual base salary shall decrease the Base Salary referred to herein.

1.3 “Board” shall mean the Board of Directors of the Company or of Sonabank, as the context so requires.

1.4 “Business Day” means any day other than a Saturday, Sunday or Federal holiday.

1.5 “Cause” shall mean any of the following: (i) Executive’s commission of a willful act (including, without limitation, a dishonest or fraudulent act which dishonest or fraudulent act results in personal gain to the Executive) or a grossly negligent act, or the willful or grossly negligent omission to act by Executive, which causes material financial or reputational harm to the Company or an Affiliate; (ii) Executive’s conviction of, or plea of nolo contendere to, any felony involving dishonesty or fraud or that causes significant material financial or reputational injury to the Company or an Affiliate; or (iii) Executive’s willful neglect of, or continued failure to substantially perform, in any material respect, her duties (as assigned to Executive from time to time) or obligations (including a material violation of Company or Affiliate policy or procedures) to the Company or an Affiliate other than any such failure resulting from her incapacity due to physical or mental illness. For purposes of this Section, an act or omission is “willful” if it was knowingly done, or knowingly omitted to be done, by Executive not in good faith and without reasonable belief that the act or omission was in the best interests of the Company or an Affiliate. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company or an Affiliate shall be conclusively presumed to be done, or omitted to be done, in good faith and in the best interests of the Company or an Affiliate, as applicable. The Board of Directors of the Company (the Executive and any of her immediate family members recusing themselves from discussions, deliberations and voting) has the discretion, in other circumstances, to determine in good faith, from all the facts and circumstances reasonably available to it, whether Executive’s act or omission was “willful.”

1.6 “Change in Control” shall mean a change in the ownership of the Company or Sonabank, a change in the effective control of the Company or Sonabank or a change in the ownership of a substantial portion of the assets of the Company or Sonabank as provided under Section 409A of the Code, as amended from time to time, and any Internal Revenue Service guidance, including Notice 2005-1, and regulations issued in connection with Section 409A of the Code. In no event, however, shall a Change in Control be deemed to have occurred as a result of any acquisition of securities or assets of the Company, Sonabank, or a subsidiary of either of them, by the Company, Sonabank, or any subsidiary of them, or by any employee benefit plan maintained by any of them.

1.7 “Code” shall mean the Internal Revenue Code of 1986, as amended.

1.8 “Date of Termination” means (i) if the Executive’s employment is terminated by the Company or Sonabank for Cause or by the Executive for Good Reason, ten (10) Business Days following the Company’s or Sonabank’s on the one hand, or Executive’s on the other, receipt of the Notice of Termination (as defined in Section 2.4) unless, in the case of Cause, the

Company or Sonabank determines that the reason (or reasons) for the Cause termination is (or are) not curable in which case the Date of Termination shall be the date set forth by the Company or Sonabank in the Notice of Termination, (ii) if the Executive’s employment is terminated by the Company or Sonabank without Cause, the Date of Termination shall be the date on which the Company or Sonabank notifies the Executive of such termination, (iii) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of the death of the Executive or the Disability Effective Date, as the case may be, and (iv) if the Executive resigns for reasons that do not constitute Good Reason, the Date of Termination shall be the last day of the month in which such resignation occurs.

1.9 “Disability” means the determination by the Board of Directors of the Company or Sonabank (the Executive and any of her immediate family members recusing themselves from discussions, deliberations and voting), in accordance with applicable law, based on information provided by a physician selected by the Company or Sonabank or its insurers and reasonably acceptable to Executive or Executive’s legal representative, that, as a result of a physical or mental injury or illness, Executive has been unable to perform the essential functions of her job with or without reasonable accommodations for a period of (i) 90 consecutive days or (ii) 180 days in any one calendar year period. The date that the Board of Directors makes such decision or that date after such decision that is determined by the Board to be the effective date of the Executive’s Disability is the “Disability Effective Date.”

1.10 “Good Reason” shall mean any one of the following events, without Executive’s written consent, following a Change in Control: (i) the assignment to Executive of duties materially inconsistent with Executive’s then-current level of authority or responsibilities, or any other action by the Company or an Affiliate that results in a material diminution in Executive’s position, compensation, authority, duties or responsibilities; (ii) a breach by the Company or an Affiliate of any material term or covenant of any agreement with Executive; (iii) a requirement that Executive be based at any office or location that is more than twenty-five (25) miles from the Executive’s principal office location immediately preceding a Change in Control; or (iv) a failure by any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company or the Affiliate employing Executive to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company or an Affiliate would be required to perform it if no such succession had taken place. Executive must provide the Company or Sonabank, as applicable, written notice of any claim of Good Reason within ninety (90) days after the occurrence of any action/inaction giving rise to such claim, and the Company or its Affiliate will have ten (10) Business Days to cure such claim.

