UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-15536
Codorus Valley Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2428543
(State of incorporation) (I.R.S. Employer ID No.)
105 Leader Heights Road, P.O. Box 2887 York, PA 17405
(Address of principal executive offices) (Zip Code)
(717) 235-6871 or (717) 846-1970
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changes
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 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 _
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes _ No _
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
2,394,868 shares of common stock, $2.50 par value, were outstanding
as of 10/26/99.
<PAGE>
CODORUS VALLEY BANCORP, INC.
10Q INDEX
Page #
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition... 1
Consolidated Statements of Income................ 2
Consolidated Statements of Cash Flows............ 3
Notes to Consolidated Financial Statements....... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 7
Item 3. Quantitative and Qualitative Disclosures About
Market Risk...................................... 23
PART II - OTHER INFORMATION
Item 1. Legal proceedings.................................. 24
Item 2. Changes in securities and use of proceeds.......... 24
Item 3. Defaults by the company on its senior securities... 24
Item 4. Results of votes of security holders............... 24
Item 5. Other information.................................. 24
Item 6. Exhibits and reports on Form 8-K................... 24
SIGNATURES................................................. 25
EXHIBIT 27, Financial Data Schedule........................ 26
<PAGE>
PART I - FINANCIAL INFORMATION: Item 1. Financial Statements
CODORUS VALLEY BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
Unaudited
September December
30, 31,
(dollars in thousands) 1999 1998
Assets --------- ---------
Cash and due from banks
Interest bearing deposits with banks $ 213 $ 203
Noninterest bearing deposits and cash 5,556 10,889
Federal funds sold 1,957 0
Securities available for sale 46,297 56,225
Securities held to maturity(market value $7,202) 7,404 0
Loans 204,948 189,111
Less-allowance for loan losses (2,037) (1,865)
-------- --------
Total net loans 202,911 187,246
Premises and equipment 9,836 9,345
Interest receivable 1,735 1,588
Other assets 8,462 7,586
-------- --------
Total assets............................. $284,371 $273,082
======== ========
Liabilities
Deposits
Noninterest bearing demand $ 25,129 $ 25,047
NOW 23,472 26,936
Insured money fund and money market 42,473 36,577
Savings 20,618 20,655
Time CDs less than $100,000 112,333 113,688
Time CDs $100,000 and above 18,928 19,010
-------- --------
Total deposits 242,953 241,913
Federal funds purchased 0 1,234
Other short-term borrowings 3,500 0
Long-term borrowings 10,413 2,571
Interest payable 823 770
Other liabilities 658 536
-------- --------
Total liabilities............................ 258,347 247,024
Stockholders' Equity
Series preferred stock, par value $2.50
per share; 1,000,000 shares authorized;
0 shares issued and outstanding 0 0
Common stock, par value $2.50 per share;
10,000,000 shares authorized; 2,395,868 shares
issued and outstanding at 9/30/99; 2,303,987
at 12/31/98 6,019 5,760
Additional paid-in capital 11,978 10,279
Retained earnings 8,571 9,561
Accumulated other comprehensive income from
unrealized (losses)gains on securities, net of tax (328) 458
Less: Treasury stock, 11,859 common shares (216) 0
-------- --------
Total stockholders' equity................... 26,024 26,058
Total liabilities and stockholders' equity... $284,371 $273,082
======== ========
See accompanying notes.
1
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CODORUS VALLEY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
<TABLE>
Three months ended Nine months ended
September 30, September 30,
(dollars in thousands, except per share data) 1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest Income
Interest and fees from loans $4,347 $4,133 $12,766 $12,692
Interest from federal funds sold and interest
bearing deposits with banks 19 90 86 317
Interest and dividends from securities
Taxable interest income 636 650 1,844 1,774
Tax-exempt interest income 92 74 268 206
Dividend income 30 13 72 42
------ ------ ------ ------
Total interest income.............................. 5,124 4,960 15,036 15,031
Interest Expense
NOW 62 87 200 258
Insured money fund and money market 343 264 933 715
Savings 108 120 318 352
Time CDs less than $100,000 1,502 1,553 4,502 4,635
Time CDs $100,000 and above 242 275 721 850
------ ------ ------ ------
Total interest expense on deposits 2,257 2,299 6,674 6,810
Interest expense on short-term borrowings and
federal funds purchased 41 0 78 0
Interest expense on long-term borrowings 123 46 231 140
------ ------ ------ ------
Total interest expense............................ 2,421 2,345 6,983 6,950
------ ------ ------ ------
Net interest income................................ 2,703 2,615 8,053 8,081
Provision for Loan Losses 50 75 200 375
------ ------ ------ ------
Net interest income after provision for loan losses 2,653 2,540 7,853 7,706
Noninterest Income
Trust and investment services fees 124 112 385 396
Service charges on deposit accounts 145 122 418 353
Other income 192 80 599 229
Gain on sales of loans 1 4 3 108
Gain on sales of securities 182 72 225 194
Gain on sales of fixed assets 13 0 15 0
------ ------ ------ ------
Total noninterest income 657 390 1,645 1,280
Noninterest Expense
Salaries and benefits 1,156 1,030 3,414 3,019
Occupancy of premises 188 208 595 610
Furniture and equipment 231 237 710 709
Postage, stationery and supplies 89 89 297 290
Professional and legal 73 83 214 188
Marketing and advertising 114 63 287 194
Acquired real estate, net 48 35 126 47
Other 396 353 1,171 1,143
------ ------ ------ ------
Total noninterest expense 2,295 2,098 6,814 6,200
Income before income taxes 1,015 832 2,684 2,786
Provision for Income Taxes 293 227 762 904
------ ------ ------ ------
Net income..........................................$ 722 $ 605 $1,922 $1,882
Net income per share ====== ====== ====== ======
Basic..............................................$0.30 $0.25 $0.80 $0.78
Diluted............................................$0.30 $0.25 $0.80 $0.78
See accompanying notes.
