Southern National Bancorp of Virginia Inc (Form: 10-Q, Received: 05/08/2020 12:48:20)

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2020

Commission File No. 001-33037

SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

(Exact name of registrant as specified in its charter)


Virginia	20-1417448
(State or other jurisdiction	(I.R.S. Employer Identification No.)
of incorporation or organization)

6830 Old Dominion Drive

McLean, Virginia 22101

(Address of principal executive offices) (zip code)

(703) 893-7400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading symbol	Name of each exchange on which registered:
Common Stock	SONA	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b–2 of the Exchange Act:


Large accelerated filer ☐	Accelerated filer ☒	Smaller reporting company ☐

Non-accelerated filer ☐	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of April 30, 2020, there were 24,297,703 shares of common stock outstanding.

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SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

FORM 10-Q

March 31, 2020

INDEX		PAGE
PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements
Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019		2
Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2020 and 2019		3
Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2020 and 2019		4
Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019		5
Notes to Unaudited Consolidated Financial Statements		6

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations		30

Item 3 – Quantitative and Qualitative Disclosures about Market Risk		39

Item 4 – Controls and Procedures		41

PART II - OTHER INFORMATION

Item 1 – Legal Proceedings		41

Item 1A – Risk Factors		42

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		43

Item 3 – Defaults Upon Senior Securities		43

Item 4 – Mine Safety Disclosures		43

Item 5 – Other Information		43

Item 6 - Exhibits		44

Signatures		46

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SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.
CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share amounts)


	March 31,		December 31,
	2020		2019
	(unaudited)		*
ASSETS
Cash and cash equivalents:
Cash and due from financial institutions	$	10,145	$	7,909
Interest-bearing deposits in other financial institutions		45,720		24,019
Total cash and cash equivalents		55,865		31,928

Securities available for sale, at fair value		168,520		164,820

Securities held to maturity, at amortized cost (fair value of $60,426 and $72,666, respectively)		59,234		72,448

Total loans		2,212,538		2,186,047
Less allowance for loan losses		(12,722)		(10,261)
Net loans		2,199,816		2,175,786
Stock in Federal Reserve Bank and Federal Home Loan Bank		21,396		17,832
Equity investment in mortgage affiliate		5,251		5,020
Preferred investment in mortgage affiliate		3,305		3,305
Bank premises and equipment, net		31,079		31,184
Operating lease right-of-use assets		7,664		8,013
Goodwill		101,954		101,954
Core deposit intangibles, net		6,850		7,191
Bank-owned life insurance		64,236		63,850
Other real estate owned		5,876		6,224
Deferred tax assets, net		11,154		11,788
Other assets		20,363		20,827
Total assets	$	2,762,563	$	2,722,170

LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing demand deposits	$	338,095	$	339,153
Interest-bearing deposits:
NOW accounts		380,977		391,172
Money market accounts		477,660		466,867
Savings accounts		151,406		144,486
Time deposits		727,216		783,040
Total interest-bearing deposits		1,737,259		1,785,565
Total deposits		2,075,354		2,124,718

Securities sold under agreements to repurchase - short term		13,179		12,883
Federal Home Loan Bank (FHLB) advances		205,140		121,640
Junior subordinated debt - long term		9,645		9,632
Senior subordinated notes - long term		47,041		47,051
Operating lease liabilities		8,509		8,469
Other liabilities		24,873		20,536
Total liabilities		2,383,741		2,344,929
Commitments and contingencies (See Note 6)

Stockholders' equity:
Preferred stock, $0.01 par value. Authorized 5,000,000 shares; no shares issued and outstanding		—		—
Common stock, $0.01 par value. Authorized 45,000,000 shares; 24,297,703 and 24,181,534 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively		242		241
Additional paid in capital		308,352		306,755
Retained earnings		67,061		69,462
Accumulated other comprehensive income		3,167		783
Total stockholders' equity		378,822		377,241
Total liabilities and stockholders' equity	$	2,762,563	$	2,722,170

* Derived from audited consolidated financial statements

See accompanying notes to unaudited consolidated financial statements.

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SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(dollars in thousands, except per share amounts) (Unaudited)


	For the Three Months Ended
	March 31,
	2020		2019
Interest and dividend income:
Interest and fees on loans	$	26,741	$	27,974
Interest and dividends on taxable securities		1,244		1,425
Interest and dividends on tax exempt securities		117		156
Interest and dividends on other earning assets		379		748
Total interest and dividend income		28,481		30,303
Interest expense:
Interest on deposits		6,503		7,462
Interest on repurchase agreements		19		23
Interest on junior subordinated debt		139		150
Interest on senior subordinated notes		712		712
Interest on other borrowings		593		1,004
Total interest expense		7,966		9,351
Net interest income		20,515		20,952
Provision for loan losses		3,450		200
Net interest income after provision for loan losses		17,065		20,752

Noninterest income:
Account maintenance and deposit service fees		1,698		1,687
Income from bank-owned life insurance		386		523
Equity gain from mortgage affiliate		231		18
Recoveries related to acquired charged-off loans and investment securities		184		591
Other		321		243
Total noninterest income		2,820		3,062

Noninterest expenses:
Salaries and benefits		12,309		5,812
Occupancy expenses		1,939		1,803
Furniture and equipment expenses		619		710
Amortization of core deposit intangible		341		363
Virginia franchise tax expense		570		563
Data processing expense		707		512
Telephone and communication expense		368		375
Net (gain) loss on other real estate owned		71		(2)
Professional fees		1,193		1,093
Other operating expenses		1,735		5,061
Total noninterest expenses		19,852		16,290
Income before income taxes		33		7,524
Income tax expense		6		1,504
Net income	$	27	$	6,020
Other comprehensive income:
Unrealized gain on available for sale securities	$	3,014	$	1,084
Accretion of amounts previously recorded upon transfer to held to maturity from available for sale		4		3
Net unrealized gain		3,018		1,087
Tax effect		634		229
Other comprehensive income		2,384		858
Comprehensive income	$	2,411	$	6,878
Earnings per share, basic	$	0.00	$	0.25
Earnings per share, diluted	$	0.00	$	0.25

See accompanying notes to unaudited consolidated financial statements.

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SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

(dollars in thousands, except per share amounts) (Unaudited)


	For the Three Months Ended March 31, 2020
							Accumulated
			Additional				Other
	Common		Paid in		Retained		Comprehensive
	Stock		Capital		Earnings		Income		Total
Balance - December 31, 2019	$	241	$	306,755	$	69,462	$	783	$	377,241
Net income		—		—		27		—		27
Changes in other comprehensive income on investment securities (net of tax $634)		—		—		—		2,384		2,384
Dividends on common stock ($0.10 per share)		—		—		(2,428)		—		(2,428)
Issuance of common stock under Stock Incentive Plan (44,600 shares)		1		193		—		—		194
Stock-based compensation expense		—		1,404		—		—		1,404
Balance - March 31, 2020	$	242	$	308,352	$	67,061	$	3,167	$	378,822

	For the Three Months Ended March 31, 2019
							Accumulated
			Additional				Other
	Common		Paid in		Retained		Comprehensive
	Stock		Capital		Earnings		Loss		Total
Balance - December 31, 2018	$	240	$	305,654	$	44,985	$	(2,589)	$	348,290
Net income		—		—		6,020		—		6,020
Changes in other comprehensive loss on investment securities (net of tax $229)		—		—		—		858		858
Dividends on common stock ($0.09 per share)		—		—		(2,170)		—		(2,170)
Issuance of common stock under Stock Incentive Plan (17,250 shares)		1		121		—		—		122
Impact of adoption of ASU 2016-02		—		—		(535)		—		(535)
Stock-based compensation expense		—		104		—		—		104
Balance - March 31, 2019	$	241	$	305,879	$	48,300	$	(1,731)	$	352,689

See accompanying notes to unaudited consolidated financial statements.

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SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019


	For the Years Ended March 31,
	2020		2019
Operating activities:
Net income	$	27	$	6,020
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Depreciation and amortization		1,364		1,741
Amortization of operating lease right-of-use assets		1,038		586
Accretion of loan discount		(597)		(816)
Amortization of FDIC indemnification asset		—		177
Provision for loan losses		3,450		200
Earnings on bank-owned life insurance		(386)		(523)
Equity gain on mortgage affiliate		(231)		(18)
Stock-based compensation expense		1,404		104
(Gain) loss on other real estate owned		71		(2)
Net (increase) decrease in other assets		464		(4,420)
Net increase in other liabilities		3,687		8,641
Net cash and cash equivalents provided by operating activities		10,291		11,690
Investing activities:
Purchases of held to maturity investment securities		(15,197)		—
Purchases of available for sale investment securities		(9,980)		(15,313)
Proceeds from paydowns, maturities and calls of available for sale investment securities		8,907		3,172
Proceeds from paydowns, maturities and calls of held to maturity investment securities		28,271		1,778
Net (increase) decrease of FRB and FHLB stock		(3,564)		1,095
Net (increase) decrease in loans		(26,883)		21,815
Proceeds from bank-owned life insurance death benefit		—		344
Sales of other real estate owned, net of improvements		277		38
Purchases of bank premises and equipment		(383)		(7)
Net cash and cash equivalents provided by (used in) investing activities		(18,552)		12,922
Financing activities:
Net increase (decrease) in deposits		(49,364)		13,464
Cash dividends paid on common stock		(2,428)		(2,170)
Issuance of common stock under Stock Incentive Plan		194		122
Net decrease (increase) in short-term borrowings		83,796		(32,798)
Net cash and cash equivalents provided by (used in) financing activities		32,198		(21,382)
Increase in cash and cash equivalents		23,937		3,230
Cash and cash equivalents at beginning of period		31,928		28,611
Cash and cash equivalents at end of period	$	55,865	$	31,841
Supplemental disclosure of cash flow information
Cash payments for:
Interest	$	7,848	$	8,989
Non-cash investing and financing activities:
Initial recognition of operating lease right-of-use assets	$	—	$	8,296
Initial recognition of operating lease liabilities		—		9,305

See accompanying notes to unaudited consolidated financial statements.

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SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC.

Notes to Unaudited Consolidated Financial Statements

March 31, 2020

1. ACCOUNTING POLICIES

Southern National Bancorp of Virginia, Inc. (“Southern National” or “SNBV” or the “Company”) is a corporation that was formed on July 28, 2004 under the laws of the Commonwealth of Virginia and is the holding company for Sonabank (“Sonabank” or the “Bank”) a Virginia state-chartered bank which commenced operations on April 14, 2005. On June 23, 2017, SNBV completed its merger with Eastern Virginia Bankshares, Inc. (“EVBS”) and the merger of EVBS’s wholly-owned subsidiary, EVB, with and into SNBV’s wholly-owned subsidiary, Sonabank. Sonabank provides a range of financial services to individuals and small and medium sized businesses.

At March 31, 2020, Sonabank had forty-five full-service branches. Thirty-eight full-service retail branches are in Virginia, located in Ashland, Burgess, Callao, Central Garage, Charlottesville, Chester, Clifton Forge, Colonial Heights, Courtland, Deltaville, Fairfax, Front Royal, Gloucester, Gloucester Point, Hampton, Hartfield, Haymarket, Heathsville, Kilmarnock, Leesburg, McLean, Mechanicsville (2), Middleburg, Midlothian, New Market, Newport News, Quinton, Reston, Richmond, South Riding, Surry, Tappahannock (2), Urbanna, Warrenton, Waverly, and Williamsburg, and seven full-service retail branches in Maryland, located in Bethesda, Brandywine, Huntingtown, Owings, Rockville, Shady Grove, and Upper Marlboro. We have administrative offices in Warrenton and Glen Allen, Virginia, and executive offices in Georgetown, Washington, D.C. and Glen Allen, Virginia where senior management is located.

The consolidated financial statements include the accounts of Southern National and its subsidiaries Sonabank and EVB Statutory Trust I (the “Trust”). Significant inter-company accounts and transactions have been eliminated in consolidation. Southern National consolidates subsidiaries in which it holds, directly or indirectly, more than 50 percent of the voting rights or where it exercises control. Entities where Southern National holds 20 to 50 percent of the voting rights, or has the ability to exercise significant influence, or both, are accounted for under the equity method. Southern National has an interest in one affiliate, Southern Trust Mortgage, LLC (“STM”), which it accounts for as an equity method investment. In addition, Southern National owns the Trust which is an unconsolidated subsidiary. The junior subordinated debt owed to the Trust is reported as a liability of Southern National.

The unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and instructions for Form 10-Q and follow general practice within the banking industry. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. However, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of the interim periods presented have been made. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in Southern National’s Form 10-K for the year ended December 31, 2019.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP 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 include: the determination of the allowance for loan losses, the fair value of investment securities, other than temporary impairment of investment securities, the valuation of goodwill and intangible assets, other real estate owned (“OREO”) and deferred taxes.

Risks and Uncertainties

The outbreak of the novel Corona Virus Disease 2019 (“COVID-19”) has adversely impacted a broad range of industries in which the Company’s customers operate and could impair their ability to fulfill their financial obligations to

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the Company. In March 2020, the World Health Organization declared COVID-19 to be a global pandemic. The spread of COVID-19 has caused significant uncertainty, volatility and disruption in the U.S. and global economy and has disrupted banking and other financial activity in the areas in which the Company operates. Given the ongoing and dynamic nature COVID-19, it is not possible to accurately predict the extent, severity or duration of these conditions or when normal economic and operating conditions will resume. For this reason, the extent to which the COVID-19 pandemic affects our business, operations and financial condition, as well as our regulatory capital and liquidity ratios and credit ratings, is highly uncertain and unpredictable and depends on, among other things, new information that may emerge concerning the scope, duration and severity of the COVID-19 pandemic and actions taken by governmental authorities and other parties in response to the pandemic. If the pandemic is prolonged, the adverse impact on the markets in which we operate and on our business, operations and financial condition could deepen.

Congress, the President, and the Federal Reserve have taken several actions designed to cushion the economic fallout. Most notably, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law at the end of March 2020 as a $2 trillion legislative package. The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors. The package also includes extensive emergency funding for hospitals and providers. In addition to the general impact of COVID-19, certain provisions of the CARES Act as well as other recent legislative and regulatory relief efforts are expected to have a material impact on the Company’s operations. The CARES Act includes provisions that temporarily delay the required implementation date of Financial Accounting Standards Board (“FASB”) ASC Topic 326, Financial Instruments—Credit Losses, and suspend the requirements related to accounting for a troubled debt restructuring (“TDR”), for certain entities.

The Company’s business is dependent upon the willingness and ability of its employees and customers to conduct banking and other financial transactions. If the global response to contain COVID-19 escalates further or is unsuccessful, the Company could experience a material adverse effect on its business, financial condition, results of operations and cash flows. While it is not possible to know the full universe or extent that the impact of COVID-19, and resulting measures to curtail its spread, will have on the Company’s operations, the Company is disclosing potentially material items of which it is aware.

Financial position and results of operations

The Company’s fee income could be reduced due to COVID-19. In keeping with guidance from regulators, the Company is actively working with COVID-19 affected customers to waive fees from a variety of sources, such as, but not limited to, insufficient funds and overdraft fees, ATM fees, account maintenance fees, etc. These reductions in fees are thought, at this time, to be temporary in conjunction with the length of the expected COVID-19 related economic crisis. At this time, the Company is unable to project the materiality of such an impact, but recognize the breadth of the economic impact is likely to impact its fee income in future periods.

The Company’s interest income could be reduced due to COVID-19. In keeping with guidance from regulators, the Company is actively working with COVID-19 affected borrowers to defer their payments, interest, and fees. While interest and fees will still accrue to income, through normal GAAP accounting, should eventual credit losses on these deferred payments emerge, interest income and fees accrued would need to be reversed. In such a scenario, interest income in future periods could be negatively impacted. At this time, the Company is unable to project the materiality of such an impact, but recognizes the breadth of the economic impact may affect its borrowers’ ability to repay in future periods.

Capital and liquidity

While the Company believes that it has sufficient capital to withstand an extended economic recession brought about by COVID-19, its reported and regulatory capital ratios could be adversely impacted by further credit losses. The Company relies on cash on hand as well as dividends from its subsidiary bank to service its debt. If the Company’s capital deteriorates such that its subsidiary bank is unable to pay dividends to it for an extended period of time, the Company may not be able to service its debt.

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The Company maintains access to multiple sources of liquidity. Wholesale funding markets have remained open to us, but rates for short term funding have recently been volatile. If funding costs are elevated for an extended period of time, it could have an adverse effect on the Company’s net interest margin. If an extended recession caused large number of the Company’s deposit customers to withdraw their funds, the Company might become more reliant on volatile or more expensive sources of funding.

Asset valuation

Goodwill is evaluated for impairment on an annual basis or more frequently if events or circumstances warrant. Our annual assessment timing is during the third calendar quarter. Considering the effects of COVID-19, management determined there to be a triggering event in the first quarter of 2020. For the 2020 assessment, we performed a qualitative assessment to determine if it was more likely than not that the fair value of our single reporting unit is less than its carrying amount. We concluded that the fair value of our single reporting unit exceeded its carrying amount and that it was not necessary to perform the quantitative impairment test pursuant to ASC 350-20. Our qualitative assessment considered many factors including, but not limited to, our actual and projected operating performance and profitability, as well as consideration of recent bank merger and acquisition transaction metrics. No impairment losses were considered necessary based on management’s assessment.

Currently, the Company does not expect COVID-19 to affect its ability to account timely for the assets on its balance sheet; however, this could change in future periods. While certain valuation assumptions and judgments will change to account for pandemic-related circumstances such as widening credit spreads, the Company does not anticipate significant changes in methodology used to determine the fair value of assets measured in accordance with GAAP.

COVID-19 could cause a further and sustained decline in the Company’s stock price or the occurrence of what management would deem to be a triggering event that could, under certain circumstances, cause us to perform another goodwill impairment test and result in an impairment charge being recorded for that period. In the event that the Company concludes that all or a portion of its goodwill is impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. Such a charge would have no impact on tangible capital or regulatory capital.

It is possible that the lingering effects of COVID-19 could cause the occurrence of what management would deem to be a triggering event that could, under certain circumstances, cause us to perform an intangible asset impairment test and result in an impairment charge being recorded for that period. In the event that the Company concludes that all or a portion of its intangible assets are impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. Such a charge would have no impact on tangible capital or regulatory capital.

Processes, controls and business continuity plan

The Company has invoked its Board approved Pandemic Preparedness Plan that includes a remote working strategy. The Company does not anticipate incurring additional material cost related to its continued deployment of the remote working strategy. No material operational or internal control challenges or risks have been identified to date. The Company does not anticipate significant challenges to its ability to maintain its systems and controls in light of the measures the Company has taken to prevent the spread of COVID-19. The Company does not currently face any material resource constraint through the implementation of its business continuity plans.

Lending operations and accommodations to borrowers

As the health crisis unfolded, the Company’s markets and businesses experienced disruptions in normal operations. In keeping with regulatory guidance to work with borrowers during this unprecedented situation, the Company provided certain modifications, including interest only or principal and interest deferments. As of April 30, 2020, total modified loans or loans with requests for modifications were $548.1 million and the Company anticipates additional amounts throughout the second quarter of 2020.

With the passage of the Paycheck Protection Program (“PPP”), administered by the Small Business Administration (“SBA”), the Company is actively participating in assisting its customers with applications for resources through the

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program. PPP loans have a two-year term and earn interest at 1%. The Company believes that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program. As of April 30, 2020, the Company has approved and secured funds with the SBA 250 PPP loans representing $52.5 million in funding. An additional 1,726 loans for $202.7 million have been approved for SBA PPP pending funding. It is the Company’s understanding that loans funded through the PPP program are fully guaranteed by the U.S. government. Should those circumstances change, the Company could be required to establish additional allowance for credit loss through additional credit loss expense charged to earnings.

Credit

The Company is working with customers directly affected by COVID-19. The Company is prepared to offer short-term assistance in accordance with regulator guidelines. As a result of the current economic environment caused by the COVID-19 virus, the Company is engaging in more frequent communication with borrowers to better understand their situation and the challenges faced, allowing it to respond proactively as needs and issues arise. It is possible that the Company’s asset quality measures could worsen at future measurement periods if the effects of COVID-19 are prolonged.

Recent Accounting Pronouncements

Adoption of New Accounting Standards:

In August 2018, FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). This ASU adds, eliminates and modifies certain disclosure requirements for fair value measurements. The amendments in ASU 2018-13 were effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption was permitted. The Company adopted ASU 2018-13 in the first quarter of 2020. The disclosures were effective using the prospective method for certain disclosures and retrospective for a majority of the disclosures. The Company adopted ASU 2018-13 in the first quarter of 2020 and it did not have a material impact on the Company’s consolidated financial statements.

New Accounting Standards Not Yet Adopted:

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which along with several other subsequent codification updates related to accounting for credit losses, sets forth a “current expected credit loss” ("CECL") model requiring the Company to measure all expected credit losses for financial instruments recorded at amortized cost held at the reporting date. The estimate is to be based on historical experience, current conditions and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. The amendments were effective for the Company beginning January 1, 2020. The initial adoption of this ASU will result in an increase of approximately $11.3 million in our allowance for loan losses, including transfers of non-accretable discount on purchased credit-impaired loans. The increase is a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. The adoption of this ASU requires that we establish an allowance for expected credit losses for certain debt securities and other financial assets which are not material. We plan to elect the federal banking agencies’ rule providing for an optional three-year phase-in period for the day-one adverse regulatory capital effects upon adopting the standard. The Company elected to defer adoption of CECL until the termination date of the current national emergency, declared by the President on March 31, 2020, under the National Emergencies Act concerning the COVID-19 outbreak, or December 31, 2020.

