U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1999
[ ] Transition Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from ____________ to _____________
Commission file number: 0-24557
CARDINAL FINANCIAL CORPORATION
(Exact Name of Small Business Issuer as Specified in its Charter)
Virginia 54-1874630
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10555 Main Street, Suite 500
Fairfax, Virginia 22030
(Address of Principle Executive Offices)
(703) 934-9200
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 __X__ No _____
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
4,239,509 shares of common stock, par value $1.00
per share, outstanding as of March 31, 1999
<PAGE>
CARDINAL FINANCIAL CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Condition
March 31, 1999 and December 31, 1998.......................................................3
Consolidated Statements of Operations
For the Quarter Ended March 31, 1999 and March 31, 1998....................................4
Condensed Consolidated Statement of Comprehensive Income
For the Quarter Ended March 31, 1999 and March 31, 1998....................................5
Condensed Consolidated Statement of Changes in Shareholders' Equity
For the Quarter Ended March 31, 1999 and March 31, 1998....................................6
Condensed Consolidated Statements of Cash Flows
For the Quarter Ended March 31, 1999 and March 31, 1998....................................7
Notes to Condensed Consolidated Financial Statements.......................................8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation..........................................................9
Part II. Other Information
Item 1. Legal Proceedings.........................................................................18
Item 2. Changes in Securities and Use of Proceeds.................................................18
Item 3. Defaults Upon Senior Securities...........................................................18
Item 4. Submission of Matters to a Vote of Security Holders.......................................18
Item 5. Other Information.........................................................................18
Item 6. Exhibits and Reports on Form 8-K..........................................................18
</TABLE>
2
<PAGE>
CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
As of March 31, 1999 and December 31, 1998
(In thousands, except share data)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
Cash & due from banks $ 1,762 $ 1,073
Federal funds sold 25,967 24,277
-------- --------
Total cash and cash equivalents 27,729 25,350
Investment securities 8,155 13,697
Loans receivable 22,041 16,327
Less: Allowance for loan losses 281 212
-------- --------
21,760 16,115
Premises and equipment, net 2,357 1,829
Accrued interest and other assets 341 304
-------- --------
Total Assets $ 60,342 $ 57,295
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 25,932 $ 21,867
Accrued interest and other liabilities 390 700
-------- --------
Total Liabilities 26,322 22,567
Common stock, $1 par value, 50,000,000 shares authorized,
shares outstanding 4,239,509 at March 31, 1999 and
December 31, 1998 4,240 4,240
Additional paid in capital 32,465 32,327
Accumulated deficit (2,666) (1,842)
Accumulated other comprehensive income (19) 3
-------- --------
Total Shareholders' Equity 34,020 34,728
-------- --------
Total Liabilities and Shareholders' Equity $ 60,342 $ 57,295
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarter ended March 31, 1999 and March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
March 31
--------------------------------------
1999 1998
---- ----
<S> <C> <C>
INTEREST INCOME
Loans receivable $ 354,895 $ -
Investment securities 131,207 -
Federal funds sold 320,801 101,236
---------- ----------
Total Interest Income 806,903 101,236
INTEREST EXPENSE
Deposits 199,510 -
Borrowings - 1,616
---------- ----------
Total Interest Expense 199,510 1,616
---------- ----------
NET INTEREST INCOME 607,393 99,620
Provision for loan losses 68,125 -
---------- ----------
Net interest income after provision for loan losses 539,268 99,620
NON-INTEREST INCOME
Service charges on deposit accounts 5,087 -
Loan service charges 19,200 -
Investment securities gains 11,203 -
Other income 9,733 -
---------- ----------
Total Non-interest income 45,223 -
NON-INTEREST EXPENSE
Salary and benefits 761,618 120,289
Depreciation 59,945 2,500
Occupancy 215,228 58,497
Professional fees 117,007 61,461
Other operating expenses 255,010 42,173