</TABLE>
2
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CODORUS VALLEY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
Nine months ended
September 30,
1999 1998
------- -------
Cash Flows From Operating Activities: (dollars in thousands)
Net Income $1,922 $ 1,882
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation 630 616
Provision for loan losses 200 375
Provision for losses on assets acquired in foreclosure 39 22
Net (gain)loss on sales of assets acquired in foreclosure (3) 2
Gain on sales of securities (225) (194)
Gain on sales of loans (3) (108)
Gain on sales of premises and equipment (15) 0
Increase in interest receivable (147) (45)
(Increase) decrease in other assets (794) 168
Increase in interest payable 53 76
Increase (decrease) in other liabilities 235 (306)
Other, net 10 (103)
------- -------
Net cash provided by operating activities.............1,902 2,385
Cash Flows From Investing Activities:
Proceeds from sales of securities available for sale 7,281 9,163
Proceeds from maturities and calls of securities
available for sale 12,661 10,359
Purchase of securities available for sale (11,099) (30,755)
Purchase of securities held to maturity (7,404) 0
Net increase in loans made to customers (16,532) (58)
Proceeds from loan sales 474 3,699
Proceeds from sales of premises and equipment 15 0
Purchases of premises and equipment (1,121) (273)
Proceeds from sales of assets acquired in foreclosure 479 380
Investment in cash surrender value of life insurance 0 (5,115)
------- -------
Net cash used in investing activities................ (15,246) (12,600)
Cash Flows From Financing Activities:
Net increase in demand and savings deposits 2,477 7,023
Net decrease in time deposits (1,437) (2,232)
Net increase in short-term borrowings and
federal funds purchased 2,266 600
Net increase (decrease) in long-term borrowings 7,842 (172)
Dividends paid (748) (680)
Payment to repurchase common stock (417) 0
Cash paid in lieu of fractional shares (5) (6)
------- -------
Net cash provided by financing activities............ 9,978 4,533
------- -------
Net decrease in cash and cash equivalents............ (3,366) (5,682)
Cash and cash equivalents at beginning of year....... 11,092 13,194
------- -------
Cash and cash equivalents at September 30,...........$ 7,726 $7,512
======= =======
Supplemental Disclosures:
Interest payments $6,621 $6,734
Income tax payments $752 $862
See accompanying notes.
3
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CODORUS VALLEY BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements
Note 1-General
The interim financial statements are unaudited. However, they reflect
all adjustments which are, in the opinion of management, necessary to
present fairly the financial condition and results of operations for the
reported periods, and are of a normal and recurring nature.
These statements should be read in conjunction with notes to the audited
financial statements contained in the 1998 Annual Report to
Stockholders.
The consolidated financial statements include the accounts of Codorus
Valley Bancorp, Inc. and its wholly owned bank subsidiary, PeoplesBank,
A Codorus Valley Company, and its wholly owned nonbank subsidiary, SYC
Realty Company, Inc. All significant intercompany account balances and
transactions have been eliminated in consolidation.
No shares of common stock are reserved for issuance in the event of
conversions or the exercise of warrants, options or other rights, except
for 134,009 shares for the Corporation's Dividend Reinvestment and Stock
Purchase Plan; 75,711 shares for the 1996 Stock Incentive Plan; 105,000
shares for the 1998 Independent Directors' Stock Option Plan; and those
shares reserved for the Shareholders' Rights Plan.
The results of operations for the nine month period ended September 30,
1999 are not necessarily indicative of the results to be expected for
the full year.
Note 2-Summary of Significant Accounting Policies
Loans Held for Sale - Loans held for sale are reported at the lower of
cost or market value. The amount by which cost exceeds market value, if
any, is accounted for as a valuation allowance and is charged to
expense in the period of the change.
Per Share Computations - All per share computations include the
retroactive effect of stock dividends, including the 5 percent stock
dividend paid June 11, 1999. The weighted average number of shares of
common stock outstanding used was approximately 2,403,175 for the nine
month period ended September 30, 1999 and 2,407,827 for the same period
in 1998.
Reclassifications - Certain reclassifications have been made to the 1998
consolidated financial statements to conform with the 1999 presentation.
Comprehensive Income - As of January 1, 1998, the Corporation adopted
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income." Statement No. 130 establishes new rules for the
reporting and display of comprehensive income and its components;
however, the adoption of this Statement had no impact on the Company's
net income or shareholders' equity. Statement No. 130 requires
4
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CODORUS VALLEY BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements, continued
Note 2 - Summary of Significant Accounting Policies, continued
unrealized gains or losses on available for sale securities, to be
included in other comprehensive income. Total comprehensive income was
$556,000 for the quarter ended September 30, 1999, compared to $810,000
for the same period of 1998. Year to date total comprehensive income
was $1,136,000 for 1999, compared to $1,922,000 for 1998.
Note 3-Current Accounting Developments
In December 1998, the Financial Accounting Standards Board (FASB) issued
an Invitation to Comment Document entitled "Methods of Accounting for
Business Combinations: Recommendations of the G4+1 for Achieving
Convergence." Subsequently, in April 1999, the FASB tentatively agreed
to eliminate the pooling-of-interests method of accounting for business
combinations. In reaching its conclusion, the Board commented that the
use of two methods, purchase and pooling-of-interests, makes it
difficult for users to compare the financial statements of companies
engaged in business combinations, and that the pooling method is
inconsistent with the general concept of fair value associated with
acquisitions. Accordingly, the Board concluded that there should be a
single method of accounting for all business combinations, and that
method is the purchase method. As a general rule, the purchase method
establishes a new accounting basis for the assets and liabilities
acquired based on fair value and recognizes goodwill (positive or
negative). Goodwill, the difference between the purchase price and total
value of the assets and liabilities obtained, is an intangible asset
that must be amortized over future periods. Regarding transition, the
Board tentatively concluded that all business combinations reported
before final issuance of a new standard, as well as all combinations in
process at the time the new standard is issued should be accounted for
under APB 16 as a pooling, if the pooling criteria within that standard
are met. The FASB is expected to issue a final standard in the fourth
quarter of 2000.
5
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CODORUS VALLEY BANCORP, INC.
Notes to Unaudited Consolidated Financial Statements, continued
Note 4-Impaired Loans
The Corporation records impaired loans in accordance with Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of
a Loan", as amended by Statement No. 118, "Accounting by Creditors for
Impairment of a Loan--Income Recognition and Disclosure." For all
reportable periods, impaired loans were comprised of collateral
dependent commercial loans and residential mortgage loans classified as
nonaccrual(cash basis). Additional information regarding impaired loans
is provided in the schedule that follows.
