Executive Summary

Q2 2023 delivered solid profitability with net income of $6.61MM and diluted EPS of $0.69; YoY up sharply on higher net interest income, but modestly down QoQ on rising funding costs and higher noninterest expense .
Margins compressed sequentially: NIM fell 19 bps QoQ to 3.81% (up 63 bps YoY), and efficiency ratio worsened to 64.19% from 59.05% in Q1; management explicitly expects further NIM pressure in 2H 2023 .
Credit remained stable: nonperforming assets to total loans/foreclosed real estate at 0.70% (vs. 0.55% in Q1 and 1.05% in Q2 2022); provision was a small reversal ($77k) under CECL .
Liquidity and capital robust: 84% of deposits estimated FDIC‑insured, CET1 at 12.20% (book value per share $19.34); deposit activity stabilized in Q2 with only a $6.7MM decline QoQ .
Board raised dividend to $0.17/share (+$0.01 QoQ), a potential support for investor sentiment amid margin headwinds .

What Went Well and What Went Wrong

What Went Well

Strong YoY earnings expansion: net income climbed to $6.61MM from $1.95MM, driven by net interest income growth ($19.90MM vs. $17.74MM YoY) and noninterest expense discipline .
Asset quality steady: nonperforming assets metrics remained low (0.70% to total loans/foreclosed real estate) and provision reversed slightly ($77k) under CECL .
Strategic liquidity actions: management emphasized liquidity fortification, diversified deposit base (84% insured), and access to wholesale facilities, strengthening resilience amid industry stress. “We made efforts to increase our liquidity, improve credit quality, fortify the balance sheet…” — Craig L. Kauffman, CEO .

What Went Wrong

Margin compression: NIM declined to 3.81% from 4.00% QoQ on rising deposit costs (avg cost of interest‑bearing deposits rose to 1.94% from 1.43% QoQ; 0.26% YoY) .
Sequential earnings softness: EPS fell to $0.69 from $0.73 QoQ as funding costs increased and noninterest expense rose ($15.48MM vs. $14.81MM QoQ) .
Securities AOCI pressure persists: unrealized loss on the securities portfolio increased YoY to $46.6MM (from $30.7MM), though improved vs. March ($40.4MM) .

Financial Results

Core P&L vs Prior Year and Prior Quarter and Estimates

Metric	Q2 2022	Q1 2023	Q2 2023	vs. Estimates
Total Interest Income ($MM)	$19.28	$26.29	$27.99	n/a (S&P Global consensus unavailable)
Interest Expense ($MM)	$1.54	$5.74	$8.09	n/a
Net Interest Income ($MM)	$17.74	$20.56	$19.90	n/a
Noninterest Income ($MM)	$3.91	$3.98	$4.05	n/a
Noninterest Expense ($MM)	$16.22	$14.81	$15.48	n/a
Net Income ($MM)	$1.95	$6.99	$6.61	n/a
Diluted EPS ($)	$0.20	$0.73	$0.69	n/a

Note: We attempted to retrieve S&P Global consensus for CVLY but it was unavailable due to mapping limitations; therefore, “vs. estimates” comparisons could not be provided.

Margins and Profitability

Metric	Q2 2022	Q1 2023	Q2 2023
Net Interest Margin (%)	3.18	4.00	3.81
Efficiency Ratio (%)	74.43	59.05	64.19
ROA (%)	0.34	1.29	1.22
ROE (%)	4.31	15.45	14.17

KPIs

KPI	Q2 2022	Q1 2023	Q2 2023
Avg Cost of Interest‑Bearing Deposits (%)	0.26	1.43	1.94
Nonperforming Assets / Total Loans & FCRE (%)	1.05	0.55	0.70
Allowance for Credit Losses / Total Loans (%)	1.44	1.31	1.23
Deposit Change QoQ ($MM)	—	—	−$6.7
CET1 Capital Ratio (%)	—	12.19	12.20
Book Value per Share ($)	$19.34 (Q2’22 shown in table)	$19.28	$19.34
FDIC‑Insured Deposits (%)	—	—	84%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Interest Margin	2H 2023	Not provided	Anticipates downward pressure on NIM in 2H 2023	Lower (directional)
Quarterly Dividend per Share	Q3 2023	$0.16 (Q1 2023)	$0.17 declared (payable Aug 8; record Jul 25)	Raised

No explicit guidance was provided for revenue, OpEx, OI&E, tax rate, or segment‑specific items in Q2 materials .

