SUBORDINATED NOTES

9 Months Ended

Sep. 30, 2025

At September 30, 2025 and December 31, 2024, subordinated notes payable outstanding totaled $31.0 million and $63.1 million, respectively, which qualified for Tier 2 capital subject to the regulatory capital phase out limitations. The remaining debt issuance costs on the subordinated notes totaled zero and $353 thousand at September 30, 2025 and December 31, 2024, respectively, and are recorded net of the subordinated notes on consolidated balance sheets. The debt issuance costs are amortized over a 10-year period on an effective yield basis.

On September 30, 2025, the Company redeemed its $32.5 million outstanding 6.0% fixed-to-floating rate subordinated notes due December 30, 2028. At September 30, 2025, the variable interest rate of three-month CME term SOFR rate, plus a spread adjustment of 0.26161% and a margin of 3.16%, on our subordinated debt was 7.72%. During the three and nine months ended September 30, 2025, amortization expense of the debt issuance costs totaled $298 thousand and $335 thousand as a result of the redemption compared to $23 thousand and $58 thousand for the three and nine months ended September 30, 2024.

In the Merger, the Company assumed Codorus Valley's unsecured subordinated notes that were issued in December 2020 in the amount of $31.0 million, which may be redeemed, in whole or in part, in a principal amount with integral multiples of $10.0 million, on or after December 9, 2025 and prior to the maturity date at 100% of the principal amount, plus accrued and unpaid interest. The subordinated notes mature on December 9, 2030. The subordinated notes are also redeemable in whole or in part from time to time, upon the occurrence of specific events defined within the note purchase agreements. The subordinated notes have a fixed rate of interest equal to 4.50% until December 30, 2025. After that term, the variable rate of interest is equal to the three-month CME term SOFR rate plus 4.04%. At the date of the Merger, these subordinated notes were marked to fair value at $28.6 million, with a discount of $2.4 million being amortized and netted against interest expense over the stated maturity.

The Company assumed junior subordinated trust preferred debt of $10.3 million from the Merger with a fair value of $7.6 million with a discount of $2.7 million being amortized and netted against interest expense over the stated maturity. In June 2006, Codorus Valley formed CVB Statutory Trust No. II, a wholly-owned special purpose entity whose sole purpose was to facilitate a pooled trust preferred debt issuance of $7.2 million with a stated maturity of July 7, 2036 and a variable rate of three-month CME term SOFR rate, plus a spread adjustment of 0.26161% and a margin of 1.54% through maturity. In November 2004, Codorus Valley formed CVB Statutory Trust No. I to facilitate a pooled trust preferred debt issuance of $3.1 million with a stated maturity of December 15, 2034 and a variable rate of three-month CME term SOFR rate, plus a spread adjustment of 0.26161% and a margin of 2.02% through maturity. For the nine months ended September 30, 2025 and 2024, the cost of the trust preferred debt, excluding the fair value mark, was 6.33% and 7.42%, respectively. The Company owns all of the common stock of these nonbank entities, and the debentures are the sole assets of the trusts. The accounts of both trusts are not consolidated for financial reporting purposes in accordance with FASB ASC 810, Consolidation. For regulatory capital purposes, the trust preferred securities qualified as Tier 1 capital, but are subject to capital limitations under the risk-based capital guidelines.

The remaining maturities of subordinated notes and trust preferred debt as of September 30, 2025 and 2024, are as follows:


		September 30, 2025		December 31, 2024
Subordinated debt maturing:
	2028	$	—	$	32,500
	2030	31,000		31,000

Trust preferred junior subordinated debt maturing:
	2034	$	3,093	$	3,093
	2036	7,217		7,217