September 30, December 31,
(dollars in thousands) 1999 1998
------ ------
Impaired loans $2,412 $1,706
Amount of impaired loans that
have a related allowance $2,412 $1,706
Amount of impaired loans with
no related allowance $0 $0
Allowance for impaired loans $554 $456
For the nine month period ended
September 30,
1999 1998
------ ------
Average investment in impaired loans $2,149 $2,821
Interest income recognized on
impaired loans (all cash-basis) $50 $44
Note 5-Analysis of Allowance for Loan Losses
Changes in the allowance for loan losses for the nine month period
ended September 30, were as follows:
(dollars in thousands) 1999 1998
------ ------
Balance-January 1, $1,865 $2,098
Provision charged to operating expense 200 375
Loans charged off (42) (624)
Recoveries 14 17
------ ------
Balance-September 30, $2,037 $1,866
====== ======
6
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CODORUS VALLEY BANCORP, INC.
Item 2. Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations
Management's discussion and analysis of the significant changes in the
results of operations, capital resources and liquidity presented in its
accompanying consolidated financial statements for Codorus Valley Bancorp,
Inc., a bank holding company (CVLY or Corporation), and its wholly-owned
subsidiary, PEOPLESBANK, A Codorus Valley Company (PEOPLESBANK) are provided
below. CVLY's consolidated financial condition and results of operations
consist almost entirely of PEOPLESBANK'S financial condition and results of
operations. Current performance does not guarantee and may not be indicative
of similar performance in the future.
Management has made forward-looking statements in this report, and in
documents that are incorporated by reference, that are subject to risks and
uncertainties. Forward-looking statements include information concerning
possible or assumed future results of operations of CVLY or PEOPLESBANK.
Management is making forward-looking statements when it uses words such as
"believes," "expects," "anticipates" or other similar expressions.
Many factors, some of which are discussed elsewhere in this document and in
the documents that are incorporated by reference, could affect the future
financial results of CVLY or PEOPLESBANK and could cause those results to
differ materially from those expressed in forward-looking statements
contained or incorporated by reference in this document. These factors
include: operating, legal and regulatory risks; economic, political and
competitive forces affecting banking, securities, asset management and
credit services businesses; and the risk that management's analyses of these
risks and forces could be incorrect and/or that the strategies developed to
address them could be unsuccessful.
CVLY undertakes no obligation to publicly revise or update these forward-
looking statements to reflect events or circumstances that arise after the
date of this report. Readers should carefully review the risk factors
described in other documents that CVLY files periodically with the
Securities and Exchange Commission.
Three months ended September 30, 1999
compared to three months ended September 30, 1998
INCOME STATEMENT ANALYSIS
Overview
Net income for the current three month period was $722,000, or $.30 per
share compared to $605,000 or $.25 per share, for the same period in 1998.
The increase in net income was caused by increases in noninterest income and
net
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CODORUS VALLEY BANCORP, INC.
interest income which more than offset an increase in noninterest expense.
The increase in noninterest income was caused primarily by gains from the
periodic sale of investment securities and income from an investment in bank
owned life insurance. The current quarter included $182,000 in gains from
the sale of investment securities compared to $72,000 for the third quarter
of 1998. The increase in net interest income was attributable to an increase
in interest income from a larger volume of earning assets, principally
commercial loans. The increase in noninterest expense was attributable to
increases in salaries and benefits, marketing and normal business growth. An
explanation of the factors and trends that caused changes between the two
periods, by earnings category, is provided below.
Net interest income
Net interest income for the current three month period was $2,703,000, an
increase of $88,000 or 3.3 percent above the third quarter of 1998. The
increase in net interest income was attributable to a larger volume of
interest earning assets which more than offset lower yields. Total earning
assets averaged $256 million with a weighted average tax equivalent yield of
7.84 percent for the third quarter of 1999 compared to $236 million and 8.17
percent, respectively, for the third quarter of 1998. Growth in the average
volume of interest earning assets occurred primarily in the commercial loan
portfolio during the first and second quarters of the current year.
During the third quarter of 1999, PEOPLESBANK and CVLY invested a total of
$7.4 million in long term trust preferred securities issued by commercial
bank holding companies with yields ranging from 7.75 percent to 9.60
percent. More information about trust preferred investments is provided
under the heading Investment Securities located in the Balance Sheet Review
section of this report.
Total deposits averaged $245 million with a weighted average rate of 3.66
percent for the third quarter of 1999 compared to $229 million and 3.98
percent, respectively, for the third quarter of 1998. Relatively low cost
demand and interest bearing demand core deposits increased from last year
while CDs remained stable.
Total long term borrowings averaged $7.4 million with a weighted average
rate of 6.43 percent for the third quarter of 1999 compared to $2.7 million
and 6.83 percent, respectively, for the third quarter of 1998. More
information about long term borrowings is provided under the heading Short-
Term and Long-Term Borrowings located in the Balance Sheet Review section of
this report.
Provision for loan losses
A $50,000 provision expense for possible loan losses was recorded for the
current period to support growth in the commercial loan portfolio.
8
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CODORUS VALLEY BANCORP, INC.
Comparatively, a $75,000 provision was recorded for the third quarter of
1998.
Noninterest income
Total noninterest income for the current three month period was $657,000, an
increase of $267,000 or 68 percent above the same period in 1998. The
overall increase was due primarily to a $112,000 increase in other income
and a $110,000 increase in gains from the periodic sale of investment
securities. Most of the increase in other income was caused by the
recognition of $66,000 in income from an investment in bank owned life
insurance (boli). There was no comparable income from boli in the third
quarter of 1998. During the current period, CVLY recognized a $109,000 gain
from the sale of a common stock investment, and PEOPLESBANK recognized a
$74,000 gain from the sale of a fixed income security.
Noninterest expense
Total noninterest expense for the current three month period was $2,295,000
an increase of $197,000 or 9.4 percent above the third quarter of 1998. The
increase in noninterest expense was largely attributable to increases in
salaries and benefits, marketing expense and normal business growth as
described in the year-to-date section of this report.
