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 September 30, 2000
[ ] 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 Principal 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:
4,245,759 shares of common stock, par value $1.00 per share,
outstanding as of September 30, 2000
<PAGE>
CARDINAL FINANCIAL CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
Part I. Financial Information
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Condition
September 30, 2000 (Unaudited) and December 31, 1999.............................3
Consolidated Statements of Operations (Unaudited)
For the Three and Nine Months Ended
September 30, 2000 and September 30, 1999........................................4
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
For the Three and Nine Months Ended
September 30, 2000 and September 30, 1999........................................5
Consolidated Statement of Changes in Shareholders' Equity (Unaudited)
For the Nine Months Ended September 30, 2000 and September 30, 1999..............6
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, 2000 and September 30, 1999..............7
Notes to Condensed Consolidated Financial Statements (Unaudited).................8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation...............................................12
Part II. Other Information
Item 1. Legal Proceedings...............................................................23
Item 2. Changes in Securities and Use of Proceeds.......................................23
Item 3. Defaults Upon Senior Securities.................................................23
Item 4. Submission of Matters to a Vote of Security Holders.............................23
Item 5. Other Information...............................................................23
Item 6. Exhibits and Reports on Form 8-K................................................24
Signatures
</TABLE>
2
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CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
As of September 30, 2000 and December 31, 1999
(In thousands, except per share data)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
Assets 2000 1999
------------- -------------
<S> <C> <C>
Cash & due from banks $ 8,779 $ 6,018
Federal funds sold 31,809 13,025
------------- -------------
Total cash and cash equivalents 40,588 19,043
Investment securities available-for-sale 9,396 4,807
Other investments 1,398 1,015
Loans receivable, net of fees 140,411 68,167
Allowance for loan losses (1,678) (726)
------------- -------------
138,733 67,441
Premises and equipment, net 5,185 4,203
Intangibles 9,736 -
Accrued interest and other assets 1,356 524
------------- -------------
Total assets $ 206,392 $ 97,033
============= =============
Liabilities and Shareholders' Equity
Deposits $ 154,064 $ 59,873
Borrowings 8,684 6,000
Accrued interest and other liabilities 8,406 415
------------- -------------
Total liabilities 171,154 66,288
Preferred stock, cumulative convertible, $1 par value, 1,412,000 shares authorized,
shares outstanding 1,411,499 in 2000 1,411 -
Common stock, $1 par value, 50,000,000 shares authorized,
shares outstanding 4,245,759 in 2000 and 4,242,634 in 1999 4,246 4,243
Additional paid in capital 38,451 32,496
Accumulated deficit (8,730) (5,881)
Accumulated other comprehensive income (loss) (140) (113)
------------- -------------
Total shareholders' equity 35,238 30,745
------------- -------------
Total liabilities and shareholders' equity $ 206,392 $ 97,033
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $ 2,397,414 $ 752,265 $ 5,809,900 $ 1,578,313
Federal funds sold 390,979 294,246 961,091 938,675
Investment securities available-for-sale 99,407 89,879 242,588 316,378
Other investments 16,155 9,335 48,666 16,932
------------ ------------ ------------ ------------
Total interest income 2,903,955 1,145,725 7,062,245 2,850,298
Interest expense:
Deposits 1,150,749 309,703 2,628,544 734,515
Borrowings 117,110 50,635 308,837 50,908
------------ ------------ ------------ ------------
Total interest expense 1,267,859 360,338 2,937,381 785,423
------------ ------------ ------------ ------------
Net interest income 1,636,096 785,387 4,124,864 2,064,875
Provision for loan losses 180,069 212,500 530,951 401,304
------------ ------------ ------------ ------------
Net interest income after provision for loan losses 1,456,027 572,887 3,593,913 1,663,571
Non-interest income:
Service charges on deposit accounts 36,617 10,257 83,385 21,949
Loan service charges 100,413 60,081 262,615 100,207
Investment fee income 371,432 368,553 1,171,120 648,734
Gains from sale of securities - - - 12,087
Other income 65,262 3,214 136,814 17,898
------------ ------------ ------------ ------------
Total non-interest income 573,724 442,105 1,653,934 800,875
Non-interest expense:
Salary and benefits 1,586,908 1,265,550 4,428,927 3,029,079
Occupancy 267,705 209,617 711,931 630,462
Professional fees 164,709 186,005 417,772 500,743
Depreciation 159,322 83,930 422,559 214,798
Other operating expenses 838,510 525,313 2,073,960 1,175,657
------------ ------------ ------------ ------------
Total non-interest expense 3,017,154 2,270,415 8,055,149 5,550,739
------------ ------------ ------------ ------------
Net loss before income taxes (987,403) (1,255,423) (2,807,302) (3,086,293)
Provision for income taxes - - - -
------------ ------------ ------------ ------------
Net Loss $ (987,403) $(1,255,423) $ (2,807,302) $ (3,086,293)
------------ ------------ ------------ ------------
