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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2004
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)
Registrant's telephone number, including area code (717) 747-1519
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $2.50
par value
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. [X]Yes [ ]No
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Act). [ ]Yes [X]No
The aggregate market value of Codorus Valley Bancorp, Inc.'s voting stock held
by non-affiliates was approximately $48,026,000 as of June 30, 2004.
As of March 10, 2005, Codorus Valley Bancorp, Inc. had 2,995,271 shares of
common stock outstanding, par value $2.50 per share.
DOCUMENTS INCORPORATED BY REFERENCE
2004 Annual Report to Shareholders Parts I, II and IV
Proxy Statement for the Annual Meeting of Shareholders
to be held May 17, 2005 Parts III and IV
1
CODORUS VALLEY BANCORP, INC.
FORM 10-K INDEX
PAGE
PART I
Item
1. Business.................................................................. 3
2. Properties................................................................ 7
3. Legal proceedings......................................................... 8
4. Submission of matters to a vote of security holders....................... 8
PART II
Item
5. Market for Codorus Valley Bancorp, Inc.'s common equity, related
shareholder matters and issuer purchases of equity securities.......... 9
6. Selected financial data................................................... 9
7. Management's discussion and analysis of financial condition
and results of operations.............................................. 9
7A. Quantitative and qualitative disclosures about market risk................ 9
8. Financial statements and supplementary data............................... 11
9. Changes in and disagreements with accountants on accounting
and financial disclosure............................................... 11
9A. Controls and procedures................................................... 11
9B. Other information......................................................... 12
PART III
Item
10. Directors and executive officers of Codorus Valley Bancorp, Inc........... 12
11. Executive compensation.................................................... 12
12. Security ownership of certain beneficial owners and management and
related shareholder matters.......................................... 12
13. Certain relationships and related transactions............................ 13
14. Principal accountant fees and services.................................... 13
PART IV
Item
15. Exhibits and financial statement schedules................................ 13
Signatures ..................................................................... 16
2
PART I
FORWARD-LOOKING STATEMENTS:
Management of Codorus Valley Bancorp, Inc. (Codorus Valley) has made
forward-looking statements in the Annual Report on Form 10-K. These
forward-looking statements may be subject to risks and uncertainties.
Forward-looking statements include the information concerning possible or
assumed future results of operations of Codorus Valley Bancorp, Inc. and its
subsidiaries, PeoplesBank, A Codorus Valley Company (PeoplesBank) and SYC Realty
Company, Inc. (SYC Realty). When words such as "believes," "expects,"
"anticipates" or similar expressions occur in this report, management is making
forward-looking statements.
Readers should note that many factors, some of which are discussed elsewhere in
the report and in the documents that management incorporates by reference, could
affect the future financial results of Codorus Valley and 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 Annual Report on Form 10-K. These factors
include the following:
- 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.
ITEM 1: BUSINESS
Codorus Valley is a Pennsylvania business corporation, incorporated on October
7, 1986. On March 2, 1987, Codorus Valley became a bank holding company, under
the Bank Holding Company Act of 1956. PeoplesBank is its wholly owned bank
subsidiary. SYC Realty Co., Inc. is its wholly owned nonbank subsidiary. Codorus
Valley's business consists primarily of managing PeoplesBank, and its principal
source of income is dividends received from PeoplesBank. On December 31, 2004,
Codorus Valley had total consolidated assets of $408 million, total deposits and
other liabilities of $372 million, and total shareholders' equity of $36
million.
BANK SUBSIDIARY
PeoplesBank, organized in 1934, is a Pennsylvania chartered bank. It is not a
member of the Federal Reserve System. PeoplesBank offers a full range of
business and consumer banking services through twelve financial centers located
throughout York County, Pennsylvania. It also offers investment, insurance,
trust and real estate services. The Federal Deposit Insurance Corporation
insures the deposits of PeoplesBank to the maximum extent provided by law. On
December 31, 2004, PeoplesBank had total loans of $302 million and total
deposits of $330 million.
PeoplesBank is not dependent on deposits or exposed to a loan concentration to a
single customer, or a small group of customers. Therefore, losses from a single
customer, or small customer group, would not have a material adverse effect on
the financial condition of PeoplesBank. At year-end 2004, the largest
indebtedness of a single PeoplesBank client was $4,400,000 or 1.5 percent of the
total loan portfolio.
