# EDGAR Filing Document

**Accession Number:** 0000806279
**File Stem:** 0000897101-23-000047
**Filing Date:** 2023-1
**Character Count:** 38421
**Document Hash:** 739b018d6b3774d484cd081345679534
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000897101-23-000047.hdr.sgml**: 20230126

**ACCESSION NUMBER**: 0000897101-23-000047

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 14

**CONFORMED PERIOD OF REPORT**: 20230126

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230126

**DATE AS OF CHANGE**: 20230126

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** CODORUS VALLEY BANCORP INC
- **CENTRAL INDEX KEY:** 0000806279
- **STANDARD INDUSTRIAL CLASSIFICATION:** SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035]
- **IRS NUMBER:** 232428543
- **STATE OF INCORPORATION:** PA
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-15536
- **FILM NUMBER:** 23558112

**BUSINESS ADDRESS:**
- **STREET 1:** CODORUS VALLEY CORPORATE CENTER
- **STREET 2:** 105 LEADER HEIGHTS ROAD
- **CITY:** YORK
- **STATE:** PA
- **ZIP:** 17403
- **BUSINESS PHONE:** 717-846-1970

**MAIL ADDRESS:**
- **STREET 1:** PO BOX 2887
- **STREET 2:** 105 LEADER HEIGHTS ROAD
- **CITY:** YORK
- **STATE:** PA
- **ZIP:** 17405

?xml version="1.0" encoding="utf-8"?

**UNITED STATES**

 **SECURITIES AND EXCHANGE COMMISSION**

 **Washington, D.C. 20549**

**FORM 8-K**

**CURRENT REPORT**

**Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934**

 **January 26, 2023**

Date of Report (Date of earliest event reported)

**CODORUS VALLEY BANCORP, INC.**

(Exact name of registrant as specified in its charter)

---

| | | |
|:---|:---|:---|
| **Pennsylvania** | **001-15536** | **23-2428543** |
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Ident. No.) |

---

---

| | |
|:---|:---|
| **105 Leader Heights Road** **, York, Pennsylvania** | **17403** |
| (Address of principal executive offices) | (Zip Code) |

---

 **717** **-747-1519**

Registrant's telephone number, including area code

**P.O. Box 2887, York, Pennsylvania 17405-2887**

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b)under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

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| | | |
|:---|:---|:---|
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, $2.50 par value | CVLY | NASDAQ Global Market |

---

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

CODORUS VALLEY BANCORP, INC.

FORM 8-K

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| | |
|:---|:---|
| **Item 2.02.** | **Results of Operations and Financial Condition** |

---

On January 26, 2023, Codorus Valley Bancorp, Inc. (the "Corporation") issued a press release (the "Press Release") announcing the Corporation's results of operations for the quarter and year ended December 31, 2022. A copy of the Press Release and supplementary financial information which accompanied the Press Release are attached as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.

The information included in Exhibit 99.1 shall be deemed "filed" for purposes of the Securities Exchange Act of 1934, as amended, and therefore may be incorporated by reference in the Corporation's filings under the Securities Act of 1933, as amended.

---

| | |
|:---|:---|
| **Item 9.01.** | **Financial Statements and Exhibits** |

---

---

| | | |
|:---|:---|:---|
| (d) | <u>Exhibits</u> |  |
|  | <u>Exhibit No.</u> | <u>Description</u> |
|  | [99.1](codorus230095_ex99-1.htm) | [Press Release dated January 26, 2023, containing financial information for the quarter and year ended December 31, 2022.](codorus230095_ex99-1.htm) |
|  | 104 | Cover Page Interactive Data File (embedded in the cover page formatted in Inline XBRL) |

---

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned, thereunto duly authorized.

