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, 1998

                         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.)

                10641 Lee Highway
                Fairfax, Virginia                            22030
     (Address of Principal Executive Offices)             (Zip Code)

                                 (703) 934-9200
                (Issuer's Telephone Number, Including Area Code)

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

                          Common Stock, $1.00 par value
                                (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. __X__

         The issuer's  revenues for the fiscal year ended December 31, 1998 were
$1,590,608.

         The aggregate  market value of the voting stock held by  non-affiliates
(as of December 31, 1998)  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 25,
1999 was $25,489,750.

         The number of shares  outstanding of Common Stock, as of March 31, 1999
was 4,239,509.


<PAGE>


                                TABLE OF CONTENTS


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

Item 2.      Description of Property......................................................................16

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.........................................................................29

Item 8.      Changes in and Disagreements with Accountants
             on Accounting and Financial Disclosure.......................................................29


                               PART III

Item 9.      Directors, Executive Officers, Promoters and Control Persons;
             Compliance with Section 16(a) of the Exchange Act............................................29

Item 10.     Executive Compensation.......................................................................29

Item 11.     Security Ownership of Certain Beneficial Owners and Management...............................30

Item 12.     Certain Relationships and Related Transactions...............................................30

Item 13.     Exhibits, List and Reports on Form 8-K.......................................................30

</TABLE>



                                       2
<PAGE>

                                     PART I

Item 1.      Description of Business

General

         Cardinal Financial  Corporation is a bank holding company headquartered
in Fairfax,  Virginia which currently  operates  Cardinal Bank, N.A.  ("Cardinal
Bank") in  Fairfax,  Virginia  and  intends  to  organize  and  establish  three
community  banks  ("Additional  Banks") in the  Manassas/Prince  William County,
Reston/Loudoun  County  and  Alexandria/Arlington  County  markets  in  northern
Virginia.  Collectively,  these  markets are among the most affluent and fastest
growing areas in Virginia.

         The Company intends to pursue 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 includes attracting
experienced  local management  teams who will 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 will operate in a manner that provides responsive,
personalized  services.  The Company will provide credit policies and procedures
as well as centralized back office functions to provide corporate, technological
and marketing support to the Banks.

         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,  Crestar Bank,  Central Fidelity National
Bank, Signet Bank, N.A. and Jefferson  National Bank, with substantial  northern
Virginia operations were acquired by large out-of-state bank holding companies.

         In the  Company's  market  area,  the  bank  consolidations  have  been
accompanied  by the  dissolution  of local boards of directors and relocation or
termination  of  management  and  customer  service  professionals.  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 banks that
have not been acquired.  As a result of these factors,  management  believes the
Company has 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  raised  $10.57
million from the sale of Common Stock in a private  placement.  Proceeds of such
private placement were used in part for organizational and pre-opening expenses,
and proceeds totaling $8.0 million were used to capitalize  Cardinal Bank, which
opened on June 8, 1998. In the summer of 1998 the Company  raised $26.0 million,
net,  in a Public  Offering  of Common  Stock.  The  Company  intends to use the
proceeds of the Public



                                       3
<PAGE>

Offering to open the  Additional  Banks by  capitalizing  such banks and seeking
local deposits to fund loan growth. The Company anticipates the Additional Banks
will open during 1999. The order in which the  Additional  Banks open, and their
respective  opening dates, may be influenced by a variety of factors,  including
the availability of suitable sites and the receipt of regulatory approvals.

         Experienced  Board and  Management.  The  Company's  Board of Directors
consists of 10  individuals,  seven of whom formerly were founding  directors of
First Patriot Bankshares  Corporation,  the holding company for Patriot National
Bank, headquartered in Reston, Virginia. First Patriot was organized in 1990 and
in 1997 was acquired by an out-of-state bank holding company. John H. Rust, Jr.,
the Company's Chairman,  served as Chairman of First Patriot.  Company directors
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 eight other executive officers has
extensive  banking  experience in northern  Virginia.  See Item 9.,  "Directors,
Executive Officers, Promoters and Control Persons; Compliance with Section 16(a)
of the Excahnge Act" below.

Strategy of the Company

         The Company's  business strategy is to successfully  penetrate selected
northern  Virginia  markets by  operating  a  locally-oriented  organization  of
independently  managed  community  banks.  The major  elements of this  strategy
include:

o   Expand the  Company's  market  share in the central  Fairfax  County  market
    through Cardinal Bank;
o   Establish  loan  production   offices  in  the  Company's  three  additional
    identified  markets in  anticipation  of future  openings of the  Additional
    Banks;
o   Target  small  and  medium-sized   business  customers,   professionals  and
    individuals that demand the attention and service which a community-oriented
    bank is well suited to provide;
o   Deliver  a broad  array  of  modern  banking  products  and  services  using
    up-to-date  technology  and a  decentralized  operating  strategy with local
    decision-making; and
o   Maintain  centralized  support functions,  including back office operations,
    credit   policies   and   procedures,   investment   portfolio   management,
    administration,  and human  resources  and  training to  maximize  operating
    efficiencies  and  facilitate  responsiveness  to  customers.  Each  of  the
    Additional Banks will operate with a uniformity of service and products that
    will be associated with the "Cardinal" name.

         Management intends to gain market share by attracting customers through
a superior level of prompt and  personalized  banking  service.  The goal of the
Company's  organizers  and management is to create a  customer-driven  financial
institution that provides high value to its customers by delivering  customized,
quality products and services. Management believes that such an institution will
appeal to  customers  who  prefer  to  conduct  their  banking  business  with a
locally-managed  financial institution that demonstrates both a genuine interest
in their financial affairs and an ability to cater to their financial needs.

         The Company's  directors and executive officers have made a significant
investment in the Company. This financial commitment by management, coupled with
the Company's strategy, is intended to result in an organization that is focused
on creating shareholder value.


                                       4
<PAGE>

         Decentralized  Operating  Strategy.  The  foundation  of the  Company's
strategy is to operate a  multi-community  bank  organization  which  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  individuals  with  extensive  knowledge  of the local
community and the authority to make credit decisions.  The Company believes this
operating  strategy  will  enable  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 will provide 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 will be 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 which will link the Company to the Banks and facilitate data
processing,  compliance, and reporting requirements, the Company believes it has
the operational and administrative  capacity to accommodate the Additional Banks
and effectively manage the Company's growth for the foreseeable future.

Growth Strategy

         The Company intends to focus on the development of the Additional Banks
and the growth of Cardinal  Bank.  Each  Bank's  growth is expected to come from
within such Bank's primary service area through loan and deposit  business.  The
Company  will focus 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 will consist 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 has
no specific  acquisition  plans at the current time other than the establishment
of the Additional Banks.

         The Company  intends to organize  and open three  additional  community
banks in northern  Virginia and anticipates that all such banks will be national
banks.  Each of the Additional Banks will operate under the "Cardinal" name with
appropriate modifiers to denote its distinct market area.

         Management of the Company has identified  individuals who will serve as
the presidents of the Additional  Banks,  as well as additional  individuals who
will  serve on the  local  board  of  directors.  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
will  have a  significant  amount  of  decision-making  authority  and  will  be
accessible  to its  customers.  As a result  of the  consolidation  trend in the
northern Virginia area, the Company's  management believes there are significant



                                       5
<PAGE>

opportunities  to attract  experienced  bank  managers who would like to join an
institution promoting a community banking concept.

         In addition,  in  anticipation  of opening the  Additional  Banks,  the
Company has established  through its Cardinal Bank  subsidiary,  loan production
offices in Manassas and the Reston area of Fairfax County to establish  customer
relationships, brand awareness and a pipeline of loan business. The Company also
expects  to open a loan  production  office in  Alexandria,  Virginia.  The loan
production  offices are or will be staffed by personnel  who will  ultimately be
employed by the respective  Additional Banks when they open for business.  Loans
originated  in the loan  production  offices are expected to be  transferred  by
Cardinal Bank to the respective Additional Banks when they are opened.

         Each Bank will have a local board of directors  which will be comprised
of  prominent  members  of  the  community,   including   business  leaders  and
professionals.  These  directors not only will operate the Banks,  but also will
act as  ambassadors of their  respective  Banks within the community and will be
expected to promote the business  development  of each bank.  The  directors and
officers of the Company and the proposed  directors of the Additional  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
proposed  directors of each of the Additional 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
the Company's Common Stock is a highly  effective means of attracting  customers
and fostering loyalty to the Banks.

Market Areas

         The target market includes areas in and around Fairfax County including
the independent  cities of Fairfax and Alexandria,  as well as Arlington County,
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 plans to establish banking  operations in four locations in
the broad target market,  each  representing 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) Reston and Herndon  (both in western  Fairfax
County),  together with Loudoun County. As of 1997,  Fairfax County, the city of
Fairfax, Prince William County, the city of Manassas, Arlington County, the city
of  Alexandria  and Loudoun  County  each ranked in the top ten for  Virginia in
median household income, and collectively the population of the area represented
24.4% of the state's  total  population.  State income tax receipts for the area
represented  37.9% of the total  income tax  receipts  collected  by Virginia in
1995.


                                       6
<PAGE>

The Banks

         Cardinal Bank opened on June 8, 1998,  and the Company  intends to open
the  Additional  Banks  by  capitalizing  each  of  the  Additional  Banks  with
approximately $7.0 million and seeking local deposits to fund loan growth.

         The Banks  will  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  herein will  support,  new
locally operated  community  banks.  Although the Company could obtain 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 their own policies,  tailored to the local market,  is a
preferable approach.  Each Bank will provide 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  will be made by the  Banks'  local  management  and board of
directors, thereby facilitating prompt response.

         The principal business of each Bank will be 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 expected to be demand,  time,  savings
and other deposits,  repayment of loans, and borrowings.  In addition, a portion
of the net proceeds of the Public  Offering,  once contributed to the capital of
each Additional  Bank,  will be used by each Additional Bank to fund loans.  The
principal source of income for each Bank is expected to be interest collected on
loans and other investments. The principal expenses of each Bank are expected to
be interest paid on savings and other deposits,  employee  compensation,  office
expenses, and other overhead expenses. Initially, the Banks will not 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 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.  This is 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.



                                       7
<PAGE>

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 further 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 intends to focus its marketing efforts
on attracting  small and  medium-sized  businesses  and  professionals,  such as
physicians,  accountants and attorneys.  Because the Company intends to focus on
businesses and professionals,  management believes that the majority of its loan
portfolio will be 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,  management  also  anticipates  that it will  attract a  significant
amount of professional and consumer  business.  Management  expects that many of
its customers  will be the principals of the small and  medium-sized  businesses
for  whom the  Banks  will  provide  banking  services.  Management  intends  to
emphasize  "relationship  banking" in order that each customer will 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  further  expected  that most of the  Company's  business  will be  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.

