SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2000

                         Commission file number 0-24557

                         CARDINAL FINANCIAL CORPORATION
                 (Name of Small Business Issuer in its Charter)

                Virginia                                         54-1874630
      (State or Other Jurisdiction                            (I.R.S. Employer
   of Incorporation or Organization)                         Identification No.)

      10555 Main Street, Suite 500
           Fairfax, Virginia                                        22030
(Address of Principal Executive Offices)                         (Zip Code)

                                 (703) 279-5050
                (Issuer's Telephone Number, Including Area Code)

         Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, $1.00 par value
            7.25% Cumulative Convertible Preferred Stock, Series A,
                           par value $1.00 per share
                                (Title of Class)

         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 past 90 days.
                                                   Yes __X__   No _____

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. _____

         The issuer's  revenues for the fiscal year ended December 31, 2000 were
$13,248,223.

         The aggregate  market value of the voting stock held by  non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked prices of such stock, as of March 28, 2001 was $16,488,274.

         The number of shares  outstanding of Common Stock, as of March 28, 2001
was 4,256,297.



<PAGE>

                                TABLE OF CONTENTS



                                     PART I
<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>                                                                                        <C>
Item 1.     Description of Business.........................................................3

Item 2.     Description of Property........................................................15

Item 3.     Legal Proceedings..............................................................16

Item 4.     Submission of Matters to a Vote of Security Holders............................16


                                     PART II

Item 5.     Market for  Common  Equity  and  Related  Stockholder Matters..................17

Item 6.     Management's  Discussion  and  Analysis of  Financial Condition
            and Results of Operation.......................................................17

Item 7.     Financial Statements...........................................................33

Item 8.     Changes in and Disagreements with Accountants
            on Accounting and Financial Disclosure.........................................33


                                    PART III

Item 9.     Directors, Executive Officers, Promoters and Control Persons;
            Compliance with Section 16(a) of the Exchange Act..............................33

Item 10.    Executive Compensation.........................................................33

Item 11.    Security  Ownership of Certain  Beneficial Owners and Management...............34

Item 12.    Certain Relationships and Related Transactions.................................34

Item 13.    Exhibits, List and Reports on Form 8-K.........................................34

</TABLE>







                                       2
<PAGE>

                                     PART I

Item 1.      Description of Business

General

         Cardinal  Financial  Corporation  (the  "Company")  is a  bank  holding
company that was  incorporated  under  Virginia law in 1997.  The Company's four
bank subsidiaries (collectively, the "Banks") are as follows:

         o    Cardinal Bank, N.A., which is based in Fairfax, Virginia and began
              operations on June 8, 1998;
         o    Cardinal Bank - Manassas/Prince  William,  N.A., which is based in
              Manassas, Virginia and began operations on July 26, 1999;
         o    Cardinal Bank - Dulles,  N.A., which is based in Reston,  Virginia
              and began operations on August 2, 1999; and
         o    Cardinal  Bank - Potomac,  which is based in McLean,  Virginia and
              was known as The Heritage  Bank prior to  September 1, 2000,  when
              the Company  acquired it through a merger with  Heritage  Bancorp,
              Inc. ("Heritage") at the subsidiary bank level.

The  Company  also  has  an  investment  advisory  subsidiary,  Cardinal  Wealth
Services, Inc., which began operations on February 1, 1999.

         Through its bank subsidiaries,  the Company pursues a community banking
strategy  by  offering  a  broad  range  of  banking  products  to  individuals,
professionals  and  small  to  medium-sized  businesses,  with  an  emphasis  on
personalized service and local decision-making authority. Management's expansion
strategy to date has included attracting experienced local management teams, who
have  significant  decision-making  authority at the local bank level, and local
independent boards of directors  consisting of individuals with strong community
affiliations  and  extensive  business   backgrounds  and  business  development
potential in the identified  markets.  Each management team operates in a manner
that provides  responsive,  personalized  services.  The Company provides credit
policies and procedures as well as centralized  back office functions to provide
corporate, technological and marketing support to the Banks.

         The  Company's  principal  executive  offices are located at 10555 Main
Street,  Suite 500,  Fairfax,  Virginia 22030, and its telephone number is (703)
279-5050. The Company also maintains a web site at www.cardinalbank.com.

Business Development

         Background.  The  Company  was  formed  in late  1997,  principally  in
response to  perceived  opportunities  resulting  from the  takeovers of several
Virginia-based banks by regional bank holding companies.  Since January 1, 1997,
numerous community banks  headquartered in northern Virginia have been acquired.
Collectively,  these banks had deposits of approximately $1.0 billion. Moreover,
in 1997 and 1998,  four  statewide  banks  with  substantial  northern  Virginia
operations -- Crestar Bank,  Central Fidelity  National Bank,  Signet Bank, N.A.
and Jefferson  National Bank -- were acquired by large out-of-state bank holding
companies.

         In the Company's market area, bank consolidations have been accompanied
by the dissolution of local boards of directors and relocation or termination of
management and customer service  professionals.



                                       3
<PAGE>

The Company believes that local industry  consolidation  has disrupted  customer
relationships as the larger regional financial  institutions  increasingly focus
on larger corporate customers,  standardized loan and deposit products and other
services.  Generally,  these  products  and  services  are offered  through less
personalized  delivery  systems,  which has created the demand for high quality,
personalized services to small and medium-sized businesses and professionals. In
addition, consolidation in the local market has created opportunities to attract
experienced bankers. Bank acquisitions have dislocated  experienced and talented
management personnel due to the elimination of redundant functions and the drive
to  achieve  cost  savings.  Additionally,   uncertainty  over  possible  future
acquisitions  has helped enable the Company to attract officers from other banks
that have not been acquired.  As a result of these factors,  management believes
that the  Company  has taken  advantage  of a rare  opportunity  to attract  its
targeted  banking  customers and  experienced  management  personnel  within the
Company's identified markets.

         Initial  Capitalization of the Company. The Company funded its start-up
and organizational  costs through a private offering (the "Private Offering") of
1,409,509  shares of its common stock, par value of $1.00 per share (the "Common
Stock"),  in the fourth quarter of 1997 and the first quarter of 1998. The total
proceeds to the Company in the Private  Offering  were $10.6  million,  of which
$8.0 million were used to  capitalize  Cardinal  Bank,  N.A.,  in June 1998.  In
addition,  the Company raised additional capital for general corporate purposes,
including  the  capitalization  of  Cardinal  Wealth  Services,   Inc.  and  two
additional  Banks,  and to support the growth of assets and  deposits  through a
public offering (the "Public  Offering") of 2,830,000  shares of Common Stock in
the third  quarter  of 1998.  The total  proceeds  to the  Company in the Public
Offering  were  $26.0  million,   after  deducting  underwriting  discounts  and
expenses.

         Experienced  Board and Management.  Seven of the initial members of the
Company's Board of Directors were founding directors of First Patriot Bankshares
Corporation  ("First  Patriot"),  the holding company for Patriot National Bank,
headquartered in Reston,  Virginia.  First Patriot was organized in 1990 and was
acquired in 1997 by an out-of-state bank holding company. John H. Rust, Jr., the
Company's  Chairman,  served as  Chairman  of First  Patriot.  Directors  of the
Company  who were former  First  Patriot  directors  include the chairs of First
Patriot's  loan,   audit,   strategic   planning,   compensation  and  marketing
committees.  Until he joined the Company in late 1997, L. Burwell Gunn, Jr., the
Company's  President  and Chief  Executive  Officer,  served as  Executive  Vice
President and  Commercial  Division head for the Greater  Washington  Region for
Crestar  Bank.  The last 13 years of Mr.  Gunn's 25 year career with Crestar all
involved  service in the northern  Virginia  area.  Each of the Company's  other
executive  officers and directors has extensive  banking  experience in northern
Virginia.

         Acquisition  of The Heritage  Bank.  On September 1, 2000,  the Company
acquired The Heritage Bank through the merger of Heritage with and into Cardinal
Merger Corp., a wholly owned subsidiary of the Company (the "Heritage  Merger").
Under the terms of the Heritage  Merger,  each  outstanding  share of Heritage's
common  stock was  converted  into the right to receive,  at the election of the
shareholder,  $6.00  in cash,  1.2  shares  of the  Company's  7.25%  Cumulative
Convertible  Preferred Stock, Series A, par value $1.00 per share (the "Series A
Preferred  Stock"),  or a  combination  thereof,  and cash in lieu of fractional
shares.  Each such  election  was subject to certain  adjustments  to permit the
Company to issue in the aggregate an equal amount of cash and Series A Preferred
Stock.  In connection  with the Heritage  Merger,  the Company issued  1,411,449
shares of Series A Preferred Stock. The Heritage Bank, the former  subsidiary of
Heritage,  became  the  Company's  fourth  banking  subsidiary  and was  renamed
Cardinal Bank - Potomac. In addition,  three of the former directors of Heritage
became directors of the Company.

         Decentralized  Operating  Strategy.  The  foundation  of the  Company's
strategy  is to operate a  multi-community  bank  organization  that  emphasizes
decision-making  at  the  local  bank  level  combined  with  strong  corporate,
technological,  marketing,  financial  and  managerial  support.  The  Company's
operating model is for each bank to operate with local  management and boards of
directors  consisting  of


                                       4
<PAGE>

individuals with extensive knowledge of the local community and the authority to
make credit decisions. The Company believes that this operating strategy enables
the Banks to attract customers who wish to conduct their business with a locally
owned and managed  institution with strong ties and an active  commitment to the
community.

         Centralized  Corporate  Support.  The Company  provides  oversight  and
various  services to the Banks,  including  technology,  finance and accounting,
human resources, credit administration, internal audit, compliance, loan review,
marketing,   retail  administration,   administrative   support,   policies  and
procedures,  product development and item processing. By providing such services
and  oversight,  the  Company  expects  not only to  achieve  monetary  savings,
compared  to the  costs if the  Banks  were  individually  responsible  for such
functions,  but also expects to achieve a uniformity of  operations  and service
that will be  associated  with the  "Cardinal"  name in the  Company's  northern
Virginia markets.  The Banks' principal focus is to generate deposits and loans.
This corporate support system will enable the Company to achieve  administrative
economies of scale while  capitalizing on the  responsiveness to client needs of
its decentralized  community bank network. With the support from its significant
investment in infrastructure,  particularly a management information system that
links the Company to the Banks and facilitates data processing,  compliance, and
reporting  requirements,  the Company  believes that it has the  operational and
administrative  capacity to  accommodate  the Banks and  effectively  manage the
Company's growth for the foreseeable future.

Growth Strategy

         The  Company  intends to focus on the growth of the Banks.  Each Bank's
growth is expected to come from within such Bank's primary  service area through
loan and  deposit  business.  The Company  focuses on  acquiring  market  share,
particularly from large bank holding companies,  by emphasizing local management
and  decision-making  and through delivering  personalized  services to business
customers and  individuals.  Specifically,  the Company's  competitive  strategy
consists  of  approving  loan  requests  quickly  with a local  loan  committee,
operating with flexible, but prudent, lending policies, personalizing service by
establishing a long-term banking relationship with the customer, and maintaining
the  requisite  personnel  to ensure a high level of service.  While the Company
does not currently intend to actively search for expansion  opportunities beyond
its designated markets,  the Company may consider  opportunities that arise from
time to time, which could occur through acquisitions of existing institutions or
branches.

         The Company  believes that a management  team that is familiar with the
needs of its community can provide  higher quality  personalized  service to its
customers.  The local  management team of each Bank has a significant  amount of
decision-making authority and is accessible to its customers. As a result of the
consolidation  trend in the northern  Virginia  area,  the Company's  management
believes that there are significant  opportunities  to attract  experienced bank
managers  who would like to join an  institution  promoting a community  banking
concept.

         As it  anticipated  the opening of its  subsidiary  Banks,  the Company
established  through its first subsidiary,  Cardinal Bank, N.A., loan production
offices in Manassas,  the Reston area of Fairfax County, and Alexandria in order
to establish  customer  relationships,  brand  awareness  and a pipeline of loan
business.  Each loan production  office was staffed by personnel now employed by
the Bank that opened in that location.

         Each Bank has a local board of directors that is comprised of prominent
members of the community,  including business leaders and  professionals.  These
directors  not only  operate  the Banks,  but also act as  ambassadors  of their
respective  Banks within the  community and are expected to promote the business
development  of each Bank.  The  directors  and  officers of the Company and the
directors  of  the



                                       5
<PAGE>

Banks are active in the civic,  charitable and social  organizations  located in
the local  communities.  It is anticipated  that members of the local management
teams will hold leadership positions in a number of community  organizations and
continue to volunteer for other positions in the future.

         The Company  believes  that each Bank's  ability to compete  with other
financial  institutions  in its  respective  market area will be enhanced by its
posture  as a locally  managed  bank with a broad base of local  ownership.  The
directors  of each of the Banks,  most of whom reside or work in the market area
in which their respective Banks will operate, own a significant amount of Common
Stock.  The Company  believes  that local  ownership of Common Stock is a highly
effective means of attracting customers and fostering loyalty to the Banks.

Market Areas

         The Company's  targeted  market  includes  areas in and around  Fairfax
County, Virginia, including the independent cities of Fairfax and Alexandria, as
well  as  Arlington,   Manassas,   and  Prince  William  and  Loudoun  Counties.
Interstates  95,  495,  and 66 all pass  through  the  market  area and  provide
efficient access to other regions of the state. Prominent local newspapers,  the
Washington  Post and  Washington  Times,  and a number of radio  and  television
stations provide diverse media outlets. The broad exposure of television,  print
media and radio offer several opportunities to explore effective advertising and
public relations avenues for the Company.

         The Company has established banking operations in four locations in the
broad target market, each of which represents a separate market. These distinct,
but contiguous  markets are: (1) the city of Fairfax and central Fairfax County;
(2) the city of Manassas and Prince William  County;  (3) the city of Alexandria
and Arlington  County;  and (4) the Reston and Herndon areas (of western Fairfax
County) and Loudoun County.

The Banks

         The Banks engage in the commercial banking business in their respective
communities.  The  Company  believes  that there is a demand  for,  and that the
northern Virginia communities described above will support, new locally operated
community banks.  Although the Company could have obtained a banking presence in
the identified markets by opening branch offices of Cardinal Bank, management of
the  Company  believes  that  separate  banks  with  their own  local  boards of
directors and banking  practices,  tailored to the local market, is a preferable
approach. Each Bank provides personalized banking services, with emphasis on the
financial  needs  and  objectives  of  individuals,  professionals  and small to
medium-sized  businesses.  Additionally,  substantially  all credit and  related
decisions  are made by the  Banks'  local  management  and  board of  directors,
thereby facilitating prompt response.

         The  principal  business  of each Bank is to accept  deposits  from the
public and to make loans and other  investments.  The principal sources of funds
for each  Bank's  loans and  investments  are  demand,  time,  savings and other
deposits,  repayment of loans, and borrowings. In addition, a portion of the net
proceeds of the Public Offering, after having been contributed to the capital of
each Bank, were used by each Bank to fund loans.  The principal source of income
for each Bank is interest  collected on loans.  The  principal  expenses of each
Bank are interest  paid on savings and other  deposits,  employee  compensation,
office expenses,  and other overhead expenses.  The Banks do not currently offer
trust or fiduciary services.

         The Company is committed to providing high quality banking products and
services to the Banks'  customers and has made a  significant  investment in its
advanced automated operating  accounting system,  which supports virtually every
banking  function.  The system  provides the technology that fully


                                       6
<PAGE>

automates  the  branches,  processes  bank  transactions,  mortgages,  loans and
electronic banking,  conducts data base and direct response marketing,  provides
cash management solutions,  streamlined reporting and reconciliation  support as
well as sales support.

         With this investment in technology,  the Company offers  Internet-based
delivery  products for both  consumers and commercial  customers.  Customers can
open accounts, apply for loans, check balances, check account history,  transfer
funds,  download images of checks,  pay bills,  download active  statements into
QuickenTM or Microsoft MoneyTM, use interactive  calculators and transmit e-mail
with the Company over the Internet. The Internet provides an inexpensive way for
the  Company to expand  its  geographic  borders  and  branch  activities  while
providing the kind of services one would expect from the larger banks.

         The Company also offers  customers the  convenience  of digital  imaged
checks that make it easy to reconcile  statements,  organize  and store  account
information  while  streamlining  the back  office.  Every  item is  imaged  and
available for  inspection.  Among the many  features,  check imaging  allows for
instant statement  reconstruction  for research,  which can be faxed or e-mailed
directly to a customer's personal computer.

Customers

         Management believes that the recent bank consolidation  within northern
Virginia   provides   a   significant   opportunity   to  build  a   successful,
locally-oriented franchise. Management of the Company also believes that many of
the larger financial  institutions do not emphasize a high level of personalized
service to the small and  medium-sized  commercial,  professional  or individual
retail customers.  The Company focuses its marketing efforts on attracting small
and medium-sized businesses and professionals,  such as physicians,  accountants
and attorneys. Because the Company focuses on businesses and professionals,  the
majority of its loan portfolio is in the commercial area with an emphasis placed
on originating sound, profitable commercial and industrial loans secured by real
estate, accounts receivable, inventory, property, plant and equipment.

         Although the Company  expects to concentrate  its lending to commercial
businesses,  the  Company  attracts a  significant  amount of  professional  and
consumer  business.  Many of its customers  are the  principals of the small and
medium-sized businesses for whom the Banks provide banking services.  Management
emphasizes  "relationship  banking" in order that each customer can identify and
establish  a comfort  level  with bank  officers  who come to  understand  their
customers' business and financial needs in depth.  Management intends to develop
its retail  business with  individuals who appreciate a higher level of personal
service, contact with their lending officer and responsive  decision-making.  It
is  expected  that most of the  Company's  business  will be  further  developed
through its lending  officers and local  boards of directors  and by pursuing an
aggressive strategy of making calls on customers throughout the market area.

Banking Products and Services

         The Company  offers a broad array of banking  products  and services to
its customers. These products and services are set forth below.

         Loans.  Through each Bank,  the Company offers a wide range of short to
long-term  commercial and consumer loans,  which are described in further detail
below. The Company has established  pre-determined  percentage levels as targets
for the division of the Company's loan portfolio  across the various  categories
of   loans.    Commercial    loans,   real    estate-commercial    loans,   real
estate-construction loans, real estate-residential loans, home equity loans, and
consumer  loans  account  for  approximately  32%,  37%,  3%,  11%,  10% and 7%,
respectively,  of its loan portfolio at December 31, 2000. The Company  believes
that this  division  reflects  the  current  credit  demands of its  markets and
provides a sufficient amount of



                                       7
<PAGE>

diversification to avoid  over-reliance on one category.  The Company may adjust
these levels from time to time as the credit demands of the community change and
as each Bank's business evolves.

