Edgar Filing: CHESAPEAKE FINANCIAL SHARES INC

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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement
[_] Confidential of Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12

CHESAPEAKE FINANCIAL SHARES, INC.
---------------------------------
(Name of Registrant as Specified in Its Charter)

CHESAPEAKE FINANCIAL SHARES, INC.
---------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

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2) Aggregate number of securities to which transaction applies

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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*

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4) Proposed maximum aggregate value of transaction:

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5) Total fee paid:

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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

1) Amount Previously Paid: _____________________________________________
2) Form Schedule or Registration Statement No.: ________________________
3) Filing Party: _______________________________________________________
4) Date Filed: _________________________________________________________

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Chesapeake Financial Shares, Inc.

_________________________________________________________

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
_________________________________________________________

To Our Shareholders:

The Annual Meeting of Shareholders of Chesapeake Financial Shares, Inc.
will be held on Friday, April 6, 2001, at 4:00 p.m. in the auditorium at
Rappahannock Westminster-Canterbury, Irvington, Virginia, for the following
purposes:

1. To elect eight (8) directors to serve for the ensuing year; and

2. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.

Shareholders of record at the close of business on February 1, 2001 will be
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.

By Order of the Board of Directors

/s/ John H. Hunt, II
----------------------------------
John H. Hunt, II
Secretary

March 6, 2001

Even if you plan to attend the Annual Meeting, please sign, date and return
the enclosed proxy in the postpaid envelope provided. If you attend the Annual
Meeting, you may withdraw your proxy and vote your own shares.

Chesapeake Financial Shares, Inc.
97 North Main Street
Post Office Box 1419
Kilmarnock, Virginia 22482

PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 6, 2001

GENERAL

The enclosed proxy is solicited by the Board of Directors of Chesapeake
Financial Shares, Inc. (the "Company") for the Annual Meeting of Shareholders of
the Company to be held on Friday, April 6, 2001, at the time and place and for
the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. The approximate mailing date of this Proxy Statement and
accompanying proxy is March 6, 2001.

Revocation and Voting of Proxies

Execution of a proxy will not affect a shareholder's right to attend the
Annual Meeting and to vote in person. Any shareholder who has executed and
returned a proxy may revoke it by attending the Annual Meeting and requesting to
vote in person. A shareholder may also revoke his proxy at any time before it
is exercised by filing a written notice with the Company or by submitting a
proxy bearing a later date. Proxies will extend to, and will be voted at, any
adjourned session of the Annual Meeting.

Voting Rights of Shareholders

Only shareholders of record at the close of business on February 1, 2001,
the record date, are entitled to notice of and to vote at the Annual Meeting or
any adjournment thereof. As of the close of business on February 1, 2001,
1,229,840 shares of the Company's common stock, par value $5.00 per share, were
outstanding and entitled to vote at the Annual Meeting. The Company has no other
class of stock outstanding. A majority of the votes entitled to be cast,
represented in person or by proxy, will constitute a quorum for the transaction
of business. Shares for which the holder has elected to abstain or to withhold
the proxies' authority to vote (including broker non-votes) on a matter will
count toward a quorum, but will not be included in determining the number of
votes cast with respect to such matter.

Each share of the Company's common stock entitles the record holder thereof
to one vote upon each matter to be voted upon at the Annual Meeting, except with
respect to the election of directors for which shareholders have cumulative
voting rights. Cumulative voting entitles a shareholder to give one nominee as
many votes as is equal to the number of directors to be elected, multiplied by
the number of shares owned by such shareholder, or in the alternative, to
distribute his or her votes on the same principle between two or more nominees
as he or she sees fit.

Solicitation of Proxies

The cost of solicitation of proxies will be borne by the Company.
Solicitation is being made by mail, and if necessary, may be made in person or
by telephone, or special letter by officers and regular employees of the Company
or its subsidiaries, acting without compensation other than regular
compensation.

Principal Shareholders

Mr. Douglas D. Monroe, Jr., who is a director and executive officer of the
Company and its wholly-owned subsidiary bank, Chesapeake Bank (the "Bank"), is
the only individual who beneficially owns 5% or more of the common stock of the
Company. His ownership as of February 1, 2001 is shown in the table below. The
address of Mr. Monroe is the same as the Company's principal offices.