Products and Services

         The  Company  intends to offer a broad  array of banking  products  and
services  to its  customers.  The  proceeds  from the  Offering  will enable the
Company to proceed to organize the  Additional  Banks.  Cardinal Bank  currently
provides,  and the  Additional  Banks are  expected  to  provide,  products  and
services that are substantially similar to those set forth below.

         Loans.  Through each Bank, the Company intends to offer 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.  The Company  expects that  commercial  loans,  commercial
mortgage loans,  residential mortgage loans,  consumer loans and credit card and
other  loans  will  account  for  approximately   35%,  20%,  30%,  8%  and  7%,
respectively,  of its loan  portfolio.  The Company  believes  that this initial
division  reflects  the current  credit  demands of its  markets and  provides a
sufficient amount of 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 will oversee credit  operations  while still granting local authority to
each Bank. The Company's chief credit officer will be primarily  responsible for
maintaining  a quality loan  portfolio and  developing a strong  credit  culture
throughout the entire organization. The chief credit officer will be responsible
for  developing  and  updating  the  credit  policies  and  procedures  for  the
organization.  The Board of Directors of any 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.



                                       8
<PAGE>

         Credit quality will be controlled by the chief credit  officer  through
compliance  with the Company's  credit  policies and  procedures.  The Company's
risk-decision  process  will be  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 will consist of specific  authorities  granted to the lending  officers.
Loans  exceeding a  particular  lending  officer's  level of  authority  will be
reviewed and considered for approval by an officers' loan committee and, then, a
Bank's  Board of  Directors.  In addition,  the chief  credit  officer will work
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  will  generally  limit the
concentration  of credit risk by a particular Bank in any loan or group of loans
to 20% 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 will establish limits on the total amount of that Bank's
outstanding loans to one borrower, which will be set below legal lending limits.
Any loan that a Bank proposes to make that will exceed such  established  limits
will require the prior approval of the Company's Board of Directors.

         Commercial  Loans.  The  Company  expects to make  commercial  loans to
qualified  businesses in its market area. The Company's  commercial lending will
consist  primarily  of  commercial  and  industrial  loans for the  financing of
accounts receivable,  inventory, property, plant and equipment. The Company also
expects to offer Small Business  Administration  guaranteed  loans ("SBA loans")
and factoring 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  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 will
actively monitor certain measures of the borrower,  including advance rate, cash
flow, collateral value and other appropriate credit factors.

         Commercial  Mortgage  Loans.  The  Company  also  expects to  originate
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.  The Company  expects these loans to 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



                                       9
<PAGE>

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.

         The Company expects that loan-to-value  ratios for commercial  mortgage
loans will not exceed 75%,  with higher  ratios  permitted  if the  borrower has
unusually  strong  general  liquidity,  net worth and cash  flow.  Loan-to-value
ratios will not exceed 85% or, if a SBA guaranty has been obtained, 90%.

         Residential  Mortgage  Loans.  The Company expects that its residential
mortgage  loans will 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. Management expects that
the Company will make mortgage  loans with a variety of terms,  including  fixed
and  floating  or variable  rates and a variety of  maturities.  Maturities  for
construction  loans will 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 employment and other income and
are secured by real estate whose value tends to be easily  ascertainable.  These
loans  will be made  consistent  with the  Company's  appraisal  policy and real
estate  lending  policy,  which will  detail  maximum  loan-to-value  ratios and
maturities.  Loans for  owner-occupied  property  will  generally be 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 will generally not exceed 75%. If the loan-to-value ratio
exceeds 90% for residential  mortgage loans, the Company will obtain appropriate
credit  enhancement  in  the  form  of  either  mortgage  insurance  or  readily
marketable collateral.

         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.

         Consumer  Loans.  The  Company  expects  that its  consumer  loans will
consist primarily of installment  loans to individuals for personal,  family and
household purposes.  The specific types of consumer loans expected to be 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



                                       10
<PAGE>

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 which can be recovered on
such loans.  Such loans 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 will require 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 will require that its banking officers
maintain an appropriate margin between the loan amount and collateral value. The
Company  expects that many of its consumer  loans will be made to the principals
of the small and  medium-sized  businesses  for whom the Banks  provide  banking
services.

         Credit Card and Other  Loans.  The Company also expects to issue credit
cards to certain of its  customers.  In determining to whom it will issue credit
cards,  the Company  intends to evaluate the  borrower's  level and stability of
income, past credit history and other factors.  Finally,  the Company expects to
make additional loans that may not be classified in one of the above categories.
In making such loans, the Company will attempt to ensure that the borrower meets
the Company's credit quality standards.

         Deposits. Management intends to offer 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.  Management anticipates that the primary sources
of deposits will be small and medium-sized  businesses and individuals within an
identified  market. In each identified  market,  senior management will have the
authority  to  set  rates  within  specified   parameters  in  order  to  remain
competitive with other financial  institutions.  All deposits will be insured by
the FDIC up to the maximum  amount  permitted  by law.  The  Company  expects to
implement a service charge fee schedule,  which will be  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 intends to offer specialized
products and services to its customers, such as lock boxes, travelers checks and
safe deposit services.

         Courier Services.  The Company expects to offer courier services to its
business  customers.   Courier  services  permit  the  Company  to  provide  the
convenience  and  personalized  service  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  customers  to  access  detailed  account  information,  execute
transactions  and pay  bills  electronically.  Management  believes  that  these
services are particularly  attractive for its customers,  as it will enable them
to conduct  their  banking  business and monitor their bank accounts from remote
locations.  Management  of the Company  believes



                                       11
<PAGE>

that  telephone  and internet  banking will assist the Banks in  attracting  and
retaining  customers and will also  encourage  its  customers to maintain  their
total banking relationships with the Company.

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

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

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 which  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,  as a consequence of legislation recently enacted by the
United States Congress,  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 will face  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
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. Currently there
are 27 other  commercial  banks,  7 savings  institutions,  and 30 credit unions
operating in the Company's targeted market areas.

Employees

         At December 31, 1998, the Company had 31 full time  employees,  none of
which is represented by a union or covered by a collective bargaining agreement.
Management considers employee relations to be good.  


                                       12
<PAGE>

Government Supervision and Regulation

         The  following  discussion  is a  summary  of the  principal  laws  and
regulations that comprise the regulatory framework applicable to the Company and
the  Banks.  Other  laws and  regulations  that  govern  various  aspects of the
operations  of banks  and  bank  holding  companies  are not  described  herein,
although  violations of such laws and  regulations  could result in  supervisory
enforcement action against the Company or a Bank. The following descriptions, as
well as  descriptions  of  laws  and  regulations  contained  elsewhere  in this
Prospectus,  summarize the material terms of the principal laws and  regulations
and are  qualified  in  their  entirety  by  reference  to  applicable  laws and
regulations.

         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 Federal Reserve. 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
additional  bank or merge or  consolidate  with  another  bank  holding  company
without  the prior  approval  of the Federal  Reserve.  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 a national bank, Cardinal Bank is subject to regulation, supervision
and  examination by the Office of the Comptroller of the Currency  ("OCC").  The
Additional  Banks also are expected to be national banks,  supervised by the OCC
in the same fashion and to the same extent as Cardinal  Bank.  Cardinal  Bank is
also subject to regulation, supervision and examination by the FDIC. Federal law
also governs the activities in which the Banks may engage,  the investments they
may make and  limits  the  aggregate  amount of loans that may be granted to one
borrower to 15% of a bank's capital and surplus. Various consumer and compliance
laws and regulations also affect the Banks' operations.

         The earnings of the Banks,  and  therefore the earnings of the Company,
are  affected  by  general  economic  conditions,  management  policies  and the
legislative  and  governmental   actions  of  various  regulatory   authorities,
including those referred to above.

         The OCC will conduct regular examinations of the Banks,  reviewing such
matters as the adequacy of loan loss reserves, quality of loans and investments,
management  practices,   compliance  with  laws,  and  other  aspects  of  their
operations.  In addition to these regular  examinations,  the Banks must furnish
the OCC with periodic  reports  containing a full and accurate  statement of its
affairs. Supervision,  regulation and examination of banks by these agencies are
intended primarily for the protection of depositors rather than shareholders.

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

         The FDIC has  implemented  a risk-based  deposit  insurance  assessment
system  under which the  assessment  rate for an insured  institutions  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",  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 .30% of domestic  deposits.  These
rate schedules are subject to future  adjustments by the FDIC. In addition,  the



                                       13
<PAGE>

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 ("SAIF") insured and BIF-insured  deposits pay a pro rata portion
of the  interest  due on the  obligations  issued by the  Financing  Corporation
("FICO"),  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  aware  of  no  existing
circumstances  that could  result in  termination  of  Cardinal  Bank's  deposit
insurance.

         Capital.  The OCC and the Federal  Reserve have issued  risk-based  and
leverage capital guidelines  applicable to banking organizations they supervise.
Under the  risk-based  capital  requirements,  the Company and Cardinal Bank 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 is to 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" and, together with Tier 1 capital, "total capital").

         In  addition,  each of the  Federal  banking  regulatory  agencies  has
established   minimum   leverage   capital   ratio   requirements   for  banking
organizations. These requirements provide for a minimum leverage ratio of Tier 1
capital  to  adjusted  average  quarterly  assets  equal to 3% for bank  holding
companies  that are  rated a  composite  "1" and 4% for all other  bank  holding
companies.  Bank holding  companies are expected to maintain higher than minimum
capital ratios if they have  supervisory,  financial,  operational or managerial
weaknesses, or if they are anticipating or experiencing significant growth.

         The  risk-based  capital  standards of the OCC and the Federal  Reserve
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 bank's capital adequacy.  The OCC and the Federal Reserve also have
recently issued  additional  capital  guidelines for bank holding companies that
engage in certain trading activities.

         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  the
depository  institution  becomes  in danger of  default  or is in  default.  For
example,  under a policy of the Federal  Reserve  with  respect to bank  holding
company  operations,  a bank holding company is required to serve as a source of
financial  strength  to its



                                       14
<PAGE>

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 BIF as a result  of the  default  of a  commonly
controlled insured depository  institution or for any assistance provided by the
FDIC to a  commonly  controlled  insured  depository  institution  in  danger of
default.  The FDIC may decline to enforce the  cross-guarantee  provision  if it
determines  that a waiver is in the best  interests of the BIF. The FDIC's claim
for  reimbursement  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  holders of  subordinated  debt (other than
affiliates) of the commonly controlled insured depository institution.

         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 Federal  Deposit  Insurance Act requires that the
federal banking  agencies  establish five capital levels for insured  depository
institutions - "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly  undercapitalized,"  and "critically  undercapitalized."  It also
requires or permits such agencies to take certain  supervisory actions should an
insured   institution's   capital  level  fall.  For  example,   an  "adequately
capitalized"  institution is restricted  from accepting  brokered  deposits.  An
"undercapitalized" or "significantly  undercapitalized" institution must develop
a  capital  restoration  plan  and is  subject  to a  number  of  mandatory  and
discretionary  supervisory actions. These powers and authorities are in addition
to  the  traditional  powers  of the  Federal  banking  agencies  to  deal  with
undercapitalized institutions.