---------- ----------
Total non-interest expense 1,408,808 284,920
---------- ----------
Net loss before income taxes (824,317) (185,300)
Provision for income taxes - -
---------- ----------
NET LOSS $ (824,317) $ (185,300)
========== ==========
Basic and diluted loss per share $ (0.19) $ (0.14)
Weighted-average shares outstanding 4,239,509 1,370,422
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Quarter ended March 31, 1999 and March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
March 31,
1999 1998
---- ----
<S> <C> <C>
Net loss $ (824,317) $ (185,300)
Other comprehensive income:
Unrealized holding loss on available-for-sale
investment securities, net of tax (21,633) -
Comprehensive income $ (845,950) $ (185,300)
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Quarter ended March 31, 1999 and March 31, 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
Additional
Common Paid-in
Shares Stock Capital
------ ----- -------
<S> <C> <C> <C>
Balance, January 1, 1999 4,240 $ 4,240 32,327
Net loss
Change in unrealized holding loss on investment
securities available for sale - - -
Total Comprehensive Loss
Reversal of Expense Accrual from Public Offering - - 138
BALANCE, MARCH 31, 1999 4,240 $ 4,240 32,465
========================================================================================================
Balance, January 1, 1998 1,175 $ 1,175 7,621
Issuance of 235 shares of common stock
at $7.50 per share, net of costs 235 235 1,524
Net loss - - -
-------------- ---------- ----------------
BALANCE, MARCH 31, 1998 1,410 $ 1,410 9,145
========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other Uncollected
Accumulated Comprehensive Subscription
Deficit Income Receivable Total
------- ------ ---------- -----
<S> <C> <C> <C> <C>
Balance, January 1, 1999 (1,842) 3 - 34,728
Net loss (824) - (824)
Change in unrealized holding loss on investment
securities available for sale (22) - (22)
-----------------
Total Comprehensive Loss (846)
=================
Reversal of Expense Accrual from Public Offering - - - 138
BALANCE, MARCH 31, 1999 (2,666) (19) - 34,020
=============================================================================================================================
Balance, January 1, 1998 (145) - (100) 8,551
Issuance of 235 shares of common stock
at $7.50 per share, net of costs - - - 1,759
Net loss (185) - - (185)
------------- -------------- ----------- ----------------
BALANCE, MARCH 31, 1998 (330) - (100) 10,125
============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarter ended March 31, 1999 and March 31, 1998
(In thousands)
<TABLE>
<CAPTION>
March 31,
------------------------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (824) $ (185)
Adjustments to reconcile net loss to net cash used in operating activities:
Realized gain on investment securities (11) -
Depreciation 60 3
Provision for loan losses 69 -
Increase in accrued interest and other assets (37) (1)
Decrease in accrued interest and other liabilities (310) (24)
-------- -------
NET CASH USED IN OPERATING ACTIVITIES (1,053) (207)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (588) (282)
Proceeds from sale of investment securities 1,984 -
Purchases of investment securities available for sale (15)
Redemptions of investment securities 3,562 -
Net increase in loan portfolio (5,714) -
-------- -------
NET CASH USED IN INVESTING ACTIVITIES (771) (282)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 4,065 -
Proceeds from stock issuance, net - 1,759
Reversal of expense accrual from public offering 138 -
Decrease (increase) in subscription receivables - 4,308
(Repayment) proceeds of borrowings - (185)
-------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,203 5,882
-------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,379 5,393
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 25,350 4,283
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 27,729 $ 9,676
======== =======
Supplemental disclosure of cash flow information
Cash paid during period for interest: $ 200 $ -
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(Unaudited)
Note 1
Organization
Cardinal Financial Corporation (the "Company") was incorporated November 24,
1997 under the laws of the Commonwealth of Virginia as a holding company whose
activities consist of investment in its wholly owned subsidiary, Cardinal Bank,
N.A. and as of February 1, 1999 investment in its new wholly owned investment
advisory subsidiary, Cardinal Wealth Services, Inc.
