Company: NWFL
Filing Date: 2025-10-28
Form Type: 424B3
Source: 0001193125-25-252482
Chunk: 77

Company: NORWOOD FINANCIAL CORP
Filing Date: 2025-10-28
Form: 424B3
Chunk 77
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 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 basis points in the FOMC’s projected rate of U.S. GDP growth would increase the model’s total calculated allowance for credit losses on loans by $42,000, or 1.0%, assuming all other qualitative
adjustments are kept at current levels. While management’s current evaluation of the allowance for credit losses indicates the allowance is appropriate, the allowance may need to be increased under different conditions or assumptions.
Additionally, changes in those factors and inputs may not occur at the same rate and inputs may be directionally inconsistent, such that improvements in one factor may offset deterioration in others. The impact of utilizing an expected credit losses
approach to estimate the allowance for credit losses can and will be significantly influenced by the composition, characteristics and quality of our loan portfolios, as well as the prevailing economic conditions and forecasts utilized. Material
changes to these and other relevant factors may result in greater volatility to the allowance for credit losses, and therefore, greater volatility to our reported earnings.

The Company’s management reviews the adequacy of the allowance for credit losses on loans on at least a quarterly basis. Refer to Note 1
— “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” which appear beginning on page F-6 of this proxy statement/prospectus
for additional details concerning the determination of the allowance for credit losses on loans.

Comparison of Balance Sheets at December 31, 2024 and December 31, 2023

Total Assets. Total assets increased $11.