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Chesapeake Financial (OTC:CPKF) Stock, Option Chain

Chesapeake Financial

CHESAPEAKE FINL SHS

Chesapeake Financial Shares Inc is engaged in the business of full-service lending, providing deposit services to individuals and businesses and offering brokerage, trust, and estate management services. The company's loan portfolio includes segments; Commercial loans include both secured and unsecured loans for working capital, expansion, and other business purposes, Commercial-Real Estate: Loans secured by commercial real estate, Consumer-Non-Real Estate, and Residential-Real Estate. The company operates through its network of branches located throughout the Northern Neck, Middle Peninsula, Williamsburg, James City County, and Richmond areas of Virginia.

CPKF


  By Ann Heffron, CFA, CPA

OTC:CPKF

READ THE FULL CPKF RESEARCH REPORT

CPKF: Raising EPS Estimates for 2022 and 2023

CPKF: Second Quarter Better Than Expected

CHESAPEAKE FINCL SHS INC by Chesapeake Financial Shares, Inc.

Chesapeake Financial Shares Inc

By <a href="https://scr.zacks.com/analyst-bios/person-details/default.aspx?ItemId=01f0eb46-fe53-4062-878a-1b70c76b06a1">Ann Heffron, CFA, CPA</a>
<stock_ticker>OTC:CPKF</stock_ticker>
<a href="https://s27.q4cdn.com/906368049/files/News/2022/Zacks_SCR_Research_09062022_CPKF_Heffron.pdf">READ THE FULL CPKF RESEARCH REPORT</a>
CPKF's (OTC: <a class="ticker" href="https://www.benzinga.com/stock/cpkf#OTC">CPKF</a>) second quarter net earnings increased $0.1 million, or 2%, year over year to $4.1 million, while 2022's second quarter diluted EPS rose by $0.04, or 5%, to $0.86 from $0.82 posted a year ago. 
This was better than our estimate, which had called for a $0.6 million decrease in net earnings to $3.4 million and a $0.10 decline in diluted EPS to $0.72.
We note that last year's second quarter benefitted from the inclusion of $660,000 of Paycheck Protection Program fees, which this quarter did not.
The main factors behind the difference between actual results and our estimate were: (1) net interest income was $0.5 million higher than our estimate due to a larger-than-expected net interest margin of 3.64% (versus our 3.40% estimate); (2) merchant services income was $0.3 million higher than expected and (3) other miscellaneous income was $0.2 million more than projected. These positives were partly offset by: (1) other miscellaneous expense that was $0.1 million more than projected and (2) income tax expense that was $0.2 million larger than our estimate due greater pretax earnings and a higher effective tax rate. 
The major reasons for the second quarter's $0.1 million, or 2%, increase in net earnings versus the prior-year quarter were a $0.7 million, or 0.5%, rise in net revenues, as a $1.1 million, or 12%, gain in net interest income was partly offset by a $0.4 million, or 7%, decrease in other noninterest income. In addition, noninterest expense was $1.0 million more than last year's second quarter due to greater compensation costs (up $0.8 million) and growth in other miscellaneous expense of $0.2 million. Income tax payments were $0.4 million less than those a year ago due to lower pretax earnings and a much lower effective tax rate that was 7.0 points below last year's 23.2%. 
We are raising our diluted EPS estimate for 2022 by $0.11, to $3.01 from $2.90, primarily reflecting better-than-expected results in the second quarter. We note our 2022 diluted EPS estimate is still 3% below 2021's diluted EPS of $3.11. The main reasons for the EPS decline in 2022 reflect the winding down of the PPP (and related decrease in recognition of deferred processing fees of an estimated $4.13 million in 2021), a loss provision of $0.7 million (compared to a credit of $0.4 million in 2021), and a $0.9 million drop in mortgage banking income, partly offset by a strong turnaround in the cash management business, including a $0.8 million gain in fee income (up 38%) and a $1.6 million decrease in the cash management loss provision.
We are increasing our diluted EPS estimate for 2023 by a penny from $3.10 to $3.11, a 3% gain over our revised 2022 EPS estimate of $3.01. We expect most operations to post solid improvement in 2023, with the exception of mortgage banking, which should experience some pressure due to rising interest rates. We are not projecting any one-time gains or losses from sales of securities or interest-rate caps, as occurred in 2022's first quarter. 
Loan demand appears to be moderating somewhat from the first half's strong pace, and we are reducing our estimate of loan growth in 2022 from 8% to 6%, while maintaining our estimate of 5% growth in 2023. The net interest margin will decline significantly in 2022 due to the loss of PPP fee income (to 3.52%from 3.80% in 2021) and experience lesser erosion in 2023 (to 3.30% from 3.52%).
We are increasing our estimate of merchant services income by $0.3 million to $4.4 million in 2022 and by $0.2 million to $4.6 million in 2023, though a recently added ISO relationship may provide higher growth going forward. We are sharply increasing our estimate of cash management income by $0.8 million (up 38%) in 2022 and by $0.2 million (up 7%) in 2023, as we expect solid receivables growth. This reflects the addition of new clients, as well as growth in existing client credit lines, following the stoppage of the PPP program.
For the first time in 2021, CPKF showed a separate line item for its mortgage banking operations (previously included in other income), while at the same time folding the ATM income line item into other income. Our stand-alone estimates for mortgage banking income, reduced by $0.2 million in both 2022 and 2023, are $1.9 million in 2022 and $1.6 million in 2023, down from $2.8 million actual in 2021, reflecting reduced activity due to the impact of higher mortgage rates.
For 2022, our estimate for the loan loss provision remains $0.7 million, up from $2021's loan loss reversal (credit) of $0.4 million in 2021, but down from 2020's $1.95 million loss provision, which reflected the bulking up of loan loss reserves in preparation for the possibility of asset quality deterioration due to economic distress caused by COVID-19 (which failed to materialize, as asset quality remains strong). Our estimate for 2023's loss provision continues at $0.7 million, the same as in 2022. Signally, the Financial Accounting Standards Board's Current Expected Credit Loss (CECL) impairment standard, which requires "life-of-loan" estimates of losses to be recorded for unimpaired loans will be adopted in 2023. Adoption of CECL is not expected to have a material impact on loss provisions in 2023.
The provision for cash management losses, a separate line item listed under other noninterest expense, is expected to decline to about $240,000 in 2022, down $1.6 million from 2021's $1.8 million, which reflected strong growth in receivables during the first quarter, as well as the charge-off of one $2.3 million credit. We are projecting that losses will remain stable and estimate the cash management provision at $240,000 again in 2023.
There are other factors adding to CPKF's expense burden going forward. CPKF expects several new hires to increase compensation costs. CPKF's digital strategy for its new on-line banking platform requires investing in new technology, leading to higher IT expense. CPKF recently opened a new tech center, which houses IT operations, marketing, and merchant card processing, and will add to depreciation expense beginning in 2021's third quarter. 
At the July 15, 2022 Chesapeake Financial Shares Board of Directors meeting, the Board raised the quarterly dividend to $0.15 per share from $0.14 per share (a 7% increase), payable on or before September 15, 2022. This follows two dividend increases in 2021. Notably, CPKF has increased the annual dividend payment every year for the past thirty years since 1991. 
In 2022 for the fifteenth consecutive year, Chesapeake Financial Shares, Inc. has been included in the American Banker magazine listing of the "Top 200 Community Banks" in the United States. The bank ranked at #130 in the nation out of approximately 6,000 community banks in the study, up from #148 when CPKF first broke into the rankings in 2008. The ranking is based on a three-year average of return on average equity (ROAE), which for CPKF was 11.07%. 
Chesapeake Financial Shares, Inc. (CPKF or the Company) is a financial holding company headquartered in Kilmarnock, Virginia, with $1,342 million in total assets at June 30, 2022. CPKF is predominantly a small business lender with 16 branch offices that serve customers in the eastern region of Virginia between the Potomac and James Rivers. 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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DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives quarterly payments totaling a maximum fee of up to $40,000 annually for these services provided to or regarding the issuer. Full Disclaimer <a href="https://scr.zacks.com/disclaimer/default.aspx" style="color: rgb(242, 132, 16);">HERE</a>.

By <a href="https://scr.zacks.com/analyst-bios/person-details/default.aspx?ItemId=01f0eb46-fe53-4062-878a-1b70c76b06a1">Ann Heffron, CFA, CPA</a>
<stock_ticker>OTC:CPKF</stock_ticker>
<a href="https://s27.q4cdn.com/906368049/files/News/2022/Zacks_SCR_Research_07292022_CPKF_Heffron.pdf">READ THE FULL CPKF RESEARCH REPORT</a>
CPKF's (OTC: <a class="ticker" href="https://www.benzinga.com/stock/cpkf#OTC">CPKF</a>) second quarter net earnings increased $0.1 million, or 2%, year over year to $4.1 million, while 2022's second quarter diluted EPS rose by $0.04, or 5%, to $0.86 from $0.82 posted a year ago. 
This was better than our estimate, which had called for a $0.6 million decrease in net earnings to $3.4 million and a $0.10 decline in diluted EPS to $0.72.
We note that last year's second quarter benefitted from the inclusion of $660,000 of Paycheck Protection Program fees, which this quarter did not.
The main factors behind the difference between actual results and our estimate were: (1) net interest income was $0.5 million higher than our estimate due to a larger-than-expected net interest margin of 3.64% (versus our 3.40% estimate); (2) merchant services income was $0.3 million higher than expected and (3) other miscellaneous income was $0.2 million more than projected. These positives were partly offset by: (1) other miscellaneous expense that was $0.1 million more than projected and (2) income tax expense that was $0.2 million larger than our estimate due greater pretax earnings and a higher effective tax rate. 
The major reasons for the second quarter's $0.1 million, or 2%, increase in net earnings versus the prior-year quarter were a $0.7 million, or 0.5%, rise in net revenues, as a $1.1 million, or 12%, gain in net interest income was partly offset by a $0.4 million, or 7%, decrease in other noninterest income. In addition, noninterest expense was $1.0 million more than last year's second quarter due to greater compensation costs (up $0.8 million) and growth in other miscellaneous expense of $0.2 million. Income tax payments were $0.4 million less than those a year ago due to lower pretax earnings and a much lower effective tax rate that was 7.0 points below last year's 23.2%. 
The loan loss provision was flat year over year at $175,000 (the same as our estimate). Loan loss reserves fell $0.5 million from $7.7 million (1.24% of loans) year over year, but rose $0.3 million sequentially from $6.9 million (1.01% of loans) to $7.2 million (1.03% of loans) as of June 30, 2022. 
 As to other asset quality measures, CPKF had net recoveries of $82,000 of loans in the second quarter. This is $75,000 larger than the $5,000 of net recoveries in the year-ago quarter and compares to net loan charge-offs of $86,000 for full-year 2021. CEO Jeff Szyperski noted nonperforming assets were 0.460% of total assets on June 30, 2022 compared to 0.815% of total assets on June 30, 2021.
Gross loans outstanding increased $85 million, or about 11%, year over year, and rose $13 million, or 2%, sequentially to $705 million. 
CPKF posted a 17.5% ROE and 1.21% ROA for the second quarter of 2022, compared to 12.6% and 1.25%, respectively, in the prior-year quarter.
At the July 15, 2022 Chesapeake Financial Shares Board of Directors meeting, the Board raised the quarterly dividend to $0.15 per share from $0.14 per share (a 7% increase), payable on or before September 15, 2022. This follows two dividend increases in 2021. Notably, CPKF has increased the annual dividend payment every year for the past thirty years since 1991. 
In 2022 for the fifteenth consecutive year, Chesapeake Financial Shares, Inc. has been included in the American Banker magazine listing of the "Top 200 Community Banks" in the United States. The bank ranked at #130 in the nation out of approximately 6,000 community banks in the study, up from #148 when CPKF first broke into the rankings in 2008. The ranking is based on a three-year average of return on average equity (ROAE), which for CPKF was 11.07%. 
We are currently reviewing our estimates and valuation model and will issue a more comprehensive report when detailed financial information becomes available within the next few weeks.
Chesapeake Financial Shares, Inc. (CPKF or the Company) is a financial holding company headquartered in Kilmarnock, Virginia, with $1,342 million in total assets at June 30, 2022. CPKF is predominantly a small business lender with 16 branch offices that serve customers in the eastern region of Virginia between the Potomac and James Rivers. CPKF, which began as Lancaster National Bank on April 13, 1900, has a long history and strong ties with the communities it serves.
<a href="http://scr.zacks.com/Subscribe/defaultaspx/ default.aspx" style="color: rgb(242, 132, 16); text-size-adjust: auto;">SUBSCRIBE TO ZACKS SMALL CAP RESEARCH</a> to receive our articles and reports emailed directly to you each morning. Please visit our <a href="http://scr.zacks.com/Home/default.aspx" style="color: rgb(242, 132, 16); text-size-adjust: auto;">website</a> for additional information on Zacks SCR. 
 
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives quarterly payments totaling a maximum fee of up to $40,000 annually for these services provided to or regarding the issuer. Full Disclaimer <a href="https://scr.zacks.com/disclaimer/default.aspx" style="color: rgb(242, 132, 16);">HERE</a>.