Basis of Presentation
In the opinion of management, the accompanying condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. However, all adjustments that are,
in the opinion of management, necessary for a fair presentation have been
included. The results of operations for the three months ended March 31, 1999
are not necessarily indicative of the results to be expected for the full year
ending December 31, 1999. The unaudited interim financial statements should be
read in conjunction with the audited financial statements and notes to financial
statements that are presented in the Annual Report on Form 10-K dated March 31,
1999.
8
<PAGE>
Item 2.
Cardinal Financial Corporation and Subsidiaries
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Cardinal Financial Corporation (the "Company") is the holding company for
Cardinal Bank, N.A. (the "Bank") which commenced operations on June 8, 1998 and
Cardinal Wealth Services, an investment advisory subsidiary, which commenced
operations on February 1, 1999. Both subsidiaries are located in Fairfax,
Virginia.
The Company funded its start-up and organizational costs through a private
offering (the "Private Offering") of 1,409,509 shares of its common stock, par
value $1.00 per share (the "Common Stock"), in the fourth quarter of 1997 and
the first quarter of 1998. The total proceeds to the Company in the Private
Offering were $10.6 million, of which $8.0 million was used to capitalize the
Bank. In addition, the Company raised additional capital for general corporate
purposes and to support the growth of assets and deposits through a public
offering (the "Public Offering") of 2,830,000 shares of Common Stock in the
third quarter of 1998. The total proceeds to the Company in the Public Offering
were $26.1 million, after deducting underwriting discounts and expenses.
The following discussion presents management's discussion and analysis of the
consolidated financial condition and results of operations of the Company as of
March 31, 1999 and for the three months ended March 31, 1999 and March 31, 1998.
This discussion should be read in conjunction with the Company's Unaudited
Condensed Consolidated Financial Statements and the notes thereto appearing
elsewhere in this report. Since principal banking operations commenced on June
8, 1998, a comparison of the March 31, 1999 results (when banking operations
were in progress) to those of March 31, 1998 (prior to the commencement of
banking operations) is not meaningful.
Financial Condition
Total assets of the Company increased to $60.3 million at March 31, 1999
compared to $57.3 million at December 31, 1998. The increase is due primarily to
an increase in deposits of $4.1 million. Gross loans at March 31, 1999 were
$22.0 million compared to $16.3 million at December 31, 1998 (see Table 1 for
loan portfolio details). Investment securities at March 31, 1999 were $8.2
million compared to $13.7 million at December 31, 1998 (see Table 2 for details
of investment securities available for sale). Cash and cash equivalents,
including Fed Funds Sold, were $27.7 million at March 31, 1999 compared to $25.4
million at December 31, 1998.
Shareholders' equity at March 31, 1999 was $34.0 million compared to $34.7
million at December 31, 1998. Book value per share on March 31, 1999 was $8.02
compared to $8.19 at December 31, 1998.
Results of Operations
Net loss for the three months ended March 31, 1999 was $824.3 thousand or $0.19
per share compared to a loss of $185.3 thousand or $0.14 per share for the three
months ended March 31, 1998. The first quarter of 1998 did not include
operations of the banking or investment advisory subsidiaries.
Net interest income is the Company's primary source of earnings and represents
the difference between interest and fees earned on interest bearing assets and
the interest paid on deposits and other interest bearing liabilities. Net
interest income for the three months ended March 31, 1999 totaled $607.4
thousand compared to $99.6 thousand for the three months ended March 31, 1998.
The Company's net interest margin for the three months ended March 31, 1999 was
4.52%. Margin comparisons with the first quarter of 1998 are not meaningful
given the start-up nature of operations during that period. Table 3 presents an
analysis of average earning assets, interest bearing liabilities and demand
deposits with the related components of interest income and interest expense.
The provision for loan losses for the three months ended March 31, 1999 was
$68.1 thousand. There was no provision for the first quarter of 1998. The
allowance for loan losses at March 31, 1999 was $280.6
9
<PAGE>
thousand compared to $212.4 thousand at December 31, 1998. The ratio of the
allowance for loan losses to gross loans at March 31, 1999 is 1.29%. Due to the
Company's short history, management is currently maintaining a loan loss
allowance comparable to its peers. The amount of loan loss provision is
determined by an evaluation of the level of loans outstanding, the level of
non-performing loans, historical loan loss experience, delinquency trends, the
amount of actual losses charged to the reserve in a given period, and assessment
of present and anticipated economic conditions. Table 4 reflects the components
of the allowance for loan losses.
