SC 13D/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT

TO § 240.13d-1(a) AND AMENDMENTS THERETO FILED

PURSUANT TO § 240.13d-2(a)

Under the Securities Exchange Act of 1934
(Amendment No. 12)

Codorus Valley Bancorp, Inc.

 (Name of Issuer)

 Common Stock, par value $2.50 per share

(Title of Class of Securities)

192025104

(CUSIP Number)

J. Abbott R. Cooper
Driver Management Company LLC
250 Park Avenue
7^th Floor
New York, NY 10177
646-360-0791

 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

January 10, 2022

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ☐

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

 *  The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 192025104

1	NAME OF REPORTING PERSON Driver Opportunity Partners I LP
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) ☒ (b) ☐
3	SEC USE ONLY
4	SOURCE OF FUNDS (SEE INSTRUCTIONS) WC
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) ☐
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware

NUMBER OF SHARES  BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH	7	SOLE VOTING POWER 640,880
	8	SHARED VOTING POWER 0
	9	SOLE DISPOSITIVE POWER 640,880
	10	SHARED DISPOSITIVE POWER 0

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 640,880
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) ☐
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.72%*
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) PN

____________ 

* The percentage calculations herein are based upon an aggregate of 9,534,606 shares of common stock, par value $2.50 per share, of Codorus Valley Bancorp, Inc. outstanding as of October 26, 2021, as reported in the Issuer’s Quarterly Report on Form 10-Q filed with the SEC on November 1, 2021.

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CUSIP No. 192025104

1	NAME OF REPORTING PERSON Driver Management Company LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) ☒ (b) ☐
3	SEC USE ONLY
4	SOURCE OF FUNDS (SEE INSTRUCTIONS) Not Applicable
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) ☐
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware

NUMBER OF SHARES  BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH	7	SOLE VOTING POWER 640,880*
	8	SHARED VOTING POWER 0
	9	SOLE DISPOSITIVE POWER 640,880*
	10	SHARED DISPOSITIVE POWER 0

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 640,880
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) ☐
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.72%**
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) OOO (Limited Liability Company)

_______________ 

*	Solely in its capacity as general partner of Driver Opportunity Partners I LP.  Driver Management Company LLC disclaims beneficial ownership except to the extent of its pecuniary interest therein.
**	The percentage calculations herein are based upon an aggregate of 9,534,606 shares of common stock, par value $2.50 per share, of Codorus Valley Bancorp, Inc. outstanding as of October 26, 2021, as reported in the Issuer’s Quarterly Report on Form 10-Q filed with the SEC on November 1, 2021.

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CUSIP No. 233237106

1	NAME OF REPORTING PERSON J. Abbott R. Cooper
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) ☒ (b) ☐
3	SEC USE ONLY
4	SOURCE OF FUNDS (SEE INSTRUCTIONS) Not Applicable
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) ☐
6	CITIZENSHIP OR PLACE OF ORGANIZATION United States

NUMBER OF SHARES  BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH	7	SOLE VOTING POWER 640,880*
	8	SHARED VOTING POWER 0
	9	SOLE DISPOSITIVE POWER 640,880*
	10	SHARED DISPOSITIVE POWER 0

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 640,880
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) ☐
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.72%**
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) IN

_____________ 

*	Mr. Cooper may be deemed to beneficially own and have shared voting and dispositive power over 618,880 shares of common stock, par value $2.50 per share, of Codorus Valley Bancorp, Inc as the controlling person of Driver Management Company LLC.  Mr. Cooper disclaims beneficial ownership of any shares held by any of the Reporting Person except to the extent of his pecuniary interest therein.
**	The percentage calculations herein are based upon an aggregate of 9,534,606 shares of common stock, par value $2.50 per share, of Codorus Valley Bancorp, Inc. outstanding as of October 26, 2021, as reported in the Issuer’s Quarterly Report on Form 10-Q filed with the SEC on November 1, 2021.

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Item 1.  Security and Issuer.