---

| | | | |
|:---|:---|:---|:---|
|  |  | **CODORUS VALLEY BANCORP, INC.** | **CODORUS VALLEY BANCORP, INC.** |
| Date: | &nbsp;&nbsp;&nbsp;&nbsp;January 26, 2023 | By: | /s/ Larry D. Pickett |
|  |  |  | Larry D. Pickett |
|  |  |  | Executive Vice President and Chief Financial Officer |
|  |  |  | (Principal Financial and Accounting Officer) |

---

## Exhibit 99.1

**Exhibit 99.1**

![](a001_v1.jpg)

---

| |
|:---|
| **FOR IMMEDIATE RELEASE** |
| January 26, 2023 |

---

**Codorus Valley Bancorp, Inc.**

**Reports Fourth Quarter and Year End 2022 Earnings**

YORK, Pa. – 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 $7.9 million or $0.83 per diluted common share, for the fourth quarter of 2022. This compares to net income of $7.2 million or $0.75 per diluted common share for the third quarter of 2022, representing an increase of $0.7 million or 10.9 percent and net income of $2.7 million or $0.28 per diluted common share, for the fourth quarter of 2021. For the year ended December 31, 2022, net income was $20.1 million or $2.10 per diluted common share, compared to $14.7 million or $1.50 per diluted common share, for the year ended December 31, 2021.

Financial and operational highlights include:

Fourth quarter net income of $7.9 million compared to net income of $2.7 million in the year-ago quarter and $7.2 million in the linked quarter

Linked quarter 32 basis point increase in net interest margin to 3.98 percent, and 123 basis point increase from the quarter ended December 31, 2021

Fourth quarter efficiency ratio of 60.9 percent

Continued improvement in credit metrics with nonperforming assets to total loans and foreclosed real estate falling to 0.70 percent of total assets

Cash dividend of $0.16 per share payable on or before February 14, 2023, to common shareholders of record on January 24, 2023

"In the fourth quarter, the PeoplesBank team continued to focus on improving future performance and increasing shareholder value. Growth in our core business, improved asset quality, improved net interest margin, and the implementation of new technology and new processes to improve efficiency, allowed the Corporation to experience strong net income growth. Due to our focus on performance, we were able to declare a $0.16 per share cash dividend, a one cent increase over the dividend paid in each of the four prior quarters," stated Craig L. Kauffman, President and CEO.

**<u>REVIEW OF RESULTS</u>**

**<u>Balance Sheet</u>**

*<u>Loans</u>*

Loans, which include SBA-backed Paycheck Protection Program loans ("SBA PPP loans"), increased $103.1 million from December 31, 2021 to December 31, 2022, or 6.3 percent as the impact of net commercial loan growth outpaced SBA PPP loan forgiveness. Excluding SBA PPP loans, total loans increased $130.8 million from December 31, 2021 to December 31, 2022, or 8.0 percent. SBA PPP loans, net of deferred fees and costs, declined by $27.7 million to zero at December 31, 2022 due to forgiveness activity.

Non-accrual loans decreased $22.6 million, or 67.3 percent to $11.0 million from December 31, 2021 to December 31, 2022 as a result of the Bank's continued focus on improving asset quality.

*<u>Investment Securities</u>*

Investment Securities increased $90.8 million to $346.4 million at December 31, 2022 compared to $255.6 million at December 31, 2021, as the Bank deployed excess liquidity through selective purchases of mortgage-backed, corporate and municipal securities.

*<u>Deposits</u>*

Total Deposits decreased $200.6 million, or 9.4 percent from December 31, 2021 to December 31, 2022, ending the period at $1.9 billion, in part due to the Bank's decision to strategically change its product emphasis away from higher cost certificates of deposit funding. From year end 2021 to year end 2022, certificates of deposit decreased by $79.6 million or 17.2 percent. In addition, noninterest-bearing demand accounts decreased $60.8 million or 11.6 percent and money market accounts decreased by $97.5 million or 13.1 percent. Offsetting the decreases was a $27.3 million or 10.4 percent increase in interest bearing checking accounts and a $10.0 million or 6.6 percent increase in savings accounts.

