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Southern National Bancorp Of Virginia: After A Sizeable Run, Current Valuation Appears Full

Mar. 01, 2021 5:59 AM ETPrimis Financial Corp. (FRST)
ALG Research profile picture
ALG Research


  • Credit trends look to be getting worse, while peer banks are improving.
  • The loan growth outlook looks muted, and investors should expect some shrinkage.
  • The margin is likely to grind lower, but the core margin looks to be holding up well.

Investment Thesis

Based in McLean, Virginia, Southern National Bancorp of Virginia (SONA) is a $3.1 billion asset holding company and parent to Sonabank. Something investors should note, in an external rebranding effort Southern National Bancorp of Virginia is changing its name to Primis Financial Corporation, and the wholly owned subsidiary, Sonabank, will be renamed Primis Bank. Finally, in addition to the name changes, the stock ticker will change from SONA to FRST. This rebranding effort will take effect March 31, 2021.

Although the bank is relatively small compared to Mid-Atlantic peers, it does have a sizable commercial real estate (CRE) lending platform. When including PPP loans (which account for 13% of the entire loan portfolio at year end), CRE loans make up 78% of the portfolio. The three largest lending subcategories are Commercial Real Estate – Non Owner Owned (25% of loan portfolio), Residential 1-4 Family (23%), and Commercial Real Estate – Owner Owned (18%).

The bank is led by Dennis Zember, who previously grew Ameris Bancorp (NASDAQ:ABCB) to what it is today. While his past endeavour was pretty noteworthy, it ended rather abruptly, with little conclusion. While I personally don't see a problem with Dennis running SONA, I do feel it is prudent to at least point out.

From an investment perspective, I find SONA to be appropriately valued. When viewing the stock from a Price to Tangible Book Value perspective, SONA trades at 1.2x relative to the peer average of 1.35x. While that relative discount might be attractive to some, the recent uptick in criticized loans gives me some investment heartburn. While I currently have a hard time recommending the stock for investors looking to put cash to work, I do think it is a pretty solid long-term hold if one were already invested. In my mind, Southern National Bancorp of Virginia - soon to be known as Primis

This article was written by

ALG Research profile picture
Passionate about the banking space and capital markets. Worked at multiple banks throughout the United States for a long time, specializing in credit and portfolio management.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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