U. S. Securities and Exchange commission
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-18543
CHESAPEAKE FINANCIAL SHARES, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-1210845
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
97 N. Main St., Kilmarnock, VA 22482
(Address of principal executive offices) (Zip Code)
(804) 435-1181
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of November 1, 2000.
Class Outstanding at November 1, 2000
Common Stock, voting, $5.00 par value 1,225,971
Common Stock, non-voting, $5.00 par value 0
CHESAPEAKE FINANCIAL SHARES, INC.
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements.........................................1-8
Consolidated Balance Sheets
September 30, 2000 and December 31, 1999................................1-2
Consolidated Statements of Earnings
Three months ended September 30, 2000 and 1999............................3
Consolidated Statements of Earnings
Nine months ended September 30, 2000 and 1999.............................4
Consolidated Statements of Cash Flows
Nine months ended September 30, 2000 and 1999.............................5
Consolidated Statement of Changes in Stockholder's Equity
Nine months ended September 30, 1999......................................6
Consolidated Statement of Changes in Stockholder's Equity
Nine months ended September 30, 2000......................................7
Notes to Consolidated Financial Statements................................8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................. 9-13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..............................................14
Item 2. Changes in Securities..........................................14
Item 3. Defaults Upon Senior Securities................................14
Item 4. Submission of Matters to a Vote of Security Holders............14
Item 5. Other Information..............................................14
Item 6. Exhibits and Reports on Form 8-K...............................15
Signatures...............................................................16
Page I
PART I. Item 1. - FINANCIAL INFORMATION
Chesapeake Financial Shares, Inc. September 30, December 31,
Consolidated Balance Sheets 2000 1999
ASSETS (Unaudited)
Cash and due from banks..................... $8,660,191 $8,669,184
Securities available for sale
U.S. Government agencies and mortgage-backed
securities (book value of $22,000,884 -2000
and $24,199,324-1999)..................... 23,286,837 23,727,615
Obligations of state and political subdivisions
(book value of $15,701,882-2000 and
$13,571,303-1999).......................... 13,729,336 13,166,902
Other Securities (book value $2,554,611-2000
and $2,554,862-1999........................ 2,523,600 2,502,150
Loans........................................ 153,231,378 132,893,500
Less: Allowance for loan loss................ (2,394,401) (2,253,676)
---------------------------
Net loans................................. 150,836,977 130,639,824
Bank premises and equipment, net............. 5,603,829 5,384,908
Accrued interest receivable.................. 1,541,517 1,337,111
Business Manager Assets...................... 7,942,850 8,791,161
Other assets................................. 3,192,595 3,216,278
---------------------------
Total assets.............................. $217,317,732 $197,435,133
============================
See accompanying notes to consolidated financial statements. Page: 1
PART I. Item 1. - FINANCIAL INFORMATION
Chesapeake Financial Shares, Inc. September 30, December 31,
Consolidated Balance Sheets 2000 1999
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
Deposits
Noninterest bearing deposits............... $ 27,871,611 $ 27,150,692
Savings and interest bearing deposits...... 69,355,829 67,238,177
Certificates of deposit.................... 93,545,906 80,443,346
---------------------------
Total deposits............................ 190,773,346 174,832,215
Federal funds purchased..................... 6,900,000 4,800,000
Accrued interest payable.................... 336,087 301,247
Other liabilities........................... 1,350,002 1,140,506
Note payable................................ 828,969 847,713
---------------------------
Total liabilities........................ 200,188,404 181,921,681
Commitments and contingent liabilities
Shareholders' equity
Preferred stock, par value $1 per share;
authorized 50,000 shares; none outstanding 0 0
Common stock, voting....................... 6,132,355 6,131,635
Common stock, non-voting................... 0 0
voting non-voting
9/30/00 12/31/99 9/30/00 12/31/99
--------- --------- ------- --------
Shares auth.2,400,000 2,400,000 635,000 635,000
Shares o/s. 1,226,471 1,226,327 0 0
Paid in capital............................. 98,552 264,745
Accumulated other comprehensive income...... (81,579) (619,848)
Retained earnings........................... 10,980,000 9,736,920
--------------------------
Total shareholders' equity............... 17,129,328 15,513,452
--------------------------
Total liabilities and Shareholders' equity $217,317,732 $197,435,133
===========================
See accompanying notes to consolidated financial statements. Page: 2
PART I. Item 1. - FINANCIAL INFORMATION (cont'd.)
