Company: NWFL
Filing Date: 2025-10-28
Form Type: 424B3
Source: 0001193125-25-252482
Chunk: 202

Company: NORWOOD FINANCIAL CORP
Filing Date: 2025-10-28
Form: 424B3
Chunk 202
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 finished according to budget, and the value of the collateral may, at any point in time, be less than the principal amount of the loan. Construction loans also bear the risk that the general contractor, who may or may not be a loan customer, may be 
 unable to finish the construction project as planned because of financial pressure or other factors unrelated to the project.                                                                                                                            |

| • |     | Commercial and industrial loans carry risks associated with the successful operation of a business because                                                                                                                                                
 repayment of these loans may be dependent upon the profitability and cash flows of the business. In addition, there is risk associated with the value of collateral other than real estate which may depreciate over time and cannot be appraised with as 
 much reliability.                                                                                                                                                                                                                                         |

| • |     | Consumer loans carry risk associated with the continued creditworthiness of the borrower and the value of the                                                                                                                                   
 collateral, if any. These loans are typically either unsecured or secured by rapidly depreciating assets. They are also likely to be immediately and adversely affected by job loss, divorce, illness, personal bankruptcy, or other changes in 
 circumstances.                                                                                                                                                                                                                                  |

F-10

PB BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loans that do not share common risk characteristics with other loans are evaluated individually and are not
included in the collective analysis. The allowance for credit losses on loans that are individually evaluated may be estimated based on their expected cash flows, or, in the case of loans for which repayment is expected substantially through the
operation or sale of collateral when the borrower is experiencing financial difficulty, may be measured based on the fair value of the collateral less estimated costs to sell.

An unallocated component of the allowance for credit losses is maintained to cover uncertainties that could affect management’s estimate of expected
losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating expected losses in the portfolio.

Allowance for Credit Losses on Unfunded Commitments

The Company records a reserve, reported in other liabilities, for expected credit losses on commitments to extend credit that are not unconditionally
cancelable by the Company. The reserve for unfunded commitments is measured based on the principles utilized in estimating the allowance for credit losses on loans and an estimate of the amount of unfunded commitments expected to be advanced.
Changes in the reserve for unfunded commitments are recorded through the provision for credit losses.

Premises and Equipment

Land is carried at