SEC Info℠

Home

Search

My Interests

Help

Sign In

Please Sign In

Cardinal Financial Corp – ‘424B1’ on 5/13/05

On:  Friday, 5/13/05, at 11:47am ET   ·   Accession #:  1047469-5-14684   ·   File #:  333-123511

Previous ‘424B1’:  ‘424B1’ on 7/20/98   ·   Latest ‘424B1’:  This Filing

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

 Text Wildcards:  ? (any letter/digit),  * (many).  Search Logic:  for Documents:  & (and),  | (or);  for Text:  | (anywhere),  "(&)" (near).  Details... 

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 5/13/05  Cardinal Financial Corp           424B1                  1:2.0M                                   Merrill Corp/New/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 424B1       Prospectus                                          HTML   1.92M 

Filed pursuant to Rule 424(b)(1)
Registration Number 333-123511

PROSPECTUS

4,500,000 Shares

Common Stock

        We are selling 4,500,000 shares of our common stock. Our common stock is currently traded on the Nasdaq National Market under the symbol "CFNL." On May 11, 2005, the last sale price of our common stock as reported on the Nasdaq National Market was $8.60 per share.

        You should consider the risks that we have described in the "Risk Factors" section beginning on page 7 before buying shares of our common stock.

        This is a firm commitment underwriting. The underwriters may purchase up to an additional 675,000 shares from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus, to cover over-allotments, if any.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

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

        The underwriters expect to deliver the shares to purchasers on or about May 17, 2005.

The date of this prospectus is May 11, 2005.

PROSPECTUS SUMMARY

        This summary highlights information contained elsewhere in this prospectus. Because this is a summary, it may not contain all of the information that may be important to you. Therefore, you should read this entire prospectus carefully before making a decision to invest in our common stock, including the risks of purchasing common stock discussed under the "Risk Factors" section and our consolidated financial statements and related notes. Unless otherwise indicated, the information in this prospectus assumes that the underwriters will not exercise their over-allotment option.

        In this prospectus, we frequently use the terms "we", "our" and "us" to refer to Cardinal Financial Corporation and our subsidiaries.

Cardinal Financial Corporation

Overview

        We are a financial holding company formed in 1997 and headquartered in Tysons Corner, Virginia. We were formed principally in response to opportunities resulting from the consolidation of several Virginia-based banks. These bank consolidations were typically accompanied by the dissolution of local boards of directors and relocation or termination of management and customer service professionals and a general deterioration of personalized customer service.

        We own Cardinal Bank, a Virginia state-chartered bank with 19 branches located in northern Virginia and the greater Washington, D.C. metropolitan area. We offer a wide range of traditional banking products and services to both commercial and retail customers in our market areas. We focus on attracting small and medium-sized businesses as well as commercial real estate developers and builders in addition to professionals, such as physicians, accountants and attorneys.

        On July 7, 2004, Cardinal Bank purchased George Mason Mortgage, LLC ("George Mason") for $17.0 million in cash. George Mason allows us to offer a broad array of mortgage loan products to our customers seeking to purchase a home or refinance a mortgage. George Mason also provides certain mortgage banking services to large local home builders. Headquartered in Fairfax, Virginia, George Mason currently has eight branches located throughout the metropolitan Washington, D.C. region and conducts business in eight states and the District of Columbia. George Mason is one of the largest residential mortgage originators in the greater Washington, D.C. metropolitan area, originating and funding over $3.5 billion of residential mortgage loans in 2004.

        We also own Cardinal Wealth Services, Inc., which further complements our core operations by offering a full range of investment products and services, including estate planning, qualified retirement plans, mutual funds, annuities, life insurance, fixed income and equity securities and equity research, to our customers through our third-party relationship with Raymond James Financial Services, Inc.

Growth Highlights

        We have achieved significant growth in assets, loans and deposits over the past five years. Throughout our growth, we have emphasized the importance of a disciplined credit culture and have been successful in maintaining strong asset quality. Our financial highlights include the following:

•

Our total assets have grown from $97.0 million at December 31, 1999 to $1.28 billion at March 31, 2005.



