FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 Leader Heights Road, P.O. Box 2887, York, Pennsylvania 17405
(Address of principal executive offices) (Zip code)
(717) 747-1519
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since the 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. On July 23, 2002, 2,692,188
shares of common stock, par value $2.50, were outstanding.
- 1 -
Codorus Valley Bancorp, Inc.
FORM 10-Q INDEX
Page #
PART I - FINANCIAL INFORMATION
Item 1. Financial statements:
Consolidated statements of financial condition 3
Consolidated statements of income 4
Consolidated statements of cash flows 5
Consolidated statements of changes in stockholders' equity 6
Notes to consolidated financial statements 7
Item 2. Management's discussion and analysis of financial condition and
results of operations 10
Item 3. Quantitative and qualitative disclosures about market risk 19
PART II - OTHER INFORMATION
Item 1. Legal proceedings 20
Item 2. Changes in securities and use of proceeds 20
Item 3. Defaults upon senior securities 20
Item 4. Submission of matters to a vote of security holders 20
Item 5. Other information 20
Item 6. Exhibits and reports on Form 8-K 21
SIGNATURES 22
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Codorus Valley Bancorp, Inc.
Consolidated Statements of Financial Condition
Unaudited
June 30, December 31,
(dollars in thousands) 2002 2001
- ---------------------------------------------------------------------------- --------- ---------
ASSETS
Interest bearing deposits with banks $ 204 $ 388
Cash and due from banks 14,977 9,722
Federal funds sold 0 14,925
--------- ---------
Total cash and cash equivalents 15,181 25,035
Securities, available for sale 64,529 38,362
Securities, held to maturity (fair value $9,603 for 2002 and $9,216 for 2001) 9,358 9,358
Loans, held for sale 1,251 12,349
Loans (net of deferred fees of $714 in 2002 and $691 in 2001) 236,750 225,785
Less-allowance for loan losses (1,946) (1,898)
--------- ---------
Net loans 234,804 223,887
Premises and equipment 9,213 9,449
Other assets 12,738 12,015
--------- ---------
Total assets $ 347,074 $ 330,455
========= =========
LIABILITIES
Deposits:
Noninterest-bearing $ 31,668 $ 26,093
Interest-bearing 260,454 250,852
--------- ---------
Total deposits 292,122 276,945
Long-term debt 19,382 19,573
Other liabilities 4,966 4,569
--------- ---------
Total liabilities 316,470 301,087
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; 2,692,188 shares issued and
outstanding on 6/30/02 and 2,564,261 on 12/31/01 6,731 6,411
Additional paid-in capital 15,494 14,004
Retained earnings 7,543 8,526
Accumulated other comprehensive income 836 427
--------- ---------
Total stockholders' equity 30,604 29,368
--------- ---------
Total liabilities and stockholders' equity $ 347,074 $ 330,455
========= =========
See accompanying notes.
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Codorus Valley Bancorp, Inc.
Consolidated Statements of Income
Unaudited
Three months ended Six months ended
June 30, June 30,
---------------------- -----------------------
(dollars in thousands, except per share data) 2002 2001 2002 2001
- --------------------------------------------------------- ------- ------- ------- -------
INTEREST INCOME
Loans, including fees $ 4,253 $ 4,785 $ 8,659 $ 9,479
Investment securities:
Taxable 651 589 1,144 1,174
Tax-exempt 131 137 262 272
Dividends 7 37 20 93
Other 68 162 183 245
------- ------- ------- -------
Total interest income 5,110 5,710 10,268 11,263
INTEREST EXPENSE
Deposits 2,045 2,473 4,145 5,005
Federal funds purchased and other short-term borrowings 0 0 0 7
Long-term debt 297 291 613 580
------- ------- ------- -------
Total interest expense 2,342 2,764 4,758 5,592
------- ------- ------- -------
Net interest income 2,768 2,946 5,510 5,671
PROVISION FOR LOAN LOSSES 50 83 70 113
------- ------- ------- -------
Net interest income after provision for loan losses 2,718 2,863 5,440 5,558
NONINTEREST INCOME
Trust and investment services fees 192 168 399 348
Service charges on deposit accounts 194 177 369 338
Income from bank owned life insurance 73 76 148 140
Other income 152 156 304 282
Gain on sale of securities 0 0 72 0
Gain on sale of mortgages 82 1 324 68
------- ------- ------- -------
Total noninterest income 693 578 1,616 1,176
NONINTEREST EXPENSE
Salaries and benefits 1,415 1,223 2,853 2,470
Occupancy of premises, net 188 208 401 401
Furniture and equipment 264 275 537 530
Postage, stationery and supplies 109 103 201 215
Professional and legal 63 50 128 91
Marketing and advertising 150 112 247 199
Foreclosed real estate, net 11 9 46 105
Other 427 459 901 853
------- ------- ------- -------
Total noninterest expense 2,627 2,439 5,314 4,864
------- ------- ------- -------
Income before income taxes 784 1,002 1,742 1,870
PROVISION FOR INCOME TAXES 125 276 296 512
------- ------- ------- -------
Net income $ 659 $ 726 $ 1,446 $ 1,358
------- ------- ------- -------
Net income per share, basic and diluted $ 0.24 $ 0.27 $ 0.54 $ 0.50
======= ======= ======= =======
See accompanying notes.
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Codorus Valley Bancorp, Inc.