         Federal regulatory  authorities also have broad enforcement powers over
the Company and the Banks,  including  the power to impose fines and other civil
and  criminal  penalties,  and to appoint a receiver  in order to  conserve  the
assets  of any  such  institution  for  the  benefit  of  depositors  and  other
creditors.

         Payment of  Dividends.  The  Company  is a legal  entity  separate  and
distinct  from the Banks.  Virtually  all of the  revenues of the  Company  will
result from dividends paid to the Company by the Banks.  Under OCC regulations a
national  bank may not  declare a dividend in excess of its  undivided  profits,
which will mean that each Bank must  recover any start-up  losses  before it may
pay a dividend to the Company.  Additionally,  a national bank may not 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
retained net income of the two preceding years,  unless the dividend is approved
by the OCC. A national bank may not declare or pay any dividend if, after making
the  dividend,  the  national  bank would be  "undercapitalized,"  as defined in
regulations  of the OCC.  The  Company  is  subject to state laws that limit the
amount of dividends  it can pay. In addition,  the Company is subject to various
general  regulatory  policies  relating to the payment of  dividends,  including
requirements to maintain adequate capital above regulatory minimums. The Federal
Reserve has indicated that banking  organizations should generally pay dividends
only if (1) the organization's net income available to common  shareholders over
the past  year has been  sufficient  to fund  fully  the  dividends  and (2) the
prospective   rate  of   earnings   retention   appears   consistent   with  the
organization's capital needs, asset quality and overall financial condition. The
Company expects that these laws,  regulations or policies will materially impact
the ability of the Banks and,  therefore,  the Company to pay  dividends  in the
early years of operations.

         Community Reinvestment.  The requirements of the Community Reinvestment
Act  ("CRA")  are   applicable  to  the  Bank.  The  CRA  imposes  on  financial
institutions an affirmative  and ongoing  obligation to meet the credit needs of
their  local  communities,  including  low and  moderate  income  neighborhoods,
consistent with the safe and sound operation of those institutions.  A financial
institution's  efforts in



                                       15
<PAGE>

meeting   community  credit  needs  currently  are  evaluated  as  part  of  the
examination  process pursuant to twelve assessment  factors.  These factors also
are considered in evaluating  mergers,  acquisitions  and applications to open a
branch or facility.

         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 is able to
merge  with a bank  headquartered  in another  state,  as long as neither of the
states has opted out of such  interstate  merger  authority  prior to such date.
States are  authorized  to enact laws  permitting  such  interstate  bank merger
transactions  prior to June 1, 1997, as well as  authorizing a bank to establish
"de novo" interstate branches.  Virginia enacted early "opt in" laws, permitting
interstate bank merger  transactions.  Once 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.

         Economic  and  Monetary  Polices.  The  operations  of the  Company are
affected not only by general economic  conditions,  but also by the economic and
monetary policies of various regulatory authorities.  In particular, the Federal
Reserve regulates money, credit and interest rates in order to influence general
economic  conditions.  These  policies have a  significant  influence on overall
growth and  distribution of loans,  investments and deposits and affect interest
rates charged on loans or paid for time and savings  deposits.  Federal  Reserve
monetary  policies  have had a significant  effect on the  operating  results of
commercial  banks in the  past  and are  expected  to  continue  to do so in the
future.


Item 2.      Description of Property

         The Company's headquarters is at 10555 Main Street,  Fairfax,  Virginia
and Cardinal  Bank's  office is at 10641 Lee  Highway,  Fairfax,  Virginia.  The
Company's  headquarters  occupies  10,000  square feet and are held under a five
year lease. Cardinal Bank's premises are held under a 10 year lease, which began
January 1, 1998.  The building,  which has been  substantially  renovated,  is a
three-story  brick  structure,  containing 9,000 square feet. It has five teller
stations,  one drive-through  window and a walk-up ATM and night depository.  In
1999 the Company leased  premises for the Reston and Alexandria  loan production
offices, consisting of 6,625 and 5,256 square feet, respectively.  These offices
will serve as the banking  offices of the Company's bank  subsidiaries  in those
localities.


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 transition  period covered by
this report.



                                       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, 1998
     3rd quarter...............................        $10.75            $7.25
     4th quarter...............................          8.41             6.13

_______________________
(1)      The Company's  Common Stock began trading on the Nasdaq SmallCap Market
         on July 17, 1998,  at an initial  public  offering  price of $10.00 per
         share. Prior to that date, there was no established  trading market for
         the Common Stock.

         As of March 26, 1999,  there were  approximately  253 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.


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

Forward Looking Statements

         This report contains certain forward-looking  statements,  which can be
identified by the use of  forward-looking  terminology  such as "may, " "will, "
"expect, " "anticipate,  " "estimate,  " or "continue, " or the negative thereof
or other  comparable  terminology.  The Company  cautions  readers  that certain
important factors, including, among others, problems with technology utilized by
the Company as described  below, in some cases have affected,  and in the future
could affect,  the Company's actual results and could cause the Company's actual
results in 1998 and beyond to differ  materially  from  those  expressed  in any
forward-looking  statements  in this  report.  Reference  is  made to the  "Risk
Factors"  section  of the  Prospectus  dated  July 17,  1998 that is part of the
Company's  Registration  Statement on Form SB-2 (Registration No. 333-52279) and
that was filed with the  Securities  and  Exchange  Commission  on July 20, 1998
pursuant to Rule 424(b)  under the  Securities  Act of 1933,  as amended,  for a
description of certain of these important factors.

General

         Cardinal  Financial  Corporation  (the  Company)  is the  bank  holding
company for Cardinal Bank, N.A. (the Bank) in Fairfax,  Virginia. The Company is
in a development stage having opened its first bank on June 8, 1998.

         The Company  funded its start-up  and  organizational  costs  through a
private  offering of 1,409,509  shares of its common stock,  par value $1.00 per
share,  in the fourth  quarter of 1997 and the first quarter of 1998.  The total
proceeds to the Company in the private  offering  were $10.6  million,  of which
$8.0 million was used to  capitalize  the Bank.  The Company  raised  additional
capital  for general  corporate  purposes  and to  capitalize  three  additional
separately  chartered banks in three distinct market areas in northern Virginia.
In July 1998,  the  Company  through its initial  public  offering of  2,830,000
shares of common stock, received net proceeds of $26.0 million.

         The  following  presents  management's  discussion  and analysis of the
consolidated financial condition and results of operation of the Company for the
year ended  December  31,1998 and for the period from November 24, 1997 (date of
inception) to December 31, 1997.  Principal banking operations commenced on June
8, 1998 and parent company operations began November 24, 1997.

                                       17
<PAGE>

         This  discussion  should be read in conjunction  with the  accompanying
consolidated financial statements and supplemental financial information.

Earnings Overview

         Consolidated  net loss for 1998 was  $1,696,345  or $0.64  per  diluted
share  compared to a net loss of  $145,178  or $0.12 per diluted  share in 1997.
Results for 1998 include the opening of the Bank, the Company's sole subsidiary.

         The key  profitability  measures of return on average  assets (ROA) and
return on average  shareholders' equity (ROE) for 1998 and 1997, for comparative
purposes,  are not meaningful due to the Company's short period of operations in
1997.  ROA for 1998 was -5.37%  and ROE for 1998 was  -7.45%.  These  ratios for
1998, along with other selected  earnings and balance sheet  information for the
year ended  December 31, 1998 and for the period from November 24, 1997 (date of
inception) to December 31, 1997 are included in Table 1.

Net Interest Income and Net Interest Margin

         The fundamental source of Cardinal's  revenue,  net interest income, is
defined as the  difference  between  income on interest  earning  assets and the
interest bearing liabilities supporting those assets. The significant categories
of  earning  assets  are  loans  and   securities,   while  deposits   represent
interest-bearing  liabilities.  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
operation.  The year ended  December 31, 1998 includes a full year of operations
for the Company and seven months of  operations  for the Bank.  Average  earning
assets  increased in 1998 to $26.9 million from  $204,000 in 1997.  The increase
was due to the  investment  of the  private  and public  offering  proceeds  and
consumer and commercial deposits into loans and money market instruments.

         The net interest margin is calculated as net interest income divided by
average  earning  assets,  and represents the Company's net yield on its earning
assets.  A comparison of the 1998 net interest  margin of 4.66% and the 1997 net
interest  margin of 3.45% is not  meaningful  given the  start-up  nature of the
Company's  operation.  Table 2 reflects the  components  of interest  income and
interest expense and their applicable yields and costs.

Non-Interest Income

         Total  non-interest  income or fee  income  was  $34,000  in 1998.  The
components of non-interest  income include service charges on deposit  accounts,
loan  service  charges  and  securities  gains and  losses.  The Company did not
generate non-interest income during its period of operation in 1997.

Non-Interest Expense

         Non-interest expense, also called operating expenses,  was $2.7 million
in 1998 compared to $149,000 in 1997.  Again,  it is important to note that when
comparing  1998 to 1997 the period of  operation in 1997 covers only five weeks.
The   components  of   non-interest   expense   include   salary  and  benefits,
depreciation,  occupancy,  professional fees and other operating  expenses.  The
significant  increase  in  expenses  in 1998  reflect  bringing  staffing  up to
required  levels as well as the cost  indicative  of operating  the Bank and the
Company. Footnote 16 provides additional detail of other operating expense.

                                       18
<PAGE>

Income Taxes

         The  Company  has not  incurred  any  income tax  liability  due to the
recognition of net losses in 1998 and 1997. The ability to utilize net operating
loss carryforwards will be dependent on the Company's ability to generate future
earnings.  Footnote  9  provides  additional  information  with  respect  to the
deferred tax accounts and the net operating loss carryforward.

Liquidity Management

         The  objective  of  liquidity  management  is to ensure the  continuous
availability  of  funds  to  meet  the  demands  of  depositors,  investors  and
borrowers.  Liquidity is provided through  investment  securities  available for
sale,  money  market   investments  and  maturing  loans.  The   Asset/Liability
Committee,  a committee  consisting of senior management that meets regularly is
responsible   for  managing   liquidity  needs  which  takes  into  account  the
marketability of assets, the sources,  stability and availability of funding and
the level of unfunded commitments.

Interest Rate Sensitivity

         An important element of asset/liability management is the monitoring of
the Company's  sensitivity to interest rate movements.  The income stream of the
Company is subject to risk  resulting  from  interest rate  fluctuations  to the
extent  there is a  difference  between  the  amount of the  Company's  interest
earning assets and the amount of interest bearing  liabilities that are prepaid,
mature or reprice in  specified  periods.  The 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 assets and liabilities.

         The  Company  uses a number of tools to  measure  interest  rate  risk,
including  simulating  net interest  income under  various  rate  scenarios  and
monitoring the difference or gap between rate sensitive  assets and  liabilities
over various time periods.

