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 June 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 August 1, 2000.
Class Outstanding at August 1, 2000
Common Stock, voting, $5.00 par value 1,232,755
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..................................1-5
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999.........................1-2
Consolidated Statements of Earnings
Three months ended June 30, 2000..............................3
Consolidated Statements of Earnings
Six months ended June 30, 2000................................4
Consolidated Statements of Cash Flows
Six months ended June 30, 2000................................5
Consolidated Statement of Changes in Stockholder's Equity
Six months ended June 30, 1999................................6
Consolidated Statement of Changes in Stockholder's Equity
Six months ended June 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. June 30, December 31,
Consolidated Balance Sheets 2000 1999
ASSETS (Unaudited)
Cash and due from banks.................... $9,789,899 $8,669,184
Securities available for sale
U.S. Government agencies (book value of
$23,170,341-2000 and $24,199,324-1999).... 22,743,853 23,727,615
Obligations of state and political
subdivisions (book value of $15,095,711-2000
and $13,571,303-1999)..................... 15,038,820 13,166,902
Other Securities (book value $2,557,928-2000
and $2,554,862-1999....................... 2,523,600 2,502,150
Loans...................................... 146,384,487 132,893,500
Less: Reserve for loan loss................ (2,312,817) (2,253,676)
---------------------------
Net loans................................ 144,071,670 130,639,824
Bank premises and equipment, net........... 5,188,608 5,384,908
Accrued interest receivable................ 1,448,369 1,337,111
Business Manager Assets.................... 8,613,430 8,791,161
Other assets............................... 3,439,558 3,216,278
---------------------------
Total assets............................. $212,857,807 $197,435,133
===========================
See accompanying notes to consolidated financial statements. Page: 1
PART I. Item 1. - FINANCIAL INFORMATION
Chesapeake Financial Shares, Inc. June 30, December 31,
Consolidated Balance Sheets 2000 1999
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
Deposits
Noninterest bearing deposits.............. $28,605,246 $27,150,692
Savings and interest bearing deposits..... 65,080,312 67,238,177
Certificates of deposit................... 90,438,177 80,443,346
----------------------------
Total deposits........................... 184,123,735 174,832,215
Federal funds purchased.................... 10,000,000 4,800,000
Accrued interest payable................... 294,299 301,247
Other liabilities.......................... 1,183,018 1,140,506
Note payable............................... 836,078 847,713
----------------------------
Total liabilities........................ 196,437,130 181,921,681
Commitments and contingent liabilities
Shareholders' equity
Preferred stock, par value $1 per share;
authorized 50,000 shares; none outstanding 0 0
Common stock, voting...................... 6,163,775 6,131,635
Common stock, non-voting.................. 0 0
voting non-voting
6/30/00 12/31/99 6/30/00 12/31/99
------- -------- ------- --------
Shares auth. 2,400,000 2,400,000 635,000 635,000
Shares o/s. 1,232,755 1,226,327 0 0
Paid in capital............................ 93,729 264,745
Accumulated other comprehensive income..... (341,687) (619,848)
Retained earnings.......................... 10,504,860 9,736,920
----------------------------
Total shareholders'equity................ 16,420,677 15,513,452
----------------------------
Total liabilities and Shareholders'equity $212,857,807 $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 June 30,
2000 1999
Interest Income (Unaudited)
Interest and fees on loans.................. $3,165,548 $2,723,893
Interest on federal funds sold.............. 685 18,922
Interest on time deposits with banks........ 6,184 3,482
Interest on U.S. Treasury securities........ 0 0
Interest on U.S. Agency Obligations......... 358,433 400,563
Interest on obligations of state and
political subs............................. 278,784 181,822
--------------------------
Total interest income 3,809,634 3,328,682
Interest Expense
Interest on savings and interest bearing
deposits................................... 563,887 495,571
Interest on certificates of deposit......... 1,163,857 1,009,935
Interest on federal funds purchased......... 152,257 10,640
Other interest expense...................... 11,561 15,893
--------------------------
Total interest expense 1,891,562 1,532,039
--------------------------
Net interest income......................... 1,918,072 1,796,643
Provision for loan losses................... 115,124 58,013
--------------------------
Net interest income after provision for loan
losses..................................... 1,802,948 1,738,630
--------------------------
Noninterest Income
Income from fiduciary activities............ 236,546 224,876
Service charges on deposit accounts......... 164,176 158,678
Merchant card income........................ 224,771 176,718
ATM income.................................. 57,993 61,875
Cash management income...................... 384,970 272,762
Other income................................ 137,545 141,283
--------------------------
Total noninterest income 1,206,001 1,036,192
--------------------------
Noninterest Expense
Salaries.................................... 867,772 801,157
Employee benefits........................... 188,785 144,773
Occupancy expenses.......................... 379,457 419,149
Merchant card expense....................... 215,034 202,138
ATM expense................................. 58,645 76,591
Cash management expense..................... 167,800 75,654
Other expenses.............................. 524,861 407,618
--------------------------
Total noninterest expense................ 2,402,354 2,127,080
--------------------------
Income before income taxes.................. 606,595 647,742
Income taxes................................ 146,227 157,544
--------------------------
Net income............................... $ 460,368 $ 490,198
==========================
Earnings per share, basic................... $0.37 $0.40
Earnings per share, assuming dilution....... $0.36 $0.38
See accompanying notes to consolidated financial statements. Page: 3
PART I. Item 1. - FINANCIAL INFORMATION (cont'd.)