Consolidated Statements of Cash Flows
Unaudited
Six months ended June 30,
--------------------------
(dollars in thousands) 2002 2001
- -------------------------------------------------------------------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,446 $ 1,358
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation 488 479
Provision for loan losses 70 113
Amortization of investment in real estate partnership 393 0
Increase in cash surrender value of life insurance investment (148) (140)
Originations of held for sale mortgages (20,430) 0
Proceeds from sales of held for sale mortgages 31,852 3,939
Gain on sales of held for sale mortgages (324) (68)
Gain on sales of securities (72) 0
Gain on sales of foreclosed real estate (32) (54)
Increase in accrued interest receivable and other assets (1,059) (106)
Increase in accrued interest payable and other liabilities 186 56
Other, net 340 (21)
-------- --------
Net cash provided by operating activities 12,710 5,556
CASH FLOWS FROM INVESTING ACTIVITIES
Securities, available for sale:
Purchases (40,684) (5,653)
Maturities and calls 13,949 5,551
Sales 1,095 2,313
Net increase in loans made to customers (11,136) (8,532)
Purchases of premises and equipment (305) (348)
Proceeds from sales of foreclosed real estate 150 1,131
-------- --------
Net cash used in investing activities (36,931) (5,538)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand and savings deposits 16,136 4,184
Net (decrease) increase in time deposits (959) 16,733
Repayment of long-term debt (191) (163)
Dividends paid (615) (586)
Cash paid in lieu of fractional shares (4) (4)
-------- --------
Net cash provided by financing activities 14,367 20,164
-------- --------
Net (decrease) increase in cash and cash equivalents (9,854) 20,182
Cash and cash equivalents at beginning of year 25,035 9,737
-------- --------
Cash and cash equivalents at end of period $ 15,181 $ 29,919
======== ========
SUPPLEMENTAL DISCLOSURES
Interest paid on deposits and borrowed funds $ 4,844 $ 5,630
Income taxes paid $ 375 $ 585
See accompanying notes.
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Codorus Valley Bancorp, Inc.
Consolidated Statements of Changes in Stockholders' Equity
Unaudited
Accumulated
Additional Other
Common Paid-in Retained Comprehensive Treasury
(dollars in thousands) Stock Capital Earnings Income Stock Total
- ------------------------------------------------ ------- ------- -------- ------- ------- --------
For the six months ended June 30, 2002
Balance, December 31, 2001 $ 6,411 $14,004 $ 8,526 $ 427 $ 0 $ 29,368
Comprehensive income:
Net income 1,446 1,446
Other comprehensive income, net of tax:
Unrealized gains on securities, net 409 409
--------
Total comprehensive income 1,855
Cash dividends ($.228 per share, adjusted) (615) (615)
5% stock dividend - 127,927 shares at fair value 320 1,490 (1,814) (4)
------- ------- -------- ------- ------- --------
Balance, June 30, 2002 $ 6,731 $15,494 $ 7,543 $ 836 $ 0 $ 30,604
======= ======= ======== ======= ======= ========
For the six months ended June 30, 2001
Balance, December 31, 2000 $ 6,137 $12,447 $ 8,844 $ 126 $ (163) $ 27,391
Comprehensive income:
Net income 1,358 1,358
Other comprehensive income, net of tax:
Unrealized gains on securities, net 366 366
--------
Total comprehensive income 1,724
Cash dividends ($.218 per share, adjusted) (586) (586)
5% stock dividend - 121,738 shares at fair value 268 1,464 (1,899) 163 (4)
------- ------- -------- ------- ------- --------
Balance, June 30, 2001 $ 6,405 $13,911 $ 7,717 $ 492 $ 0 $ 28,525
======= ======= ======== ======= ======= ========
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
The interim financial statements are unaudited. However, they reflect all
adjustments that 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 the notes to the audited
financial statements contained in the 2001 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. PeoplesBank has two wholly owned subsidiaries, SYC Insurance Services, Inc.
and SYC Settlement Services, Inc. All significant intercompany account balances
and transactions have been eliminated in consolidation.
The results of operations for the six-month period ended June 30, 2002 are not
necessarily indicative of the results to be expected for the full year.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
Stock dividend and per share computations
The balance sheet and all per share computations include the retroactive effect
of stock dividends declared, including the 5 percent stock dividend declared
April 9, 2002. The weighted average shares of common stock outstanding, used for
basic and diluted calculations, were 2,692,435 and 2,700,764, respectively, for
the six-month period ended June 30, 2002. Comparatively, shares for both basic
and diluted calculations were 2,690,527, for the six-month period ended June 30,
2001.
Comprehensive income
Accounting principles generally require that recognized revenue, expenses, gains
and losses be included in net income. Although certain changes in assets and
liabilities, such as unrealized gains and losses on available-for-sale
securities, are reported as a separate component of the equity section of the
balance sheet, such items, along with net income, are components of
comprehensive income. The components of other comprehensive income and related
tax effects are presented in the following table:
Three months ended Six months ended
June 30, June 30,
(dollars in thousands) 2002 2001 2002 2001
----- ---- ----- -----
Unrealized holding gains(losses)
arising during the period $ 794 $(57) $ 692 $ 556
Reclassification adjustment for gains
included in net income 0 0 (72) 0
----- ---- ----- -----
Net unrealized gains(losses) 794 (57) 620 556
Tax effect (270) 19 (211) (190)
----- ---- ----- -----
Net of tax effect $ 524 $(38) $ 409 $ 366
===== ==== ===== =====
Reclassifications
Certain amounts in the 2001 financial statements have been reclassified to
conform to the 2002 presentation format. These reclassifications had no impact
on the Corporation's net income.
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Recently issued FASB Statements
In June of 2001, the Financial Accounting Standards Board issued Statement No.
143, "Accounting for Asset Retirement Obligations", which addresses the
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. This Statement requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred, if a
reasonable estimate of fair value can be made. The associated asset retirement
costs are capitalized as part of the carrying amount of the long-lived asset.
This Statement will become effective for Codorus Valley on January 1, 2003 and
is not expected to have a significant impact on the financial condition or
results of operations.
