Edgar Filing: CHESAPEAKE FINANCIAL SHARES INC

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 March 31, 2001
--------------

[_] 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 12, 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 May 1, 2001.

Class Outstanding at May 1, 2001
------------- --------------------------

Common Stock, voting, $5.00 par value 1,233,560
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.................................................................... 1-6

Consolidated Balance Sheets
March 31, 2001 and December 31, 2000....................................................... 1-2

Consolidated Statements of Earnings
Three months ended March 31, 2001 and 2000................................................. 3

Consolidated Statements of Cash Flows
Three months ended March 31, 2001 and 2000................................................. 4

Consolidated Statement of Changes in Stockholder's Equity
Three months ended March 31, 2000.......................................................... 5

Consolidated Statement of Changes in Stockholder's Equity
Three months ended March 31, 2001.......................................................... 6

Notes to Consolidated Financial Statements................................................. 7

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................................ 8-12

PART II - OTHER INFORMATION

Item 1. Legal Proceedings................................................................ 13

Item 2. Changes in Securities............................................................ 13

Item 3. Defaults Upon Senior Securities.................................................. 13

Item 4. Submission of Matters to a Vote of Security Holders.............................. 13

Item 5. Other Information................................................................ 13

Item 6. Exhibits and Reports on Form 8-K................................................. 14

Signatures.................................................................................. 15

PART I. Item 1. - FINANCIAL INFORMATION
Chesapeake Financial Shares, Inc. March 31, December 31,
Consolidated Balance Sheets 2001 2000
--------------------------------------------------------------------------------------------------------

ASSETS (Unaudited)
Cash and due from banks............................................. $ 9,598,003 $ 8,965,457
Securities available for sale
U.S. Government agencies (book value of $20,012,046
-2001 and $21,053,805-2000)..................................... 20,270,609 21,167,667
Obligations of state and political subdivisions (book value of
$15,131,832-2001 and $15,110,437-2000).......................... 15,981,973 15,839,088
Other Securities (book value $2,511,245-2001 and
$2,551,294-2000................................................. 2,532,350 2,548,600

Loans............................................................... 162,678,812 158,455,860

Less: Reserve for loan loss......................................... (2,317,215) (2,125,022)

--------------------------------
Net loans........................................................ 160,361,597 156,330,838

Bank premises and equipment, net.................................... 5,442,285 5,580,409
Accrued interest receivable......................................... 1,611,834 1,533,719
Business Manager Assets............................................. 10,604,328 9,209,373
Other assets........................................................ 2,388,644 3,037,565
--------------------------------
Total assets.................................................... $ 228,791,623 $ 224,212,716
================================

See accompanying notes to consolidated financial statements. Page: 1

LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)

Deposits
Noninterest bearing deposits................................................... $ 26,833,899 $ 27,396,972
Savings and interest bearing deposits.......................................... 70,211,412 64,744,254
Certificates of deposit........................................................ 102,905,135 101,902,570
------------
Total deposits............................................................... 199,950,446 194,043,796

Federal funds purchased and FHLB advances......................................... 7,400,000 9,500,000
Accrued interest payable.......................................................... 367,147 397,244
Other liabilities................................................................. 1,225,819 1,119,597
Note payable...................................................................... 814,454 821,762
----------------------------
Total liabilities............................................................ 209,757,866 205,882,399

Commitments and contingent liabilities

Shareholders' equity
Preferred stock, par value $1 per share; authorized 50,000
shares; none outstanding....................................................... 0 0
Common stock, voting........................................................... 6,167,800 6,149,200
Common stock, non-voting....................................................... 0 0
voting non-voting
3/31/01 12/31/00 3/31/01 12/31/00
------- -------- -------- -------
Shares auth. 2,000,000 2,000,000 635,000 635,000
Shares o/s.. 1,233,560 1,229,840 0 0
Paid in capital................................................................... 152,021 153,521
Accumulated other comprehensive income............................................ 754,430 554,280
Retained earnings................................................................. 11,959,506 11,473,316
----------------------------
Total shareholders' equity................................................... 19,033,757 18,033,317
----------------------------
Total liabilities and Shareholders' equity................................... $ 228,791,623 $224,212,716
============================

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 March 31,
2001 2000
-------------------------------------------------------------------------------------------------

Interest Income (Unaudited)

Interest and fees on loans...................................... $ 3,689,164 $ 2,995,157
Interest on federal funds sold.................................. 494 1,375
Interest on time deposits with banks............................ 7,632 2,692
Interest on U.S. Treasury securities............................ 0 0
Interest on U.S. Agency Obligations............................. 354,853 434,717
Interest on obligations of state and political subs............. 236,563 223,322
--------------------------
Total interest income...................................... 4,288,706 3,657,263