         Credit  Policies.  With  respect to each  Bank's  loan  portfolio,  the
Company oversees credit  operations while still granting local authority to each
Bank.  The  Company's   chief  credit  officer  is  primarily   responsible  for
maintaining  a quality loan  portfolio and  developing a strong  credit  culture
throughout the entire organization.  The chief credit officer is responsible for
developing and updating the credit policies and procedures for the organization.
The Board of Directors of a Bank may make  exceptions  to these credit  policies
and  procedures as  appropriate,  but any such  exception must be documented and
made for sound business reasons.

         Credit  quality  is  controlled  by the chief  credit  officer  through
compliance  with the Company's  credit  policies and  procedures.  The Company's
risk-decision  process is actively managed in a disciplined  fashion to maintain
an  acceptable  risk profile  characterized  by soundness,  diversity,  quality,
prudence,  balance and  accountability.  The Company's  credit approval  process
consists  of  specific  authorities  granted  to  the  lending  officers.  Loans
exceeding a particular  lending  officer's  level of authority  are reviewed and
considered for approval by an officers' loan committee and, then, a Bank's Board
of  Directors.  In addition,  the chief credit  officer  works closely with each
lending officer at the Bank level to ensure that the business being solicited is
of the quality and structure that fits the Company's desired risk profile.

         Under  its  credit   policies,   the  Company   generally   limits  the
concentration  of credit risk by a particular Bank in any loan or group of loans
to 30% of that Bank's capital. Such concentration limit pertains to any group of
borrowers  related as to the source of repayment  or any one specific  industry.
Furthermore, each Bank has established limits on the total amount of that Bank's
outstanding  loans to one  borrower,  all of which are set below  legal  lending
limits.  Any loan that a Bank proposes to make that will exceed such established
limits requires the prior approval of the Company's Board of Directors.

         Commercial  Loans.  The Company  makes  commercial  loans to  qualified
businesses  in its  market  area.  The  Company's  commercial  lending  consists
primarily  of  commercial  and  industrial  loans for the  financing of accounts
receivable,  inventory,  property,  plant and equipment. The Company also offers
Small Business  Administration  ("SBA") guaranteed loans and asset-based lending
arrangements to certain of its customers.

         Commercial  business loans  generally have a higher degree of risk than
residential mortgage loans, but have commensurately  higher yields.  Residential
mortgage loans generally are made on the basis of the borrower's ability to make
repayment  from his or her  employment  and other income and are secured by real
estate whose value tends to be easily  ascertainable.  In  contrast,  commercial
business loans typically are made on the basis of the borrower's ability to make
repayment  from cash flow from its business and are secured by business  assets,
such as commercial real estate, accounts receivable, equipment and inventory. As
a result,  the  availability  of funds for the repayment of commercial  business
loans may be  substantially  dependent  on the success of the  business  itself.
Further,  the collateral for commercial  business loans may depreciate over time
and cannot be appraised with as much precision as residential real estate.

         To manage these risks,  the  Company's  policy is to secure  commercial
loans  with  both the  assets of the  borrowing  business  and other  additional
collateral  and  guarantees  that may be  available.  In  addition,  the Company
actively monitors certain measures of the borrower, including advance rate, cash
flow, collateral value and other appropriate credit factors.


                                       8
<PAGE>

         Commercial  Mortgage  Loans.  The Company  also  originates  commercial
mortgage loans. These loans are primarily secured by various types of commercial
real  estate,  including  office,  retail,   warehouse,   industrial  and  other
non-residential  types of properties and are made to the owner and/or  occupiers
of such property.  These loans have maturities  generally ranging from one to 10
years.

         Commercial  mortgage  lending  entails  significant   additional  risk,
compared with residential mortgage lending.  Commercial mortgage loans typically
involve  larger loan balances  concentrated  with single  borrowers or groups of
related  borrowers.  Additionally,  the payment  experience  on loans secured by
income producing  properties is typically dependent on the successful  operation
of a business  or a real estate  project  and thus may be subject,  to a greater
extent,  to  adverse  conditions  in the real  estate  market or in the  economy
generally.  The  Company's  commercial  real estate loan  underwriting  criteria
require  an  examination  of  debt  service  coverage  ratios,   the  borrower's
creditworthiness  and prior  credit  history  and  reputation,  and the  Company
generally requires personal guarantees or endorsements of borrowers. The Company
also carefully considers the location of the security property.

         Loan-to-value  ratios for commercial  mortgage  loans  generally do not
exceed 75%.  Loan-to-value  ratios up to 85% are  permitted  if the borrower has
unusually strong general  liquidity,  net worth and cash flow, and loan-to-value
ratios up to 90% are permitted if an SBA guaranty has been obtained.

         Residential  Mortgage Loans. The Company's  residential  mortgage loans
consist of residential first and second mortgage loans, residential construction
loans and home equity lines of credit and term loans secured by first and second
mortgages on the  residences of borrowers for home  improvements,  education and
other personal expenditures.  The Company makes mortgage loans with a variety of
terms,  including  fixed  and  floating  or  variable  rates  and a  variety  of
maturities.  Maturities for  construction  loans  generally range from six to 12
months for residential property and from 12 to 18 months for non-residential and
multi-family properties.

         Residential  mortgage  loans  generally  are  made on the  basis of the
borrower's ability to make repayment from his or her employment and other income
and are  secured by real estate  whose  value tends to be easily  ascertainable.
These loans are made  consistent  with the Company's  appraisal  policy and real
estate lending policy, which detail maximum loan-to-value ratios and maturities.
Loans for owner-occupied  property generally are made with a loan-to-value ratio
of up to 80% for first  liens and 75% for  junior  liens.  Higher  loan-to-value
ratios  may  be  allowed  based  on  the  borrower's  unusually  strong  general
liquidity,  net worth and cash flow.  Loan-to-value ratios for home equity lines
of credit  generally do not exceed 75%. If the  loan-to-value  ratio exceeds 90%
for  residential  mortgage  loans,  the  Company  has  determined  that it is an
unusually strong credit.

         Construction  lending entails  significant  additional risks,  compared
with residential mortgage lending.  Construction loans often involve larger loan
balances  concentrated  with single  borrowers  or groups of related  borrowers.
Construction  loans also involve  additional risks attributable to the fact that
loan funds are advanced upon the security of property under construction,  which
is of uncertain value prior to the completion of construction.  Thus, it is more
difficult  to evaluate  accurately  the total loan funds  required to complete a
project and related  loan-to-value ratios. To minimize the risks associated with
construction  lending,  the Company limits  loan-to-value ratios for residential
property to 85% and for non-residential  property and multi-family properties to
80%, in addition to its usual credit analysis of its borrowers.

         Management  expects that the loan-to-value  ratios described above will
be  sufficient  to  compensate  for  fluctuations  in the real estate  market to
minimize the risk of loss.


                                       9
<PAGE>

         Consumer  Loans.  The Company's  consumer  loans  consist  primarily of
installment  loans to individuals for personal,  family and household  purposes.
The specific types of consumer loans made by the Banks include home  improvement
loans, debt consolidation loans and general consumer lending.

         Consumer loans may entail greater risk than residential  mortgage loans
do, particularly in the case of consumer loans that are unsecured, such as lines
of credit, or secured by rapidly depreciable assets such as automobiles. In such
cases, any repossessed  collateral for a defaulted consumer loan may not provide
an adequate source of repayment of the  outstanding  loan balance as a result of
the greater likelihood of damage, loss or depreciation. The remaining deficiency
often does not  warrant  further  substantial  collection  efforts  against  the
borrower. In addition, consumer loan collections are dependent on the borrower's
continuing  financial  stability,  and  thus  are more  likely  to be  adversely
affected by job loss, divorce, illness or personal bankruptcy.  Furthermore, the
application  of various  federal  and state  laws,  including  federal and state
bankruptcy  and  insolvency  laws, may limit the amount that can be recovered on
such loans.  A loan may also give rise to claims and defenses by a consumer loan
borrower  against an assignee of such loan, such as the Company,  and a borrower
may be able to assert  against such  assignee  claims and  defenses  that it has
against the seller of the underlying collateral.

         The  Company's  policy for consumer  loans is to accept  moderate  risk
while minimizing  losses,  primarily through a careful analysis of the borrower.
In  evaluating  consumer  loans,  the Company  requires its lending  officers to
review the borrower's level and stability of income, past credit history and the
impact of these  factors on the  ability of the  borrower to repay the loan in a
timely  manner.  In addition,  the Company  requires  that its banking  officers
maintain an appropriate  margin  between the loan amount and  collateral  value.
Many of the Company's consumer loans are made to the principals of the small and
medium-sized businesses for whom the Banks provide banking services.

         The  Company  has in the past and may  continue  to  purchase  loans as
opportunities  arise  from time to time with  respect  to  portfolios  that meet
established underwriting criteria.

         The Company also issues  credit cards to certain of its  customers.  In
determining  to whom it will issue  credit  cards,  the  Company  evaluates  the
borrower's level and stability of income, past credit history and other factors.
Finally,  the Company makes  additional  loans that are not classified in one of
the above categories.  In making such loans, the Company attempts to ensure that
the borrower meets the Company's credit quality standards.

         Deposits.  Management  offers  a broad  range of  interest-bearing  and
noninterest-bearing  deposit accounts,  including commercial and retail checking
accounts,  money  market  accounts,   individual  retirement  accounts,  regular
interest-bearing  savings  accounts and  certificates of deposit with a range of
maturity  date  options.   The  primary   sources  of  deposits  are  small  and
medium-sized  businesses and individuals  within an identified  market.  In each
identified  market,  senior  management  has the  authority  to set rates within
specified  parameters  in order  to  remain  competitive  with  other  financial
institutions.  All  deposits  are  insured  by  the  Federal  Deposit  Insurance
Corporation  ("FDIC") up to the maximum  amount  permitted  by law.  The Company
implements  a service  charge  fee  schedule,  which is  competitive  with other
financial  institutions  in a Bank's  market  area,  covering  such  matters  as
maintenance  fees on checking  accounts,  per item  processing  fees on checking
accounts, returned check charges and other similar fees.

         Specialized  Consumer Services.  Management offers specialized products
and  services  to its  customers,  such as  travelers  checks  and safe  deposit
services.


                                       10
<PAGE>

         Courier  Services.  The Company offers courier services to its business
customers.  Courier  services  permit the Company to provide the convenience and
personalized  service  that its  customers  require by  scheduling  pick-ups  of
deposits.

         Telephone and Internet  Banking.  The Company  believes that there is a
strong demand within its market for telephone banking and internet banking. Both
services allow both commercial and retail  customers to access detailed  account
information and execute a wide variety of the banking  transactions  referred to
above.  Management believes that these services are particularly  attractive for
its customers,  as it enables them to conduct their banking business and monitor
their bank  accounts  from remote  locations.  Telephone  and  internet  banking
assists the Banks in attracting  and  retaining  customers  and  encourages  its
customers to maintain their total banking relationships with the Company.

         Automatic  Teller  Machines  ("ATMs").  The  Company has an ATM at each
office  of each  Bank.  Management  makes  other  financial  institutions'  ATMs
available to its  customers  and offers  customers a certain  number of free ATM
transactions per month.

         Other Products and Services.  The Company evaluates other services such
as  trust  services,   insurance,   mortgage   services  and  other  permissible
activities.  Management  expects to  introduce  these  services  as they  become
economically viable.

Brokerage and Investment Advisory Services

         Through Cardinal Wealth Services,  Inc., the Company provides financial
and estate  planning  services.  Cardinal  Wealth  Services,  Inc.  has formed a
strategic alliance with LM Financial  Partners,  Inc., a wholly owned subsidiary
of Legg Mason Inc. Through this alliance,  the Company's  financial advisors can
offer its  customers an  extensive  range of  financial  products and  services,
including estate planning,  qualified retirement plans, mutual funds, annuities,
life insurance, fixed income securities and equity research and recommendations.

Competition

         Banks generally compete with other financial  institutions  through the
selection of banking products and services offered, the pricing of services, the
level of service provided, the convenience and availability of services, and the
degree of  expertise  and the  personal  manner in which  services  are offered.
Virginia  law permits  statewide  branching by banks.  Consequently,  commercial
banking in Virginia is highly  competitive.  Many large  banking  organizations,
several of which are controlled by  out-of-state  holding  companies,  currently
operate in the Company's targeted market areas. In addition, competition between
commercial  banks and  thrift  institutions  (savings  institutions  and  credit
unions)  has  intensified  significantly  by the  elimination  of many  previous
distinctions  between  the  various  types  of  financial  institutions  and the
expanded  powers  and  increased  activity  of thrift  institutions  in areas of
banking that  previously  had been the sole domain of commercial  banks.  Recent
legislation, together with other regulatory changes by the primary regulators of
the various financial institutions, has resulted in the almost total elimination
of practical  distinctions  between a commercial bank and a thrift  institution.
Consequently,  competition among financial  institutions of all types is largely
unlimited  with respect to legal ability and authority to provide most financial
services.  Furthermore,  out-of-state banks not previously allowed to operate in
Virginia  are  allowed to  commence  operations  and  compete  in the  Company's
targeted market areas.

         Each of the Banks faces competition from other banks, as well as thrift
institutions,   consumer  finance  companies,   insurance  companies  and  other
institutions in the Banks'  respective  market areas.  Some of these competitors
are not subject to the same degree of regulation  and  restriction  imposed upon


                                       11
<PAGE>

the Banks.  Many of these competitors also have broader  geographic  markets and
substantially  greater  resources  and  lending  limits than the Banks and offer
certain  services  such as trust  banking  that the  Banks are not  expected  to
provide in the near term. In addition,  many of these  competitors have numerous
branch offices  located  throughout the extended  market areas of the Banks that
the  Company  believes  may  provide  these  competitors  with an  advantage  in
geographic  convenience that the Banks do not have at present.  Such competitors
may also be in a  position  to make  more  effective  use of media  advertising,
support services, and electronic technology than can the Banks.

Employees

         At December 31, 2000, the Company had 131 full time employees,  none of
whom are represented by a union or covered by a collective bargaining agreement.
Management considers employee relations to be good.

Government Supervision and Regulation

         General.  As  a  bank  holding  company,  the  Company  is  subject  to
regulation  under the Bank Holding Company Act of 1956, as amended (the "BHCA"),
and the examination and reporting  requirements of the Board of Governors of the
Federal  Reserve System (the "Federal  Reserve  Board").  Under the BHCA, a bank
holding company may not directly or indirectly  acquire  ownership or control of
more than 5% of the voting shares or substantially all of the assets of any bank
or merge or  consolidate  with another bank  holding  company  without the prior
approval  of the  Federal  Reserve  Board.  The BHCA also  generally  limits the
activities of a bank holding company to that of banking, managing or controlling
banks,  or any other  activity  which is determined to be so closely  related to
banking or to managing or  controlling  banks that an  exception  is allowed for
those activities.

         As national  banks,  Cardinal  Bank,  Cardinal  Bank -  Manassas/Prince
William and Cardinal Bank - Dulles are subject to  regulation,  supervision  and
examination  at the  federal  level  by the  Office  of the  Comptroller  of the
Currency  (the "OCC").  As a  state-chartered  bank,  Cardinal Bank - Potomac is
subject  to  regulation,  supervision  and  examination  by the  Virginia  State
Corporation  Commission's  Bureau of Financial  Institutions  and by the Federal
Reserve Board. All of the Banks are also subject to regulation,  supervision and
examination by the Federal Deposit Insurance Corporation (the "FDIC"). State and
federal  law  also  governs  the  activities  in which  the  Banks  engage,  the
investments that they make and the aggregate amount of loans that may be granted
to one borrower.  Various  consumer and  compliance  laws and  regulations  also
affect the Banks' operations.

         The earnings of the Company's subsidiaries,  and therefore the earnings
of  the  Company,  are  affected  by  general  economic  conditions,  management
policies,  changes  in state and  federal  legislation  and  actions  of various
regulatory  authorities,  including  those  referred  to  above.  The  following
description summarizes the significant state and federal and state laws to which
the  Company  and the  Banks  are  subject.  To the  extent  that  statutory  or
regulatory  provisions or proposals are described,  the description is qualified
in  its  entirety  by  reference  to  the  particular  statutory  or  regulatory
provisions or proposals.

         Payment of  Dividends.  The  Company  is a legal  entity  separate  and
distinct from its banking and other subsidiaries. Virtually all of the Company's
revenues will result from dividends paid to the Company by the Banks.  The Banks
are subject to laws and regulations that limit the amount of dividends that they
can pay.  Under OCC  regulations,  a national bank may not declare a dividend in
excess of its  undivided  profits,  which  means  that each  national  Bank must
recover  any  start-up  losses  before  it may pay a  dividend  to the  Company.
Additionally,  none of the Banks may declare a dividend  if the total  amount of
all dividends, including the proposed dividend, declared by the national bank in
any calendar year exceeds the total of the national  bank's  retained net income
of that year to date, combined with its



                                       12
<PAGE>

retained net income of the two preceding years,  unless the dividend is approved
by the  Bank's  federal  regulator.  None of the  Banks may  declare  or pay any
dividend   if,  after  making  the   dividend,   the  national   bank  would  be
"undercapitalized," as defined in federal regulations.

         In  addition,  both the  Company  and the Banks are  subject to various
regulatory  restrictions  relating  to  the  payment  of  dividends,   including
requirements  to  maintain  capital  at or above  regulatory  minimums.  Banking
regulators  have  indicated  that banking  organizations  should  generally  pay
dividends only if the organization's net income available to common shareholders
over the past year has been  sufficient  to fully  fund the  dividends,  and the
prospective   rate  of   earnings   retention   appears   consistent   with  the
organization's capital needs, asset quality and overall financial condition.

         In  connection  with  the  Heritage   Merger,   The  Heritage  Bank,  a
state-chartered  bank,  received  approval  for the  payment  of a $3.0  million
dividend  to the  Company.  The  Company  is using this  payment to pay  holding
company  level  expenses  and to pay  dividends  to the  holders of the Series A
Preferred Stock.

         Insurance of Accounts,  Assessments  and  Regulation  by the FDIC.  The
deposits  of the Bank are  insured by the FDIC up to the limits set forth  under
applicable  law. The  deposits of the Bank are subject to the deposit  insurance
assessments of the Bank Insurance Fund ("BIF") of the FDIC.

         The FDIC has  implemented  a risk-based  deposit  insurance  assessment
system  under  which the  assessment  rate for an insured  institution  may vary
according to  regulatory  capital  levels of the  institution  and other factors
(including supervisory evaluations).  Depository institutions insured by the BIF
that are "well capitalized" and that present few or no supervisory  concerns are
required to pay only the statutory  minimum  assessment  of $2,000  annually for
deposit  insurance,  while all other banks are required to pay premiums  ranging
from .03% to .27% of  domestic  deposits.  These rate  schedules  are subject to
future  adjustments  by the FDIC. In addition,  the FDIC has authority to impose
special assessments from time to time. However,  because the legislation enacted
in 1996  requires  that both  Savings  Association  Insurance  Fund  insured and
BIF-insured  deposits  pay a pro  rata  portion  of  the  interest  due  on  the
obligations  issued  by  the  Financing  Corporation,   the  FDIC  is  assessing
BIF-insured  deposits an  additional  1.30 basis  points per $100 of deposits to
cover those obligations.

