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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
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.)
1 Manchester Street, P.O. Box 67, Glen Rock, Pennsylvania 17327
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 717-846-1970
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NOT APPLICABLE NOT APPLICABLE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $2.50 per share
(Title of class)
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 if 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 definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
On February 25, 1997, the aggregate market value of the Registrant's voting
stock held by non-affiliates was approximately, $27,112,000.
As of February 25, 1997, Codorus Valley Bancorp, Inc. had 1,045,296 shares of
common stock outstanding, par value $2.50 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Document: Parts:
1996 Annual Report to Stockholders I, II and IV
Proxy Statement for the Annual Meeting of
Stockholders to be held May 20, 1997. III and IV
1
Codorus Valley Bancorp, Inc.
Form 10-K Index
Part I Page
Item 1 Business............................................ 3
Item 2 Properties.......................................... 6
Item 3 Legal Proceedings................................... 8
Item 4 Submission of Matters to a Vote of Security Holders. 8
Part II
Item 5 Market for the Registrant's Common Equity and
Related Stockholder Matters......................... 8
Item 6 Selected Financial Data............................. 8
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 8
Item 8 Financial Statements and Supplementary Data......... 9
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. 9
Part III
Item 10 Directors and Executive Officers of the Registrant. 9
Item 11 Executive Compensation............................. 9
Item 12 Security Ownership of Certain Beneficial Owners
and Management..................................... 9
Item 13 Certain Relationships and Related Transactions..... 9
Part IV
Item 14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K........................................ 10
Signatures......................................... 12
2
PART I
Item 1: Business
Codorus Valley Bancorp, Inc. ("Bancorp" or the "Registrant") is a Pennsylvania
business corporation, incorporated on October 7, 1986. On March 2, 1987, Bancorp
became a bank holding company, pursuant to the Bank Holding Company Act of 1956,
as amended. PEOPLESBANK, A Codorus Valley Company ("PEOPLESBANK" or the "Bank")
is its wholly-owned banking subsidiary and SYC Realty Co., Inc. is its
wholly-owned nonbank subsidiary. Since commencing operations, Bancorp's business
has consisted primarily of managing and supervising the Bank, and its principal
source of income has been dividends paid by the Bank. At December 31, 1996,
Bancorp had total consolidated assets of $237.3 million, total deposits and
other liabilities of $214.6 million, and total stockholders' equity of $22.7
million.
Bank Subsidiary
PEOPLESBANK, formerly Peoples Bank of Glen Rock until February 1997, organized
in 1934, is a Pennsylvania chartered bank and is not a member of the Federal
Reserve System. PEOPLESBANK offers a full range of commercial and consumer
banking services through seven full service banking office locations in York
County, Pennsylvania. An eighth full service office, located in East York, is
scheduled to open in April, 1997. PEOPLESBANK also offers trust and investment
services at a separate office located in Pine Grove Commons, York, Pennsylvania.
The deposits of PEOPLES BANK are insured by the Federal Deposit Insurance
Corporation ("FDIC") to the extent provided by law. At December 31, 1996,
PEOPLESBANK had total loans of $166.7 million and total deposits of $209.5
million.
The Bank is not dependent for deposits nor exposed by loan concentration to a
single customer or to a small group of customers. Accordingly, losses from a
single customer, or small customer group, would not have a material adverse
effect on the financial condition of the Bank. At fiscal year end 1996
approximately 15% of total loans were concentrated in the commercial facility
leasing industry and approximately 9% of total loans were concentrated in the
real estate development industry, compared to 7% and 12%, respectively, at year
end 1995.
Nonbank Subsidiary
On June 20, 1991, SYC Realty Company, Inc. ("SYC Realty") was incorporated as a
wholly-owned subsidiary of the Registrant. This nonbank subsidiary was created
primarily for the purpose of disposing of selected properties obtained from the
Bank 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 the Registrant and the Bank has been immaterial.
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Competition
The banking industry in PEOPLESBANK's service area, principally York County,
Pennsylvania, is extremely competitive. The Bank competes with commercial banks
and other financial service providers such as thrifts, credit unions, consumer
finance companies, investment firms, and mortgage companies. Some of the
financial services providers operating in PEOPLESBANK's service area operate on
a regional scale and possess resources greater than those of PEOPLESBANK.
Supervision and Regulation
The Bancorp is subject to regulation by the Pennsylvania Department of Banking,
the Federal Reserve Board ("FRB") and the Securities and Exchange Commission
("SEC"). Bancorp is restricted to activities that are found by the Federal
Reserve Board to be closely related to banking, and which are expected to
produce benefits for the public that will outweigh any potentially adverse
effects.
