NORWOOD FINANCIAL CORP

Previous wording

This Quarterly Report on Form 10-Q may include certain forward-looking statements based on current management expectations. Such forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may”, “will”, “believe”, “expect”, “estimate”, “anticipate”, “continue”, or similar terms or variations on those terms, or the negative of those terms. The actual results of the Company could differ materially from those management expectations. This includes statements regarding general economic conditions, legislative and regulatory changes, monetary and fiscal policies of the federal government, changes in tax policies, rates and regulations of federal, state and local tax authorities and failure to integrate or profitably operate acquired businesses. Additional potential factors include changes in interest rates, the rate of inflation, deposit flows, cost of funds, demand for loan products and financial services, competition and changes in the quality or composition of loan and investment portfolios of the Company. Other factors that could cause future results to vary from current management expectations include changes in accounting principles, policies or guidelines, and other economic, competitive, governmental and technological factors affecting the Company’s operations, markets, products, services and prices, instability in the banking system, and the potential for a recessionary economy. Further description of the risks and uncertainties to the business are included in the Company’s other filings with the Securities and Exchange Commission.

Current wording

This Quarterly Report on Form 10-Q may include certain forward-looking statements based on current management expectations. Such forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may”, “will”, “believe”, “expect”, “estimate”, “anticipate”, “continue”, or similar terms or variations on those terms, or the negative of those terms. The actual results of the Company could differ materially from those management expectations. This includes statements regarding general economic conditions, legislative and regulatory changes, monetary, trade, tariff and fiscal policies of the federal government, changes in tax policies, rates and regulations of federal, state and local tax authorities and failure to integrate or profitably operate acquired businesses. Additional potential factors include changes in interest rates, the rate of inflation, deposit flows, cost of funds, demand for loan products and financial services, competition and changes in the quality or composition of loan and investment portfolios of the Company. Other factors that could cause future results to vary from current management expectations include changes in accounting principles, policies or guidelines, and other economic, competitive, governmental and technological factors affecting the Company’s operations, markets, products, services and prices, instability in the banking system, and the potential for a recessionary economy. Further description of the risks and uncertainties to the business are included in the Company’s other filings with the Securities and Exchange Commission.

Previous wording

Total assets as of September 30, 2024 were $2.280 billion compared to $2.201 billion as of December 31, 2023. The increase was due primarily to a $71.5 million increase in gross loans outstanding.

Current wording

Total assets as of March 31, 2025 were $2.376 billion compared to $2.317 billion as of December 31, 2024. The increase was due primarily to a $57.6 million increase in gross loans outstanding.

Previous wording

The fair value of securities available for sale as of September 30, 2024 was $396.9 million compared to $406.3 million as of December 31, 2023. In Management’s opinion the unrealized losses reflect changes in interest rates subsequent to the acquisition of specific securities. The Company concluded that the decrease in the value of these securities was not indicative of a credit loss. The Company did not recognize any credit losses on these available for sale debt securities for the nine months ended September 30, 2024, or the nine months ended September 30, 2023. The Company does not have the intent to sell the securities and it is more likely than not that it will not have to sell the securities before recovery of its cost basis.

Current wording

The fair value of securities available for sale as of March 31, 2025 was $408.7 million compared to $397.8 million as of December 31, 2024. In Management’s opinion the unrealized losses reflect changes in interest rates subsequent to the acquisition of specific securities. The Company concluded that the decrease in the value of these securities was not indicative of a credit loss. The Company did not recognize any credit losses on these available for sale debt securities for the three months ended March 31, 2025, or the three months ended March 31, 2024. The Company does not intend to sell the securities and it is more likely than not that it will not have to sell the securities before recovery of its cost basis.

Previous wording

Loans receivable totaled $1.656 billion at September 30, 2024 compared to $1.585 billion as of December 31, 2023. The $71.8 million increase in net loans receivable during the nine months ended September 30, 2024, was due primarily to a $40.3 million increase in commercial real estate loans, a $4.9 million increase in residential real estate loans and a $33.8 million increase in consumer loans, partially offset by a $7.3 million decrease in commercial, agricultural and construction loans, net.

Current wording

Loans receivable totaled $1.751 billion at March 31, 2025 compared to $1.694 billion as of December 31, 2024. The $57.0 million increase in net loans receivable during the three months ended March 31, 2025, was due primarily to a $14.3 million increase in commercial real estate loans, a $21.5 million increase in commercial loans, a $19.9 million increase in consumer loans, and a $1.9 million increase in residential, agricultural and construction loans, net.

