Company: NWFL
Filing Date: 2025-10-08
Form Type: S-4/A
Source: 0001193125-25-234244
Chunk: 201

Company: NORWOOD FINANCIAL CORP
Filing Date: 2025-10-08
Form: S-4/A
Chunk 201
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 losses. Loan losses are charged against the allowance for credit losses for the difference between the carrying value of the loan
and the estimated net realizable value or fair value of the collateral, if collateral dependent, when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance.

The allowance represents management’s current estimate of expected credit losses over the contractual term of loans, and is recorded at an amount that,
in management’s judgment, reduces the recorded investment in loans to the net amount expected to be collected. No allowance for credit losses are recorded on accrued interest receivable and amounts written-off are reversed by an adjustment to
interest income. Management’s judgment in determining the level of the allowance is based on evaluations of historical loan losses, current conditions and reasonable and supportable forecasts relevant to the collectability of loans. Loans that
share common risk characteristics are evaluated collectively using a cash flow approach for all loans. The cash flow approach used by the Company utilizes loan-level cash flow projections and pool-level assumptions. For all loan pools, cash flow
projections and estimated expected losses are based in part on benchmarked peer data.

Management’s estimate of the allowance for credit losses on
loans that are collectively evaluated also includes a qualitative assessment of available information relevant to assessing collectability that is not captured in the loss estimation process. This includes forecasts that are reasonable and
supportable concerning expectations of future

F-9

PB BANKSHARES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. These qualitative risk factors may include, but are not limited to:

| 1. | Lending policies and procedures, including underwriting standards and collection, charge-off, and recovery 
 practices.                                                                                                 |

| 2. | National, regional, and local economic and business conditions as well as the condition of various market 
 segments, including the value of underlying collateral for collateral dependent loans.                    |

| 3. | Nature and volume of the portfolio and terms of loans. |

| 4. | Volume and severity of past due, classified and nonaccrual loans as well as other loan modifications. |

| 5. | Existence and effect of any concentrations of credit and changes in the level of such concentrations. |

| 6. | Effect of external factors, such as competition and legal and regulatory requirements. |

| 7. |