UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006
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 [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
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 April 25, 2006, 3,318,862
shares of common stock, par value $2.50, were outstanding, which includes the
effect of the 5 percent stock dividend declared April 11, 2006.
-1-
Codorus Valley Bancorp, Inc.
FORM 10-Q INDEX
Page #
------
PART I - FINANCIAL INFORMATION
Item 1. Financial statements:
Consolidated balance sheets 3
Consolidated statements of income 4
Consolidated statements of cash flows 5
Consolidated statements of changes in shareholders' equity 6
Notes to consolidated financial statements 7
Item 2. Management's discussion and analysis of financial condition
and results of operations 13
Item 3. Quantitative and qualitative disclosures about market risk 21
Item 4. Controls and procedures 21
PART II - OTHER INFORMATION
Item 1. Legal proceedings 21
Item 1A. Risk factors 21
Item 2. Unregistered sales of equity securities and use of proceeds 21
Item 3. Defaults upon senior securities 21
Item 4. Submission of matters to a vote of security holders 21
Item 5. Other information 21
Item 6. Exhibits 22
SIGNATURES 24
-2-
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Codorus Valley Bancorp, Inc.
Consolidated Balance Sheets
Unaudited
March 31, December 31,
(dollars in thousands, except per share data) 2006 2005
--------- ------------
ASSETS
Interest bearing deposits with banks $ 137 $ 126
Cash and due from banks 11,982 11,959
Federal funds sold 8,958 0
-------- --------
Total cash and cash equivalents 21,077 12,085
Securities available-for-sale 58,084 58,111
Securities held-to-maturity (fair value $9,628 for 2006 and $9,686 for 2005) 9,100 9,101
Restricted investment in bank stock, at cost 2,590 2,452
Loans held for sale 605 1,522
Loans (net of deferred fees of $507 in 2006 and $537 in 2005) 373,352 368,109
Less-allowance for loan losses (2,763) (2,538)
-------- --------
Net loans 370,589 365,571
Premises and equipment, net 11,054 10,962
Other assets 16,431 16,248
-------- --------
Total assets $489,530 $476,052
======== ========
LIABILITIES
Deposits
Noninterest bearing $ 50,056 $ 49,369
Interest bearing 357,382 335,785
-------- --------
Total deposits 407,438 385,154
Short-term borrowings 0 9,781
Long-term debt 39,320 39,712
Other liabilities 3,215 2,676
-------- --------
Total liabilities 449,973 437,323
SHAREHOLDERS' EQUITY
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; 3,318,862 shares issued and
outstanding on 3/31/06 and 3,160,821 on 12/31/05 8,297 7,902
Additional paid-in capital 25,720 23,035
Retained earnings 6,087 8,204
Accumulated other comprehensive loss (547) (412)
-------- --------
Total shareholders' equity 39,557 38,729
-------- --------
Total liabilities and shareholders' equity $489,530 $476,052
======== ========
See accompanying notes.
-3-
Codorus Valley Bancorp, Inc.
Consolidated Statements of Income
Unaudited
Three months
ended March 31,
---------------
(dollars in thousands, except per share data) 2006 2005
------ ------
INTEREST INCOME
Loans, including fees $7,005 $5,144
Investment securities
Taxable 599 599
Tax-exempt 138 101
Dividends 29 19
Other 17 2
------ ------
Total interest income 7,788 5,865
INTEREST EXPENSE
Deposits 2,494 1,465
Short-term borrowings 112 51
Long-term debt 486 376
------ ------
Total interest expense 3,092 1,892
------ ------
Net interest income 4,696 3,973
PROVISION FOR LOAN LOSSES 210 200
------ ------
Net interest income after provision for loan losses 4,486 3,773
NONINTEREST INCOME
Trust and investment services fees 325 265
Service charges on deposit accounts 434 373
Mutual fund, annuity and insurance sales 254 283
Income from bank owned life insurance 63 65
Other income 119 113
Gain on sales of mortgages 88 66
------ ------
Total noninterest income 1,283 1,165
NONINTEREST EXPENSE
Personnel 2,139 1,834
Occupancy of premises, net 384 324
Furniture and equipment 407 317
Postage, stationery and supplies 121 102
Professional and legal 31 65
Marketing and advertising 108 89
Other 731 550
------ ------
Total noninterest expense 3,921 3,281
------ ------
Income before income taxes 1,848 1,657
PROVISION FOR INCOME TAXES 487 429
------ ------
Net income $1,361 $1,228
====== ======
Net income per share, basic $ 0.41 $ 0.37
Net income per share, diluted $ 0.40 $ 0.36
====== ======
See accompanying notes.
-4-
Codorus Valley Bancorp, Inc.