1.11 “IRS” shall mean the Internal Revenue Service.

2. TERMINATIONS OF EMPLOYMENT TRIGGERING SEVERANCE BENEFITS.

2.1 Subject to Section 2.2, and provided that Executive has executed the Mutual General Release, a copy of which is attached hereto as Exhibit A , the Company or an Affiliate will provide Executive with the benefits set forth in Section 3 if Executive’s employment is terminated for the following reasons (“Qualifying Terminations”): (i) by the Company or an

Affiliate without Cause at any time; or (ii) by Executive for “Good Reason” at any time. The Mutual General Release shall be executed by the Company and Sonabank and an executed copy shall be delivered to Executive promptly after receipt of the executed copy from Executive.

2.2 Except as otherwise set forth herein, in no event will benefits be payable to Executive under this Agreement in the event of termination due to Executive’s retirement, termination by the Company or an Affiliate for Cause, or voluntary termination by Executive without Good Reason.

2.3 Notwithstanding the foregoing, the following payments will be made in a lump sum within ten (10) Business Days after Executive’s termination of employment for any reason or no reason (including by reason of Disability, but not by reason of death): (i) earned but unpaid Base Salary through the date of termination; (ii) any accrued but unpaid vacation; (iii) any amounts payable under any employee pension or welfare benefit plans of the Company or an Affiliate in accordance with the terms of those plans; and (iv) unreimbursed business expenses incurred by Executive on behalf of the Company or an Affiliate (in accordance with existing expense reimbursement policies of the Company or an Affiliate).

2.4 Any termination by the Company or an Affiliate for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other Party hereto given in accordance with Section 5.13 of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) indicates the Date of Termination (as defined above). The failure by the Executive on the one hand, or the Company or Sonabank, on the other hand, to set forth in a Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive, or the Company or Sonabank, respectively, hereunder, or preclude the Executive, or the Company or Sonabank, respectively, from asserting such fact or circumstance in enforcing the Executive’s, or the Company’s or Sonabank’s rights hereunder.

3. TERMINATION BENEFITS.

3.1 Subject to the conditions set forth in Section 2, the following benefits shall be paid or provided to Executive in the event Executive’s employment is terminated in a Qualifying Termination:

(a) Cash Severance . (i) The Company or an Affiliate shall pay to Executive in a lump sum an amount equal to three (3) times the sum of (i) Executive’s annual Base Salary as of the date on which the termination occurred and (ii) Executive’s target bonus amount for the year in which the termination occurred, if such target bonus amount has been set by the Board. In the event that the Board has not set such target bonus amount, the target bonus amount shall be deemed to be equal to the bonus paid by the Company or an Affiliate, as applicable, for the year prior to the year in which termination occurs.

(ii) Regardless of when the Qualifying Termination occurs the cash severance benefits in this Section 3.1(a) shall be paid by the Company or an Affiliate to Executive in a lump sum within ten (10) days of the date of such Qualifying Termination. Notwithstanding the foregoing, no payments under this Section 3.1(a) shall commence prior to the expiration of any revocation period required by law in connection with the release being provided to the Company and Sonabank by Executive under Section 2.1.

(b) Health Benefits . To the extent permissible under applicable law, the Company or an Affiliate shall continue to provide coverage to Executive (and to Executive’s spouse and dependents who are covered as of date of the Qualifying Termination) under the health and welfare benefit plans the Company or an Affiliate maintains for active employees following Executive’s Qualifying Termination, at the same cost to Executive and under the same terms applicable to active employees (and their dependents as was being paid prior to the Qualifying Termination), for a period of twenty-four (24) months after Executive’s Qualifying Termination. Notwithstanding the foregoing, if Executive becomes employed with another employer during such twenty-four (24) month period and is eligible to receive substantially comparable health and welfare benefits from such employer, the obligation of the Company and its Affiliates to provide the benefits described in this Section 3.1(b) shall cease on the date the Executive commences to receive such substantially comparable benefits. The Executive shall provide the Company or the Affiliate with prompt notice of the commencement of such health benefits.

(c) Incentive Plan Vesting . All awards under the Company’s 2004 Stock Option Plan, any Company restricted stock, stock appreciation right, phantom stock or other equity-based compensation plan, or any similar or successor plan, held by Executive shall immediately and totally vest, become exercisable in full, all restrictions applicable to such awards shall lapse, and all performance measures with respect to such awards shall be deemed satisfied in full.

3.2 TAXATION AND WITHHOLDING. Neither the Company nor any Affiliate makes any representations or warranties with respect to, and has no responsibility or liability for, the personal tax consequences of this Agreement to Executive. The Company and its Affiliates may make such provisions and take such steps as they may deem necessary or appropriate for the withholding of any taxes that the Company or any Affiliate is required by any law or regulation of any governmental authority, whether federal, state or local, domestic or foreign, to withhold in connection with this Agreement.