Provisions of the Bank Holding Company Act of 1956, as amended, ("BHC Act")
require Bancorp to secure the prior approval of the Federal Reserve Board before
it owns or controls, directly or indirectly, more than 5% of the voting shares
or substantially all of the assets of any institution, including another bank.
Bancorp is required to file an annual report with the FRB and any additional
information required pursuant to the BHC Act. The FRB may also make examinations
of Bancorp and each of its subsidiaries. Subsidiary banks of a bank holding
company are subject to certain restrictions imposed by the BHC Act on any
extensions of credit to the bank holding company or any of its subsidiaries,
investments in the stock or securities thereof, and on the taking of such stock
or securities as collateral for loans to any borrower. A bank holding company
and its subsidiaries are also prevented from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or sale of
property or furnishing of services.
PEOPLESBANK is subject to regulation by the Pennsylvania Department of Banking,
the FDIC and the FRB. Federal and state laws and regulations govern, among other
things, the scope of a bank's business, the investments a bank may make, the
reserves against deposits a bank must maintain, loans a bank makes and
collateral it takes, the activities of a bank with respect to mergers and
consolidations, and the establishment of branches. The earnings of the Bank are
also affected by domestic economic conditions and the monetary and fiscal
policies of the United States government and its agencies.
The United States Supreme Court recently rendered a decision in favor of
nationwide insurance sales by banks. The decision also bars states from blocking
insurance sales by national banks in towns with populations of no more than
5,000. Subsequent to the Supreme Court's ruling, the Office of the Comptroller
of the Currency has issued draft guidelines for national banks to sell
insurance. This federal guidance, however, will not necessarily ease
4
state restrictions which currently hinder bank insurance sales. States that have
traditionally been opposed to bank insurance sales could impose licensing
requirements and other restrictions hampering bank insurance activities. Because
the insurance industry is opposed to banks selling and underwriting insurance,
it is difficult to determine to what extent banks will be allowed to engage in
insurance activities and the regulatory costs that will be attached to such
activities.
Congress is currently considering legislative reform centered on repealing the
Glass-Steagall Act which prohibits commercial banks from engaging in the
securities industry. The major initiative proposed by the House Banking
Committee Chairman, James Leach, was recently defeated. The proposal required a
financial services holding company structure which would be permitted to own a
bank and a separately capitalized securities firm. However, banks would be
prohibited from affiliating with insurance companies or nonfinancial firms. The
holding company structure would be regulated by the Federal Reserve Board, and
its subsidiaries would be supervised by the applicable regulator based on their
respective functions. Alternatively, the proposal also permitted a securities
firm to establish an investment bank holding company to own an uninsured
wholesale financial institution and a securities unit. Although Leach's
proposal, as currently drafted, has been cancelled, he has announced plans to
introduce legislation proposing limited regulatory relief.
The passage of the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 and the Riegle Community Development and Regulatory Improvement Act may
have a significant impact upon the Registrant. The key provisions pertain to
interstate banking and interstate branching as well as a reduction in the
regulatory burden on the banking industry. During July 1995, Pennsylvania
amended the provisions of its Banking Code to authorize full interstate banking
and branching under Pennsylvania law and to facilitate the operations of
interstate banks in Pennsylvania. As a result of legal and industry changes,
management predicts that consolidation will continue as the financial services
industry strives for greater cost efficiencies and market share.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
also has impact on how the Bank conducts its business. FDICIA's risk-based
assessment system is designed to promote safety and soundness in the banking and
thrift industries by making the deposit insurance system fairer to well-run
institutions and by encouraging weaker institutions to improve their financial
condition. Current information regarding FDIC issues and costs is provided in
the 1996 Annual Report to Shareholders, within the Management's Discussion
section under the subheading non-interest expenses. Information about Bancorp's
capital ratios can be found in the 1996 Annual Report, within the Management's
Discussion section under the subheading stockholder's equity (including Table
10). Bancorp's and the Bank's capital ratios exceed current regulatory
requirements for well capitalized banks. "Truth-in-Savings" a separate subtitle
within FDICIA, called the "Bank Enterprize Act of 1991," requires
truth-in-savings on consumer deposit accounts so that consumers can make
meaningful comparisons between the competing claims of banks with regard to
deposit accounts and products. The Bank has been providing information to
5
depositors concerning the terms of their deposit accounts, and in particular the
annual percentage yield in compliance with this law.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") reformed supervisory, enforcement and penalty provisions relative to
financial service companies.
Periodically, legislation is enacted which has the effect of increasing the cost
of doing business, limiting or expanding permissible activities or affecting the
competitive balance between banks and other financial institutions. Proposals to
change the laws and regulations governing the operations and taxation of banks,
bank holding companies, and other financial institutions are frequently made in
Congress, and before various bank regulatory agencies. No predictions can be
made as to the likelihood of any major changes or the impact such changes might
have on the assets, earnings or capital of the Bancorp and the Bank.