Capital investment in technology
To improve staff productivity through technology, PEOPLESBANK implemented a
local area network (LAN) during the third quarter of 1999. A LAN
infrastructure enables selected employees to access e-mail, the Internet,
and the latest desk-top application systems. It also permits centralized
file sharing, storage and backup. The initial capital investment, exclusive
of user training expense, was approximately $80,000 and is being depreciated
over a three year expected useful life.
Income taxes
The provision for federal income taxes was $293,000 for the current three
month period, compared to $227,000 for the same period in 1998. The tax
increase corresponds to an increase in income before income taxes.
9
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CODORUS VALLEY BANCORP, INC.
Nine months ended September 30, 1999
compared to nine months ended September 30, 1998
INCOME STATEMENT ANALYSIS
Overview
Net income for the current nine month period was $1,922,000 or $.80 per
share, compared to $1,882,000 or $0.78 per share, for the same period in
1998. All per share amounts were adjusted for stock dividends. The increase
in current period net income was caused by a $365,000 increase in
noninterest income, a $175,000 decrease in the loan loss provision and a
$142,000 decrease in the federal income tax provision. The favorable effect
of these three income statement categories more than offset a $614,000
increase in noninterest operating expenses. For the nine month period
(annualized) of 1999, the return on average assets was approximately 0.93
percent compared to .98 percent for 1998. For the same periods, the return
on average equity was approximately 9.8 percent for 1999 compared to 9.9
percent for 1998.
On September 30, 1999, total assets were approximately $284 million, an
increase of $11 million or 4 percent above December 31, 1998. Balance sheet
growth was driven by an increase in commercial loans which were funded by
borrowings and deposit growth. Book value per share, as adjusted, was $10.86
on September 30, 1999, compared to $10.82 on December 31, 1998. As of
September 30, 1999, management believes that CVLY's capital meets all
capital requirements to which it is subject. PEOPLESBANK'S capital ratios
exceed the quantitative federal regulatory minimums for well capitalized
commercial banks.
An explanation of the factors and trends that caused changes between the two
periods, by earnings category, is provided below.
Net interest income
Net interest income for the current nine month period was $8,053,000, a
decrease of $28,000 or 0.3 percent less than the same period in 1998. A
significant factor which contributed to the decline in net interest income
was a $5 million investment in bank owned life insurance (boli) in September
1998. This tax exempt investment caused income to shift from an interest
income category to a noninterest income category on the income statement.
Additionally, competitive price pressures and a relatively flat yield curve
served to constrain net interest income in the current period.
Total interest earning assets averaged $250 million with a weighted average
tax equivalent yield of 7.88 percent for the first nine months of 1999
compared to $236 million and 8.33 percent, respectively, for the first nine
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CODORUS VALLEY BANCORP, INC.
months of 1998. Growth in the average volume of interest earning assets
occurred primarily in the commercial loan and investment securities
portfolios.
During the third quarter of 1999, CVLY and PEOPLESBANK began to execute a
planned $10 million leverage growth strategy which involves investment in
long term trust preferred securities funded by borrowings from third
parties. The purpose of the leverage strategy is to generate additional net
interest income to help offset financial opportunity costs associated with
the long term investment in the Codorus Valley Corporate Center facility.
More information about this strategy can be found under the headings
Investment Securities and Short-term and Long-Term Borrowings within the
Balance Sheet Review section of this report.
Total deposits averaged $242 million with a weighted average rate of 3.68
percent for the first nine months of 1999 compared to $227 million and 4.01
percent, respectively, for the same period of 1998. The average balances of
demand and interest bearing demand deposits increased 21 percent above 1998,
while savings deposits increased 1 percent and CD deposits were stable. Due
to the growth in relatively low cost core deposits and the need to manage
net interest income compression, PEOPLESBANK has not priced CDs
aggressively.
Commercial equipment leasing
In May 1999, PEOPLESBANK entered into a third party commercial leasing
arrangement in order to provide the Bank with an additional source of
income, and expand its menu of commercial services. Under the arrangement,
PEOPLESBANK will fund leases that meet its credit risk standards with
assignment of the lease and a security interest in the leased equipment as
collateral. Third party responsibilities include entering into the lease
agreement with the lessee, equipment purchase and disposition, marketing and
administrative support, and providing PEOPLESBANK with commercial leasing
expertise. Start-up costs were approximately $10,000 and ongoing expenses
associated with the commercial leasing arrangement are expected to be
insignificant.
Provision for loan losses
A $200,000 provision expense for possible loan losses was recorded for the
current period to support growth in the commercial loan portfolio.
Comparatively, a $375,000 provision was recorded for the same period of 1998
to support a higher level of net loan charge-offs.
Noninterest income
Total noninterest income for the current nine month period was $1,645,000,
an increase of $365,000 or 29 percent above the same period in 1998. The
overall
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CODORUS VALLEY BANCORP, INC.
increase was due primarily to a 162 percent increase in the other income
category which reflects increases in the cash surrender value of bank owned
life insurance, ATM fees and rental income. Service charge fees on deposit
accounts also increased 18 percent above the first nine months of 1998 due
to a larger deposit base. During the current period, PEOPLESBANK recorded
$243,000 in capital gains from the periodic sale of assets compared to
$302,000 for the same period in 1998.
For 1999, noninterest income is expected to exceed the 1998 level, with the
possible exception of capital gains from asset sales. Boli investment income
and rental income from leasing space in CVLY and PEOPLESBANK facilities is
projected to make a larger contribution to noninterest income. Fee income
from the PEOPLESBANK subsidiary, SYC Settlement Services, Inc., described in
the section that follows, and fees from commercial equipment leasing are
also expected to contribute to growth in noninterest income.
Sales of insurance and related investment products
In January 1999, PEOPLESBANK subsidiary, SYC Settlement Services, Inc. began
operations. This subsidiary was created, and operates at minimal cost. SYC
Settlement Services generates fee income for PEOPLESBANK by providing real
estate title insurance and settlement services. PEOPLESBANK is currently
evaluating its options regarding the sale of other insurance and related
investment products.