By <a href="https://scr.zacks.com/analyst-bios/person-details/default.aspx?ItemId=01f0eb46-fe53-4062-878a-1b70c76b06a1">Ann Heffron, CFA, CPA</a>
<stock_ticker>OTC:CPKF</stock_ticker>
<a href="https://s27.q4cdn.com/906368049/files/News/2022/Zacks_SCR_Research_02182022_CPKF_Heffron.pdf">READ THE FULL CPKF RESEARCH REPORT</a>
CPKF's (OTC: <a class="ticker" href="https://www.benzinga.com/stock/cpkf#OTC">CPKF</a>) fourth quarter net earnings decreased $0.9 million, or 32%, year over year to $2.0 million, while 2021's fourth quarter diluted EPS fell by $0.19, or 31%, to $0.42 from $0.61 posted a year ago. 
This was slightly below our estimate, which had called for a $0.7 million decrease in net earnings to $2.3 million and a $0.14 decline in diluted EPS to $0.47.
The main factors behind the difference between actual results and our estimate were: (1) net interest income was $0.6 million higher than our estimate due to a larger-than expected net interest margin of 3.58% (versus our 3.25% estimate), as well as higher average interest-earning assets; (2) the provision for loan losses swung a positive $0.4 million to a credit of $225,000 (i.e., a reversal of the loss provision) from an estimated charge (provision) of $175,000, as credit quality was better than anticipated; (3) income tax expense was $0.6 million less than our estimate due to an effective tax credit of 2.3% that was 22.3 points lower than our 20.0% effective tax rate estimate, as CPKF trued up the tax accrual account for the year; and (4) other miscellaneous expense was $0.3 million lower than projected. These positives were more than offset by: (1) noninterest income that was $0.8 million, or 17%, less than we had estimated due to worse-than-expected contributions from most segments, except the cash management and trust and wealth management segments; (2) compensation expense was $0.5 million higher than our estimate stemming from one-time bonus payments in recognition of 2021's record profitability; (3) occupancy expense was $0.5 million above our estimate due to a number of one-time costs; and (4) the provision for cash management losses of $0.75 million came in $0.4 million above our $0.35 million estimate, due to exceptional receivables growth during the fourth quarter (up 44% sequentially).
The major reasons for the fourth quarter's $0.9 million, or 32%, decrease in net earnings versus the prior-year quarter were a $0.5 million, or 3%, gain in net revenues, as growth in net interest income (up $1.0 million, or 11%) was partly offset by a $0.5 million, or 12%, decline in other noninterest income. The decrease in noninterest income primarily reflected a $0.3 million drop in mortgage banking income on weaker activity as well as a $0.2 million fall in net merchant services income. In addition, earnings benefitted from a $0.4 million decline in the provision for loan losses to a credit (reversal) of $225,000 from a charge (provision) of $175,000 in the prior year. Moreover, income tax payments were $0.6 million lower due to a reduced effective tax rate that was 19.3 points less than a year ago. These positives were partly offset by a $2.4 million, or 24%, increase in total noninterest expense, largely stemming from a $0.5 million rise in compensation costs (up 8%), a $0.6 million advance in the provision for cash management losses, a $0.9 million jump in other miscellaneous expense (up 33%), and a $0.4 million (49%) rise in occupancy costs. 
For the year, CPKF posted record net income of $15.0 million, or $3.11 per diluted share, up from the $11.7 million, or $2.39 per diluted share, posted in 2020. 
Primary contributors to this result were a $7.4 million, or 14%, gain in net revenues from an $8.0 million, or 24%, rise in net interest income (including recognition of $4.13 million in PPP fee income), partly offset by a $0.6 million, or 12%, decline in noninterest income, as well as a $2.4 million positive swing in the provision for loan losses. This was partly offset by a $6.2 million, or 17%, increase in total noninterest expense, largely the result of a $3.0 million advance in other miscellaneous expense (up 26%), a $1.6 million jump in the provision for cash management losses stemming from growth in receivables and the charge-off of one $2.3 million credit, a $1.0 million rise in compensation costs (up 5%), and a $0.6 million increase (up 20%) in occupancy costs. In addition, income taxes increased by $0.3 million on larger pretax earnings, partially offset by a lower effective tax rate of 13.3% compared to 14.8% in 2020. 
Our diluted EPS estimate for 2022 remains the same at $2.70, or 13% below 2021's diluted EPS of $3.11. The main reasons for the EPS decline in 2022 reflect the winding down of the PPP (and related decrease in recognition of deferred processing fees of an estimated $4.13 million in 2021), the absence of securities gains ($730,000 in 2021), a loss provision of $0.7 million (compared to a credit of $0.4 million in 2021), and a $0.7 million drop in mortgage banking income, partly offset by a strong turnaround in the cash management business, including a $1.4 million gain in fee income (up 68%) and a $1.6 million decrease in the cash management loss provision.
CPKF participated in the Paycheck Protection Program (PPP), designed to provide a direct incentive for small businesses to keep their workers on the payroll. The Small Business Administration (SBA) will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. PPP loans are guaranteed by the SBA for 100% of amount of the PPP loan not forgiven. Loans issued prior to June 5, 2020 have a maturity of 2 years and 5 years after that. All loans have an interest rate of 1%. In addition, lenders receive fees for processing the PPP loans: 5% for loans of $350,000 or less, 3% for loans between $350,000 and $2 million, and 1% for loans of $2 million or more. (We note these amounts have been tweaked under new provisions when the Consolidated Appropriations Act (CAA) was signed into law on December 27, 2020. The CAA provides for two types of PPP loans, initial or first-draw loans up to $10 million, for entities that have never received a PPP loan, and second-draw loans up to $2 million for entities that have. The Paycheck Protection Program ended on May 31, 2021). 
PPP loans provide for the deferral of payments for a period of 6 months, including payment of principal, interest and fees. Interest will accrue, but payments will not be required during the first 6 months. Processing fees will be amortized over the contract life and adjusted based on actual prepayments. Upon notification from the SBA of the amount of the PPP loan to be forgiven, acceleration of recognition of deferred processing fees will occur for the percentage of the loan forgiven. 
Through the end of September 2020, CPKF had generated about $77 million of PPP loans, of which less than $58,000 remained outstanding at December 31, 2021.  PPP loans that were originated in 2021 under the CAA totaled $36 million, with a remaining $2.7 million outstanding as of December 31, 2021.
The PPP loans had countervailing impacts on the CPKF's net interest margin. First, the 1% annual interest rate is lower than is typical for CPKF loans, which reduced the NIM. However, PPP processing fees, amortized over the life of the loan, added to the NIM. Moreover, when a PPP loan is forgiven, any deferred processing fee was also added to the NIM. We have estimated a net interest margin of 3.30% for full-year 2022, noting that remaining PPP income will total only about $100,000 in 2022. 
The NIM was supplemented in 2021 by the recognition of deferred processing fees. Of total deferred processing fees of about $2.97 million earned during 2020, only $770,000 was taken into income during 2020 while $1.89 million was recognized in 2021's first quarter. Moreover, we estimate that deferred processing fees earned from new PPP loans added under the CAA in 2021 generated an additional $1.52 million of deferred fees in the first quarter and $420,000 in the second quarter, of which $1,178,000 was recognized in the third quarter, significantly more than the $660,000 recognized in the second quarter. The remaining $0.4 million balance of deferred processing fees was booked into income in 2021's fourth quarter ($0.3 million) and 2022's first quarter ($0.1 million).
For 2022, our estimate for the loan loss provision remains $0.7 million, up from $2021's loan loss reversal (credit) of $0.4 million in 2021, but down from 2020's $1.95 million loss provision, which reflected the bulking up of loan loss reserves in preparation for the possibility of asset quality deterioration due to economic distress caused by COVID-19 (which failed to materialize, as asset quality remains strong).
The provision for cash management losses, a separate line item listed under other noninterest expense, is expected to decline to about $240,000 in 2022, down $1.6 million from 2021's $1.8 million, which reflected strong growth in receivables during the fourth quarter, as well as the charge-off of one $2.3 million credit.
There are other factors adding to CPKF's expense burden going forward. CPKF expects several new hires to increase compensation costs. CPKF's digital strategy for its new on-line banking platform requires investing in new technology, leading to higher IT expense. CPKF recently opened a new tech center, which will house IT operations, marketing, and merchant card processing, and will add to depreciation expense beginning in 2021's third quarter. 
Loan demand appears to be solid, and we are maintaining our estimate of loan growth in 2022 at 8%. 
We are continuing our estimate of merchant services income at $4.3 million in 2022, though a recently added ISO relationship may provide higher growth going forward. We are sharply increasing our estimate of cash management income by $1.4 million (up 68%), as we expect strong receivables growth. This reflects the addition of new clients, as well as growth in existing client credit lines, following the stoppage of the PPP program.
For the first time in 2021, CPKF has shown a separate line item for its mortgage banking operations (previously included in other income), while at the same time folding the ATM income line item into other income. Our stand-alone estimate for mortgage banking income is $2.2 million in 2022, down from $2.8 million actual in 2021, reflecting reduced activity due to the impact of higher mortgage rates.
Chesapeake Financial Shares increased the quarterly dividend twice in 2021. On October 14, 2021, the Board of Directors raised the dividend by 8% to $0.14 per share from $0.13 per share, paid on December 15, 2021, to shareholders of record at December 1, 2021. This follows a 4% dividend increase to $0.13 per share from $0.125 per share declared in January 2021 and paid on March 15, 2021. Notably, CPKF has increased the annual dividend payment every year for the past thirty years since 1991. 
In 2021 for the fourteenth consecutive year, Chesapeake Financial Shares, Inc. has been included in the American Banker magazine listing of the "Top 200 Community Banks" in the United States. The bank ranked at #117 in the nation out of approximately 479 publicly traded banks and thrifts with less than $2 billion in assets in the study, up from #148 when CPKF first broke into the rankings in 2008. The ranking is based on a three-year average of return on average equity (ROAE), which for CPKF was 11.14%. Chesapeake Bank again garnered a top ranking in the American Banker's list of "Best Banks to Work for", and had a #24 spot in 2020, out of the 85 banks listed.
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DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives quarterly payments totaling a maximum fee of up to $40,000 annually for these services provided to or regarding the issuer. Full Disclaimer <a href="https://scr.zacks.com/disclaimer/default.aspx" style="color: rgb(242, 132, 16);">HERE</a>.