As of February 1, 2001, the directors and executive officers of the Company
beneficially owned as a group 554,722 shares, or approximately 42.7% of the
Company's common stock (including shares for which they hold presently
exercisable stock options).

ELECTION OF DIRECTORS - PROPOSAL ONE

The Bylaws of the Company provide that the Board shall consist of not less
than three nor more than nine directors, with the exact number within such
limits to be fixed according to the number elected by the shareholders. The
Board is nominating eight persons as directors of the Company for 2001. The
persons named below, each of whom are members of the present Board of Directors
of the Company, will be nominated for election to serve until the next annual
meeting and until their successors have been duly elected and have qualified.

It is the intention of the persons named in the proxy to vote for the
election of the eight nominees named below. The election of each nominee
requires the affirmative vote of the holders of a plurality of the shares of
common stock cast in the election of directors. If for any reason any of the
persons named below should become unavailable to serve, then the proxies will be
voted for such substitute nominees as the Board of Directors may designate.
Management has no reason to believe that any of the nominees will be
unavailable.

Number of Shares
Director Principal Occupation Beneficially Owned as
Nominee (Age) Since For the Last Five Years of February 1, 2001 (1)
------------- -------- ----------------------- -----------------------

T. Nash Broaddus (82) 1988 Chairman of the Board & Chief 25,341 (2.1%)
Executive Officer, Prodesco,
Inc., a textile manufacturer,
Perkasie, Pennsylvania

Eugene S. Hudnall, Jr. (62) 1983 President, George Noblett, 9,351 *
Inc., a major appliance
dealer, mechanical contractor,
and propane gas dealer,
Kilmarnock, Virginia

Douglas D. Monroe, Jr. (67) 1982 Chairman of the Board & Chief 315,811 (25.1%)
Executive Officer of the (2)(3)
Company and Chairman of the
Board of the Bank

Katherine W. Monroe (67) 1985 A licensed real estate agent; 57,341 (4.7%)
Treasurer of the Company (3)

Bruce P. Robertson (55) 1999 President, Shirley Pewter 1,041 *
Shops, Inc. and The Porcelain
Collector of Williamsburg,
Ltd., Williamsburg, Virginia

William F. Shumadine, Jr. (56) 1997 Managing Director, Lowe, 9,686 *
Brockenbrough & Co., Inc.,
investment counsel, Richmond,
Virginia

Robert L. Stephens (68) 1985 Owner, The Tides Inn, Inc. a 15,247 (1.2%)
resort & conference center in
Irvington, Virginia

Jeffrey M. Szyperski (39) 1999 President & Chief Executive 56,851 (4.6%)
Officer of the Bank (4)

_______________________

* Represents less than 1.0% of the total outstanding shares of common stock.

(1) For purposes of this table, a person is deemed to be the beneficial owner
of shares of the Company's common stock if he or she has or shares the
power to vote or to direct the voting of the security or the power to
dispose of or to direct the disposition of the security, or if he has the
right to acquire beneficial ownership of the security within 60 days.
(2) Includes: (i) 47,884 shares which are held jointly with his wife Katherine
W. Monroe (see Note 3 below); (ii) 30,960 shares that may be acquired
pursuant to presently exercisable stock options; and (iii) 15,840 shares
held in trust for which he serves as joint trustee.
(3) Douglas D. Monroe, Jr., and Katherine W. Monroe are husband and wife. Mr.
Monroe has sole voting power over 221,127 shares of common stock. Mrs.
Monroe has sole voting power over 57,341 shares. Mr. and Mrs. Monroe share
voting power over 47,884 shares, which are reflected in Mr. Monroe's stock
ownership information in order to avoid double counting. In the aggregate,
Mr. and Mrs. Monroe beneficially own 373,152 shares of common stock.
(4) Includes: (i) 14,140 shares which are held by Mr. Szyperski's spouse; (ii)
17,280 shares that may be acquired pursuant to presently exercisable stock
options; and (iii) 23,040 shares held in trust for his children, nieces,
and nephews for which he serves as trustee.