•

Our loans receivable, net of fees, have grown from $68.2 million at December 31, 1999 to $535.7 million at March 31, 2005. Our ratio of non-performing loans to total loans was 0.11% at each of March 31, 2005 and December 31, 2004. Our ratio of net loan charge-offs to average total loans was 0.00% for the quarter ended March 31, 2005 and 0.02% for the year ended December 31, 2004.

1

•

Our total deposits have grown from $59.9 million at December 31, 1999 to $894.9 million at March 31, 2005.



•

Our results improved from a net loss of $4.0 million in 1999 to net income of $3.5 million for the year ended December 31, 2004. Net income for the quarter ended March 31, 2005 was $1.6 million, compared to $719,000 for the quarter ended March 31, 2004.



•

Our efficiency ratio continued to improve from 181.13% in 1999 to 79.95% in 2004 and was 77.62% for the quarter ended March 31, 2005.



•

Our branch network expanded from seven branches at December 31, 1999 to 19 branches currently.



•

We remain a well capitalized institution with a total risk based capital ratio of 12.83% and a Tier 1 risk based capital ratio of 12.06% at March 31, 2005.

Growth Strategy

        We believe that both the strong demographic characteristics of our markets and the ongoing bank consolidation within the greater Washington, D.C. and Northern Virginia metropolitan areas provide a significant opportunity to continue building a successful community-focused banking franchise. We intend to continue to expand our business through internal growth as well as selective geographic expansion while maintaining strong asset quality and achieving sustained profitability. Our strategy for achieving these objectives includes the following:

        Continue to expand our branch network.    We intend to continue to expand our footprint by establishing new branches and potentially acquiring existing branches or other financial institutions in communities that present attractive growth opportunities within Northern Virginia and other markets in the greater Washington, D.C. metropolitan area. During the 12 months ended March 31, 2005, we opened seven branch banking facilities, including our 19^th branch which is located in Sterling, Virginia in January 2005. We have also submitted applications to banking regulators to open three additional branch banking offices, including one in the District of Columbia. We anticipate adding as many as five new branches by the end of 2005.

        Further capitalize on the continued bank consolidation in our market.    Recently announced or completed mergers of larger regional and national banks will result in further consolidation in our target market. We believe this consolidation creates opportunities for us to further expand our branch network to attractive retail sites, to increase our market share of bank deposits within our target market as well as to recruit dislocated customers seeking more personalized service from a local institution. As a local banking organization, we believe we can compete effectively by providing a high level of personalized customer service in a retail-oriented branch system.

        Although we are not at this time engaged in negotiations with any specific bank acquisition targets, we will continue to explore the possibility of further growth through acquisition in Virginia and the metropolitan Washington, D.C. market.

        Expand our lending activities.    We have substantially increased our legal lending limit to $14.3 million as of March 31, 2005 as a result of retained earnings and the completion of our secondary common stock offering in December 2003. This has allowed us to further expand our commercial and real estate lending activities and improved our ability to serve larger residential homebuilders and government contractors in the greater Washington, D.C. area. Our goal is to aggressively grow our loan portfolio while maintaining superior asset quality through conservative underwriting practices.

        Continue to recruit experienced bankers.    We have been successful in recruiting senior bankers with experience in and knowledge of our markets who have been displaced or have grown dissatisfied

2

as a result of the bank consolidation in our market. We intend to continue our efforts to recruit experienced bankers, particularly experienced lenders within our market who can have an immediate impact on generating additional loan volume through existing relationships.

        Focus on specialized lending services.    We plan to continue to expand certain existing product lines that we believe provide unique opportunities for growth in our market, including government contract lending, SBA guaranteed lending, and retail lending.

        Capitalize on cross-selling opportunities.    We intend to further penetrate our expanding customer base through enhanced cross-selling initiatives and by offering additional financial products and services. The addition of George Mason allows us to offer our existing customer base a broader array of mortgage loan products. In addition, we will aggressively market our traditional banking and wealth management products to George Mason's customers. Our focus at George Mason is to build and maintain relationships with local and national homebuilders in an attempt to both reduce this business' reliance on the cyclical mortgage refinancing market and increase our commercial real estate lending activities. We also plan to further develop and expand the investment services we offer through our wealth management subsidiary. We believe we will better serve our growing customer base by expanding our current products and services and delivering them with personalized customer service.