Dividends to Preferred Shareholders 42,636 - 42,636 -
Net Loss to Common Shareholders (1,030,039) (1,255,423) (2,849,938) (3,086,293)
============ ============ ============ ============
Basic and diluted loss per share $ (0.24) $ (0.30) $ (0.67) $ (0.73)
============ ============ ============ ============
Weighted-average shares outstanding 4,245,759 4,241,604 4,244,721 4,240,207
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------- -------------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net loss $ (987,403) $ (1,255,423) (2,807,302) (3,086,293)
Other comprehensive loss:
Unrealized holding gain (loss) on available-for-sale
investment securities, net of tax 53,944 (21,551) (27,009) (103,878)
------------- ------------- ------------- -------------
Comprehensive loss $ (933,459) $ (1,276,974) (2,834,311) (3,190,171)
============= ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Nine Months Ended September 30, 2000 and 1999
(In thousands, except per share data)
(Unaudited)
Accumulated
Additional Other
Common Preferred Paid-in Accumulated Comprehensive
Shares Stock Stock Capital Deficit Income (Loss) Total
-------- ----------- ----------- ---------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999 4,240 $ 4,240 $ - $ 32,327 $ (1,842) $ 3 $ 34,728
Issuance of 3,125 shares of common stock
par value $1, at $7.06 per share, net of costs 3 3 - 19 - - 22
Reversal of Expense Accrual from
Public Offering - - - 138 - - 138
Change in unrealized holding loss on
investment securities available-for-sale, - - - - - (104) (104)
net of tax
Net loss - - - - (3,086) - (3,086)
-------- ---------- -------- --------- ----------- ------------ --------
Balance, September 30, 1999 4,243 $ 4,243 $ - $ 32,484 $ (4,928) $ (101) $ 31,698
===================================================================================================================================
Balance, January 1, 2000 4,243 $ 4,243 $ - $ 32,496 $ (5,881) $ (113) $ 30,745
Issuance of 1,411,499 shares of cumulative
preferred stock, par value $1 - - 1,411 5,645 - - 7,056
Issuance of common stock option in
connection with the acquisition - - - 301 - - 301
Issuance of stock awards 3 3 - 9 - - 12
Dividends declared on preferred stock - - - - (42) - (42)
Change in unrealized holding loss on
investment securities available-for-sale - - - - - (27) (27)
Net loss - - - - (2,807) - (2,807)
-------- ---------- -------- --------- ----------- ------------ --------
Balance, September 30, 2000 4,246 $ 4,246 $ 1,411 $ 38,451 $ (8,730) $ (140) $ 35,238
===================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE>
CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2000 and 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,807) $ (3,086)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 423 215
Amortization of intangibles 59 -
Provision for loan losses 531 401
Gain on sale of investment securities available-for-sale - (12)
Increase in accrued interest and other assets (225) (313)
Increase in accrued interest and other liabilities 6,703 337
Compensation related to stock awards 12 22
---------- ---------
Net cash used in operating activities 4,696 (2,436)
---------- ---------
Cash flows from investing activities:
Purchase of premises and equipment (653) (2,591)
Proceeds from sale of securities - 3,341
Purchase of investment securities-available-for-sale - (637)
Purchase of other investments (18) -
Redemptions of investment securities-available-for-sale 312 4,030
Net increase in loan portfolio (34,384) (28,170)
Net cash acquired in merger 11,090 -
---------- ---------
Net cash used in investing activities (23,653) (24,027)
---------- ---------
Cash flows from financing activities:
Net increase in deposits 40,292 25,308
Net increase in short-term borrowings 252 3,000
Dividends declared on preferred stock (42) -
Reversal of accrued costs related to public offering - 138
---------- ---------
Net cash provided by financing activities 40,502 28,446
---------- ---------
Net increase in cash and cash equivalents 21,545 1,983
Cash and cash equivalents at beginning of period 19,043 25,350
---------- ---------
Cash and cash equivalents at end of period $ 40,588 $ 27,333
========== =========
Supplemental disclosure of cash flow information:
Cash paid during period for interest: $ 2,870 $ 733
========== =========
</TABLE>
Supplemental schedule of noncash investing and financing activities: The company
purchased all of the common stock of Heritage Bancorp, Inc. for $14.4 million.
In conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired $ 71,974
Cash paid (7,059)
Preferred stock issued (7,056)
Issuance of common stock options (301)
----------
Liabilities assumed 57,558
See accompanying notes to consolidated financial statements.
7
<PAGE>
CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(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 subsidiaries, Cardinal
Bank, N.A., Cardinal Wealth Services, Inc., Cardinal Bank - Manassas/Prince
William, N.A. and Cardinal Bank - Dulles, N.A. On September 1, 2000, the Company
completed its acquisition of Heritage Bancorp, Inc. ("Heritage"). Heritage's
sole subsidiary, The Heritage Bank, is now the Company's fourth banking
subsidiary and has been renamed Cardinal Bank - Potomac.
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 and nine months ended
September 30, 2000 are not necessarily indicative of the results to be expected
for the full year ending December 31, 2000. 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 Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999.