         The FDIC is authorized  to prohibit any  BIF-insured  institution  from
engaging in any activity that the FDIC determines by regulation or order to pose
a serious threat to the respective  insurance fund.  Also, the FDIC may initiate
enforcement actions against banks, after first giving the institution's  primary
regulatory  authority an opportunity to take such action. The FDIC may terminate
the deposit  insurance of any depository  institution if it determines,  after a
hearing,  that the  institution  has engaged or is engaging in unsafe or unsound
practices,  is in an unsafe or unsound condition to continue operations,  or has
violated any  applicable  law,  regulation,  order or any  condition  imposed in
writing by the FDIC. It also may suspend deposit  insurance  temporarily  during
the  hearing  process  for  the  permanent  termination  of  insurance,  if  the
institution has no tangible  capital.  If deposit  insurance is terminated,  the
deposits  at the  institution  at  the  time  of  termination,  less  subsequent
withdrawals,  shall  continue  to be insured for a period from six months to two
years,  as  determined  by the FDIC.  Management  is not  aware of any  existing
circumstances that could result in termination of any Bank's deposit insurance.

         Capital.  Each of the OCC and the  Federal  Reserve  Board  has  issued
risk-based and leverage capital guidelines  applicable to banking  organizations
that it supervises.  Under the risk-based capital requirements,  the Company and
the Banks are each  generally  required  to  maintain  a minimum  ratio of total
capital to risk-weighted assets (including certain off-balance sheet activities,
such as standby  letters  of  credit) of 8%. At least half of the total  capital
must be composed of common equity,  retained  earnings and qualifying  perpetual
preferred stock, less certain intangibles ("Tier 1 capital").  The remainder may
consist of certain  subordinated  debt,  certain hybrid capital  instruments and
other qualifying preferred stock and a limited amount of the loan loss allowance
("Tier  2  capital,"  which,  together  with  Tier 1  capital,  composes  "total
capital").


                                       13
<PAGE>

         In  addition,  each of the  federal  banking  regulatory  agencies  has
established  minimum  leverage capital  requirements for banking  organizations.
Under these requirements, banking organizations must maintain a minimum ratio of
Tier 1 capital to adjusted  average  quarterly assets equal to 3% to 5%, subject
to federal bank regulatory  evaluation of an  organization's  overall safety and
soundness.

         The  risk-based  capital  standards  of each of the OCC and the Federal
Reserve Board  explicitly  identify  concentrations  of credit risk and the risk
arising from non-traditional  activities, as well as an institution's ability to
manage these risks, as important  factors to be taken into account by the agency
in assessing an institution's  overall capital adequacy.  The capital guidelines
also provide that an  institution's  exposure to a decline in the economic value
of its capital due to changes in interest rates be considered by the agency as a
factor in evaluating a banking organization's capital adequacy.

         Other  Safety  and  Soundness  Regulations.   There  are  a  number  of
obligations  and  restrictions  imposed  on bank  holding  companies  and  their
depository  institution  subsidiaries by federal law and regulatory  policy that
are  designed  to reduce  potential  loss  exposure  to the  depositors  of such
depository  institutions  and to the FDIC insurance  funds in the event that the
depository  institution is insolvent or is in danger of becoming insolvent.  For
example,  under the  requirements  of the Federal  Reserve Board with respect to
bank holding company operations,  a bank holding company is required to serve as
a source of financial strength to its subsidiary depository  institutions and to
commit resources to support such  institutions in  circumstances  where it might
not do so otherwise.  In addition,  the "cross-guarantee"  provisions of federal
law require insured  depository  institutions  under common control to reimburse
the FDIC for any loss suffered or reasonably anticipated by the FDIC as a result
of the insolvency of commonly controlled insured depository  institutions or for
any assistance  provided by the FDIC to commonly  controlled  insured depository
institutions  in  danger  of  failure.  The  FDIC may  decline  to  enforce  the
cross-guarantee  provision  if it  determines  that  a  waiver  is in  the  best
interests of the deposit  insurance  funds.  The FDIC's claim for  reimbursement
under the cross  guarantee  provisions is superior to claims of  shareholders of
the insured depository  institution or its holding company but is subordinate to
claims  of  depositors,   secured   creditors  and   nonaffiliated   holders  of
subordinated debt of the commonly controlled insured depository institutions.

         The federal  banking  agencies  also have broad  powers  under  current
federal  law to take  prompt  corrective  action to resolve  problems of insured
depository  institutions.  The extent of these  powers  depends upon whether the
institution   in  question   is  well   capitalized,   adequately   capitalized,
undercapitalized, significantly undercapitalized or critically undercapitalized,
as defined by the law. As of December 31,  2000,  the Company and the Banks were
classified as well capitalized.

         Federal and state banking regulators also have broad enforcement powers
over the Banks, including the power to impose fines and other civil and criminal
penalties, and to appoint a conservator.

         Interstate  Banking  and  Branching.  Current  federal  law  authorizes
interstate  acquisitions of banks and bank holding companies without  geographic
limitation.  Effective  June 1,  1997,  a bank  headquartered  in one  state was
authorized  to merge  with a bank  headquartered  in another  state,  as long as
neither of the states had opted out of such interstate merger authority prior to
such  date.  After  a bank  has  established  branches  in a  state  through  an
interstate  merger  transaction,  the bank may establish and acquire  additional
branches at any location in the state where a bank  headquartered  in that state
could have established or acquired  branches under  applicable  federal or state
law.

         Gramm-Leach-Bliley Act of 1999. The Gramm-Leach-Bliley Act of 1999 (the
"Act") was signed into law on November 12, 1999. The Act covers a broad range of
issues,  including a repeal of most of the  restrictions on  affiliations  among
depository institutions,  securities firms and insurance companies.  Most of the
Act's  provisions  require  the  federal  bank  regulatory  agencies  and  other
regulatory bodies to adopt



                                       14
<PAGE>

regulations  to implement the Act, and for that reason an assessment of the full
impact  on the  Company  of the Act must  await  completion  of that  regulatory
process.

         The Act  repeals  sections  20 and 32 of the  Glass-Stegall  Act,  thus
permitting unrestricted affiliations between banks and securities firms. The Act
also  permits  bank  holding  companies  to elect to  become  financial  holding
companies.  A financial  holding company may engage in or acquire companies that
engage in a broad range of financial services,  including securities  activities
such as underwriting,  dealing, brokerage,  investment and merchant banking, and
insurance  underwriting,  sales and brokerage  activities.  In order to become a
financial  holding  company,  the bank holding company and all of its affiliated
depository  institutions  must be  well-capitalized,  well-managed,  and have at
least a satisfactory Community Reinvestment Act rating.

         The Act  provides  that the states  continue to have the  authority  to
regulate insurance  activities,  but prohibits the states in most instances from
preventing or significantly  interfering with the ability of a bank, directly or
through   an   affiliate,   to  engage   insurance   sales,   solicitations   or
cross-marketing  activities.  Although the states  generally  must regulate bank
insurance  activities in a nondiscriminatory  manner, the states may continue to
adopt and enforce rules that specifically  regulate bank insurance activities in
certain areas identified in the Act. The Act directs the federal bank regulatory
agencies to adopt insurance consumer protection  regulations that apply to sales
practices, solicitations, advertising and disclosures.

         The Act  adopts a system  of  functional  regulation  under  which  the
Federal  Reserve  Board is  confirmed as the umbrella  regulator  for  financial
holding   companies,   but  financial  holding  company  affiliates  are  to  be
principally  regulated  by  functional  regulators  such as the FDIC  for  state
nonmember bank affiliates, the Securities and Exchange Commission for securities
affiliates  and state  insurance  regulators for insurance  affiliates.  The Act
repeals  the broad  exemption  of banks from the  definitions  of  "broker"  and
"dealer" for purposes of the  Securities  Exchange Act of 1934, as amended,  but
identifies a set of specific  activities,  including  traditional bank trust and
fiduciary  activities,  in  which a bank  may  engage  without  being  deemed  a
"broker",  and a set of  activities  in which a bank may  engage  without  being
deemed a "dealer".  The Act also makes conforming  changes in the definitions of
"broker" and "dealer" for  purposes of the  Investment  Company Act of 1940,  as
amended, and the Investment Advisers Act of 1940, as amended.

         The Act contains  extensive  customer  privacy  protection  provisions.
Under these provisions,  a financial  institution must provide to its customers,
at the  inception of the customer  relationship  and  annually  thereafter,  the
institution's  policies and  procedures  regarding  the  handling of  customers'
nonpublic  personal  financial  information.  The Act provides that,  except for
certain  limited  exceptions,  an  institution  may not  provide  such  personal
information to unaffiliated  third parties unless the  institution  discloses to
the customer that such  information may be so provided and the customer is given
the opportunity to opt out of such  disclosure.  An institution may not disclose
to a  non-affiliated  third party,  other than to a consumer  reporting  agency,
customer  account  numbers or other similar  account  identifiers  for marketing
purposes.  The Act also  provides  that the  states may adopt  customer  privacy
protections  that are more strict than those  contained in the Act. The Act also
makes  a  criminal  offense,  except  in  limited  circumstances,  obtaining  or
attempting to obtain customer information of a financial nature by fraudulent or
deceptive means.


Item 2.      Description of Property

         The Company's headquarters are located at 10555 Main Street, Suite 500,
Fairfax,  Virginia.  The Company  occupies  10,000 square feet under a five-year
lease that began on January 15, 1999.


                                       15
<PAGE>

         Cardinal Bank,  N.A. is  headquartered  at 10641 Lee Highway,  Fairfax,
Virginia.  This Bank  occupies a three-story  brick  structure,  which  contains
approximately  9,000 square feet, under a 10-year lease that began on January 1,
1998. In June 2000, this Bank opened a second branch office located at 1737 King
Street,  Alexandria,  Virginia  with  approximately  2,800  square  feet under a
15-year lease.

         Cardinal Wealth Services,  Inc. is headquartered at 1313 Dolley Madison
Boulevard,  Suite 100, McLean,  Virginia.  The subsidiary occupies approximately
1,500  square feet under a 10-year  lease.  Its former  location of 3,600 square
feet at 10555 Main Street, Suite 500, Fairfax, Virginia has been subleased under
the same terms and conditions of its original five-year lease.

         Cardinal Bank - Manassas/Prince  William, N.A. is headquartered at 9626
Center  Street,  Manassas,  Virginia.  This Bank occupies a two-story  building,
containing approximately 6,000 square feet, that is owned by the Company.

         Cardinal  Bank - Dulles,  N.A. is  headquartered  at 11150 Sunset Hills
Road, Reston,  Virginia. This Bank occupies approximately 6,600 square feet of a
three-story  structure  under a 10-year  lease  that  began on  January 1, 1999.
Following the Heritage Merger in September 2000, this Bank added a second branch
office.  This  office,  which was  formerly a branch of The  Heritage  Bank,  is
located at 46005 Regal Plaza,  Sterling Plaza. It occupies  approximately  3,000
square feet under a 10-year lease.

         Cardinal Bank - Potomac  (formerly The Heritage Bank) is  headquartered
at  1313  Dolley  Madison  Boulevard,   McLean,  Virginia.  This  Bank  occupies
approximately  9,600  square feet at that  location  under a 10-year  lease that
began in March  1999.  An  additional  branch  office is located at 1650  Tysons
Boulevard,  Suite 100, McLean,  Virginia. It occupies approximately 4,100 square
feet under a 10-year lease that began in March 1995.


Item 3.      Legal Proceedings

         In the ordinary course of operations,  the Company and the Banks expect
to be parties to various legal proceedings.  At present, there are no pending or
threatened  proceedings  against  the  Company  or any of the  Banks  which,  if
determined adversely,  would have a material effect on the business,  results of
operations, or financial position of the Company or any of the Banks.


Item 4.      Submission of Matters to a Vote of Security Holders

         No matters were  submitted to a vote of security  holders,  through the
solicitation  of proxies or otherwise,  during the fourth quarter of 2000.









                                       16
<PAGE>

                                     PART II

Item 5.      Market for Common Equity and Related Stockholder Matters

         The Common Stock of the Company is traded on the Nasdaq SmallCap Market
under the symbol of "CFNL".  The following table sets forth the high and low bid
information for the shares of Common Stock on the Nasdaq SmallCap Market for the
quarters indicated.

                                                              Bid Information
                                                              ---------------
                                                           High ($)      Low ($)
                                                           --------      -------
Fiscal Year Ended December 31, 1999
-----------------------------------
         1st quarter.................................        7.00         6.25
         2nd quarter.................................       10.94         6.75
         3rd quarter.................................        7.88         6.25
         4th quarter.................................        7.38         5.50

Fiscal Year Ended December 31, 2000
-----------------------------------
         1st quarter.................................        4.75         4.50
         2nd quarter.................................        5.25         5.06
         3rd quarter.................................        5.13         4.13
         4th quarter.................................        3.88         3.25


         As of March 28, 2001,  there were  approximately  235 record holders of
Common Stock.

         The Company has never  declared any cash dividends on the Common Stock,
and any future  payment of dividends is solely in the discretion of the Board of
Directors  and is dependent  upon the earnings  and  financial  condition of the
Company and such other  factors as the Board of Directors  from time to time may
deem relevant and applicable governmental regulations and policies. See "Item 1.
Description of Business -- Government  Supervision and Regulation." In addition,
the Company  cannot  declare or pay  dividends  on the Common  Stock  unless the
Company has paid in full all dividends  that have accrued to date to the holders
of the Series A Preferred  Stock and set aside a sum  sufficient  to pay in full
the next dividend payable to the holders of the Series A Preferred Stock.


Item 6.      Management's  Discussion  and Analysis of Financial  Condition  and
             Results of Operation

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.



                                       17
<PAGE>

General

         The  following  presents  management's  discussion  and analysis of the
consolidated financial condition and results of operation of the Company for the
years  ended  December  31,  2000 and  1999.  The  discussion  should be read in
conjunction with the accompanying consolidated financial statements.

      On September 1, 2000, the Company  completed its merger with  Heritage,  a
bank  holding  company  with $62.2  million in assets  headquartered  in McLean,
Virginia.  The  Heritage  Merger  was  accounted  for  as  a  purchase  business
combination. The Heritage Bank was renamed Cardinal Bank - Potomac. Accordingly,
the results of  operations  of the Company  include the results of Heritage from
September 1, 2000 forward.

Earnings Overview

         The  Company's  net loss for 2000  totaled  $3,971,000  or ($0.98)  per
common  share,  compared  with a net loss for 1999 of  $4,039,000 or ($0.95) per
share.  The return on average  assets was (2.72%) in 2000 as compared to (5.61%)
in 1999.  The  return on average  equity was  (12.72%)  in 2000 as  compared  to
(12.26%) in 1999.

         Operating results in 2000 reflected significant increases in all income
and expense  categories as three of the Company's five operating  subsidiaries -
Cardinal Bank - Manassas/Prince William, N.A., Cardinal Bank - Dulles, N.A., and
Cardinal  Wealth  Services,  Inc.  - each  recorded  their  first  full  year of
operations.  The  acquisition of Heritage and its sole  operating  subsidiary on
September 1, 2000 also contributed to the aforementioned increases. Net interest
income was $6.4  million in 2000,  up $3.4  million  from 1999 or 112%.  The net
interest  margin  was 35  basis  points  higher  than  last  year as the rate on
interest  earning assets  increased to 8.39% in 2000 from 6.57% in 1999, and the
Company's  cost of  funds  increased  to 3.29% in 2000  from  1.82% in 1999.  In
particular,  rates on  commercial  loans  increased 126 basis points to 8.84% in
2000 from  7.58% in 1999.  A major  reason  for this  increase  is the  business
manager  receivable loans that generally carry a higher interest rate than other
types of credit.  Business  manager loan average  balances were $3.0 million for
2000  compared to $0.6 million for 1999.  Average  total loans  increased  $70.3
million  to $104.0  million in 2000 from  $33.7  million in 1999,  due to strong
commercial loan demand.  Average total deposits increased $49.9 million to $78.7
million in 2000 from  $28.8  million in 1999.  The 2000 loan loss  provision  of
$753,000 was 47% higher than the $514,000  recorded in 1999 primarily due to the
increase  in  loan  balances,   both   originated  and  acquired   during  2000.
Non-interest  income was $2.1  million,  a 59%  increase  compared to 1999.  The
primary reason for this increase was investment fee income,  which  increased to
$1.5 million in 2000 from $1.0 million in 1999.  Non-interest  expense was $11.7
million in 2000 compared to $7.9 million in 1999. Total personnel  expense,  the
single largest component of non-interest  expenses,  was up $2.0 million or 48%,
as a result of the  Heritage  Merger as well as a full year of expense for three
subsidiaries;  Cardinal Wealth Services,  Inc.,  Cardinal Bank - Manassas/Prince
William, N.A., Cardinal Bank - Dulles, N.A. all of which opened in 1999.

Net Interest Income/Margin

         The primary source of the Company's  revenue,  net interest income,  is
defined as the difference between income on earning assets and the cost of funds
supporting those assets.  The level of net interest income is impacted primarily
by variations in the volume and mix of these assets and liabilities,  as well as
changes in interest rates when compared to previous  periods of operations.  Net
interest income for 2000 was $6.4 million,  112% higher than the prior year. The
net  interest  margin was 5.10% in 2000  compared to 4.75% in 1999.  The average
rate on earning  assets  increased  182 basis points to 8.39%  primarily  due to
prime  rate  increases  in the first half of 2000 as well as  increased  average
balances in the Company's  business manager  receivable  product which carries a
significantly  higher  yield than  other  loan  products.



                                       18
<PAGE>

The average  rate on interest  bearing  liabilities  increased  127 basis points
again as a result of rate increases primarily on time deposits. Table 1 contains
more detailed information concerning average balances,  yields earned, and rates
paid.

Provision and Allowance for Loan Losses

         Management's  policy is to maintain the  allowance for loan losses at a
level  sufficient to absorb the probable  losses inherent in the loan portfolio.
Both the amount of the  provision and the level of the allowance for loan losses
are impacted by many factors, including general economic conditions,  actual and
expected  credit  losses,  historical  trends  and  specific  conditions  of the
individual  borrower.  The loan loss provision for 2000 was $753,000 compared to
$514,000 in 1999.  The increase is due  primarily to higher loan balances as the
result of loan  production.  In  addition,  a specific  reserve of $104,000  was
recorded to reflect  the  non-performing  status of one credit in the  Company's
loan portfolio.

