DEF 14A 1 codorus210474_def14a.htm DEF14A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:


☐	Preliminary Proxy Statement
☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒	Definitive Proxy Statement
☐	Definitive Additional Materials
☐	Soliciting Material Pursuant to § 240.14a-12

	Codorus Valley Bancorp, Inc.

	(Name of Registrant as Specified In Its Charter)

	(Name of Person(s) Filing Proxy Statement, if other than the Registrant)


Payment of Filing Fee (Check the appropriate box):
☒	No fee required
☐	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	1)	Title of each class of securities to which transaction applies:


	2)	Aggregate number of securities to which transaction applies:


	3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):


	4)	Proposed maximum aggregate value of transaction:


	5)	Total fee paid:


☐	Fee paid previously with preliminary materials.
☐	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	1)	Amount Previously Paid:


	2)	Form, Schedule or Registration Statement No.:


	3)	Filing Party:


	4)	Date Filed:

April 2, 2021

Dear Fellow Shareholders of Codorus Valley Bancorp, Inc.:

On behalf of the Corporation’s Board of Directors, I am pleased to invite you to attend Codorus Valley Bancorp, Inc.’s Annual Meeting of Shareholders to be held on Tuesday, May 18, 2021, at 9:00 a.m., prevailing time. In light of public health concerns regarding the coronavirus outbreak, the Annual Meeting will be held in a virtual meeting format only. You will not be able to attend the Annual Meeting physically. To be admitted to the Annual Meeting at www.virtualshareholdermeeting.com/CVLY2021, you must enter the control number found on your proxy card, voting instruction form or notice.

At the Annual Meeting, you will have the opportunity to ask questions and to make comments. Enclosed with the Proxy Statement and Notice of Meeting is a proxy card and the Corporation’s 2020 Annual Report to Shareholders on Form 10-K.

The principal business of the meeting is:

●

To elect three Class A directors, each to serve for a term of three years and until their successors are elected and qualified;

●

To approve an advisory, non-binding resolution regarding executive compensation;

●

To ratify the appointment of Crowe LLP as Codorus Valley Bancorp, Inc.’s Independent Registered Public Accounting Firm for the fiscal year ending December 31, 2021; and

●

To transact any other business that is properly presented at the Annual Meeting.

The Notice of Meeting and Proxy Statement accompanying this letter describe the specific business to be acted upon in more detail.

I am delighted that you have invested in Codorus Valley Bancorp, Inc., and I hope that, whether or not you plan to virtually attend the Annual Meeting, you will vote as soon as possible, either electronically through the Internet, by telephone or by following the instructions on the enclosed proxy card and returning the proxy in the envelope provided. The prompt return of your proxy will save the Corporation expenses involved in further communications, and will ensure your representation at the Annual Meeting if you do not attend virtually.

We continue to evaluate the benefits of moving toward the electronic delivery of proxy materials in the future. If you would be strongly opposed to receiving proxy materials via the Internet, please let us know. We appreciate your feedback.

Sincerely,

Larry J. Miller

Chair, President and Chief Executive Officer

CODORUS VALLEY BANCORP, INC.

NASDAQ TRADING SYMBOL: CVLY

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

AND

PROXY STATEMENT

2021

www.peoplesbanknet.com

PROXY STATEMENT

Dated and to be mailed on or about April 2, 2021

Codorus Valley Bancorp, Inc.

Codorus Valley Corporate Center

105 Leader Heights Road

York, Pennsylvania 17403

ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 18, 2021

TABLE OF CONTENTS

		Page

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS		4

GENERAL		5

GOVERNANCE OF THE CORPORATION		7

PROPOSAL 1 – Election of Directors		11

INFORMATION CONCERNING SECURITY OWNERSHIP		16

INFORMATION CONCERNING COMPENSATION		20

Executive Compensation		20

Director Compensation		48

RELATED PERSON TRANSACTIONS AND POLICIES		49

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE		50

PROPOSAL 2 - Advisory Vote Regarding Executive Compensation		50

PROPOSAL 3 - Ratification of Independent Registered Public Accounting Firm		51

REPORT OF THE AUDIT COMMITTEE		52

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		53

ADDITIONAL INFORMATION		54

OTHER MATTERS		54

INTERNET AVAILABILITY OF PROXY MATERIALS		54

CODORUS VALLEY BANCORP, INC.

CODORUS VALLEY CORPORATE CENTER

105 LEADER HEIGHTS ROAD

YORK, PENNSYLVANIA 17403

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 18, 2021

TO THE SHAREHOLDERS OF CODORUS VALLEY BANCORP, INC.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of Codorus Valley Bancorp, Inc. will be held in a virtual meeting format only on Tuesday, May 18, 2021, at 9:00 a.m., prevailing time, for the purpose of considering and voting upon the following matters:

To elect three Class A directors, each to serve for a three-year term and until their successors are elected and qualified;

To approve an advisory, non-binding resolution regarding executive compensation;

To ratify the appointment of Crowe LLP as Codorus Valley Bancorp, Inc.’s Independent Registered Public Accounting Firm for the fiscal year ending December 31, 2021; and

To transact such other business as may properly come before the meeting and any adjournment or postponement thereof.

Only those shareholders of record at the close of business on February 24, 2021, are entitled to notice of and to vote at the meeting. Please vote as soon as possible, either electronically through the Internet, by telephone or by following the instructions on the enclosed proxy card and returning the proxy in the envelope provided. Your proxy is revocable at any time by voting again through the Internet or by telephone, or by delivering notice of revocation or a later dated proxy to the Secretary of the Corporation before the vote at the meeting.

To be admitted to the Annual Meeting at www.virtualshareholdermeeting.com/CVLY2021, you must enter the control number found on your proxy card, voting instruction form or notice. You may vote during the Annual Meeting by following the instructions available on the meeting website during the meeting.

Your vote is important and voting electronically through the Internet, by telephone or by written proxy, will ensure your representation at the Annual Meeting if you do not attend in person.

We enclose with this Notice of Annual Meeting and Proxy Statement a proxy card (with voting instructions) and a copy of the Corporation’s 2020 Annual Report on Form 10-K.

	BY ORDER OF THE BOARD OF DIRECTORS



	Timothy J. Nieman, Esq.
	Secretary

York, Pennsylvania

April 2, 2021

YOUR VOTE IS IMPORTANT. PLEASE VOTE PROMPTLY, EITHER ELECTRONICALLY THROUGH THE INTERNET, BY TELEPHONE, OR BY COMPLETING, SIGNING AND RETURNING YOUR PROXY CARD.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May 18, 2021. This Notice of Annual Meeting and Proxy Statement, proxy card and 2020 Annual Report are available at: www.proxyvote.com.

GENERAL

Introduction

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Codorus Valley Bancorp, Inc. (the “Corporation”) to be used at the 2021 Annual Meeting of Shareholders. This Proxy Statement and the related proxy card are being first distributed to shareholders on or about April 2, 2021.

The Corporation will bear the expense of soliciting proxies. In addition to the use of the mail, the directors, officers and associates of the Corporation and its subsidiaries may, without additional compensation, solicit proxies in person or by telephone, e-mail, Internet or facsimile.

The Annual Meeting of Shareholders will be held on Tuesday, May 18, 2021, at 9:00 a.m. In light of public health concerns regarding the coronavirus, the Annual Meeting will be held in a virtual format only. You will not be able to physically attend the Annual Meeting and to be admitted to the meeting at www.virtualshareholdermeeting.com/CVLY2021, you must enter the control number found on your proxy card, voting instruction form or notice. Shareholders of record at the close of business on February 24, 2021, are entitled to vote at the meeting.

At the Annual Meeting, shareholders will vote:

●

To elect three Class A directors, each to serve for a three-year term and until their successors are elected and qualified;

●

To approve an advisory, non-binding resolution regarding executive compensation;

●

To ratify the appointment of Crowe LLP as the Corporation’s Independent Registered Public Accounting Firm for the fiscal year ending December 31, 2021; and

●

To transact any other business that may properly come before the meeting and any adjournment or postponement of the meeting.

In addition, the Corporation may ask shareholders to approve the minutes of the prior shareholders’ meeting. However, approval of such minutes is an administrative action and does not constitute approval of, or a vote for, any of the matters set forth in the minutes.

Proxies and Voting Procedures

You can vote your shares by completing and returning a written proxy card. You can also vote during the virtual meeting. Alternatively, you may vote by telephone or electronically through the Internet by following the instructions on the proxy card. Submitting your voting instructions through one of these methods will not affect your right to attend the meeting and will not limit your right to vote at the annual meeting if you later decide to attend.

If your shares are held in a brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker or nominee, who is considered, with respect to those shares, the shareholder of record. As the beneficial owner, you may have the right to direct your broker or nominee how to vote, and you are also invited to attend the meeting. However, because you are not the shareholder of record, you may not vote your street-name shares in person at the meeting unless you obtain a proxy executed in your favor from the holder of record. Please contact your broker or nominee for a voting instruction card for you to use in directing the broker or nominee how to vote your shares. Please note that brokers or nominees may not cast a vote on your behalf for the election of directors or on any other matter that is not routine without instruction from you.

By properly completing a proxy, you appoint Cindy E. Baugher, Judy Simpson, and Wanda Waugh as proxy holders to vote your shares as indicated on the proxy card. Any signed proxy card not specifying to the contrary will be voted FOR election of the director nominees identified in this Proxy Statement, FOR approval of the advisory, non-binding resolution regarding executive compensation, and FOR ratification of Crowe LLP as the Corporation’s independent registered public accounting firm for the fiscal year ending December 31, 2021.

You may revoke a previously delivered proxy by delivering written notice of revocation to Timothy J. Nieman, Esq., Secretary of the Corporation, or by executing a later dated proxy and giving written notice of the revocation to Mr. Nieman at any time before the proxy is voted at the Annual Meeting. If you submitted your proxy by Internet or by telephone, you can vote again by voting over the Internet or by telephone. We will honor the latest vote received. Proxy holders will vote shares represented by written proxies, if properly signed and returned to the Secretary, in accordance with instructions of the shareholders.

If you are a participant in the Codorus Valley Bancorp, Inc. Dividend Reinvestment and Stock Purchase Plan, the enclosed proxy will serve as a voting instruction card for your shares held in the Plan. Equiniti Trust Company, the Plan administrator, will vote your shares held in the Dividend Reinvestment and Stock Purchase Plan in the same manner as you indicate on your proxy card.

At the close of business on February 24, 2021, the record date for the Annual Meeting, the Corporation had 9,839,991 shares of common stock, par value $2.50 per share, issued and outstanding. Each share is entitled to one vote on all matters submitted to a vote of the shareholders.

Quorum

A majority of the outstanding shares of common stock, represented in person or by proxy, constitutes a quorum for the conduct of business at the Annual Meeting. Under Pennsylvania law and the Corporation’s Bylaws, the presence of a quorum is required for each matter to be acted upon at the meeting. Votes withheld and abstentions, while not votes cast, will be counted as present for purposes of determining the presence of a quorum. Shares of common stock represented by “broker non-votes” (i.e., shares of common stock held in record name by brokers or nominees as to which (i) instructions have not been received from the beneficial owners or persons entitled to vote, (ii) the broker or nominee does not have discretionary voting power under applicable rules of the New York Stock Exchange or the instrument under which it serves in such capacity, or (iii) the record holder has indicated on the proxy or otherwise notified the Corporation that it does not have authority to vote such shares on that matter) will be counted as present for purposes of determining the presence of a quorum only if such shares have been voted at the meeting on a matter other than a procedural motion.

Required Vote

In the case of the election of directors, the three nominees receiving the highest number of votes shall be elected. A “Withhold” vote will have the effect of a vote against the election of the nominee. Abstentions and broker non-votes will have no effect on the election of directors.

Approval of each of the other proposals identified in this Proxy Statement requires the affirmative vote of a majority of the votes cast at the meeting, in person or by proxy. Abstentions and broker non-votes that are counted only for purposes of determining a quorum, will have the effect of a vote against each of these other proposals.

Although the Board knows of no other business to be presented at the Annual Meeting at this time, in the event that any other matters are properly brought before the meeting, any proxy given pursuant to this solicitation will be voted in accordance with the instructions of the Board as permitted by Securities and Exchange Commission (SEC) Rule 14a-4(c).

Cautionary Statement Regarding Forward-Looking Statements

This Proxy Statement and the documents that have been incorporated herein by reference may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, these statements can be identified by the use of words such as “anticipate,” “believe,” “can,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “target,” “will,” “would” and similar expressions. Actual results and trends could differ materially from those set forth in such statements due to various risks, uncertainties and other factors. Such risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the following: ineffectiveness of our business strategy due to changes in current or future market conditions; the effects of competition, and of changes in laws and regulations, including industry consolidation and development of competing financial products and services; interest rate movements; changes in credit quality; inability to achieve merger-related synergies; difficulties in integrating distinct business operations, including information technology difficulties; volatilities in the securities markets; and deteriorating economic conditions, and other risks and uncertainties, including those detailed in our filings with the SEC.

Although forward-looking statements help provide additional information about us, investors should keep in mind that forward-looking statements are only predictions, at a point in time, and are inherently less reliable than historical information. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Proxy Statement. We assume no obligation to update any forward-looking statement in order to reflect any event or circumstance that may arise after the date of this Proxy Statement, other than as may be required by applicable law or regulation.

GOVERNANCE OF THE CORPORATION

Our Board of Directors believes that the purpose of corporate governance is to maximize long-term shareholder value in a manner consistent with applicable law and with the highest standards of integrity. The Board adheres to corporate governance practices that the Board and management believe promote this purpose, are sound and represent best practices. We continually review these governance practices against changes in applicable federal and Pennsylvania (the state in which we are incorporated) law, the rules and listing standards of the NASDAQ Stock Market, and the rules and regulations of the SEC, as well as best practices suggested by recognized governance authorities.

Director Independence

Currently, our Corporate Board of Directors has nine (9) members. The Board has determined that the following seven (7) directors are independent in accordance with the independence standards of the NASDAQ Stock Market: Harry R. Swift, Esq., Lead Director; Sarah M. Brown; Brian D. Brunner; Cynthia A. Dotzel, CPA; John W. Giambalvo, Esq.; Jeffrey R. Hines, P.E.; and J. Rodney Messick.

In determining the directors’ independence, in addition to matters disclosed under “Related Person Transactions”, the Board of Directors considered each director’s beneficial ownership of Corporation common stock and loan transactions between the Corporation’s wholly-owned bank subsidiary, PeoplesBank, A Codorus Valley Company (the “Bank”), and the directors, their family members and businesses with whom they are associated, as well as any contributions made by the Bank to non-profit organizations with whom such persons are associated. In each case, the Board determined that none of the transactions above impaired the independence of the director.

Board Structure

The Corporation’s senior leadership is currently shared between the Board’s Chair, President and Chief Executive Officer and the Board’s Vice Chair and Lead Director.

The Board believes that Larry J. Miller’s service as President and Chief Executive Officer of the Bank from 1981 to 2016 and the Corporation since its incorporation in 1986 uniquely qualifies him for this role, and that the addition of several key members to the Corporation’s executive management team in recent years allows Mr. Miller the time necessary to perform the additional duties of Chair. The Board of Directors also believes that Mr. Miller’s leadership of the Corporation over the last thirty plus years, together with his knowledge of the current business and regulatory environment, will ensure that management is aligned with the Board and positioned to effectively implement the business strategy endorsed by the Board.

Our Chair is currently responsible for ensuring the smooth functioning and efficient operation of our Board by guiding the processes of our Board, presiding at Board meetings and at shareholder meetings, and acting as a liaison between our Board and our management team. In this regard, our Chair consults regularly with our executives over business matters and provides our executives with consultation and advice on matters that require prompt attention.

The Corporation has designated Harry R. Swift, Esq., as the independent Lead Director. As Lead Director, Mr. Swift presides at any Board meeting at which the Chair is not present, including executive sessions of the independent directors; serves as a liaison between the Chair and the independent directors; reviews and consults with the Chair regarding meeting agendas and meeting schedules of the Board; has the authority to call meetings of the independent directors; receives and responds directly to shareholder and other stakeholder questions and comments that are directed to the Lead Director or to the independent directors as a group; assists with the identification and recommendation of Board candidates; serves as a member of the Corporate Governance and Nominating Committee; and Chairs the Enterprise Risk Management Committee.

Moreover, on at least a semi-annual basis, when the independent directors meet in executive session, without the presence of management, the independent directors meet under the leadership of the independent Lead Director.

Meetings and Committees of the Board of Directors

The Board of Directors of Codorus Valley Bancorp, Inc. met eighteen (18) times during 2020, which includes six (6) joint meetings with the Board of Directors of the Bank. Fifteen of these meetings were held virtually. At the onset of the coronavirus pandemic, the Board of Directors met more frequently in order to address the challenges posed by the pandemic. During 2020, all directors attended at least 75% of the meetings of the Board of Directors and of the various committees on which they served. While the Corporation has no formal policy in place, directors are strongly encouraged to attend the Annual Meeting of Shareholders. All of our then serving directors attended the 2020 Annual Meeting of Shareholders, and we anticipate that all directors will attend this year’s meeting.

The Board of Directors of the Corporation has a standing Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee and Enterprise Risk Management Committee, each of which is described below.

Audit Committee. The Audit Committee of the Board of Directors is comprised solely of directors who meet the applicable standards for independence of audit committee members of the NASDAQ Stock Market and possess the requisite knowledge or experience to serve on the Audit Committee. The current members of the Audit Committee are: Cynthia A. Dotzel, CPA (Chair); Jeffrey R. Hines, P.E. (Vice Chair); and John W. Giambalvo, Esq. The Audit Committee met four (4) times during 2020.

The principal duties of the Audit Committee, as set forth in its charter, include reviewing significant audit and accounting principles, policies and practices, reviewing performance of internal auditing procedures and recommending to the Board the engagement of the Corporation’s independent registered public accounting firm. The Audit Committee has the authority to engage legal counsel or other experts or consultants as it deems appropriate to carry out its responsibilities.

Cynthia A. Dotzel, CPA, Chair of the Committee, has been designated by the Board as the Audit Committee financial expert. In designating Ms. Dotzel as the Audit Committee financial expert, the Board considered her more than 35 years of experience as a practicing certified public accountant, and her prior audit committee experience. Furthermore, the Board of Directors believes that each Audit Committee member has sufficient knowledge in financial and auditing matters to serve on the committee.

The Audit Committee operates under a written charter, which is available on the Corporation’s website at www.peoplesbanknet.com. Click on the “Your Business” link at the top of the home page, click on “Investor Relations” under the “Connect” heading, and then click on the “Governance Documents” link.

Compensation Committee. All members of the Compensation Committee are independent under applicable independence standards of the NASDAQ Stock Market. The current members of the Compensation Committee are: John W. Giambalvo, Esq. (Chair); Jeffrey R. Hines, P.E. (Vice Chair); Brian D. Brunner; Cynthia A. Dotzel, CPA; and J. Rodney Messick. The Compensation Committee met six (6) times during 2020.

The principal duties of the Compensation Committee include evaluating and recommending to the Board compensation plans, policies, and programs for the executive officers of the Corporation and its subsidiaries. The Compensation Committee may delegate any of its responsibilities to a subcommittee comprised of three or more members of the committee.

The Compensation Committee’s processes and procedures for consideration and determination of executive compensation are described below in the section titled “Compensation Discussion and Analysis” entitled “Role of the Compensation Committee, Management and Compensation Consultant in the Executive Compensation Process.”

