Company Quick10K Filing
ENB Financial
Price21.25 EPS2
Shares6 P/E11
MCap121 P/FCF9
Net Debt39 EBIT17
TEV160 TEV/EBIT9
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-13
10-Q 2020-06-30 Filed 2020-08-14
10-Q 2020-03-31 Filed 2020-05-14
10-K 2019-12-31 Filed 2020-03-27
10-Q 2019-09-30 Filed 2019-11-14
10-Q 2019-06-30 Filed 2019-08-14
10-Q 2019-03-31 Filed 2019-05-15
10-K 2018-12-31 Filed 2019-03-29
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-15
10-K 2017-12-31 Filed 2018-03-29
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-11
10-Q 2017-03-31 Filed 2017-05-15
10-K 2016-12-31 Filed 2017-03-29
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-11
10-Q 2016-03-31 Filed 2016-05-13
10-K 2015-12-31 Filed 2016-03-28
10-Q 2015-09-30 Filed 2015-11-13
10-Q 2015-06-30 Filed 2015-08-13
10-Q 2015-03-31 Filed 2015-05-14
10-K 2014-12-31 Filed 2015-03-27
10-Q 2014-09-30 Filed 2014-11-13
10-Q 2014-06-30 Filed 2014-08-13
10-Q 2014-03-31 Filed 2014-05-14
10-K 2013-12-31 Filed 2014-03-28
10-Q 2013-09-30 Filed 2013-11-13
10-Q 2013-06-30 Filed 2013-08-14
10-Q 2013-03-31 Filed 2013-05-13
10-K 2012-12-31 Filed 2013-03-28
10-Q 2012-09-30 Filed 2012-11-14
10-Q 2012-06-30 Filed 2012-08-14
10-Q 2012-03-31 Filed 2012-05-15
10-K 2011-12-31 Filed 2012-03-29
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-12
10-Q 2011-03-31 Filed 2011-05-13
10-K 2010-12-31 Filed 2011-03-25
10-Q 2010-09-30 Filed 2010-11-12
10-Q 2010-06-30 Filed 2010-08-13
10-Q 2010-03-31 Filed 2010-05-14
10-K 2009-12-31 Filed 2010-03-25
8-K 2020-10-21 Other Events, Exhibits
8-K 2020-10-15 Earnings, Exhibits
8-K 2020-10-02 Officers
8-K 2020-07-15 Other Events, Exhibits
8-K 2020-07-14 Earnings, Exhibits
8-K 2020-06-02
8-K 2020-05-05
8-K 2020-04-15
8-K 2020-04-13
8-K 2020-04-03
8-K 2020-01-15
8-K 2020-01-14
8-K 2019-10-16
8-K 2019-10-11
8-K 2019-07-17
8-K 2019-07-17
8-K 2019-06-03
8-K 2019-05-15
8-K 2019-05-07
8-K 2019-04-17
8-K 2019-04-12
8-K 2019-04-01
8-K 2019-02-20
8-K 2019-01-31
8-K 2019-01-16
8-K 2019-01-15
8-K 2018-10-18
8-K 2018-10-17
8-K 2018-10-15
8-K 2018-07-19
8-K 2018-07-18
8-K 2018-05-08
8-K 2018-04-18
8-K 2018-04-16
8-K 2018-02-02
8-K 2018-01-18
8-K 2018-01-17

ENBP 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities - Nothing To Report
Item 4. Mine Safety Disclosures - Not Applicable
Item 5. Other Information - Nothing To Report
Item 6. Exhibits:
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm
EX-32.2 ex32-2.htm

ENB Financial Earnings 2020-09-30

Balance SheetIncome StatementCash Flow

10-Q 1 form10q-24980_enbf.htm 10-Q

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from________________________________ to ________________________________

 

ENB Financial Corp

(Exact name of registrant as specified in its charter)

 

Pennsylvania 000-53297 51-0661129
(State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No)
     
31 E. Main St., Ephrata, PA           17522-0457             
(Address of principal executive offices) (Zip Code)  

 

Registrant’s telephone number, including area code           (717) 733-4181          

 

Former name, former address, and former fiscal year, if changed since last report           Not Applicable          

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
None.   N/A   N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒          No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)

Yes ☒          No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

  Large accelerated filer Accelerated filer
  Non-accelerated filer Smaller reporting company
      Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐          No ☒

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November 1, 2020, the registrant had 5,556,413 shares of $0.10 (par) Common Stock outstanding.