Earnings Call Themes & Trends

No Q2 2023 earnings call transcript was found; themes are drawn from press releases and financial highlights .

Topic	Previous Mentions (Q4 2022 and Q1 2023)	Current Period (Q2 2023)	Trend
Liquidity posture	Added FHLB/short‑term borrowings to fortify liquidity; diversified funding	Liquidity emphasized; 84% deposits insured; IntraFi access; BTFP considered if needed	Improving/robust
Credit quality	Non‑accruals down; NPA ratio improved; provision recovery under incurred method	NPA/loans at 0.70%; minor CECL reversal; allowance methodology transitioned	Stable
Margin dynamics	NIM expanded into Q4/Q1 on asset yields; deposit costs rising	NIM down 19 bps QoQ; deposit cost up to 1.94%; management guides further pressure	Deteriorating sequentially
Deposit mix/cost	Shift from noninterest‑bearing/money market to CDs; cost rising	Continued mix shift; avg cost up; deposits stabilized with −$6.7MM QoQ decline	Stabilizing volumes; cost rising
Capital/returns	Dividend increased to $0.16 in Q4; capital ratios strong	Dividend raised to $0.17; CET1 ~12.20%; TBV improved	Improving shareholder returns

Management Commentary

“During the quarter we made efforts to increase our liquidity, improve credit quality, fortify the balance sheet, and position the Corporation to support its stakeholders.” — Craig L. Kauffman, President & CEO .
“We were pleased that the Board increased the cash dividend to $0.17 per share, an increase of $0.01 over the first quarter of 2023.” — Craig L. Kauffman .
Liquidity framework: 84% of deposits insured; IntraFi used for reciprocal deposits; BTFP considered among wholesale options if needed .
Q1 focus: increased liquidity, improved credit quality, fortified balance sheet amid industry turmoil .

Q&A Highlights

No Q2 2023 earnings call transcript was available; key clarifications from press materials addressed deposit stability (−$6.7MM QoQ decline), rising deposit costs, and anticipated NIM pressure in 2H 2023 .
Liquidity and insurance coverage levels (84% FDIC‑insured deposits) were highlighted to mitigate depositor concerns during industry stress .
CECL adoption details: allowance increased $2.8MM; net retained earnings impact −$2.1MM .

Estimates Context

Wall Street consensus estimates via S&P Global were unavailable for CVLY this quarter; we were unable to compare actuals to consensus EPS or revenue. Future estimate comparisons may reflect downward revisions to margin expectations given management’s guidance for 2H 2023 NIM pressure .

Key Takeaways for Investors

Earnings resilience: Despite higher funding costs, CVLY generated $6.61MM net income and $0.69 EPS; YoY momentum remains strong on asset yield expansion .
Margin headwinds intensifying: Avg cost of interest‑bearing deposits rose to 1.94%, and NIM fell to 3.81%; management warns of further pressure in 2H 2023, a key near‑term stock narrative driver .
Credit solid, provision light: NPA ratios remain low and stable; CECL reversal underscores benign credit trends, supporting valuation downside protection .
Liquidity/capital strengths: High insured deposit share and CET1 ~12.20% provide flexibility while the portfolio works through AOCI; dividend increase signals confidence in cash flow .
Deposit mix shifts: Migration toward CDs continues; deposit levels stabilized in Q2, but cost pressures likely persist—watch for pricing discipline and retention .
Operating efficiency slipped QoQ (64.19%), suggesting expense vigilance is important to offset margin compression .
Without published sell‑side consensus, focus near‑term on management’s margin outlook and deposit cost trajectory as primary estimate revision catalysts .

Appendix: Balance Sheet Context (End of Period)

Total assets $2.216B; total deposits $1.883B; short‑term borrowings $83.32MM; book value per share $19.34; CET1 12.20% at Q2 2023 .

Non-GAAP Disclosures

Tangible book value per share and tangible book value per share without AOCI are non‑GAAP measures; reconciliations provided in the press materials .

CODORUS VALLEY BANCORP INC (CVLY)·Q2 2023 Earnings Summary