CPKF: Fourth Quarter EPS Dragged Down by Nonoperating
By Ann Heffron, CFA
CPKF (OTC Markets:
reported fourth quarter diluted EPS of $0.39 that was $0.10, or
20%, lower than our $0.49 estimate as nonoperating items dragged
Specifically, net losses from sales of securities and OREO
plus other noninterest expense were larger than we had expected,
though this was partly offset by other noninterest income, loan
growth, and an effective tax rate that were better than
Relative to the year-ago quarter, net earnings slid 17% to
$1.3 million, while 2012's fourth quarter diluted EPS fell 20%
from the $0.49 posted in 2011's fourth quarter due to a greater
number of shares outstanding.
For the year, CPKF earned $7.7 million, or $2.32 per diluted
share, up 10% from the $7.0 million, or $2.16 per diluted share,
posted in 2011. Primary contributors to this growth were a 10%
gain in noninterest income on the back of higher merchant card
revenues, a 50% reduction in the loan loss provision, and
continuing strong control over operating expenses.
CPKF recently hiked its quarterly dividend by 9% to $0.12,
following a 10% increase earlier in 2012. Notably, CPKF has
increased the annual dividend payment every year for the past
twenty years since 1991.
In December, CPKF completed a tender offer to repurchase $1.5
million of company stock (about 2% of outstanding shares) at
$18.50 per share.
We note that American Banker recently ranked CPKF 16
(up from 20
a year ago) out of all banks nationally with less than $2 billion
in total assets, which includes approximately 6,000 banks, and #1
of all banks in Virginia for the second year in a row. This
ranking was based upon three-year average returns on equity,
which for Chesapeake Financial was 14.00%. The Company has
steadily risen through the rankings in the past five years,
reflecting its solid financial performance during this difficult
We are reviewing our estimates and will issue a more
comprehensive report when detailed financial information becomes
available within the next few weeks.
Chesapeake Financial Shares, Inc. is a bank holding company
headquartered in Kilmarnock, Virginia, with $668 million in total
assets at December 31, 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. In addition, CPKF opened a commercial loan
production office in Richmond, Virginia in mid-August 2011.
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