         The data in Table 3  reflects  re-pricing  or  expected  maturities  of
various  assets and  liabilities  at December 31, 1998.  This gap represents the
difference  between interest sensitive assets and liabilities in a specific time
interval. The interest sensitivity gap analysis presents a position that existed
at one  particular  point in time and assumes that assets and  liabilities  with
similar  re-pricing  characteristics  will  re-price at the same time and to the
same degree.  Given the Company's short history and anticipated  growth over the
next six to twelve months,  management has maintained a high positive short-term
gap.

Capital

         At December 31, 1998,  shareholders'  equity was $34.7 million, up from
$8.6  million at December 31,  1997.  The  increase in total  capital in 1998 is
attributable  to the receipt of net proceeds from both the private  offering and
the initial public  offering,  reduced by accumulated  losses.  The Consolidated
Statements of Changes in  Shareholders'  Equity  highlight the changes in equity
since November 24, 1997.

         Capital adequacy is an important  indicator 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.

                                       19
<PAGE>

         Banking  regulators  define  minimum  capital  ratios for bank  holding
companies and their banking subsidiaries.  Based on the risk-based capital rules
and  definitions  prescribed by the banking  regulators,  an  institution  whose
capital ratios fall below pre-defined minimum levels,  would become subject to a
series of restrictive  regulatory  actions.  Note 10- Regulatory  Matters in the
accompanying   consolidated  financial  statements  shows  the  minimum  capital
requirements and the Bank's capital position as of December 31, 1998.

Investment Securities

         The  investment  portfolio  of  the  Company  has  been  designated  as
available  for sale. It consists of debt  securities  and is used as a source of
income and liquidity.  Table 4 shows information  pertaining to the composition,
yields and  maturities  of the  investment  portfolio  as of  December  31,1998.
Corporate policy calls for all securities purchased for the investment portfolio
to be rated investment grade by Moody's Investor Service or Standard & Poors. At
December 31, 1998, the Company was in compliance with these guidelines.

Lending

         The Company's loan  portfolio is segmented  into two broad  categories,
commercial  loans  and  consumer  loans.   Commercial  loans  are  comprised  of
short-term lines of credit, term loans, or mortgage financing. Construction loan
funds are used by borrowers to build or develop real estate properties. Consumer
loans  are  comprised  of  residential  real  estate  mortgage,  bank  card  and
installment  loans.  Table 5 shows the  various  loan  categories  and  balances
outstanding  as of December  31,  1998.  There were no loans  outstanding  as of
December 31, 1997.

Credit Risk Management and Asset Quality

         The Company has comprehensive  policies and procedures which cover both
commercial and consumer loan  origination  and management of risk. All loans are
underwritten  in a manner  that  focuses on the  borrowers  ability to pay.  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.  At December  31, 1998,  the
Company did not have any non-performing loans.

Provision and Allowance for Loan Losses

         Management's  policy is to maintain the  allowance for loan losses at a
level  sufficient to absorb the estimated 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,  loan  performance  measures,  historical  trends  and
specific conditions of the individual borrower.

         The allowance  for loan losses at December 31, 1998 was  $212,460.  The
provision  for loan  loss was also  $212,460  since the  Company  did not have a
provision or loan loss allowance in 1997. In addition, there were no charge-offs
in 1998.  Table 6 reflects the components of the loan loss allowance and Table 7
reflects the reserve allocation.

                                       20
<PAGE>

Table 1

                  Cardinal Financial Corporation and Subsidiary
                         Selected Financial Information
                 (In thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                                   For the period from
                                                For the year ended        November 24, 1997 (date of inception)
                                                 December 31,1998                 to December 31, 1997
                                              ----------------------           -------------------------- 
<S>                                                <C>                               <C>
Results of Operations                            
Income from earning assets                                   $ 1,557                               $ 7
Net interest income                                            1,216                                 4
Provision for loan losses                                        212                                 -
Net Loss                                                      (1,696)                             (145)

Loss Per Share
Basic & Diluted:
     Net Income                                              $ (0.64)                          $ (0.12)
     Average shares outstanding                            2,646,036                         1,174,988
Dividends paid per common share                                  $ -                               $ -
=======================================================================================================
Financial Condition
Total assets                                                $ 57,295                           $ 8,796
Earning assets                                                54,317                             4,210
Loans, net                                                    16,115                                 -
Deposits                                                      21,867                                 -
Total equity                                                  34,728                             8,551
=======================================================================================================
Selected Ratios
Return on average assets                                      -5.37%                             N/M
Return on average equity                                      -7.45%                             N/M
Total equity to total assets                                  60.61%                             97.22%
Net interest margin                                            4.66%                             N/A
Net interest spread                                            1.09%                             N/A
Based on averages:
     Total equity to total assets                             72.09%                             N/M
     Total loans to total equity                               9.53%                                 -
=======================================================================================================
</TABLE>


                                       21
<PAGE>

Table 2

                  CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY
                 RATE AND VOLUME ANALYSIS (TAX EQUIVALENT BASIS)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                                                      Variance
    Average Volume         Average Rate                                            Interest         Increase      Attributable to
    1998       1997       1998      1997                                        1998      1997      (Decrease)     Rate     Volume
---------------------- ---------------------                                 --------------------  ---------------------------------
<S>            <C>      <C>        <C>                                      <C>        <C>         <C>         <C>        <C>
                                               Interest Income
                                               Loans:
      $ 529       $ -      10.07%     0.00%        Commercial                     $ 53       $ -         $ 53        $ 53       $ -
        287         -       8.12%     0.00%        Real estate - commercial         23         -           23          23         -
         63         -       8.05%     0.00%        Real estate - construction        5         -            5           5         -
        768         -       7.49%     0.00%        Real estate - residential        58         -           58          58         -
        155         -      10.21%     0.00%        Home equity lines                16         -           16          16         -
        168         -      13.93%     0.00%        Consumer                         23         -           23          23         -
------------------------------------------------------------------------------------------------------------------------------------
      1,970         -       9.06%     0.00%                        Total loans     178         -          178         178         -

      5,617         -       5.63%     0.00%    Investment Securities - AFS         316         -          316         316         -

        764       204       4.17%     3.45%    Money Market Accounts                32         7           25           5        19

     18,574         -       5.55%     0.00%    Federal funds sold                1,031         -        1,031       1,031         -

------------------------------------------------------------------------------------------------------------------------------------
   $ 26,925     $ 204       5.78%     3.45%    Total interest-earning assets   $ 1,557       $ 7      $ 1,550     $ 1,531      $ 19
====================================================================================================================================

                                               Interest Expense
                                               Deposits:
        535         -       2.07%     0.00%        Interest Checking                11         -           11          11         -
      2,316         -       3.71%     0.00%        Money Markets                    86         -           86          86         -
         62         -       2.95%     0.00%        Statement Savings                 2         -            2           2         -
      4,336         -       5.56%     0.00%        Certificates of Deposit         241         -          241         241         -
------------------------------------------------------------------------------------------------------------------------------------
      7,249         -       4.69%     0.00%    Total interest-bearing liabilities  340         -          340         340         -

     23,045       713                          Other Sources - Net
------------------------------------------------------------------------------------------------------------------------------------
     30,294       713       1.12%     0.00%    Total Sources of Funds              340         -          340         340         -
------------------------------------------------------------------------------------------------------------------------------------

   $ 19,676     $ 204       4.66%     3.45%    Net Interest Margin             $ 1,217       $ 7      $ 1,210     $ 1,191      $ 19
====================================================================================================================================
</TABLE>


                                       22
<PAGE>

Table 3

                     Interest Rate Sensitivity Gap Analysis
                             As of December 31, 1998
                                 (In thousands)

<TABLE>
<CAPTION>
                                                 -----------------------------------------------------------------------------------
                                                        1-90         91-180       181-365         1-5         Over 5
                                                        Days          Days          Days         Years         Years        TOTAL
------------------------------------------------------------------------------------------------------------------------------------
                     ASSETS
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>          <C>           <C>          <C>          <C>    
Investment Securities
U.S. Government agency securities                          300             -             -         9,005        1,001      $ 10,306
Mortgage-backed securities                                   -             -             -           440        2,731         3,171
Other securities                                             -             -             -             -          220           220
------------------------------------------------------------------------------------------------------------------------------------
Total Investment Securities                                300             -             -         9,445        3,952        13,697
------------------------------------------------------------------------------------------------------------------------------------
Federal Funds Sold                                      24,277                                                               24,277
------------------------------------------------------------------------------------------------------------------------------------
Loans
Variable rate loans                                      5,514             -         1,212         6,745            -        13,471
Fixed rate loans                                           225             -            58         2,246          343         2,872
------------------------------------------------------------------------------------------------------------------------------------
Total Gross Loans                                        5,739             -         1,270         8,991          343        16,343
------------------------------------------------------------------------------------------------------------------------------------
Total Earning Assets                                    30,316             -         1,270        18,436        4,295      $ 54,317
------------------------------------------------------------------------------------------------------------------------------------
Cumulative Rate Sensitive Assets                        30,316        30,316        31,586        50,022       54,317
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
------------------------------------------------------------------------------------------------------------------------------------
Deposits
Demand deposits                                          5,501             -             -             -            -       $ 5,501
Interest checking                                        1,746             -             -             -            -         1,746
Statement savings                                           88             -             -             -            -            88
Money market accounts                                    3,383             -             -             -            -         3,383
Certificates of deposit                                  1,070         2,686         6,921           472            -        11,149
------------------------------------------------------------------------------------------------------------------------------------
Total Deposits                                          11,788         2,686         6,921           472            -        21,867
------------------------------------------------------------------------------------------------------------------------------------
Other liabilities                                            -             -             -             -            -             -
------------------------------------------------------------------------------------------------------------------------------------
Total Interest Bearing Liabilities                      11,788         2,686         6,921           472            -      $ 21,867
------------------------------------------------------------------------------------------------------------------------------------
Cumulative Rate Sensitive Liabilities                   11,788        14,474        21,395        21,867       21,867
------------------------------------------------------------------------------------------------------------------------------------

Gap                                                     18,528        (2,686)       (5,651)       17,964        4,295
Cumulative Gap                                          18,528        15,842        10,191        28,155       32,450
Gap/ Total Assets                                       32.34%        -4.69%        -9.86%        31.35%        7.50%
Cumulative Gap/ Total Assets                            32.34%        27.65%        17.79%        49.14%       56.64%
Rate Sensitive Assets/ Rate Sensitive Liabilities         2.57             -          0.18         39.07            -
Cumulative RSA/ Cumulative RSL                            2.57          2.09          1.48          2.29         2.48

</TABLE>


                                       23
<PAGE>

Table 4

                  CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY
                   Investment Securities - Available for Sale
                             As of December 31, 1998
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                         Amortized        Market      Unrealized      Average
                                                           Par Value        Cost          Value       Gain/(Loss)      Yield
                                                      -------------------------------------------------------------------------
<S>                                                       <C>            <C>           <C>            <C>           <C> 
U.S. Government Agencies
     Within one year                                           $ 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
     Within one year                                               -             -              -             -              -
     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%
-------------------------------------------------------------------------------------------------------------------------------