This statement constitutes Amendment Number 12 to the Schedule 13D (as amended from time to time, the “Schedule 13D”) relating to the common stock, $2.50 par value (the “Common Stock”), of Codorus Valley Bancorp, Inc., a Pennsylvania corporation (“CVLY” or the “Issuer”) and hereby amends the Schedule 13D filed by the Reporting Persons with the Securities and Exchange Commission on July 6, 2021.  Capitalized terms used but not otherwise defined herein shall have the meaning given them in the Schedule 13D.

Item 4. Purpose of Transaction

Item 4 of the Schedule 13D is hereby amended as follows:

On December 27, 2021, Mr. Cooper sent a letter (the “December 27 Letter”) to Ms. Dotzel.  A copy of the December 27 Letter is attached hereto as Exhibit 99.1 and incorporated herein. 

On January 10, 2022, Mr. Cooper sent a letter (the “January 10 Letter”) to Craig Kauffman, the Issuer’s chief executive officer.  A copy of the January 10 Letter is attached hereto as Exhibit 99.2 and incorporated herein.

Item 7.  Exhibits

Item 7 of the Schedule 13D is hereby amended as follows:

Exhibit	Description
Exhibit 99.1	December 27 Letter
Exhibit 99.2	January 10 Letter

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SIGNATURES

After reasonable inquiry and to the best of each of the undersigned’s knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.

	Driver Opportunity Partners I LP By:  Driver Management Company LLC, its general partner
Dated: January 10, 2022	By:	/s/ J. Abbott R. Cooper
	Name	J. Abbott R. Cooper
	Title	Managing Member
	Driver Management Company LLC
	By:	/s/ J. Abbott R. Cooper
	Name:	J. Abbott R. Cooper
	Title:	Managing Member
	By:	/s/ J. Abbott R. Cooper
		J. Abbott R. Cooper

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EX-99.1

EXHIBIT 99.1

December 27, 2021

Ms. Cynthia Dotzel
Soon to be Chair, Board of Directors
c/o Timothy J. Nieman, Esq.
Corporate Secretary
Codorus Valley Bancorp, Inc.
105 Leader Heights Road
York, PA 17405

VIA EMAIL

Cindy,

I am in receipt of a letter dated December 22, 2021 from Lawrence Elbaum of Vinson & Elkins.  To cut to the chase, it appears that the board of directors (the “Board”) of Codorus Valley Bancorp, Inc. (“CVLY”) has hired Mr. Elbaum, his colleague Patrick Gadson and their law firm Vinson & Elkins, to “defend” the Board and CVLY against Driver Opportunity Partners I LP (together with Driver Management Company LLC, “Driver”), the owner of approximately 6.7% of CVLY’s outstanding common stock.  Just to state the obvious, Driver has been extremely critical of what it believes is the Board’s long standing practice of abandoning its responsibility to act in the best interests of CVLY and its shareholders in favor of indulging CVLY’s former CEO (and soon to be former Chairman) Larry Miller.  The Board’s failure to adequately oversee Mr. Miller has resulted in years of underperformance and, most recently, increasing levels of non-performing assets.  Given the adverse impact that Mr. Miller’s—now thankfully over—tenure has had on shareholder value (and the Board’s complicity in Mr. Miller’s mismanagement), a reasonable person might wonder why the Board has chosen (particularly given CVLY’s poor expense management) to spend shareholder resources to “defend” against one of CVLY’s largest shareholders, rather than focusing on increasing shareholder value.

I assume that, in attempting to secure a lucrative “defense” assignment, Mr. Elbaum discussed his prior representation of First United Corporation (“FUNC”) with the Board and the role he played in FUNC’s “defense” against Driver.  Just to recap some of the salient facts of that “defense”:

· On April 16, 2021 FUNC repurchased 360,737 shares of FUNC’s common stock ( “FUNC Common Stock”) at purchase price of $18.00 per share, representing an aggregate purchase price of $6,493,266 (the “Repurchase Consideration”); and

· In addition to the Stock Consideration, FUNC agreed to pay Driver $3,300,000 in cash (the “Cash Consideration”).

