Measuring Progress
ANNUAL
REVIEW
2018
Larry J. Miller, Chairman, President and CEO
Harry R. Swift, Esq., Vice Chairman and Lead Director
Dear Shareholders
Congress passed and the President signed into law the Tax Cuts
and Jobs Act (the Act) about fourteen months ago. Almost
immediately, overjoyed and overzealous investors pushed the
Dow Jones industrial average past 25,000, a new record. Market
volatility was low and after a decade-long stock market frenzy,
stocks of the S&P 500 index created about $17 trillion in new
wealth. Many wondered if passage of the Act would propel the
stock market for another decade, or more. Alas, all good things
must come to an end.
And so it did. While the current recovery is the longest on record,
it is also one of the weakest ever recorded. Stocks plunged in
December, posting their worst monthly loss since 1931 and the
Great Depression. And as it is in any business cycle, the longer
the expansion, the closer it is to the next downturn.
After the initial euphoria from the tax cuts approved by the Act, the
financial services industry saw its market value decline in the fourth
quarter of 2018. Booming summertime stock prices experienced
a roughly 25-30 percent decline in late 2018, as the market feared
recession and a flattening yield curve. Deepening the angst among
investors, the recent 35-day Federal Government shutdown was
by far the longest ever, eclipsing the previous 21-day record closure
that ended in January 1996.
Businesses and bankers will face many tests in the coming months
as they determine how their respective companies navigate the
near-term. At Codorus Valley Bancorp, Inc. (the “Corporation”), we
have assembled a cadre of talented bankers and professionals to lead
your Corporation into the future. While the Corporation reported
the highest net income in its history in 2018, I have chosen to first
discuss the people who have been recruited over the past year, in
this Letter to Shareholders.
People
Black swans are events that are highly improbable, difficult to
predict and have massive impact. For the Corporation and its
financial services subsidiary, PeoplesBank (collectively referred to
as the “Company”), our black swan event was the resignation,
retirement or departure of five members of the Leadership Team
during 2018.
With the departure of PeoplesBank’s President/CEO in February
2018, I was called upon to return to the position that I had
previously held for 36 years. I stepped in as CEO of the Bank until
August, when we were pleased to recruit Craig L. Kauffman. Mr.
Kauffman was appointed President/CEO of PeoplesBank and
Executive Vice President/COO of Codorus Valley Bancorp, Inc. at
that time. A lifelong resident of Lancaster County, PA, Craig
received his undergraduate degree from Millersville University and
his Master’s Degree from the Pennsylvania State University. Most
recently, Mr. Kauffman was the Regional President for Central
Pennsylvania for BB&T Bank.
Also during the summer, we recruited Larry D. Pickett, CPA, to
serve as Executive Vice President and Chief Financial Officer of
PeoplesBank and Treasurer of Codorus Valley; and Chad M. Cla-
baugh to serve as Senior Vice President/Director of the Retail
Sales and Services Division for PeoplesBank.
Mr. Pickett is a long-term resident of Harford County, Maryland.
He earned his undergraduate degree in Accounting from Towson
University and received his CPA designation the same year. Larry
was most recently employed by Bay Bancorp, Inc., located in
Baltimore County, Maryland.
Mr. Clabaugh is a lifelong resident of York County, Pennsylvania.
He earned his undergraduate associate degree from York College
of Pennsylvania. Chad most recently worked for BB&T Bank.
In early fall, we recruited E. Dennis Ginder as Senior Vice President/
Chief Credit Officer. Mr. Ginder is a Lancaster County native and
earned his undergraduate degree from the Pennsylvania State
University. He is also an Honors Graduate of the Stonier Graduate
School of Banking. Dennis was most recently employed by S&T Bank.
All of the foregoing have in excess of 30-years of professional
experience, respectively, in the financial services industry within
the Central Pennsylvania and Central Maryland marketplace.
Finally, we were most pleased to engage Ms. Kristen Heisey as
Vice President, Director of Marketing and Client Experience. Ms.