CPKF: Record Earnings in 2022

By <a href="https://scr.zacks.com/analyst-bios/person-details/default.aspx?ItemId=01f0eb46-fe53-4062-878a-1b70c76b06a1">Ann Heffron, CFA, CPA</a>
<stock_ticker>OTC:CPKF</stock_ticker>
<a href="https://s27.q4cdn.com/906368049/files/News/2021/Zacks_SCR_Research_11222021_CPKF_Heffron.pdf">READ THE FULL CPKF RESEARCH REPORT</a>
CPKF's (OTC: <a class="ticker" href="https://www.benzinga.com/stock/cpkf#OTC">CPKF</a>) third quarter net earnings increased $0.4 million, or 11%, year over year to $3.8 million, while 2021's third quarter diluted EPS soared by $0.09, or 13%, to $0.78 from $0.69 posted a year ago. 
This was well above our estimate, which had called for a $0.6 million decrease in net earnings to $2.8 million and a $0.11 decline in diluted EPS to $0.58.
The main factors behind the difference between actual results and our estimate were: (1) net interest income was $1.2 million higher than our estimate due to a larger-than expected contribution from PPP income recognized during 2021's third quarter of $1,178,000, as well as higher average interest-earning assets; (2) noninterest income was $0.8 million, or 14%, more than we had estimated due to better-than-expected contributions from all segments; (3) the provision for loan losses swung a positive $0.7 million to a credit of $525,000 (i.e., a reversal of the loss provision) from an estimated charge (provision) of $175,000; and (4) income tax expense was $0.2 million less than our estimate due to an effective tax rate of 2.7% that was 5.9 points lower than our 8.6% estimate. These were partly offset by: (1) the provision for cash management losses that came in at $1.0 million versus our $30,000 estimate offset and (1) other miscellaneous expense that was $0.9 million more than projected.
The major reasons for the third quarter's $0.4 million, or 11%, increase in net earnings versus the prior-year quarter were a $1.6 million, or 12%, gain in net revenues, as growth in net interest income (up $2.4 million, or 29%) was partly offset by an $0.8 million, or 14%, decline in other noninterest income. The decrease in noninterest income reflected a $0.6 million drop in mortgage banking income on weaker activity as well as a $0.2 million fall in other miscellaneous income. In addition, earnings benefitted from a $1.15 million decline in the provision for loan losses to a credit (reversal) of $525,000 from a charge (provision) of $625,000 in the prior year. Moreover, income tax payments were $0.5 million lower due to a reduced effective tax rate that was 11.8 points less than a year ago. These positives were partly offset by a $2.9 million, or 32%, increase in total noninterest expense, largely stemming from a $0.5 million rise in compensation costs (up 8%), a $1.0 million advance in the provision for cash management losses, a $1.3 million jump in other miscellaneous expense (up 46%), and a $0.1 million (19%) rise in occupancy costs. 
We are again raising our 2021 diluted EPS estimate by $0.20 to $3.15 from $2.95, 32% above 2020's actual diluted EPS of $2.40. Our diluted EPS estimate for 2022 increases by the same amount—to $2.70 from $2.50, $0.45 or, 14%, below our 2021 estimate. The main reasons for the EPS decline in 2022 reflect the winding down of the PPP (and related decrease in recognition of deferred processing fees of an estimated $4.13 million in 2021), the absence of securities gains ($730,000 in 2021 to date), a loss provision of $0.7 million (compared to zero in 2021), and a $0.7 million drop in mortgage banking income, partly offset by a $1.3 million decrease in the cash flow loss provision.
First, CPKF has participated in the Paycheck Protection Program (PPP), designed to provide a direct incentive for small businesses to keep their workers on the payroll. The Small Business Administration (SBA) will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. PPP loans are guaranteed by the SBA for 100% of amount of the PPP loan not forgiven. Loans issued prior to June 5, 2020 have a maturity of 2 years and 5 years after that. All loans have an interest rate of 1%. In addition, lenders receive fees for processing the PPP loans: 5% for loans of $350,000 or less, 3% for loans between $350,000 and $2 million, and 1% for loans of $2 million or more. (We note these amounts have been tweaked under new provisions when the Consolidated Appropriations Act (CAA) was signed into law on December 27, 2020. The CAA provides for two types of PPP loans, initial or first-draw loans up to $10 million, for entities that have never received a PPP loan, and second-draw loans up to $2 million for entities that have. The Paycheck Protection Program ended on May 31, 2021). 
PPP loans provide for the deferral of payments for a period of 6 months, including payment of principal, interest and fees. Interest will accrue, but payments will not be required during the first 6 months. Processing fees will be amortized over the contract life and adjusted based on actual prepayments. Upon notification from the SBA of the amount of the PPP loan to be forgiven, acceleration of recognition of deferred processing fees will occur for the percentage of the loan forgiven. 
Through the end of September 2020, CPKF had generated about $77 million of PPP loans, of which $0.2 million remained outstanding at September 30, 2021.  PPP loans that were originated in 2021 under the CAA totaled $36 million, with a remaining $11.7 million outstanding as of September 30, 2021.
The PPP loans will have countervailing impacts on the CPKF's net interest margin. First, the 1% annual interest rate is lower than is typical for CPKF loans, which will tend to reduce the NIM. However, PPP processing fees, amortized over the life of the loan, will add to the NIM. Moreover, when a PPP loan is forgiven, any deferred processing fee will also be added to the NIM. We have estimated a net interest margin of 3.30% for full-year 2021, but reduced our estimate for full-year 2022 by 5 basis points to 3.25%, with both estimates excluding any impact from the recognition of deferred processing fees. 
The NIM will be supplemented in 2021 by the recognition of deferred processing fees. Of total deferred processing fees of about $2.97 million earned during 2020, only $770,000 was taken into income during 2020 while $1.89 million was recognized in 2021's first quarter. Moreover, we estimate that deferred processing fees earned from new PPP loans added under the CAA in 2021 generated an additional $1.52 million of deferred fees in the first quarter and $420,000 in the second quarter, of which $1,178,000 was recognized in the third quarter, significantly more than the $660,000 recognized in the second quarter. The remaining $0.4 million balance of deferred processing fees will likely be booked into income during during the final quarter of 2021.
For 2021, we are cutting our estimate of the loan loss provision from $0.7 million to $0.0 million, following the $525,000 reversal of the loss provision in the third quarter. This compares to 2020's $1.95 million loss provision, which reflected the bulking up of loan loss reserves in preparation for the possibility of asset quality deterioration due to economic distress caused by COVID-19 (which failed to materialize, as asset quality remains strong). For 2022, our initial estimate for the loan loss provision remains $0.7 million.
The provision for cash flow losses, a separate line item listed under other noninterest expense, is raised from $0.12 million to $1.44 million in 2021. This follows the $1.0 million rise in the loss provision during the third quarter and an estimated $350,000 bump in the fourth quarter to beef up loss reserves going forward. These adjustments stem from the bankruptcy of one $2.3 million credit, for which there is no expectation of any recovery, but which is now fully written off.
There are other factors adding to CPKF's expense burden going forward. CPKF expects several new hires to increase compensation costs. CPKF's digital strategy for its new on-line banking platform requires investing in new technology, leading to higher IT expense. CPKF recently opened a new tech center, which will house IT operations, marketing, and merchant card processing, and will add to depreciation expense beginning in 2021's third quarter. Finally, the Company added a full-service branch to its network in the third quarter of 2020, which will also increase expenses. 
Loan demand, other than for PPP loans, appears to be solid, and we are maintaining our recently increased estimate of loan growth in both 2021 and 2022 at 8%. 
We are increasing our estimate for merchant services income by $0.2 million to $4.2 million, with $4.3 million our estimate for 2022. We are also raising our estimate of cash management fee income to $1.8 million from $1.5 million in 2021 and to $2.0 million from $1.7 million in 2022, as growth is coming in a bit higher than anticipated.
For the first time in 2021, CPKF has shown a separate line item for its mortgage banking operations (previously included in other income), while at the same time folding the ATM income line item into other income. Our stand-alone estimates for mortgage banking income are $3.0 million in 2021 (up from $2.4 million previously) and $2.3 million in 2022 (up from $1.8 million before).
For the second time this year, Chesapeake Financial Shares increased the quarterly dividend. On October 14, 2021, the Board of Directors raised the dividend by 8% to $0.14 per share from $0.13 per share, payable on December 15, 2021, to shareholders of record at December 1, 2021. This follows a 4% dividend increase to $0.13 per share from $0.125 per share declared in January 2021 and paid on March 15, 2021. Notably, CPKF has increased the annual dividend payment every year for the past thirty years since 1991. 
In 2021 for the fourteenth consecutive year, Chesapeake Financial Shares, Inc. has been included in the American Banker magazine listing of the "Top 200 Community Banks" in the United States. The bank ranked at #117 in the nation out of approximately 479 publicly traded banks and thrifts with less than $2 billion in assets in the study, up from #148 when CPKF first broke into the rankings in 2008. The ranking is based on a three-year average of return on average equity (ROAE), which for CPKF was 11.14%. Chesapeake Bank again garnered a top ranking in the American Banker's list of "Best Banks to Work for", and had a #24 spot in 2020, out of the 85 banks listed.
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CPKF: Some Surprises, But a Good Quarter Overall

By <a href="https://scr.zacks.com/analyst-bios/person-details/default.aspx?ItemId=01f0eb46-fe53-4062-878a-1b70c76b06a1">Ann Heffron, CFA, CPA</a>
<stock_ticker>OTC:CPKF</stock_ticker>
<a href="https://s27.q4cdn.com/906368049/files/News/2021/Zacks_SCR_Research_08272021_CPKF_Heffron.pdf">READ THE FULL CPKF RESEARCH REPORT</a>
CPKF's (OTC: <a class="ticker" href="https://www.benzinga.com/stock/cpkf#OTC">CPKF</a>) second quarter net earnings jumped $1.9 million, or 93%, year over year to $4.0 million, while 2021's second quarter diluted EPS soared by $0.40, or 96%, to $0.82 from $0.40 posted a year ago. 
This was well above our estimate, which had called for a $0.6 million increase in net earnings to $2.6 million and a $0.12 increase in diluted EPS to $0.54.
The main factors behind the difference between actual results and our estimate were: (1) net interest income was $1.2 million higher than our estimate due to a larger-than expected contribution from PPP income recognized during 2021's second quarter of $660,000, as well as higher average interest-earning assets; (2) noninterest income was $0.9 million more than we had estimated due to higher-than-expected net gains on securities sales of $730,000 and $160,000 greater trust and wealth management income; and (3) compensation expense came in $0.3 million lower than anticipated. These were offset by: (1) other miscellaneous expense that was $0.3 million more than projected and (2) income tax expense that was $0.7 million greater due to larger pretax earnings and an effective tax rate of 23.2% that was 8.2 points higher than our 15% estimate.
The major reasons for the second quarter's $1.9 million, or 93%, increase in net earnings versus the prior-year quarter were a $3.1 million, or 25%, gain in net revenues, as growth in net interest income (up $1.5 million) was aided by a $1.6 million, or 39%, rise in noninterest income, as well as a $450,000 decline in the provision for loan losses. The advance in noninterest income reflected $730,000 of securities gains, a $0.6 million increase in other miscellaneous income, a $0.3 million increase in merchant services income, and $0.2 million more trust and wealth management income. These positives were partly offset by a $0.2 million fall in mortgage banking income and a $0.1 million decline in cash flow income on lower receivables balances. Other contributing factors included a $0.7 million, or 7%, increase in total noninterest expense, largely stemming from a $0.1 million rise in compensation costs (up 1%) and a $0.6 million (up 21%) advance in other miscellaneous expense, as well as $0.9 million higher income tax payments due to greater pretax earnings and a higher effective tax rate. 
We are raising our 2021 diluted EPS estimate by $0.20 to $2.95 from $2.75, 23% above 2020's actual diluted EPS of $2.40. Our diluted EPS estimate for 2022 remains $2.50, $0.45 or, 15%, below our 2021 estimate. The main reasons for the EPS decline in 2022 reflect the winding down of the PPP (and related decrease in recognition of deferred processing fees of an estimated $4.14 million in 2021), a $1.6 million cutback in our estimate of cash flow income on reduced receivables growth prospects, and the absence of securities gains ($730,000 in 2021 to date), partly offset by a $0.7 million cut in compensation costs, reflecting a labor shortage. Details of our estimates are discussed more fully below.
First, CPKF has participated in the Paycheck Protection Program (PPP), designed to provide a direct incentive for small businesses to keep their workers on the payroll. The Small Business Administration (SBA) will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. PPP loans are guaranteed by the SBA for 100% of amount of the PPP loan not forgiven. Loans issued prior to June 5, 2020 have a maturity of 2 years and 5 years after that. All loans have an interest rate of 1%. In addition, lenders receive fees for processing the PPP loans: 5% for loans of $350,000 or less, 3% for loans between $350,000 and $2 million, and 1% for loans of $2 million or more. (We note these amounts have been tweaked under new provisions when the Consolidated Appropriations Act (CAA) was signed into law on December 27, 2020. The CAA provides for two types of PPP loans, initial or first-draw loans up to $10 million, for entities that have never received a PPP loan, and second-draw loans up to $2 million for entities that have. The Paycheck Protection Program ended on May 31, 2021). 
PPP loans provide for the deferral of payments for a period of 6 months, including payment of principal, interest and fees. Interest will accrue, but payments will not be required during the first 6 months. Processing fees will be amortized over the contract life and adjusted based on actual prepayments. Upon notification from the SBA of the amount of the PPP loan to be forgiven, acceleration of recognition of deferred processing fees will occur for the percentage of the loan forgiven. 
Through the end of September 2020, CPKF had generated about $77 million of PPP loans, of which $1.9 million remained outstanding at June 30, 2021.  PPP loans that were originated in 2021 under the CAA totaled $36 million, with a remaining $32 million outstanding as of June 30, 2021.
The PPP loans will have countervailing impacts on the CPKF's net interest margin. First, the 1% annual interest rate is lower than is typical for CPKF loans, which will tend to reduce the NIM. However, PPP processing fees, amortized over the life of the loan, will add to the NIM. Moreover, when a PPP loan is forgiven, any deferred processing fee will also be added to the NIM. We have estimated a net interest margin of 3.30% for full-year 2021 and full-year 2022, exclusive of any impact from the recognition of deferred processing fees. 
The NIM will be supplemented by the recognition of deferred processing fees. Of total deferred processing fees of about $2.97 million earned during 2020, only $770,000 was taken into income during 2020 while $1.89 million was recognized in 2021's first quarter. Moreover, we estimate that deferred processing fees earned from new PPP loans added under the CAA in 2021 generated an additional $1.52 million of deferred fees in the first quarter and $420,000 in the second quarter, of which $660,000 was recognized in the second quarter. The $1.6 million balance of deferred processing fees will likely be booked into income during during the final two quarters of 2021.
For 2021, we are cutting our estimate of the loan loss provision from $0.9 million to $0.7 million, about 64% below the level of 2020's $1.95 million, which reflected the bulking up of loan loss reserves in preparation for the possibility of asset quality deterioration due to economic distress caused by COVID-19 (which failed to materialize, as asset quality remains strong). For 2022, our initial estimate for the loan loss provision is also $0.7 million.
There are other factors adding to CPKF's expense burden going forward. CPKF expects several new hires to increase compensation costs. CPKF's digital strategy for its new on-line banking platform requires investing in new technology, leading to higher IT expense. CPKF recently opened a new tech center, which will house IT operations, marketing, and merchant card processing, and will add to depreciation expense beginning in 2021's third quarter. Finally, the Company added a full-service branch to its network in the third quarter of 2020, which will also increase expenses. 
Loan demand, other than for PPP loans, appears to be solid, and we have increased our estimate for loan growth in both 2021 and 2022 from 5% to 8%. 
We are maintaining our estimate for merchant services income at $4.0 million, with $4.3 million our estimate for 2022. We are cutting our estimate of cash management fee income to $1.5 million from $1.8 million, as customers opted for PPP loans, rather than cash flow financing. We now expect cash management to remain weak in 2022, and are cutting our estimate of cash flow fee income to $1.7 million from $3.3 million before.
For the first time in 2021, CPKF has shown a separate line item for its mortgage banking operations (previously included in other income), while at the same time folding the ATM income line item into other income. Our stand-alone estimates for mortgage banking income are $2.4 million in 2021 (down slightly from $2.5 million previously) and $1.8 million in 2022 (down from $2.2 million before).
On January 22, 2021 Chesapeake Financial Shares increased the quarterly dividend 4% to $0.130 per share from $0.125, effective March 1, 2021, payable on or before March 15, 2021. Notably, CPKF has increased the annual dividend payment every year for the past thirty years since 1991. This follows on the heels of a 6-for-5 stock dividend, paid October 15, 2019. 
In 2021 for the fourteenth consecutive year, Chesapeake Financial Shares, Inc. has been included in the American Banker magazine listing of the "Top 200 Community Banks" in the United States. The bank ranked at #117 in the nation out of approximately 479 publicly traded banks and thrifts with less than $2 billion in assets in the study, up from #148 when CPKF first broke into the rankings in 2008. The ranking is based on a three-year average of return on average equity (ROAE), which for CPKF was 11.14%. Chesapeake Bank again garnered a top ranking in the American Banker's list of "Best Banks to Work for", and had a #24 spot in 2020, out of the 85 banks listed.
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CPKF: CPKF Books Another Solid Quarter