The Employee Stock Ownership Plan adopted by the Company holds 33,551
shares of common stock for the benefit of the employees participating in the
plan. The trustees of the plan are Douglas D. Monroe, Jr., John H. Hunt, II and
Jeffrey M. Szyperski, all of whom are executive officers of the Bank. They have
no voting rights nor any investment or dispositive power with respect to the
shares other than as directed by plan participants.

Except as set forth below, there are no family relationships among any of
the directors or principal officers. Douglas D. Monroe, Jr. and Katherine W.
Monroe are husband and wife and Mr. Szyperski is the son-in-law of Mr. and Mrs.
Monroe. None of the directors currently serves as a director of any other
company with a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934.

Board Committees and Attendance

During 2000, the Board of Directors of the Company met four times. All
directors attended at least 75% of the total Board meetings. The Company has no
standing committees.

The Bank's Audit Committee is comprised of Messrs. Albert C. Pollard,
Chairman, James M. Holmes, Jr., Harvey B. Morgan, Thomas G. Tingle and Harry M.
Ward. The Audit Committee reviews on a regular basis the work of the internal
audit department. It also reviews and approves the scope and detail of the
continuous audit program which is conducted by the internal audit staff to
protect against improper and unsound practices and to furnish adequate
protection of all assets and records. The committee also recommends the
selection of independent certified public accountants and reviews the reports of
examination by the regulatory agencies and the independent accountants. During
2000, the Audit Committee met seven times.

Compensation of Directors

Directors of the Company received an annual retainer fee of $4,500 in 2000.
During 2000, 1999 and 1998, the Company issued a total of 1,751, 1,333 and 1,600
shares, respectively, of common stock to its directors as a group for partial
compensation in lieu of cash for the annual retainer fees due.

AUDIT COMMITTEE REPORT

The Board of Directors of the Company and the members of the Audit
Committee have independently reviewed and discussed the audited financial
statements with management. The Board and the committee also have independently
reviewed and discussed with Yount, Hyde & Barbour, P.C. ("Yount Hyde"), the
Company's independent auditors, the matters required to be discussed by
Statement in Accounting Standards No. 61, as amended.

In discharging their oversight responsibility as to the audit process, the
Board of Directors and the Audit Committee obtained the written disclosures and
the letter from the independent accountants required by Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committee," as may be
modified or supplemented, and have discussed with Yount Hyde its independence.

Based on the foregoing discussions, the Board of Directors of the Company
approved the audited financial statements to be included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2000, for filing with the
Securities and Exchange Commission.

Board of Directors
Chesapeake Financial Shares, Inc.

ACCOUNTING FIRM FEES

The following table provides the aggregate fees billed to the Company for
the fiscal year ended December 31, 2000 by the Company's independent public
accountants, Yount Hyde:

Audit Fees................................................... $50,800
Financial Information Systems Design and Implementation...... -0-
All Other Fees............................................... 21,744

EXECUTIVE COMPENSATION AND OTHER INFORMATION

Compensation

The following table provides information on the total compensation paid or
accrued during the fiscal years indicated below to certain executive officers of
the Company and the Bank. The principal officers of the Company do not receive
any compensation in their capacities as such, but are paid by the Bank for their
services as officers of the Bank.

Summary Compensation Table

Long-Term
Compensation
------------
Securities
Name and Annual Compensation (1) Underlying All Other
--------------------------
Principal Position Year Salary (2) Bonus Options Compensation (3)
------------------ ---- ---------- ------ ------- ----------------

Douglas D. Monroe, Jr. 2000 $163,481 $15,000 3,500 $58,014
Chairman/Chief 1999 161,101 --- 3,000 41,949
Executive Officer 1998 160,538 15,000 2,880 40,812

Jeffrey M. Szyperski 2000 $138,581 $12,500 3,500 $29,230
President and Chief 1999 122,663 --- 3,000 20,777
Executive Officer of 1998 98,622 8,500 2,880 1,594
the Bank

John H. Hunt, II 2000 $ 99,946 $ 9,000 1,000 $22,887
Chief Financial Officer 1999 94,644 --- 1,000 16,292
and Secretary of the 1998 91,581 8,400 1,080 2,716
Company and the Bank