At year-end 2004, the loan portfolio included one industry concentration that
exceeded 10 percent of total loans. The commercial real estate leasing industry
accounted for 12.2 percent of total loans, as compared to 11.8 percent at
year-end 2003. Commercial leasing pertains to borrowers who lease real estate
for business purposes. At year-end 2003, there was also a 10.3 percent
concentration in the agricultural industry.
3
In 1999, PeoplesBank created SYC Insurance Services, Inc. (SYC Insurance) as a
wholly owned subsidiary, to sell nondeposit investment products. SYC Insurance
began operations in January 2000. Products sold by SYC Insurance are not FDIC
insured, not obligations of or guaranteed by PeoplesBank and are subject to
investment risk including the possible loss of principal.
In 1998, PeoplesBank created SYC Settlement Services, Inc. (SYC Settlement), as
a wholly owned subsidiary, to provide real estate settlement services. SYC
Settlement began operations in January 1999. Historically, SYC Insurance and SYC
Settlement have not had a material impact on consolidated operating results.
NONBANK SUBSIDIARIES
In November 2004, Codorus Valley formed CVB Statutory Trust I (Trust), a
wholly-owned special purpose subsidiary. The sole purpose of the Trust is to
execute the pooled trust preferred debt issuance of $3,093,000.
On June 20, 1991, SYC Realty was incorporated as a wholly owned subsidiary of
Codorus Valley. Codorus Valley created this nonbank subsidiary primarily for the
purpose of disposing of selected properties obtained from PeoplesBank in
satisfaction of debts previously contracted. SYC Realty commenced business
operations in October 1995. To date, the financial impact of this subsidiary's
operations on Codorus Valley and PeoplesBank has not been material.
EMPLOYEES
At year-end 2004, PeoplesBank had 128 full-time employees, 28 part-time
employees and 8 seasonal employees. Employees are not covered by a collective
bargaining agreement and management considers its relations with employees to be
good.
SEGMENT REPORTING
Management has determined that it operates in only one segment, community
banking. The Corporation's non-banking activities are insignificant to the
consolidated financial statements.
COMPETITION
The banking industry in PeoplesBank's service area, principally York County,
Pennsylvania, and northern Maryland is extremely competitive. PeoplesBank
competes with commercial banks and other financial service providers such as
thrifts, credit unions, consumer finance companies, investment firms and
mortgage companies. Some financial service providers operating in PeoplesBank's
service area operate on a national and regional scale and possess resources
greater than those of PeoplesBank.
SUPERVISION AND REGULATION
Codorus Valley is registered as a bank holding company and is subject to the
regulations of the Board of Governors of the Federal Reserve System (the Federal
Reserve) under the Bank Holding Company Act of 1956, as amended. The Bank
Holding Company Act requires bank holding companies to file periodic reports
with and is subject to examination by the Federal Reserve. The Federal Reserve
issued regulations under the Bank Holding Company Act that require a bank
holding company to serve as a source of financial and managerial strength to its
subsidiary banks. As a result, the Federal Reserve may require Codorus Valley to
use its resources to provide adequate capital funds to PeoplesBank during
periods of financial stress or adversity.
4
The Bank Holding Company Act prohibits Codorus Valley from acquiring direct or
indirect control of more than 5 percent of the outstanding voting stock of any
bank, or substantially all of the assets of any bank, or merging with another
bank holding company, without the prior approval of the Federal Reserve. The
Pennsylvania Department of Banking must also approve any similar transaction.
Pennsylvania law permits Pennsylvania bank holding companies to control an
unlimited number of banks.
The Bank Holding Company Act restricts Codorus Valley to engaging in activities
that the Federal Reserve has found to be closely related to banking, and which
are expected to produce benefits for the public that will outweigh any
potentially adverse effects. To this end, the Bank Holding Company Act prohibits
Codorus Valley from engaging in most nonbanking businesses, or acquiring
ownership or control of more than 5 percent of the outstanding voting stock of
any company engaged in a nonbanking business, unless the Federal Reserve has
determined that the nonbanking business is closely related to banking. Under the
Bank Holding Company Act, the Federal Reserve may require a bank holding company
to end a nonbanking business if it constitutes a serious risk to the financial
soundness and stability of any bank subsidiary of the bank holding company.