3.3 GROSS-UP PAYMENT. (a) In the event that any payment, benefit or distribution by or on behalf of the Company or an Affiliate to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “Payments”) is determined to be an “excess parachute payment” pursuant to Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) or any successor or substitute provision of the Code, with the effect that Executive is liable for the payment of the excise tax described in Code Section 4999 or any successor or substitute provision of the Code (the “Excise Tax”), then the Company or an Affiliate shall pay to Executive an additional amount (the “Gross-

Up Payment”) such that the net amount retained by Executive, after deduction of any Excise Tax on the Payments and any federal, state and local income and employment taxes and Excise Tax on the Gross-Up Payment, shall be equal to the Payments. All determinations required to be made under this paragraph, and the assumptions to be utilized in arriving at such determination, shall be made by the registered public accounting firm used for auditing purposes by the Company or an Affiliate immediately prior to Executive’s employment termination or, if the Parties determine that such registered public accounting firm cannot make such determination because of legal restrictions, the Parties shall agree on a different registered public accounting firm (such registered public accounting firm is hereinafter referred to as the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company (or the Affiliate) and Executive. The Company or the Affiliate shall pay all fees and expenses of the Accounting Firm. Any determination by the Accounting Firm shall be binding upon the Company, the Affiliate and the Executive, except as provided in the following sentences. As a result of the uncertainty in the application of Code Sections 280G and 4999 at the time of the initial determination by the Accounting Firm hereunder, it is possible that the Internal Revenue Service (“IRS”) or other agency will claim that a greater or lesser Excise Tax is due. In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, Executive shall repay to the Company or an Affiliate, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by Executive to the extent that such repayment results in a reduction in Excise Tax and/or a federal, state or local income or employment tax deduction). In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company or an Affiliate shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by Executive with respect to such excess) at the time that the amount of such excess is finally determined. Executive and the Company (or the Affiliate) shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Payments. The Company or an Affiliate shall pay all fees and expenses of Executive relating to a claim by the IRS or other agency for the Excise Tax as provided below.

(b) Executive shall notify the Company or the Affiliate who paid the Gross-Up Payment in writing of any claim by the IRS that, if successful, would require the payment by the Company or an Affiliate of the Gross-Up Payment or an additional Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) Business Days after Executive is informed in writing of such claim and shall apprise the Company or the Affiliate of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which Executive gives such notice to the Company or the Affiliate (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company or an Affiliate notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, the Company or an Affiliate, subject to the provisions of this Section 3.3, shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo

any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner. In this connection, Executive agrees, subject to the provisions of this Section 3.3, to (i) prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company or the Affiliate shall determine, (ii) give the Company or the Affiliate any information reasonably and timely requested by the Company or the Affiliate relating to such claim, (iii) take such action in connection with contesting such claim as the Company or the Affiliate shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iv) cooperate with the Company and the Affiliate in good faith in order to effectively contest such claim, and (v) permit the Company and the Affiliate to participate in any proceedings relating to such claim. The foregoing is subject, however, to the following: (i) the Company or an Affiliate shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed in connection therewith, (ii) if the Company directs Executive to pay such claim and sue for a refund, the Company or an Affiliate shall advance the amount of such payment to Executive, on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance, (iii) any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due shall be limited solely to such contested amount, and (iv) the Company’s or the Affiliate’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the IRS or any other taxing authority.

(c) The Company or the Affiliate will, if necessary or appropriate in order to retain the benefits under this Agreement, submit for stockholder approval, and the Board of Directors of the Company or the Affiliate will recommend that stockholders approve, all payments to be made hereunder in order to avoid any limitation, prohibition or adverse tax consequences under applicable federal and state tax laws.

3.4 EXECUTIVE’S DEATH. If Executive dies before the completion of any payments or benefits required under this Section 3, the Company or an Affiliate will make or continue all payments and benefits to Executive’s surviving spouse, if any, or Executive’s estate in accordance with this Section.

3.5 PAYMENT IN LIEU. If the provision of any of the benefits covered by this Article 3 would trigger the 20% excise tax and interest penalties under Section 409A of the Code, then the benefit(s) that would trigger such tax and interest penalties shall not be provided (the “Excluded Benefits”), and in lieu of the Excluded Benefits, the Company or Sonabank shall pay to the Executive, in a lump sum within thirty (30) days following termination of employment or within thirty (30) days after such determination should it occur after termination of employment, a cash amount equal to the cost to the Employer of providing the Excluded Benefits.