Chesapeake Financial Shares, Inc. Three Months Ended
Consolidated Statements of Earnings September 30,
2000 1999
Interest Income (Unaudited)
Interest and fees on loans................... $ 3,411,800 $ 2,768,335
Interest on federal funds sold............... 3,636 108
Interest on time deposits with banks......... 8,507 1,734
Interest on U.S. Treasury securities......... 0 0
Interest on U.S. Agency Obligations.......... 423,322 434,658
Interest on obligations of state and
political subs.............................. 175,757 203,291
------------------------
Total interest income 4,023,022 3,408,126
Interest Expense
Interest on savings and interest bearing
deposits.................................... 544,817 558,433
Interest on certificates of deposit.......... 1,458,484 911,350
Interest on federal funds purchased.......... 79,739 45,205
Other interest expense....................... 11,463 7,885
------------------------
Total interest expense 2,094,503 1,522,873
------------------------
Net interest income.......................... 1,928,519 1,885,253
Provision for loan losses.................... 88,874 48,012
------------------------
Net interest income after provision for loan
losses...................................... 1,839,645 1,837,241
Noninterest Income
Income from fiduciary activities............. 393,342 369,299
Service charges on deposit accounts.......... 175,554 163,204
Securities gains (loses)-net................. 0 (96,661)
Merchant card income......................... 348,199 304,763
ATM income................................... 61,847 65,515
Cash Management income....................... 362,813 310,221
Other income................................. 142,055 234,519
------------------------
Total noninterest income 1,483,810 1,350,860
Noninterest Expense
Salaries..................................... 908,766 836,839
Employee benefits............................ 174,418 238,586
Occupancy expenses........................... 440,120 382,649
Merchant card expense........................ 306,084 283,285
ATM expense.................................. 61,497 74,061
Cash management expense...................... 195,109 88,257
Other expenses............................... 450,672 440,995
-----------------------
Total noninterest expense................... 2,536,666 2,344,672
-----------------------
Income before income taxes................... 786,789 843,429
Income taxes................................. 188,829 238,426
-----------------------
Net income................................ $ 597,960 $ 605,003
=======================
Earnings per share, basic.................... $0.49 $0.49
Earnings per share, assuming dilution........ $0.47 $0.47
See accompanying notes to consolidated financial statements. Page: 3
PART I. Item 1. - FINANCIAL INFORMATION (cont'd.)
Chesapeake Financial Shares, Inc. Nine Months Ended
Consolidated Statements of Earnings September 30,
2000 1999
Interest Income (Unaudited)
Interest and fees on loans.................... $ 9,572,505 $ 8,087,635
Interest on federal funds sold................ 5,696 53,990
Interest on time deposits with banks.......... 17,383 9,229
Interest on U.S. Treasury securities.......... 0 1,025
Interest on U.S. Agency Obligations........... 1,216,472 1,178,231
Interest on obligations of state and
political subs............................... 677,863 564,074
-----------------------
Total interest income 11,489,919 9,894,184
Interest Expense
Interest on savings and interest bearing
deposits.................................... 1,649,686 1,500,048
Interest on certificates of deposit........... 3,694,562 2,996,233
Interest on federal funds purchased........... 309,816 59,085
Other interest expense........................ 30,784 31,785
-----------------------
Total interest expense 5,684,848 4,587,151
-----------------------
Net interest income........................... 5,805,071 5,307,033
Provision for loan losses..................... 269,122 162,700
-----------------------
Net interest income after provision for loan
losses....................................... 5,535,949 5,144,333
-----------------------
Noninterest Income
Income from fiduciary activities.............. 852,798 818,733
Service charges on deposit accounts........... 501,407 462,774
Security gains (losses)-net................... 0 (96,661)
Merchant card income.......................... 755,796 623,248
ATM income.................................... 176,197 175,617
Cash Management income........................ 1,101,135 845,721
Other income.................................. 428,670 491,573
----------------------
Total noninterest income 3,816,003 3,321,005
----------------------
Noninterest Expense
Salaries...................................... 2,628,831 2,389,981
Employee benefits............................. 537,642 533,204
Occupancy expenses............................ 1,213,333 1,158,207
Merchant card expense......................... 680,426 621,744
ATM expense................................... 180,760 212,980
Cash management expense....................... 539,006 253,046
Other expenses................................ 1,466,953 1,237,545
----------------------
Total noninterest expense................ 7,246,951 6,406,707
----------------------
Income before income taxes.................... 2,105,001 2,058,631
Income taxes.................................. 505,200 542,226
----------------------
Net income................................ $ 1,599,801 $ 1,516,405
=======================
Earnings per share, basic..................... $1.30 $1.23
Earnings per share, assuming dilution......... $1.26 $1.18
See accompanying notes to consolidated financial statements. Page: 4
PART I. - FINANCIAL INFORMATION (cont'd.)