         The  allowance  for loan losses  increased to $1.9 million in 2000 from
$726,000 in 1999.  Included in the  increase  was the  addition of the  Heritage
allowance  for loan  losses of  $421,000.  The ratio of the  allowance  for loan
losses  to gross  loans at  December  31,  2000 was 1.23%  compared  to 1.07% at
December 31, 1999. Tables 2 and 3 contain additional  information  pertaining to
the calculation and allocation of the allowance for loan losses.

Lending

         The Company has comprehensive  policies and procedures which cover both
commercial and consumer loan  origination  and management of credit risk.  Loans
are  underwritten  in a manner that focuses on the borrower's  ability to repay.
The Company's  goal is not to avoid risk, but to manage it and to include credit
risk as part of the pricing decision for each product.

         Total loans,  net of fees and premiums and discounts,  increased  $86.1
million to $154.3  million at December 31, 2000.  Included in the increase  were
$37.9 million of loans acquired in the Heritage Merger. The strongest growth was
in commercial  loans and commercial  real estate loans  reflecting the Company's
strength as a local small business community bank.

         The loan portfolio has a heavy  commercial  orientation as evidenced by
the  information  provided in Table 4. The Company  began in late 1999 to better
diversify the loan portfolio by purchasing  consumer loans.  The Company intends
to continue to  diversify  its  portfolio in 2001 by again  purchasing  consumer
installment loans.

         Non-performing  assets  were  $585,000  at  December  31,  2000,  which
represents one loan,  compared to none at December 31, 1999.  Subsequent to year
end, the Company has placed the loan back on accrual status and believes that it
will be paid in full.  Interest  income on non-accrual  loans,  if recognized is
recorded  using the cash basis  method of  accounting.  When a loan is placed on
non-accrual,  unpaid  interest is  reversed  against  interest  income if it was
accrued in the current year and is charged to the  allowance  for loan losses if
it was accrued in prior years. When, in the opinion of management,  the borrower
has demonstrated the ability to pay and remain current,  the loan is returned to
an  accruing  status.  When this  occurs,  any unpaid  interest  is  recorded as
interest  income  only  after  all past due  principal  has been  collected.  At
December  31,  2000 the ratio of  non-performing  loans to total loans was 0.38%
compared to 0.00% at December 31, 1999.

Non-Interest Income

         Non-interest  income  continues  to  be  an  important  factor  in  the
Company's  operating results.  Non-interest  income was $2.1 million in 2000, an
increase of $778,000 or 58.9%.  Investment  fee income,



                                       19
<PAGE>

the Company's largest source of non-interest income, increased $498,000 or 48.9%
compared to 1999, and service charges on deposit accounts  increased to $154,000
in 2000 from $42,000 in 1999.  The  increases  can be  attributed  to additional
growth as well as the first full year of  operations  for three of the Company's
de  novo  operating   subsidiaries.   Table  5  provides  additional  detail  on
non-interest income for 2000 and 1999.

Non-Interest Expense

         Non-interest expense was $11.7 million in 2000 compared to $7.9 million
in 1999.  The  increase  can be  attributed  to the full year of  operations  of
Cardinal Bank - Manassas/Prince William, N.A., Cardinal Bank - Dulles, N.A., and
Cardinal Wealth Services,  Inc., which were opened in July,  August and February
of 1999, and the Heritage Merger  effective  September 1, 2000.  Total personnel
expense  increased  to $6.3  million  in 2000 from $4.3  million  in 1999.  This
increase  as  well  as  increases  in  most  expense  categories  are due to the
aforementioned  full  year of  operations  of  three  of the  Company's  de novo
operating subsidiaries. Table 6 reflects the components of non-interest expense.

Income Taxes

         The Company has not  recorded  income tax expense or benefit due to the
recognition of net losses in 2000 and all prior years of operations. The ability
to utilize net operating loss  carryforwards  will be dependent on the Company's
ability to generate  future  taxable  earnings.  Footnote 9 of the  Consolidated
Financial  Statements  provides  additional  information  with  respect  to  the
deferred tax accounts and the net operating loss carryforward.

Securities Available for Sale

         The Company's  investment  securities  portfolio is used as a source of
income and liquidity.  The securities portfolio was $6.9 million at December 31,
2000  compared  to $4.8  million at  December  31,  1999.  The  increase  is due
primarily to the Heritage Merger, which added $4.9 million in securities. During
the year the Company sold $2.5 million in securities for liquidity purposes at a
net loss of $32,400.  The portfolio  yield increased from 5.83% in 1999 to 6.12%
in 2000 due to the higher  yielding  Heritage  portfolio.  Table 7 reflects  the
composition of the investment portfolio as of December 31, 2000 and 1999.

Interest Rate Sensitivity

         The  most  important  element  of  asset/liability  management  is  the
monitoring of the Company's sensitivity to interest rate movements. Fluctuations
in  interest  rates  may  result  in  changes  in the fair  market  value of the
Company's  financial  instruments,  cash  flows  and net  interest  income.  The
Company's goal is to maximize net interest income with acceptable levels of risk
to changes in interest rates.  Management seeks to meet this goal by influencing
the maturity and re-pricing  characteristics  of the various lending and deposit
taking line of business and by managing  discretionary  balance  sheet asset and
liability portfolios.

         The Company utilizes a simulation  modeling process to measure interest
rate risk and the  impact  that  rate  fluctuations  will  have on net  interest
income. These simulations incorporate assumptions regarding balance sheet growth
and mix, pricing and the re-pricing and maturity characteristics of the existing
and projected  balance sheets.  One of the ways the Company manages its interest
rate risk is through an analysis of the  relationship  between  interest-earning
assets and  interest-bearing  liabilities  to measure  the  impact  that  future
changes in  interest  rates will have on net  interest  income.  The  difference
between rate  sensitive  assets and rate  sensitive  liabilities  for a specific
period of time is known as the



                                       20
<PAGE>

"GAP". The data in Table 8 reflects re-pricing or expected maturities of various
assets and liabilities at December 31, 2000.  Interest  sensitivity gap analysis
presents a position  that  existed at one  particular  point in time and assumes
that assets and liabilities  with similar  characteristics  will re-price at the
same  time  and to the same  degree.  As shown in the  table,  the  Company  was
liability  sensitive  (excess of liabilities  over assets) in the three month to
one year horizon.  Senior management regularly reviews the overall interest rate
risk position and develops and implements  appropriate  strategies to manage the
risk.

Liquidity

         The  objective  of  liquidity  management  is to ensure the  continuous
availability  of  funds  to  meet  the  demands  of  depositors,  investors  and
borrowers.  Stable core deposits and a strong  capital  position are the current
components  of a solid  foundation  for the  Company's  liquidity  position.  In
addition,  the availability of regional and national  wholesale  funding sources
including fed funds purchased,  negotiable  certificates of deposit,  securities
sold  under  agreements  to  repurchase,  and  Federal  Home Loan Bank  advances
enhances  the  Company's  liquidity.  Cash  flow from  operations,  such as loan
payments and payoffs are also a significant source of liquidity. The Company has
a contingency plan that provides for continued monitoring of liquidity needs and
available sources of liquidity.  Management believes the Company has the ability
to meet its liquidity needs. Table 9 reflects the maturities of the certificates
of deposit of $100,000 or more.

Capital Resources

         Capital  adequacy is an important  measure of financial  stability  and
performance.  Management's  objectives are to maintain a level of capitalization
that is sufficient  to sustain  asset growth and promote  depositor and investor
confidence.

         Regulatory  agencies measure capital adequacy  utilizing a formula that
takes into account the individual  risk profile of financial  institutions.  The
guidelines  define  capital as either  Tier 1  (primarily  common  shareholders'
equity,  defined to include  certain  debt  obligations)  and Tier 2 (to include
certain  other debt  obligations  and a portion of the allowance for loan losses
and 45% of unrealized gains in equity securities).

         At December 31, 2000,  shareholders'  equity was $34.1 million compared
to $30.7 million at December 31, 1999. The increase in shareholders'  equity was
due  to  the  issuance  of  $7.1  million  in   preferred   stock   representing
approximately 50% of the purchase price for Heritage reduced by the net loss for
2000.  Average  equity to average  total assets was 21.4% in 2000 as compared to
45.6% in 1999.

         Footnote 10 of the Consolidated  Financial Statements shows the minimum
capital  requirement and the Company's  capital position as of December 31, 2000
and 1999. The Company's  regulatory  capital levels exceed those established for
well-capitalized institutions.

1999 Compared to 1998

         The  comparison  of operating  results  between 1999 and 1998 should be
read  in the  context  of the  start-up  nature  of the  Company.  Three  of the
companies operating subsidiaries, Cardinal Wealth Services Inc., Cardinal Bank -
Manassas/Prince  William,  N.A.  and  Cardinal  Bank -  Dulles,  N.A.  opened in
February, July and August of 1999, respectively.

         Consolidated  net loss for 1999 was $4.0  million or $0.95 per  diluted
share compared to a net loss of $1.7 million or $0.64 per diluted share in 1998.
Net interest  income was $3.0 million in 1999  compared to $1.2 million in 1998.
Non-Interest  income  totaled $1.3 million in 1999 compared to $34,000



                                       21
<PAGE>

in 1998. Total non-interest  expense increased in 1999 to $7.9 million from $2.7
million in 1998.

         Total  assets  increased  to $97.0  million in 1999  compared  to $57.3
million in 1998. Total loans, net of reserves were $67.4 million at December 31,
1999 compared to $16.1 million at December 31, 1998.  Total deposits at December
31, 1999 were $59.9 million compared to $21.9 million at December 31, 1998.



















                                       22
<PAGE>

Table 1.

                 Cardinal Financial Corporation and Subsidiaries
                 Rate and Volume Analysis (Tax Equivalent Basis)
                             (Dollars in thousands)

<TABLE>
<CAPTION>

  Average Volume       Average Rate                                               Interest          Increase       Attributable to
  2000      1999      2000     1999                                            2000      1999      (Decrease)      Rate     Volume
---------------------------------------                                      -------------------  ------------  --------------------
<S>       <C>         <C>        <C>     <C>                                 <C>        <C>           <C>         <C>       <C>
                                                  Interest Income
                                         Loans:
$  35,605 $ 11,087    8.84%      7.58%       Commercial                      $  3,149   $   840       $ 2,309     $   451   $ 1,858
   33,546    9,718    8.64%      8.13%       Real estate - commercial           2,899       790         2,109         172     1,937
    2,425      719   11.84%      9.32%       Real estate - construction           287        67           220          61       159
   15,568    8,089    9.29%      7.76%       Real estate - residential          1,447       628           819         238       581
    7,307    2,340    9.55%      7.17%       Home equity lines                    698       168           530         174       356
    9,518    1,724    8.17%      9.75%       Consumer                             778       168           610        (150)      760
------------------------------------------------------------------------------------------------------------------------------------
  103,969   33,677    8.90%      7.90%                Total loans               9,258     2,661         6,597     $   946   $ 5,651

    6,068    6,960    6.12%      5.83%   Investment securities - AFS              371       406           (35)         17       (52)

    1,036      504    6.74%      5.74%   Other investments                         70        29            41          10        31

   21,790   24,804    6.66%      4.97%   Federal funds sold                     1,452     1,234           218         368      (150)

------------------------------------------------------------------------------------------------------------------------------------
$ 132,863 $ 65,945    8.39%      6.57%   Total interest-earning assets       $ 11,151   $ 4,330       $ 6,821     $ 1,341   $ 5,480
====================================================================================================================================

                                                   Interest Expense

$   5,375  $ 2,436    2.42%      2.01%       Interest checking                  $ 130   $    49          $ 81     $    22   $    59
   15,256    7,168    4.09%      3.68%       Money markets                        624       264           360          62       298
    2,441      239    2.50%      2.93%       Statement savings                     61         7            54         (10)       64
   55,656   18,980    6.25%      4.67%       Certificates of deposit            3,479       887         2,592         878     1,714
------------------------------------------------------------------------------------------------------------------------------------
   78,728   28,823    5.45%      4.19%   Total interest-bearing liabilities     4,294     1,207         3,087     $   952   $ 2,135

    6,904    1,773    6.47%      5.53%   Borrowings                               447        98           349          65       284

------------------------------------------------------------------------------------------------------------------------------------
$  85,632 $ 30,596    5.54%      4.27%   Total interest-bearing liabilities  $  4,741   $ 1,305       $ 3,436     $ 1,017     2,419
====================================================================================================================================

   58,418   41,151                       Other sources - net
------------------------------------------------------------------------------------------------------------------------------------
$ 144,050 $ 71,747    3.29%      1.82%   Total sources of funds              $  4,741   $ 1,305       $ 3,436     $ 1,017   $ 2,419
------------------------------------------------------------------------------------------------------------------------------------

$  47,231 $ 35,349    5.10%      4.75%   Net interest margin                 $  6,410   $ 3,025       $ 3,385     $   324   $ 3,061
====================================================================================================================================
</TABLE>





                                       23
<PAGE>

                 Cardinal Financial Corporation and Subsidiaries
                 Rate and Volume Analysis (Tax Equivalent Basis)
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                                                 Variance
  Average Volume      Average Rate                                                Interest       Increase     Attributable to
   1999     1998      1999     1998                                            1999     1998    (Decrease)    Rate     Volume
------------------- ------------------                                       ------------------ -----------  -----------------
<S>       <C>          <C>     <C>      <C>                                   <C>      <C>        <C>         <C>      <C>
                                        Interest Income
                                        Loans:
$ 11,087  $    529     7.58%   10.01%        Commercial                       $   840  $    53    $   787     $ (270)  $ 1,057
   9,718       287     8.13%    8.01%        Real estate - commercial             790       23        767         12       755
     719        63     9.32%    7.89%        Real estate - construction            67        5         62         10        52
   8,089       768     7.76%    7.42%        Real estate - residential            628       57        571         28       543
   2,340       155     7.17%   10.36%        Home equity lines                    168       16        152        (74)      226
   1,724       168     9.75%   13.73%        Consumer                             168       23        145        (69)      214
-------------------------------------------------------------------------------------------------------------------------------
  33,677     1,970     7.90%    8.99%                       Total loans         2,661      177      2,484       (363)    2,847

   6,960     5,484     5.83%    5.62%   Investment securities - AFS               406      308         98         15        83

     504       133     5.74%    5.97%   Other investments                          29        8         21         (1)       22

       -       764     0.00%    4.17%   Money market accounts                       -       32        (32)         -       (32)

  24,804    18,574     4.97%    5.55%   Federal funds sold                      1,234    1,031        203       (143)      346

-------------------------------------------------------------------------------------------------------------------------------
$ 65,945  $ 26,925     6.57%    5.78%   Total interest-earning assets         $ 4,330  $ 1,556    $ 2,774     $ (492)  $ 3,266
===============================================================================================================================

                                        Interest Expense

   2,436       535     2.01%    2.06%        Interest checking                     49       11         38         (1)       39
   7,168     2,316     3.68%    3.71%        Money markets                        264       86        178         (2)      180
     239        62     2.93%    3.23%        Statement savings                      7        2          5         (1)        6
  18,980     4,336     4.67%    5.54%        Certificates of deposit              887      240        647       (164)      811
-------------------------------------------------------------------------------------------------------------------------------
  28,823     7,249     4.19%    4.68%   Total deposits                          1,207      339        868       (168)    1,036

   1,773         -     5.53%    0.00%   Borrowings                                 98        1         97         97         -

-------------------------------------------------------------------------------------------------------------------------------
  30,596     7,249     4.27%    4.69%   Total interest-bearing liabilities      1,305      340        965        (71)    1,036
===============================================================================================================================

  41,151    23,045                      Other sources
-------------------------------------------------------------------------------------------------------------------------------
  71,747    30,294     1.82%    1.12%   Total sources of funds                  1,305      340        965        (71)    1,036
-------------------------------------------------------------------------------------------------------------------------------

$ 35,349  $ 19,676     4.75%    4.66%   Net interest margin                   $ 3,025  $ 1,216    $ 1,809     $ (421)  $ 2,230
===============================================================================================================================
</TABLE>





                                       24
<PAGE>

Table 2.

                 Cardinal Financial Corporation and Subsidiaries
                            Allowance for Loan Losses
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                            2000              1999              1998
                                                        ------------      ------------      ------------
<S>                                                     <C>               <C>               <C>
Beginning balance                                       $        726      $        212      $          -

Provision for loan losses                                        753               514               212

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, December 31,                                   $      1,900      $        726      $        212
========================================================================================================



                                                        December 31,      December 31,      December 31,
Loans:                                                      2000              1999              1998
                                                        ------------      ------------      ------------
            Balance at period end                       $    154,078      $     68,147      $     16,343
            Allowance for loan losses to
            Period end loans                                    1.23%             1.07%             1.30%

</TABLE>


                                       25
<PAGE>

Table 3.

                 Cardinal Financial Corporation and Subsidiaries
                   Allocation of the Allowance for Loan Losses
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                      December 31,            December 31,             December 31,
                                                         2000                     1999                     1998
                                                 --------------------     --------------------     --------------------

<S>                                              <C>            <C>       <C>            <C>       <C>            <C>
Commercial                                       $      612     32.21%    $      241     33.20%    $       59     27.83%
Real estate - commercial                                678     35.68%           211     29.06%            40     18.87%
Real estate - construction                               50      2.63%             9      1.24%             9      4.25%
Real estate - residential                               181      9.53%           126     17.36%            64     30.19%
Home equity lines                                       126      6.63%            40      5.51%            12      5.66%
Consumer                                                 63      3.32%            24      3.31%             4      1.89%
Unallocated                                             190     10.00%            75     10.32%            24     11.31%
                                                 --------------------     --------------------     --------------------

Total allowance for loan losses                  $    1,900    100.00%    $      726    100.00%    $      212    100.00%
                                                 ====================     ====================     ====================
</TABLE>

















                                       26
<PAGE>

Table 4.

                 Cardinal Financial Corporation and Subsidiaries
                                      Loans
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                            December 31,             December 31,              December 31,
                                               2000                      1999                      1998
                                       ---------------------     ---------------------     ---------------------

<S>                                    <C>             <C>       <C>             <C>       <C>             <C>
Commercial                             $   49,646      32.22%    $   22,558      33.10%    $    5,138      31.43%
Real estate - commercial                   57,083      37.05%        19,780      29.03%         3,507      21.46%
Real estate - construction                  4,088       2.65%           870       1.28%           760       4.65%
Real estate - residential                  17,729      11.51%        11,851      17.39%         5,529      33.83%
Home equity lines                          14,867       9.65%         3,777       5.54%         1,040       6.37%
Consumer                                   10,665       6.92%         9,311      13.66%           369       2.26%
                                       ---------------------     ---------------------     ---------------------

Gross loans                            $  154,078     100.00%    $   68,147     100.00%    $   16,343     100.00%

Add: unearned income, net                     193                        20                      (16)
Less: allowance for loan losses            (1,900)                     (726)                    (212)
                                       ----------                ----------                ---------

Total loans, net                       $  152,371                $   67,441                $  16,115
                                       ==========                ==========                =========
</TABLE>














                                       27
<PAGE>

Table 5.

