Company: NWFL
Filing Date: 2025-10-28
Form Type: 424B3
Source: 0001193125-25-252482
Chunk: 39

Company: NORWOOD FINANCIAL CORP
Filing Date: 2025-10-28
Form: 424B3
Chunk 39
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 depending on the duration of certain securities included in
the investment portfolio.

Our securities portfolio performance in difficult market conditions could have adverse effects on our results of operations.

Unrealized losses on investment securities result from changes in market interest rates, credit spreads and
liquidity in the marketplace, along with changes in the credit profile of individual securities issuers. Prior to implementation of current expected credit losses (“CECL”) model, unrealized losses on available-for-sale (“AFS”) debt securities caused by a credit event would require the direct write-down of the AFS security through the other than temporary impairment approach; however, the new
standard under ASC 326-30,Financial Instruments — Credit Losses, requires credit losses to be presented as an allowance for credit losses. We are still required to conduct an impairment
evaluation on AFS securities to determine we have the intent to sell the security or it is more likely than not that we will be required to sell the security before recovery. If these situations apply, the guidance continues to require us to reduce
the security’s amortized cost basis down to its fair value through earnings.

We also evaluate the unrealized losses on AFS
securities to determine if a security’s decline in fair value below its amortized cost basis is due to credit factors. The evaluation is based upon factors such as the creditworthiness of the underlying borrowers, performance of the underlying
collateral, if applicable, and the level of credit support in the security structure. Management also evaluates other factors and circumstances that may be indicative of a decline in the fair value of the security due to a credit factor. This
analysis includes, but is not limited to, an evaluation of the type of security, the length of time and extent to which the fair value has been less than cost and near-term prospects of the issuer. If this assessment indicates that a credit loss
exists, the present value of the expected cash flows of the security is compared to the amortized cost basis of the security. Under the CECL standard, if the present value of the cash flows expected to be collected is less than the amortized cost,
an allowance for credit losses is recorded for the credit loss.

Subsequent valuations, in light of factors prevailing at that time, may
result in significant changes in the values of these securities in future periods. Any of these factors could require us to recognize an allowance for credit losses charge and any additional amount of loss due to
non-credit factors could impact accumulated other comprehensive income. A reduction in the value