Ann Heffron, CFA
CPKF: Strong First Quarter; Target Price and Estimates under Review
CPKF reported a strong first quarter, with diluted EPS rising 34.5% to $ 0.47 from $ 0.35, a penny short of our first quarter estimate of $ 0.48. (All per share data in this report have been adjusted for a 6-for-5 stock split that took place earlier this month.)
This occurred despite a 144% year-over-year increase in the loan loss provision to $ 0.6 million as CPKF strengthened loan loss reserves and was mainly the result of 12.5% growth in net interest income to $ 5.8 million and tight control over operating expenses, which fell 2% year over year and 9% sequentially to $ 6.2 million. In addition, the effective tax rate was 2.5 points lower in 2011’s first quarter than in the comparable 2010 period.
CPKF has taken a number of steps to increase returns to shareholders, including two recent dividend hikes totalling almost 9% and a stock split. The Company just raised the quarterly dividend rate by 4.3% to $ 0.10 from $ 0.096, which follows a 4.5% dividend increase in March. In addition, the Company had a 6-for-5 stock split that occurred earlier this month.
Following these events, CPKF shares surged 20% and are now trading at a 52-week high and well in excess of our target price.
We are currently reviewing our target price and estimates and will issue a more comprehensive report when detailed financial information becomes available in the next few weeks.
Chesapeake Financial Shares, Inc. (CPKF or the Company) is a bank holding company headquartered in Kilmarnock, Virginia, with $ 603 million in total assets at March 31, 2010. 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.
For a free copy of the CPKF research report, please email scr@zacks.com with CPKF as the subject.
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