NOTE 3 -- DEPOSITS
The composition of deposits on June 30, 2002 and December 31, 2001, was as
follows:
June 30, December 31,
(dollars in thousands) 2002 2001
- --------------------------- -------- --------
Noninterest bearing demand $ 31,668 $ 26,093
NOW 31,741 29,301
Money market 69,897 62,148
Savings 14,089 13,719
Time CDs less than $100,000 114,341 117,724
Time CDs $100,000 or more 30,386 27,960
-------- --------
Total deposits $292,122 $276,945
======== ========
NOTE 4 -- REGULATORY MATTERS
Codorus Valley and PeoplesBank are subject to various regulatory capital
requirements administered by banking regulators. Failure to meet minimum capital
requirements can initiate certain mandatory and possible additional
discretionary actions by regulators that, if undertaken, could have a material
effect on Codorus Valley's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, Codorus
Valley and PeoplesBank must meet specific capital guidelines that involve
quantitative measures of assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The capital amounts
and classifications are also subject to qualitative judgements by the
regulators.
Quantitative measures established by regulators to ensure capital adequacy
require Codorus Valley and PeoplesBank to maintain minimum ratios, as set forth
below, to total and Tier I capital as a percentage of risk-weighted assets, and
of Tier I capital to average assets (leverage ratio). Management believes that
Codorus Valley and PeoplesBank were well capitalized on June 30, 2002, based on
FDIC capital guidelines.
- 8 -
NOTE 4-REGULATORY MATTERS
CODORUS VALLEY BANCORP, INC.
ADEQUATELY
ACTUAL CAPITALIZED MINIMUM
-------------- -----------------------------------------
(dollars in thousands) AMOUNT RATIO AMOUNT RATIO
- ----------------------- ------- ----- ------------------------ ------- ------------------------ -----
AT JUNE 30, 2002
Capital ratios:
Tier 1 risk based $29,761 11.17% Greater Than or Equal To $10,657 Greater Than or Equal To 4.0%
Total risk based 31,707 11.90 Greater Than or Equal To 21,315 Greater Than or Equal To 8.0
Leverage 29,761 8.83 Greater Than or Equal To 13,489 Greater Than or Equal To 4.0
- ----------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 2001
Capital ratios:
Tier 1 risk based $28,932 10.88% Greater Than or Equal To $10,637 Greater Than or Equal To 4.0%
Total risk based 30,829 11.59 Greater Than or Equal To 21,275 Greater Than or Equal To 8.0
Leverage 28,932 9.27 Greater Than or Equal To 12,482 Greater Than or Equal To 4.0
- ----------------------------------------------------------------------------------------------------------------
WELL CAPITALIZED
MINIMUM
-----------------------------------------
(dollars in thousands) AMOUNT RATIO
- ----------------------- ------------------------ ------- ------------------------ -----
AT JUNE 30, 2002
Capital ratios:
Tier 1 risk based Greater Than or Equal To $15,986 Greater Than or Equal To 6.0%
Total risk based Greater Than or Equal To 26,643 Greater Than or Equal To 10.0
Leverage Greater Than or Equal To 16,861 Greater Than or Equal To 5.0
- ---------------------------------------------------------------------------------------------------
AT DECEMBER 31, 2001
Capital ratios:
Tier 1 risk based Greater Than or Equal To $15,956 Greater Than or Equal To 6.0%
Total risk based Greater Than or Equal To 26,593 Greater Than or Equal To 10.0
Leverage Greater Than or Equal To 15,603 Greater Than or Equal To 5.0
- ---------------------------------------------------------------------------------------------------
PEOPLESBANK
ADEQUATELY
ACTUAL CAPITALIZED MINIMUM
-------------- -----------------------------------------
(dollars in thousands) AMOUNT RATIO AMOUNT RATIO
- ----------------------- ------- ----- ------------------------ ------- ------------------------ -----
AT JUNE 30, 2002
Capital ratios:
Tier 1 risk based $24,756 9.53% Greater Than or Equal To $10,386 Greater Than or Equal To 4.0%
Total risk based 26,702 10.28 Greater Than or Equal To 20,771 Greater Than or Equal To 8.0
Leverage 24,756 7.49 Greater Than or Equal To 13,218 Greater Than or Equal To 4.0
- ----------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 2001
Capital ratios:
Tier 1 risk based $23,919 9.23% Greater Than or Equal To $10,369 Greater Than or Equal To 4.0%
Total risk based 25,816 9.96 Greater Than or Equal To 20,738 Greater Than or Equal To 8.0
Leverage 23,919 7.86 Greater Than or Equal To 12,207 Greater Than or Equal To 4.0
- ----------------------------------------------------------------------------------------------------------------
WELL CAPITALIZED
MINIMUM
---------------------------------------
(dollars in thousands) AMOUNT RATIO
- ----------------------- ------------------------ ------- ------------------------ -----
AT JUNE 30, 2002
Capital ratios:
Tier 1 risk based Greater Than or Equal To $15,578 Greater Than or Equal To 6.0%
Total risk based Greater Than or Equal To 25,964 Greater Than or Equal To 10.0
Leverage Greater Than or Equal To 16,523 Greater Than or Equal To 5.0
- ------------------------------------------------------------------------------------------------
AT DECEMBER 31, 2001
Capital ratios:
Tier 1 risk based Greater Than or Equal To $15,554 Greater Than or Equal To 6.0%
Total risk based Greater Than or Equal To 25,923 Greater Than or Equal To 10.0
Leverage Greater Than or Equal To 15,259 Greater Than or Equal To 5.0
- ------------------------------------------------------------------------------------------------
NOTE 5--CONTINGENT LIABILITIES
During second quarter 2001, the management of PeoplesBank became aware of
a potential loss stemming from its merchant credit card business. Some
individuals, who transacted business with a former PeoplesBank merchant
customer, are seeking refunds claiming that service was not rendered. The
merchant did not have sufficient funds to cover reimbursement requests, and
PeoplesBank terminated the merchant's credit card account relationship. Losses
of approximately $1,500 were included in other expense for the first six months
of 2002 and $41,000 for the year 2001, which represent refunds in excess of
funds available in the merchant's account. Management cannot estimate the
additional potential loss associated with this merchant credit card account at
this time. Management has engaged legal counsel to determine the extent of its
liability and to assist it with developing and pursuing legal remedies.
