Cardinal Financial Corp. in Tysons Corner, Va., ended a self-imposed 18-month exile from investor conferences last month, when its chairman and chief executive made a presentation at the Mid-Atlantic Super Community Bank Conference in Philadelphia.
Virtually every seat in the ballroom-size auditorium at the Union Club was filled, and Bernard H. Clineburg held the audience's attention throughout his 35-minute presentation as he strode up and down the aisles, touting the $1.5 billion-asset Cardinal's turnaround.
Investors seemed interested in his company's change in fortunes, but they also wanted to know how it plans to address the recent entry of the Cherry Hill, N.J., retail hotshot Commerce Bancorp Inc. into Washington's banking market.
Mr. Clineburg, 57, met the questions head on.
"I'm glad Commerce is moving into northern Virginia," he said. "They're a massive advertiser, and that creates customer churn. Commerce hurts the big banks. Community banks with a little muscle on them - the ones with the wherewithal to make a $20 million loan - are going to benefit."
The $38 billion-asset Commerce opened branches this year in Washington and in Alexandria and Manassas, Va. It has said it plans to open as many as 10 branches a year in the Washington and Baltimore markets until it has about 200 in the region.
Other regional and money-center banking companies are also trying to gain a foothold in one of the nation's most affluent markets.
The $93.2 billion-asset PNC Financial Services Group Inc. of Pittsburgh entered the region in May by buying Riggs National Corp., and the $38 billion-asset First Horizon National Corp. of Memphis has opened more than a dozen branches in northern Virginia in the last two years. SunTrust Banks Inc. of Atlanta, which already has more than 170 branches in the Washington market, plans to open another 66 there by 2010.
Cardinal is responding to the competitive challenge with a major expansion of its own.
Since November of last year it has opened six branches, and a seventh is slated to open in Washington early next month. The company plans to open branches in Washington's affluent Maryland suburbs, and it is eyeing Charlottesville and Winchester in Virginia.
At the same time, it has focused on expanding its wealth management product line. In June, it acquired Wilson/Bennett Capital Management Inc., an Alexandria firm with $225 million under management, and last month it announced a deal to buy most of the assets and all of the deposits of FBR National Trust Co., a unit of the Arlington, Va., investment bank Friedman, Billings, Ramsey Group Inc.
Making its story even sweeter, Cardinal is enjoying its fattest profits ever. The $8.3 million it made in the first nine months of this year is nearly equal to what it earned in all of 2003 and 2004 combined. Moreover, the third quarter was the first in which all three of its business lines - mortgage banking, commercial banking, and wealth management - turned a profit.
Cardinal's lack of profits prompted Mr. Clineburg to step away from the investor-conference circuit early last year.
"I decided that we weren't going to come back until we had put some earnings on the books," he said.
Cardinal was founded in 1998 with a business plan that called for opening several separately chartered banks in markets throughout northern Virginia. When Mr. Clineburg joined the company in 2001, it had four bank subsidiaries.
The problem was that Cardinal had never managed to generate enough income to support its costly organizational structure.
"We had more than 40 directors, four bank presidents, four senior lending officers, and no revenue," Mr. Clineburg said. "It was a recipe for disaster."
The solution was straightforward, he said; the company had to downsize to have a chance for future growth.
Straightforward, though, does not mean easy. Faced with mounting losses, Mr. Clineburg collapsed the four subsidiaries into a single bank and let 33 employees go in 2001. Making matters worse, the pink slips went out shortly before Christmas.
"It was a life-changing event," he said. "I agonized over it for weeks. They were quality, class individuals … but I had to save the company."
The layoffs were the low point. Mr. Clineburg recapitalized the company with a series of secondary stock offerings, then used the cash to acquire George Mason Mortgage LLC, a highly profitable local mortgage company, in June of last year. George Mason, Mr. Clineburg said, has provided the company with earnings as he has fleshed out its commercial banking and wealth management product lines.
With the layoffs now in the distant past, Mr. Clineburg is clearly enjoying his time at Cardinal - a fact that was evident during his presentation in Philadelphia.
Instead of making his pitch from behind a podium, Mr. Clineburg grabbed a cordless microphone and a wireless clicker to maneuver through his PowerPoint presentation and began working the room.
When an investor wanted to ask a question, he rushed to the seat and handed over the microphone, the way talk-show hosts do with their audiences.
Cardinal is the third banking company Mr. Clineburg has run in his 35-year career. He presided over the sale of the first two - Arlington Bank and George Mason Bankshares Inc. in Fairfax, Va. (the former parent of George Mason Mortgage) - for substantial premiums.
His track record has contributed to the takeover speculation that is beginning to bubble around Cardinal, but Mr. Clineburg said he has no plans for a sale, though he ruled nothing out.
"I think I have proven that I work directly for the shareholders and that I'll do what it takes to create value for them," he said.
Investors seem to like what they are seeing from Cardinal. Its stock hit a 52-week high of $11.79 a share Friday and has risen about 23% since June 1. It retreated Tuesday and was trading at $11.14 in the late afternoon.
Mr. Clineburg "is doing all the right things," said Kevin K. Reevey, a senior research analyst at BankAtlantic Bancorp Inc.'s Ryan Beck & Co. Inc. "He is branching into some very attractive areas, and broadening the product line."
Cardinal is still a relatively unknown "diamond in the rough," but its growing success is beginning to attract attention, Mr. Reevey said.
"It's beginning to pop up on the radar screens of a lot of buyers," he said. "I think within a five-year window, it is going to be an attractive takeout candidate."
Mr. Reevey rates Cardinal's stock "outperform," as does John A. Pandtle, who covers the company for Raymond James & Associates.
Mr. Pandtle said Cardinal "has the legitimate potential to be the bank of choice" for both bankers and customers disillusioned with big banks.
Mr. Pandtle said Cardinal's success in attracting bankers is a good indicator of its future prospects. In recent months the company has brought on several loan officers, and last month it pulled of something of a local coup by hiring Kathleen W. Carr, the former president and CEO of the $334 million-asset Abigail Adams National Bancorp Inc. in Washington, to lead its expansion in the nation's capital.
"I can't point to one silver bullet, but it's got a lot of positive things jelling right now," he said. "You cannot underestimate the influence of Bernard Clineburg. He brought a lot of credibility and expertise to a company that was struggling."