Market Area

        We consider our target market to be the greater Washington, D.C. metropolitan area, which we define as the District of Columbia, the northern Virginia counties of Arlington, Fairfax, Fauquier, Loudoun, Prince William, Spotsylvania and Stafford, the Northern Virginia cities of Alexandria, Fairfax, Falls Church, Fredericksburg and Manassas, and the Maryland counties of Frederick, Montgomery and Prince George's.

        According to 2000 U.S. census data, the population of the greater Washington metropolitan area was approximately 4.7 million people. The average of the median family income figures reported in the 2000 U.S. census for this market was approximately $64,000, compared to a national median household income of approximately $42,000. Based on estimates released by the Bureau of Labor Statistics of the U.S. Department of Labor for December 2004, the unemployment rate for the greater Washington metropolitan area was approximately 3.2%, compared to a national unemployment rate of 5.4%. According to 2000 U.S. census figures, approximately 44% of adults at least 25 years old in this area have a bachelor's degree or higher, compared to approximately 24% nationally. As of June 30, 2004, total deposits in this area were approximately $120 billion as reported by the Federal Deposit Insurance Corporation.

        Our headquarters is located approximately seven miles west of Washington, D.C. in Fairfax County, Virginia. The 2000 U.S. census data indicates that Fairfax County is the most populous county in Virginia with a population of approximately 1 million people and a median household income of over $81,000. Based on estimates released by the Bureau of Statistics of the U.S. Department of Labor for December 2004, the unemployment rate in Fairfax County was 1.8%. The 2000 U.S. census data shows that over 54% of Fairfax county adults at least 25 years old have a bachelor's degree or higher.

*    *    *    *    *

Our principal executive offices are located at 8270 Greensboro Drive, Suite 500, McLean, Virginia 22102, and our telephone number is (703) 584-3400. Our Internet address is www.cardinalbank.com. The information contained on our web site is not part of this prospectus.

3

Recent Developments

        On April 29, 2005, we signed a definitive agreement to acquire Wilson/Bennett Capital Management, Inc., an asset management firm based in Alexandria, Virginia. John W. Fisher, a member of our Board of Directors, is the founder and President and Chief Investment Officer of Wilson/Bennett and owns 90% of the firm. Under the terms of the agreement, we plan to acquire Wilson/Bennett for approximately $6.6 million in a combination of common stock and cash. The cash portion of the transaction will be approximately $1.1 million. We expect that, if the conditions to the closing of the transaction are satisfied, the transaction will close early in the third quarter of 2005. At that time, Wilson/Bennett will become a subsidiary of Cardinal Financial Corporation. Additional information on this transaction is included in "Certain Relationships and Related Transactions" on page 79.

        We believe that this acquisition advances our strategy of enhancing fee income and further diversifying our revenue stream. Wilson/Bennett has approximately 500 institutional and personal clients and approximately $227 million of assets under management. Wilson/Bennett utilizes a value-oriented investment approach that focuses on large capitalization stocks. Wilson/Bennett's 2004 revenues were approximately $1.4 million. We anticipate that the acquisition of Wilson/Bennett will not have a material impact on our 2005 earnings.

The Offering

(1)

This amount does not include 1,661,055 common shares issuable upon the exercise of options outstanding at March 31, 2005 that were granted under our stock option plans, which have a weighted average exercise price of $7.61. Of the outstanding options, options to purchase 1,130,674 shares are currently exercisable at a weighted average exercise price of $8.03.

4

SUMMARY HISTORICAL FINANCIAL DATA

        The table below presents a summary of our selected historical consolidated financial data for the periods and the dates indicated. Since the information contained in this table is a summary and does not provide all of the information contained in our consolidated financial statements, including the related notes, you should read "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes included elsewhere in this prospectus. The selected consolidated financial data has been derived from our unaudited consolidated financial statements for the three months ended March 31, 2005 and 2004 and from our audited consolidated financial statements for the years that ended December 31, 2004, 2003, 2002, 2001 and 2000.