**<u>Income Statement</u>**

The Corporation's net interest income for the three months ended December 31, 2022 was $21.5 million, an increase of 37.0 percent when compared to $15.7 million for the same period in 2021 and an increase of 5.5 percent when compared to $20.4 million for the linked quarter. The Corporation's tax-equivalent net interest margin ("NIM") was 3.98 percent for the three months ended December 31, 2022, compared to 2.75 percent for the same period in 2021 and 3.66 percent for the linked quarter. Net interest income for the year ended December 31, 2022 was $75.3 million, an increase of 21.2 percent when compared to $62.1 million for the year ended December 31, 2021. The Corporation's tax-equivalent NIM was 3.39 percent for the year ended December 31, 2022, compared to 2.87 percent for the year ended December 31, 2021.

For the three months ended December 31, 2022 the Corporation realized a recovery of the provision for loan losses of $544,000 compared to a provision for loan losses of $1.7 million for the same period in 2021 and a recovery of the provision for loan losses of $567,000 for the linked quarter. The decreased, or negative, provision was primarily the result of improving credit metrics and a reduction in the historical loss factor. The provision for loan losses for the year ended December 31, 2022 was $2.9 million compared to $3.7 million for the year ended December 31, 2021. The Corporation's nonperforming assets ratio was 0.70 percent at December 31, 2022, a 68.5 percent decrease from the nonperforming assets ratio of 2.22 percent at December 31, 2021.

Noninterest income for the fourth quarter 2022 was $3.5 million, a decrease of $1.0 million or 22.4 percent, as compared to noninterest income of $4.5 million for the fourth quarter 2021 and a decrease of $141,000 or 3.9 percent as compared to the linked quarter. The decrease in both periods was primarily due to lower gains on sales of mortgage loans recognized during the current quarter. Noninterest income for the year ended December 31, 2022 was $14.9 million, a decrease of $1.5 million, as compared to noninterest income of $16.4 million for the year ended December 31, 2021. The year-to-date decrease was primarily due to lower gains on sales of mortgage loans, offset by a loss on the write down of assets held for sale in the prior year.

Noninterest expense was $15.3 million for the fourth quarter 2022, an increase of $277,000 or 1.8 percent, as compared to noninterest expense of $15.1 million for the fourth quarter 2021 and an increase of $25,000 compared to noninterest expense of $15.3 million for the linked quarter. Higher personnel expense was the primary driver of the increase compared to the prior year. Noninterest expense was $61.6 million for the year ended December 31, 2022, an increase of $5.4 million or 9.5 percent, as compared to noninterest expense of $56.2 million for the year ended December 31, 2021. Personnel expense, professional/legal expense and miscellaneous expense were the primary drivers of the increase between the two periods.

Income tax expense for the quarter ended December 31, 2022 was $2.2 million compared to $639,000 for the same period in 2021 and $2.1 million in the linked quarter. The effective tax rate for the three months ended December 31, 2022, December 31, 2021 and September 30, 2022 was 21.7 percent, 19.2 and 22.3 percent, respectively. Income tax expense for the year ended December 31, 2022 was $5.6 million compared to $3.9 million for the year ended December 31, 2021. The effective tax rate for the year ended December 31, 2022 and December 31, 2021 was 21.7 and 21.1, respectively.

**<u>Dividend Declared</u>**

On January 10, 2023, the Board of Directors of the Corporation declared a regular quarterly cash dividend of $0.16 per share, payable on or before February 14, 2023 to common shareholders of record at the close of business on January 24, 2023. The payment of this $0.16 per share cash dividend in the first quarter 2023 is an increase of $0.01 compared to the cash dividend paid in the prior four quarters.

**<u>Business Lines</u>**

Commercial banking renewed its focus on specific industries by reorganizing to more effectively dedicate associates to specific business and geographic areas. This is intended to position the Bank for growth by enhancing coordination and leadership support within specific markets, allowing us to continue our focus on a few specialty business areas where PeoplesBank has expertise, and growing talent by supporting the career development of existing team members and attracting additional qualified bankers in our markets.