 

 

 

ENB FINANCIAL CORP

INDEX TO FORM 10-Q

September 30, 2020

 

 

Part I – FINANCIAL INFORMATION  
       
  Item 1. Financial Statements  
       
  Consolidated Balance Sheets at September 30, 2020 and 2019, and December 31, 2019 (Unaudited) 3
       
  Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited) 4
       
  Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited) 5
       
  Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited) 6
       
  Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (Unaudited) 7
       
  Notes to the Unaudited Consolidated Interim Financial Statements 8-34
       
  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35-70
       
  Item 3. Quantitative and Qualitative Disclosures about Market Risk 71-76
       
  Item 4. Controls and Procedures 77
       
       
Part II – OTHER INFORMATION 78
       
  Item 1. Legal Proceedings 78
       
  Item 1A. Risk Factors 78
       
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 79
       
  Item 3. Defaults upon Senior Securities 79
       
  Item 4. Mine Safety Disclosures 79
       
  Item 5. Other Information 79
       
  Item 6. Exhibits 80
       
       

SIGNATURE PAGE

81

 

2

Index 

ENB FINANCIAL CORP

 

Part I - Financial Information

Item 1. Financial Statements

 

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

 

   September 30,   December 31,   September 30, 
   2020   2019   2019 
   $   $   $ 
ASSETS               
Cash and due from banks   19,979    24,304    23,856 
Interest-bearing deposits in other banks   24,347    16,749    17,334 
   Total cash and cash equivalents   44,326    41,053    41,190 
Securities available for sale (at fair value)   360,029    308,097    298,983 
Equity securities (at fair value)   6,854    6,708    6,108 
Loans held for sale   5,008    2,342    1,578 
Loans (net of unearned income)   843,177    753,618    738,104 
   Less: Allowance for loan losses   11,996    9,447    9,474 
   Net loans   831,181    744,171    728,630 
Premises and equipment   24,696    25,033    25,247 
Regulatory stock   6,525    7,291    7,200 
Bank owned life insurance   29,418    28,818    28,610 
Other assets   8,964    8,237    8,452 
       Total assets   1,317,001    1,171,750    1,145,998 
                
LIABILITIES AND STOCKHOLDERS' EQUITY               
Liabilities:               
  Deposits:               
    Noninterest-bearing   465,247    363,857    347,929 
    Interest-bearing   661,574    610,231    599,062 
    Total deposits   1,126,821    974,088    946,991 
  Short-term borrowings   1,500    200     
  Long-term debt   60,010    77,872    79,989 
  Other liabilities   3,362    2,902    3,381 
       Total liabilities   1,191,693    1,055,062    1,030,361 
Stockholders' equity:               
  Common stock, par value $0.10               
Shares:  Authorized 24,000,000               
             Issued 5,739,114 and Outstanding 5,566,413 as of 9/30/20,               
             5,640,742 as of 12/31/19, and 5,677,161 as of 9/30/19   574    574    574 
  Capital surplus   4,456    4,482    4,471 
  Retained earnings   117,960    111,944    110,067 
  Accumulated other comprehensive income   5,756    1,600    1,685 
  Less: Treasury stock cost on 172,700 shares as of 9/30/20, 98,372 as of 12/31/19,               
   and 61,953 as of 9/30/19   (3,438)   (1,912)   (1,160)
       Total stockholders' equity   125,308    116,688    115,637 
       Total liabilities and stockholders' equity   1,317,001    1,171,750    1,145,998 

 

See Notes to the Unaudited Consolidated Interim Financial Statements

3

Index 

ENB FINANCIAL CORP

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

 

   Three Months ended September 30,   Nine Months ended September 30, 
   2020   2019   2020   2019 
   $   $   $   $ 
Interest and dividend income:                    
Interest and fees on loans   8,617    8,501    25,705    24,833 
Interest on securities available for sale                    
Taxable   920    1,179    3,207    3,696 
Tax-exempt   690    605    1,899    1,860 
Interest on deposits at other banks   31    128    112    294 
Dividend income   129    177    419    531 
                     