5

(1)

Net loss to common shareholders for the year ended December 31, 2002 included a $1.7 million other than temporary impairment of the WorldCom bond. Net loss to common shareholders for the year ended December 31, 2001 includes an $8.3 million goodwill impairment charge and $884,000 in restructuring costs.

(2)

Net interest margin is calculated as net interest income divided by total average earning assets.

(3)

Efficiency ratio is calculated as total non-interest expense divided by the total of net interest income and non-interest income.

6

RISK FACTORS

        An investment in our common stock involves significant risks. You should carefully read and consider these risks and uncertainties before you decide to invest in our common stock. These risk factors may adversely affect our financial condition and future earnings. In that event, the trading price of our common stock could decline and you could lose all or a part of your investment. You should read this section together with the other information, including our consolidated financial statements and related notes to the consolidated financial statements, included in this prospectus.

Risks Factors

We have operated at a cumulative loss since our inception.

        We have operated at a cumulative loss since our organization in 1997. While we reported net income of $3.5 million in 2004 and $5.7 million in 2003, we cannot assure you that we will be able to continue to operate at a profit as we continue to grow.

We may not be able to successfully manage our growth or implement our growth strategies, which may adversely affect our results of operations and financial condition.

        During the last five years, we have experienced significant growth, and a key aspect of our business strategy is our continued growth and expansion. Our ability to continue to grow depends, in part, upon our ability to:

•

open new branch offices or acquire existing branches or other financial institutions;



•

attract deposits to those locations; and



•

identify attractive loan and investment opportunities.

        We may not be able to successfully implement our growth strategy if we are unable to identify attractive markets, locations or opportunities to expand in the future. Our ability to manage our growth successfully also will depend on whether we can maintain capital levels adequate to support our growth, maintain cost controls and asset quality and successfully integrate any businesses we acquire into our organization.

        As we continue to implement our growth strategy by opening new branches or acquiring branches or other banks, we expect to incur increased personnel, occupancy and other operating expenses. In the case of new branches, we must absorb those higher expenses while we begin to generate new deposits, and there is a further time lag involved in redeploying new deposits into attractively priced loans and other higher yielding earning assets. Thus, our plans to branch aggressively could depress our earnings in the short run, even if we efficiently execute our branching strategy.

We rely heavily on our management team and the unexpected loss of any of those personnel could adversely affect our operations; we depend on our ability to attract and retain key personnel.

        We are a customer-focused and relationship-driven organization. We expect our future growth to be driven in a large part by the relationships maintained with our customers by our Chairman, President and Chief Executive Officer, Bernard H. Clineburg, and our other executive and senior lending officers. We have entered into employment agreements with Mr. Clineburg and three other executive officers. The existence of such agreements, however, does not necessarily assure that we will be able to continue to retain their services. The unexpected loss of Mr. Clineburg or other key employees could have a material adverse effect on our business and possibly result in reduced revenues and earnings. We do not maintain key man life insurance policies on any of our executives.

7

        The implementation of our business strategy will also require us to continue to attract, hire, motivate and retain skilled personnel to develop new customer relationships as well as new financial products and services. Many experienced banking professionals employed by our competitors are covered by agreements not to compete or solicit their existing customers if they were to leave their current employment. These agreements make the recruitment of these professionals more difficult. The market for these people is competitive, and we cannot assure you that we will be successful in attracting, hiring, motivating or retaining them.

We have identified a material weakness and significant deficiencies in our internal control over financial reporting that may adversely affect our ability to properly account for non-routine transactions.

        As we have grown and expanded, we have acquired and added, and expect to continue to acquire and add, businesses and other activities that complement our core retail and commercial banking functions. Such acquisitions or additions frequently involve complex operational and financial reporting issues. While we make every effort to thoroughly understand any new activity or acquired entity's business and plan for proper integration into our company, we can give no assurance that we will not encounter operational and financial reporting difficulties.