By <a href="https://scr.zacks.com/analyst-bios/person-details/default.aspx?ItemId=01f0eb46-fe53-4062-878a-1b70c76b06a1">Ann Heffron, CFA, CPA</a>
<stock_ticker>OTC:CPKF</stock_ticker>
<a href="https://s27.q4cdn.com/906368049/files/News/2021/Zacks_SCR_Research_06082021_CPKF_Heffron.pdf">READ THE FULL CPKF RESEARCH REPORT</a>
CPKF's (OTC: <a class="ticker" href="https://www.benzinga.com/stock/cpkf#OTC">CPKF</a>) first quarter net earnings jumped $1.9 million, or 56%, year over year to a record $5.3 million, while 2021's first quarter diluted EPS soared by $0.40, or 60%, to $1.08 from $0.68 posted a year ago. 
This was well above our estimate, which had called for a $0.4 million decline in net earnings to $3.0 million and a $0.07 decrease in diluted EPS to $0.61.
The main factors behind the difference between actual results and our estimate were: (1) noninterest income was $2.1 million higher than our estimate due to a larger-than expected contribution from PPP income recognized during 2021's first quarter of $1.87 million; (2) noninterest income was $0.3 million more than we had estimated due to higher-than-expected mortgage banking income; and (3) compensation expense came in $0.4 million lower than anticipated. These were offset by: income tax expense that was $0.5 million greater due to higher pretax earnings and an effective tax rate of 16.6% that was 1.6 points higher than our 15% estimate.
The major reasons for the first quarter's $1.9 million, or 56%, increase in net earnings versus the prior-year quarter were a $2.2 million, or 17%, gain in net revenues, as growth in net interest income (up $3.1 million) was partly offset by a $0.9 million, or 16%, drop in noninterest income, as well as a $0.4 million decline in the provision for loans losses. This reflected $0.5 million growth in mortgage banking income, a $0.2 million increase in merchant services income, and a $0.3 million gain in other miscellaneous income. These positives were more than offset by the absence of securities gains ($1.2 million in 2020's first quarter), a $0.2 million net loss on foreclosed assets, and a $0.5 million decline in cash flow income on lower receivables balances. Other contributing factors included a $0.2 million, or 3%, increase in total noninterest expense, largely stemming from a $0.1 million rise in compensation costs (up 2%) and a $0.1 million (up 4%) advance in other miscellaneous expense, as well as $0.5 million higher income tax payments due to greater pretax earnings and a slightly higher effective tax rate. 
We are raising our 2021 diluted EPS estimate by $0.50 to $2.75 from $2.25, 15% above 2020's actual diluted EPS of $2.40. Our initial diluted EPS estimate for 2022 is $2.50, $0.25 or, 9%, below our 2021 estimate. The main reason for the EPS decline in 2022 reflects the winding down of the PPP, and related decrease in recognition of deferred processing fees. Details of our estimates are discussed more fully below.
First, CPKF has participated in the Paycheck Protection Program (PPP), designed to provide a direct incentive for small businesses to keep their workers on the payroll. The Small Business Administration (SBA) will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. PPP loans are guaranteed by the SBA for 100% of amount of the PPP loan not forgiven. Loans issued prior to June 5, 2020 have a maturity of 2 years and 5 years after that. All loans have an interest rate of 1%. In addition, lenders receive fees for processing the PPP loans: 5% for loans of $350,000 or less, 3% for loans between $350,000 and $2 million, and 1% for loans of $2 million or more. (We note these amounts have been tweaked under new provisions when the Consolidated Appropriations Act (CAA) was signed into law on December 27, 2020. The CAA provides for two types of PPP loans, initial or first-draw loans up to $10 million, for entities that have never received a PPP loan, and second-draw loans up to $2 million for entities that have. The Paycheck Protection Program ended on May 31, 2021). 
PPP loans provide for the deferral of payments for a period of 6 months, including payment of principal, interest and fees. Interest will accrue, but payments will not be required during the first 6 months. Processing fees will be amortized over the contract life and adjusted based on actual prepayments. Upon notification from the SBA of the amount of the PPP loan to be forgiven, acceleration of recognition of deferred processing fees will occur for the percentage of the loan forgiven. 
Through the end of September 2020, CPKF had generated about $77 million of PPP loans, of which $58 million remained outstanding at March 31, 2021. This included about $34 million of additional PPP loans that were generated in 2021's first quarter under the CAA. 
The PPP loans will have countervailing impacts on the CPKF's net interest margin. First, the 1% annual interest rate is lower than is typical for CPKF loans, which will tend to reduce the NIM. However, PPP processing fees, amortized over the life of the loan, will add to the NIM. Moreover, when a PPP loan is forgiven, any deferred processing fee will also be added to the NIM. We have estimated a net interest margin of 3.30% for full-year 2021 and full-year 2022, exclusive of any impact from the recognition of deferred processing fees. 
The NIM will be supplemented by the recognition of deferred processing fees. Of total deferred processing fees of about $2.97 million earned during 2020, only $770,000 was taken into income during 2020 while $1.89 million was recognized in 2021's first quarter. Moreover, we estimate that deferred processing fees earned from new PPP loans added under the CAA in 2021 generated an additional $1.52 million of deferred fees in the first quarter and $420,000 in the second quarter. These deferred processing fees will likely be booked into income during during the final three quarters of 2021, with most of this coming in the third and fourth quarters.
For 2021, we are cutting our estimate of the loan loss provision from $0.9 million to $0.7 million, about 64% below the level of 2020's $1.95 million, which reflected the bulking up of loan loss reserves in preparation for the possibility of asset quality deterioration due to economic distress caused by COVID-19 (which failed to materialize, as asset quality remains strong). For 2022, our initial estimate for the loan loss provision is also $0.7 million.
There are other factors adding to CPKF's expense burden going forward. CPKF expects several new hires to increase compensation costs. CPKF's digital strategy for its new on-line banking platform requires investing in new technology, leading to higher IT expense. CPKF will be opening a new tech center, which will house IT operations, marketing, and merchant card processing, and will add to depreciation expense beginning in 2021's third quarter. Finally, the Company added a full-service branch to its network in the third quarter of 2020, which will also increase expenses. 
Loan demand, other than for PPP loans, appears to be solid, with our estimate for loan growth in both 2021 and 2022 at 5%. 
We are maintaining our estimate for merchant services income at $4.0 million, with $4.2 million our estimate for 2022. We are cutting our estimate of cash management fee income to $1.8 million from $2.0 million, as customers opted for PPP loans, rather than cash flow financing. With the winding down of the PPP, we expect cash management to bounce back in 2022, and are estimating cash flow fee income of $3.3 million.
For the first time in 2021, CPKF has shown a separate line item for its mortgage banking operations (previously included in other income), while at the same time folding the ATM income line item into other income. Our initial stand-alone estimates for mortgage banking income are $2.5 million in 2021 and $2.2 million in 2022.
On January 22, 2021 Chesapeake Financial Shares increased the quarterly dividend 4% to $0.130 per share from $0.125, effective March 1, 2021, payable on or before March 15, 2021. Notably, CPKF has increased the annual dividend payment every year for the past thirty years since 1991. This follows on the heels of a 6-for-5 stock dividend, paid October 15, 2019. 
In 2021 for the fourteenth consecutive year, Chesapeake Financial Shares, Inc. has been included in the American Banker magazine listing of the "Top 200 Community Banks" in the United States. The bank ranked at #117 in the nation out of approximately 479 publicly traded banks and thrifts with less than $2 billion in assets in the study, up from #148 when CPKF first broke into the rankings in 2008. The ranking is based on a three-year average of return on average equity (ROAE), which for CPKF was 11.14%. Chesapeake Bank again garnered a top ranking in the American Banker's list of "Best Banks to Work for", and had a #24 spot in 2020, out of the 85 banks listed.
Chesapeake Financial Shares, Inc. (CPKF or the Company) is a financial holding company headquartered in Kilmarnock, Virginia, with $1,238 million in total assets at March 31, 2021. CPKF is predominantly a small business lender with 16 branch offices that serve customers in the eastern region of Virginia between the Potomac and James Rivers. 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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DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks provides and Zacks receives quarterly payments totaling a maximum fee of $40,000 annually for these services. Full Disclaimer <a href="https://scr.zacks.com/home/default.aspx" style="color: rgb(242, 132, 16);">HERE</a>.

CPKF: CPKF Hits a Home Run

By <a href="http://scr.zacks.com/Analysts/Person-Details/default.aspx?ItemId=62130fc1-60ee-4e79-80ae-b6172e6a338a">Ann Heffron, CFA, CPA</a>
<stock_ticker>OTC:CPKF</stock_ticker>
<a href="https://s1.q4cdn.com/460208960/files/News/2020/Zacks_SCR_Research_12162020_CPKF_Heffron.pdf">READ THE FULL CPKF RESEARCH REPORT</a>
Chesapeake Financial's (OTC: <a class="ticker" href="https://www.benzinga.com/stock/cpkf#OTC">CPKF</a>) third quarter net earnings rose $0.2 million, or 5%, year over year to $3.4 million, while 2020's third quarter diluted EPS decreased by $0.04, or 6%, to $0.69 from $0.65 posted a year ago. All data in this report have been adjusted for a 6-for-5 stock dividend, paid on October 15, 2019.
This was significantly better than our estimate, which had called for a $0.9 million decline in net earnings to $2.3 million and $0.19 drop in diluted EPS to $0.46 (off by $0.23).
The main factors behind the difference between actual results and our estimate were: (1) a $0.9 million jump in other miscellaneous income due to large gains in refinancing fees stemming from strong mortgage loan origination; (2) merchant card income growth that was $0.3 million more than expected; and (3) compensation costs that were $0.2 million below our estimate. These were offset by: (1) net interest income that was $0.1 million less than we had estimated as the net interest margin was a bit lower than expected and (2) income tax expense that was $0.2 million higher due to greater-than-estimated pretax earnings. 
The major reasons for the third quarter's 5% increase in net earnings versus the prior-year quarter were a $0.7 million, or 5%, gain in net revenues, as growth in net interest income (up $0.8 million) was partly offset by a $0.1 million, or 2%, drop in non-interest income, which reflected $1.1 million growth in miscellaneous income from higher mortgage refinancing fees that was more than offset by the absence of securities gains ($0.7 million in 2019's third quarter), a $0.1 million fall in merchant card income, and $0.4 million decline in cash flow income. Other contributing factors included a $0.1 million, or 2%, rise in total non-interest expense, primarily from greater compensation costs (up $0.2 million) offset by reduced other miscellaneous expense (down by $0.1 million), as well as $0.4 million more in the loan loss provision. 
We are reducing our 2020 diluted EPS estimate by a nickel from $2.45 to $2.40, an $0.11, or 5%, increase over 2019's $2.29. However, we are maintaining our 2021 diluted EPS at $2.25, 6% below our 2020 estimate. There are many uncertainties in our estimates, stemming from the effects of COVID-19. We discuss these below.
First, CPKF has participated in the Paycheck Protection Program (PPP), designed to provide a direct incentive for small businesses to keep their workers on the payroll. Through the end of September, CPKF had generated about $77 million of PPP loans. The Small Business Administration (SBA) will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll (60% of the forgiven amount must have been used for payroll), rent, mortgage interest, or utilities. PPP loans are guaranteed by the SBA for 100% of amount of the PPP loan not forgiven. Loans issued prior to June 5 have a maturity of 2 years and 5 years after that. All loans have an interest rate of 1%. In addition, lenders receive fees for processing the PPP loans: 5% for loans of $350,000 or less, 3% for loans between $350,000 and $2 million, and 1% for loans of $2 million or more. PPP loans provide for the deferral of payments for a period of 6 months, including payment of principal, interest and fees. Interest will accrue, but payments will not be required during the first 6 months. Processing fees will be amortized over the contract life and adjusted based on actual prepayments. Upon notification from the SBA of the amount of the PPP loan to be forgiven, acceleration of recognition of deferred processing fees will occur for the percentage of the loan forgiven. 
The PPP loans will have countervailing impacts on the CPKF's net interest margin. First, the 1% annual interest rate is lower than is typical for CPKF loans, which will tend to reduce the NIM. However, PPP processing fees, amortized over the life of the loan, will add to the NIM. Moreover, when a PPP loan is forgiven, any deferred processing fee will also be added to the NIM. We have estimated a net interest margin of 3.55% for the fourth quarter of 2020, exclusive of any impact from the recognition of deferred processing fees. 
The NIM will be supplemented by the recognition of deferred processing fees. Originally, we had estimated that the majority of the deferred processing fees (estimated at $2.96 million) would be recognized during 2020's fourth quarter. We are now estimating that approximately $1 million of deferred processing fees will be booked in 2020's fourth quarter, while the balance will be recognized in 2021's first quarter. At the same time, we are cutting our 2021 NIM estimate, exclusive of any impact from the recognition of deferred processing fees, to 3.45% from 3.70%, stemming from the effect of continuing low interest rates. 
Secondly, our estimate of the provision for loan losses in 2020 is $2.4 million, about 4.5 times higher than in 2019, to allow for any asset quality deterioration that may occur as a result of the pandemic. Though asset quality remained strong in the third quarter, CPKF has wisely chosen to beef up its loan loss reserves in preparation for the possibility of asset quality deterioration due to economic distress caused by COVID-19. Positively, certain loans, which had previously been on deferral though still accruing interest (with deferred payments added onto the back end of the loan), are no longer in deferral. This means these loans are paying full principal and interest unless granted an interest only period. 
For 2021, we are reducing our estimate of the loan loss provision to $0.9 million from our initial estimate of $1.2 million, about 40% of the level of 2020. We assume some economic improvement from 2020, though note the $0.9 million level is still much higher than the loss provision had been in each of the past six years prior to the pandemic. 
There are other factors adding to CPKF's expense burden going forward. CPKF expects several new hires to increase compensation costs. CPKF's digital strategy for its new on-line banking platform requires investing in new technology, leading to higher IT expense. Finally, the Company added a full-service branch to its network in the third quarter, which will also increase expenses. 
Loan demand, other than for PPP loans, has softened somewhat, and we have again reduced our loan growth estimate for 2020 by one-half, to 2% from 4%. Our estimate for loan growth in 2021 remains 5%. 
Our estimate of net merchant card income has been increased due to recent improvement in card volumes. For 2020, our new estimate for net merchant card income is $3.8 million, up from $3.2 million before, while our 2021 estimate is now $4.2 million versus $3.4 million before. 
Finally, we had previously slashed our estimates of cash flow income, as customers opted for PPP loans, rather than cash flow financing. We are maintaining these reduced estimates of $2.5 million in 2020 and $2.0 million in 2021. 
On October 18, 2019, Chesapeake Financial Shares, Inc. approved a 3% quarterly dividend increase to $0.125 per share from $0.121 per share, payable on or about December 15, 2019 to shareholders of record on December 1, 2019. Notably, CPKF has increased the annual dividend payment every year for the past twenty-nine years since 1991. This follows on the heels of a 6-for-5 stock dividend, paid October 15, 2019. 
In 2020 for the thirteenth consecutive year, Chesapeake Financial Shares, Inc. has been included in the American Banker magazine listing of the "Top 200 Community Banks" in the United States. The bank ranked at #75 in the nation out of approximately 511 publicly traded banks and thrifts with less than $2 billion in assets in the study, up from #148, when CPKF first broke into the rankings in 2008. The ranking is based on a three-year average of return on average equity (ROAE), which for CPKF was 11.48%. Chesapeake Bank again garnered a top ranking in the American Banker's list of "Best Banks to Work for", moving up to a #19 spot in 2019, out of the 85 banks listed, from a #25 place in 2018.
In other news, Chesapeake Financial Shares, Inc. graduated in 2019 from the OTCQB Venture Market to the OTCQX Best Market, trading on OTCQX under the symbol CPKF.
Chesapeake Financial Shares, Inc. (CPKF or the Company) is a financial holding company headquartered in Kilmarnock, Virginia, with $1,172 million in total assets at September 30, 2020. CPKF is predominantly a small business lender with 16 branch offices and one loan production office that serve customers in the eastern region of Virginia between the Potomac and James Rivers. 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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CPKF: Strong Third Quarter Was Better than Expected