                 Cardinal Financial Corporation and Subsidiaries
                               Non-interest Income
                  Years Ended December 31, 2000, 1999 and 1998


<TABLE>
<CAPTION>
                                                     2000            1999            1998
                                                 ------------    ------------    ------------
<S>                                              <C>             <C>             <C>
Service charges on deposit accounts              $    153,769    $     41,612    $      3,388
Loan service charges                                  230,228         226,211          16,145
Investment fee income                               1,515,530       1,017,924               -
Gain from sale of assets                                2,687           4,207           8,760
ATM transaction fees                                   26,108           4,950           1,967
Credit card fees                                       29,124          13,325           1,100
Check order fees                                       34,039          10,999           7,798
Other income                                          106,456           1,257          (5,121)
                                                 ------------    ------------    ------------
                                                 $  2,097,941    $  1,320,485    $     34,037
                                                 ============    ============    ============
</TABLE>















                                       28
<PAGE>

Table 6.

                 Cardinal Financial Corporation and Subsidiaries
                              Non-interest Expense
                  Years Ended December 31, 2000, 1999 and 1998


<TABLE>
<CAPTION>
                                            2000              1999              1998
                                       --------------    --------------    --------------
<S>                                    <C>               <C>               <C>
Salary and benefits                    $    6,317,278    $    4,277,231    $    1,401,117
Occupancy                                   1,075,075           811,578           151,583
Professional fees                             507,769           494,472           463,497
Depreciation                                  600,397           356,435           106,653
Intangible amortization                       235,297                 -                 -
Data processing                               560,825           353,498           104,067
Stationary and supplies                       344,623           322,586           133,821
Brokerage clearing                            344,978           197,822                 -
Advertising and marketing                     241,225           175,100            82,069
Telecommunications                            253,826           163,481            36,591
Other taxes                                   220,902            94,670            11,225
Travel and entertainment                      139,212            79,128            54,031
Bank operations                               165,058           125,541            38,216
Premises and equipment                        142,137           103,739             6,047
Miscellaneous                                 577,513           314,788           145,352
                                       --------------    --------------    --------------
                                       $   11,726,115    $    7,870,069    $    2,734,269
                                       ==============    ==============    ==============
</TABLE>














                                       29
<PAGE>

Table 7.

                 Cardinal Financial Corporation and Subsidiaries
                   Investment Securities - Available-for-Sale
                     As of December 31, 2000, 1999 and 1998
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                           Amortized        Fair        Unrealized          Average
As of  December 31, 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   $        497   $         (3)           5.25%
     One to five years                                           4,000          3,949          3,999             50            6.85%
     After ten years                                             1,377          1,403          1,374            (29)           6.64%
-----------------------------------------------------------------------------------------------------------------------------------
           Total U.S. government agencies                 $      5,877   $      5,852   $      5,870   $         18            6.66%
-----------------------------------------------------------------------------------------------------------------------------------

Mortgage-backed securities
    Within one year                                       $         30   $         30   $         30   $          -            5.50%
    One to five years                                              740            742            734             (8)           6.44%
     Five to ten years                                             306            307            301             (6)           5.92%
     After ten years                                                 -              -              -              -            0.00%
-----------------------------------------------------------------------------------------------------------------------------------
           Total mortgage-backed securities               $      1,076   $      1,079   $      1,065   $        (14)           6.27%
-----------------------------------------------------------------------------------------------------------------------------------

           Total investment securities available-for-sale $      6,953   $      6,931   $      6,935   $          4            6.60%
                                                          =========================================================================

                                                                           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%
                                                          =========================================================================


                                                                           Amortized        Fair        Unrealized          Average
As of December 31, 1998                                     Par Value         Cost          Value       Gain/(Loss)          Yield
                                                          -------------------------------------------------------------------------
U.S. government agencies and enterprises
     Within one year                                      $        300   $        300   $        300   $          -            5.28%
     One to five years                                           9,000          9,002          9,005              3            5.79%
     Five to ten years                                             500            501            502              1            5.79%
     After ten years                                               500            499            499              -            6.26%
-----------------------------------------------------------------------------------------------------------------------------------
           Total U.S. government agencies                 $     10,300   $     10,302   $     10,306   $          4            5.78%
-----------------------------------------------------------------------------------------------------------------------------------

Mortgage-backed securities
     One to five years                                    $        437   $        441   $        440   $         (1)           5.43%
     Five to ten years                                             460            460            460              -            5.27%
     After ten years                                             2,278          2,271          2,271              -            5.87%
-----------------------------------------------------------------------------------------------------------------------------------
           Total mortgage-backed securities               $      3,175   $      3,172   $      3,171   $         (1)           5.52%
-----------------------------------------------------------------------------------------------------------------------------------

           Total investment securities available-for-sale $     13,475   $     13,474   $     13,477   $          3            5.65%
                                                          =========================================================================
</TABLE>


                                       30
<PAGE>

Table 8.

                 Cardinal Financial Corporation and Subsidiaries
                     Interest Rate Sensitivity Gap Analysis
                             As of December 31, 2000
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                      1-90         91-180       181-365         1-5          Over 5
                                                      Days          Days          Days         Years          Years         TOTAL
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>           <C>           <C>           <C>            <C>           <C>
Assets
------------------------------------------------------------------------------------------------------------------------------------
Investment securities available-for-sale
U.S. Government agency securities                  $        -    $        -    $      497    $    3,999     $    1,374    $    5,870
Mortgage-backed securities                                 30             -             -           735            300         1,065
------------------------------------------------------------------------------------------------------------------------------------
Total investment securities available-for-sale             30             -           497         4,734          1,674         6,935
------------------------------------------------------------------------------------------------------------------------------------
Other investments                                           -             -             -             -          1,513         1,513
------------------------------------------------------------------------------------------------------------------------------------
Federal funds sold                                     24,754             -             -             -              -        24,754
------------------------------------------------------------------------------------------------------------------------------------
Loans
Commercial - fixed                                      4,918         3,513         5,995        13,295         10,247        37,968
Commercial - variable                                   2,547         3,450           880         3,504          1,297        11,678
Real estate - commercial fixed                              8             6            13           547            579         1,153
Real estate - commercial variable                       2,701         3,674         2,631        16,718         30,206        55,930
Real estate - construction fixed                            -             -             -             -              -             -
Real estate - construction variable                     2,146         1,152           790             -              -         4,088
Real estate - residential fixed                            32            26            53         3,860            815         4,786
Real estate - residential variable                         66            52           107         1,042         11,676        12,943
Home equity lines                                         123            18            34           283         14,409        14,867
Consumer - fixed                                          662           169         1,113         1,523          6,133         9,600
Consumer - variable                                       217             9            23           391            425         1,065
------------------------------------------------------------------------------------------------------------------------------------
Loans receivable                                       13,420        12,069        11,639        41,163         75,787       154,078
------------------------------------------------------------------------------------------------------------------------------------
Total earning assets                                   38,204        12,069        12,136        45,897         78,974    $  187,280
------------------------------------------------------------------------------------------------------------------------------------
Cumulative rate sensitive assets                   $   38,204    $   50,273    $   62,409    $  108,306     $  187,280
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
------------------------------------------------------------------------------------------------------------------------------------
Deposits
Demand deposits                                    $   10,236    $    4,094    $    8,189    $    3,275     $   15,149    $   40,943
Interest checking                                       3,017         1,207         2,414           966          4,465        12,069
Statement savings                                       1,129           452           903           361          1,671         4,516
Money market accounts                                   5,292         2,117         4,233         1,693          7,832        21,167
Certificates of deposit - fixed                         2,647         4,579         5,999        10,013              -        23,238
Certificates of deposit - no penalty                    9,818        14,978        25,277        11,365              -        61,438
------------------------------------------------------------------------------------------------------------------------------------
Total deposits                                         32,139        27,427        47,015        27,673         29,117       163,371
------------------------------------------------------------------------------------------------------------------------------------
Borrowings - short term                                 7,287             -             -             -              -         7,287
------------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities                     39,426        27,427        47,015        27,673         29,117    $  170,658
------------------------------------------------------------------------------------------------------------------------------------
Cumulative rate sensitive liabilities              $   39,426    $   66,853    $  113,868    $  141,541     $  170,658
------------------------------------------------------------------------------------------------------------------------------------

Gap                                                $   (1,222)   $  (15,358)   $  (34,879)   $   18,224     $   49,857
Cumulative gap                                     $   (1,222)   $  (16,580)   $  (51,459)   $  (33,235)    $   16,622
Gap/ total assets                                       -0.59%        -7.42%       -16.85%         8.80%         24.08%
Cumulative gap/ total assets                            -0.59%        -8.01%       -24.85%       -16.05%          8.03%
Rate sensitive assets/ rate sensitive liabilities        0.97          0.44          0.26          1.66           2.71
Cumulative rate sensitive assets/
         Cumulative rate sensitive liabilities           0.97          0.75          0.55          0.77           1.10
</TABLE>


                                       31
<PAGE>

Table 9.
                 Cardinal Financial Corporation and Subsidiaries
                   Certificates of Deposit of $100,000 or More
                             As of December 31, 2000
                             (Dollars in thousands)




Maturities

Three months or less                                    $         3,116
Over three months through six months                              8,721
Over six months through twelve months                            17,397
Over twelve months                                               11,225
                                                        ---------------
                                                        $        40,459






















                                       32
<PAGE>

Item 7.      Financial Statements

         The following  financial  statements are filed as a part of this report
following Item 13 below:

         Independent Auditors' Report

         Financial Statements

                  Consolidated  Statements of  Condition,  December 31, 2000 and
                    1999

                  Consolidated  Statements of  Operations,  Years Ended December
                    31, 2000 and 1999

                  Consolidated  Statements of Comprehensive Income (Loss), Years
                    Ended December 31, 2000 and 1999

                  Consolidated  Statements of Changes in  Shareholders'  Equity,
                    Years Ended December 31, 2000 and 1999

                  Consolidated  Statements of Cash Flows,  Years Ended  December
                    31, 2000 and 1999

                  Notes to Consolidated Financial Statements


Item 8.      Changes in and  Disagreements  with  Accountants  on Accounting and
             Financial Disclosure

         No changes in the Company's independent accountants or disagreements on
accounting and financial disclosure required to be reported hereunder have taken
place.


                                    PART III

Item 9.      Directors,  Executive  Officers,  Promoters  and  Control  Persons;
             Compliance with Section 16(a) of the Exchange Act

         Pursuant to General  Instruction  E(3) of Form 10-KSB,  the information
contained under the headings  "Election of Directors,"  "Executive  Officers Who
Are  Not  Directors,"  and  "Section  16(a)   Beneficial   Ownership   Reporting
Compliance"  in the  Company's  definitive  Proxy  Statement for its 2001 Annual
Meeting of Shareholders, which Proxy Statement will be filed with the Securities
and Exchange  Commission within 120 days of the end of the Company's 2000 fiscal
year (the "2001 Proxy Statement"), is hereby incorporated by reference.


Item 10.     Executive Compensation

         Pursuant to General  Instruction  E(3) of Form 10-KSB,  the information
contained  under the  headings  "Executive  Compensation  - Summary  of Cash and
Certain Other  Compensation,"  "- Stock Option Grants," "- Option  Exercises and
Holdings," "- Directors' Fees," and "- Employment  Agreements" in the 2001 Proxy
Statement is hereby incorporated by reference.





                                       33
<PAGE>

Item 11.     Security Ownership of Certain Beneficial Owners and Management

         Pursuant to General  Instruction  E(3) of Form 10-KSB,  the information
contained under the headings "Securities  Ownership of Management" and "Security
Ownership  of  Certain  Beneficial  Owners"  in  the  2001  Proxy  Statement  is
incorporated by reference.


Item 12.     Certain Relationships and Related Transactions

         Pursuant to General  Instruction  E(3) of Form 10-KSB,  the information
contained  under the heading  "Transactions  With  Management" in the 2001 Proxy
Statement is hereby incorporated by reference.


Item 13.     Exhibits, List and Reports on Form 8-K

      (a)    Exhibits.

             3.1    Articles of Incorporation of Cardinal Financial Corporation,
                    attached as Exhibit  3.1 to the  Registration  Statement  on
                    Form  SB-2,  Registration  No.  333-52279,  filed  with  the
                    Commission  on May 8, 1998 (the "Form  SB-2"),  incorporated
                    herein by reference.

             3.2    Articles of Amendment to the  Articles of  Incorporation  of
                    Cardinal   Financial   Corporation,   which  set  forth  the
                    designation  for the Series A Preferred  Stock,  attached as
                    Exhibit  4.2 to the  Registration  Statement  on  Form  8-A,
                    Registration  No.  0-24457,  filed  with the  Commission  on
                    September 5, 2000, incorporated herein by reference.

             3.3    Bylaws  of  Cardinal  Financial  Corporation,   attached  as
                    Exhibit  3.2  to  the  Form  SB-2,  incorporated  herein  by
                    reference.

             4      Form of Common Stock  Certificate,  attached as Exhibit 4 to
                    the Form SB-2, incorporated herein by reference.

             10.1   Employment Agreement,  dated as of October 13, 1998, between
                    Cardinal Financial  Corporation and Thomas C. Kane, attached
                    as  Exhibit  10.2 to the  Company's  Annual  Report  on Form
                    10-KSB for the year ended  December 31, 1998 (the "1998 Form
                    10-KSB"), incorporated herein by reference.

             10.2   Employment  Agreement,  dated as of August 31, 1998, between
                    Cardinal   Financial   Corporation  and  Greg  D.  Wheeless,
                    attached   as  Exhibit   10.7  to  the  1998  Form   10-KSB,
                    incorporated herein by reference.

             21     Subsidiaries of the Registrant.


      (b)    Reports on Form 8-K.

                    On November 17, 2000,  the Company filed a Current Report on
                    Form  8-K/A to amend a Form 8-K  dated  September  1,  2000,
                    which  announced,  under  Item 2,  the  consummation  of the
                    merger of Heritage  with and into Cardinal  Merger Corp.,  a
                    wholly owned  subsidiary of the Company,  to include,  under
                    Item 7, the  financial  statements of Heritage and pro forma
                    financial information.






                                       34
<PAGE>


                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                        Consolidated Financial Statements

                           December 31, 2000 and 1999

                   (With Independent Auditors' Report Thereon)





<PAGE>


                            [LETTERHEAD OF KPMG LLP]



                          Independent Auditors' Report


The Board of Directors and Shareholders
Cardinal Financial Corporation and subsidiaries:


We have  audited  the  accompanying  consolidated  statements  of  condition  of
Cardinal Financial Corporation and subsidiaries (the Company) as of December 31,
2000  and  1999,  and  the  related   consolidated   statements  of  operations,
comprehensive income (loss), changes in shareholders' equity, and cash flows for
the  years  then  ended.  These  consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Cardinal Financial
Corporation  and  subsidiaries as of December 31, 2000 and 1999, and the results
of their operations and their cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of America.



                                   /s/KPMG LLP
McLean, Virginia
January 25, 2001





<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CONDITION

                           December 31, 2000 and 1999

                                 (In thousands)

<TABLE>
<CAPTION>
                                    Assets                                             2000              1999
                                                                                    ------------     ------------
<S>                                                                                 <C>              <C>
Cash & due from banks                                                               $      4,734     $      6,018
Federal funds sold                                                                        24,754           13,025
                                                                                    ------------     ------------

                   Total cash and cash equivalents                                        29,488           19,043

Investment securities available-for-sale                                                   6,935            4,807
Other investments                                                                          1,513            1,015

Loans receivable, net of fees                                                            154,271           68,167
Allowance for loan losses                                                                 (1,900)            (726)
                                                                                    ------------     ------------

                                                                                         152,371           67,441

Premises and equipment, net                                                                5,659            4,203
Goodwill and other intangibles                                                             9,576                -
Accrued interest and other assets                                                          1,506              524
                                                                                    ------------     ------------

                   Total assets                                                     $    207,048     $     97,033
                                                                                    ============     ============
                   Liabilities and Shareholders' Equity

Deposits                                                                            $    163,371     $     59,873
Borrowings                                                                                 7,287            6,000
Accrued interest and other liabilities                                                     2,278              415
                                                                                    ------------     ------------

                   Total liabilities                                                     172,936           66,288

Preferred stock, cumulative convertible, $1 par value, 1,412,000 shares
    authorized, 1,411,268 shares outstanding in 2000                                       1,411                -
Common stock, $1 par value, 50,000,000 shares authorized,
    4,253,155 and 4,242,634 shares outstanding in 2000
    and 1999, respectively                                                                 4,253            4,243
Additional paid in capital                                                                38,466           32,496
Accumulated deficit                                                                      (10,022)          (5,881)
Accumulated other comprehensive income (loss)                                                  4             (113)
                                                                                    ------------     ------------

                   Total shareholders' equity                                             34,112           30,745
                                                                                    ------------     ------------

                   Total liabilities and shareholders' equity                       $    207,048     $     97,033
                                                                                    ============     ============
</TABLE>


See accompanying notes to consolidated financial statements


<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                     Years Ended December 31, 2000 and 1999
<TABLE>
<CAPTION>
                                                                                   2000             1999
                                                                               ------------     ------------
<S>                                                                            <C>              <C>
Interest income:
    Loans receivable                                                           $  9,257,708     $  2,660,851
    Federal funds sold                                                            1,451,315        1,234,273
    Investment securities available-for-sale                                        371,386          405,604
    Other investments                                                                69,873           28,902
                                                                               ------------     ------------
                 Total interest income                                           11,150,282        4,329,630

Interest expense:
    Deposits                                                                      4,293,522        1,206,882
    Borrowings                                                                      446,839           98,036
                                                                               ------------     ------------
                 Total interest expense                                           4,740,361        1,304,918
                                                                               ------------     ------------
                 Net interest income                                              6,409,921        3,024,712

Provision for loan losses                                                           752,755          513,847
                                                                               ------------     ------------
                 Net interest income after provision for loan losses              5,657,166        2,510,865

Non-interest income:
    Service charges on deposit accounts                                             153,769           41,612
    Loan service charges                                                            230,228          226,211
    Investment fee income                                                         1,515,530        1,017,924
    Gains from sale of assets                                                         2,687            4,207
    Other income                                                                    195,727           30,531
                                                                               ------------     ------------
                 Total non-interest income                                        2,097,941        1,320,485

Non-interest expense:
    Salary and benefits                                                           6,317,278        4,277,231
    Occupancy                                                                     1,075,075          811,578
    Professional fees                                                               507,769          494,472
    Depreciation                                                                    600,397          356,435
    Amortization of intangibles                                                     235,297                -
    Other operating expenses                                                      2,990,299        1,930,353
                                                                               ------------     ------------
                 Total non-interest expense                                      11,726,115        7,870,069
                                                                               ------------     ------------
                 Net loss before income taxes                                    (3,971,008)      (4,038,719)

Provision for income taxes                                                                -                -
                                                                               ------------     ------------
Net loss                                                                       $ (3,971,008)    $ (4,038,719)
                                                                               ============     ============
Dividends to preferred shareholders                                                 170,555                -
                                                                               ------------     ------------
Net loss to common shareholders                                                $ (4,141,563)    $ (4,038,719)
                                                                               ============     ============
Basic and diluted loss per common share                                        $      (0.98)    $      (0.95)
                                                                               ============     ============
Weighted-average common shares outstanding                                        4,246,346        4,240,819
                                                                               ============     ============
</TABLE>

See accompanying notes to consolidated financial statements

<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                     Years Ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                  2000             1999
                                                              ------------     ------------

<S>                                                           <C>              <C>
Net loss                                                      $ (3,971,008)    $ (4,038,719)
Other comprehensive income (loss):
   Unrealized gain (loss) on available-for-sale
        investment securities                                      116,939         (115,491)
                                                              ------------     ------------

Comprehensive loss                                            $ (3,854,069)    $ (4,154,210)
                                                              ============     ============
</TABLE>


See accompanying notes to consolidated financial statements.


