Executive Summary

Q4 2023 diluted EPS was $0.57 on net income of $5.5M, down versus $0.83 and $7.9M in Q4 2022 and down versus $0.61 and $5.9M in Q3 2023, driven by higher deposit costs and merger-related expenses; adjusted EPS excluding $0.96M merger costs was $0.64 .
Net interest income softened to $19.2M with NIM at 3.61% (vs 3.98% YoY and 3.64% QoQ) amid deposit mix shifts toward higher-cost CDs; management expects further NIM pressure into early 2024 .
Credit quality improved: nonperforming assets/loans fell to 0.23% (vs 0.70% YoY), and Q4 recorded a total provision reversal of $0.77M under CECL, supporting earnings resilience .
Strategic catalyst: announced merger-of-equals with Orrstown Financial Services (ORRF) in December; Q4 included $0.96M merger-related expenses and management targets closing in Q3 2024, positioning for scale and operating leverage .
Dividend maintained at $0.17 per share; liquidity remains sound with ~83% of deposits FDIC-insured and added wholesale borrowing capacity utilized prudently .

What Went Well and What Went Wrong

What Went Well
- Credit metrics strengthened: nonperforming assets/loans declined to 0.23% (down ~67% YoY), and Q4 provision was a net reversal of $0.77M .
- Noninterest income grew 22% YoY to $4.24M, led by swap fees, BOLI income, and trust/investment service fees .
- CEO underscored record annual earnings and momentum heading into the Orrstown merger: “We are eager to leverage the momentum we’ve generated… to establish the premier regional community bank…” .
What Went Wrong
- Margin pressure persisted: NIM fell to 3.61% (3.98% in Q4 2022) and management warns of further NIM headwinds due to deposit costs and curve slope .
- Deposit mix shift to higher-cost CDs (+$69.9M YoY) and decline in NIB deposits (−$84.6M YoY) raised funding costs; average cost of interest-bearing deposits rose to 2.59% (0.90% YoY) .
- Noninterest expense increased to $17.3M (+13% YoY), including $0.96M merger expenses and higher variable compensation accruals .

Metric	Q4 2022	Q3 2023	Q4 2023
Net Interest Income ($USD Millions)	$21.461	$19.372	$19.166
Noninterest Income ($USD Millions)	$3.470	$4.193	$4.240
Provision for Credit Losses - Total ($USD Millions)	$(0.544)	$0.251	$(0.767)
Noninterest Expense ($USD Millions)	$15.347	$15.896	$17.285
Net Income ($USD Millions)	$7.932	$5.917	$5.453
Diluted EPS ($USD)	$0.83	$0.61	$0.57
Net Interest Margin (%)	3.98	3.64	3.61
Efficiency Ratio (%)	63.51	66.95	73.28

Notes: Provision total equals loans provision plus unfunded commitments provision per consolidated statement .

Segment/KPI Highlights

KPI	Q4 2022	Q3 2023	Q4 2023
ROAA (%)	1.25	1.08	1.00
ROAE (%)	15.93	12.64	11.69
Nonperforming Assets / Total Loans (%)	0.99	0.47	0.23
Allowance for Credit Losses / Total Loans (%)	1.39	1.26	1.20
CET1 Capital Ratio (%)	12.04	12.53	12.81
Book Value per Share ($)	$18.51	$19.06	$20.70

Deposit Mix and Funding Cost (YoY change to 12/31/2023)

Category	Change ($USD Millions)	Change (%)
Total Deposits	$(69.9)	(3.6%)
Noninterest-Bearing Demand	$(84.6)	(18.2%)
Interest-Bearing Demand	+$14.7	+1.0%
Savings	$(30.1)	(18.7%)
Money Market	$(2.5)	<1.0% decline
Certificates of Deposit	+$69.9	+18.3%
Avg. Cost of Interest-Bearing Deposits (Q4)	0.90% (’22)	2.31% (Q3 ’23)

Metric	Period	Previous Guidance	Current Guidance	Change
Net Interest Margin outlook	Early 2024	Not quantified	Downward pressure expected due to deposit costs and curve slope	Lowered tone
Merger with Orrstown (ORRF)	Target close Q3 2024	N/A	Expect completion in Q3 2024 (subject to approvals)	New
Merger-related expenses	FY 2024	N/A	Expect additional merger-related expenses in 2024	New
Quarterly dividend	Q1 2024	$0.17 last quarter	$0.17 declared, payable Feb 13, 2024	Maintained

Note: No Q4 2023 earnings call transcript was available in the document set; themes based on quarterly press releases.

Topic	Previous Mentions (Q-2: Q2 2023; Q-1: Q3 2023)	Current Period (Q4 2023)	Trend
Deposit mix and funding costs	Shift to CDs; cost rise; stabilization QoQ (+$23.7M deposits)	Continued mix toward CDs; avg cost 2.59%; further NIM pressure expected	Funding costs rising; cautious margin outlook
Liquidity and wholesale funding	FHLB advances peaked then reduced; options include BTFP	FHLB/short-term borrowings increased QoQ; BTFP considered if needed	Proactive liquidity management
Credit quality	CECL adoption; improved NPA ratio; provision reversals	NPA ratio at 0.23%; provision net reversal $0.77M	Improving
Capital and book value	CET1 improved; TBV per share increased	CET1 12.81%; BVPS $20.70; tangible BV up	Strengthening
Strategic actions	No merger in Q2; stable operations	Announced MOE with ORRF; $0.96M Q4 merger costs	Major strategic shift

“Our robust performance in the fourth quarter… resulted in Codorus Valley achieving its highest annual earnings on record… we maintained a strong net interest margin and mitigated the effects of margin compression… We are eager to leverage the momentum… when we join forces with Orrstown Financial Services later this year…” — Craig L. Kauffman, President & CEO .
“We are excited to be partnering with Orrstown… CVLY expects the merger to be completed in the third quarter of 2024.” — Craig L. Kauffman .

No Q4 2023 earnings call transcript was available in the document set; therefore, no Q&A highlights or guidance clarifications could be sourced from a call transcript [functions.ListDocuments returned none for transcripts].

Wall Street consensus estimates via S&P Global (EPS and revenue) for Q4 2023 were unavailable due to missing CIQ mapping for CVLY; as a result, beats/misses versus consensus cannot be assessed at this time.*

Margin headwinds likely persist near term: NIM fell to 3.61% and management anticipates further pressure into early 2024 given higher deposit costs and curve dynamics .
Earnings quality bolstered by credit: NPA ratio improved to 0.23%, and Q4 posted a net provision reversal, partially offsetting margin compression .
Funding mix is the swing factor: deposit shifts toward CDs and away from NIB demand accounts elevated funding costs; monitor further mix changes and pricing discipline .
Expense trajectory includes integration: noninterest expense rose to $17.3M in Q4, including $0.96M merger costs; expect additional merger-related expenses in 2024 .
Strategic catalyst: Orrstown merger offers scale and potential operating leverage; closing targeted Q3 2024, making regulatory progress and cost-synergy execution key stock drivers .
Capital and book value provide support: CET1 12.81% and BVPS $20.70 underpin resilience and optionality through the integration period .
Dividend sustained at $0.17; liquidity remains robust with high insured deposit levels and diversified borrowing options (FHLB, BTFP considered) .

*Estimates unavailable via S&P Global due to missing CIQ mapping; values would be retrieved from S&P Global when accessible.