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Codorus Valley Bancorp, Inc. Reports Fourth Quarter 2023 Results and Record Earnings for the Year
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Codorus Valley Bancorp, Inc. Reports Fourth Quarter 2023 Results and Record Earnings for the Year

  • Fourth quarter net income of $5.5 million compared to net income of $7.9 million in the quarter ended December 31, 2022, and $5.9 million in the quarter ended September 30, 2023;
  • Net income of $25.0 million for the year ended December 31, 2023, compared to net income of $20.1 million for the year ended December 31, 2022;
  • Net interest margin of 3.76% for the year ended December 31, 2023, a 37-basis point increase from the net interest margin of 3.39% for the year ended December 31, 2022;
  • Year-to-date efficiency ratio of 65.75%; return on average assets of 1.15%; and return on equity of 13.47%;
  • Continued improvement in credit metrics with nonperforming assets to total loans of 0.23% at December 31, 2023, a decrease of 67.1% from the ratio at December 31, 2022;
  • Cash dividend of $0.17 per common share payable on February 13, 2024, to common stock holders of record on January 23, 2024.
  • On December 12, 2023, Codorus Valley Bancorp Inc. (NASDAQ: CVLY) and Orrstown Financial Services Inc. (NASDAQ: ORRF) (“Orrstown”) announced that the companies entered into an Agreement and Plan of Merger to effect a merger of equals (the “Merger”) later this year. As a result, the Corporation realized merger-related expenses of $956,000 in the fourth quarter 2023.

YORK, Pa., Jan. 25, 2024 (GLOBE NEWSWIRE) — Codorus Valley Bancorp, Inc. (“Codorus Valley”, or the “Corporation”) (NASDAQ: CVLY), parent company of PeoplesBank, A Codorus Valley Company (“PeoplesBank”, or the “Bank”), today reported net income of $5.5 million or $0.57 per diluted common share, for the quarter ended December 31, 2023. This compares to net income of $7.9 million or $0.83 per diluted common share, for the quarter ended December 31, 2022, representing a decrease of $2.4 million or 30.4 percent, and compares to net income of $5.9 million or $0.61 per diluted common share for the third quarter of 2023, representing a decrease of $400,000 or 7.8 percent.   Excluding the impact of $956,000 in merger-related expenses, net income and diluted earnings per share, respectively, were $6.2 million(1) and $0.64(1) for the quarter ended December 31, 2023. For the year ended December 31, 2023, net income was $25.0 million or $2.59 per diluted share, compared to $20.1 million or $2.10 per diluted share, for the year ended December 31, 2022, representing an increase of $4.9 million or 24.3 percent. Excluding the impact of $956,000 in merger-related expenses, net income and diluted earnings per share, respectively, were $25.7 million(1) and $2.67(1) for the year ended December 31, 2023.

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(1) Net income excluding merger-related expenses, diluted earnings per share excluding merger-related expenses, tangible book value per share and tangible book value per share without accumulated other comprehensive loss are non-GAAP financial measures. Please see Financial Highlights for disclosure and reconciliation of non-GAAP financial measures.

"Our robust performance in the fourth quarter is a testament to the dedicated efforts of our team over the past several years, resulting in Codorus Valley achieving its highest annual earnings on record. We attribute this success to our unwavering commitment to enhancing the client experience, fostering Associate engagement, and making a positive impact on the community, while also focusing on creating shareholder value. Despite the challenges faced by the banking industry in 2023, our steady loan production and prudent utilization of customer deposits have allowed us to maintain a strong net interest margin and mitigate the effects of margin compression. The continued improvement in our capital ratios positions us favorably for the upcoming exciting phase in our growth cycle. We are eager to leverage the momentum we’ve generated when we join forces with Orrstown Financial Services later this year to establish the premier regional community bank serving South Central Pennsylvania, Central Maryland and the Greater Baltimore area," stated Craig L. Kauffman, President, and Chief Executive Officer.
  
REVIEW OF RESULTS

Balance Sheet

Loans

Loans increased $72.8 million from December 31, 2022 to December 31, 2023, an annualized growth rate of 4.5 percent. Nonperforming assets decreased $7.5 million, or 65.1 percent to $4.0 million from December 31, 2022 to December 31, 2023.

Investment Securities

Investment Securities increased $4.3 million to $349.8 million at December 31, 2023 compared to $345.5 million at December 31, 2022. The Bank sold $4.7 million of investment securities, realizing a net loss of $388,000 during the first quarter of 2023, improving the security portfolio yield by three basis points. The tax-equivalent yield on securities for the three months ended December 31, 2023 was 2.84 percent, compared to 2.55 percent for the three months ended December 31, 2022 and 2.75 percent for the three months ended September 30, 2023. The unrealized loss on the securities portfolio was $40.6 million at December 31, 2023, compared to $45.5 million at December 31, 2022 and $56.0 million at September 30, 2023.

Borrowings

FHLB advances and other short-term borrowings increased $45.0 million to $56.5 million at December 31, 2023 compared to $11.6 million at December 31, 2022, as the Bank added liquidity to the balance sheet during the recent industry turmoil to provide an added measure of liquidity in the event the Bank were to experience outsized deposit withdrawals.   FHLB advances and other short-term borrowings increased $17.4 million or 44.6 percent from $39.1 million at September 30, 2023.

