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, 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 May 1, 2000. Class	 			Outstanding at May 1, 2000 Common Stock, voting, $5.00 par value		 1,234,345 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 March 31, 2000 and December 31, 1999.............................1-2 Consolidated Statements of Earnings Three months ended March 31, 2000..................................3 Consolidated Statements of Cash Flows Three months ended March 31, 2000..................................4 Consolidated Statement of Changes in Stockholder's Equity Three months ended March 31, 1999..................................5 Consolidated Statement of Changes in Stockholder's Equity Three months ended March 31, 2000..................................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 Page I PART I. Item 1. - FINANCIAL INFORMATION Chesapeake Financial Shares, Inc. 			 March 31,	 December 31, Consolidated Balance Sheets 			 2000 1999 ASSETS 				 (Unaudited) Cash and due from banks........................ $8,185,703 $8,669,184 Securities available for sale U.S. Government agencies (book value of $24,344,498-2000 and $24,199,324-1999)........ 23,794,496 23,727,615 Obligations of state and political subdivisions (book value of $15,083,505-2000 and $13,571,303-1999)............................. 15,141,848	 13,166,902 Other Securities (book value $2,550,845-2000 and $2,554,862-1999........................... 2,515,150 2,502,150 Loans........................................... 137,550,281 132,893,500 Less: Reserve for loan loss..................... (2,316,111) (2,253,676) 							 --------------------------- Net loans..................................... 135,234,170 130,639,824 Bank premises and equipment, net................ 5,289,523 5,384,908 Accrued interest receivable..................... 1,509,095 1,337,111 Business Manager Assets......................... 8,730,696 8,791,161 Other assets.................................... 3,050,656 3,216,278 						 	 --------------------------- Total assets..................................$203,451,337 $197,435,133 					 ============================ See accompanying notes to consolidated financial statements. Page: 1 PART I. Item 1. - FINANCIAL INFORMATION Chesapeake Financial Shares, Inc. 			 March 31, December 31, Consolidated Balance Sheets 		 	 2000 	 1999 LIABILITIES AND SHAREHOLDERS' EQUITY	 		(Unaudited) Deposits Noninterest bearing deposits............... $ 26,067,042 $ 27,150,692 Savings and interest bearing deposits...... 66,032,262 67,238,177 Certificates of deposit.................... 82,450,148	 80,443,346 						 	--------------------------- Total deposits............................ 174,549,452 174,832,215 Federal funds purchased..................... 10,300,000 4,800,000 Accrued interest payable.................... 287,746 301,247 Other liabilities........................... 1,340,123 1,140,506 Note payable................................ 843,091 847,713 						 ---------------------------- Total liabilities......................... 187,320,412 181,921,681 Commitments and contingent liabilities Shareholders' equity Preferred stock, par value $1 per share; authorized 50,000 shares; none outstanding 0 	 0 Common stock, voting...................... 6,131,025 6,131,635 Common stock, non-voting.................. 0 	 0 		 voting	 	 non-voting 3/31/00 12/31/99 3/31/00 12/31/99 -------- --------	 ------- -------- Shs. auth.2,400,000 2,400,000 	 635,000 635,000 Shs. o/s 1,226,205 1,226,327 0 0 Paid in capital............................. 180,678 264,745 Accumulated other comprehensive income...... (348,516) (619,848) Retained earnings........................... 10,167,738 9,736,920 							 ---------------------------- Total shareholders' equity................ 16,130,925 15,513,452 							 ---------------------------- Total liabilities and Shareholders' equity $203,451,337 $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			 March 31, 					 2000 1999 	Interest Income				 		(Unaudited) Interest and fees on loans................. $ 2,995,157 $ 2,595,407 Interest on federal funds sold............. 1,375 34,960 Interest on time deposits with banks....... 2,692 4,013 Interest on U.S. Treasury securities....... 0 1,025 Interest on U.S. Agency Obligations........ 434,717 343,010 Interest on obligations of state and political subs............................ 223,322 178,961 ------------------------- Total interest income 				 3,657,263 3,157,376 	Interest Expense Interest on savings and interest bearing deposits..................................	 540,982 	 446,044 Interest on certificates of deposit........ 