Non-interest income for the three months ended March 31, 1999 was $45,223. The
Company did not record non-interest income for the three months ended March 31,
1998. Included in non-interest income are service charges on loan and deposit
accounts and fees on miscellaneous bank services.
Non-interest expense for the three months ended March 31, 1999 totaled $1.41
million compared to $284.9 thousand for the three months ended March 31, 1998.
Expenses for the first quarter of 1999 are significantly higher than the
comparable quarter in 1998 due to the operations of the banking and investment
subsidiaries.
Capital Resources
Shareholders' equity at March 31, 1999 was $34.0 million compared to $34.7
million at December 31, 1998. The reduction in equity was due to the recognition
of the first quarter's net loss.
At March 31, 1999 the Company's tier 1 and total risk-based capital ratios were
114.1% and 113.2%, respectively. At December 31, 1998, the Company's tier 1 and
total risk-based capital ratio were 146.9% and 146.0%, respectively. Table 5
reflects the components of regulatory capital. The Company's capital structure
places it well above minimum regulatory requirements. The Company maintains a
strong capital base in order to implement its growth strategy, which includes
the funding of three additional bank subsidiaries, as well as ensuring that it
has the resources to protect against the risks inherent in its business.
Liquidity
Liquidity provides the Company with the ability to meet normal deposit
withdrawals, while also providing for the credit needs of customers. At March
31, 1999, cash, cash equivalents and investment securities available for sale
totaled $35.9 million compared to $39.0 million at December 31, 1998. Management
is committed to maintaining liquidity at a level sufficient to protect
depositors, provide for reasonable growth, and fully comply with all regulatory
requirements.
Interest Rate Sensitivity
An important element of asset/liability management is the monitoring of the
Company's sensitivity to interest rate movements. In order to measure the effect
of interest rates on the Company's net interest income, management takes into
consideration the expected cash flows from the securities and loan portfolios
and the expected magnitude of the repricing of specific asset and liability
categories. Management evaluates interest sensitivity risk and then formulates
guidelines to manage this risk based upon its outlook regarding the economy,
forecasted interest rate movements and other business factors. Management's goal
is to maximize and stabilize the net interest margin by limiting exposure to
interest rate changes.
The data in Table 6 reflects re-pricing or expected maturities of various assets
and liabilities at March 31, 1999. This gap analysis represents the difference
between interest sensitive assets and liabilities in a specific time interval.
Interest sensitivity gap analysis presents a position that existed at one
particular point in time, and assumes that assets and liabilities with similar
re-pricing characteristics will re-price at the same time and to the same
degree. Given the Company's short history and anticipated growth, management has
maintained a high positive short-term gap.
Year 2000 Compliance
As the year 2000 approaches, an important business issue has emerged regarding
how existing software programs and operating systems can accommodate this date
value. Many existing application software products were designed to accommodate
a two-digit year. For example, "98" is stored on the systems and
10
<PAGE>
represents 1998 and "00" represents 1900.
The Company utilizes a third-party vendor for processing its primary banking
applications. In addition, the Company also uses several other third-party
vendors for ancillary computer applications. All third party vendors for the
Company's banking applications either are already Year 2000 ready or are in the
process of modifying, upgrading or replacing their computer applications to
ensure Year 2000 compliance. Because the Company was recently formed, all of its
data processing equipment is new and is Year 2000 ready. The Company does not
expect to incur any material expense to replace data processing equipment.