Deposits

Total Deposits decreased $69.9 million, or 3.6 percent from December 31, 2022 to December 31, 2023, ending the period at $1.87 billion.   From year-end 2022 to December 31, 2023, noninterest-bearing demand accounts decreased $84.6 million or 18.2 percent, and interest-bearing demand accounts increased $14.7 million or 1.0 percent. During that same period, savings accounts decreased $30.1 million or 18.7 percent and money market accounts decreased $2.5 million or less than 1.0 percent. Offsetting the decreases, certificates of deposit increased by $69.9 million or 18.3 percent. As a result of the change in deposit mix, the average cost of interest-bearing deposits increased to 2.59 percent for the quarter ended December 31, 2023, compared to 0.90 percent for the quarter ended December 31, 2022 and 2.31 percent for the quarter ended September 30, 2023. For the year ended December 31, 2023, the average cost of interest-bearing deposits increased to 2.08 percent, compared to 0.47 percent for the year ended December 31, 2022. We anticipate downward pressure on net interest margin to continue into early 2024 due to the cost of deposits and the slope of the interest rate curve.

Income Statement

The Corporation’s net interest income for the three months ended December 31, 2023 was $19.2 million, a decrease of 10.7 percent when compared to $21.5 million for the three months ended December 31, 2022 and a decrease of 1.1 percent when compared to $19.4 million for the three months ended September 30, 2023. The Corporation’s tax-equivalent net interest margin (“NIM”) was 3.61 percent for the three months ended December 31, 2023, compared to 3.98 percent for the same period in 2022 and 3.64 percent for the quarter ended September 30, 2023. Net interest income for the year ended December 31, 2023 was $79.0 million, an increase of 5.0 percent when compared to $75.3 million for the year ended December 31, 2022. The Corporation’s tax-equivalent NIM was 3.76 percent for the year ended December 31, 2023, compared to 3.39 percent for the year ended December 31, 2022.

The Corporation’s provision for credit losses, which includes provision for credit losses on unfunded commitments in 2023, for the three months ended December 31, 2023 was a reversal of $767,000 compared to a reversal of the provision for loan losses of $544,000 for the three months ended December 31, 2022 and a provision for credit losses of $251,000 for the quarter ended September 30, 2023.   The Corporation’s nonperforming assets ratio was 0.23 percent at December 31, 2023, a 67.1 percent decrease from the nonperforming assets ratio of 0.70 percent at December 31, 2022. On January 1, 2023, the Corporation adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) and now measures estimated credit losses on financial instruments at the time of origination using the current expected credit loss (“CECL”) methodology. At adoption of the CECL methodology in the first quarter of 2023, the allowance for credit losses increased $2.8 million and the net impact to retained earnings was $2.1 million.   

Noninterest income for the three months ended December 31, 2023 was $4.2 million, an increase of $770,000 or 22.2 percent, compared to noninterest income of $3.5 million for the three months ended December 31, 2022 and an increase of $47,000 or 1.1 percent compared to the three months ended September 30, 2023.   The increase in the current quarter compared to the prior year, was primarily due to higher other income related to swap fees, income from bank owned life insurance related to the purchase of new policies and trust/investment service fees. Noninterest income for the year ended December 31, 2023 was $16.5 million, an increase of $1.6 million or 10.8 percent compared to noninterest income of $14.9 million for the year ended December 31, 2022. Higher trust and investment service fees, service charges on deposits, other income related to interest rate swap fees, income from bank owned life insurance and gains on sale of assets held for sale in the current period were partially offset by a decrease in gains on sale of loans and a loss on sale of securities compared to the year ended December 31, 2022.

Noninterest expense was $17.3 million for the fourth quarter 2023, an increase of $1.9 million or 12.6 percent, as compared to noninterest expense of $15.3 million for the fourth quarter 2022 and an increase of $1.4 million compared to noninterest expense of $15.9 million for the third quarter of 2023.   Noninterest expense was $63.5 million for the year ended December 31, 2023, an increase of $1.9 million or 3.1 percent compared to noninterest expense of $61.6 million for the year ended December 31, 2022. During the fourth quarter 2023, the Corporation announced it has entered into an agreement to merge with Orrstown. For the three months and year ended December 31, 2023, merger-related expenses totaled $956,000, which included due diligence costs, legal expenses and investment banking expenses related to delivery of a fairness opinion to its Board of Directors. The Corporation expects to incur additional merger-related expenses in 2024 as it works toward consummation of the merger with Orrstown and the related merger and integration of PeoplesBank with and into Orrstown Bank. In addition to merger-related expenses, noninterest expense was impacted in the current period by higher variable compensation accruals, offset by lower settlement expense.  

Income tax expense for the quarter ended December 31, 2023 was $1.4 million compared to $2.2 million for the same period in 2022 and $1.5 million in the quarter ended September 30, 2023. The effective tax rate for the three-month periods ended December 31, 2023, December 31, 2022 and September 30, 2023 was 20.8 percent, 21.7 percent and 20.2 percent, respectively.   Income tax expense for the year ended December 31, 2023 was $6.9 million compared to $5.6 million for the year ended December 31, 2022. The effective tax rate for the year ended December 31, 2023 and December 31, 2022 was 21.6 percent and 21.7 percent, respectively.  

Capital

Shareholders’ equity totaled $199.6 million at December 31, 2023, an increase of $22.3 million from $177.3 million at December 31, 2022. The increase was primarily attributable to net income of $25.0 million, partially offset by dividends paid of $6.3 million during the year and a $2.1 million impact at the adoption of CECL at January 1, 2023. Other changes are related to accumulated other comprehensive loss and issuance of treasury stock.