Noninterest expense
Total noninterest expense for the current nine month period was $6,814,000,
an increase of $614,000 or 10 percent above the same period in 1998. The
increase in noninterest expense primarily reflects increases in salaries and
benefits, professional and legal, marketing and advertising, and acquired
real estate expenses. Salaries and benefits expense increased $395,000 or 13
percent above 1998 due primarily to staff additions, merit raises, higher
replacement and recruiting expenses, and increases in the cost of health and
retirement benefit plans. Additionally, the prior period included a one-time
$58,000 expense reduction associated with termination of PEOPLESBANK's
defined benefits retirement plan. Professional and legal expense increased
$26,000 or approximately 14 percent due primarily to consulting fees
associated with a third party investment management arrangement for selected
accounts within the trust and investment services division, and technology
planning. Marketing and advertising expense increased $93,000 or
approximately 48 percent due to a larger marketing budget. Acquired real
estate expense increased $79,000 or 168 percent due to greater carrying
costs and deterioration in the market value of selected properties.
Noninterest expense is expected to increase in the period ahead due to
planned strategic initiatives, including capital investment in technology,
Y2K compliance and normal business growth.
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CODORUS VALLEY BANCORP, INC.
Capital investment in technology
In accordance with CVLY's strategic technology plan, PEOPLESBANK has focused
on three key technology projects for 1999. Two of these projects are
complete and one is currently in process. A brief project description is
provided below.
During the third quarter of 1999 a local area network (LAN) was implemented.
More information about the LAN is provided under the heading Capital
Investment in the current quarter section of this report. In late April
1999, PEOPLESBANK completed the installation of an item processing system
with check imaging capability. This mission critical system replaced an
aged, fully depreciated, item processing system that was not Y2K compliant.
The new system, which is more efficient and has more processing capacity,
cost approximately $660,000 ($300,000 for item processing and $360,000 for
check imaging) and was funded internally. Annual depreciation expense on the
new system will approximate $110,000 based on an expected useful life of
five to seven years. Following installation and testing, the system was
introduced to PEOPLESBANK clients effective July 1, 1999.
To improve client convenience through technology, PEOPLESBANK is
implementing an Internet banking system with online bill payment and other
useful features. The capital investment, exclusive of marketing and
maintenance expenses, is expected to approximate $60,000 and will be
depreciated over a three year expected useful life. Internet banking should
be available to PEOPLESBANK clients in the fourth quarter of 1999.
Sales and product training
In January 1998, PEOPLESBANK contracted with a national sales training and
consulting firm to implement a sales and product training program. The
program is focused on the retail banking staff and has two primary
objectives: first, to expedite the transformation of PEOPLESBANK to a
customer-focused corporate culture, based upon superior sales and service;
second, to increase sales through improved selling skills, increased product
knowledge and confidence, and sales incentives. Formal training of the
retail banking staff began in May 1998. This comprehensive retail training
program is expected to take approximately 30 months to complete at an
estimated cost of $175,000. Through September 30, 1999, PEOPLESBANK expended
approximately $127,000 toward this program ($32,000 in 1999 and $95,000 for
the full year 1998).
Year 2000 compliance
The following section contains forward-looking statements which involve
risks
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CODORUS VALLEY BANCORP, INC.
and uncertainties. The actual impact of the Year 2000 issue (Y2K) on CVLY
could materially differ from that which is anticipated in the forward-
looking statements as a result of certain factors identified below.
The Year 2000 issue poses significant risks for all businesses, households
and governments. The risk is that on January 1, 2000, date sensitive systems
using two digits to represent the year may not be able to distinguish
between
the Year 2000 and the Year 1900. The date problem could result in system
failures or miscalculations causing disruptions in normal business and
governmental operations. The problem has broad implications far beyond
familiar computer systems and could adversely impact security systems,
telephone systems, climate control systems, elevators, automobiles and other
date sensitive systems. Unfortunately, there is no universal solution for
this problem, and resolution of the Year 2000 issue may be both labor
intensive and costly for some companies.
PEOPLESBANK is subject to the regulation and oversight of various banking
regulators, whose oversight includes the provision of specific timetables,
programs and guidance regarding Y2K issues. Regulatory examination of
PEOPLESBANK'S Y2K programs are conducted periodically, and reports from
management are submitted quarterly to CVLY's Board of Directors.
Corporation's State of Year 2000 Readiness
Resolving the Year 2000 issue is one of CVLY's highest priorities. In 1997,
a project team was formed to address the Y2K issue. Based on an internal
assessment of CVLY's systems and software, the project team determined that
some existing systems and software must be remediated or replaced prior to
the millennium. Management presently believes that as a result of
modifications to existing software and hardware and conversions to new
software, the Y2K issue can be mitigated.
CVLY has initiated communications with its major vendors to determine the
extent to which these third parties will be Y2K compliant. To date,
responses have been positive; however, there is no guarantee that the
systems and software of other companies on which CVLY relies will be Y2K
compliant. As a precaution CVLY has developed a business resumption
contingency plan, as needed, for mission critical systems.
Further, PEOPLESBANK has communicated with its large commercial borrowers.
These borrowers may pose a credit risk to PEOPLESBANK if they are not Y2K
compliant, and their businesses are disrupted. Responses from large
commercial borrowers have been evaluated, and PEOPLESBANK will take
appropriate action based upon their level of readiness for Year 2000.
PEOPLESBANK has also incorporated a Y2K readiness review in its underwriting
process for business loans.
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CODORUS VALLEY BANCORP, INC.
Costs of Year 2000 Readiness
As of September 30, 1999, management's best estimate of the total cost of
Y2K readiness is $83,000. No attempt was made to measure staff costs
associated with this project. Management believes that if staff costs were
quantified they would be substantial. Of the $83,000 estimate, $50,000 is
expected to incurred in 1999, and $33,000 was incurred in 1998. Y2K
expenditures were incurred principally for external technicians for system
test plans and testing. Lost income associated with maintaining a larger
cash inventory during November and December 1999 is an anticipated cost
included in the estimate. In addition, PEOPLESBANK replaced an aged item-
processing system in April 1999 which was not Y2K compliant. On a comparable
cost basis, this system cost approximately $300,000 (exclusive of the cost
of a check imaging capability unique to the new system) which produces an
annual after-tax depreciation expense of $28,000 based on a seven-year
expected useful life. Implementation of this mission critical system was
accelerated from its original fourth quarter 1999 target date. The cost of
the Y2K project is based on management's best estimates, which assume the
continued availability of certain resources, third party modification plans
and other factors. However, there is no guarantee that these estimates will
be achieved and actual results could differ materially.