By <a href="https://scr.zacks.com/Analysts/Person-Details/default.aspx?ItemId=62130fc1-60ee-4e79-80ae-b6172e6a338a">Ann Heffron, CFA, CPA</a>
<stock_ticker>OTC:CPKF</stock_ticker>
<a href="https://s1.q4cdn.com/460208960/files/News/2020/Zacks_SCR_Research_06232020_CPKF_Heffron.pdf">READ THE FULL CPKF RESEARCH REPORT</a>
Chesapeake Financial's (OTC: <a class="ticker" href="https://www.benzinga.com/stock/cpkf#OTC">CPKF</a>) first quarter net earnings rose $0.4 million, or 13%, year over year to $3.4 million, while 2020's first quarter diluted EPS increased by $0.08, or 13%, to $0.68 from $0.60 posted a year ago. All data in this report have been adjusted for a 6-for-5 stock dividend, paid on October 15, 2019.
This was better than our estimate, which had called for essentially flat net earnings at $3.0 million and flat diluted EPS at $0.60 (off by $0.08).
The main factors behind the difference between actual results and our estimate were: (1) net interest income was $0.1 million more than we had estimated as the net interest margin of 3.79% was 9 basis points higher; (2) noninterest income was $1.0 million greater than anticipated as there were $1.2 million of securities gains (our estimate had been zero), which was partially offset by reduced merchant card income ($0.2 million below our estimate) and (3) compensation costs were $0.2 million less than estimated. These were offset by: (1) a provision for credit losses that came in $0.4 million higher than our $0.17 million estimate due to the potential effects of COVID-19 on the loan portfolio; (2) noninterest expense that was $0.4 million more than estimated due primarily to higher other miscellaneous expense; and (3) income tax expense that was $0.1 million larger due to higher-than-estimated pretax earnings and a tax rate of 15.0% versus our 14.0% estimate. 
The major reasons for the first quarter's 13% increase in net earnings versus the prior-year quarter were a $2.0 million, or 17%, advance in net revenues, largely due to growth in net interest income (up $0.8 million) and net securities gains (up by $1.1 million), partly offset by a $1.1 million, or 14%, rise in total noninterest expense, primarily from greater compensation costs (up $0.7 million) and increased other miscellaneous expense (up by $0.4 million), as well as $0.4 million more in the loan loss provision and $0.1 more income taxes due to greater pretax earnings and a higher effective tax rate of 15.0% versus 12.6% a year ago. 
We are increasing our 2020 diluted EPS estimate by a $0.15 to $2.45, a $0.16, or 7%, increase over 2019's $2.29. Our initial 2021 diluted EPS estimate is $2.50, a nickel higher than our 2020 estimate. There are many uncertainties in our estimates, stemming from the effects of COVID-19. We discuss these below.
First, CPKF has participated in the Paycheck Protection Program (PPP), designed to provide a direct incentive for small businesses to keep their workers on the payroll. Through the beginning of June, CPKF had generated about $75 million of PPP loans. The Small Business Administration (SBA) will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll (60% of the forgiven amount must have been used for payroll), rent, mortgage interest, or utilities. PPP loans are guaranteed by the SBA for 100% of amount of the PPP loan not forgiven. Loans issued prior to June 5 have a maturity of 2 years and 5 years after that. All loans have an interest rate of 1%. In addition, lenders receive fees for processing the PPP loans: 5% for loans of $350,000 or less, 3% for loans between $350,000 and $2 million, and 1% for loans of $2 million or more. PPP loans provide for the deferral of payments for a period of 6 months, including payment of principal, interest and fees. Interest will accrue, but payments will not be required during the first 6 months. Processing fees will be amortized over the contract life and adjusted based on actual prepayments. Upon notification from the SBA of the amount of the PPP loan to be forgiven, acceleration of recognition of deferred processing fees will occur for the percentage of the loan forgiven. 
The PPP will have countervailing impacts on the CPKF's net interest margin. First, the 1% annual interest rate is lower than is typical for CPKF loans, which will tend to reduce the NIM. However, PPP processing fees, amortized over the life of the loan, will add to the NIM. Moreover, when a PPP loan is forgiven, any deferred processing fee will also be added to the NIM. We have estimated a net interest margin of 3.75% for the second and third quarters of 2020, and a 5% net interest margin for the fourth quarter, assuming the majority of the deferred processing fee (estimated at $2.8 million) is recognized at this time. For full-year 2020, our NIM estimate is now 4.08% (up from 3.70% previously), which compares to an actual NIM of 3.98% in 2019. Our initial NIM estimate for 2021 is 3.70%.
Secondly, we have significantly increased our estimate of the provision for loan losses in 2020 to $2.3 million from $0.7 million, to allow for any asset quality deterioration that may occur as a result of the pandemic. At present, a portion of the loan portfolio is on deferral, with three months' of payments added onto the back end of the loan. Though these loans are in deferral, they are still accruing interest for the time being. After three months, the loans will be evaluated to determine their status. CPKF has wisely chosen to beef up its loan loss reserves in preparation for the possibility of asset quality deterioration due to economic distress caused by COVID-19, though asset quality remained strong in the first quarter. 
For 2021, our initial estimate for the loan loss provision is $1.2 million, about half the level of 2020. We assume some economic improvement from 2020, though note the $1.2 million level is still much higher than the loss provision had been in each of the past six years prior to the pandemic. 
There are other factors adding to CPKF's expense burden going forward. CPKF expects several new hires to increase compensation costs. CPKF's digital strategy for its new on-line banking platform requires investing in new technology, leading to higher IT expense. Finally, the Company expects to add a full-service branch to its network in the third quarter, which will also increase expenses. 
Loan demand, other than for PPP loans, has softened, and we have reduced our loan growth estimate for 2020 by one-half, to 4% from 8%. Our initial estimate for loan growth in 2021 is 5%. 
Finally, we have cut back our estimate of net merchant card income, reflecting the termination of one independent sales organization (ISO) in the first quarter, as well as lower card volumes due to reduced consumer spending during the pandemic. Thus, we have cut our estimate for merchant card revenues to $3.4 million from $4.9 million in 2020, and are using an initial estimate of $3.6 million for 2021.
On October 18, 2019, Chesapeake Financial Shares, Inc. approved a 3% quarterly dividend increase to $0.125 per share from $0.121 per share, payable on or about December 15, 2019 to shareholders of record on December 1, 2019. Notably, CPKF has increased the annual dividend payment every year for the past twenty-nine years since 1991. This follows on the heels of a 6-for-5 stock dividend, paid October 15, 2019. 
In 2020 for the thirteenth consecutive year, Chesapeake Financial Shares, Inc. has been included in the American Banker magazine listing of the "Top 200 Community Banks" in the United States. The bank ranked at #75 in the nation out of approximately 511 publicly traded banks and thrifts with less than $2 billion in assets in the study, up from #148, when CPKF first broke into the rankings in 2008. The ranking is based on a three-year average of return on average equity (ROAE), which for CPKF was 11.48%. Chesapeake Bank again garnered a top ranking in the American Banker's list of "Best Banks to Work for", moving up to a #19 spot in 2019, out of the 85 banks listed, from a #25 place in 2018.
In other news, Chesapeake Financial Shares, Inc. graduated in 2019 from the OTCQB Venture Market to the OTCQX Best Market, trading on OTCQX under the symbol CPKF.
Chesapeake Financial Shares, Inc. (CPKF or the Company) is a financial holding company headquartered in Kilmarnock, Virginia, with $958 million in total assets at December 31, 2019. CPKF is predominantly a small business lender with 15 branch offices and one loan production office that serve customers in the eastern region of Virginia between the Potomac and James Rivers. 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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CPKF: First Quarter Aided by Securities Gains

By <a href="http://scr.zacks.com/Analysts/Person-Details/default.aspx?ItemId=62130fc1-60ee-4e79-80ae-b6172e6a338a">Ann Heffron, CFA, CPA</a>
<stock_ticker>OTC:CPKF</stock_ticker>
<a href="https://s1.q4cdn.com/460208960/files/News/2020/Zacks_SCR_Research_03272020_CPKF_Heffron.pdf">READ THE FULL CPKF RESEARCH REPORT</a>
Chesapeake Financial's (OTC: <a class="ticker" href="https://www.benzinga.com/stock/cpkf#OTC">CPKF</a>) fourth quarter net earnings rose $61,000, or 3%, year over year to $1.9 million, while 2019's fourth quarter diluted EPS increased by $0.02, or 3%, to $0.39 from $0.37 posted a year ago. All data in this report have been adjusted for a 6-for-5 stock dividend, paid on October 15, 2019.
This was better than our estimate, which had called for a $0.2 million, or 9%, decrease in net earnings to $1.7 million and diluted EPS of $0.34 (off by $0.05).
The main factors behind the difference between actual results and our estimate were: (1) net interest income was $0.1 million more than we had estimated as average interest-earning assets were higher than expected; (2) there was no provision for credit losses versus our $0.2 million estimate; (3) noninterest income was $0.2 million greater than anticipated as both merchant card income and other miscellaneous income were each $0.1 million larger than our estimate; and (4) both occupancy expense and other miscellaneous expense were each $0.2 million lower than we expected. These were offset by: (1) compensation costs that were $0.5 million more than estimated due to an accrual adjustment and (2) income tax expense that was $0.2 million larger due to higher-than-estimated pretax earnings and a tax rate of 18.2% versus our 13.0% estimate. 
We note that in last year's fourth quarter the Company changed its method of presenting merchant card income and expense from separate line items in noninterest income and noninterest expense, respectively, to a single line item, entitled merchant card income, net, in noninterest income. This change had no impact on the bottom line, though noninterest income and noninterest expense are lower than previously reported, both reduced by the amount of merchant card expense. All data in this report have been modified to conform to this new method of presentation.
The major reasons for the fourth quarter's 3% increase in net earnings versus the prior-year quarter were a $1.1 million, or 9%, advance in net revenues due to growth in net interest income (up $0.7 million) and net securities gains (up by $0.4 million), partly offset by a $0.7 million, or 8%, rise in total noninterest expense, primarily from greater compensation costs (up $0.8 million) and reduced occupancy expense (down by $0.1 million), as well as $0.3 million more in income taxes due to greater pretax earnings and a higher effective tax rate of 18.2% versus 5.4% a year ago. 
For the year, CPKF posted record net income of $11.4 million, or $2.29 per diluted share, up 5% from the $10.8 million, or $2.17 per diluted share, posted in 2018. 
Primary contributors to this result were a $3.8 million, or 8%, gain in net revenues from a $2.1 million, or 8%, rise in net interest income, and a $1.7 million, or 9%, advance in noninterest income, primarily the result of higher other miscellaneous income ($1.7 million). These positives were partly offset by a $2.7 million, or 8%, increase in total noninterest expense, largely stemming from a $2.1 million rise in compensation costs (up 11%) and a $0.6 million advance in other miscellaneous expense (up 6%). In addition, income taxes increased by $0.5 million on larger pretax earnings and a higher effective tax rate of 14.3% compared to 11.3% in 2018. 
We are increasing our 2020 diluted EPS estimate by a nickel to $2.30, a penny increase over 2019's $2.29. We recognize that this is down from the prior years' record earnings growth, but there are several factors contributing to this reality. 
First, there is pressure on lending rates due to the recent Fed cut in interest rates, though somewhat offsetting influences are reductions in deposit rates and the call of certain higher rate brokered certificates of deposit. This is reducing our NIM estimate to 3.70% in 2020, down 20 basis points from our prior 3.90% estimate and an actual net interest margin of 3.98% in 2019. Secondly, CPKF expects several new hires to add to compensation costs. Thirdly, CPKF is investing in new technology, leading to higher IT expense. Finally, the Company expects to add a full-service branch to its network late in the second quarter, which will also increase expenses. Positively, loan growth is expected to be solid, and we are continuing our 8% loan growth estimate in 2020.
On October 18, 2019, Chesapeake Financial Shares, Inc. approved a 3% quarterly dividend increase to $0.125 per share from $0.121 per share, payable on or about December 15, 2019 to shareholders of record on December 1, 2019. Notably, CPKF has increased the annual dividend payment every year for the past twenty-eight years since 1991. This follows on the heels of a 6-for-5 stock dividend, paid October 15, 2019. 
In 2019 for the twelfth consecutive year, Chesapeake Financial Shares, Inc. has been included in the American Banker magazine listing of the "Top 200 Community Banks" in the United States. The bank ranked at #107 in the nation out of approximately 601 publicly traded banks and thrifts with less than $2 billion in assets in the study, up from #148, when CPKF first broke into the rankings in 2008. The ranking is based on a three-year average of return on average equity (ROAE), which for CPKF was 10.59%. Chesapeake Bank again garnered a top ranking in the American Banker's list of "Best Banks to Work for", moving up to a #19 spot in 2019, out of the 85 banks listed, from a #25 place in 2018.
In other news, Chesapeake Financial Shares, Inc. graduated from the OTCQB Venture Market to the OTCQX Best Market, trading on OTCQX under the symbol CPKF.
Chesapeake Financial Shares, Inc. (CPKF or the Company) is a financial holding company headquartered in Kilmarnock, Virginia, with $958 million in total assets at December 31, 2019. CPKF is predominantly a small business lender with 15 branch offices and one loan production office that serve customers in the eastern region of Virginia between the Potomac and James Rivers. CPKF, which began as Lancaster National Bank on April 13, 1900, has a long history and strong ties with the communities it serves.
<a href="http://scr.zacks.com/Subscribe/defaultaspx/default.aspx" style="color: rgb(242, 132, 16); font-family: HelveticaNeue; text-size-adjust: auto;">SUBSCRIBE TO ZACKS SMALL CAP RESEARCH</a> to receive our articles and reports emailed directly to you each morning. Please visit our <a href="http://scr.zacks.com/Home/default.aspx" style="color: rgb(242, 132, 16); font-family: HelveticaNeue; text-size-adjust: auto;">website</a> for additional information on Zacks SCR. 
 

DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks provides and Zacks receives quarterly payments totaling a maximum fee of $30,000 annually for these services. Full Disclaimer <a href="http://scr.zacks.com/Disclaimer/default.aspx" style="color: rgb(242, 132, 16);">HERE</a>.

CPKF: Fourth Quarter Better than Expected

The following post was written and/or published as a collaboration between Benzinga&rsquo;s in-house sponsored content team and a financial partner of Benzinga.
Investors and financial professionals looking to better understand the corporate structure of U.S. banks now have a new tool at their disposal.
OTC Markets Group recently announced the availability of data that visually displays the corporate structure for more than 550 U.S banks that trade on OTC Markets as well as the U.S. exchanges. The move creates more transparency for data that is made available by the Federal Reserve but is otherwise hard for investors to access and not very consumable.
Corporate structure data is particularly useful for financial companies, as these entities can often be comprised of several layers. This is often true for banks, many of which are organized as a &#39;Bank Holding Company&#39; comprised of several entities, including an operating bank.
&ldquo;Often, these bank holding companies own assets other than a commercial bank, which retail investors may not be aware of,&rdquo; said Matthew Fuchs, executive vice president of market data and strategy at OTC Markets Group. &ldquo;They believe they are investing solely in an operating bank. The structure data will give context to the bank holding companies&rsquo; financials and investors can then more easily understand the source of non-commercial bank revenue and expenses.&rdquo;
The data is the latest set added to Qaravan, OTC Markets&rsquo; market data platform for the banking sector. It also includes a visual representation of corporate structure levels, entity names, locations and ownership percentages, and is available on respective bank profile pages on OTCMarkets.com.
Fuchs added that a lot of work had to be done to map the relationships of different corporate entities to each other, and then map that data to the respective trading symbol and issuer.
For example, this is how the information is displayed for Chesapeake Financial Shares, Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/cpkf#OTCQX">CPKF</a>), a Virginia-based bank with several different layers of its corporate structure, including a bank, investment group, and insurance agency.
<img alt="unnamed_16.png" src="https://www.benzinga.com/files/u91860/unnamed_16.png" style="height:218px; width:600px" /> 
Source: OTCMarkets.com
<img alt="unnamed_15.png" src="https://www.benzinga.com/files/u91860/unnamed_15.png" style="height:511px; width:600px" /> 
Source: OTCMarkets.com
The preceding post was written and/or published as a collaboration between Benzinga&rsquo;s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.

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There's A New Tool That Helps Investors Understand The Corporate Structure Of US Banks

By <a href="http://scr.zacks.com/Analysts/Person-Details/default.aspx?ItemId=62130fc1-60ee-4e79-80ae-b6172e6a338a">Ann Heffron, CFA, CPA</a>
<stock_ticker>OTC:CPKF</stock_ticker>
<a href="https://s1.q4cdn.com/460208960/files/News/2019/Zacks_SCR_Research_12182019_CPKF_Heffron.pdf">READ THE FULL CPKF RESEARCH REPORT</a>
Chesapeake Financial's (OTC: <a class="ticker" href="https://www.benzinga.com/stock/cpkf#OTC">CPKF</a>) third quarter net earnings rose $47,000, or 2%, year over year to $3.2 million, while 2019's third quarter diluted EPS increased by $0.01, or 2%, to $0.65 from $0.64 posted a year ago. All data in this report have been adjusted for a 6-for-5 stock dividend, paid on October 15, 2019.
This was better than our estimate, which had called for a $0.2 million, or 7%, decrease in net earnings to $3.0 million and diluted EPS of $0.60 (off by $0.05).
The main factors behind the difference between actual results and our estimate were: (1) net interest income that was $0.4 million more than we had estimated due to a net interest margin and average interest-earning asset base that both were higher than expected and (2) compensation costs that were $0.1 million less than estimated. These were offset by: (1) other miscellaneous expense that was $0.2 million more than anticipated and (2) income tax expense that was $0.1 million larger due to higher-than-estimated pretax earnings and a tax rate of 14.4% versus our 13.0% estimate. 
We note that in last year's fourth quarter the Company changed its method of presenting merchant card income and expense from separate line items in noninterest income and noninterest expense, respectively, to a single line item, entitled merchant card income, net, in noninterest income. This change had no impact on the bottom line, though noninterest income and noninterest expense are lower than previously reported, both reduced by the amount of merchant card expense. All data in this report have been modified to conform to this new method of presentation.
The major reasons for the third quarter's 2% increase in net earnings versus the prior-year quarter were a $1.0 million, or 9%, advance in net revenues due to growth in net interest income (up $0.6 million), net securities gains (up by $0.3 million) and other miscellaneous income (up $0.1 million), partly offset by a $0.9 million, or 11%, rise in total noninterest expense, primarily from greater compensation costs (up $0.6 million) and higher other miscellaneous expense (up $0.3 million). 
We are maintaining our 2019 and 2020 diluted EPS estimates at $2.25 each year—for 2019, a $0.08 increase from 2018's $2.17, and for 2020, flat with our 2019 estimate. We recognize that this is down from the prior two years' record earnings growth, but there are several factors contributing to this reality. 
First, there is pressure on lending rates due to the recent Fed cut in interest rates, though somewhat offsetting influences are reductions in deposit rates and the call of certain higher rate brokered certificates of deposit. This is reducing our NIM estimates to 3.97% in 2019 from 4.10% actual in 2018 and by another 7 basis points, to 3.90% in 2020 from an estimated 3.97% in 2019. Secondly, CPKF expects several new hires to add to compensation costs. Thirdly, CPKF is investing in new technology, leading to higher IT expense. Finally, the Company expects to add a full-service branch to its network late in next year's first quarter, which will also increase expenses. Positively, loan growth is expected to be solid, though we are cutting our estimate from 10% to 7 ½% in 2019, following a flat third quarter, while continuing our 8% loan growth estimate in 2020.
On October 18, 2019, Chesapeake Financial Shares, Inc. approved a 3% quarterly dividend increase to $0.125 per share from $0.121 per share, payable on or about December 15, 2019 to shareholders of record on December 1, 2019. Notably, CPKF has increased the annual dividend payment every year for the past twenty-eight years since 1991. This follows on the heels of a 6-for-5 stock dividend, paid October 15, 2019, for which all data have been adjusted. 
In 2019 for the twelfth consecutive year, Chesapeake Financial Shares, Inc. has been included in the American Banker magazine listing of the "Top 200 Community Banks" in the United States. The bank ranked at #107 in the nation out of approximately 601 publicly traded banks and thrifts with less than $2 billion in assets in the study, up from #148, when CPKF first broke into the rankings in 2008. The ranking is based on a three-year average of return on average equity (ROAE), which for CPKF was 10.59%. Chesapeake Bank again garnered a top ranking in the American Banker's list of "Best Banks to Work for", moving up to a #19 spot in 2019, out of the 85 banks listed, from a #25 place in 2018.
In other news, Chesapeake Financial Shares, Inc. graduated from the OTCQB Venture Market to the OTCQX Best Market, trading on OTCQX under the symbol CPKF.
Chesapeake Financial Shares, Inc. (CPKF or the Company) is a financial holding company headquartered in Kilmarnock, Virginia, with $944 million in total assets at September 30, 2019. CPKF is predominantly a small business lender with 15 branch offices and one loan production office that serve customers in the eastern region of Virginia between the Potomac and James Rivers. 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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CPKF: Third Quarter Beats Our Estimate

Most major cap-weighted indexes are rebalanced quarterly, semi-annually, or annually. This rebalancing consists of adding and removing securities based on market cap fluctuations throughout the quarter.&nbsp;
It&rsquo;s up to the index provider to make and publicize these changes, usually at or in the days after the end of a quarter. The <a href="https://www.benzinga.com/markets/cannabis/19/02/13168160/6-indexes-that-can-help-you-track-the-otc-markets">indexes created by OTC Markets</a> all rebalance at the end of every quarter to account for the changing prices of their components. Here&rsquo;s how each of the market&rsquo;s major indexes rebalanced at the end of Q3:
<h3><a href="https://www.otcmarkets.com/index/.OTCQXBK">OTCQX Banks</a></h3>
The OTCQX Banks Index closed Q3 with 67 holdings and up 0.5%. Seventeen companies were added to the index, including Chesapeake Financial Shares, Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/cpkf#OTCQX">CPKF</a>) and PSB Holdings Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/psbq#OTCQX">PSBQ</a>).&nbsp;
Ten companies were removed, including First Farmers Financial Corp (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/ffmr#OTCQX">FFMR</a>) and Marquette National Corp. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/mnat#OTCQX">MNAT</a>).&nbsp;
<h3><a href="https://www.otcmarkets.com/index/.OTCQX">OTCQX Composite</a></h3>
The OTCQX Composite Index, the benchmark for tracking the overall performance of the most transparent domestic and international companies on OTC Markets, closed down 1.25% for the third quarter. There are 365 members of the index, 54 of which were added at the end of Q3. Notable adds include Grayscale Ethereum Trust (ETH) (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/ethe#OTCQX">ETHE</a>), Overstock.com, Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/ostbp#OTCQX">OSTBP</a>), and Trulieve Cannabis Corporation (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/tcnnf#OTCQX">TCNNF</a>).&nbsp;
Thirty-nine securities were removed from the index, including Stereotaxis, Inc. (MKT: STXS) and Avita Medical Ltd. (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/rcel#NASDAQ">RCEL</a>), both graduated to NYSE American and&nbsp; Nasdaq.&nbsp;
<h3><a href="https://www.otcmarkets.com/index/.OTCQXBIL">OTCQX Billion+</a></h3>
The OTCQX Billion+ Index, which tracks the $1 billion-plus market cap companies trading on OTCQX, finished down 1.02% in Q3. Three new companies joined the index while five companies were removed, bringing the total to 59.&nbsp;
Companies added were Green Thumb Industries Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/gtbif#OTCQX">GTBIF</a>), Interconexion Electrica S.A. E.S.P. - ISA (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/iesfy#OTCQX">IESFY</a>), and U.S.-based Computer Services, Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/csvi#OTCQX">CSVI</a>), which joins the Grayscale Bitcoin Trust (BTC) (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/gbtc#OTCQX">GBTC</a>) as the only domestic companies in the index.
The five companies removed were Acreage Holdings Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/acrgf#OTCQX">ACRGF</a>), Koninklijke Ahold Delhaize N.V. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/adrny#OTCQX">ADRNY</a>), Ocean Yield ASA (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/oyief#OTCQX">OYIEF</a>), Software AG (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/stwry#OTCQX">STWRY</a>), and UPM-Kymmene Corp. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/upmmy#OTCQX">UPMMY</a>).&nbsp;
<h3><a href="https://www.otcmarkets.com/index/.OTCQXDIV">OTCQX Dividend</a></h3>
The OTCQX Dividend Index finished Q3 down 0.8% with 113 holdings. Twenty-two new companies were added to the index in the quarter while 12 companies were removed. Eleven of those companies were removed for stopping their dividend programs, while Alerus Financial Corp. (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/alrs#NASDAQ">ALRS</a>) graduated to Nasdaq.
<h3><a href="https://www.otcmarkets.com/index/.OTCQXUS">OTCQX U.S.</a></h3>
Over half of the securities that trade on OTCQX are based in the U.S. Of those, 120 are in the OTCQX U.S. Index. The index closed down 7.8% in Q3, with 27 additions and 17 deletions.&nbsp;
Notable additions include MariMed Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/mrmd#OTCQX">MRMD</a>), Prime Meridian Holding Co. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/pmhg#OTCQX">PMHG</a>), and Calvin B. Taylor Bankshares, Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/tycb#OTCQX">TYCB</a>). Deletions include Forbes Energy Services Ltd. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/flss#OTCQX">FLSS</a>) and Amplify Energy Corp. (NY: AMPY).&nbsp;
<h3><a href="https://www.otcmarkets.com/index/.OTCQXMJ">OTCQX Cannabis</a></h3>
OTC Markets&rsquo; newest index closed down 27.2% in Q3. The total number of companies in the index stayed constant, as eight companies were added and eight were removed.&nbsp;
The companies added were Australis Capital Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/ausaf#OTCQX">AUSAF</a>), Dixie Brands Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/dxbrf#OTCQX">DXBRF</a>), Eve and Co Incorporated (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/eevvf#OTCQX">EEVVF</a>), Green Thumb Industries Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/gtbif#OTCQX">GTBIF</a>), InMed Pharmaceuticals, Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/imlff#OTCQX">IMLFF</a>), Medicine Man Technologies Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/mdcl#OTCQX">MDCL</a>), Trulieve Cannabis Corporation (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/tcnnf#OTCQX">TCNNF</a>), and Valens Groworks Corp (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/vgwcf#OTCQX">VGWCF</a>).&nbsp;
The eight companies removed were Beleave Inc., Emerald Health Therapeutics Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/emhtf#OTCQX">EMHTF</a>), Harvest One Cannabis Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/hrvof#OTCQX">HRVOF</a>), Invictus MD Strategies Corp. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/ivitf#OTCQX">IVITF</a>), Lifestyle Delivery Systems, Inc., Next Green Wave (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/nxgwf#OTCQX">NXGWF</a>), Radient Technologies Inc (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/rddtf#OTCQX">RDDTF</a>), and THC BioMed&nbsp;Intl Ltd. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/thcbf#OTCQX">THCBF</a>).&nbsp;
<h3><a href="https://www.otcmarkets.com/index/.OTCQXCAN">OTCQX Canada</a></h3>
The OTCQX Canada Index, the benchmark for tracking the overall performance of all the Canadian securities that are traded on OTCQX, closed down 10.4% in the third quarter. Twenty-seven new companies joined the index, including Rocky Mountain Dealerships Inc. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/rckxf#OTCQX">RCKXF</a>), while 16 companies were removed.&nbsp;
<h3><a href="https://www.otcmarkets.com/index/.OTCQXINT">OTCQX International</a></h3>
The index closed down 1.2% in Q3. The 245-company index received 31 additions and 22 deletions at the end of the quarter. Semiconductor Manufacturing International Corp. (OTCQX: <a class="ticker" href="https://www.benzinga.com/stock/smicy#OTCQX">SMICY</a>) highlights the new additions.&nbsp;
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These Were The Companies Added And Removed From OTC Markets Indexes At The End Of Q3