Total interest and dividend income   10,387    10,590    31,342    31,214 
                     
Interest expense:                    
Interest on deposits   430    889    1,782    2,626 
Interest on borrowings   415    412    1,333    1,158 
                     
Total interest expense   845    1,301    3,115    3,784 
                     
Net interest income   9,542    9,289    28,227    27,430 
                     
Provision for loan losses   1,250    630    2,575    840 
                     
Net interest income after provision for loan losses   8,292    8,659    25,652    26,590 
                     
Other income:                    
Trust and investment services income   442    538    1,480    1,580 
Service fees   701    701    2,015    2,024 
Commissions   781    734    2,116    2,145 
Gains on the sale of debt securities, net   55    42    704    229 
Gains (losses) on equity securities, net   (54)   7    (279)   51 
Gains on sale of mortgages   2,081    606    4,312    1,370 
Earnings on bank-owned life insurance   209    186    620    543 
Other income   159    129    241    307 
                     
Total other income   4,374    2,943    11,209    8,249 
                     
Operating expenses:                    
Salaries and employee benefits   5,860    5,227    16,522    15,520 
Occupancy   598    605    1,805    1,825 
Equipment   298    297    904    871 
Advertising & marketing   184    205    676    621 
Computer software & data processing   835    620    2,309    1,886 
Shares tax   239    233    718    698 
Professional services   549    448    1,679    1,479 
Other expense   635    493    1,939    1,727 
                     
Total operating expenses   9,198    8,128    26,552    24,627 
                     
Income before income taxes   3,468    3,474    10,309    10,212 
                     
Provision for federal income taxes   533    550    1,610    1,596 
                     
Net income   2,935    2,924    8,699    8,616 
                     
Earnings per share of common stock   0.53    0.51    1.56    1.51 
                     
Cash dividends paid per share   0.160    0.155    0.480    0.460 
                     
Weighted average shares outstanding   5,564,158    5,685,679    5,591,027    5,690,788 

 

See Notes to the Unaudited Consolidated Interim Financial Statements

4

Index 

ENB FINANCIAL CORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(DOLLARS IN THOUSANDS)

 

   Three Months ended September 30,  Nine Months Ended September 30,
   2020  2019  2020  2019
   $  $  $  $
             
Net income   2,935    2,924    8,699    8,616 
                     
Other comprehensive income, net of tax:                    
Securities available for sale not other-than-temporarily impaired:                    
                     
   Unrealized gains arising during the period   1,616    1,798    5,962    9,549 
   Income tax effect   (339)   (378)   (1,250)   (2,005)
    1,277    1,420    4,712    7,544 
                     
   Gains recognized in earnings   (55)   (42)   (704)   (229)
   Income tax effect   12    9    148    48 
    (43)   (33)   (556)   (181)
                     
Other comprehensive income, net of tax   1,234    1,387    4,156    7,363 
                     
Comprehensive Income   4,169    4,311    12,855    15,979 

 

See Notes to the Unaudited Consolidated Interim Financial Statements

5

Index 

ENB FINANCIAL CORP

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

 

            Accumulated      
            Other     Total
   Common  Capital  Retained  Comprehensive  Treasury  Stockholders'
   Stock  Surplus  Earnings  Income (Loss)  Stock  Equity
   $  $  $  $  $  $
Balances, December 31, 2018   574    4,435    104,067    (5,678)   (596)   102,802 
Net income           2,603            2,603 
Other comprehensive income net of tax               2,489        2,489 
Treasury stock purchased - 18,800 shares                   (330)   (330)
Treasury stock issued - 8,188 shares       3            143    146 
Cash dividends paid, $0.15 per share           (852)           (852)
Balances, March 31, 2019   574    4,438    105,818    (3,189)   (783)   106,858 
Net income           3,089            3,089 
Other comprehensive income net of tax               3,487        3,487 
Treasury stock purchased - 29,366 shares                   (204)   (204)
Treasury stock issued - 16,686 shares       16            151    167 
Cash dividends paid, $0.155 per share           (883)           (883)
Balances, June 30, 2019   574    4,454    108,024    298    (836)   112,514 
Net income           2,924            2,924 
Other comprehensive income net of tax               1,387        1,387 
Treasury stock purchased - 22,400 shares                   (457)   (457)
Treasury stock issued - 7,177 shares       17            133    150 
Cash dividends paid, $0.155 per share           (881)           (881)
Balances, September 30, 2019   574    4,471    110,067    1,685    (1,160)   115,637 
                               