Business and Consumer marketing efforts continue to focus on supporting strategic goals, combining traditional and digital marketing channels to reach prospective clients in our business area. In the fourth quarter of 2022, online traffic was up over 20% compared to a year earlier, and the number of new users to the PeoplesBank website was up over 22% compared to the prior year.

The Bank's East York Financial Center completed its upgrade to a PeoplesBank Connections Center in the fourth quarter of 2022, and retail and business clients can now enjoy an enhanced environment to discuss how PeoplesBank can help them to achieve their business and personal goals, conduct business and learn more about PeoplesBank products and services.

During the fourth quarter of 2022, we continued our efforts to deliver services to clients in the mode and locations that best serve their needs. With that ongoing focus on rationalizing our delivery platform to best serve clients, we closed our Glen Rock financial center as clients continued to prefer to transact via digital platforms and in neighboring PeoplesBank financial centers that offered drive-thru capabilities. A full service ATM was installed at the Glen Rock location. The building, which also housed the Glen Rock Borough office and the Glen Rock Historical Preservation Society, became part of the National Register of Historical Places in 1997. In appreciation for the Borough of Glen Rock and the community's role in the origin and growth of PeoplesBank dating back to 1864, the Bank donated the building to Glen Rock Borough, which plans to use the building to conduct borough meetings and expand the Glen Rock Historical Preservation Society's museum.

Rising rates and a softening of the housing market resulted in lower than expected mortgage loan originations and sales for the Mortgage Banking Division. Despite the muted activity, the Bank was able to utilize niche products such as our Physician's Preferred Mortgage and a first-time homebuyer program assisting clients with down payments to expand our mortgage portfolio. Adjustable rate mortgage activity also accelerated as the mortgage portfolio grew by a net $31 million or 30% during 2022.

**<u>About Codorus Valley Bancorp, Inc.</u>**

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**".

**<u>Forward-looking Statements</u>**

This Press Release may contain forward-looking statements by Codorus Valley Bancorp, Inc. (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 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," "will," "could," "believes," "plans," "expects," "estimates," "intends," "anticipates," "strives to," "seeks," "intends," "anticipates" 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, 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. Actual results could differ materially from those indicated in forward-looking statements due to, among others, the following factors: general economic conditions; the scope and duration of the on-going COVID-19 pandemic; the effects of the COVID-19 pandemic, including on the Corporation's credit quality and operations as well as its impact on general economic conditions; legislative and regulatory changes including actions taken by governmental authorities in response to the COVID-19 pandemic; monetary and fiscal policies of the federal government; the effects of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Financial Accounting Standards Board and other accounting standard setters; changes in market interest rates; the persistence of the current inflationary environment in the U.S. and our market areas; the uncertain impact of new laws and regulations; ineffectiveness of the Corporation's business strategy due to changes in the current or future market conditions; changes in deposit flows, the cost of funds, demand for loan products and the demand for financial services, in each case as may be affected by the COVID-19 pandemic; 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; geographic concentration of the Corporation's business; fluctuations in real estate values; the adequacy of loan loss reserves; deterioration in the credit quality of borrowers; the Company's ability to retain key personnel; failure or disruption of the Corporation's information systems; failure or circumvention of our internal controls; changes in government regulation and supervision; 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 other economic, competitive, governmental and technological factors affecting the Corporation's operations, markets, products, services and fees.

A discussion of certain risks and uncertainties affecting the Corporation can also be found in its Annual Report on Form 10-K for the year ended December 31, 2021, and in its 2022 Form 10-Qs, which are filed with the Securities and Exchange Commission (the "SEC") and available on the SEC's website at <u>www.sec.gov</u> or in the Investor Relations section of the Corporation's website at <u>www.peoplesbanknet.com</u>. We include web addresses here as inactive textual references only. 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 press release.

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 Company'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.