Consolidated Statements of Cash Flows
Unaudited
Three months ended
March 31,
------------------
(dollars in thousands) 2006 2005
------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,361 $ 1,228
Adjustments to reconcile net income to net cash provided by operations
Depreciation 296 255
Provision for loan losses 210 200
Deferred federal income tax expense 28 0
Amortization of investment in real estate partnership 121 119
Income from bank owned life insurance (63) (65)
Originations of held for sale mortgages (5,601) (5,108)
Proceeds from sales of held for sale mortgages 6,606 5,614
Gain on sales of held for sale mortgages (88) (66)
Gain on sales of foreclosed real estate 0 (27)
Stock-based compensation expense 12 0
(Increase) decrease in accrued interest receivable and other assets (210) 64
Increase in accrued interest payable and other liabilities 539 342
Other, net 86 117
------- --------
Net cash provided by operating activities 3,297 2,673
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available-for-sale
Purchases (3,115) (2,403)
Maturities and calls 2,893 3,810
Net (increase) decrease in restricted investment in bank stock (138) 442
Net increase in loans made to customers (5,258) (11,872)
Purchases of premises and equipment (388) (1,047)
Purchase of insurance agency assets 0 (60)
Proceeds from sales of foreclosed real estate 0 1,559
------- --------
Net cash used in investing activities (6,006) (9,571)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand and savings deposits 16,596 8,737
Net increase in time deposits 5,688 6,311
Net decrease in short-term borrowings (9,781) (8,336)
Proceeds from issuance of long-term debt 0 5,000
Repayment of long-term debt (392) (302)
Dividends paid (410) (375)
Issuance of common stock 0 75
------- --------
Net cash provided by financing activities 11,701 11,110
------- --------
Net increase in cash and cash equivalents 8,992 4,212
Cash and cash equivalents at beginning of year 12,085 8,085
------- --------
Cash and cash equivalents at end of period $21,077 $ 12,297
======= ========
See accompanying notes.
-5-
Codorus Valley Bancorp, Inc.
Consolidated Statements of Changes in Shareholders' Equity
Unaudited
Accumulated
Additional Other
Common Paid-in Retained Comprehensive
(dollars in thousands, except per share data) Stock Capital Earnings (Loss) Income Total
------ ---------- -------- ------------- -------
For the three months ended March 31, 2006
Balance, December 31, 2005 $7,902 $23,035 $ 8,204 ($412) $38,729
Comprehensive income:
Net income 1,361 1,361
Other comprehensive loss, net of tax:
Unrealized losses on securities, net (135) (135)
-------
Total comprehensive income 1,226
Cash dividends ($.124 per share, adjusted) (410) (410)
5% stock dividend - 158,041 shares at fair value 395 2,673 (3,068) 0
Stock-based compensation 12 12
------ ------- ------- ----- -------
Balance, March 31, 2006 $8,297 $25,720 $ 6,087 ($547) $39,557
====== ======= ======= ===== =======
For the three months ended March 31, 2005
Balance, December 31, 2004 $7,481 $20,293 $ 8,034 $ 174 $35,982
Comprehensive income:
Net income 1,228 1,228
Other comprehensive loss, net of tax:
Unrealized losses on securities, net (440) (440)
-------
Total comprehensive income 788
Cash dividends ($.113 per share, adjusted) (375) (375)
5% stock dividend - 149,885 shares at fair value 375 2,518 (2,893) 0
Issuance of common stock -
5,112 shares under stock option plan 13 62 75
------ ------- ------- ----- -------
Balance, March 31, 2005 $7,869 $22,873 $ 5,994 ($266) $36,470
====== ======= ======= ===== =======
See accompanying notes.
-6-
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 Corporation's Annual Report on Form 10-K
for the year ended December 31, 2005.
The consolidated financial statements include the accounts of Codorus Valley
Bancorp, Inc. and its wholly owned bank subsidiary, PeoplesBank, A Codorus
Valley Company (PeoplesBank), and its wholly owned nonbank subsidiary, SYC
Realty Company, Inc., (collectively referred to as Codorus Valley or
Corporation). PeoplesBank has two wholly owned subsidiaries, Codorus Valley
Financial Advisors, Inc. and SYC Settlement Services, Inc. All significant
intercompany account balances and transactions have been eliminated in
consolidation. The combined results of operations of the nonbank subsidiaries
are not material to the consolidated financial statements.
The results of operations for the three-month period ended March 31, 2006 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
All per share computations include the effect of stock dividends declared,
including the 5 percent stock dividend declared April 11, 2006. The weighted
average number of shares of common stock outstanding used for basic and diluted
calculations follows.
Three months
ended March 31,
---------------
(In thousands) 2006 2005
----- -----
Basic 3,319 3,302
Diluted 3,394 3,372
Stock-Based Compensation
The Corporation adopted Statement of Financial Accounting Standards No. 123R,
"Share-Based Payments" (Statement 123R) in the first quarter of 2006, using the
"modified prospective method." Prior to the implementation of FAS 123R, stock
options issued under shareholder approved employee and director stock option
plans were accounted for under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25). Under APB 25, no
compensation expense was recognized related to these plans. Stock options are
granted at exercise prices not less than the fair value of the common stock on
the date of grant. See Note 6 - Stock-Based Compensation.
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
-7-
sheet, such items, along with net income, are components of comprehensive
income. The components of other comprehensive income (loss) and related tax
effects are presented in the following table:
Three months
ended March 31,
---------------
(Dollars in thousands) 2006 2005
----- -----
Unrealized holding losses arising
during the period $(205) $(667)
Reclassification adjustment for (gains)
losses included in income 0 0
----- -----
Net unrealized losses (205) (667)
Tax effect 70 227
----- -----
Net of tax amount $(135) $(440)
===== =====
NOTE 3--DEPOSITS
The composition of deposits on March 31, 2006 and December 31, 2005, was as
follows:
March 31, December 31,
(Dollars in thousands) 2006 2005
--------- ------------
Noninterest bearing demand $ 50,056 $ 49,369
NOW 48,839 50,638
Money market 116,479 97,601
Savings 20,035 21,205
Time CDs less than $100,000 131,410 125,572
Time CDs $100,000 or more 40,619 40,769
-------- --------
Total deposits $407,438 $385,154
======== ========
-8-
NOTE 4--LONG-TERM DEBT
A summary of long-term debt at March 31, 2006 and December 31, 2005 follows:
March 31, December 31,
(Dollars in thousands) 2006 2005
--------- ------------
Obligations of PeoplesBank to FHLBP
Due 2007, 4.69%, amortizing 331 439
Due 2007, 4.68% 7,000 7,000
Due 2009, 3.47%, convertible quarterly after
December 2006 5,000 5,000
Due 2010, 4.32% 6,000 6,000
Due 2011, 4.30%, amortizing 4,695 4,757
Due 2012, 4.25%, amortizing 2,240 2,319
Due 2013, 3.46%, amortizing 3,754 3,869
Due 2014, 6.43%, convertible quarterly after
July 2009 5,000 5,000
Obligations of Codorus Valley Bancorp, Inc.
