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Ames National Corporation“Execution requires a comprehensive understanding of a business, its people and its environment.” —Ram Charan, Global Business Advisor 2018 > Establish 2018 was the year of leadership transition at Codorus Valley Bancorp, Inc. (“Codorus Valley” or “Company”), as many new leaders, including PeoplesBank’s Chief Executive Officer Craig Kauffman, joined the team. The 2018 Annual Review focused on the importance of establishing the next generation of leaders necessary to prepare Codorus Valley for the next decade, and to continue growing our Company. 2019 > EVOLVE The only thing constant in our 154-year history is the evolution of our Company. 2019 was a year of going deep through the development of powerful and high impact strategies in order to continue to grow and evolve Codorus Valley and PeoplesBank. This 2019 Annual Review will highlight many of the strategies that have been deployed in 2020 and will be into the future. These strategies were developed through the cultivation of a team with a strong growth-mindset and a solution based approach which is fully aligned with the Company’s refreshed mission, vision and values. 2020 > Execute 2020 will be the year of execution. We will execute a strategy of market disruption through piloting a new branch concept in our marketplace, launching new products and a new refreshed brand. The 2019 Annual Review will also provide a preview of what is to come. 1 2019 > EVOLVE DEAR SHAREHOLDERS: This past year has been an exciting year of retooling, analyzing, strategizing, and evolving. EVOLVE An important element of the evolution process has been to focus on devising strategies and tactics that are driven by data and market feedback. The goal was to develop strategies that ensure PeoplesBank continues to remain relevant in a landscape with constant market disruption and where banking habits and client engagement experiences are continually changing. Considerable analysis was conducted in 2019 to understand how the PeoplesBank brand is perceived and recognized across all markets. This primary research also focused on client and prospect banking habits and preferences. Follow-up research focused on market testing various brand, product and client experience concepts. The findings from this research laid the ground-work for many initiatives that will be executed in 2020, including a refreshed PeoplesBank brand which will launch in spring 2020. In addition, we conducted a deep dive into analyzing client segments and market growth opportunities. This effort resulted in the development of a new Connections Center branch concept, with the first Connections Center scheduled to open in early spring 2020 in Lancaster City. Product innovation was also a major focus in 2019 with the development of a new rewards deposit product called PeoplesBank Momentum Checking and Savings, which will be rolled out to various markets throughout 2020. OPERATIONS This was the first full year usage of PeoplesBank’s online investments in a new personal online banking platform, new online account opening and new online consumer loan application. Client engagement in these new digital offerings showed positive growth. Personal Online Banking saw a 95 percent increase in enrollment since it was launched in August 2018. Online account openings increased by 180 percent for deposit accounts compared to 2018. An online consumer loan application process was introduced in late in 2018, resulting in 159 online applications in 2019. In August 2019, PeoplesBank opened a new Retirement Community Office at Bethany Village, a continuing care retirement community located in Mechanicsburg, PA. August 2019 also marked the one-year anniversary of the opening of the new Oregon Pike location in Lancaster County, PA. We have been pleased with the number of new retail and business clients we have gained in this growing marketplace. In December, PeoplesBank closed its leased Fallston Financial Center location in Fallston, Maryland. Also in December, the decision was made to close five limited service Retirement Community Offices in 2020. Resources from these closures will be redeployed to higher growth opportunity areas. The Mortgage Banking Division realized substantial growth as it launched several new offerings including FHA loans, a first-time home-buyer program and a new Welcome Home program for properties in low to moderate income areas. PEOPLE Last year we welcomed two new members to our Board of Directors, Ms. Sarah M. Brown and Mr. J. Rodney Messick. Ms. Brown is the fifth-generation President and CEO of Keller- Brown Insurance Services, Inc. (Shrewsbury, PA) and Mr. Messick is CEO of Homesale Realty Service Group, Inc. (Lancaster, PA). We thank them for accepting this important governance