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CV

CODORUS VALLEY BANCORP INC (CVLY)·Q3 2023 Earnings Summary

Executive Summary

  • Q3 2023 delivered net income of $5.9M ($0.61 diluted EPS), down 10.5% sequentially and 17.3% year over year; NIM compressed to 3.64% from 3.81% in Q2 as deposit costs rose and mix shifted to higher-cost certificates .
  • Deposits stabilized and increased $23.7M QoQ to $1.91B; nonperforming assets ratio improved to 0.47%, down 32.9% vs year-end 2022, highlighting resilient credit quality .
  • Management expects continued downward pressure on net interest margin into late 2023 and 2024 due to deposit pricing; declared a $0.17 dividend payable Nov 14, 2023 .
  • Liquidity and capital remained strong (CET1 12.53%, TBVPS ex-AOCI $23.28), with short-term borrowings reduced QoQ, improving funding profile .
  • No S&P Global consensus estimates were available for CVLY in our system; therefore, estimate beat/miss comparisons are not provided (S&P Global consensus unavailable) [SpgiEstimatesError].

What Went Well and What Went Wrong

What Went Well

  • Deposit activity stabilized; total deposits increased $23.7M QoQ, with growing CDs offsetting declines in DDAs and savings; average cost of interest-bearing deposits rose but deposit base is 83% FDIC-insured and 7% collateralized .
  • Credit metrics improved: nonperforming assets to total loans fell to 0.47% (down from 0.70% at Dec 31, 2022); net loan charge-offs to average loans were -0.15% in Q3 (recoveries) .
  • Noninterest income grew 16% YoY to $4.2M, driven by service charges and bank-owned life insurance income; trust and investment service fees also remained robust .

Management quote: “Despite the challenging environment, the company continued to generate strong earnings in the third quarter… ensured strong liquidity and capital positions, and maintained diligence around expense control. Additionally, the Corporation added several seasoned bankers who should contribute meaningfully to the growth plans of the Bank.” — Craig L. Kauffman, President & CEO .

What Went Wrong

  • Net interest margin compressed to 3.64% from 3.81% in Q2 2023 and 4.00% in Q1 2023, driven by higher deposit costs and mix shift; NII declined 4.3% QoQ and 4.8% YoY .
  • Provision for credit losses swung to a $251K expense in Q3 from reversals in Q2 and Q3 2022, reflecting CECL dynamics and caution on the macro backdrop .
  • Unrealized loss on the AFS securities portfolio increased to $56.0M at 9/30 from $46.6M at 6/30, reflecting rate-driven market values despite portfolio yield improvements .

Financial Results

MetricQ3 2022Q1 2023Q2 2023Q3 2023
Diluted EPS ($)0.75 0.73 0.69 0.61
Net Interest Income ($USD Millions)20.35 20.56 19.90 19.37
Noninterest Income ($USD Millions)3.61 3.98 4.05 4.19
Total Net Revenue (NII + Noninterest) ($USD Millions)23.96 24.53 23.95 23.57
Net Interest Margin %3.66 4.00 3.81 3.64
Efficiency Ratio %63.32 59.05 64.19 66.95
Return on Average Assets %1.20 1.29 1.22 1.08
Return on Average Equity %14.07 15.45 14.17 12.64

KPIs

KPIQ3 2022Q1 2023Q2 2023Q3 2023
Total Deposits ($USD Millions)2,014.01 1,889.39 1,882.67 1,906.38
Net Loans ($USD Millions)1,576.80 1,626.34 1,661.01 1,682.93
Avg Cost of Interest-Bearing Deposits %0.46 1.43 1.94 2.31
Nonperforming Assets / Loans & OREO %0.99 0.55 0.70 0.47
Allowance for Credit Losses / Total Loans %1.26 1.31 1.23 1.26
Net Loan Charge-Offs / Avg Loans %0.06 0.15 0.20 -0.15
Short-Term Borrowings ($USD Millions)13.25 61.37 83.32 39.10
Unrealized Loss on Securities ($USD Millions)47.70 40.40 46.60 56.00