Book value per share was $20.70 and $18.51 at December 31, 2023 and December 31, 2022, respectively. Tangible book value per share and tangible book value per share without accumulated other comprehensive loss (1) increased to $20.46 per share and $23.68 per share, respectively, at December 31, 2023 from $18.27 per share and $21.90 per share, respectively, at December 31, 2022, primarily the result of changes in shareholders’ equity discussed above. The Corporation’s common equity tier 1 capital ratio was 12.81 percent at December 31, 2023, an increase from 12.04 percent at December 31, 2022. At December 31, 2023, all capital ratios applicable to the Bank were above regulatory minimum levels and the Bank met the “well-capitalized” criteria under current bank regulatory guidelines. (Note that the regulatory “well-capitalized” definition is not applicable to small bank holding companies such as the Corporation).

Liquidity Risk Management

The Bank maintains a well-diversified deposit base and has a comparatively low level of uninsured deposits. At December 31, 2023, 83% of the Bank’s deposits were estimated to be FDIC-insured, and an additional 7% of deposits were fully collateralized.         

The overall deposit and liquidity position of the Bank and the Corporation remain positive, with overall deposits exceeding the level at December 31, 2019, the start of the pandemic, by $282.8 million or 17.8 percent.

Although the Bank had not utilized the Federal Reserve’s Bank Term Funding Facility as of December 31, 2023, the program has attractive features, such as being able to borrow based on the par values (rather than market values) of a bank’s investment securities that are pledged as collateral. For this reason, the program would be considered among the Bank’s other wholesale borrowing options if additional liquidity was needed.

The Bank is a member of the IntraFi Network®, which provides reciprocal deposit alternatives allowing our clients to have the benefit of additional FDIC insurance coverage, and assisting the Bank in the management of its liquidity needs.

Dividend Declared

On January 9, 2024, the Board of Directors of the Corporation declared a regular quarterly cash dividend of $0.17 per share, payable on February 13, 2024 to common shareholders of record at the close of business on January 23, 2024.

Agreement and Plan of Merger with Orrstown Financial Services, Inc. (“Orrstown”)

On December 12, 2023, Codorus Valley Bancorp Inc. (NASDAQ: CVLY) and Orrstown Financial Services Inc. (NASDAQ: ORRF) announced that the companies entered into an Agreement and Plan of Merger pursuant to which Codorus Valley Bancorp, Inc. will be merged with and into Orrstown, with Orrstown as the surviving corporation (the “Merger”). Promptly following the Merger, Codorus Valley’s wholly-owned subsidiary, PeoplesBank, will be merged with and into Orrstown Bank, with Orrstown Bank as the surviving bank. Subject to receipt of regulatory and shareholder approvals, CVLY expects the merger to be completed in the third quarter of 2024. “We are excited to be partnering with Orrstown to build long-term value for our clients, associates, shareholders and community. Thank you to our shareholders for your long-standing investment in our company,” noted Craig L. Kauffman, “and, to our clients, we very much look forward to continuing to serve your financial needs.”

Certain Accounting Matters

Accounting standards require the consideration of subsequent events occurring after the balance sheet date for matters that require adjustment to, or disclosure in, the consolidated financial statements. The review period for subsequent events extends up to and includes the filing date of a public company’s financial statements when filed with the SEC. Accordingly, the consolidated financial information in this announcement is subject to change.

The Corporation uses certain non-GAAP (Generally Accepted Accounting Principles) financial measures in this Press Release. The Corporation’s management believes that the supplemental non-GAAP information provided in this press release is utilized by market analysts and others to evaluate the Corporation’s financial condition and results of operations and, therefore, such information is useful to investors. These measures have limitations as analytical tools and should not be considered a substitute for analysis of results under GAAP. These non-GAAP financial measures are reconciled to the most comparable measures following the “Financial Highlights” section of this press release.

Annualized, proforma, projected, and estimated numbers used herein are for illustrative purposes only, are not forecasts and may not reflect actual results.

About Codorus Valley Bancorp, Inc.

Codorus Valley Bancorp, Inc. is the largest independent financial services holding company headquartered in York, Pennsylvania. Codorus Valley primarily operates through its financial services subsidiary, PeoplesBank, A Codorus Valley Company. PeoplesBank offers a full range of consumer, business, wealth management, and mortgage services at financial centers located in communities throughout South Central Pennsylvania and Central Maryland. Codorus Valley Bancorp, Inc.’s Common Stock is listed on the NASDAQ Global Market under the symbol “CVLY”.

Cautionary Note Regarding Forward-looking Statements    

This Press Release may contain forward-looking statements by Codorus Valley Bancorp, Inc. (“Codorus Valley”, or the “Corporation”). Forward-looking statements may include information concerning the financial condition, results of operations and business of the Corporation and its subsidiaries and include, but are not limited to, statements regarding expectations or predictions of future financial or business performance or conditions relating to the Corporation and its operations. These forward-looking statements may include statements with respect to the Corporation’s beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond the Corporation’s control). Forward-looking statements may also include, but are not limited to, discussions of strategy, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives, goals, expectations or consequences, and statements about future performance, expenses, operations, or products and services of the Corporation and its subsidiaries. Forward-looking statements can be identified by the use of words such as “may,” “should,” “could,” “will,” “could,” “believes,” “plans,” “expects,” “estimates,” “forecasts,” “intends,” “anticipates,” “projects,” “strives to,” “seeks,” “intends” or similar words or expressions.