Heisey was valedictorian at William Penn High School in York,
earned her undergraduate degree from Messiah College and was
awarded a Master’s Degree from Johns Hopkins University. Kristen
has a well-rounded resume that includes non-profit and for profit
marketing, client experience and strategic planning.
By definition, black swans are tail-risk events. Some would consider
such events “unknown unknowns,”and their effects only became
clear after the fact. For your Company, we were able to mitigate this
black swan event and through a timely and organized approach,
we successfully engaged highly qualified individuals with a broad
range of financial services and business experience.
Retirement
In August, Ms. Lynn D. Crenshaw retired as Senior Vice President/
Retail Sales and Services Division Leader of PeoplesBank. Ms.
Crenshaw joined PeoplesBank in September 2005 and has made
lasting contributions to the success of our Company, including:
expansion of our full-service Financial Center Network from 12
locations to 25 locations, expanding our limited services delivery
channel from 3 locations to 11 locations, consolidating the consumer
loan approval and processing center, and other deposit product
and service related enhancements too numerous to mention.
Lynn was a tireless worker, mentor, confidant, leader and friend.
We wish her good health and happiness during the next phase of
her life.
Profit
Codorus Valley Bancorp, Inc. realized net income available to
common shareholders (earnings) of $19.5 million for the year ending
2018, compared to $12.0 million of earnings realized in 2017,
which represents an increase of approximately $7.5 million or 63
percent. The increase in net income for the year was partially the
result of a $2.7 million reduction in the net deferred asset value at
December 31, 2017.
Net interest income for 2018 increased $4.3 million or 7 percent
as compared to 2017, due primarily to the increased profit derived
from an increase in the volume of commercial loans. Net interest
margin (tax-equivalent basis) for 2018 was 3.84 percent, which
was the same as in 2017.
Non-interest income for 2018 from all sources increased $1.8
million or 16 percent above 2017. These results were primarily due
to increases in: trust and investment services fees, income from
mutual fund, annuity and insurance sales, service charges on
deposit accounts, gains on sales of loans held for sale, and other
income. Non-interest expense for 2018 increased $4.8 million or 11
percent above 2017. Higher costs were associated with: personnel,
professional and legal fees, debit card processing, external data
processing, and charitable donations, which accounted for the
majority of the increase. The primary driver of the aforementioned
increase in non-interest expense was the continued expansion of
our business and consumer banking in and support services for
our Maryland and Pennsylvania markets.
On December 31, 2018, total assets of Codorus Valley Bancorp,
Inc. were approximately $1.81 billion, representing a 6 percent
increase compared to December 31, 2017. Total deposits at year-
end 2018 were approximately $1.50 billion, compared to $1.38
billion at year-end 2017, which represents an increase of $110 million
or 8 percent. Total loans at year-end 2018 were approximately $1.49
billion, compared to $1.40 billion at year-end 2017, representing
an increase of $89 million or 6 percent.
Additional 2018 financial performance information for Codorus
Valley Bancorp, Inc. is contained in the Corporation’s Annual Report
on Form 10-K for the year ending December 31, 2018.
Operations
Several strategic initiatives came to fruition in 2018, including: the
opening of a new full service financial center at 2343 Oregon Pike,
Manheim Township, Lancaster County, Pennsylvania; in Bel Air,
Harford County, Maryland, relocation of the previously leased
financial center at 126 N. Main Street, to an adjacent property
purchased by the Company at 140 N. Main Street and the opening
of a Loan Production Office at 139 N. Main Street; and the launch
of a new personal Online and Mobile Banking platform. With the
New Account Opening solution, clients are able to open and fund
a new account online in approximately 4 minutes!
Brand Recognition
Locally for the third year in a row, PeoplesBank was chosen as
the Best Bank in York County by voters in the York Sunday News
2018 Best of York County Competition. This award recognizes
our Associates superior client service and commitment to our
community.