<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                     Years Ended December 31, 2000 and 1999
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                                              Accumulated
                                                                                     Additional                  Other
                                              Preferred  Preferred  Common  Common    Paid-in   Accumulated  Comprehensive
                                               Shares      Stock    Shares  Stock     Capital     Deficit    Income (Loss)    Total
                                              ---------  ---------  ------  ------  ----------  -----------  ------------  --------
<S>                                               <C>    <C>         <C>    <C>     <C>         <C>          <C>           <C>
Balance, December 31, 1998                            -  $       -   4,240  $4,240  $   32,327  $    (1,842) $          3  $ 34,728

Issuance of 3 shares of common stock
par value $1, at $7.06 per share, net of costs        -          -       3       3          19            -             -        22

Reversal of accrued cost related to
   Public Offering                                    -          -       -       -         138            -             -       138

Accrual of Stock Award                                -          -       -       -          12            -             -        12

Change in unrealized gain (loss) on
   investment securities available-for-sale           -          -       -       -           -            -          (116)     (116)

Net loss                                              -          -       -       -           -       (4,039)            -    (4,039)
                                              ---------  ---------  ------  ------  ----------  -----------  ------------  --------
Balance, December 31, 1999                            -  $       -   4,243  $4,243  $   32,496  $    (5,881) $       (113) $ 30,745

Issuance of 1,411 shares of cumulative
   preferred stock, par value $1                  1,411      1,411       -       -       5,645            -             -     7,056

Issuance of common stock options in
   connection with the acquisition                    -          -       -       -         301            -             -       301

Stock options exercised                               -          -       7       7          15            -             -        22

Issuance of stock awards                              -          -       3       3           9            -             -        12

Dividends on preferred stock                          -          -       -       -           -         (170)            -      (170)

Change in unrealized gain (loss) on
   investment securities available-for-sale           -          -       -       -           -            -           117       117

Net loss                                              -          -       -       -           -       (3,971)            -    (3,971)
                                              ---------  ---------  ------  ------  ----------  -----------  ------------  --------
Balance, December 31, 2000                        1,411  $   1,411   4,253  $4,253  $   38,466  $   (10,022) $          4  $ 34,112
===================================================================================================================================
</TABLE>


See accompanying notes to consolidated financial statements


<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years ended December 31, 2000 and 1999
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                        2000             1999
                                                                                    ------------     ------------
<S>                                                                                 <C>              <C>
Cash flows from operating activities:
    Net loss                                                                        $     (3,971)    $     (4,039)
    Adjustments to reconcile net loss to net cash used in operating
      activities:
        Depreciation                                                                         600              356
        Amortization of intangibles, premiums and discounts                                  230               13
        Provision for loan losses                                                            753              514
        Loss (gain) on sale of investment securities available-for-sale                       32               (4)
        Gain on sale of premises and equipment                                               (25)               -
        Increase in accrued interest and other assets                                     (1,082)            (220)
        Increase (decrease) in accrued interest and other liabilities                      1,268             (227)
        Compensation related to stock awards                                                  12               34
                                                                                    ------------     ------------
               Net cash used in operating activities                                      (2,183)          (3,573)
                                                                                    ------------     ------------
Cash flows from investing activities:
    Purchase of premises and equipment                                                    (1,456)          (2,730)
    Proceeds from sale of investment securities available-for-sale                         2,468            7,722
    Purchase of investment securities available-for-sale                                       -             (850)
    Purchase of other investments                                                           (133)               -
    Redemptions of investment securities available-for-sale                                  421              820
    Proceeds from sale of premises and equipment                                             175                -
    Net increase in loan portfolio                                                       (48,244)         (51,840)
    Net cash acquired in merger                                                           11,090                -
                                                                                    ------------     ------------
               Net cash used in investing activities                                     (35,679)         (46,878)
                                                                                    ------------     ------------
Cash flows from financing activities:
    Net increase in deposits                                                              49,600           38,006
    Net increase (decrease) in short-term borrowings                                      (1,145)           6,000
    Dividends declared on preferred stock                                                   (170)               -
    Stock options exercised                                                                   22                -
    Reversal of accrued costs related to public offering                                       -              138
                                                                                    ------------     ------------
            Net cash provided by financing activities                                     48,307           44,144
                                                                                    ------------     ------------
Net increase (decrease) in cash and cash equivalents                                      10,445           (6,307)

Cash and cash equivalents at beginning of period                                          19,043           25,350
                                                                                    ------------     ------------
Cash and cash equivalents at end of period                                          $     29,488     $     19,043
                                                                                    ============     ============
Supplemental disclosure of cash flow information:
    Cash paid during period for interest:                                           $      4,676     $      1,259
                                                                                    ============     ============

</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:
<TABLE>
<CAPTION>
<S>                                                                                 <C>
    Fair value of assets acquired                                                   $    62,162
    Goodwill and other intangibles                                                        9,812
    Cash paid                                                                            (7,059)
    Preferred stock issued                                                               (7,056)
    Issuance of common stock options                                                       (301)
                                                                                    -----------
    Fair value of liabilities assumed                                               $    57,558
</TABLE>


See accompanying notes to consolidated financial statements.



<PAGE>


                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999

(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.  In addition to Cardinal Bank, N.A. which began  operations
       in 1998, the Company  opened the following  three  subsidiaries  in 1999,
       Cardinal Wealth Services,  Inc. an investment  subsidiary (as of February
       1, 1999),  Cardinal Bank - Manassas/Prince  William, N.A. (as of July 26,
       1999),  and  Cardinal  Bank - Dulles,  N.A.  (as of August 2,  1999).  On
       September 1, 2000,  the Company  completed  its  acquisition  of Heritage
       Bancorp,   Inc.  and  it's  banking   subsidiary,   The  Heritage   Bank,
       headquartered  in McLean,  Virginia.  The  Heritage  Bank was renamed and
       became the Company's fourth banking subsidiary, Cardinal Bank - Potomac.

(2)    Summary of Significant Accounting Policies

        (a)   Use of Estimates

              The  preparation  of  financial   statements  in  conformity  with
              accounting  principles  generally accepted in the United States of
              America requires management to make estimates and assumptions that
              affect  the  reported   amounts  of  assets  and  liabilities  and
              disclosures of contingent assets and contingent liabilities at the
              date of the  consolidated  financial  statements  and the reported
              amounts of revenues  and  expenses  during the  reporting  period.
              Actual results could differ from those estimates.

       (b)    Principles of Consolidation

              The consolidated  financial statements include the accounts of the
              Company  and  its  subsidiaries.   All  significant   intercompany
              transactions and balances have been eliminated in consolidation.

       (c)    Cash and Cash Equivalents

              For the purpose of presentation in the consolidated  statements of
              cash flows,  the Company has defined cash and cash  equivalents as
              those amounts  included in cash, due from banks, and Federal funds
              sold.

       (d)    Investment Securities

              The Company  classifies its debt and marketable  equity securities
              in one of two categories:  available-for-sale or held-to-maturity.
              Held-to-maturity  securities  are those  securities  for which the
              Company  has the ability  and intent to hold until  maturity.  All
              other securities are classified as available-for-sale. The Company
              has no trading securities.

              Held to maturity  securities are held at cost.  Available-for-sale
              securities  are  recorded  at fair  value.  Unrealized  gains  and
              losses, net of tax if applicable, on available-for-sale securities
              are reported in other comprehensive income (loss).

              Gains and losses on the sale of securities  are  determined  using
              the specific  identification method. Declines in the fair value of
              individual  held-to-maturity  and  available-for-sale   securities
              below their cost that are deemed other than  temporary are charged
              to earnings as realized losses,  resulting in the establishment of
              a new cost basis for the security.

              Premiums and discounts are recognized in interest income using the
              effective interest method over the period to maturity.  Prepayment
              of the  mortgages  securing  the  mortgage-backed


<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


              securities may affect the maturity date and yield to maturity. The
              Company uses actual principal prepayment  experience and estimates
              of future principal prepayments in calculating the yield necessary
              to apply the effective interest method.

       (e)    Loans Receivable

              Loans  receivable  that  management  has the intent and ability to
              hold for the  foreseeable  future or until maturity or pay-off are
              reported at their  outstanding  principal balance adjusted for any
              charge-offs,  and net of the  allowance  for loan  losses  and any
              deferred fees or costs.  Loan  origination fees and certain direct
              origination  costs are  capitalized and amortized as an adjustment
              of the yield of the related loan.

              Loans are placed in  nonaccrual  status when they are  past-due 90
              days as to either principal or interest or when, in the opinion of
              management,  the collection of principal and interest is in doubt.
              A loan remains in  nonaccrual  status until the loan is current as
              to payment of both principal and interest or past-due less than 90
              days, and the borrower  demonstrates the ability to pay and remain
              current. Loans are charged-off when a loan or a portion thereof is
              considered  uncollectible.  When cash payments are received,  they
              are applied to principal first, then accrued  interest.  It is the
              Company's policy not to record interest income until principal has
              become current.

              The Company determines and recognizes  impairment of certain loans
              when based on current  information and events, it is probable that
              the Company will be unable to collect all amounts due according to
              the  contractual  terms  of the  loan  agreement.  A  loan  is not
              considered  impaired  during a period of delay in  payment  if the
              Company  expects to collect all amounts  due,  including  past-due
              interest. An impaired loan is measured at the present value of its
              expected  future  cash flows  discounted  at the loan's  effective
              interest  rate, or at the loan's  observable  market price or fair
              value of the collateral if the loan is collateral dependent.

              The allowance for loan losses is increased by provisions  for loan
              losses  and  decreased  by   charge-offs   (net  of   recoveries).
              Management's  periodic evaluation of the adequacy of the allowance
              is based on the  Company's  past loan loss  experience,  known and
              inherent  risks  in the  portfolio,  adverse  situations  that may
              affect the borrower's ability to repay, the estimated value of any
              underlying  collateral,   and  current  economic  conditions.   In
              addition,  various  regulatory  agencies,  as an integral  part of
              their  examination  process,  periodically  review  the  Company's
              allowance  for loan losses.  Such agencies may require the Company
              to recognize  additions to the allowance  based on their judgments
              about  information   available  to  them  at  the  time  of  their
              examination.  Management  believes that the current  allowance for
              loan losses is adequate to absorb  losses that are inherent in the
              current loan portfolio.

       (f)    Premises and Equipment

              Land is  carried  at cost.  Premises,  furniture,  equipment,  and
              leasehold  improvements  are  carried  at cost,  less  accumulated
              depreciation and amortization. Depreciation of premises, furniture
              and  equipment  is computed  using the  straight-line  method over
              their estimated  useful lives from 3 to 10 years.  Amortization of
              leasehold  improvements is computed using the straight-line method
              over the  useful  lives of the  improvements  or the  lease  term,
              whichever is shorter.

       (g)    Goodwill and other intangibles

              Goodwill,  which represents the excess of purchase price over fair
              value of net assets  acquired,  is  amortized  on a  straight-line
              basis over 15 years.  The Company assesses the  recoverability

<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


              of this intangible  asset by determining  whether the amortization
              of the goodwill  balance over its remaining  life can be recovered
              through  undiscounted  future operating cash flows of the acquired
              operation.  If the projected undiscounted net operating cash flows
              are less than the carrying  amount, a loss is recognized to reduce
              the  carrying  amount to fair  value,  and when  appropriate,  the
              amortization period is also reduced. The other intangible includes
              a core  deposit  intangible  for the  value  placed  on long  term
              deposit relationships that exist at acquisition.  The core deposit
              intangible  is  amortized  on  a  straight-line   basis  over  the
              estimated lives of the deposit  relationships  acquired,  which is
              1.5 years.

       (h)    Investment Fee Income

              Investment fee income represents  commissions paid by customers of
              Cardinal Wealth Services, Inc. for investment  transactions.  Fees
              are recognized in income when received.

       (i)    Income Taxes

              Deferred  tax assets and  liabilities  are  reflected at currently
              enacted  income  tax rates  applicable  to the period in which the
              deferred tax assets or liabilities  are expected to be realized or
              settled. As changes in tax laws or rates are enacted, deferred tax
              assets and  liabilities  are adjusted  through the  provision  for
              income taxes.

       (j)    Earnings Per Common Share

              Basic and  diluted  loss per common  share is computed by dividing
              net loss by the weighted  average number of shares of common stock
              outstanding   during  the  periods.   Common   stock   equivalents
              outstanding  at December 31, 2000 and 1999 were  antidilutive  and
              consequently not included in the EPS calculation.

       (k)    Stock Option Plan

              The Company applies the intrinsic value-based method of accounting
              prescribed by Accounting  Principles Board ("APB") Opinion No. 25,
              Accounting   for  Stock   Issued   to   Employees,   and   related
              interpretations,  in accounting  for its fixed plan stock options.
              As such,  compensation  expense is  recorded  only if the  current
              market price of the  underlying  stock exceeded the exercise price
              on the date of grant.

       (l)    New Accounting Standards

              In June 1998,  the  Financial  Accounting  Standards  Board (FASB)
              issued  Statement No. 133,  Accounting for Derivative  Instruments
              and Hedging Activities.  Statement No. 133 established  accounting
              and reporting  standards for  derivative  instruments  and hedging
              activities and requires that the Company recognize all derivatives
              as assets  or  liabilities  on the  balance  sheet at fair  market
              value.  Statement  No. 133, as amended by  Statements  No. 137 and
              138, is effective for the Company on January 1, 2001.  The Company
              has no derivative  instruments or hedging activities and therefore
              the  adoption of  Statement  No.  133,  as  amended,  did not have
              material  impact on the Company's  financial  position,  equity or
              results of operations.

       (m)    Reclassifications

              Certain amounts for 1999 have been  reclassified to conform to the
              presentation for 2000.

<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


(3)    Acquisition

       On September 1, 2000, the Company acquired 100% of the outstanding common
       stock of Heritage  Bancorp,  Inc.,  McLean,  Virginia  ("Heritage") for a
       combination  of cash,  shares of  convertible  preferred  stock and stock
       options  totaling $14.4 million.  The transaction was accounted for using
       the purchase method of accounting.  Accordingly, results of operations of
       the Company  include only the results of Heritage from  September 1, 2000
       through  December 31, 2000. At acquisition,  the fair value of Heritage's
       assets was approximately $62.2 million, including loans of $37.9 million,
       and the  fair  value of  deposits  was  $53.9  million.  The  acquisition
       resulted in the  recording  of $9.7  million in goodwill  and $102,000 of
       core deposit intangibles.  The following table presents pro forma results
       of operations for the year ended December 31, 2000 and 1999 as though the
       Company and  Heritage  had  combined at the  beginning  of the  reporting
       period.
<TABLE>
<CAPTION>
                                                                             Pro Forma
                                                                         For the Year Ended
                                                                            December 31,
                                                                       2000                   1999
                                                                   ------------           ------------
<S>                                                                <C>                    <C>
                    Net interest income                            $  8,657,000           $  6,393,000
                    Provision for loan losses                           753,000                514,000
                    Non-interest income                               1,620,000              1,543,000
                    Non-interest expense                             14,569,000             11,465,000
                                                                   ------------           ------------
                    Net income (loss)                              $ (5,045,000)          $ (4,043,000)
                                                                   ============           ============

                    Earnings (loss) per common share:
                        Basic                                      $      (1.19)          $      (0.95)
                        Diluted                                           (1.19)                 (0.95)
</TABLE>


<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


(4)    Investment Securities and Other Investments

       The fair value and amortized cost of available-for-sale  securities as of
       December 31, 2000 and 1999 are shown below.
<TABLE>
<CAPTION>
                                                                             2000
                                                                 ----------------------------
                                                                     Fair          Amortized
       (In thousands)                                                value           cost
                                                                 ------------    ------------
<S>                                                              <C>             <C>
       Obligations of U.S. government-sponsored
           agencies and enterprises                              $      5,870    $      5,852
       Mortgage-backed securities                                       1,065           1,079
                                                                 ------------    ------------
                          Total                                  $      6,935    $      6,931
                                                                 ============    ============

                                                                             1999
                                                                 ----------------------------
                                                                     Fair          Amortized
       (In thousands)                                                value           cost
                                                                 ------------    ------------
       Obligations of U.S. government-sponsored
           agencies and enterprises                              $      3,372    $      3,499
       Mortgage-backed securities                                       1,435           1,479
                                                                 ------------    ------------
                          Total                                  $      4,807    $      4,978
                                                                 ============    ============
</TABLE>

       The fair value and  amortized  cost of  available-for-sale  securities by
       contractual  maturity  at  December  31,  2000 is shown  below.  Expected
       maturities may differ from  contractual  maturities  because many issuers
       have the  right to call or prepay  obligations  with or  without  call or
       prepayment penalties.
<TABLE>
<CAPTION>
                                                                            2000
                                                                 ----------------------------
                                                                     Fair         Amortized
       (In thousands)                                                value           cost
                                                                 ------------    ------------
<S>                                                              <C>             <C>
       Maturing within 1 year                                    $        527    $        530
       After 1 year but within 5 years                                  4,733           4,692
       After 5 years but within 10 years                                  301             307
       After 10 years                                                   1,374           1,402
                                                                 ------------    ------------
                          Total                                  $      6,935    $      6,931
                                                                 ============    ============
</TABLE>

       Gross   realized   gains   and   gross   realized   losses  on  sales  of
       available-for-sale securities were $0 and $32,000, respectively, in 2000,
       and $14,000 and $9,000, respectively, in 1999. Gross unrealized losses in
       the  available-for-sale  securities  at  December  31, 2000 and 1999 were
       $61,000 and $171,000,  respectively.  Gross  unrealized gains at December
       31, 2000 and 1999 were $65,000 and $309, respectively.