__________________
(1) The named officers received certain perquisites and other personal
benefits, the amounts of which are not shown because the aggregate amount
of such compensation during the year did not exceed the lesser of $50,000
or 10% of his total salary and bonus.
(2) Includes directors' fees paid by the Company and the Bank.
(3) Consists of for 2000: (i) $2,572, $2,168 and $1,580 accrued on behalf of
Messrs. Monroe, Szyperski and Hunt, respectively, under the Company's
401(k) Plan; (ii) $26,981 and $20,700 credited to Messrs. Szyperski and
Hunt under the Company's 401(k) Overflow Deferred

(footnote continued on next page)

(footnote continued from previous page)

Compensation Plan; (iii) the taxable portion of the group life insurance
premium paid by the Bank on behalf of Messrs. Monroe, Szyperski and Hunt of
$3,825, $81 and $607, respectively; (iv) the taxable portion of a key man
life insurance policy paid by the Bank on behalf Mr. Monroe of $32,000; and
(v) $19,617 accrued by the Bank under a deferred compensation agreement
with Mr. Monroe. See "Employee Benefit Plans" for further information.

Employee Benefit Plans

Pension Plan. The Bank has a noncontributory defined benefit pension plan
for all full-time employees over 18 years of age. The pension plan is designed
to assist employees in providing for their retirement income security. All
employees who complete at least 1,000 hours of service each year are
automatically eligible to participate. The Bank funds pension costs in
accordance with the funding provisions of the Employee Retirement Income
Security Act. All contributions to the pension plan are made by the Bank.
Employees become fully vested after seven years of credited service.

Upon retiring at normal retirement age, pension plan participants will
receive an annual pension based on their years of service. The normal
retirement age under the pension plan is 65. Reduced benefits are available as
early as age 55 if at least ten years of credited service have been completed.
Cash benefits under the pension plan generally commence on retirement, death, or
other termination of employment and are payable in various forms, generally at
the election of the participant.

Employee Stock Ownership Plan. The Bank has adopted a tax-credit employee
stock ownership plan (the "ESOP"). Every officer and employee of the Bank
(other than straight-time hourly paid employees) is eligible to participate in
the ESOP beginning on any January 1 after he or she completes one year of
service and reaches the age of 18.

Contributions each year are at the discretion of the Board of Directors,
within certain limitations prescribed by federal tax regulations. Compensation
expense related to the ESOP was $19,993 in 2000, $19,993 in 1999 and $19,993 in
1998. The ESOP intends to invest contributions received in shares of the
Company's common stock.

Under the ESOP, the Bank will make contributions in cash necessary to service
loans to the ESOP and may make additional discretionary contributions in cash or
stock of the Company (the "ESOP Contribution"). In addition, the Bank will make
further contributions designed to satisfy certain nondiscrimination requirements
of the Internal Revenue Service, if such requirements should ever become
applicable (the "Top-Heavy Contribution"). Participants in the ESOP are neither
required nor permitted to make contributions.

ESOP and Top-Heavy Contributions become fully vested when a participant
reaches age 65, whether or not he retires at that time, when a participant has
completed 7 years of service, becomes permanently or totally disabled, or dies
while employed by the Bank. If a participant leaves before the occurrence of
one of these events, the ESOP and Top-Heavy Contributions allocated to his
account will become 30% vested after 3 years of service, 40% vested after 4
years of service, 60% vested after 5 years of service, 80% vested after 6 years
of service, and 100% vested after 7 years of service.

Distribution of benefits under the ESOP to a participant or beneficiary is
made after death, retirement, or termination of employment in a single payment
consisting of cash and to the extent

allocated to his account, common stock of the Company. Each participant or
beneficiary may direct that all distributions be made in the form of common
stock of the Company or, conversely, may direct that all distributions be made
in the form of cash.

401(k) Plan. The Company maintains a defined contribution plan established
in accordance with Section 401(k) of the Internal Revenue Code (the "401(k)
Plan"). Employees who have attained age 18 are eligible to participate after one
year of employment. The 401(k) Plan provides for employee pre-tax contributions
not to exceed 15% of the employee's compensation. The Company is required to
match $0.25 of an employee's contributions up to 6% of the employee's
compensation. Company contributions, if any, vest 30% after 3 years of service,
40% after 4 years of service, 60% after 5 years of service, 80% after 6 years of
service, and 100% after 7 years of service. Distributions are made at death,
retirement or other termination of employment. Distributions may be made in a
lump sum cash payment, in the form of annuities, or in annual installment
payments.