Note 2
Acquisition
On September 1, 2000, the Company acquired 100% of the outstanding common stock
of Heritage for a combination of cash, shares of convertible preferred stock and
stock options totaling $14.4 million. Accordingly, the results of operations of
the Company include the results of Heritage from September 1, 2000 forward. The
transaction was accounted for using the purchase method of accounting. At
consummation, Heritage had assets of approximately $62.2 million, loans, net of
fees, of $37.8 million and deposits of $54.0 million, all of which reflected
purchase accounting adjustments. The following table presents pro forma results
of operations for the nine months ended September 30, 1999 and September 30,
2000 as though the Company and Heritage had combined at the beginning of the
reporting period:
8
<PAGE>
Pro Forma
Nine Months Ended
September 30,
2000 1999
------------ ------------
Net interest income $ 6,372,467 $ 4,556,113
Provision for loan losses 530,951 419,304
Non-interest income 1,176,096 950,875
Non-interest expense 10,898,501 8,139,146
------------ ------------
Net income (loss) $ (3,880,889) $ (3,051,462)
============ ============
Earnings per share:
Basic $ (0.91) $ (0.72)
Diluted (0.91) (0.72)
Note 3
Segment Disclosures
The Company operates and reports in two business segments, commercial banking
and investment advisory services. The commercial banking segment includes both
commercial and consumer lending and provides customers such products as term
loans, real estate loans, other business financing and installment loans. In
addition, this segment also provides customers with several choices of deposit
products including demand deposit accounts, savings accounts and certificates of
deposit. The investment advisory services segment provides advisory services to
businesses and individuals including financial planning and retirement/estate
planning.
Information about reportable segments, and reconciliation of such information to
the consolidated financial statements as of and for the quarters and
year-to-date periods ended September 30, 2000 and 1999 follows:
For the Three Months Ended September 30, 2000:
<TABLE>
<CAPTION>
Commercial Investment Intersegment
Banking Advisory Elimination Other Consolidated
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest income $ 1,498,304 $ - $ - $ 137,792 $ 1,636,096
Provision for loan losses 180,069 - - - 180,069
Non-interest income 185,670 371,432 - 16,622 573,724
Non-interest expense 1,679,414 494,961 - 842,779 3,017,154
--------------------------------------------------------------------------------
Net income (loss) $ (175,509) $ (123,529) $ - $ (688,365) $ (987,403)
================================================================================
</TABLE>
9
<PAGE>
For the Nine Months Ended September 30, 2000:
<TABLE>
<CAPTION>
Commercial Investment Intersegment
Banking Advisory Elimination Other Consolidated
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest income $ 3,695,743 $ - $ - $ 429,121 $ 4,124,864
Provision for loan losses 530,951 - - - 530,951
Non-interest income 453,971 1,171,120 (3,551) 32,394 1,653,934
Non-interest expense 4,577,134 1,524,184 (3,551) 1,957,382 8,055,149
---------------------------------------------------------------------------------
Net income (loss) $ (958,371) $ (353,064) $ - $ (1,495,867) $ (2,807,302)
=================================================================================
Total Assets $ 183,236,012 $ 217,179 $ (19,711,468) $ 42,649,954 $ 206,391,677
</TABLE>
For the Three Months Ended September 30, 1999:
<TABLE>
<CAPTION>
Commercial Investment Intersegment
Banking Advisory Elimination Other Consolidated
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest income $ 646,807 $ - $ - $ 140,354 $ 787,161
Provision for loan losses 212,500 - - - 212,500
Non-interest income 71,778 368,553 - - 440,331
Non-interest expense 1,250,460 554,753 - 465,202 2,270,415
--------------------------------------------------------------------------------
Net income (loss) $ (744,375) $ (186,200) $ $ (324,848) $ (1,255,423)
================================================================================
</TABLE>
For the Nine Months Ended September 30, 1999:
<TABLE>
<CAPTION>
Commercial Investment Intersegment
Banking Advisory Elimination Other Consolidated
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest income $ 1,302,116 $ - $ - $ 765,900 $ 2,068,016
Provision for loan losses 401,304 - - - 401,304
Non-interest income 149,000 648,734 - - 797,734
Non-interest expense 2,836,484 1,130,218 - 1,584,037 5,550,739
---------------------------------------------------------------------------------
Net income (loss) $ (1,786,672) $ (481,484) $ - $ (818,137) $ (3,086,293)
=================================================================================
Total Assets $ 69,606,898 $ 477,197 $ (19,774,865) $ 32,600,662 $ 82,909,892
</TABLE>
The Company does not have operating segments other than those reported. Parent
company financial information is included in the "Other" category above and
represents the overhead function rather than an operating segment. Parent
company net interest income is comprised of interest income from fed funds,
investment securities and certificates of deposit.
Note 4
Earnings Per Share
The following table discloses the calculation of basic and diluted earnings per
share for the three months and nine months ended September 30, 2000 and 1999.
Because the Company had net losses due to the
10
<PAGE>
start-up nature of the organization, all stock options issued to date (331,199
as of September 30, 2000) have an anti-dilutive effect and, therefore, have been
excluded from the earnings per share calculation.
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
2000 1999 2000 1999
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Net loss $ (987,403) $(1,255,423) $(2,807,302) $(3,086,293)
Dividends to preferred shareholders 42,636 - 42,636 -
Net loss to common shareholders (1,030,039) (1,255,423) (2,849,938) (3,086,293)
Weighted average shares for basic and diluted 4,245,759 4,241,604 4,244,721 4,240,207
Basic and diluted loss per share $ (0.24) $ (0.30) $ (0.67) $ (0.73)
</TABLE>
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Cardinal Financial Corporation (the "Company") is a multi-bank holding company
that includes one non-bank subsidiary. The Company began operations on November
24, 1997 and completed a private offering in late 1997 and early 1998 that
raised $10.6 million in capital. Following the private offering, the Company
opened its first bank subsidiary, Cardinal Bank, N.A., on June 8, 1998. In July
1998, the Company raised an additional $26.0 million in an initial public
offering. In February 1999, Cardinal Wealth Services, Inc. began operations as
the Company's non-bank investment advisory subsidiary. Through a strategic
alliance with LM Financial Partners, Inc., a wholly owned subsidiary of Legg
Mason Inc., Cardinal Wealth Services, Inc. can offer an extensive range of
financial products and services. The Company's second bank subsidiary, Cardinal
Bank - Manassas/Prince William, N.A., began operations in July 1999. The
Company's third bank subsidiary, Cardinal Bank - Dulles, N.A., began operations
in August 1999.