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

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

---

**Codorus Valley Bancorp, Inc.**

**Financial Highlights**

Condensed Consolidated Statements of Income (Unaudited)

(in thousands of dollars, except per share data)

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | Quarterly | Quarterly | Quarterly | Year-to-Date | Year-to-Date |
|  | | | | December 31, | December 31, |
|  | 4th Qtr<br>2022 | 3rd Qtr<br>2022 | 4th Qtr<br>2021 | 2022 | 2021 |
| Interest income | $25400 | $22673 | $17519 | $84653 | $71691 |
| Interest expense | 3939 | 2322 | 1858 | 9401 | 9591 |
| &nbsp;&nbsp;&nbsp;Net interest income | 21461 | 20351 | 15661 | 75252 | 62100 |
| (Recovery of) provision for loan losses | (544) | (567) | 1731 | 2890 | 3663 |
| Noninterest income | 3470 | 3611 | 4473 | 14854 | 16365 |
| Noninterest expense | 15347 | 15322 | 15070 | 61568 | 56215 |
| &nbsp;&nbsp;&nbsp;Income before income taxes | 10128 | 9207 | 3333 | 25648 | 18587 |
| Provision for income taxes | 2196 | 2053 | 639 | 5556 | 3928 |
| &nbsp;&nbsp;&nbsp;Net income | $7932 | $7154 | $2694 | $20092 | $14659 |
| Basic earnings per share | $0.83 | $0.75 | $0.28 | $2.11 | $1.51 |
| Diluted earnings per share | $0.83 | $0.75 | $0.28 | $2.10 | $1.50 |

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Condensed Consolidated Statements of Financial Condition (Unaudited)

(in thousands of dollars)

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| | | |
|:---|:---|:---|
|  | December 31,<br>2022 | December 31,<br>2021 |
| Cash and short term investments | $120439 | $545494 |
| Investment securities | 346412 | 255596 |
| Loans | 1633011 | 1537627 |
| Allowance for loan losses | (20736) | (22782) |
| Net loans | 1612275 | 1514845 |
| Premises and equipment, net | 21136 | 21955 |
| Operating leases right-of-use assets | 3072 | 1697 |
| Goodwill | 2301 | 2301 |
| Other assets | 89417 | 76684 |
| &nbsp;&nbsp;&nbsp;Total assets | $2195052 | $2418572 |
| Deposits | $1943219 | $2143765 |
| Borrowed funds | 23155 | 32340 |
| Subordinated debentures | 30764 | 30683 |
| Operating leases liability | 3204 | 1803 |
| Other liabilities | 17410 | 14476 |
| Shareholders' equity | 177300 | 195505 |
| &nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $2195052 | $2418572 |

---

**Codorus Valley Bancorp, Inc.** 

**Financial Highlights**

Selected Financial Data (Unaudited)