The operations of PeoplesBank are subject to federal and state statutes
applicable to banks chartered under the banking laws of the Commonwealth of
Pennsylvania and whose deposits the Federal Deposit Insurance Corporation (FDIC)
insures.
The FDIC is the primary federal regulator of PeoplesBank. It regularly examines
banks in such areas as loss allowances, loans, investments, management practices
and other aspects of operations. These examinations are designed for the
protection of PeoplesBank's depositors rather than Codorus Valley's
shareholders. PeoplesBank must furnish annual and quarterly reports to the FDIC.
Federal and state banking laws and regulations govern such things as: the scope
of a bank's business, the investments a bank may make, the reserves against
deposits a bank must maintain, the types and terms of loans a bank may make and
the collateral it may take, the activities of a bank with respect to mergers and
consolidations, the establishment of branches, and the sale of nondeposit
investment products by the bank and its insurance subsidiary. The Pennsylvania
Insurance Department, the Securities and Exchange Commission (SEC) and the
National Association of Securities Dealers (NASD) control and supervise the
licensing and activities of employees engaged in the sale of nondeposit
investment products.
Pennsylvania business and banking laws restrict dividend payments if certain
conditions are met, and Codorus Valley and PeoplesBank are subject to regulatory
capital requirements. More information about dividend restrictions and capital
requirements can be found in Note 11 -- Regulatory Matters, to the financial
statements of the 2004 Annual Report to Shareholders.
The Federal Reserve Act imposes restrictions on a subsidiary bank of a bank
holding company, such as PeoplesBank. The restrictions affect extensions of
credit to the bank holding company and its subsidiaries, investments in the
stock or other securities of the bank holding company and its subsidiaries, and
taking such stock or securities as collateral for loans. The Federal Reserve Act
and the Federal Reserve regulations also place limitations and reporting
requirements on extensions of credit by a bank to the principal shareholders of
its parent holding company, among others, and to related interests of such
principal shareholders. In addition, such legislation and regulation may affect
the terms upon which any person becoming a principal shareholder of a holding
company may obtain credit from banks with which the subsidiary bank maintains a
correspondent relationship.
5
PeoplesBank and the banking industry in general, are affected by the monetary
and fiscal policies of government agencies, including the Federal Reserve.
Through open market securities transactions and changes in its federal funds and
discount rates and reserve requirements, the Federal Reserve exerts considerable
influence over the cost and availability of funds for lending and investment.
A brief discussion of recent federal agency pronouncements that affect Codorus
Valley and/or PeoplesBank follows.
THE AMERICAN JOBS CREATION ACT OF 2004 In 2004, the American Jobs Creation Act
(Act) was enacted as the first major corporate tax act in years. The Act
addresses a number of areas of corporate taxation including executive deferred
compensation restrictions. The impact of the Act on Codorus Valley is unknown at
this time, but management is monitoring its developments.
SARBANES-OXLEY ACT OF 2002 The Sarbanes-Oxley Act (SOA) was signed into law in
July 2002 and applies to all companies, both U.S. and non-U.S. that file
periodic reports under the Securities Exchange Act of 1934. The stated goals of
the SOA are to increase corporate responsibility, to provide for enhanced
penalties for accounting and auditing improprieties at publicly traded companies
and to protect investors by improving the accuracy and reliability of corporate
disclosures pursuant to the securities laws. The SOA is the most far-reaching
U.S. securities legislation enacted in some time. The SEC is responsible for
establishing rules to implement various provisions of the SOA. The SOA includes
very specific disclosure requirements and new corporate governance rules,
requires the SEC and securities exchanges to adopt extensive additional
disclosure, corporate governance and other related rules and mandates further
studies of certain issues by the SEC. The SOA represents significant regulation
of the accounting profession, and has greatly impacted state corporate law, such
as the relationship between a board of directors and management and between a
board of directors and its committees.
Compliance costs associated with SOA, particularly Section 404, are expected to
increase in the period ahead. Section 404 requires publicly held companies to
document, test and certify that their internal control systems over financial
reporting are effective.