- 9 -
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 the accompanying
consolidated financial statements for Codorus Valley Bancorp, Inc. (Codorus
Valley or Corporation), a bank holding company, and its wholly owned subsidiary,
PeoplesBank, A Codorus Valley Company (PeoplesBank), are provided below. Codorus
Valley'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.
FORWARD-LOOKING STATEMENTS:
Management of the Corporation has made forward-looking statements in this Form
10-Q. These forward-looking statements are subject to risks and uncertainties.
Forward-looking statements include information concerning possible or assumed
future results of operations of the Corporation and its subsidiaries. When words
such as "believes," "expects," "anticipates" or similar expressions occur in the
Form 10-Q, management is making forward-looking statements.
Readers should note that many factors, some of which are discussed elsewhere in
this report and in the documents that management incorporates by reference,
could affect the future financial results of the Corporation and its
subsidiaries, both individually and collectively, and could cause those results
to differ materially from those expressed in the forward-looking statements
contained or incorporated by reference in this Form 10-Q. 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 analysis of these risks and forces could be
incorrect and/or that the strategies developed to address them could be
unsuccessful.
The Corporation 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 Codorus Valley files periodically with the
Securities and Exchange Commission.
CRITICAL ACCOUNTING POLICIES:
Disclosure of Codorus Valley's significant accounting policies is included in
Note 1 to the consolidated financial statements of the 2001 Annual Report to
Stockholders, filed as Exhibit 13 to the Annual Report on Form 10-K for the
period ended December 31, 2001. Some of these policies are particularly
sensitive, requiring that significant judgements, estimates and assumptions be
made by management. Additional information is contained in Management's
Discussion and Analysis for the most sensitive of these issues, including the
provision and allowance for loan losses, which are located on pages 13 and 17 of
this Report.
Significant estimates are made by management in determining the allowance for
loan losses. Management considers a variety of factors in establishing this
estimate such as current economic conditions, diversification of the loan
portfolio, delinquency statistics, results of internal loan reviews,
- 10 -
financial and managerial strengths of borrowers, adequacy of collateral, if
collateral dependent, or present value of future cash flows and other relevant
factors. Based on its analysis, management believes that the allowance for loan
losses is adequate at June 30, 2002.
THREE MONTHS ENDED JUNE 30, 2002
COMPARED TO THREE MONTHS ENDED JUNE 30, 2001
OVERVIEW
Net income for the second quarter of 2002 was $659,000 or $.24 per diluted
share, compared to $726,000 or $.27 per diluted share, for the second quarter of
2001. The $67,000 or 9 percent decrease in current period net income was caused
primarily by a 6 percent decrease in net interest income and an 8 percent
increase in noninterest expense. The decrease in net interest income was due to
a decrease in the interest income component, which was greater than the decrease
in interest expense on interest bearing liabilities. Interest income was
constrained by lower yields on earning assets due to low market interest rates,
reductions in income from business loans that were placed on nonaccrual and
other factors. The increase in noninterest expense was caused primarily by
increased operating expenses attributable to the addition of two full service
financial centers, a centralized call center and a mortgage banking operation in
the prior year. The decrease in net interest income and increase in noninterest
expense more than offset a 20 percent increase in noninterest income and a 55
percent decrease in federal income taxes. The increase in noninterest income was
caused primarily by gains from the sale of mortgages and normal business growth.
The decrease in federal income tax was due to the recognition of tax credits,
described in the Income Tax section of this report. 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 second quarter of 2002 was $2,768,000, a decrease of
$178,000 or 6 percent below the second quarter of 2001. The decrease in net
interest income was due to a decrease in the interest income component, which
was greater than the decrease in interest expense on interest bearing
liabilities. Interest income was constrained by lower yields on earning assets
due to low market interest rates, reductions in income from business loans that
were placed on nonaccrual and other factors described in the year-to-date
section of this report. Earning assets averaged $313 million and yielded 6.42
percent (tax equivalent) for second quarter 2002, compared to $279 million and
8.06 percent, respectively, for the same period in 2001. Interest bearing
liabilities averaged $281 million at an average rate of 3.35 percent for the
second quarter of 2002, compared to $253 million and 4.37 percent, respectively,
for the same period in 2001.
PROVISION FOR LOAN LOSSES
A $50,000 provision expense for loan losses was recorded in the current
three-month period, compared to $83,000 for the same period in 2001. The expense
for each period was responsive to loan growth and the condition of the loan
portfolio. Refer to the nonperforming assets and allowance for loan losses
sections of this Report.
NONINTEREST INCOME
Total noninterest income for the current three-month period was $693,000, an
increase of $115,000 or 20 percent above the second quarter of 2001. Current
period noninterest income included an $81,000 increase in gains from the sale of
held-for-sale residential mortgages. Low market interest rates continued to
prevail throughout the current period, which was beneficial for the mortgage
lending
- 11 -
business. The increase in trust and investment service fees and service charges
on deposit accounts was due primarily to normal business growth.