Forward-looking statements are not historical facts, nor should they be relied upon as providing assurance of future performance. Forward-looking statements are based on current beliefs, expectations and assumptions regarding the future of the Corporation’s business, including its pending merger (the “Merger”) with Orrstown Financial Services, Inc. (“Orrstown”), future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of the Corporation’s control. Note that the following factors, among others, could affect the future financial results of the Corporation and its subsidiaries, both individually and collectively, and could cause those results to differ materially from those expressed in these forward-looking statements:

  • changes or volatility in market interest rates and the persistence of an inflationary environment in the U.S. and our market areas and the potential for an economic downturn or recession;
  • the effects of financial challenges at other banking institutions that could lead to depositor concerns that spread within the banking industry causing disruptive deposit outflows and other destabilizing results;
  • legislative and regulatory changes, and the uncertain impact of new laws and regulations;
  • monetary and fiscal policies of the federal government;
  • the effects of changes in accounting policies and practices;
  • ineffectiveness of the Corporation’s business strategy due to changes in current or future market conditions;
  • changes in deposit flows, the cost of funds, demand for loan products and the demand for financial services;
  • the remaining effects of the COVID-19 pandemic, including on the Corporation’s credit quality and operations as well as its impact on general economic conditions;
  • competition; market volatility, market downturns, changes in consumer behavior, business closures;
  • adverse changes in the quality or composition of the Corporation’s loan, investment and mortgage-backed securities portfolios, including from the effects of the recent inflationary environment;
  • geographic concentration of the Corporation’s business;
  • deterioration of commercial real estate values;
  • the adequacy of loan loss reserves;
  • deterioration in the credit quality of borrowers;
  • the Corporation’s ability to attract and retain key personnel, especially in light of the pending Merger with Orrstown;
  • the impact of operational risks, including the risk of human error, failure or disruption of internal processes and systems, including of the Corporation’s information and other technology systems;
  • failure or circumvention of our internal controls;
  • the Corporation’s ability to keep pace with technological changes;
  • breaches of security or failures of the Corporation to identify and adequately address cybersecurity and data breaches;
  • changes in government regulation and supervision and the potential for negative consequences resulting from regulatory examinations, investigations and violations, in particular, the effect that such occurrences could have on the pending Merger with Orrstown; 
  • the effects of adverse outcomes from claims and litigation;
  • occurrence of natural or man-made disasters or calamities, including health emergencies, the spread of infectious diseases, epidemics or pandemics, an outbreak or escalation of hostilities or other geopolitical instabilities, the effects of climate change or extraordinary events beyond the Corporation’s control, and the Corporation’s ability to deal effectively with disruptions caused by the foregoing; and
  • economic, competitive, governmental and technological factors affecting the Corporation’s operations, markets, products, services and fees.

In addition to the foregoing factors with respect to the Corporation’s business, the following factors and uncertainties exist with respect to the pending Merger with Orrstown:

  • the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the definitive agreement and plan of merger between the Corporation and Orrstown;
  • the outcome of any legal proceedings that may be instituted against the Corporation or Orrstown;
  • delays in completing the proposed Merger;
  • the failure to obtain necessary regulatory approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed Merger) or shareholder approvals;
  • the failure to satisfy any of the other conditions to the proposed Merger on a timely basis or at all, including the ability of the Corporation or Orrstown to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed Merger;
  • the possibility that the anticipated benefits of the proposed Merger are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where the Corporation and Orrstown do business;
  • the possibility that the proposed Merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events;
  • the possibility that revenues following the proposed Merger may be lower than expected; the impact of certain restrictions during the pendency of the proposed Merger on the parties’ ability to pursue certain business opportunities and strategic transactions;
  • diversion of management’s attention from ongoing business operations and opportunities;
  • potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or the completion of the proposed Merger;
  • the ability to complete the proposed Merger and integration of the Corporation and Orrstown successfully;
  • the dilution caused by Orrstown’s issuance of additional shares of its capital stock in connection with the proposed Merger; and
  • the potential impact of general economic, political or market factors on the companies or the proposed Merger and other factors that may affect future results of the Corporation or Orrstown.

The Corporation does not commit to update or revise any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Corporation to reflect events or circumstances occurring after the date of this report.   Further information regarding Codorus Valley, Orrstown and factors which could affect the forward-looking statements contained herein can be found in Codorus Valley’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, its Quarterly Reports on Form 10-Q for the periods ended March 31, 2023, June 30, 2023 and September 30, 2023, and its other filings with the SEC, and in Orrstown’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, its Quarterly Reports on Form 10-Q for the periods ended March 31, 2023, June 30, 2023 and September 30, 2023, and its other filings with the SEC. SEC filings are available free of charge on the SEC’s website at www.sec.gov

No Offer or Solicitation

This communication is not a proxy statement or solicitation or a proxy, consent or authorization with respect to any securities or in respect of the proposed Merger and shall not constitute an offer to sell or a solicitation of an offer to buy the securities of Orrstown, Codorus Valley or the combined company, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be deemed to be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended, and otherwise in accordance with applicable law.

Additional Information About the Merger and Where to Find It

In connection with the proposed Merger, Orrstown intends to file a registration statement on Form S-4 with the SEC that will include a joint proxy statement of Codorus Valley and Orrstown and a prospectus of Orrstown, which will be distributed to the shareholders of Codorus Valley and Orrstown in connection with their votes on the Merger of Codorus Valley with and into Orrstown and the issuance of Orrstown common stock in the proposed transaction.