4. RESTRICTIVE COVENANTS

4.1 TRADE SECRETS. Executive acknowledges that she has had, and will have, access to confidential information of the Company and its Affiliates (including, but not limited to, current and prospective confidential know-how, customer lists, marketing plans, business plans, financial and pricing information, and information regarding acquisitions, mergers and/or joint ventures) concerning the business, customers, contacts, prospects, and assets of the Company and its Affiliates that is unique, valuable and not generally known outside the Company and its Affiliates, and that was obtained from the Company or an Affiliate or which was learned as a result of the performance of services by Executive on behalf of the Company or an Affiliate (“Trade Secrets”). Trade Secrets shall not include any information that: (i) is now, or hereafter becomes, through no act or failure to act on the part of Executive that constitutes a breach of this Section 4, generally known or available to the public; (ii) is known to Executive at the time such information was obtained from the Company or an Affiliate; (iii) is hereafter furnished without restriction on disclosure to Executive by a third party, other than an employee or agent of the Company or an Affiliate, who is not under any obligation of confidentiality to the Company or an Affiliate; (iv) is disclosed with the written approval of the Company or an Affiliate; or (v) is required to be disclosed or provided by law, court order, order of any regulatory agency having jurisdiction or similar compulsion, including pursuant to or in connection with any legal proceeding involving the Parties hereto; provided however, that such disclosure shall be limited to the extent so required or compelled; and provided further, however, that if Executive is required to disclose such confidential information, she shall give the Company notice of such disclosure and cooperate in seeking suitable protections. Other than in the course of performing services for the Company and its Affiliates, Executive will not, at any time, directly or indirectly use, divulge, furnish or make accessible to any person any Trade Secrets, but instead will keep all Trade Secrets strictly and absolutely confidential. Executive will deliver promptly to the Company or the Affiliate that employed Executive, at the termination of her employment or at any other time at the request of the Company or an Affiliate, without retaining any copies, all documents and other materials in her possession relating, directly or indirectly, to any Trade Secrets.

4.2 NON-COMPETITION. Beginning on the Effective Date and for a period continuing through the later of (i) twelve (12) months following termination of Executive’s employment with the Company and all Affiliates and (ii) the period the Company or an Affiliate is making severance payments to Executive under Section 3.1(a) (the “Restricted Period”), Executive shall not directly or indirectly own any interest in, operate, control or participate as a partner, director, principal, member, lender, sponsor, officer, or agent of, enter into the employment of, act as a consultant to, or perform any services for, any company, person, or entity engaged in a Competitive Business (as defined herein). A “Competitive Business” shall mean any person or entity that is involved in or seeks to become involved in providing deposits, money market accounts, certificates of deposit or other typical retail banking deposit-type services or loans on a retail level, to individuals, businesses or non-profit entities in any State in the United States in which the Company or an Affiliate is doing business at the time of

termination of Executive’s employment. Notwithstanding the foregoing, nothing in this Agreement shall prevent the Executive from owning for passive investment purposes not intended to circumvent this Agreement, less than five percent (5%) of the publicly traded voting securities of any company engaged in the banking, financial services, insurance, brokerage or other business similar to or competitive with the Company or any Affiliate (so long as the Executive has no power to manage, operate, advise, consult with or control the competing enterprise and no power, alone or in conjunction with other affiliated parties, to select a director, manager, general partner, or similar governing official of the competing enterprise other than in connection with the normal and customary voting powers afforded the Executive in connection with any permissible equity ownership).

4.3. NON-SOLICITATION OF EMPLOYEES. During the Restricted Period, Executive shall not, directly or indirectly solicit, induce or hire, or attempt to solicit, induce or hire, any current employee of the Company or an Affiliate, or any individual who becomes an employee during the Restricted Period, to leave his or her employment with the Company or an Affiliate or join or become affiliated with any other business or entity, or in any way interfere with the employment relationship between any employee and the Company or an Affiliate.

4.4 NON-SOLICITATION OF CUSTOMERS. During the Restricted Period, Executive shall not, directly or indirectly, solicit or induce, or attempt to solicit or induce, any customer, lender, supplier, licensee, licensor or other business relation of the Company or an Affiliate to terminate its relationship or contract with the Company or an Affiliate, to cease doing business with the Company or an Affiliate, or in any way interfere with the relationship between any such customer, lender, supplier, licensee or business relation and the Company or an Affiliate (including making any negative or derogatory statements or communications concerning the Company or an Affiliate or their directors, officers or employees).