Closing
Earlier in this letter I spoke of black swans and “unknown
unknowns.” I want to close by raising topics that could be
considered “known unknowns,” or gray rhinos. Gray rhinos are
probable, high-impact trends that are clearly observable but often
ignored. In the financial services industry today, examples of gray
rhinos would include: disruptive technologies and shadow
financial services entities, cybersecurity, gathering of sufficient
deposits to fund new loans, and on and on. All of the foregoing,
and more, are mega-trends that have been clearly observable,
with known risks and opportunities. The question is how will
financial services companies respond to these, and other, gray
rhinos. We believe we have assembled a Leadership Team at Co-
dorus Valley and PeoplesBank who have the experience, skillsets
and temperament to continue our hero/caregiver culture and
effectively manage the gray rhinos of the future.
Thank you for investing in Codorus Valley Bancorp, Inc. We sincerely
appreciate your confidence in our organization and, on behalf of
all of our associates, thank you for your support and continued
long-term investment in Codorus Valley Bancorp, Inc.
Larry J. Miller
Chairman, President and Chief Executive Officer
Codorus Valley Bancorp, Inc.
Selected Financial Data
Codorus Valley Bancorp, Inc.
2018 2017 2016 2015 2014
Summary of operations (in thousands)
Interest income $ 80,321 $ 70,415 $ 62,230 $ 56,002 $ 50,400
Interest expense 16,401 10,868 8,649 8,174 8,040
Net interest income 63,920 59,547 53,581 47,828 42,360
Provision for loan losses 2,700 4,175 3,000 3,500 1,600
Noninterest income 13,314 11,522 10,030 9,047 8,153
Noninterest expense 49,810 44,986 41,623 37,427 32,476
Income before income taxes 24,724 21,908 18,988 15,948 16,437
Provision for income taxes 5,182 9,904 5,886 4,813 4,668
Net income 19,542 12,004 13,102 11,135 11,769
Preferred stock dividends 0 0 16 120 174
Net income available to common shareholders $ 19,542 $ 12,004 $ 13,086 $ 11,015 $ 11,595
Per common share (adjusted for stock dividends)
Net income, basic $ 2.08 $ 1.29 $ 1.42 $ 1.52 $ 1.70
Net income, diluted $ 2.06 $ 1.27 $ 1.41 $ 1.51 $ 1.67
Cash dividends paid $ 0.592 $ 0.492 $ 0.448 $ 0.420 $ 0.384
Stock dividends distributed 5% 5% 5% 5% 5%
Book value $ 18.91 $ 17.56 $ 16.68 $ 15.97 $ 15.01
Tangible book value (1) $ 18.67 $ 17.31 $ 16.43 $ 15.72 $ 15.01
Cash dividend payout ratio 28.3% 38.0% 32.0% 27.2% 22.5%
Weighted average shares outstanding 9,388,151 9,314,110 9,233,085 7,227,172 6,821,185
Weighted average diluted shares outstanding 9,479,266 9,423,455 9,312,113 7,305,017 6,940,683
Profitability ratios
Return on average shareholders' equity (ROE) 11.42% 7.40% 8.47% 8.94% 10.22%
Return on average assets (ROA) 1.11% 0.72% 0.88% 0.82% 0.98%
Net interest margin (tax equivalent basis) 3.84% 3.84% 3.89% 3.79% 3.84%
Efficiency ratio 63.95% 62.07% 64.09% 64.60% 62.83%
Net overhead ratio 2.08% 2.03% 2.15% 2.12% 2.08%
Capital ratios
Common equity tier 1 ratio 12.15% 11.58% 11.88% 12.56% n/a
Tier 1 risk-based capital 12.83% 12.29% 12.66% 14.49% 13.24%
Total risk-based capital 14.08% 13.48% 13.81% 15.60% 14.42%
Average shareholders' equity to average assets 9.75% 9.79% 10.44% 9.15% 9.62%
Summary of financial condition
at year-end (in thousands)
Investment securities $ 155,515 $ 164,902 $ 201,665 $ 218,498 $ 216,973
Loans 1,489,807 1,401,479 1,272,319 1,123,775 920,554
Assets 1,807,480 1,709,205 1,611,587 1,456,334 1,213,846
Deposits 1,495,280 1,384,507 1,264,177 1,094,149 954,973
Borrowings 122,332 150,805 181,947 194,820 132,590
Equity 178,746 164,219 154,957 159,141 118,440
Other data
Full service financial centers 26 26 26 24 21
Number of employees (full-time equivalents) 348 326 306 282 238
Wealth Management assets,
market value (in thousands) $ 725,087 $ 711,161 $ 562,865 $ 514,728 $ 307,000
1) A reconciliation of tangible book value, which is a non-GAAP Financial Measure, can be found further in this Annual Review.