Balances, December 31, 2019   574    4,482    111,944    1,600    (1,912)   116,688 
Net income           2,165            2,165 
Other comprehensive loss net of tax               (497)       (497)
Treasury stock purchased - 49,911 shares                   (1,098)   (1,098)
Treasury stock issued - 7,670 shares       (6)           156    150 
Cash dividends paid, $0.16 per share           (902)           (902)
Balances, March 31, 2020   574    4,476    113,207    1,103    (2,854)   116,506 
Net income           3,599            3,599 
Other comprehensive income net of tax               3,419        3,419 
Treasury stock purchased - 32,966 shares                   (627)   (627)
Treasury stock issued - 8,354 shares       (10)           167    157 
Cash dividends paid, $0.16 per share           (892)           (892)
Balances, June 30, 2020   574    4,466    115,914    4,522    (3,314)   122,162 
Net income           2,935            2,935 
Other comprehensive income net of tax               1,234        1,234 
Treasury stock purchased - 16,526 shares                   (304)   (304)
Treasury stock issued - 9,050 shares       (10)           180    170 
Cash dividends paid, $0.16 per share           (889)           (889)
Balances, September 30, 2020   574    4,456    117,960    5,756    (3,438)   125,308 

 

See Notes to the Unaudited Consolidated Interim Financial Statements

6

Index 

ENB FINANCIAL CORP

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)  Nine Months Ended September 30, 
   2020   2019 
   $   $ 
Cash flows from operating activities:          
Net income   8,699    8,616 
Adjustments to reconcile net income to net cash          
provided by operating activities:          
Net amortization of securities premiums and discounts and loan fees   2,173    2,592 
Amortization of operating leases right-of-use assets   134    131 
Increase in interest receivable   (586)   (76)
(Decrease) increase in interest payable   (162)   119 
Provision for loan losses   2,575    840 
Gains on the sale of debt securities, net   (704)   (229)
Loss (gain) on equity securities, net   279    (51)
Gains on sale of mortgages   (4,312)   (1,370)
Loans originated for sale   (101,044)   (35,657)
Proceeds from sales of loans   102,690    36,878 
Earnings on bank-owned life insurance   (620)   (543)
Depreciation of premises and equipment and amortization of software   1,137    1,171 
Deferred income tax   (586)   (416)
Other assets and other liabilities, net   (111)   828 
Net cash provided by operating activities   9,562    12,833 
           
Cash flows from investing activities:          
Securities available for sale:          
   Proceeds from maturities, calls, and repayments   51,451    20,908 
   Proceeds from sales   50,819    35,818 
   Purchases   (150,728)   (54,437)
Equity securities          
    Proceeds from sales       168 
    Purchases   (425)   (163)
Purchase of regulatory bank stock   (1,225)   (2,749)
Redemptions of regulatory bank stock   1,991    1,897 
Net increase in loans   (89,270)   (44,441)
Purchases of premises and equipment, net   (705)   (787)
Purchase of computer software   (133)   (68)
Net cash used for investing activities   (138,225)   (43,854)
           
Cash flows from financing activities:          
Net increase in demand, NOW, and savings accounts   165,296    23,701 
Net (decrease) increase in time deposits   (12,563)   3,556 
Net increase (decrease) in short-term borrowings   1,300    (7,870)
Proceeds from long-term debt   12,984    24,723 
Repayments of long-term debt   (30,846)   (10,120)
Dividends paid   (2,683)   (2,616)
Proceeds from sale of treasury stock   477    463 
Treasury stock purchased   (2,029)   (991)
Net cash provided by financing activities   131,936    30,846 
Increase in cash and cash equivalents   3,273    (175)
Cash and cash equivalents at beginning of period   41,053    41,365 
Cash and cash equivalents at end of period   44,326    41,190 
           