responsibility within our Company and look forward to their counsel in the future. Mr. Harland (Hal) E. Carney, III joined PeoplesBank as the Senior Vice President, Director of Commercial Banking. Hal brings with him over 25 years of lending and leadership experience. We are pleased that Hal has joined our team. During 2020, Directors Dallas L. Smith and MacGregor S. Jones will be retiring from the Board after they reach the mandatory retirement age. Mr. Smith has served as a Director since 1986 and has held various leadership positions on the Board during his tenure. Mr. Jones has served as a Director since 1993, and collectively, these two gentlemen have over sixty years of service to our Company. We thank them for their insight, loyalty and dedication to our Company, our clients, our community and our associates. PROFIT Codorus Valley Bancorp, Inc. realized net income available to common shareholders (earnings) of $18.6 million for the year ending 2019, compared to $19.5 million of earnings realized in 2018, which represents a reduction of approximately 2 Craig L. Kauffman Executive Vice President and Chief Operating Officer Larry J. Miller Chairman, President and CEO Harry R. Swift, Esq. Vice Chairman and Lead Director $900,000 or approximately 4.6 percent. The decrease in net income and earnings per share for the year was primarily the result of higher noninterest expense in 2019 compared to 2018. Net interest income for 2019 and 2018 was basically the same, at $63.9 million. Net interest margin (tax equivalent basis) for 2019 was 3.66 percent, compared to 3.84 percent realized in both 2018 and 2017. On December 31, 2019, total assets of Codorus Valley Bancorp, Inc. were approximately $1.89 billion, representing a 4.2 percent increase compared to December 31, 2018. Total deposits at year-end 2019 were approximately $1.6 billion, compared to $1.5 billion at year-end 2018, which represents an increase of $100 million or 6.2 percent. Total loans at year-end 2019 were basically flat at $1.50 billion, as compared to year-end 2018. Additional 2019 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, 2019. CLOSING Over fifty years ago the late Robert F. Kennedy is quoted as saying “Like it or not we live in interesting times.” While the bull market in the United States economy is about to turn 11 years old, other international economies, such as Japan and Germany, are on the brink of recession—and the Chinese economy has slowed, as the spread of the coronavirus continues. Couple all of the foregoing with the upcoming Presidential election, and we truly do live in interesting times. We believe we have assembled a cadre of associates to provide appropriate governance of our Company and a team of dedicated, motivated and highly skilled leaders to meet the needs of our clients, communities, associates and stockholders. Thank you for investing in Codorus Valley, Bancorp, Inc. We genuinely appreciate your support, continued long-term investment and confidence in Codorus Valley Bancorp, Inc. BRAND RECOGNITION For the fourth year in a row, PeoplesBank was voted the 2019 Best Bank in York County by readers of the York Sunday News and the Bank was also named as one of the Top 200 Community Banks in the United States. Larry J. Miller Chairman, President and Chief Executive Officer Codorus Valley Bancorp, Inc. 3 2020 > EXECUTE Brand Refresh The clients and communities served by PeoplesBank will be seeing a refreshed look and brand positioning in 2020. The brand refresh to clients will officially launch in March 2020. Signage and the brand campaign to increase top of mind awareness will be executed in a staged approach by geographical area over the first two quarters of 2020. The updated brand communicates in a fresh way the heart of who PeoplesBank has always been — an independent and local community bank. The new positioning will focus on PeoplesBank’s commitment to serving as financial mentors by helping clients achieve their dreams and live confidently. Marketing research showed opportunities for increased brand recognition in growing markets and a need to refresh the PeoplesBank brand to attract new generations of clients. It has been 15 years since the PeoplesBank brand was significantly updated. The typical life cycle of a brand is 10-20 years. About The Brand Mark The refreshed logo speaks to PeoplesBank’s commitment of helping clients move forward. The client is represented by the cranberry diamond, exemplifying that the client is at the center of everything we do. The element to the left represents the bank embracing and supporting the client and the arrow to the far right signifies how PeoplesBank helps our clients move forward toward their goals, dreams, needs and priorities. Billboard from the “Take Your Dreams to the Bank SM ” Campaign that will also include new TV commercials, digital and transit ads. Refreshed website with streamlined navigation. 