The Company has a Year 2000 compliance program to review the Year 2000 issues
faced by its third-party vendors. Under this program, the Company is examining
the need for modifications or replacement of all non-compliant software. The
Company's recent entrance into the market has allowed it the opportunity to
screen third party vendors. Vendors chosen are already compliant or are in the
process of becoming Year 2000 compliant. Data processing vendor contracts have
Year 2000 clauses, which allow the Company to test for compliance and to cancel
without penalty if a vendor does not meet its Year 2000 compliance plan. The
Company has satisfactorily completed testing of its primary operating system.
All hardware has been certified compliant. All of the Company's critical
outsource partners have satisfactorily reported successful testing and the
Company does not contemplate changing any vendors.
The Company does not expect the cost of its Year 2000 compliance program,
including possible remediation costs, to be material to its financial condition
and expects to satisfy compliance without material disruption of its operations.
The anticipated costs will be for testing of vendor Year 2000 compliance. The
Company will utilize internal staff for this purpose, as well as third-party
vendors as necessary. The Company does not separately track the internal costs
incurred for its Year 2000 compliance program, and such costs are principally
the related payroll costs for its test team. In the event that the Company's
significant vendors, including its correspondent, the Federal Reserve Bank of
Richmond, do not successfully achieve Year 2000 compliance, the Company's
business, results of operations or financial condition could be adversely
affected.
The Company's contingency plan has been completed and tested. The plan provides
an outline for operating in any worst case scenario.
The Company is subject to periodic review by its primary regulator, the Office
of the Comptroller of the Currency, to ensure existence of and adherence to a
Year 2000 compliance plan.
Forward Looking Statements
This report contains certain forward-looking statements, which can be identified
by the use of forward-looking terminology such as "may, " "will, " "expect, "
"anticipate, " "estimate, " or "continue, " or the negative thereof or other
comparable terminology. The Company cautions readers that certain important
factors, including, among others, problems with terminology utilized by the
Company as described above, in some cases have affected, and in the future could
affect, the Company's actual results and could cause the Company's actual
results in 1999 and beyond to differ materially from those expressed in any
forward-looking statements in this report. Reference is made to the "Risk
Factors" section of the Prospectus dated July 17, 1998 that is part of the
Company's Registration Statement on Form SB-2 (Registration No. 333-52279) and
that was filed with the Securities and Exchange Commission on July 20, 1998
pursuant to Rule 424(b) under the Securities Act of 1933, as amended, for a
description of certain of these important factors.
11
<PAGE>
Cardinal Financial Corporation and Subsidiaries
Loans
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31 December 31,
1999 1998
<S> <C> <C> <C> <C>
Commercial $ 6,855 31.07% $ 5,138 31.43%
Real estate - commercial 6,237 28.27% 3,507 21.46%
Real estate - construction 829 3.76% 760 4.65%
Real estate - residential 5,598 25.38% 5,529 33.83%
Home equity lines 1,527 6.92% 1,040 6.37%
Consumer 1,014 4.60% 369 2.26%
--------------------------- ----------------------------
Gross loans $ 22,060 100.00% $ 16,343 100.00%
Less: unearned income, net (19) - (16) -
Less: allowance for loan loss (281) - (212) -
Total net loans $ 21,760 - $ 16,115 -
============================ =============================
</TABLE>
12
<PAGE>
Cardinal Financial Corporation and Subsidiaries
Investment Securities - Available for Sale
As of March 31, 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Amortized Market Unrealized Average
Par Value Cost Value Gain/(Loss) Yield
--------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
U.S. Government Agencies
Within one year $ 2,000 2,000 1,997 (3) 5.31%