Previous wording

The allowance for credit losses totaled $18,699,000 as of September 30, 2024, and represented 1.12% of total loans outstanding, compared to $18,968,000, or 1.18% of total loans outstanding, at December 31, 2023. The Company had net charge-offs for the nine months ended September 30, 2024 of $1,157,000, compared to $2,897,000 in the corresponding period in 2023. The Company’s management assesses the adequacy of the allowance for credit losses on a quarterly basis. Based on management’s best judgement, the qualitative factors are applied to the final adjusted loss rate each quarter. Management considers the allowance for credit losses adequate at September 30, 2024 based on the Company’s criteria. However, there can be no assurance that the allowance for credit losses will be adequate to cover significant losses, if any, which might be incurred in the future.

Current wording

The allowance for credit losses totaled $20,442,000 as of March 31, 2025, and represented 1.15% of total loans outstanding, compared to $19,843,000, or 1.16% of total loans outstanding, at December 31, 2024. The Company had net charge-offs for the three months ended March 31, 2025 of $324,000, compared to $323,000 in the corresponding period in 2024. The Company’s management assesses the adequacy of the allowance for credit losses on a quarterly basis. Based on management’s best judgement, the qualitative factors are applied to the final adjusted loss rate each quarter. Management considers the allowance for credit losses adequate at March 31, 2025 based on the Company’s criteria. However, there can be no assurance that the allowance for credit losses will be adequate to cover significant losses, if any, which might be incurred in the future.

Previous wording

As of September 30, 2024, non-performing loans totaled $7,888,000 or 0.47% of total loans compared to $7,622,000, or 0.48%, of total loans at December 31, 2023. At September 30, 2024, non-performing assets totaled $7,888,000, or 0.35%, of total assets, compared to $7,719,000, or 0.35%, of total assets at December 31, 2023.

Current wording

As of March 31, 2025, non-performing loans totaled $7,951,000 or 0.45% of total loans compared to $7,874,000, or 0.46%, of total loans at December 31, 2024. At March 31, 2025, non-performing assets totaled $7,951,000, or 0.33%, of total assets, compared to $7,874,000, or 0.34%, of total assets at December 31, 2024.

Previous wording

During the nine-months ended September 30, 2024, total deposits increased $60.1 million due primarily to a $38.9 million increase in interest-bearing demand and a $33.4 million increase in certificates of deposit, partially offset by a $12.2 million decrease in other all other deposit categories, net.

Current wording

During the three-months ended March 31, 2025, total deposits increased $145.3 million due primarily to an $80.6 million increase in interest-bearing demand, a $50.5 million increase in certificates of deposit, and a $14.2 million increase in other all other deposit categories, net.

Previous wording

Short-term borrowings decreased $21.7 million to $52.4 million at September 30, 2024, compared to $74.1 million at December 31, 2023, due primarily to an decrease in overnight borrowings.

Current wording

Short-term borrowings were $0 at March 31, 2025, compared to $113.1 million at December 31, 2024, due primarily to a decrease in overnight borrowings.

Previous wording

Other borrowings as of September 30, 2024, were $145.0 million compared to $124.2 million as of December 31, 2023. Federal Reserve Bank borrowings increased $30.0 million during the nine-months ended September 30, 2024, contributing to the increase. Federal Home Loan Bank borrowings decreased $9.3 million during the nine-months ended September 30, 2024.

Current wording

Other borrowings as of March 31, 2025, were $118.6 million compared to $101.8 million as of December 31, 2024. Federal Reserve Bank borrowings decreased $20.0 million during the three-months ended March 31, 2025, while Federal Home Loan Bank borrowings increased $36.8 million during the three-months ended March 31, 2025.

Previous wording

As of September 30, 2024, total stockholders’ equity was $195.7 million, compared to $181.1 million as of December 31, 2023. Total stockholders’ equity increased $12.5 million due to net income and $9.3 million due to an increase in the fair value of securities in the available-for-sale portfolio, offset partially by $7.3 million of dividends declared, net of tax. Because of interest rate volatility, the Company’s accumulated other comprehensive income could materially fluctuate for each interim and year-end period.