In December 2019, FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This ASU simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition for deferred tax liabilities for outside basis differences. This ASU also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12 is effective for annual periods beginning after December 15, 2020, including

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interim periods within those annual periods. Early adoption is permitted. Southern National is currently in the process of evaluating the impact of adopting the new guidance on its consolidated financial statements and disclosures.

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. The ASU is intended to help stakeholders during the global market-wide reference rate transition period. ASU 2020-04 is effective upon issuance and can be applied through December 31, 2022. Southern National is currently in the process of evaluating the impact of adopting the new guidance on its consolidated financial statements and disclosures.

2. STOCK-BASED COMPENSATION

At the June 21, 2017 Annual Meeting of Stockholders of Southern National, the 2017 Equity Compensation Plan (the “2017 Plan”) was approved as recommended by the Board of Directors. The 2017 Plan replaced the 2010 Plan and has a maximum number of 750,000 shares reserved for issuance. The purpose of the 2017 Plan was to promote the success of the Company by providing greater incentive to employees, non-employee directors, consultants and advisors to associate their personal interests with the long-term financial success of the Company, including its subsidiaries, and with growth in stockholder value, consistent with the Company’s risk management practices. Because the 2017 Plan was approved, shares under the 2004 stock-option plan or 2010 Plan were to be no longer awarded.

A summary of the activity in the stock option plan during the three months ended March 31, 2020 follows:


				Weighted
		Weighted		Average	Aggregate
		Average		Remaining	Intrinsic
		Exercise		Contractual	Value
	Shares	Price		Term	(in thousands)
Options outstanding, beginning of period	555,750	$	10.02	4.3	$	3,518
Exercised	(44,600)		7.32
Options outstanding, end of period	511,150	$	10.25	4.3	$	(212)

Exercisable at end of period	392,730	$	9.45	3.7	$	18

Stock-based compensation expense associated with stock options was $95 thousand and $21 thousand for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, unrecognized compensation expense associated with stock options was $24 thousand, which is expected to be recognized over a weighted average period of 1.1 year.

A summary of the activity in the restricted stock plan for 2020 follows:


				Weighted
		Weighted		Average
		Average		Remaining
		Exercise		Contractual
	Shares	Price		Term
Unvested restricted stock outstanding, beginning of period	86,500	$	14.85	3.8
Granted	80,000		15.87
Vested	(89,900)		14.54
Unvested restricted stock outstanding, end of period	76,600	$	15.50	4.5

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Restricted stock compensation expense totaled $1.3 million and $83 thousand for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, unrecognized compensation expense associated with restricted stock was $1.2 million, which is expected to be recognized over a weighted average period of 4.5 years.

3. INVESTMENT SECURITIES

The amortized cost and fair value of available for sale investment securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows (in thousands):


	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
March 31, 2020
Residential government-sponsored mortgage-backed securities	$	48,523	$	1,804	$	(48)	$	50,279
Obligations of states and political subdivisions		16,248		592		(11)		16,829
Corporate securities		2,002		12		—		2,014
Trust preferred securities		2,530		101		(365)		2,266
Residential government-sponsored collateralized mortgage obligations		34,591		1,240		—		35,831
Government-sponsored agency securities		19,796		179		—		19,975
Agency commercial mortgage-backed securities		27,424		821		—		28,245
SBA pool securities		13,199		49		(167)		13,081
Total	$	164,313	$	4,798	$	(591)	$	168,520


	Amortized		Gross Unrealized				Fair
	Cost		Gains		Losses		Value
December 31, 2019
Residential government-sponsored mortgage-backed securities	$	48,540	$	455	$	(16)	$	48,979
Obligations of states and political subdivisions		17,041		541		—		17,582
Corporate securities		2,004		8		—		2,012
Trust preferred securities		2,530		283		(245)		2,568
Residential government-sponsored collateralized mortgage obligations		36,511		217		(39)		36,689
Government-sponsored agency securities		14,823		47		(48)		14,822
Agency commercial mortgage-backed securities		27,557		192		(18)		27,731
SBA pool securities		14,622		11		(196)		14,437
Total	$	163,628	$	1,755	$	(562)	$	164,820

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The amortized cost, unrecognized gains and losses, and fair value of investment securities held to maturity were as follows (in thousands):


	Amortized		Gross Unrecognized				Fair
	Cost		Gains		Losses		Value
March 31, 2020
Residential government-sponsored mortgage-backed securities	$	36,953	$	853	$	(3)	$	37,803
Obligations of states and political subdivisions		12,983		151		—		13,134
Trust preferred securities		1,783		—		(25)		1,758
Residential government-sponsored collateralized mortgage obligations		2,515		51		—		2,566
Government-sponsored agency securities		5,000		165		—		5,165
Total	$	59,234	$	1,220	$	(28)	$	60,426


	Amortized		Gross Unrecognized				Fair
	Cost		Gains		Losses		Value
December 31, 2019
Residential government-sponsored mortgage-backed securities	$	22,925	$	62	$	(52)	$	22,935
Obligations of states and political subdivisions		15,071		165		(1)		15,235
Trust preferred securities		1,938		99		(2)		2,035
Residential government-sponsored collateralized mortgage obligations		3,128		10		(9)		3,129
Government-sponsored agency securities		29,386		108		(162)		29,332
Total	$	72,448	$	444	$	(226)	$	72,666

During the three months ended March 31, 2020, $10.0 million and $15.2 million, respectively, of available for sale investment securities and held to maturity investment securities were purchased. No investment securities were sold during the three months ended March 31, 2020 and 2019.

The fair value and carrying amount, if different, of debt investment securities as of March 31, 2020, by contractual maturity were as follows (in thousands). Investment securities not due at a single maturity date are shown separately.


	Available for Sale				Held to Maturity
	Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value
Due in one to five years	$	2,569	$	2,669	$	3,418	$	3,495
Due in five to ten years		13,768		13,963		2,188		2,230
Due after ten years		24,239		24,452		14,160		14,332
Residential government-sponsored mortgage-backed securities		48,523		50,279		36,953		37,803
Residential government-sponsored collateralized mortgage obligations		34,591		35,831		2,515		2,566
Agency commercial mortgage-backed securities		27,424		28,245		—		—
SBA pool securities		13,199		13,081		—		—
Total	$	164,313	$	168,520	$	59,234	$	60,426

Investment securities with a carrying amount of approximately $114.7 million and $120.5 million at March 31, 2020 and December 31, 2019, respectively, were pledged to secure public deposits, certain other deposits, a line of credit for advances from the Federal Home Loan Bank (“FHLB”) of Atlanta, and repurchase agreements.

Southern National monitors its securities portfolio for indicators of other than temporary impairment. At March 31, 2020 and December 31, 2019, certain investment securities’ fair values were below cost. As outlined in the tables below, there were investment securities with fair values totaling approximately $16.1 million in the portfolio with the carrying value exceeding the estimated fair value that were considered temporarily impaired at March 31, 2020. Because the decline in fair value is attributable to changes in interest rates and market illiquidity, and not credit quality, and because we do not have the intent to sell these investment securities and it is likely that we will not be required to sell the investment securities

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before their anticipated recovery, management does not consider these investment securities to be other than temporarily impaired as of March 31, 2020.

The following tables present information regarding investment securities available for sale and held to maturity in a continuous unrealized loss position as of March 31, 2020 and December 31, 2019 by duration of time in a loss position (in thousands):


March 31, 2020	Less than 12 months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available for Sale	value		Losses		value		Losses		value		Losses
Residential government-sponsored mortgage-backed securities	$	3,556	$	(48)	$	—	$	—	$	3,556	$	(48)
Obligations of states and political subdivisions		759		(11)		—		—		759		(11)
Trust preferred securities		—		—		675		(365)		675		(365)
SBA pool securities		766		(1)		8,459		(166)		9,225		(167)
Total	$	5,081	$	(60)	$	9,134	$	(531)	$	14,215	$	(591)


March 31, 2020	Less than 12 months				12 Months or More				Total
	Fair		Unrecognized		Fair		Unrecognized		Fair		Unrecognized
Held to Maturity	value		Losses		value		Losses		value		Losses
Residential government-sponsored mortgage-backed securities	$	—	$	—	$	146	$	(3)	$	146	$	(3)
Trust preferred securities		1,758		(25)		—		—		1,758		(25)
Total	$	1,758	$	(25)	$	146	$	(3)	$	1,904	$	(28)


December 31, 2019	Less than 12 months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available for Sale	value		Losses		value		Losses		value		Losses
Residential government-sponsored mortgage-backed securities	$	2,686	$	(7)	$	1,758	$	(9)	$	4,444	$	(16)
Trust preferred securities		—		—		795		(245)		795		(245)
Residential government-sponsored collateralized mortgage obligations		4,253		(25)		3,133		(14)		7,386		(39)
Government-sponsored agency securities		4,924		(48)		—		—		4,924		(48)
Agency commercial mortgage-backed securities		2,833		(6)		3,126		(12)		5,959		(18)
SBA pool securities		1,148		(2)		9,420		(194)		10,568		(196)
Total	$	15,844	$	(88)	$	18,232	$	(474)	$	34,076	$	(562)


December 31, 2019	Less than 12 months				12 Months or More				Total
	Fair		Unrecognized		Fair		Unrecognized		Fair		Unrecognized
Held to Maturity	value		Losses		value		Losses		value		Losses
Residential government-sponsored mortgage-backed securities	$	14,978	$	(41)	$	1,402	$	(11)	$	16,380	$	(52)
Obligations of states and political subdivisions		2,011		(1)		—		—		2,011		(1)
Trust preferred securities		—		—		53		(2)		53		(2)
Residential government-sponsored collateralized mortgage obligations		1,162		(3)		571		(6)		1,733		(9)
Government-sponsored agency securities		—		—		20,833		(162)		20,833		(162)
Total	$	18,151	$	(45)	$	22,859	$	(181)	$	41,010	$	(226)

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As of March 31, 2020, we owned pooled trust preferred investment securities as follows (in thousands):


												% of		Previously
												Current		Recognized
												Defaults and		Cumulative
		Ratings When								Estimated		Deferrals to		Other
	Tranche	Purchased		Current Ratings		Par		Book		Fair		Total		Comprehensive
Security	Level	Moody's	Fitch	Moody's	Fitch	Value		Value		Value		Collateral		Loss(1)
Held to Maturity
ALESCO VII A1B	Senior	Aaa	AAA	Aa1	AA	$	1,910	$	1,783	$	1,758	17	%	$	219
						$	1,910	$	1,783	$	1,758			$	219

Available for Sale														Cumulative OTTI
Other Than														Related to
Temporarily Impaired:														Credit Loss (2)
TPREF FUNDING II	Mezzanine	A1	A-	Caa3	WD	$	1,500	$	1,040	$	675	32	%	$	400
ALESCO V C1	Mezzanine	A2	A	Caa1	C		2,150		1,490		1,591	15	%		660
						$	3,650	$	2,530	$	2,266			$	1,060

Total						$	5,560	$	4,313	$	4,024

(1)	Pre-tax, and represents unrealized losses at date of transfer from available-for-sale to held-to-maturity, net of accretion.

(2)

Pre-tax.

Each of these investment securities has been evaluated for other than temporary impairment. In performing a detailed cash flow analysis of each investment security, Sonabank works with independent third parties to estimate expected cash flows and assist with the evaluation of other than temporary impairment. There have been no changes to our cash flow analyses and assumptions as of March 31, 2020.

There were no other than temporary impairment charges related to credit losses or sales of these securities during the three months ended March 31, 2020 and 2019.

Changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2020 and 2019 are shown in the tables below. All amounts are net of tax (in thousands).


	Unrealized Holding
	Gains on		Held to Maturity
For the three months ended March 31, 2020	Available for Sale		Securities		Total
Beginning balance	$	943	$	(160)	$	783
Current period other comprehensive income		2,382		2		2,384
Ending balance	$	3,325	$	(158)	$	3,167


	Unrealized Holding
	Losses on		Held to Maturity
For the three months ended March 31, 2019	Available for Sale		Securities		Total
Beginning balance	$	(2,419)	$	(170)	$	(2,589)
Current period other comprehensive income		856		2		858
Ending balance	$	(1,563)	$	(168)	$	(1,731)

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4. LOANS AND ALLOWANCE FOR LOAN LOSSES

The following table summarizes the composition of our loan portfolio as of March 30, 2020 and December 31, 2019 (in thousands):


	March 31, 2020		December 31, 2019
Loans secured by real estate:
Commercial real estate - owner occupied	$	409,739	$	414,479
Commercial real estate - non-owner occupied		599,987		559,195
Secured by farmland		16,608		17,622
Construction and land loans		115,144		150,750
Residential 1-4 family (1)		624,119		604,777
Multi- family residential		90,652		82,055
Home equity lines of credit (1)		106,820		109,006
Total real estate loans		1,963,069		1,937,884

Commercial loans		223,433		221,447
Consumer loans		25,708		26,304
Subtotal		2,212,210		2,185,635
Plus deferred costs on loans		328		412
Total loans	$	2,212,538	$	2,186,047

(1)	Included $13.5 million of loans as of December 31, 2019, acquired in the Greater Atlantic Bank (“GAB”) transaction covered under an FDIC loss-share agreement. The agreement covering single family loans expired on December 31, 2019.

Accounting policy related to the allowance for loan losses is considered a critical policy given the level of estimation, judgment, and uncertainty in the levels of the allowance required to account for the inherent probable losses in the loan portfolio and the material effect such estimation, judgment, and uncertainty can have on the Company’s consolidated financial results.

Accretable discount on the acquired loans totaled $10.6 million and $11.2 million at March 31, 2020 and December 31, 2019, respectively. Accretion associated with the acquired loans held for investment of $597 thousand and $816 thousand was recognized during the three months ended March 31, 2020 and 2019, respectively.

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Impaired loans for the portfolio were as follows (in thousands):


	Total Loans
			Unpaid
	Recorded		Principal		Related
March 31, 2020	Investment (1)		Balance		Allowance
With no related allowance recorded
Commercial real estate - owner occupied	$	5,986	$	6,956	$	—
Commercial real estate - non-owner occupied (2)		3,231		3,327		—
Construction and land development		357		802		—
Commercial loans		5,276		6,513		—
Residential 1-4 family (3)		5,103		6,222		—
Other consumer loans		20		20		—
Total	$	19,973	$	23,840	$	—

With an allowance recorded
Commercial real estate - owner occupied	$	—	$	—	$	—
Commercial real estate - non-owner occupied (2)		—		—		—
Construction and land development		—		—		—
Commercial loans		2,415		2,480		1,309
Residential 1-4 family (3)		—		—		—
Other consumer loans		—		—		—
Total	$	2,415	$	2,480	$	1,309
Grand total	$	22,388	$	26,320	$	1,309


	Total Loans
			Unpaid
	Recorded		Principal		Related
December 31, 2019	Investment (1)		Balance		Allowance
With no related allowance recorded
Commercial real estate - owner occupied	$	6,890	$	8,530	$	—
Commercial real estate - non-owner occupied (2)		3,120		3,363		—
Construction and land development		345		747		—
Commercial loans		5,049		8,490		—
Residential 1-4 family (3)		1,021		2,719		—
Other consumer loans		—		—		—
Total	$	16,425	$	23,849	$	—

With an allowance recorded
Commercial real estate - owner occupied	$	—	$	—	$	—
Commercial real estate - non-owner occupied (2)		176		281		1
Construction and land development		—		—		—
Commercial loans		2,498		2,533		957
Residential 1-4 family (3)		2,841		3,243		92
Other consumer loans		39		39		1
Total	$	5,554	$	6,096	$	1,051
Grand total	$	21,979	$	29,945	$	1,051

(1)	Recorded investment is after cumulative prior charge offs of $1.5 million as of March 31, 2020 and December 31, 2019. These loans also have aggregate SBA guarantees of $4.4 million and $3.1 million as of March 31, 2020 and December 31, 2019, respectively.

(2)	Includes loans secured by farmland and multi-family residential loans.

(3)	Includes home equity lines of credit.

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The following tables present the average recorded investment and interest income recognized for impaired loans recognized by class of loans for the three months ended March 31, 2020 and 2019 (in thousands):


	Total Loans
	Average		Interest
	Recorded		Income
Three Months Ended March 31, 2020	Investment		Recognized
With no related allowance recorded
Commercial real estate - owner occupied	$	6,987	$	91
Commercial real estate - non-owner occupied (1)		3,341		46
Construction and land development		815		14
Commercial loans		3,646		46
Residential 1-4 family (2)		6,229		37
Other consumer loans		20		—
Total	$	21,038	$	234

With an allowance recorded
Commercial real estate - owner occupied	$	—	$	—
Commercial real estate - non-owner occupied (1)		—		—
Construction and land development		—		—
Commercial loans		3,581		49
Residential 1-4 family (2)		—		—
Other consumer loans		—		—
Total	$	3,581	$	49
Grand total	$	24,619	$	283


	Total Loans
	Average		Interest
	Recorded		Income
Three Months Ended March 31, 2019	Investment		Recognized
With no related allowance recorded
Commercial real estate - owner occupied	$	6,034	$	66
Commercial real estate - non-owner occupied (1)		4,435		37
Construction and land development		370		14
Commercial loans		5,011		11
Residential 1-4 family (2)		5,305		59
Other consumer loans		40		—
Total	$	21,195	$	187

With an allowance recorded
Commercial real estate - owner occupied	$	—	$	—
Commercial real estate - non-owner occupied (1)		—		—
Construction and land development		—		—
Commercial loans		4,712		50
Residential 1-4 family (2)		984		18
Other consumer loans		—		—
Total	$	5,696	$	68
Grand total	$	26,891	$	255

________________________________________

(1)	Includes loans secured by farmland and multi-family residential loans.

(2)	Includes home equity lines of credit.

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The following tables present the aging of the recorded investment in past due loans by class of loans as of March 31, 2020 and December 31, 2019 (in thousands):


	30 - 59		60 - 89		90
	Days		Days		Days		Total		Nonaccrual		Loans Not		Total
March 31, 2020	Past Due		Past Due		or More		Past Due		Loans (3)		Past Due		Loans (4)
Total loans:
Commercial real estate - owner occupied	$	8,716	$	942	$	—	$	9,658	$	—	$	400,081	$	409,739
Commercial real estate - non-owner occupied (1)		10,837		867		—		11,704		—		695,543		707,247
Construction and land development		1,087		—		—		1,087		—		114,057		115,144
Commercial loans		571		109		—		680		5,358		217,395		223,433
Residential 1-4 family (2)		14,531		394		—		14,925		3,563		712,451		730,939
Other consumer loans		211		6		—		217		20		25,471		25,708
Total	$	35,953	$	2,318	$	—	$	38,271	$	8,941	$	2,164,998	$	2,212,210


	30 - 59		60 - 89		90
	Days		Days		Days		Total		Nonaccrual		Loans Not		Total
December 31, 2019	Past Due		Past Due		or More		Past Due		Loans (3)		Past Due		Loans
Total loans:
Commercial real estate - owner occupied	$	813	$	—	$	—	$	813	$	—	$	413,666	$	414,479
Commercial real estate - non-owner occupied (1)		936		—		—		936		—		657,936		658,872
Construction and land development		746		275		—		1,021		—		149,729		150,750
Commercial loans		234		62		—		296		6,337		214,814		221,447
Residential 1-4 family (2)		4,060		—		—		4,060		2,524		707,199		713,783
Other consumer loans		107		—		—		107		39		26,158		26,304
Total	$	6,896	$	337	$	—	$	7,233	$	8,900	$	2,169,502	$	2,185,635

(1)	Includes loans secured by farmland and multi-family residential loans.

(2)	Includes home equity lines of credit.

(3)	Nonaccrual loans include SBA guaranteed amounts totaling $2.9 million and $4.1 million at March 31, 2020 and December 31, 2019, respectively.

(4)	Includes $547.1 million of loans that were subject to deferrals at April 30, 2020.

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Activity in the allowance for loan and lease losses by class of loan for the three months ended March 31, 2020 and 2019 is summarized below (in thousands):


	Commercial		Commercial
	Real Estate		Real Estate		Construction						Other
	Owner		Non-owner		and Land		Commercial		1-4 Family		Consumer
Three Months Ended March 31, 2020	Occupied		Occupied (1)		Development		Loans		Residential (2)		Loans		Unallocated		Total
Allowance for loan losses:
Beginning balance	$	810	$	1,720	$	683	$	5,418	$	1,266	$	190	$	174	$	10,261
Provision (recovery) for non-purchased loans		253		971		(307)		822		1,387		74		(100)		3,100
Provision for purchase credit impaired loans		—		—		—		350		—		—		—		350
Total provision (recovery)		253		971		(307)		1,172		1,387		74		(100)		3,450
Charge offs		—		—		—		(822)		(245)		(32)		—		(1,099)
Recoveries		5		2		—		65		31		7		—		110
Ending balance	$	1,068	$	2,693	$	376	$	5,833	$	2,439	$	239	$	74	$	12,722

Three Months Ended March 31, 2019
Allowance for loan losses:
Beginning balance	$	802	$	1,669	$	821	$	7,097	$	1,106	$	224	$	564	$	12,283
Provision (recovery)		11		624		99		(887)		56		83		214		200
Charge offs		—		(462)		—		(167)		—		(60)		—		(689)
Recoveries		3		—		—		63		8		6		—		80
Ending balance	$	816	$	1,831	$	920	$	6,106	$	1,170	$	253	$	778	$	11,874

(1)	Includes loans secured by farmland and multi-family residential loans.

(2)	Includes home equity lines of credit.