Chesapeake Financial Shares, Inc. Nine Months Ended
Consolidated Statements of Cash Flows September 30,
2000 1999
(Unaudited)
Cash flows from operating activities:
Net income................................... $ 1,599,801 $ 1,516,405
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization............... 670,966 484,947
Provision for loan losses................... 269,122 162,700
Provision for cash management account losses 190,000 85,000
(Amortization) of discount and amortization
of premiums, net .......................... 158,377 475,483
Net loss on sale of securities............. 0 96,661
Changes in assets and liabilities:
Decrease (increase) in accr. interest
receivable................................. (204,406) (21,982)
Decrease (increase) in other assets......... (144,548) (326,947)
Increase (decrease) in accrued interest
payable.................................... 34,840 (45,484)
Increase (decrease) in other liabilities.... 209,496 219,755
-----------------------
Net cash provided by (used for) operating
activities.................................. 2,783,648 2,646,538
-----------------------
Cash flows from investing activities:
Purchases of securities available for sale... (3,001,715) (15,255,607)
Proceeds from sale or call of securities
available for sale.......................... 0 4,746,458
Proceeds from maturities of securities
available for sale.......................... 3,406,732 12,334,189
Origination of loans available for sale...... (1,698,360) (5,619,250)
Proceeds from sale of loans available for
sale........................................ 1,698,360 5,619,250
Net (increase) decrease in loans outstanding. (20,466,275) (13,980,014)
Net (increase) decrease in business manager
assets...................................... 658,311 180,990
Other capital expenditures................... (889,887) (860,828)
------------------------
Net cash provided by (used for) investing
activities.................................. (20,292,834) (12,834,812)
------------------------
Cash flows from financing activities:
Net increase (decrease) in demand accounts,
interest bearing demand deposit accounts
and savings deposits........................ 2,838,571 14,663,387
Net increase (decrease) in certificates of
deposit..................................... 13,102,560 (13,969,753)
Net increase (decrease) in federal funds
purchased................................... 2,100,000 5,000,000
Cash dividends............................... (356,721) (296,434)
Proceeds from issuance of voting common stock 110,790 77,000
Acquisition of voting common stock........... (276,263) (281,234)
Curtailment of long-term borrowings.......... (18,744) (17,744)
------------------------
Net cash provided by (used for) financing
activities.................................. 17,500,193 5,175,222
------------------------
Net (decrease) increase in cash and federal
funds sold.................................. (8,993) (5,013,052)
Cash and federal funds sold at beginning of
period...................................... 8,669,184 12,937,686
------------------------
Cash and federal funds sold at end of period. $ 8,660,191 $ 7,924,634
=========================
See accompanying notes to consolidated financial statements. Page: 5
<TABLE>
Statement of Changes in Stockholder's Equity
Chesapeake Financial Shares, Inc.