Chesapeake Financial Shares, Inc. Six Months Ended
Consolidated Statements of Earnings June 30,
2000 1999
Interest Income (Unaudited)
Interest and fees on loans................... $6,160,705 $5,319,300
Interest on federal funds sold............... 2,060 53,882
Interest on time deposits with banks......... 8,876 7,495
Interest on U.S. Treasury securities......... 0 0
Interest on U.S. Agency Obligations.......... 793,150 743,573
Interest on obligations of state and political
subs......................................... 502,106 360,783
-------------------------
Total interest income 7,466,897 6,486,058
Interest Expense
Interest on savings and interest bearing
deposits.................................... 1,104,869 941,615
Interest on certificates of deposit.......... 2,236,078 2,084,883
Interest on federal funds purchased.......... 230,077 13,880
Other interest expense....................... 19,321 23,900
-------------------------
Total interest expense 3,590,345 3,064,278
-------------------------
Net interest income.......................... 3,876,552 3,421,780
Provision for loan losses.................... 180,248 114,688
-------------------------
Net interest income after provision for loan
losses...................................... 3,696,304 3,307,092
-------------------------
Noninterest Income
Income from fiduciary activities............. 459,456 449,434
Service charges on deposit accounts.......... 325,853 299,570
Merchant card income......................... 407,597 318,485
ATM income................................... 114,350 110,102
Cash management income....................... 738,322 535,500
Other income................................. 286,615 257,054
-------------------------
Total noninterest income 2,332,193 1,976,145
-------------------------
Noninterest Expense
Salaries..................................... 1,720,065 1,553,142
Employee benefits............................ 363,224 294,618
Occupancy expenses........................... 773,213 796,668
Merchant card expense........................ 374,342 338,459
ATM expense.................................. 119,263 138,919
Cash management expense...................... 343,897 164,789
Other expenses............................... 1,016,281 775,440
-------------------------
Total noninterest expense................. 4,710,285 4,062,035
-------------------------
Income before income taxes................... 1,318,212 1,215,202
Income taxes................................. 316,371 303,800
-------------------------
Net income................................ $1,001,841 $ 911,402
=========================
Earnings per share, basic.................... $0.82 $0.74
Earnings per share, assuming dilution........ $0.79 $0.71
See accompanying notes to consolidated financial statements. Page: 4
PART I. - FINANCIAL INFORMATION (cont'd.)
Chesapeake Financial Shares, Inc. Six Months Ended
Consolidated Statements of Cash Flows June 30,
2000 1999
(Unaudited)
Cash flows from operating activities:
Net income.................................... $1,001,841 $ 911,402
Adjustments to reconcile net income to net
cash provided by (used for) operating activities:
Depreciation and amortization................ 425,827 320,108
Provision for loan losses.................... 180,248 114,688
Provision for cash management account losses. 142,500 7,500
(Accretion) of discount and amortization of
premiums, net............................... 158,377 380,376
Changes in assets and liabilities:
Decrease (increase) in accr. interest receivable (111,258) 22,466
Decrease (increase) in other assets.......... (353,152) 966,477
Increase (decrease) in accrued interest payable (6,948) (26,294)
Increase (decrease) in other liabilities..... 42,512 45,146
----------------------
Net cash provided by (used for) operating
activities................................... 1,479,947 2,553,379
----------------------
Cash flows from investing activities:
Purchases of securities available for sale.... (3,001,715) (11,268,912)
Proceeds from maturities of securities available
for sale..................................... 2,344,846 9,708,304
Origination of loans available for sale....... (774,500) (2,951,750)
Proceeds from sale of loans available for sale 774,500 2,951,750
Net (increase) decrease in loans outstanding.. (13,612,094) (10,177,934)
Net (increase) decrease in business manager
assets....................................... 35,231 180,990
Other capital expenditures.................... (232,608) (890,576)
----------------------
Net cash provided by (used for) investing
activities................................... (14,466,340) (12,448,128)
-----------------------
Cash flows from financing activities:
Net increase (decrease) in demand accounts,
interest bearing demand deposit accounts
and savings deposits......................... (703,311) 9,380,768
Net increase (decrease) in certificates of
deposit...................................... 9,994,831 (9,324,341)
Net increase (decrease) in federal funds
purchased.................................... 5,200,000 4,450,000
Cash dividends................................ (233,901) (197,895)
Proceeds from issuance of voting common stock. 110,790 77,000
Acquisition of voting common stock............ (249,666) (136,707)
Curtailment of long-term borrowings........... (11,635) (13,246)
----------------------
Net cash provided by (used for) financing
activities................................... 14,107,108 4,235,579
Net (decrease) increase in cash and federal
funds sold................................... 1,120,715 (5,659,170)
Cash and federal funds sold at beginning of
period....................................... 8,669,184 12,937,686
-----------------------
Cash and federal funds sold at end of period.. $9,789,899 $7,278,516
=======================
See accompanying notes to consolidated financial statements. Page: 5
<TABLE>
Statement of changes in Stockholder's Equity
Chesapeake Financial Shares, Inc.