Due 2011, floating rate based on 1 month
LIBOR plus 1.50%, amortizing 1,621 1,641
Due 2034, floating rate based on 3 month
LIBOR plus 2.02%, callable quarterly after
December 2009 3,093 3,093
------- -------
38,734 39,118
Capital lease obligation 586 594
------- -------
Total long-term debt $39,320 $39,712
======= =======
PeoplesBank's obligations to Federal Home Loan Bank of Pittsburgh (FHLBP) are
fixed rate and fixed/floating (convertible) rate instruments. The FHLBP has an
option on the convertible borrowings to convert the rate to a floating rate
after the expiration of a specified period. The floating rate is based on the
LIBOR index plus a spread. If the FHLBP elects to exercise its conversion
option, PeoplesBank may repay the converted loan without a prepayment penalty.
Codorus Valley has two long-term obligations. The first is due 2011 and is
secured by a mortgage on the Codorus Valley Corporate Center office building at
105 Leader Heights Road, York, Pennsylvania. The second obligation is due 2034
and represents the issuance of trust preferred debt securities. Trust preferred
debt securities were issued to support planned growth and are included in Tier 1
capital for regulatory capital purposes.
NOTE 5--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 judgments by the regulators.
-9-
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 1 capital as a percentage of risk-weighted assets, and
of Tier 1 capital to year-to-date average assets (leverage ratio). Management
believes that Codorus Valley and PeoplesBank were well capitalized on March 31,
2006, based on FDIC capital guidelines.
MINIMUM FOR WELL CAPITALIZED
ACTUAL CAPITAL ADEQUACY MINIMUM*
--------------- --------------------------- ----------------------------
(dollars in thousands) AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ----- -------------- ---------- -------------- -----------
CODORUS VALLEY BANCORP, INC. (CONSOLIDATED)
AT MARCH 31, 2006
Capital ratios:
Tier 1 risk based $42,632 10.65% > or = $16,013 > or = 4.0% n/a n/a
Total risk based 45,395 11.34 > or = 32,027 > or = 8.0 n/a n/a
Leverage 42,632 8.84 > or = 19,285 > or = 4.0 n/a n/a
AT DECEMBER 31, 2005
Capital ratios:
Tier 1 risk based $41,658 10.61% > or = $15,699 > or = 4.0% n/a n/a
Total risk based 44,196 11.26 > or = 31,398 > or = 8.0 n/a n/a
Leverage 41,658 9.57 > or = 17,420 > or = 4.0 n/a n/a
PEOPLESBANK, A CODORUS VALLEY COMPANY AT MARCH 31, 2006
Capital ratios:
Tier 1 risk based $38,239 9.69% > or = $15,782 > or = 4.0% > or = $23,672 > or = 6.0%
Total risk based 41,002 10.39 > or = 31,563 > or = 8.0 > or = 39,454 > or = 10.0
Leverage 38,239 8.03 > or = 19,053 > or = 4.0 > or = 23,816 > or = 5.0
AT DECEMBER 31, 2005
Capital ratios:
Tier 1 risk based $37,201 9.62% > or = $15,463 > or = 4.0% > or = $23,194 > or = 6.0%
Total risk based 39,739 10.28 > or = 30,926 > or = 8.0 > or = 38,657 > or = 10.0
Leverage 37,201 8.66 > or = 17,184 > or = 4.0 > or = 21,480 > or = 5.0
* To be well capitalized under prompt corrective action provisions.
NOTE 6--STOCK-BASED COMPENSATION
The Corporation adopted Statement of Financial Accounting Standards No. 123R,
"Share-Based Payments" (Statement 123R) in the first quarter of 2006, using the
"modified prospective method." Statement 123R requires that the fair value of
equity awards to employees be recognized as compensation expense over the period
during which an employee is required to provide service in exchange for such
award. The impact on net income and earnings per share that would have occurred
if compensation expense would have been recognized based on the estimated fair
value of the options on the date of grant is as follows:
-10-
Three months
ended
March 31,
---------------
(Dollars in thousands, except per share data) 2006 2005
------ ------
Reported net income $1,361 $1,228
Add: stock-based employee compensation expense
included in reported net income, net of related
tax effects of $0 12 0
Deduct: total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related tax
effects of $0 and $0 (12) (14)
------ ------
Pro forma net income $1,361 $1,214
Reported basic earnings per share $ .41 $ .37
Reported diluted earnings per share $ .40 $ .36
Pro forma basic earnings per share $ .41 $ .37
Pro forma diluted earnings per share $ .40 $ .36
The Corporation's equity awards consist of stock options granted under three
stock option plans as follows: a 2000 Stock Incentive Plan (2000 Plan), a 1998
Independent Directors Stock Option Plan (1998 Plan) and a 1996 Stock Incentive
Plan (1996 Plan). All options available for grant under the 1998 and 1996 Plans
have been granted. The 2000 Plan also allows for the granting of stock
appreciation rights and restricted stock, none of which have been granted to
date at March 31, 2006.