Supplemental disclosures of cash flow information:          
    Interest paid   3,277    3,664 
    Income taxes paid   2,225    1,300 
           
Supplemental disclosure of non-cash investing and financing activities:          
Fair value adjustments for securities available for sale   (5,258)   (9,320)
Initial recognition of operating right-of-use assets       1,075 
Initial recognition of operating lease liabilities       1,075 

 

See Notes to the Unaudited Consolidated Interim Financial Statements

7

Index 

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

1.       Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and to general practices within the banking industry. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all significant adjustments considered necessary for fair presentation have been included. Certain items previously reported have been reclassified to conform to the current period’s reporting format. Such reclassifications did not affect net income or stockholders’ equity.

 

ENB Financial Corp (“the Corporation”) is the bank holding company for its wholly-owned subsidiary Ephrata National Bank (the “Bank”). This Form 10-Q, for the third quarter of 2020, is reporting on the results of operations and financial condition of ENB Financial Corp.

 

Operating results for the three and nine months ended September 30, 2020, are not necessarily indicative of the results that may be expected for the year ended December 31, 2020. For further information, refer to the consolidated financial statements and footnotes thereto included in ENB Financial Corp’s Annual Report on Form 10-K for the year ended December 31, 2019.

 

Revenue from Contracts with Customers

 

The Company records revenue from contracts with customers in accordance with Accounting Standards Topic 606, Revenue from Contracts with Customers (Topic 606). Under Topic 606, the Corporation must identify contracts with customers, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when the Corporation satisfies a performance obligation. Significant revenue has not been recognized in the current reporting period that results from performance obligations satisfied in previous periods.

 

The Corporation’s primary sources of revenue are derived from interest and dividends earned on loans, investment securities, and other financial instruments that are not within the scope of Topic 606. The Corporation has evaluated the nature of its contracts with customers and determined that further disaggregation of revenue from contracts with customers into more granular categories beyond what is presented in the Consolidated Statements of Income was not necessary. The Corporation generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers.

8

Index 

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

2.       Securities Available for Sale 

 

The amortized cost, gross unrealized gains and losses, and fair value of securities held at September 30, 2020, and December 31, 2019, are as follows:

 

      Gross  Gross   
(DOLLARS IN THOUSANDS)  Amortized  Unrealized  Unrealized  Fair
   Cost  Gains  Losses  Value
   $  $  $  $
September 30, 2020                    
U.S. government agencies   8,216    157        8,373 
U.S. agency mortgage-backed securities   64,263    1,492    (91)   65,664 
U.S. agency collateralized mortgage obligations   40,236    758    (89)   40,905 
Asset-backed securities   41,892    82    (921)   41,053 
Corporate bonds   59,436    1,308    (30)   60,714 
Obligations of states and political subdivisions   138,701    4,889    (270)   143,320 
Total securities available for sale   352,744    8,686    (1,401)   360,029 
                     
December 31, 2019                    
U.S. government agencies   32,621    31    (28)   32,624 
U.S. agency mortgage-backed securities   48,859    215    (448)   48,626 
U.S. agency collateralized mortgage obligations   60,124    323    (194)   60,253 
Asset-backed securities   23,646    7    (391)   23,262 
Corporate bonds   54,604    316    (40)   54,880 
Obligations of states and political subdivisions   86,216    2,245    (9)   88,452 
Total securities available for sale   306,070    3,137    (1,110)   308,097 

 

The amortized cost and fair value of securities available for sale at September 30, 2020, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities due to certain call or prepayment provisions.

 

CONTRACTUAL MATURITY OF DEBT SECURITIES      
(DOLLARS IN THOUSANDS)      
   Amortized   
   Cost  Fair Value
   $  $
Due in one year or less   47,256    47,804 
Due after one year through five years   103,969    106,143 
Due after five years through ten years   49,683    50,428 
Due after ten years   151,836    155,654 
Total debt securities   352,744    360,029 

 

Securities available for sale with a par value of $80,235,000 and $66,712,000 at September 30, 2020, and December 31, 2019, respectively, were pledged or restricted for public funds, borrowings, or other purposes as required by law. The fair value of these pledged securities was $85,331,000 at September 30, 2020, and $68,732,000 at December 31, 2019.