Nine Months Ended September 30, 1999
(Unaudited)
<CAPTION>
Accumulated Additional
Comprehensive Retained Other Compr. Common Paid-In
Total Income Earnings Income Stock Capital
---------- ---------- ----------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance $14,928,406 $8,082,349 $174,267 $6,147,995 $523,795
Comprehensive Income:
Net Income 1,516,405 $1,516,405 1,516,405
Other comprehensive
income, net of tax:
Unrealized gain on
securities available
for sale: (420,992) (420,992) (420,992)
--------- ---------
Total comprehensive
income, net of tax: $1,095,413
==========
Acquisition of common stock (281,234) (68,700) (212,534)
Issuance of common stock 77,000 55,440 21,560
Dividends declared (296,434) (296,434)
--------- --------- --------- -------- ---------
Ending balance $15,523,151 $9,302,320 $(246,725) $6,134,735 $332,821
=========== ========== ========= ========== ========
</TABLE>
Page 6
<TABLE>
Statement of changes in Stockholder's Equity
Chesapeake Financial Shares, Inc.
Nine Months Ended September 30, 2000
Unaudited
<CAPTION>
Accumulated Additional
Comprehensive Retained Other Compr. Common Paid-In
Total Income Earnings Income Stock Capital
----------- ----------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance $15,513,452 $ $9,736,920 $(619,848) $6,131,635 $264,745
Comprehensive Income:
Net Income 1,599,801 1,599,801 1,599,801
Other comprehensive
income, net of tax:
Unrealized gain on
securities available
for sale: 538,269 538,269 538,269
--------- --------- ---------
Total comprehensive
income, net of tax: $2,138,070
==========
Acquisition of common
stock (276,263) (74,880) (201,383)
Issuance of common
stock 110,790 75,600 35,190
Dividends declared (356,721) (356,721)
--------- --------- -------- ------- --------
Ending balance $17,129,328 $10,980,000 $(81,579) $6,132,355 $98,552
=========== =========== ======== ========= =======
</TABLE>
Page 7
PART I. Item 1. - FINANCIAL INFORMATION (cont'd.) 9/00-10QSB
Chesapeake Financial Shares, Inc.
Notes to Consolidated Financial Statements
1. Chesapeake Financial Shares, Inc. ("CFS) owns 100% of Chesapeake Bank
(the "Bank") and Chesapeake Financial Group, Inc. (CFG). Two additional
subsidiaries, Chesapeake Mortgage Company, Inc. and Chesapeake Insurance
Agency, Inc. (t/a Chesapeake Investment Services) are wholly owned
subsidiaries of CFS and the Bank, respectively. The Bank also is the 100%
owner of CNB Properties, Inc The consolidated financial statements include
the accounts of CFS and its wholly owned subsidiaries. All significant
intercompany accounts have been eliminated.
2. The accounting and reporting policies of the registrant conform to
generally accepted accounting principles and to the general practices within
the banking industry. The interim financial statements have not been
audited; however, in the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of
the consolidated financial statements have been included. Results of
operations for the interim periods are not necessarily indicative of the
results to be expected for the full year.
These financial statements should be read in conjunction with the financial
statements and the footnotes included in the registrant's 1999Annual Report
to Shareholders.
3. The following data shows the amounts used in computing earnings per share
and the effect on the weighted average number of shares of potential
dilutive common stock. The potential common stock will not have a
significant impact on net income.
September 30, 2000 September 30, 1999
Weighted average number of common
shares, basic 1,229,019 1,233,598
Effect of dilutive stock options 39,440 55,250
--------- ---------
Weighted number of common shares
and dilutive potential common
stock used in diluted EPS 1,268,459 1,288,848
========= =========
Page: 8
PART I. Item 2. - FINANCIAL INFORMATION (cont'd.) 9/00-10QSB
Chesapeake Financial Shares, Inc.
Management's Discussion and Analysis of Financial
Condition or Plan of Operation (Unaudited)
A. Summary - liquidity and capital resources
Sufficient short-term assets are maintained at Chesapeake Financial Shares
to meet cash needs anticipated by management. Management's primary sources
of liquidity continue to be federal funds sold, short term borrowings from
Federal Home Loan Bank Atlanta, securities maturing within one year, and
principal payments from mortgage securities. The repayment and sale of loans
also provide liquidity. The total of federal funds sold, securities
maturing within one year, and estimated principal payments on mortgage-backed
securities within one year at September 30, 2000 was approximately
$4,731,000, compared to $8,236,000 one year ago and $6,334,000 at December
31,1999.
