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CPKF: Spectacular Quarter with Diluted EPS Surging 32% Year over Year

06/16/2017
By Ann Heffron, CFA, CPA

OTC:CPKF

CPKF’s (OTC:CPKF) first quarter net earnings rose $0.6 million year over year, or 32%, to $2.6 million, while 2017’s first quarter diluted EPS increased by $0.15, or 32%, to $0.63 from $0.48 posted a year ago. It was CPKF’s best quarter since we began covering the Company.

This was much better than our estimate, which had called for a $0.1 million gain in net earnings to $2.0 million (off by $0.6 million) and a $0.02 advance in diluted EPS to $0.50 (off by $0.13).

The primary factors behind the difference between reported results and our estimate were:  (1) merchant card income was $0.8 million higher than our estimate; (2) income from fiduciary activities was $0.3 million better than we had expected; and (3) other miscellaneous income was $0.2 million more than our projection. This was partly offset by merchant card expense that was $0.5 million worse than our estimate. 

The major reasons for the first quarter’s $0.6 million increase in net earnings versus the prior-year quarter were a $1.7 million, or 16%, advance in net revenues due to higher net interest income (up $0.1 million) and larger noninterest income (up $1.6 million from merchant card income and other miscellaneous income), partly offset by a $0.7 million, or 9%, rise in total noninterest expense, mostly from greater merchant card expense.

Gross loans increased $39 million, or 9%, year over year, and $14 million, or 3%, sequentially to $468 million. 

We are currently reviewing our estimates and will issue a more comprehensive report when detailed financial information becomes available within the next few weeks.

Last July, CPKF’s Board of Directors approved a 4.2% increase in the quarterly dividend to $0.125 from $0.12. Notably, CPKF has increased the annual dividend payment every year for the past twenty-five years since 1991. 

In 2017 for the tenth consecutive year, Chesapeake Financial Shares, Inc. has been included in the American Banker magazine listing of the “Top 200 Community Banks” in the United States. The bank ranked at #123 in the nation out of approximately 669 publicly traded banks and thrifts with less than $2 billion in assets in the study, up from #148, when CPKF first broke into the rankings in 2008. The ranking is based on a three-year average of return on average equity (ROAE), which for CPKF was 9.94%.  

Chesapeake Financial Shares, Inc. (CPKF or the Company) is a financial holding company headquartered in Kilmarnock, Virginia, with $744 million in total assets at March 31, 2017. CPKF is predominantly a small business lender with 14 branch offices and one loan production office that serve customers in the eastern region of Virginia between the Potomac and James Rivers. 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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