1,072,221 1,074,948 Interest on federal funds purchased........ 77,820 3,240 Other interest expense..................... 7,760 8,007 ------------------------- Total interest expense					 1,698,783 1,532,239 ------------------------- Net interest income........................ 1,958,480 1,625,137 Provision for loan losses.................. 65,124 56,675 ------------------------- Net interest income after provision for loan losses............................... 	 1,893,356 1,568,462 ------------------------- 	Noninterest Income Income from fiduciary activities........... 222,910 224,558 Service charges on deposit accounts........ 161,677 140,892 Merchant card income....................... 182,826 141,767 ATM income................................. 56,357 48,227 Cash management income.................... 353,352 262,738 Other income............................... 149,070 115,771 ------------------------- Total noninterest income				 1,126,192 	 933,953 ------------------------- 	Noninterest Expense Salaries................................... 852,293 751,985 Employee benefits.......................... 174,439 149,845 Occupancy expenses......................... 393,756 377,519 Merchant card expense...................... 159,308 136,321 ATM expense................................ 60,618 62,328 Cash management expense.................... 176,097 89,135 Other expenses............................. 491,420 367,822 ------------------------- Total noninterest expense............. 2,307,931 1,934,955 ------------------------- Income before income taxes................. 711,617 567,460 Income taxes............................... 170,144 146,256 ------------------------- Net income............................ $ 541,473 $ 421,204 ========================= Earnings per share, basic.................. $0.44 $0.34 Earnings per share, assuming dilution...... $0.42 $0.33 See accompanying notes to consolidated financial statements. Page: 3 PART I. - FINANCIAL INFORMATION (cont'd.) Chesapeake Financial Shares, Inc.		 			 Three Months Ended Consolidated Statements of Cash Flows				 March 31, 								 2000 1999 								 (Unaudited) 	Cash flows from operating activities: Net income..................................... $ 541,473 $ 421,204 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization................. 203,785 220,580 Provision for loan losses..................... 65,124 56,675 Provision for cash management account losses.. 71,250 7,500 (Accretion) of discount and amortization of premiums, net................................ 72,538 208,237 Changes in assets and liabilities: Decrease (increase) in accrued interest receivable.................................. (171,984) (24,401) Decrease (increase) in other assets.......... 36,186 790,194 Increase (decrease) in accrued interest payable (13,501) (3,993) Increase (decrease) in other liabilities..... 199,617 95,733 ------------------------ Net cash provided by (used for) operating activities................................... 1,004,488 1,771,729 ------------------------ 	Cash flows from investing activities: Purchases of securities available for sale..... (2,992,015) (6,228,189) Proceeds from maturities of securities available for sale...................................... 1,265,418 5,459,934 Origination of loans available for sale........ (321,500) (2,286,650) Proceeds from sale of loans available for sale. 321,500 2,286,650 Net (increase) decrease in loans outstanding... (4,659,470) (4,715,786) Net (increase) decrease in 	business manager assets........................................ (10,785) (95,773) Other capital expenditures..................... (108,400) (941,046) Net cash provided by (used for) investing activities.................................... (6,505,252) (6,520,860) 	Cash flows from financing activities: Net increase (decrease) in demand accounts, interest bearing demand deposit accounts and savings deposits.......................... (2,289,565) 4,057,001 Net increase (decr) in certificates of deposit. 2,006,802 (4,041,199) Net increase (decr) in federal funds purchased. 5,500,000 500,000 Cash dividends................................. (110,655) (98,995) Proceeds from issuance of voting common stock.. 44,790 60,000 Acquisition of voting common stock............. (129,467) (26,433) Curtailment of long-term borrowings............ (4,622) (4,376) ------------------------ Net cash provided by (used for) financing activities.................................... 5,017,283 445,998 Net (decrease) increase in cash and federal funds sold.................................... (483,481) (4,303,133) Cash and federal funds sold at beginning of period........................................ 