Company: NWFL
Filing Date: 2025-10-28
Form Type: 424B3
Source: 0001193125-25-252482
Chunk: 196

Company: NORWOOD FINANCIAL CORP
Filing Date: 2025-10-28
Form: 424B3
Chunk 196
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 that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated balance sheets and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses on
loans.

While management uses available information to recognize estimated losses on loans, future additions to the allowance for credit losses on loans
may be necessary based on changes in economic conditions and underlying collateral values, if any. In addition, the FDIC and Pennsylvania Department of Banking and Securities, as an integral part of their examination process, periodically review the
Bank’s allowance for credit losses. These agencies may require the Bank to recognize additions to the allowance based on their judgments of information available to them at the time of their examinations.

Concentration of Credit Risk

Most of the
Company’s activities are with customers located within Chester, Cumberland, Dauphin, Lancaster, and Lebanon Counties of Pennsylvania. Note 2 of the consolidated financial statements discuss the types of securities that the Company invests
in. Note 3 of the consolidated financial statements discuss the types of lending that the Company engages in. The Company does not have any significant loan concentrations to any one

F-6

PB BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

industry or customer. Although the Company has a diversified loan portfolio, its debtors’ ability to honor their contracts is influenced by the region’s economy and real estate
values.

Cash and Cash Equivalents

For
purposes of reporting cash flows, cash and cash equivalents include cash on hand, cash due from banks, interest bearing deposits with banks, and federal funds sold. Generally, federal funds are purchased and sold for one-day periods.

The Company maintains cash deposits in other depository institutions that occasionally exceed the amount of deposit insurance available. Management
periodically assesses the financial condition of these institutions and believes that the risk of any possible credit loss is minimal.

Debt Securities

Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of
each balance sheet date.

Securities that management has the positive intent and ability to hold until maturity are classified as held to maturity and are
carried at their remaining unpaid principal balance, net of unamortized premiums, or unaccreted discounts. At December 31, 2024 and 2023 and for