INVESTORS AND SECURITY HOLDERS ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS WHEN THEY BECOME AVAILABLE (AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION OR INCORPORATED BY REFERENCE INTO THE JOINT PROXY STATEMENT/PROSPECTUS) BECAUSE SUCH DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION REGARDING THE PROPOSED MERGER AND RELATED MATTERS.

Investors and security holders will be able to obtain these documents, and any other documents Orrstown and Codorus Valley have filed with the SEC, free of charge at the SEC’s website, www.sec.gov, or by accessing Orrstown’s website at www.Orrstown.com under the “Investor Relations” link and then under the heading “Documents,” or by accessing Codorus Valley’s website at ir.peoplesbanknet.com. In addition, documents filed with the SEC by Orrstown or Codorus Valley will be available free of charge by writing to (i) Orrstown at 4750 Lindle Road, Harrisburg, PA 17111, Attention: Neil Kalani or (ii) Codorus Valley at 105 Leader Heights Road, York, PA 17403, Attention: Daniel R. Stolzer.

Participants in the Solicitation

The directors, executive officers and certain other members of management and employees of Orrstown may be deemed to be participants in the solicitation of proxies from the shareholders of Orrstown in connection with the proposed Merger. Information about Orrstown’s directors and executive officers is included in the proxy statement for its 2023 annual meeting of Orrstown’s shareholders, which was filed with the SEC on March 31, 2023.

The directors, executive officers and certain other members of management and employees of Codorus Valley may also be deemed to be participants in the solicitation of proxies in connection with the proposed Merger from the shareholders of Codorus Valley. Information about the directors and executive officers of Codorus Valley is included in the proxy statement for its 2023 annual meeting of Codorus Valley shareholders, which was filed with the SEC on March 31, 2023.

Additional information regarding the interests of those participants and other persons who may be deemed participants in the proposed Merger may be obtained by reading the joint proxy statement/prospectus regarding the proposed Merger when it becomes available. Free copies of this document may be obtained as described above.

Questions or comments concerning this Press Release should be directed to:

Codorus Valley Bancorp, Inc.   
Craig L. Kauffman  Larry D. Pickett
President and CEO  Chief Financial Officer 
717-747-1501 717-747-1502
ckauffman@peoplesbanknet.com  lpickett@peoplesbanknet.com 
   

CODORUS VALLEY BANCORP, INC.
Consolidated Balance Sheets (Unaudited)
     
    December 31,   December 31,
(Dollars in thousands, except share and per share data)   2023     2022
           
Assets          
Interest bearing deposits with banks $ 10,882     $ 99,777  
Cash and due from banks   22,809       20,662  
      Total cash and cash equivalents   33,691       120,439  
Securities, available-for-sale, at fair value (amortized cost $390,397 at December 31, 2023        
 and $390,900 at December 31, 2022, respectively)   349,767       345,457  
Restricted investment in bank stocks, at cost   3,146       955  
Loans held for sale   822       154  
Loans (net of deferred fees of $3,752 – 2023 and $3,813 – 2022)   1,705,608       1,632,857  
Less-allowance for credit losses (1)   (20,506 )     (20,736 )
      Net loans   1,685,102       1,612,121  
Premises and equipment, net   19,563       21,136  
Operating leases right-of-use assets   2,746       3,072  
Goodwill   2,301       2,301  
Other assets   94,656       89,417  
      Total assets $ 2,191,794     $ 2,195,052  
Liabilities          
Deposits          
    Noninterest bearing $ 379,288     $ 463,853  
    Interest bearing   1,494,054       1,479,366  
      Total deposits   1,873,342       1,943,219  
Short-term borrowings   56,541       11,605  
Long-term debt and junior subordinated debt   11,520       11,550  
Subordinated notes – face amount $31,000 (less discount and debt          
 issuance cost of $155 at December 31, 2023 and $236 at December 31, 2022)   30,845       30,764  
Operating leases liabilities   2,848       3,204  
Allowance for credit losses on off-balance sheet credit exposures   2,278       0  
Other liabilities   14,815       17,410  
      Total liabilities   1,992,189       2,017,752  
Shareholders’ equity          
Preferred stock, par value $2.50 per share;          
    1,000,000 shares authorized; no shares issued or outstanding   0       0  
Common stock, par value $2.50 per share; 30,000,000 shares authorized;          
  shares issued: 9,883,660 at December 31, 2023 and December 31, 2022;          
  and shares outstanding: 9,642,851 at December 31, 2023 and 9,581,230 at December 31, 2022   24,709       24,709  
Additional paid-in capital   142,633       141,896  
Retained earnings   68,633       52,146  
Accumulated other comprehensive loss   (31,082 )     (34,764 )
Treasury stock shares outstanding, at cost: 240,809 shares at December 31, 2023          
  and 302,430 at December 31, 2022   (5,288 )     (6,687 )
      Total shareholders’ equity   199,605       177,300  
      Total liabilities and shareholders’ equity $ 2,191,794     $ 2,195,052  
           
(1) Beginning January 1, 2023, calculation is based on current expected loss methodology. Prior to January 1, 2023, calculation was based on incurred loss methodology.
           