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (directional)Remainder of 2023 and into 2024Not quantifiedExpect continued downward pressure due to deposit costs Lower (directional)
Deposits (directional)Q3 2023Declines in 1H23 Stabilized; increased $23.7M QoQ Improved stability
Dividend per share ($)Q4 2023$0.17 (Q2) $0.17 payable Nov 14, 2023 Maintained
Liquidity facilitiesOngoingBTFP among options, not utilized BTFP remains an option, not utilized Maintained optionality

Earnings Call Themes & Trends

Note: A Q3 2023 earnings call transcript was not available in our dataset; themes summarized from company earnings materials.

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2023)Trend
Liquidity & deposit insurance84% insured; deposit base diversified; BTFP optional, not used 83% insured; deposits above Dec-2019 by $315.8M; BTFP considered among options Stable, positive positioning
Deposit mix & pricingShift to CDs; rising cost of IB deposits (1.43% Q1; 1.94% Q2) Continued shift; average cost 2.31% and deposit stabilization/increase in Q3 Higher costs; stabilization emerging
Net interest margin4.00% (Q1), 3.81% (Q2) with caution for 2H23 3.64%; guidance for pressure into 2024 Downward pressure
Credit qualityNPA ratio fell to 0.55% (Q1) then 0.70% (Q2) NPA ratio improved to 0.47%; charge-offs negative Improving
Securities portfolioUnrealized losses rose from $40.4M (Q1) to $46.6M (Q2) Unrealized loss at $56.0M; taxable yield up YoY Rate-impact elevated
Strategic hiring/expansionAdded leaders in Business Banking and Wealth; marketing push Added seasoned bankers to drive growth; community engagement Strengthening franchise

Management Commentary

  • Prepared remarks emphasized earnings resilience and disciplined balance sheet management: “the company continued to generate strong earnings… ensured strong liquidity and capital positions, and maintained diligence around expense control” — Craig L. Kauffman, President & CEO .
  • Strategic focus on growth talent: “added several seasoned bankers who should contribute meaningfully to the growth plans of the Bank” — Craig L. Kauffman .
  • Liquidity positioning highlighted FDIC coverage, optional BTFP access on par values, and IntraFi network usage to manage liquidity needs .
  • Capital strength: CET1 12.53%; TBVPS $18.82; TBVPS ex-AOCI $23.28 .

Q&A Highlights

  • A Q3 2023 earnings call transcript was not found; no Q&A details or guidance clarifications were available in our sources. We rely on the 8‑K press release and financial supplements for commentary [ListDocuments returned no earnings-call-transcript for CVLY during Q3 2023].

Estimates Context

  • Wall Street consensus (S&P Global) for Q3 2023 was unavailable for CVLY in our system due to missing CIQ mapping; therefore, we cannot provide beat/miss comparisons or estimate-based context (S&P Global consensus unavailable) [SpgiEstimatesError].

Key Takeaways for Investors

  • Margin headwinds are the core narrative: rising deposit costs and mix shift are pressuring NIM into 2024; watch deposit betas and CD repricing cadence .
  • Credit remains a differentiator: improved NPA ratio and negative net charge-offs in Q3 indicate conservative underwriting amid macro uncertainty .
  • Funding profile improved QoQ with lower short-term borrowings; deposit stabilization is an early positive sign after 1H declines .
  • Securities AOCI remains elevated ($56.0M unrealized loss), a lever to earnings volatility with rate moves; portfolio yield has improved YoY .
  • Capital and tangible book value metrics are strong (CET1 12.53%; TBVPS ex-AOCI $23.28), supporting dividend continuity and strategic flexibility .
  • Near-term trading: shares are likely sensitive to deposit cost trends and any inflection in NIM; quarterly deposit flows and funding mix disclosures are key catalysts .
  • Medium-term thesis: franchise strengthening via experienced banker hires and consistent credit discipline; watch for sustained deposit growth and stabilization of AOCI to unlock higher ROTCE as rate pressures abate .