NONINTEREST EXPENSE
Total noninterest expense for the current three-month period was $2,627,000, an
increase of $188,000 or 8 percent above the second quarter of 2001. The increase
was caused primarily by increases in salaries and benefits, and marketing and
advertising expenses. Salaries and benefits increased $192,000 or 16 percent due
primarily to staffing two financial centers, a mortgage banking operation and a
centralized call center, which became operational primarily in the latter half
of 2001. Marketing and advertising expense increased $38,000 or 34 percent due
to an increase in product and image advertising.
INCOME TAXES
The provision for federal income tax was $125,000 for the current three-month
period, compared to $276,000 for the same period in 2001. The 55 percent
decrease in the current period reflects the recognition of tax credits described
in the year-to-date section of this report.
- 12 -
SIX MONTHS ENDED JUNE 30, 2002
COMPARED TO SIX MONTHS ENDED JUNE 30, 2001
INCOME STATEMENT ANALYSIS
OVERVIEW
Net income for the current six-month period was $1,446,000 or $.54 per diluted
share, compared to $1,358,000 or $.50 per diluted share, for the same period of
2001. The $88,000 or 6.5 percent increase in current period net income was
caused primarily by an increase in noninterest income and a decrease in federal
income tax. The 37 percent increase in noninterest income was due primarily to
gains from the sale of held-for-sale mortgages and available-for-sale
securities. The 42 percent decrease in federal income tax was due to tax
credits, which PeoplesBank will receive from its investment in a real estate
partnership with an affiliate of the YMCA of York, Pennsylvania. The
partnership's purpose is to provide affordable housing to qualified families
and, to a lesser degree to provide space for commercial purposes in downtown
York, as part of a revitalization initiative. The increase in noninterest income
and decrease in federal income tax more than offset an increase in noninterest
expense and a decrease in net interest income. The 9 percent increase in
noninterest expense was caused primarily by increased operating expenses
attributable to the addition of two full service financial centers, a
centralized call center and a mortgage banking operation in the prior year. The
3 percent decrease in net interest income was caused by lower yields on earning
assets due to a lower interest rate environment and other factors. Net income as
a percentage of average total assets for the first six months (annualized) of
2002 was 0.86 percent, compared to 0.90 percent for the same period of 2001. Net
income as a percentage of average stockholders' equity for the first six months
(annualized) of 2002 was 9.66 percent compared, to 9.70 percent for the same
period of 2001. Total assets of the Corporation on June 30, 2002, were $347
million, an increase of $17 million or 5 percent above December 31, 2001.
Management believes that the Corporation and PeoplesBank were both well
capitalized on June 30, 2002, based on FDIC capital guidelines. 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 six-month period ended June 30, 2002, was
$5,510,000, a decrease of $161,000 or 3 percent below the same period in 2001.
Net interest income decreased due to several factors: lower yields on earning
assets caused by low market interest rates; an increase in variable rate
business loans, with yields significantly below fixed rate loans; interest
income reductions caused by placing several large business loans on nonaccrual;
and a higher level of liquidity due to deposit growth. Earning assets averaged
$309 million and yielded 6.80 percent (tax equivalent) for 2002, compared to
$276 million and 8.35 percent, respectively, for 2001. Interest bearing
liabilities averaged $277 million at an average rate of 3.47 percent for 2002,
compared to $249 million and 4.53 percent, respectively, for 2001. Declining
market interest rates, which prevailed throughout 2001, have remained at
historically low levels for the current period, lowering yields on earning
assets and funding costs. Based on a balance sheet simulation analysis at June
30, 2002, management believes that Codorus Valley is asset sensitive, which may
increase net interest income if market interest rates rise in the period ahead.
- 13 -
PROVISION FOR LOAN LOSSES
A $70,000 provision expense for loan losses was recorded in the current
six-month period, compared to $113,000 for the same period in 2001. The expense
for each period was responsive to loan growth and the condition of the loan
portfolio. Refer to the nonperforming assets and allowance for loan losses
sections within this Report.
NONINTEREST INCOME
Total noninterest income for the current six-month period was $1,616,000, an
increase of $440,000 or 37 percent above the same period in 2001. Most of the
increase was caused by gains from the sale of residential mortgages and
investment securities. Gains from the sale of residential mortgages were up
$256,000 above the prior year due to mortgage banking operations, which did not
exist during the first six months of 2001, and low market interest rates. The
current period also reflected $72,000 in gains from the sale of
available-for-sale securities. No gains were realized from the sale of
securities during the same period of 2001. Increases in the remaining categories
of noninterest income were due primarily to normal business growth.
NONINTEREST EXPENSE
Total noninterest expense for the current six-month period was $5,314,000, an
increase of $450,000 or 9 percent above the same period in 2001. The increase
was caused primarily by increases in salaries and benefits, professional and
legal, marketing and advertising, and other expense. Salaries and benefits
increased $383,000 or 16 percent due primarily to staffing two financial
centers, a mortgage banking operation and a centralized call center primarily in
the latter half of 2001. Professional and legal expense increased $37,000 or 41
percent due to several factors: dispute (via arbitration, which was settled)
with selected building contractors relative to issues associated with
construction of the corporate center facility; revision of PeoplesBank's 401k
Plan; and advice on future growth strategies. Marketing and advertising expense
increased $48,000 or 24 percent due to an increase in product and image
advertising. Other expense increased $48,000 or 6 percent due to a $35,000 loss
on a fraudulent check, and normal business growth.
FRANCHISE EXPANSION
Management plans to establish a financial center in the new Susquehanna Commerce
Center at 221 West Philadelphia Street in downtown York, Pennsylvania when
construction is complete during the fourth quarter of 2002. An eight-year
operating lease, with renewal options, for approximately 2,814 square feet of
space has been executed. Base rent for the first year is $42,500. The lease
agreement provides for annual increases in base rent.