       Investment  securities  available-for-sale  that were  pledged  to secure
       short-term  borrowings  at December  31, 2000 and 1999 had fair values of
       $2,017,000 and $2,835,000, respectively. At December 31, 2000, investment
       securities  available-for-sale  that were  pledged  to secure  repurchase
       agreements were $1,418,000.  The Company had no repurchase  agreements in
       1999.

<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


       Other  investments  include  $850,000  of  Federal  Reserve  Bank  stock,
       $480,000 of Federal Home Loan Bank stock,  $63,000 of Community  Bankers'
       Bank stock and $120,000 in other  investments.  As members of the Federal
       Reserve  Bank of  Richmond  and Federal  Home Loan Bank of  Atlanta,  the
       Company's  banking  subsidiaries  are  required  to hold  stock  in these
       entities.  Stock membership in Community Bankers' Bank allows the Company
       to participate in loan purchases or sales including participations. These
       stocks are carried at cost since no active trading markets exist.

(5)    Loans Receivable

       The  loan  portfolio  at  December  31,  2000 and  1999  consists  of the
       following:
<TABLE>
<CAPTION>
       (In thousands)                                                 2000             1999
                                                                  ------------     ------------
<S>                                                               <C>              <C>
       Commercial                                                 $     49,646     $     22,558
       Real estate - commercial                                         57,083           19,780
       Real estate - construction                                        4,088              870
       Real estate - residential                                        17,729           11,851
       Home equity lines                                                14,867            3,777
       Consumer                                                         10,665            9,311
                                                                  ------------     ------------
                                                                       154,078           68,147
       Net deferred fees                                                   193               20
                                                                  ------------     ------------
               Loans receivable, net of fees                           154,271           68,167

       Allowance for loan losses                                        (1,900)            (726)
                                                                  ------------     ------------
               Loans receivable, net of fees and allowance        $    152,371     $     67,441
                                                                  ============     ============
</TABLE>

       Most of the Company's  loans,  commitments  and standby letters of credit
       have  been  granted  to  customers   located  in  the  Washington,   D.C.
       metropolitan  area. The  concentrations of credit by type of loan are set
       forth above. As a matter of regulatory restriction, the Company's banking
       subsidiaries  limit the amount of credit  extended to any single borrower
       or group of related borrowers.

       An analysis of the change in the allowance for loan losses follows:

<TABLE>
<CAPTION>
       (In thousands)                                                 2000            1999
                                                                  ------------    ------------
<S>                                                               <C>             <C>
       Balance, beginning of year                                 $        726    $        212
       Provision for loan losses                                           753             514
       Assumed allowance for loan losses from
           acquisition of Heritage                                         421               -
       Loans charged off                                                     -               -
       Recoveries                                                            -               -
                                                                  ------------    ------------
       Balance, end of year                                       $      1,900    $        726
                                                                  ============    ============
</TABLE>

       As of December  31, 2000,  the Company had one impaired  loan of $585,000
       which was on nonaccrual status. This impairment had a valuation allowance
       of $104,000. The average balance of impaired


<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


       loans was $195,000 for 2000.  The Company had no impaired  loans in 1999.
       The  Company  recorded  no  interest  income on  impaired  loans in 2000.
       Interest  income  that  would  have  been  recorded  had this  loan  been
       performing would have been $34,000.

(6)    Premises and Equipment

       Components  of premises and  equipment at December 31, 2000 and 1999 were
       as follows:
<TABLE>
<CAPTION>
                                                                      2000            1999
                                                                  ------------    ------------
<S>                                                               <C>             <C>
       Land                                                       $        197    $        197
       Building                                                            789             789
       Furniture and equipment                                           4,132           2,413
       Leasehold improvements                                            1,604           1,267
                                                                  ------------    ------------
                 Total cost                                              6,722           4,666
       Less accumulated depreciation and amortization                    1,063             463
                                                                  ------------    ------------
                 Premises and equipment, net                      $      5,659    $      4,203
                                                                  ============    ============
</TABLE>

       Depreciation  expense for the years ended  December 31, 2000 and 1999 was
       $600,000 and $356,000, respectively.

       The Company has entered into leases for office  space over various  terms
       beginning  January  1998.  The leases are subject to annual  increases as
       well as allocations of real estate taxes and certain operating expenses.

       Minimum future rental payments under the noncancelable  operating leases,
       as of  December  31,  2000  for each of the next  five  years  and in the
       aggregate, are as follows:

       Year ending December 31,                                      Amount
                                                                  ------------
       2001                                                       $  1,165,000
       2002                                                          1,203,000
       2003                                                          1,239,000
       2004                                                            959,000
       2005                                                            988,000
       Thereafter                                                    3,392,000
                                                                  ------------
                                                                  $  8,946,000
                                                                  ============

       The total  rent  expense  was  $965,000  and  $742,000  in 2000 and 1999,
       respectively.


(7)    Deposits

       Deposits consist of the following at December 31, 2000 and 1999:

<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999

<TABLE>
<CAPTION>
(In thousands)                                                        2000            1999
                                                                  ------------    ------------
<S>                                                               <C>             <C>
       Demand deposits                                            $     40,943    $     12,330
       Interest checking                                                12,069           3,891
       Money market and statement savings                               25,683          11,499
       Certificates of deposit                                          84,676          32,153
                                                                  ------------    ------------
                                                                  $    163,371    $     59,873
                                                                  ============    ============
</TABLE>

       Interest expense by deposit categories is as follows:
<TABLE>
<CAPTION>
(In thousands)                                                        2000            1999
                                                                  ------------    ------------
<S>                                                               <C>             <C>
       Interest checking                                          $        130    $         49
       Money market and statement savings                                  685             271
       Certificates of deposit                                           3,479             887
                                                                  ------------    ------------
                                                                  $      4,294    $      1,207
                                                                  ============    ============
</TABLE>

       The aggregate amount of time deposits,  each with a minimum  denomination
       of  $100,000  was   $40,459,000   and   $22,290,000  in  2000  and  1999,
       respectively.

       At December 31, 2000, the scheduled maturities of certificates of deposit
       are as follows:

<TABLE>
<CAPTION>
<S>    <C>                                                                        <C>
       (In thousands)
       2001                                                                       $     62,410
       2002                                                                             19,375
       2003                                                                              1,063
       2004                                                                                433
       2005 and thereafter                                                               1,395
                                                                                  ------------
                                                                                  $     84,676
                                                                                  ============
</TABLE>

(8)    Borrowings

       The Company has obtained and renewed  advances from the Federal Home Loan
       Bank of Atlanta of $6.0 million for the years ended December 31, 2000 and
       1999.  As of December 31, 2000,  the Company had the  following  advances
       outstanding:

<TABLE>
<CAPTION>
                                                                                    Amount
       Advance Date     Interest Rate      Term of Advance       Date Due         Outstanding
       -------------    --------------     ---------------    --------------    --------------
<S>      <C>                <C>               <C>                 <C>           <C>
         12/12/00           6.70%             3 months            03/12/01      $    3,000,000
         12/26/00           6.42%             4 months            04/26/01           3,000,000
                                                                                --------------
                                                                                $    6,000,000
                                                                                ==============
</TABLE>

       The  average  balances  of  short-term  borrowings  for the  years  ended
       December  31,  2000  and  1999  were  $6.0  million  and  $1.8   million,
       respectively,  while the  maximum  amount  outstanding  at any  month-end
       during the years ended December 31, 2000 and 1999 was $6.0 million. Total
       interest  expense on


<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


       short-term  borrowings for the years ended December 31, 2000 and 1999 was
       $398,000 and $98,000, respectively.

       Securities sold under  agreements to repurchase,  which are classified as
       secured  borrowings,  generally  mature  within one to four days from the
       transaction  date.  Securities  sold under  agreements to repurchase  are
       reflected  at  the  amount  of  cash  received  in  connection  with  the
       transaction.  The Company is required  to provide  additional  collateral
       based on the fair value of the underlying securities.

       As of  December  31,  2000,  the  Company had  repurchase  agreements  of
       $1,287,000  at a rate of 5.00%.  The average  balances of the  repurchase
       agreements  for 2000 was $929,000 and the maximum  amount  outstanding at
       any month-end during 2000 was $3,720,000.  Interest expense on repurchase
       agreements for 2000 was $48,000. The Company had no repurchase agreements
       in 1999.

(9)    Income Taxes

       The  Company  and its  subsidiaries  file  consolidated  tax returns on a
       calendar-year  basis.  The  Company  had no  provision  for  current  and
       deferred  income  taxes for the years ended  December  31, 2000 and 1999,
       respectively.

       The provision  for income taxes is  reconciled to the amount  computed by
       applying the federal  corporate tax rate to income before taxes and is as
       follows:
<TABLE>
<CAPTION>
                                                                      2000             1999
                                                                  ------------     ------------
<S>                                                               <C>              <C>
       Income tax (benefit) at federal corporate rate             $ (1,350,143)    $ (1,373,165)
       Nondeductible expenses                                           90,233           18,363
       Change in valuation allowance                                 1,259,910        1,354,802
                                                                  ------------     ------------
                                                                  $          -     $          -
                                                                  ============     ============
</TABLE>

       The tax benefits of temporary differences between the financial reporting
       basis  and  income  tax  basis of assets  and  liabilities  relate to the
       following:

<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                              2000             1999
                                                                          ------------     ------------
<S>                                                                       <C>                   <C>
       Deferred tax assets:
           Bad debts                                                      $    500,464          223,126
           Organization and other costs                                         66,632           71,438
           Net operating loss carryforwards                                  3,552,745        1,765,588
           Unrealized (gains) losses on investments available-for-sale          (1,379)          58,153
           Other                                                                 1,279            6,890
                                                                          ------------     ------------
                          Total gross deferred assets                        4,119,741        2,125,195
       Less valuation allowance                                             (3,940,171)      (2,026,756)
                                                                          ------------     ------------
                          Net deferred tax assets                              179,570           98,439
                                                                          ------------     ------------
       Deferred tax liabilities:
           Prepaid expenses                                                    (35,710)          (6,960)
           Depreciation                                                        (94,084)         (91,479)
           Loan origination costs                                              (49,776)               -
                                                                          ------------     ------------
                          Total gross deferred tax liabilities            $          -                -
                                                                          ============     ============
</TABLE>

       Deferred income taxes reflect temporary differences in the recognition of
       revenue and expenses for tax reporting and financial  statement purposes,
       principally  because certain items, such as depreciation and amortization
       are  recognized  in different  periods for  financial  reporting  and tax
       return  purposes.  A valuation  allowance in the amount of  $3,940,000 at
       December  31,  2000  and   $2,026,000  at  December  31,  1999  has  been
       established  for deferred  tax assets as  realization  is dependent  upon
       generating future taxable income.

       The Company has net operating loss  carryforwards of approximately  $10.4
       million at December 31, 2000 which are available to offset future taxable
       income.  $1.9 million of the net operating loss  carryforwards is subject
       to annual  limitation on  utilization.  The Company's net operating  loss
       carryforwards  expire as follows:  $1.5 million in 2018,  $3.6 million in
       2019, and $5.3 million in 2020.

(10)   Regulatory Matters

       The Company's banking  subsidiaries ("the Banks"), as national banks, are
       subject to the dividend  restrictions set forth by the Comptroller of the
       Currency.  Under such restrictions,  the Banks may not, without the prior
       approval of the Comptroller of the Currency,  declare dividends in excess
       of the sum of the current year's  earnings (as defined) plus the retained
       earnings  (as  defined)  from the prior two years.  At December 31, 2000,
       there were no earnings against which dividends could be paid.

       The Banks are required to maintain a minimum average reserve balance with
       the Federal Reserve Bank. The average amount of the required  reserve was
       $100,000 for 2000.  As members of the Federal  Reserve  Bank system,  the
       Banks are  required  to  subscribe  to  shares of $100 par value  Federal
       Reserve Bank stock equal to 6 percent of the Bank's  capital and surplus.
       The Banks are  required  to pay for  one-half  of the  subscription.  The
       remaining amount is subject to call when deemed necessary by the Board of
       Governors of the Federal Reserve.

       The  Federal  Deposit  Insurance  Corporation  Improvement  Act  of  1991
       ("FDICIA")  requires the  regulators to stratify  institutions  into five
       quality tiers based upon their relative capital strengths and to increase
       progressively  the degree of  regulation  over the  weaker  institutions,
       limits the pass through deposit  insurance  treatment of certain types of
       accounts,  adopts a "truth in savings" program, calls for

<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


       the adoption of risk-based premiums on deposit insurance and requires the
       Banks to observe insider credit underwriting products no less strict than
       those applied to comparable noninsider transactions.

       At  December  31,  2000,  the Company  and its  subsidiary  banks met all
       regulatory  capital  requirements.  The key  measures of capital are: (1)
       total  capital  (Tier I capital plus the  allowance for loan losses up to
       certain limitations) as a percent of total risk-weighted assets, (2) Tier
       I capital  (as  defined) as a percent of total  risk-weighted  assets (as
       defined),  and (3) Tier I capital  (as  defined)  as a  percent  of total
       assets (as defined).
<TABLE>
<CAPTION>
As of December 31, 2000                                                                      To Be Well
(In thousands)                                                                            Capitalized Under
                                                                       For Capital        Prompt Corrective
                                                     Actual         Adequacy Purposes     Action Provisions
                                               ------------------   ------------------   ------------------
                                                Amount    Ratio      Amount    Ratio      Amount     Ratio
                                               --------  --------   --------  --------   --------  --------
<S>                                            <C>          <C>     <C>       <C>        <C>       <C>
       Total capital to risk weighted assets   $ 36,002     19.94%  $ 14,443  >=  8.00%  $ 18,053  >= 10.00%
       Tier I capital to risk weighted assets    34,102     18.89%     7,221  >=  4.00%    10,832  >=  6.00%
       Tier I capital to average assets          34,102     17.39%     8,282  >=  4.00%    10,352  >=  5.00%
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1999                                                                      To Be Well
(In thousands)                                                                            Capitalized Under
                                                                       For Capital        Prompt Corrective
                                                     Actual         Adequacy Purposes     Action Provisions
                                               ------------------   ------------------   ------------------
                                                Amount    Ratio      Amount    Ratio      Amount     Ratio
                                               --------  --------   --------  --------   --------  --------
<S>                                            <C>          <C>     <C>       <C>        <C>       <C>
       Total 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%
       Tier I capital to average assets          30,858     32.55%     3,881  >=  4.00%     4,852  >=  5.00%

</TABLE>

(11)   Related-Party Transactions

       Officers,  directors,  employees and their related business interests are
       loan  customers  in the  ordinary  course of  business.  In  management's
       opinion,  these loans are made on substantially the same terms, including
       interest  rates  and  collateral,  as  those  prevailing  at the time for
       comparable  loans with other  persons and do not involve more than normal
       risk of collectibility or present other unfavorable features.

       Analysis of activity for loans to related parties is as follows:
<TABLE>
<CAPTION>
(In thousands)                                                      2000           1999
                                                                ------------   ------------
<S>                                                             <C>            <C>
       Balance, beginning of year                               $      2,876   $        996
       New loans                                                         853          2,336
       Loans paid off or paid down                                      (421)          (456)
                                                                ------------   ------------
       Balance, end of year                                     $      3,308   $      2,876
                                                                ============   ============
</TABLE>

<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


(12)   Earnings Per Common Share

       The following is the calculation of basic and diluted earnings per common
       share.  Because the Company has net losses, all stock options issued have
       an  anti-dilutive  effect and,  therefore,  have been  excluded  from the
       earnings per common share calculation.
<TABLE>
<CAPTION>
                                                                    2000           1999
                                                                ------------   ------------
<S>                                                             <C>            <C>
       Net loss to common shareholders                          $ (3,971,008)  $ (4,038,719)
       Dividends to preferred shareholders                           170,555              -
                                                                ------------   ------------
       Net loss to common shareholders                            (4,141,563)    (4,038,719)
       Weighted average shares for basic and diluted               4,246,346      4,240,819
       Basic earnings (loss) per common share                   $      (0.98)  $      (0.95)
                                                                ============   ============
       Diluted earnings (loss) per common share                 $      (0.98)  $      (0.95)
                                                                ============   ============
</TABLE>

(13)   Employee Benefit Plan

       The Company  established  a 401(k) plan in January  1998 for all eligible
       employees. The Company began to match a portion of employee contributions
       beginning  January 1, 1999. The Company's match for December 31, 2000 and
       1999 was $109,000 and $61,000, respectively.


(14)   Director and Employee Stock Compensation Plan

       In 1998, the Company adopted a stock option plan (the "Plan") pursuant to
       which the Company may grant stock options to employees and members of its
       holding  company and  subsidiaries'  Board of Directors.  The Company has
       granted  options to purchase up to 318,462  shares of common  stock as of
       December 31, 2000.

       The Company  also granted  stock awards to an employee.  The stock awards
       vest ratably over a three year period and are  contingent  upon continued
       employment  of the  individual  and  other  factors  as set  forth in the
       agreement.  As of December 31, 2000,  the Company  recognized  $12,000 in
       compensation expense related to the stock awards.

       Stock  options  are granted  with an exercise  price equal to the stock's
       fair  market  value at the date of grant.  Director  stock  options  have
       10-year terms and vest and become fully exercisable immediately. Employee
       stock  options have 10-year  terms and vest and become fully  exercisable
       after 3 years.

<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


       Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
                                                                                 Weighted
                                                                                 Average
                                                                  Number of      Exercise
                                                                   Shares         Price
                                                                ------------   ------------
<S>                                                                  <C>       <C>
       Balance at December 31, 1998                                   13,750   $       6.75
       Granted                                                       164,841   $       6.84
       Exercised                                                           -              -
       Forfeited                                                        (440)          6.38
       Expired                                                             -              -
                                                                ------------   ------------
       Balance at December 31, 1999                                  178,151   $      13.22
       Granted                                                        62,786           4.90
       Issued at acquisition                                          95,534           3.56
       Exercised                                                      (7,259)          2.92
       Forfeited                                                     (10,750)          6.21
       Expired                                                             -              -
                                                                ------------   ------------
       Balance at December 31, 2000                                  318,462   $       5.74
                                                                ============   ============
</TABLE>

       At December 31, 2000, the range of exercise  prices and  weighted-average
       remaining  contractual life of outstanding options were $2.41 - $7.50 and
       8.4 years,  respectively.  At December  31,  1999,  the range of exercise
       prices and  weighted-average  remaining  contractual  life of outstanding
       options  were $6.38 - $7.50 and 9.2 years,  respectively.  As of December
       31, 2000 and 1999, the outstanding  options  exercisable were 133,075 and
       44,800, respectively.

       At December  31, 2000 and 1999,  additional  shares  available  for grant
       under the Plan  were  74,279  and  221,849,  respectively.  The per share
       weighted-average fair value of stock options granted during 2000 and 1999
       was $2.23 and $2.74,  respectively,  on the date of grant using the Black
       Scholes  option-pricing  model  (using an  expected  volatility  over the
       expected   life  of  the  options  of  33.5  percent  and  37.5  percent,
       respectively).  As of December 31, 2000 the weighted-average  assumptions
       were as follows: expected dividend yield 0.00 percent, risk-free interest
       rate of 6.54 percent,  and an expected  life of 10 years.  As of December
       31, 1999,  the  weighted-average  assumptions  were as follows:  expected
       dividend yield 0.00 percent, risk-free interest rate of 4.94 percent, and
       an expected life of 10 years.