4.5 IRREPARABLE HARM. Executive acknowledges that: (i) Executive’s compliance with this Agreement is necessary to preserve and protect the proprietary rights, Trade Secrets, and the goodwill of the Company or an Affiliate as going concerns, and (ii) any failure by Executive to comply with the provisions of this Agreement will result in irreparable and continuing injury for which there will be no adequate remedy at law. In the event that Executive fails to comply with the terms and conditions of this Agreement, the obligations of the Company and its Affiliates to pay the severance benefits set forth in Section 3 shall cease, and the Company or an Affiliate will be entitled, in addition to other relief that may be proper, to all types of equitable relief (including, but not limited to, the issuance of an injunction and/or temporary restraining order) that may be necessary to cause Executive to comply with this Agreement, to restore to the Company and its Affiliates their property, and to make the Company and its Affiliates whole.

4.6 SURVIVAL. The provisions set forth in this Section 4 shall survive termination of this Agreement.

4.7 SCOPE LIMITATIONS. If the scope, period of time or area of restriction specified in this Section 4 are or would be judged to be unreasonable in any court proceeding, then the period of time, scope or area of restriction will be reduced or limited in the manner and

to the extent necessary to make the restriction reasonable, so that the restriction may be enforced in those areas, during the period of time and in the scope that are or would be judged to be reasonable.

5. MISCELLANEOUS

5.1 EMPLOYMENT STATUS. Nothing herein shall be deemed to create any term of employment, it being expressly understood and agreed between the Parties that Executive’s employment is at will and that either Party may terminate such employment at any time.

5.2 GOVERNING LAW. All provisions of this Agreement will be construed and governed by Virginia law without regard to its choice of law principles or the laws of any other jurisdiction. Any suit, claim or other legal proceeding for injunctive relief arising out of or relating to this Agreement shall be brought exclusively in the federal or state courts located in Alexandria, Virginia, and Executive and the Company and its Affiliates hereby submit to personal jurisdiction in the Commonwealth of Virginia and to venue in such courts. Notwithstanding the foregoing, a Party may seek and obtain injunctive relief against any other Party in any court having jurisdiction over Executive.

5.3 ARBITRATION. The Company and Executive agree to arbitrate any controversy or claim arising out of this Agreement or the termination of Executive’s employment to the extent set forth herein required (but not including any claims of breach of any employment contract, wrongful termination or age, sex, race or other discrimination); provided that the Company and Executive shall have the right to, and be permitted to, seek and obtain injunctive relief from a court of competent jurisdiction pursuant to Section 4.5 above. Any such arbitration shall be fully and finally resolved in binding arbitration in a proceeding in Alexandria, Virginia, in accordance with the national Rules for the Resolution of Employment Disputes of the American Arbitration Association before a single arbitrator. The arbitrator shall not have the authority to modify or change any of the terms of this Agreement, except as provided in Section 5.4 hereof. The arbitrator’s award shall be final and binding upon the Parties, and judgment upon the award may be entered in any court of competent jurisdiction in any state of the United States or country or application may be made to such court for a judicial acceptance of the award and an enforcement as the law of such jurisdiction may require or allow.

5.4 SEVERABILITY. Every provision of this Agreement is intended to be severable. If any provision or portion of a provision is illegal or invalid, then that portion shall be re-negotiated by the Parties or recast by an arbitrator or court, consistent with the intent of the Parties reflected herein, so that it is not illegal or invalid, and the remainder of this Agreement shall not be affected. Moreover, any provision of this Agreement which is determined to be unreasonable, arbitrary or against public policy shall be modified as necessary so that it is not unreasonable, arbitrary or against public policy while maximizing the intent of the Parties.

5.5 ENTIRE AGREEMENT. Except as provided in Section 5.8 and in any non-disclosure, non-solicitation, intellectual property or similar agreement signed by Executive, with respect to its subject matter, this Agreement and the Mutual General Release attached hereto as Exhibit A constitute the entire understanding of the Parties superseding all prior agreements, understandings, negotiations and discussions between them, whether written or oral, and there are no other understandings, representations, warranties or commitments with respect thereto.

5.6 SUCCESSORS AND ASSIGNS. This Agreement is personal to the Executive and without the prior written consent of the Company, shall not be assignable by the Executive. To the extent provisions contained herein relate to the Executive’s legal representatives, successors or permitted assigns this Agreement shall inure to the benefit of and be enforceable by such legal representatives, successors or permitted assigns. This Agreement shall inure to the benefit of and be binding upon the Company, Sonabank, Affiliates and their respective successors and assigns. The Company and Sonabank will require any successor to the Company or to any Affiliate obligated hereunder (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company or of any Affiliate obligated hereunder to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company or any Affiliate obligated hereunder would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as set forth herein and any successor to its business and/or assets as set forth herein which assumes and agrees to perform this Agreement. In addition, the term “Affiliate” shall mean any Affiliate of the Company (including Sonabank) as hereinbefore defined and obligated hereunder and any successor to its business and/or assets as set forth herein and any successor to its business and/or assets as set forth herein which assumes and agrees to perform this Agreement.

