Regulatory Matters

3 Months Ended

Mar. 31, 2024

Regulatory Matters [Abstract]

Regulatory Matters

Note 8—Regulatory Matters

The Corporation is subject to restrictions on the payment of dividends to its shareholders pursuant to the Pennsylvania Business Corporation Law of 1988, as amended (“BCL”). The BCL prohibits the making of a dividend payment if such payment would render the Corporation insolvent or result in it having negative net worth. Federal and state banking regulations also place certain restrictions on dividends paid and loans or advances made by PeoplesBank to the Corporation. The amount of total dividends, which may be paid at any date, is generally limited to the retained earnings of PeoplesBank. Furthermore, dividend payments would be prohibited if the effect would be to cause PeoplesBank’s capital to fall below applicable minimum capital requirements as discussed below. Loans and advances by PeoplesBank to affiliates, including the Corporation, are limited to 10 percent of PeoplesBank’s capital stock and contributed capital on a secured basis.

Banks are also subject to regulatory capital requirements administered by federal banking agencies.  Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off balance sheet items calculated under regulatory accounting practices.  Capital amounts and classifications are also subject to qualitative judgments by regulators.  Failure of a bank to meet capital requirements can cause bank regulators to initiate certain regulatory actions.  The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital.  Management believes as of March 31, 2024, the Bank met all capital adequacy requirements to which it is subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At March 31, 2024 and December 31, 2023, the most recent regulatory notifications categorized PeoplesBank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

The table below sets for the Corporation’s and PeoplesBank’s capital positive relative to its respective regulatory capital requirements at March 31, 2024 and December 31, 2023.

									To Be Well Capitalized Under
					Required for Capital				Prompt Corrective Action
	Actual (1)				Adequacy Purposes (2) (3)				Provisions (2)
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Codorus Valley Bancorp, Inc. (consolidated)
at March 31, 2024
Capital ratios:
Common equity Tier 1	$	231,381	12.85	%	$	126,071	7.00	%	$	n/a	n/a	%
Tier 1 risk based		241,381	13.40			153,086	8.50			n/a	n/a
Total risk based		294,201	16.34			189,106	10.50			n/a	n/a
Leverage		241,381	10.80			89,386	4.00			n/a	n/a
at December 31, 2023
Capital ratios:
Common equity Tier 1	$	228,163	12.79	%	$	124,875	7.00	%	$	n/a	n/a	%
Tier 1 risk based		238,163	13.35			151,634	8.50			n/a	n/a
Total risk based		289,514	16.23			187,312	10.50			n/a	n/a
Leverage		238,163	10.75			88,627	4.00			n/a	n/a
PeoplesBank, A Codorus Valley Company
at March 31, 2024
Capital ratios:
Common equity Tier 1	$	267,241	14.86	%	$	125,860	7.00	%	$	116,870	6.50	%
Tier 1 risk based		267,241	14.86			152,829	8.50			143,839	8.00
Total risk based		288,886	16.07			188,789	10.50			179,799	10.00
Leverage		267,241	11.97			89,268	4.00			111,585	5.00
at December 31, 2023
Capital ratios:
Common equity Tier 1	$	264,967	14.89	%	$	124,606	7.00	%	$	115,705	6.50	%
Tier 1 risk based		264,967	14.89			151,307	8.50			142,407	8.00
Total risk based		285,473	16.04			186,909	10.50			178,008	10.00
Leverage		264,967	11.98			88,478	4.00			110,598	5.00

(1) Net unrealized gains and losses on securities available-for-sale, net of taxes, are disregarded for capital ratio computation purposes in accordance with federal regulatory banking guidelines.

(2) The Corporation is currently not subject to the regulatory capital requirements imposed by Basel III on bank holding companies because the Corporation's consolidated assets did not exceed $3.0 billion as of March 31, 2024 and therefore qualified as a small bank holding company.

(3) Ratio includes Capital Conservation Buffer of 2.50%, except Leverage Ratio, for which the Capital Conservation Buffer does not apply.