The Compensation Committee operates pursuant to a written charter, which is available on the Corporation’s website at www.peoplesbanknet.com. Click on the “Your Business” link at the top of the home page, click on “Investor Relations” under the “Connect” heading, and then click on the “Governance Documents” link. The Committee has the authority under its charter to select, retain and terminate counsel, consultants and other experts. For information concerning Meridian Compensation Partners, LLC, the compensation consultant currently retained by the committee, see the section of “Compensation Discussion and Analysis” entitled “Role of the Compensation Consultant.”

Corporate Governance and Nominating Committee. All members of the Corporate Governance and Nominating Committee are independent under applicable independence standards of the NASDAQ Stock Market. The current members of the Corporate Governance and Nominating Committee are: Jeffrey R. Hines, P.E. (Chair); Harry R. Swift, Esq. (Vice Chair); Brian D. Brunner; Cynthia A. Dotzel, CPA; and John W. Giambalvo, Esq. The Corporate Governance and Nominating Committee met two (2) times during 2020.

The principal duties of the Corporate Governance and Nominating Committee include developing and recommending to the Board criteria for selecting qualified director candidates, identifying individuals qualified to become Board members, evaluating and selecting, or recommending to the Board, director nominees for each election of directors, considering committee member qualifications, appointment and removal, recommending codes of conduct and codes of ethics applicable to the Corporation and providing oversight in the evaluation of the Board and each committee.

The Corporate Governance and Nominating Committee operates pursuant to a written charter, which is available on the Corporation’s website at www.peoplesbanknet.com. Click on the “Your Business” link at the top of the home page, click on “Investor Relations” under the “Connect” heading, and then click on the “Governance Documents” link.

Role of the Board in Risk Oversight

The Board of Directors is responsible for oversight of the various risks facing the Corporation. In this regard, the Board seeks to understand and oversee the most critical risks relating to the Corporation’s business, to allocate responsibilities for the oversight of risks among the full Board and its committees, and to see that management has in place effective systems and processes for managing risks facing the Corporation. Overseeing risk is an ongoing process, and risk is inherently tied to strategy and to strategic decisions. Accordingly, the Board considers risk throughout the year and with respect to specific proposed actions. While the Board oversees risk, management is charged with identifying and managing risk within the risk parameters set by the Board.

The Board implements its risk oversight function both as a whole and through delegation to various committees. These committees meet regularly and report back to the full Board. The following committees play particularly significant roles in carrying out the risk oversight function.

●

The Enterprise Risk Management Committee: The Enterprise Risk Management Committee operates pursuant to a written charter, and provides general risk oversight and is generally responsible for risk management, which includes monitoring and ensuring that credit risk, interest rate risk, liquidity risk, price risk, transaction risk, compliance risk, strategic risk and reputation risk assumed by the Corporation is consistent with the levels established by the Board.

The committee is comprised of the Chief Risk Officer, President and Chief Executive Officer of the Bank, General Counsel, Chief Financial Officer, Chief Credit Officer, BSA and Security Officer, and Loan Review Officer, as well as representatives from the Board of Directors (currently Sarah M. Brown, Larry J. Miller and Harry R. Swift, Esq.). Mr. Swift chairs the committee. The Enterprise Risk Management Committee met six (6) times during 2020. The Enterprise Risk Management Committee takes minutes at each of its meetings, and those minutes are reviewed and accepted by the Board of Directors.

●

The Compensation Committee: The Compensation committee evaluates the risks and rewards associated with the Corporation’s compensation philosophy and programs.

●

The Audit Committee: The Audit Committee oversees the Corporation’s processes for assessing risks and the effectiveness of the Corporation’s system of internal controls. In performing this function, the Audit Committee considers information from the Corporation’s independent registered public accounting firm, internal auditors, and other consultants as it determines appropriate, and discusses relevant issues with management and the independent registered public accounting firm.

Director Nomination Process

The Corporate Governance and Nominating Committee is responsible for identifying and evaluating individuals qualified to become members of the Board of Directors and to recommend such individuals to the Board of Directors for consideration and nomination. The Corporate Governance and Nominating Committee and the Board of Directors endeavor to recruit and retain Board members who demonstrate intellectual capacity, strong interpersonal skills, good business instinct, objectivity and the highest level of personal and professional integrity. When evaluating current members of the Board of Directors and prospective candidates for the Board of Directors, the Committee seeks to balance the skill sets and attributes of existing Board members with the need for other complementary skills, talents and qualities that will position the Corporation to successfully implement its strategic vision.

In addition to requiring that each existing director and candidate for nomination possesses unquestionable character and a commitment to contribute to the success of the Corporation and the stewardship of the community, the Corporate Governance and Nominating Committee’s evaluation of director candidates includes an assessment of issues and factors regarding the individual’s education, business experience, accounting and financial expertise, age, diversity, reputation, civic and community relationships and knowledge and experience in matters that impact diversified community financial institutions. The Committee will also take into account the director candidate’s ability to devote adequate time to corporate matters, including being prepared for, and participating in, all meetings of the Board of Directors and any committees to which he or she may be assigned. When the Corporate Governance and Nominating Committee is considering current members of the Board of Directors for nomination for reelection, the Committee considers prior performance, as well as meeting attendance records.

The current practice of the Corporate Governance and Nominating Committee is to identify potential director candidates through a variety of sources. The Committee considers recommendations made by current or former directors or members of management. Potential candidates may also be identified through contacts in the business, civic, academic, legal and non-profit communities served by the Corporation. The Chair of the Corporate Governance and Nominating Committee determines how best to approach director candidates regarding a potential nomination.

Regarding new director candidates, the Corporate Governance and Nominating Committee will evaluate whether the nominee is independent, as independence is defined under applicable standards of the NASDAQ Stock Market, and whether the nominee meets the qualifications for directors outlined above, as well as any special qualifications applicable to membership on any committee to which the nominee may be appointed to serve if elected. A majority of the Board of Directors must meet the criteria for “independence” established by the NASDAQ Stock Market, and the Committee will consider any conflicts of interest that might impair that independence prior to making a decision.

The Corporate Governance and Nominating Committee will consider recommendations received from Corporation shareholders. Shareholders may recommend qualified director candidates by writing to:

Timothy J. Nieman, Esq.

Corporate Secretary

Codorus Valley Bancorp, Inc.

P.O. Box 2887

York, PA 17405-2887

Submissions must include information regarding a candidate’s citizenship, age, background, business and personal addresses, qualifications, experience, principal occupation or employment, directorships and other positions held by the candidate in business, charitable and community organizations and his/her willingness to serve as a member of the Board of Directors. Based on a preliminary assessment of the candidate’s qualifications, the Corporate Governance and Nominating Committee may conduct interviews with, and request additional information from, the candidate.

The Board does not have a formal policy for considering director candidates recommended by shareholders due to the infrequency of nominations, but its policy is to give due consideration to any and all candidates and there are no differences in how the Corporate Governance and Nominating Committee evaluates a candidate for director based on whether the candidate is recommended by the Committee or by a shareholder.

Nomination of Directors

Article 10, Section 10.1 of the Corporation’s Bylaws requires that nominations for election as a director be made pursuant to timely notice in writing to the Secretary. To be timely, a shareholder’s notice must be delivered to or received at the principal executive office of the Corporation not less than 90 days prior to the one year anniversary date of the preceding meeting of shareholders called to elect directors. The notice must provide the specific information required by Section 10.1 of the Bylaws. The Board is required to determine whether nominations have been made in accordance with the requirements of the Bylaws. If the Board determines that a nomination was not made in accordance with the Bylaws, the shareholder may be given an opportunity to cure any deficiency in accordance with the Bylaws.

You may obtain a copy of the Corporation’s Bylaws by writing to Timothy J. Nieman, Esq., Corporate Secretary, Codorus Valley Bancorp, Inc., P.O. Box 2887, York, PA 17405-2887. Additionally, a copy of the Corporation’s current Bylaws has been filed with the SEC as Exhibit 3.(ii) 10-Q/A to Form 8-K filed May 15, 2020.

Deadline for Submission of Shareholder Proposals

In order for a shareholder to include a proposal in the Corporation’s Proxy Statement for presentation at the 2022 Annual Meeting of Shareholders, the proposal must be received by the Corporation at its principal executive offices c/o Timothy J. Nieman, Esq., Corporate Secretary, Codorus Valley Bancorp, Inc., P.O. Box 2887, York, PA 17405-2887, no later than December 3, 2021. Any such proposal must comply with Rule 14a-8 of Regulation 14A of the proxy rules of the SEC. If a shareholder proposal is submitted to the Corporation after December 3, 2021, it will not be included in the Corporation’s 2022 Proxy Statement.

For any proposal that is not submitted for inclusion in next year’s proxy statement (as described in the preceding paragraph), but is instead sought to be presented directly at the next Annual Meeting, the Corporation’s Bylaws require shareholders to give advance notice of such proposals. The required notice, which must include the information and documents set forth in Section 2.6(b) of the Bylaws, must be given not less than 120 days prior to the first anniversary of the date of the Corporation’s proxy statement released to shareholders in connection with the preceding year’s Annual Meeting. If notice is not received by the Corporation within this timeframe, the Corporation will consider such notice untimely. Under Rule 14a-4(c)(1) of the Securities Exchange Act of 1934, as amended, if any shareholder proposal intended to be presented at the Annual Meeting without inclusion in our proxy statement is received within the required timeframe and is properly presented, then a proxy will have the ability to confer discretionary authority to vote on the proposal.

Communicating with Directors

The Board of Directors has established a process for shareholders and other interested parties to communicate directly with the Chair of the Board of Directors or its independent directors, individually, or the Board of Directors, collectively, by submitting written correspondence to the following address:

Chair of the Board of Directors (or Lead Director)

c/o Timothy J. Nieman, Esq.

Corporate Secretary

Codorus Valley Bancorp, Inc.

P.O. Box 2887

York, PA 17405-2887

The Corporate Secretary may facilitate direct communications with the Board of Directors or individual, independent directors by reviewing and summarizing such communications. All such communications will be referred to the Chair of the Board of Directors or individual, independent directors for consideration unless otherwise instructed by the Board of Directors.

PROPOSAL 1 – ELECTION OF DIRECTORS

The Corporation’s Bylaws provide that the Board of Directors shall consist of not less than five (5) nor more than twenty-five (25) persons. The Bylaws also provide that the Board of Directors shall be divided into three (3) classes, with directors of each class to be elected for a term of three (3) years, so that the term of office of one class of directors expires at the annual meeting each year. Each class consists, as nearly as possible, of one-third of the directors. The Board of Directors determines the number of directors in each class.

A majority of the Board of Directors may increase or decrease the number of directors between meetings of the shareholders. Any vacancy occurring on the Board of Directors, whether due to an increase in the number of directors, resignation, retirement, death, or any other reason, may be filled by appointment by the remaining directors. Any director who is appointed to fill a vacancy holds office until the expiration of the term of the class of directors to which he or she was appointed. The Corporation’s Bylaws mandate the retirement of directors at age 75.

The Board of Directors has fixed the number of directors at nine (9). There are three (3) nominees for the Board of Directors for election at the 2021 Annual Meeting. The Board of Directors has nominated the following three (3) individuals for election to the Board of Directors, each for a three-year term:

Nominees for Class A Directors

For a Three Year Term Expiring in 2024

Brian D. Brunner

Jeffrey R. Hines, P.E.

J. Rodney Messick

Each of the nominees presently serves as a director of the Corporation.

If the nominees should become unavailable for any reason, proxies received from shareholders will be voted in favor of substitute nominees, as the Board of Directors shall determine. The Board of Directors has no reason to believe that the nominees will be unable to serve if elected.

Cumulative voting does not exist in the election of directors. Each share of Corporation common stock is entitled to cast one vote for each nominee. For example, if a shareholder owns ten shares of common stock, he or she may cast up to ten votes for each of the three nominees to be elected.

The Board of Directors recommends a vote FOR the foregoing nominees.

Information about Nominees and Continuing Directors

Information, as of April 2, 2021, concerning the three nominees for election to the Board of Directors and the six continuing directors appears below. Each of the nominees and continuing directors also serves as a director of the Bank.

Name and Age	Director Since	Principal Occupation and Business Experience for the Past Five Years and Positions Held With Codorus Valley Bancorp, Inc. and Subsidiaries
Class A- Continuing Directors with Terms Expiring in 2021

Brian D. Brunner (65)	2016	Mr. Brunner has served as a director of the Corporation since January 12, 2016 and the Bank since September 15, 2015. He is a member of the Corporation’s Corporate Governance and Nominating Committee, the Corporation’s Compensation Committee and Chair of the Bank’s Strategic Technology and Cybersecurity Committee. Mr. Brunner serves as the Division President of Account and Item Processing Sales within the Global Sales Organization of Fiserv, Inc. and is also a member of the Association for Financial Technology. Mr. Brunner was an organizer and founding director of Bay Net Community Bank, a de novo bank established in the Baltimore, Maryland region. Mr. Brunner previously served as an independent director on the Board of Madison Bancorp, Inc., which was acquired by Codorus Valley Bancorp, Inc. on January 16, 2015. The Corporate Governance and Nominating Committee believes that his 30 plus years of experience in the financial services industry, extensive knowledge of the Maryland markets and expertise in financial services technology enables Mr. Brunner to provide unique expertise to the Board of Directors.

Jeffrey R. Hines, P.E.

(59)

2011

Mr. Hines has served as a director of both the Corporation and the Bank since November 8, 2011. He is currently Chair of the Corporation’s Corporate Governance and Nominating Committee, Vice Chair of the Compensation Committee and Vice Chair of the Audit Committee. Since 2008, Mr. Hines, currently retired, had served as President and Chief Executive Officer, and currently serves as a member of the Board of Directors, of The York Water Company, a Pennsylvania public utility and NASDAQ listed company. Mr. Hines served in various additional capacities with The York Water Company since 1995, including Vice President of Engineering, Secretary, Chief Operating Officer and Engineering Manager. Mr. Hines also serves in leadership roles on numerous non-profit and trade organizations.

The Corporate Governance and Nominating Committee believes that the attributes, skills and qualifications Mr. Hines has developed through his business background, his leadership role at The York Water Company, Inc., and his leadership roles in non-profit and trade organizations enable him to provide continued business expertise to the Board of Directors.

J. Rodney Messick

(50)

2020

Mr. Messick has served as a director of the Bank since August 26, 2019, and director of the Corporation since February 11, 2020. He is Chair of the Bank’s Wealth Management Committee and the Corporation’s Compensation Committee. Mr. Messick is Chief Executive Officer of Homesale Realty Service Group, Inc., headquartered in Lancaster, Pennsylvania and servicing clients in the Baltimore, South Central Pennsylvania and Southeastern Pennsylvania areas. Mr. Messick served on the Board of Metro Bank from December 2012 through February 2016. Mr. Messick is a 1994 graduate of the United States Naval Academy and served eight years as a naval flight officer. He is also a graduate of the University of Pennsylvania’s Wharton School and School of Engineering and Applied Science.

The Corporate Governance and Nominating Committee believes that the attributes, skills and qualifications Mr. Messick has developed through his professional experiences as a business leader, as well as his knowledge and experience as a director of the Bank and Corporation, enable him to provide continued business expertise to the Board of Directors.

Class B –Continuing Directors with Terms Expiring in 2022

Cynthia A. Dotzel, CPA (66)	2011	A lifelong resident of York County, Ms. Dotzel currently serves as a practicing CPA with the public accounting firm of Dotzel & Company, Inc. Until January 2019, she practiced as a Director of Baker Tilly Virchow Krause, LLP, which acquired SF & Company, CPAs & Business Advisors, in November 2015, where she practiced as a CPA since 2009. Ms. Dotzel has served as a director of both the Corporation and Bank since November 8, 2011 and is the Chair of the Corporation’s Audit Committee, a member of both the Compensation Committee and Corporate Governance Committee and the Bank’s Wealth Management Committee. She has over 35 years of experience in the accounting industry. Additionally, Ms. Dotzel has numerous civic, charitable and professional affiliations, many of which involve leadership roles, and previously served as a Board Member and Audit Committee Chair for Waypoint Financial Corp., Waypoint Bank, York Financial Corp. and York Federal Savings & Loan. Ms. Dotzel is currently serving as a Board Member for the York Water Company. The Corporate Governance and Nominating Committee believes that Ms. Dotzel’s professional and financial services experience, as well as her roles in civic, charitable and professional organizations, enable her to provide continued business and financial expertise to the Board of Directors.
Harry R. Swift, Esq. (73)	2012	Mr. Swift currently serves as the Board’s Lead Director. Mr. Swift has served as a director of both the Corporation and the Bank since January 2012. He is Chair of the Corporation’s Enterprise Risk Management Committee, a member of the Bank’s Wealth Management Committee, Vice Chair of the Corporate Governance Committee and Chair of the Bank’s CRA Committee. A resident of York County since 1973, Mr. Swift is a retired attorney and was employed with the Bank and Corporation beginning in 1997 and retired as General Counsel and Secretary on December 31, 2013. He remained employed with the Bank on a part time basis through March 2014. At various times, Mr. Swift served as Executive Vice President, Secretary, Chief Operating Officer, General Counsel, and Cashier of the Bank and/or the Corporation. Prior to his employment with the Bank, Mr. Swift was in private practice and provided representation to the financial services industry. Mr. Swift has over 30 years of combined service in the financial services industry. The Corporate Governance and Nominating Committee believes that his 30 plus years of experience in the financial services industry enables Mr. Swift to provide continued business and institutional expertise to the Board of Directors.

Craig L. Kauffman (57)	2019	Mr. Kauffman currently serves as Executive Vice President and Chief Operating Officer of the Corporation and President and Chief Executive Officer of the Bank since August, 2018. Previously he served as Regional President of BB&T Bank, Lancaster, Pennsylvania from 2015 to August 2018; and Pennsylvania CEO of Susquehanna Bank, Lancaster, Pennsylvania, 2013 through 2015. Mr. Kauffman has served as a director of the Corporation since October 8, 2019 and a director of the Bank since August 14, 2018. Mr. Kauffman is a 1985 graduate of Millersville University with a B.S. in Business Administration and a 1990 graduate of Pennsylvania State University in Harrisburg with an MBA. The Corporate Governance and Nominating Committee believes that Mr. Kauffman’s 30 plus years of experience in the financial services industry enables him to provide continued business and financial expertise to the Board of Directors.
Class C – Continuing Directors with Terms Expiring in 2023

Sarah M. Brown (39)	2020	Ms. Brown has served as a director of the Bank since August 13, 2019, and director of the Corporation since February 11, 2020. She is a member of the Corporation’s Enterprise Risk Management Committee and the Bank’s Wealth Management Committee. Ms. Brown currently serves as President and Chief Executive Officer of Keller-Brown Insurance Services, a fifth generation, family owned insurance agency located in York County, Pennsylvania. Ms. Brown is a 2004 graduate of Duquesne University, with a BS degree in Business Administration. The Corporate Governance and Nominating Committee believes that the attributes, skills and qualifications Ms. Brown has developed through her professional experiences as a business leader and insurance specialist, as well as her knowledge and experience as a director of the Bank and Corporation, enable her to provide continued business expertise to the Board of Directors.
John W. Giambalvo, Esq. (52)	2017	Mr. Giambalvo has served as a director of the Bank since January 12, 2017, and director of the Corporation since July 11, 2017. He is a member of the Corporation’s Corporate Governance and Nominating Committee, Chair of the Compensation Committee, member of the Audit Committee and is also a member of the Bank’s Strategic Technology and Cybersecurity Committee. Mr. Giambalvo is the President and CEO of Jack Giambalvo Motor Co., Inc., and has over 20 years’ experience in the auto industry. Mr. Giambalvo started his professional career as a law clerk for the Honorable John C. Uhler, and then became an Assistant District Attorney in York, PA. Mr. Giambalvo previously served as a member of the Board of Directors of the PA Automobile Dealers Association. The Corporate Governance and Nominating Committee believes that the attributes, skills and qualifications Mr. Giambalvo has developed through his professional experiences as a business leader and lawyer, as well as his knowledge and experience as a director of the Bank and Corporation, enable him to provide continued business expertise to the Board of Directors.