Craig Kauffman visits PeoplesBank’s newly relocated Bel
Air, MD financial center. This restoration effort has helped
transform the entry into the historic downtown.
Do not measure success by today's harvest.
Measure success by the seeds you plant today.
—Robert Louis Stevenson
Fiscal year 2018 marked another extraordinary year for
PeoplesBank. From every measure of success, the Bank realized
record results once again confirming that our tireless focus on our
Mission, Vision and Values remains the anchor for our clients,
Associates, communities and shareholders. Working together to
make this mission a reality, PeoplesBank once again recorded solid
growth in all business lines, expanded and improved client access
and experience, realized significant process improvement and
posted record breaking financial performance.
Our relentless focus on client experience is the driving force behind
our strategic and tactical priorities. Increasing our technology
platforms, introducing and enhancing our digital and mobile
capabilities, strategically expanding our physical infrastructure, and
integrating the broader PeoplesBank value-proposition to our
clients continues to be the roadmap to success. Our investments
in these areas have been significant, and will continue to evolve
without compromising our longstanding, unparalleled commitment
to personal, responsive client service.
professionals joined the PeoplesBank Leadership Team. With this
strong Team, we are confident that we are well positioned to
successfully execute any opportunities that arise in the future.
PeoplesBank’s commitment to our community is longstanding and
foundational to our long-term success. We know that the success
of our community is connected to the success of our clients and
Associates, therefore our commitment remains intentional and
unwavering. From all levels of measurement, PeoplesBank’s
commitment and investment in the community reached record
proportions in 2018. This is PeoplesBank: making a difference
in the lives of many so our clients and communities may live
confidently and fulfill their dreams.
I am honored and humbled to lead such an extraordinary Company
and group of dedicated Associates. The commitment and focus of
this team are unprecedented, and I believe that from every measure
of success our future is bright. Thank you for your commitment
and support of PeoplesBank.
Our Associates continue to be a defining strength of our
Company, and their commitment to our clients and communities
is unprecedented. Associate engagement is a primary focal point
of our Leadership Team, and we continue to increase learning and
educational opportunities, integrate Associates with process and
efficiency improvement, and encourage and facilitate volunteerism
and support of our communities. During 2018, several key
Craig L. Kauffman
President and CEO, PeoplesBank
Common Stock, Dividend, and Broker Information
Codorus Valley Bancorp, Inc. common stock is listed on the NASDAQ Global Market under the symbol CVLY. Codorus Valley had approximately
2,450 holders of record as of February 27, 2019. The closing price per share of Codorus Valley’s common stock on February 28, 2018, was $22.95.
The following table sets forth high and low sales prices and dividends paid per common share for Codorus Valley as reported by NASDAQ
during the periods indicated. All amounts reflect the impact of the common stock dividends distributed by the Corporation.
2018 2017
Dividends Dividends
Quarter High Low Per Share High Low Per Share
First $28.31 $23.65 $0.148 $26.17 $22.70 $0.123
Second 29.51 26.21 0.148 26.81 22.88 0.123
Third 31.86 28.19 0.148 28.90 21.73 0.123
Fourth 30.48 20.27 0.148 31.87 26.01 0.123
For further information, we refer you to the following market makers in our common stock:
Boenning and Scattergood, Inc.
