Codorus Valley Bancorp (CVLY) is warning investors about higher credit costs a month before its third quarter will end.

The York, Pa., company said in a regulatory filing Thursday that it would record a $1.03 million loan-loss provision for foreclosed real estate for the third quarter. The charge stems from an independent appraisal of a partially developed residential subdivision, the filing said.

The $1 billion-asset company said in the filing that it had an agreement to sell the subdivision lots at an unspecified price, but the buyer "did not perform as provided in the contract." The failed contract prompted Codorus Valley to conduct the new appraisal.

Codorus Valley had previously recorded a $600,000 valuation allowance against the foreclosed property. The added provision increases the total valuation allowance for the property to roughly $1.6 million.

The company said that, despite the new charge, it expects to report a third-quarter profit and that it should have a "significant reduction" in nonperforming assets compared to a quarter earlier. Nonperforming assets made up 3.3% of total assets at June 30.

Cordorus Valley earned $2.7 million in the second quarter. Those results included a $250,000 loan-loss provision and $211,000 in foreclosed real estate expenses.

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