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The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2020 and the balance in the allowance for loan losses and the recorded investment in non-covered loans by portfolio segment and based on impairment method as of December 31, 2019 (in thousands):


	Commercial		Commercial
	Real Estate		Real Estate		Construction						Other
	Owner		Non-owner		and Land		Commercial		1-4 Family		Consumer
March 31, 2020	Occupied		Occupied (1)		Development		Loans		Residential (2)		Loans		Unallocated		Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	—	$	—	$	1,309	$	—	$	—	$	—	$	1,309
Collectively evaluated for impairment		1,068		2,693		376		4,524		2,439		239		74		11,413
Total ending allowance	$	1,068	$	2,693	$	376	$	5,833	$	2,439	$	239	$	74	$	12,722

Loans:
Individually evaluated for impairment	$	5,986	$	3,231	$	357	$	5,276	$	5,103	$	20	$	—	$	19,973
Collectively evaluated for impairment		403,753		704,016		114,787		218,157		725,836		25,688		—		2,192,237
Total ending loan balances	$	409,739	$	707,247	$	115,144	$	223,433	$	730,939	$	25,708	$	—	$	2,212,210

December 31, 2019
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	—	$	—	$	957	$	85	$	—	$	—	$	1,042
Collectively evaluated for impairment		810		1,720		683		4,461		1,181		190		174		9,219
Total ending allowance	$	810	$	1,720	$	683	$	5,418	$	1,266	$	190	$	174	$	10,261

Loans:
Individually evaluated for impairment	$	6,890	$	3,120	$	345	$	7,544	$	1,443	$	—	$	—	$	19,342
Collectively evaluated for impairment		407,589		655,752		150,405		213,903		712,340		26,304		—		2,166,293
Total ending loan balances	$	414,479	$	658,872	$	150,750	$	221,447	$	713,783	$	26,304	$	—	$	2,185,635

(1)	Includes loans secured by farmland and multi-family residential loans.

(2)	Includes home equity lines of credit.

Troubled Debt Restructurings

A modification is classified as a TDR if both of the following exist: (1) the borrower is experiencing financial difficulty and (2) the Bank has granted a concession to the borrower. The Bank determines that a borrower may be experiencing financial difficulty if the borrower is currently delinquent on any of its debt, or if the Bank is concerned that the borrower may not be able to perform in accordance with the current terms of the loan agreement in the foreseeable future. Many aspects of the borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty, particularly as it relates to commercial borrowers due to the complex nature of the loan structure, business/industry risk and borrower/guarantor structures. Concessions may include the reduction of an interest rate at a rate lower than current market rates for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, or principal forgiveness. When evaluating whether a concession has been granted, the Bank also considers whether the borrower has provided additional collateral or guarantors and whether such additions adequately compensate the Bank for the restructured terms, or if the revised terms are consistent with those currently being offered to new loan customers. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty and whether a concession has been granted is subjective in nature and management’s judgment is required when determining whether a modification is a TDR.

Although each occurrence is unique to the borrower and is evaluated separately, for all portfolio segments, TDRs are typically modified through reduction in interest rates, reductions in payments, changing the payment terms from principal and interest to interest only, and/or extensions in term maturity.

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There were no TDRs during the three months ended March 31, 2020 and there have been no defaults of TDRs modified during the past twelve months.

Credit Quality Indicators

Through its system of internal controls, Southern National evaluates and segments loan portfolio credit quality on a quarterly basis using regulatory definitions for Special Mention, Substandard and Doubtful. Special Mention loans are considered to be criticized. Substandard and Doubtful loans are considered to be classified.

Special Mention loans are loans that have a potential weakness that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position.

Substandard loans may be inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful loans have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Southern National had no loans classified Doubtful at March 31, 2020 or December 31, 2019.

As of March 31, 2020 and December 31, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands):


	Total Loans
	Special
March 31, 2020	Mention		Substandard (3)		Pass		Total
Commercial real estate - owner occupied	$	3,795	$	4,192	$	401,752	$	409,739
Commercial real estate - non-owner occupied (1)		3,563		173		703,511		707,247
Construction and land development		—		667		114,477		115,144
Commercial loans		3,487		4,212		215,734		223,433
Residential 1-4 family (2)		661		1,308		728,970		730,939
Other consumer loans		116		—		25,592		25,708
Total	$	11,622	$	10,552	$	2,190,036	$	2,212,210


	Total Loans
	Special
December 31, 2019	Mention		Substandard (3)		Pass		Total
Commercial real estate - owner occupied	$	3,821	$	3,975	$	406,683	$	414,479
Commercial real estate - non-owner occupied (1)		4,193		176		654,503		658,872
Construction and land development		—		690		150,060		150,750
Commercial loans		3,432		4,462		213,553		221,447
Residential 1-4 family (2)		666		1,194		711,923		713,783
Other consumer loans		122		—		26,182		26,304
Total	$	12,234	$	10,497	$	2,162,904	$	2,185,635

(1)	Includes loans secured by farmland and multi-family residential loans.

(2)	Includes home equity lines of credit.

(3)	Includes SBA guarantees of $2.9 million and $4.1 million as of March 31, 2020 and December 31, 2019, respectively.

The amount of foreclosed residential real estate property held at March 31, 2020 and December 31, 2019 was $1.2 million and $1.4 million, respectively. The recorded investment in consumer mortgage loans collateralized by residential

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real estate property that are in the process of foreclosure was $2.0 million and $1.9 million at March 31, 2020 and December 31, 2019, respectively.

5. LEASES

The Company leases certain premises and equipment under operating leases. In recognizing lease right-of-use assets and related liabilities, we account for lease and non-lease components (such as taxes, insurance, and common area maintenance costs) separately as such amounts are generally readily determinable under our lease contracts. At March 31, 2020, the Company had operating lease liabilities totaling $8.5 million and right-of-use assets totaling $7.7 million related to these leases. Operating lease liabilities and right-of-use assets are reflected in our consolidated balance sheets. We do not currently have any financing leases. For the three months ended March 31, 2020 and 2019, our net operating lease cost was $1.0 million and $586 thousand, respectively and was reflected in occupancy expenses on our income statement.

The following table presents supplemental cash flow and other information related to our operating leases:


	For the Three Months Ended
(in thousands except for percent and period data)	March 31, 2020			March 31, 2019
Supplemental cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	$	1,241		$	1,262
Right-of-use assets obtained in exchange for new operating lease liabilities	$	—		$	155

Other information:
Weighted-average remaining lease term - operating leases, in years		5.6			6.1
Weighted-average discount rate - operating leases		2.8	%		3.0	%

The following table summarizes the maturity of remaining lease liabilities:



	As of
(dollars in thousands)	March 31, 2020
Lease payments due:
Less than one year	$	2,305
One to three years		3,323
Three to five years		2,043
More than five years		1,586
Total lease payments		9,257
Less: imputed interest		(748)
Lease liabilities	$	8,509

As of March 31, 2020, the Company did not have any operating leases that have not yet commenced that will create additional lease liabilities and right-of-use assets for the Company.

6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

Southern National 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, standby letters of credit and guarantees of credit card accounts. These instruments involve elements of credit and funding risk in excess of the amount recognized in the consolidated balance sheet. Letters of credit are written conditional commitments issued by Southern National 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. We had letters of credit outstanding totaling $17.6 million and $17.7 million as of March 31, 2020 and December 31, 2019, respectively.

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Our 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. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. Unless noted otherwise, we do 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 are made predominately for adjustable rate loans, and generally have fixed expiration dates of up to three months or other termination clauses and usually 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. We evaluate each customer’s creditworthiness on a case-by-case basis.

At March 31, 2020 and December 31, 2019, we had unfunded lines of credit and undisbursed construction loan funds totaling $341.0 million and $324.8 million, respectively. Virtually all of our unfunded lines of credit and undisbursed construction loan funds are variable rate.

7. EARNINGS PER SHARE

The following is a reconciliation of the denominators of the basic and diluted earnings per share (“EPS”) computations (amounts in thousands, except per share data):


			Weighted
			Average
	Income		Shares	Per Share
	(Numerator)		(Denominator)	Amount
For the three months ended March 31, 2020
Basic EPS	$	27	24,168	$	0.00
Effect of dilutive stock options and unvested restricted stock		—	220		—
Diluted EPS	$	27	24,388	$	0.00

For the three months ended March 31, 2019
Basic EPS	$	6,020	24,012	$	0.25
Effect of dilutive stock options and unvested restricted stock		—	299		—
Diluted EPS	$	6,020	24,311	$	0.25

The Company did not have any anti-dilutive options in 2020 and 2019.

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8. FAIR VALUE

ASC 820 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability

The following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy:

Assets Measured on a Recurring Basis:

Investment Securities Available for Sale

Where quoted prices are available in an active market, investment securities are classified within Level 1 of the valuation hierarchy. Level 1 investment securities include highly liquid government bonds and mortgage products. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of investment securities with similar characteristics or discounted cash flow. Level 2 investment securities include U.S. agency securities, mortgage-backed securities, obligations of states and political subdivisions and certain corporate, asset-backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, investment securities are classified within Level 3 of the valuation hierarchy. Currently, a majority of Southern National’s available for sale debt investment securities are considered to be Level 2 investment securities, except for a few corporate securities that are classified as Level 3 investment securities.

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Assets measured at fair value on a recurring basis are summarized below:


			Fair Value Measurements Using
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	Total at		Identical Assets		Inputs		Inputs
(dollars in thousands)	March 31, 2020		(Level 1)		(Level 2)		(Level 3)
Available for sale securities
Residential government-sponsored mortgage-backed securities	$	50,279	$	—	$	50,279	$	—
Obligations of states and political subdivisions		16,829		—		16,829		—
Corporate securities		2,014		—		1,014		1,000
Trust preferred securities		2,266		—		2,266		—
Residential government-sponsored collateralized mortgage obligations		35,831		—		35,831		—
Government-sponsored agency securities		19,975		—		19,975		—
Agency commercial mortgage-backed securities		28,245		—		28,245		—
SBA pool securities		13,081		—		13,081		—
Total	$	168,520	$	—	$	167,520	$	1,000


			Fair Value Measurements Using
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	Total at		Identical Assets		Inputs		Inputs
(dollars in thousands)	December 31, 2019		(Level 1)		(Level 2)		(Level 3)
Available for sale securities
Residential government-sponsored mortgage-backed securities	$	48,979	$	—	$	48,979	$	—
Obligations of states and political subdivisions		17,582		—		17,582		—
Corporate securities		2,012		—		1,012		1,000
Trust preferred securities		2,568		—		2,568		—
Residential government-sponsored collateralized mortgage obligations		36,689		—		36,689		—
Government-sponsored agency securities		14,822		—		14,822		—
Agency commercial mortgage-backed securities		27,731		—		27,731		—
SBA pool securities		14,437		—		14,437		—
Total	$	164,820	$	—	$	163,820	$	1,000

No corporate securities that are classified as Level 3 above were purchased or sold during 2020 or 2019. These corporate securities did not have a material impact on the income statement for the three months ended March 31, 2020 and 2019.

Assets and Liabilities Measured on a Non-recurring Basis:

Impaired Loans

Generally, we measure the impairment for impaired loans considering the fair value of the loan’s collateral (if the loan is collateral dependent). Fair value of the loan’s collateral is determined by an independent appraisal or evaluation less estimated costs related to selling the collateral. In some cases appraised value is net of costs to sell. Estimated selling costs range from 5% to 10% of collateral valuation at March 31, 2020 and December 31, 2019. Fair value is classified as Level 3 in the fair value hierarchy. Loans identified as impaired totaled $22.4 million (including SBA guarantees of $3.1 million) as of March 31, 2020 with $1.3 million allocation made to the allowance for loan losses compared to a carrying amount of $22.0 million (including SBA guarantees of $4.4 million) with $1.1 million allocation made to the allowance for loan losses at December 31, 2019.

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Assets Held for Sale

In connection with the merger with EVBS, SNBV acquired four properties that were either former EVBS administrative locations or previously anticipated to be future EVBS administrative locations. As of March 31, 2020, all four of these properties have been sold. Assets held for sale are measured at fair value less cost to sell, based on appraisals conducted by an independent, licensed appraiser outside of the Company using observable market data. If the fair value is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level 3. Assets held for sale are measured at fair value on a non-recurring basis and are included in other assets in the consolidated balance sheets. Subsequent fair value adjustments are recorded in the period incurred and included in other noninterest expense on the consolidated statements of comprehensive income.

Other Real Estate Owned (“OREO”)

OREO is evaluated at the time of acquisition and recorded at fair value as determined by independent appraisal or evaluation less cost to sell. In some cases appraised value is net of costs to sell. Selling costs have been in the range from 5% to 10% of collateral valuation at March 31, 2020 and December 31, 2019. Fair value is classified as Level 3 in the fair value hierarchy. OREO is further evaluated quarterly for any additional impairment. At March 31, 2020 and December 31, 2019, the total amount of OREO was $5.9 million and $6.2 million, respectively.

Assets measured at fair value on a non-recurring basis are summarized below:


			Fair Value Measurements Using
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	Total at		Identical Assets		Inputs		Inputs
(dollars in thousands)	March 31, 2020		(Level 1)		(Level 2)		(Level 3)
Impaired loans:
Commercial real estate - owner occupied	$	5,986	$	—	$	—	$	5,986
Commercial real estate - non-owner occupied (1)		3,231		—		—		3,231
Construction and land development		357		—		—		357
Commercial loans		7,691		—		—		7,691
Residential 1-4 family (2)		5,103		—		—		5,103
Consumer		20		—		—		20
Other real estate owned:
Commercial real estate - owner occupied (1)		1,984		—		—		1,984
Construction and land development		2,666		—		—		2,666
Residential 1-4 family (2)		1,226		—		—		1,226

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			Fair Value Measurements Using
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	Total at		Identical Assets		Inputs		Inputs
(dollars in thousands)	December 31, 2019		(Level 1)		(Level 2)		(Level 3)
Impaired loans:
Commercial real estate - owner occupied	$	6,890	$	—	$	—	$	6,890
Commercial real estate - non-owner occupied (1)		3,296		—		—		3,296
Construction and land development		345		—		—		345
Commercial loans		7,547		—		—		7,547
Residential 1-4 family (2)		3,862		—		—		3,862
Consumer		39		—		—		39
Other real estate owned:
Commercial real estate - owner occupied (1)		1,984		—		—		1,984
Construction and land development		2,874		—		—		2,874
Residential 1-4 family (2)		1,366		—		—		1,366

(1)	Includes loans secured by farmland and multi-family residential loans.

(2)	Includes home equity lines of credit.

Fair Value of Financial Instruments

The carrying amount, estimated fair values and fair value hierarchy levels (previously defined) of financial instruments were as follows (in thousands) for the periods indicated:


		March 31, 2020				December 31, 2019
	Fair Value	Carrying		Fair		Carrying		Fair
	Hierarchy Level	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	55,865	$	55,865	$	31,928	$	31,928
Securities available for sale	Level 2 & Level 3		168,520		168,520		164,820		164,820
Securities held to maturity	Level 2		59,234		60,426		72,448		72,666
Stock in Federal Reserve Bank and Federal Home Loan Bank	Level 2		21,396		21,396		17,832		17,832
Equity investment in mortgage affiliate	Level 3		5,251		5,251		5,020		5,020
Preferred investment in mortgage affiliate	Level 3		3,305		3,305		3,305		3,305
Net loans	Level 3		2,199,816		2,217,962		2,175,786		2,180,487
Accrued interest receivable	Level 2 & Level 3		8,548		8,548		8,210		8,210
Financial liabilities:
Demand deposits and NOW accounts	Level 2	$	719,072	$	719,072	$	730,325	$	730,325
Money market and savings accounts	Level 2		629,066		629,066		611,353		611,353
Time deposits	Level 3		727,216		736,513		783,040		786,420
Securities sold under agreements to repurchase	Level 1		13,179		13,179		12,883		12,883
FHLB short term advances	Level 1		205,140		205,140		121,640		121,640
Junior subordinated debt	Level 2		9,645		8,787		9,632		9,206
Senior subordinated notes	Level 2		47,041		48,044		47,051		48,156
Accrued interest payable	Level 1 & Level 3		5,025		5,025		4,907		4,907

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Carrying amount is the estimated fair value for cash and cash equivalents (including federal funds sold), accrued interest receivable and payable, demand deposits, savings accounts, money market accounts and short-term debt (FHLB short-term advances and securities sold under agreements to repurchase).

The investment in common stock of our mortgage affiliate is accounted for using the equity method. Under the equity method, the carrying value of Southern National’s investment in STM was originally recorded at cost but is adjusted periodically to record Southern National’s proportionate share of STM’s earnings or losses through noninterest income and decreased by the amount of cash dividends or similar distributions received from STM. The investment in preferred stock of our mortgage affiliate is considered to be a non-marketable equity security that does not have a readily determinable fair value. Non-marketable equity securities with no recurring market value data available are reviewed periodically and any observable market value change are adjusting through noninterest income. Southern National evaluates its investments in this non-marketable equity security for impairment and recoverability of the recorded investment by considering positive and negative evidence, including the profitability and asset quality of STM, dividend payment history and recent redemption experience. Impairment is assessed at each reporting period and if identified, is recognized in noninterest income. No impairment was recorded for the three month periods ended March 31, 2020 and 2019.

Fair value of long-term debt is based on current rates for similar financing. Carrying amount of Federal Reserve Bank and FHLB stock is a reasonable estimate of fair value as these securities are not readily marketable and are based on the ultimate recoverability of the par value. The fair value of off-balance-sheet items is not considered material. Fair value of net loans, time deposits, junior subordinated debt, and senior subordinated notes are measured using the exit-price notion.

9. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER SHORT-TERM BORROWINGS

Other short-term borrowings can consist of FHLB of Atlanta overnight advances, other FHLB advances maturing within one year, federal funds purchased and securities sold under agreements to repurchase (“repo”) that mature within one year, which are secured transactions with customers. The balance in repo accounts at March 31, 2020 and December 31, 2019 was $13.2 million and $12.9 million, respectively.

10. JUNIOR SUBORDINATED DEBT AND SENIOR SUBORDINATED NOTES

In connection with our merger with EVBS, the Company assumed $10.3 million of trust preferred securities that were issued on September 17, 2003 and placed through the Trust in a pooled underwriting totaling approximately $650 million. The trust issuer has invested the total proceeds from the sale of the trust preferred securities in Floating Rate Junior Subordinated Deferrable Interest Debentures (“Junior Subordinated Debt”) issued by EVBS. At March 31, 2020 and December 31, 2019, we had $9.6 million of Junior Subordinated Debt. The trust preferred securities pay cumulative cash distributions quarterly at a variable rate per annum, reset quarterly, equal to the three-month LIBOR plus 2.95%. As of March 31, 2020 and December 31, 2019, the interest rate was 3.79% and 4.85%, respectively. The dividends paid to holders of the trust preferred securities, which are recorded as interest expense, are deductible for income tax purposes.

The trust preferred securities may be included in Tier 1 capital for regulatory capital adequacy determination purposes up to 25% of Tier 1 capital after its inclusion. At March 31, 2020, all of the trust preferred securities qualified as Tier 1 capital.

On January 20, 2017, Southern National completed the sale of $27.0 million of its fixed-to-floating rate Subordinated Notes due 2027 (the “SNBV Senior Subordinated Notes”). The SNBV Senior Subordinated Notes will initially bear interest at 5.875% per annum until January 31, 2022; thereafter, the SNBV Senior Subordinated Notes will be payable at an annual floating rate equal to three-month LIBOR plus a spread of 3.95% until maturity or early redemption. At March 31, 2020, all of the SNBV Senior Subordinated Notes qualified as Tier 2 capital. At March 31, 2020, the remaining unamortized debt issuance costs related to the SNBV Senior Subordinated Notes totaled $643 thousand.

Also in connection with our merger with EVBS, the Company assumed the Senior Subordinated Note Purchase Agreement previously entered into by EVBS on April 22, 2015 with certain institutional accredited investors pursuant to

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which EVBS sold $20.0 million (fair value adjustment of $1.9 million) in aggregate principal amount of its 6.50% Fixed-to-Floating Rate Subordinated Notes due 2025 (the “EVBS Senior Subordinated Notes”) to the investors at a price equal to 100% of the aggregate principal amount of the EVBS Senior Subordinated Notes. At March 31, 2020 all of the EVBS Senior Subordinated Notes qualified as Tier 2 capital.

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ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis is presented to aid the reader in understanding and evaluating the financial condition and results of operations of SNBV. This discussion and analysis should be read with the consolidated financial statements, the footnotes thereto, and the other financial data included in this report and in our annual report on Form 10-K for the year ended December 31, 2019. Results of operations for the three months ended March 31, 2020 are not necessarily indicative of results that may be attained for any other period.

FORWARD-LOOKING STATEMENTS

Statements and financial discussion and analysis contained in this Quarterly Report on Form 10-Q that are not statements of historical fact constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control, particularly with regard to developments related to the novel coronavirus (“COVID-19”). Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. The words “believe,” “may,” “forecast,” “should,” “anticipate,” “estimate,” “expect,” “intend,” “continue,” “would,” “could,” “hope,” “might,” “assume,” “objective,” “seek,” “plan,” “strive” or similar words, or the negatives of these words, identify forward-looking statements.

Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements. In addition to the Risk Factor contained in this Quarterly Report on Form 10-Q, as well as the Risk Factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, factors that could contribute to those differences include, but are not limited to:

●

the effects of future economic, business and market conditions and disruptions in the credit and financial markets, domestic and foreign;

●

the impact of COVID-19 on our business, including the impact of the actions taken by governmental authorities to contain the virus or address the impact of the virus on the United States economy (including, without limitation, the Coronavirus Aid, Relief and Economic Security (“CARES” Act)), and the resulting effect of all of such items on our operations, liquidity and capital position, and on the financial condition of our borrowers and other customers;

●

changes in the local economies in our market areas which adversely affect our customers and their ability to transact profitable business with us, including the ability of our borrowers to repay their loans according to their terms or a change in the value of the related collateral;

●

changes in the availability of funds resulting in increased costs or reduced liquidity, as well as the adequacy of our cash flow from operations and borrowings to meet our short-term liquidity needs;

●

a deterioration or downgrade in the credit quality and credit agency ratings of the investment securities in our investment securities portfolio;

●

impairment concerns and risks related to our investment securities portfolio of collateralized mortgage obligations, agency mortgage-backed securities, obligations of states and political subdivisions and pooled trust preferred securities;

●

the incurrence and possible impairment of goodwill associated with current or future acquisitions and possible adverse short-term effects on our results of operations;

●

increased credit risk in our assets and increased operating risk caused by a material change in commercial, consumer and/or real estate loans as a percentage of our total loan portfolio;

●

the concentration of our loan portfolio in loans collateralized by real estate;

●

our level of construction and land development and commercial real estate loans;

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●

failure to prevent a breach to our Internet-based system and online commerce security;

●

changes in the levels of loan prepayments and the resulting effects on the value of our loan portfolio;

●

the failure of assumptions and estimates underlying the establishment of and provisions made to the allowance for loan losses;

●

our ability to expand and grow our business and operations, including the establishment of additional branches and acquisition of additional branches and banks, and our ability to realize the cost savings and revenue enhancements we expect from such activities;

●

government intervention in the U.S. financial system, including the effects of legislative, tax, accounting and regulatory actions and reforms, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the Jumpstart Our Business Startups Act, the Consumer Financial Protection Bureau, the capital ratios of Basel III as adopted by the federal banking authorities and the Tax Cuts and Jobs Act of 2017;

●

uncertainty related to the transition away from or methods of calculating the LIBOR;

●

increased competition for deposits and loans adversely affecting rates and terms;

●

the continued service of key management personnel;

●

the potential payment of interest on demand deposit accounts to effectively compete for customers;

●

potential environmental liability risk associated with properties that we assume upon foreclosure;

●

increased asset levels and changes in the composition of assets and the resulting impact on our capital levels and regulatory capital ratios;

●

risks of current or future mergers and acquisitions, including the related time and cost of implementing transactions and the potential failure to achieve expected gains, revenue growth or expense savings;

●

increases in regulatory capital requirements for banking organizations generally, which may adversely affect our ability to expand our business or could cause us to shrink our business;

●

acts of God or of war or other conflicts, acts of terrorism, pandemics or other catastrophic events that may affect general economic conditions;

●

changes in accounting policies, rules and practices and applications or determinations made thereunder;

●

fraudulent and negligent acts by loan applicants, mortgage brokers and our employees;

●

failure to maintain effective internal controls and procedures;

●

the risk that our deferred tax assets could be reduced if future taxable income is less than currently estimated, if corporate tax rates in the future are less than current rates, or if sales of our capital stock trigger limitations on the amount of net operating loss carryforwards that we may utilize for income tax purposes;

●

our ability to attract and retain qualified employees; and

●

other factors and risks described under “Risk Factors” herein and in any of our subsequent reports that we file with the Securities and Exchange Commission (the “Commission” or “SEC”) under the Exchange Act.

Forward-looking statements are not guarantees of performance or results and should not be relied upon as representing management’s views as of any subsequent date. A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe we have chosen these assumptions or bases in good faith and that they are reasonable. We caution you, however, that assumptions or bases almost always vary from actual results, and the differences between assumptions or bases and actual results can be material. When considering forward-looking statements, you should refer to the risk factors and other cautionary statements in this Quarterly Report on Form 10-Q and in our periodic and current reports filed with the SEC for specific factors that could cause our actual results to be different from those expressed or implied by our forward-looking statements. These statements speak only as of the date of this Quarterly Report on Form 10-Q (or an earlier date to the extent applicable). Except as required by applicable law, we undertake no obligation to update publicly these statements in light of new information or future events.

OVERVIEW

SNBV is a corporation that was formed on July 28, 2004 under the laws of the Commonwealth of Virginia and is the holding company for Sonabank a Virginia state-chartered bank which commenced operations on April 14, 2005. On June 23, 2017, SNBV completed its merger with EVBS and the merger of EVBS’s wholly-owned subsidiary, EVB, with and into SNBV’s wholly-owned subsidiary, Sonabank. Sonabank provides a range of financial services to individuals and small and medium sized businesses.

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RESULTS OF OPERATIONS

Net Income

Three-Month Comparison. Net income for the three months ended March 31, 2020 was $27 thousand, or $0.00 basic and diluted earnings per share, compared to net income of $6.0 million, or $0.25 basic and diluted earnings per share for the three months ended March 31, 2019.

Net income declined $6.0 million during the three months ended March 31, 2020 compared to the three months ended March 31, 2019. The decline in net income was driven by a one-time charge of $4.4 million, net of taxes of salary and benefits expense related to the restructuring of executive management and a $378 thousand, net of taxes, one-time charge to occupancy for the pending closure of three underperforming branch offices. During the three months ended March 31, 2020, the Company made certain adjustments to its qualitative factors in response to the impact of COVID-19 that increased the provision by $3.1 million. Net income was also impacted by lower income tax expenses in the current year.

During the three months ended March 31, 2019, net income was impacted by a nonrecurring other loss of $2.5 million and related legal expense of $397 thousand, net of taxes.

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.

Three-Month Comparison. Net interest income was $20.5 million for the three months ended March 31, 2020 compared to $21.0 million for the three months ended March 31, 2019. Southern National’s net interest margin for the three months ended March 31, 2020 was 3.32% compared to 3.41% for the three months ended March 31, 2019. Total income on interest-earning assets was $28.5 million and $30.3 million for the three months ended March 31, 2020 and 2019, respectively. The yield on average interest-earning assets decreased 33 basis points to 4.61% during the three months ended March 31, 2020 compared to the 4.94% yield on average interest-earning assets during the three months ended March 31, 2019. The cost of average interest-bearing liabilities decreased 26 basis points to 1.60% during the three months ended March 31, 2020 when comparing to the 1.86% cost on average interest-bearing liabilities during the three months ended March 31, 2019. Interest and fees on loans totaled $26.7 million and $28.0 million for the first quarters of 2020 and 2019, respectively. The accretion of the discount on loans acquired in the acquisitions of EVBS, Greater Atlantic Bank, HarVest and Prince Georges Federal Savings Bank contributed $597 thousand to net interest income during the three months ended March 31, 2020 compared to $816 thousand during the three months ended March 31, 2019. The decrease in accretion was due to the slowdown in the volume of acquired loan prepayments and payoffs. Average loans during the first quarter of 2020 were $2.20 billion compared to $2.16 billion during the first quarter of 2019.

Total interest expense was $8.0 million and $9.4 million for the three months ended March 31, 2020 and 2019, respectively. Interest on deposits was $6.5 million and $7.5 million for the three months ended March 31, 2020 and 2019, respectively. Total average interest-bearing deposits for the first quarter of 2020 and 2019 were $1.75 billion and $1.82 billion, respectively. The yield on total average interest-bearing deposits was 1.49% and 1.66% for the quarter ended March 31, 2020 and 2019, respectively. Interest expense on total average borrowings, which include securities sold under agreements to repurchase, FHLB advances, junior subordinated debt, and senior subordinated notes, was $1.5 million and

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$1.9 million for the three months ended March 31, 2020 and 2019, respectively. Total average borrowings were $251.8 million and $214.0 million for the three months ended March 31, 2020 and 2019, respectively.

The following table details average balances of interest-earning assets and interest-bearing liabilities, the amount of interest earned/paid on such assets and liabilities, and the yield/rate for the periods indicated:


	Average Balance Sheets and Net Interest
	Analysis For the Three Months Ended
	March 31, 2020						March 31, 2019
			Interest						Interest
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate		Balance		Expense		Rate
	(Dollar amounts in thousands)
Assets
Interest-earning assets:
Loans, net of deferred fees (1) (2)	$	2,200,926	$	26,741	4.89	%	$	2,155,252	$	27,974	5.26	%
Investment securities		231,794		1,361	2.36	%		237,420		1,581	2.70	%
Other earning assets		54,800		379	2.79	%		90,370		748	3.36	%
Total earning assets		2,487,520		28,481	4.61	%		2,483,041		30,303	4.94	%
Allowance for loan losses		(10,928)						(12,296)
Total non-earning assets		263,627						257,217
Total assets	$	2,740,220					$	2,727,963

Liabilities and stockholders' equity
Interest-bearing liabilities:
NOW and other demand accounts	$	379,531	$	786	0.83	%	$	345,935	$	642	0.75	%
Money market accounts		469,651		1,575	1.35	%		401,615		1,828	1.85	%
Savings accounts		147,697		116	0.32	%		147,589		115	0.32	%
Time deposits		756,055		4,026	2.14	%		926,137		4,877	2.14	%
Total interest-bearing deposits		1,752,934		6,503	1.49	%		1,821,276		7,462	1.66	%
Borrowings		251,830		1,463	2.34	%		213,929		1,889	3.58	%
Total interest-bearing liabilities		2,004,764		7,966	1.60	%		2,035,205		9,351	1.86	%
Noninterest-bearing liabilities:
Demand deposits		333,408						320,299
Other liabilities		21,781						19,414
Total liabilities		2,359,953						2,374,919
Stockholders' equity		380,267						353,044
Total liabilities and stockholders' equity	$	2,740,220					$	2,727,963
Net interest income			$	20,515					$	20,952
Interest rate spread					3.01	%					3.08	%
Net interest margin					3.32	%					3.41	%

(1)	Includes loan fees in both interest income and the calculation of the yield on loans.

(2)	Calculations include non-accruing loans in average loan amounts outstanding.

Provision for Loan Losses

The provision for loan losses is a current charge to earnings made in order to adjust the allowance for loan losses to an appropriate level for inherent probable losses in the loan portfolio based on an evaluation of the loan portfolio, current economic conditions, changes in the nature and volume of lending, historical loan experience and other known internal and external factors affecting loan collectability. Our allowance for loan losses is calculated by segmenting the loan portfolio by loan type and applying risk factors to each segment. The risk factors are determined by considering historical loss data, peer data, as well as applying management’s judgment.

The Company elected to defer adoption of the CECL model until the earlier of the national emergency being lifted or December 31, 2020, as provided for by the CARES Act. During the three months ended March 31, 2020, the Company made certain adjustments to its qualitative factors in response to the impact of COVID-19 that increased the provision by $3.1 million. For the three months ended March 31, 2020 and 2019, the provision for loan losses was $3.5 million and

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$200 thousand, respectively. Net charge offs for the three months ended March 31, 2020 and 2019 was $990 thousand and $609 thousand, respectively.

Noninterest Income

The following table presents the major categories of noninterest income for the three months ended March 31, 2020 and 2019:


	For the Three Months Ended
	March 31,
(dollars in thousands)	2020		2019		Change
Account maintenance and deposit service fees	$	1,698	$	1,687	$	11
Income from bank-owned life insurance		386		523		(137)
Equity gain from mortgage affiliate		231		18		213
Recoveries related to acquired charged-off loans and investment securities		184		591		(407)
Other		321		243		78
Total noninterest income	$	2,820	$	3,062	$	(242)

Noninterest income decreased 7.9% to $2.8 million for the three months ended March 31, 2020 compared to $3.1 million for the three months ended March 31, 2019. The $242 thousand decrease was primarily driven by a $407 thousand decrease in recoveries related to acquired charged-off loans and investment securities. The decrease was also attributable to a $137 thousand decrease in income from bank-owned life insurance due to death benefits paid in the first quarter of 2019. These decreases were partially offset by an increase of $213 thousand in equity gain from mortgage affiliate. Other noninterest income benefited from $321 thousand in income on other equity investments during the three months ended March 31, 2020 compared to $243 thousand for the three months ended March 31, 2019.

Noninterest Expense

The following table presents the major categories of noninterest expense for the three months ended March 31, 2020 and 2019:


	For the Three Months Ended
	March 31,
(dollars in thousands)	2020		2019		Change
Salaries and benefits	$	12,309	$	5,812	$	6,497
Occupancy expenses		1,939		1,803		136
Furniture and equipment expenses		619		710		(91)
Amortization of core deposit intangible		341		363		(22)
Virginia franchise tax expense		570		563		7
Data processing expense		707		512		195
Telephone and communication expense		368		375		(7)
Net (gain) loss on other real estate owned		71		(2)		73
Professional fees		1,193		—		1,193
Other operating expenses		1,735		6,154		(4,419)
Total noninterest expenses	$	19,852	$	16,290	$	3,562

Noninterest expenses were $19.9 million during the three months ended March 31, 2020, compared to $16.3 million during the three months ended March 31, 2019. The 21.9% increase in noninterest expenses was primarily due to an increase in employee compensation and benefits expense and higher legal and professional services expense, partially offset by lower other operating expenses. Employee compensation and benefits expense totaled $12.3 million and $5.8 million for the three months ended March 31, 2020 and 2019, respectively. The increase was associated with a pre-tax management restructuring expenses of $5.6 million in the current year. Professional fees increased $1.2 million for the three months ended March 31, 2020, when compared to the three months ended March 31, 2019 mainly due to costs incurred as part of our implementation efforts for the 2020 adoption of the CECL accounting standard, enhancements to

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our compliance and Bank Secrecy Act programs, and general legal expense for corporate matters in 2020. The decrease in other operating expenses was driven by a pre-tax nonrecurring loss of $3.2 million with related legal expense of $502 thousand during the first quarter of 2019, that did not recur.

FINANCIAL CONDITION

Balance Sheet Overview

Total assets were $2.76 billion as of March 31, 2020 and $2.72 billion as of December 31, 2019. Total loans increased 1.21%, from $2.19 billion at December 31, 2019 to $2.21 billion at March 31, 2020 with loan production in the quarter centered mostly on the Company’s adjustable rate mortgage offerings with 1-4 family mortgages. Total deposits were $2.08 billion at March 31, 2020 compared to $2.12 billion at December 31, 2019 and total equity was $378.8 million and $377.2 million at March 31, 2020 and December 31, 2019, respectively.

Loan Portfolio

Total loans were $2.21 billion and $2.19 billion at March 31, 2020 and December 31, 2019, respectively. Loan production in the first quarter of 2020 centered mostly on the Company’s adjustable rate mortgage offerings with 1-4 family mortgages. The Company experienced no overall growth in its combined commercial real estate portfolio and construction and development loans during the three months ended March 31, 2020 and were only $1.12 billion or 50.84% of total loans as of March 31, 2020.

As of March 31, 2020, the Company had hotel loans of $279.7 million. For the year ended December 31, 2019, the portfolio of hotel loans had debt coverage of approximately 147% and weighted average loan to value of approximately 68%. 99% of the Company’s hotel loans are to national brands (Marriott, Hilton, Choice, IHG, Best Western, and Wyndham) with 93% of the portfolio being to limited service hotels with historically lower operating costs.

The composition of our loan portfolio consisted of the following at March 31, 2020 and December 31, 2019 (in thousands):


	March 31, 2020		December 31, 2019
Loans secured by real estate:
Commercial real estate - owner occupied	$	409,739	$	414,479
Commercial real estate - non-owner occupied		599,987		559,195
Secured by farmland		16,608		17,622
Construction and land loans		115,144		150,750
Residential 1-4 family		624,119		604,777
Multi-family residential		90,652		82,055
Home equity lines of credit		106,820		109,006
Total real estate loans		1,963,069		1,937,884

Commercial loans		223,433		221,447
Consumer loans		25,708		26,304
Subtotal		2,212,210		2,185,635
Plus deferred costs on loans		328		412
Total loans	$	2,212,538	$	2,186,047

As of March 31, 2020 and December 31, 2019, substantially all of our loans were to customers located in Virginia and Maryland. We are not dependent on any single customer or group of customers whose insolvency would have a material adverse effect on operations.

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Asset Quality

Asset quality remained high during the first quarter of 2020. The outbreak of COVID-19 will likely have an impact on our asset quality, but it is unknown to what extent at this point. 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 nonperforming 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 impairment or write-down to their fair values. If foreclosure occurs, we record OREO 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 the area of our portfolio will increase significantly depends upon the value of the real estate securing loans and economic factors such as the overall economy of the region.

OREO at March 31, 2020 was $5.9 million compared to $6.2 million at December 31, 2019. The decrease was driven by a write-down on OREO during the first quarter of 2020.

Loans acquired in the GAB transaction covered under an FDIC loss-share agreement expired on December 31, 2019 and therefore any references to “non-covered” do not apply to any periods after December 31, 2019. Nonaccrual loans were $6.1 million (excluding $2.9 million of loans fully covered by SBA guarantees) at March 31, 2020 compared to $4.8 million (non-covered and excluding $4.1 million of loans fully covered by SBA guarantees) at December 31, 2019. The ratio of non-covered nonperforming assets (excluding the SBA guaranteed loans) to total non-covered assets was 0.41% at December 31, 2019 and the ratio of nonperforming assets (excluding the SBA guaranteed loans) to total assets was 0.43% at March 31, 2020, an increase of 2 basis points.

Southern National’s allowance for loan losses as a percentage of total loans at March 31, 2020 was 0.58%, compared to 0.47% at December 31, 2019 (based on total non-covered loans).

We have an internal loan review and a loan committee, both of which provide on-going monitoring to identify and address issues with problem loans. The loan loss provision is determined after consideration of all known relevant internal and external factors affecting loan collectability to maintain the allowance for loan and lease losses at a level necessary to absorb estimated credit losses.

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The following table presents a comparison of nonperforming assets as of March 31, 2020 and December 31, 2019 (in thousands):


	March 31,			December 31,
	2020			2019 (1)
Nonaccrual loans	$	8,941		$	8,900
Loans past due 90 days and accruing interest		—			—
Total nonperforming loans		8,941			8,900
Other real estate owned		5,876			6,224
Total nonperforming assets	$	14,817		$	15,124

Troubled debt restructurings	$	694		$	697
SBA guaranteed amounts included in nonaccrual loans	$	2,889		$	4,129

Allowance for loan losses to nonperforming loans		142.28	%		115.30	%
Allowance for loan losses to total loans		0.58	%		0.47	%
Nonperforming assets excluding SBA guaranteed loans to total assets		0.43	%		0.41	%

(1)

December 31, 2019 included non-covered loans and non-covered assets.

Investment Securities

Investment securities, available for sale and held to maturity, totaled $227.8 million at March 31, 2020 down from $237.3 million at December 31, 2019.

Investment securities in our portfolio as of March 31, 2020 were as follows:

●

residential government-sponsored collateralized mortgage obligations in the amount of $38.3 million;

●

agency residential mortgage-backed securities in the amount $87.2 million;

●

corporate bonds in the amount of $2.0 million;

●

commercial mortgage-backed securities in the amount of $28.2 million;

●

SBA loan pool securities in the amount of $13.1 million;

●

callable agency securities in the amount of $25.0 million;

●

trust preferred securities in the amount of $4.0 million; and

●

municipal bonds in the amount of $29.8 million (fair value of $30.0 million) with a taxable equivalent yield of 3.0% and ratings as of March 31, 2020 as follows:


Moody's	Amount		Standard & Poor's	Amount
Rating	(in thousands)		Rating	(in thousands)
Aaa	$	5,997	AAA	$	5,571
Aa1		6,567	AA+		6,636
Aa2		3,917	AA		8,533
Aa3		693	AA-		1,798
A1		2,346	A+		1,003
A2		1,003	A		842
Baa1		—	BBB+		—
NA		9,441	NA		5,581
Total	$	29,964	Total	$	29,964

During the three months ended March 31, 2020, $10.0 million of available for sale investment securities and $15.2 million of held to maturity investment securities were purchased. No investment securities were sold during the first quarter of 2020 and 2019.

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At March 31, 2020, we owned pooled trust preferred securities as follows (in thousands):


												% of		Previously
												Current		Recognized
												Defaults and		Cumulative
		Ratings								Estimated		Deferrals to		Other
	Tranche	When Purchased		Current Ratings		Par		Book		Fair		Total		Comprehensive
Security	Level	Moody's	Fitch	Moody's	Fitch	Value		Value		Value		Collateral		Loss(1)
						(in thousands)
Held to Maturity
ALESCO VII A1B	Senior	Aaa	AAA	Aa1	AA	$	1,910	$	1,783	$	1,758	17	%	$	219
						$	1,910	$	1,783	$	1,758			$	219

															Cumulative OTTI
Available for Sale														Related to
Other Than Temporarily Impaired:														Credit Loss (2)
TPREF FUNDING II	Mezzanine	A1	A-	Caa3	WD	$	1,500	$	1,040	$	675	32	%	$	400
ALESCO V C1	Mezzanine	A2	A	Caa1	C		2,150		1,490		1,591	15	%		660
						$	3,650	$	2,530	$	2,266			$	1,060

Total						$	5,560	$	4,313	$	4,024

(1)	Pre-tax, and represents unrealized losses at date of transfer from available-for-sale to held-to-maturity, net of accretion.

(2)

Pre-tax.

Each of these investment securities has been evaluated for potential impairment under accounting guidelines. In performing a detailed cash flow analysis of each investment security, Sonabank works with independent third parties to identify the most reflective estimate of the cash flow estimated to be collected. If this estimate results in a present value of expected cash flows that is less than the amortized cost basis of an investment security (that is, credit loss exists), an other than temporary impairment is considered to have occurred. If there is no credit loss, any impairment is considered temporary.

We recognized no other than temporary impairment charges during the three months ended March 31, 2020 and 2019, respectively.

Liquidity and Funds Management

The objective of our liquidity management is to ensure 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 the sale of available for sale investment securities. In addition, we maintain lines of credit with the FHLB of Atlanta, federal funds lines of credit with three correspondent banks and utilize securities sold under agreements to repurchase and reverse repurchase agreement borrowings from approved securities dealers.