CODORUS VALLEY BANCORP, INC.              
Consolidated Statements of Income (Unaudited)              
  Three months ended     Twelve months ended
  December 31,   September 30,   December 31,   December 31,
(dollars in thousands, except per share data) 2023   2023   2022     2023       2022  
Interest income                              
Loans, including fees $ 26,967     $ 26,000     $ 21,676     $ 100,804     $ 73,139  
Investment securities:                              
    Taxable   2,781       2,562       2,374       10,292       7,455  
    Tax-exempt   108       106       110       414       427  
    Dividends   (90 )     44       14       22       44  
Other   176       361       1,226       1,766       3,588  
      Total interest income   29,942       29,073       25,400       113,298       84,653  
Interest expense                              
Deposits   9,800       8,740       3,382       30,754       7,261  
Federal funds purchased and other short-term borrowings   385       377       13       1,237       48  
Long-term debt and junior subordinated debt   222       215       175       839       616  
Subordinated notes   369       369       369       1,476       1,476  
      Total interest expense   10,776       9,701       3,939       34,306       9,401  
      Net interest income   19,166       19,372       21,461       78,992       75,252  
(Recovery of) provision for credit losses – loans (1)   (833 )     128       (544 )     (244 )     2,890  
Provision for credit losses – unfunded commitments (1)   66       123       0       389       0  
      Net interest income after provision for credit losses   19,933       19,121       22,005       78,847       72,362  
Noninterest income                              
Trust and investment services fees   1,261       1,293       1,109       5,031       4,549  
Income from mutual fund, annuity and insurance sales   299       315       289       1,306       1,247  
Service charges on deposit accounts   1,529       1,598       1,458       6,153       5,503  
Income from bank owned life insurance   405       396       315       1,452       1,256  
Other income   773       549       401       2,771       1,880  
Gain on sale of loans held for sale   27       42       4       75       625  
(Loss) gain on sale of assets held for sale   (54 )     0       13       64       (87 )
Loss on sales of securities   0       0       (119 )     (388 )     (119 )
      Total noninterest income   4,240       4,193       3,470       16,464       14,854  
Noninterest expense                              
Personnel   10,031       9,412       8,937       37,974       35,061  
Occupancy of premises, net   926       853       1,004       3,637       3,848  
Furniture and equipment   924       798       851       3,438       3,402  
Professional and legal   444       549       345       1,839       2,626  
Marketing   304       347       592       1,314       1,932  
FDIC insurance   244       245       148       983       765  
Debit card processing   520       546       481       1,976       1,703  
Charitable donations   644       62       600       1,637       1,571  
External data processing   1,015       974       1,064       4,042       3,884  
Settlement expenses   0       0       1,000       0       1,000  
Merger-related expenses   956       0       0       956       0  
(Recovery of) impaired loan carrying cost   (119 )     107       34       (348 )     546  
Other   1,396       2,003       291       6,020       5,230  
      Total noninterest expense   17,285       15,896       15,347       63,468       61,568  
      Income before income taxes   6,888       7,418       10,128       31,843       25,648  
Provision for income taxes   1,435       1,501       2,196       6,870       5,556  
Net income $ 5,453     $ 5,917     $ 7,932     $ 24,973     $ 20,092  
      Net income per share, basic   0.57       0.62       0.83       2.60       2.11  
      Net income per share, diluted   0.57       0.61       0.83       2.59       2.10  
                               
(1) Beginning January 1, 2023, calculation is based on current expected loss methodology. Prior to January 1, 2023, calculation was based on incurred loss methodology.       
                               

Codorus Valley Bancorp, Inc.        
Financial Highlights        
                               
Selected Financial Data (Unaudited)        
                               
      Quarterly   Year-to-Date
        2023       2023       2023       2023       2022     December 31,
      4th Qtr   3rd Qtr   2nd Qtr   1st Qtr   4th Qtr    2023    2022
Earnings and Per Share Data (1)                            
  (in thousands, except per share data)                            
  Net income   $ 5,453     $ 5,917     $ 6,611     $ 6,992     $ 7,932     $ 24,973   $ 20,092
  Basic earnings per share   $ 0.57     $ 0.62     $ 0.69     $ 0.73     $ 0.83     $ 2.60   $ 2.11
  Diluted earnings per share   $ 0.57     $ 0.61     $ 0.69     $ 0.73     $ 0.83     $ 2.59   $ 2.10
  Cash dividends paid per share   $ 0.17     $ 0.17     $ 0.16     $ 0.16     $ 0.15     $ 0.66   $ 0.60
  Book value per share   $ 20.70     $ 19.06     $ 19.34     $ 19.28     $ 18.51     $ 20.70   $ 18.51
  Tangible book value per share (2)   $ 20.46     $ 18.82     $ 19.10     $ 19.04     $ 18.27     $ 20.46   $ 18.27
  Tangible book value per share without AOCI (8)   $ 23.68     $ 23.28     $ 22.81     $ 22.26     $ 21.90     $ 23.68   $ 21.90
  Average shares outstanding     9,629       9,616       9,600       9,585       9,566       9,608     9,532
  Average diluted shares outstanding     9,644       9,631       9,610       9,612       9,589       9,625     9,560
                               
Performance Ratios (%)                            
  Return on average assets (3)     1.00       1.08       1.22       1.29       1.43       1.15     0.87
  Return on average equity (3)     11.69       12.64       14.17       15.45       18.50       13.47     11.08
  Net interest margin (4)     3.61       3.64       3.81       4.00       3.98       3.76     3.39
  Efficiency ratio (5)     73.28       66.95       64.19       59.05       60.87       65.75     67.79
  Net overhead ratio (3)(6)     2.40       2.14       2.10       1.93       2.13       2.14     2.02
                               