The liquidity ratio at September 30, 2000 was 23.3%, compared with 25.4%
one year ago. This ratio is arrived at by dividing net liquid assets
(sum of total Cash and Due from Banks, including Federal Reserve, unpledged
and over pledged portions of Investment Securities at market value, and
federal funds sold less reserves required at the Federal Reserve Bank) by
net liabilities (total liabilities excluding valuation reserves and capital).
Management has found in the past that 18% represents a sufficient level of
liquidity to meet cash needs.
Management believes capital is adequate to meet current needs. Unencumbered
capital (total capital net of accumulated other comprehensive income less
intangibles plus reserves) as a percent of total adjusted assets (total
assets less intangibles plus reserves) was 8.9% at September 30, 2000 and
9.2% at December 31, 1999, for CFS.
Chesapeake Financial Shares and Chesapeake Bank must have a ratio of Tier 1
capital (common equity, retained earnings less certain goodwill) to
risk-adjusted assets of at least 4.0%. At September 30, 2000 and December
31, 1999 the consolidated ratio of Tier 1 risk-based capital to
risk-adjusted assets was 9.8% and 10.4%, respectively. Total risked based
capital to risk weighted assets was 11.1% and 11.7% at September 30, 2000
and December 31, 1999, respectively. Tier one leverage capital was 8.1% and
8.3%, at September 30, 2000 and December 31, 1999, respectively.
Page: 9
PART I. Item 2. - FINANCIAL INFORMATION (cont'd.) 9/00-10QSB
Chesapeake Financial Shares, Inc.
Management's Discussion and Analysis of Financial
Condition or Plan of Operation (Unaudited)
B. Results of operations:
Earnings Summary:
Net income was $1,599,801 for the nine months ended September 30, 2000,
compared with income of $1,516,405 for the same period in 1999. On a fully
diluted per share basis, the net profit was $1.26 for the first nine months
of 2000. Earnings per share through the third quarter of 1999 were $1.18,
fully diluted. Net interest income before provision increased $498,038 or
9.4% and noninterest income increased $494,998 or 14.9%. The Company
experienced a net increase in noninterest expense (which includes other
expense) of $840,244 or 13.1%.
Net Interest Income:
Chesapeake Financial Shares' results of operation are significantly affected
by its ability to manage effectively the interest rate sensitivity and
maturity of its interest-earning assets and interest-bearing liabilities.
At September 30, 2000, the Company's interest-earning assets exceeded its
interest-bearing liabilities by approximately $29.8 million, compared with a
$25.2 million excess one year ago.
Net interest margins are 4.43% at September 30, 2000 compared to 4.60% at
September 30, 1999. Margins had narrowed during the later part of 1998 and
the first half of 1999 due to falling rates and the resulting compression of
spreads as deposit rates hit floors. Margins have generally improved since
then as rates have increased. A different sort of compression of margins
occurred as rates continued upward and the competition with the brokerage
firms for deposits intensified.
There has been significant growth in deposits in all trade areas of the bank.
New product offerings have been very successful in maintaining market share
as interest rates have been increasing. A significant portion of past
deposit growth has been noninterest bearing. Large banks continue to buy
market share in the current rising rate environment. A large number of
interest-bearing deposits are maturing/repricing at higher interest rates and
higher yielding certificates have increased 31.5% from one year ago.
Offsetting this will be the effect of loans with interest rates that are tied
to prime repricing at slightly higher rates which will positively impact
margins during the next several quarters. However, with prime plus 1%
currently at 10.5%, loan demand is expected to weaken. This will have a
negative impact on margins if rates remain at these levels.
Page: 10
PART I. Item 2. - FINANCIAL INFORMATION (cont'd.) 9/00-10QSB
Chesapeake Financial Shares, Inc.