We prepare a cash flow forecast on a 30, 60 and 90 day basis along with a one and a two year basis. The projections incorporate expected cash flows on loans, investment securities, and deposits based on data used to prepare our interest rate risk analyses. To estimate loan growth, the projection incorporates the scheduled loan closings in the Loan Pipeline Report along with other management estimates.

During the three months ended March 31, 2020, we funded our financial obligations with deposits and borrowings from the FHLB of Atlanta. At March 31, 2020, we had $341.0 million of unfunded lines of credit and undisbursed construction loan funds. The amount of certificate of deposit accounts maturing in 2020 is $540.8 million as of March 31,

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2020. Management anticipates that funding requirements for these commitments can be met from the normal sources of funds.

Capital Resources

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


	Minimum
	Required for
	Capital				Actual Ratio at
	Adequacy		To Be Categorized		March 31,		December 31,
	Purposes		as Well Capitalized (1)		2020		2019
Sonabank
Common equity tier 1 capital ratio	4.50	%	6.50	%	14.44	%	14.81	%
Tier 1 risk-based capital ratio	6.00	%	8.00	%	14.44	%	14.81	%
Total risk-based capital ratio	8.00	%	10.00	%	15.04	%	15.29	%
Leverage ratio	4.00	%	5.00	%	11.86	%	12.07	%

(1)	Prompt corrective action provisions are not applicable at the bank holding company level.

Sonabank’s capital position is consistent with being well- capitalized under the regulatory framework for prompt corrective action.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are engaged primarily in the business of investing funds obtained from deposits and borrowings into interest-earning 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 other investments and the interest expense on deposits and borrowings. To the extent that our interest-bearing liabilities do not reprice or mature at the same time as our interest-earning 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 net interest income, without having to incur unacceptable levels of credit or investment risk.

We use simulation modeling to manage our interest rate risk, and review quarterly interest sensitivity. This approach uses a model which generates estimates of the change in our economic value of equity (“EVE”) over a range of interest rate scenarios. EVE is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts using assumptions about estimated loan prepayment rates, reinvestment rates and deposit decay rates.

The following tables are based on an analysis of our interest rate risk as measured by the estimated change in EVE resulting from instantaneous and sustained parallel shifts in the yield curve (plus 400 basis points or minus 100 basis points, measured in 100 basis point increments) as of March 31, 2020 and as of December 31, 2019. All changes are within

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our Asset/Liability Risk Management Policy guidelines except for the change resulting from the 100 basis point decrease in interest rates at March 31, 2020 and December 31, 2019.


	Sensitivity of Economic Value of Equity
	As of March 31, 2020
							Economic Value of
	Economic Value of Equity						Equity as a % of
Change in Interest Rates			$ Change		% Change		Total		Equity
in Basis Points (Rate Shock)	Amount		From Base		From Base		Assets		Book Value
	(dollar amounts in thousands)
Up 400	$	306,663	$	(39,915)	(11.52)	%	11.10	%	80.95	%
Up 300		320,069		(26,509)	(7.65)	%	11.59	%	84.49	%
Up 200		332,231		(14,347)	(4.14)	%	12.03	%	87.70	%
Up 100		345,560		(1,018)	(0.29)	%	12.51	%	91.22	%
Base		346,578		—	—	%	12.55	%	91.49	%
Down 100		311,696		(34,882)	(10.06)	%	11.28	%	82.28	%


	Sensitivity of Economic Value of Equity
	As of December 31, 2019
							Economic Value of
	Economic Value of Equity						Equity as a % of
Change in Interest Rates			$ Change		% Change		Total		Equity
in Basis Points (Rate Shock)	Amount		From Base		From Base		Assets		Book Value
	(dollar amounts in thousands)
Up 400	$	323,871	$	(45,102)	(12.22)	%	11.90	%	85.85	%
Up 300		336,822		(32,151)	(8.71)	%	12.37	%	89.29	%
Up 200		349,192		(19,781)	(5.36)	%	12.83	%	92.56	%
Up 100		363,935		(5,038)	(1.37)	%	13.37	%	96.47	%
Base		368,973		—	0.00	%	13.55	%	97.81	%
Down 100		353,371		(15,602)	(4.23)	%	12.98	%	93.67	%

Our interest rate sensitivity is also monitored by management through the use of a model that generates estimates of the change in the net interest income (“NII”) over a range of interest rate scenarios. NII depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them. In this regard, the model assumes that the composition of our interest sensitive assets and liabilities existing at March 31, 2020 and December 31, 2019 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 assets and liabilities. All changes are within our Asset/Liability Risk Management Policy guidelines at March 31, 2020 and December 31, 2019.


	Sensitivity of Net Interest Income
	As of March 31, 2020
	Adjusted Net Interest Income				Net Interest Margin
Change in Interest Rates			$ Change				% Change
in Basis Points (Rate Shock)	Amount		From Base		Percent		From Base
	(dollar amounts in thousands)
Up 400	$	72,221	$	(8,822)	2.92	%	(0.36)	%
Up 300		74,682		(6,361)	3.02	%	(0.26)	%
Up 200		76,962		(4,081)	3.11	%	(0.16)	%
Up 100		79,482		(1,561)	3.21	%	(0.06)	%
Base		81,043		—	3.27	%	—	%
Down 100		80,892		(151)	3.27	%	(0.01)	%

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	Sensitivity of Net Interest Income
	As of December 31, 2019
	Adjusted Net Interest Income				Net Interest Margin
Change in Interest Rates			$ Change				% Change
in Basis Points (Rate Shock)	Amount		From Base		Percent		From Base
	(dollar amounts in thousands)
Up 400	$	74,096	$	(8,158)	3.00	%	(0.33)	%
Up 300		76,355		(5,899)	3.09	%	(0.24)	%
Up 200		78,458		(3,796)	3.18	%	(0.15)	%
Up 100		80,649		(1,605)	3.27	%	(0.07)	%
Base		82,254		—	3.33	%	—	%
Down 100		81,273		(981)	3.29	%	(0.04)	%

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in EVE 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 EVE tables and NII 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 NII. Sensitivity of EVE and NII are modeled using different assumptions and approaches.

ITEM 4 – CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this quarterly report on Form 10-Q, under the supervision and with the participation of management, including our chief executive officer and chief financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d -15(e) under the Securities Exchange Act of 1934) utilizing the framework established in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon that evaluation, our chief executive officer and chief financial officer have concluded that these controls and procedures are effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

Southern National and Sonabank are from time to time a party, as both plaintiff and defendant, to various claims and proceedings arising in the ordinary course of the Bank’s business, including administrative and/or legal proceedings that may include employment-related claims, as well as claims of lender liability, breach of contract, and other similar lending-related claims. While the ultimate resolution of these matters cannot be determined at this time, the Bank’s management presently believes that such matters, individually and in the aggregate, will not have a material adverse effect on the Bank’s financial condition or results of operations. There are no proceedings pending, or to management’s knowledge, threatened, that represent a significant risk against Southern National or Sonabank as of March 31, 2020.

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ITEM 1A – RISK FACTORS

The Company disclosed risk factors in its Annual Report on Form 10-K for the year ended December 31, 2019. The risks described may not be the only risks facing us. Additional risks and uncertainties not currently known to us or that are currently considered to not be material also may materially adversely affect our business, financial condition, and/or operating results. The following risk factors have been included in this Quarterly Report on Form 10-Q in response to the global market disruptions that have resulted from the COVID-19 pandemic.

The ongoing COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on our business, results of operations and financial condition, and such effects will depend on future developments, which are highly uncertain and are difficult to predict.

Global health concerns relating to the COVID-19 outbreak and related government actions taken to reduce the spread of the virus have been weighing on the macroeconomic environment, and the outbreak has significantly increased economic uncertainty and reduced economic activity. The outbreak has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place or total lock-down orders and business limitations and shutdowns. Such measures have significantly contributed to rising unemployment and negatively impacted consumer and business spending. The United States government has taken steps to attempt to mitigate some of the more severe anticipated economic effects of the virus, including the passage of the CARES Act, but there can be no assurance that such steps will be effective or achieve their desired results in a timely fashion.

The outbreak has adversely impacted and is likely to further adversely impact our workforce and operations and the operations of our borrowers, customers and business partners. In particular, we may experience financial losses due to a number of operational factors impacting us or our borrowers, customers or business partners, including but not limited to:

●

credit losses resulting from financial stress being experienced by our borrowers as a result of the outbreak and related governmental actions, particularly in the hospitality, energy, retail and restaurant industries, but across other industries as well;

●

declines in collateral values;

●

third party disruptions, including outages at network providers and other suppliers;

●

increased cyber and payment fraud risk, as cybercriminals attempt to profit from the disruption, given increased online and remote activity;

●

risk of litigation or other third party claims in connection with our lending practices, including our participating in the PPP; and

●

operational failures due to changes in our normal business practices necessitated by the outbreak and related governmental actions.

These factors may remain prevalent for a significant period of time and may continue to adversely affect our business, results of operations and financial condition even after the COVID-19 outbreak has subsided.

The spread of COVID-19 has caused us to modify our business practices (including restricting employee travel, and developing work from home and social distancing plans for our employees), and we may take further actions as may be required by government authorities or as we determine are in the best interests of our employees, customers and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or will otherwise be satisfactory to government authorities.

The extent to which the coronavirus outbreak impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of the virus’s global economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that has occurred or may occur in the future.

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There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of the outbreak is highly uncertain and subject to change. We do not yet know the full extent of the impacts on our business, our operations or the global economy as a whole. However, the effects could have a material impact on our results of operations and heighten many of our known risks described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4 – MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 – OTHER INFORMATION

Not applicable.

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ITEM 6 - EXHIBITS

(a) Exhibits.


Exhibit No.		Description

3.1		Articles of Incorporation (incorporated herein by reference to Exhibit 3.1 to Southern National’s Registration Statement on Form S-1 (Registration No. 333-136285))

3.2		Certificate of Amendment to the Articles of Incorporation dated January 31, 2005 (incorporated herein by reference to Exhibit 3.2 to Southern National’s Registration Statement on Form S-1 (Registration No. 333-136285))

3.3		Certificate of Amendment to the Articles of Incorporation dated April 13, 2006 (incorporated herein by reference to Exhibit 3.3 to Southern National’s Registration Statement on Form S-1 (Registration No. 333-136285))

3.4		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.4 to Southern National’s Annual Report on Form 10-K for the year ended December 31, 2006)

3.5		Amendment No. 1 to Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.1 to Southern National’s Current Report on Form 8-K filed on October 14, 2009)

3.6		Amendment No. 2 to Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.1 to Southern National’s Current Report on Form 8-K filed on April 5, 2017)

10.1+*		Separation Agreement, dated as of February 20, 2020, by and between Joe A. Shearin and Southern National Bancorp of Virginia, Inc.

10.2+*		Employment Agreement, dated as of February 20, 2020, by and between Dennis J. Zember and Southern National Bancorp of Virginia, Inc.

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10.3+*		Separation Agreement, dated as of March 30, 2020, by and between Georgia S. Derrico and Southern National Bancorp of Virginia, Inc.

10.4+*		Separation Agreement, dated as of March 30, 2020, by and between R. Roderick Porter and Southern National Bancorp of Virginia, Inc.

31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from Southern National Bancorp of Virginia, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Inline XBRL (Extensible Business Reporting Language), filed herewith: (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Statements of Income and Comprehensive Income (unaudited), (iii) Consolidated Statement of Changes in Stockholders’ Equity (unaudited), (iv) Consolidated Statements of Cash Flows (unaudited), and (v) Notes to Consolidated Financial Statements (unaudited).

104		The cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document).

+ Management contract or compensatory plan or arrangement

* Filed with this Quarterly Report on Form 10-Q

** Furnished with this Quarterly Report on Form 10-Q

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Southern National Bancorp of Virginia, Inc.
			(Registrant)


May 8, 2020			/s/ Dennis J. Zember
(Date)			Dennis J. Zember,
			Chief Executive Officer
			(President and Executive Officer)


May 8, 2020			/s/ Jeffrey L. Karafa
(Date)			Jeffrey L. Karafa,
			Executive Vice President and Chief Financial Officer
			(Principal Financial and Accounting Officer)

Exhibit 10.1

SEPARATION AGREEMENT AND RELEASE

THIS SEPARATION AGREEMENT AND RELEASE (this “Agreement”) is entered into and effective as of the Effective Date (as defined in Section 3(e) hereof), by and between Southern National Bancorp of Virginia, Inc. (the “Holding Company”), Sonabank (the “Bank” and, together with the Holding Company, the “Company”) and Joe A. Shearin (“Executive”). The Company and Executive are referred to in this Agreement, together, as the “parties” and, each individually, as a “party.”

WHEREAS, Executive currently serves as the Chief Executive Officer of the Holding Company and of the Bank and as a member of the Holding Company’s Board of Directors (the “Holding Company Board”) and the Bank’s Board of Directors (the “Bank Board” and, together with the “Holding Company Board, the “Board”), pursuant to that certain Employment Agreement between the Company and Executive, dated June 23, 2017 (the “Employment Agreement”);

WHEREAS, Executive desires to retire from his positions as Chief Executive Officer and a director of the Company;

WHEREAS, the Company and Executive each desire to enter into this Agreement to set forth in writing the terms and conditions of Executive’s separation from the Company, its subsidiaries and affiliates; and

WHEREAS, the Company and Executive seek to fully and finally settle all actual or potential differences or claims, whether or not now known, on the terms set forth in this Agreement;

NOW, THEREFORE, in consideration of the payments, covenants and releases described below, and in consideration of other good and valuable consideration, the receipt and sufficiency of all of which is hereby acknowledged, the Company and Executive agree as follows:

Separation. In connection with Executive’s retirement, Executive hereby resigns his position as a member of the Board of Directors of the Holding Company and the Bank and his position as the Chief Executive Officer and President of the Holding Company and the Bank, and all other positions Executive holds with the Company and any subsidiaries and affiliates thereof, effective as of 5:00 p.m. on February 19, 2020 (the “Termination Date”). Executive acknowledges and agrees that he has been paid all wages and accrued benefits to which he is entitled through the date of execution of this Agreement or that the Company has promised to pay such wages and accrued benefits within thirty (30) days of the Termination Date. Other than the payments set forth in this Agreement, the parties agree that the Company owes no additional amounts to Executive for wages, back pay, severance pay, bonuses, damages, accrued vacation, benefits, insurance, sick leave, other leave, or any other reason. This Agreement is intended to, and does, settle and resolve all claims of any nature that Executive might have against the Company arising out of his employment relationship with Company or the termination of such employment or relating to any other matter.

Payments and Benefits. In consideration of Executive’s promises, covenants and releases contained in this Agreement, the Company will pay or provide to Executive:

The payments and benefits set forth in Section 7(a)(i) and (ii) (A) through (D) of the Employment Agreement. The Accrued Obligations under Section 7(a)(i) of the Employment Agreement include, but are not limited to, Executive’s accrued but unpaid salary and accrued but unused paid time off through the Termination Date,

reimbursements for expenses incurred but not yet reimbursed, all benefits under the Eastern Virginia Bankshares, Inc. Supplemental Executive Retirement Plan effective June 1, 2008, and as amended on November 20, 2014, and June 23, 2017 and all vested benefits under any ERISA-governed benefit plans. In accordance with the timing set forth in the Employment Agreement, the installments of the Severance Benefit (as defined in 7(a)(ii)(A) of the Employment Agreement) that would have been paid before September 1, 2020, but for the required six-month delay under Section 19(b) of the Employment Agreement and the related interest due under such Section 19(b), and the amount set forth in Section 7(a)(ii)(D), shall be paid on September 1, 2020, and the remaining installments of the Severance Benefit shall be paid in equal monthly payments thereafter, in accordance with the Company’s normal payroll practices;

Acceleration of vesting in full as of the Termination Date of Executive’s 26,000 outstanding shares of restricted stock;

As of the Termination Date, Executive shall become fully vested in Executive’s “Normal Retirement Benefit” under the Supplemental Retirement Plan Agreement entered into effective as of the 2nd day of April 2018 by and between the Bank and Executive;

The Company shall transfer to Executive the title to the Company vehicle currently used by Executive within ten (10) days following the Effective Date; and

Following the Effective Date, for calendar year 2020, the Company shall reimburse Executive for reasonable costs incurred for financial planning advice up to a maximum amount of $10,000.

The Company’s agreement to provide the consideration set forth in this Section 2 is specifically contingent upon Executive (i) executing this Agreement and not revoking this Agreement, as set forth in Section 3(e) below; and (ii) complying with Executive’s obligations under this Agreement and the continuing contractual obligations Executive owes to the Company, as described in Section 5 below.

General Release of All Claims. In consideration of the benefits promised herein, Executive hereby irrevocably and unconditionally releases, acquits, and forever discharges the Company and its agents, directors, members, shareholders, affiliated entities, officers, employees, former employees, attorneys, and all persons acting by, through, under or in concert with any of them (collectively “Releasees”) from any and all charges, complaints, claims, liabilities, grievances, obligations, promises, agreements, controversies, damages, policies, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses of any nature whatsoever, known or unknown, suspected or unsuspected, including, but not limited to, any rights arising out of alleged violations or breaches of any contracts, express or implied, or any tort, or any legal restrictions on Releasees’ right to terminate employees, or any federal, state or other governmental statute, regulation, law or ordinance, including without limitation (1) Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991; (2) the Americans with Disabilities Act; (3) 42 U.S.C. § 1981; (4) the federal Age Discrimination in Employment Act (age discrimination); (5) the Older Workers Benefit Protection Act; (6) the Equal Pay Act; (7) the Family and Medical Leave Act; and (8) the Employee Retirement Income Security Act (“ERISA”) (“Claim” or “Claims”), which Executive now has, owns or holds, or claims to have, own or hold, or which Executive at any time heretofore had owned or held, or claimed to have owned or held, against each or any of the Releasees at any time up to and including the date of the execution of this Agreement. Nothing herein releases the Company’s obligations under this Agreement.

Executive hereby acknowledges and agrees that the execution of this Agreement and the cessation of Executive’s employment and all actions taken in connection therewith are in compliance with the federal Age Discrimination in Employment Act and the Older Workers Benefit Protection Act and that the releases set forth above shall be applicable, without limitation, to any claims brought under these Acts. Executive further acknowledges and agrees that:

a.The release given by Executive in this Agreement is given solely in exchange for the benefits set forth in the Employment Agreement to which this release was initially attached and such consideration is in addition to anything of value which Executive was entitled to receive prior to entering into this Agreement;

b.By entering into this Agreement, Executive does not waive rights or claims that may arise after the date this Agreement is executed;

c.Executive has been advised to consult an attorney prior to entering into this Agreement, and this provision of the Agreement satisfies the requirements of the Older Workers Benefit Protection Act that Executive be so advised in writing;

d.Executive has been offered twenty-one (21) days from receipt of this Agreement within which to consider whether to sign this Agreement; and

e.For a period of seven (7) days following Executive’s execution of this Agreement, Executive may revoke this Agreement by delivering the revocation to a Company officer. Assuming Executive does not revoke this Agreement, this Agreement shall become effective and enforceable on the eighth (8th) day following the date on which Executive executes this Agreement (the “Effective Date”).

This Agreement shall be binding upon the heirs and personal representatives of Executive and shall inure to the benefit of the successors and assigns of the Company.

Consulting Services. From the Termination Date and through March 31, 2020 (the “Consulting Period”), Executive agrees to make himself available to consult and cooperate with the Company, and to respond to appropriate inquiries, regarding such matters pertaining to the Company’s business as may, from time to time, be reasonably requested of Executive by the Company’s Chief Executive Officer, including cooperating with the Company with respect to the communication of Executive’s separation from the Company and related matters (the “Consulting Services”). In consideration for the Consulting Services, the Company shall pay Executive a consulting fee in the aggregate amount of $65,519, payable in approximately equal monthly payments during the Consulting Period, in accordance with the Company’s normal payroll practices. Executive shall be entitled to reimbursement from the Company for any reasonable out-of-pocket expenses incurred by Executive in connection with the performance of the Consulting Services during the Consulting Period, if any. For the avoidance of doubt, the parties agree that Executive’s “separation from service” for purposes of Code Section 409A shall occur on the Termination Date.

Final Agreement. The parties agree that this document was negotiated, is their entire Agreement regarding Executive’s separation from employment with the Company and Executive’s release of claims, and supersedes all prior agreements between the parties, except that the parties further agree that the covenants in Section 7(b), (c), (d) and (f), Section 8, Section 11 and Section 19 of the Employment Agreement survive and remain in full force and effect in accordance with their terms, as well as any other provisions of the Employment Agreement that are necessary to enforce or interpret such sections (all such sections and such other provisions, collectively, the “Surviving Provisions”). For purposes of interpreting

the Surviving Provisions for purposes of this Agreement, the “Date of Termination” referred to in the Surviving Provisions shall be the Termination Date. The parties agree that neither party shall be considered the drafter for the purpose of construing any ambiguity or disagreement. The parties agree that this Agreement may not be modified except by a written document signed by both parties. The parties agree that this Agreement may be executed and delivered in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Virginia without giving effect to its conflict of law principles.

[Signatures on following page]

IN WITNESS WHEREOF, Executive has executed and delivered this Agreement, and the Company has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized, all as of the last day and year written below.

