By Ann Heffron, CFA
Chesapeake Financial Shares, Inc. (OTC Markets:CPKF) reported third quarter diluted EPS of $0.75 that 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.
Relative to the year-ago quarter, net earnings jumped 36% to $2.5 million, while 2012’s third quarter diluted EPS advanced 33% over the $0.56 posted in 2011’s third quarter due to a greater number of shares outstanding.
Net interest income rose 2% year over year to $5.7 million, due to good 4% growth in loans and receivables outstanding partially offset by a net interest margin that we estimate was below the 4.56% earned in the year-ago quarter.
Noninterest income advanced $1.0 million, or 28%, year over year to $4.4 million, largely the result of strong growth in merchant card income (up $0.4 million, or 32%) as the Company added new clients and in other noninterest income (up $0.3 million, or 54%), as well as a $0.3 million positive swing in the combined loss from the sales of securities and OREO to a loss of $0.1 million from a loss of $0.4 million.
Total noninterest expense increased $0.3 million, or about 2%, year over year to $6.9 million ($0.1 million below our estimate), as total compensation expense climbed 3% and other noninterest expense rose 10%.
CPKF just 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.
CPKF was ranked 16th (up from 20th a year ago) out of all banks nationally with less than $2 billion in total assets by American Banker.
We are currently 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 $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 .