Chesapeake Financial Shares, Inc. (CPKF, or the Company) reported third quarter diluted EPS of $0.71, a 33% increase from the $0.53 posted a year ago. This compares to our third quarter estimate of $0.59, with the Company’s outperformance primarily reflecting stronger cost controls than anticipated, as total noninterest expense declined 2% year over year and 6.5% sequentially to $6.2 million.
Net interest income increased 12% year over year to $5.6 million, and noninterest income jumped 23% to $4.5 million, largely the result of a $0.9 million positive swing in securities gains/losses to a $0.65 million gain in 2010’s third quarter from a $0.25 million loss in the prior-year quarter. This was offset by a corresponding $0.9 million increase in the loan loss provision to $1.2 million.
Though CPKF charged off $1.0 million of loans in the third quarter, the Company increased its loan loss reserves to $5.6 million (1.54% of loans) at the end of 2010’s third quarter from $5.5 million at June 30, 2010 (1.49% of loans) and $5.2 million at yearend 2009 (1.41% of loans). Nonperforming loans declined, falling to 2.71% of total loans at September 30, 2010 from 3.04% at the end of June 2010.
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 $605 million in total assets at September 30, 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.
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