Larry J. Miller

(69)

1986

Mr. Miller currently serves as Chair of the Board, President and Chief Executive Officer for the Corporation, Executive Chair of the Bank and is currently a member of the Corporation’s Enterprise Risk Management Committee, and the Bank’s CRA Committee. A resident of York County since 1972, Mr. Miller has served as a director, President and Chief Executive Officer of the Corporation since 1986 and the Bank from 1981 to 2016, and served as Vice Chair of both Boards from 2004 until his appointment as Chair in August 2015. He attended York College of Pennsylvania, is a graduate from The Pennsylvania School of Banking at Bucknell University, and has served as Chair of the Board of Directors of the United Way of York County, the York County Economic Development Corporation, YorkCounts, the Cultural Alliance of York County and Wellspan Health System. Mr. Miller serves in leadership capacities for various other non-profit organizations.

The Corporate Governance and Nominating Committee believes that the attributes, skills and qualifications Mr. Miller has developed through his banking background, his leadership roles in charitable and community organizations, and his professional experiences as a business leader, as well as his knowledge and experience as director and President and Chief Executive Officer of the Bank and Corporation, enable him to provide continued banking and business expertise to the Board of Directors.

INFORMATION CONCERNING SECURITY OWNERSHIP

Beneficial ownership of shares of the Corporation’s common stock is determined in accordance with SEC Rule 13d-3, which provides that a person should be credited with the ownership of any stock held, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, in which the person has or shares:

●

Voting power, which includes power to vote or to direct the voting of the stock;

●

Investment power, which includes the power to dispose or direct the disposition of the stock; or

●

The right to acquire beneficial ownership within 60 days after February 24, 2021.

Beneficial Ownership of Principal Holders

The following table shows, to the best of the Corporation’s knowledge, those persons or entities who owned of record or beneficially, on December 31, 2020, more than 5% of the Corporation’s outstanding common stock.

Name & Address	Amount & Nature of
of Beneficial Owner	Beneficial Ownership	Percent of Class
FMR LLC	866,291⁽¹⁾	8.84%
245 Summer Street
Boston, MA 02210

Fourthstone LLC	782,800⁽²⁾	7.99%
13476 Glayton Road
St Louis MO 63131

Name & Address	Amount & Nature of
of Beneficial Owner	Beneficial Ownership	Percent of Class
The Banc Funds Company LLC Affiliates	655,167⁽³⁾	6.70%
20 North Wacker Drive, Suite 3300
Chicago, IL 60606

BlackRock, Inc.	545,948⁽⁴⁾	5.60%
55 East 52nd Street
New York, NY 10055

⁽¹⁾ This information is based solely on Schedule 13G/A filed by FMR LLC with the SEC on February 5, 2021, reporting ownership as of December 31, 2020.

⁽²⁾ This information is based solely on Schedule 13G/A filed jointly by Fourthstone Master Opportunity Fund, Fourthstone QP Opportunity, Fourthstone Small-Cap Financials and Fourthstone GP with the SEC on February 16, 2021, reporting ownership as of December 31, 2020.

⁽³⁾ This information is based solely on Schedule 13G/A filed jointly by Banc Fund VIII, L.P., Banc Fund IX L.P. and Banc Fund X L.P. with the SEC on February 8, 2021, reporting ownership as of December 31, 2020.

⁽⁴⁾This information is based solely on Schedule 13G filed by BlackRock, Inc. with the SEC on January 28, 2021 reporting ownership as of December 31, 2020.

Beneficial Ownership of Executive Officers and Directors

The following table sets forth, as of February 24, 2021, and from information supplied by the respective persons, the amount and the percentage, if over 1%, of the common stock of the Corporation beneficially owned by each director, each nominee for director, each of the named executive officers and all executive officers and directors of the Corporation as a group.

Name of Individual or Identity of Group	Amount and Nature of Beneficial Ownership⁽¹⁾	Percent of Class
Directors and Nominees
Sarah M. Brown	2,470	*
Brian D. Brunner	42,928⁽²⁾	*
Cynthia A. Dotzel, CPA	55,323⁽³⁾	*
John W. Giambalvo, Esq.	21,826⁽⁴⁾	*
Jeffrey R. Hines, P.E.	16,582⁽⁵⁾	*
Craig L. Kauffman	19,994⁽⁶⁾	*
J. Rodney Messick	3,920	*
Larry J. Miller	137,850⁽⁷⁾	1.40%
Harry R. Swift, Esq.	6,224⁽⁸⁾	*

Named Executive Officers

Larry D. Pickett, CPA	3,393⁽⁹⁾	*
Diane E. Baker, CPA	31,075⁽¹⁰⁾	*
Amy L. Doll	23,322⁽¹¹⁾	*

All Executive Officers and Directors as a Group (18 persons)	450,382	4.53%

* Indicates beneficial ownership of less than 1%.

⁽¹⁾Unless otherwise indicated, to the knowledge of the Corporation, all persons listed have sole voting and investment power with respect to their shares of Corporation common stock, except to the extent authority is shared by spouses under applicable law. Fractional shares beneficially owned by such individuals have been rounded down to the number of whole shares beneficially owned. Pursuant to the rules of the SEC, the number of shares of common stock deemed outstanding includes shares issuable pursuant to options held by the respective person or group that are currently exercisable or may be exercised within 60 days of February 24, 2021 (“presently exercisable stock options”).
⁽²⁾ Includes 36,320 shares held jointly with Mr. Brunner’s spouse.
⁽³⁾ Includes 7,398 shares issuable pursuant to presently exercisable stock options.
⁽⁴⁾ Includes 6,037 shares held in a profit sharing plan for his benefit.
⁽⁵⁾ Includes 3,862 shares held jointly with Mr. Hines’ spouse, 1,740 shares held by his spouse and 9,462 shares issuable pursuant to presently exercisable stock options.
⁽⁶⁾Includes 2,654 of unvested restricted stock and 13,097 shares held in Mr. Kauffman’s IRA.
⁽⁷⁾ Includes 30,790 shares held jointly with Mr. Miller’s spouse, 2,521 shares held jointly with his daughter, 2,521 shares held jointly with his son, 1,717 shares held in Mr. Miller’s IRA and 2,790 shares of unvested restricted stock.
⁽⁸⁾ Includes 606 shares held in Mr. Swift’s IRA.
⁽⁹⁾ Includes 800 shares held jointly with Mr. Pickett’s spouse, 677 shares of unvested restricted stock.
⁽¹⁰⁾ Includes 1,440 shares of unvested restricted stock and 16,202 shares issuable pursuant to presently exercisable stock options.
⁽¹¹⁾ Includes 1,334 shares of unvested restricted stock and 16,280 shares issuable pursuant to presently exercisable stock options.

Executive Officers

The following table identifies each of the executive officers of the Corporation, their age as of April 2, 2021, the position they currently hold and their professional experience during the prior five years.

Name	Age	Position and Prior Professional Experience

Larry J. Miller	69	Chair of the Board of the Corporation since 2015; President and Chief Executive Officer of the Corporation since 1986; Executive Chair of the Bank since March 8, 2016; and President and Chief Executive Officer of the Bank from 1981 through his retirement from such positions on March 8, 2016.

Craig L. Kauffman	57	Executive Vice President and Chief Operating Officer of the Corporation and President and Chief Executive Officer of the Bank since August 2018; Regional President of BB&T Bank, Lancaster, Pennsylvania from 2015 to August 2018; Pennsylvania CEO of Susquehanna Bank, Lancaster, Pennsylvania, 2013 through 2015.

Timothy J. Nieman, Esq.	55	Secretary and General Counsel of the Corporation and Bank since February 2018; General Counsel of the Corporation and Bank from January 2018 to February 2018; and Partner at Rhoads & Sinon, LLP from January 2003 to December 2017.

Larry D. Pickett, CPA	59	Treasurer of the Corporation since August, 2018; Executive Vice President and Chief Financial Officer of the Bank since August 2018; Executive Vice President and Chief Financial Officer of Bay Bancorp, Inc., Columbia, Maryland, from January 2014 to June 2018.

Diane E. Baker, CPA	50	Vice President of the Corporation since 2002; Secretary of the Corporation from July 2017 to February 2018; Assistant Treasurer and Assistant Secretary of the Corporation since February 2018; Executive Vice President, Chief Operations Officer and Chief Risk Officer of the Bank since October 1, 2020; Executive Vice President, Chief Operating Officer and Chief Risk Officer of the Bank from February 2018 to October 1, 2020; Senior Vice President and Chief Risk Officer of the Bank from March 2016 to February 2018; Enterprise Risk Management Officer of the Bank from 2014 to March 2016.

INFORMATION CONCERNING COMPENSATION

Executive Compensation

Compensation Discussion and Analysis

The Compensation Committee (referred to in this discussion as the “Committee”) assists the Board of Directors and maintains responsibility for establishing and implementing the Corporation’s executive compensation philosophy for the Corporation and the Bank (hereinafter referred to as the compensation policies of the Corporation), as well as monitoring adherence to the policies and practices of compensation programs maintained by the Corporation for all associates (including equity and non-equity-based incentive programs and retirement programs). This Compensation Discussion and Analysis section is intended to help our shareholders understand the Corporation’s compensation philosophy, objectives, components and practices. This section also describes the Committee’s decisions made during 2020 as they relate to the compensation of our named executive officers.

The following officers have been identified as our named executive officers:

Larry J. Miller-

Chair, President and Chief Executive Officer of the Corporation; Executive Chair of the Bank

Craig L. Kauffman-

Executive Vice President and Chief Operating Officer of the Corporation; President and Chief Executive Officer of the Bank

Larry D. Pickett-

Treasurer of the Corporation; Executive Vice President and Chief Financial Officer of the Bank

Diane E. Baker-

Vice President, Assistant Treasurer and Assistant Secretary of the Corporation; Executive Vice President, Chief Operations and Chief Risk Officer of the Bank

Amy L. Doll-

Senior Vice President, Chief Commercial Banking and Lending Officer of the Bank

Executive Summary

Key 2020 Business Accomplishments

The 2020 year was a very successful one for the Corporation despite the challenges posed by the worldwide coronavirus pandemic. As we look back on the 2020 year as an organization, we are extremely proud of the following key accomplishments:

Key Strategic Accomplishments:

●

Successfully navigated the hurdles imposed by the coronavirus, which required a team effort led by the Board of Directors and management team. The Board of Directors met more frequently during the initial phases of the pandemic and the Bank’s Crisis Management Team continues to meet on a bi-weekly basis to address the unique challenges posed by the pandemic.

●

Opened a new retail location in Lancaster City at 101 N. Queen Street, called a Connections Center, to better reflect a new approach to the traditional banking experience. The new Connections Center features concierge staff, interactive screens to develop personal and business vision boards, self-serve and full serve account opening, non-traditional seating, video conferencing, as well as a small teller area. This storefront location is part of a newly updated mixed use four story building that includes retail, office and residential living in the heart of downtown Lancaster.

●

Enriched the Bank’s technical landscape and security posture with several new implementations, including expanding the use of Multifactor Authentication (MFA) to all externally facing applications, implementing advanced email filtering to reduce phishing and malware risks, and migrating to a new managed service provider to enhance perimeter security.

●

In response to the coronavirus, the Bank deployed Internet phones to associate homes to better support remote work, distributed Chromebooks and transitioned nearly 50% of associates to work from home over a two week period, and installed Zoom Room conferencing stations in Financial Centers to accommodate virtual meetings with clients.

●

Improved operational efficiency by further evolving the Project Portfolio Management (PPM) framework; leveraging Laserfiche, a leading content management and business process platform, to automate many internal processes across the organization, winning the Bank the 2020 Laserfiche Run Smarter® Award; and launching nCino, a best-in-class commercial loan origination system.

Key Financial Accomplishments:

●

Total assets surpassed $2.1 billion by the end of 2020, total loans exceeded $1.5 billion and total deposits exceeded $1.8 billion, reflecting continued organic growth throughout the year in both our core business and retail banking activities.

●

Total loans and deposits grew by 2.6 percent and 17.2 percent respectively in 2020.

●

Net Overhead Ratio improved to 1.73 percent in 2020.

●

Total assets under management for the wealth management division surpassed $1 billion in 2020. Average assets under management resulted in 2020 fee income of $5.0 million, a 7.5 percent increase.

●

Mortgage closings increased to 733 units and $172 million, both increases of 115% over 2019. The related gains increased to $3.5 million, an increase of 285%.

●

The Corporation actively participated in the Payroll Protection Program (PPP), supplying over 1,300 SBA backed potentially forgivable loans for over $180 million to help businesses keep their workforce employed during the coronavirus crisis.

●

Earnings for the year ended December 31, 2020 were $.86 per share basic and diluted, with a return on average equity of 4.35 percent.

●

Book value per share increased to $20.16 at December 31, 2020, an increase of 2.9 percent over December 31, 2019.

●

Dividends per share were 52.0 cents for the year ended December 31, 2020.

Key 2020 Compensation Program Attributes

The Committee strives to implement an executive compensation program that is aligned with the philosophy of the Corporation, as well as achieves the Corporation’s desired objectives. Overall, we believe that our compensation programs are fair, reasonable, competitive with our peers and reflective of best practices. Listed below are some of the key attributes of our compensation program:

●

Our salaries are competitive with the median for comparably-sized financial institutions.

●

Our overall compensation program is performance-oriented and reflects our pay-for-performance culture.

●

We have risk-mitigating design principles, such as placing caps on our annual incentive opportunities, assessing performance across multiple measures - including asset quality, and including vesting requirements on our long-term incentive awards.

●

We seek and receive advice from independent experts in executive compensation.

2020 Compensation Decisions

The Compensation Committee elected not to make any base salary adjustments for NEOs in 2020.

The remainder of this Compensation Discussion & Analysis, as well as the Summary Compensation Table and supporting tabular disclosures, are intended to provide greater detail on the compensation philosophy, roles, programs, processes, and actions in 2020.

Executive Compensation Philosophy and Objectives

The Committee believes the success of the Corporation is driven through hiring, developing and retaining qualified executives who are motivated to perform for the benefit of our shareholders, the community, clients and associates. The executive compensation program is designed to:

●

Further the strategic goals of the Corporation.

●

Align the interests of our executives with our shareholders.

●

Be competitive with our peers.

●

Motivate and reward executives for achievement of high levels of performance against defined goals and objectives – both short- and long-term.

●

Enable the Corporation to attract and retain key executives capable of maximizing the Corporation’s performance.

●

Be prudent and fiscally responsible.

●

Ensure regulatory compliance.

●

Provide for a balanced mix of fixed and variable compensation.

●

Motivate and reward executives without encouraging undue risk-taking which could materially threaten the safety and soundness of the Corporation or any individual business unit.

The Corporation seeks to provide all of its executive officers with a comprehensive program of compensation and benefit opportunities consistent with prevailing practices among publicly-traded financial services organizations of similar asset size (including slightly smaller and slightly larger), market profiles, operating circumstances and regionally similar geographic locations. The Committee believes that this level of market competitiveness appropriately positions the Corporation to attract, motivate, reward and retain the caliber of executive talent required to enable the Corporation to achieve its short- and long-term strategic goals and objectives. When deemed necessary by the Committee, position values are established based on compensation practices of larger institutions with which the Corporation competes for executive talent in its local and regional labor market.

The executive compensation program is intended to provide participating executives with a balanced and market-competitive mix of fixed and performance-based variable compensation and benefit provisions. The variable compensation features include annual cash incentives to reward short-term performance relative to our annual business plans and long-term incentives, in the form of equity grants, to reward future performance of the Corporation and increased shareholder value. Short- and Long-Term incentives are designed to focus executives’ efforts on the strategic goals and objectives of the Corporation and to link executives’ financial rewards with the interests of the Corporation’s shareholders.

All components of compensation, both fixed and variable are targeted at the median of our industry peer group, as identified by the Committee in consultation with its compensation consultant. The variable incentive award opportunities allow executives to earn total compensation which is above the median of industry norms when their individual and collective performance significantly exceeds established goals and objectives as outlined in the Corporation’s strategic plan or goals and objectives established for their positions. When corporate and or individual performance is below goals and objectives, variable compensation plans are designed to result in compensation that lags behind the market.

Role of the Compensation Committee, Management and the Compensation Consultant in the Executive Compensation Process

Role of the Compensation Committee

The Compensation Committee is appointed by the Corporation’s Board of Directors to discharge the Board’s responsibilities relating to compensation of the Corporation’s executive officers and other key associates of its subsidiaries. Five members of our Board of Directors sit on the Committee, each of whom is an independent director under the NASDAQ Stock Market listing requirements. To fulfill its responsibilities, the Committee meets at least quarterly throughout the year (met six times in 2020). The Chair of the Committee reports on Committee actions at meetings of the Board of Directors. Written minutes of Committee meetings are prepared, presented to and accepted by the Board.

The Committee has overall responsibility for evaluating and approving the compensation plans, policies and programs of the Corporation applicable to its key executives. In discharging its responsibilities, the Committee establishes the Corporation’s general compensation philosophy, and oversees the development and implementation of the Corporation’s executive compensation programs and related policies.

The Committee reviews the operation and effectiveness of the executive compensation program on a continuous basis discussing current regulatory issues, industry trends and internal Corporation needs with respect to executive compensation.

The Committee may request information from management about the Corporation, the performance of the business and the executive compensation program to evaluate effectiveness and to recommend program modifications and changes for Board consideration. It may also recommend to the Board changes in the scope of its responsibilities beyond the positions currently designated as “executive” to include other critical positions in the Corporation.

Based upon corporate goals and objectives approved by the Board, the Compensation Committee annually reviews and approves corporate goals and objectives that are specifically relevant to both the Bank’s Executive Chair and Chief Executive Officer’s compensation and evaluates their respective performance in light of those goals and objectives. Based on such evaluation, the Committee sets the compensation including base salary, incentive compensation, employment terms (such as severance agreements, employment agreements and change in control agreements, if and when appropriate, and equity-based awards or special or supplemental benefits) of both the Bank’s Executive Chair and Chief Executive Officer subject to ratification by the full Board of Directors. In determining compensation, the Compensation Committee may consider, among other factors, the Corporation’s performance and relative shareholder return, the nature, extent and acceptability of risks that both the Bank’s Executive Chair and Chief Executive Officer may be encouraged to take by such compensation, the value of similar incentive awards to chief executive officers at comparable companies, and the awards given to the Bank’s Executive Chair and Chief Executive Officer in past years.

In addition to determining both the Bank’s Executive Chair and Chief Executive Officer compensation, the Committee annually reviews and recommends to the Board for approval the compensation of executive officers other than the Executive Chair and Chief Executive Officer.

