Company: NWFL
Filing Date: 2025-10-08
Form Type: S-4/A
Source: 0001193125-25-234244
Chunk: 43

Company: NORWOOD FINANCIAL CORP
Filing Date: 2025-10-08
Form: S-4/A
Chunk 43
---
 property or business involved, repayment of such loans may be more sensitive than other types of loans due to adverse conditions in the real estate market or the
economy. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment and other income and which are secured by real property whose value tends to be more
easily ascertainable, commercial loans typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial
loans may be substantially dependent on the success of the business itself and the general economic environment. If the cash flow from business operations is reduced, the borrower’s ability to repay the loan may be impaired. In addition, our
credit risk may be increased when the collateral held by us cannot be readily realized or liquidated at prices sufficient to recover the full amount of our credit. An increase in non-performing loans or
collateral value deficiencies could result in a net loss of earnings from these loans, an increase in the provision for credit losses on loans and an increase in loan charge-offs, any of which could have a material adverse effect on our financial
condition and results of operations.

Our loan portfolio has a significant concentration in commercial real estate loans.

Our loan portfolio includes a large number of commercial real estate loans. The federal banking agencies have promulgated guidance governing
banks with concentrations in commercial real estate lending. The guidance provides that a bank has a concentration in commercial real estate lending if (i) total reported loans for construction, land development and other land represent 100% or
more of total risk-based capital or (ii) total commercial real estate loans represent 300% or more of total risk-based capital and that bank’s commercial real estate loan portfolio has increased 50% or more during the prior thirty-six months. Owner-occupied commercial real estate loans are excluded from this second category. If a bank is deemed to have a concentration in

24

commercial real estate loans, it is required to employ heightened risk management practices that address board and management oversight and strategic planning, portfolio management, development
of underwriting standards, risk assessment and monitoring through market analysis and stress testing and maintenance of increased capital levels as needed to support the level of commercial real estate lending.

Most of our loans are secured, in whole or in part, with real estate collateral which may be subject to decreases in value.

In addition to the financial strength and cash flow