EX-99.3 2 exhibit993v2.htm EX-99.3 Document
Exhibit 99.3
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma combined consolidated financial information has been prepared using the acquisition method of accounting under the provisions of the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”), giving effect to the merger of Codorus Valley Bancorp, Inc. ("Codorus Valley") with and into Orrstown Financial Services, Inc. ("Orrstown"), with Orrstown as the surviving corporation. Under this method, Codorus Valley’s assets and liabilities as of the date of the merger were recorded at their respective fair values and added to those of Orrstown. Any difference between the purchase price for Codorus Valley and the fair value of the identifiable net assets acquired (including core deposit intangibles) was recorded as goodwill. The goodwill resulting from the merger will not be amortized to expense, but instead will be reviewed for impairment at least annually. Any core deposit intangible and other intangible assets with estimated useful lives to be recorded by Orrstown in connect with the merger are amortized to expense over their estimated useful lives. The financial statements of Orrstown issued after the merger will reflect the results attributable to the merged operations of Codorus Valley beginning on the date of completion of the merger.
On July 1, 2024, Orrstown completed the previously announced merger of equals with Codorus Valley, pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of December 12, 2023, by and between Orrstown and Codorus Valley. At the effective time of the Merger (the “Effective Time”), Codorus Valley was merged with and into Orrstown, with Orrstown as the surviving corporation, which was promptly followed by the merger of Codorus Valley's wholly-owned bank subsidiary, PeoplesBank, A Codorus Valley Company, with and into Orrstown Bank, a wholly-owned subsidiary of Orrstown, with Orrstown Bank as the surviving bank.
The following unaudited pro forma combined consolidated financial information is based on the separate historical financial statements of Orrstown and Codorus Valley and gives effect to the merger of Orrstown and Codorus Valley, including pro forma assumptions and adjustments related to the merger, as described in the accompanying notes to the unaudited pro forma combined consolidated financial information. The unaudited pro forma combined consolidated financial information and accompanying notes have been prepared to illustrate the effects of the merger under the acquisition method of accounting.
The unaudited pro forma combined consolidated financial statements are provided for informational purposes only. The unaudited pro forma combined consolidated financial statements are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the merger been completed as of the dates indicated or that may be achieved in the future. The unaudited pro forma combined consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X, Pro Forma Information, which requires the depiction of the accounting for the transaction, which we refer to as transaction accounting adjustments. The preparation of the unaudited pro forma combined consolidated financial statements and related adjustments required management to make certain assumptions and estimates.
The unaudited pro forma combined consolidated balance sheet as of March 31, 2024 combines the historical financial statements of Orrstown and Codorus Valley and gives effect to the merger as if the merger occurred on March 31, 2024. The unaudited pro forma combined consolidated statements of income give effect to the merger as if the merger occurred on January 1, 2023, for the year ended December 31, 2023, and for the three months ended March 31, 2024.
The following unaudited pro forma condensed combined consolidated financial information and accompanying notes are based on and should be read in conjunction with (i) the historical audited consolidated financial statements of Orrstown and accompanying notes included in Orrstown's Annual Report on Form 10-K for the year ended December 31, 2023, (ii) the historical unaudited consolidated financial statements of Orrstown and accompanying notes included in Orrstown's quarterly report on Form 10-Q for the three months ended March 31, 2024, (iii) the historical audited consolidated financial statements of Codorus Valley and accompanying notes included in Codorus Valley's Annual Report on Form 10-K for the year ended December 31, 2023, and (iv) the historical unaudited consolidated financial statements of Codorus Valley and accompanying notes included in Codorus Valley’s quarterly report on Form 10-Q for the three months ended March 31, 2024, which are incorporated by reference herein.
The unaudited pro forma combined consolidated financial statements were prepared with Orrstown as the accounting acquirer and Codorus Valley as the accounting acquiree under the acquisition method of accounting. Accordingly, the consideration paid by Orrstown to complete the merger with Codorus Valley was allocated to Orrstown’s assets and liabilities based upon their estimated fair values as of the date of completion of the merger. The allocation is dependent upon certain valuations and other studies that have been included in the unaudited condensed pro forma financial statements. The total purchase price for the purpose of this pro forma financial information is $234.0 million, which is based on Orrstown’s closing common stock price of $27.36 as of June 28, 2024.