The Committee is also responsible for reviewing the Bank’s executive incentive compensation plans, equity-based plans, retirement plans, deferred compensation plans and welfare benefit plans. Unless their administration is otherwise delegated in accordance with the provisions of such plans, the Committee administers such plans, including determining any incentive or equity-based awards to be granted to executive officers, and other key associates under such plans.

In order to discharge its responsibilities, the Committee has the authority and is provided the resources to obtain advice and assistance from internal or external legal, compensation, human resource, accounting and other advisors or consultants as it deems necessary or appropriate. These services are provided as a matter of practice as requested by the Committee and such advisors report directly to the Committee.

Details on the Committee’s functions are more fully described in its charter. As part of its responsibilities, the Committee reviews its charter in the development of an annual work plan and recommends any proposed changes to the Board for approval. The Committee’s Charter can be viewed at the Corporation’s website, www.peoplesbanknet.com by clicking on “Your Business” at the top of the Npage, click on “Investor Relations” under the “Connect” heading, and then click on “Governance Documents”.

The Committee will continue to review, evaluate, and revise the compensation philosophy as appropriate to meet its desired objectives.

Role of the Compensation Consultant

The Committee has the authority to hire, terminate, and seek the services of compensation consulting and advisory firms as it deems appropriate. These advisors serve as independent counsel and report directly to the Committee. As a matter of general policy the Committee does not prohibit its advisors from providing services to management, but any such engagements must be approved by the Committee.

The Committee hired the independent outside consulting firm Meridian Compensation Partners, LLC, Newton, MA, sometimes referred to in this discussion as Meridian, which specializes in executive and board compensation. Meridian reports directly to the Committee and carries out its responsibilities to the Committee in coordination with the human resources department, as requested by the Committee. Meridian only provides services on behalf of the Committee and did not perform any additional services to the Corporation during 2020.

Role of Management

The Committee often requests other non-committee members of the Board and one or more members of the Bank’s Executive Leadership Team, such as the Executive Chair, Chief Executive Officer and the Chief Administrative Officer, to be present at Committee meetings where executive compensation and corporate or individual performances are discussed and evaluated. Although the Committee is ultimately responsible for executive compensation decisions, information and input from executive leadership is critical to ensuring the Committee and its advisors have the information needed to make informed decisions. Executives may provide insight, suggestions or recommendations regarding executive compensation. However, only Committee members vote on decisions regarding executive compensation. In all cases, no executive officer shall be present at meetings at which their compensation or performance is discussed or determined by the Committee.

Below is a summary of the role of management in assisting the Committee to discharge its responsibilities:

●

The Bank’s Executive Chair and/or Chief Executive Officer develop recommendations for corporate goals and corresponding weightings and incentive performance metrics for the annual executive incentive plan and presents the same to the Committee for its consideration. The Committee has final approval of the goals, weightings and metrics to be used for purposes of the annual executive incentive plan.

●

The Bank’s Chief Executive Officer presents performance summaries and recommendations relating to the other named executive officers and other key executives’ compensation to the Committee for its review and approval. The Committee Chair ensures feedback is shared with the full Board for the purposes of making informed compensation decisions.

●

As deemed necessary, the Executive Chair, Chief Executive Officer and Chief Administrative Officer provide the Committee with data necessary to evaluate and implement compensation proposals and programs.

●

The Chief Administrative Officer coordinates external legal support related to employment agreements and retirement programs.

●

The Chief Administrative Officer provides data and information to the Committee, as requested, and also assists the Committee Chair in determining the logistics and agenda for the meeting.

●

At the direction of the Committee, the Chief Administrative Officer works with outside consultants to provide data and information relative to the Committee’s needs and objectives.

Factors Considered in Determining Executive Compensation

The Committee’s compensation decisions throughout the year were supported by various analyses, information and input including, but not limited to:

●

Total compensation philosophy and objectives.

●

Pay target guidelines as developed in consultation with our independent compensation consultant.

●

Strategic plans and performance relative to annual goals.

●

Competitive benchmarking reviews conducted by our independent compensation consultant.

●

Risk assessment/mitigation considerations.

●

Individual performance, overall leadership, and potential.

●

Individual performance related to leading and upholding the Corporation’s vision, mission and values.

●

External influences, economic conditions and industry factors.

●

Executive recruitment and retention considerations.

●

Best/emerging practices as provided by outside consultants.

●

Changing regulations.

●

Director and Committee input as gathered during executive sessions.

●

Internal equity considerations.

●

Cost, tax, and accounting considerations.

Competitive Benchmarking

In 2020, Meridian was retained by the Committee to provide insight and counsel with the Corporation’s executive compensation program. The purpose of the engagement was to provide an independent and objective analysis of all elements of compensation (individually and in the aggregate), including pay and performance alignment. In recognition of these extraordinary times, the Committee elected to leverage the prior year’s analysis as the basis for making compensation decisions for 2020 performance.

Total Compensation and Performance Alignment

The Committee seeks to ensure that the total compensation package paid to executives is considered in the aggregate (i.e., the sum of its parts) and is properly aligned with the Corporation’s performance. The Corporation’s performance is evaluated relative to a number of factors, including corporate and individual performance in light of our own performance targets and industry/peer results, overall financial performance and strategic accomplishments that position the Corporation for success going forward. Performance goals in our incentive plans are positioned at levels that are achievable, but require increased effort on the part of our executive officers and other key associates.

The Committee receives regular updates on the Corporation’s performance relative to performance goals and industry realities.

The Committee will continue to refine its assessment processes and peer groups to ensure its comparisons are appropriate.

Risk Assessment/Mitigation Considerations

As a bank holding company with its principal subsidiary a Pennsylvania-chartered bank, both of which are subject to significant federal and state regulation and regulatory oversight, the Corporation has always adhered to defined risk guidelines, practices and controls designed to ensure the safety and soundness of the organization. Our management and Board of Directors conduct regular reviews of our business to ensure we remain within appropriate regulatory guidelines and appropriate practice, supplemented by our internal audit and compliance function.

Annually, the Committee reviews the Bank’s executive incentive plan and assesses the extent to which the established incentives relate to or influence excessive risk-taking on the part of participating associates. The Committee reviewed the plan in January 2020, including the performance goals driving awards under the plan. The performance goals include measures intended to ensure that participating executives do not engage in activities or behaviors that create undue risk for the Corporation.

The Committee approved a clawback policy in 2016 that requires, to the extent legally permitted, the return, repayment or forfeiture of any annual or long-term incentive compensation payment or award made or granted to any current or former executive officer if the payment or award was based on financial statements filed with the SEC within the prior 3-years that were subject to a restatement due to noncompliance with the rules and regulations of the SEC or misconduct by an executive officer or other key associates.

Assessing Industry Competitiveness

Based on the information provided by Meridian, as well as national and regional compensation practice survey reports for financial services companies with assets of similar size and scope to the Corporation, the Committee believes the types and levels of compensation provisions included in our executive compensation program are consistent with current features and “best practices” among organizations of similar size, regional geography and type.

Compensation Components and 2020 Decisions

The Corporation’s compensation program consists of four main components: Base Salary, Annual Incentives, Long-Term Incentive/Equity, and Benefits and Perquisites. The following section summarizes the role of each component in the decision making process, how decisions are made and the resulting 2020 decisions with respect to the named executive officers.

Base Salary

Objective. The Corporation believes the purpose of base salary is to provide competitive and fair base compensation that recognizes the executives’ role, responsibilities, experience and performance. Base salary represents fixed compensation that is targeted to be competitive with the practices of comparable financial institutions in the region.

Typically, the Committee sets base salary for each executive effective in January of each year. Salaries are determined in consideration of the competitive market for similar roles, as well as each individual’s experience, performance and contributions. Input from the Bank’s Chief Executive Officer is considered in setting executive salaries, while the Committee is solely responsible for recommending the Bank’s Executive Chair and Chief Executive Officer’s salaries.

Annual opportunities for salary increases may be affected by changes in the market value of the position, but are based primarily on the performance of the individual during the most recent performance period.

2020 and 2021 Decisions. The Committee elected not to approve any base salary adjustments for the Executive Leadership Team during 2020. Base salaries for 2021 are reflected below:

Base Salary Adjustments

Named Executive Officer	Bank Title	2020 Base Salary	% Increase	2021 Base Salary
Larry J. Miller⁽¹⁾	Executive Chair	$ 375,000	0.0%	$ 375,000
Larry D. Pickett	EVP, Chief Financial Officer	$ 256,500	3.1%	$ 264,500
Craig L. Kauffman	Chief Executive Officer	$ 410,000	3.0%	$ 422,500
Diane E. Baker	EVP, Chief Operations & Chief Risk Officer	$ 269,000	3.0%	$ 277,000
Amy L. Doll	SVP, Chief Commercial Banking & Lending Officer	$ 268,500	3.0%	$ 276,500

⁽¹⁾

Mr. Miller continues to serve as Executive Chair of the Bank and President and Chief Executive Officer of the Corporation.

Annual Incentives

Objectives and Process. The objective of the Bank’s annual executive incentive plan, adopted on February 11, 2020, is to motivate and reward key members of the Executive Leadership team for achieving specific corporate and individual performance goals that support the Corporation’s strategic plan through the use of cash awards. Awards under this plan represent compensation that must be earned (and re-earned each year) based upon corporate and individual performance.

The proposed corporate performance goals for the incentive plan are developed by the Chief Executive Officer of the Bank based on budget projections and is typically presented by the Chief Executive Officer to the Committee by February of each year. To support and enhance the team dynamics among the executive group, the corporate performance goals are identical for each participant. Each member of the executive group also has personal performance goals that reflect each executive’s unique role and responsibilities. Once the performance goals are finalized and approved by the Committee, the goals are presented to the full Board for final approval.

The annual executive incentive plan provides target payout opportunities that are intended to be consistent with those offered by the Corporation’s peers. The targets and performance measures for the 2020 compensation year are described below. In the event that awards are not triggered in a plan year due to a failure to achieve the threshold goal, the Board of Directors may create a pool equal to 3% of the base compensation of plan participants, other than the current Executive Chair and current Chief Executive Officer of the Bank, and pay awards to such participants in such amounts as the Board deems appropriate to reflect exceptional individual performance, if any.

Pursuant to the provisions of the 2020 Executive Incentive Plan, the Compensation Committee may “terminate, modify, or amend this plan. Amendments can include adjustments to award calculations for any significant extraordinary financial items” occurring in any given time period.

Award Opportunity: The table below illustrates the 2020 award opportunities (expressed as a percentage of base salary) available under our annual executive incentive plan upon achievement of the approved Corporate performance metrics.

Participant	Threshold Performance	Target Performance	Maximum Performance
Executive Chair	12.5%	25%	37.5%
Chief Executive Officer & President of the Bank	12.5%	25%	37.5%
Other Named Executive Officers	10%	20%	30%

Trigger/Gate: Prior to the payment of any award under the plan, the Corporation’s external auditors must attest to the financial performance of the Corporation to determine whether the performance measure was achieved. The Bank’s Executive Chair and/or Chief Executive Officer reviews the financial performance generally and in relation to the strategic goals.

Performance Measures: The 2020 performance measures were aligned with the corporate strategy and business plan and included financial performance of the Bank based on pre-tax, pre-provision income, return on equity and efficiency ratio as well as individual goals as determined by the Bank’s Chief Executive Officer. The Committee believed these measures would drive the appropriate focus by the executive team on overall performance of the Corporation.

Weightings for each measure were established by the Committee and approved unanimously in February 2020. The following table summarizes the goals and actual performance in 2020.

Performance Measure	Weighting	Threshold	Target	Stretch	2020 Actual Performance
Pre-Tax, Pre-Provision Income	40%	$23,856	$26,507	$29,158	$25,148
Return on Equity	25%	8.63%	9.59%	10.55%	4.35%
Efficiency Ratio	20%	69.77%	67.10%	64.54%	66.68%
Individual Performance	15%	Personal Goals as Determined by Compensation Committee
TOTAL	100%

Individual Performance Factor: The Board of Directors retains discretion under the plan to adjust an individual’s award, down 100% or up to 150%, taking into account the individual’s performance during the year. A decision to make an adjustment is based on input from the Bank’s Chief Executive Officer as to all other participants, or the Committee, as to the Executive Chair and Chief Executive Officer. The Board of Directors retains discretion to suspend payments under the plan if it determines that excessive risk has been taken by one or more individuals.

2020 Awards: For 2020, the weighted performance fell between threshold and target. The following table summarizes the 2020 annual incentive awards paid pursuant to the annual executive incentive plan adopted in January 2020 to the Executive Chair, Chief Executive Officer and the other named executive officers.

Named Executive Officer	Bank Title	2020 Non-Equity Incentive Awards	Percentage of Base Salary⁽¹⁾
Larry J. Miller	Executive Chair	$ 62,239	16.6%
Larry D. Pickett	EVP, Chief Financial Officer	$ 35,119	13.3%
Craig L. Kauffman	President & Chief Executive Officer	$ 78,044	18.5%
Diane E. Baker	EVP, Chief Operations and Risk Officer	$ 36,779	13.3%
Amy L. Doll	SVP, Chief Commercial Banking & Lending Officer	$ 36,713	13.3%

⁽¹⁾

The Compensation Committee of the Board of Directors elected to calculate 2020 Non-Equity Incentive Awards on the 2021 Annualized Salary for participants as a mitigating factor since no members of Executive Leadership received merit increases during 2020.

Long-Term Incentive/Equity Compensation

Objectives. The granting of equity-based incentives is viewed as a desirable long-term incentive compensation strategy because it closely links the interest of management with shareholder value, aids in associate retention, and motivates executives to improve the long-term stock market performance of our common stock.

When granting equity-based incentives to executives, the Committee considers the competitive market practice, corporate performance and individual performance. The Committee also considers the Bank’s Chief Executive Officer’s recommendations for other named executive officers, which are based upon each executive’s level of responsibility and contribution towards achievement of our business plan and objectives. The Committee is authorized, in its discretion, to grant equity-based awards under the Corporation’s existing Long-Term Incentive Plan and upon such terms and conditions as the Committee may determine. Historically, equity-based incentive awards have been granted on an annual basis in the form of stock options and restricted stock.

2020 Award Decisions. No awards were granted during 2020. Awards consideration will move to the first quarter of each year.

2020 Awards

Named Executive Officer	Bank Title	Grant Date	Restricted Shares Granted (#)		Option Awards (#)	Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Stock and Option Awards ($)
Larry J. Miller	Executive Chair			⁽¹⁾	-
Larry D. Pickett	EVP, Chief Financial Officer			⁽¹⁾	-
Craig L. Kauffman	President & Chief Executive Officer			⁽¹⁾	-

Named Executive Officer	Bank Title	Grant Date	Restricted Shares Granted (#)		Option Awards (#)	Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Stock and Option Awards ($)
Diane E. Baker	EVP, Chief Operations and Chief Risk Officer			⁽¹⁾	-
Amy L. Doll	SVP, Chief Revenue & Lending Officer			⁽¹⁾	-

⁽¹⁾

The Company made a decision to shift the timing of equity awards from December of each year to March. As a result, there were no equity awards granted in 2020. Going forward, annual awards to leadership are targeted for mid to late first quarter.

Perquisites and Other Benefits

The Corporation provides select executives perquisites and other benefits described below, which the Committee believes are reasonable and consistent with the Corporation’s overall compensation philosophy. The Committee regularly reviews and refines executive benefits to ensure market competitiveness.

Executive Perquisites. The Corporation provides a limited number of perquisites to key executives that the Committee believes are necessary for conducting business, are reasonable and enable us to attract and retain high performing associates for our key executive officers. These benefits also allow our executives to maintain direct contact and involvement with current and prospective clients, as well as non-profit organizations in the communities in which we do business. The Committee periodically reviews the levels of perquisites and other personal benefits provided to the named executive officers.

The primary perquisites are: corporate owned automobiles for certain executives, club memberships for certain executives and life and disability insurance programs. These perquisites represent a relatively insignificant portion of the total compensation of each named executive officer. The aggregate incremental cost to the Corporation for these perquisites is set forth in the Summary Compensation Table under the “All Other Compensation” column and related notes.

Employment and Change in Control Agreements with Named Executive Officers. The Corporation is party to employment agreements with Mr. Miller, Executive Chair of the Bank, and Mr. Kauffman, President and Chief Executive Officer of the Bank. The Corporation is party to change in control agreements with Mr. Pickett, Executive Vice President and Chief Financial Officer of the Bank; Ms. Doll, Senior Vice President, Chief Commercial Banking and Lending Officer of the Bank and Ms. Baker, Executive Vice President, Chief Operations and Chief Risk Officer of the Bank. The Board of Directors views such agreements as integral in ensuring the continued dedication of the executives to the Corporation and promoting stability of management, particularly in the event of a change in control of the Corporation. These agreements are described further under “Employment Agreements” on page 39.

Long-Term Nursing Care Agreement. On December 27, 2005, the Corporation and the Bank entered into a Long-Term Nursing Care Agreement with Mr. Miller, with the final premium installment paid in 2013. The policy was originally purchased on May 27, 2003. The cost of long-term nursing care is a growing concern among executives as they transition through life phases. The Compensation Committee believes that good health care planning reduces the amount of time and attention that Mr. Miller must spend on that topic and maximizes the net financial reward to Mr. Miller of the compensation he receives from the Corporation.

Supplemental Long-Term Disability Program. The Corporation provides supplemental long-term disability insurance for Mr. Miller, Mr. Kauffman, Mr. Pickett, Ms. Baker, Ms. Doll and other key executives. The policy is designed to supplement coverage, in the event of a disability, to bridge the gap between payments under the Corporation’s general short- and long-term disability plans and the executive’s salary.

Employee Stock Bonus Plan. In 2001, the Corporation implemented an Employee Stock Bonus Plan, administered by non-employee members of the Corporation’s Board of Directors, under which the Corporation may issue shares of its common stock to associates as performance-based compensation. As of December 31, 2020, 21,117 shares of common stock were reserved for possible issuance under this plan, subject to future adjustment in the event of specified changes in the Corporation’s capital structure. No shares were issued under the Employee Stock Bonus Plan in 2020.

Codorus Valley Bancorp, Inc. Employee Stock Purchase Plan. The Employee Stock Purchase Plan (“ESPP”) was designed to encourage and enable associates of the Corporation and its subsidiaries to acquire an ownership interest in the Corporation through a regular investment program. The Corporation believes that associates who participate in the ESPP will have a closer identification with the Corporation by virtue of their ability, as shareholders, to participate in the Corporation’s growth and earnings, and will be motivated to improve their job performance accordingly. Under the terms of the ESPP, associates may use payroll deductions to purchase stock of no more than 2,000 shares per year. The purchase price for shares purchased under the ESPP currently represents a 15% discount to the fair market value of the shares on the semi-annual purchase date.

401(k) Retirement Plan. The Bank maintains and sponsors a defined contribution 401(k) retirement plan. The 401(k) plan is administered by a committee which is appointed by the Board of Directors. The 401(k) plan is subject to the Internal Revenue Code of 1986, as amended, and to the regulations promulgated thereunder. Participants are entitled to certain rights and protection under the Employee Retirement Income Security Act of 1974, as amended.