The SOA addresses, among other matters:
- audit committees for all reporting companies;
- certification of financial statements by the chief executive officer
and the chief financial officer;
- the forfeiture of bonuses or other incentive-based compensation and
profits from the sale of an issuer's securities by directors and
senior officers in the twelve month period following initial
publication of any financial statements that later require
restatement;
- a prohibition on insider trading during pension plan black out
periods;
- disclosure of off-balance sheet transactions;
- expedited filing requirements for Form 4's;
- disclosure of a code of ethics and filing of a Form 8-K for a change
or waiver of such code;
- "real time" filing of periodic reports;
- the formation of a public accounting oversight board;
- auditor independence; and
- various increased criminal penalties for violations of securities
laws.
USA PATRIOT ACT OF 2001 In October of 2001, the USA Patriot Act of 2001 was
enacted to strengthen U.S. law enforcement's and the intelligence communities'
abilities to work cohesively to combat terrorism on a variety of fronts. The
potential impact of the Patriot Act on financial institutions of all kinds is
significant and wide ranging. The Patriot Act contains sweeping anti-money
laundering and financial transparency laws and imposes various regulations,
including standards for verifying client identification at account opening, and
rules to promote cooperation among financial institutions,
6
regulators and law enforcement entities in identifying parties that may be
involved in terrorism or money laundering.
Periodically, various types of federal and state legislation are proposed that
could result in additional regulation of, and restrictions on, the business of
Codorus Valley and PeoplesBank. 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. As a consequence of the extensive
regulation of commercial banking activities in the United States of America,
Codorus Valley and PeoplesBank's business is particularly susceptible to being
affected by federal legislation and regulations that may increase the cost of
doing business. Except as specifically described above, management believes that
the effect of the provisions of the aforementioned legislation on the liquidity,
capital resources, and results of operations of Codorus Valley will not be
material. 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.
OTHER INFORMATION
The required statistical information for Item 1 can be found in the 2004 Annual
Report to Shareholders, which is incorporated by reference under Exhibit 13.
The Annual Report on Form 10-K is filed with the Securities and Exchange
Commission (SEC). Copies of this document and other SEC filings by Codorus
Valley Bancorp, Inc. may be obtained electronically at PeoplesBank's website at
www.peoplesbanknet.com (select Investor Relations, then select SEC filings), or
the SEC's website at www.sec.gov/edgarhp.htm. Copies can also be obtained
without charge by writing to: Treasurer, Codorus Valley Bancorp, Inc., P.O. Box
2887, York, PA 17405-2887.
ITEM 2: PROPERTIES
Codorus Valley owns the following property in fee, subject to two liens. A
regional financial institution holds a first lien for approximately $1.7 million
and Codorus Valley's wholly owned subsidiary PeoplesBank holds a second lien for
approximately $2 million.
Codorus Valley Corporate Center--The Corporate Center is located at 105
Leader Heights Road, York Township, York, PA. This facility serves as the
corporate headquarters and is approximately 40,000 square feet.
Approximately sixty-seven percent of the leasable space is leased to
PeoplesBank; the remaining thirty-three percent, which is currently leased
to nonaffiliated parties. The Corporate Center is adjacent to
PeoplesBank's Data Operations Center and the Leader Heights office.
PeoplesBank owns the following properties in fee and without liens:
Glen Rock Office--Located at 1 Manchester Street in the borough of Glen
Rock, PA. Two bank-owned parking lots are located nearby on Hanover Street
and at 7 Manchester Street in the borough of Glen Rock.
Jacobus Office--Located at 1 North Main Street in the borough of
Jacobus, PA.
Jefferson Office--Located at 6 Baltimore Street in Jefferson Borough,
PA. A bank-owned parking lot is located nearby at 10 Baltimore Street in
Jefferson Borough.
7
York New Salem Office--Located at 320 North Main Street in the borough
of York New Salem, PA.
Leader Heights Office--This facility serves as both a banking office and
data operations center. It is located at 109 Leader Heights Road in York
Township, PA.
Cape Horn Office--Located at 2587 Cape Horn Road, Red Lion in the
Township of Windsor, PA.