Other Securities
     Within one year                                               -             -              -             -              -
     One to five years                                             -             -              -             -              -
     Five to ten years                                             -             -              -             -              -
     After ten years                                             220           220            220             -          6.00%
-------------------------------------------------------------------------------------------------------------------------------
             Total Other Securities                            $ 220           220            220             -          6.00%
-------------------------------------------------------------------------------------------------------------------------------
             Total Securities Available for Sale            $ 13,695        13,694         13,697             3          5.77%
</TABLE>



                                       24
<PAGE>

Table 5

                  CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY
                                      Loans
                                 (In thousands)

<TABLE>
<CAPTION>
                                                December 31,                    December 31
                                                    1998                            1997
                                        ----------------------------    -----------------------------

<S>                                       <C>          <C>                   <C>         <C>
Commercial                                  $ 5,138      31.44%                $ -          -
Real estate - commercial                      3,507      21.46%                  -          -
Real estate - construction                      760       4.65%                  -          -
Real estate - residential                     5,529      33.83%                  -          -
Home equity lines                             1,040       6.37%                  -          -
Consumer                                        369       2.26%                  -          -
                                        ----------------------------    -----------------------------

Gross loans                                $ 16,343     100.00%                $ -          -

Less: unearned income, net                      (16)          -                  -          -
Less: allowance for loan loss                  (212)          -                  -          -
                                        ----------------------------    -----------------------------

Total net loans                            $ 16,115           -                $ -          -
                                        ============================    =============================
</TABLE>


                                       25
<PAGE>

Table 6

                         Cardinal Financial Corporation
                            Allowance for Loan Losses
                                 (In Thousands)

<TABLE>
<CAPTION>

                                                  1998                    1997
                                             ----------------       ------------------
<S>                                             <C>                      <C>
Beginning balance                                        $ -                      $ -

Provision for loan losses                                212                        -

Loans charged off:
    Commercial                                             -                        -
    Real estate - commercial                               -                        -
    Real estate - construction                             -                        -
    Real estate - residential                              -                        -
    Home equity lines                                      -                        -
    Consumer                                               -                        -
--------------------------------------------------------------------------------------
    Total loans charged off                                -                        -

Recoveries:
    Commercial                                             -                        -
    Real estate - commercial                               -                        -
    Real estate - construction                             -                        -
    Real estate - residential                              -                        -
    Home equity lines                                      -                        -
    Consumer                                               -                        -
--------------------------------------------------------------------------------------
    Total recoveries                                       -                        -

Net charge-offs                                            -                        -

Balance, December 31                                   $ 212                      $ -
======================================================================================


Loans:
     Total at year end                              $ 16,343
Allowance for loan losses to:
     Year-end loans                                    1.30%

</TABLE>



                                       26
<PAGE>

Table 7

                         Cardinal Financial Corporation
                   Allocation of the Allowance for Loan Losses


<TABLE>
<CAPTION>
                                          December 31,                      December 31
                                              1998                              1997
                                     -----------------------           -----------------------
<S>                                    <C>         <C>                   <C>         <C>    
Commercial                             $   67      31.54%                $   -       $   -  
Real estate - commercial                   45      21.25%                    -           -  
Real estate - construction                 10       4.67%                    -           -  
Real estate - residential                  72      33.94%                    -           -  
Home equity lines                          13       6.33%                    -           -  
Consumer                                    5       2.27%                    -           -  
                                     -----------------------           ---------------------
Total loan loss reserve                 $  212    100.00%               $    -       $   -  
                                     =======================           =======================

</TABLE>




                                      -27-
<PAGE>

Year 2000 Compliance

         As the year 2000  approaches,  an important  business issue has emerged
regarding how existing  software  programs and operating systems can accommodate
this date value.  Many existing  application  software products were designed to
accommodate  a two-digit  year.  For example,  "98" is stored on the systems and
represents 1998 and "00" represents 1900.

         The Company  utilizes a third-party  vendor for  processing its primary
banking  applications.   In  addition,  the  Company  also  uses  several  other
third-party vendors for ancillary computer applications. All third party vendors
for the Company's banking applications either are already Year 2000 ready or are
in the process of modifying,  upgrading or replacing their computer applications
to ensure Year 2000 compliance.  Because the Company was recently formed, all of
its data  processing  equipment is new and is Year 2000 ready.  The Company does
not expect to incur any material expense to replace data processing equipment.

         The Company has a Year 2000 compliance  program to review the Year 2000
issues faced by its  third-party  vendors.  Under this  program,  the Company is
examining  the  need  for  modifications  or  replacement  of all  non-compliant
software.  The  Company's  recent  entrance  into the market has  allowed it the
opportunity to screen third party vendors.  Vendors chosen are already compliant
or are in the process of becoming Year 2000 compliant.  Data  processing  vendor
contracts have Year 2000 clauses, which allow the Company to test for compliance
and to cancel without penalty if a vendor does not meet its Year 2000 compliance
plan. The Company's Year 2000 compliance program provides that all critical data
processing  applications will be tested beginning in November 1998 and ending on
or before March 31, 1999.  For any software  that is not Year 2000  compliant at
March 31, 1999, the vendor contract can be terminated and an alternative  vendor
can be  selected.  Alternative  vendors  have  been  identified  should  they be
necessary.  By  definition  of its loan  policy  on Year  2000  risk  management
parameters, the Company has no Year 2000 credit risk at this time.

         The  Company  does not  expect  the cost of its  Year  2000  compliance
program,  including possible  remediation costs, to be material to its financial
condition and expects to satisfy compliance  without material  disruption of its
operations.  The  anticipated  costs  will be for  testing  of vendor  Year 2000
compliance. The Company will utilize internal staff for this purpose, as well as
third-party  vendors as  necessary.  The Company does not  separately  track the
internal  costs incurred for its Year 2000  compliance  program.  However,  such
costs are limited to the related  payroll  costs for its test team. In the event
that the Company's significant vendors, including its correspondent, the Federal
Reserve Bank of Richmond, do not successfully achieve Year 2000 compliance,  the
Company's  business,  results of  operations  or  financial  condition  could be
adversely affected.

         The Company's  contingency plan will be based on the ability to replace
mission  critical  vendors that do not achieve Year 2000  compliance.  Alternate
vendors have been identified and, should any of the Company's  existing  vendors
not certify Year 2000  compliance  by March 31,  1999,  the Company will proceed
with plans to move to alternate  vendors and to establish a contingency plan for
handling the Company's Year 2000 exposure.

         The Company is subject to periodic review by its primary regulator, the
Office of the Comptroller of the Currency,  to ensure existence of and adherence
to a Year 2000 compliance plan.




                                       28
<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 Balance Sheets, December 31, 1998 and 1997

                  Consolidated Statements of Operations, Year Ended December 31,
                  1998,   and  the  Period  from  November  24,  1997  (date  of
                  inception) to December 31, 1997

                  Consolidated  Statements of Comprehensive  Income,  Year Ended
                  December  31, 1998 and Period from  November 24, 1997 (date of
                  inception) to December 31, 1997

                  Consolidated  Statements of Changes in  Shareholders'  Equity,
                  Year Ended  December 31, 1998 and the Period from November 24,
                  1997 (date of inception) to December 31, 1997

                  Consolidated Statements of Cash Flows, Year Ended December 31,
                  1998 and the Period from November 24, 1997 (date of inception)
                  to December 31, 1997

                  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

         Information  set forth  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 1999 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 1998 fiscal year (the "1999 Proxy Statement"),  is hereby incorporated
by reference.

Item 10.      Executive Compensation

         Information as set forth 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 1999 Proxy Statement is hereby incorporated by reference.



                                       29
<PAGE>

Item 11.     Security Ownership of Certain Beneficial Owners and Management

         Information  set forth  under the  headings  "Securities  Ownership  of
Management" and "Security  Ownership of Certain  Beneficial  Owners" in the 1999
Proxy Statement is incorporated by reference.

Item 12.     Certain Relationships and Related Transactions

         Information set forth under the heading  "Transactions With Management"
in the 1999 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        Bylaws of Cardinal  Financial  Corporation,  attached as
                        Exhibit  3.2 to the Form  SB-2, incorporated  herein  by
                        reference.

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

             10.1       Employment  Agreement,  dated as of September  30, 1997,
                        between  Commercial   Fidelity   Financial   Partnership
                        (predecessor to Cardinal  Financial  Corporation) and L.
                        Burwell  Gunn,  Jr.,  attached as Exhibit 10 to the Form
                        SB-2, incorporated herein by reference.

             10.2       Employment  Agreement,  dated as of  October  13,  1998,
                        between  Cardinal  Financial  Corporation  and Thomas C.
                        Kane.

             10.3       Employment  Agreement,  dated as of  December 17,  1998,
                        between  Cardinal  Financial  Corporation  and  Edgar M.
                        Andrews, III.

             10.4       Employment  Agreement,  dated as  of December 17,  1998,
                        between Cardinal  Financial  Corporation and Christopher
                        W. Bergstrom.

             10.5       Employment  Agreement,  dated as of February  17,  1999,
                        between  Cardinal  Financial  Corporation  and Joseph L.
                        Borrelli.

             10.6       Employment  Agreement,  dated as of February  12,  1999,
                        between  Cardinal  Financial  Corporation  and F.  Kevin
                        Reynolds.

             10.7       Employment  Agreement,  dated  as of  August  31,  1998,
                        between  Cardinal  Financial  Corporation  and  Greg  D.
                        Wheeless.

             21         Subsidiaries of the Registrant.


                                       30
<PAGE>

             27         Financial Data Schedule (filed electronically only).

      (b)    Reports on Form 8-K.

                       No reports on Form 8-K were filed by the  Company  during
             the last quarter of the period covered by this report.



                                       31
<PAGE>

                          Independent Auditors' Report

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

We have  audited  the  accompanying  consolidated  statements  of  condition  of
Cardinal Financial  Corporation and subsidiary as of December 31, 1998 and 1997,
and the related  consolidated  statements of operations,  comprehensive  income,
changes in shareholders'  equity, and cash flows for the year ended December 31,
1998 and for the period from  November 24, 1997 (date of  inception) to December
31, 1997.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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 financial  statements  referred to above present fairly, in
all material respects,  the financial position of Cardinal Financial Corporation
and  subsidiary  as of  December  31,  1998 and 1997,  and the  results of their
operations and their cash flows for the year ended December 31, 1998 and for the
period from  November 14, 1997 (date of  inception)  to December  31,  1997,  in
conformity with generally accepted accounting principles.



