Company: NWFL
Filing Date: 2025-10-08
Form Type: S-4/A
Source: 0001193125-25-234244
Chunk: 76

Company: NORWOOD FINANCIAL CORP
Filing Date: 2025-10-08
Form: S-4/A
Chunk 76
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 to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions,
resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

The following represents our critical accounting estimates:

Allowance for credit losses on loans. The allowance for credit losses on loans represents management’s
best estimate of expected lifetime credit losses within the Company’s loan portfolio as of the balance sheet date.

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The allowance is established through a provision for credit losses and is increased by recoveries of loans previously charged off. Loan losses are charged against the allowance when
management’s assessments confirm that the Company will not collect the full amortized cost basis of a loan. The calculation of expected credit losses is determined using cash flow methodology, and includes considerations of historical data,
current conditions, and reasonable and supportable economic forecasts that may affect collection of the recorded balances. The Company assesses an allowance to groups of loans which share similar risk characteristics or on an individual basis, as
deemed appropriate. Changes in the allowance for credit losses on loans, and as a result, the related provision for credit losses, can materially affect financial results. Although the overall balance is determined based on specific portfolio
segments and individually assessed assets, the entire balance is available to absorb credit losses for loans in the portfolio. Management of the Company considers the accounting policy relating to the allowance for credit losses to be a critical
accounting estimate given the uncertainty in evaluating the level of the allowance required to cover management’s estimate of all expected credit losses over the expected contractual life of our loan portfolios. Determining the appropriateness
of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain, including making significant estimates of current credit risks and trends using existing quantitative and qualitative
information, and reasonable and supportable forecasts of future economic conditions, which may undergo frequent and material changes. Subsequent evaluations of the then-existing loan portfolios, in light of changes in economic conditions, new
information regarding existing loans and other factors, may result in significant changes in the allowance for credit losses in those future periods. For example, changes to the Federal Open Market Committee’s (FOMC) forecasted civilian
unemployment rate and year-over-year U.S. GDP growth could have a material impact on the model’s estimation of the allowance for credit losses on loans. An immediate increase of 150 basis points in the FOMC’s projected rate of civilian
unemployment and a decrease of 100