        For example, in February 2005, we restated our three- and nine-month financial statements for the periods ended September 30, 2004. The restatement resulted from our identification of certain errors relating to our acquisition of George Mason in 2004. Specifically, management and our independent registered accounting firm concluded that our accounting personnel lacked sufficient resources and expertise to properly account for certain non-routine transactions, our policies and procedures did not provide for timely review of significant non-routine transactions and related accounting entries, and we did not maintain sufficient documentation related to the application of U.S. generally accepted accounting principles to significant non-routine transactions. Our management and our independent registered accounting firm concluded that such circumstances constituted a material weakness and that, as a result, our internal control over financial reporting as of December 31, 2004 was not effective. Additional information on these issues is included in the "Controls and Procedures" section of Management's Discussion and Analysis of Financial Condition and Results of Operations found later in this prospectus.

        In response to the circumstances giving rise to such material weakness, we appointed a new chief financial officer and hired a new senior accountant in October 2004. Furthermore, during the first quarter of 2005, we implemented timely review and sign-off procedures that include the utilization of a disclosure checklist. Finally, we implemented procedures to ensure that we document the application of U.S. generally accepted accounting principles to significant non-routine transactions. Although we believe that these efforts have strengthened our internal controls and addressed the concerns that gave rise to the material weakness, we are continuing to work to improve our internal control over financial reporting related to non-routine transactions. We cannot be certain, however, that these measures will ensure that we implement and maintain adequate controls over our financial processes and reporting in the future for such transactions. In addition, as permitted by the Securities and Exchange Commission, we have not yet completed an assessment of the effectiveness of internal control over financial reporting at George Mason. Any failure to implement effective internal control over financial reporting, or difficulties encountered in their implementation, with respect to non-routine transactions or otherwise could harm our operating results or cause us to fail to meet our reporting obligations. Inadequate internal control over financial reporting could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

We may incur losses if we are unable to successfully manage interest rate risk.

        Our profitability will depend in substantial part upon the spread between the interest rates earned on investments and loans and interest rates paid on deposits and other interest-bearing liabilities. We

8

may pay above-market rates to attract deposits as we have done in some of our marketing promotions in the past. Changes in interest rates will affect our operating performance and financial condition in diverse ways including the pricing of securities, loans and deposits, the volume of loan originations in our mortgage banking business and the value we can recognize on the sale of mortgage and home equity loans in the secondary market. We attempt to minimize our exposure to interest rate risk, but we will be unable to eliminate it. Based on our asset/liability position at March 31, 2005, a rise in interest rates would benefit our net interest income in the short term. Our net interest spread will depend on many factors that are partly or entirely outside our control, including competition, federal economic, monetary and fiscal policies, and economic conditions generally.

We may be adversely affected by economic conditions in our market area.

        We are headquartered in northern Virginia, and our market includes the greater Washington, D.C. metropolitan area. Because our lending is concentrated in this market, we will be affected by the general economic conditions in the greater Washington area. Changes in the economy may influence the growth rate of our loans and deposits, the quality of the loan portfolio and loan and deposit pricing and the performance of our mortgage subsidiary. A significant decline in general economic conditions caused by inflation, recession, unemployment or other factors beyond our control would impact these local economic conditions and the demand for banking products and services generally, which could negatively affect our financial condition and performance.

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

Our concentration in loans secured by real estate may increase our credit losses, which would negatively affect our financial results.

        We offer a variety of secured loans, including commercial lines of credit, commercial term loans, real estate, construction, home equity, consumer and other loans. Many of our loans are secured by real estate (both residential and commercial) in our market area. At March 31, 2005, substantially all of our $364.1 million portfolio of loans held for sale was secured by residential real estate. As of this same date, approximately 58% and 30% of our $535.7 million loans receivable portfolio were secured by commercial and residential real estate, respectively. A major change in the real estate market, such as a deterioration in the value of this collateral, or in the local or national economy, could adversely affect our customers' ability to pay these loans, which in turn could impact us. Risk of loan defaults and foreclosures are unavoidable in the banking industry, and we try to limit our exposure to this risk by monitoring our extensions of credit carefully. We cannot fully eliminate credit risk, and as a result credit losses may occur in the future.