9

Index 

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

Proceeds from active sales of securities available for sale, along with the associated gross realized gains and gross realized losses, are shown below. Realized gains and losses are computed on the basis of specific identification.

 

PROCEEDS FROM SALES OF SECURITIES AVAILABLE FOR SALE   
(DOLLARS IN THOUSANDS)            
             
   Three Months Ended September 30,  Nine Months Ended September 30,
   2020  2019  2020  2019
   $  $  $  $
Proceeds from sales   7,001    7,169    50,819    35,818 
Gross realized gains   64    43    730    261 
Gross realized losses   (9)   (1)   (26)   (32)

 

Management evaluates all of the Corporation’s securities for other-than-temporary impairment (OTTI) on a periodic basis. No securities in the portfolio had other-than-temporary impairment recorded in the first nine months of 2020 or 2019.

 

Information pertaining to securities with gross unrealized losses at September 30, 2020, and December 31, 2019, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

 

TEMPORARY IMPAIRMENTS OF SECURITIES

(DOLLARS IN THOUSANDS)  

   Less than 12 months  More than 12 months  Total
      Gross     Gross     Gross
   Fair  Unrealized  Fair  Unrealized  Fair  Unrealized
   Value  Losses  Value  Losses  Value  Losses
   $  $  $  $  $  $
As of September 30, 2020                              
U.S. government agencies                        
U.S. agency mortgage-backed securities   10,586    (75)   2,561    (16)   13,147    (91)
U.S. agency collateralized mortgage obligations   14,940    (89)           14,940    (89)
Asset-backed securities   13,031    (257)   16,749    (664)   29,780    (921)
Corporate bonds           3,001    (30)   3,001    (30)
Obligations of states & political subdivisions   22,673    (270)           22,673    (270)
                               
Total temporarily impaired securities   61,230    (691)   22,311    (710)   83,541    (1,401)
                               
                               
As of December 31, 2019                              
U.S. government agencies   1,222    (3)   15,971    (25)   17,193    (28)
U.S. agency mortgage-backed securities   5,040    (32)   24,027    (416)   29,067    (448)
U.S. agency collateralized mortgage obligations   17,457    (50)   17,512    (144)   34,969    (194)
Asset-backed securities   10,278    (169)   9,126    (222)   19,404    (391)
Corporate bonds   2,562    (4)   13,041    (36)   15,603    (40)
Obligations of states & political subdivisions   2,642    (9)           2,642    (9)
                               
Total temporarily impaired securities   39,201    (267)   79,677    (843)   118,878    (1,110)

 

In the debt security portfolio there were 49 positions that were carrying unrealized losses as of September 30, 2020. There were no instruments considered to be other-than-temporarily impaired at September 30, 2020.

 

10

Index 

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

The Corporation evaluates fixed maturity positions for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic and market concerns warrant such evaluation. U.S. generally accepted accounting principles provide for the bifurcation of OTTI into two categories: (a) the amount of the total OTTI related to a decrease in cash flows expected to be collected from the debt security (the credit loss), which is recognized in earnings, and (b) the amount of total OTTI related to all other factors, which is recognized, net of taxes, as a component of accumulated other comprehensive income.

 

 

3.       Equity Securities

 

The following table summarizes the amortized cost, gross unrealized gains and losses, and fair value of equity securities held at September 30, 2020 and December 31, 2019.

 

      Gross  Gross   
(DOLLARS IN THOUSANDS)  Amortized  Unrealized  Unrealized  Fair
   Cost  Gains  Losses  Value
   $  $  $  $
September 30, 2020                    
CRA-qualified mutual funds   6,162            6,162 
Bank stocks   947        (255)   692 
Total equity securities   7,109        (255)   6,854 

 

 

      Gross  Gross   
(DOLLARS IN THOUSANDS)  Amortized  Unrealized  Unrealized  Fair
   Cost  Gains  Losses  Value
   $  $  $  $
December 31, 2019                    
CRA-qualified mutual funds   6,071            6,071 
Bank stocks   614    26    (3)   637 
Total equity securities   6,685    26    (3)   6,708 

 

The following table presents the net gains and losses on the Corporation’s equity investments recognized in earnings during the three and nine months ended September 30, 2020 and 2019, and the portion of unrealized gains and losses for the period that relates to equity investments held as of September 30, 2020 and 2019.