5.7 AMENDMENT. This Agreement may only be amended or terminated by a written agreement executed by the Company, Sonabank and Executive.

5.8 INSURANCE AND INDEMNIFICATION. The Company or the Affiliate that employed Executive agrees to indemnify Executive on at least the same basis and for the same period of time as other directors and officers, in accordance with applicable state law and the Company’s or the Affiliate’s (as applicable) Articles of Incorporation and/or Bylaws. If there occurs any Change in Control of the Company or any Affiliate where the acquirer of the Company or the Affiliate, that, at such time, employs or employed Executive, agrees to indemnify and/or insure some or all of the directors or officers of the Company or the Affiliate, the Company or the Affiliate will make it a condition to the closing of the Change in Control transaction that the Executive be indemnified and/or insured to the same extent as the other directors or officers who will obtain such coverage in said transaction(s).

5.9 LEGAL FEES. The Company or an Affiliate agrees to pay promptly as incurred, to the full extent permitted by law, all documented legal fees and expenses that Executive may reasonably incur as a result of any contest by the Company or an Affiliate, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement, unless the court or arbitrator, as the case may be, finds the Executive’s claims or defenses to be wholly without merit.

5.10 EFFECT ON OTHER OBLIGATIONS. The obligations of the Company or an Affiliate to make the payments provided for in this Agreement and otherwise to perform its

obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action that the Company or an Affiliate may have against Executive or others. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, except as provided in Section 3.1(b).

5.11. NO WAIVER. No failure or delay by the Company or an Affiliate on the one hand, or Executive on the other hand, in enforcing or exercising any right or remedy hereunder shall operate as a waiver thereof. Any such waiver or consent shall be given in writing, signed by the Company or the Affiliate, or the Executive, as applicable, and be effective only in the specific instance and for the purpose for which given.

5.12 REGULATORY RESTRICTIONS. Any and all payments to be made hereunder are subject to the prohibitions, limitations and restrictions under applicable law and regulation, including the Federal Deposit Insurance Act (12 U.S.C. Sections 1811, 1813(x)(1), 1818 (e)(3) or (e)(4) or (g)(1)), 1828 (k) and Part 359 of the Regulations of the Federal Deposit Insurance Corporation (12 C.F.R. Part 359, Section 359.0, et seq .).

5.13 NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other Party or by registered or certified mail, return receipt requested, postage prepaid, as follows:


If to the Company or Sonabank:		Southern National Bancorp of Virginia, Inc.
		1002 Wisconsin Avenue, NW
		Washington, D.C. 20007
		Attn: Secretary
With a copy (which shall not constitute notice) to:		Elias Matz Tiernan & Herrick L.L.P.
		734 15th Street, NW
		12th Floor
		Washington, D.C. 20005
		Attn: Timothy B. Matz, Esq.
If to the Executive:		Ms. Georgia S. Derrico
		2954 Burrland Lane
		The Plains, Virginia 20198

or to such other address as either Party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

5.14. COUNTERPARTS. The Parties may execute this Agreement in one or more counterparts, all of which together shall constitute but one Agreement.

IN WITNESS WHEREOF, each Party has executed this Change in Control Agreement or caused this Change in Control Agreement to be duly executed as of the Effective Date.


SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

By:
Name:
Title:

SONABANK, NATIONAL ASSOCIATION

By:
Name:
Title:

EXECUTIVE

By:
Name:		Georgia S. Derrico

EXHIBIT A

MUTUAL GENERAL RELEASE

THIS MUTUAL GENERAL RELEASE (this “Agreement”) is entered into as of , 20 by and between Georgia S. Derrico (the “Executive”) on the one hand, and Southern National Bancorp of Virginia, Inc. a Virginia corporation (the “Company”) and Sonabank, National Association, a national bank (“Sonabank”) on the other. Each of the Company and Executive is a “Party” to this Agreement, and, together, they are the “Parties” hereto.

RECITALS

WHEREAS, the Company, Sonabank and Executive are entering into a Change in Control Agreement, dated as of August , 2006 (the “Change in Control Agreement”);

WHEREAS, the Change in Control Agreement requires that this Agreement be executed by the Company, Sonabank and Executive at the time of a Qualifying Termination as a condition to the Company’s payment of severance benefits to Executive under the Change in Control Agreement;

NOW THEREFORE, in consideration of the foregoing and the mutual covenants set forth herein, the Parties hereto hereby agree as follows:

1. Certain Actions to Be Taken By Executive .

(a) On the closing date of any Change in Control (as such term is defined in the Change in Control Agreement) transaction, if requested in writing by the acquirer in said transaction, the Executive shall execute and deliver, in a form satisfactory to such acquirer, a resignation from all positions she holds as a director or officer of the Company or any Affiliate (as such term is defined in the Change in Control Agreement) of the Company.