                                                 /s/  KPMG LLP


Washington, D.C.
January 29, 1999


<PAGE>

                  CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CONDITION
                        (In thousands, except share data)
                        As of December 31, 1998 and 1997

<TABLE>
<CAPTION>
                                                                                   1998                      1997
                                                                             -----------------          ----------------
<S>                                                                          <C>                        <C>
ASSETS

Cash & due from banks                                                                 $ 1,073                      $ 73
Federal funds sold                                                                     24,277                     4,210
                                                                             -----------------          ----------------
Total cash and cash equivalents                                                        25,350                     4,283

Investment securities (Note 3)                                                         13,697                         -

Loans receivable (Note 4)                                                              16,327                         -
Less: Allowance for loan losses                                                           212                         -
                                                                             -----------------
                                                                                                        ----------------
                                                                                       16,115

Subscriptions receivable (Note 7)                                                           -                     4,510
Premises and equipment, net (Note 6)                                                    1,829                         -
Accrued interest and other assets                                                         304                         3
                                                                             -----------------          ----------------

          Total Assets                                                               $ 57,295                   $ 8,796
                                                                             =================          ================


LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits (Note 8)                                                                    $ 21,867                       $ -
Borrowings                                                                                    -                     185
Accrued interest and other liabilities                                                    700                        60
                                                                             -----------------          ----------------

          Total Liabilities                                                            22,567                       245

Common stock, $1 par value, 50,000,000 shares authorized;
     shares outstanding 4,239,509 in 1998 and 1,174,988 in 1997                         4,240                     1,175
Uncollected subscriptions receivable                                                        -                      (100)
Additional paid in capital                                                             32,327                     7,621
Accumulated deficit                                                                    (1,842)                     (145)
Accumulated other comprehensive income                                                      3                         -
                                                                             -----------------          ----------------

          Total Shareholders' Equity                                                   34,728                     8,551
                                                                             -----------------          ----------------

          Total Liabilities and Shareholders' Equity                                 $ 57,295                   $ 8,736
                                                                             =================          ================
</TABLE>


          See accompanying notes to consolidated financial statements.



                                       
<PAGE>

                  CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
            For the Year ended December 31, 1998 and the period from
           November 24, 1997 (date of inception) to December 31, 1997

<TABLE>
<CAPTION>

                                                                                          December 31,
                                                                          --------------------------------------------
                                                                                 1998                      1997
                                                                          ------------------         -----------------
<S>                                                                       <C>                        <C>
INTEREST INCOME
Loans receivable                                                                  $ 178,697                       $ -
Investment securities                                                               316,059                         -
Federal funds sold                                                                1,061,815                     7,041
                                                                          ------------------         -----------------

          Total Interest Income                                                   1,556,571                     7,041


INTEREST EXPENSE
Deposits                                                                            338,608                         -
Borrowings                                                                            1,616                     2,724
                                                                          ------------------         -----------------

          Total Interest Expense                                                    340,224                     2,724
                                                                          ------------------         -----------------

          NET INTEREST INCOME                                                     1,216,347                     4,317

Provision for loan losses                                                           212,460                         -
                                                                          ------------------         -----------------

          Net interest income after provision for loan losses                     1,003,887                     4,317


NON-INTEREST INCOME
Service charges on deposit accounts                                                   3,388                         -
Loan service charges                                                                 16,145
Investment securities gains                                                           8,760
Other income                                                                          5,744                         -
                                                                                                     -----------------
                                                                          ------------------

          Total Non-interest income                                                  34,037                         -


NON-INTEREST EXPENSE
Salary and benefits                                                               1,401,117                    66,918
Depreciation                                                                        106,654                         -
Occupancy                                                                           151,583                    42,500
Professional fees                                                                   463,497                    18,142
Other operating expenses (Note 16)                                                  611,419                    21,935
                                                                          ------------------         -----------------

          Total non-interest expense                                              2,734,269                   149,495

          Net loss before income taxes                                           (1,696,345)                 (145,178)

Provision for income taxes                                                                -                         -

          NET LOSS                                                             $ (1,696,345)               $ (145,178)
                                                                          ==================         =================

          Basic and diluted loss per share                                          $ (0.64)                  $ (0.12)

          Weighted-average shares outstanding                                     2,646,036                 1,174,988
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       
<PAGE>

                  CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
            For the Year ended December 31, 1998 and the period from
           November 24, 1997 (date of inception) to December 31, 1997

<TABLE>
<CAPTION>
                                                                            Year                 Period from
                                                                           Ended              November 24, 1997
                                                                        December 31,           to December 31,
                                                                            1998                    1997
                                                                     -------------------    ----------------------
<S>                                                                        <C>                         <C>        
Net loss                                                                   $ (1,696,345)               $ (145,178)
Other comprehensive income:
   Unrealized holding gain on available-for-sale
        investment securities, net of tax                                         2,605                         -
                                                                     -------------------    ----------------------
Comprehensive income
                                                                           $ (1,693,740)               $ (145,178)
                                                                     ===================    ======================
</TABLE>


See accompanying notes to consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>

                  CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY
            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
 For the Year ended December 31, 1998 and the period from November 24, 1997 (date of inception) to December 31, 1997
                      (In thousands, except per share data)


                                                                                                     Accumulated
                                                                          Additional                    Other      
                                                                 Common    Paid-in    Accumulated   Comprehensive  
                                                       Shares    Stock     Capital      Deficit        Income      
                                                       ------   -------   ---------   -----------      ------      
                                                                                                                   
<S>                                                   <C>       <C>       <C>         <C>           <C>
Balance, November 24, 1997                                      $     -           -             -               -  
                                                                                                                   
Issuance of subscription receivable                                   -           -             -               -  
                                                                                                                   
Issuance of 1,175 shares of common stock                                                                           
    at $7.50 per share, net of costs                    1,175     1,175       7,621             -               -  
                                                                                                                   
Net loss                                                    -         -           -          (145)              -  
                                                       ------   -------   ---------   -----------   -------------  
                                                                                                                   
BALANCE, DECEMBER 31, 1997                              1,175   $ 1,175       7,621          (145)              -  
                                                                                                                   
Issuance of 235 shares of common stock                                                                        
    at $7.50 per share, net of costs                      235       235       1,525             -               -  
                                                                                                                   
Issuance of 2,830 shares of common stock                                                                           
    at $10.00 per share, net of costs                   2,830     2,830      23,181             -               -  
                                                                                                                   
Payment of subscription receivable                          -         -           -             -               -  
                                                                                                                   
Change in unrealized holding gain on investment                                                                    
    securities available for sale                           -         -           -             -               3  
                                                                                                                   
Net loss                                                    -         -           -        (1,697)              -  
                                                                                                                   
                                                       ------   -------   ---------   -----------   -------------  
                                                                                                                   
BALANCE, December 31, 1998.                             4,240   $ 4,240      32,327        (1,842)              3  
                                                       ======   =======   =========   ===========   =============  
</TABLE>
                                        

                                                       Uncollected              
                                                       Subscription             
                                                        Receivable      Total   
                                                       ------------    -------  
                                                                                
Balance, November 24, 1997                                        -          -  
                                                                                
Issuance of subscription receivable                            (100)      (100) 
                                                                                
Issuance of 1,175 shares of common stock 
   at $7.50 per share, net of costs                               -      8,796  
                                                                                
Net loss                                                          -       (145) 
                                                       ------------    -------  
                                                                                
BALANCE, DECEMBER 31, 1997                                     (100)     8,551  
                                                                                
Issuance of 235 shares of common stock 
   at $7.50 per share, net of costs                               -      1,760  
                                                                                
Issuance of 2,830 shares of common stock                                        
   at $10.00 per share, net of costs                              -     26,011  
                                                                                
Payment of subscription receivable                               100       100  
                                                                                
Change in unrealized holding gain on investment                                 
   securities available for sale                                  -          3  
                                                                                
Net loss                                                          -     (1,697) 
                                                                                
                                                       ------------    -------  
                                                                                
BALANCE, December 31, 1998.                                       -     34,728  
                                                       ============    =======  


          See accompanying notes to consolidated financial statements.

<PAGE>

                  CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
            For the Year ended December 31, 1998 and the period from
           November 24, 1997 (date of inception) to December 31, 1997
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                                                    Period from
                                                                                       Year ended              November 24, 1997 to
                                                                                    December 31, 1998            December 31, 1997
                                                                                  ---------------------        ---------------------
<S>                                                                                   <C>                       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net loss                                                                              $ (1,697)                      $ (145)
      Adjustments to reconcile net loss to net cash used in operating activities:
           Realized gain on investment securities                                                 (9)                           -
           Unrealized appreciation available-for-sale investment securitites                      (3)                           -
           Depreciation                                                                          107                            -
           Provision for loan losses                                                             212                            -
           Increase in accrued interest and other assets                                        (301)                          (3)
           Increase in accrued interest and other liabilities                                    640                           60
                                                                                  ---------------------        ---------------------
           NET CASH USED IN OPERATING ACTIVITIES                                              (1,051)                         (88)
                                                                                  ---------------------        ---------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
           Purchase of fixed assets                                                           (1,936)                           -
           Proceeds from sale of investment securities                                         3,460                            -
           Purchase of investment securities                                                 (17,142)                           -
           Net increase in loan portfolio                                                    (16,327)                           -
                                                                                  ---------------------        ---------------------
           NET CASH USED IN INVESTING ACTIVITIES                                             (31,945)                           -
                                                                                  ---------------------        ---------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
           Net increase in deposits                                                           21,867                            -
           Proceeds from stock issuance, net                                                  27,871                        8,696
           Decrease (increase) in subscription receivables                                     4,510                       (4,510)
           (Repayment) proceeds of borrowings                                                   (185)                         185
                                                                                  ---------------------        ---------------------
           NET CASH PROVIDED BY FINANCING ACTIVITIES                                          54,063                        4,371
                                                                                  ---------------------        ---------------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                                     21,067                        4,283
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                               4,283                            -
                                                                                  ---------------------        ---------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                  $ 25,350                      $ 4,283
                                                                                  =====================        =====================

                               
Supplemental disclosure of cash flow information
      Cash paid during period for interest:                                                    $ 341                          $ -
                                                                                  =====================        =====================
</TABLE>

          See accompanying notes to consolidated financial statements.



<PAGE>

CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1998 and 1997

--------------------------------------------------------------------------------


(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 a wholly
         owned  subsidiary,  Cardinal Bank,  National  Association  (the "Bank")
         which was established in April 1998.

(2)      Summary of Significant Accounting Policies

         Use of Estimates

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  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.

         Principles of Consolidation

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

         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.

         Investment Securities

         The Company may classify its debt and marketable  equity  securities in
         one   of   three   categories:    trading,    available-for-sale,    or
         held-to-maturity.  Trading  securities are bought and held  principally
         for the  purpose  of selling  them in the near  term.  Held-to-maturity
         securities  are those  securities for which the Company has the ability
         and intent to hold until maturity.  All other securities not classified
         as trading or  held-to-maturity  are classified as  available-for-sale.
         The Company does not engage in trading activities and, accordingly, has
         no trading portfolio.



                                       1
<PAGE>

CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1998 and 1997

--------------------------------------------------------------------------------

         Available-for-sale  securities  are recorded at fair value.  Unrealized
         holding gains and losses, net of tax, on available-for-sale  securities
         are reported as a net amount in other comprehensive income.