East York Office--Located at 2701 Eastern Boulevard, York in the
Township of Springettsbury, PA.
PeoplesBank leases the following properties:
Stewartstown Office--Located at 2 Ballast Lane in the borough of
Stewartstown, PA. This office is a 1,278 square foot unit of a business
complex known as Village Square at Stewartstown. The lease, signed
November 29, 1993, is for a twenty-year term with four five-year term
renewal options.
South Hanover Office--Located at 1400 Baltimore Street, Hanover in Penn
Township, PA. This office is a 1,850 square foot unit adjacent to a
Rutter's Farm Store and gas station. The capital lease, effective February
1, 2001, is for a fifteen-year term with three five-year term renewal
options.
East Market Street Office--Located at 118 E. Market Street, York City,
PA. This office is a 1,750 square foot unit located in the City of York.
Management has negotiated a short-term lease for this space.
West Philadelphia Street Office--Located at 221 W. Philadelphia Street,
York City, PA. This office is a 2,814 square foot unit located in the City
of York. The lease, effective December 10, 2002, is for an eight-year term
with two five-year term renewal options.
Brogue Office--Located at 2510 Delta Road in Chanceford Township, PA.
This office is a 1,600 square foot portion of a business complex known as
Brogue Center. The lease, effective November 5, 2004, is for a five-year
term with five five-year term renewal options.
West York Office--Located at 1477 Carlisle Road in West Manchester
Township, PA. This office is a 2,800 square foot unit. The lease,
effective December 1, 2004, is for a ten-year term with three five-year
term renewal options.
All of the above properties are located in York County, Pennsylvania and, in the
opinion of management, are adequate for the business purposes of Codorus Valley
and its subsidiaries.
ITEM 3: LEGAL PROCEEDINGS
Legal proceedings appear in the 2004 Annual Report to Shareholders, under Note
16 -- Contingent Liabilities on page 26 and under the caption Forfeiture Action
Related to Mortgaged Property on page 46 of Exhibit 13.
8
Codorus Valley is involved in no other material litigation other than routine
litigation incident to the nature of its business. In addition, management is
not aware of any material proceedings pending, threatened or contemplated
against Codorus Valley and PeoplesBank by government authorities.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5: MARKET FOR CODORUS VALLEY BANCORP, INC.'S COMMON EQUITY, RELATED
SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market and dividend information appearing in the 2004 Annual Report to
Shareholders, under the caption "Stock, Dividend and Broker Information", is
incorporated by reference in response to this item and is included on page 52 of
Exhibit 13.
As of March 10, 2005, Codorus Valley had approximately 964 shareholders of
record.
Related shareholder information appearing in the 2004 Annual Report to
Shareholders, under the caption "Shareholders' Equity and Capital Adequacy",
included in Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations, is incorporated by reference in response to
this item and is included on page 43 of Exhibit 13.
Information appearing in the 2005 Proxy Statement, under the caption "Securities
Authorized for Issuance under Equity Compensation Plans" is incorporated by
reference in response to this item.
ITEM 6: SELECTED FINANCIAL DATA
Information appearing in the 2004 Annual Report to Shareholders, under the
caption "Selected Financial Data", is incorporated by reference in response to
this item and is included on page 5 of Exhibit 13.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Consolidated Financial Condition and
Results of Operations in the 2004 Annual Report to Shareholders is incorporated
by reference in response to this item and is included on pages 31 through 51 of
Exhibit 13.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information appearing in the 2004 Annual Report to Shareholders, under the
caption "Market Risk Management" included in Management's Discussion and
Analysis of Consolidated Financial Condition and Results of Operations, is
incorporated by reference in response to this item and is included on page 49 of
Exhibit 13.
The Asset-Liability Management Committee of PeoplesBank manages interest rate
risk primarily through sensitivity analysis, which is described in the 2004
Annual Report to Shareholders on pages 49 and 50 of Exhibit 13. Periodically, it
may also use a gap analysis as a secondary means for managing interest rate
risk. The gap analysis begins by assigning interest rate sensitive assets and
interest rate sensitive liabilities into future time periods, typically one
year, based on a scheduled maturity or repricing date. Repriceable liabilities
are then subtracted from repriceable assets to determine a difference, or gap.