       The Company  applies APB Opinion No. 25 in  accounting  for its Plan and,
       accordingly,  no  compensation  cost has been  recognized  for its  stock
       options.  Had the Company determined  compensation cost based on the fair
       value at the grant date for its stock  options  under SFAS No.  123,  the
       Company's  net loss would have been  increased  to the pro forma  amounts
       indicated below:


<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


<TABLE>
<CAPTION>
                                                                   2000               1999
                                                              --------------     --------------
<S>                                                           <C>                <C>
       Net loss:
           As reported                                        $   (3,971,000)    $   (4,038,000)
           Pro forma                                              (4,111,000)        (4,490,000)
       Loss per share:
           As reported                                        $        (0.98)    $        (0.95)
           Pro forma                                                   (1.01)             (1.06)
</TABLE>

(15)   Segment Reporting

       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  commercial  loans,  real estate  loans,  and other  business
       financing  and consumer  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
       years ended December 31, 2000 and 1999 follows:

Segment Reporting as of December 31, 2000
<TABLE>
<CAPTION>
                                             Commercial     Investment                   Intersegment
                                               Banking       Advisory         Other      Elimination    Consolidated
                                            ------------   ------------   ------------   ------------   ------------
<S>                                         <C>            <C>            <C>            <C>            <C>
       Net interest income                  $  5,913,862   $          -   $    496,059   $          -   $  6,409,921
       Provision for loan losses                 752,755              -              -              -        752,755
       Non-interest income                       573,754      1,515,530         12,210         (3,553)     2,097,941
       Non-interest expense                    6,694,546      1,990,297      3,044,825         (3,553)    11,726,115
                                            ------------   ------------   ------------   ------------   ------------
       Net income (loss)                    $   (959,685)  $   (474,767)  $ (2,536,556)  $          -   $ (3,971,008)
                                            ============   ============   ============   ============   ============
       Total assets                         $193,641,120   $    175,842   $ 35,013,763   $(21,782,385)  $207,048,340


Segment Reporting as of December 31, 1999

                                             Commercial     Investment                   Intersegment
                                               Banking       Advisory         Other      Elimination    Consolidated
                                            ------------   ------------   ------------   ------------   ------------
       Net interest income                  $  2,136,974   $          -   $    887,738   $          -   $  3,024,712
       Provision for loan losses                 513,847              -              -              -        513,847
       Non-interest income                       310,441      1,017,924         (7,880)             -      1,320,485
       Non-interest expense                    4,238,767      1,612,411      2,018,891              -      7,870,069
                                            ------------   ------------   ------------   ------------   ------------
       Net income (loss)                    $ (2,305,199)  $   (594,487)  $ (1,139,033)  $          -   $ (4,038,719)
                                            ============   ============   ============   ============   ============
       Total assets                         $ 91,628,884   $    792,792   $ 31,056,219   $(26,444,928)  $ 97,032,967

</TABLE>

<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


       The Company does not have operating  segments other than those  reported.
       Parent  Company  financial  information is included in the Other category
       and represents the overhead function rather than an operating segment.

(16)   Financial Instruments with Off Balance Sheet Risk

       The Company is a party to financial  instruments  with  off-balance-sheet
       risk in the normal course of business to meet the financing  needs of its
       customers.  These  financial  instruments  include  commitments to extend
       credit  and  standby   letters  of  credit  and   financial   guarantees.
       Commitments to extend credit are agreements to lend to a customer so long
       as there is no violation of any  condition  established  in the contract.
       Commitments  usually have fixed  expiration dates up to one year or other
       termination  clauses and may require  payment of a fee. Since many of the
       commitments  are expected to expire  without being drawn upon,  the total
       commitment amounts do not necessarily represent future cash requirements.

       Standby  letters  of credit  are  conditional  commitments  issued by the
       Company to guarantee the performance of the contractual  obligations by a
       customer to a third party. The majority of these guarantees  extend until
       satisfactory  completion of the customer's contractual  obligations.  All
       standby   letters  of  credit   outstanding  at  December  31,  2000  are
       collateralized.

       Those instruments  represent  obligations of the Company to extend credit
       or  guarantee  borrowings,  therefore,  they  are  not  recorded  on  the
       consolidated  statements of financial  condition.  The rates and terms of
       these  instruments are competitive with others in the market in which the
       Company operates. Almost all of these instruments as of December 31, 2000
       have floating rates, therefore significantly mitigating the market risk.

       Those instruments may involve, to varying degrees, elements of credit and
       interest rate risk in excess of the amount recognized in the consolidated
       statements  of  financial  condition.  Credit  risk  is  defined  as  the
       possibility of sustaining a loss because the other parties to a financial
       instrument  fail to perform in accordance with the terms of the contract.
       The Company's  maximum  exposure to credit loss under standby  letters of
       credit and commitments to extend credit is represented by the contractual
       amounts of those instruments.
<TABLE>
<CAPTION>
<S>                                                                      <C>
       (In thousands)
       Financial instruments whose contract amounts represent potential
           credit risk:
              Commitments to extend credit                               $     45,739
              Standby letters of credit                                         3,215
                                                                         ============
</TABLE>

       The Company  uses the same  credit  policies  in making  commitments  and
       conditional obligations as it does for on-balance-sheet  instruments. The
       Company  evaluates  each  customer's  creditworthiness  on a case-by-case
       basis and  requires  collateral  to support  financial  instruments  when
       deemed  necessary.  The amount of collateral  obtained upon  extension of
       credit  is  based  on  management's   evaluation  of  the   counterparty.
       Collateral  held varies but may  include  deposits  held by the  Company,
       marketable securities,  accounts receivable,  inventory,  property, plant
       and equipment, and income-producing commercial properties.

<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


(17)   Disclosures of Fair Value of Financial Instruments

       The assumptions used and the estimates disclosed  represent  management's
       best judgment of appropriate valuation methods. These estimates are based
       on pertinent information available to management as of December 31, 2000.
       In certain cases,  fair values are not subject to precise  quantification
       or  verification  and may  change as  economic  and market  factors,  and
       management's evaluation of those factors change.

       Although  management  uses its best judgment in estimating the fair value
       of these  financial  instruments,  there are inherent  limitations in any
       estimation  technique.  Therefore,  these  fair value  estimates  are not
       necessarily indicative of the amounts that the Company would realize in a
       market transaction. Because of the wide range of valuation techniques and
       the numerous  estimates  which must be made,  it may be difficult to make
       reasonable comparisons of the Company's fair value information to that of
       other financial institutions. It is important that the many uncertainties
       discussed  above be  considered  when  using  the  estimated  fair  value
       disclosures  and to  realize  that  because of these  uncertainties,  the
       aggregate   fair  value   amount   should  in  no  way  be  construed  as
       representative of the underlying value of the Company.

       Fair Value of Financial Instruments

       The following  summarizes the significant  methodologies  and assumptions
       used in estimating the fair values presented in the accompanying table.

       Cash and Cash Equivalents

       The carrying amount of cash and cash  equivalents is used as a reasonable
       estimate of fair value.

       Investment Securities and Other Investments

       Fair values for  investment  securities are based on quoted market prices
       or prices quoted for similar financial instruments.  Fair value for other
       investments  is estimated as their cost since no active  trading  markets
       exist.

       Loans Receivable

       In order to determine the fair market value for loans, the loan portfolio
       was segmented  based on loan type,  credit  quality and  maturities.  For
       certain  variable  rate loans with no  significant  credit  concerns  and
       frequent repricings,  estimated fair values are based on current carrying
       amounts.  The fair values of other loans are estimated  using  discounted
       cash flow  analyses,  using interest  rates  currently  being offered for
       loans with similar terms to borrowers of similar credit quality.

       Deposits

       The fair values  disclosed for demand deposits are, by definition,  equal
       to the amount  payable on demand at the  reporting  date (that is,  their
       carrying  amounts.)  The carrying  amounts of variable  rate,  fixed-term
       money market accounts and certificates of deposit (CDs) approximate their
       fair value at the  reporting  date.  Fair values for  fixed-rate  CDs are
       estimated using a discounted cash flow  calculation that applies interest
       rates currently being offered on certificates to a schedule of aggregated
       expected monthly maturities on time deposits.

<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


       Borrowings

       The fair value of  borrowings is estimated  using a discounted  cash flow
       calculation  that  applies an  interest  rate  currently  available  with
       similar terms.

       Commitments

       The fair  value of these  financial  instruments  is based on the  credit
       quality and relationship,  fees, interest rates,  probability of funding,
       compensating   balance  and  other  convenants  or  requirements.   These
       commitments  generally have fixed  expiration  dates expiring  within one
       year. Many  commitments are expected to, and typically do, expire without
       being  drawn  upon.  The  rates  and  terms  of  these   instruments  are
       competitive with others in the market in which the Company operates.  The
       carrying  amounts  are  reasonable  estimates  of the fair value of these
       financial instruments. The carrying amounts of these instruments are zero
       at December 31, 2000.

       Accrued Interest

       The carrying amounts of accrued interest approximate their fair values.



<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


       Fair Value of Financial Instruments as of December 31, 2000 and 1999:
<TABLE>
<CAPTION>
                                                                     December 31, 2000
                                                                --------------------------
                                                                  Carrying     Estimated
       (In thousands)                                              Amount      Fair Value
                                                                ------------  ------------
<S>                                                             <C>           <C>
       Financial assets:
           Cash and cash equivalents                            $     29,488  $     29,488
           Investment securities and other investments                 8,448         8,448
           Loans receivable                                          152,371       152,462
           Accrued interest receivable                                 1,059         1,059
       Financial liabilities:
           Demand deposits                                      $     40,943  $     40,943
           Interest checking                                          12,069        12,069
           Money market and statement savings                         25,683        25,683
           Certificates of deposit                                    84,676        85,535
           Borrowings                                                  7,287         7,287
           Accrued interest payable                                       78            78
</TABLE>
<TABLE>
<CAPTION>
                                                                     December 31, 1999
                                                                --------------------------
                                                                  Carrying     Estimated
(In thousands)                                                     Amount      Fair Value
                                                                ------------  ------------
<S>                                                             <C>           <C>
       Financial assets:
           Cash and cash equivalents                            $     19,043  $     19,043
           Investment securities and other investments                 5,822         5,822
           Loans receivable                                           67,441        66,896
           Accrued interest receivable                                   351           351
       Financial liabilities:
           Demand deposits                                      $     12,330  $     12,330
           Interest checking                                           3,891         3,891
           Money market and statement savings                         11,499        11,499
           Certificates of deposit                                    32,153        32,124
           Accrued interest payable                                       48            48
</TABLE>

(18)   Parent Company -Only Financial Statements

       The  Cardinal  Financial  Corporation  (parent  company-only)   condensed
       financial statements are as follows:


<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999



              PARENT COMPANY ONLY CONDENSED STATEMENTS OF CONDITION
                           December 31, 2000 and 1999
                                 (In thousands)

<TABLE>
<CAPTION>
                          Assets                                    2000          1999
                                                                ------------  ------------
<S>                                                             <C>           <C>
Cash & cash equivalents                                         $      3,478  $      8,224
Investment securities available-for-sale                                   -         2,438
Other investments                                                         84            84
Investment in subsidiaries                                            19,341        17,676
Premises and equipment, net                                            2,365         2,532
Goodwill and other intangibles                                         9,576             -
Other assets                                                             169           102
                                                                ------------  ------------
               Total assets                                     $     35,013  $     31,056
                                                                ============  ============
           Liabilities and Shareholders' Equity

Total liabilities                                               $        901  $        311

Total shareholders' equity                                      $     34,112  $     30,745

               Total liabilities and shareholders' equity       $     35,013  $     31,056
                                                                ============  ============
</TABLE>


<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999



             PARENT COMPANY ONLY CONDENSED STATEMENTS OF OPERATIONS

                     Years Ended December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                     2000          1999
                                                                 ------------   ------------
<S>                                                              <C>            <C>
Income:
Interest income                                                  $    496,059   $    887,738
Other income                                                           12,210         (7,880)
                                                                 ------------   ------------
    Total income                                                      508,269        879,858


Expense:

General and administrative expenses                                 3,044,825      2,018,891
                                                                 ------------   ------------
    Total expense                                                   3,044,825      2,018,891

    Net loss before income taxes and equity in undistributed
          earnings of subsidiaries                               $ (2,536,556)  $ (1,139,033)

Provision for income taxes                                                  -              -

Equity in undistributed earnings of subsidiaries                   (1,434,452)    (2,899,686)
                                                                 ------------   ------------
Net loss                                                         $ (3,971,008)  $ (4,038,719)
                                                                 ------------   ------------
</TABLE>


<PAGE>

                 CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


                  PARENT COMPANY ONLY CONDENSED STATEMENT OF CASH FLOWS
                         Years ended December 31, 2000 and 1999
                                     (In thousands)
<TABLE>
<CAPTION>
                                                                                             2000             1999
                                                                                         ------------     ------------
<S>                                                                                      <C>              <C>
Cash flows from operating activities:
    Net loss                                                                             $     (3,971)    $     (4,039)
    Adjustments to reconcile net loss to net cash used in operating
      activities:
        Equity in undistributed earnings of subsidiaries                                        1,434            2,900
        Depreciation and amortization                                                             465              245
        Increase (decrease) in and other assets and liabilities                                   544             (156)
                                                                                         ------------     ------------
                Net cash used in operating activities                                          (1,528)          (1,050)
                                                                                         ------------     ------------
Cash flows from investing activities:
    Capital infusions in subsidiaries                                                            (750)         (14,028)
    Dividends from subsidiary                                                                   3,000                -
    Net change in premises and equipment                                                          (62)          (1,249)
    Proceeds from sale of and redemptions of securities                                         2,468            3,500
    Purchase of other investments                                                                   -              (84)
    Cash paid in acquisition                                                                   (7,726)               -
                                                                                         ------------     ------------
                Net cash used in investing activities                                          (3,070)         (11,861)
                                                                                         ------------     ------------
Cash flows from financing activities:
    Dividends declared on preferred stock                                                        (170)               -
    Stock options exercised                                                                        22                -
    Reversal of accrued costs related to public offering                                            -              138
                                                                                         ------------     ------------
             Net cash (used in) provided by financing activities                                 (148)             138
                                                                                         ------------     ------------
Net decrease in cash and cash equivalents                                                      (4,746)         (12,773)

Cash and cash equivalents at beginning of period                                                8,224           20,997
                                                                                         ------------     ------------
Cash and cash equivalents at end of period                                               $      3,478     $      8,224
                                                                                         ============     ============


</TABLE>



<PAGE>

                                   SIGNATURES

         In accordance  with Section 13 or 15(d) of the Securities  Exchange Act
of 1934,  as  amended,  the  registrant  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                       CARDINAL FINANCIAL CORPORATION



Date:  April 4, 2001                   By: /s/ L. Burwell Gunn, Jr.
                                           -------------------------------------
                                           L. Burwell Gunn, Jr.
                                           President and Chief Executive Officer


         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
                  Signature                                       Title                              Date
                  ---------                                       -----                              ----
<S>                                                  <C>                                        <C>

          /s/ L. Burwell Gunn, Jr.                    President and Chief Executive             April 4, 2001
-------------------------------------------               Officer and Director
            L. Burwell Gunn, Jr.                      (Principal Executive Officer)


           /s/ Joseph L. Borrelli                        Chief Financial Officer                April 4, 2001
-------------------------------------------           (Principal Financial Officer)
             Joseph L. Borrelli


            /s/ Jennifer L. Deacon                             Controller                       April 4, 2001
-------------------------------------------          (Principal Accounting Officer)
             Jennifer L. Deacon


                                                                Director                        April __, 2001
-------------------------------------------
              Robert M. Barlow


           /s/ Wayne W. Broadwater                              Director                        April 4, 2001
-------------------------------------------
             Wayne W. Broadwater


             /s/ Nancy K. Falck                                 Director                        April 4, 2001
-------------------------------------------
               Nancy K. Falck


                                                                Director                        April __, 2001
-------------------------------------------
            Harvey W. Huntzinger


<PAGE>

                  Signature                                       Title                              Date
                  ---------                                       -----                              ----


             /s/ Jones V. Isaac                                 Director                        April 4, 2001
-------------------------------------------
               Jones V. Isaac


           /s/ J. Hamilton Lambert                              Director                        April 4, 2001
-------------------------------------------
            J. Hamilton Lambert


            /s/ Harold E. Lieding                               Director                        April 4, 2001
-------------------------------------------
              Harold E. Lieding


             /s/ James D. Russo                                 Director                        April 4, 2001
-------------------------------------------
               James D. Russo


                                                                Director                        April __, 2001
-------------------------------------------
              John H. Rust, Jr.


            /s/ George P. Shafran                               Director                        April 4, 2001
-------------------------------------------
              George P. Shafran


                                                                Director                        April __, 2001
-------------------------------------------
               Kevin B. Tighe

</TABLE>


<PAGE>

                                  EXHIBIT INDEX


Number                                   Document
------                                   --------

  3.1          Articles  of  Incorporation  of Cardinal  Financial  Corporation,
               attached as Exhibit  3.1 to the  Registration  Statement  on Form
               SB-2,  Registration No.  333-52279,  filed with the Commission on
               May 8, 1998 (the "Form SB-2"), incorporated herein by reference.

  3.2          Articles  of  Amendment  to  the  Articles  of  Incorporation  of
               Cardinal Financial  Corporation,  which set forth the designation
               for the Series A Preferred Stock,  attached as Exhibit 4.2 to the
               Registration  Statement on Form 8-A,  Registration  No.  0-24457,
               filed with the  Commission  on  September  5, 2000,  incorporated
               herein by reference.

  3.3          Bylaws of Cardinal Financial Corporation, attached as Exhibit 3.2
               to the Form SB-2, incorporated herein by reference.

  4            Form of Common  Stock  Certificate,  attached as Exhibit 4 to the
               Form SB-2, incorporated herein by reference.

  10.1         Employment  Agreement,  dated as of  October  13,  1998,  between
               Cardinal  Financial  Corporation and Thomas C. Kane,  attached as
               Exhibit 10.2 to the  Company's  Annual  Report on Form 10-KSB for
               the year  ended  December  31,  1998 (the  "1998  Form  10-KSB"),
               incorporated herein by reference.

  10.2         Employment  Agreement,  dated  as of  August  31,  1998,  between
               Cardinal Financial Corporation and Greg D. Wheeless,  attached as
               Exhibit  10.7 to the 1998  Form  10-KSB,  incorporated  herein by
               reference.

  21           Subsidiaries of the Registrant.