Interest Expense

Interest on savings and interest bearing deposits............... 493,268 540,982
Interest on certificates of deposit............................. 1,528,807 1,072,221
Interest on federal funds purchased............................. 127,480 77,820
Other interest expense.......................................... 11,266 7,760
--------------------------
Total interest expense..................................... 2,160,821 1,698,783
--------------------------
Net interest income............................................. 2,127,885 1,958,480
Provision for loan losses....................................... 195,000 65,124
--------------------------
Net interest income after provision for loan losses............. 1,932,885 1,893,356
--------------------------

Noninterest Income

Income from fiduciary activities................................ 219,669 222,910
Service charges on deposit accounts............................. 197,225 161,677
Securities (losses) - net....................................... (1,625) 0
Merchant card income............................................ 194,944 182,826
ATM income...................................................... 55,386 56,357
Cash management income......................................... 436,721 353,352
Other income.................................................... 150,066 149,070
--------------------------
Total noninterest income................................... 1,252,386 1,126,192
--------------------------
Noninterest Expense

Salaries........................................................ 890,852 852,293
Employee benefits............................................... 217,290 174,439
Occupancy expenses.............................................. 383,545 393,756
Merchant card expense........................................... 161,111 159,308
ATM expense..................................................... 58,375 60,618
Cash management expense......................................... 147,452 176,097
Other expenses.................................................. 508,555 491,420
--------------------------
Total noninterest expense.................................. 2,367,180 2,307,931
--------------------------
Income before income taxes...................................... 818,091 711,617
Income taxes.................................................... 196,187 170,144
--------------------------
Net income................................................. $ 621,904 $ 541,473
==========================

Earnings per share, basic....................................... $ 0.51 $ 0.44
Earnings per share, assuming dilution........................... $ 0.49 $ 0.42

See accompanying notes to consolidated financial statements. Page: 3

PART I. - FINANCIAL INFORMATION (cont'd.)
Chesapeake Financial Shares, Inc.
Consolidated Statements of Cash Flows

Three Months Ended
March 31,
2001 2000
-------------------------------------------------------------------------------------------------------------------------------
(Unaudited)

Cash flows from operating activities:
Net income......................................................................................... $ 621,904 $ 541,473
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization.................................................................... 229,516 203,785
Provision for loan losses........................................................................ 195,000 65,124
Provision for cash management account losses..................................................... 60,000 71,250
(Accretion) discount and amortization of premiums, net............................................. 67,899 72,538
Net (gain) loss on sale of securities............................................................ 1,625 0
Changes in assets and liabilities:
Decrease (increase) in accr. interest receivable................................................ (78,115) (171,984)
Decrease (increase) in other assets............................................................. 545,813 36,186
Increase (decrease) in accrued interest payable................................................. (30,097) (13,501)
Increase (decrease) in other liabilities........................................................ 169,222 199,617
--------------------------
Net cash provided by (used for) operating activities............................................... 1,719,767 1,004,488
--------------------------
Cash flows from investing activities:
Purchases of securities available for sale......................................................... (994,798) (2,992,015)
Proceeds from sale of securities available for sale................................................ 1,040,000 0
Proceeds from maturities of securities available for sale.......................................... 958,955 1,265,418
Origination of loans available for sale............................................................ (1,552,300) (321,500)
Proceeds from sale of loans available for sale..................................................... 1,552,300 321,500
Net (increase) decrease in loans outstanding....................................................... (4,225,759) (4,659,470)
Net (increase) decrease in business manager assets................................................. (1,454,955) (10,785)
Other capital expenditures......................................................................... (91,392) (108,400)
--------------------------
Net cash provided by (used for) investing activities............................................... (4,767,949) (6,505,252)
--------------------------

Cash flows from financing activities:
Net increase (decrease) in demand accounts, interest bearing demand
deposit accounts and savings deposits............................................................ 4,904,086 (2,289,565)
Net increase (decrease) in certificates of deposit................................................. 1,002,564 2,006,802
Net increase (decrease) in federal funds purchased................................................. (2,100,000) 5,500,000
Cash dividends..................................................................................... (135,714) (110,655)
Proceeds from issuance of voting common stock...................................................... 26,250 44,790
Acquisition of voting common stock................................................................. (9,150) (129,467)
Curtailment of long-term borrowings................................................................ (7,308) (4,622)
--------------------------
Net cash provided by (used for) financing activities............................................... 3,680,728 5,017,283
Net (decrease) increase in cash and federal funds sold............................................. 632,546 (483,481)
Cash and federal funds sold at beginning of period................................................. 8,965,457 8,669,184
--------------------------
Cash and federal funds sold at end of period....................................................... $ 9,598,003 $ 8,185,703
==========================