Viewed another way, FUNC paid Driver $9,793,266 (the sum of the Repurchase Consideration and the Cash Consideration) for Driver’s 360,737 shares of FUNC Common Stock (resulting in an implied purchase price of $27.14 per share) and the agreements contained in a Cooperation and Settlement Agreement dated April 16, 2021 (the “Cooperation Agreement”).

250 Park Avenue

7th Floor

New York, NY 10177

For context,  the trading price for FUNC’s Common Stock has never reached $27.14.  Indeed, since becoming publicly traded, the highest closing price for FUNC’s Common Stock was $26.80 on January 20, 2004.¹  Since April 15, 2021 (the date prior to the announcement of the Cooperation Agreement), the price performance of FUNC’s Common Stock has trailed the Dow Jones U.S. Micro Cap Banks Index by almost 50%.²

Pursuant to the terms the Settlement Agreement, Driver withdrew its nominee for election to director at FUNC’s 2021 annual meeting of shareholders, effectively ending the second proxy contest FUNC had faced in as many years and agreed to dismiss two lawsuits brought by Driver in federal court against FUNC and its board of directors.  Set forth below is a risk factor related to the litigation brought by Driver and subsequently dismissed pursuant to the Settlement Agreement that was included in FUNC’s Annual Report on Form 10-K for the year ended December 31, 2020:

First United Corporation will likely incur significant expenses and faces the possibility of damages in connection with recent litigation.

As discussed below in Item 3 of Part I of this report, the Corporation, its directors, and two former directors have been sued by Driver Opportunity Fund I LP (the “Driver Shareholder”).  This litigation has, and will likely continue to be, time consuming and has involved, and will likely continue to involve, significant defense and other costs. We cannot predict what expenses that we might incur in connection with this litigation. This litigation, if decided adversely to us, could result in significant monetary damages and reputational harm and require us to incur significant expenses related to holding a new meeting of shareholders, if the court were to order such a meeting as part of the relief granted. Subject to certain conditions imposed by Maryland law, our bylaws require us to indemnify and advance expenses to each of the current and former directors who are parties to this litigation.  Further, our insurance policies might not cover all expenses and/or claims that have been or might be brought against us and the individual defendants, and insurance coverage might not continue to be available to us at a reasonable cost.  As a result, we are exposed to the possibility of substantial uninsured liabilities in connection with this litigation, including pursuant to our indemnification obligations, which could materially and adversely affect our business, prospects, results of operations and financial condition.³  [emphasis added]

In addition, also pursuant to the terms of the Settlement Agreement, FUNC dismissed a lawsuit brought against Driver that was awaiting oral argument before Maryland’s highest state appellate court.

Attached hereto as Exhibit A are selections from certain of FUNC’s filings made pursuant to the Securities and Exchange Act of 1934 (the “Exchange Act”) that illustrate the expenses incurred by FUNC and its shareholders in connection with its “defense” against Driver—a “defense” that Driver believes was choreographed by Mr. Elbaum.  Driver first publicly disclosed its investment in FUNC on March 26, 2019 and exited that investment pursuant to the terms of the Settlement Agreement on April 16, 2021.  During the period of Driver’s investment in FUNC, Driver initiated two proxy contests and two lawsuits against FUNC and its directors while defending against a lawsuit initiated by FUNC as well as responding to a regulatory investigation by Maryland’s state banking regulator.

All the above is a slightly long-winded way of pointing out that, to the extent that the Board—with the assistance of Mr. Elbaum—intends to mount a “defense” against Driver in the same manner as FUNC did, Driver is more than happy to accommodate that intention, but you and your fellow directors should be fully informed as to some of the potential consequences of going down that road.

With respect to the contents of Mr. Elbaum’s letter, Mr. Elbaum writes:

The terms of the Bylaws that address shareholders’ ability to nominate director candidates (“Advance Notice Bylaws”), have long been considered to serve a legitimate purpose to allow for orderly election contests to provide companies with sufficient time to respond to nominations by shareholders, and to allow shareholders to have sufficient time and information to make voting decisions.

