By Ann Heffron, CFA
On October 29, 2012, Chesapeake Financial Shares, Inc. (OTC Markets:CPKF) announced a tender offer to repurchase up to $1.5 million of company stock at a price of $18.50 per share for shareholders of record as of October 25, 2012. Shares must be tendered by the close of business on December 10, 2012.
We view this share repurchase at a $2.00, or 12%, premium to CPKF’s current stock price of $16.50 positively, noting that it will help EPS growth be reducing shares outstanding by 2% and could have a positive impact on valuations going forward. The Company remains undervalued, both relative to small-cap bank peers and historical norms, and we continue our Outperform recommendation on CPKF shares.
This is the third piece of good news CPKF has delivered recently. About a week ago, CPKF reported record EPS for the third quarter, up 33% year over year to $0.75, which was 27% higher than our $0.59 estimate. Results were driven by a strong gain in merchant card income and solid growth in loans and receivables outstanding.
Just as important, the Company also hiked its quarterly dividend by 9% to $0.12, following a 10% increase earlier this year.
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.
To view a free copy of our most recent research report on CPKF, visit Ann Heffron's page at Zacks Small Cap Research .