CAPITAL INVESTMENT IN TECHNOLOGY
Automation of the teller function at PeoplesBank is underway. Capital investment
in teller automation software and printers is expected to increase productivity
and quality control, and increase fee income. It is also expected to enhance
sales and corporate image. The new system will cost approximately $127,000 and
will be depreciated over a five-year useful life. Plans call for the teller
automation system to be operational by the end of September 2002.
INCOME TAXES
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The provision for federal income tax was $296,000 for the current six-month
period, compared to $512,000 for the same period in 2001. The 42 percent
decrease in tax in the current period reflects the recognition of tax credits
from PeoplesBank's investment in a low-income housing partnership with an
affiliate of the YMCA of York, Pennsylvania, described more fully in the 2001
Annual Report to Stockholders.
BALANCE SHEET REVIEW
INVESTMENTS AND FEDERAL FUNDS SOLD
On June 30, 2002, overnight investments in federal funds sold reflected a $15
million decrease from year-end 2001, as funds were deployed to
available-for-sale securities to obtain higher yields. Available-for-sale
securities increased $26 million from year-end 2001, due primarily to the
deployment of overnight investments, and deposit growth.
LOANS
On June 30, 2002, loans increased $11 million from year-end 2001, principally
business loans. In contrast, on June 30, 2002, held-for-sale mortgages decreased
$11 million from year-end 2001. The decrease in held-for-sale mortgages
represented a focused effort by management to liquidate this portfolio and
generate gains.
DEPOSITS
On June 30, 2002, total deposits increased $15 million from year-end 2001. The
increase in deposits, principally core deposits, was driven primarily by
customers seeking safe haven from depressed securities markets. The addition of
two financial centers in 2001 also contributed to deposit growth in the current
period.
STOCKHOLDERS' EQUITY AND CAPITAL ADEQUACY
Stockholders' equity, or capital, as a source of funds, enables Codorus Valley
to maintain asset growth and absorb losses. Total stockholders' equity was
approximately $30,604,000 on June 30, 2002, an increase of $1,236,000 or 4.2
percent above December 31, 2001. The increase was caused primarily by increases
in net income and unrealized gains from available-for-sale securities.
On July 9, 2002, the board of directors declared a quarterly cash dividend of
$0.12 per share, payable on or before August 13, 2002, to shareholders of record
July 23, 2002. This follows $0.12 ($0.114 adjusted) per share cash dividends
paid in May and February. Additionally, a 5 percent stock dividend was paid on
June 6, 2002. Payment of the stock dividend resulted in the issuance of 127,927
common shares. The weighted average shares of common stock outstanding, used for
basic and diluted calculations, were 2,692,435 and 2,700,764, respectively, for
the six-month period ended June 30, 2002. Comparatively, shares for both basic
and diluted calculations were 2,690,527, for the period ended June 30, 2001.
Codorus Valley and PeoplesBank are subject to various regulatory capital
requirements administered by banking regulators that involve quantitative
guidelines and qualitative judgements. Quantitative measures established by
regulators pertain to minimum capital ratios, as set forth in Note 4 --
Regulatory Matters, to the financial statements. Management believes that
Codorus Valley and PeoplesBank were well capitalized on June 30, 2002, based on
FDIC capital guidelines.
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RISK MANAGEMENT
NONPERFORMING ASSETS
Table 1 -- Nonperforming Assets and Past Due Loans, provides a summary of
nonperforming assets and past due loans, and related ratios. The paragraphs
below provide information for selected categories for June 30, 2002, compared to
December 31, 2001.
TABLE 1--NONPERFORMING ASSETS AND PAST DUE LOANS
June 30, December 31,
(dollars in thousands) 2002 2001
- ------------------------------------------------ ------ ------
Nonaccrual loans $5,493 $1,411
Foreclosed real estate, net of allowance 624 692
------ ------
Total nonperforming assets $6,117 $2,103
====== ======
Accruing loans that are contractually past due
90 days or more as to principal or interest $ 235 $ 164
Ratios:
Nonaccrual loans as a % of total year-end loans 2.32% 0.62%
Nonperforming assets as a % of total year-end
loans and net foreclosed real estate 2.58% 0.93%
Nonperforming assets as a % of total year-end
stockholders' equity 19.99% 7.16%
Allowance for loan losses as a multiple of
nonaccrual loans .4x 1.3x
Nonaccrual loans were principally comprised of collateral dependent business
loans. Accordingly, Codorus Valley recognized interest income on a cash basis
for these loans. On June 30, 2002, the nonaccrual loan portfolio was $5,493,000,
an increase of $4,082,000 above December 31, 2001. The increase was caused by
the addition of four unrelated business loan accounts. Based on information that
came to light during the second quarter, management believes that the largest
loan, which totals $2,647,000, is adequately collateralized. The $325,000
allowance previously established for this account was no longer deemed
necessary. The remaining three loan accounts, which range in size from $303,000
to $932,000, are not adequately collateralized, in management's judgement. A
loss allowance, totaling $691,000, has been established for these three
accounts, pending collateral liquidation and debt workout. On June 30, 2002, the
nonaccrual loan portfolio was comprised of nineteen unrelated accounts, ranging
in size from $3,000 to $2,647,000. These loan relationships vary by industry and
are generally collateralized with real estate assets. Management and the board
of directors evaluate an allowance for probable loan losses at least quarterly.
Foreclosed real estate, net of reserve, was $624,000 on June 30, 2002, which was
below the level at year-end 2001. On June 30, 2002, the foreclosed real estate
portfolio consisted of four unrelated accounts, ranging in size from $13,000 to
$502,000. The single largest property makes up 76 percent of the total
portfolio. Management believes that the fair value of this property exceeds its
carrying value. An allowance for probable losses, which is evaluated at least
quarterly, has been established for foreclosed real estate assets whose
estimated fair value, less selling expenses, is below their financial
- 16 -
carrying value. On June 30, 2002, the allowance was $35,000. For the first six
months of 2002 a $30,000 loss provision was recorded to reflect losses
associated with declines in fair value. Comparatively, a $22,000 loss provision
was recorded for the same period of 2001. Efforts to liquidate foreclosed real
estate are proceeding as quickly as potential buyers can be located and legal
constraints permit.