See accompanying notes to consolidated financial statements. Page: 4

Statement of changes in Stockholder's Equity
Chesapeake Financial Shares, Inc.
Three Months Ended March 31, 2000
(unaudited)

Accumulated Additional
Comprehensive Retained Other Compr. Common Paid-In
Total Income Earnings Income Stock Capital
------------ ------------- ------------ ------------ ------------ ------------

Beginning balance $ 15,513,452 $ 9,736,920 $ (619,848) $ 6,131,635 $ 264,745

Comprehensive Income:
Net Income 541,473 $ 541,473 541,473
Other comprehensive
income, net of tax:
Unrealized gain on securities
available for sale; net of
deferred income taxes of
$139,777 271,332 271,332 271,332
------------ ------------- ------------
Total comprehensive income,
net of tax: $ 812,805
=============

Acquisition of common stock (129,466) (33,010) (96,457)
Issuance of common stock 44,790 32,400 12,390
Dividends declared (110,655) (110,655)
------------ ------------ ------------ ------------ ------------
Ending balance $ 16,130,926 $ 10,167,738 $ (348,516) $ 6,131,025 $ 180,678
============ ============ ============ ============ ============

Page 5

Statement of changes in Stockholder's Equity
Chesapeake Financial Shares, Inc.
Three Months Ended March 31, 2001
(unaudited)

Accumulated Additional
Comprehensive Retained Other Compr. Common Paid-In
Total Income Earnings Income Stock Capital
------------ ------------- ------------ ------------ ------------ ------------

Beginning balance $18,330,317 $11,473,316 $ 554,280 $ 6,149,200 $ 153,521

Comprehensive Income:
Net Income 621,904 621,904 621,904
Other comprehensive
income, net of tax:
Unrealized gain on securities
available for sale; net of
deferred income taxes of
$139,777 201,150 201,150 201,150
----------- ------------- ------------
Total comprehensive income,
net of tax: $ 822,054
============
Acquisition of common stock (9,150) (3,000) (6,150)
Issuance of common stock 26,250 21,600 4,650
Dividends declared (135,713) (135,713)
----------- ----------- ------------ ------------ ------------

Ending balance $19,033,757 $11,959,506 $ 754,430 $ 6,167,800 $ 152,021
=========== =========== ============ ============ ============

Page 6

PART I. Item 1. - FINANCIAL INFORMATION (cont'd.) 3/01-10QSB
Chesapeake Financial Shares, Inc.
Notes to Consolidated Financial Statements
-------------------------------------------------------------------------------

1. Chesapeake Financial Shares, Inc. ("CFS) owns 100% of Chesapeake Bank
(the "Bank") and Chesapeake Investment Group, Inc. The Company conducts
substantially all of its business activities through the Bank. The Company also
operates Chesapeake Investment Group, Inc. and its subsidiaries Chesapeake
Financial Group, Inc., Chesapeake Insurance Agency, Inc., d/b/a Chesapeake
Investment Services, and Chesapeake Trust Company. 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 2000 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.

March 31, 2001 March 31, 2000
-------------- ---------------

Weighted average number of common shares, basic 1,231,126 1,227,755
Effect of dilutive stock options 29,079 47,279
--------------- ---------------
Weighted number of common shares and dilutive
potential common stock used in diluted EPS 1,260,205 1,275,034
=============== ===============

Page:7

PART I. Item 2. - FINANCIAL INFORMATION (cont'd.) 3/01-10QSB
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, 2001 was approximately $4,750,000, compared to
$5,109,000 one year ago and $4,034,000 at December 31,2000.

The asset liquidity ratio at March 31, 2001 was 17.7%, compared with
25.3% 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
believes that this asset liquidity ratio combined with liability liquidity
through the Federal Home Loan Bank and other lenders 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 March 31, 2001 and
8.7% at December 31, 2000, 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 March 31, 2001 and December 31, 2000
the bank's ratio of Tier 1 risk-based capital to risk-adjusted assets was 9.0%
and 9.1%, respectively. Total risked based capital to risk weighted assets was
10.2% and 10.3% at March 31, 2001 and December 31, 2000, respectively. Tier one
leverage capital was 8.4% and 7.6% at March 31, 2001 and December 31, 2000,
respectively.

Page: 8

B. Results of operations:

Earnings Summary:

Net income was $621,904 for the three months ended March 31, 2001,
compared with income of $541,473 for the same period in 2000. On a fully diluted
per share basis, the net profit was $0.49 for the first three months of 2001.
Earnings per share for the first quarter of 2000 were $0.42. Net interest income
before provision increased $169,405 or 8.6% and noninterest income increased
$126,194 or 11.2%. The Company experienced a net increase in noninterest expense
(which includes other expense) of only $59,249 or 2.6%.