EXECUTIVE

/s/ Joe A. Shearin

Joe A. Shearin

Date:February 20, 2020

HOLDING COMPANY

By: Georgia S. Derrico

Its:Executive Chairman of the Board

Date:

BANK

By: Georgia S. Derrico

Its:Executive Chairman of the Board

Date:

Exhibit 10.2

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered as of the 19th day of February, 2020, by and among SOUTHERN NATIONAL BANCORP OF VIRGINIA, INC., a Virginia corporation (the “Bancorp”), SONABANK, a Virginia state-chartered bank and wholly owned subsidiary of the Bancorp (the “Bank”; the Bancorp and the Bank are collectively referred to herein as the “Employer”), and DENNIS J. ZEMBER, JR. (“Executive”).

BACKGROUND

WHEREAS, the expertise and experience of Executive in the financial institutions industry are valuable to the Employer;

WHEREAS, it is in the best interests of the Employer to maintain an experienced and sound executive management team to manage the Employer, further the Employer’s overall strategies and protect and enhance shareholder value; and

WHEREAS, the Employer and Executive desire to enter into this Agreement to establish the scope, terms and conditions of Executive’s continued employment by the Employer;

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Effective Date. The effective time and date of this Agreement shall be deemed to be 5:00 p.m. on the date of its making first set forth above (the “Effective Date”).

2. Employment. Executive is employed as the President and Chief Executive Officer and Member of the Board of Directors of the Bancorp and the Chief Executive Officer of the Bank. Executive’s responsibilities, duties, prerogatives and authority in such offices shall be those customary for persons holding such offices of institutions in the financial institutions industry, as well as such other duties of an executive, managerial or administrative nature, which are consistent with such offices, as shall be specified and designated from time to time by the Board of Directors of the Bancorp (the “Bancorp Board”). Executive will report directly to Bancorp Board and the Board of the Directors of the Bank.

3. Employment Period. Unless earlier terminated in accordance with Section 6 hereof, Executive’s employment under this Agreement shall begin as of the Effective Date and shall continue thereafter for a term of three years (the “Employment Period”). Commencing on the third anniversary of the Effective Date, this Agreement and the Employment Period shall automatically renew for successive three (3) year periods unless the Employer or the Executive delivers written notice of non-renewal at least sixty (60) days prior to the expiration of the then current Employment Period. A non-renewal of the Employment Period by the Employer shall not constitute a termination of the Executive’s employment without Cause.

4. Extent of Service. During the Employment Period, and excluding any periods of vacation, sick or other leave to which Executive is entitled under this Agreement, Executive agrees to devote all of Executive’s business time and efforts to serving the business and affairs of the Employer commensurate with Executive’s offices. During the Employment Period, it shall not be a violation of this Agreement for Executive, subject to the requirements of Section 11, to (i) serve on civic or charitable boards or committees or (ii) manage personal investments, so long as such activities do not interfere with the performance of Executive’s responsibilities to the Employer or violate the Employer’s conflicts of interest or other applicable policies.

5. Compensation and Benefits.

(a) Base Salary. During the Employment Period, the Employer will pay to Executive a base salary at the rate of $600,000 per year (“Base Salary”), less normal withholdings, payable in equal monthly or more frequent installments as are customary under the Employer’s payroll procedures from time to time. In accordance with

the policies and procedures of the Compensation Committee (the “Committee”) of the Bancorp Board, the Employer shall review Executive’s total compensation at least annually and in its sole discretion may adjust Executive’s total compensation from year to year, but during the Employment Period the Employer may not decrease Executive’s Base Salary below $600,000; provided, however, that periodic increases in Base Salary, once granted, shall not be subject to revocation. The annual review of Executive’s total compensation will consider, among other things, changes in the cost of living, Executive’s own performance and the Bancorp’s consolidated performance.

(b) Incentive Plans. During the Employment Period, Executive shall be entitled to participate, as determined by the Committee, in all incentive plans of the Employer applicable to senior executives of the Employer generally, including, without limitation, short-term and long-term incentive plans and equity compensation plans that shall be competitive with industry norms taking into consideration the complexity of the Company’s strategies, operating performance, geography and other elements deemed appropriate, subject to eligibility requirements and terms and conditions of each such plan; provided, however, that nothing herein shall limit the ability of Employer to amend, modify or terminate any such plans, policies or programs at any time and from time to time. Without limiting the foregoing,

(i)Executive shall be eligible to receive an annual cash incentive bonus (the “Annual Bonus”) payable in cash, pursuant to the performance criteria and targets established and administered by the Bancorp Board (or the Compensation Committee of the Bancorp Board, to which such responsibility may be delegated by the Bancorp Board). Executive’s Annual Bonus for calendar year 2020 shall be not less than fifty percent (50%) of Executive’s Base Salary subject only to the Executive’s performance relative to certain agreed upon criteria . The Annual Bonus payable to Executive each year shall be determined and payable as soon as practicable after year-end for such year (but no later than March 15th of the year following the year to which the Annual Bonus relates). Except as provided in Section 7, to be entitled to receive any Annual Bonus, Executive must remain employed through the last day of the calendar year to which the Annual Bonus relates.

(ii)the Bancorp shall grant to Executive 20,000 restricted shares of its common stock (the “Initial Restricted Stock Award”), pursuant to, and subject to the terms and conditions of, the Southern National Bancorp of Virginia, Inc. 2017 Equity Compensation Plan. The Initial Restricted Stock Award will vest in approximately equal annual installments on each of first five (5) anniversaries of the Effective Date, subject to Executive’s continued employment on each vesting date. The Initial Restricted Stock Award will be granted within three (3) business days following the date Executive commences employment with the Company, and shall be subject to subject to other terms and conditions set forth in the award certificate memorializing the Initial Restricted Stock Award, substantially in the form attached as Exhibit A hereto.

(c) Benefit Plans. During the Employment Period, Executive or Executive’s dependents, as the case may be, shall be eligible for participation in all employee benefit plans, practices, policies and programs provided by the Employer applicable to senior executives of the Employer generally (the “Benefit Plans”), subject to eligibility requirements and terms and conditions of each such plan; provided, however, that nothing herein shall limit the ability of Employer to amend, modify or terminate any such benefit plans, policies or programs at any time and from time to time.

(d) Expenses. During the Employment Period, Executive shall be entitled to receive prompt reimbursement, in accordance with the policies, practices and procedures of the Employer applicable to senior executives of the Employer generally, for all reasonable and necessary out-of-pocket expenses incurred by Executive in the performance of Executive’s duties under this Agreement, including dues for country club memberships and civic organizations in which Executive is or shall become a member, not to exceed $20,000 in the aggregate per calendar year.

(e) Vacation, Sick and Other Leave. During the Employment Period, Executive shall be entitled annually to a minimum of thirty (30) business days of paid vacation and shall be entitled to those number of business days of paid disability, sick and other leave specified in the employment policies of the Employer.

(f) Automobile. During the Employment Period, Employer shall provide Executive with an appropriate automobile for Executive’s use and will maintain and insure it at Employer’s expense. At least annually, Executive, in accordance with the Bank's procedure, shall report business and personal usage of the automobile.

(g) Relocation Expenses. During calendar year 2020 of the Employment Period, Employer shall reimburse Executive for expenses associated with relocating from Executive’s current residence promptly following Executive’s submission of receipts with respect thereto, in accordance with the policies, practices and procedures of the Employer. These expenses shall not exceed $100,000 in the aggregate and include temporary housing, real estate commissions and general moving expenses. If on or before the first anniversary of the Effective Date, Executive voluntarily resigns from employment for any reason, or Employer terminates Executive’s employment for Cause, then Executive shall promptly repay Employer in full for the amount of such relocation expenses actually paid by Employer.

6. Termination of Employment.

(a) Cause. The Employer may terminate Executive’s employment with the Employer for Cause by providing written Notice of Termination. For purposes of this Agreement, “Cause” shall mean :

(i) the material failure of Executive to perform Executive’s duties with the Employer, other than any such failure resulting from Disability (as defined below), or to follow the lawful directives of the Bancorp Board, which failure is not cured within ten (10) days following Executive’s receipt of written notice from the Bancorp Board specifying such failure;

(ii) Executive’s engaging in any illegal conduct, gross misconduct, or gross negligence in connection with the Employer’s business or relating to Executive’s duties hereunder;

(iii) Executive’s illegal use of controlled substances;

(iv) Executive’s commission, charge with, indictment for, conviction of, or entry of a plea of nolo contendere or no contest with respect to: (A) any felony, or any misdemeanor involving fraud, dishonesty, moral turpitude, or a breach of trust (including pleading guilty or nolo contendere to a felony or lesser charge which results from plea bargaining), whether or not such felony, crime or lesser offense is connected with the business of the Employer, or (B) any crime connected with the business of the Employer;

(v) Executive’s commission of or engagement in any act of fraud, misappropriation, theft, embezzlement or an act of comparable dishonesty, whether or not such act was committed in connection with the business of the Employer;

(vi)Executive’s breach of fiduciary duty or breach of any of the covenants set forth in Section 11 of this Agreement;

(vii) Executive’s breach of any material term or provision of this Agreement other than the covenants set forth in Section 11 of this Agreement, which breach (if curable) has not been cured within thirty (30) days of receipt of written notice of such breach from the Bancorp Board;

(viii)Executive’s violation of the Employer’s policy against harassment, its equal employment opportunity policy, or the Employer’s code of business conduct, or a material violation of any other policy or procedure of the Employer; or

(ix) conduct by Executive that results in the permanent removal of Executive from Executive’s position as an officer or employee of the Bancorp or the Bank pursuant to a written order by any banking regulatory agency with authority or jurisdiction over the Bancorp or the Bank, as the case may be.

(b) Good Reason. Executive may terminate Executive’s employment with the Employer for Good Reason. For purposes of this Agreement, “Good Reason” shall mean:

(i) a material diminution in Executive’s authority, duties or responsibilities;

(ii) a material change in the geographic location at which Executive must regularly perform the services to be performed by Executive pursuant to this Agreement (other than a change in such geographic location to an office or other location closer to Executive’s home residence); and

(iii) any other action or inaction that constitutes a material breach by the Employer of this Agreement;

provided, however, that Executive must provide notice to the Employer of the condition Executive contends is Good Reason within 90 days after the initial existence of the condition, and the Employer must have a period of 30 days to remedy the condition. If the condition is not remedied within such 30-day period, then Executive must provide a Notice of Termination as set forth in Section 6(f) within 30 days after the end of the Employer’s remedy period.

(d) Voluntary Termination. Executive may voluntarily terminate Executive’s employment without Good Reason (a “Voluntary Termination”).

(e) Death or Disability. Executive’s employment with the Employer shall terminate automatically upon Executive’s death during the Employment Period. If Executive is incapacitated by accident, sickness or otherwise so as to render Executive mentally or physically incapable of performing fully the services required of Executive under this Agreement (referred to herein as a “Disability”) for a period of ninety (90) consecutive days or for an aggregate of one hundred twenty (120) business days during any twelve (12) month period, the Employer may terminate Executive’s employment and this Agreement effective immediately after the expiration of either of such periods, upon giving Executive Notice of Termination. Notwithstanding the foregoing provision, if it is determined by the Employer that Executive has a “disability” as defined under the Americans with Disabilities Act, Executive’s employment shall not be terminated on the basis of such disability unless it is first determined by the Employer after consultation with Executive that there is no reasonable accommodation which would permit Executive to perform the essential functions of Executive’s position without imposing an undue hardship on the Employer.

(f) Notice of Termination. Any termination (other than for death) shall be communicated by a Notice of Termination given in accordance with Section 14(i) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice that (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 Executive’s employment under the provision so indicated and (iii) if the Termination Date (as defined below) is other than the date of receipt of such notice, specifies the Termination Date (which date shall be not more than 30 days after the giving of such notice, except as otherwise provided in Section 6(e)). The failure to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Disability, Cause or Good Reason shall not waive any right of Executive or the Employer hereunder or preclude Executive or the Employer from asserting such fact or circumstance in enforcing Executive’s or the Employer’s rights hereunder.

(g) Termination Date. “Termination Date” means (i) if Executive’s employment is terminated by the Employer for Cause or without Cause, the date of Executive’s receipt of the Notice of Termination or a later date specified therein, as the case may be, (ii) if Executive’s employment is terminated by Executive for Good Reason, the date of the Employer’s receipt of the Notice of Termination, (iii) if Executive’s employment is terminated by Executive as a Voluntary Termination, the date of the Employer’s receipt of the Notice of Termination or a later date specified therein, as the case may be, and (iv) if Executive’s employment is terminated by reason of death or Disability, the Termination Date shall be the date of death of Executive or the Disability Effective Date, as the case may be.

7. Obligations of the Employer Upon Termination.

(a) Cause; Voluntary Termination. If, during the Employment Period, the Employer shall terminate Executive’s employment for Cause or Executive shall terminate Executive’s employment by a Voluntary Termination, then Executive shall be entitled to receive the following (collectively, the “Accrued Amounts”):

(i) any accrued but unpaid Base Salary and accrued but unused vacation, sick or other leave pay, which shall be paid on the pay date immediately following the Termination Date in accordance with the Employer’s customary payroll procedures;

(ii) any earned but unpaid cash bonus with respect to any completed fiscal year immediately preceding the Termination Date, which shall be paid on the otherwise applicable payment date; provided, however, that if Executive’s employment is terminated by the Employer for Cause, then any such accrued but unpaid cash bonus shall be forfeited;

(iii) reimbursement for unreimbursed business expenses properly incurred by Executive, which shall be subject to and paid in accordance with the Employer’s expense reimbursement policies, practices and procedures; and

(iv) such employee benefits, if any, as to which Executive may be entitled under the Benefit Plans as of the Termination Date.

(b) Termination Without Cause or for Good Reason. If, during the Employment Period, the Employer shall terminate Executive’s employment without Cause or Executive shall terminate Executive’s employment for Good Reason, then Executive shall be entitled to receive the Accrued Amounts and, subject to Executive’s execution of a release of claims in favor of the Employer, its subsidiaries and affiliates and their respective officers and directors substantially in the form attached as Exhibit B hereto (the “Release”) and such Release becoming effective within 45 days following the Termination Date (such 45-day period, for purposes of this Section 7(b), the “Release Execution Period”), Executive shall also be entitled to receive the following:

(i) a lump sum amount equal to three times the sum of (A) Executive’s Base Salary and (B) Executive’s highest cash bonus earned with respect to any fiscal year within the three most recently completed fiscal years immediately preceding the Termination Date (or if Termination occurs within the first year of the Employment Period, 50% of Base Salary), which amount shall be paid in cash on or before the 60th day after the Termination Date; provided, however, that if the Release Execution Period begins in one taxable year and ends in another taxable year, then payment shall not be made until the beginning of the second taxable year;

(ii) a lump sum amount equal to the product of (A) the cash bonus, if any, that Executive would have earned for the fiscal year in which the Termination Date occurs based on the achievement of applicable performance goals for such year and (B) a fraction, the numerator of which is the number of days Executive was employed by the Employer during the year of termination and the denominator of which is the number of days in such year (the “Pro-Rata Bonus”), which amount shall be paid in cash on the date that annual bonuses are paid to senior executives of the Employer generally, but in no event later than two-and-one-half months following the end of the fiscal year in which the Termination Date occurs;

(iii) if Executive timely and properly elects continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), then the Employer shall reimburse Executive for the monthly COBRA premium paid by Executive for Executive and Executive’s dependents until the earliest of: (A) the 18-month anniversary of the Termination Date; (B) the date Executive is no longer eligible to receive COBRA continuation coverage; and (C) the date on which Executive becomes eligible to receive substantially similar coverage from another employer. Such reimbursement shall be paid to Executive on the 15th day of the month immediately following the month in which Executive timely remits the premium payment; and

(iv) any issued but unvested restricted stock, stock options, phantom stock or other long-term incentive shall be deemed to be fully vested as of the date of termination.

(c) Death or Disability. If Executive’s employment is terminated during the Employment Period on account of Executive’s death or Disability, Executive (or Executive’s estate or beneficiaries, as the case may be) shall be entitled to receive the following: (i) the Accrued Amounts; and (ii) a lump sum amount equal to the Pro-Rata Bonus, if any, that Executive would have earned for the fiscal year in which the Termination Date occurs

based on the achievement of applicable performance goals for such year, which amount shall be paid in cash on the date that annual bonuses are paid to senior executives of the Employer generally, but in no event later than two-and-one-half months following the end of the fiscal year in which the Termination Date occurs. Notwithstanding any other provision contained herein, all payments made in connection with Executive’s Disability shall be provided in a manner that is consistent with federal and state law.

8. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in any plan, program, policy or practice provided by the Employer and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Employer, except as expressly provided otherwise in this Agreement. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Employer at or subsequent to the Termination Date shall be payable in accordance with such plan, policy, practice or program or such contract or agreement, except as expressly modified by this Agreement.

9. No Mitigation. 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 Section 7 of this Agreement.

10. Code Section 280G.

(a) Certain Reductions in Agreement Payments. Anything in this Agreement to the contrary notwithstanding, in the event a nationally recognized independent accounting firm designated by the Employer and reasonably acceptable to Executive (the “Accounting Firm”) shall determine that receipt of all payments or distributions by the Employer and its affiliates in the nature of compensation to or for Executive’s benefit, whether paid or payable pursuant to this Agreement or otherwise (a “Payment”), would subject Executive to the excise tax under Section 4999 of the Code, the Accounting Firm shall determine as required below in this Section 10(a) whether to reduce any of the Payments paid or payable pursuant to this Agreement (the “Agreement Payments”) to the Reduced Amount (as defined below). The Agreement Payments shall be reduced to the Reduced Amount only if the Accounting Firm determines that Executive would have a greater Net After-Tax Receipt (as defined below) of aggregate Payments if Executive’s Agreement Payments were so reduced. If the Accounting Firm determines that Executive would not have a greater Net After-Tax Receipt of aggregate Payments if Executive’s Agreement Payments were so reduced, then Executive shall receive all Agreement Payments to which Executive is entitled.

(b) Accounting Firm Determinations. If the Accounting Firm determines that aggregate Agreement Payments should be reduced to the Reduced Amount, then the Employer shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof. All determinations made by the Accounting Firm under this Section 10 shall be binding upon the Employer and Executive and shall be made as soon as reasonably practicable and in no event later than 20 days following the Termination Date. For purposes of reducing the Agreement Payments to the Reduced Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing the payments and benefits under the following sections in the following order: first from Section 7(b)(iii), then from Section 7(b)(ii) and lastly from Section 7(b)(i). All fees and expenses of the Accounting Firm shall be borne solely by the Employer.

(c) Overpayments; Underpayments. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Employer to or for the benefit of Executive pursuant to this Agreement which should not have been so paid or distributed (an “Overpayment”) or that additional amounts which will have not been paid or distributed by the Employer to or for the benefit of Executive pursuant to this Agreement which should have been so paid or distributed (an “Underpayment”), in each case consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Employer or Executive which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, Executive shall pay any such Overpayment to the Employer together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by Executive to the Employer if and to the extent such payment would not either reduce the amount on which Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be paid promptly (and in no event later

than 60 days following the date on which the Underpayment is determined) by the Employer to or for the benefit of Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.

(d) Definitions. The following terms shall have the following meanings for purposes of this Section 10:

(i) “Reduced Amount” shall mean the greatest amount of Agreement Payments that can be paid that would not result in the imposition of the excise tax under Section 4999 of the Code if the Accounting Firm determines to reduce Agreement Payments pursuant to Section 10(a).

(ii) “Net After-Tax Receipt” shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of a Payment net of all taxes imposed on Executive with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to Executive’s taxable income for the immediately preceding taxable year, or such other rate(s) as the Accounting Firm determined to be likely to apply to Executive in the relevant taxable year(s).

11. Restrictive Covenants.

(a) Executive Acknowledgements. Executive acknowledges that (i) Executive has received good and valuable consideration in exchange for Executive’s agreement to be bound by the restrictive covenants in this Section 11 and (ii) the Employer will provide certain benefits to Executive hereunder in reliance on such covenants in view of the unique and essential nature of the services Executive will perform on behalf of the Employer and the irreparable injury that would befall the Employer should Executive breach such covenants. Executive further acknowledges that Executive’s services are of a special, unique and extraordinary character and that Executive’s position with the Employer will place Executive in a position of confidence and trust with customers and employees of the Employer and its subsidiaries and affiliates and with the Employer’s other constituencies and will allow Executive access to Trade Secrets and Confidential Information (each as defined below) concerning the Employer and its subsidiaries and affiliates. Executive further acknowledges that the types and periods of restrictions imposed by the covenants in this Section 11 are fair and reasonable, and that such restrictions will not prevent Executive from earning a livelihood.

(b) Covenants. Having acknowledged the foregoing, Executive covenants and agrees with the Employer as follows:

(i) While Executive is employed by the Employer and continuing thereafter, Executive shall not disclose or use any Confidential Information for any purpose other than as may be necessary and appropriate in the ordinary course of performing Executive’s duties to the Employer during the Employment Period. This obligation shall remain in effect for as long as the information or materials in question retain their status as Confidential Information. Executive further agrees that Executive shall fully cooperate with the Employer in maintaining the secrecy of the Confidential Information, to the extent permitted by law. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Employer’s rights or Executive’s obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, Executive shall not be restricted from: (A) disclosing information that is required to be disclosed by law, court order or other valid and appropriate legal process; provided, however, that in the event such disclosure is required by law, Executive shall provide the Employer with prompt notice of such requirement so that the Employer may seek an appropriate protective order prior to any such required disclosure by Executive; or (B) reporting possible violations of federal, state, or local law or regulation to any governmental agency or entity, or from making other disclosures that are protected under the whistleblower provisions of federal, state, or local law or regulation, and Executive shall not need the prior authorization of the Employer to make any such reports or disclosures and shall not be required to notify the Employer that Executive has made such reports or disclosures. In addition, and anything herein to the contrary notwithstanding, Executive is hereby given notice that Executive shall not be criminally or civilly liable under any federal or state trade secret law for: (C) disclosing a trade secret (as defined by 18 U.S.C. § 1839) in confidence to a federal, state, or local

government official, either directly or indirectly, or to an attorney, in either event solely for the purpose of reporting or investigating a suspected violation of law; or (C) disclosing a trade secret (as defined by 18 U.S.C. § 1839) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

(ii) While Executive is employed by the Employer and for a period of 18 months thereafter, Executive shall not (except on behalf of or with the prior written consent of the Employer), on Executive’s own behalf or in the service or on behalf of others, solicit or attempt to solicit any customer of the Employer or its subsidiaries or affiliates, including, without limitation, actively sought prospective customers, with whom Executive had Material Contact (as defined below) during Executive’s employment, for the purpose of engaging in, providing or selling Competitive Services (as defined below).