The measurement process relies on many assumptions such as the amount and timing
9
of repriceable cash flows from interest rate sensitive assets and liabilities.
The following assumptions are made about repriceable cash flows from interest
rate sensitive assets:
- - variable rate instruments reprice daily,
- - adjustable rate instruments reprice at the interest maturity date,
- - fixed rate loans reprice at their scheduled maturity date and include
estimated prepayments,
- - fixed rate investment securities, except for mortgage-backed instruments,
reprice at their scheduled maturity date, or call date if more
appropriate, and
- - fixed rate mortgage-backed instruments reprice based on principal paydown
estimates.
Generally, cash flow assumptions for interest sensitive assets apply to interest
sensitive liabilities with the exception of NOW, money market and savings
deposits, which do not have scheduled maturities. Technically, NOW, money market
and savings deposits can be repriced at any time. Historically, these deposits
and rates have been relatively stable despite changes in market interest rates.
This presumption about stability was incorporated in the current measurement
process.
A schedule showing balance sheet repricing characteristics and an estimate of
gap at December 31, 2004 is provided below. The gap is one way to measure how a
change in market interest rates might impact net interest income for specific
time frames. For example, the cumulative gap in the "181-365" repricing category
represents a one year net asset position of $25.3 million or 6.8 percent of
interest earning assets on December 31, 2004. The asset sensitive gap position
implies that over the next year net income will increase if market interest
rates rise and decrease if rates decline. The theory is that more assets will
reprice, at higher market interest rates, than the liabilities that fund them.
A gap analysis is limited in its usefulness since it represents a one-day
position, which is continually changing and not necessarily indicative of
Codorus Valley's position at any other time. Gap analysis does not consider the
complexity of interest rate relationships and spreads depending on the
direction, magnitude and timing of changes in market interest rates.
Additionally, it does not consider the impact of financial strategies that
management could employ. Due to its limitations, interest rate risk implications
from a gap analysis may differ significantly from the results of an interest
sensitivity/simulation analysis.
10
Codorus Valley Bancorp, Inc.
Balance Sheet Gap Analysis
After
at December 31, 2004 0-30 31-90 91-180 181-365 1-2 2-5 5
(dollars in thousands) Days Days Days Days Years Years Years Total
-------- -------- -------- -------- -------- -------- -------- --------
Interest earning assets:
Interest earning deposits $ 19 $ 0 $ 0 $ 100 $ 0 $ 0 $ 0 $ 119
Securities,
available-for-sale 281 3,569 2,854 10,370 13,635 23,669 8,209 62,587
Securities,
held-to-maturity 0 0 0 0 0 0 9,103 9,103
Restricted investment in stock 2,450 0 0 0 0 0 0 2,450
Loans held for sale 1,589 0 0 0 0 0 0 1,589
Loans 112,563 10,471 15,079 35,237 41,871 78,571 4,879 298,671
-------- -------- -------- -------- -------- -------- -------- --------
Total $116,902 $ 14,040 $ 17,933 $ 45,707 $ 55,506 $102,240 $ 22,191 $374,519
Interest bearing
liabilities:
NOW deposits $ 0 $ 10,797 $ 0 $ 0 $ 0 $ 0 $ 32,391 $ 43,188
Money market deposits 13,128 46,421 0 0 0 28,452 0 88,001
Savings deposits 0 4,817 0 0 0 0 14,451 19,268
Time CDs less than $100,000 22,266 9,814 9,361 13,711 20,563 36,051 0 111,766
Time CDs $100,000 and above 6,422 2,858 1,733 3,366 2,597 9,441 0 26,417
Short-term borrowings 12,880 0 0 0 0 0 0 12,880
Long-term borrowings 1,803 3,243 225 6,440 936 6,616 7,350 26,613
-------- -------- -------- -------- -------- -------- -------- --------
Total $ 56,499 $ 77,950 $ 11,319 $ 23,517 $ 24,096 $ 80,560 $ 54,192 $328,133
Period gap $ 60,403 $(63,910) $ 6,614 $ 22,190 $ 31,410 $ 21,680 $(32,001) $ 46,386
Cumulative gap $ 60,403 $ (3,507) $ 3,107 $ 25,297 $ 56,707 $ 78,387 $ 46,386
Cumulative gap as a % of
interest earning assets
at December 31, 2004 16.1 (0.9) 0.8 6.8 15.1 20.9 12.4
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Codorus Valley's Consolidated Financial Statements and the Notes thereto, in the
2004 Annual Report to Shareholders, are incorporated by reference in response to
this item and are included on pages 6 through 30 of Exhibit 13. Table 13-Summary
of Quarterly Financial Data included in Management's Discussion and Analysis of
Consolidated Financial Condition and Results of Operations, in the 2004 Annual
Report to Shareholders, is incorporated by reference in response to
supplementary financial data and is included on page 51 of Exhibit 13.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A: CONTROLS AND PROCEDURES
Codorus Valley maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the company 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 SEC. Based upon their evaluation of those controls and procedures
performed as of December
11
31, 2004, 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 over
financial reporting or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of the controls by the chief
executive and chief financial officers.
