Company: NWFL
Filing Date: 2025-10-28
Form Type: 424B3
Source: 0001193125-25-252482
Chunk: 76

Company: NORWOOD FINANCIAL CORP
Filing Date: 2025-10-28
Form: 424B3
Chunk 76
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 at December 31, 2024,
compared to 0.32% at December 31, 2023. At December 31, 2024, the majority of our nonperforming assets were related to commercial real estate loans. We will continue to increase our investment in our credit review function, both in
experienced personnel as well as ancillary systems, as necessary, in order to be able to evaluate more complex loans and better manage credit risk, which will also support our intended loan growth.

Critical Accounting Estimates

The
discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of
these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. The
estimates and assumptions that we use are based on historical experience and various other factors and are believed 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.

46

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