Management's Discussion and Analysis of Financial
Condition or Plan of Operation (Unaudited)
Provision for Loan Losses:
The loan loss provision is a charge against earnings necessary to maintain
the reserve for loan losses at a level consistent with management's
evaluation of the credit quality and risk adverseness of the portfolio.
Management makes a quarterly evaluation as to the adequacy of the current
loan loss reserve. Management's detailed analysis as of September 30, 2000
supports the adequacy of the current loan loss level of $2.4 million.
Chesapeake Bank's management maintains a reserve for loan loss that they
feel represents a conservative estimate of potential losses in the Bank's
loan portfolio. The methodology incorporates subjective factors into the
evaluation of the adequacy of the ALLL such as:
The effect of volume and trends in delinquencies and nonaccrual loans.
The effect of trends in portfolio volume, maturity, and composition.
An estimate of future loss on all significant loans and assessment of
underwriting and lending policies and procedures including those
for charge off, collection and recovery.
Experience, ability and depth of lending management and staff.
The effect of national and local economic conditions and downturns in
specific industries.
Concentrations of credit that might affect loss experience across one or
more components of the portfolio.
The results of any independent reviews of the portfolio.
The loan loss reserve was 1.6% and 1.7% of gross loans as of September 30,
2000 and December 31, 1999.
Noninterest Income:
Noninterest income is up 14.9% or $494,998 from the same period last year.
Chesapeake Bank's Business Manager product generated $1,101,135 in gross
revenue for the first nine months ended September 30, 2000, compared to the
same period last year of $845,721. Managed assets in the business manager
program were $7,942,850 at September 30, 2000, and $8,791,161 at September
30, 1999.
The merchant card program has generated $755,799 or 21.3% more in gross
revenue through September of this year versus the same period last year due
to an increased customer base. The Other Income category was $428,670, down
12.8%, or $62,903 from one year ago. The Bank sold a building in September
of last year at a gain of $109,000.
Page: 11
PART I. Item 2. - FINANCIAL INFORMATION (cont'd.) 9/00-10QSB
Chesapeake Financial Shares, Inc.
Management's Discussion and Analysis of Financial
Condition or Plan of Operation (Unaudited)
Noninterest Expenses:
Employee salary expense amounted to $2,628,831 and $2,389,981 for the nine
months ended September 30, 2000 and 1999, respectively. Benefits expense is
up 0.8% or $4,438 from September 30, 1999. These increases are directly
related to new hires as market share has increased. In addition, the
Williamsburg market continues to be highly competitive due to the higher
growth rate that the community is experiencing.
Other expenses are up 18.5%, or $229,408, over the same period last year.
There was a $15,000 expense incurred for the removal of the James City County
(JCC) Winn-Dixie Supermarket banking unit. The JCC branch was closed on
January 31, 2000. The rental expense associated with that facility ended
April 20, 2000. Other increases in expenses are associated with increased level
of business activity.
Cash management expense was $539,006 for the nine months ended September 30,
2000, up 113.0% from the same period one year ago. This increase is
associated with additional business activity and is more than offset by
increased revenue.
Page: 12
PART I. Item 2. - FINANCIAL INFORMATION (cont'd.) 9/00-10QSB
Chesapeake Financial Shares, Inc.
Management's Discussion and Analysis of Financial
Condition or Plan of Operation (Unaudited)
Assets and Loans:
At September 30, 2000, Chesapeake Financial Shares had total assets of
$217.3 million, up 10.1% from $197.4 million at December 31, 1999 and up
15.4% from $188.3 million of one year ago. Management has budgeted for a
7.0% growth in total assets for 2000.
Total loans (gross) at September 30, 2000 were $153.2 million, representing
an increase of 15.3% from December 31, 1999, when loans were $132.9 million.
Chesapeake Bank's loan quality is good as the following table shows.
Management is confident that no serious delinquency trends are developing.
9/30/00 12/31/99
Nonaccrual loans $394,696 $155,520
90 days past due 251,684 3,554
Restructured loans 0 0
________ ________
Totals $646,380 $159,074
Management is also confident there will be no loss incurred as the Bank is
well secured on these assets. There are no impaired loans outstanding at the
end of either period.