(iii) While Executive is employed by the Employer and for a period of 18 months thereafter, Executive shall not (except on behalf of or with the prior written consent of the Employer), either directly or indirectly, on Executive’s own behalf or in the service or on behalf of others, carry on or engage in Competitive Services for a financial institution headquartered within the Restricted Territory.

(iv) While Executive is employed by the Employer and for a period of 18 months thereafter, Executive shall not (except on behalf of or with the prior written consent of the Employer), on Executive’s own behalf or in the service or on behalf of others, solicit or recruit or attempt to solicit or recruit, directly or by assisting others, any employee of the Employer or its subsidiaries or affiliates, whether or not such employee is a full-time employee or a temporary employee of the Employer or its subsidiaries or affiliates, whether or not such employment is pursuant to a written agreement and whether or not such employment is for a determined period or is at will, to cease working for the Employer in order to go to work for a competitor of the Employer.

(v) Executive agrees that Executive will not retain or destroy (except as set forth below), and will immediately return to the Employer on or prior to the date Executive’s employment with the Employer ends, or at any other time the Employer requests such return, any and all property of the Employer that is in Executive’s possession or subject to Executive’s control, including, but not limited to, donor or customer files and information, papers, drawings, notes, manuals, specifications, designs, devices, code, email, documents, diskettes, CDs, tapes, keys, access cards, credit cards, identification cards, equipment, computers, mobile devices, other electronic media, all other files and documents relating to the Employer and its business (regardless of form, but specifically including all electronic files and data of the Employer), together with all Confidential Information belonging to the Employer or that Executive received from or through Executive’s employment with the Employer. Executive will not make, distribute, or retain copies of any such information or property. To the extent that Executive has electronic files or information in Executive’s possession or control that belong to the Employer or contain Confidential Information (specifically including but not limited to electronic files or information stored on personal computers, mobile devices, electronic media, or in cloud storage), on or prior to the date Executive’s employment with the Employer ends, or at any other time the Employer requests, Executive shall (A) provide the Employer with an electronic copy of all of such files or information (in an electronic format that readily accessible by the Employer); (B) after doing so, delete all such files and information, including all copies and derivatives thereof, from all non-Employer-owned computers, mobile devices, electronic media, cloud storage, and other media, devices, and equipment, such that such files and information are permanently deleted and irretrievable; and (C) provide a written certification to the Employer that the required deletions have been completed and specifying the files and information deleted and the media source from which they were deleted.

(i) “Competitive Services” shall mean the business of 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 Employer has a retail bank branch at the time Executive’s employment ceases.

(ii) “Confidential Information” shall mean data and information: (A) relating to the business of the Employer and its subsidiaries and affiliates, regardless of whether the data or information constitutes a trade secret; (B) disclosed to Executive or of which Executive becomes aware as a consequence of Executive’s relationship with the Employer; (C) having value to the Employer; and (D) not generally known to competitors of the Employer. Confidential Information shall include, without limitation, trade secrets (as defined by applicable law), methods of operation, names of customers, price lists, financial information and projections, personnel data and similar information; provided, however, that such term shall not mean data or information that (x) has been voluntarily disclosed to the public by the Employer, except where such public disclosure has been made by Executive without authorization from the Employer, (y) has been independently developed and disclosed by others or (z) has otherwise entered the public domain through lawful means. In addition to data and information relating to the Employer and its subsidiaries and affiliates, “Confidential Information” also includes any and all data and information relating to or concerning a third party that otherwise meets the definition set forth above, that was provided or made available to the Employer or its subsidiaries or affiliates by such third party, and that the Employer and/or its subsidiaries and affiliates have a duty or obligation to keep confidential. This definition shall not limit any definition of “confidential information” or any equivalent term under state or federal law.

(iii) “Material Contact” as to a customer or prospective customer shall mean (A) having dealings with a customer or prospective customer on behalf of the Employer or its subsidiaries or affiliates; (B) directly coordinating or supervising dealings with a customer or prospective customer on behalf of the Employer or its subsidiaries or affiliates; or (C) obtaining Confidential Information about a customer or prospective customer in the ordinary course of business as a result of Executive’s employment with the Employer.

(iv) “Restricted Territory” shall mean the geographic territory within a 50-mile radius of each of the Employer’s corporate office located at 6830 Old Dominion Drive, McLean, VA 22101; provided, however, that if the physical location of such office shall change during the Term, then the Restricted Territory shall mean the geographic territory within a 50-mile radius of the physical location of such office at such time and, in the event of the termination of Executive’s employment, the Restricted Territory shall mean the geographic territory within a 50-mile radius of the physical location of such office on the Termination Date.

(d) Equitable Remedies. The parties specifically acknowledge and agree that the remedy at law for any breach of the covenants contained in this Section 11 (the “Protective Covenants”) will be inadequate, and that in the event Executive breaches, or threatens to breach, any of the Protective Covenants, the Employer shall have the right and remedy, without the necessity of proving actual damage or posting any bond, to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Protective Covenants and to have the Protective Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Protective Covenants would cause irreparable injury to the Employer and that money damages would not provide an adequate remedy to the Employer. Executive understands and agrees that if Executive violates any of the obligations set forth in the Protective Covenants, the period of restriction applicable to each obligation violated shall cease to run during the pendency of any litigation over such violation, provided that such litigation was initiated during the period of restriction. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Employer at law or in equity. The parties agree that, if the parties become involved in legal action regarding the enforcement of the Protective Covenants, the prevailing party in such action will be entitled, in addition to any other remedy, to recover from the non-prevailing party its or his reasonable costs and attorneys’ fees incurred in such action. The Employer’s ability to enforce its rights under the Protective Covenants or applicable law against Executive shall not be impaired in any way by the existence of a claim or cause of action on the part of Executive based on, or arising out of, this Agreement or any other event or transaction.

(e) Severability and Modification of Covenants. Executive acknowledges and agrees that each of the Protective Covenants is reasonable and valid in time and scope and in all other respects. The parties agree that it is their intention that the Protective Covenants be enforced in accordance with their terms to the maximum extent permitted by law. Each of the Protective Covenants shall be considered and construed as a separate and independent covenant. Should any part or provision of any of the Protective Covenants be held invalid, void, or unenforceable,

such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Agreement or such Protective Covenant. If any of the provisions of the Protective Covenants should ever be held by a court of competent jurisdiction to exceed the scope permitted by the applicable law, such provision or provisions shall be automatically modified to such lesser scope as such court may deem just and proper for the reasonable protection of the Employer’s legitimate business interests and may be enforced by the Employer to that extent in the manner described above and all other provisions of this Agreement shall be valid and enforceable.

12. Executive’s Representations. Executive hereby represents to the Employer that the execution and delivery of this Agreement by Executive and the Employer and the performance by Executive of Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound. Executive represents and warrants that Executive is not subject to any employment agreement, nondisclosure agreement, common law nondisclosure obligation, fiduciary duty, noncompetition agreement, restrictive covenant or any other obligation to any former employer or to any other person or entity that conflicts in any way with Executive’s ability to be employed by or perform services for the Employer. Executive will not disclose to the Employer or use on its behalf any proprietary or confidential information of any other party required to be kept confidential by Executive.

13. Assignment and Successors.

(a) Executive. This Agreement is personal to Executive and without the prior written consent of the Employer shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives.

(b) The Employer. This Agreement shall inure to the benefit of and be binding upon the Employer and its successors and assigns. The Bancorp and the Bank will each require any successor to it (whether direct or indirect, by stock or asset purchase, merger, consolidation or otherwise) or to all or substantially all of its business or assets to assume expressly and agree to perform this Agreement in the same manner and to the same extent it would be required to perform it if no such succession had taken place.

14. Miscellaneous.

(a) Waiver. Failure of either party to insist, in one or more instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver.

(b) Severability. If any provision or covenant, or any part thereof, of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect.

(c) Entire Agreement. Except as provided herein, this Agreement contains the entire agreement between the Employer and Executive with respect to the subject matter hereof and from and after the Effective Date supersedes and invalidates all previous employment agreements with Executive. No representations, inducements, promises or agreements, oral or otherwise, which are not embodied herein shall be of any force or effect.

(d) Withholdings. Notwithstanding any other provision of this Agreement, the Employer shall withhold from any amounts payable or benefits provided under this Agreement any federal, state and local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(e) Compliance with Section 409A.

(i) It is intended that this Agreement shall conform with all applicable Section 409A requirements to the extent Section 409A applies to any provisions of the Agreement. Accordingly, in interpreting, construing or applying any provisions of the Agreement, the same shall be construed in such

manner as shall meet and comply with Section 409A, and in the event of any inconsistency with Section 409A, the same shall be reformed so as to meet the requirements of Section 409A. For purposes of Section 409A, each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments. In no event shall Executive, directly or indirectly, designate the calendar year of payment. Executive acknowledges that the Employer has not made, and does not make, any representation or warranty regarding the treatment of this Agreement or the benefits payable under this Agreement under federal, state or local income tax laws, including, but not limited to, Section 409A or compliance with the requirements thereof. Neither Employer nor its directors, officers, employees, or advisers shall be held liable for any taxes, interest, penalties, or other monetary amounts owed by Executive as a result of the application of Section 409A.

(ii) Notwithstanding anything in this Agreement to the contrary, to the extent that any amount or benefit that would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code (“Non-Exempt Deferred Compensation”) would otherwise be payable or distributable hereunder, such Non-Exempt Deferred Compensation will not be payable or distributable to Executive by reason of such circumstance unless the circumstances giving rise to such payment event meet any description or definition of “separation from service” in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition).

(iii) To the extent Executive is a “specified employee” as defined in Section 409A, notwithstanding the timing of payment provided in any other Section of this Agreement, no payment, distribution or benefit under this Agreement that constitutes a distribution of deferred compensation (within the meaning of Section 409A) upon separation from service (within the meaning of Section 409A), after taking into account all available exemptions, that would otherwise be payable, distributable or settled during the six-month period after separation from service, will be made during such six-month period, and any such payment, distribution or benefit will instead be paid, distributed or settled on the first business day after such six-month period; provided, however, that if Executive dies following the Termination Date and prior to the payment, distribution, settlement or provision of any payments, distributions or benefits delayed on account of Section 409A, then such payments, distributions or benefits shall be paid or provided to the personal representative of Executive’s estate within 30 days after the date of Executive’s death.

(f)If Executive is entitled to be paid or reimbursed for any taxable expenses under this Agreement, and such payments or reimbursements are includible in Executive’s federal gross taxable income, the amount of such expenses reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred. No right of Executive to reimbursement of expenses under this Agreement shall be subject to liquidation or exchange for another benefit.

(f) Clawback Provisions. Notwithstanding any other provisions in this Agreement to the contrary, any bonus, incentive-based, equity-based or other similar compensation paid to Executive pursuant to this Agreement or any other agreement or arrangement with the Employer which is subject to recovery under any law, government regulation or stock exchange listing requirement will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Employer pursuant to any such law, government regulation or stock exchange listing requirement).

(g) Governing Law. Except to the extent preempted by federal law, the laws of the State of Virginia shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

(h) Arbitration. Except for any claim for injunctive relief hereunder or as provided in Section 11 hereof, any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by binding arbitration in accordance with the rules and procedures of the American Arbitration Association. The place of arbitration shall be selected by the Employer. The decision of the arbitration panel shall be final and binding upon the parties, and judgment upon the award rendered by the arbitration panel may be entered by any court having

jurisdiction. The parties agree that Executive and the Employer shall each bear one-half of the administrative expenses (filing and arbitrator costs) associated with the arbitration, and the prevailing party shall be entitled to reimbursement for the additional costs and expenses, including, without limitation, reasonable attorneys’ fees, incurred by such party in connection with any such dispute.

(i) Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, by nationally recognized overnight courier service or sent by certified, registered or express mail, postage prepaid. Any such notice shall be deemed given when so delivered personally, when delivered by nationally recognized overnight courier service or, if mailed, five days after the date of deposit in the United States mail, as follows:

To the Employer:

SONABANK

6830 Old Dominion Drive

McLean, Virginia 22101

Attention: Board of Directors

To Executive:

At the most recent address on file for Executive with the Employer.

(j) Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein.

(k) Survival. Notwithstanding anything in this Agreement to the contrary, the provisions of Sections 7, 10, 11 and 14(e)-(j), the definitions of defined terms used therein and the remaining provisions of this Section 14 (to the extent necessary to effectuate the survival of the foregoing provisions) shall survive the termination of this Agreement and any termination of Executive’s employment hereunder.

(l) Amendments and Modifications. This Agreement may be amended or modified only by a writing signed by all parties hereto that makes specific reference to this Agreement.

[Signature page follows.]

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Executive Employment Agreement as of the date first above written.

BANCORP

By: __________________________

Name: __________________________

Title: __________________________

BANK

By: __________________________

Name: __________________________

Title: __________________________

EXECUTIVE

/s/ Dennis J. Zember, Jr.

Exhibit 10.3

SEPARATION AGREEMENT

THIS SEPARATION AGREEMENT (this “Agreement”) is entered into as of the Effective Date, as defined in Section 6 hereof, by and between Southern National Bancorp of Virginia, Inc. (the “Company”) and Ms. Georgia S. Derrico (“Employee”). Together, the Company and Employee may be referred to hereinafter as the “Parties.”

In consideration of the payments, covenants and releases described below, and in consideration of other good and valuable consideration, the receipt and sufficiency of all of which is hereby acknowledged, the Company and Employee agree as follows:

Resignations. In order to effect Employee’s separation from the Company and its wholly-owned subsidiary, Sonabank, Employee hereby resigns (a) Employee’s position as Executive Chairman of the Board of each of the Company and Sonabank, effective as of March 30, 2020 (the “Separation Date”), (b) Employee’s position as a member of the boards of directors of each of the Company and Sonabank, effective as of the date of the Company’s 2020 annual meeting of stockholders, which is currently expected to be held on May 23, 2020 (the “Annual Meeting Date”), (c) Employee’s employment with the Company and Sonabank and, except as set forth in Section 1(b), all other positions Employee holds with the Company, Sonabank, and any of their respective affiliates (including, without limitation, Southern Trust Mortgage, LLC (“STM”)), effective as of the Separation Date, and (d) Employee’s position as a member of the board of managers and any other governing body of STM, effective as of the Separation Date). Employee agrees and acknowledges that she has been paid all outstanding wages through and including the date of Employee’s most recent paycheck, less customary and applicable payroll deductions. Employee confirms and agrees that she has received all wages, commissions, reimbursements, payments, or other benefits to which Employee is entitled as a result of Employee’s employment with the Company and Sonabank, other than those that have not yet become due pursuant to the normal payroll schedule of the Company and Sonabank and which the Company agrees will be paid in accordance with such normal payroll schedule. In addition, the Company agrees to reimburse Employee for any business expenses incurred in the ordinary course which have not yet been reimbursed, in accordance with the Company’s normal practices. Other than the payments set forth in this Agreement, the parties agree that neither the Company nor Sonabank owes any additional amounts to Employee for wages, back pay, severance pay, bonuses, damages, accrued vacation, benefits, insurance, sick leave, other leave, or any other reason. This Agreement is intended to and does settle and resolve all claims of any nature that Employee might have against the Company or Sonabank arising out of their employment relationship or the termination of employment or relating to any other matter.

Consideration for this Agreement. In consideration of Employee’s promises and the General Release of Claims and Covenant Not To Sue contained in Section 3 of this Agreement, the Company agrees to:

a. pay or provide to Employee the payments and benefits set forth in Section 5(a) of the Employment Agreement (as defined in Section 7 hereof), subject to the terms and conditions thereof, except that (1) Employee shall receive twelve (12) months (instead of six (6) months) of

base salary continuation at the rate in effect on the Separation Date, payable in accordance with the established payroll practices of the Company (but not less frequently than monthly and in equal installments); and (2) Section 5(a)(ii) of the Employment Agreement shall be amended to provide that the Company shall provide Employee with access to a personal assistant in a manner consistent with past practice for three (3) years (instead of two (2) years) following the Separation Date, provided that the dollar value attributed to the services provided by such personal assistant to Employee shall not exceed $60,000 per year; provided, further, that if the Company determines in its sole discretion that it is unable to provide Employee with such access to a personal assistant at any time during the three years, then the Company shall pay to Employee a lump sum cash payment equal to $60,000 per year for the remainder of the three-year period, pro-rated for partial calendar years; and

b. take the following actions with respect to certain of Employee’s outstanding options: (1) amend Employee’s 72,000 options outstanding on the Separation Date with an exercise price greater than $9.70 (the “3-Year Extension Options”) such that the period of time in which Employee has to exercise the shares subject to the 3-Year Extension Options shall be extended until the earlier of (i) the expiration of the original term of each Option or (ii) the third anniversary of the Separation Date; and (2) amend Employee’s 20,000 options outstanding on the Separation Date with an exercise price equal to $9.14 (the “2-Year Extension Options” and, together with the 3-Year Extension Options, the “Extended Options”) such that the period of time in which Employee has to exercise the shares subject to the 2-Year Extension Options shall be extended until the earlier of (i) the expiration of the original term of each Option or (ii) the second anniversary of the Separation Date. Notwithstanding the foregoing, in no event shall any Extended Option remain outstanding or exercisable: (i) more than 10 years following the date of grant of the Option; or (ii) following the Extended Option’s original expiration date.

The Company agrees that Employee’s initial annual installment of her Normal Retirement Benefit under her Supplemental Executive Retirement Plan agreement entered into with Sonabank, effective as of April 2, 2018, shall be paid on October 1, 2020.

General Release of Claims and Covenant Not To Sue.

a.General Release of Claims. In consideration of the payments made to Employee by the Company and the promises contained in this Agreement, Employee on behalf of himself and Employee’s agents and successors in interest, hereby UNCONDITIONALLY RELEASES AND DISCHARGES the Company, its successors, subsidiaries (including, without limitation, Sonabank), parent companies, assigns, joint ventures, and affiliated companies and their respective agents, legal representatives (including, without limitation, Alston & Bird LLP), shareholders, attorneys, employees, members, managers, officers and directors (collectively, the “Releasees”) from ALL CLAIMS, LIABILITIES, DEMANDS AND CAUSES OF ACTION which she may by law release, as well as all contractual obligations not expressly set forth in this Agreement, whether known or unknown, fixed or contingent, that she may have or claim to have against any Releasee for any reason as of the date of execution of this Agreement. This General Release and Covenant Not To Sue includes, but is not limited to, claims arising under federal, state or local laws prohibiting employment discrimination; claims arising under severance plans and contracts; and claims growing out of any legal restrictions on the Company’s and Sonabank’s rights to terminate its employees or to take any other employment action, whether statutory, contractual or arising

under common law or case law. Employee specifically acknowledges and agrees that she is releasing any and all rights under federal, state and local employment laws including without limitation the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 1981, the Americans With Disabilities Act, the Family and Medical Leave Act, the Genetic Information Nondiscrimination Act, the anti-retaliation provisions of the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Equal Pay Act, the Occupational Safety and Health Act, the Worker Adjustment and Retraining Notification Act, the Employee Polygraph Protection Act, the Fair Credit Reporting Act, the Virginia Human Rights Act, the Virginians with Disabilities Act, the Virginia Equal Pay Act, the Virginia Payment of Wage Law, and any and all other local, state, and federal law claims arising under statute or common law. It is agreed that this is a general release and it is to be broadly construed as a release of all claims, except as set forth in Section 3(d) below.

b.Covenant Not to Sue. Except as expressly set forth in Section 4 below, Employee further hereby AGREES NOT TO FILE A LAWSUIT or other legal claim or charge to assert against any of the Releasees any claim released by this Agreement, other than to enforce her rights under this Agreement.

c.Representations and Acknowledgements. This Agreement is intended to and does settle and resolve all claims of any nature that Employee might have against the Company and Sonabank arising out of their employment relationship or the termination of employment or relating to any other matter, except as set forth in Section 3(d) below. By signing this Agreement, Employee acknowledges that she is doing so knowingly and voluntarily, that she understands that she may be releasing claims she may not know about, and that she is waiving all rights she may have had under any law that is intended to protect her from waiving unknown claims. This Agreement shall not in any way be construed as an admission by the Company or any of the other Releasees of wrongdoing or liability or that Employee has any rights against the Company or any of the other Releasees. Employee represents and agrees that she has not transferred or assigned, to any person or entity, any claim that she is releasing in this Section 3.

d.Exceptions to General Release. Nothing in this Agreement is intended as, or shall be deemed or operate as, a release by Employee of (i) any rights of Employee under this Agreement; (ii) any vested benefits under any Company or Sonabank-sponsored benefit plans; (iii) any rights under COBRA or similar state law; (iv) any recovery to which Employee may be entitled pursuant to workers’ compensation and unemployment insurance laws; (v) Employee’s right to challenge the validity of Employee’s release of claims under the ADEA; (vi) any rights or claims under federal, state, or local law that cannot, as a matter of law, be waived by private agreement; and (vii) any claims arising after the date on which Employee executes this Agreement.