One to five years 3,000 3,002 2,987 (15) 5.76%
Five to ten years - - - - 0.00%
After ten years 500 499 494 (5) 6.26%
- ------------------------------------------------------------------------------------------------------------------------------------
Total U.S Government Agencies $ 5,500 5,501 5,478 (23) 5.64%
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage-Backed Securities
Within one year 777 778 778 0 5.44%
One to five years 796 809 812 3 5.53%
Five to ten years 858 862 852 (10) 5.92%
After ten years - - - - 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Mortgage-Backed Securities $ 2,431 2,449 2,442 (7) 5.64%
- ------------------------------------------------------------------------------------------------------------------------------------
Other Securities
Within one year - - - - -
One to five years - - - - -
Five to ten years - - - - -
After ten years 235 235 235 - 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Other Securities $ 235 235 235 - 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Securities Available for Sale $ 8,166 8,185 8,155 (30) 5.65%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Cardinal Financial Corporation and Subsidiaries
Rate and Volume Analysis (Tax Equivalent Basis)
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
First Quarter First Quarter First Quarter Variance
Average Volume Average Rate Interest Increase Attributable to
1999 1998 1999 1998 1999 1998 (Decrease) Rate Volume
--------------- --------------- -------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income
Loans:
$ 6,445 $ - 8.09% 0.00% Commercial $ 130 $ - $ 130 $ 130 $ -
3,587 - 8.33% 0.00% Real estate - commercial 75 - 75 75 -
526 - 7.97% 0.00% Real estate - construction 10 - 10 10 -
5,668 - 7.20% 0.00% Real estate - residential 102 - 102 102 -
1,211 - 6.15% 0.00% Home equity lines 19 - 19 19 -
588 - 8.52% 0.00% Consumer 13 - 13 13 -
- ------------------------------------------------------------------------------------------------------------------------------------
18,025 - 7.74% 0.00% Total loans 349 - 349 349 -
9,463 - 5.55% 0.00% Investment Securities - AFS 131 - 131 131 -
- 9,437 0.00% 4.29% Money Market Accounts - 101 (101) - (101)
26,898 - 4.77% 0.00% Federal funds sold 321 - 321 321 -
- ------------------------------------------------------------------------------------------------------------------------------------
$ 54,386 $ 9,437 5.89% 4.29% Total interest-earning assets $ 801 $ 101 $ 700 $ 801 $ (101)
====================================================================================================================================
Interest Expense
1,912 - 2.05% 0.00% Interest Checking 10 - 10 10 -
4,299 - 3.59% 0.00% Money Markets 38 - 38 38 -
111 - 2.97% 0.00% Statement Savings 1 - 1 1 -
12,078 - 4.88% 0.00% Certificates of Deposit 145 - 145 145 -
- ------------------------------------------------------------------------------------------------------------------------------------
18,400 - 4.27% 0.00% Total interest-bearing liabilities 194 - 194 194 -
38,898 10,268 Other Sources - Net
- ------------------------------------------------------------------------------------------------------------------------------------
57,298 10,268 1.37% 0.00% Total Sources of Funds 194 - 194 194 -
- ------------------------------------------------------------------------------------------------------------------------------------
$ 35,986 $ 9,437 4.52% 4.29% Net Interest Margin $ 607 $ 101 $ 506 $ 607 $ (101)
====================================================================================================================================
</TABLE>
14
<PAGE>
Cardinal Financial Corporation and Subsidiaries
Allowance for Loan Losses
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three For the year
months ended ended
March 31, December 31,
1999 1998
<S> <C> <C>
Beginning balance $ 212 $ -
Provision for loan losses 69 212
Loans charged off:
Commercial - -
Real estate - commercial - -
Real estate - construction - -
Real estate - residential - -
Home equity lines - -
Consumer - -
- --------------------------------------------------------------------------------------
Total loans charged off - -
Recoveries:
Commercial - -
Real estate - commercial - -
Real estate - construction - -