(b) In the event a claim (written or oral) arises for which indemnification is or may be sought by the Executive under the Change in Control Agreement, Executive shall promptly notify the Company and Sonabank in writing, at the address set forth in the Change in Control Agreement, of the commencement of such legal action or existence of, and facts relating to, such claim.

(c) Executive agrees to cooperate in the defense of any action for which indemnification is sought under the Change in Control Agreement. Such cooperation shall include, but not be limited to, providing the Company and Sonabank and their respective counsel copies of any and all relevant documents relating to the claim, consulting with the Company, Sonabank and their respective counsel with regard to the claim, providing testimony, either in deposition or at trial or both, regarding the facts relating to the claim, making herself available at all reasonable times for consultation, testimony and fact finding and otherwise furnishing such information to the Company, Sonabank and their respective counsel as Executive would provide to her own counsel in the event she were defending the action herself. Except as expressly permitted by the Company or Sonabank, as the case may be, Executive shall not object to the

A-1

production or use of any documents prepared by Executive, or of information provided to the Company’s or Sonabank’s legal counsel on the basis of any claim of privilege that is available to the Company or Sonabank, as the case may be. Such cooperation shall be provided regardless of whether the Company or Sonabank assumes the defense of the action, provided that the Company or Sonabank is providing indemnification under the Change in Control Agreement, provides to Executive reasonable compensation for her time, reimburses her expenses relating to these activities and is not in breach of its obligations under the Change in Control Agreement or this Agreement. For purposes of this Agreement and the Change in Control Agreement, the termination of any claim, action, suit or proceeding by judgment, order, settlement (whether with or without court approval) shall not of itself create a presumption that the Executive did or did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is or is not permitted by applicable law.

2. Releases .

(a) Provided that the Company and Sonabank are not in material breach of the Change in Control Agreement or this Agreement, and except for any Claims (as hereinafter defined) under this Agreement or the Change in Control Agreement, for good and valuable consideration, the receipt of which is hereby acknowledged by Executive, Executive, for herself and for her heirs, spouses, estates, beneficiaries, executors, trusts, personal representatives, successors and assigns, and all those claiming by, through, under or in concert with them or any of them, does hereby release completely and forever discharge the Company, its Affiliates and their respective directors, officers, employees, agents, successors and assigns from any and all claims, debts, liabilities, losses, promises, expenses, costs, damages, actions, obligations, or cause(s) of action, of any kind whatsoever (“Claims”), whether asserted by way of affirmative claims, counter-claims, defenses or offsets or otherwise, in any proceeding whatsoever, whether due and owing in the past, present or future and whether based on contract, tort, statute, regulation or any other legal or equitable theory of recovery and whether known or unknown, suspected or unsuspected, fixed or contingent, matured or unmatured, with respect to, pertaining to or arising out of Executive’s employment with the Company or any Affiliate thereof or her service as a director or a member of a committee of the Board of Directors of the Company or any Affiliate thereof.

(b) Provided that Executive is not in material breach of the Change in Control Agreement or this Agreement, and except for any Claims under this Agreement or the Change in Control Agreement, for good and valuable consideration, the receipt of which is hereby acknowledged by the Company and Sonabank, the Company and Sonabank, for itself and for its Affiliates and their respective directors, officers, employees, agents, successors and assigns, and all those claiming by, through, under or in concert with them or any of them, does hereby release completely and forever discharge Executive and her legal representatives, successors and assigns from any and all Claims, whether asserted by way of affirmative claims, counter-claims, defenses or offsets or otherwise, in any proceeding whatsoever, whether due and owing in the past, present or future and whether based on contract, tort, statute, regulation or any other legal or equitable theory of recovery and whether known or unknown, suspected on unsuspected, fixed or contingent, matured or unmatured, with respect to, pertaining to or arising out of Executive’s employment with the Company or any Affiliate thereof or her service as a director or a member of a committee of the Board of Directors of the Company or any Affiliate thereof.

A-2

(c) The Parties acknowledge that they may hereafter discover claims and/or facts now unknown or unsuspected, or in addition to, or different from, those which the Parties now know or believe to be true with respect to this Agreement. Nevertheless, the Parties intend by this Agreement to release fully, finally, and forever all claims released hereby. Accordingly, this Agreement shall remain in full force as a complete release of such claims notwithstanding the discovery or existence of any such additional or different claims and/or facts before or after the date of this Agreement.