Other information
At December 31, 1996, the Bank had one hundred and twenty (120) full-time
employees and twenty-one (21) part-time employees.
The required Statistical Information for Item I can be found in Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of this report.
Item 2: Properties
The Bancorp owns in fee and without liens the following properties.
Trust and Investment Services Office
Located at 120 Pine Grove Commons, Pine Grove Road, York, in York Township,
PA. This office is a 1,575 square foot (approximately) unit of a business
condominium complex known as Pine Grove Commons. This space is leased to
its subsidiary, PEOPLESBANK. The lease, as signed on August 17, 1990, is
for a five year term and is renewable every five years thereafter at the
option of the lessee. The lessee pays annual rent of $18,900 during the
said term in monthly installments of $1,575. The fixed rent may be adjusted
annually in reference to the Consumer Price Index as described in the lease
agreement.
Codorus Valley Corporate Center
Currently under construction at 105 Leader Heights Road, York, in York
Township, PA. This 40,000 square foot (approximately) facility will serve
as a corporate headquarters. It is adjacent to the Bank's Data Operations
Center and Leader Heights banking office. Occupancy is expected during the
third quarter of 1997.
6
PEOPLESBANK owns the following properties in fee and without liens.
Glen Rock Office: Currently serves as both a corporate headquarters and
banking office. It is located at 1 Manchester Street in the borough of Glen
Rock, PA. A bank-owned parking lot is located nearby on Hanover Street.
Jacobus Office: Located at 1 North Main Street in the borough of
Jacobus, PA.
Jefferson Office: Located at 6 Baltimore Street in the borough of
Jefferson, PA. A bank-owned parking lot is located nearby at 10
Baltimore Street.
York New Salem Office: Located at 320 North Main Street in the
borough of York New Salem, PA.
Leader Heights Office: 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: In February 1997, the Bank purchased an existing branch
office located at 2701 Eastern Boulevard, York in the township of
Springettsbury, PA. Opening of the full service banking office is scheduled
for April 1997.
Human Resources Office: Located at 7 Manchester Street in the
borough of Glen Rock, PA. This office is a frame dwelling located
next to the Glen Rock banking office.
PEOPLESBANK leases the following property.
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, as signed on
November 29, 1993 is for a twenty year term. The minimum annual rent for
years 1 thru 4 is $15,656, payable in monthly installments of $1,305.
Thereafter, the minimum annual rent will increase at four year intervals.
All of the above properties are located in York County, Pennsylvania and are, in
the opinion of management, adequate for the business purposes of the Registrant
and its subsidiaries.
7
Item 3: Legal Proceedings
Various legal actions or proceedings, arising in the ordinary course of
business, are pending involving the Corporation or its subsidiaries. In the
opinion of management, these matters are without merit or, if determined
adversely to the Registrant, will not have a material impact on the
Corporation's liquidity, capital resources, and results of operations.
Item 4: Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5: Market for the Corporation's Common Equity and Related
Stockholder Matters
Market and dividend information appearing in the 1996 Annual Report to
Stockholders, under the caption "Stock, Dividend and Broker Information," is
incorporated by reference in response to this item and is included in Exhibit
13.
As of February 27, 1996, the Registrant had approximately one thousand,
twenty-one (1,021) stockholders of record.
Related stockholder information appearing in the 1996 Annual Report to
Stockholders, under the caption "Stockholders' Equity," 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 in Exhibit 13.
Item 6: Selected Financial Data
Information appearing in the 1996 Annual Report to Stockholders, under the
caption "Selected Financial Data," is incorporated by reference in response to
this item and is included in Exhibit 13.
Item 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The "Management Discussion and Analysis of Consolidated Financial Condition and
Results of Operations" in the 1996 Annual Report to Stockholders is incorporated
by reference in response to this item and is included in Exhibit 13.
8
Item 8: Financial Statements and Supplementary Data
The Registrant's Consolidated Financial Statements and Notes thereto in the 1996
Annual Report to Stockholders, is incorporated by reference in response to this
item and is included in Exhibit 13.
The Registrant does not meet both of the tests under Item 302(a)(5) of
Regulation S-K, and therefore, is not required to provide supplementary
financial data.
Item 9: Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10: Directors and Executive Officers of the Registrant
Information appearing in the Proxy Statement relating to the Annual Meeting of
Stockholders to be held May 20, 1997 (the "Proxy Statement"), under the caption
"Information as to Nominees, Directors and Executive Officers," is incorporated
by reference in response to this item.
Item 11: Executive Compensation
Information appearing in the Proxy Statement, under the caption "Executive
Compensation," is incorporated by reference in response to this item.
Item 12: Security Ownership of Certain Beneficial Owners and Management
Information appearing in the Proxy Statement, under the caption "Section 16(a)
Beneficial Ownership Compliance," is incorporated by reference in response to
this item.