Unaudited Pro Forma Combined Consolidated Balance Sheet
As of March 31, 2024
(in thousands)
Orrstown Historical
Codorus Valley Historical
Transaction Accounting Adjustments
Notes
Combined Pro Forma
Assets     
Cash and due from banks$23,552 $15,534 $— $39,086 
Interest-bearing deposits with banks159,170 11,128 (22,872)
(A)(M)
147,426 
Cash and cash equivalents182,722 26,662 (22,872)186,512 
Restricted investments in bank stocks11,453 3,186 — 14,639 
Securities available for sale514,909 339,495 — 
(E)
854,404 
Loans held for sale535 958 — 1,493 
Loans2,303,073 1,739,269 (79,847)
(F)
3,962,495 
Less: Allowance for credit losses(29,165)(21,645)3,722 
(F)
(47,088)
Net loans2,273,908 1,717,624 (76,125)3,915,407 
Premises and equipment, net28,952 19,090 6,537 
(G)
54,579 
Cash surrender value of life insurance73,656 62,406 — 136,062 
Accrued interest receivable13,496 8,373 — 21,869 
Goodwill18,724 2,301 44,853 
(H)
65,878 
Other intangibles assets, net2,189 — 44,827 
(H)
47,016 
Deferred tax assets, net21,181 16,760 3,466 
(I)
41,407 
Other assets41,606 11,738 — 53,344 
Total assets$3,183,331 $2,208,593 $686 $5,392,610 
Liabilities
Deposits:
Noninterest-bearing$418,512 $365,358 $— $783,870 
Interest-bearing2,277,439 1,549,705 (2,890)
(J)
3,824,254 
Total deposits2,695,951 1,915,063 (2,890)4,608,124 
Securities sold under agreements to repurchase and federal funds purchased
12,099 4,272 — 16,371 
FHLB advances and other borrowings115,000 41,827 (219)
(K)
156,608 
Subordinated notes32,111 30,865 (1,593)
(K)
61,383 
Other liabilities56,488 15,572 1,195 
(L)
73,255 
Total liabilities2,911,649 2,007,599 (3,507)4,915,741 
Stockholders’ Equity— 
Preferred stock— — — — 
Common stock583 24,709 (24,264)
(A)
1,028 
Additional paid-in capital187,267 142,816 90,708 
(A)
420,791 
Retained earnings124,075 71,249 (100,031)
(B)(M)
95,293 
Accumulated other comprehensive loss(28,668)(32,911)32,911 
(C)
(28,668)
Treasury stock(11,575)(4,869)4,869 
(D)
(11,575)
Total stockholders’ equity271,682 200,994 4,193 476,869 
Total liabilities and stockholders’ equity$3,183,331 $2,208,593 $686 $5,392,610 
See accompanying notes to Unaudited Pro Forma Combined Consolidated Financial Information. See Note 4 for explanation and descriptions of transaction accounting adjustments.