Before 10 am Monday, 83 stocks made new 52-week highs.
<h3>Key Facts:</h3>
<ul>
<li>Procter &amp; Gamble (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/pg#NYSE">PG</a>) was the largest company by market cap to set a new 52-week high.</li>
<li>AirTrona International (OTC: ARTR) was the smallest firm based on market cap to set a new 52-week high</li>
<li>Entergy (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/etr#NYSE">ETR</a>) was the largest loser of the group, with shares hitting a new 52-week high but then plummeting 12.65% afterwards.</li>
</ul>
The following stocks achieved new 52-week highs during the first half-hour of trading on Monday:
<ul>
<li>Procter &amp; Gamble (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/pg#NYSE">PG</a>) shares were up 0.43% on Monday to hit a new 52-week high of $125.02 for a change of up 0.43%.</li>
<li>Roche Holding (OTC: <a class="ticker" href="https://www.benzinga.com/stock/rhhby#OTC">RHHBY</a>) shares hit a yearly high of $36.48. The stock traded down 0.16% on the session.</li>
<li>Taiwan Semiconductor (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/tsm#NYSE">TSM</a>) shares hit a yearly high of $46.57. The stock traded up 2.4% on the session.</li>
<li>Nike (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/nke#NYSE">NKE</a>) shares were up 1.03% on Monday to hit a new 52-week high of $92.87 for a change of up 1.03%.</li>
<li>Broadcom (OTC: AVGOP) shares hit a yearly high of $1,045.71. The stock traded down 0.2% on the session.</li>
<li>NextEra Energy (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/nee#NYSE">NEE</a>) stock on Monday broke to a yearly high of $232.92. Shares traded up 0.49%.</li>
<li>GlaxoSmithKline (OTC: <a class="ticker" href="https://www.benzinga.com/stock/glaxf#OTC">GLAXF</a>) shares broke to $42.95 on Monday, setting a new 52-week high with a change of up 1.94%.</li>
<li>GlaxoSmithKline (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/gsk#NYSE">GSK</a>) shares set a new yearly high of $21.35 this morning. The stock was up 0.97% on the session.</li>
<li>Celgene (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/celg#NASDAQ">CELG</a>) shares reached a new 52-week high of $99.86 on Monday morning, moving up 0.93%.</li>
<li>Kimberly-Clark (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/kmb#NYSE">KMB</a>) shares broke to $143.16 on Monday, setting a new 52-week high with a change of up 0.69%.</li>
<li>Sempra Energy (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/sre#NYSE">SRE</a>) shares were up 2.01% on Monday to hit a new 52-week high of $145.41 for a change of up 2.01%.</li>
<li>Engie (OTC: <a class="ticker" href="https://www.benzinga.com/stock/engiy#OTC">ENGIY</a>) shares set a new yearly high of $16.26 this morning. The stock was up 2.18% on the session.</li>
<li>Consolidated Edison (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/ed#NYSE">ED</a>) stock set a new 52-week high of $94.97 Monday morning. Over the session, the stock traded down 0.17%.</li>
<li>Eversource Energy (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/es#NYSE">ES</a>) shares achieved a new 52-week high on Monday morning, hitting $85.64 with a daily change of up 0.21%.</li>
<li>Dollar Tree (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/dltr#NASDAQ">DLTR</a>) shares broke to a new 52-week high of $114.58 on Monday. Shares of the company traded up 0.94%.</li>
<li>Digital Realty Trust (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/dlr#NYSE">DLR</a>) shares hit $129.61 on Monday morning, setting a new 52-week high for a change of up 0.12%.</li>
<li>Entergy (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/etr#NYSE">ETR</a>) shares achieved a new 52-week high on Monday morning, hitting $118.15 with a daily change of up 0.2%.</li>
<li>Martin Marietta Materials (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/mlm#NYSE">MLM</a>) shares hit a new 52-week high of $274.79. The stock traded up 1.58% on the session.</li>
<li>Arch Capital Group (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/acgl#NASDAQ">ACGL</a>) shares were up 0.06% on Monday to hit a new 52-week high of $42.73 for a change of up 0.06%.</li>
<li>M3 (OTC: <a class="ticker" href="https://www.benzinga.com/stock/mthrf#OTC">MTHRF</a>) shares were up 14.94% on Monday to hit a new 52-week high of $23.54 for a change of up 14.94%.</li>
<li>Mid-America Apartment (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/maa#NYSE">MAA</a>) stock made a new 52-week high of $130.86 Monday. The stock was up 0.11% for the day.</li>
<li>Seattle Genetics (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/sgen#NASDAQ">SGEN</a>) shares hit a new 52-week high of $84.38. The stock traded up 12.84% on the session.</li>
<li>Barry Callebaut (OTC: <a class="ticker" href="https://www.benzinga.com/stock/bycbf#OTC">BYCBF</a>) shares were up 4.88% on Monday to hit a new 52-week high of $2,150.00 for a change of up 4.88%.</li>
<li>Rentokil Initial (OTC: <a class="ticker" href="https://www.benzinga.com/stock/rtoky#OTC">RTOKY</a>) shares broke to $29.14 on Monday, setting a new 52-week high with a change of up 0.62%.</li>
<li>Tele2 (OTC: <a class="ticker" href="https://www.benzinga.com/stock/tltzf#OTC">TLTZF</a>) shares achieved a new 52-week high on Monday morning, hitting $15.04 with a daily change of flat%.</li>
<li>Insulet (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/podd#NASDAQ">PODD</a>) stock hit a yearly high price of $168.28. The stock was up 0.16% for the day.</li>
<li>OGE Energy (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/oge#NYSE">OGE</a>) shares hit a new 52-week high of $45.76. The stock traded up 0.37% on the session.</li>
<li>Kimco Realty (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/kim#NYSE">KIM</a>) stock set a new 52-week high of $20.90 Monday morning. Over the session, the stock traded up 0.35%.</li>
<li>Dai Nippon Printing Co (OTC: <a class="ticker" href="https://www.benzinga.com/stock/dnply#OTC">DNPLY</a>) shares hit a new 52-week high of $13.09. The stock traded up 2.06% on the session.</li>
<li>Brookfield Renewable (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/bep#NYSE">BEP</a>) shares broke to a new 52-week high of $39.90 on Monday. Shares of the company traded up 1.6%.</li>
<li>Healthcare Trust (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/hta#NYSE">HTA</a>) shares were down 0.78% for the day, having made a 52-week high of $29.63.</li>
<li>Brixmor Property Group (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/brx#NYSE">BRX</a>) shares hit a yearly high of $20.30. The stock traded up 0.35% on the session.</li>
<li>Square Enix Holdings (OTC: <a class="ticker" href="https://www.benzinga.com/stock/sqnxf#OTC">SQNXF</a>) shares set a new 52-week high of $48.31 on Monday, moving up 8.39%.</li>
<li>Life Storage (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/lsi#NYSE">LSI</a>) shares hit $106.49 on Monday morning, setting a new 52-week high for a change of up 0.28%.</li>
<li>Ritchie Bros Auctioneers (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/rba#NYSE">RBA</a>) shares broke to $39.97 on Monday, setting a new 52-week high with a change of up 1.03%.</li>
<li>Atco (OTC: <a class="ticker" href="https://www.benzinga.com/stock/acllf#OTC">ACLLF</a>) shares hit a yearly high of $37.00. The stock traded flat% on the session.</li>
<li>PNM Resources (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/pnm#NYSE">PNM</a>) shares were up 2.1% on Monday morning to hit a new 52-week high of $52.52.</li>
<li>TerraForm Power (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/terp#NASDAQ">TERP</a>) shares broke to $18.05 on Monday, setting a new 52-week high with a change of up 1.32%.</li>
<li>QTS Realty Trust (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/qts#NYSE">QTS</a>) shares set a new 52-week high of $51.52 on Monday, moving up 1.04%.</li>
<li>KB Home (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/kbh#NYSE">KBH</a>) stock set a new 52-week high of $33.13 Monday morning. Over the session, the stock traded up 3.69%.</li>
<li>Jack In The Box (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/jack#NASDAQ">JACK</a>) shares were down 0.56% for the day, having made a 52-week high of $91.39.</li>
<li>Group 1 Automotive (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/gpi#NYSE">GPI</a>) shares were up 1.18% on Monday to hit a new 52-week high of $91.30 for a change of up 1.18%.</li>
<li>Easterly Government Props (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/dea#NYSE">DEA</a>) shares hit a new 52-week high of $21.41. The stock traded up 0.38% on the session.</li>
<li>NEL (OTC: NLLSY) stock set a new 52-week high of $27.55 Monday morning. Over the session, the stock traded up 32.13%.</li>
<li>John B Sanfilippo &amp; Son (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/jbss#NASDAQ">JBSS</a>) shares hit a new 52-week high of $97.99. The stock traded down 0.04% on the session.</li>
<li>Middlesex Water (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/msex#NASDAQ">MSEX</a>) shares hit a new 52-week high of $65.76. The stock traded up 0.46% on the session.</li>
<li>Douglas Dynamics (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/plow#NYSE">PLOW</a>) shares hit a new 52-week high of $45.91. The stock traded down 0.89% on the session.</li>
<li>Community Healthcare (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/chct#NYSE">CHCT</a>) shares achieved a new 52-week high on Monday morning, hitting $44.48 with a daily change of up 0.75%.</li>
<li>Investors Real Estate (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/iret#NYSE">IRET</a>) shares set a new yearly high of $74.50 this morning. The stock was up 0.68% on the session.</li>
<li>US Concrete (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/uscr#NASDAQ">USCR</a>) stock made a new 52-week high of $53.90 Monday. The stock was up 3.42% for the day.</li>
<li>United Royale Holdings (OTC: <a class="ticker" href="https://www.benzinga.com/stock/uryl#OTC">URYL</a>) shares set a new yearly high of $5.48 this morning. The stock was up 1.48% on the session.</li>
<li>Gladstone Commercial (OTC: <a class="ticker" href="https://www.benzinga.com/stock/glsdp#OTC">GLSDP</a>) stock hit a yearly high price of $25.75. The stock was flat% for the day.</li>
<li>Dova Pharmaceuticals (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/dova#NASDAQ">DOVA</a>) shares achieved a new 52-week high on Monday morning, hitting $27.97 with a daily change of up 38.68%.</li>
<li>York Water (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/yorw#NASDAQ">YORW</a>) shares broke to $44.64 on Monday, setting a new 52-week high with a change of up 2.9%.</li>
<li>America First Multifamily (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/atax#NASDAQ">ATAX</a>) stock hit a yearly high price of $8.15. The stock was down 0.12% for the day.</li>
<li>Landmark Infrastructure (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/lmrk#NASDAQ">LMRK</a>) stock hit a yearly high price of $17.80. The stock was up 0.74% for the day.</li>
<li>NACCO Industries (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/nc#NYSE">NC</a>) shares reached a new 52-week high of $62.19 on Monday morning, moving up 1.44%.</li>
<li>Gladstone Capital (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/glad#NASDAQ">GLAD</a>) shares broke to a new 52-week high of $9.71 on Monday. Shares of the company traded up 0.39%.</li>
<li>Avance Gas Holding (OTC: <a class="ticker" href="https://www.benzinga.com/stock/avacf#OTC">AVACF</a>) shares set a new 52-week high of $3.95 on Monday, moving up 5.33%.</li>
<li>Impac Mortgage Holdings (AMEX: IMH) shares were up 2.34% on Monday morning to hit a new 52-week high of $7.87.</li>
<li>El AL Israel Airlines (OTC: <a class="ticker" href="https://www.benzinga.com/stock/elalf#OTC">ELALF</a>) shares hit $0.33 on Monday morning, setting a new 52-week high for a change of up 34.69%.</li>
<li>PCTEL (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/pcti#NASDAQ">PCTI</a>) shares set a new yearly high of $7.90 this morning. The stock was up 4.24% on the session.</li>
<li>Chesapeake Financial (OTC: <a class="ticker" href="https://www.benzinga.com/stock/cpkf#OTC">CPKF</a>) shares broke to a new 52-week high of $26.49 on Monday. Shares of the company traded down 12.65%.</li>
<li>Sotherly Hotels (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/sohoo#NASDAQ">SOHOO</a>) shares were up 13.56% for the day, having made a 52-week high of $29.98.</li>
<li>Sotherly Hotels (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/sohon#NASDAQ">SOHON</a>) shares broke to a new 52-week high of $26.25 on Monday. Shares of the company traded down 0.28%.</li>
<li>EnviroLeach Technologies (OTC: <a class="ticker" href="https://www.benzinga.com/stock/evllf#OTC">EVLLF</a>) shares were up 16.94% on Monday to hit a new 52-week high of $1.03 for a change of up 16.94%.</li>
<li>Borealis Exploration (OTC: <a class="ticker" href="https://www.benzinga.com/stock/boref#OTC">BOREF</a>) stock on Monday broke to a yearly high of $10.62. Shares traded up 12.2%.</li>
<li>Venture Vanadium (OTC: <a class="ticker" href="https://www.benzinga.com/stock/venv#OTC">VENV</a>) shares were up 22.09% for the day, having made a 52-week high of $1.00.</li>
<li>County Bank (OTC: <a class="ticker" href="https://www.benzinga.com/stock/cbnc#OTC">CBNC</a>) shares broke to a new 52-week high of $59.00 on Monday. Shares of the company traded up 0.86%.</li>
<li>Mineworx Technologies (OTC: <a class="ticker" href="https://www.benzinga.com/stock/mwxrf#OTC">MWXRF</a>) shares hit a yearly high of $0.15. The stock traded up 25.0% on the session.</li>
<li>FFD Financial (OTC: <a class="ticker" href="https://www.benzinga.com/stock/ffdf#OTC">FFDF</a>) stock on Monday broke to a yearly high of $58.00. Shares traded up 1.58%.</li>
<li>Heritage Global (OTC: <a class="ticker" href="https://www.benzinga.com/stock/hgbl#OTC">HGBL</a>) shares achieved a new 52-week high on Monday morning, hitting $0.99 with a daily change of up 5.26%.</li>
<li>Bv Financial (OTC: <a class="ticker" href="https://www.benzinga.com/stock/bvfl#OTC">BVFL</a>) shares set a new 52-week high of $16.50 on Monday, moving up 8.2%.</li>
<li>Clancy Systems Intl (OTC: <a class="ticker" href="https://www.benzinga.com/stock/clsi#OTC">CLSI</a>) shares set a new 52-week high of $0.04 on Monday, moving up 50.17%.</li>
<li>Rockwealth Resources (OTC: <a class="ticker" href="https://www.benzinga.com/stock/crzhf#OTC">CRZHF</a>) stock on Monday broke to a yearly high of $0.38. Shares traded up 13.9%.</li>
<li>Mission Mining (OTC: MISM) stock made a new 52-week high of $0.01 Monday. The stock was up 20.83% for the day.</li>
<li>Williamette Community (OTC: <a class="ticker" href="https://www.benzinga.com/stock/wmcb#OTC">WMCB</a>) shares hit a yearly high of $11.25. The stock traded flat% on the session.</li>
<li>Strasbaugh (OTC: <a class="ticker" href="https://www.benzinga.com/stock/strb#OTC">STRB</a>) shares achieved a new 52-week high on Monday morning, hitting $0.10 with a daily change of up 577.42%.</li>
<li>Legacy Education Alliance (OTC: <a class="ticker" href="https://www.benzinga.com/stock/leai#OTC">LEAI</a>) shares hit a yearly high of $0.36. The stock traded up 25.26% on the session.</li>
<li>PureRay (OTC: <a class="ticker" href="https://www.benzinga.com/stock/pury#OTC">PURY</a>) shares hit a yearly high of $0.01. The stock traded up 52.73% on the session.</li>
<li>Continental Beverage (OTC: CBBB) shares hit a yearly high of $0.27. The stock traded up 17.39% on the session.</li>
<li>RIT Technologies (OTC: <a class="ticker" href="https://www.benzinga.com/stock/ritt#OTC">RITT</a>) shares were up 27.39% for the day, having made a 52-week high of $0.04.</li>
<li>AirTrona International (OTC: ARTR) shares hit a yearly high of $0.0005. The stock traded up 25.0% on the session.</li>
</ul>