Each Bank associate who has attained the age of 21, and at the time of hire is expected to complete 1,000 hours of service within 12 months of employment, may participate in the 401(k) plan on the first day of the month following the third month of employment, providing he/she remains employed as of that date. An eligible associate may elect to contribute certain portions of salary, wages, or commissions to the 401(k) plan. Generally, eligible associates may contribute up to 100% of their compensation, subject to statutory deductions and limitations. In 2020, the Bank matched 100% of each associate’s contribution up to 4% of the associate’s eligible wages. Associate and employer contributions to the 401(k) plan vest immediately.

Officer Group Term Replacement Insurance Plans. The Bank provides an officers’ life insurance program for certain Bank officers, including each of the named executive officers. This program provides a death benefit to the named executive officer’s beneficiary in an amount equal to three (3) times the officer’s highest base salary during employment up to $1,000,000; provided, the officer is employed by the Corporation at the time of his or her death. Under this program, the Bank is the beneficiary of any death proceeds remaining after an officer’s death benefit is paid to his or her beneficiary. The Committee believes that this benefit helps the Corporation attract and retain talented individuals to the management team. It also believes that it is an appropriate compensation strategy to provide for the continuing lifestyle of the officers’ families in the case of death.

Other Benefits. The named executive officers also participate in the Corporation’s other benefit plans on the same terms as other associates. These plans include medical and dental insurance, short and long-term disability insurance, and discounts on the Corporation’s products and services.

Impact of Accounting and Tax on the Form of Compensation

The Compensation Committee and management consider the accounting and tax (individual and corporate) consequences of the compensation plans prior to making changes to the plans.

The Committee has considered the impact of Accounting Standards Codification Topic 718, as issued by the FASB, on the Corporation’s use of equity incentives as a key retention tool.

Section 162(m) of the Internal Revenue Code limits the deduction of compensation paid to named executive officers to $1,000,000. Prior to the enactment of the Tax Cuts and Jobs Act (the “Act”) in December, 2017, “performance based” compensation was an exception under Code Section 162(m) and thus not subject to the $1,000,000 limit on deductibility. The Act, however, removed the exception under Code Section 162(m) for qualified performance-based compensation with certain limited exceptions. In the Corporation’s case, based on the current compensation of the named executive officers, the Corporation does not believe Section 162(m) will be triggered for our Executive Chair, Chief Executive Officer, Chief Financial Officer or the other named executive officers in 2021, but will consider this in future years.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis that is required by the rules established by the Securities and Exchange Commission. Based on such review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

Compensation Committee of the Board of Directors of

Codorus Valley Bancorp, Inc.

John W. Giambalvo, Esq. (Chair)

Jeffrey R. Hines, P.E. (Vice Chair)

Brian D. Bruner

Cynthia A. Dotzel, CPA

J. Rodney Messick

Executive Compensation Tables

The following tables set forth for the fiscal years ending December 31, 2020, 2019, and 2018 the compensation which the Corporation and its subsidiaries paid to its named executive officers.

2020 Summary Compensation Table

The table below reflects information concerning the annual compensation for services in all capacities to the Corporation and its subsidiaries of those persons who were:

●

the Chief Executive Officer and Chief Financial Officer;

●

the President and Chief Executive Officer of the Bank;

●

the two most highly compensated executive officers of the Bank other than the Chief Executive Officer, President and CEO of the Bank, and Chief Financial Officer who were serving at December 31, 2020;

Name and Principal Position⁽¹⁾	Year	Salary ($)	Bonus ($)	Stock Awards ($)⁽²⁾	Option Awards ($)⁽³⁾	Non-equity Incentive Plan Compensation ($)⁽⁴⁾	Non-qualified Deferred Compensation Earnings ($)	All Other Compensation ($)⁽⁷⁾⁽⁸⁾	Total ($)
Larry J. Miller, President and Chief Executive Officer of the Corporation, Executive Chair of PeoplesBank	2020	375,000	--	--(9)	--	62,239		35,410	472,649
	2019	375,000	--	38,990	--	42,355	76,108(5)	30,773	563,226
	2018	387,116	--	100,989	--	144,281	70,632(5)	28,973	731,991
Larry D. Pickett, CPA, Treasurer of the Corporation and Executive Vice President & Chief Financial Officer of PeoplesBank	2020	256,500	--	--(9)	--	35,119	841(6)	11,073	303,533
	2019	256,500	--	21,980	--	23,177	110(6)	12,622	314,389
	2018	93,269	25,000	--(9)	--	--	--	50	118,319
Craig L. Kauffman, Chief Operating Officer of the Corporation and President & Chief Executive Officer of PeoplesBank	2020	410,000	--	--(9)	--	78,044	9,462(6)	85,106	582,612
	2019	388,462	--	42,989	--	46,309	2,566(6)	89,505	569,831
	2018	123,846	50,000	94,220	--	--	--	5,364	273,430
Diane E. Baker, CPA, Executive Vice President & Chief Operations & Chief Risk Officer of PeoplesBank	2020	269,000	--	--(9)	--	36,779	46,899(5)(6)	10,210	362,888
	2019	269,000	--	22,997	--	24,306	42,701(5)(6)	12,375	371,379
	2018	248,923	--	46,494	15,496	74,100	--	12,589	397,602
Amy L. Doll, Senior Vice President & Chief Commercial Banking & Lending Officer of PeoplesBank	2020	268,500	--	--(9)	--	36,713	--	24,511	329,724
	2019	268,500	--	22,997	--	24,261	--	23,839	339,597
	2018	262,000	--	39,736	13,246	74,670	--	22,751	412,403

⁽¹⁾

Pursuant to SEC rules, compensation is only shown for each Named Executive Officer in each of the years in which the individual met the criteria of a Named Executive Officer.

⁽²⁾

Amounts represent the grant date fair values of restricted stock awards computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 12 to the Corporation’s audited consolidated financial statements for the fiscal year ended December 31, 2020, included in the Corporation’s Annual Report filed on Form 10-K with the SEC on or about March 9, 2020.

⁽³⁾

Amounts represent the grant date fair values of the options computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 12 to the Corporation’s audited consolidated financial statements for the fiscal year ended December 31, 2020, included in the Corporation’s Annual Report filed on Form 10-K with the SEC on or about March 9, 2020

⁽⁴⁾

Payments characterized as “Non-Equity Incentive Plan Compensation” for the fiscal year ended December 31, 2020 were earned through the Executive Incentive Plan. The payments were approved by the Compensation Committee on January 29, 2021 and paid March 2021.

⁽⁵⁾

Reflects change in the present value of future benefits payable under Supplemental Executive Retirement Plans (SERPS), described on page 37 under the heading “Non Qualified Deferred Compensation Table.”

⁽⁶⁾

Reflects “above market or preferential portion” of interest credited (i.e. the portion of interest, if any, above the 120% long-term AFR) to NEO during the fiscal year under the deferred compensation plans, described on page 37 under the heading “Non Qualified Deferred Compensation Table.”

⁽⁷⁾

All other compensation primarily consists of matching contributions allocated by the Corporation to each Named Executive Officer pursuant to the Corporation’s 401(k) Retirement Plan, which is more fully described on page 30 under the heading “401k Retirement Plan”, and the imputed cost of life and supplemental disability insurance. The table below details the foregoing payments for 2020.

⁽⁸⁾

In 2020, the amount attributable to other perquisites for Messrs. Miller, Kauffman, and Doll exceeded $10,000 and is shown in the “Other Perquisites” column in the table below. The amounts attributable to perquisites in 2020 for Mr. Pickett and Ms. Baker were less than $10,000. Mr. Miller’s perquisites included country club dues totaling $7,060 as well as the personal benefits associated with the use of a vehicle owned by the Corporation, totaling $11,852. Mr. Kauffman’s perquisites included country club dues totaling $5,152, as well as the personal benefits associated with the use of a vehicle owned by the Corporate, totaling $5,139. Ms. Doll’s perquisites included the personal benefits associated with the use of a vehicle owned by the Corporation, totaling $12,651. Mr. Kauffman’s “Other Compensation” reflects the Corporation’s contribution to his Bank Contribution Deferred Compensation Agreement as detailed on page 37 under the heading “Non Qualified Deferred Compensation Table.” The calculation of the automobile benefit consists of the incremental cost attributable to Corporation-provided automobiles, as well as insurance premiums, maintenance, and repair costs. The incremental cost attributable to Corporation-provided automobiles (calculated in accordance with Internal Revenue Service guidelines) are included on the W-2 of NEOs who receive such benefits and the NEO is responsible for paying income tax on such amounts.

⁽⁹⁾

ALL OTHER COMPENSATION

Name	Year	401(k) Match	Life Insurance	Disability Insurance	Other Compensation	Other Perquisites	Total All Other Compensation
Larry J. Miller	2020	11,400	4,980	-	-	19,030	35,410
	2019	11,200	4,527	2,977	-	12,069	30,773
	2018	11,000	4,098	1,806	-	12,069	28,973
Larry D. Pickett	2020	9,931	1,142	-	-	-	11,073
	2019	8,366	1,019	3,237	-	-	12,622
	2018	-	50	-	-	-	50
Craig L. Kauffman	2020	11,400	1,130	-	61,500	11,076	85,106
	2019	10,904	1,009	4,864	58,565	14,163	89,505
	2018	1,077	50	-	4,237	-	5,364
Diane E. Baker	2020	9,684	526	-	-	-	10,210
	2019	8,960	501	2,914	-	-	12,375
	2018	9,957	473	2,159	-	-	12,589
Amy L. Doll	2020	10,740	290	-	-	13,481	24,511
	2019	10,740	274	1,958	-	10,867	23,839
	2018	10,480	244	1,738	-	10,290	22,751

CEO PAY RATIO

Pursuant to the mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Securities and Exchange Commission adopted a rule requiring annual disclosure of the ratio of the median associate’s annual total compensation to the total compensation of the principal executive officer (“PEO”). This ratio is commonly referred to as the “CEO Pay Ratio.” The Corporation’s CEO is Mr. Miller, the Chair, President and Chief Executive Officer.

The median associate was identified by examining a list of all associates as of November 30, 2020, and applying total (gross) compensation as reported on the 2020 W-2 forms. Upon the identification of the median associate, that individual’s 2020 total compensation was calculated in accordance with the requirements of the Executive Summary Compensation Table on page 31.

The following table sets forth the calculation of the 2020 CEO Pay Ratio:

	Executive Chair			(1)	Median Associate
Salary	$	375,000.00			$	49,230.88
Bonus					$	-
Stock Awards					$	-
Non-Equity Incentive Plan Compensation	$	62,239.00			$	2,538.46
Non-qualified Deferred Compensation Earnings					$	-
All Other Compensation	$	35,410.00			$	58.88	(2)
	$	472,649.00			$	51,828.22

Ratio of CEO Pay to Median Associate Pay			9	to	1

(1)

The compensation as outlined below for the President and CEO corresponds with the detail as provided in the Summary Compensation Table on Page 31.

(2)

Included in “All other Compensation” for the median associate is Employer 401(k) Match and the annual cost of Basic Life Insurance coverage, consistent with the calculations in the Summary Compensation Table.

Grants of Plan-Based Awards Table

The following table presents information concerning awards granted to the named executive officers for 2020 under the annual executive incentive plan and the Corporation’s equity incentive and stock option plans.

Name	Grant Date	Estimated Possible Payouts Under Non-Equity Incentive Plan Awards			Estimated Future Payouts Under Equity Incentive Plan Awards			All Other Stock Awards: Number of Shares of Stock or Units (#)	All Other Option Awards: Number of Securities Underlying Options (#)	Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Stock and Option Awards ($)
		Threshold	Target	Maximum	Threshold	Target	Maximum
		($)	($)	($)	(#)	(#)	(#)
Larry J. Miller⁽¹⁾	-	46,875	93,750	140,625	N/A	N/A	N/A	-	-	-	-
Larry J. Miller⁽¹⁾	⁽⁶⁾	-	-	-	N/A	N/A	N/A	-	-	-	-
Larry D. Pickett⁽²⁾	-	26,450	52,900	79,350	N/A	N/A	N/A	-	-	-	-
Larry D. Pickett⁽²⁾	⁽⁶⁾	-	-	-	N/A	N/A	N/A	-	-	-	-
Craig L. Kauffman⁽³⁾	-	52,813	105,625	158,438	N/A	N/A	N/A	-	-	-	-
Craig L. Kauffman⁽³⁾	⁽⁶⁾	-	-	-	N/A	N/A	N/A	-	-	-	-
Diane E. Baker⁽⁴⁾	-	27,700	55,400	83,100	N/A	N/A	N/A	-	-	-	-
Diane E. Baker⁽⁴⁾	⁽⁶⁾	-	-	-	N/A	N/A	N/A	-	-	-	-
Amy L. Doll⁽⁵⁾	-	27,650	55,300	82,950	N/A	N/A	N/A	-	-	-	-
Amy L. Doll⁽⁵⁾	⁽⁶⁾	-	-	-	N/A	N/A	N/A	-	-	-	-

⁽¹⁾In accordance with the annual executive incentive plan applicable to the Executive Chair, amounts reported are the following percentages of Mr. Miller’s base salary: Threshold - 12.5%; Target - 25%; and Maximum - 37.5%. Based on the Company’s performance in 2020, Mr. Miller received an award of $62,239 pursuant to the plan, which was paid in March 2021. For further information regarding the executive incentive plan and awards made thereunder, please refer to the “Compensation Discussion and Analysis” section of this proxy statement.

⁽²⁾In accordance with the annual executive incentive plan applicable to other Named Executive Officers, amounts reported are the following percentages of Mr. Pickett’s base salary: Threshold - 10%; Target - 20%; and Maximum - 30%. Based on the Company’s performance in 2020, Mr. Pickett received an award of $35,119 pursuant to the plan, which was paid in March 2021. For further information regarding the executive incentive plan and awards made thereunder, please refer to the “Compensation Discussion and Analysis” section of this proxy statement.

⁽³⁾In accordance with the annual executive incentive plan applicable to the President & CEO (Bank), amounts reported are the following percentages of Mr. Kauffman’s base salary: Threshold - 12.5%; Target - 25%; and Maximum - 37.5%. Based on the Company’s performance in 2020, Mr. Kauffman received an award of $78,044 pursuant to the plan, which was paid in March 2021. For further information regarding the executive incentive plan and awards made thereunder, please refer to the “Compensation Discussion and Analysis” section of this proxy statement.

⁽⁴⁾In accordance with the annual executive incentive plan applicable to other Named Executive Officers, amounts reported are the following percentages of Ms. Baker’s base salary: Threshold - 10%; Target - 20%; and Maximum - 30%. Based on the Company’s performance in 2020, Ms. Baker received an award of $36,779 pursuant to the plan, which was paid in March 2021. For further information regarding the executive incentive plan and awards made thereunder, please refer to the “Compensation Discussion and Analysis” section of this proxy statement.

⁽⁵⁾In accordance with the annual executive incentive plan applicable to other Named Executive Officers, amounts reported are the following percentages of Ms. Doll’s base salary: Threshold - 10%; Target - 20%; and Maximum - 30%. Based on the Company’s performance in 2020, Ms. Doll received an award of $36,713 pursuant to the plan, which was paid in March 2021. For further information regarding the executive incentive plan and awards made thereunder, please refer to the “Compensation Discussion and Analysis” section of this proxy statement.

⁽⁶⁾The Company made a decision to shift the timing of equity awards from December of each year to March. As a result, there were no equity awards granted in 2020. Going forward, annual awards to leadership are targeted for mid to late first quarter.

Outstanding Equity Awards at Fiscal Year-End Table

The following table presents outstanding stock option and non-vested stock awards as of December 31, 2020.

Outstanding Equity Awards at 2020 Fiscal Year End ⁽¹⁾

	Option Awards					Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable⁽²⁾	Number of Securities Underlying Unexercised Options (#) Unexercisable⁽²⁾	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options	Option Exercise Price ($)⁽²⁾	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)⁽²⁾	Market Value of Shares or Units of Stock That Have Not Vested ($)⁽³⁾	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
Larry J. Miller	-	-	-	-	-	2,631⁽⁴⁾	44,622	-	-
Larry J. Miller	-	-	-	-	-	2,631⁽⁴⁾	44,622	-	-
Larry D. Pickett	-	-	-	-	-	649⁽⁵⁾	11,007	-	-
Larry D. Pickett	-	-	-	-	-	649⁽⁵⁾	11,007	-	-
Craig L. Kauffman	-	-	-	-	-	2,503⁽⁶⁾	42,451
Craig L. Kauffman	-	-	-	-	-	2,503⁽⁶⁾	42,451
Diane E. Baker	987	-	-	10.4826	11/13/2022			-	-
	805	-		14.3647	11/19/2023
	2,150	-		15.4354	12/16/2024
	4,566	-		17.1862	11/17/2025
	3,582	-		18.5725	11/15/2026
	2,054	-		26.1769	12/12/2027
	2,058	1,029⁽⁷⁾		22.7429	12/11/2028
						1,360⁽⁸⁾	23,066
Amy L. Doll	1,341	-	-	15.3945	8/12/2024			-	-
	920	-		15.4354	12/16/2024
	6,395	-		17.1862	11/17/2025
	3,582	-		18.5725	11/15/2026
	2,283	-		26.1769	12/12/2027
	1,759	880⁽⁹⁾		22.7429	12/11/2028
						1,261⁽¹⁰⁾	21,387

⁽¹⁾

Includes shares issued under the Corporation’s 2007 Long-Term Incentive Plan and 2017 Long-Term Incentive Plan..

⁽²⁾

As adjusted for stock dividends distributed through December 31, 2019.

⁽³⁾

Based on the closing price of the Corporation’s common stock of $16.96 on December 31, 2020.

⁽⁴⁾

576 shares vest on December 10, 2021. 1,480 shares vest on December 11, 2021. 575 shares vest on December 10, 2022.

⁽⁵⁾

325 shares vest on December 10, 2021. 324 shares vest on December 10, 2022.

⁽⁶⁾

590 shares vest on August 16, 2021. 635 shares vest on December 10, 2021. 644 shares vest on December 11, 2021. 634 share vest on December 10, 2022.

⁽⁷⁾

Options for 1,029 shares vest on December 11, 2021.

⁽⁸⁾

340 shares vest on December 10, 2021. 681 shares vest on December 11, 2021. 339 shares vest on December 10, 2022.

⁽⁹⁾

Options for 880 shares vest on December 11, 2021.

⁽¹⁰⁾

340 shares vest on December 10, 2021. 582 shares vest on December 11, 2021. 339 shares vest on December 10, 2022.

Option Exercises and Stock Vested

The following table presents a summary of options exercised and stock vested during the year ended December 31, 2020.

Name	Number of Shares Acquired on Exercise (#)	Value Realized on Exercise ($)	Number of Shares Acquired on Vesting (#)⁽¹⁾	Total Value Realized on Vesting ($)⁽²⁾
Larry J. Miller	-	n/a	3,003	50,950
Larry D. Pickett	-	n/a	335	5,675
Craig L. Kauffman	-	n/a	1,972	31,002
Diane E. Baker	-	n/a	1,543	26,180
Amy L. Doll	-	n/a	1,491	25,294

⁽¹⁾

Includes shares from reinvested cash dividends received during the vesting period that were subject to the same restrictions as the stock awards.

⁽²⁾

Vested shares are valued at the closing price of the Corporation’s common stock on the vesting date.