Risks of Year 2000
At present, management believes its progress in remedying CVLY's systems,
programs and applications and installing Y2K compliant upgrades is on
target.
The Y2K problem creates risk for CVLY from unforeseen problems in its own
computer systems and from third party vendors who provide the majority of
mainframe and pc-based computer applications. Failure of third party systems
relative to the Y2K issue could have a material impact on CVLY's ability to
conduct business. CVLY is also exposed to credit risk if large commercial
borrowers are not Y2K compliant and their businesses are disrupted.
Contingency Plans for Year 2000
Mission critical systems have been remediated and tested for Year 2000
compliance. Mission critical systems were successfully tested and operated
correctly within the test environment. CVLY will continue to monitor and
test
mission critical systems and has developed a business resumption contingency
plan.
In accordance with regulatory mandate, CVLY was substantially Year 2000
compliant by year end 1998. However, uncertainties remain about whether or
not CVLY's third party vendors and large commercial borrowers will be Year
2000 compliant. Accordingly, the financial impact of the Year 2000 issue on
CVLY's assets, earnings and liquidity cannot be determined at this time.
15
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CODORUS VALLEY BANCORP, INC.
Income taxes
The provision for federal income taxes was $762,000 for the current nine
month period, compared to $904,000 for the same period in 1998. The decrease
in the tax provision for 1999 was the result of a lower level of income
before income taxes and a higher level of tax-exempt income.
BALANCE SHEET REVIEW
Investment securities
At September 30, 1999, the available-for-sale investment securities
portfolio was $46.3 million compared to $56.2 million at December 31, 1998.
The decline was caused primarily by securities sales which totalled
approximately $7 million during the first nine months of operations.
Securities sales for PEOPLESBANK and CVLY generated pretax capital gains
totalling $225,000 for 1999. Sale proceeds were reinvested in the commercial
loan portfolio.
Pursuant to a planned leverage growth strategy involving PEOPLESBANK and
CVLY, PEOPLESBANK invested $5,072,000 in trust preferred stock (trust
preferreds) issued by money center bank holding companies during July 1999.
These instruments, rated investment grade, are substantially junior
subordinated debt, pay interest semi-annually, are callable, mature in the
years 2026-2027, and yield approximately 7.8 percent. Also during the third
quarter, CVLY invested $2,332,000 in nonrated and below investment grade
trust preferred securities issued by financially sound community bank
holding companies which yield approximately 9 percent. Trust preferred
securities are classified as held-to-maturity on the balance sheet.
Loans
At September 30, 1999, total loans were $205 million representing a $16
million or 8.4 percent increase from year end 1998. The increase was due
primarily to growth in the fixed rate commercial loan category during the
first and second quarters of 1999. To date, commercial loan growth has more
than compensated for the portfolio runoff that occurred during 1998. Runoff
in the prior year was attributable to competitive price pressures and
approximately $8.5 million in early loan payoffs associated with PEOPLESBANK
clients selling businesses and assets. In spite of competitive pressures,
PEOPLESBANK is committed to maintaining high credit underwriting standards.
Deposits
At September 30, 1999, total deposits were $243 million representing a $1
million or 0.4 percent increase from year end 1998. Competitive pressures,
16
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CODORUS VALLEY BANCORP, INC.
particularly the domestic stock and mutual fund markets, have constrained
deposit growth for PEOPLESBANK, specifically, and the commercial banking
industry in general.
Short-Term and Long-Term Borrowings
In order to meet short-term funding needs PEOPLESBANK can borrow from larger
correspondent banks in the form of funds purchased. PEOPLESBANK also
utilizes available credit through the Federal Home Loan Bank of Pittsburgh
(FHLBP). The rate is established daily based on prevailing market conditions
for overnight funds. PEOPLESBANK'S maximum borrowing capacity, as
established quarterly by the FHLBP, was approximately $64 million, at June
30, 1999, the most recent available date.
At September 30, 1999, long term borrowings were $10.4 million, an increase
of $7.8 million above year end 1998. During September 1999, CVLY borrowed $2
million from a local financial institution. Under the loan arrangement the
rate is fixed at 7.35 percent for 10 years based on a 20 year principal
amortization, with no prepayment penalty. Loan proceeds were used to
partially fund an investment in trust preferred securities. In July 1999,
PEOPLESBANK borrowed $5 million for 15 years from the FHLBP to help fund its
operations. Under the loan arrangement with the FHLBP, the rate is fixed at
6.43 percent for 10 years. During the remaining 5 years, the FHLBP has the
option to convert the rate to a floating rate based on the 3 month Libor
index plus 16 basis points. If the FHLB elects its conversion option,
PEOPLESBANK can repay the loan without a prepayment penalty.
Stockholders' Equity
Stockholders' equity, or capital, is a source of funds which enables CVLY to
maintain asset growth and to absorb losses. Total stockholders' equity was
$26 million at September 30, 1999, approximately the same as December 31,
1998. The flatness in equity was primarily attributable to unrealized
holding losses on available-for-sale investment securities caused by rising
market interest rates, and stock repurchases which partially offset the
positive impact from earnings. Book value per share, as adjusted, was $10.86
on September 30, 1999, compared to $10.82 on December 31, 1998.
The level of capital for CVLY and PEOPLESBANK remained sound for both
periods. PEOPLESBANK exceeded all minimum regulatory requirements for well
capitalized commercial banks as established by the FDIC, its primary federal
regulator. The FDIC's minimum quantitative standards for a well capitalized
institution are as follows: Tier I risk-based capital, 6 percent; Total
risk-based capital, 10 percent; and Leverage ratio, 5 percent. At the state
level, the Pennsylvania Department of Banking uses a Leverage ratio
guideline of 6 percent. CVLY's and PEOPLESBANK'S capital amounts and
classification are also subject to qualitative judgements by regulators. The
table below depicts
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CODORUS VALLEY BANCORP, INC.
capital ratios for CVLY and PEOPLESBANK on September 30, 1999, and December
31, 1998.