Shares reserved and available for issuance as of March 31, 2006, adjusted for
stock dividends declared, were 127,975 for the 2000 Plan, 132,661 for the 1998
Plan, and 94,647 for the 1996 Plan. Shares reserved for future issuance under
each plan are subject to adjustment in the event of specified changes in the
Corporation's capital structure. Options awarded under these plans to date have
been granted with an exercise price equal to the fair value of the stock on the
grant date, a minimum vesting period of six months and an expiration period of
ten years. Upon exercise, the Corporation has historically issued from its
authorized, but unissued, common stock to satisfy the options.
The grant-date fair value of options granted in June 2005, adjusted for stock
dividends, was $6.86. No options were granted to date during 2006. The fair
value of the options awarded under the Option Plans is estimated on the date of
grant using the Black-Scholes valuation model, which is dependent upon certain
assumptions as presented below.
2005
----
Expected life (in years) 6.12
Risk-free interest rate 3.89%
Expected volatility 48.3%
Expected dividend yield 2.6%
The expected life of the options was estimated using one half of the exercise
period plus the vesting period and represents the period of time that options
granted are expected to be outstanding. The risk-free interest rate is the U.S.
Treasury rate commensurate with the expected life of the options on the grant
date. Volatility of the Corporation's stock price was based on historical
volatility. Dividend yield was based on dividends for the most current year
divided by the average market price for the most current year.
-11-
There was no activity during the quarter ended March 31, 2006 and a summary of
stock options from all Plans, adjusted for stock dividends declared, is shown
below.
WEIGHTED AVERAGE WEIGHTED AVERAGE AGGREGATE
EXERCISE PRICE REMAINING INTRINSIC VALUE
OPTIONS PER SHARE CONTRACTUAL TERM ($000)
------- ---------------- ---------------- ---------------
Outstanding at March 31, 2006 275,164 $13.68 4.5 years $1,607
Exerciseable at March 31, 2006 251,256 $13.29 4.1 years $1,565
No options were exercised to date during 2006. The intrinsic value of options
exercised during the first quarter of 2005 was $39,000. Cash received from such
exercises was $62,000 and the tax benefit recognized was $13,000.
Information regarding nonvested options as of March 31, 2006, adjusted for stock
dividends declared, is presented in the following table:
WEIGHTED AVERAGE
GRANT DATE
OPTIONS FAIR VALUE
------- ----------------
Balance at December 31, 2005 31,018 $7.11
Granted -- --
Vested 7,110 6.22
Forfeited -- --
------ -----
Balance at March 31, 2006 23,908 $7.38
------ -----
As of March 31, 2006, total unrecognized compensation cost related to nonvested
options was $114,000. The cost is expected to be recognized over a weighted
average period of 1.7 years.
NOTE 7--CONTINGENT LIABILITIES
Management is not aware of any material contingent liabilities on March 31,
2006.
NOTE 8--GUARANTEES
Codorus Valley does not issue any guarantees that would require liability
recognition or disclosure, other than its standby letters of credit. Standby
letters of credit written are conditional commitments issued by the PeoplesBank
to guarantee the performance of a customer to a third party. Generally, all
letters of credit, when issued have expiration dates within one year. The credit
risk involved in issuing letters of credit is essentially the same as those that
are involved in extending loan facilities to customers. The Corporation
generally holds collateral and/or personal guarantees supporting these
commitments. The Corporation had $4,459,000 of standby letters of credit on
March 31, 2006, compared to $2,777,000 on December 31, 2005. Management believes
that the proceeds obtained through a liquidation of collateral and the
enforcement of guarantees would be sufficient to cover the potential amount of
future payment required under the corresponding guarantees. The current amount
of the liability as of March 31, 2006 and December 31, 2005, for guarantees
under standby letters of credit issued, is not material.
-12-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 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 ESTIMATES:
Disclosure of Codorus Valley's significant accounting policies is included in
Note 1 to the consolidated financial statements of the 2005 Annual Report on
Form 10-K for the period ended December 31, 2005. Some of these policies are
particularly sensitive, requiring management to make significant judgments,
estimates and assumptions. 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, located on pages 15 and 18 of this Form
10-Q.
Management makes significant estimates 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, financial and
managerial strengths of borrowers, adequacy of collateral, if collateral
dependent, or present value of future cash flows and other relevant factors.
Estimates related to the value of collateral also have a
-13-
significant impact on whether or not management continues to accrue income on
delinquent loans and on the amounts at which foreclosed real estate is recorded
on the statement of financial condition.
The Corporation changed its method of accounting for stock-based compensation in
2006, in accordance with Financial Accounting Statement No. 123(R), which is
described in Note 6 - Stock-Based Compensation of this report. Based on stock
options outstanding on March 31, 2006, approximately $114,000 will be expensed
over the weighted average period of 1.7 years.
Management discussed the development and selection of critical accounting
estimates and related Management Discussion and Analysis disclosure with the
Audit Committee. There were no material changes made to the critical accounting
estimates during the periods presented within this report.
