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CPKF: Third Quarter Results Better Than Anticipated


By Ann Heffron, CFA, CPA


CPKF’s (OTC:CPKF) third quarter net earnings rose $0.2 million year over year, or 12%, to $1.7 million, while 2014’s third quarter diluted EPS grew by $0.04, or 11%, to $0.42 from $0.38 posted a year ago. All per share data in this report have been adjusted for a 5-for-6 stock split, paid to shareholders in mid-October 2014.

Click here to download a free copy of the CPKF research report: CPKF 12-22-14

This was better than our estimate, which had called for a $0.1 million increase in net earnings to $1.6 million (off by $0.1 million) and a $0.02 rise in diluted EPS to $0.40 (off by $0.02).

The primary reasons for the difference between reported results and our estimate was that net revenues were $1.0 million greater than $9.4 million we had projected, largely due to a sharper-than-expected increase in other income, partly offset by total noninterest that was $0.7 million more than we had estimated as other expense came in $0.4 million higher than we had expected. In addition, the effective tax rate of 26.3% was much greater than our 22.0% estimate, which decreased the bottom line by $0.2 million more than we anticipated. 

The major reasons for the third quarter’s $0.2 million gain versus the prior-year quarter were a $0.7 million increase in noninterest income (mostly due to a $0.9 million jump in other miscellaneous income) that was partly offset by a $0.3 million rise in noninterest expense (primarily the result of a $0.5 million climb in other miscellaneous expense) and a 26.3% effective tax rate, which was almost 500 basis points higher than the 21.4% posted last year, thereby depleting net income by $0.2 million more than a year ago. 

In July, CPKF declared a 6-for-5 stock split, while maintaining the quarterly dividend at $0.135 ($0.1125 after the split). Notably, CPKF was cited by SNL Financial as one of only 20 banks in the country (and only two in Virginia) to increase dividends by at least 2% per year and at least a cumulative 30% over the past five years. CPKF recorded cumulative dividend growth of 51.1% over 2008-2013. 

In August, CPKF announced that for the seventh consecutive year, Chesapeake Bank had made the American Banker magazine listing of the “Top 200 Community Banks” in the United States. The bank ranked at #28 out of approximately 6,000 community banks in the study (up from #148, when CPKF first broke into the rankings in 2008), based upon its three-year average ROE of 14.07%. 

Chesapeake Financial Shares, Inc. is a financial holding company headquartered in Kilmarnock, Virginia, with $658 million in total assets at September 30, 2014. CPKF is predominantly a small business lender with 12 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 five branches in Williamsburg. In addition, CPKF opened a commercial loan production office in Richmond, Virginia in mid-August 2011. 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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