ITEM 9B: OTHER INFORMATION
Nothing to report.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF CODORUS VALLEY BANCORP, INC.
Information appearing in the Proxy Statement relating to the 2005 Annual Meeting
of Shareholders to be held May 17, 2005 (Proxy Statement), under the captions
"Information about Nominees and Continuing Directors" and "Executive Officers"
is incorporated by reference in response to this item.
The Corporation has adopted a Code of Business Conduct and Ethics (Code of
Ethics) as defined in Item 406 of Regulation S-K. The Code of Ethics was filed
as Exhibit 14 to a Form 8-K, filed with the SEC on September 16, 2004 and is
incorporated by reference in response to this item. The Code of Ethics is also
published on PeoplesBank's website at www.peoplesbanknet.com, under the Investor
Relations tab.
Information regarding Section 16(a) Beneficial Ownership Reporting Compliance
follows. Section 16(a) of the Securities Exchange Act of 1934, requires that the
Corporation's officers and directors, and persons who own more than 10% of the
registered class of the Corporation's equity securities, file reports of
ownership and changes in ownership with the SEC. Officers, directors and greater
than 10% shareholders are required by SEC regulation to furnish the Corporation
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of Forms 3, 4 and 5 and amendments
thereto received by it, or written representations from certain reporting
persons that no Form 5 was required for that reporting person, the Corporation
believes that during the period from January 1, 2004 through December 31, 2004,
its officers and directors were in compliance with all filing requirements
applicable to them except for PeoplesBank senior vice president Scott T. Weaver
who filed one late Form 4 to report a transaction during 2004.
ITEM 11: EXECUTIVE COMPENSATION
Information appearing in the Proxy Statement, under the captions "Compensation,"
"Compensation Committee Report on Executive Compensation" and "Shareholder
Return Performance Graph" is incorporated by reference in response to this item.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS
Information appearing in the Proxy Statement, under the caption "Share
Ownership" and "Compensation and Plan Information" is incorporated by reference
in response to this item.
12
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information appearing in the Proxy Statement, under the caption "Transactions
with Directors and Executive Officers," is incorporated by reference in response
to this item.
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information appearing in the Proxy Statement, under the caption "Report of the
Audit Committee," is incorporated by reference in response to this item.
PART IV
ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this Form 10-K report.
1. Financial Statements
The following consolidated statements of Codorus Valley Bancorp,
Inc. are incorporated by reference in Part II, Item 8 hereof:
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Condition
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Shareholders' Equity
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Required financial statement schedules are omitted. This information
is either not applicable, not required or is shown in the respective
financial statements or in the notes thereto.
3. Exhibits filed as part of 10-K pursuant to Item 601 of Regulation
S-K.
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. 333-09277 on Form S-8, filed with the
Commission on July 31, 1996.)
10.2 Amendment to the Employment Agreement by and among PeoplesBank, A
Codorus Valley Company, Codorus Valley Bancorp, Inc. and Larry J.
Miller
13
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 20, 2003.)
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 on March 20, 2003.)
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 10.3 to the
Registrant's Current Report on Form 8-K, filed with the Commission on
March 20, 2003.)