 

NET GAINS AND LOSSES ON EQUITY INVESTMENTS RECOGNIZED IN EARNINGS

(DOLLARS IN THOUSANDS)    

   Three Months Ended  Nine Months Ended
   September 30,  September 30,
   2020  2019  2020  2019
   $  $  $  $
             
Net gains (losses) recognized in equity securities during the period   (54)   (9)   (279)   35 
                     
Less:  Net gains realized on the sale of equity securities during the period       16        16 
                     
Unrealized gains (losses) recognized in equity securities held at reporting date   (54)   7    (279)   51 

 

 

11

Index 

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

4.        Loans and Allowance for Loan Losses

 

The following table presents the Corporation’s loan portfolio by category of loans as of September 30, 2020, and December 31, 2019:

 

LOAN PORTFOLIO      
(DOLLARS IN THOUSANDS)      
   September 30,  December 31,
   2020  2019
   $  $
Commercial real estate          
Commercial mortgages   136,125    120,212 
Agriculture mortgages   174,150    175,367 
Construction   22,380    16,209 
Total commercial real estate   332,655    311,788 
           
Consumer real estate (a)          
1-4 family residential mortgages   260,465    258,676 
Home equity loans   10,788    9,770 
Home equity lines of credit   68,368    70,809 
Total consumer real estate   339,621    339,255 
           
Commercial and industrial          
Commercial and industrial   128,414    58,019 
Tax-free loans   16,423    16,388 
Agriculture loans   20,494    20,804 
Total commercial and industrial   165,331    95,211 
           
Consumer   5,190    5,416 
           
Gross loans prior to deferred fees   842,797    751,670 
           
Deferred loan costs, net   380    1,948 
Allowance for loan losses   (11,996)   (9,447)
Total net loans   831,181    744,171 

 

(a) Real estate loans serviced for others, which are not included in the Consolidated Balance Sheets, totaled $217,812,000 and $154,577,000 as of September 30, 2020, and December 31, 2019, respectively.

 

The largest movement within the Corporation’s loan portfolio since December 31, 2019 was the sharp growth in the commercial and industrial loan sector, which experienced a $70.1 million, or 73.6% increase. This was a direct result of the Small Business Administration’s new Paycheck Protection Program (PPP) established as part of the CARES Act passed in March 2020, to provide relief to small businesses from the impact of COVID-19. The Corporation began making these loans in early April 2020, and by September 30, 2020 had $77.7 million in PPP loan balances. The majority of these loans have been written with a two-year term, however management expects the vast majority of these loans to be forgiven by the SBA, or paid off by the borrower, prior to maturity of the loan. As a result, management expects the commercial and industrial loan balances to decline by December 31, 2020 with further declines during 2021.

 

The Corporation grades commercial credits differently than consumer credits. The following tables represent all of the Corporation’s commercial credit exposures by internally assigned grades as of September 30, 2020 and December 31, 2019. The grading analysis estimates the capability of the borrower to repay the contractual obligations under the loan agreements as scheduled. The Corporation's internal commercial credit risk grading system is based on experiences with similarly graded loans.

12

Index 

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

The Corporation's internally assigned grades for commercial credits are as follows:

 

·Pass – loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.

 

·Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem, if not corrected. 

 

·Substandard – loans that have a well-defined weakness based on objective evidence and characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

 

·Doubtful – loans classified as doubtful have all the weaknesses inherent in a substandard asset.  In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

 

·Loss – loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted.