In April 2000, the Company announced the planned acquisition of Heritage
Bancorp, Inc. ("Heritage"), a bank holding company with over $64 million in
assets headquartered in McLean, Virginia. Heritage's only subsidiary, The
Heritage Bank, operates three branches in McLean, Sterling and Tyson's Corner in
northern Virginia. The transaction closed on September 1, 2000 and was accounted
for as a purchase. Conversion of systems will occur in the fourth quarter of
2000.
The following discussion presents management's discussion and analysis of the
consolidated financial condition and results of operations of the Company as of
September 30, 2000 and for the three and nine months ended September 30, 2000
and 1999. 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.
Financial Condition
Total assets of the Company were $206.4 million at September 30, 2000 compared
to $97.0 million at December 31, 1999, representing an increase of $109.4 or
113%. The increase is due to the acquisition of Heritage on September 1, 2000 as
well as deposit and loan production during the nine months ended September 30,
2000. Deposit balances increased from $59.9 million on December 31, 1999 to
$154.1 million at September 30, 2000. Of the $94.2 million increase, $40.2
million was due to production and $54.0 million due to the Heritage acquisition.
Total loans, net of fees, increased $72.2 million to $140.4 million at September
30, 2000 from $68.2 million at December 31, 1999. The increase in loan balances
is due to $37.8 million from the acquisition of Heritage and production of $34.4
million. (See Table 1 for loan portfolio details.) Total cash and cash
equivalents were $40.6 million at September 30, 2000 compared to $19.0 million
at December 31, 1999. The $21.6 million increase was due primarily to the
acquisition of Heritage, which added $11.0 million in cash and cash equivalents.
Investment securities available for sale increased $4.6 million to $9.4 million
at September 30, 2000 from $4.8 million at December 31, 1999. Again, the
increase is attributable to the acquisition of Heritage. (See Table 2 for
details of the investment securities available for sale portfolio). As a result
of the acquisition, which was accounted for using the purchase method,
intangible assets in the amount of $9.7 million were added to the balance sheet.
Approximately $100,000 of the intangible assets have been identified as a core
deposit intangible. The core deposit intangible is being amortized over 20
months, and the remaining intangible is being amortized over 15 years.
Shareholders' equity at September 30, 2000 was $35.2 million compared to $30.7
million at December 31, 1999. The $4.5 million increase represents the capital
12
<PAGE>
issued in the Heritage acquisition. As part of the purchase transaction,
1,411,499 shares of cumulative preferred stock with a 7.25% annual dividend were
issued.
Results of Operations
Net loss for the three and nine months ended September 30, 2000 was $987
thousand and $2.81 million, respectively, compared with $1.26 million and $3.09
million for the same periods of 1999. The net loss reduction in the third
quarter of 2000 compared to the third quarter of 1999 of $268,000 or 21% can be
attributed to increased deposit generation and loan production. In addition, the
third quarter of 2000 reflects a full quarter operation for the
Manassas/PrinceWilliam and Dulles banks, plus one month of operations from
Cardinal Bank - Potomac (formerly The Heritage Bank). Return on average assets
and return on average equity for the three months ended September 30, 2000 were
-2.56% and -12.17%, respectively. For the three months ended September 30, 1999,
return on average assets and return on average equity were -6.79% and -15.47%
respectively.
Net interest income is the Company's primary source of revenue 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 before provision for loan losses for the three and nine months
ended September 30, 2000 was $1.64 million and $4.12 million, respectively,
compared to $785 thousand and $2.06 million for the same periods in 1999. The
significant increase in net interest income represents the full operations of
three banks in the third quarter of 2000 as well as one month of operations for
the Company's fourth bank, Cardinal Bank - Potomac.
The Company's net interest margin for the three and nine months ended September
30, 2000 was 4.96% and 4.92%, respectively, compared to 4.70% and 4.67% for the
same periods in 1999. The 26 basis point increase in the margin for the third
quarter of 2000 can be attributed to a change in deposit mix as
non-interest-bearing liabilities fund a higher percentage of interest bearing
liabilities at September 30, 2000 than at September 30, 1999. 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 and nine months ended September 30,
2000 was $180.1 thousand and $531.0 thousand, respectively, compared to $212.5
thousand and $401.3 thousand for the same periods in 1999. The allowance for
loan losses at September 30, 2000 was $1.68 million compared to $726 thousand at
December 31, 1999. The ratio of the allowance for loan losses to gross loans at
September 30, 2000 was 1.20% compared to a ratio of 1.07% at December 31, 1999.
The Company's loan balances include certain types of loans that have been
structured such that the risk of loss is reduced by third party guarantees or
additional collateral. These loans include purchased loans where the seller is
required to absorb losses of up to 115 basis points of the outstanding balances
and business manager loan receivables (funding of small business accounts
receivable) where the borrower maintains a minimum of 10% of the outstanding
balance in a restricted deposit account. Table 4 reflects the components of the
allowance for loan losses and calculates the loan loss ratio two ways; first,
with total gross loans, and second, with total gross loans less purchased loans
and business manager receivables. The Company's ratio of non-performing loans to
total gross loans was 0.46% at September 30, 2000 compared to 0.00% at September
30, 1999.