If our allowance for loan losses becomes inadequate, our results of operations may be adversely affected.

        We maintain an allowance for loan losses that we believe is a reasonable estimate of known and inherent losses in our loan portfolio. Through a periodic review and consideration of the loan portfolio, management determines the amount of the allowance for loan losses by considering general market conditions, credit quality of the loan portfolio, the collateral supporting the loans and performance of our customers relative to their financial obligations with us. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, that may be beyond our control, and these losses may exceed our current estimates. Rapidly growing loan portfolios are, by their nature, unseasoned. As a result, estimating loan loss allowances is more difficult, and may

9

be more susceptible to changes in estimates, and to losses exceeding estimates, than more seasoned portfolios. Although we believe the allowance for loan losses is a reasonable estimate of known and inherent losses in our loan portfolio, we cannot fully predict such losses or that our loan loss allowance will be adequate in the future. Excessive loan losses could have a material impact on our financial performance. Because of our growth strategy, we expect that our earnings will be negatively impacted by loan growth, which requires additions to our allowance for loan losses. Consistent with our loan loss reserve methodology, we expect to make additions to our loan loss reserve levels as a result of our growth strategy, which may affect our short-term earnings.

        Federal and state regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs, based on judgments different than those of our management. Any increase in the amount of our provision or loans charged-off as required by these regulatory agencies could have a negative effect on our operating results.

Our future success is dependent on our ability to compete effectively in the highly competitive banking industry.

        We face vigorous competition from other banks and other financial institutions, including savings and loan associations, savings banks, finance companies and credit unions for deposits, loans and other financial services in our market area. A number of these banks and other financial institutions are significantly larger than we are and have substantially greater access to capital and other resources, as well as larger lending limits and branch systems, and offer a wider array of banking services. To a limited extent, we also compete with other providers of financial services, such as money market mutual funds, brokerage firms, consumer finance companies, insurance companies and governmental organizations which may offer more favorable financing than we can. Many of our non-bank competitors are not subject to the same extensive regulations that govern us. As a result, these non-bank competitors have advantages over us in providing certain services. This competition may reduce or limit our margins and our market share and may adversely affect our results of operations and financial condition.

Our profitability and the value of your investment may suffer because of rapid and unpredictable changes in the highly regulated environment in which we operate.

        We are subject to extensive supervision by several governmental regulatory agencies at the federal and state levels. Recently enacted, proposed and future banking legislation and regulations have had, and will continue to have, or may have a significant impact on the financial services industry. These regulations, which are intended to protect depositors and not our shareholders, and the interpretation and application of them by federal and state regulators, are beyond our control, may change rapidly and unpredictably and can be expected to influence our earnings and growth. Our success depends on our continued ability to maintain compliance with these regulations. Some of these regulations may increase our costs and thus place other financial institutions that are not subject to similar regulation in stronger, more favorable competitive positions.

If we need additional capital in the future to continue our growth, we may not be able to obtain it on terms that are favorable. This could negatively affect our performance and the value of our common stock.

        Our business strategy calls for continued growth. We anticipate that we will be able to support this growth through the generation of additional deposits at new branch locations as well as investment opportunities. However, we may need to raise additional capital in the future to support our continued growth and to maintain our capital levels. Our ability to raise capital through the sale of additional securities will depend primarily upon our financial condition and the condition of financial markets at

10

that time. We may not be able to obtain additional capital in the amounts or on terms satisfactory to us. Our growth may be constrained if we are unable to raise additional capital as needed.

Risks Related to the Securities Markets and Ownership of Our Common Stock

There is a limited trading market for our common stock; it may be difficult to sell our shares after you have purchased them.

        Our common stock is currently listed on the Nasdaq National Market under the symbol "CFNL." The volume of trading activity in our stock is relatively limited. Even if a more active market develops, there can be no assurance that such market will continue, or that you will be able to sell your shares at or above the offering price. You should carefully consider the lack of liquidity of your investment in the common shares when making your investment decision.