Unaudited Pro Forma Combined Consolidated Statement of Income
For the Three Months Ended March 31, 2024
 (in thousands, except share and per share data)
Orrstown Historical
Codorus Valley Historical
Transaction Accounting Adjustments
Notes
Combined Pro Forma
Interest income     
Loans$36,233 $26,855 $4,080 
(F)
$67,168 
Investment securities5,461 2,834 1,664 
(E)
9,959 
Short-term investments956 155 — 1,111 
Total interest income42,650 29,844 5,744 78,238 
Interest expense
Deposits13,516 10,738 — 
(J)
24,254 
Securities sold under agreements to repurchase and federal funds purchased
25 34 — 59 
FHLB advances and other borrowings1,474 1,061 3 
(K)
2,538 
Subordinated notes754 369 51 
(K)
1,174 
Total interest expense15,769 12,202 54 28,025 
Net interest income26,881 17,642 5,690 50,213 
Provision for credit losses298 116 — 
(F)
414 
Net interest income after provision for credit losses
26,583 17,526 5,690 49,799 
Noninterest income
Service charges on deposit accounts1,200 556 — 1,756 
Interchange income911 899 — 1,810 
Swap fee income199 31 — 230 
Wealth management income3,102 1,735 — 4,837 
Mortgage banking activities458 105 — 563 
Income from life insurance634 414 — 1,048 
Other income131 436 — 567 
Investment securities losses(5)— — (5)
Total noninterest income6,630 4,176 — 10,806 
Noninterest expenses
Salaries and employee benefits13,752 9,879 — 23,631 
Occupancy, furniture and equipment2,639 1,722 23 
(G)(L)
4,384 
Data processing1,265 1,111 — 2,376 
Automated teller and interchange fees351 470 — 821 
Advertising and bank promotions398 312 — 710 
FDIC insurance441 246 — 687 
Professional services631 283 — 914 
Taxes other than income494 363 — 857 
Intangible asset amortization225 2 2,037 
(H)
2,264 
Merger related expenses672 118 (790)— 
Other operating expenses1,601 1,755 — 3,356 
Total noninterest expenses22,469 16,261 1,270 40,000 
Income before income tax expense10,744 5,441 4,420 20,605 
Income tax expense2,213 1,186 799 
(N)
4,198 
Net income$8,531 $4,255 $3,621 $16,407 
See accompanying notes to Unaudited Pro Forma Combined Consolidated Financial Information. See Note 4 for explanation and descriptions of transaction accounting adjustments.


Unaudited Pro Forma Combined Consolidated Statement of Income
For the Year Ended December 31, 2023
(in thousands, except share and per share data)
Orrstown Historical
Codorus Valley Historical
Transaction Accounting Adjustments
Notes
Combined Pro Forma
Interest income     
Loans$126,595 $100,804 $16,456 
(F)
$243,855 
Investment securities21,493 10,728 6,657 
(E)
38,878 
Short-term investments1,809 1,766 — 3,575 
Total interest income149,897 113,298 23,113 286,308 
Interest expense
Deposits37,510 30,754 2,890 
(J)
71,154 
Securities sold under agreements to repurchase and federal funds purchased
114 1,237 — 1,351 
FHLB advances and other borrowings5,350 839 11 
(K)
6,200 
Subordinated notes2,017 1,476 205 
(K)
3,698 
Total interest expense44,991 34,306 3,106 82,403 
Net interest income104,906 78,992 20,007 203,905 
Provision for credit losses1,682 145 7,588 
(F)
9,415 
Net interest income after provision for credit losses
103,224 78,847 12,419 194,490 
Noninterest income
Service charges on deposit accounts4,866 2,338 — 7,204 
Interchange income3,873 3,815 — 7,688 
Swap fee income1,039 751 — 1,790 
Wealth management income11,340 6,337 — 17,677 
Mortgage banking activities591 315 — 906 
Income from life insurance2,482 1,452 — 3,934 
Other income1,508 1,844 — 3,352 
Investment securities losses(47)(388)— (435)
Total noninterest income25,652 16,464 — 42,116 
Noninterest expenses
Salaries and employee benefits50,983 37,974 — 88,957 
Occupancy, furniture and equipment9,593 7,075 93 
(G)(L)
16,761 
Data processing4,913 4,042 — 8,955 
Automated teller and interchange fees1,252 1,976 — 3,228 
Advertising and bank promotions2,157 2,951 — 5,108 
FDIC insurance1,960 983 — 2,943 
Professional services2,905 1,839 — 4,744 
Taxes other than income1,050 — — 1,050 
Intangible asset amortization953 2 8,149 
(H)
9,104 
Merger related expenses1,059 956 28,139 
(M)
30,154 
Other operating expenses7,018 5,670 — 12,688 
Total noninterest expenses83,843 63,468 36,381 183,692 
Income before income tax expense45,033 31,843 (23,962)52,914 
Income tax expense9,370 6,870 (4,357)
(N)
11,883 
Net income$35,663 $24,973 $(19,605)$41,031 
See accompanying notes to Unaudited Pro Forma Combined Consolidated Financial Information. See Note 4 for explanation and descriptions of transaction accounting adjustments.


NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Basis of Pro Forma Presentation
The unaudited pro forma combined consolidated balance sheet as of March 31, 2024 and the unaudited pro forma combined consolidated statements of income for the three months ended March 31, 2024 and for the year ended December 31, 2023 are based on the historical financial statements of Orrstown and Codorus Valley after giving effect to the completion of the merger and the assumptions and adjustments described in the accompanying notes. Such financial statements do not reflect cost savings or operating synergies expected to result from the merger, the costs to achieve these cost savings or operating synergies, or any anticipated disposition of assets that may result from the integration of the operations of both companies.
Certain historical financial information has been reclassified to conform to the current presentation.
The transaction was accounted for under the acquisition method of accounting in accordance with ASC 805. In business combination transactions in which the consideration given is not in the form of cash (that is, in the form of non-cash assets, liabilities incurred, or equity interests issued), measurement of the merger consideration is based on the fair value of the consideration given or the fair value of the asset (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable.
Under ASC 805, all of the assets acquired and liabilities assumed in a business combination are recognized at their acquisition-date fair value, while transaction costs and restructuring costs associated with the business combination are expensed as incurred. The excess of the merger consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill. Changes in deferred tax asset valuation allowances and income tax uncertainties after the merger date generally affect income tax expense. Based on the integration plan, for those assets in the combined company that will be phased out or will no longer be used, additional amortization, depreciation and possibly impairment charges may be recorded after management completes the integration plan.
The unaudited pro forma information is presented solely for informational purposes and is not necessarily indicative of the combined results of operations or financial position that might have been achieved for the periods or dates indicated, nor is it necessarily indicative of the future results of the combined company.
Note 2 — Purchase Price Merger Consideration
Under the terms of the Merger Agreement, Codorus Valley stockholders are entitled to receive 0.875 shares of Orrstown common stock for each share of Codorus Valley common stock. Based on the number of Codorus Valley common stock shares outstanding as of March 28, 2024, the purchase price merger consideration is as follows.
(dollars are in thousands, except per share data)March 31, 2024
Number of shares of Codorus Valley common stock outstanding
9,662,378
Number of Codorus Valley unvested restricted stock units
111,169
Total number of shares
9,773,547
Per common share exchange ratio0.875
Number of shares of Orrstown common stock — as exchanged
8,551,854
Multiplied by Orrstown common stock price per common share (closing stock price as of June 28, 2024)
$27.36 
Purchase price merger consideration for Codorus Valley
$233,979 
Note 3 — Merger Consideration Allocation
Under the acquisition method of accounting, the total merger consideration is allocated to the acquired tangible and intangible assets and assumed liabilities of Codorus Valley based on their estimated fair value as of the closing of the merger. The excess of the merger consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill.









The total merger consideration as shown in the tables above is allocated to Codorus Valley’s tangible and intangible assets and liabilities based on their fair values as follows:
 (in thousands)
Codorus Valley Book Value
March 31, 2024
Fair Value AdjustmentsNotes
Codorus Valley
Fair Value
March 31, 2024
Total purchase price considerations$233,979 
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents$26,662 $— $26,662 
Restricted investments in bank stocks3,186 — 3,186 
Securities available for sale339,495 — 339,495 
Loans held-for-sale958 — 958 
Loans, net of allowance for credit losses (“ACL”)1,717,624 (68,536)
(F)
1,649,088 
Premises and equipment, net19,090 6,537 
(G)
25,627 
Cash surrender value of life insurance62,406 — 62,406 
Accrued interest receivable8,373 — 8,373 
Goodwill
2,301 (2,301)
(H)
— 
Other intangibles— 44,827 
(H)
44,827 
Deferred income tax asset, net16,760 1,797 
(I)
18,557 
Other assets11,738 11,738 
Total identifiable assets acquired2,208,593 (17,676)2,190,917 
Deposits1,915,063 (2,890)
(J)
1,912,173 
Securities sold under agreements to repurchase4,272 — 4,272 
FHLB advances and other borrowings41,827 (219)
(K)
41,608 
Subordinated notes30,865 (1,593)
(K)
29,272 
Other liabilities15,572 1,195 
(L)
16,767 
Total liabilities assumed2,007,599 (3,507)2,004,092 
Total identifiable net assets$200,994 $(14,169)$186,825 
Goodwill$47,154 
Approximately $44.8 million has been allocated to amortizable intangible assets acquired. The amortization related to the fair value of net amortizable intangible assets is reflected as a transaction accounting adjustment to the unaudited pro forma combined consolidated financial statements.
Identifiable intangible assets. The fair values of intangible assets were determined based on the provisions of ASC 805, which defines fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Intangible assets were identified that met either the separability criterion or the contractual-legal criterion described in ASC 805. The allocation to intangible assets is allocated to core deposit intangibles.
Goodwill. Goodwill represents the excess of the merger consideration over the fair value of the underlying net tangible and intangible assets. Among the factors that contributed to a purchase price in excess of the fair value of the net tangible and intangible assets are the experience and expertise of personnel, operations, customer base and organizational cultures that can be leveraged to enable the combined company to build an enterprise greater than the sum of its parts. In accordance with ASC Topic 350, Intangibles—Goodwill and Other, goodwill will not be amortized, but instead will be tested for impairment at least annually and whenever events or circumstances have occurred that may indicate a possible impairment. In the event management determines that the value of goodwill has become impaired, the combined company will incur an accounting charge for the amount of the impairment during the period in which the determination is made.
Note 4 — Adjustments to the Unaudited Pro Forma Combined Consolidated Balance Sheet and Statements of Income
The unaudited pro forma financial information is not necessarily indicative of what the financial position of Orrstown would have been had the merger been completed at the date indicated. Such information includes adjustments that may be revised and may result in material changes. The financial position shown herein is not necessarily indicative of what the past financial position of the