Nonqualified Deferred Compensation Table

The Corporation maintains non-qualified deferred compensation plans for the benefit of the Executive Leadership Team, including salary continuation plans (“SERPs”) between the Bank and Mr. Miller and Ms. Baker, an Elective Deferred Compensation Plan available to members of the Executive Leadership Team and select other members of the Senior Leadership Team, and a Bank Contribution Deferred Compensation Agreement for Mr. Kauffman. Information regarding these arrangements is summarized in the following narrative and table.

Mr. Miller’s SERP was originally executed on October 1, 1998, and provides for certain payments to Mr. Miller following his normal retirement date and continuing for 240 months. The SERP provided for an annual benefit at normal retirement age (age 60) of $130,433. On December 23, 2008, the SERP was amended to increase the amount of normal retirement benefit at an annual rate of 4% for each month the executive remains employed beyond his normal retirement age, up to a maximum of five (5) years. On May 10, 2016, the SERP was further amended to extend the post-normal retirement age employment period during which the normal retirement benefit would increase at an annual rate of 4% from five (5) years to one hundred two (102) months. Following the impact of these amendments, the annual benefit under the Plan is $182,060. The agreement contains provisions for early retirement, disability benefits, death benefits and payments on specified changes of control. The agreement also contains non-competition provisions that prohibit him from competing with the Corporation or the Bank within fifty (50) miles of the Bank’s registered office for a period of three (3) years following a termination of employment for any reason other than a change of control.

Ms. Baker’s SERP was executed on January 29, 2019 and provides for certain payments to Ms. Baker following her normal retirement age and continuing for 180 months. The SERP provides an annual benefit at normal retirement age (age 63) of $75,000. The agreement contains provisions for early termination, disability benefits, death benefits and payments on specified changes in control. The agreement also contains non-competition provisions that prohibit Ms. Baker from competing with the Corporation or the Bank within fifty (50) miles of the Bank’s registered office for a period of three (3) year following a termination of employment for any reason other than a change of control.

Because payments due under the SERPs vest gradually over a period of time, the SERP serves to encourage longevity with the Corporation and Bank. The Committee believes that it is appropriate to reward long-term executives with benefits that provide for a retirement lifestyle commensurate with that they experienced during their professional careers.

The Elective Deferred Compensation Plan was adopted on February 20, 2019 to provide supplemental retirement benefits to a select group of management or highly compensated associates (“participants”). Participants may elect annually to defer a portion of base salary and/or cash bonus to be held in a deferral account and credited with interest at a rate of 50% of the Bank’s ROE from the immediately preceding calendar year. The plan is unfunded, and provides for distribution of benefits at normal retirement, as well as provisions for early termination, disability, death or specified change in control. Participant accounts are vested immediately, however, the Plan contains provisions related to termination for cause and non-competition. During 2020, Mr. Kauffman, Mr. Pickett, and Ms. Baker were the only NEO’s who participated in the Elective Deferred Compensation plan.

A Bank Contribution Deferred Compensation Agreement was executed on February 21, 2019 between the Bank and Mr. Kauffman. Under the terms of this agreement, the Bank provided an initial contribution to Mr. Kauffman’s deferral account in the amount of $5,034, with additional monthly contributions totaling 15% of total annual base salary, plus interest credited at a rate of 75% of the Bank’s ROE from the immediately preceding calendar year. Mr. Kauffman’s agreement provides for distribution provisions as a result of normal retirement, early termination, disability, death, and specified change in control. The agreement further provides for forfeiture of non-distributed benefit, in the event that Mr. Kauffman would violate the non-competition provisions of his Employment Agreement or of the Bank Contribution Deferred Compensation Agreement.

These deferred compensation arrangements, collectively, are intended to recognize the value of the services provided, as well as encourage continued employment and achievement of corporate objectives.

Nonqualified Deferred Compensation Table

Name	Executive Contributions in Last FY ($)⁽¹⁾	Registrant Contributions in last FY ($)⁽²⁾	Aggregate Earnings in Last FY ($)⁽⁵⁾	Aggregate Withdrawals / Distributions ($)	Aggregate Balance at Last FYE ($)
Larry J. Miller	-	-	-	-	3,641,200
Larry D. Pickett	19,283	-	1,099	-	28,860
Craig L. Kauffman	68,446	61,500⁽⁴⁾	11,607	-	251,345⁽⁶⁾
Diane E. Baker	51,206	43,824⁽³⁾	4,019	-	187,191⁽⁶⁾
Amy L. Doll	-	-	-	-	-

⁽¹⁾

Reflects the NEO’s contributions made to the Elective Deferred Compensation Plan. In 2020, Messrs. Miller and Doll did not particpate in the Elective Deferred Compensation Plan.

⁽²⁾

The Corporation’s contributions toward nonqualified deferred compensation for each of the NEO’s are listed in this column.

⁽³⁾

Reflects contributions to the Supplemental Executive Retirement Plans for Ms. Baker. This amount is also reflected on the Summary Compensation Table under the column “Non Qualified Deferred Compensation Earnings.

⁽⁴⁾

Reflects the amount credited via the Bank Contribution Deferred Compensation Agreement for Mr. Kauffman. This amount is also reflected on the Summary Compensation Table under “Other Compensation” as noted.

⁽⁵⁾

Reflects interest credited during 2020 to the Elective Deferred Compensation Plan available to all NEO’s, as well as the Bank Contribution Deferred Compensation Agreement established for Mr. Kauffman.

⁽⁶⁾

Reflects the total balance including the NEO’s elective deferrals, the Corporation’s contributions, and Aggregate Earnings for plans as outlined above.

Employment Agreements

The Corporation and the Bank have entered into employment agreements with Mr. Miller and Mr. Kauffman, the material terms of which are described below.

Larry J. Miller, Chair, President & Chief Executive Officer of the Corporation and Executive Chair of the Bank. On December 27, 2005, the Corporation, the Bank and Mr. Miller entered into an employment agreement for an initial term of three years. The term of the agreement renews automatically for an additional twelve (12) months at the end of each calendar year, unless the Corporation and the Bank provide written notice to Mr. Miller of non-renewal.

Under the terms of the agreement, as amended effective March 8, 2016, Mr. Miller serves as the Chair, President and Chief Executive Officer of the Corporation and Executive Chair of the Bank. The agreement contains a confidentiality provision and a non-competition provision that prohibits Mr. Miller from competing with the Corporation or the Bank within fifty (50) miles of the Bank’s registered office for a period of one (1) year following his termination of employment for any reason other than a change of control.

Pursuant to his agreement, the Board of Directors has discretion to pay a periodic bonus to Mr. Miller. At the present time, Mr. Miller is not entitled to receive director’s fees or other compensation for serving on the Corporation’s or the Bank’s Board of Directors or any committee thereof. Mr. Miller is also entitled to receive the employee benefits made available to Bank associates, generally; to the use of a vehicle provided by the Bank; and for reimbursement of country club dues.

The agreement with Mr. Miller provides that if his employment is terminated by the Corporation or the Bank due to death, disability or “for cause,” then he is entitled to the full annual salary and any accrued benefits through the date of termination. “For cause” termination includes termination for willful failure to perform his duties; engaging in misconduct injurious to the Corporation or to the Bank; violation of certain terms of the agreement; dishonesty or gross negligence in the performance of his duties; violation of banking laws and regulations; failure to win election or to serve on the Board of Directors of the Corporation; or moral turpitude which brings public discredit to the Corporation or to the Bank.

If Mr. Miller’s employment is terminated by the Corporation or the Bank other than as a result of death, disability or “for cause,” then he is entitled to a lump sum payment equal to his full annual salary from the date of termination through the last day of the term of the agreement or to an amount equal to his current annual salary, whichever is greater, and to a continuation of employee benefits for one (1) year.

If Mr. Miller terminates his employment for “good reason,” then he is entitled to an amount equal to his direct annual salary and to a continuation of employee benefits for one (1) year. “Good reason” includes reduction in title or responsibilities; geographic reassignment; removal from office; reduction in salary or benefits; failure to extend the term of the agreement; or any other material breach of the agreement by the Corporation or the Bank.

If Mr. Miller’s employment is terminated by the Corporation or the Bank other than “for cause” or if Mr. Miller terminates his employment for good reason within two (2) years following a change in control of the Corporation or the Bank, he is entitled to receive a lump sum payment equal to three (3) times the sum of his then current direct annual salary and the highest bonus paid to him with respect to one of the last three years of employment, and he will continue to receive all benefits to which he was previously entitled for a period of three (3) years. Change of control is defined to include a more than fifty percent (50%) change in ownership of the Corporation or the Bank, a change in effective control of the Corporation or the Bank or a change in ownership of a substantial portion of the Corporation’s or the Bank’s assets. Change of control is determined consistently under all of the Corporation’s and the Bank’s compensation plans and employment agreements.

In the event the amounts and benefits payable under the agreement resulting from a change of control, when added to all other benefits and amounts which may become payable to Mr. Miller by the Corporation and/or the Bank in such a circumstance, are such that they become subject to Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and, therefore, to the excise tax provisions of Section 4999 of the Code, then Mr. Miller is to be paid the additional amount necessary to reimburse him for the economic detriment of the excise tax. Amounts and benefits paid under the agreement that are subject to Section 280G are not deductible by the Corporation.

Craig L. Kauffman, Executive Vice President and Chief Operating Officer of the Corporation and President and Chief Executive Officer of the Bank. On August 6, 2018, the Corporation, the Bank and Mr. Kauffman entered into an employment agreement to be effective as of August 16, 2018. The agreement provides for an initial two (2) year term and will be automatically renewed on August 16 of each year for successive two (2) year terms, unless either the Corporation or Mr. Kauffman gives written notice of non-renewal to the other party at least ninety (90) days prior to August 16 of any year, in which case the agreement will continue in effect for a term ending one (1) year from the annual renewal date immediately following such notice.

Mr. Kauffman may terminate his employment for “good reason” (as defined in the agreement) after notice to the Corporation or the Bank within ninety (90) days after the initial existence of the condition giving rise to the right to terminate and the failure of the Corporation or Bank to cure the situation within thirty (30) days after receipt of such notice.

The agreement provides for a lump sum payment to Mr. Kauffman and certain benefit continuation if his employment is involuntarily terminated without “cause,” as defined in the Agreement, or if Mr. Kauffman terminates his employment for “good reason.” The amount of the payment and duration of the benefit continuation varies depending upon whether the termination follows a “change of control,” as defined in the agreement.

Specifically, if Mr. Kauffman’s employment is terminated within two (2) years following a change of control, he will be paid an amount equal to two (2) times the sum of: (A) his then current base salary and (B) the highest cash bonus paid to him with respect to one of the three (3) calendar years preceding the year of termination and his benefits will be continued for two (2) years from the date of termination.

Absent a change in control, if Mr. Kauffman’s employment is terminated more than two (2) years after the date of the agreement, he will be paid an amount equal to one (1) times his current annual base salary and his benefits will be continued for one (1) year from the date of termination.

The agreement provides that the total payments due Mr. Kauffman in connection with a termination of employment following a change of control shall be reduced to avoid the imposition of an excise tax and loss of deductibility under Section 280G and Section 4999 of the Code. The agreement also contains provisions intending that any payments to Mr. Kauffman comply with Section 409A of the Code.

Under the agreement, Mr. Kauffman also is subject to confidentiality obligations both during the period of his employment and following any termination of his employment. During the course of his employment with the Corporation and the Bank, and for a period of 12 months following the termination of employment for any reason (whether such termination is voluntary or involuntary), Mr. Kauffman is prohibited from contacting or soliciting or engaging in business with or otherwise providing services to (either directly or indirectly) any of the Bank’s customers, vendors, suppliers and referral sources, nor will he recruit or encourage any associates of the Corporation or the Bank to terminate their relationship with the Corporation or the Bank or to seek employment with another entity. Mr. Kauffman also agreed that, during his employment and for a period of 12 months after his employment terminates for any reason, he will not compete with the Corporation or the Bank, or provide assistance to any person engaged in either banking or lending or financial services or insurance business within a fifty (50) mile radius of any branch banking office of the Bank.

Change of Control Agreements

The named executive officers and other associates of the Bank have built the Corporation into the successful enterprise that it is today, and the Compensation Committee believes that it is important to protect them in the event of a change of control. Further, it is the Committee’s belief that the shareholders will be best served if the interests of management are aligned with the interests of the shareholders. Providing change of control benefits should eliminate, or at least reduce, the reluctance of management to pursue potential change of control transactions that may be in the best interests of the Corporation. Relative to the overall value of the Corporation, these potential change of control benefits are relatively minor. The level of change of control benefits are based on industry practices and negotiations with the affected named executive officers and other executive officers.

Change of control benefits for Mr. Miller and Mr. Kauffman are described above in the section describing their employment agreements. The other named executive officers with an agreement providing for change in control benefits are Ms. Baker, Ms. Doll and Mr. Pickett, which are described below.

Diane E. Baker, Executive Vice President, Chief Operations and Chief Risk Officer; Amy Doll, Senior Vice President, Chief Revenue and Chief Lending Officer and Larry Pickett, Executive Vice President and Chief Financial Officer. On June 23, 2016, the Corporation and the Bank entered into a Change of Control Agreement with each of Ms. Baker and Ms. Doll. On August 9, 2018, the Corporation and the Bank entered into a Change of Control Agreement with Mr. Pickett. Each Agreement contains substantially similar terms to those contained in the other Agreements.

The terms and condition of the Agreements provide that Ms. Baker, Ms. Doll and Mr. Pickett are entitled to receive certain cash compensation and employee benefits in the event that their respective employment is terminated by the Corporation or Bank (or an acquirer or successor thereof) without “good cause,” or, in certain specified circumstances, by Ms. Baker, Ms. Doll or Mr. Pickett, in each case within two (2) years after the occurrence of a “change of control.”

More specifically, the agreements provide that upon a termination pursuant to a “change of control,” Ms. Baker, Ms. Doll, and Mr. Pickett are entitled to be paid cash compensation in an amount equal to one (1) times the sum of his or her highest annual base salary during one of the three immediately preceding calendar years, plus his or her highest cash bonus earned during the same time period. Payment of this cash compensation is to be made in a single lump sum within ten (10) days after the termination of employment. In addition, each would be entitled to continue participation in the Bank’s employee benefit plans for a period of one (1) year; provided that if participation in any health, medical, life insurance or disability plan is barred, the Bank will be required to pay for an individual plan with substantially equivalent coverage.

As used in the agreement, a “change of control” means:

●

A change in ownership of the Corporation or the Bank such that any person or group of persons acquires stock that causes such person or group to own more than 50 percent of the total fair market value or total voting power of the stock of the Corporation or the Bank;

●

A change in the effective control of the Corporation or the Bank such that any person or group of persons acquires, during any 12-month period, the ownership of stock of the Corporation or Bank possessing 35 percent or more of the total voting power of the stock of the Corporation or the Bank, or a majority of the Corporation’s Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Corporation’s board of directors prior to the date of the appointment or election; or

●

A change in the ownership of a substantial portion of the assets of the Corporation or the Bank during any 12-month period such that any person or group of persons acquires assets from the Corporation or the bank that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Corporation or the Bank immediately prior to such acquisitions.

“Good cause” is defined in the Agreements to mean: the willful failure to substantially perform his or her duties as an officer of the Corporation or Bank following receipt of written notice of such failure; the willful engaging in misconduct injurious to the Corporation or Bank; dishonesty or gross negligence in the performance of his or her duties; breach of a fiduciary duty involving personal profit; the violation of any law, rule or regulation governing banks or bank officers or any final cease and desist order issued by a bank regulatory authority, any of which materially jeopardizes the business of the Corporation or Bank; or moral turpitude or other conduct which brings public discredit to the Corporation or Bank.

Should Ms. Baker, Ms. Doll or Mr. Pickett terminate his or her employment for any of the following reasons following a change of control of the Corporation or the Bank, he or she will be entitled to receive the benefits payable under their respective Agreement: reduction in title or responsibilities or authority which are inconsistent with, or assignment of duties inconsistent with, his or her position; removal from office other than for “good cause”; reassignment to a principal place of employment which is more than twenty-five (25) miles from his or her respective principal place of employment immediately preceding the termination of employment; reduction in annual base salary; failure to provide Ms. Baker, Ms. Doll or Mr. Pickett with benefits as favorable as those enjoyed by he or she prior to the termination of employment; requirement that he or she travel in the performance of his or her duties for a significantly greater period of time than was required of he or she during the year preceding the change in control; or any material breach of the agreement by the Corporation or Bank.

The Agreements provide that in the event the amounts and benefits payable to Ms. Baker, Ms. Doll and Mr. Pickett under the Agreements resulting from a change in control, when added to all other benefits and amounts which may become payable to them in such a circumstance, are such that they become subject to Section 280G of the Code and, therefore, to the excise tax provisions of Section 4999 of the Code, then the Bank shall reduce the amounts payable to Ms. Baker, Ms. Doll and Mr. Pickett under the Agreements so that the amounts payable to each of them under the Agreements and any other agreements, plans or programs of the Bank shall be $1.00 less than the amount which would trigger the excise tax under Section 4999 of the Code and corresponding lack of deduction to the Corporation.

Potential Payments upon Termination or Change in Control

The tables below show the value of estimated payments pursuant to the employment and change in control agreements, stock incentive plans and other non-qualified plans described above upon a termination of employment, including gross-up payments for any excise tax on the parachute payments upon a change of control for Mr. Miller (our only named executive officer with an agreement providing for such payments). The payments represent the maximum possible payments under interpretations and assumptions most favorable to the executive officer. All termination events are assumed to occur on December 31, 2020, and termination upon a change of control is assumed to be involuntary. Corporation payments to a terminated executive may be more or less than the amounts contained in the various agreements and plans. In addition, certain amounts currently are vested and, thus, do not represent an increased amount of benefits.

Larry J. Miller

Assuming one of the following events had occurred on December 31, 2020, Mr. Miller’s payments and benefits had an estimated value as follows:

Termination Reason	Change in Control Payment ($)⁽¹⁾	Severance Payment ($)		Accelerated Vesting of Stock Awards ($)		Stock Options ($) ⁽⁶⁾	Accelerated Vesting of Deferred Compensation Benefit ⁽⁷⁾	Value of Employee Benefit Plans and Programs ($)		Life Insurance Benefit Paid ($)⁽¹¹⁾	Disability Payments ($)⁽¹²⁾	Excise Tax Gross-Up Payment ($)⁽¹³⁾	Total ($)
Voluntary	-	-		-			-	-		-	-	-	-
Voluntary for ‘Good Reason’	-	375,000	⁽²⁾	-			-	20,818	⁽⁸⁾	-	-	-	395,818
Involuntary without ‘Cause’	-	1,125,000	⁽³⁾	-			-	20,818	⁽⁸⁾	-	-	-	1,145,818
Involuntary for ‘Cause’	-	-		-			-			-	-	-	-
Permanent Disability	-	-		26,260	⁽⁴⁾		-	10,409	⁽⁹⁾	-	185,006	-	221,675
Death	-	-		26,260	⁽⁴⁾		-	-		1,000,000	-	-	1,026,260
Change in Control (with Double Trigger Adverse Employment Action)	1,557,843	-		46,934	⁽⁵⁾		-	62,454	⁽¹⁰⁾	-	-	393,022	2,060,253

⁽¹⁾

If Mr. Miller’s employment is terminated during the period commencing with the date of any Change in Control and ending on the second anniversary of the date of the Change in Control, then Mr. Miller shall be paid an amount equal to three (3) times the sum of (a) his then current annual direct salary, and (b) the highest bonus paid to him with respect to one of the three calendar years immediately preceding the year of termination. Such amount will be paid in a lump sum within ten (10) days following the date of termination of employment.