Item 13: Certain Relationships and Related Transactions
Information appearing in the Proxy Statement, under the caption "Certain
Transactions," is incorporated by reference in response to this item.
9
PART IV
Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements.
The following consolidated statements of Codorus Valley Bancorp,
Inc. are included by reference in Part II, Item 8 hereof:
Report of Independent Auditors
Consolidated Statements of Financial Condition
Consolidated Statements of Income
Consoldated Statements of Cash Flows
Consolidated Statements of Changes in Stockholders' Equity
Notes to Consolidated Financial Statements
2. Financial Statement Schedules are omitted because the required
information is either not applicable, not required or is shown in the
respective financial statements or in the notes thereto.
10
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 25, 1996.)
3(ii) By-laws (Incorporated by reference to Exhibit 3(ii) to
Current Report on Form 8-K, filed with the Commission on
March 25, 1996.)
4 Rights Agreement Dated as of November 4, 1995 (Incorporated
by reference to Current Report on Form 8-K, filed with the
Commission on December 4, 1995.)
10(a) 1996 Stock Incentive Plan (Incorporated by reference to
Exhibit 99 of Registration Statement No. 333-9277 on
Form S-8, filed with the Commission on July 31, 1996.)
10(b) Executive Employment Agreement (Incorporated by reference to
Current Report on Form 8-K, filed with the Commission on
March 25, 1997.)
11 Statement re: Computation of Earnings Per Share
(Incorporated by reference to Exhibit 13 hereof, 1996
Annual Report to Stockholders at Note 1 to the
Consolidated Financial Statements.)
13 Excerpts from the Annual Report to Stockholders for
fiscal year ended December 31, 1996.
21 List of subsidiaries of the Registrant.
23 Consent of Independent Auditors
24 Power of Attorney
27 Financial Data Schedule
(B) Reports on Form 8-K.
The Registrant filed no Current Reports on Form 8-K for the quarter
ended December 31, 1996.
11
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Codorus Valley Bancorp, Inc.
(Registrant)
By /s/ Larry J. Miller Date: March 25, 1997
-------------------------
Larry J. Miller, President
and Chief Executive Officer
Pursuant to 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 dates indicated.
Signature and Capacity
/s/ George A. Trout Chairman of the Board of 3/25/97
- ----------------------- Directors and Director
George A. Trout, D.D.S.
/s/ Larry J. Miller President, Chief Executive 3/25/97
- ------------------------ Officer and Director
Larry J. Miller, President
(Principal Executive Officer)
/s/ Barry A. Keller Vice Chairman of the Board of 3/25/97
- ------------------------ Directors and Director
Barry A. Keller
/s/ Dallas S. Smith Secretary and Director 3/25/97
- ------------------------
Dallas S. Smith
/s/ M. Carol Druck Assistant Secretary, 3/25/97
- ------------------------ Assistant Treasurer and Director
M. Carol Druck
/s/ MacGregor S. Jones Assistant Secretary and 3/25/97
- ------------------------ Director
MacGregor S. Jones
/s/ Rodney L. Krebs Treasurer and Director 3/25/97
- ------------------------
Rodney L. Krebs
/s/ Donald H. Warner Vice President and Director 3/25/97
- ------------------------
Donald H. Warner
/s/ D. Reed Anderson, Esq. Director 3/25/97
- --------------------------
D. Reed Anderson, Esq.
/s/ Jann A. Weaver Assistant Treasurer and 3/25/97
- ------------------------ Assistant Secretary
Jann A. Weaver
(Principal Financial and
Principal Accounting Officer)
12
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 25,
1996.)
3(ii) By-laws (Incorporated by reference to Exhibit 3(ii) to Current Report
on Form 8-K, filed with the Commission on March 25, 1996.)
4 Rights Agreement Dated as of November 4, 1995 (Incorporated by
reference to Current Report on Form 8-K, filed with the Commission on
December 4, 1995.)
10(a) 1996 Stock Incentive Plan (Incorporated by reference to
Exhibit 99 of Registration Statement No. 333-9277 on
Form S-8, filed with the Commission on July 31, 1996.)
10(b) Executive Employment Agreement (Incorporated by reference to Current
Report on Form 8-K, filed with the Commission on March 25, 1997.)
11 Statement re: Computation of Earnings Per Share 23
(Incorporated by reference to Exhibit 13 hereof, 1996
Annual Report to Stockholders at Note 1 to the
Consolidated Financial Statements.)
13 Excerpts from the Annual Report to Stockholders for
fiscal year ended December 31, 1996. 14-52
21 List of subsidiaries of the Registrant. 53
23 Consent of Independent Auditors 54
24 Power of Attorney 55
27 Financial Data Schedule 56
13