Six Months Ended June 30, 1999
<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 911,402 911,402 911,402
Other comprehensive
income, net of tax:
Unrealized gain on
securities
available for sale: (211,386) (211,386) (211,386)
--------- ------- -------
Total comprehensive income,
net of tax: $ 700,016
=======
Acquisition of common
stock (136,707) (33,425) (103,282)
Issuance of common stock 77,000 55,400 21,560
Dividends declared 197,895) (197,895)
--------- --------- -------- --------- -------
Ending balance $15,370,820 $8,795,856 $ (37,119) $6,170,010 $442,073
========== ========= ======== ========= =======
</TABLE>
Page 6
<TABLE>
Statement of changes in Stockholder's Equity
Chesapeake Financial Shares, Inc.
Six Months Ended June 30, 2000
<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 1,001,841 1,001,841 1,001,841
Other comprehensive
income, net of tax:
Unrealized gain on
securities
available for sale: 278,161 278,161 278,161
--------- --------- -------
Total comprehensive income,
net of tax: $1,280,003
=========
Acquisition of common
stock (249,666) (66,260) (183,406)
Issuance of common stock 110,790 98,400 12,390
Dividends declared (233,901) (233,901)
--------- --------- ------- -------- --------
Ending balance $16,420,677 $10,504,860 $(341,687) $6,163,775 $93,729
========== ========== ========= ========= ========
</TABLE>
Page 7
PART I. Item 1. - FINANCIAL INFORMATION (cont'd.)6/00-10QSB
Chesapeake Financial Shares, Inc.
Notes to Consolidated Financial Statements
1. Chesapeake Financial Shares, Inc. ("CFS) owns 100%
of Chesapeake Bank (the "Bank"). Two additional
subsidiaries, Chesapeake Financial Group, 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.
These financial statements should be read in
conjunction with the financial statements and the
footnotes included in the registrant's 1999 Annual
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.
June 30, 2000 June 30, 1999
------------- -------------
Weighted avg. number of common shares, basic 1,229,195 1,234,478
Effect of dilutive stock options 43,810 55,713
--------- ---------
Weighted number of common shares and dilutive
potential common stock used in diluted EPS 1,273,005 1,290,191
========= =========
Page: 8
PART I. Item 2. - FINANCIAL INFORMATION (cont'd.)6/00-10QSB
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 provides liquidity.
The total of federal funds sold, securities maturing
within one year, and estimated principal payments on
mortgage-backed securities within one year at March 31,
2000 was approximately $4,824,000, compared to
$6,838,000 one year ago and $6,334,000 at December
31,1999.
The liquidity ratio at June 30, 2000 was 24.6%,
compared with 27.4% 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 8.7% at June 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 June 30, 2000 and
December 31, 1999 the consolidated ratio of Tier 1 risk-
based capital to risk-adjusted assets was 9.9% and
10.4%, respectively. Total risked based capital to
risk weighted assets was 11.2% and 11.7% at June 30,
2000 and December 31, 1999, respectively. Tier one
leverage capital was 8.1% and 8.3% at June 30, 2000 and
December 31, 1999, respectively.
Page: 9
PART I. Item 2. - FINANCIAL INFORMATION (cont'd.) 6/00-10QSB
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 $1,001,841 for the six months ended
June 30, 2000, compared with income of $911,402 for the
same period in 1999. On a fully diluted per share
basis, the net profit was $0.79 for the first six
months of 2000. Earnings per share for the first
quarter of 1999 were $0.71. Net interest income before
provision increased $454,772 or 13.3% and noninterest
income increased $356,048 or 18.0%. The Company
experienced a net increase in noninterest expense
(which includes other expense) of $648,250 or 16.0%.