3. Representation and Warranty . Each Party to this Agreement represents and warrants to the other that it or she (as the case may be) (a) is the lawful owner of everything released hereunder, (b) has all necessary power and authority to make such release, and including the absence of any duty or obligation that would prevent, or be put in breach or default by, such release, and (c) has not heretofore transferred or attempted to transfer all or any part of any such thing released in any manner whatsoever, including by way of subrogation or operation of law. The Parties represent and warrant further to each other that each has been, or has had the opportunity to be, represented by his or its own counsel, that this Agreement is executed voluntarily, and without duress or undue influence on the part of or on behalf of either Party.

4. Notices . All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered as set forth in Section 5.13 of the Change in Control Agreement.

5. Disclosure . (a) The Company, Sonabank and Executive will respond to any and all third party queries (including press queries) regarding Executive’s termination of employment by the following statement: “The Company and Ms. Derrico have agreed to end their relationship on an amicable basis and have no further comment on the matter.”

(b) No Party will disclose the terms or conditions of this Agreement to anyone other than her spouse, or their counsel, accountants, directors, officers who need to know the contents hereof or the appropriate regulatory agencies having jurisdiction, or an arbitrator or court of competent jurisdiction.

(c) No Party will make any comment, oral or written, relating to the other Party, her spouse or any of its directors, officers, employees or agents, which may be construed as derogatory, critical or harmful to the reputation of the other Party.

6. General .

(a) The terms of this Agreement shall be binding upon the Parties hereto and their respective heirs, spouses, estates, beneficiaries, executors, trusts, personal representatives, successors and assigns.

A-3

(b) This Agreement represents the entire understanding of the Parties with respect to the subject matter hereof and supersedes all prior understandings, written or oral. The terms of this Agreement may be changed, modified or discharged only by an instrument in writing signed by each of the Parties hereto.

(c) This Agreement shall be construed, enforced and interpreted in accordance with, and governed by, the laws of the Commonwealth of Virginia, without reference to its principles of conflicts of law, except to the extent that federal law shall be deemed to preempt such state laws.

(d) Any capitalized terms not defined in this Agreement shall have as their meaning the definitions contained in the Change in Control Agreement, but the Change in Control Agreement is not otherwise a part of this Agreement.

(e) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement.

(f) References herein to the masculine or feminine gender shall be deemed to refer to the other or neuter gender where appropriate.

(g) This Agreement shall not be construed as an admission of liability, fault or wrongdoing by either Party and each Party specifically disclaims liability, fault or wrongdoing and each Party agrees that this Agreement shall not be used or admitted into evidence in any proceeding of any kind, including judicial, administrative or arbitrative, except for proceeding to enforce this Agreement or the Change in Control Agreement.

7. Effectiveness . Executive acknowledges that she will have twenty-one (21) days following her receipt of this Agreement to consider executing this Agreement, and an additional period of seven (7) days following her execution of this Agreement in which to revoke this Agreement. Her notice of revocation must be in writing and given to William H. Lagos, the Chief Financial Officer of the Company, 1002 Wisconsin Avenue, NW, Washington, D.C. 20007 within seven (7) days after signing this Agreement and either delivered personally or sent certified or registered mail return receipt requested. If Executive has not revoked her acceptance of this Agreement within this seven (7) day period, this Agreement’s effectiveness will become final. If Executive does revoke this Agreement, neither Executive nor the Company will be required to satisfy any of the terms of this Agreement. Executive has the right, if she so chooses, to execute this Agreement prior to the expiration of the twenty-one (21) day period. This Agreement shall not be effective or enforceable until the expiration of the seven (7) day period after Executive executes this Agreement. Notwithstanding anything to the contrary contained herein, this Agreement shall not be effective unless and until it is executed subsequent to the occurrence of a Qualifying Termination.

A-4

IN WITNESS WHEREOF, the Company and Sonabank have caused this Agreement to be executed by their duly authorized officers, and Executive has signed this Agreement, as of the date first above written.


EXECUTIVE:

By:
Name:		Georgia S. Derrico

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

By:
Name:
Title:

SONABANK, NATIONAL ASSOCIATION

By:
Name:
Title:

A-5

Exhibit 21.0

Subsidiaries of

Southern National Bancorp of Virginia, Inc.

•

Sonabank, National Association

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

Southern National Bancorp of Virginia, Inc.

Charlottesville, Virginia

We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated February 16, 2006, relating to the consolidated financial statements of Southern National Bancorp of Virginia, Inc. as of December 31, 2005 and for the period from inception (April 14, 2005) through December 31, 2005, which is contained in that Prospectus.

We also consent to the reference to us under the caption “Experts” in the Prospectus.

/s/ BDO Seidman, LLP

Richmond, Virginia

August 2, 2006

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Southern National Bancorp of Virginia, Inc.

We consent to the use of our report included herein and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ Thompson, Greenspon & Co., P.C.

Fairfax, Virginia

August 4, 2006