         Gains  and  losses  on the sale of  available-for-sale  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
         interest  method  over  the  period  to  maturity.  Prepayment  of  the
         mortgages securing the collateralized  mortgage  obligations 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.

         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 adjusted for any charge-offs, the allowance
         for loan losses, and any deferred fees or costs on originated loans.

         Loan  origination  fees  and  certain  direct   origination  costs  are
         capitalized and recognized as an adjustment of the yield of the related
         loan.

         The  accrual of  interest  on impaired  loans is  discounted  when,  in
         management's  opinion,  the borrower may be unable to meet  payments as
         they  become  due.  When  interest  accrual is  discounted,  all unpaid
         accrued   interest  is  reversed.   Interest   income  is  subsequently
         recognized only to the extent cash payments are received.

         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
         Bank's  past loan loss  experience,  known  and  inherent  risks in the
         portfolio,



                                       2
<PAGE>

CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1998 and 1997

--------------------------------------------------------------------------------

         adverse situations that may affect the borrower's ability to repay, the
         estimated  value of any  underlying  collateral,  and current  economic
         conditions.

         Premises and Equipment

         Land is carried  at cost.  Bank  premises,  furniture,  equipment,  and
         leasehold   improvements   are  carried  at  cost,   less   accumulated
         depreciation and amortization computed principally by the straight-line
         method.  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.  Depreciation  of bank  premises,
         furniture and equipment is computed using the straight-line method over
         their estimated useful lives from 3 to 10 years.

         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.


         Net Income Per Share

         Basic and diluted  loss per common  share was  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, 1998 were  antidilutive  and  consequently not included in
         the EPS calculation.


         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  would be  recorded  on the date of grant  only if the  current
         market price of the underlying stock exceeded the exercise price.



                                       3
<PAGE>

CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1998 and 1997

--------------------------------------------------------------------------------

         New Accounting Standards

         On January  1, 1998 the  Company  implemented  Statement  of  Financial
         Accounting  Standards  No.  130  (SFAS  130),  Reporting  Comprehensive
         Income.  The disclosures  required under SFAS 130 have been included in
         the financial  statements  since the Company had items of Comprehensive
         income at December 31, 1998.

         In April 1998, the American  Institute of Certified Public  Accountants
         issued  Statement of Position 98-5,  Reporting on the Costs of Start-Up
         Activities (SOP 98-5). SOP 98-5 requires that costs incurred during the
         start-up  activities,  including  organization  costs,  be  expenses as
         incurred.  SOP 98-5 is effective  for financial  statements  for fiscal
         years  beginning  after  December 15, 1998, but the Company has elected
         early adoption.

         Reclassifications

         Certain  amounts  for 1997 have been  reclassified  to  conform  to the
         presentation for 1998.

(3)      Investment Securities

         The carrying amount and amortized cost of available-for-sale securities
         at  December  31,  1998  is  shown  below.  

<TABLE>
<CAPTION>

                                                                                              1998                         
                                                                        -------------------------------------------------- 
                                                                                Fair Value           Amortized Cost       
         (In thousands)                                                                                                    
         -------------------------------------------------------------- ------------------------- ------------------------ 
<S>                                                                          <C>                      <C>                  
         Obligations of U.S. government-sponsored                                                                          
           agencies                                                                 $10,306                  $10,302       
         Mortgage-backed securities                                                   3,171                    3,172       
         Federal Reserve Stock                                                          220                      220       
         -------------------------------------------------------------- ------------------------- ------------------------ 
                                                                                                                           
         Total                                                                      $13,697                  $13,694       
         -------------------------------------------------------------- ------------------------- ------------------------ 
</TABLE>

         The carrying amount and amortized cost of available-for-sale securities
         by contractual  maturity at December 31, 1998 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.



                                       4
<PAGE>

CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1998 and 1997

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                              1998                         
                                                                        -------------------------------------------------- 
                                                                             Carrying Value           Amortized Cost       
         (In thousands)                                                                                                    
         -------------------------------------------------------------- ------------------------- ------------------------ 
<S>                                                                          <C>                       <C> 
         Maturing within 1 year                                                       $ 300                    $ 300       
         After 1 but within 5 years                                                   9,445                    9,443       
         After 5 but within 10 years                                                    962                      961       
         After 10 years                                                               2,770                    2,770       
         Marketable equity securities                                                   220                      220       
         -------------------------------------------------------------- ------------------------- ------------------------ 
                                                                                                                           
         Total                                                                      $13,697                  $13,694       
         -------------------------------------------------------------- ------------------------- ------------------------ 
</TABLE>

         Gross   realized   gains  and  gross   realized   losses  on  sales  of
         available-for-sale  securities were $12,996 and $4,236  respectively in
         1998.  Gross  unrealized  holding  losses  in  the   available-for-sale
         securities  at December 31, 1998 were $13,348,  while gross  unrealized
         holding gains were $15,953.

         As a member of the Federal Reserve System, the Bank is required to hold
         stock in the Federal Reserve Bank of Richmond. This stock is carried at
         cost since no active trading markets exist.

(4)      Loans Receivable

         The loan portfolio at December 31, 1998 consists of the following:
<TABLE>
<CAPTION>
         (In thousands)                                                             1998               
         -------------------------------------------------------------- -----------------------------  
<S>                                                                              <C>          
         Commercial                                                                 $ 5,138            
         Real estate - commercial                                                     3,507            
         Real estate - construction                                                     760            
         Real estate - residential                                                    5,529            
         Home equity lines                                                            1,040            
         Consumer                                                                       369            
         -------------------------------------------------------------- -----------------------------  
                                                                                     16,343            
         Net deferred loan fees, premiums and discounts                                (16)            
         -------------------------------------------------------------- -----------------------------  
                                                                                     16,327

</TABLE>

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



                                       5
<PAGE>

CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1998 and 1997

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
         (In thousands)                                                          1998               
         ----------------------------------------------------------- -----------------------------  
<S>                                                                           <C>           
         Balance, beginning of year                                                  $ -            
         Provision for loan losses                                                   212            
         Loans charged off                                                             -            
         Recoveries                                                                    -            
         ----------------------------------------------------------- -----------------------------  
                                                                                                    
         Balance, end of year                                                       $212            
         ----------------------------------------------------------- -----------------------------  
</TABLE>

         There were no impaired or nonaccrual loans at December 31, 1998.

(5)      Significant Concentrations of Credit Risk

         All of the Bank'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.
         The  Bank,  as a matter  of  regulatory  restriction,  does not  extend
         credit, net of participated amounts, to any single borrower or group of
         related borrowers in excess of $1,014,085.

(6)      Premises and Equipment

         Components of properties  and  equipment  included in the  consolidated
         statements of financial condition at December 31, 1998 and 1997 were as
         follows:

                                                 1998                 1997    
                                          -----------------    ----------------
                                                                               
         Land                                      $ 20               $ -      
         Furniture and equipment                  1,334                 -      
         Leasehold improvements                     582                 -      
                                          -----------------    ----------------
            Total cost                            1,936                 -      
                                                         
         Less accumulated depreciation              107                 -      
                                          =================    ================
            Net book value                       $1,829               $ -      
                                          =================    ================

         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.



                                       6
<PAGE>

CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1998 and 1997

--------------------------------------------------------------------------------

         Minimum  future  rental  payments  under  the  noncancelable  operating
         leases,  as of December 31, 1998 for each of the next five years and in
         the aggregate, are as follows:

                    Year ending December 31            Amount     
                    ------------------------------ ---------------
                                                                  
                    1999                                $621,151  
                    2000                                 686,533  
                    2001                                 707,129  
                    2002                                 728,342  
                    2003                                 750,193  
                    Thereafter                         3,147,707  
                    ------------------------------ ---------------
                                                                  
                                                      $6,641,055  
                                                                                

         The total  rent  expense  was  $71,687  and  $42,500  in 1998 and 1997,
         respectively.


(7)      Subscription Receivable

         Subscription  receivable  represents stock subscribed for which payment
         has  yet to be  received.  Subscription  receivable  of  $4,509,652  at
         December 31, 1997 was collected as of April 29, 1998.


(8)      Deposits

         The aggregate amount of jumbo CDs, each with a minimum  denomination of
         $100,000 was approximately $1,056,580 and in 1998.

         At December 31, 1998, the scheduled maturities of CDs are as follows:

         (In thousands)                                     
                                                            
         1999                                     $10,677   
         2000                                         367   
         2001                                           -   
         2002                                         105   
         2003 and thereafter                            -   
                                       -------------------  
                                                            
                                                  $11,149   



                                       7
<PAGE>

CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1998 and 1997

--------------------------------------------------------------------------------

(9)      Income Taxes

         The  Company  and  the  Bank  file   consolidated   tax  returns  on  a
         calendar-year  basis.  The provision for income taxes  consisted of the
         following for the years ended December 31, 1998 and 1997 respectfully:
<TABLE>
<CAPTION>

                                                        1998                          1997                
                                             ---------------------------    --------------------------    
<S>                                               <C>                            <C>                      
         Current                                          $ -                           $ -               
         Deferred                                           -                             -               
                                             ---------------------------    --------------------------    
                                                          $ -                           $ -               
                                             ---------------------------    --------------------------    
</TABLE>


         The provisions  for income taxes are reconciled to the amount  computed
         by  applying  the federal  corporate  tax rate to income  before  taxes
         follows:
<TABLE>
<CAPTION>
                                                                                      1998                   1997
         -------------------------------------------------------------------- --------------------- ---------------------- 
<S>                                                                                 <C>                    <C>             
         Income tax (benefit) at federal corporate rate                             $(576,757)             $ (40,861)       
         Nondeductible expenses                                                        (1,870)                 1,947       
         Change in valuation allowance                                              $ 574,887                 38,914       
         -------------------------------------------------------------------- --------------------- ---------------------- 
                                                                                    $       -              $       -       
         -------------------------------------------------------------------- --------------------- ---------------------- 

         The  tax  benefits  of  temporary  differences  between  the  financial
         reporting basis and income tax basis of assets and  liabilities  relate
         to the following:
                                                                                                                             
                                                                                      1998                  1997             
         -------------------------------------------------------------------- --------------------- ----------------------   
         Deferred tax assets:                                                                                                
                  Bad debts                                                           $ 64,465             $       -
                  Organization and other costs                                          18,730                14,570         
                  Net operating loss carryforwards                                     538,901                24,344         
                  Other                                                                    567                     -
         -------------------------------------------------------------------- --------------------- ----------------------   
                                                                                                                             
         Total gross deferred assets                                                   622,663               38,914         
                                                                                                                             
         Less valuation allowance                                                     (612,915)             (38,914)         
         -------------------------------------------------------------------- --------------------- ----------------------   
                                                                                                                             
         Net deferred tax assets                                                         9,748                    -         
                                                                                                                             
         Deferred tax liabilities                                                                                            
                  Unrealized gains on investments AFS                                     (886)                   -
                  Prepaid expenses                                                      (8,862)                   -         
         -------------------------------------------------------------------- --------------------- ----------------------   
                                                                                                                             
          Total gross deferred tax liabilities                                          (9,748)                    -         
         -------------------------------------------------------------------- --------------------- ----------------------   
                                                                                                                             
</TABLE>



                                       8
<PAGE>

CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1998 and 1997

--------------------------------------------------------------------------------

         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 $612,915 at December  31, 1998 and $38,914 at December  31, 1997 has
         been  established  for deferred tax assets as  realization is dependent
         upon generating future taxable income.