Accruing loans that are contractually past due 90 days or more as to principal
or interest totaled $235,000 on June 30, 2002, compared to $164,000 on December
31, 2001. The level for both periods is considered immaterial. Generally, loans
in the past due category are adequately collateralized and in the process of
collection.
ALLOWANCE FOR LOAN LOSSES
Table 2 -- Analysis of Allowance for Loan Losses, shows a $1,946,000 allowance
on June 30, 2002, which was 0.82 percent of total loans. Based on a recent
evaluation of potential loan losses in the current portfolio, management
believes that the allowance is adequate to support losses inherent in the loan
portfolio on June 30, 2002.
TABLE 2-ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(dollars in thousands) 2002 2001
------ ------
Balance-January 1, $1,898 $1,967
Provision charged to operating expense 70 113
Loans charged off:
Commercial 30 79
Real estate-mortgage 7 0
Consumer 26 70
------ ------
Total loans charged off 63 149
Recoveries:
Commercial 34 4
Real estate-mortgage 0 0
Consumer 7 3
------ ------
Total recoveries 41 7
------ ------
Net charge-offs (recoveries) 22 142
Balance-June 30, $1,946 $1,938
====== ======
Ratios:
Net charge-offs (annualized) to average
total loans 0.02% 0.12%
Allowance for loan losses to total loans
at period-end 0.82% 0.87%
Allowance for loan losses to nonaccrual loans
and loans past due 90 days or more 34.0% 98.8%
LIQUIDITY
Codorus Valley's loan-to-deposit ratio, which is used as a broad measure of
liquidity, was approximately 81 percent on June 30, 2002, and December 31, 2001.
During 2002, continued growth in deposits and proceeds from the sale of
held-for-sale mortgages resulted in increased liquidity for
- 17 -
Codorus Valley. These funds, temporarily invested in overnight instruments, were
largely deployed into available-for-sale securities, and loans by June 30, 2002.
Codorus Valley's financial statements do not reflect various commitments that
are made in the normal course of business, which may involve some liquidity
risk. These commitments consist primarily of commitments to grant new loans,
unfunded commitments of existing loans, and letters of credit made under the
same standards as on-balance sheet instruments. Unused commitments on June 30,
2002, were $51,072,000, which consisted of $33,446,000 in unfunded commitments
of existing loans, $14,976,000 to grant new loans and $2,650,000 in letters of
credit. Due to fixed maturity dates and specified conditions within these
instruments, many will expire without being drawn upon. Management believes that
amounts actually drawn upon can be funded in the normal course of operations and
therefore do not present a significant liquidity risk to Codorus Valley.
MARKET RISK MANAGEMENT
In the normal course of conducting business, Codorus Valley 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. An asset-liability management committee comprised of
members of management manages interest rate risk. A detailed discussion of
market interest risk is provided in SEC Form 10-K for the period ended December
31, 2001.
Codorus Valley performed a simulation on its balance sheet for June 30, 2002.
The results of that point-in-time analysis are shown in Table 3 -- Interest Rate
Sensitivity. Since year-end 2001, Codorus Valley's balance sheet has become less
asset sensitive because overnight investments decreased while investment
securities increased, particularly in the three to four year average life
category. Generally, the financial services industry has experienced increased
liquidity, as deposit customers sought safe haven from depressed securities
markets, loan customers refinanced and bond issuers called bonds.
TABLE 3-INTEREST RATE SENSITIVITY
at June 30, 2002
- -----------------------------------------------------------------------
Change in
Change in interest rates Forecasted interest net income
(basis points) over 12 mos rate scenario $000's %
- -----------------------------------------------------------------------
+200 High 187 5.7
0 Flat (baseline) 0 0
-200 Low (372) (11.3)
+175 Most likely 83 2.5
at December 31, 2001
- -----------------------------------------------------------------------
Change in
Change in interest rates Forecasted interest net income
(basis points) over 12 mos rate scenario $000's %
- -----------------------------------------------------------------------
+200 High 304 10.2
0 Flat (baseline) 0 0
-200 Low (458) (15.4)
+175 Most likely 35 1.2
- 18 -
OTHER RISKS
More grand acts of terrorism in the United States of America, or in other
countries, could erode consumer and business confidence and disrupt commerce,
resulting in a prolonged economic recession. A prolonged economic recession
could have a material adverse effect on the liquidity, capital resources or
results of operations of Codorus Valley.
Periodically, federal and state legislation is proposed that could result in
additional regulation of, or restrictions on, the business of Codorus Valley 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 Codorus Valley and its subsidiaries.
In November 1999, the Gramm-Leach-Bliley Act of 1999, which is also known as the
Financial Services Modernization Act, became law. The law repeals Depression-era
banking laws and permits banks, insurance companies and securities firms to
engage in each others' businesses after complying with certain conditions and
regulations. The law grants to community banks the power to enter new financial
markets as a matter of right that larger institutions have managed to do on an
ad hoc basis. At this time, Codorus Valley has no plans to pursue these
additional possibilities. Management does not believe that the Financial
Services Modernization Act will have a material effect on Codorus Valley's
operations. However, the law may result in increased competition from larger
financial service companies, many of which have substantially more financial
resources than Codorus Valley, and now may offer banking services in addition to
insurance and brokerage services.