Because we have no plans to pay cash dividends on our common stock, you may recognize a return on your investment only through selling your common shares.

        We do not currently pay cash dividends on our common stock and have no plans to do so in the foreseeable future. Moreover, our ability to pay future dividends largely depends on our receipt of dividends from the bank and federal banking laws restrict the amount of dividends the bank can pay to us. You should not purchase our common stock if you are depending upon dividend income from this investment.

We may in the future issue additional stock, any or all of which will dilute your percentage ownership and, possibly, the value of your shares.

        Our board of directors has the authority to issue all or part of any authorized but unissued common shares without prior shareholder approval and without allowing the shareholders the right to purchase their pro rata portion of such shares. This includes shares authorized to be issued under our stock option plans. The issuance of any new common shares will dilute your percentage ownership, and could dilute the value of your shares. Assuming 4,500,000 shares are sold in this offering, we will have 23,030,894 outstanding common shares. If the underwriters' over-allotment option is exercised in full, the number of common shares issued in this offering would increase from 4,500,000 to 5,175,000. At March 31, 2005, 1,661,055 common shares were issuable upon the exercise of outstanding options granted under our stock option plans, of which options to purchase 1,130,674 shares were currently exercisable.

11

CAUTION ABOUT FORWARD LOOKING STATEMENTS

        We make certain forward looking statements in this prospectus that are subject to risks and uncertainties. These forward looking statements include statements regarding our profitability, liquidity, allowance for loan losses, interest rate sensitivity, market risk, growth strategy, and financial and other goals. The words "believes," "expects," "may," "will," "should," "projects," "contemplates," "anticipates," "forecasts," "intends," or other similar words or terms are intended to identify forward looking statements.

        These forward looking statements are subject to significant uncertainties because they are based upon or are affected by factors including:

•

the ability to successfully manage our growth or implement our growth strategies if we are unable to identify attractive markets, locations or opportunities to expand in the future;



•

changes in interest rates and the successful management of interest rate risk;



•

risks inherent in making loans such as repayment risks and fluctuating collateral values;



•

maintaining cost controls and asset quality as we open or acquire new branches;



•

maintaining capital levels adequate to support our growth;



•

reliance on our management team, including our ability to attract and retain key personnel;



•

competition with other banks and financial institutions, and companies outside of the banking industry, including those companies that have substantially greater access to capital and other resources;



•

changes in general economic and business conditions in our market area;



•

demand, development and acceptance of new products and services;



•

problems with technology utilized by us;



•

changing trends in customer profiles and behavior;



•

changes in banking, other laws and regulations applicable to us; and



•

other factors discussed in "Risk Factors" above.

        Because of these uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. In addition, our past results of operations do not necessarily indicate our future results.

12

USE OF PROCEEDS

        We will receive net proceeds of approximately $34.64 million from the sale of 4,500,000 shares of our common stock in this offering, after deducting the underwriting discount and estimated offering expenses of approximately $261,000 payable by us. If the underwriters' over-allotment option is exercised in full, our net proceeds will be approximately $39.87 million.

        We will use the net proceeds from this offering to increase our capital to support our future growth and expansion and for general corporate purposes. We have not otherwise made a specific allocation for the use of the net proceeds.

DILUTION

Effect of the Offering on Book Value

        At March 31, 2005, we had a net tangible book value of approximately $81.1 million, or $4.38 per share of common stock. Net tangible book value per common share represents the amount of our common shareholders' equity, less intangible assets, divided by the number of shares of common stock that are outstanding. Dilution per share to new investors in this offering represents the difference between the amount per share that these investors paid and the pro forma net tangible book value per share of common stock immediately after completion of this offering.

        After giving effect to the sale by us of all 4,500,000 shares of common stock in this offering at the public offering price of $8.25 per share, deducting estimated offering expenses, and giving effect to the application of the estimated net proceeds described in the "Use of Proceeds" above, our pro forma net tangible book value at March 31, 2005 would have been approximately $115.7 million, or $5.02 per share. This represents an immediate increase in net tangible book value of $0.65 per share to existing shareholders and an immediate dilution of $3.23 per share to new investors.