8,669,184 12,937,686 ------------------------ Cash and federal funds sold at end of period... $ 8,185,703 $ 8,634,553 ======================== 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, 1999 	 	 							 		Accumulated		 	Additional 			 	 		 	Comprehensive	 Retained 	Other Compr. 	Common	 Paid-In 					 Total 	Income Earnings	 Income 	 Stock 	 Capital Beginning balance		 	$14,928,406 	$	 	$8,082,349 	$ 174,267 $6,147,995 $523,795 Comprehensive Income: 	Net Income			 421,204	 421,204	 421,204 	Other comprehensive 	income, net of tax: 	 Unrealized gain on securities	available for sale:		 229,656	 229,656 			 229,656 --------- -------- --------- -------- Total comprehensive income, net of tax:			 	$ 650,860 ========= Acquisition of common stock		 (26,433)				 			 (6,440)	 (19,993) Issuance of common stock			 60,00					 43,200 16,800 Dividends declared			 (98,995		 (98,995) --------- ---------	 -------- --------- ------- Ending balance		 		$15,513,838			 $8,404,558 	$403,923 	$6,184,755	 $520,602 =========== ========== ======== ========= ======= Page 5 Statement of Changes in Stockholder's Equity Chesapeake Financial Shares, Inc. Three Months Ended March 31, 2000 									 		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	 541,47	 541,473 	Other comprehensive 	income, net of tax: 	 Unrealized gain on securities	available for sale:		 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 6 PART I. Item 1. - FINANCIAL INFORMATION (cont'd.) 3/00-10QSB 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 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. and Chesapeake Financial Group, Inc. (CFG). 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. 				 		March 31, 2000	 March 31, 1999 Weighted average number of common shares, basic	 1,227,755		 1,232,136 Effect of dilutive stock options			 47,279	 	 58,056 --------- --------- Weighted number of common shares and dilutive potential common stock used in diluted EPS 	 1,275,034		 1,290,202 ========= ========= Page: 7 PART I. Item 2. - FINANCIAL INFORMATION (cont'd.) 3/00-10QSB 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 $5,109,000, compared to $13,584,000 one year ago and $6,334,000 at December 31,1999. 	The liquidity ratio at March 31, 2000 was 25.3%, compared with 28.7% 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 9.1% at March 31, 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 March 31, 2000 and December 31, 1999 the consolidated ratio of Tier 1 risk-based capital to risk-adjusted assets was 10.3% and 10.4%, respectively. Total risked based capital to risk weighted assets was 11.6% and 11.7% at March 31, 2000 and December 31, 1999, respectively. Tier one leverage capital was 8.3% and 8.3% at March 31, 2000 and December 31, 1999, respectively. Page: 8 PART I. Item 2. - FINANCIAL INFORMATION (cont'd.) 3/00-10QSB 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 $541,473 for the three months ended March 31, 2000, compared with income of $421,204 for the same period in 1999. On a fully diluted per share basis, the net profit was $0.42 for the first three months of 2000. Earnings per share for the first quarter of 1999 were $0.33. Net interest income before provision increased $333,343 or 20.5% and noninterest income increased $192,239 or 20.6%. The Company experienced a net increase in noninterest expense (which includes other expense) of $372,976 or 19.3%. 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, 2000, the Company's interest-earning assets exceeded its interest-bearing liabilities by approximately $17.9 million, compared with a $16.4 million excess one year ago. 	Net interest margins are 4.67% at March 31, 2000 compared to 4.33% at March 31, 1999. Margins have narrowed since early 1998 as our loan to deposit ratio dropped from over 76% at June, 1997, to under 69% at the end of 1998. Prime also dropped three times in the last four months of 1998. Management reduced deposit rates during the last half of 1998 on all products to match the market for reduced earning asset returns. These changes produced short term improvements in margins, but prepayments on mortgage-backed securities during the last quarter of 1998 and the first quarter of 1999 had a negative impact on margins. The record prepayment period was a direct result of the lower rate environment in 1998. Returns on mortgage-backed investment securities improved quickly as rates increased at the end of 1999. Current and near term future returns on the mortgaged-backed portfolio are expected to be well within previous estimates since prepayment speeds have returned to more normal levels. 