Company: NWFL
Filing Date: 2025-09-19
Form Type: S-4
Source: 0001193125-25-208580
Chunk: 210

Company: NORWOOD FINANCIAL CORP
Filing Date: 2025-09-19
Form: S-4
Chunk 210
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 ASC Topic 718, “Stock Compensation.” ASC Topic 718 requires compensation
costs related to share-based payment transactions to be recognized in the financial statements (with limited exceptions). The amount of compensation cost is measured based on the grant-date fair value of the equity or liability instruments issued
and forfeitures are accounted for as they occur. Fair value is based on a Black-Scholes pricing model for options and the closing share price for the Company’s stock for other unvested awards. Compensation cost is recognized over the period
that an employee provides services in exchange for the award. The Company allows the employee to use shares to satisfy employer income tax withholding obligations.

Earnings per Common Share

Basic earnings per
common share is net income divided by the weighted average number of common shares outstanding during the period. ESOP shares are considered outstanding for this calculation unless unearned. Diluted earnings per common share includes the dilutive
effect of additional potential common shares issuable under share-based compensation arrangements.

Fair Value of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair
value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market
conditions could significantly affect these estimates.

Advertising

The Company follows the policy of charging the costs of advertising to expense as incurred.

Comprehensive Income

Accounting principles
generally require that recognized revenue, expenses, gains and losses be included in results of operations. Although certain changes in assets and liabilities, such as unrealized gains or losses on securities available-for-sale, are reported as a
separate component of the equity section of the consolidated balance sheet, such items, along with net income, are components of comprehensive income.

Segment Reporting

The Company’s financial
results are considered to be aggregated into one reportable operating segment with revenue derived from the business of community banking. Through its community banking segment, the Company offers a full range of products and services through
various delivery channels. The banking products and services include the acceptance of deposits in noninterest-bearing demand deposits, interest-bearing demand deposits, savings deposits, money market deposits and certificate of deposits; the
origination and servicing of real

F-13

PB BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

estate one-to four-family residential, real estate commercial, real estate construction,