⁽²⁾

In the event of Mr. Miller’s termination for ‘Good Reason’, the Bank shall pay Mr. Miller an amount equal to his annual direct salary. Such amount shall be paid in a lump sum within ten (10) days following the date of termination of employment.

⁽³⁾

In the event of employment termination by the Bank without ‘Cause’ and no Change in Control, the Bank shall pay Mr. Miller his full annual direct salary from the date of termination through the last day of the term of the employment agreement or an amount equal to his current annual direct salary, whichever is greater. Such amount shall be paid in a lump sum within ten (10) days following the date of termination of employment.

⁽⁴⁾

In the event an Executive terminates employment during the restricted period by reason of death, disability, or retirement, and the Executive had completed a minimum of one year of employment during the restricted period, restrictions shall lapse on the number of shares (if any) determined by multiplying the full number of shares subject to restriction by a fraction, the numerator of which is the number of full months of employment the Executive had completed in such restriction period, and the denominator of which is the total number of full months in such restriction period. The value of the accelerated vesting was calculated using the closing price of $16.96 as of December 31, 2020.

⁽⁵⁾

In the event of any Change in Control, all restrictions applicable to any outstanding Restricted Stock Award shall lapse as of the date of such Change in Control. The value of the accelerated vesting was calculated using the closing price of $16.96 as of December 31, 2020.

⁽⁶⁾

Mr. Miller had no outstanding stock options as of December 31, 2020.

⁽⁷⁾

Mr. Miller is fully vested in his salary continuation plan. Please see page 37 under the heading labeled “Non Qualified Deferred Compensation Table” for additional information.

⁽⁸⁾

Reflects the value of twelve (12) months of employee benefit plans and programs to which Mr. Miller was entitled prior to the date of termination, to be provided pursuant to Mr. Miller’s employment agreement.

⁽⁹⁾

Reflects the value of six (6) months of employee benefit plans and programs to which Mr. Miller was entitled prior to the date of termination, to be provided pursuant to Mr. Miller’s employment agreement.

⁽¹⁰⁾

Reflects the value of thirty-six (36) months of employee benefit plans and programs to which Mr. Miller was entitled prior to the date of termination, to be provided pursuant to Mr. Miller’s employment agreement.

⁽¹¹⁾

The life insurance payment reflects three (3) times the highest annual base salary of the executive with maximum benefit of $1,000,000.

⁽¹²⁾

In the event that Mr. Miller becomes disabled, he is eligible for up to six (6) months of Short Term and twelve (12) months of Long Term disability in accordance with the Bank’s employee benefit program, assuming permanent disability on December 31, 2020.

⁽¹³⁾

Calculation in accordance with Section 280G of the Internal Revenue Code. This calculation does not include executive deferred compensation payments as they were vested immediately upon grant.

Craig L. Kauffman

Assuming one of the following events had occurred on December 31, 2020, Mr. Kauffman’s payments and benefits had an estimated value as follows:

Termination Reason	Change in Control Payment ($)⁽¹⁾	Severance Payment ($)⁽²⁾	Accelerated Vesting of Stock Awards ($)		Stock Options ($) ⁽⁵⁾	Accelerated Deferred Compensation Payments ($)	Value of Employee Benefit Plans and Programs ($)		Life Insurance Benefit Paid ($)⁽⁹⁾	Disability Payments ($)⁽¹⁰⁾	Excise Tax Gross-Up Payment ($)	Total ($)
Voluntary	-	-	-		-	-	-		-	-	-	-
Voluntary for ‘Good Reason’	-	410,000	-		-	-	23,844	⁽⁶⁾	-	-	-	433,844
Involuntary without ‘Cause’	-	410,000	-		-	-	23,844	⁽⁶⁾	-	-	-	433,844
Involuntary for ‘Cause’	-	-	-		-	-			-	-	-	-
Permanent Disability	-	-	25,410	⁽³⁾	-	-	11,922	⁽⁷⁾	-	666,674	-	704,006
Death	-	-	25,410	⁽³⁾	-	-			1,000,000	-	-	1,025,410
Change in Control (with Double Trigger Adverse Employment Action)	976,088	-	44,659	⁽⁴⁾	-	-	47,688	⁽⁸⁾	-	-	-	1,068,435

⁽¹⁾ Under Mr. Kauffman’s employment agreement, payment is calculated as two (2) times the sum of (a) his then current annual base salary, and (b) the highest bonus paid to him with respect to one of the three calendar years immediately preceding the year of termination, to be paid in a lump sum within ten (10) days following the date of termination. Based upon the terms of Mr. Kauffman’s employment agreement, and in compliance with Section 4999 of the Code, should this payment exceed the applicable Safe Harbor limit, the total payments shall be reduced to the extent necessary to assure that their aggregate present value does not exceed the greater of (i) the Safe Harbor Amount, or (ii) the greatest after-tax amount payable to the Executive after taking into account any excise tax imposed under section 4999 of the Code on Total Payments. Should a Change of Control occur, the final amount would be calculated and confirmed in accordance with the regulations and the employment agreement.

⁽²⁾In the event of termination by the Bank without “Cause” or voluntary for “Good Reason” after the first two years of the agreement and absent Change in Control, the Bank shall pay Mr. Kauffman an amount equal to one (1) times his annual base salary as defined in his employment agreement.

⁽³⁾In the event an Executive terminates employment during the restricted period by reason of death, disability, or retirement, and the Executive had completed a minimum of one year of employment during the restricted period, restrictions shall lapse on the number of shares (if any) determined by multiplying the full number of shares subject to restriction by a fraction, the numerator of which is the number of full months of employment the Executive had completed in such restriction period, and the denominator of which is the total number of full months in such restriction period. The value of the accelerated vesting was calculated using the closing price of $16.96 as of December 31, 2020.

⁽⁴⁾In the event of any Change in Control, all restrictions applicable to any outstanding Restricted Stock Award shall lapse as of the date of such Change in Control. The value of the accelerated vesting was calculated using the closing price of $16.96 as of December 31, 2020.

⁽⁵⁾Mr. Kauffman had no outstanding stock options as of December 31, 2020.

⁽⁶⁾Reflects the value of twelve (12) months of employee benefit plans and programs to which Mr. Kauffman was entitled prior to the date of termination, to be provided pursuant to Mr. Kauffman’s employment agreement.

⁽⁷⁾Reflects the value of six (6) months of employee benefit plans and programs to which Mr. Kauffman was entitled prior to the date of termination, to be provided pursuant to Mr. Kauffman’s employment agreement.

⁽⁸⁾Reflects the value of twenty-four (24) months of employee benefit plans and programs to which Mr. Kauffman was entitled prior to the date of termination, to be provided pursuant to Mr. Kauffman’s employment agreement.

⁽⁹⁾The life insurance payment reflects three (3) times the annual base salary of the executive with maximum benefit of $1,000,000.

⁽¹⁰⁾In the event that Mr. Kauffman becomes disabled, he is eligible for up to six (6) months of Short Term and Long Term disability payments until the age of 67, in accordance with the Bank’s employee benefit program, assuming permanent disability on December 31, 2020.

Diane E. Baker

Assuming one of the following events had occurred on December 31, 2020, Ms. Baker’s payments and benefits had an estimated value as follows:

Termination Reason	Change in Control Payment ($)⁽¹⁾	Severance Payment ($)	Accelerated Vesting of Stock Awards ($)		Stock Options ($)		Accelerated Vesting of Deferred Compensation Benefit		Value of Employee Benefit Plans and Programs ($)		Life Insurance Benefit Paid ($)⁽⁹⁾	Disability Payments ($)⁽¹⁰⁾	Excise Tax Gross-Up Payment ($)	Total ($)
Voluntary	-	-	-		11,760	⁽⁴⁾	-		-		-	-	-	11,760
Voluntary for ‘Good Reason’	-	-	-		11,760	⁽⁴⁾	-		-		-	-	-	11,760
Involuntary without ‘Cause’	-	-	-		11,760	⁽⁴⁾	-		-		-	-	-	11,760
Involuntary for ‘Cause’	-	-	-		11,760	⁽⁴⁾	-		-		-	-	-	11,760
Permanent Disability	-	-	13,212	⁽²⁾	11,760	⁽⁵⁾	-		-		-	1,044,671	-	1,069,643
Death	-	-	13,212	⁽²⁾	11,760	⁽⁵⁾	-		-		807,000	-	-	831,972
Change in Control (with Double Trigger Adverse Employment Action)	343,100	-	24,236	⁽³⁾	11,760	⁽⁶⁾	1,010,970	⁽⁷⁾	20,940	⁽⁸⁾	-	-	-	1,411,006

⁽¹⁾ Under Ms. Baker’s Change in Control agreement, payment is calculated as one (1) times the sum of (a) the highest annualized base salary at the time of or during one of the three calendar years immediately preceding the termination pursuant to a Change in Control, and (b) the highest cash bonus earned with respect to one of the three calendar years immediately preceding the date of the termination pursuant to a Change in Control. Such amount will be paid in a lump sum within ten (10) days after termination of employment. Should the total payments as a result of a Change of Control constitute “excess parachute payments,” the Corporation shall reduce the amounts otherwise payable to the Executive per the terms of the agreement. Should a Change of Control occur, the final amount would be calculated and confirmed in accordance with the regulations and the Change in Control agreement.

⁽²⁾In the event an Executive terminates employment during the restricted period by reason of death, disability, or retirement, and the Executive had completed a minimum of one year of employment during the restricted period, restrictions shall lapse on the number of shares (if any) determined by multiplying the full number of shares subject to restriction by a fraction, the numerator of which is the number of full months of employment the Executive had completed in such restriction period, and the denominator of which is the total number of full months in such restriction period. The value of the accelerated vesting was calculated using the closing price of $16.96 as of December 31, 2020.

⁽³⁾ In the event of any Change in Control, all restrictions applicable to any outstanding Restricted Stock Award shall lapse as of the date of such Change in Control. The value of the accelerated vesting was calculated using the closing price of $16.96 as of December 31, 2020.

⁽⁴⁾ In the event that the Executive would terminate employment for any reason other than death, disability, retirement, or Change of Control, vested options must be exercised within three months following the Executive’s termination date and prior to its expiration. All options which are not exercisable on the date of termination shall be cancelled. The value of the vested and “in the money” stock options was calculated using the closing price of $16.96 on December 31, 2020.

⁽⁵⁾ In the event that the Executive would terminate employment due to death, disability, or retirement, vesting is accelerated on all unvested options. All vested options must be exercised within one year following the Executive’s termination of employment and prior to the expiration of the options. The value of all “in the money” stock options was calculated using the closing price of $16.96 on December 31, 2020.

⁽⁶⁾ In the event of any Change in Control, all Stock Options shall immediately become exercisable without regard to the exercise period. The value of all “in the money” stock options was calculated using the closing price of $16.96 on December 31, 2020.

⁽⁷⁾ Reflects the value of accelerated vesting pursuant to Ms. Baker’s Supplemental Executive Retirement Plan as a result of a Change of Control. The full value of the benefit would be paid in accordance with the plan, over a fifteen (15) year period, beginning at the Normal Retirement Age as defined.

⁽⁸⁾ Reflects the value of twelve (12) months of employee benefit plans and programs to which Ms. Baker was entitled prior to the date of termination, to be provided pursuant to Ms. Baker’s Change of Control agreement.

⁽⁹⁾The life insurance payment reflects three (3) times the annual base salary of the executive with maximum benefit of $1,000,000.

⁽¹⁰⁾In the event that Ms. Baker becomes disabled, she is eligible for up to six (6) months of Short Term and Long Term disability payments until the age of 67, in accordance with the Bank’s employee benefit program, assuming permanent disability on December 31, 2020.

Amy L. Doll

Assuming one of the following events had occurred on December 31, 2020, Ms. Doll’s payments and benefits had an estimated value as follows:

Termination Reason	Change in Control Payment ($)⁽¹⁾	Severance Payment ($)	Accelerated Vesting of Stock Awards ($)		Stock Options ($)		Accelerated Deferred Compensation Payments ($)	Value of Employee Benefit Plans and Programs ($)		Life Insurance Benefit Paid ($)⁽⁸⁾	Disability Payments ($)⁽⁹⁾	Excise Tax Gross-Up Payment ($)	Total ($)
Voluntary	-	-	-		3,502	⁽⁴⁾	-	-		-	-	-	3,502
Voluntary for ‘Good Reason’	-	-	-		3,502	⁽⁴⁾	-	-		-	-	-	3,502
Involuntary without ‘Cause’	-	-	-		3,502	⁽⁴⁾	-	-		-	-	-	3,502
Involuntary for ‘Cause’	-	-	-		3,502	⁽⁴⁾	-	-		-	-	-	3,502
Permanent Disability	-	-	12,017	⁽²⁾	3,502	⁽⁵⁾	-	-		-	1,587,004	-	1,602,523
Death	-	-	12,017	⁽²⁾	3,502	⁽⁵⁾	-	-		805,500	-	-	821,019
Change in Control (with Double Trigger Adverse Employment Action)	343,170	-	22,448	⁽³⁾	3,502	⁽⁶⁾	-	26,749	⁽⁷⁾	-	-	-	395,869

⁽¹⁾ Under Ms. Doll’s Change in Control agreement, payment is calculated as one (1) times the sum of (a) the highest annualized base salary at the time of or during one of the three calendar years immediately preceding the termination pursuant to a Change in Control, and (b) the highest cash bonus earned with respect to one of the three calendar years immediately preceding the date of the termination pursuant to a Change in Control. Such amount will be paid in a lump sum within ten (10) days after termination of employment.

⁽³⁾In the event of any Change in Control, all restrictions applicable to any outstanding Restricted Stock Award shall lapse as of the date of such Change in Control. The value of the accelerated vesting was calculated using the closing price of $16.96 as of December 31, 2020.

⁽⁴⁾In the event that the Executive would terminate employment for any reason other than death, disability, retirement, or Change of Control, vested options must be exercised within three months following the Executive’s termination date and prior to its expiration. All options which are not exercisable on the date of termination shall be cancelled. The value of the vested and “in the money” stock options was calculated using the closing price of $16.96 as of December 31, 2020.

⁽⁵⁾In the event that the Executive would terminate employment due to death, disability, or retirement, vesting is accelerated on all unvested options. All vested options must be exercised within one year following the Executive’s termination of employment and prior to the expiration of the options. The value of all “in the money” stock options was calculated using the closing price of $16.96 as of December 31, 2020.

⁽⁶⁾In the event of any Change in Control, all Stock Options shall immediately become exercisable without regard to the exercise period. The value of all “in the money” stock options was calculated using the closing price of $16.96 as of December 31, 2020.

⁽⁷⁾Reflects the value of twelve (12) months of employee benefit plans and programs to which Ms. Doll was entitled prior to the date of termination, to be provided pursuant to Ms. Doll’s Change of Control agreement.

⁽⁸⁾The life insurance payment reflects three (3) times the annual base salary of the executive with maximum benefit of $1,000,000.

⁽⁹⁾In the event that Ms. Doll becomes disabled, she is eligible for up to six (6) months of Short Term and Long Term disability payments until the age of 67, in accordance with the Bank’s employee benefit program, assuming permanent disability on December 31, 2020.

Larry D. Pickett

Assuming one of the following events had occurred on December 31, 2020, Mr. Pickett’s payments and benefits had an estimated value as follows:

Termination Reason	Change in Control Payment ($)⁽¹⁾	Severance Payment ($)	Accelerated Vesting of Stock Awards ($)		Stock Options ($)		Accelerated Deferred Compensation Payments ($)	Value of Employee Benefit Plans and Programs ($)		Life Insurance Benefit Paid ($)⁽⁸⁾	Disability Payments ($)⁽⁹⁾	Excise Tax Gross-Up Payment ($)	Total ($)
Voluntary	-	-	-		-	⁽⁴⁾	-	-		-	-	-	-
Voluntary for ‘Good Reason’	-	-	-		-	⁽⁴⁾	-	-		-	-	-	-
Involuntary without ‘Cause’	-	-	-		-	⁽⁴⁾	-	-		-	-	-	-
Involuntary for ‘Cause’	-	-	-		-	⁽⁴⁾	-	-		-	-	-	-
Permanent Disability	-	-	4,762	⁽²⁾	-	⁽⁵⁾	-	-		-	493,004	-	497,766
Death	-	-	4,762	⁽²⁾	-	⁽⁵⁾	-	-		769,500	-	-	774,262
Change in Control (with Double Trigger Adverse Employment Action)	291,619	-	11,393	⁽³⁾	-	⁽⁶⁾	-	13,124	⁽⁷⁾	-	-	-	316,136

⁽¹⁾ Under Mr. Pickett’s Change in Control agreement, payment is calculated as one (1) times the sum of (a) the highest annualized base salary at the time of or during one of the three calendar years immediately preceding the termination pursuant to a Change in Control, and (b) the highest cash bonus earned with respect to one of the three calendar years immediately preceding the date of the termination pursuant to a Change in Control. Such amount will be paid in a lump sum within ten (10) days after termination of employment.

⁽³⁾In the event of any Change in Control, all restrictions applicable to any outstanding Restricted Stock Award shall lapse as of the date of such Change in Control. The value of the accelerated vesting was calculated using the closing price of $16.96 as of December 31, 2020.

⁽⁴⁾In the event that the Executive would terminate employment for any reason other than death, disability, retirement, or Change of Control, vested options must be exercised within three months following the Executive’s termination date and prior to its expiration. All options which are not exercisable on the date of termination shall be cancelled. Mr. Pickett had no outstanding exercisable stock option awards as of December 31, 2020.

⁽⁵⁾In the event that the Executive would terminate employment due to death, disability, or retirement, vesting is accelerated on all unvested options. All vested options must be exercised within one year following the Executive’s termination of employment and prior to the expiration of the options. Mr. Pickett had no outstanding stock option awards as of

December 31, 2020.

⁽⁶⁾In the event of any Change in Control, all Stock Options shall immediately become exercisable without regard to the exercise period. Mr. Pickett had no outstanding stock option awards as of December 31, 2020.

⁽⁷⁾Reflects the value of twelve (12) months of employee benefit plans and programs to which Mr. Pickett was entitled prior to the date of termination, to be provided pursuant to Mr. Pickett’s Change of Control agreement.

⁽⁸⁾The life insurance payment reflects three (3) times the annual base salary of the executive with maximum benefit of $1,000,000.

⁽⁹⁾In the event that Mr. Pickett becomes disabled, he is eligible for up to six (6) months of Short Term and Long Term disability payments until the age of 67, in accordance with the Bank’s employee benefit program, assuming permanent disability on December 31, 2020.

Compensation Committee Interlocks and Insider Participation

Starting in May 2020, the members of the Compensation Committee were John W. Giambalvo, Esq. (Chair) Jeffrey R. Hines, P.E. (Vice Chair), Brian D. Brunner, Cynthia A. Dotzel, and J. Rodney Messick. Harry R. Swift, Esq. was a member of the Compensation Committee prior to May 2020. Relationships that members of the Compensation Committee have had and/or maintain with the Corporation are described in the “Related Person Transactions and Policies” section of this Proxy Statement.

