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CPKF: Second Quarter Displays Strong Sequential Growth in Merchant Card and Cash Flow Businesses

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CPKF: Second Quarter Displays Strong Sequential Growth in Merchant Card and Cash Flow Businesses

Ann Heffron, CFA

Chesapeake Financial Shares, Inc. (CPKF) reported second quarter diluted EPS of $0.62 that was 22% higher than our $0.51 estimate as noninterest revenue and noninterest expense were better than our estimates.

Relative to the year-ago quarter, net earnings were basically flat at $2.1 million, though 2012’s second quarter diluted EPS was a penny lower than the $0.63 posted in 2011’s second quarter due to a greater number of shares outstanding.

From an operating perspective, results were actually stronger than they first appear: 2012’s second quarter includes a combined net loss of $0.3 million from the sales of securities and OREO, while 2011’s second quarter includes a combined net gain of $0.3 million from the sales of securities and OREO. Excluding these items from both years’ results in a $0.13 per share gain in diluted EPS in 2012’s second quarter, rather than the $0.01 per share decrease that was actually reported.

Sequential net income advanced 11% from $1.8 million and diluted EPS gained 10% from $0.57 in the first quarter of 2012 due to strong growth in merchant card income (up $0.2 million, or 25%) and cash flow income (up $0.2 million, or 29.0% on a solid gain in cash flow receivables from new business initiatives), partly offset by $0.2 million, or 2%, slide in net interest income.

CPKF raised its quarterly dividend by 10% to $0.11 and has increased its dividend payment annually for the past twenty years.

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 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 $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.  

To view a free copy of our most recent research report on CPKF, visit  Ann Heffron's page at  Zacks Small Cap Research.

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