4 The New Lancaster City Connections Center PeoplesBank will be launching a fresh approach to the traditional banking experience at its new location opening in March 2020. This new Connections Center concept will be located at 101 N Queen Street in 101NQ, a newly restored mixed use building located in the heart of Lancaster City. The new Connections Center concept is designed to operate more efficiently in a smaller footprint, storefront location with high foot traffic. The design recognizes the changing behaviors of banking consumers who are using branches to do less routine transactions, but who still value a personal interaction for identifying solutions and handling more complex financial needs. The new concept resonated strongly with younger demographics during market testing. Debuting at this location will be the ability for visitors to create a personal or business vision board using a touch screen. This unique approach shifts the staff from a more transactional role to a financial mentor, helping to move clients towards their goals and dreams based on their current situation. This signature experience will also provide a more relaxed setting to foster conversation, including booth seating, a high top table, and private conversation areas. Clients will see no traditional desks at this location. Self-serve and assisted account opening will be available with the goal of the concierge team to ensure clients walk out fully enabled to bank on all devices. 5 Selected Financial Data Codorus Valley Bancorp, Inc. 2019 2018 2017 2016 2015 Summary of operations (in thousands) Interest income $ 85,317 $ 80,321 $ 70,415 $ 62,230 $ 56,002 Interest expense 21,378 16,401 10,868 8,649 8,174 Net interest income 63,939 63,920 59,547 53,581 47,828 Provision for loan losses 2,450 2,700 4,175 3,000 3,500 Noninterest income 13,912 13,314 11,522 10,030 9,047 Noninterest expense 51,729 49,810 44,986 41,623 37,427 Income before income taxes 23,672 24,724 21,908 18,988 15,948 Provision for income taxes 5,025 5,182 9,904 5,886 4,813 Net income 18,647 19,542 12,004 13,102 11,135 Preferred stock dividends 0 0 0 16 120 Net income available to common shareholders $ 18,647 $ 19,542 $ 12,004 $ 13,086 $ 11,015 Per common share (adjusted for stock dividends) Net income, basic $ 1.89 $ 1.98 $ 1.22 $ 1.35 $ 1.45 Net income, diluted $ 1.88 $ 1.96 $ 1.21 $ 1.34 $ 1.44 Cash dividends paid $ 0.608 $ 0.564 $ 0.468 $ 0.427 $ 0.400 Stock dividends distributed 5% 5% 5% 5% 5% Book value $ 19.59 $ 18.01 $ 16.72 $ 15.88 $ 15.21 Tangible book value (1) $ 19.36 $ 17.78 $ 16.49 $ 15.65 $ 14.97 Cash dividend payout ratio 32.4% 28.3% 38.0% 32.0% 27.2% Weighted average shares outstanding 9,863,332 9,857,559 9,779,816 9,694,739 7,588,531 Weighted average diluted shares outstanding 9,929,659 9,953,229 9,894,628 9,777,719 7,670,268 Profitability ratios Return on average shareholders' equity (ROE) 9.98% 11.42% 7.40% 8.47% 8.94% Return on average assets (ROA) 1.01% 1.11% 0.72% 0.88% 0.82% Net interest margin (tax equivalent basis) 3.66% 3.84% 3.84% 3.89% 3.79% Efficiency ratio 65.93% 63.95% 62.07% 64.09% 64.60% Net overhead ratio 2.05% 2.08% 2.03% 2.15% 2.12% Capital ratios (consolidated) Common equity tier 1 ratio 12.45% 12.15% 11.58% 11.88% 12.56% Tier 1 risk-based capital 13.11% 12.83% 12.29% 12.66% 14.49% Total risk-based capital 14.36% 14.08% 13.48% 13.81% 15.60% Average shareholders' equity to average assets 10.12% 9.75% 9.79% 10.44% 9.15% Summary of financial condition at year-end (in thousands) Investment securities (including restricted bank stock) $ 164,226 $ 155,515 $ 164,902 $ 201,665 $ 218,498 Loans (including loans held for sale) 1,516,938 1,489,807 1,401,479 1,272,319 1,123,775 Assets 1,886,545 1,807,480 1,709,205 1,611,587 1,456,334 Deposits 1,590,564 1,495,280 1,384,507 1,264,177 1,094,149 Borrowings 89,557 122,332 150,805 181,947 194,820 Equity 191,168 178,746 164,219 154,957 159,141 Other data Full service financial centers 25 26 26 26 24 Number of employees (full-time equivalents) 350 348 326 306 282 Wealth Management assets, market value (in thousands) $ 899,876 $ 725,087 $ 711,161 $ 562,865 $ 514,728 1) A reconciliation of tangible book value, which is a non-GAAP Financial Measure, can be found further in this Annual Review. 6 Tangible Book Value (1) The following table provides the reconciliation of tangible book value, which is a non-GAAP Financial Measure, for the dates indicated: 2019 2018 2017 2016 2015 (dollars in thousands) Total Shareholders' Equity $ 191,168 $ 178,746 $ 164,219 $ 154,957 $ 159,141 Less: Preferred Stock 0 0 0 0 (12,000) Less: Goodwill and Other Intangible Assets (2,312) (2,316) (2,321) (2,327) (2,333) Tangible Shareholders' Equity $ 188,856 176,430 $ 161,898 $ 152,630 $144,808 Common Shares Outstanding 9,756 9,924 9,819 9,755 9,672 Book Value $ 19.59 $ 18.01 $ 16.72 $ 15.88 $ 15.21 Book Value $ 19.59 $ 18.01 $ 16.72 $ 15.88 $ 15.21 Effect of Intangible Assets (0.23) (0.23) (0.23) (0.23) (0.24) Tangible Book Value $ 19.36 $ 17.78 $ 16.49 $ 15.65 $ 14.97 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. 