CPKF Chesapeake Financial Shares Inc (QX)

CPKF: Raising Estimates Following Strong Third Quarter

By Ann Heffron, CFA

We are raising our diluted EPS estimates on Chesapeake Financial Shares, Inc. (OTC Markets:CPKF) following the third quarter’s strong showing.

For 2012, our new EPS estimate is $2.42, up from $2.25 previously and a 12% increase over 2011’s $2.16.

For 2013, we have raised our estimate by a dime, to $2.45 from $2.35 before. This represents a 1% gain over our 2012 estimate, with projected EPS dynamics hurt by a contracting net interest margin and the absence of a couple of beneficial items as occurred in 2012, including a one-time accounting adjustment in recognizing merchant card income and higher-than-normal levels of pare-off fees from residential mortgage loans that are originated and closed with FHLMC.

To access a free copy of the CPKF research report, please click here: CPKF 12-20-12

CPKF reported third quarter diluted EPS of $0.75, which was 27% higher than our $0.59 estimate and a record quarter for the Company as noninterest revenue and noninterest expense were better than our estimates. Third quarter diluted EPS advanced 33% over the $0.56 posted in 2011’s third quarter and was up 20% sequentially from $0.62 in the second quarter.

CPKF hiked its quarterly dividend by 9% to $0.12, following a 10% increase earlier this year. Notably, CPKF has increased the annual dividend payment every year for the past twenty years since 1991.

On October 29, CPKF announced a tender offer to repurchase up to $1.5 million of company stock. Assuming the entire $1.5 million was repurchased, this would reduce shares outstanding by 2%, and increase diluted EPS by a penny.

CPKF was ranked 16^th (up from 20^th a year ago) out of all banks nationally with less than $2 billion in total assets by the American Bankers Association.

Chesapeake Financial Shares, Inc. is a bank holding company headquartered in Kilmarnock, Virginia, with $634 million in total assets at September 30, 2012. CPKF is predominantly a small business lender with 11 branch offices that serve customers in the eastern region of Virginia between the Potomac and James Rivers. These offices are located in Kilmarnock, Lively, Irvington, Mathews, Hayes, and Gloucester, with four branches in Williamsburg. CPKF, which began as Lancaster National Bank on April 13, 1900, has a long history and strong ties with the communities it serves. 

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