CPKF: Bumping up EPS Estimates Due to Strong Noninterest Income Growth
Ann Heffron, CFA
We are bumping up our diluted EPS estimates—in 2012 to $2.25 from $2.16 and in 2013 to $2.35 from $2.30, mainly to reflect increases in our estimates for noninterest income on the back of expected solid growth in merchant card processing and cash flow income. This represents EPS gains of 4% in both 2012 and 2013.
Merchant card income should continue to benefit from the addition of a new service to its line-up. CPKF has become the middleman for independent sales organization (ISOs) that need bank processing for card transactions. CPKF has been increasing market share as smaller competitors have left this space. CPKF is now providing this service to two companies, and will begin processing for another ISO later this year.
Moreover, cash flow receivables jumped over $3 million, or 20 ½%, during the second quarter due to positive customer response to a new array of more attractive offerings designed specfically for customers in the cash flow business, the impact of which should continue to be experienced through upcoming quarters.
Looking forward, other positives include continued asset quality improvement resulting in an expected decline in the loan loss provision in 2012, as well as estimated total loan growth of 4% in 2012 and 6% in 2013.
Chesapeake Financial Shares, Inc. is a bank holding company headquartered in Kilmarnock, Virginia, with $635 million in total assets at June 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.
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