Regulatory Matters

9 Months Ended

Sep. 30, 2016

Regulatory Matters [Abstract]

Regulatory Matters

Note 9—Regulatory Matters

Codorus Valley and PeoplesBank are subject to various regulatory capital requirements.  Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if imposed, could have a material adverse 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.

On July 2, 2013, the Board of Governors of the Federal Reserve System finalized its rule implementing the Basel III regulatory capital framework, which the FDIC adopted on July 9, 2013. Under the rule, minimum requirements increased both the quantity and quality of capital held by banking organizations. Consistent with the Basel III framework, the rule included a new minimum ratio of common equity Tier 1 capital to risk-weighted assets of 4.5 percent, and a common equity Tier 1 conservation buffer of 2.5 percent of risk-weighted assets, that applies to all supervised financial institutions, which is to be phased in over a four year period beginning January 1, 2016, with the full 2.5 percent required as of January 1, 2019.  The rule also raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4 percent to 6 percent, and includes a minimum leverage ratio of 4 percent for all banking organizations. The new rule also increased the risk weights for past-due loans, certain commercial real estate loans, and some equity exposures, and makes selected other changes in risk weights and credit conversion factors. The rule for smaller, less complex institutions, including the Corporation, took effect January 1, 2015.

As of September 30, 2016, Codorus Valley and PeoplesBank met the minimum requirements of the Basel III framework, and PeoplesBank’s capital ratios exceeded the amount to be considered “well capitalized” as defined in the regulations.  The table below provides a comparison of the Corporation’s and PeoplesBank’s risk-based capital ratios and leverage ratios to the minimum regulatory requirement for the periods indicated.  

						Minimum for				Well Capitalized
		Actual				Capital Adequacy (1)				Minimum (2)
(dollars in thousands)		Amount	Ratio			Amount	Ratio			Amount	Ratio
Codorus Valley Bancorp, Inc. (consolidated)
at September 30, 2016
Capital ratios:
Common equity Tier 1	$	150,485	12.18	%	$	63,324	5.125	%		n/a	n/a
Tier 1 risk based		160,485	12.99			81,858	6.625			n/a	n/a
Total risk based		174,710	14.14			106,569	8.625			n/a	n/a
Leverage		160,485	10.53			60,967	4.00			n/a	n/a
at December 31, 2015
Capital ratios:
Common equity Tier 1	$	143,456	12.56	%	$	51,395	4.50	%		n/a	n/a
Tier 1 risk based		165,456	14.49			68,527	6.00			n/a	n/a
Total risk based		178,160	15.60			91,370	8.00			n/a	n/a
Leverage		165,456	11.73			56,398	4.00			n/a	n/a
PeoplesBank, A Codorus Valley Company
at September 30, 2016
Capital ratios:
Common equity Tier 1	$	156,897	12.73	%	$	63,151	5.125	%	$	80,094	6.50	%
Tier 1 risk based		156,897	12.73			81,634	6.625			98,577	8.00
Total risk based		171,122	13.89			106,279	8.625			123,222	10.00
Leverage		156,897	10.32			60,828	4.00			76,035	5.00
at December 31, 2015
Capital ratios:
Common equity Tier 1	$	149,073	13.10	%	$	51,227	4.50	%	$	73,994	6.50	%
Tier 1 risk based		149,073	13.10			68,302	6.00			91,070	8.00
Total risk based		161,777	14.21			91,070	8.00			113,837	10.00
Leverage		149,073	10.60			56,248	4.00			70,310	5.00

(1) Minimum amounts and ratios as of September 30, 2016 include the first year phase in of the capital conservation buffer of 0.625 percent required by the Basel III framework.  The conservation buffer is to be phased in over a four year period beginning January 1, 2016, with the full 2.5 percent required as of January 1, 2019.

(2) To be “well capitalized” under the prompt corrective action provisions in the Basel III framework.  “Well capitalized” applies to PeoplesBank only.