610-862-5368
800-842-8928
Janney Montgomery Scott LLC
717-779-2720
800-999-0503
Sandler O’Neill & Partners, L.P.
(Institutional Trades Only)
212-466-8000
800-635-6871
Internet Information
Information about products and services that are offered by Codorus Valley and its subsidiaries is available on the Internet at
www.peoplesbanknet.com.
Financial Information
The Annual Report on Form 10-K is filed with the Securities and Exchange Commission ( SEC ). Copies of this document and other SEC filings by Co-
dorus Valley Bancorp, Inc. may be obtained electronically at PeoplesBank’s website at www.peoplesbanknet.com (select Investor Relations, then
Filings, then Documents), or the SEC’s website at www.sec.gov/edgarhp.htm. Copies can also be obtained without charge by writing to: Treasurer,
Codorus Valley Bancorp, Inc., P.O. Box 2887, York, PA 17405-2887.
Annual Shareholders Meeting
The Annual Meeting of Shareholders will be held on Tuesday, May 21, 2019, at 9:00 a.m. Eastern Time, at the Codorus Valley Corporate Center, 105
Leader Heights Road, York, PA 17403.
Transfer Agent
EQ Shareholder Services, 1110 Centre Point Curve, Suite 101, MAC N9173-010, Mendota Heights, MN 55120. Phone: 800-468-9716.
Dividend Reinvestment and Stock Purchase Plan
Information regarding the Corporation’s Dividend Reinvestment and Stock Purchase Plan may be obtained by contacting the transfer agent above.
Tangible Book Value
2018 2017 2016 2015 2014
Reconciliation of Tangible Book Value
(dollars in thousands)
Total Shareholders' Equity $ 178,746 $ 164,219 $ 154,957 $ 159,141 $ 118,440
Less: Preferred Stock 0 0 0 (12,000) (12,000)
Less: Goodwill and Other Intangible Assets (2,316) (2,321) (2,327) (2,333) 0
Tangible Shareholders' Equity $ 176,430 $ 161,898 $ 152,630 $ 144,808 $ 106,440
Common Shares Outstanding 9,452 9,351 9,290 9,211 7,087
Book Value $ 18.91 $ 17.56 $ 16.68 $ 15.97 $ 15.01
Book Value $ 18.91 $ 17.56 $ 16.68 $ 15.97 $ 15.01
Effect of Intangible Assets (0.25) (0.25) (0.25) (0.25) 0.00
Tangible Book Value $ 18.67 $ 17.31 $ 16.43 $ 15.72 $ 15.01
This document contains certain financial information determined by methods other than in accordance with GAAP. This non-GAAP disclosure has limitations
as an analytical tool and should not be considered in isolation or as a substitute for 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.
Board of Directors
Codorus Valley Bancorp, Inc.
Leadership Group
PeoplesBank
Larry J. Miller
Chairman, President, and Chief Executive Officer
Codorus Valley Bancorp, Inc.
Larry J. Miller
Executive Chairman
717-747-1500
E. Dennis Ginder
Senior Vice President and Chief Credit Officer
717-781-8485
Kristen M. Heisey
Vice President and Director of Marketing and
Client Experience
717-747-1520
Kent A. Ketterman
Senior Vice President and Director of
Commercial Real Estate Lending
717-747-1506
Timothy J. Nieman, Esq.