THREE MONTHS ENDED MARCH 31, 2006,
COMPARED TO THREE MONTHS ENDED MARCH 31, 2005
OVERVIEW
Net income for the three-month period ended March 31, 2006, was $1,361,000 or
$.41 per share ($.40 diluted), compared to $1,228,000 or $.37 per share ($.36
diluted), for the same period of 2005. The $133,000 or 11 percent increase in
net income was the result of increases in net interest income and noninterest
income, which more than offset an increase in noninterest expense. The $723,000
or 18 percent increase in net interest income was primarily attributable to an
increase in interest income from a larger volume of business and consumer loans
and loan fees. The $118,000 or 10 percent increase in noninterest income was
primarily attributable to increases in trust fees, service charges on deposit
accounts and gains from the sale of mortgages, which resulted from increased
sales and business growth. The $640,000 or 20 percent increase in noninterest
expense was attributable in part to corporate expansion. PeoplesBank opened two
full service financial centers and renovated two existing financial centers
during the prior year, which increased 2006 operating expenses. The increase in
personnel expense also reflected the planned addition of key sales and support
staff, increased health insurance premiums and normal merit increases. The
increase in noninterest expense increased the efficiency ratio (noninterest
expense as a percentage of net operating revenue) to 64.3 percent for the
current quarter, compared to 62.8 percent for the first three months of 2005.
Total assets were approximately $490 million on March 31, 2006, an increase of
$70 million or 17 percent above March 31, 2005. Asset growth occurred primarily
in business loans and consumer loans, which were funded primarily by growth in
CD and money market deposits.
Net income as a percentage of average shareholder's equity (return on equity or
ROE), was 13.79 percent for the first three months (annualized) of 2006,
compared to 13.43 percent for the same period of 2005. Net income as a
percentage of average total assets (return on assets or ROA), was 1.13 percent
for 2006, compared to 1.18 percent for the same period of 2005.
On March 31, 2006, nonperforming assets as a percentage of total loans and net
foreclosed real estate were 1.03 percent, compared to 0.26 percent for March 31,
2005. Information regarding nonperforming assets is provided in the Risk
Management section of this report, including Table 1--Nonperforming Assets.
Based on a recent evaluation of probable loan losses and the current loan
portfolio, management believes that the allowance is adequate to support losses
inherent in the loan portfolio on March 31, 2006. An analysis of the allowance
is provided in Table 2--Analysis of Allowance for Loan Losses.
Throughout the current period Codorus Valley maintained a capital level well
above minimum regulatory quantitative requirements. Currently, there are three
federal regulatory definitions of capital
-14-
that take the form of minimum ratios. Note 5--Regulatory Matters, shows that the
Corporation and PeoplesBank were well capitalized on March 31, 2006.
A more detailed analysis of the factors and trends affecting corporate earnings
follows.
NET INTEREST INCOME
Net interest income for the three-month period ended March 31, 2006, was
$4,696,000, an increase of $723,000 or 18 percent above the same period in 2005.
The increase was primarily the result of an increase in loan volume, although an
increase in loan yields and fees also contributed. Earning assets averaged $446
million and yielded 7.24 percent (tax equivalent basis) for the first quarter of
2006, compared to $380 million and 6.37 percent, respectively, for the first
quarter of 2005. The $66 million or 17 percent increase in average earning
assets occurred primarily in business loans and secondarily in consumer loans.
Interest bearing liabilities averaged $395 million at an average rate of 3.18
percent for 2006, compared to $335 million and 2.29 percent, respectively, for
the first quarter of 2005. The approximately $60 million or 18 percent increase
in the average volume of interest bearing liabilities occurred primarily in
certificates of deposit (principally variable rate CDs) followed by money market
deposits and to a lesser degree long-term debt. The net interest margin, on a
tax equivalent basis, was 4.35 percent for the first quarter of 2006, compared
to 4.30 percent for the same period in 2005. In the period ahead, if the US
Treasury yield curve remains flat or slightly inverted the upward pressure on
funding costs may lower net interest margin.
PROVISION FOR LOAN LOSSES
A $210,000 provision expense for loan losses was recorded for the three-month
period ended March 31, 2006, compared to $200,000 for the same period in 2005.
The current period provision was based on management's assessment of overall
credit quality and macro-economic factors such as rising energy costs and
interest rates, which might portend debt service problems for some of our
borrowers.
NONINTEREST INCOME
Total noninterest income for the current three-month period was $1,283,000, an
increase of $118,000 or 10 percent above the first quarter of 2005. The increase
was primarily attributable to increases in trust fees, service charges on
deposit accounts and gains from the sale of mortgages, which resulted from
increased sales and business growth.
NONINTEREST EXPENSE
Total noninterest expense for the current three-month period was $3,921,000, an
increase of $640,000 or 20 percent above the first quarter of 2005. The increase
was attributable in part to corporate expansion, which increased personnel,
occupancy, stationery and supplies, and furniture and equipment expenses.
PeoplesBank opened two full service financial centers and renovated two existing
financial centers during the prior year, which increased 2006 operating costs.
The increase in personnel expense also reflected the planned addition of key
sales and support staff, increased health insurance premiums and normal merit
increases. The increase in other expense was attributable in part to increases
in charitable donations (net of state tax credits), ATM/debit card processing
(increased transaction volume) and carrying costs on problem assets (the prior
year included a gain from the sale of real estate acquired in satisfaction of
debt, which lowered this expense in 2005).
-15-
INCOME TAXES
The provision for federal income tax was $487,000 for the current three-month
period, compared to $429,000 for the same period in 2005. The $58,000 or 14
percent increase in the tax provision was the result of a 12 percent increase in
pretax income.
BALANCE SHEET REVIEW
LOANS
On March 31, 2005, loans were approximately $373 million, an increase of $5
million or 1 percent above year-end 2005. The increase was evenly divided
between the business and consumer loan portfolios. Business loan growth was
constrained during the current quarter due to an unusually high level of
run-off, which resulted from scheduled loan maturities and early payoffs. The
average yield (tax-equivalent basis) earned on loans was 7.59 percent for the
first quarter of 2006, compared to 7.18 percent for the fourth quarter of 2005
and 6.79 percent for the first quarter of 2005.