Non-interest income for the three and nine months ended September 30, 2000 was
$573.7 thousand and $1.65 million, respectively, compared to $442.1 thousand and
$800.9 thousand for the same periods in 1999. The increase in non-interest
income was due to higher investment fee income generated by Cardinal Wealth
Services, Inc., as well as additional fees generated by the Company's bank
subsidiaries.
13
<PAGE>
Non-interest expense for the three and nine months ended September 30, 2000 was
$3.02 million and $8.06 million, respectively, compared to $2.27 million and
$5.55 million for the same periods in 1999. The increase in non-interest expense
can be attributed to the full period operations in 2000 of two additional de
novo banks (Manassas/Prince William and Dulles) as well as the operations for
one month in the third quarter of 2000 of Cardinal Bank -Potomac.
Business Segment Operations
The Company provides a diversified selection of banking and non-banking
financial services and products through its subsidiaries. Management operates
and reports the results of the Company's operations through two business
segments - commercial banking and investment advisory services.
Commercial Banking
The commercial banking segment provides comprehensive banking services to small
businesses and individuals through multiple delivery channels. Through three
banking subsidiaries, services include commercial and consumer lending, deposit
products, direct banking via the internet and telephone, and the funding of
small business receivables through the Business Manager product.
For the three and nine months ended September 30, 2000, the commercial banking
segment had net losses of $175.5 thousand and $958.4 thousand, respectively,
compared to net losses of $744.4 thousand and $1.79 million for the same periods
in 1999. As of September 30, 2000, total assets were $183.2 million, total loans
were $140.4 million and deposits were $154.1 million. As of September 30, 1999,
total assets were $69.6 million, total loans were $44.5 million and total
deposits were $47.2 million.
Investment Advisory Services
The investment advisory services segment provides financial and estate planning
services utilizing a host of products provided through a strategic alliance with
Legg Mason Financial Partners, a wholly owned subsidiary of Legg Mason, Inc.
Operations for this segment began February 1, 1999.
For the three and nine months ended September 30, 2000, the investment advisory
services segment had net losses of $123.5 thousand and $353.1 thousand,
respectively, compared to net losses of $186.2 thousand and $481.5 thousand for
the same periods in 1999. As of September 30, 2000, total assets were $217.2
thousand and assets under management were $81.1 million. As of September 30,
1999, total assets were $477.2 thousand and assets under management were $49.3
million.
Capital Resources
Shareholders' equity at September 30, 2000 was $35.2 million compared to $30.7
million at December 31, 1999. The increase in equity is due to the issuance of
preferred stock in connection with the acquisition of Heritage offset somewhat
by the net loss recorded for the nine months ended September 30, 2000. At
September 30, 2000, the Company's tier 1 and total risk based capital ratios
were 21.5% and 22.2% respectively. At December 31, 1999, the Company's tier 1
and total risk-based capital ratios were 37.9% and 38.8%, respectively. The
decline in the Company's capital ratios is due to the increase in assets as well
as the absorption of operating losses. Table 5 reflects the components of
regulatory capital. The Company continues to maintain a capital structure that
places it well above minimum regulatory requirements.
14
<PAGE>
Liquidity
Liquidity provides the Company with the ability to meet normal deposit
withdrawals while also providing for the credit needs of customers. At September
30, 2000, cash and cash equivalents and securities available for sale totaled
$50.0 million or 24% of total assets compared to $23.9 million or 25% of total
assets at December 31, 1999. 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 flow from the loan and securities 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 as of September 30, 2000. 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 exists 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.
Forward Looking Statements
Certain information contained in this discussion may include "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements are generally identified by phrases such as
"the Company expects," "the Company believes" or words of similar import. Such
forward-looking statements involve known and unknown risks including, but not
limited to, changes in general economic and business conditions, interest rate
fluctuations, competition within and from outside the banking industry, new
products and services in the banking industry, risk inherent in making loans
such as repayment risks and fluctuating collateral values, problems with
technology utilized by the Company, changing trends in customer profiles and
changes in laws and regulations applicable to the Company. Although the Company
believes that its expectations with respect to the forward-looking statements
are based upon reliable assumptions within the bounds of its knowledge of its
business and operations, there can be no assurance that actual results,
performance or achievements of the Company will not differ materially from any
future results, performance or achievements expressed or implied by such
forward-looking statements. For more information on factors that could affect
expectations, see the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1999.
15
<PAGE>
Table 1.
Cardinal Financial Corporation and Subsidiaries
Loans
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
-------------------------- -------------------------
<S> <C> <C> <C> <C>
Commercial $ 41,814 29.54% $ 22,558 33.10%
Real estate - commercial 52,701 38.18% 19,780 29.03%
Real estate - construction 5,184 3.66% 870 1.28%
Real estate - residential 17,346 12.25% 11,851 17.39%
Home equity lines 13,136 9.28% 3,777 5.54%
Consumer 10,029 7.09% 9,311 13.66%
-------------------------- -------------------------
Gross loans $ 140,210 100.00% $ 68,147 100.00%
Less: unearned income, net 201 20
Less: allowance for loan losses (1,678) (726)
-------------- -------------
Total loans, net $ 138,733 $ 67,441
============== =============
</TABLE>
16
<PAGE>
Table 2.