Intraday Update

Movers

ACGL

ACLLF

ATAX

AVACF

BOREF

BVFL

BYCBF

CBNC

CELG

CHCT

CLSI

CRZHF

DLTR

DNPLY

DOVA

ELALF

ENGIY

EVLLF

FFDF

GLAD

GLAXF

GLSDP

HGBL

IRET

JACK

JBSS

LEAI

LMRK

MSEX

MTHRF

MINEWORX TECH LTD ORD by Mineworx Technologies Ltd.

MWXRF

PCTI

PLOW

PODD

PURY

RHHBY

RITT

RTOKY

SGEN

SOHON

SOHOO

SQNXF

STRB

TERP

TLTZF

URYL

USCR

VENV

WMCB

YORW

Stocks That Hit 52-Week Highs On Monday

Following the market opening Monday, the Dow traded down 0.12 percent to 25,028.84 while the NASDAQ declined 0.25 percent to 7,800.39. The S&amp;P also fell, dropping 0.10 percent to 2,798.99.
Leading and Lagging Sectors
Monday morning, the financial shares climbed 0.80 percent. Meanwhile, top gainers in the sector included Independent Bank Corp. (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/indb#NASDAQ">INDB</a>) up 5 percent, and Chesapeake Financial Shares, Inc. (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/cpkf#NASDAQ">CPKF</a>) up 4 percent.
In trading on Monday, industrials shares fell 0.42 percent.

Top Headline
Hasbro, Inc. (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/has#NASDAQ">HAS</a>) reported better-than-expected results for its second quarter.
Hasbro posted quarterly profit of $0.48 per share, on revenue of $904.5 million. Analysts projected earnings of $0.31 per share on revenue of $840.11 million.
&nbsp;
Equities Trading UP
Dover Downs Gaming &amp; Entertainment, Inc. (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/dde#NYSE">DDE</a>) shares shot up 57 percent to $3.1796 after the company and Twin River Worldwide Holdings disclosed a merger agreement.
Shares of LifePoint Health, Inc. (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/lpnt#NASDAQ">LPNT</a>) got a boost, shooting up 34 percent to $64.15 after the company agreed to be acquired by Apollo&rsquo;s RCCH HealthCare Partners for $65 per share in cash.
Reata Pharmaceuticals, Inc. (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/reta#NASDAQ">RETA</a>) shares were also up, gaining 21 percent to $56.07 after reporting positive Phase 2 data for bardoxolone.

Equities Trading DOWN
PetMed Express, Inc. (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/pets#NASDAQ">PETS</a>) shares dropped 14 percent to $34.44 after the company reported weaker-than-expected earnings for its first quarter.
Shares of Beasley Broadcast Group, Inc. (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/bbgi#NASDAQ">BBGI</a>) were down 14 percent to $9.15 after the company filed for a 1.3 million share offering.
Illinois Tool Works Inc. (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/itw#NYSE">ITW</a>) was down, falling around 8 percent to $135.85 after the company reported downbeat quarterly sales and issued weak FY18 forecast.

Commodities

In commodity news, oil traded up 1.08 percent to $69.00 while gold traded down 0.05 percent to $1,230.50.
Silver traded down 0.19 percent Monday to $15.52, while copper rose 0.40 to $2.767.
Eurozone
European shares were lower today. The eurozone&rsquo;s STOXX 600 declined 0.13 percent, the Spanish Ibex Index fell 0.24 percent, while Italy&rsquo;s FTSE MIB Index fell 0.55 percent. Meanwhile the German DAX dropped 0.20 percent, and the French CAC 40 slipped 0.49 percent while U.K. shares fell 0.15 percent.
Economics
The Chicago Fed National Activity Index rose to a reading of 0.43 in June, versus a reading of -0.45 in May.
U.S. existing home sales fell 0.6 percent to an annual rate of 5.38 million for June.
The Treasury is set to auction 3-and 6-month bills at 11:30 a.m. ET.

Eurozone

BBGI

INDB

LPNT

PETS

RETA

Mid-Morning Market Update: Markets Open Lower; Hasbro Beats Q2 Estimates

Ann Heffron, CFA

	 
	<a href="http://www.zacks.com/stock/quote/CPKF">CPKF</a>: Maintain Neutral following Fourth Quarter Results
	We are maintaining our Neutral rating on Chesapeake Financial Shares, Inc. (<a href="http://www.zacks.com/stock/quote/CPKF">CPKF</a>). CPKF reported 2010 fourth quarter net earnings of $1.0 million, down 20% from the $1.3 million reported in the year-ago quarter, while diluted EPS decreased 17% to $0.38 from $0.45, with the better EPS performance reflecting share buybacks. This compares to our fourth quarter estimate of $0.49.
	There were a number of variances from our estimate. On the negative side, the loan loss provision was $0.9 million, higher than our estimate of $0.6 million, and other expenses were $2.5 million versus our estimate of $1.8 million, primarily the result of one-time write-downs of other real estate owned. This was partially offset by a $0.1 million income tax credit compared to our estimate of $0.5 million in income taxes, as CPKF reversed income tax overaccruals in the prior three quarters.  
	Net interest income was flat year over year at $5.5 million, and noninterest income rose 8% to $3.7 million. This was due to a 25% jump in merchant card income to $1.1 million on higher processing  volumes and a 54% decline in securities losses to $0.1 million, which were partially offset by a 20% slide in services charges on deposit accounts, hurt by changes in federal regulations, and a 16% drop in cash flow income, the result of reduced lending volumes.  
	Noninterest expense rose 3% year over year, largely due to a significant increase in other expenses that were partly offset by declines in other line items. The efficiency ratio was flat at 80%.
	The loan loss provision more than doubled to $0.9 million from $0.4 million in the fourth quarter of last year, as the Company continued to strengthen loan loss reserves. CPKF increased its loan loss reserves to $6.1 million (1.69% of loans) from $5.6 million (1.54% of loans) at the end of 2010's third quarter and $5.2 million at yearend 2009 (1.41% of loans).
	As to other asset quality measures, CPKF charged off $0.4 million of loans in the fourth quarter, resulting in a 0.45% charge-off ratio for the loan portfolio. This compares to net charge-offs of $0.4 million for full-year 2009 and $0.1 million for all of 2008. Gross loans outstanding dropped about $4 million, or 1%, sequentially to $362 million and $3 million from the end of 2009, reflecting continued weak loan demand.
	CPKF posted a 9.7% ROE and 0.67% ROA for the fourth quarter of 2010, compared to 14.2% and 0.87%, respectively, in the prior-year quarter.
	Notably, CPKF just raised its quarterly dividend by 4.5% to $0.115 from $0.11, payable on March 15, 2011 to shareholders of record on March 1, 2011. This means CPKF is on track to increase its annual dividend payment every year since 1992. 
	  
	We are currently 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 $608 million in total assets at December 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 <a href="mailto:scr@zacks.com">scr@zacks.com</a> with CPKF as the subject. 
	 
   <a href="http://www.zacks.com/registration/pfp?ALERT=ZER_LINK&amp;d_alert=ZER_LINK&amp;t=CPKF&amp;ADID=BENZ_CONTENT_ZER">CHESAPEAKE FINC (<a class="ticker" href="/stock/cpkf#">CPKF</a>): Free Stock Analysis Report</a>   <a href="http://www.zacks.com/">Zacks Investment Research</a>

CPKF: Maintain Neutral following Fourth Quarter Results - Analyst Blog

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ALLE

ALSN

AMAT

AMCR

AMSF

ARES

AROW

ARTNA

ATRI

BOKF

BPOP

BPRN

BRKL

CABO

CADE

CASS

CASY

CBOE

CCFN

CFFI

CGNX

CHCO

CNOB

COFS

COST

CRAI

CSGS

CSWC

CTAS

CTBI

CTRA

CTSH

CTVA

CWEN

DGICA

DGICB

EBAY

EBTC

EFSC

EFSI

ENSG

EPRT

ESNT

EWBC

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