____________ 

¹ Source:  Bloomberg.

² From April 15, 2021 to December 24, 2021, the price of FUNC Common Stock increased by 8.98% compared to a 13.39% increase in the Dow Jones U.S. Micro Cap Banks Index.  Source:  S&P Capital IQ.

³ https://www.sec.gov/Archives/edgar/data/0000763907/000156276221000134/func-20201231x10k.htm#Item_1A_Risk_Factors.

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While I generally agree with Mr. Elbaum’s summary of the purpose and function of Advance Notice Bylaws, as Mr. Elbaum notes, Driver filled an application (the “Application”) for Approval to Acquire Shares under Title 7 P.S. § 112 with the Bureau of Bank Supervision, Pennsylvania Department of Banking and Securities (the “Department”) on October 4, 2021.⁴  Staff from the Department has advised me that a copy of the Application (along with all supplements and amendments thereto) were promplty provided to CVLY pursuant to 7 P.S. § 112(d).  To the extent that the Board wishes in the future to argue that the changes to CVLY’s bylaws implemented by the amended and restated bylaws adopted on December 17, 2021 (the “Amended Bylaws”) were necessary to provide CVLY and the Board with sufficient notice of an election contest brought by Driver, Driver will be more than happy to take the other side of that argument.

Moreover, 7 P.S. § 112(d) provides that, in considering an application for approval to acquire shares made pursuant to 7 P.S. § 112, the Department must conduct an investigation to determine, among other things, “whether the proposed acquisition would be prejudicial to the interests of the depositors, creditors, beneficiaries of fiduciary accounts or shareholders of the institution or corporation involved.”  At the risk of pointing out the obvious, the Department, unlike the Board, has no vested interest in the outcome of any director election contest at CVLY, since the Department’s sole interest is making sure the purposes (the “Banking Law Purposes”) of the Pennsylvania Banking Code of 1965, as those purposes are set out in 7 P.S. § 103, are fulfilled.⁵  Call me cynical, but it seems obvious that, with respect to any potential director election contest, the Board is likely to be far more concerned with preserving the seats of incumbent directors and perpetuating a status quo that has created little in the way of shareholder value than the public policy considerations reflected in the Banking Law Purposes.

While the Department has not yet taken any action on the Application, it is my understanding that the Department currently has all the information it requires to do so and that all that information has been provided to CVLY, which makes it a little hard to believe that the Board might actually require the additional information included in the Amended Bylaws in order to have “sufficient time” to respond to any notice of nomination submitted by Driver.

_____________ 

⁴ While positing that Advance Notice Bylaws are for the benefit of shareholders and not simply “structural defenses” implemented to “gain tactical advantages” is a nice spin, given that notices of nomination are rarely made public or otherwise available to shareholders to review, the notion that any such notices would provide shareholders with any relevant information is, at best, a stretch.  See, “What To Do When the Barbarians Are At Your Gate,” Vinson & Elkins Presentation dated June 10, 2018 (recommending a board “consider unilateral bylaw amendments to gain tactical advantages” when confronted with an activist investor.)   Moreover, since CVLY’s common stock is registered pursuant to Section 12(b) of the Exchange Act and any solicitation of proxies from the holders thereof is subject to Exchange Act Rules 14a-3 to 14a-15 (the “Proxy Rules”), any contention that an Advance Notice Bylaw, rather than the Proxy Rules, is the primary means for ensuring that shareholders have sufficient time and information to make voting decisions is laughable.  In addition, given the Board’s refusal to comply with Driver’s demand to inspect CVLY’s books and records, it is hard for Driver to take any of the Board’s claims regarding the need to provide CVLY shareholders with adequate information seriously.