Cardinal Financial Corporation and Subsidiaries
Investment Securities - Available-for-Sale
As of September 30, 2000 and December 31, 1999
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Amortized Fair Unrealized Average
As of September 30, 2000 Par Value Cost Value Gain/(Loss) Yield
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Government Agencies and Enterprises
Within one year 500 500 496 (4) 5.73%
One to five years 6,500 6,442 6,408 (34) 6.28%
After ten years 1,384 1,427 1,358 (69) 7.59%
------------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agencies $ 8,384 $ 8,369 $ 8,262 $ (107) 6.46%
------------------------------------------------------------------------------------------------------------------------------------
Mortgage-Backed Securities
Within one year 71 71 71 - 5.27%
One to five years 705 707 690 (17) 6.05%
Five to ten years 388 389 373 (16) 5.96%
After ten years - - - - 0.00%
------------------------------------------------------------------------------------------------------------------------------------
Total Mortgage-Backed Securities $ 1,164 $ 1,167 $ 1,134 $ (33) 5.97%
------------------------------------------------------------------------------------------------------------------------------------
Total Investment Securities-Available-for-Sale $ 9,548 $ 9,536 $ 9,396 $ (140) 6.40%
========================================================================================================================
Amortized Fair Unrealized Average
As of December 31, 1999 Par Value Cost Value Gain/(Loss) Yield
---------------------------------------------------------------------
U.S. Government Agencies and Enterprises
One to five years $ 3,000 $ 3,000 $ 2,927 $ (73) 5.90%
After ten years 500 499 445 (54) 6.26%
------------------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agencies $ 3,500 $ 3,499 $ 3,372 $ (127) 5.95%
------------------------------------------------------------------------------------------------------------------------------------
Mortgage-Backed Securities
Within one year $ 89 $ 89 $ 89 - 6.20%
Five to ten years 216 217 215 (2) 5.40%
After ten years 1,170 1,173 1,131 (42) 5.86%
------------------------------------------------------------------------------------------------------------------------------------
Total Mortgage-Backed Securities $ 1,475 $ 1,479 $ 1,435 $ (44) 5.87%
------------------------------------------------------------------------------------------------------------------------------------
Total Investment Securities-Available-for-Sale $ 4,975 $ 4,978 $ 4,807 $ (171) 5.93%
=====================================================================
</TABLE>
17
<PAGE>
Table 3.
Cardinal Financial Corporation and Subsidiaries
Rate and Volume Analysis (Tax Equivalent Basis)
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Three Months Three Months
Ended September 30, Ended September 30, Ended September 30, Ended September 30,
Average Volume Average Rate Interest Increase Attributable to
2000 1999 2000 1999 2000 1999 (Decrease) Rate Volume
------------------------------------- -------------------- ------------- ------------------
Interest Income
Loans:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 33,601 $ 10,530 9.76% 8.47% Commercial $ 821 $ 223 $ 598 $ 111 $ 487
33,901 12,746 7.47% 7.31% Real estate - commercial 633 233 400 13 387
3,373 1,071 10.12% 8.59% Real estate - construction 85 23 62 13 49
19,746 9,446 9.33% 7.54% Real estate - residential 460 178 282 89 194
8,253 2,819 8.85% 7.38% Home equity lines 183 52 131 31 100
9,635 1,053 8.95% 8.36% Consumer 216 22 194 14 180
--------------------------------------------------------------------------------------------------------------------------------
108,509 37,665 8.83% 7.76% Total loans 2,398 731 1,667 $ 271 $ 1,396
6,310 6,783 6.30% 5.90% Investment Securities - AFS 99 100 (1) 6 (7)
1,036 - 6.24% 0.00% Other Investments 16 - 16 16 -
22,906 22,995 6.85% 5.11% Federal funds sold 391 294 97 98 (1)
--------------------------------------------------------------------------------------------------------------------------------
$ 138,761 $ 67,443 8.37% 6.67% Total interest-earning assets $ 2,904 $ 1,125 $ 1,779 $ 391 $ 1,388
================================================================================================================================
Interest Expense
6,244 2,461 2.10% 2.12% Interest Checking 33 13 20 (0) 20
16,169 7,692 3.37% 3.65% Money Markets 136 70 66 (11) 77
2,216 248 2.97% 3.23% Statement Savings 16 2 14 (1) 15
62,115 18,201 6.24% 4.96% Certificates of Deposit 966 225 741 198 543
--------------------------------------------------------------------------------------------------------------------------------
86,744 28,602 5.32% 4.35% Total interest-bearing liabilities 1,151 310 841 186 655
6,875 3,000 6.83% 6.82% Borrowings 117 51 66 0 66
--------------------------------------------------------------------------------------------------------------------------------
$ 93,619 $ 31,602 5.43% 4.58% Total interest-bearing liabilities $ 1,268 $ 361 $ 907 $ 186 $ 721
================================================================================================================================
55,358 41,810 Other Sources - Net - - - - -
--------------------------------------------------------------------------------------------------------------------------------
148,976 73,412 3.41% 1.97% Total Sources of Funds 1,268 361 907 186 721
--------------------------------------------------------------------------------------------------------------------------------
$ 45,142 $ 35,841 4.95% 4.70% Net Interest Margin $ 1,636 $ 764 $ 872 $ 205 $ 667
================================================================================================================================
</TABLE>
18
<PAGE>
Table 3 continued.