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Quarterly | Quarterly | Quarterly | Quarterly | Quarterly | Year-to-Date | Year-to-Date |
|  | | | | | | December 31, | December 31, |
|  | 2022<br>4th Qtr | 2022<br>3rd Qtr | 2022<br>2nd Qtr | 2022<br>1st Qtr | 2021<br>4th Qtr | 2022 | 2021 |
| Earnings and Per Share Data (1) <br> (in thousands, except per share data) |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Net income | $7932 | $7154 | $1953 | $3053 | $2694 | $20092 | $14659 |
| &nbsp;&nbsp;&nbsp;Basic earnings per share | $0.83 | $0.75 | $0.20 | $0.32 | $0.28 | $2.11 | $1.51 |
| &nbsp;&nbsp;&nbsp;Diluted earnings per share | $0.83 | $0.75 | $0.20 | $0.32 | $0.28 | $2.10 | $1.50 |
| &nbsp;&nbsp;&nbsp;Cash dividends paid per share | $0.15 | $0.15 | $0.15 | $0.15 | $0.15 | $0.60 | $0.54 |
| &nbsp;&nbsp;&nbsp;Book value per share | $18.51 | $17.63 | $18.37 | $19.28 | $20.64 | $18.51 | $20.64 |
| &nbsp;&nbsp;&nbsp;Tangible book value per share (2) | $18.27 | $17.39 | $18.13 | $19.04 | $20.40 | $18.27 | $20.40 |
| &nbsp;&nbsp;&nbsp;Tangible book value per share without AOCI (8) | $21.90 | $21.21 | $20.59 | $20.50 | $20.41 | $21.90 | $20.41 |
| &nbsp;&nbsp;&nbsp;Average shares outstanding | 9566 | 9545 | 9532 | 9486 | 9506 | 9532 | 9715 |
| &nbsp;&nbsp;&nbsp;Average diluted shares outstanding | 9589 | 9568 | 9565 | 9517 | 9548 | 9560 | 9753 |
| Performance Ratios (%) |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Return on average assets (3) | 1.43 | 1.25 | 0.34 | 0.51 | 0.46 | 0.87 | 0.64 |
| &nbsp;&nbsp;&nbsp;Return on average equity (3) | 18.50 | 15.93 | 4.31 | 6.33 | 5.46 | 11.08 | 7.38 |
| &nbsp;&nbsp;&nbsp;Net interest margin (4) | 3.98 | 3.66 | 3.18 | 2.79 | 2.75 | 3.39 | 2.87 |
| &nbsp;&nbsp;&nbsp;Efficiency ratio (5) | 60.87 | 63.51 | 74.43 | 74.51 | 74.31 | 67.79 | 71.13 |
| &nbsp;&nbsp;&nbsp;Net overhead ratio (3)(6) | 2.13 | 2.04 | 2.11 | 1.81 | 1.79 | 2.02 | 1.75 |
| Asset Quality Ratios (%) |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Net loan charge-offs to average loans (3) | 0.24 | 0.02 | 0.54 | 0.47 | 0.34 | 0.31 | 0.14 |
| &nbsp;&nbsp;&nbsp;Allowance for loan losses to total loans (7) | 1.27 | 1.39 | 1.44 | 1.44 | 1.49 | 1.27 | 1.49 |
| &nbsp;&nbsp;&nbsp;Nonperforming assets to total loans and foreclosed real estate | 0.70 | 0.99 | 1.05 | 2.00 | 2.22 | 0.70 | 2.22 |
| Capital Ratios (%) |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Average equity to average assets | 7.75 | 7.84 | 7.78 | 8.09 | 8.34 | 7.87 | 8.72 |
| &nbsp;&nbsp;&nbsp;Tier 1 leverage capital ratio | 9.77 | 9.18 | 8.79 | 8.60 | 8.59 | 9.77 | 8.59 |
| &nbsp;&nbsp;&nbsp;Common equity Tier 1 capital ratio | 12.04 | 11.80 | 11.63 | 11.93 | 12.11 | 12.04 | 12.11 |
| &nbsp;&nbsp;&nbsp;Tier 1 risk-based capital ratio | 12.61 | 12.38 | 12.23 | 12.54 | 12.74 | 12.61 | 12.74 |
| &nbsp;&nbsp;&nbsp;Total risk-based capital ratio | 15.57 | 15.42 | 15.30 | 15.67 | 15.92 | 15.57 | 15.92 |

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(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)

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| (in thousands, except per share data) | 2022 | 2022 | 2022 | 2022 | 2021 |
|  | 4th Qtr | 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr |
| Total Shareholders' Equity | $177300 | $168339 | $175282 | $183719 | $195505 |
| Less: Preferred Stock | 0 | 0 | 0 | 0 | 0 |
| Less: Goodwill and Other Intangible Assets | (2303) | (2303) | (2304) | (2305) | (2301) |
| Tangible Shareholders' Equity | $174997 | $166036 | $172978 | $181414 | $193204 |
| Less: Accumulated Other Comprehensive Income | (34764) | (36499) | (23462) | (13957) | (164) |
| Tangible Shareholders' Equity without AOCI | $209761 | $202535 | $196440 | $195371 | $193368 |
| Common Shares Outstanding | 9581 | 9548 | 9541 | 9528 | 9472 |
| Book Value Per Share | $18.51 | $17.63 | $18.37 | $19.28 | $20.64 |
| Effect of Intangible Assets | (0.24) | (0.24) | (0.24) | (0.24) | (0.24) |
| ***Tangible Book Value Per Share*** | $18.27 | $17.39 | $18.13 | $19.04 | $20.40 |
| Book Value Per Share | $18.51 | $17.63 | $18.37 | $19.28 | $20.64 |
| Effect of Intangible Assets and AOCI | 3.39 | 3.58 | 2.22 | 1.22 | (0.23) |
| ***Tangible Book Value Per Share without AOCI*** | $21.90 | $21.21 | $20.59 | $20.50 | $20.41 |