General Counsel and Secretary
717-747-2403
Larry D. Pickett, CPA
Executive Vice President and
Chief Financial Officer
717-747-1502
Todd A. Tyson, CFSSP, CCBSP, CBAP
Senior Vice President and Director of General
Services and Security Officer
717-747-1510
Eric G. Warfel
Senior Vice President and Director of
Commercial Lending
717-747-2424
Craig L. Kauffman
President and Chief Executive Officer
717-747-1501
Stephen M. Altland
Senior Vice President,
Wealth Management Division
717-747-1585
Diane E. Baker, CPA
Executive Vice President and
Chief Operating/Risk Officer
717-747-1550
Scott R. Campagna
Senior Vice President and
Chief Information Officer
717-747-1581
Chad Clabaugh
Senior Vice President,
Retail Sales and Services Division
717-747-1515
Matthew A. Clemens, SPHR
Senior Vice President and
Chief Administrative Officer
717-747-1507
Amy L. Doll
Senior Vice President and
Chief Revenue and Lending Officer
717-747-1580
Harry R. Swift, Esq.
Vice Chairman and Lead Director
Retired General Counsel and Secretary
Codorus Valley Bancorp, Inc. and PeoplesBank
Brian D. Brunner
Division President, Account and Item Processing Sales
Fiserv, Inc.
Cynthia A. Dotzel, CPA
Practicing CPA
Dotzel & Company, Inc.
John W. Giambalvo, Esq.
President and Chief Executive Officer
Jack Giambalvo Motor Company
Jeffrey R. Hines, P.E.
President and Chief Executive Officer
The York Water Company
MacGregor S. Jones
Retired Automobile Dealer
Dallas L. Smith
President
Bruce V. Smith, Inc.
PeoplesBank
Directors Emeritus
D. Reed Anderson, Esq.
M. Carol Druck
Barry A. Keller
Rodney L. Krebs
Corporate Officers
Codorus Valley Bancorp, Inc.
PeoplesWealth Advisors
A Subsidiary of PeoplesBank
Stephen M. Altland
President and Chief Executive Officer
Diane E. Baker, CPA
Vice President and Secretary
Larry D. Pickett, CPA
Treasurer and Assistant Secretary
Contact Information
To contact any Financial Center, the Client Care
Center, or any bank associate, please call us at
717-846-1970 or 1-888-846-1970.
Information regarding our products, services,
and locations may be found at our website at
www.peoplesbanknet.com.
Company Headquarters
Larry J. Miller
Chairman, President and Chief Executive Officer
Timothy J. Nieman, Esq.
General Counsel
Craig L. Kauffman
Executive Vice President and Chief Operating Officer
Victoria A. Schofield
Vice President
Diane E. Baker, CPA
Vice President, Assistant Secretary and
Assistant Treasurer
Larry D. Pickett, CPA
Treasurer
Timothy J. Nieman, Esq.
General Counsel and Secretary
Financial Advisors and
Registered Representatives
Jamie K. Cash, CFP®
Wendy M. Livingston
Victoria A. Schofield
Gregory F. Wolfe
Codorus Valley Bancorp, Inc.
Codorus Valley Corporate Center
105 Leader Heights Road
York, Pennsylvania 17403-5137
717-747-1519
For location information and hours,
visit www.peoplesbanknet.com.
All Financial Centers have a 24-Hour ATM
on-site for client convenience and are members
of the MoneyPass® and Allpoint ATM Networks.
Incorporated in 1986, Codorus Valley Bancorp, Inc. is a bank holding company that provides a full range of financial services
through its principal subsidiary, PeoplesBank, A Codorus Valley Company. As a publicly-held corporation, common stock issued
by Codorus Valley Bancorp, Inc. is traded on the NASDAQ Global Market under the symbol CVLY.
PeoplesBank, with origins dating back to 1864, is the largest independent community bank headquartered and managed in
York County, Pennsylvania. Focused on acquiring and nurturing financial relationships with small and mid-sized businesses and
consumers, PeoplesBank provides business, personal, and mortgage banking services as well as wealth management and real
estate settlement services throughout its network of financial centers located in York, Lancaster, and Cumberland Counties in
Pennsylvania and in Baltimore and Harford Counties and Baltimore City in Maryland.
Codorus Valley Bancorp, Inc. • Codorus Valley Corporate Center • 105 Leader Heights Road • York, PA 17403-5137 • (717) 747-1519
www.peoplesbanknet.com
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