combined companies would have been, nor necessarily indicative of the financial position of the post-merger periods. The unaudited pro forma financial information does not give consideration to the impact of possible cost savings, expense efficiencies, synergies, strategic modifications, asset dispositions or other actions that may result from the merger.
The following unaudited transaction accounting adjustments result from accounting for the merger, including the determination of fair value of the assets, liabilities, and commitments that Orrstown acquired from Codorus Valley. The pro forma combined consolidated balance sheet was adjusted to reflect the reversal of Codorus Valley's historical equity account balances, the purchase price considerations, the fair value adjustments and the after-tax provision for credit losses for non-PCD loans to record the transaction accounting adjustments for common stock, additional paid-in capital ("APIC"), retained earnings, accumulated other comprehensive income ("AOCI") and treasury stock. The descriptions related to these adjustments are as follows: (dollars are in thousands, except share and per share data):
A
Orrstown common shares issued to stockholders of Codorus Valley representing the total merger consideration. For the purpose of this pro forma presentation, common stock is the number of Orrstown shares to be issued to Codorus Valley stockholders multiplied by the par value of $0.05205. Additional paid-in capital is the difference between purchase price merger consideration for Codorus Valley and common stock. The value of a share of Orrstown common stock was assumed to equal its closing price on June 28, 2024, as reported by NASDAQ ($27.36 per common share).
Transaction accounting adjustment for common stock 
Balance Sheet
March 31, 2024
Reversal of Codorus Valley common stock
$(24,709)
Number of shares of Orrstown common stock issued
8,551,854 
Par value of Orrstown common stock
$0.05205
Par value of Orrstown shares issued for merger
445 
Total transaction accounting adjustment for common stock  $(24,264)
Transaction accounting adjustment for APIC
 
Balance Sheet
March 31, 2024
Reversal of Codorus Valley common stock to APIC
$24,709 
Reversal of Codorus Valley retained earnings to APIC
71,249 
Reversal of Codorus Valley accumulated other comprehensive loss to APIC
(32,911)
Reversal of Codorus Valley treasury stock to APIC
(4,869)
 58,178 
Issued and outstanding shares of Codorus Valley common stock
9,773,547 
Exchange ratio0.875
Number of Orrstown common stock issued
8,551,854 
Closing price of Orrstown common stock as of June 28, 2024
$27.36 
Purchase price consideration for common stock $233,979 
Cash in lieu of fractional shares
10
Par value of Orrstown common stock
445
APIC adjustment for Orrstown common stock issued
$233,524 
Less: Codorus Valley shareholders’ equity
200,994 
Net adjustment to APIC for stock consideration 32,530 
Total transaction accounting adjustment for APIC $90,708 