401(k) Overflow Deferred Compensation Plan. The Company maintains a
voluntary non-qualified deferred compensation plan for certain highly
compensated employees under which participants may elect to contribute on a pre-
tax basis compensation the participants would have contributed to the Company's
401(k) Plan but for limits on contributions to that plan imposed under the
Internal Revenue Code. Distributions are made at death, retirement, or other
termination of employment. Distributions may be made in a lump sum cash payment,
in the form of annuities, or in annual installment payments.

Stock Options. As of February 1, 2001, the Company had options outstanding
covering 108,900 shares of common stock, of which options covering 68,400 shares
are currently exercisable. Options are generally not exercisable until after
three years from the date of issuance and require continuous employment during
the period prior to exercise. The table below shows the stock option grants made
to each of the executive officers named in the Summary Compensation Table during
2000.

Number of
Securities % of Total
Underlying Options Granted
Options To Employees Exercise Expiration
Name Granted in 2000 Price(1) Date(2)
---- ------- ------- -------- -------

Douglas D. Monroe, Jr. 3,500 23.3% $19.25 2005
Jeffrey M. Szyperski 3,500 23.3 17.50 2007
John H. Hunt, II 1,000 6.7 17.50 2007

__________________
(1) The exercise price is based on the market value of a share of common stock
at the time the option was granted, with the exception of the options
granted to Mr. Monroe which exercise price must be set at 10% above market
value in accordance with the provisions of the Company's stock option plan
and applicable regulations.
(2) The expiration date for the options granted to Mr. Monroe is shortened by
two years in accordance with the provisions of the Company's stock option
plan and applicable regulations.

The following table shows information with respect to exercises of options
to purchase common stock by each executive officer named in the Summary
Compensation Table during 2000 and with respect to the aggregate value of
options held by each executive officer named in the Summary Compensation Table
as of December 31, 2000.

Number of Value of
Shares Underlying Unexercised
Number of Unexercised In-the-Money
Shares Options at Options at
Acquired Value December 31, 2000 December 31, 2000(2)
---------------------------- -----------------------------
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------

Douglas D. Monroe, Jr. 8,640 $89,519 28,080 9,380 $164,210 $-0-
Jeffrey M. Szyperski -0- --- 14,400 9,380 90,750 -0-
John H. Hunt, II 4,320 49,922 7,200 3,080 45,250 -0-

__________________
(1) Calculated by subtracting the exercise price from the fair market value of
the stock as of the exercise date.
(2) Calculated by subtracting the exercise price from the market value of the
stock at December 31, 2000.

Deferred Compensation Arrangement. In 1984, the Company entered into a
deferred compensation agreement with Mr. Monroe under the terms of which Mr.
Monroe was required to work through April of 1994 in order to earn the right to
receive payments from the Company of $3,042 per month for 180 months beginning
at the date of his retirement from the Company, but in no event prior to his
reaching age 70. The Company has funded its deferred compensation commitment
through a life insurance policy on Mr. Monroe.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Pursuant to Section 16(a) of the Securities Exchange Act of 1934, directors
and executive officers of the Company are required to file reports with the
Securities and Exchange Commission indicating their holdings of and transactions
in the Company's equity securities. To the Company's knowledge, based solely on
a review of the copies of such reports furnished to the Company and written
representations that no other reports were required, insiders of the Company
complied with all filing requirements during the fiscal year ended December 31,
2000.

INDEBTEDNESS AND CERTAIN TRANSACTIONS

In calendar year 2000 and up to the present time, there were transactions
between the Bank and certain of the officers and directors of the Company and
the Bank and their known associates, all consisting of extensions of credit by
the Bank in the ordinary course of its business. Each transaction was made on
substantially the same terms, including interest rates, collateral, and
repayment terms, as those prevailing at the time for comparable transactions
with the general public. In the opinion of management, none of the transactions
involves more than the normal risk of collectibility or presents other
unfavorable features. Thus, the Bank has had, and the Bank expects to have in
the future, banking transactions in the ordinary course of its business with the
officers and directors of the Company and the Bank and their associates on the
same terms, including interest rate, collateral and repayment terms on loans, as
those prevailing at the same time for comparable transactions with others.