Real estate - residential - -
Home equity lines - -
Consumer - -
- --------------------------------------------------------------------------------------
Total recoveries - -
Net charge-offs - -
Ending Balance $ 281 $ 212
======================================================================================
Loans:
Total at period end $ 21,760 $ 16,343
Allowance for loan losses to:
Period-end loans 1.29% 1.30%
</TABLE>
15
<PAGE>
CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES
Capital Components
As of March 31, 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------ ----------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total risk based capital to risk weighted assets $ 33,758 113.2% $2,386 > 8.00% $2,983 > 10.0%
--- ---
Tier I capital to risk weighted assets 34,039 114.1% 1,193 > 4.00% 1,790 > 6.0%
--- ---
Leverage ratio total risk based capital to quarterly
average assets 33,758 58.2% 2,322 > 4.00% 2,902 > 5.0%
--- ---
</TABLE>
16
<PAGE>
Cardinal Financial Corporation and Subsidiaries
Interest Rate Sensitivity Gap Analysis
As of March 31, 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
1-90 91-180 181-365 1-5 Over 5
Days Days Days Years Years TOTAL
---- ---- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C>
ASSETS
Investment Securities
U.S. Government agency securities - - - 4,984 493 $ 5,477
Mortgage-backed securities - - 779 812 852 2,443
Other securities - - - - 235 235
Total Investment Securities - - 779 5,796 1,580 8,155
Federal Funds Sold 25,967 25,967
Loans
Variable rate loans 6,924 1,166 150 8,973 - 17,213
Fixed rate loans 500 203 65 3,068 992 4,828
Total Gross Loans 7,424 1,369 215 12,041 992 22,041
Total Earning Assets 33,391 1,369 994 17,837 2,572 $ 56,163
Cumulative Rate Sensitive Assets 33,391 34,760 35,754 53,592 56,163
Liabilities and Shareholders' Equity
Deposits
Demand deposits 6,039 - - - - $ 6,039
Interest checking 2,145 - - - - 2,145
Statement savings 149 - - - - 149
Money market accounts 4,634 - - - - 4,634
Certificates of deposit 2,461 2,372 7,510 622 - 12,965
Total Deposits 15,428 2,372 7,510 622 - 25,932
Other liabilities - - - - - -
Total Interest Bearing Liabilities 15,428 2,372 7,510 622 - $ 25,932
Cumulative Rate Sensitive Liabilities 15,428 17,800 25,310 25,932 25,932
Gap 17,963 (1,003) (6,516) 17,215 2,572
Cumulative Gap 17,963 16,960 10,444 27,660 30,231
Gap/ Total Assets 29.77% -1.66% -10.80% 28.53% 4.26%
Cumulative Gap/ Total Assets 29.77% 28.11% 17.31% 45.84% 50.10%
Rate Sensitive Assets/ Rate Sensitive Liabilities 2.16 0.58 0.13 28.68 -
Cumulative RSA/ Cumulative RSL 2.16 1.95 1.41 2.07 2.17
</TABLE>
17
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during
the quarter ended March 31, 1999.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (filed electronically
only).
(b) Reports on Form 8-K - none.
18
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CARDINAL FINANCIAL CORPORATION
Date: May 17, 1999 /s/ L. Burwell Gunn, Jr.
-----------------------------------------
L. Burwell Gunn, Jr.
President and Chief Executive Officer
Date: May 17, 1999 /s/ Joseph L. Borrelli
-----------------------------------------
Joseph L. Borrelli
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-QSB FOR CARDINAL FINANCIAL CORPORATION FOR THE
PERIOD ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1762
<INT-BEARING-DEPOSITS> 19893
<FED-FUNDS-SOLD> 25967
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 8155
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 22041
<ALLOWANCE> 281
<TOTAL-ASSETS> 60342
<DEPOSITS> 25932
<SHORT-TERM> 0
<LIABILITIES-OTHER> 390
<LONG-TERM> 0
0
0
<COMMON> 4240
<OTHER-SE> 29780
<TOTAL-LIABILITIES-AND-EQUITY> 60342
<INTEREST-LOAN> 355
<INTEREST-INVEST> 131
<INTEREST-OTHER> 321
<INTEREST-TOTAL> 807
<INTEREST-DEPOSIT> 200
<INTEREST-EXPENSE> 200
<INTEREST-INCOME-NET> 539
<LOAN-LOSSES> 68
<SECURITIES-GAINS> 11
<EXPENSE-OTHER> 1409
<INCOME-PRETAX> (824)
<INCOME-PRE-EXTRAORDINARY> (824)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (824)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
<YIELD-ACTUAL> 5.89
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 212
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 281
<ALLOWANCE-DOMESTIC> 281
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