DEPOSITS
On March 31, 2006, total deposits were approximately $407 million, an increase
of $22 million or 6 percent above year-end 2005. The increase in deposits, which
reflected the continuation of a long trend of successful sales efforts, occurred
primarily within the money market and CD categories, as shown in Note
3--Deposits of this report. The increase in money market deposits was partially
the result of new money market products, which were priced competitively and
heavily promoted. CD growth occurred in variable rate CD's, which re-price
weekly based on the one year US Treasury bond rate. The trend of rising
short-term interest rates, since July 2004, was a factor in overall deposit
growth and product selection by bank customers. The increase in deposits was
also attributable in part to the addition of two financial centers in March of
2005. The average rate paid on interest-bearing deposits was 2.93 percent for
the first quarter of 2006, compared to 2.62 percent for the fourth quarter of
2005 and 2.01 percent for the first quarter of 2005.
SHORT-TERM BORROWINGS AND LONG-TERM DEBT
On March 31, 2006, there were no short-term borrowings, compared to $10 million
outstanding at year-end 2005. Deposit growth during the current period provided
funds to repay short-term borrowings. Long-term debt declined slightly from
year-end 2005 as shown in Note 4--Long-term Debt of this report.
SHAREHOLDERS' EQUITY AND CAPITAL ADEQUACY
Shareholders' equity or capital, as a source of funds, enables Codorus Valley to
maintain asset growth and absorb losses. Total shareholders' equity was
approximately $39,557,000 on March 31, 2006, an increase of $828,000 or 2
percent above December 31, 2005. The increase was caused primarily by an
increase in retained earnings from profitable operations.
On April 11, 2006 the Board of Directors declared a quarterly cash dividend of
$.13 per common share ($.124 adjusted), payable on or before May 9, 2006, to
shareholders of record April 25, 2006. This follows a $.13 per share ($.124
adjusted) cash dividend paid in January. Also on April 11, 2006, the Board
declared a 5 percent stock dividend payable on or before June 8, 2006, to
shareholders of record
-16-
April 25, 2006. Distribution of the stock dividend will result in the issuance
of approximately 158,041 common shares, as reflected in the enclosed financial
statements.
Based on strong balance sheet growth management may raise additional capital
this year. Management believes that the most cost efficient way to raise capital
is through the issuance of trust preferred debt securities. The interest expense
on trust preferred debt is tax deductible, while the amount borrowed is included
in Tier 1 capital, subject to regulatory limitations, for regulatory capital
purposes. Trust preferred debt is usually priced at a spread to LIBOR and has a
30-year maturity, but is callable at quarterly intervals after the fifth year.
On October 14, 2004, the Corporation issued a press release, which was filed on
Form 8-K, announcing that the Board of Directors authorized the purchase, in
open market and privately negotiated transactions, of up to 4.9 percent or
approximately 146,000 shares of its then outstanding common stock. As of March
31, 2006, the Corporation had not acquired any of its common stock under the
authorization reported in October 2004.
Codorus Valley and PeoplesBank are subject to various regulatory capital
requirements administered by banking regulators that involve quantitative
guidelines and qualitative judgments. Quantitative measures established by
regulators pertain to minimum capital ratios, as set forth in Note 5--Regulatory
Matters, to the financial statements. Management believes that Codorus Valley
and PeoplesBank were well capitalized on March 31, 2006, based on FDIC capital
guidelines.
RISK MANAGEMENT
NONPERFORMING ASSETS
Table 1--Nonperforming Assets, provides a summary of nonperforming assets and
related ratios. The paragraphs below provide information for selected categories
for March 31, 2006, compared to December 31, 2005.
-17-
TABLE 1-NONPERFORMING ASSETS
March 31, December 31,
(dollars in thousands) 2006 2005
--------- ------------
Nonaccrual loans $1,782 $1,034
Accruing loans that are contractually past due
90 days or more as to principal or interest 2,067 --
Foreclosed real estate, net of allowance 6 7
------ ------
Total nonperforming assets $3,855 $1,041
====== ======
Ratios:
Nonaccrual loans as a % of total period-end loans 0.48% 0.28%
Nonperforming assets as a % of total period-end
loans and net foreclosed real estate 1.03% 0.28%
Nonperforming assets as a % of total period-end
stockholders' equity 9.75% 2.69%
Allowance for loan losses as a multiple of
nonaccrual loans 1.6x 2.5x
On March 31, 2006, nonaccrual loans consisted of collateralized business and
mortgage loans, and consumer loans. The Corporation recognizes interest income
on a cash basis for nonaccrual loans. On March 31, 2006, the nonaccrual loan
portfolio was $1,782,000, compared to $1,034,000 on December 31, 2005. The
$748,000 increase was attributable to the reclassification of a $796,000
business account to nonaccrual in March 2006. In management's judgment the net
realizable value of the real estate collateral, which the borrower is attempting
to liquidate, is insufficient. Accordingly, management established a $206,000
loss allowance for this account. On March 31, 2006, the nonaccrual loan
portfolio was comprised of 16 unrelated accounts ranging in size from $12,000 to
$796,000. Collection efforts including modification of contractual terms for
individual accounts, based on prevailing market conditions, and liquidation of
collateral assets are being employed to maximize recovery.
Loans that are contractually past due 90 days or more as to principal or
interest were $2,067,000 on March 31, 2006, compared to $0 on December 31, 2005.