B
Adjustment to retained earnings for the impact to earnings for the estimated one-time merger expenses to be paid in conjunction with the merger, net of the related tax benefit and the allowance for credit losses for acquired non-purchase credit deteriorated (“PCD”) loans, net of the related tax benefit.
Transaction accounting adjustment for retained earnings
Balance Sheet
March 31, 2024
Reversal of Codorus Valley retained earnings
$(71,249)
Provision for credit fair value mark assigned to Non-PCD loans (5,919)
Orrstown merger-related expenses
(22,863)
Total transaction accounting adjustment for retained earnings $(100,031)
C
Adjustment to reverse Codorus Valley's AOCI
Transaction accounting adjustment for AOCI
Balance Sheet
March 31, 2024
Reversal of Codorus Valley accumulated other comprehensive loss
$32,911 
Total transaction accounting adjustment for AOCI32,911 
D
Adjustment to reverse Codorus Valley's treasury stock
Transaction accounting adjustment for treasury stock
Balance Sheet
March 31, 2024
Reversal of Codorus Valley treasury stock
$4,869 
Total transaction accounting adjustment for treasury stock
4,869 
E
Adjustment to reflect the fair value of investment securities acquired pursuant to the merger, which will be accreted into income based on the expected life of securities using the straight-line method over the average life of the securities. For the balance sheet at March 31, 2024, securities available-for-sale were recorded at fair value, therefore no balance sheet adjustment is necessary.
Balance Sheet
Statements of Income
(dollars are in thousands)March 31, 2024December 31, 2023March 31, 2024
Securities available for sale
$— $6,657 $1,664 
F
Adjustment to reflect the fair value for acquired PCD and non-PCD loans and the reversal of net deferred loan fees. The accruing loan fair value adjustments will be substantially recognized over the expected life of the loans.
Balance Sheet
Statements of Income
Fair value adjustment on loans acquired: March 31, 2024December 31, 2023March 31, 2024
Interest rate fair value mark assigned to Non-PCD loans $(69,153)$13,631 $3,408 
Interest rate fair value mark assigned to PCD loans(6,742)1,329 316 
Total interest rate fair value mark for loans(75,895)14,960 3,724 
Credit fair value mark assigned to Non-PCD loans (7,588)1,496 356 
Credit fair value mark assigned to PCD loans (10,335)— — 
Total credit fair value mark for loans(17,923)1,496 356 
Total fair value adjustments for loans (93,818)16,456 4,080 
Reversal of net deferred loan fees
3,636 — — 
Fair value of PCD loans assigned to ACL 10,335 — — 
Total loan adjustments $(79,847)$16,456 $4,080 



Adjustment to the allowance for credit losses ("ACL") to reflect the reversal of Codorus Valley’s existing ACL and to include the gross-up fair value adjustment for PCD loans to the ACL. In addition, the ACL was adjusted to include additional provision expense for acquired non-PCD loans. The pro forma combined consolidated statement of income includes a one-time after-tax provision expense, which is recorded as a direct adjustment to retained earnings on the pro forma combined consolidated balance sheet.
Balance Sheet
Statements of Income
March 31, 2024December 31, 2023March 31, 2024
Allowance for credit losses:
Reversal of existing ACL $21,645 $— $— 
Fair value of PCD loans assigned to ACL (10,335)— — 
Total adjustment to the ACL excluding CECL for non-PCD loans
$11,310 $— $— 
Provision for credit losses for non-PCD loans
(7,588)7,588 — 
Total adjustment to the ACL$3,722 $7,588 $— 
Retained Earnings impact to non-PCD
Deferred tax asset impact (using 22% tax rate)
1,669 — — 
Retained Earnings impact $(5,919)$7,588 $— 
G
Adjustment to reflect the fair value of the Codorus Valley's fixed assets acquired, primarily buildings, based on the current market value. The increase in the fair value will be amortized over an estimated 40 year useful life on a straight line basis.
Balance Sheet
Statements of Income
March 31, 2024December 31, 2023March 31, 2024
Premise and equipment, net$6,537 $163 $41 
H
Adjustments to reverse Codorus Valley's existing goodwill and record goodwill generated as a result of consideration paid in excess of the fair value of the net assets acquired and other intangible assets. The core deposit intangible asset and the customer list intangible asset are amortized based on the sum-of-the-years digits method over the expected life of 10 years.
Balance Sheet
Statements of Income
March 31, 2024December 31, 2023March 31, 2024
Intangible assets
Core deposit intangible asset
$34,427 $6,258 $1,565 
Customer list intangible asset
10,400 1,891 472 
Total intangible assets
$44,827 $8,149 $2,037 
Goodwill adjustment
Reversal of Codorus Valley existing goodwill adjustment
(2,301)— — 
Transaction Goodwill
Goodwill booked in transaction47,154 — — 
Total goodwill
$44,853 $— $— 
Total adjustments$89,680 $8,149 $2,037 



