CPKF: Sweet Sixteen
Ann Heffron, CFA
Chesapeake Financial Shares, Inc. (CPKF) remains a buy, though we are reducing our 12-month target price by $1.00 to $16.50 as we have adjusted our earnings model.
We are lowering our 2012 diluted EPS estimate to $2.16, the same as CPKF earned in 2011, from $2.20, principally due to the EPS shortfall from our estimate in 2012’s first quarter. Our initial 2013 estimate is $2.30 per diluted share, a 6% gain over our 2012 estimate.
Importantly, CPKF remains one of the more profitable banks among small-cap banks in the US. In fact, American Banker recently ranked CPKF 16th (up from 20th 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 for the second year in a row. This ranking was based upon three-year average returns on equity, which for Chesapeake Financial was 14.00%. Chesapeake Financial is a high-quality, well-managed bank that has steadily risen through the American Banker rankings in the past five 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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