Current wording

As of March 31, 2025, total stockholders’ equity was $220.7 million, compared to $213.5 million as of December 31, 2024. Total stockholders’ equity increased $5.8 million due to net income and $4.4 million due to an increase in the fair value of securities in the available-for-sale portfolio, offset partially by $2.9 million of dividends declared, net of tax. Because of interest rate volatility, the Company’s accumulated other comprehensive income could materially fluctuate for each interim and year-end period.

Previous wording

As of September 30, 2024, the Company had cash and cash equivalents of $82.9 million in the form of cash, due from banks and short-term deposits with other institutions. In addition, the Company had total securities available for sale of $396.9 million which could be used for liquidity needs. Total liquidity of $479.8 million as of September 30, 2024, represents 21.0% of total assets, compared to $472.4 million and 21.5% of total assets as of December 31, 2023. The Company also monitors other liquidity measures, all of which were within the Company’s policy guidelines as of September 30, 2024 and December 31, 2023. Based upon these measures, the Company believes its liquidity is adequate.

Current wording

As of March 31, 2025, the Company had cash and cash equivalents of $75.4 million in the form of cash, due from banks and short-term deposits with other institutions. In addition, the Company had total securities available for sale of $408.7 million which could be used for liquidity needs. Total liquidity of $484.1 million as of March 31, 2025, represents 20.4% of total assets, compared to $470.1 million and 20.3% of total assets as of December 31, 2024. The Company also monitors other liquidity measures, all of which were within the Company’s policy guidelines as of March 31, 2025 and December 31, 2024. Based upon these measures, the Company believes its liquidity is adequate.

Previous wording

The Bank’s maximum borrowing capacity with the Federal Home Loan Bank was approximately $678,033,000 as of September 30, 2024, of which $84.959,000 was outstanding in the form of borrowings as of September 30, 2024. As of December 31, 2023, the maximum borrowing capacity was $682,417,000, of which $114,236,000 of borrowings was outstanding as of December 31, 2023. Additionally, as of September 30, 2024, the Bank had secured Letters of Credit from the Federal Home Loan Bank in the amount of $145,975,000 as collateral for specific municipal deposits. These Letters of Credit reduce the availability under the maximum borrowing capacity. As of December 31, 2023, there was $136,650,000 outstanding in the form of Letters of Credit. Advances and Letters of Credit from the Federal Home Loan Bank are secured by qualifying assets of the Bank.

Current wording

The Bank’s maximum borrowing capacity with the Federal Home Loan Bank was approximately $658,298,000 as of March 31, 2025, of which $118,590,000 was outstanding in the form of borrowings as of March 31, 2025. As of December 31, 2024, the maximum borrowing capacity was $654,838,000, of which $15,525,000 of borrowings was outstanding as of December 31, 2024. Additionally, as of March 31, 2025, the Bank had secured Letters of Credit from the Federal Home Loan Bank in the amount of $146,425,000 as collateral for specific municipal deposits. These Letters of Credit reduce the availability under the maximum borrowing capacity. As of December 31, 2024, there was $146,975,000 outstanding in the form of Letters of Credit. Advances and Letters of Credit from the Federal Home Loan Bank are secured by qualifying assets of the Bank.

Previous wording

This report contains or references fully taxable-equivalent (fte) interest income and net interest income, which are non-GAAP financial measures. Interest income (fte) and net interest income (fte) are derived from GAAP interest income and net interest income using an assumed tax rate of 21%. We believe the presentation of interest income (fte) and net interest income (fte) ensures comparability of interest income and net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income (fte) and Net interest income (fte) is reconciled to GAAP interest income and net interest income on pages 40 and 44. Fully taxable equivalent interest income and net interest income is also reflected in the table on pages 41 and 45.

Current wording

This report contains or references fully taxable-equivalent (fte) interest income and net interest income, which are non-GAAP financial measures. Interest income (fte) and net interest income (fte) are derived from GAAP interest income and net interest income using an assumed tax rate of 21%. We believe the presentation of interest income (fte) and net interest income (fte) ensures comparability of interest income and net interest income arising from both taxable and tax-exempt sources and is consistent with industry practice. Interest income (fte) and Net interest income (fte) is reconciled to GAAP interest income and net interest income on page 37. Fully taxable equivalent interest income and net interest income is also reflected in the table on page 38. Although the

Previous wording

Although the Company believes that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP measures.

Current wording

Company believes that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP measures.