The increase in the current period was due primarily to the addition of a
$1,956,000 business loan that was making interest, but not principal payments.
In April 2006, management reclassified this loan and other loans that pertained
to this borrower, which totaled $2,631,000, to nonaccrual status when
anticipated collateral sales and refinancing failed to materialize. Management
believes that the net realizable value of real estate collateral along with
personal guarantees is adequate to ensure the full recovery of this account.
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 the allowance was
$2,763,000 or .74 percent of total loans on March 31, 2006, compared to
$2,064,000 or .66 percent of total loans, respectively, on March 31, 2005. The
$699,000 or 34 percent increase in the allowance was based on management's
estimate to bring the allowance to a level reflective of risk in the portfolio,
loan growth, local employment and macro-economic factors such as rising energy
costs and interest rates. Based on a
-18-
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 March 31, 2006.
TABLE 2-ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(dollars in thousands) 2006 2005
------- ------
Balance-January 1, $ 2,538 $1,865
Provision charged to operating expense 210 200
Loans charged off:
Commercial 0 1
Real estate-mortgage 0 9
Consumer 7 18
------- ------
Total loans charged off 7 28
Recoveries:
Commercial 14 12
Real estate-mortgage 1 0
Consumer 7 15
------- ------
Total recoveries 22 27
------- ------
Net (recoveries) charge-offs (15) 1
------- ------
Balance-March 31, $ 2,763 $2,064
------- ------
Ratios:
Net recoveries (annualized) to average total loans -0.02% 0.00%
Allowance for loan losses to total loans
at period-end 0.74% 0.66%
Allowance for loan losses to nonaccrual loans
and loans past due 90 days or more 71.8% 264.6%
LIQUIDITY
Codorus Valley's loan-to-deposit ratio, which is used as a broad measure of
liquidity, was approximately 91.6 percent on March 31, 2006, compared to 95.6
percent on December 31, 2005. Liquidity for both periods was adequate based on
availability from many sources, including the potential liquidation of a $58
million portfolio of available-for-sale securities, valued at March 31, 2006.
Another important source of liquidity for PeoplesBank is available credit from
the Federal Home Loan Bank of Pittsburgh (FHLBP). On December 31, 2005, the
latest available date, available funding from the FHLBP was approximately $88
million. The addition of two financial centers in March 2005 and planned deposit
promotions have increased liquidity in the form of deposit growth.
Off-Balance Sheet Arrangements
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 March 31,
2006, totaled $117,638,000 and consisted of $82,556,000 in unfunded commitments
of existing loans, $30,623,000 to grant new loans and $4,459,000 in letters of
credit. Due to fixed maturity dates and
-19-
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.
Contractual Obligations
Codorus Valley has various long-term contractual obligations outstanding at
March 31, 2006, including long-term debt, time deposits and obligations under
capital and operating leases, which were reported in Table 13 of the Annual
Report on Form 10-K for the year ended 2005. A comparative schedule of deposits,
which includes time deposits, is provided in Note 3 of this Form 10-Q report. A
comparative schedule of long-term debt is provided in Note 4.
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.
Codorus Valley performed a simulation on its balance sheet for March 31, 2006
and December 31, 2005. The results of the point-in-time analyses are shown in
Table 3--Interest Rate Sensitivity. Continued growth in interest rate sensitive
liabilities, principally variable rate CDs and money market funds have gradually
shifted the balance sheet to a liability sensitive position. Liability
sensitivity means that deposits and debt will reprice to a greater and faster
degree than the loans and investments that they fund. This suggests that
earnings may increase if market interest rates decrease. Conversely, earnings
may decrease if short-term market interest rates, which have been influenced by
the Federal Reserve Bank, continue to trend upward. Under the low rate scenario
(down 200 basis points) for both periods, management presumed that trust
preferred investment securities, which are callable at a premium, would be
called and would result in a one time increase in interest income to the
Corporation. A detailed discussion of market interest rate risk is provided in
the Corporation's Annual Report on Form 10-K for the year ended December 31,
2005.
TABLE 3-INTEREST RATE SENSITIVITY
Change in
Forecasted Change in interest rates net income
interest rate ramped over 12 months -------------
scenario (basis points) $000's %
------------- ------------------------ ------ ----
AT MARCH 31, 2006
Most likely +50 52 1.0
High +200 (25) (0.5)
Flat (baseline) 0 0 0.0
Low -200 281 5.4
AT DECEMBER 31, 2005
Most likely +50 (1) 0.0
High +200 2 0.0
Flat (baseline) 0 0 0.0
Low -200 39 0.7
-20-
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 on page 20 of this Form 10-Q.
ITEM 4. CONTROLS AND PROCEDURES
Codorus Valley maintains disclosure controls and procedures designed to ensure
that information required to be disclosed in the reports that the Corporation
files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission. Based upon their
evaluation of those controls and procedures performed as of March 31, 2006, the
chief executive and chief financial officers of Codorus Valley concluded that
Codorus Valley's disclosure controls and procedures were adequate.
Codorus Valley made no significant changes in its internal controls or in other
factors that could significantly affect these controls in the quarter ended
March 31, 2006, as evaluated by the chief executive and chief financial
officers.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings pending against Codorus Valley Bancorp, Inc. or
any of its subsidiaries which are expected to have a material impact upon the
financial position and/or operating results of the Corporation. Management is
not aware of any proceedings known or contemplated by government authorities.