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 June 30, 2000, the Company's interest-
earning assets exceeded its interest-bearing
liabilities by approximately $18.2 million, compared
with a $17.3 million excess one year ago.
Net interest margins are 4.63% at June 30, 2000
compared to 4.49% at June 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 will occur as rates continue upward and the
competition with the brokerage firms for deposits
intensifies.
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 started to increase. A
significant portion of past deposit growth has been
noninterest bearing. Large banks are currently buying
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 12% 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 in the near future. However, with prime plus
1% currently at 10.5%, loan demand will begin 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.) 6/00-10QSB
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 June 30,
2000 supports the adequacy of the current loan loss
level of $2.3 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 June 30, 2000 and December 31, 1999.
Noninterest Income:
Noninterest income is up 18.0% or $356,048 from
the same period last year. Chesapeake Bank's Business
Manager product generated $738,322 in gross revenue for
the first six months ended June 30, 2000, compared to
the same period last year of $535,500. Managed assets
in the business manager program were $8,613,430 at June
30, 2000, and $6,943,174 at June 30, 1999.
The merchant card program has generated $407,597
or 28.0% more in gross revenue through June of this
year than in the same period last year due to an
increased customer base.
The Other Income category was $286,615, up 11.5%,
or $29,561 from one year ago. The Bank sold several
pieces of mechanical equipment at gains and had a
nonrecurring recovery of $8,482 from a billing error in
a previous period. Service Charges on deposit accounts
were up 8.8%, or $26,283, from one year ago due to
increased account volume.
Page: 11
PART I. Item 2. - FINANCIAL INFORMATION (cont'd.) 6/00-10QSB
Chesapeake Financial Shares, Inc.
Management's Discussion and Analysis of Financial
Condition or Plan of Operation (Unaudited)
Noninterest Expenses:
Employee salary expense amounted to $1,720,065 and
$1,553,142 for the six months ended June 30, 2000 and
1999, respectively. Benefits expense is up 23.3% or
$68,606 from June 30, 1999. These increases are
directly related to new hires as market share has
increased and due to cost increases in the employee
benefit area. 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 31.1%, or $240,841, over the
same period last year due in part to a $21,000 loss on
property owned. There was also 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 $343,897 for the six
months ended June 30, 2000, up 108.7% 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.) 6/00-10QSB
Chesapeake Financial Shares, Inc.
Management's Discussion and Analysis of Financial
Condition or Plan of Operation (Unaudited)
Assets and Loans:
At June 30, 2000, Chesapeake Financial Shares had
total assets of $212.9 million, up 7.8% from $197.4
million at December 31, 1999 and up 13.9% from $186.8
million of one year ago. Management has budgeted for a
7.0% growth in total assets for 2000.
Total loans (gross) at June 30, 2000 were $146.4
million, representing an increase of 10.2% 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.
6/30/00 12/31/99
------- --------
Nonaccrual loans $515,852 $155,520
90 days past due 6,743 3,554
Restructured loans 0 0
________ ________
Totals $522,595 $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 June 30, 2000, amounted
to $122,967 and charged off loans through June 30,
1999, were $686. Recoveries through June 30, 2000 were
$1,860 as compared to $16,656 as of June 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 (227% of capital) and
residential real estate (82% 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. Bank management is
currently marketing these properties. The Bank also has
one repossessed asset valued at $6,500.
Deposits:
Deposits are $ 184.1 million at June 30, 2000 and
$174.8 million at December 31, 1999. Deposits were
$184.1 million and $164.7 million at June 30, 2000 and
June 30, 1999, respectively. The Bank's mix of deposit
dollars has changed from June 30, 1999 with net
increases in noninterest bearing, while savings and
interest bearing transaction balances remained
unchanged. During the same period total certificates
dollars have increased 19.2%. It is management's
opinion that this trend will continue in the current
interest rate environment.
Page: 13
PART II. Item l. - OTHER INFORMATION 6/00-10QSB
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
Chesapeake Financial Shares' annual meeting of
shareholders was held on Friday, April 14, 2000 in
Irvington, Virginia. We have previously forwarded to
the Commission copies of the letter to shareholders,
the notice of the meeting, the proxy statement, and the
proxy. Over 89% of the shareholders were represented
at the meeting in person or by proxy with over 87%
voting in favor of the proposals submitted.
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 6/00-10QSB
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 contracts 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 6/00
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)
08/08/00
(Date) (Signature)
Douglas D. Monroe, Jr.
Chairman and Chief Executive Officer
08/08/00
(Date) (Signature)
John H. Hunt, II
Secretary and Chief Financial Officer
Page: 16