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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)**

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Three Months Ended | Three Months Ended | Three Months Ended | Three Months Ended | Three Months Ended | Three Months Ended | Three Months Ended | Three Months Ended | Three Months Ended |
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 | September 30, 2022 | September 30, 2022 | September 30, 2022 | December 31, 2021 | December 31, 2021 | December 31, 2021 |
| (Dollars in thousands) | Average<br> Balance | Taxable-Equivalent Interest | Taxable-Equivalent Rate | Average<br> Balance | Taxable-Equivalent Interest | Taxable-Equivalent Rate | Average<br> Balance | Taxable-Equivalent Interest | Taxable-Equivalent Rate |
| **Assets** |  |  |  |  |  |  |  |  |  |
| Interest bearing deposits with banks | $132772 | $1226 | 3.66% | $260302 | $1486 | 2.26% | $497931 | $191 | 0.15% |
| Investment securities: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Taxable | 366923 | 2387 | 2.58 | 347656 | 2080 | 2.37 | 215571 | 1010 | 1.86 |
| &nbsp;&nbsp;&nbsp;Tax-exempt | 25601 | 137 | 2.13 | 26414 | 142 | 2.13 | 23618 | 118 | 1.98 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total investment securities | 392524 | 2524 | 2.55 | 374070 | 2222 | 2.36 | 239189 | 1128 | 1.87 |
| Loans: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Taxable (1) | 1598206 | 21499 | 5.34 | 1556060 | 18817 | 4.80 | 1520641 | 16097 | 4.20 |
| &nbsp;&nbsp;&nbsp;Tax-exempt | 22829 | 222 | 3.85 | 23057 | 222 | 3.82 | 11004 | 160 | 5.78 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total loans | 1621035 | 21721 | 5.32 | 1579117 | 19039 | 4.78 | 1531645 | 16257 | 4.21 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total earning assets | 2146331 | 25471 | 4.71 | 2213489 | 22747 | 4.08 | 2268765 | 17576 | 3.07 |
| Other assets (2) | 66173 |  |  | 78942 |  |  | 99625 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $2212504 |  |  | $2292431 |  |  | $2368390 |  |  |
| **Liabilities and Shareholders' Equity** |  |  |  |  |  |  |  |  |  |
| Deposits: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest bearing demand | $942286 | 2561 | 1.08% | $982174 | 1238 | 0.50% | $963920 | $354 | 0.15% |
| &nbsp;&nbsp;&nbsp;Savings | 163184 | 12 | 0.03 | 166275 | 13 | 0.03 | 147584 | 14 | 0.04 |
| &nbsp;&nbsp;&nbsp;Time | 383013 | 808 | 0.84 | 402576 | 556 | 0.55 | 476061 | 965 | 0.80 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest bearing deposits | 1488483 | 3381 | 0.90 | 1551025 | 1807 | 0.46 | 1587565 | 1333 | 0.33 |
| Short-term borrowings | 12605 | 13 | 0.40 | 13255 | 13 | 0.39 | 11505 | 12 | 0.40 |
| Long-term debt | 14858 | 175 | 4.68 | 15047 | 133 | 3.51 | 23540 | 145 | 2.44 |
| Subordinated debentures | 30757 | 369 | 4.76 | 30737 | 369 | 4.76 | 30676 | 369 | 4.77 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest bearing liabilities | 1546703 | 3938 | 1.01 | 1610064 | 2322 | 0.57 | 1653286 | 1858 | 0.45 |
| Noninterest bearing deposits | 476347 |  |  | 489589 |  |  | 503035 |  |  |
| Other liabilities | 17974 |  |  | 12992 |  |  | 14502 |  |  |
| Shareholders' equity | 171480 |  |  | 179786 |  |  | 197567 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $2212504 |  |  | $2292431 |  |  | $2368390 |  |  |
| Net interest income (tax equivalent basis) |  | $21533 |  |  | $20425 |  |  | $15718 |  |
| Net interest margin (3) |  |  | 3.98% |  |  | 3.66% |  |  | 2.75% |
| Tax equivalent adjustment |  | (72) |  |  | (74) |  |  | (57) |  |
| Net interest income |  | $21461 |  |  | $20351 |  |  | $15661 |  |