Comparison of Prices Paid for Common Stock

        The following table sets forth on a pro forma basis, as of March 31, 2005:

•

the number of shares of common stock purchased from us prior to this offering and the number of shares purchased in this offering, and



•

the total consideration, prior to the deduction of any expenses and/or commission, and average price per share that our existing shareholders have paid to us and that new investors will pay in this offering at the public offering price of $8.25 per share.

(1)

We have excluded outstanding options to purchase 1,661,055 shares of our common stock outstanding at March 31, 2005. The weighted average exercise price of these options is $7.61.

(2)

We have excluded up to an additional 675,000 shares of common stock that we may sell if the underwriters' over-allotment option is exercised in full.

13

MARKET FOR COMMON STOCK AND DIVIDENDS

Market for Common Stock

        Our common stock is currently listed for quotation on the Nasdaq National Market under the symbol "CFNL." Prior to December 17, 2003, our common stock was listed for quotation on the Nasdaq SmallCap Market under the same symbol. As of May 11, 2005, our common stock was held by 699 shareholders of record. In addition, we estimate that there were 4,800 beneficial owners of our common stock who own their shares through brokers or banks.

        The high and low sale prices per share for our common stock for each quarter of 2003 and 2004 and the first and second quarters of 2005 through May 11, 2005, as reported on the Nasdaq National Market and, prior to December 17, 2003, on the Nasdaq SmallCap Market, were as follows:

        The closing sale price for our common stock on May 11, 2005 as reported on the Nasdaq National Market was $8.60 per share.

14

DIVIDEND POLICY

        We have not declared or distributed any cash dividends to the holders of our common stock, and we have no current intentions to declare a cash dividend in the foreseeable future. Our board of directors intends to follow a policy of retaining any earnings to provide funds to operate and expand our business. Our future dividend policy is subject to the discretion of the board of directors and will depend upon a number of factors, including future earnings, financial condition, cash requirements, and general business conditions.

        Our ability to distribute cash dividends will depend primarily on the ability of our subsidiaries to pay dividends to us. Cardinal Bank is subject to legal limitations on the amount of dividends it is permitted to pay. Furthermore, neither Cardinal Bank nor we may declare or pay a cash dividend on any of our capital stock if we are insolvent or if the payment of the dividend would render us insolvent or unable to pay our obligations as they become due in the ordinary course of business. For additional information on these limitations, see "Government Regulation and Supervision—Payment of Dividends."

15

CAPITALIZATION

        The table below sets forth our historical consolidated capitalization at March 31, 2005, and our capitalization as of the same date on an adjusted basis, giving effect to this offering. For purposes of this table, our net proceeds from this offering are estimated to be approximately $34.64 million after deducting estimated offering expenses and underwriting discounts and commissions. If the underwriters' over-allotment option is exercised in full, 675,000 additional shares would be sold, resulting in aggregate net proceeds of approximately $39.87 million based on the public offering price after deducting estimated offering expenses and underwriting discounts and commissions.

        The following data should be read in conjunction with our consolidated financial information and related notes.

(1)

This amount does not include 1,661,055 common shares issuable upon exercise of options outstanding as of March 31, 2005, that were granted under our stock option plans with a weighted average exercise price of $7.61. Of the outstanding options, options to purchase 1,130,674 common shares at March 31, 2005 are currently exercisable at a weighted average exercise price of $8.03.

        The following table sets forth our actual consolidated regulatory capital amounts and ratios as of March 31, 2005, and as adjusted as of March 31, 2005, after giving effect to the application of the net proceeds of this offering.

16

SELECTED HISTORICAL FINANCIAL DATA

        The table below presents a summary of our selected historical consolidated financial data for the periods and the dates indicated. Since the information contained in this table is a summary and does not provide all of the information contained in our consolidated financial statements, including the related notes, you should read "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes included elsewhere in this prospectus. The selected consolidated financial data has been derived from our unaudited consolidated financial statements for the three months ended March 31, 2005 and 2004 and from our audited consolidated financial statements for the years that ended December 31, 2004, 2003, 2002, 2001 and 2000.