Additionally, Larry J. Miller, President and Chief Executive Officer of the Corporation, is also Chair of the Board of Directors and Executive Chair of the Bank. Mr. Miller, along with Mr. Kauffman, makes recommendations to the Compensation Committee regarding compensation for associates. Mr. Miller and Mr. Kauffman do not participate in conducting their respective reviews.

Director Compensation

The Corporation uses a combination of cash and stock-based compensation to attract and retain qualified candidates to serve on the Board. In setting director compensation, the Corporation considers the significant time commitment required of directors in fulfilling their duties to the Corporation.

Cash Compensation Paid to Board Members

In 2020, the Bank’s non-employee directors were compensated for their services rendered as follows:

●

a monthly retainer of $1,500;

●

directors’ fees of $850 for each regular or special meeting attended;

●

committee meeting fees paid at the flat rate of $500 per meeting; and

●

monthly retainer paid to committee chairs of $300 (Wealth Management Committee); $300 (Enterprise Risk Management Committee); $300 (Strategic Technology Committee) and $500 (Audit Committee).

The Corporation’s Lead Director and Bank’s Vice Chair received a monthly retainer of $2,000 in 2020. In addition, each non-employee director recognized imputed income for insurance premiums paid on behalf of the non-employee Bank directors, which totaled $7,406 in 2020. The Bank provides a directors’ life insurance program for non-employee directors. This program is designed to provide a death benefit to the director’s beneficiary in the amount of $200,000. Under this program, the Bank is the direct beneficiary of death benefits equal to the greater of: (1) the cash surrender value of the policy; (2) the aggregate premiums paid on the policy by the Bank less any outstanding indebtedness to the insurer; or (3) the amount in excess of $200,000. In the aggregate, the Bank paid $270,378 in cash compensation to the directors in 2020.

Independent Directors’ Deferred Compensation Plan

The Corporation maintains a deferred compensation plan for independent directors. Participants may elect to defer receipt of compensation in order to gain certain tax benefits under Section 451 of the Internal Revenue Code of 1986, as amended. This plan is not funded by the Corporation.

2017 Long-Term Incentive Plan

The Corporation maintains a 2017 Long-Term Incentive Plan (“2017 Plan”), which was approved by the Corporation’s shareholders. The purposes of the 2017 Plan are to advance the long-term success of the Corporation and to increase shareholder value by providing the incentive of long-term stock-based rewards to officers, directors and key Bank associates as determined by the Compensation Committee. The 2017 Plan provides for awards of incentive stock options, non-statutory stock options, restricted stock awards, stock appreciation rights, and stock awards. The Compensation Committee administers the 2017 Plan. Persons eligible to receive awards under the 2017 Plan are those officers, directors and key Bank associates as determined by the Compensation Committee.

Name ⁽¹⁾⁽²⁾	Fees Earned or Paid in Cash ($)⁽²⁾	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)⁽³⁾	Total ($)
Sarah M. Brown	35,750	-	-	-	-	214	35,964
Brian D. Brunner	9,213	-	-	-	29,713	692	39,618
Cynthia A. Dotzel, CPA	41,750	-	-	-	-	702	42,452
John W. Giambalvo, Esq.	37,150	-	-	-	-	214	37,364
Jeffrey R. Hines, P.E.	33,060	-	-	-	-	412	33,472
MacGregor S. Jones	32,900	-	-	-	-	1,434	34,334
J. Rodney Messick	33,950	-	-	-	-	140	34,090
Dallas L. Smith	12,705	-	-	-	3,200	2,308	18,213
Harry R. Swift, Esq.	43,300	-	-	-	1,095	1,308	45,703

⁽¹⁾Mr. Miller, Executive Chair, President and Chief Executive Officer of the Corporation and Mr. Kauffman, Chief Executive Officer and President of PeoplesBank, did not receive separate compensation as directors of the Corporation or the Bank. Mr. Miller and Mr. Kauffman’s compensation is described and disclosed in the Executive Compensation section of this proxy statement.

⁽²⁾Includes fees for attendance at Board of Directors meetings of the Bank. The Board of Directors of the Bank met eighteen (18) times in 2020, though members were not paid for attendance at all meetings.

⁽³⁾Imputed cost of life insurance for non-employee directors for a life insurance benefit of $200,000 for the named beneficiary of each director.

RELATED PERSON TRANSACTIONS AND POLICIES

Some of the Corporation and Bank’s directors and executive officers and the companies with which they are associated were clients of and had banking transactions with the Bank during 2020. All loans and loan commitments made to them and their immediate family members and to their companies were made in the ordinary course of business, on substantially the same terms, including interest rates, collateral and repayment terms, as those prevailing at the time for comparable transactions with other clients of the Bank, and did not involve more than a normal risk of collectability or present other unfavorable features. The principal loan balance outstanding for these persons on December 31, 2020, was approximately $8,376,000, which did not include unfunded commitments of approximately $1,307,000. The Bank anticipates that it will enter into similar transactions in the future.

Ms. Sarah M. Brown, who is a member of the Corporation’s Board of Directors, is the President and CEO of Keller Agency, Inc. t/a Keller-Brown Insurance Services, an insurance agency headquartered in York, Pennsylvania. Keller-Brown Insurance Services is the property and casualty insurance agent for the Corporation and the Bank. During 2020, the Corporation paid $931,696 in insurance policy premiums to Keller-Brown Insurance Services. Keller-Brown Insurance Services, as part of its normal course of business as an insurance agency, collects the premiums from the Corporation and remits the bulk of the premiums to the insurance companies which provide the insurance coverage. Of the premiums received, Keller-Brown Insurance Services retained $108,351 as commissions payable by the insurance companies to Keller-Brown Insurance Services.

The Bank’s Board of Directors is responsible for ensuring compliance with Federal Reserve Board Regulation O, including its lending, record-keeping and reporting requirements and, to that end, has adopted and maintains a written Regulation O compliance policy. The Bank’s Chief Risk Officer is the executive officer responsible for administration of the Regulation O compliance policy. The Chief Risk Officer maintains a list of insiders (directors, executive officers, principal shareholders and their related interests) who are subject to the Regulation O compliance policy. Each year, a Directors and Officers questionnaire is circulated to all directors and executive officers in order to update related party information and to assist in the identification of potential related party transactions. Any direct or indirect extension of credit to an insider, including related interests, must be approved by the Bank’s Board of Directors. Approval is only granted if the transaction will be made on substantially the same terms, including interest rates, collateral and repayment terms, as those prevailing at that time for comparable transactions with other persons, and if the transaction does not involve more than the normal risk of collection and does not present any other unfavorable features.

In addition to its Regulation O compliance policy, the Bank’s Code of Ethics and Conflicts of Interest Policies address, among other things, related party transactions and potential conflicts of interest. Both policies apply to all directors, officers and employees as well as their immediate family members and related business entities, trusts or estates.

To identify related persons and entities, the Bank requires directors and executive officers to complete a Directors’ and Officers’ Questionnaire annually. This information is utilized to identify real or potential transactions in which conflicts of interest covered by the above-referenced policies and guidelines may arise.

Proposed transactions with such persons or entities are reviewed and voted on by the Board of Directors of the Corporation or the Bank, as applicable. Interested parties do not participate in such review and vote.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Corporation’s directors, executive officers and shareholders who beneficially own more than 10% of the Corporation’s outstanding common stock to file initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Corporation with the Securities and Exchange Commission, and deliver a copy of such reports to the Corporation. Based on a review of copies of the reports we received, and on the statements of the reporting persons, we believe that all Section 16(a) filing requirements were complied with in a timely fashion during 2020, except for the following. Mr. Messick made a late filing on July 10, 2020 related to the acquisition of common stock. The late filing was due to administrative oversight.

PROPOSAL 2 –ADVISORY VOTE REGARDING EXECUTIVE COMPENSATION

Pursuant to section 14A of the Securities Exchange Act of 1934, we are again providing our shareholders the opportunity to vote on an advisory, non-binding resolution to approve the compensation paid to our named executive officers, as described in this Proxy Statement. This advisory vote, commonly referred to as a “say-on-pay” vote, gives our shareholders the opportunity to endorse, or not endorse, the compensation of our named executive officers on an annual basis. Shareholders are encouraged to carefully review the “Executive Compensation” section of this Proxy Statement for a detailed discussion of our executive compensation programs.

We believe that our executive compensation policies and programs, which are reviewed and approved by our Compensation Committee, are designed to align our named executive officers’ compensation with our short-term and long-term performance and to provide the compensation and incentives that are necessary to attract, motivate and retain key executives who are important to our continued success. The Compensation Committee regularly reviews all elements of our executive compensation program and takes any actions it deems necessary to continue to fulfill the objectives of our compensation programs. These programs have been designed to promote a performance-based culture which aligns the interests of our executive officers and other managers with the interests of our shareholders.

The Corporation’s shareholders approved the compensation payable to our named executive officers at the 2020 Annual Meeting of Shareholders by a majority of the votes cast, and we note that the Corporation has not made any material changes to its compensation programs or philosophies in the past year.

For the reasons discussed above, our shareholders are asked to again provide their support with respect to the compensation of the Corporation’s named executive officers by voting in favor of the following non-binding resolution:

“Resolved, that the shareholders of Codorus Valley Bancorp, Inc. approve the compensation of the Corporation’s Named Executive Officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission.”

Because this shareholder vote is advisory, it will not be binding on our Board of Directors. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.

Vote Required for Approval

The approval of the non-binding advisory proposal on our executive compensation requires the affirmative vote of a majority of the votes cast at the meeting, in person or by proxy. Abstentions and broker non-votes that are counted only for purposes of determining a quorum will have the effect of a vote against this proposal.

Recommendation of the Board of Directors

The Board of Directors recommends a vote FOR the advisory, non-binding resolution approving the compensation paid to the Corporation’s named executive officers.

PROPOSAL 3 - RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Corporation’s Audit Committee has selected the firm of Crowe LLP (“Crowe”) as our independent registered public accounting firm for the fiscal year ending December 31, 2021. Although shareholder approval of the selection of Crowe is not required by law, the Board of Directors believes that it is advisable to give shareholders an opportunity to ratify this selection as is the common practice with other publicly traded companies.

Vote Required for Approval

Assuming the presence of a quorum at the Annual Meeting, the affirmative vote of the majority of the votes cast at the meeting, in person or by proxy, is required to ratify the appointment of Crowe as the Corporation’s independent registered public accounting firm for the fiscal year ending December 31, 2021. If our shareholders at the 2021 Annual Meeting do not approve this proposal, the Audit Committee may reconsider its selection of Crowe, but no determination has been made as to what action the Audit Committee would take if shareholders do not ratify the appointment of Crowe.

Recommendation of the Board of Directors

The Board of Directors recommends that shareholders vote FOR ratification of the appointment of Crowe LLP as the Corporation’s independent registered public accounting firm for the fiscal year ending December 31, 2021.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee met with management periodically during the year to consider the adequacy of the Corporation’s internal controls and the objectivity of its financial reporting. The Audit Committee discussed these matters with the Corporation’s independent registered public accounting firm.

The Audit Committee met privately at its regular meetings with both the independent registered public accounting firm and the internal auditors, each of whom has unrestricted access to the Audit Committee.

The Audit Committee appointed, and the Board approved, Crowe LLP (“Crowe”), as the independent registered public accounting firm for the Corporation’s fiscal year ending December 31, 2020 after reviewing the firm’s performance with management and independence.

Management has primary responsibility for the Corporation’s consolidated financial statements and the overall reporting process, including the Corporation’s system of internal controls. The independent registered public accounting firm audited the annual consolidated financial statements prepared by management, expressed an opinion as to whether those consolidated financial statements fairly present the financial position, results of operations and cash flows of the Corporation in conformity with generally accepted accounting principles in the United States of America and discussed with the Audit Committee any issues they believe should be raised with the Audit Committee.

The Audit Committee reviewed with management and Crowe, the Corporation’s independent registered public accounting firm, the Corporation’s audited consolidated financial statements and met separately with both management and Crowe to discuss and review those consolidated financial statements and reports prior to issuance. Management has represented, and Crowe has confirmed to the Audit Committee, that the consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States of America.

The Audit Committee received from and discussed with Crowe the written disclosure and the letter required by PCAOB Rule 3526 Communication with Audit Committees Concerning Independence. These items relate to that firm’s independence from the Corporation. The Audit Committee also discussed with Crowe matters required to be discussed by Auditing Standard No. 16 Communication with Audit Committees. The Audit Committee monitored certified public accounting firm independence and reviewed audit and non-audit services performed by Crowe.

Based on the reviews and discussions referred to above, the Committee recommended to the Board of Directors and the Board has approved that the audited consolidated financial statements be included in the Annual Report on Form 10-K as of and for the year ended December 31, 2020, for filing with the Securities and Exchange Commission.

Audit Committee of the Board of Directors of

Codorus Valley Bancorp, Inc.

Cynthia A. Dotzel, CPA, Chair

Jeffrey R. Hines, P.E. Vice Chair

John W. Giambalvo, Esq.

Independent Registered Public Accounting Firm

The consolidated financial statements of the Corporation as of December 31, 2020 included in the Corporation’s Form 10-K for the year ended December 31, 2020 have been audited by Crowe LLP (“Crowe”), an independent registered public accounting firm, as stated in their report thereon, in reliance upon such report and upon the authority of said firm as experts in accounting and auditing.

The consolidated financial statements of the Corporation as of December 31, 2019 included in the Corporation’s Form 10-K for the year ended December 31, 2020 and the effectiveness of the Corporation’s internal controls over financial reporting as of December 31, 2020 have been audited by BDO USA, LLP (“BDO”), an independent registered public accounting firm, as stated in their report thereon, in reliance upon such report and upon the authority of said firm as experts in accounting and auditing.

Crowe’s and BDO’s reports on the Corporation’s consolidated financial statements as of December 31, 2020 and 2019 and for each of the two years in the period ended December 31, 2020 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.

During the fiscal years ended December 31, 2020 and December 31, 2019 and the subsequent interim period through the date hereof, there were: (i) no “disagreements” as that term is defined in Item 304(a)(1)(iv) of Regulation S-K, between the Corporation and Crowe or BDO on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, any of which, if not resolved to Crowe’s or BDO’s satisfaction, would have caused Crowe or BDO to make reference to the subject matter of any such disagreement in connection with its reports for such years and interim period and (ii) no reportable events within the meaning of Item 304(a)(1)(v) of Regulation S-K during the three most recent fiscal years or the subsequent interim period.

As noted above, the Board of Directors of the Corporation selected Crowe as the independent registered public accounting firm for the examination of its consolidated financial statements as of and for the fiscal year ending December 31, 2021.

We expect a representative of Crowe to be present at the Annual Meeting to respond to appropriate questions and to make a statement if either representative desires to do so.

Fees of Independent Public Accountants


Aggregate fees billed to the Corporation by Crowe and BDO for services rendered for 2020 and 2019, respectively, are presented below:

	Year Ended December 31,
	2020		2019

Audit Fees	$	303,000	$	231,900
Audit Related Fees		0		0
Tax Fees		0		0
All Other Fees		0		0
Total Fees	$	303,000	$	231,900

Audit fees include professional services rendered for the audit of the Corporation’s annual consolidated financial statements included in Form 10-K and review of consolidated financial statements included in Form 10-Q and services normally provided in connection with statutory and regulatory filings, and services provided in connection with the HUD audit, including out-of-pocket expenses. These fees also include an audit of internal controls over financial reporting in accordance with the Federal Deposit Insurance Corporation Improvement Act.

The Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services, and other services. The Audit Committee has adopted a policy for the pre-approval of services provided by the independent registered public accounting firm. Under the policy, pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of particular services on a case-by- case basis. The Audit Committee approved all fees, including tax fees, during 2020 and 2019.

The Audit Committee has considered Crowe’s and BDO’s provision of non-audit services and determined that such services are compatible with maintaining Crowe’s and BDO’s independence.

ADDITIONAL INFORMATION

Any shareholder may obtain a copy of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020, including the consolidated financial statements and related schedules and exhibits, required to be filed with the Securities and Exchange Commission, without charge, by submitting a written request to the Treasurer, Codorus Valley Bancorp, Inc., P.O. Box 2887, York, PA 17405-2887. You may also view these documents on the Corporation’s website at www.peoplesbanknet.com., click on “Your Business” at the top of the page, click on “Investor Relations” under the “Connect” heading, and then click on “Documents.” In the middle of the page click on “Latest 10-K.”

OTHER MATTERS

The Board of Directors knows of no matters other than those discussed in this Proxy Statement that will be presented at the Annual Meeting. However, if any other matter should be properly presented for consideration and voting at the annual meeting or any adjournments of the meeting, the proxy holders will vote the proxies in accordance with the instructions of the Board of Directors of the Corporation.

INTERNET AVAILABILITY OF PROXY MATERIALS

CODORUS VALLEY BANCORP, INC. 105 LEADER HEIGHTS ROAD P.O. BOX 2887 YORK, PA 17405-2887	VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on May 17, 2021. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/CVLY2021 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on May 17, 2021. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.


TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:

	D47006-P49846	KEEP THIS PORTION FOR YOUR RECORDS
		DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

CODORUS VALLEY BANCORP, INC.

The Board of Directors recommends you vote FOR Proposals 1, 2 and 3.

☐

Election of Directors

To withhold authority to vote for any individual

For

Withhold

For All

nominee(s), mark “For All Except” and write the

Nominees:

All

Except

number(s) of the nominee(s) on the line above.

01)

Brian D. Brunner

02)

Jeffrey R. Hines, P.E.

03)

J. Rodney Messick

For

Against

Abstain

Approve an advisory, non-binding resolution regarding executive compensation.

☐

Ratify the appointment of Crowe LLP as Codorus Valley Bancorp, Inc.’s Independent Registered Public Accounting Firm for the fiscal year ending December 31, 2021.

☐

The undersigned acknowledges receipt of the Notice of Annual Meeting and Proxy Statement dated April 2, 2021.

Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.

Signature [PLEASE SIGN WITHIN BOX]

Date

Signature (Joint Owners)

Date

CODORUS VALLEY BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS

Tuesday, May 18, 2021
9:00 a.m. Prevailing Time

www.virtualshareholdermeeting.com/CVLY2021

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:

The Notice of Annual Meeting and Proxy Statement and 2020 Annual Report are available at www.proxyvote.com.

D47007-P49846

ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 18, 2021

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned holder of common stock of Codorus Valley Bancorp, Inc. (the “Corporation”) hereby appoints Cindy E. Baugher, Judy Simpson and Wanda Waugh, and each or any of them, proxies of the undersigned, with full power of substitution and to act without the other, to vote all of the shares of common stock of the Corporation that the undersigned may be entitled to vote at the Annual Meeting of Shareholders of the Corporation to be held virtually at www.virtualshareholdermeeting.com/CVLY2021 on Tuesday, May 18, 2021, commencing at 9:00 a.m., prevailing time, and at any adjournment or postponement thereof, as fully and effectually as the undersigned could do if personally present, and hereby revokes all previous proxies for said meeting.

This proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder of record.

When a vote is not specified, the proxy holders will vote shares represented by this proxy FOR Proposals 1, 2 and 3, and in accordance with the instructions of the Board of Directors of the Corporation on such other matters that may properly come before the meeting.

PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY IN

THE ENCLOSED, POSTAGE-PAID ENVELOPE OR PROVIDE YOUR

INSTRUCTIONS TO VOTE VIA THE INTERNET OR BY TELEPHONE.

(continued, and to be marked, dated and signed, on the other side)

See reverse for voting instructions