Charged off loans through September 30, 2000, amounted to $131,073 and
charged off loans through September 30, 1999, were $8,962. Recoveries through
September 30, 2000 were $2,676 as compared to $18,956 as of September 30,
1999.
Concentrations of credit in loans are compiled quarterly by management and
reviewed with the Board of Director's Loan Review Committee. There have been
no material changes in the concentrations of credit within the past three
months that would warrant above average additions to the reserve. The Bank's
only concentrations of credit greater than 70% of capital are individual
consumer (225% of capital) and residential real estate (71% of total
capital). Bank management feels that the current levels are consistent with
the objectives of the Bank and do not represent unwarranted risk.
The Bank's Other Real Estate Owned (OREO) portfolio currently has two
properties with a total carrying value of $185,000. There is a contract on
one property valued at $175,000.
Deposits:
Deposits are $190.8 million at September 30, 2000 and $174.8 million at
December 31, 1999. At September 30, 1999, deposits were $165.3 million. The
Bank's mix of deposit dollars has changed from September 30, 1999 with net
increases in noninterest bearing, while savings and interest bearing
transaction balances are flat. During the same period total certificates
dollars have increased 31.5%. It is management's opinion that this trend
will continue in the current interest rate environment.
Page: 13
PART II. Item l. - OTHER INFORMATION 9/00-10QSB
Chesapeake Financial Shares, Inc.
Legal Proceedings
None to report
PART II. Item 2. - OTHER INFORMATION
Chesapeake Financial Shares, Inc.
Changes in Securities
None to report.
PART II. Item 3. - OTHER INFORMATION
Chesapeake Financial Shares, Inc.
Default Upon Senior Securities
None to report.
PART II. Item 4. - OTHER INFORMATION
Chesapeake Financial Shares, Inc.
Submission of Matters to a Vote of Security Holders
None to report.
PART II. Item 5. - OTHER INFORMATION
Chesapeake Financial Shares, Inc.
Other Information
As of May 30, 1998, the Bank and Holding Company completed a safety and
soundness examination, an Information Systems examination, a Phase II Y2K
examination, and a Trust examination, performed by the Federal Reserve Bank
of Richmond. The Bank and Holding Company completed a safety and soundness
examination in the fall of 1999, performed by the Bureau of Financial
Institutions, Virginia State Corporation Commission.
As a result of these examinations management is not aware of any current
recommendations of the regulatory authorities which, if they were
implemented, would have a material effect on liquidity, capital resources or
operations of the Bank or Holding Company.
Page: 14
PART II. Item 6. - OTHER INFORMATION 9/00-10QSB
Chesapeake Financial Shares, Inc.
Exhibits and Reports on Form 8-K
(Unaudited)
(a) Exhibit 2 Plan of acquisition, reorganization, arrangement,
liquidation or succession N/A
Exhibit 4 Instruments defining the rights of security holders,
including indentures N/A
Exhibit 10 Material contract N/A
Exhibit 11 Statement re: computation of earnings per share See Part 1,
Item 1, Note
3 of this
Form 10-QSB
Exhibit 15 Letter re: unaudited interim financial information N/A
Exhibit 18 Letter re: change in accounting principles N/A
Exhibit 19 Report furnished to security holders N/A
Exhibit 22 Published report regarding matters submitted to
vote of security holders Previously Filed
Exhibit 23 Consents of experts and counsel N/A
Exhibit 24 Power of attorney N/A
Exhibit 27 Financial Data Schedule Attached
Exhibit 99 Additional exhibits N/A
(b) No filings were made on Form 8-K for the period.
Page: 15
SIGNATURES
Chesapeake Financial Shares, Inc. SEC 10-QSB 9/00
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Chesapeake Financial Shares, Inc.
(Registrant)
11/01/00 /s/ Douglas D. Monroe, Jr.
(Date) (Signature)
Douglas D. Monroe, Jr.
Chairman and Chief Executive Officer
11/01/00 /s/ John H. Hunt, II
(Date) (Signature)
John H. Hunt, II
Secretary and Chief Financial Officer
Page: 16