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(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)**

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | Twelve Months Ended | Twelve Months Ended | Twelve Months Ended | Twelve Months Ended | Twelve Months Ended | Twelve Months Ended |
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2021 | December 31, 2021 | December 31, 2021 |
| (Dollars in thousands) | Average<br> Balance | Taxable-Equivalent Interest | Taxable-Equivalent Rate | Average<br> Balance | Taxable-Equivalent Interest | Taxable-Equivalent Rate |
| **Assets** |  |  |  |  |  |  |
| Interest bearing deposits with banks | $300922 | $3588 | 1.19% | $415840 | $550 | 0.13% |
| Investment securities: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Taxable | 323011 | 7499 | 2.32 | 182535 | 3364 | 1.84 |
| &nbsp;&nbsp;&nbsp;Tax-exempt | 25545 | 536 | 2.10 | 21349 | 453 | 2.12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total investment securities | 348556 | 8035 | 2.31 | 203884 | 3817 | 1.87 |
| Loans: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Taxable (1) | 1557289 | 72558 | 4.66 | 1543078 | 67060 | 4.35 |
| &nbsp;&nbsp;&nbsp;Tax-exempt | 18200 | 730 | 4.01 | 9855 | 447 | 4.54 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total loans | 1575489 | 73288 | 4.65 | 1552933 | 67507 | 4.35 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total earning assets | 2224967 | 84911 | 3.82 | 2172657 | 71874 | 3.31 |
| Other assets (2) | 79891 |  |  | 104776 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $2304858 |  |  | $2277433 |  |  |
| **Liabilities and Shareholders' Equity** |  |  |  |  |  |  |
| Deposits: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest bearing demand | $975583 | 4561 | 0.47% | $880576 | $1660 | 0.19% |
| &nbsp;&nbsp;&nbsp;Savings | 162701 | 49 | 0.03 | 134268 | 62 | 0.05 |
| &nbsp;&nbsp;&nbsp;Time | 414784 | 2650 | 0.64 | 505981 | 5503 | 1.09 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest bearing deposits | 1553068 | 7260 | 0.47 | 1520825 | 7225 | 0.48 |
| Short-term borrowings | 11987 | 48 | 0.40 | 10451 | 42 | 0.40 |
| Long-term debt | 18741 | 616 | 3.29 | 34127 | 848 | 2.48 |
| Subordinated debentures | 30727 | 1476 | 4.80 | 30646 | 1476 | 4.82 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest bearing liabilities | 1614523 | 9400 | 0.58 | 1596049 | 9591 | 0.60 |
| Noninterest bearing deposits | 494969 |  |  | 468203 |  |  |
| Other liabilities | 14073 |  |  | 14660 |  |  |
| Shareholders' equity | 181293 |  |  | 198521 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $2304858 |  |  | $2277433 |  |  |
| Net interest income (tax equivalent basis) |  | $75511 |  |  | $62283 |  |
| Net interest margin (3) |  |  | 3.39% |  |  | 2.87% |
| Tax equivalent adjustment |  | (259) |  |  | (183) |  |
| Net interest income |  | $75252 |  |  | $62100 |  |

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(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.