Ratios CVLY CONSOLIDATED PEOPLESBANK
9/30/99 12/31/98 9/30/99 12/31/98
Tier I risk-based capital 11.5 12.4 9.5 10.1
Total risk-based capital 12.4 13.3 10.5 11.1
Leverage 9.3 9.6 7.6 7.8
Capital investments made in earlier periods, as described in previous SEC
filings, and future investments will impact current and future earnings and
capital growth. Possible future investments could include: expansion of the
community office franchise, technology, and acquisition of financial
services companies. Management and the Board of Directors believe that
capital investments, guided by a long range strategic plan, are necessary to
develop an infrastructure to grow market share and net income over the long-
term, and are important components of the overall strategy of enhancing
long-term shareholder value.
On October 12, 1999, the Board declared a regular quarterly cash dividend of
$.11 cents per share, payable November 9, 1999, to shareholders of record
October 26, 1999. This follows a $.11 cents per share cash dividend paid in
August 1999 and a $.105 cents per share cash dividend paid in May 1999 and
in February 1999. In June 1999, a 5 percent stock dividend was paid which
resulted in the issuance of 103,840 shares of common stock.
In February 1999, CVLY publicly announced that its Board authorized the
purchase, in open market and privately negotiated transactions, of up to
112,500 shares or 4.9 percent of CVLY's outstanding common stock. Purchases
are authorized periodically when market conditions warrant, and are expected
to be funded from operations using available retained capital. As of
September 30, 1999, CVLY purchased 22,737 shares of its common stock for
approximately $417,000. Of this total, 10,878 shares were reissued to
partially satisfy the 5 percent stock dividend paid in June 1999. The
remaining 11,859 shares were held in treasury as of September 30, 1999. For
the period October 1, 1999, through the filing date of this report, CVLY
acquired 52,685 shares of its common stock for approximately $935,000.
The weighted average number of shares of common stock outstanding, adjusted
for stock dividends, was approximately 2,403,175 shares for the nine month
period ended September 30, 1999, and 2,407,827 shares for the same period in
1998.
RISK MANAGEMENT
Nonperforming assets
A summary of nonperforming assets and past due loans, and related ratios, is
provided in Table 1 included in this report. An explanation of changes
within
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CODORUS VALLEY BANCORP, INC.
each classification for September 30, 1999, compared to December 31, 1998,
is provided below.
A major component of nonperforming assets is impaired loans. For all
reporting periods, impaired loans were principally comprised of collateral
dependent commercial loans and residential mortgage loans classified as
nonaccrual. Accordingly, CVLY uses the cash basis method to recognize
interest income on loans that are impaired. On September 30, 1999, the
impaired loan portfolio was $2,412,000, reflecting a $706,000 or 41 percent
increase since year end 1998. The increase was caused by the addition of one
commercial account, adequately collaterized by real estate assets, which
totalled $759,000. As of the filing date of this report, PEOPLESBANK
collected $271,000 on this account from a partial sale of collateral. At
September 30, 1999, the impaired loan portfolio was comprised of twenty-two
unrelated accounts, primarily commercial loan relationships, ranging in size
from $1,000 to $759,000. These loan relationships vary by industry and are
generally collateralized with real estate assets. A loss allowance, which is
evaluated at least quarterly, has been established for accounts that appear
to be under-collateralized. Efforts to modify contractual terms for
individual accounts, based on prevailing market conditions, or liquidate
collateral assets, are proceeding as quickly as potential buyers can be
located and legal constraints permit.
Assets acquired in foreclosure, net of allowance, totalled $1,643,000 on
September 30, 1999, reflecting a decrease of $228,000 or 12 percent below
year end 1998. The decrease was caused by the liquidation of several real
estate assets. On September 30, 1999, the assets acquired portfolio was
comprised of real estate assets from six former commercial loan
relationships. The largest property has a carrying value of $1,003,000 which
makes up 61 percent of the assets acquired portfolio. Management believes
that the net realizable value of this property is sufficiently greater than
its carrying value based on a recent external appraisal. A loss allowance,
which is evaluated at least quarterly, has been established for assets whose
estimated market value, less selling expenses, are below their financial
carrying costs. At September 30, 1999, the allowance for assets acquired was
$69,000. For the first nine months of 1999, a $39,000 loss provision was
recorded to reflect a decline in fair value. Comparatively, a $22,000 loss
provision was deemed necessary for the same period in 1998. Efforts to
liquidate assets acquired are proceeding as quickly as potential buyers can
be located and legal constraints permit.
At September 30, 1999, and December 31, 1998, the level of loans past due 90
days or more and still accruing interest was deemed insignificant.
Generally, loans in the past due category are well collateralized and in the
process of collection.
At September 30, 1999, there were no potential problem loans, as defined by
the Securities and Exchange Commission, identified by management. However,
management was monitoring loans of approximately $8.6 million for which the
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CODORUS VALLEY BANCORP, INC.
ability of the borrower to comply with present repayment terms was
uncertain. These loans were not included in the Table 1 disclosure. They are
monitored closely, and management presently believes that the allowance for
loan losses is adequate to cover anticipated losses that may be attributable to
these loans. Comparatively, management was monitoring loans of approximately
$7.5 million on December 31, 1998.
Allowance for loan losses
Table 2, Analysis of Allowance for Loan Losses depicts a $2,037,000
allowance at September 30, 1999, which was 1 percent of total loans. The
current period allowance increased above 1998 primarily to support a larger
portfolio of commercial loans. The provision expense for the current nine
month period was $200,000, compared to $375,000 for the same period in 1998.
The loss provision was greater in 1998 due to a larger level of loan charge-
offs. In
June of 1998 management charged off $456,000 attributable to a single
commercial borrower whose account was deemed partially uncollectible.
Based on a recent evaluation of potential loan losses, management believes
that the allowance is adequate to support any reasonably foreseeable level
of losses that may arise. Ultimately, however, the adequacy of the allowance
is largely dependent upon future economic factors beyond CVLY's control.
Liquidity
Liquidity is deemed adequate and the principal funding sources include:
deposit growth, maturing investment securities, the ability to borrow from
the Federal Home Loan Bank of Pittsburgh, and asset sales.
