CPKF: Record First Quarter Net Earnings
Ann Heffron, CFA
Chesapeake Financial Shares, Inc. (CPKF) reported that record first quarter net earnings jumped 21% year over year to $1.8 million and diluted EPS climbed 20% to $0.57. Sequential net income and diluted EPS advanced 16% and 15%, respectively, from the fourth quarter of 2011. The primary reasons for 2012’s outperformance versus 2011’s first quarter were a $0.44 million, or 75%, slide in the provision for loan losses to $0.15 million, and a drop in the effective tax rate to to 21.9% from 24.4%.
Compared to our projections, net income was about $60,000, or $0.02 per diluted share, below our $1.9 million, or $0.59 per share, estimates. This primarily reflected asset management fees that were a bit lower and compensation expense that was modestly higher than our estimates.
Net interest income inched up 0.3% year over year to $5.9 million (the same as our estimate), due to improvement in the net interest margin, while noninterest income advanced $0.4 million, or 15%, year over year to $3.1 million, largely reflecting a $0.3 million combined positive swing in securities losses and net losses on other real estate owned.
Importantly, CPKF recently raised its quarterly dividend by 10% to $0.11 from $0.10 and has increased its dividend payment annually for the past twenty years.
We will update our estimates when detailed financial information becomes available within the next few weeks.
We note that US Banker ranked CPKF 20th (up from 32nd about a year ago) out of all banks nationally with less than $2 billion in total assets, which includes approximately 6,000 banks, and #1 of all banks in Virginia. This ranking was based upon three-year average returns on equity, which for Chesapeake Financial was 13.40%. The Company has steadily risen through the rankings in the past four years, reflecting its solid financial performance during this difficult banking environment.
Chesapeake Financial Shares, Inc. is a bank holding company headquartered in Kilmarnock, Virginia, with $641 million in total assets at March 31, 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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