I
Adjustments to reflect the net deferred tax asset/liability generated by the net fair value adjustments and existing pre-merger timing differences and the deferred tax effect of the allowance for credit losses for acquired non-PCD loans using an assumed effective tax rate of 22%.
Balance Sheet
Statements of Income
March 31, 2024December 31, 2023March 31, 2024
Fair value purchase accounting adjustment
$(8,168)$— $— 
Provision for credit losses on non-PCD loan
(7,588)— — 
    Total subject to deferred taxes
(15,756)— — 
Tax impact
$3,466 $— $— 
J
Adjustment to reflect the fair value of time deposits assumed based on current interest rates for similar instruments. The average maturity of the time deposits was less than one year. For the pro forma combined consolidated financial statements, the fair value adjustment will be amortized within twelve months following the merger.
Balance Sheet
Statements of Income
March 31, 2024December 31, 2023March 31, 2024
Time deposits$(2,890)$2,890 $— 
K
Adjustment to reflect the fair value of the subordinated debt and trust preferred securities assumed based on current interest rates for similar instruments. This fair value adjustments will be amortized over the remaining estimated life of the liabilities.
Balance Sheet
Statements of Income
March 31, 2024December 31, 2023March 31, 2024
Subordinated debt$(1,593)$205 $51 
Trust preferred securities(219)11 3 
Total subordinated notes and trust preferred securities$(1,812)$216 $54 
L
Adjustment to reflect the fair value for operating lease contracts, which will be amortized over the expected life of the lease contracts of 17 years.
Balance Sheet
Statements of Income
March 31, 2024December 31, 2023March 31, 2024
Operating lease obligations
$1,195 $70 $18 
M
Adjustment represents the merger-related expenses incurred after the Effective Time of the merger, which are recorded to the pro forma combined consolidated balance sheet as an after-tax adjustment to reduce cash and retained earnings.
Balance Sheet
Statements of Income
March 31, 2024December 31, 2023March 31, 2024
Merger-related expenses$28,139 $28,139 $— 
Tax impact(5,276)(5,276)— 
Merger-related expenses (after-tax)$22,863 $22,863 $— 
N
Adjustment to reflect the income tax provision of the transaction accounting adjustments using an effective tax rate of approximately 22%, which includes the impact of the of non-deductible merger-related expenses.



Note 5 — Earnings per Common Share
Unaudited pro forma earnings per common share for the year ended December 31, 2023 and for the three months ended March 31, 2024 have been calculated using Orrstown’s historic weighted average common shares outstanding plus the common shares estimated to be issued to Codorus Valley’s stockholders in the merger.
The following table sets forth the calculation of basic and diluted unaudited pro forma earnings per common share:
 
Three Months Ended
March 31, 2024
(dollars are in thousands, except per share data)BasicDiluted
Pro forma net income available to common stockholders$16,407 $16,407 
Weighted average common shares outstanding:
    Common shares issued to Orrstown stockholders
10,349,264 10,482,102 
    Common shares issued to Codorus Valley stockholders
8,442,875 8,461,250 
Pro forma weighted average common shares outstanding18,792,139 18,943,352 
Pro forma net income per common share$0.87 $0.87 
 
Year Ended
December 31, 2023
(dollars are in thousands, except per share data)BasicDiluted
Pro forma net income available to common stockholders$41,031 $41,031 
Weighted average common shares outstanding:
    Common shares issued to Orrstown stockholders
10,339,937 10,434,818 
    Common shares issued to Codorus Valley stockholders
8,407,000 8,421,875 
Pro forma weighted average common shares outstanding18,746,937 18,856,693 
Pro forma net income per common share$2.19 $2.18