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. Management expects this favorable trend to stop. 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. 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%, loan demand will begin to weaken. This will have negative impact on margins if rates remain at these levels. Page: 9 PART I. Item 2. - FINANCIAL INFORMATION (cont'd.) 3/00-10QSB 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 March 31, 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 is 1.7% of gross loans as of March 31, 2000 and December 31,1999. Noninterest Income: 	Noninterest income is up 20.6% or $192,239 from the same period last year. Chesapeake Bank's Business Manager product generated $353,352 in gross revenue for the first three months ended March 31, 2000, compared to the same period last year of $262,738. Managed assets in the business manager program were $8,941,946 at March 31, 2000, and $7,294,938 at March 31, 1999. 	The merchant card program has generated $182,826 or 29.0% more in gross revenue through March of this year than in the same period last year due to an increased customer base. 	The Other Income category was $149,070, up 28.8%, or $33,299 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 14.8%, or $20,785, from one year ago due to increased account volume. Page: 10 PART I. Item 2. - FINANCIAL INFORMATION (cont'd.) 3/00-10QSB Chesapeake Financial Shares, Inc. Management's Discussion and Analysis of Financial Condition or Plan of Operation (Unaudited) Noninterest Expenses: 	Employee salary expense amounted to $852,293 and $751,985 for the three months ended March 31, 2000 and 1999, respectively. Benefits expense is up 16.4% or $24,594 from March 31, 1999. 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. In addition, the Williamsburg market has been highly competitive due to the higher growth rate that the community is experiencing. 	Other expenses are up 33.6%, or $123,598, 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 ends April 20, 2000. Other increases in expenses are associated with increased level of business activity. 	Cash management expense was $176,097 for the three months ended March 31, 2000, up 97.6% from the same period one year ago. This increase is associated with additional business activity. Page: 11 PART I. Item 2. - FINANCIAL INFORMATION (cont'd.) 3/00-10QSB Chesapeake Financial Shares, Inc. Management's Discussion and Analysis of Financial Condition or Plan of Operation (Unaudited) Assets and Loans: 	At March 31, 2000, Chesapeake Financial Shares had total assets of $203.5 million, up 3.1% from $197.4 million at December 31, 1999 and up 11.2% from $183.0 million of one year ago. Management has budgeted for a 7.0% growth in total assets for 2000. 	Total loans (gross) at March 31, 2000 were $137.6 million, representing an increase of 3.5% 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. 					 3/31/00	 12/31/99 		Nonaccrual loans	 	$231,951 	$155,520 		90 days past due		 5,865	 3,554 		Restructured loans	 0		 0 					________ 	________ 		Totals		 	$237,816 	$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 March 31, 2000, amounted to $4,393. There were no charge offs through March 31, 1999. Recoveries through March 31, 2000 were $1,704 as compared to $1,203 as of March 31, 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 (188% of capital) and residential real estate (83% 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 no repossessed assets. 	Deposits: 	Deposits are essentially unchanged at $ 174.5 million at March 31, 2000 and $174.8 million at December 31, 1999. Deposits were $174.5 million and $164.7 million at March 31, 2000 and March 31, 1999, respectively. The Bank's mix of deposit dollars has changed from March 31, 1999 with net increases in noninterest bearing and lower interest bearing balances. During the same period total certificates dollars have increased slightly. It is management's opinion that this trend will reverse itself in the current interest rate environment. Page: 12 PART II. Item l. - OTHER INFORMATION 3/00-10QSB 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: 13 PART II. Item 6. - OTHER INFORMATION 3/00-10QSB 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	 	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 27 Financial Data Schedule	 		 Attached 	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 3/00 	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) 	05/08/00 (Date		 	(Signature) 			 	Douglas D. Monroe, Jr. 			 	Chairman and Chief Executive Officer 	05/08/00 (Date)	 			(Signature) 			John H. Hunt, II 			 	Secretary and Chief Financial Officer Page: 15