Protected Rights. Employee understands that nothing contained in this Agreement limits Employee’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”). Employee further understands that this Agreement does not limit Employee’s ability to communicate or share information with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agencies. However,

based on Employee’s release of claims set forth in Section 3 of this Agreement, Employee understands that Employee is releasing all claims and causes of action that Employee might personally pursue or that might be pursued in Employee’s name and, to the extent permitted by applicable law, Employee’s right to recover monetary damages or obtain injunctive relief that is personal to Employee in connection with such claims and causes of action.

Acknowledgment. Employee shall have until the forty-fifth (45th) day after she receives this Agreement to execute this Agreement. If she does not execute the Agreement by that date, the offer contained in this Agreement shall be revoked by the Company. The Company hereby advises Employee to consult with an attorney prior to executing this Agreement and Employee acknowledges and agrees that the Company has advised, and hereby does advise, Employee of Employee’s opportunity to consult an attorney or other advisor and has not in any way discouraged her from doing so. Employee expressly acknowledges and agrees that she has been offered at least forty-five (45) days to consider this Agreement before signing it, that she has read this Agreement and Release carefully, and that she has had sufficient time and opportunity to consult with an attorney or other advisor of Employee’s choosing concerning the execution of this Agreement. Employee acknowledges and agrees that she fully understands that the Agreement is final and binding (except as set forth in Section 6 below), that it contains a full release of all claims and potential claims, and that the only promises or representations she has relied upon in signing this Agreement are those specifically contained in the Agreement itself. Employee acknowledges and agrees that she is signing this Agreement voluntarily, with the full intent of releasing the Company and the other Releasees from all claims covered by Section 3.

Revocation and Effective Date. The Parties agree Employee may revoke the Agreement at will within seven (7) days after she executes the Agreement by giving written notice of revocation to the Company. Such notice must be delivered to Mark Kanaly, Alston & Bird LLP, 1201 West Peachtree Street NE, Atlanta, Georgia 30309, mark.kanaly@alston.com, and must actually be received by him at or before the above-referenced seven-day deadline. The Agreement may not be revoked after the expiration of the seven-day deadline. In the event that Employee revokes the Agreement within the revocation period described in this Section, this Agreement shall not be effective or enforceable, and all rights and obligations hereunder shall be void and of no effect. Assuming that Employee does not revoke this Agreement within the revocation period described above, the effective date of this Agreement (the “Effective Date”) shall be the eighth (8th) day after the day on which Employee executes this Agreement.

Survival of Certain Obligations on Employee. Employee’s obligations under Section 6 of the Amended and Restated Employment Agreement dated as of October 2, 2019 between Employee and the Company (the “Employment Agreement”), as well as any other provisions of the Employment Agreement necessary to interpret or enforce Employee’s obligations under such Section 6, shall remain in full force and effect in accordance with their terms, and nothing in this Agreement shall alter such obligations or terms.

Return of Property. Employee’s access to Employee’s Company e-mail account will be terminated on the April 3, 2020, but the Company will make its IT staff reasonably available between the Separation Date and the Annual Meeting Date to cooperate in good faith with Employee to retrieve Employee’s personal contacts and personal e-mails from such account.

Employee represents and warrants that (a) she will return to the Company on or before the Annual Meeting Date, all documents, materials, equipment, keys, recordings, client contact information, other client-related information, sales information, workforce information, production information, computer data, and other material and information relating to Company or any of the other Releasees, or the business of the Company or any of the other Releasees (“Company Property”), and (b) she has not retained or provided to anyone else any copies, excerpts, transcripts, descriptions, portions, abstracts, or other representations of Company Property, except for materials that have been provided to all directors of the Company. To the extent that Employee has any Company Property in electronic form (including, but not limited to, Company-related e-mail), Employee represents and warrants that, after returning such electronic Company Property as described in this Section, she will permanently delete on or before April 3, 2020, such Company Property from all non-Company-owned computers, mobile devices, electronic media, cloud storage, or other media devices, or equipment. Employee further represents and warrants that she has not provided and will not provide any Company Property to any third party, including any documents, equipment, or other tangible property, but with the exception of non-confidential materials generally distributed by Company to clients or the general public.

Non-Disparagement. Employee agrees that, except as may be required by law or court order, she will not, directly or indirectly, make any statement, oral or written, or perform any act or omission which disparages or casts in a negative light the Company, its business, its employees, or any of the Releasees. This Section 9 is not intended to in any way limit any of the Protected Rights contained in Section 4 of this Agreement, or to prevent Employee from providing truthful testimony in response to a valid subpoena, court order, or request from a Government Agency. In addition, to the extent that Employee engages in discussions or other communications with customers, investors, analysts, or shareholders of the Company and its subsidiaries and affiliates, or any other third parties that have business relationships with the Company and its subsidiaries and affiliates, or the media, Employee will strictly limit such communications to matters that have been publicly disclosed by the Company and its subsidiaries and affiliates. The Company will advise the members of its board of directors (and those of the Sonabank’s board of directors) and all executive officers of the Company and Sonabank (collectively, the “Persons to be Advised”) that they should not make public statements that are in any way disparaging or negative towards Employee. The Company will advise the Persons to be Advised that a non-disparagement agreement is in effect and will use reasonable efforts to enforce compliance with this Agreement.

10.

Final Agreement. Subject to Section 7, this Agreement contains the entire agreement between the Company and Employee with respect to the subject matter hereof. The Parties agree that this Agreement may not be modified except by a written document signed by both Parties. The Parties agree that this Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

11.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Virginia without giving effect to its conflict of law principles.

12.

Severability. With the exception of the release contained in Section 3, the provisions of this Agreement are severable and if any part of it is found to be unenforceable the other sections

shall remain fully and validly enforceable. If the general release and covenant not to sue set forth in Section 3 of this Agreement is found to be unenforceable, this Agreement shall be null and void and Employee will be required to return to the Company all Consideration already paid to Employee. The language of all valid parts of this Agreement shall in all cases be construed as a whole, according to fair meaning, and not strictly for or against any of the parties.

13.

Waiver. The failure of either party to enforce any of the provisions of this Agreement shall in no way be construed to be a waiver of any such provision. Any waiver of any provision of this Agreement must be in a writing signed by the party making such waiver. No waiver of any breach of this Agreement shall be held to be a waiver of any other or subsequent breach.

14.

No Reemployment. Employee agrees that by signing this Agreement, she relinquishes any right to employment or reemployment with the Company or any of the other Releasees. Employee agrees that she will not seek, apply for, accept, or otherwise pursue employment with the Company or any of the Releasees, and acknowledges that if she reapplies for or seeks employment with the Company or any of the Releasees, the Company’s or any of the Releasees’ refusal to hire Employee based on this Section 14 shall provide a complete defense to any claims arising from Employee’s attempt to obtain employment.

15.

Stand-Still. For a period of 24 months from the date of this Agreement, unless Employee shall have been specifically invited in writing by the Company, neither Employee nor any person acting on behalf of or in concert with Employee will in any manner, directly or indirectly, (a) effect or seek, offer or propose (whether publicly or otherwise) or enter into an agreement to effect, or cause or participate in or in any way assist any other person to effect or seek, offer or propose (whether publicly or otherwise) to effect or participate in, (i) any acquisition of any securities (or beneficial ownership thereof) or assets of the Company or any of its subsidiaries, (ii) any tender or exchange offer, merger or other business combination involving the Company or any of its subsidiaries, (iii) any recapitalization, restructuring, liquidation, dissolution or other extraordinary transaction with respect to the Company or any of its subsidiaries, or (iv) any “solicitation” of “proxies” (as such terms are used in the proxy rules of the Securities and Exchange Commission) or consents to vote any voting securities of the Company, (b) form, join or in any way participate in a “group” (as defined under the 1934 Act) with respect to more than 5% of the securities of the Company, (c) otherwise act, alone or in concert with others, to seek to control or influence the management, board, or policies of the Company, (d) take any action which might force the Company to make a public announcement regarding any of the types of matters set forth in (a) above, or (e) enter into any discussions or arrangements with any third party with respect to any of the foregoing. Employee also agrees during such period not to request the Company (or its directors, officers, employees, advisors or agents), directly or indirectly, to amend or waive any provision of this paragraph (including this sentence).

16.

Required Disclosure. Employee acknowledges she has been provided with a notice (Exhibit A to this Agreement), pursuant to the Older Workers Benefit Protection Act, 29 U.S.C. § 626(f), that fully complies with the requirements of 29 U.S.C. § 626(f)(1)(H).

(Signature page follows)

The Parties hereby signify their agreement to these terms by their signatures below.

/s/ Georgia S. Derrico

Date: March 30, 2020

Southern National Bancorp of Virginia, Inc.

By: /s/ Dennis J. Zember

Name: Dennis J. Zember, Jr.

Title: President and Chief Executive Officer

Date: March 30, 2020

Exhibit A

This notice applies to the exit incentive conducted at Southern National Bancorp of Virginia, Inc. (the “Company”) and the severance payments being offered in connection therewith (the “Exit Incentive and Severance Program”). For purposes of the Exit Incentive and Severance Program, you were considered to be a part of the organizational unit consisting of employees working as part of the Office of the Chairman (the “Organizational Unit”). To be eligible for the Severance described in the attached Agreement, you must execute the Agreement within forty-five (45) days after you receive it, and not revoke the Agreement during the seven (7) day revocation period following execution of the Agreement. The Severance offered in the Agreement in connection with the Exit Incentive and Severance Program is, therefore, contingent upon the Company receiving a signed and unrevoked Agreement, which includes a general release of claims, from you.

The following is a list of the ages and job titles of persons in the Organizational Unit who were selected for inclusion in the Exit Incentive and Severance Program in exchange for signing an agreement which includes a general release:

Job Title	Age
Executive Chairman	75
Executive Vice Chairman	75

There are not any employees in the Organizational Unit who were not selected for inclusion in the Exit Incentive and Severance Program.

Exhibit 10.4

SEPARATION AGREEMENT

THIS SEPARATION AGREEMENT (this “Agreement”) is entered into as of the Effective Date, as defined in Section 6 hereof, by and between Southern National Bancorp of Virginia, Inc. (the “Company”) and Mr. R. Roderick Porter (“Employee”). Together, the Company and Employee may be referred to hereinafter as the “Parties.”

Resignations. In order to effect Employee’s separation from the Company and its wholly-owned subsidiary, Sonabank, Employee hereby resigns (a) Employee’s position as Executive Vice Chairman of the Board of each of the Company and Sonabank, effective as of March 30, 2020 (the “Separation Date”), (b) Employee’s position as a member of the boards of directors of each of the Company and Sonabank, effective as of the date of the Company’s 2020 annual meeting of stockholders, which is currently expected to be held on May 23, 2020 (the “Annual Meeting Date”), (c) Employee’s employment with the Company and Sonabank and, except as set forth in Section 1(b), all other positions Employee holds with the Company, Sonabank, and any of their respective affiliates (including, without limitation, Southern Trust Mortgage, LLC (“STM”)), effective as of the Separation Date, and (d) Employee’s position as a member of the board of managers and any other governing body of STM, effective as of the Separation Date). Employee agrees and acknowledges that he has been paid all outstanding wages through and including the date of Employee’s most recent paycheck, less customary and applicable payroll deductions. Employee confirms and agrees that he has received all wages, commissions, reimbursements, payments, or other benefits to which Employee is entitled as a result of Employee’s employment with the Company and Sonabank, other than those that have not yet become due pursuant to the normal payroll schedule of the Company and Sonabank and which the Company agrees will be paid in accordance with such normal payroll schedule. In addition, the Company agrees to reimburse Employee for any business expenses incurred in the ordinary course which have not yet been reimbursed, in accordance with the Company’s normal practices. Other than the payments set forth in this Agreement, the parties agree that neither the Company nor Sonabank owes any additional amounts to Employee for wages, back pay, severance pay, bonuses, damages, accrued vacation, benefits, insurance, sick leave, other leave, or any other reason. This Agreement is intended to and does settle and resolve all claims of any nature that Employee might have against the Company or Sonabank arising out of their employment relationship or the termination of employment or relating to any other matter.

Consideration for this Agreement. In consideration of Employee’s promises and the General Release of Claims and Covenant Not To Sue contained in Section 3 of this Agreement, the Company agrees to:

The Company agrees that Employee’s initial annual installment of his Normal Retirement Benefit under his Supplemental Executive Retirement Plan agreement entered into with Sonabank, effective as of April 2, 2018, shall be paid on October 1, 2020.

General Release of Claims and Covenant Not To Sue.

a.General Release of Claims. In consideration of the payments made to Employee by the Company and the promises contained in this Agreement, Employee on behalf of himself and Employee’s agents and successors in interest, hereby UNCONDITIONALLY RELEASES AND DISCHARGES the Company, its successors, subsidiaries (including, without limitation, Sonabank), parent companies, assigns, joint ventures, and affiliated companies and their respective agents, legal representatives (including, without limitation, Alston & Bird LLP), shareholders, attorneys, employees, members, managers, officers and directors (collectively, the “Releasees”) from ALL CLAIMS, LIABILITIES, DEMANDS AND CAUSES OF ACTION which he may by law release, as well as all contractual obligations not expressly set forth in this Agreement, whether known or unknown, fixed or contingent, that he may have or claim to have against any Releasee for any reason as of the date of execution of this Agreement. This General Release and Covenant Not To Sue includes, but is not limited to, claims arising under federal, state or local laws prohibiting employment discrimination; claims arising under severance plans and contracts; and claims growing out of any legal restrictions on the Company’s and Sonabank’s rights to terminate its employees or to take any other employment action, whether statutory, contractual or arising

under common law or case law. Employee specifically acknowledges and agrees that he is releasing any and all rights under federal, state and local employment laws including without limitation the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 1981, the Americans With Disabilities Act, the Family and Medical Leave Act, the Genetic Information Nondiscrimination Act, the anti-retaliation provisions of the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Equal Pay Act, the Occupational Safety and Health Act, the Worker Adjustment and Retraining Notification Act, the Employee Polygraph Protection Act, the Fair Credit Reporting Act, the Virginia Human Rights Act, the Virginians with Disabilities Act, the Virginia Equal Pay Act, the Virginia Payment of Wage Law, and any and all other local, state, and federal law claims arising under statute or common law. It is agreed that this is a general release and it is to be broadly construed as a release of all claims, except as set forth in Section 3(d) below.

c.Representations and Acknowledgements. This Agreement is intended to and does settle and resolve all claims of any nature that Employee might have against the Company and Sonabank arising out of their employment relationship or the termination of employment or relating to any other matter, except as set forth in Section 3(d) below. By signing this Agreement, Employee acknowledges that he is doing so knowingly and voluntarily, that he understands that he may be releasing claims he may not know about, and that he is waiving all rights he may have had under any law that is intended to protect him from waiving unknown claims. This Agreement shall not in any way be construed as an admission by the Company or any of the other Releasees of wrongdoing or liability or that Employee has any rights against the Company or any of the other Releasees. Employee represents and agrees that he has not transferred or assigned, to any person or entity, any claim that he is releasing in this Section 3.

Acknowledgment. Employee shall have until the forty-fifth (45th) day after he receives this Agreement to execute this Agreement. If he does not execute the Agreement by that date, the offer contained in this Agreement shall be revoked by the Company. The Company hereby advises Employee to consult with an attorney prior to executing this Agreement and Employee acknowledges and agrees that the Company has advised, and hereby does advise, Employee of Employee’s opportunity to consult an attorney or other advisor and has not in any way discouraged him from doing so. Employee expressly acknowledges and agrees that he has been offered at least forty-five (45) days to consider this Agreement before signing it, that he has read this Agreement and Release carefully, and that he has had sufficient time and opportunity to consult with an attorney or other advisor of Employee’s choosing concerning the execution of this Agreement. Employee acknowledges and agrees that he fully understands that the Agreement is final and binding (except as set forth in Section 6 below), that it contains a full release of all claims and potential claims, and that the only promises or representations he has relied upon in signing this Agreement are those specifically contained in the Agreement itself. Employee acknowledges and agrees that he is signing this Agreement voluntarily, with the full intent of releasing the Company and the other Releasees from all claims covered by Section 3.

Revocation and Effective Date. The Parties agree Employee may revoke the Agreement at will within seven (7) days after he executes the Agreement by giving written notice of revocation to the Company. Such notice must be delivered to Mark Kanaly, Alston & Bird LLP, 1201 West Peachtree Street NE, Atlanta, Georgia 30309, mark.kanaly@alston.com, and must actually be received by him at or before the above-referenced seven-day deadline. The Agreement may not be revoked after the expiration of the seven-day deadline. In the event that Employee revokes the Agreement within the revocation period described in this Section, this Agreement shall not be effective or enforceable, and all rights and obligations hereunder shall be void and of no effect. Assuming that Employee does not revoke this Agreement within the revocation period described above, the effective date of this Agreement (the “Effective Date”) shall be the eighth (8th) day after the day on which Employee executes this Agreement.

Return of Property. Employee’s access to Employee’s Company e-mail account will be terminated on April 3, 2020, but the Company will make its IT staff reasonably available between the Separation Date and the Annual Meeting Date to cooperate in good faith with Employee to retrieve Employee’s personal contacts and personal e-mails from such account. Employee

represents and warrants that (a) he will return to the Company on or before the Annual Meeting Date, all documents, materials, equipment, keys, recordings, client contact information, other client-related information, sales information, workforce information, production information, computer data, and other material and information relating to Company or any of the other Releasees, or the business of the Company or any of the other Releasees (“Company Property”), and (b) he has not retained or provided to anyone else any copies, excerpts, transcripts, descriptions, portions, abstracts, or other representations of Company Property, except for materials that have been provided to all directors of the Company. To the extent that Employee has any Company Property in electronic form (including, but not limited to, Company-related e-mail), Employee represents and warrants that, after returning such electronic Company Property as described in this Section, he will permanently delete on or before the Annual Meeting Date, such Company Property from all non-Company-owned computers, mobile devices, electronic media, cloud storage, or other media devices, or equipment. Employee further represents and warrants that he has not provided and will not provide any Company Property to any third party, including any documents, equipment, or other tangible property, but with the exception of non-confidential materials generally distributed by Company to clients or the general public.

Non-Disparagement. Employee agrees that, except as may be required by law or court order, he will not, directly or indirectly, make any statement, oral or written, or perform any act or omission which disparages or casts in a negative light the Company, its business, its employees, or any of the Releasees. This Section 9 is not intended to in any way limit any of the Protected Rights contained in Section 4 of this Agreement, or to prevent Employee from providing truthful testimony in response to a valid subpoena, court order, or request from a Government Agency. In addition, to the extent that Employee engages in discussions or other communications with customers, investors, analysts, or shareholders of the Company and its subsidiaries and affiliates, or any other third parties that have business relationships with the Company and its subsidiaries and affiliates, or the media, Employee will strictly limit such communications to matters that have been publicly disclosed by the Company and its subsidiaries and affiliates. The Company will advise the members of its board of directors (and those of the Sonabank’s board of directors) and all executive officers of the Company and Sonabank (collectively, the “Persons to be Advised”) that they should not make public statements that are in any way disparaging or negative towards Employee. The Company will advise the Persons to be Advised that a non-disparagement agreement is in effect and will use reasonable efforts to enforce compliance with this Agreement.

10.

11.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Virginia without giving effect to its conflict of law principles.

12.

Severability. With the exception of the release contained in Section 3, the provisions of this Agreement are severable and if any part of it is found to be unenforceable the other sections

13.

14.

No Reemployment. Employee agrees that by signing this Agreement, he relinquishes any right to employment or reemployment with the Company or any of the other Releasees. Employee agrees that he will not seek, apply for, accept, or otherwise pursue employment with the Company or any of the Releasees, and acknowledges that if he reapplies for or seeks employment with the Company or any of the Releasees, the Company’s or any of the Releasees’ refusal to hire Employee based on this Section 14 shall provide a complete defense to any claims arising from Employee’s attempt to obtain employment.

15.

16.

Required Disclosure. Employee acknowledges he has been provided with a notice (Exhibit A to this Agreement), pursuant to the Older Workers Benefit Protection Act, 29 U.S.C. § 626(f), that fully complies with the requirements of 29 U.S.C. § 626(f)(1)(H).

(Signature page follows)

The Parties hereby signify their agreement to these terms by their signatures below.

/s/ R. Roderick Porter

Date: March 30, 2020

Southern National Bancorp of Virginia, Inc.

By: /s/ Dennis J. Zember

Name: Dennis J. Zember, Jr.

Title: President and Chief Executive Officer

Date: March 30, 2020

Exhibit A

Job Title	Age
Executive Chairman	75
Executive Vice Chairman	75

There are not any employees in the Organizational Unit who were not selected for inclusion in the Exit Incentive and Severance Program.

Exhibit 31.1

CERTIFICATIONS

I, Dennis J. Zember, certify that:

1. I have reviewed this report on Form 10-Q of Southern National Bancorp of Virginia, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 8, 2020		/s/ Dennis J. Zember
		Dennis J. Zember,
		President and Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, Jeffrey L. Karafa, certify that:

1. I have reviewed this report on Form 10-Q of Southern National Bancorp of Virginia, Inc.;

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 8, 2020		/s/ Jeffrey L. Karafa
		Jeffrey L. Karafa,
		Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Southern National Bancorp of Virginia, Inc. (“Southern National”) on Form 10-Q for the period ending March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Chief Executive Officer and Chief Financial Officer of Southern National hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that based on their knowledge and belief: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Southern National as of and for the periods covered in the Report.


/s/ Dennis J. Zember
Dennis J. Zember,
President and Chief Executive Officer


/s/ Jeffrey L. Karafa
Jeffrey L. Karafa,
Chief Financial Officer


May 8, 2020