Cardinal Financial Corporation and Subsidiaries
Rate and Volume Analysis (Tax Equivalent Basis)
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months Nine Months Nine Months
Ended September 30, Ended September 30, Ended September 30, Ended September 30,
Average Volume Average Rate Interest Increase Attributable to
2000 1999 2000 1999 2000 1999 (Decrease) Rate Volume
---------------------------------------- -------------------- ------------ --------------------
Interest Income
Loans:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 27,978 $ 7,977 9.51% 8.19% Commercial $ 1,996 $ 490 $ 1,506 $ 290 $ 1,216
30,020 7,335 7.53% 8.18% Real estate - commercial 1,696 450 1,246 (144) 1,390
1,990 796 9.78% 8.88% Real estate - construction 146 53 93 13 80
15,068 7,194 8.96% 7.38% Real estate - residentia 1,012 398 614 177 437
6,078 2,068 8.62% 6.77% Home equity lines 393 105 288 84 204
9,428 910 8.01% 8.50% Consumer 566 58 508 (34) 542
----------------------------------------------------------------------------------------------------------------------------------
90,562 26,280 8.55% 7.88% Total loans 5,809 1,554 4,255 $ 386 $ 3,869
5,136 7,769 6.30% 5.68% Investment Securities - AFS 243 331 (88) 23 (111)
971 - 6.68% 0.00% Other Investments 49 - 49 49 -
19,245 25,641 6.66% 4.88% Federal funds sold 961 938 23 255 (232)
----------------------------------------------------------------------------------------------------------------------------------
$ 115,914 $ 59,690 8.12% 6.31% Total interest-earning assets $ 7,062 $ 2,823 $ 4,239 $ 713 $ 3,526
==================================================================================================================================
Interest Expense
4,264 2,199 2.32% 2.08% Interest Checking 73 34 39 7 32
12,666 5,791 3.57% 3.63% Money Markets 336 156 180 (5) 185
1,096 178 3.23% 3.03% Statement Savings 26 4 22 2 20
48,564 14,715 6.08% 4.87% Certificates of Deposit 2,193 532 1,661 437 1,224
----------------------------------------------------------------------------------------------------------------------------------
66,590 22,883 5.31% 4.27% Total interest-bearing liabilities 2,628 726 1,902 $ 441 $ 1,461
6,261 1,011 6.55% 6.70% Borrowings 309 51 258 (3) 261
----------------------------------------------------------------------------------------------------------------------------------
$ 72,851 $ 23,894 5.43% 4.38% Total interest-bearing liabilities $ 2,937 $ 777 $ 2,160 $ 438 1,722
==================================================================================================================================
50,532 39,901 Other Sources - Net
----------------------------------------------------------------------------------------------------------------------------------
123,383 63,795 3.21% 1.64% Total Sources of Funds 2,937 777 2,160 438 1,722
----------------------------------------------------------------------------------------------------------------------------------
$ 43,063 $ 35,796 4.92% 4.67% Net Interest Margin $ 4,125 $ 2,046 $ 2,079 275 1,804
==================================================================================================================================
</TABLE>
19
<PAGE>
Table 4.
Cardinal Financial Corporation and Subsidiaries
Allowance for Loan Losses
(Dollars in thousands)
(Unaudited)
2000 1999
------------- -------------
Beginning balance, January 1 $ 726 $ 212
Provision for loan losses 531 401
Assumed allowance for loan losses from acquisition
of Heritage 421
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 - -
Balance, September 30 $ 1,678 $ 613
================================================================================
<TABLE>
<CAPTION>
September 30, December 31, September 30,
2000 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
Loans:
Balance at period end $ 140,210 $ 68,147 $ 44,501
Allowance for loan losses to
Period end loans 1.20% 1.07% 1.38%
Less: Business Manager $ 3,309 $ 1,522 $ 948
Less: Purchased Loans 6,444 7,687 -
------------ ------------ ------------
Adjusted Loan Balance $ 130,457 $ 58,938 $ 43,553
Allowance for loan losses to
Period end adjusted loans 1.29% 1.23% 1.41%
</TABLE>
20
<PAGE>
Table 5.
Cardinal Financial Corporation and Subsidiaries
Capital Components
As of September 30, 2000 and December 31, 1999
(Dollars 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>
As of September 30, 2000
Total risk based capital to risk weighted assets $ 36,540 22.22% $ 13,155 > 8.00% $ 16,443 > 10.00%
- -
Tier I capital to risk weighted assets 35,321 21.48% 6,577 > 4.00% 9,866 > 6.00%
Leverage ratio total risk based capital to total - -
assets 36,540 17.70% 8,256 > 4.00% 10,320 > 5.00%
- -
------------------------------------------------------------------------------------------------------------------------
As of December 31, 1999
Total risk based capital to risk weighted assets $ 31,585 38.75% $ 6,521 > 8.00% $ 8,151 > 10.00%
- -
Tier I capital to risk weighted assets 30,858 37.86% 3,261 > 4.00% 4,891 > 6.00%
Leverage ratio total risk based capital to total - -
assets 31,585 32.55% 3,881 > 4.00% 4,852 > 5.00%
- -
</TABLE>
21
<PAGE>
Table 6.