The loan-to-deposit ratio was approximately 84 percent on September 30,
1999, compared to 78 percent on December 31, 1998. The ratio for both
periods was within current policy guidelines.
Market risk management
In the normal course of conducting business, CVLY is exposed to market risk,
principally interest rate risk, through the operations of its banking
subsidiary. Interest rate risk arises from market driven fluctuations in
interest rates which may affect cash flows, income, expense and values of
financial instruments. Interest rate risk is managed by an Asset-Liability
Management Committee comprised of members of senior management and an
outside director. No material changes in market risk strategy occurred
during the
current period. A detailed discussion of market risk is provided in the SEC
Form 10-K for period ended December 31, 1998.
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CODORUS VALLEY BANCORP,INC.
Other risks
Periodically, various types of federal and state legislation are proposed
that could result in additional regulation of, or restrictions on, the
business of CVLY and its subsidiaries. Other than as discussed below, it
cannot be predicted whether such legislation will be adopted or, if adopted,
how such legislation would affect the business of CVLY and its subsidiaries.
Further, the business of CVLY is also affected by the state of the financial
services industry in general. As a result of legal and industry changes,
management predicts that the industry will continue to experience an
increase in consolidations and mergers as the financial services industry
strives to increase profits and market share. Management also expects
increased diversification of financial products and services offered by the
Corporation or subsidiary thereof, and its competitors. Management believes
that such consolidations and mergers, and diversification of products and
services may enhance its competitive position as a community bank.
During the fourth quarter of 1999, management anticipates enactment of the
Financial Institutions Modernization Act. This law will dramatically change
the financial services industry by eliminating the barriers between
commercial banking, insurance and securities industries. These barriers have
existed since the enactment of the Glass-Steagall Act during the height of
the Great Depression. Management is analyzing the effect of the
aforementioned law on the liquidity, capital resources, and results of
operations of CVLY. The law may have a substantial long term impact by
changing the business environment in which CVLY operates.
Management is not aware of any other current specific recommendations by
regulatory authorities or proposed legislation which, if they were
implemented, would have a material adverse effect upon the liquidity,
capital resources, or results of operations, although the general cost of
compliance with numerous and multiple federal and state laws and regulations
does have, and in the future may have, a negative impact on CVLY's results
of operations.
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CODORUS VALLEY BANCORP, INC.
Table 1 - Nonperforming Assets and Past Due Loans
September 30, December 31,
(dollars in thousands) 1999 1998
------ ------
Impaired loans (1) $2,412 $1,706
Assets acquired in foreclosure (2) 1,643 1,871
------ ------
Total nonperforming assets $4,055 $3,577
====== ======
Loans past due 90 days or more
and still accruing interest $60 $13
Ratios:
Impaired loans as a % of
total period-end loans 1.18% .90%
Nonperforming assets as a % of
total period-end loans and net
assets acquired in foreclosure 1.96% 1.87%
Nonperforming assets as a % of
total period-end stockholders'
equity 15.58% 13.73%
Allowance for loan losses as a
multiple of impaired loans .8x 1.1x
Interest not recognized on impaired
loans at period-end: (3)
- ------------------------------------
Contractual interest due $321 $312
Interest revenue recognized 50 73
---- ----
Interest not recognized in operations $271 $239
==== ====
(1) Comprised solely of nonaccrual loans.
(2) Net of related allowance(reserve).
(3) This table includes interest not recognized on loans which were
classified as impaired at period-end. While every effort is being
made to collect this interest revenue, it is probable a portion will
never be recovered.
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CODORUS VALLEY BANCORP, INC.
Table 2-Analysis of Allowance for Loan Losses
(dollars in thousands) 1999 1998
------ ------
Balance-January 1, $1,865 $2,098
Provision charged to operating expense 200 375
Loans charged off:
Commercial 2 610
Real estate-mortgage 0 0
Consumer 40 14
------ ------
Total loans charged off 42 624
Recoveries:
Commercial 10 10
Real estate-mortgage 0 0
Consumer 4 7
------ ------
Total recoveries 14 17
------ ------
Net (recoveries)chargeoffs 28 607
Balance-September 30, $2,037 $1,866
====== ======
Ratios:
Net charge-offs (annualized) to average
total loans .02% .43%
Allowance for loan losses to total loans
at period-end .99% 1.00%
Allowance for loan losses to impaired loans
and loans past due 90 days or more 82.4% 59.8%
Item 3. Quantitative and Qualitative Disclosures About Market Risk
No material changes have occurred in the market risk strategy as discussed
in the Form 10-K for the period ended December 31, 1998. (SEC file number
000-15536, "Item 7A: Quantitative and Qualitative Disclosures About Market
Risk," pages 9 and 10 of Form 10-K.)
23
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CODORUS VALLEY BANCORP, INC.
PART II - OTHER INFORMATION:
Item 1. Legal proceedings
In the opinion of the management of the Corporation, there are no
proceedings pending to which the Corporation and the Bank are a party or to
which its property is subject, which, if determined adversely to the
Corporation and the Bank, would be material in relation to the Corporation's
and the Bank's financial condition. There are no proceedings pending other
than ordinary routine litigation incident to the business of the Corporation
and the Bank. In addition, no material proceedings are pending or are known
to be threatened or contemplated against the Corporation and the Bank by
government authorities.
Item 2. Changes in securities and use of proceeds - nothing to report.
Item 3. Defaults by the company on its senior securities - nothing to
report.
Item 4. Results of votes of security holders - nothing to report.
Item 5. Other information - nothing to report.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits-The following exhibit is being filed as part of this
Report: (see also Item 6(b))
Exhibit No. Description
27 Financial Data Schedule as of September 30, 1999.
(b) Reports on Form 8-K- none.
24
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CODORUS VALLEY BANCORP, INC.
Signatures
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.
Codorus Valley Bancorp, Inc.
(Registrant)
November 9, 1999 /s/ Larry J. Miller
Date Larry J. Miller,
President & CEO
(principal executive officer)
November 9, 1999 /s/ Jann A. Weaver
Date Jann A. Weaver,
Assistant Treasurer &
Assistant Secretary
(principal financial and
accounting officer)
25
<PAGE>
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
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