The Financial Services Modernization Act also modifies current law related to
financial privacy and community reinvestment. The new privacy provisions will
generally prohibit financial institutions, including Codorus Valley and
PeoplesBank, from disclosing nonpublic personal financial information to
nonaffiliated third parties unless customers have the opportunity to "opt out"
of the disclosure.
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 Codorus Valley's results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Refer to the section entitled "Market risk management" within Management's
Discussion and Analysis of Consolidated Financial Condition and Results of
Operations.
- 19 -
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the opinion of management, there are no proceedings pending to which the
Corporation or its subsidiaries are a party or to which their property is
subject, which, if determined adversely to the Corporation or its subsidiaries,
would be material in relation to the Corporation's or its subsidiaries'
financial condition. There are no proceedings pending other than ordinary
routine litigation incident to the business of the Corporation or its
subsidiaries. In addition, no material proceedings are pending or are known to
be threatened or contemplated against the Corporation or its subsidiaries by
government authorities.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Nothing to report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Nothing to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) An annual meeting of shareholders was held on May 21, 2002, at 9:00 am,
Codorus Valley Corporate Center, 105 Leader Heights Road, York, Pennsylvania
17403.
(b), (c) Three directors were re-elected at the May 21, 2002, meeting. Votes
were as follows:
Votes
Term Votes Against or
Re-elected Expires For Withheld*
Class C:
D. Reed Anderson, Esq 2005 2,151,915 3,530
MacGregor S. Jones 2005 2,151,905 3,540
Larry J. Miller 2005 2,127,735 27,710
*includes broker nonvotes
Directors whose term continued after the meeting:
Term Expires
------------
Class A:
Rodney L. Krebs 2003
Dallas L. Smith 2003
George A. Trout, D.D.S. 2003
Class B:
M. Carol Druck 2004
Donald H. Warner 2004
ITEM 5. OTHER INFORMATION
On July 9, 2002, the board of directors appointed Michael L. Waugh, Pennsylvania
State Senator, as a Class B director on the boards of Codorus Valley and
PeoplesBank. Both boards have nine members including Mr. Waugh.
- 20 -
ITEM 6. (A) EXHIBITS
Exhibit
Number Description of Exhibit
- ------- ----------------------
3(i) Articles of Incorporation (Incorporated by reference to Exhibit 3(i)
to Current Report on Form 8-K, filed with the Commission on March
29, 2001.)
3(ii) By-laws (Incorporated by reference to Exhibit 3(ii) to Current
Report on Form 8-K, filed with the Commission on March 29, 2001.)
4 Rights Agreement dated as of November 4, 1995 (Incorporated by
reference to Current Report on Form 8-K, filed with the Commission
on March 29, 2001.)
10.1 1996 Stock Incentive Plan (Incorporated by reference to Exhibit 99
of Registration Statement No. 333-9277 on Form S-8, filed with the
Commission on July 31, 1996.)
10.2 Amendments to the Employment Agreement by and among PeoplesBank, A
Codorus Valley Company, Codorus Valley Bancorp, Inc., and Larry J.
Miller dated October 1, 1997, including Executive Employment
Agreement dated January 1, 1993 between Codorus Valley Bancorp,
Inc., Peoples Bank of Glen Rock and Larry J. Miller. (Incorporated
by reference to Exhibit 10.1 to Registrant's Current Report on Form
8-K, dated and filed with the Commission on March 13, 1998.)
10.3 Change of Control Agreement between PeoplesBank, A Codorus Valley
Company, Codorus Valley Bancorp, Inc. and Jann A. Weaver, dated
October 1, 1997. (Incorporated by reference to Exhibit 10.2 to the
Registrant's Current Report on Form 8-K, dated and filed with the
Commission March 13, 1998.)
10.4 Change of Control Agreement between PeoplesBank, A Codorus Valley
Company, Codorus Valley Bancorp, Inc. and Harry R. Swift, dated
October 1, 1997. (Incorporated by reference to Exhibit 10.4 to the
Registrant's Current Report on Form 8-K, filed with the Commission
on March 13, 1998.)
10.5 1998 Independent Directors Stock Option Plan (Incorporated by
reference to Exhibit 4.3 of Registration Statement No. 333-61851 on
Form S-8, filed with the Commission on August 19, 1998.)
10.6 2000 Stock Incentive Plan (Incorporated by reference to Exhibit 4.3
of Registration Statement No. 333-40532 on Form S-8, filed with the
Commission on June 30, 2000.)
10.7 2001 Employee Stock Bonus Plan (Incorporated by reference to Exhibit
99.1 of Registration Statement No. 333-68410 on Form S-8, filed with
the Commission on August 27, 2001.)
11 Statement re: Computation of Earnings Per Share can be referenced
in Note 2 of the Consolidated Financial Statements in this report.
- 21 -
ITEM 6. (A) EXHIBITS, CONTINUED
Exhibit
Number Description of Exhibit
- ------ ----------------------
99.1 Certification of Principal Executive Officer Pursuant to 18 U.S.C.
Section 1350. (Filed as part of this June 30, 2002, Form 10Q on page
23.)
99.2 Certification of the Principal Financial Officer Pursuant to 18
U.S.C. Section 1350. (Filed as part of this June 30, 2002, Form 10Q
on page 24.)
ITEM 6. (B) REPORTS ON FORM 8-K
None.
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, the Registrant
has caused this report to be signed on its behalf by the authorized undersigned.
Codorus Valley Bancorp, Inc.
(Registrant)
August 12, 2002 /s/ Larry J. Miller
- --------------- --------------------------------
Date Larry J. Miller
President & CEO
(Principal executive officer)
August 12, 2002 /s/ Jann A. Weaver
- --------------- --------------------------------
Date Jann A. Weaver
Treasurer & Assistant Secretary
(Principal financial and
accounting officer)\
- 22 -