ITEM 1A. RISK FACTORS
Management is not aware of any material changes in the risk factors previously
disclosed in the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2005.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Codorus Valley made no sales or repurchases of equity securities during the
quarter ended March 31, 2006.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Nothing to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Nothing to report.
ITEM 5. OTHER INFORMATION
Nothing to report.
-21-
ITEM 6. EXHIBITS
Exhibit
Number Description of Exhibit
- ------- ----------------------
3(i) Articles of Incorporation (Incorporated by reference to Exhibit 3(i)
to the Registrant's Current Report on Form 8-K, filed with the
Commission on October 14, 2005.)
3(ii) By-laws (Incorporated by reference to Exhibit 3(ii) to the
Registrant's Current Report on Form 8-K, filed with the Commission on
October 14, 2005.)
4 Rights Agreement dated as of November 4, 2005 (Incorporated by
reference to Exhibit 4 to the Registrant's Current Report on Form 8-K,
filed with the Commission on November 8, 2005.)
10.1 1996 Stock Incentive Plan (Incorporated by reference to Exhibit 99 of
Registration Statement No. 333-09277 on Form S-8, filed with the
Commission on July 31, 1996.)
10.2 Employment Agreement between Codorus Valley Bancorp, Inc.,
PeoplesBank, A Codorus Valley Company and Larry J. Miller dated
December 27, 2005. (Incorporated by reference to Exhibit 10.1 to the
Registrant's Current Report on Form 8-K, filed with the Commission on
January 3, 2006.)
10.3 Change of Control Agreement by and among Codorus Valley Bancorp, Inc.,
PeoplesBank, A Codorus Valley Company and Jann A. Weaver, dated
December 27, 2005. (Incorporated by reference to Exhibit 10.7 to the
Registrant's Current Report on Form 8-K, filed with the Commission on
January 3, 2006.)
10.4 Change of Control Agreement by and among Codorus Valley Bancorp, Inc.,
PeoplesBank, A Codorus Valley Company and Harry R. Swift, dated
December 27, 2005. (Incorporated by reference to Exhibit 10.6 to the
Registrant's Current Report on Form 8-K, filed with the Commission on
January 3, 2006.)
10.5 1998 Independent Directors Stock Option Plan (Incorporated by
reference to Exhibit 4.3 of Registrant 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.)
10.8 Dividend Reinvestment and Stock Purchase Plan (Incorporated by
reference to Exhibit 4(a) Registration Statement no. 33-46171 on
Amendment no. 4 to Form S-3, filed with the Commission on July 23,
2004.)
10.9 Amendment to Salary Continuation Agreement by and among PeoplesBank, A
Codorus Valley Company, a wholly owned subsidiary of Codorus Valley
Bancorp, Inc. and Larry
-22-
J. Miller dated December 27, 2005. (Incorporated by reference to
Exhibit 10.3 to the Registrant's Current Report on Form 8-K, filed
with the Commission on January 3, 2006.)
10.10 Amendment to Salary Continuation Agreement by and among PeoplesBank, A
Codorus Valley Company, a wholly owned subsidiary of Codorus Valley
Bancorp, Inc. and Harry R. Swift dated December 27, 2005.
(Incorporated by reference to Exhibit 10.4 to the Registrant's Current
Report on Form 8-K, filed with the Commission on January 3, 2006.)
10.11 Amendment to Salary Continuation Agreement by and among PeoplesBank, A
Codorus Valley Company, a wholly owned subsidiary of Codorus Valley
Bancorp, Inc. and Jann A. Weaver dated December 27, 2005.
(Incorporated by reference to Exhibit 10.5 to the Registrant's Current
Report on Form 8-K, filed with the Commission on January 3, 2006.)
10.12 Form of Group Term Replacement Plan, dated December 1, 1998, as
amended, including Split Dollar Policy Endorsements pertaining to
senior officers of the Corporation's subsidiary, PeoplesBank, A
Codorus Valley Company. (Incorporated by reference to Exhibit 10.12 to
the Registrant's Annual Report on Form 10-K, filed on March 29, 2005.)
10.13 Sample form of Director Group Term Replacement Plan, dated December 1,
1998, including Split Dollar Policy Endorsements pertaining to
non-employee directors of the Corporation's subsidiary, PeoplesBank, A
Codorus Valley Company. (Incorporated by reference to Exhibit 10.13 to
the Registrant's Annual Report on Form 10-K, filed on March 29, 2005.)
10.14 Long Term Nursing Care Agreement between Codorus Valley Bancorp, Inc.,
PeoplesBank, A Codorus Valley Company and Larry J. Miller, dated
December 27, 2005. (Incorporated by reference to Exhibit 10.2 to the
Registrant's Current Report on Form 8-K, filed with the Commission on
January 3, 2006.)
10.15 Codorus Valley Bancorp, Inc. Change in Control and Supplemental
Benefit Trust Agreement between Codorus Valley Bancorp, Inc.,
PeoplesBank, A Codorus Valley Company and Hershey Trust Company, dated
January 25, 2006. (Incorporated by reference to Exhibit 10.1 to the
Registrant's Current Report on Form 8-K, filed with the Commission on
January 27, 2006.)
31a Certification of Principal Executive Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
31b Certification of Principal Financial Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
32 Certification of Principal Executive Officer and Principal Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
-23-
SIGNATURES
Pursuant to 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)
May 9, 2006 /s/ Larry J. Miller
Date ----------------------------------------
Larry J. Miller
President & CEO
(Principal executive officer)
May 9, 2006 /s/ Jann A. Weaver
Date ----------------------------------------
Jann A. Weaver
Treasurer & Assistant Secretary
(Principal financial and
accounting officer)
-24-