Company: NWFL
Filing Date: 2025-09-19
Form Type: S-4
Source: 0001193125-25-208580
Chunk: 202

Company: NORWOOD FINANCIAL CORP
Filing Date: 2025-09-19
Form: S-4
Chunk 202
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, and purchase discounts are recognized
in the same manner from purchase to maturity.

On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments which eliminated the previous concept of other-than-temporary impairment for available for sale securities (see Allowance for Credit Losses on Securities below).

Allowance for Credit Losses on Securities

Management classifies its debt securities at the time of purchase as available for sale or held to maturity. At December 31, 2024 and 2023, all debt
securities were classified as available for sale, meaning that the Company intends to hold them for an indefinite period of time, but not necessarily to maturity.

With the adoption of current expected credit losses (CECL) standard on January 1, 2023, the previous concept of other-than-temporary impairment for
available for sale securities has been eliminated. Impairment of debt securities occurs when the fair value of a security is less than its amortized cost. For debt securities available for sale, impairment is recognized in its entirety in net income
if either (i) we intend to sell the security or (ii) it is more-likely-than-not that we will be required to sell the security before recovery of its amortized cost basis. If, however, the Company does not intend to sell the security and it
is not more-likely-than-not that the Company will be required to sell the security before recovery, the Company evaluates unrealized losses to determine whether a decline in fair value below amortized cost basis is a result of a credit loss, which
occurs when the

F-7

PB BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

amortized cost basis of the security exceeds the present value of the cash flows expected to be collected from the security, or other factors such as changes in market interest rates. If a credit
loss exists, an allowance for credit losses is recorded that reflects the amount of the impairment related to credit losses, limited by the amount by which the security’s amortized cost basis exceeds its fair value. Changes in the allowance
for credit losses are recorded in net income in the period of change and are included in provision for credit losses. Changes in the fair value of debt securities available for sale not resulting from credit losses are recorded in other
comprehensive income (loss). The Company regularly reviews unrealized losses in its