Regulatory Matters

9 Months Ended

Sep. 30, 2018

Regulatory Matters [Abstract]

Regulatory Matters

Note 8—Regulatory Matters

The Corporation 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 the Corporation’s financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation 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, 2018, the Corporation 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, 2018
Capital ratios:
Common equity Tier 1	$	175,204	11.82	%	$	94,493	6.375	%		n/a	n/a
Tier 1 risk based		185,204	12.49			116,726	7.875			n/a	n/a
Total risk based		203,438	13.73			146,371	9.875			n/a	n/a
Leverage		185,204	10.39			71,335	4.00			n/a	n/a
at December 31, 2017
Capital ratios:
Common equity Tier 1	$	162,860	11.58	%	$	80,842	5.750	%		n/a	n/a
Tier 1 risk based		172,860	12.29			101,932	7.250			n/a	n/a
Total risk based		189,549	13.48			130,051	9.250			n/a	n/a
Leverage		172,860	10.26			67,382	4.00			n/a	n/a
PeoplesBank, A Codorus Valley Company
at September 30, 2018
Capital ratios:
Common equity Tier 1	$	181,193	12.25	%	$	94,260	6.375	%	$	96,108	6.50	%
Tier 1 risk based		181,193	12.25			116,439	7.875			118,287	8.00
Total risk based		199,427	13.49			146,011	9.875			147,859	10.00
Leverage		181,193	10.18			71,188	4.00			88,986	5.00
at December 31, 2017
Capital ratios:
Common equity Tier 1	$	168,879	12.04	%	$	80,630	5.750	%	$	91,147	6.50	%
Tier 1 risk based		168,879	12.04			101,664	7.250			112,181	8.00
Total risk based		185,568	13.23			129,709	9.250			140,226	10.00
Leverage		168,879	10.05			67,234	4.00			84,043	5.00

(1) Minimum amounts and ratios as of September 30, 2018 include the third year phase in of the capital conservation buffer of 1.875 percent required by the Basel III framework.  At December 31, 2017, the minimum amounts and ratios included the second year phase in of the capital conservation buffer of 1.25 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.