NORWOOD FINANCIAL CORP Fair Value Disclosure
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In accordance with fair value accounting guidance, the Company measures, records, and reports various types of assets and liabilities at fair value on either a recurring or non-recurring basis in the Consolidated Financial Statements. Those assets and liabilities are presented in the sections entitled “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis” and “Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis”. There are three levels of inputs that may be used to measure fair values:
Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis
For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2025 and 2024 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair Value Measurement Reporting Date using | ||||||||||
Description |
| Total |
| Level 1 |
| Level 2 |
| Level 3 | ||||
December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
| $ | 20,857 |
| $ | 20,857 |
| $ | — |
| $ |
|
U.S. Government agencies |
|
| 7,675 |
|
|
|
|
| 7,675 |
|
|
|
States and political subdivisions |
|
| 92,500 |
|
|
|
|
| 92,500 |
|
|
|
Corporate obligations |
|
| 13,551 |
|
|
|
|
| 13,551 |
|
|
|
Mortgage-backed securities-government |
|
|
|
|
|
|
|
|
|
|
|
|
sponsored entities |
|
| 274,199 |
|
|
|
|
| 274,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
| $ | 19,598 |
| $ | 19,598 |
| $ | — |
| $ |
|
U.S. Government agencies |
|
| 11,364 |
|
|
|
|
| 11,364 |
|
|
|
States and political subdivisions |
|
| 87,274 |
|
|
|
|
| 87,274 |
|
|
|
Mortgage-backed securities-government |
|
|
|
|
|
|
|
|
|
|
|
|
sponsored entities |
|
| 279,609 |
|
|
|
|
| 279,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities:
The fair value of securities available for sale (carried at fair value) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted prices. For certain securities which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence (Level 3). In the absence of such evidence, management’s best estimate is used. Management’s best estimate consists of both internal and external support on certain Level 3 investments. Internal cash flow models using a present value formula that includes assumptions market participants would use along with indicative exit pricing obtained from broker/dealers (where available) are used to support fair values of certain Level 3 investments, if applicable.
Interest Rate Swaps:
The fair value of interest rate swaps is based upon the present value of the expected future cash flows using the SOFR swap curve, the basis for the underlying interest rate. To price interest rate swaps, cash flows are first projected for each payment date using the fixed rate for the fixed side of the swap and the forward rates for the floating side of the swap. These swap cash flows are then discounted to time zero using SOFR zero-coupon interest rates. The sum of the present value of both legs is the fair market value of the interest rate swap. These valuations have been derived from our third party vendor’s proprietary models rather than actual market quotations. The proprietary models are based upon financial principles and assumptions that we believe to be reasonable.
Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis
For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2025 and 2024 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair Value Measurement Reporting Date using | ||||||||||
Description |
| Total |
| Level 1 |
| Level 2 |
| Level 3 | ||||
December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
Individually analyzed loans held for investment |
| $ | 7,923 |
| $ |
|
| $ |
|
| $ | 7,923 |
Foreclosed real estate |
|
| 771 |
|
|
|
|
|
|
|
| 771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
Individually analyzed loans held for investment |
| $ | 9,363 |
| $ |
|
| $ |
|
| $ | 9,363 |
Individually Analyzed loans (generally carried at fair value):
The Company measures impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the lowest level of input that is significant to the fair value measurements.
As of December 31, 2025, the fair value investment in individually analyzed loans totaled $7,923,000, which included 51 loan relationships with a carrying value of $5,492,000 that did not require a specific allowance for credit loss since either the estimated realizable value of the collateral or the discounted cash flows exceeded the recorded investment in the loan. As of December 31, 2025, the Company has recognized charge-offs against the allowance for credit losses on these individually analyzed loans in the amount of $0 over the life of the loans. As of December 31, 2025, the fair value investment in individually analyzed loans included 40 loan relationships with a carrying value of $2,976,000 that required a valuation allowance of $293,000 since the estimated realizable value of the collateral did not support the recorded investment in the loan. As of December 31, 2025, the Company has recognized charge-offs against the allowance for credit losses on these individually analyzed loans in the amount of $0 over the life of the loan.
As of December 31, 2024, the fair value investment in individually analyzed loans totaled $9,363,000, which included 34 loan relationships with a carrying value of $6,978,000 that did not require a specific allowance for credit loss since either the estimated realizable value of the collateral or the discounted cash flows exceeded the recorded investment in the loan. As of December 31, 2024, the Company has recognized charge-offs against the allowance for credit losses on these individually analyzed loans in the amount of $456,000 over the life of the loans. As of December 31, 2024, the fair value investment in individually analyzed loans included 34 loan relationships with a carrying value of $3,044,000 that required a valuation allowance of $659,000 since the estimated realizable value of the collateral did not support the recorded investment in the loan. As of December 31, 2024, the Company has recognized charge-offs against the allowance for credit losses on these individually analyzed loans in the amount of $0 over the life of the loan.
Foreclosed real estate owned (carried at fair value):
Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are carried at fair value less estimated cost to sell. Fair value is based upon independent market prices, appraised value of the collateral or management’s estimation of the value of the collateral. These assets are included in Level 3 fair value based upon the lowest level of input that is significant to the fair value measurement.