2002 ANNUAL MEETING OF SHAREHOLDERS

It is contemplated that the 2002 Annual Meeting of Shareholders will be
held on or about Friday, April 5, 2002. In order for any appropriate shareholder
proposal to be included in the proxy materials of the Company for the 2002
Annual Meeting of Shareholders, it must be received by the Secretary at the
Company's principal place of business on or before November 6, 2001.

OTHER MATTERS

As of the date of this Proxy Statement, the management of the Company has
no knowledge of any matters to be presented for consideration at the Annual
Meeting other than those referred to above. If any other matters properly come
before the Annual Meeting, the persons named in the accompanying proxy intend to
vote such proxy, to the extent entitled, in accordance with the recommendation
of the Board of Directors.

By Order of the Board of Directors

/s/ John H. Hunt, II
-----------------------------------
John H. Hunt, II
Secretary

A COPY OF THE COMPANY'S 2000 ANNUAL REPORT ON FORM 10-KSB TO THE SECURITIES
AND EXCHANGE COMMISSION MAY BE OBTAINED WITHOUT CHARGE BY ANY SHAREHOLDER OF
RECORD ON FEBRUARY 1, 2001. ALL REQUESTS MUST BE IN WRITING, ADDRESSED TO
DOUGLAS D. MONROE, JR., PRESIDENT, CHESAPEAKE FINANCIAL SHARES, INC., POST
OFFICE BOX 1419, KILMARNOCK, VIRGINIA 22482.

PROXY

Chesapeake Financial Shares, Inc.

MANAGEMENT PROXY: Solicited on Behalf of the Board of Directors

The undersigned hereby appoints T. Nash Broaddus and Eugene S. Hudnall,
Jr., jointly and severally, proxies, with full power to act alone and with full
power of substitution to represent the undersigned and vote all shares of the
Company standing in the name of the undersigned at the Annual Meeting of
Shareholders of Chesapeake Financial Shares, Inc. to be held on Friday, April 6,
2001 at 4:00 p.m. in the auditorium at Rappahannock Westminster-Canterbury,
Irvington, Virginia, or any adjournment thereof, on each of the following
matters:

1. Election of directors.

[_] FOR all Nominees listed below [_] WITHHOLD AUTHORITY TO VOTE FOR
THOSE INDICATED BELOW

T. Nash Broaddus, Eugene S. Hudnall, Jr., Douglas D. Monroe, Jr., Katherine
W. Monroe, Bruce P. Robertson, William F. Shumadine, Jr., Robert L.
Stephens, and Jeffrey M. Szyperski.

(Instructions: To withhold authority to vote for any individual nominee, place
a line through that nominee's name. Cumulative voting is permitted. See page 1
of the accompanying Proxy Statement for an explanation of cumulative voting.)

2. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting or any adjournment
thereof. The Board of Directors at present knows of no other business to
be presented.

This proxy, when properly executed, will be voted in the manner directed by
the undersigned shareholder. If no direction is made, this proxy will be voted
"FOR" each proposal. All joint owners MUST sign.

Dated: ____________________, 2001 ____________________________________
Signature*

____________________________________
Signature if held jointly

*NOTE: When signing as attorney, executor, administrator, trustee or guardian,
please give full title. If more than one fiduciary, all should sign. All
joint owners MUST sign.

I [ ] will / [ ] will not attend the Annual Meeting.

The shares represented hereby will be voted in accordance with any choice
specified by the shareholders and, where there is no choice, such shares will be
voted IN FAVOR OF each proposal. This Proxy further provides authority to
accumulate such votes as the proxies may deem appropriate in the election of
directors.

IF YOU ARE INTERESTED IN RECEIVING VIA E-MAIL INFORMATION ABOUT THE COMPANY
THAT IT SENDS OUT IN PAPER FORM LIKE PRESS RELEASES, EARNINGS RELEASES AND OUR
QUARTERLY LETTER TO SHAREHOLDERS, PLEASE PROVIDE YOUR E-MAIL ADDRESS BELOW:

E-mail Address: www.chesbank.com