Cardinal Financial Corporation and Subsidiaries
Interest Rate Sensitivity Gap Analysis
As of September 30, 2000
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
1-90 91-180 181-365 1-5 Over 5
Days Days Days Years Years TOTAL
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment securities available-for-sale
U.S. Government agency securities $ 928 $ - $ - $ 6,906 $ 440 $ 8,274
Mortgage-backed securities 57 - - 1,065 - 1,122
------------------------------------------------------------------------------------------------------------------------------------
Total investment securities available-for-sale 985 - - 7,971 440 9,396
------------------------------------------------------------------------------------------------------------------------------------
Other investments - - - - 1,398 1,398
------------------------------------------------------------------------------------------------------------------------------------
Federal funds sold 31,809 - - - - 31,809
------------------------------------------------------------------------------------------------------------------------------------
Loans
Commercial -fixed 2,903 1,013 1,942 4,405 2,472 12,735
Commercial - variable 24,082 4,719 1,057 41,823 10,346 82,027
Real estate - construction fixed - - - - - -
Real estate - construction variable 5,137 - - - - 5,137
Real estate - residential fixed 18 21 43 2,792 667 3,541
Real estate - residential variable 3,450 2,171 132 4,658 3,248 13,659
Home equity lines 13,136 - - - - 13,136
Consumer - fixed 552 106 213 3,248 1,225 5,344
Consumer - variable 1,134 267 4 795 2,431 4,631
------------------------------------------------------------------------------------------------------------------------------------
Loans receivable 50,412 8,297 3,391 57,721 20,389 140,210
------------------------------------------------------------------------------------------------------------------------------------
Total Earning Assets 83,206 8,297 3,391 65,692 22,227 182,813
------------------------------------------------------------------------------------------------------------------------------------
Cumulative Rate Sensitive Assets $ 83,206 $ 91,503 $ 94,894 $ 160,586 $ 182,813
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
------------------------------------------------------------------------------------------------------------------------------------
Deposits
Demand deposits $ 25,756 $ 5,456 $ 2,290 $ 2,201 $ - $ 35,703
Interest checking 3,940 - - - - 3,940
Statement savings 2,124 2,696 3,569 3,429 - 11,818
Money market accounts 14,088 5,921 1,986 1,908 - 23,903
Certificates of deposit - fixed 5,461 9,738 31,341 11,345 - 57,885
Certificates of deposit - no penalty 106 2,395 8,413 9,901 - 20,815
------------------------------------------------------------------------------------------------------------------------------------
Total Deposits 51,475 26,206 47,599 28,784 - 154,064
------------------------------------------------------------------------------------------------------------------------------------
Borrowings - short term 9,394 - - - - 9,394
------------------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities 60,869 26,206 47,599 28,784 - $ 163,458
------------------------------------------------------------------------------------------------------------------------------------
Cumulative Rate Sensitive Liabilities $ 60,869 $ 87,075 $ 134,674 $ 163,458 $ 163,458
------------------------------------------------------------------------------------------------------------------------------------
Gap $ 22,337 $ (17,909) $ (44,208) $ 36,908 $ 22,227
Cumulative Gap 22,337 4,428 (39,780) (1,534) 20,693
Gap/ Total Assets 10.82% -8.68% -21.42% 17.88% 10.77%
Cumulative Gap/ Total Assets 10.82% 2.15% -19.27% -0.74% 10.03%
Rate Sensitive Assets/ Rate Sensitive Liabilities 1.37 0.32 0.07 2.33 N/A
Cumulative Rate Sensitive Assets/
Cumulative Rate Sensitive Liabilities 1.37 1.05 0.70 0.99 1.13
</TABLE>
22
<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
A Special Meeting of Shareholders (the "Meeting") of Cardinal
Financial Corporation (the "Company") was held on July 25, 2000.
At the Meeting, the Shareholders voted to (i) approve the issuance
of shares of the Company's 7.25% Cumulative Convertible Preferred
Stock, Series A, under the Amended and Restated Agreement and Plan
of Reorganization dated June 19, 2000 by and between Heritage
Bancorp, Inc. ("Heritage"), Cardinal Merger Corp. and the Company,
which provided for Heritage to be merged with and into Cardinal
Merger Corp. and (ii) elect three of Heritage's directors to serve
on the Company's board of directors. The results of the voting on
these matters are set forth below.
<TABLE>
<CAPTION>
Approval of Issuance of Preferred Stock
Broker
For Against Abstain Non-Votes
<S> <C> <C> <C>
Issuance of Preferred Stock 2,474,472 106,450 18,000 --
</TABLE>
<TABLE>
<CAPTION>
Election of Directors
For Withheld
<S> <C> <C>
Harold E. Lieding 3,441,312 92,567
Kevin B. Tighe 3,450,012 83,867
George P. Shafran 3,450,012 83,867
</TABLE>
No other matters were voted upon at the Meeting or during the
quarter for which this report is filed.
Item 5. Other Information
Not applicable.
23
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (filed electronically only).
(b) Reports on Form 8-K
On September 18, 2000, the Company filed a Current Report
on Form 8-K dated September 1, 2000 to disclose, under Item
2, the consummation of the merger of Heritage Bancorp,
Inc., a Virginia corporation, with and into Cardinal Merger
Corp., a Virginia corporation and wholly owned subsidiary
of the Company.
24
<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: November 20, 2000 /s/ L. Burwell Gunn, Jr.
-------------------------------------
L. Burwell Gunn, Jr.
President and Chief Executive Officer
Date: November 20, 2000 /s/ Joseph L. Borrelli
-------------------------------------
Joseph L. Borrelli
Chief Financial Officer