⁵ 7 P.S. § 103(a) provides:

(a) Purposes of the act--The General Assembly declares as its purposes in adopting this act to provide for:  (i) the safe and sound conduct of the business of institutions subject to this act, (ii) the conservation of their assets, (iii) the maintenance of public confidence in them, (iv) the protection of the interests of their depositors, creditors and shareholders and of the interest of the public in the soundness and preservation of the banking system, (v) the opportunity for institutions subject to this act to remain competitive with each other, with financial organizations existing under other laws of this Commonwealth, and with banking and financial organizations existing under the laws of other states, the United States and foreign countries, (vi) the opportunity for institutions subject to this act to serve effectively the convenience and needs of their depositors, borrowers and other customers, to participate in and promote the economic progress of Pennsylvania and the United States and to improve and expand their services and facilities for those purposes, (vii) the opportunity for the management of institutions to exercise their business judgment, subject to the provisions of this act, in conducting the affairs of their institutions, to the extent compatible with, and subject to, the purposes recited in the preceding clauses of this subsection (a), (viii) a delegation to the department of adequate rule-making power and administrative discretion, subject to the provisions of this act and to the purposes stated in this subsection (a), in order that the supervision and regulation of institutions subject to this act may be flexible and readily responsive to changes in economic conditions and to changes in banking and fiduciary practices, (ix) simplification and modernization of the law governing banking and governing the exercise of fiduciary and other representative powers by corporations, and (x)  authorization of institutions to participate fully in interstate banking and branching and to be competitive with interstate banking organizations based in other states.

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In addition, regarding Mr. Elbaum’s assertion that Driver has “no intention of attempting to constructively engage with [CVLY] in a private way,” you might want to alert Mr. Elbaum to the fact that I suggested, on June 29, 2021, that Driver and CVLY enter into a confidentiality and standstill agreement for the very purpose of constructively engaging in a private way, an offer which CVLY declined.  For the record, Driver does not consider vague discussion regarding changes in business strategy to be “constructive engagement” and Driver specifically proposed a confidentiality and standstill agreement in order to engage in a frank and candid assessment of CVLY’s prospects and strategic plans.  I would also note that Mr. Elbaum’s assurances that CVLY “remains open to privately handling any concerns or misunderstandings” rings hollow given how CVLY’s other lawyer seems to be very pointedly avoiding any discussions regarding any settlement or compromise in the action Driver was forced to bring to enforce its rights pursuant to 15 P.S. § 1508.⁶

From my perspective, (i) the Board has overseen years of pathetic performance (for an illustration, please see the total return comparison set forth on Exhibit B), (ii) I believe that there are multiple buyers who would be willing to pay (in a sale transaction) a price per share far higher than CVLY’s common stock has ever traded, (iii) CVLY’s chief executive officer Craig Kauffman appears entirely unable to make a convincing (or even plausible) case that CVLY’s standalone value might ever approach the value that might be obtained now in a sale and (iv) rather than focusing on increasing shareholder value, the Board is spending its time (and shareholders’ resources) “defending” against Driver by, among other things, adopting Advance Notice Bylaws that serve—when viewed against the statutory scheme of 7 P.S. § 112—no “fair and reasonable” purpose but are merely a lame attempt to “gain tactical advantages.”⁷

Notwithstanding anything that might be deemed to the contrary contained herein, I like Mr. Elbaum and I enjoy (relatively speaking) butting heads with him.  However, you and the rest of the Board might want to consider if your time (and shareholders’ interests) is better served by quickly taking affirmative steps to increase shareholder value rather than gearing up for a potentially long, costly and distracting confrontation with one of CVLY’s largest shareholders.

Finally, as a matter of record keeping, could you please confirm the specific date that CVLY considers to be “the date for which nominations would have been due had the Bylaws not been recently amended”—by my calculations, that date would be February 17, 2022, but if you could confirm that, I would appreciate it.

Please share this letter with the rest of the Board.

Very truly yours,

/s/ J. Abbott R. Cooper

______________ 

⁶ While a little off topic, CVLY’s actions in that case also suggest that the Board has generally adopted a policy of delay and obfuscation, again wasting shareholder resources, rather than seeking either a compromise or a decision on the merits.