The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quantitative Information about Level 3 Fair Value Measurements | |||||||
(dollars in thousands) | Fair Value Estimate |
| Valuation Techniques |
| Unobservable Input |
| Range (Weighted Average) | |
December 31, 2025 |
|
|
|
|
|
|
|
|
Individually analyzed loans held for investment | $ | 7,923 |
| Appraisal of collateral(1) |
| Appraisal adjustments(2) |
| 0%-20.0% (7.51%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosed real estate owned | $ | 771 |
| Appraisal of collateral(1) |
| Liquidation Expenses(2) |
| 11.3% (11.3%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quantitative Information about Level 3 Fair Value Measurements | |||||||
(dollars in thousands) | Fair Value Estimate |
| Valuation Techniques |
| Unobservable Input |
| Range (Weighted Average) | |
December 31, 2024 |
|
|
|
|
|
|
|
|
Individually analyzed loans held for investment | $ | 9,363 |
| Appraisal of collateral(1) |
| Appraisal adjustments(2) |
| 0%-50.0% (8.01%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosed real estate owned | $ | — |
| Appraisal of collateral(1) |
| Liquidation Expenses(2) |
| 0% |
(1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable, less any associated allowance.
(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.
Assets and Liabilities Not Required to be Measured or Reported at Fair Value
The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.
The estimated fair values of the Bank’s financial instruments not required to be measured or reported at fair value were as follows at December 31, 2025 and December 31, 2024. (In thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair Value Measurements at December 31, 2025 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying |
| Fair |
|
|
|
|
|
|
|
|
| ||
| Amount |
| Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (1) | $ | 44,436 |
| $ | 44,436 |
| $ | 44,436 |
| $ | — |
| $ | — |
Loans receivable, net |
| 1,833,540 |
|
| 1,841,753 |
|
| — |
|
| — |
|
| 1,841,753 |
Mortgage servicing rights |
| 238 |
|
| 673 |
|
| — |
|
| — |
|
| 673 |
Regulatory stock (1) |
| 6,623 |
|
| 6,623 |
|
| 6,623 |
|
| — |
|
| — |
Bank owned life insurance (1) |
| 46,089 |
|
| 46,089 |
|
| 46,089 |
|
| — |
|
| — |
Accrued interest receivable (1) |
| 9,250 |
|
| 9,250 |
|
| 9,250 |
|
| — |
|
| — |
Interest rate derivatives |
| 8,840 |
|
| 771 |
|
| — |
|
| 771 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| 2,078,645 |
|
| 2,076,705 |
|
| 1,213,279 |
|
| — |
|
| 863,426 |
Short-term borrowings (1) |
| 14,714 |
|
| 14,714 |
|
| 14,714 |
|
| — |
|
| — |
Other borrowings |
| 59,419 |
|
| 59,635 |
|
| — |
|
| — |
|
| 59,635 |
Accrued interest payable (1) |
| 12,138 |
|
| 12,138 |
|
| 12,138 |
|
| — |
|
| — |
Interest rate derivatives |
| 8,840 |
|
| 771 |
|
| — |
|
| 771 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair Value Measurements at December 31, 2024 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying |
| Fair |
|
|
|
|
|
|
|
|
| ||
| Amount |
| Value |
| Level 1 |
| Level 2 |
| Level 3 | |||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (1) | $ | 72,339 |
| $ | 72,339 |
| $ | 72,339 |
| $ |
|
| $ |
|
Loans receivable, net |
| 1,693,795 |
|
| 1,687,128 |
|
|
|
|
|
|
|
| 1,687,128 |
Mortgage servicing rights |
| 199 |
|
| 575 |
|
|
|
|
|
|
|
| 575 |
Regulatory stock (1) |
| 13,366 |
|
| 13,366 |
|
| 13,366 |
|
|
|
|
|
|
Bank owned life insurance (1) |
| 46,657 |
|
| 46,657 |
|
| 46,657 |
|
|
|
|
|
|
Accrued interest receivable (1) |
| 8,466 |
|
| 8,466 |
|
| 8,466 |
|
|
|
|
|
|
Interest rate derivatives |
| 9,524 |
|
| 1,193 |
|
|
|
|
| 1,193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| 1,859,163 |
|
| 1,856,148 |
|
| 1,091,644 |
|
|
|
|
| 764,504 |
Short-term borrowings (1) |
| 113,069 |
|
| 113,069 |
|
| 113,069 |
|
|
|
|
|
|
Other borrowings |
| 101,793 |
|
| 102,220 |
|
|
|
|
|
|
|
| 102,220 |
Accrued interest payable (1) |
| 12,615 |
|
| 12,615 |
|
| 12,615 |
|
|
|
|
|
|
Interest rate derivatives |
| 9,524 |
|
| 1,193 |
|
|
|
|
| 1,193 |
|
|
|
(1) This financial instrument is carried at cost, which approximates the fair value of the instrument.
Want the next NORWOOD FINANCIAL CORP fair value disclosure the moment it drops?
Set a Sentinel and we'll alert you the moment NORWOOD FINANCIAL CORP's next filing hits EDGAR. No credit card, your email never gets sold.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 13, 2026 | Showing above |
| 2024 | Mar 14, 2025 | |
| 2022 | Mar 17, 2023 | |
| 2020 | Mar 9, 2021 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.