Asset Quality Ratios (%)                            
  Net loan charge-offs to average loans (3)     0.03       (0.15 )     0.20       0.15       0.24       0.05     0.31
  Allowance for credit losses to total loans (7)     1.20       1.26       1.23       1.31       1.27       1.20     1.27
  Nonperforming assets to total loans                            
    and foreclosed real estate     0.23       0.47       0.70       0.55       0.70       0.23     0.70
                               
Capital Ratios (%)                            
  Average equity to average assets     8.57       8.55       8.58       8.38       7.75       8.52     7.87
  Tier 1 leverage capital ratio     10.75       10.50       10.38       10.20       9.77       10.75     9.77
  Common equity Tier 1 capital ratio     12.81       12.52       12.37       12.19       12.04       12.81     12.04
  Tier 1 risk-based capital ratio     13.37       13.08       12.94       12.76       12.61       13.37     12.61
  Total risk-based capital ratio     16.26       16.01       15.85       15.75       15.57       16.26     15.57
                               
(1) per share amounts and shares outstanding were adjusted for stock dividends                  
(2) non-GAAP measure – book value less goodwill and core deposit intangibles; see reconciliation below        
(3) annualized for the quarterly periods presented                            
(4) net interest income (tax-equivalent) as a percentage of average interest earning assets                
(5) noninterest expense as a percentage of net interest income and noninterest income (tax-equivalent)            
(6) noninterest expense less noninterest income as a percentage of average assets                
(7) excludes loans held for sale                            
(8) non-GAAP measure – book value less accumulated other comprehensive income; see reconciliation below        
                               
  Reconciliation of Non-GAAP Financial Measures (Tangible Book Value and Tangible Book Value without AOCI and Adjusted Net Income)
                               
        2023       2023       2023       2023       2022          
  (in thousands, except per share data)   4th Qtr   3rd Qtr   2nd Qtr   1st Qtr   4th Qtr        
  Total Shareholders’ Equity   $ 199,605     $ 183,363     $ 185,869     $ 184,946     $ 177,300          
  Less: Goodwill and Other Intangible Assets     (2,301 )     (2,302 )     (2,302 )     (2,303 )     (2,303 )        
  Tangible Shareholders’ Equity   $ 197,304     $ 181,061     $ 183,567     $ 182,643     $ 174,997          
  Add: Accumulated Other Comprehensive Loss     31,082       42,869       35,650       30,941       34,764          
  Tangible Shareholders’ Equity without AOCI   $ 228,386     $ 223,930     $ 219,217     $ 213,584     $ 209,761          
                               
  Common Shares Outstanding     9,644       9,619       9,611       9,594       9,581          
  Book Value Per Share   $ 20.70     $ 19.06     $ 19.34     $ 19.28     $ 18.51          
  Effect of Intangible Assets     (0.24 )     (0.24 )     (0.24 )     (0.24 )     (0.24 )        
  Tangible Book Value Per Share   $ 20.46     $ 18.82     $ 19.10     $ 19.04     $ 18.27          
                               
  Book Value Per Share   $ 20.70     $ 19.06     $ 19.34     $ 19.28     $ 18.51          
  Effect of Intangible Assets and AOCI     (3.46 )     (4.70 )     (3.95 )     (3.47 )     (3.87 )        
  Tangible Book Value Per Share without AOCI   $ 17.24     $ 14.37     $ 15.39     $ 15.81     $ 21.90          
                               
      Quarterly       Year-to-Date        
        2023       2022         December 31,        
  (in thousands, except per share data)   4th Qtr   4th Qtr         2023       2022          
  Average Diluted Shares Outstanding     9,644       9,589           9,625       9,560          
  Net Income   $ 5,453     $ 7,932           24,973       20,092          
  Plus: Merger-related expenses     956                 956                
  Less: Related tax effect     200                 200                
  Adjusted Net Income   $ 6,209     $ 7,932         $ 25,729     $ 20,092          
  Adjusted Diluted Earnings Per Share   $ 0.64     $ 0.83         $ 2.67     $ 2.10          
                               
  This report contains certain financial information determined by methods other than in accordance with GAAP. This non-GAAP disclosure has limitation as an analytical tool
  and should not be considered in isolation or as a substitute for the analysis of the Corporation’s results as reported under GAAP, nor is it necessarily comparable to non-GAAP
  performance measures that may be presented by other companies. Our management uses this non-GAAP measure in its analysis of our performance because it believes this measure
  is material and will be used as a measure of our performance by investors.                        
                               
ANALYSIS OF NET INTEREST INCOME                     
Average Balances and Interest Rates, Taxable-Equivalent Basis (Unaudited)           
                                           
    Three Months Ended
    December 31, 2023     September 30, 2023     December 31, 2022  
(Dollars in thousands)   Average Balance   Taxable-Equivalent Interest   Taxable-Equivalent Rate     Average Balance   Taxable-Equivalent Interest   Taxable-Equivalent Rate     Average Balance   Taxable-Equivalent Interest   Taxable-Equivalent Rate  
                                           