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 Salary Continuation Agreement dated October 1, 1998 between
PeoplesBank, A Codorus Valley Company and Larry J. Miller
10.10 Salary Continuation Agreement dated October 1, 1998 between
PeoplesBank, A Codorus Valley Company and Harry R. Swift
10.11 Salary Continuation Agreement dated October 1, 1998 between
PeoplesBank, A Codorus Valley Company and Jann Allen Weaver
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
10.13 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
14
11 Statement re: Computation of Earnings Per Share (Incorporated by
reference to Exhibit 13 hereof 2004 Annual Report to Shareholders at
Note 1 to the Consolidated Financial Statements.)
13 Excerpts from the Annual Report to Shareholders for fiscal year ended
December 31, 2004.
14 Code of Ethics (Incorporated by reference to Exhibit 14 to Codorus
Valley's Current Report on Form 8-K, filed with the Commission on
September 16, 2004.)
21 List of subsidiaries of Codorus Valley Bancorp, Inc.
23 Consent of Independent Registered Public Accounting Firm
24 Power of Attorney
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
15
SIGNATURES
Under the requirements of Section 13 or 15(d) 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)
/s / Larry J. Miller
- --------------------
Larry J. Miller, President Date: March 22, 2005
and Chief Executive Officer
Under the requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dated indicated.
Signature and Capacity
/s/ Rodney L. Krebs Chairman of the Board of 3/22/05
- ------------------- Directors and Director
Rodney L. Krebs
/s/ Larry J. Miller President, Chief Executive Officer, 3/22/05
- ------------------- Vice Chairman of the Board of
Larry J. Miller Directors and Director
(Principal Executive Officer)
/s/ D. Reed Anderson Director 3/22/05
- --------------------
D. Reed Anderson, Esq.
/s/ M. Carol Druck Director 3/22/05
- ------------------
M. Carol Druck
/s/ MacGregor S. Jones Director 3/22/05
- ----------------------
MacGregor S. Jones
__________________ Director 3/22/05
Dallas L. Smith
/s/ Donald H. Warner Director 3/22/05
- --------------------
Donald H. Warner
/s/ Michael L. Waugh Director 3/22/05
- --------------------
Michael L. Waugh
/s/ Jann A. Weaver Treasurer and Assistant Secretary 3/22/05
- ------------------
Jann A. Weaver
(Principal Financial Officer)
__________________ Vice President and Secretary 3/22/05
Harry R. Swift, Esq.
/s/ Diane E. Hill Vice President 3/22/05
- -----------------
Diane E. Hill
16
EXHIBIT INDEX
Page # in
manually signed
Exhibit original
Number Description of Exhibit Form 10-K
- ------- -------------------------------------------------------------------------------- ---------------
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. 333-09277 on Form S-8, filed with the Commission on
July 31, 1996.)
10.2 Amendment 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 20, 2003.)
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, filed with the Commission on March 20, 2003.)
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 10.3 to the Registrant's Current Report on
Form 8-K, dated and filed with the Commission March 20, 2003.)
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.)
17
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 Salary Continuation Agreement dated October 1, 1998 between PeoplesBank, A
Codorus Valley Company and Larry J. Miller 19-31
10.10 Salary Continuation Agreement dated October 1, 1998 between PeoplesBank, A
Codorus Valley Company and Harry R. Swift 32-44
10.11 Salary Continuation Agreement dated October 1, 1998 between PeoplesBank, A
Codorus Valley Company and Jann Allen Weaver 45-57
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 58-68
10.13 Sample form 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 69-77
11 Statement re: Computation of Earnings Per Share (Incorporated by reference to
Exhibit 13, 2004 Annual Report to Shareholders at Note 1 to the Consolidated
Financial Statements.) 87
13 Excerpts from the Annual Report to Shareholders for fiscal year ended December
31, 2004. 78-127
14 Code of Ethics (Incorporated by reference to Exhibit 14 to Codorus Valley's
Current Report on Form 8-K, filed with the Commission on September 16, 2004.)
21 List of subsidiaries of the Registrant 128
23 Consent of Independent Registered Public Accounting Firm 129
24 Power of Attorney 130-131
31a Certification of Principal Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 132
31b Certification of Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 133
32 Certification of Principal Executive Officer and Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 134
18