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
March 31, 2001, the Company's interest-earning assets exceeded its
interest-bearing liabilities by approximately $26.7 million, compared with $26.7
million excess one year ago.

Net interest margins are 4.55% at March 31, 2001 compared to 4.67% at
March 31, 2000. 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 had generally improved during the first half
of 2000, but since then compression of margins actually occurred again as rates
continued upward through the end of the year and the competition with the
brokerage firms for deposits intensified. In the current falling rate
environment, management expects margins to improve during the year.

There has been significant growth in interest bearing deposits during
the last year in all trade areas of the bank. There has been little growth in
noninterest bearing deposits and a 16.6% growth in interest bearing accounts,
including certificates. Generally, deposits have been easier to attract this
quarter as a result of the stock market volatility, however, large banks are
currently buying market share in this attractive rate environment.

Page: 9

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 March 31, 2001 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 is 1.4% of gross loans as of March 31, 2001 and
1.3% as of December 31, 2000.

Noninterest Income:

Noninterest income is up 11.2% or $126,194 from the same period last
year. Chesapeake Bank's Business Manager product generated $436,721 in gross
revenue for the first three months ended March 31, 2001, compared to the same
period last year of $353,352. Managed assets in the business manager program
were $10,964,328 at March 31, 2001, and $8,941,946 at March 31, 2000. Service
Charges on deposit accounts were up 22.0%, or $35,548, from one year ago due to
increased account volume. The merchant card program has generated $194,944 or
6.6% more in gross revenue through March of this year than in the same period
last year due.

Page: 10

Employee salary expense amounted to $890,852 and $852,293 for the three
months ended March 31, 2001 and 2000, respectively. Benefits expense is up 24.6%
or $42,851 from March 31, 2000. These increases are directly related to new
hires as market share has increased and due to cost increase in the human
resource and benefits areas. Other expenses are up only 3.5%, or $17,135, over
the same period last year.

Page:11

Assets and Loans:

At March 31, 2001, Chesapeake Financial Shares had total assets of
$228.8 million, up 2.0% from $224.2 million at December 31, 2000 and up 12.5%
from $203.5 million of one year ago. Management has budgeted for an 8.0% growth
in total assets for 2001.

Total loans (gross) at March 31, 2001 were $162.7 million, representing
an increase of 2.6% from December 31, 2000, when loans were $158.5 million.
Chesapeake Bank's loan quality is good as the following table shows. Management
is confident that no serious delinquency trends are developing.

3/31/01 12/31/00
------- --------
Nonaccrual loans $ 574,511 $ 562,813
90 days past due 43,188 28,234
Restructured loans 0 0
--------- ---------
Totals $ 617,699 $ 591,047

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 March 31, 2001, amounted to $3,032. Charged
off loans through March 31, 2000 amounted to $4,393. Recoveries through March
31, 2001 were $225 as compared to $1,704 as of March 31, 2000.

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
(235% 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 no
properties. The Bank has repossessed assets with a carrying value of $2,224.

Deposits:

Deposits were $ 200.0 million at March 31, 2001 and $194.0 million at
December 31, 2000. Deposits were $174.5 million at March 31, 2000. The Bank's
mix of deposit dollars has changed from March 31, 2000 with no significant
increase in noninterest bearing balances and a 16.6% increase in savings and
interest bearing deposits and certificates of deposit during the same period.

Page: 12

PART II. Item l. - OTHER INFORMATION 3/01-10QSB
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. - OTHER1 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 6, 2001 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 90% of the shareholders were
represented at the meeting in person or by proxy with over 89% voting in favor
of the proposals submitted.

PART II. Item 5. - OTHER INFORMATION
Chesapeake Financial Shares, Inc.
Other Information
--------------------------------------------------------------------------------
During the fourth quarter of 2000, the Company satisfactorily
completed a Combined Safety and Soundness Examination performed by the Federal
Reserve Bank of Richmond. As of December 2000, the Bank and the Company
satisfactorily completed Transfer Agent Examination, also performed by the
Federal Reserve Bank. 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: 13

PART II. Item 6. - OTHER INFORMATION 3/01-10QSB
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 N/A

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 99 Additional exhibits N/A

(b) No filings were made on Form 8-K for the period.

Page: 14

SIGNATURES
Chesapeake Financial Shares, Inc. SEC 10-QSB 3/01
--------------------------------------------------------------------------------

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)

05/08/01 /s/ Douglas D. Monroe, Jr.
---------------- -----------------------------------
(Date) (Signature)
Douglas D. Monroe, Jr.
Chairman and Chief Executive Officer

05/08/01 /s/ John H. Hunt, II
---------------- -------------------------------------
(Date) (Signature)
John H. Hunt, II
Secretary and Chief Financial Officer

Page: 15