Assets                                          
Interest bearing deposits with banks   $ 12,724   $ 176     5.46 %   $ 26,772   $ 361     5.35 %   $ 132,772   $ 1,226     3.66 %
Investment securities:                                          
  Taxable     371,949     2,691     2.87       371,603     2,606     2.78       366,923     2,388     2.58  
  Tax-exempt     22,476     132     2.33       22,523     128     2.25       25,601     137     2.13  
    Total investment securities     394,426     2,822     2.84       394,126     2,734     2.75       392,524     2,524     2.55  
Loans:                                          
  Taxable (1)     1,682,403     26,797     6.32       1,677,117     25,829     6.11       1,598,206     21,499     5.34  
  Tax-exempt     21,359     210     3.90       21,721     213     3.89       22,829     222     3.85  
    Total loans     1,703,762     27,007     6.29       1,698,838     26,042     6.08       1,621,035     21,721     5.32  
    Total earning assets     2,110,913     30,005     5.64       2,119,736     29,137     5.45       2,146,331     25,471     4.71  
Other assets (2)     65,067               71,008               66,173          
    Total assets   $ 2,175,980             $ 2,190,744             $ 2,212,504          
Liabilities and Shareholders’ Equity                                          
Deposits:                                          
  Interest bearing demand   $ 914,832     5,918     2.57 %   $ 917,983     5,542     2.40 %   $ 942,286     2,561     1.08 %
  Savings     136,622     11     0.03       146,038     11     0.03       163,184     12     0.03  
  Time     447,884     3,873     3.43       435,439     3,187     2.90       383,013     808     0.84  
    Total interest bearing deposits     1,499,338     9,800     2.59       1,499,460     8,740     2.31       1,488,483     3,382     0.90  
Short-term borrowings     36,836     385     4.15       38,726     377     3.86       12,605     13     0.40  
Long-term debt and junior subordinated debt     14,395     222     6.12       14,356     215     5.94       14,858     175     4.68  
Subordinated notes     30,838     369     4.75       30,818     369     4.75       30,757     369     4.76  
    Total interest bearing liabilities     1,581,406     10,776     2.70       1,583,360     9,701     2.43       1,546,703     3,939     1.01  
Noninterest bearing deposits     388,589               401,734               476,347          
Other liabilities     19,473               18,439               17,974          
Shareholders’ equity     186,511               187,211               171,480          
    Total liabilities and shareholders’ equity   $ 2,175,980             $ 2,190,744             $ 2,212,504          
Net interest income (tax equivalent basis)       $ 19,229               $ 19,436               $ 21,533        
Net interest margin (3)           3.61 %           3.64 %           3.98 %
Tax equivalent adjustment         (63 )               (64 )               (72 )      
Net interest income       $ 19,166               $ 19,372               $ 21,461        
                                           
(1) Average balances include nonaccrual loans.                     
(2) Average balances include bank owned life insurance and foreclosed real estate.                 
(3) Net interest income (tax-equivalent basis) annualized as a percentage of average interest earning assets.               
 

ANALYSIS OF NET INTEREST INCOME              
Average Balances and Interest Rates, Taxable-Equivalent Basis (Unaudited)
                             
    Twelve Months Ended  
    December 31, 2023     December 31, 2022  
(Dollars in thousands)   Average Balance   Taxable-Equivalent Interest   Taxable-Equivalent Rate     Average Balance   Taxable-Equivalent Interest   Taxable-Equivalent Rate  
                             
Assets                            
Interest bearing deposits with banks   $ 35,542   $ 1,766     4.97 %   $ 300,922   $ 3,588     1.19 %
Investment securities:                            
  Taxable     370,774     10,314     2.78       323,011     7,499     2.32  
  Tax-exempt     22,776     506     2.22       25,545     536     2.10  
    Total investment securities     393,550     10,820     2.75       348,556     8,035     2.31  
Loans:                            
  Taxable (1)     1,654,614     100,114     6.05       1,557,289     72,558     4.66  
  Tax-exempt     21,988     854     3.88       18,200     730     4.01  
    Total loans     1,676,602     100,968     6.02       1,575,489     73,288     4.65  
    Total earning assets     2,105,694     113,554     5.39       2,224,967     84,911     3.82  
Other assets (2)     70,027               79,891          
    Total assets   $ 2,175,721             $ 2,304,858          
Liabilities and Shareholders’ Equity                            
Deposits:                            
  Interest bearing demand   $ 908,860     19,532     2.15 %   $ 975,583   $ 4,562     0.47 %
  Savings     148,395     45     0.03       162,701     49     0.03  
  Time     422,276     11,177     2.65       414,784     2,650     0.64  
    Total interest bearing deposits     1,479,531     30,754     2.08       1,553,068     7,261     0.47  
Short-term borrowings     33,229     1,237     3.72       11,987     48     0.40  
Long-term debt     14,489     839     5.79       18,741     616     3.29  
Subordinated debentures     30,808     1,476     4.79       30,727     1,476     4.80  
    Total interest bearing liabilities     1,558,057     34,306     2.20       1,614,523     9,401     0.58  
Noninterest bearing deposits     413,126               494,969          
Other liabilities     19,186               14,073          
Shareholders’ equity     185,352               181,293          
    Total liabilities and shareholders’ equity   $ 2,175,721             $ 2,304,858          
Net interest income (tax equivalent basis)       $ 79,248               $ 75,510        
Net interest margin (3)           3.76 %           3.39 %
Tax equivalent adjustment         (256 )               (258 )      
Net interest income       $ 78,992               $ 75,252        
                             
(1) Average balances include nonaccrual loans.                            
(2) Average balances include bank owned life insurance and foreclosed real estate.                    
(3) Net interest income (tax-equivalent basis) annualized as a percentage of average interest earning assets.                

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