⁷ Cf., High River LP v. Mylan Labs, Inc. 383 F. Supp. 2d 660, 665 (M.D. Pa. 2005)(noting that the Pennsylvania Business Corporation Law allows a court to review corporate actions and invalidate or enjoin enforcement of bylaws that are not fair and reasonable).

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Exhibit A

First United Corporation
Selected Other Operating Expense Detail⁸
($ 000s)

	Other Operating Expense
	2020		2019		% Change
Professional Services		4,204		1,480		184.05
Investor Relations		1,277		284		349.65	%

	Expense as % of Total Other Operating Expenses
	Three Months Ended March 31,
	2021				2020
Professional Expenses	$	1,170	9	%	$	723	7	%
Investor Relations	$	124	1	%	$	93	1	%

	Expense as % of Total Other Operating Expenses
	Three Months Ended June 30,
	2021				2020
Professional Expenses	$	1,491	14	%	$	1,181	10	%
Investor Relations		306	3	%	$	1,103	9	%

First United Corporation
Select Other Operating Expense Commentary

Year Ended December 31, 2020

Professional services increased $2.7 million primarily due to increased legal and professional expenses related to the 2020 proxy contest and related litigation. Investor relations expenses increased $1.0 million, also related to the 2020 proxy contest.⁹

_____________  

⁸ Source:  FUNC Exchange Act filings.

⁹ https://www.sec.gov/Archives/edgar/data/763907/000156276221000134/func-20201231x10k.htm.

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Exhibit B

Total Return Comparison

Years Ended December 24, 2021		CVLY			Dow Jones U.S. Micro Cap Banks Index
	1		29.24	%		44.98	%
	3		10.61	%		48.34	%
	5		-0.75	%		44.61	%

Source:  S&P Capital IQ

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EX-99.2

EXHIBIT 99.2

January 10, 2022

Mr. Craig Kauffman
Chief Executive Officer
Codorus Valley Bancorp, Inc.
105 Leader Heights Road
York, PA 17405

VIA EMAIL

Craig,

I recently heard a rumor that Larry Miller, the former chief executive officer of Codorus Valley Bancorp, Inc. (“CVLY”) and chairman of CVLY’s board of directors (the “Board”), was in the process of exploring a potential sale of CVLY during the past fall but abandoned those plans because he believed that you “deserved a chance” to run CVLY. This was a rumor, so I have no idea whether it is true or, if so, I have accurately described the situation, but based on what I know about Mr. Miller, the Board and CVLY, it sounds plausible enough and prompts the following questions:

Are you CEO because you will substantially increase shareholder value or because it is “your turn?” Driver Opportunity Partners I LP (together with Driver Management Company LLC, “Driver”) owns approximately 6.72% of CVLY’s outstanding common stock (the “Common Stock”) and is, unabashedly, a capitalist. You could even say that we love capitalism. Driver bought its shares of Common Stock because, in its opinion, they were undervalued and, to be blunt, expects you and the Board to take action to substantially increase shareholder value. Are you planning on taking action to substantially increase shareholder value or can we expect more of the same indifference towards value creation as amply demonstrated by your predecessor Mr. Miller, who seemed more than content to simply enjoy the benefits of an indulgent board without any concern for accountability?

Do you have an actual plan to increase shareholder value or do you intend to simply keep repeating vague aspirational goals? I believe that we have spoken only twice since Driver filed its first Schedule 13D on July 6, 2021, more than six months ago, despite the fact that Driver is one of CVLY’s largest shareholders. On both occasions, you indicated that CVLY was focused on becoming more oriented towards commercial lending, which, without further detail, appears to be nothing more than a vague aspirational goal. Do you have specific plans on how to transform CVLY into a commercially focused bank, such as targets (and milestones) for commercial loan and non-interest bearing deposit growth, treasury management business and the like? Do you have a timeline for when this transformation is going to occur? Most importantly, do you have projections showing how (and when) this transformation will impact shareholder value and to what extent?

Do you know what CVLY would be worth in a sale? When we spoke in December, I mentioned that, in my opinion, CVLY shareholders could receive $31.00 per share or more in a sale. Given that you did not dispute my opinion, my guess is that you agree with that conjecture. However, if you do not agree that CVLY shareholders could receive $31.00 or more per share in a sale, I would appreciate hearing your views as to what CVLY might be worth in a sale.