         The Company has a net  operating  loss  carryforward  of  approximately
         $1,585,004  at December 31, 1998 which are  available to offset  future
         taxable income.  There are no annual  limitations on utilization of the
         net operating loss carryforwards.

(10)     Regulatory Matters

         The Bank, as a national  bank, is subject to the dividend  restrictions
         set forth by the Comptroller of the Currency.  Under such restrictions,
         the Bank 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, 1998,  there were no earnings  against
         which dividends could be charged.

         The Bank is required to maintain a minimum average reserve balance with
         the Federal  Reserve Bank. The average  amount of the required  reserve
         was $150,000 for 1998.

         As a member of the Federal Reserve Bank system, the Bank is 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 Bank is 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 the  adoption  of  risk-based  premiums  on deposit  insurance  and
         requires the Bank to observe  insider credit  underwriting  products no
         less strict than those applied to comparable noninsider transactions.

         At December  31,  1998,  the Company  and its  subsidiary  bank met all
         regulatory capital  requirements.  The key measures of capital are: (1)
         Tier I capital (as defined) as a percent



                                       9
<PAGE>

CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1998 and 1997

--------------------------------------------------------------------------------

         of total  risk-weighted  assets (as  defined);  (2) Tier I capital  (as
         defined)  as a percent of average  assets (as  defined),  and (3) total
         capital  (Tier I  capital  plus the  allowance  for loan  losses  up to
         certain limitations) as a percent of total risk-weighted assets.
<TABLE>
<CAPTION>
                                                                                                                                 
                                                                                                            To Be Well           
                                                                                                         Capitalized Under       
                                                                                 For Capital             Prompt Corrective       
         (In thousands)                                  Actual               Adequacy Purposes          Action Provisions       
                                                  ---------------------    ------------------------   ------------------------   
                                                   Amount      Ratio        Amount       Ratio          Amount       Ratio       
<S>                                                 <C>         <C>           <C>            <C>          <C>           <C>      
         Total capital to risk weighted assets      $34,938     147.8%        $1,892      >= 8.00%        $2,365     >= 10.0%    
         Tier I capital to risk weighted assets      34,725     146.9%           946      >= 4.00%         1,419      >= 6.0%    
         Tier I capital to average assets            34,725      60.2%         2,308      >= 4.00%         2,885      >= 5.0%    
                                              
</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:

                                                                                
         (In thousands)                                                1998     
         ------------------------------------------------------- ---------------
                                                                                
         Balance, beginning of year                                       $ -   
         New loans                                                        999   
         Loans paid off or paid down                                      (3)   
         ------------------------------------------------------- ---------------
                                                                                
         Balance, end of year                                            $996   
         ------------------------------------------------------- ---------------


(12)     Employee Benefit Plan

         The Company  established  a 401K plan in January  1998 for all eligible
         employees.   The   Company   began  to  match  a  portion  of  employee
         contributions beginning January 1, 1999.



                                       10
<PAGE>

CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1998 and 1997

--------------------------------------------------------------------------------

(13)     Director Stock Compensation Plan

         In 1998, the Company adopted a stock option plan (the "Plan")  pursuant
         to which the  Company's  Board of Directors  may grant stock options to
         certain directors. The Plan authorizes grants of options to purchase up
         to 13,750 shares of authorized but unissued common stock.

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

         At December 31, 1998,  there were 386,250  additional  shares available
         for grant under the Plan. The per share  weighted-average fair value of
         stock options granted during 1998 was $ 4.03 on the date of grant using
         the Black Scholes  option-pricing  model (using an expected  volatility
         over the  expected  life of the  options  of 40%)  with  the  following
         weighted-average assumptions:  expected dividend yield 0.00%, risk-free
         interest rate of 4.81%, 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  in  the  financial  statements.  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:

                                                      1998
         Net loss          As reported            $(1,696,345)
                           Pro forma               (1,751,758)

         Loss Per Share    As reported                 $(0.64)
                           Pro forma                   $(0.66)

         Stock option activity during the periods indicated is as follows:




                                       11
<PAGE>

CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1998 and 1997

--------------------------------------------------------------------------------


                                                    Number of   Weighted-Average
                                                     Shares      Exercise Price
         Balance at December 31, 1997                     -         $      -
                  Granted                            13,750             6.75
                  Exercised                               -                -
                  Forfeited                               -                -
                  Expired                                 -                -
                                                     ------         --------
         Balance at December 31, 1998                13,750             6.75
                                                     ======         ========

         At December 31, 1998, the range of exercise prices and weighted-average
         remaining  contractual  life of  outstanding  options was $ 6.75 and 10
         years, respectively.

         All outstanding options are exerciseable at December 31, 1998.


(14)     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,
         1998, 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, 1998 have floating rates,  therefore  significantly  mitigating the
         market risk.



                                       12
<PAGE>

CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1998 and 1997

--------------------------------------------------------------------------------

         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                                                       $3,206  
                 Standby letters of credit                                                               5  
         ---------------------------------------------------------------------------------- ----------------
</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.


(15)     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,  1998.  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




                                       13
<PAGE>

CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1998 and 1997

--------------------------------------------------------------------------------

         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 was used as a
                  reasonable estimate of fair value.

                  Investment Securities

                  Fair  values  for  Investment  Securities  are based on quoted
                  market   prices  or  prices   quoted  for  similar   financial
                  instruments.

                  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.

                  Deposit Liabilities

                  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.



                                       14
<PAGE>

CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1998 and 1997

--------------------------------------------------------------------------------

                  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, 1998.

                  Accrued Interest

                  The carrying  amounts of accrued  interest  approximate  their
                  fair values.

         Fair Value of Financial Instruments as of December 31, 1998:
<TABLE>

                                                                              December 31, 1998                   
                                                                 --------------------------------------------     
                                                                       Carrying              Estimated            
         (In thousands)                                                 Amount              Fair Value            
         ------------------------------------------------------- --------------------- ----------------------     
<S>                                                                   <C>                   <C>     
         Financial assets:                                                                                        
             Cash and cash equivalents                                   $25,350               $25,350            
             Investment securities                                        13,697                13,697            
             Loans receivable                                             16,343                16,343            
                                                                                                                  
         Financial liabilities:                                                                                   
             Demand deposits                                               5,501                 5,501            
             Interest checking                                             1,746                 1,746            
             Statement savings                                                88                    88            
             Money market accounts                                         3,383                 3,383            
             Certificates of deposit                                      11,149                11,149            

</TABLE>




                                       15
<PAGE>

CARDINAL FINANCIAL CORPORATION AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 1998 and 1997

--------------------------------------------------------------------------------

(16)     Other Operating Expenses


         Other operating expenses for December 31, 1998 include the following:
<TABLE>
<CAPTION>
                                                                                                                             
                                                                                           1998               1997           
         --------------------------------------------------------------------------- ------------------ ------------------   
<S>                                                                                       <C>                   <C>          
         Stationary & Supplies                                                            $133,821              $ 327        
         Data Processing                                                                   104,067                  -        
         Advertising & Marketing                                                            82,069                  -        
         Travel and Entertainment                                                           54,031              3,615        
         Furniture, Fixtures & Equipment                                                    42,766                  -        
         Dues & Memberships                                                                 42,708                  -        
         Telecommuncations                                                                  36,591                256        
         Miscellaneous                                                                     115,366             17,737        
         --------------------------------------------------------------------------- ------------------ ------------------   
                                                                                          $611,419            $21,935        
</TABLE>





                                       16
<PAGE>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of 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.

                                       CARDINAL FINANCIAL CORPORATION


Date:  March 30, 1999                  By: /s/ L. Burwell Gunn, Jr. 
                                           -------------------------------------
                                           President and Chief Executive Officer

         In accordance with Section 13 or 15(d) of 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             March 30, 1999
-------------------------------------------               Officer and Director
                                                      (Principal Executive Officer)

/s/ Joseph L. Borrelli                           Chief Financial Officer, Secretary and         March 30, 1999
-------------------------------------------        Treasurer (Principal Financial and
                                                      Principal Accounting Officer)

/s/ Robert M. Barlow                                            Director                        March 30, 1999
-------------------------------------------



/s/ Nancy K. Falck                                              Director                        March 30, 1999
-------------------------------------------


/s/ Wayne W. Broadwater                                         Director                        March 30, 1999
-------------------------------------------


/s/ Dale B. Peck                                                Director                        March 30, 1999
-------------------------------------------


/s/ John H. Rust, Jr.                                           Chairman                        March 30, 1999
-------------------------------------------


/s/ Harvey W. Huntzinger                                        Director                        March 30, 1999
-------------------------------------------




                                       
<PAGE>


                                                                Director                        March __, 1999
-------------------------------------------


                                                                Director                        March __, 1999
-------------------------------------------


                                                                Director                        March __, 1999
-------------------------------------------
</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         Bylaws  of  Cardinal  Financial  Corporation,  attached  as
                     Exhibit  3.2  to  the  Form  SB-2, incorporated  herein  by
                     reference.

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

         10.1        Employment  Agreement,  dated  as of  September  30,  1997,
                     between   Commercial    Fidelity   Financial    Partnership
                     (predecessor  to  Cardinal  Financial  Corporation)  and L.
                     Burwell Gunn, Jr., attached as Exhibit 10 to the Form SB-2,
                     incorporated herein by reference.

         10.2        Employment Agreement, dated as of October 13, 1998, between
                     Cardinal Financial Corporation and Thomas C. Kane.

         10.3        Employment  Agreement,  dated  as  of  December  17,  1998,
                     between  Cardinal   Financial   Corporation  and  Edgar  M.
                     Andrews, III.

         10.4        Employment  Agreement,  dated  as  of  December  17,  1998,
                     between Cardinal  Financial  Corporation and Christopher W.
                     Bergstrom.

         10.5        Employment  Agreement,  dated  as  of  February  17,  1999,
                     between  Cardinal  Financial   Corporation  and  Joseph  L.
                     Borrelli.

         10.6        Employment  Agreement,  dated  as  of  February  12,  1999,
                     between  Cardinal   Financial   Corporation  and  F.  Kevin
                     Reynolds.

         10.7        Employment Agreement,  dated as of August 31, 1998, between
                     Cardinal Financial Corporation and Greg D. Wheeless.

         21          Subsidiaries of the Registrant.

         27          Financial Data Schedule (filed electronically only).