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 2,787 holders of record as of February 26, 2020. The closing price per share of Codorus Valley’s common stock on February 26, 2020, was $21.10. 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. 2019 2018 Dividends Dividends Quarter High Low Per Share High Low Per Share First $23.07 $18.71 $0.152 $26.97 $22.52 $0.141 Second 22.35 19.30 0.152 28.11 24.96 0.141 Third 23.46 19.30 0.152 30.34 26.85 0.141 Fourth 23.60 20.69 0.152 29.03 19.30 0.141 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 Piper Sandler (Formerly Sandler O’Neill & Partners, L.P.) (Institutional Trades Only) 800-333-6000 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 Codorus Valley Bancorp, Inc. may be obtained electronically at PeoplesBank’s website at www.peoplesbanknet.com (select Your Life, then under Connect 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 19, 2020, 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. 7 Board of Directors Codorus Valley Bancorp, Inc. Larry J. Miller Chairman, President and Chief Executive Officer Codorus Valley Bancorp, Inc. Executive Chairman PeoplesBank Harry R. Swift, Esq. Vice Chairman and Lead Director Retired General Counsel and Secretary Codorus Valley Bancorp, Inc. and PeoplesBank Craig L. Kauffman Executive Vice President and Chief Operating Officer Codorus Valley Bancorp, Inc. President and Chief Executive Officer PeoplesBank Sarah M. Brown President and Chief Executive Officer Keller-Brown Insurance Services 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. Retired President and Chief Executive Officer The York Water Company MacGregor S. Jones Retired Automobile Dealer J. Rodney Messick Chief Executive Officer HomeSale Realty Services Group, Inc. Dallas L. Smith Retired President Bruce V. Smith, Inc. Corporate Headquarters 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. PeoplesBank Directors Emeritus D. Reed Anderson, Esq. M. Carol Druck Barry A. Keller Rodney L. Krebs Corporate Officers Codorus Valley Bancorp, Inc. Larry J. Miller Chairman, President and Chief Executive Officer Craig L. Kauffman Executive Vice President and Chief Operating Officer Diane E. Baker, CPA Vice President, Assistant Secretary and Assistant Treasurer Larry D. Pickett, CPA Treasurer Timothy J. Nieman, Esq. General Counsel and Secretary 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 Timothy J. Nieman, Esq. General Counsel Victoria A. Schofield Vice President Financial Advisors and Registered Representatives Jamie K. Cash, CFP® Wendy M. Livingston Victoria A. Schofield Gregory F. Wolfe 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. All Financial Centers have a 24-Hour ATM on-site for client convenience and are members of the MoneyPass® and Allpoint ATM Networks. Information regarding our products, services, and locations may be found at our website at www.peoplesbanknet.com. 8 Leadership Group PeoplesBank Craig L. Kauffman President and Chief Executive Officer 717-747-1501 Diane E. Baker, CPA Executive Vice President, Chief Operating and Chief Risk Officer 717-747-1550 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 Stephen M. Altland Senior Vice President, Wealth Management Division 717-747-1585 Scott R. Campagna Senior Vice President, Chief Information Officer 717-747-1581 Harland Carney, III Senior Vice President, Director of Commercial Lending 717-747-2424 Chad Clabaugh Senior Vice President, Retail Sales and Services Division 717-747-1515 Matthew A. Clemens, SPHR, PCC Senior Vice President, Chief Administrative Officer 717-747-1507 Amy L. Doll Senior Vice President, Chief Revenue and Chief Lending Officer 717-747-1580 E. Dennis Ginder Senior Vice President, Chief Credit Officer 717-781-8485 Kristen M. Heisey, CFMP Vice President, Director of Marketing and Client Experience 717-747-1520 Kent A. Ketterman Senior Vice President, Director of Commercial Real Estate Lending 717-747-1506 Todd A. Tyson, CFSSP, CCBSP, CBAP Senior Vice President, Director of General Services and Security Officer 717-747-1510 Codorus Valley Bancorp, Inc. Board of Directors: (front row left to right) Dallas Smith, Sarah Brown, Rodney Messick, MacGregor Jones; (back row left to right) John Giambalvo, Brian Brunner, Harry “Ron” Swift, Larry Miller, Craig Kauffman, Cindy Dotzel, Jeffrey Hines 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 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 peoplesbanknet.com P31893
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