Is any plan you might have likely to deliver more value to CVLY shareholders than what they might be able to obtain in a sale now? When we spoke in December, I tried to make my position as clear as possible: I think CVLY would be worth $31.00 per share or more in a sale now and I was open to hearing any reasonable case as to how you and the Board would be able to deliver greater shareholder value, taking into account all relevant risks and uncertainties, by remaining independent. Put bluntly, I was asking you to explain to me, as a shareholder, in economic terms, how I would be better off by CVLY remaining independent than finding a buyer. My sense is that you were neither expecting such a direct question nor had you thought of the issue in those terms and my recollection is that I suggested that you give it some serious consideration. However, I am putting that question to you again now and would appreciate an equally direct response.

250 Park Avenue

7th Floor

New York, NY 10177 

Are you familiar with the concept of “earning your independence?” Though it may only be paid lip service in most cases, earning your independence is a concept that I believe is fairly well known by publicly traded bank CEOs and investors and refers to the notion that, in a still highly fragmented industry where consolidation remains the dominant secular trend and where economies of scale are easily realized, a bank CEO (and board of directors) can only justify being independent to his/her and their shareholders instead of selling at a premium by delivering shareholders superior risk adjusted returns over the long term. I do not believe that CVLY has earned (or is earning) its independence nor do I believe that merely attaining peer levels of profitability will qualify CVLY as having earned its independence.¹ Do you subscribe to the notion of earning your independence or do you instead believe that CVLY’s existence as an independent entity is unrelated to its investors/shareholders/owners’ return on their investment? To the extent that you do not subscribe to the notion of earning your independence, what obligation do you think that you, the Board and/or CVLY have to shareholders?

Do you think that CVLY is earning its independence? If so, I would appreciate the chance to better understand the basis of that opinion, since, as mentioned above, I do not believe that CVLY is earning its independence. If you do not believe that CVLY is earning its independence, then, the obvious question is: what are you and the Board going to do about it?

Are you prepared to be accountable for CVLY’s performance? I am going to hazard a guess that, if the above-mentioned rumor is correct, you were in favor of abandoning any exploration of a sale to get your chance to run CVLY. While you may think you are up to the challenge, the real question is whether you are prepared to be accountable for CVLY’s performance and results. In terms of accountability, I think an ideal place to start is by explaining your role in (i) the decision to make an $8 million loan to Richard Welkowitz and/or his affiliates and (ii) the determination to significantly reduce targeted return on equity for calculating cash bonuses in order to minimize the impact (to executives, not shareholders) of writing off that loan. Based on my review of CVLY’s public filings, it seems obvious to me that Mr. Miller, with the Board’s complicity, operated on the principle of “heads I win, tails shareholders lose” whereby Mr. Miller took pains to insulate himself and his leadership team from losses (like charging off the Welkowitz loan) suffered by shareholders.

In my opinion, the Board has repeatedly demonstrated that it is feckless and entirely incapable of putting shareholders’ interests before its loyalty to Mr. Miller. Given the value that I believe CVLY shareholders would receive in a sale, it is hard for me to interpret any commitment by the Board to let you “have your shot at running CVLY” as anything more than a determination to maintain the status quo, meaning total disregard for shareholder value. To the extent that you believe that I am mistaken, I would welcome an opportunity to hear your opinions on the matters raised in this letter.

#nounearnedindependence

Very truly yours,

/s/ J. Abbott R. Cooper

___________ 

¹ See the total return comparison on Exhibit A.

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Exhibit A

Total Return Comparison

Period ended 12/31/21	CVLY			Dow Jones U.S. Micro Cap Bank Index			Difference
1 year		30.45	%		45.99	%		(1,554	)bps
3 years		16.47	%		47.07	%		(3,060	)bps
5 years		(0.68	)%		46.77	%		(4,745	)bps

Source:  S&P Capital IQ

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