 

COMMERCIAL CREDIT EXPOSURE

CREDIT RISK PROFILE BY INTERNALLY ASSIGNED GRADE

(DOLLARS IN THOUSANDS)

 

September 30, 2020  Commercial
Mortgages
  Agriculture
Mortgages
  Construction  Commercial
and
Industrial
  Tax-free
Loans
  Agriculture
Loans
  Total
   $  $  $  $  $  $  $
Grade:                                   
Pass   126,713    160,772    20,884    117,506    16,423    18,646    460,944 
Special Mention   3,500    2,630    1,496    5,779        826    14,231 
Substandard   5,912    10,748        5,129        1,022    22,811 
Doubtful                            
Loss                            
                                    
    Total   136,125    174,150    22,380    128,414    16,423    20,494    497,986 

 

 

December 31, 2019  Commercial
Mortgages
  Agriculture
Mortgages
  Construction  Commercial
and
Industrial
  Tax-free
Loans
  Agriculture
Loans
  Total
   $  $  $  $  $  $  $
Grade:                                   
Pass   117,875    158,896    16,209    52,028    16,388    18,530    379,926 
Special Mention   827    4,546        618        939    6,930 
Substandard   1,510    11,925        5,293        1,335    20,063 
Doubtful               80            80 
Loss                            
                                    
    Total   120,212    175,367    16,209    58,019    16,388    20,804    406,999 

 

 

Substandard loans increased by $2,748,000, or 13.7%, while special mention loans have increased by $7,301,000, or 105.4%, from December 31, 2019 to September 30, 2020. Substandard loans increased from $20.1 million to $22.8 million from December 31, 2019, to September 30, 2020 while special mention loans increased from $6.9 million to $14.2 million during this same period. The loan areas that experienced material changes in special mention and substandard loans were commercial and industrial and commercial mortgages. Under commercial and industrial loans, one $3.5 million non-profit loan and another $1.5 million hotel loan to unrelated borrowers were transferred to special mention, along with a number of smaller loan relationships. During the third quarter of 2020, a bowling alley with a $3.6 million mortgage was downgraded from special mention to substandard. A total of sixteen loans were downgraded to substandard in the third quarter of 2020, twelve of which were downgraded from special mention.

13

Index 

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

Special mention loans within agriculture declined from $5.5 million to $3.5 million; one farm customer with $1.8 million in outstanding loans was upgraded from special mention to a pass rating, while another customer with $754,000 in outstanding balances was downgraded from a pass rating to special mention.

 

For consumer loans, the Corporation evaluates credit quality based on whether the loan is considered performing or non-performing. Non-performing loans consist of those loans greater than 90 days delinquent and nonaccrual loans. The following tables present the balances of consumer loans by classes of the loan portfolio based on payment performance as of September 30, 2020 and December 31, 2019:

 

CONSUMER CREDIT EXPOSURE

CREDIT RISK PROFILE BY PAYMENT PERFORMANCE

(DOLLARS IN THOUSANDS)          

 

September 30, 2020  1-4 Family
Residential
Mortgages
  Home Equity
Loans
  Home Equity
Lines of
Credit
  Consumer  Total
Payment performance:  $  $  $  $  $
                
Performing   259,710    10,696    68,358    5,182    343,946 
Non-performing   755    92    10    8    865 
                          
   Total   260,465    10,788    68,368    5,190    344,811 

 

 

December 31, 2019  1-4 Family
Residentia
l Mortgages
  Home Equity
Loans
  Home Equity
Lines of
Credit
  Consumer  Total
Payment performance:  $  $  $  $  $
                
Performing   257,374    9,678    70,799    5,412    343,263 
Non-performing   1,302    92    10    4    1,408 
                          
   Total   258,676    9,770    70,809    5,416    344,671 

 

14

Index 

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

The following tables present an age analysis of the Corporation’s past due loans, segregated by loan portfolio class, as of September 30, 2020 and December 31, 2019:

 

AGING OF LOANS RECEIVABLE                     
(DOLLARS IN THOUSANDS)                     
                      
                     Loans
         Greater           Receivable >
   30-59 Days  60-89 Days  than 90  Total Past     Total Loans  90 Days and
September 30, 2020  Past Due  Past Due  Days  Due  Current  Receivable  Accruing
   $  $  $  $  $  $  $
Commercial real estate                                   
   Commercial mortgages           210    210    135,915    136,125     
   Agriculture mortgages   532            532    173,618    174,150     
   Construction                   22,380    22,380     
Consumer real estate                                   
   1-4 family residential mortgages   1,080        755    1,835    258,630    260,465    266 
   Home equity loans           92    92    10,696    10,788     
   Home equity lines of credit   68        10    78    68,290    68,368    10 
Commercial and industrial                                   
   Commercial and industrial   102        495    597    127,817    128,414     
   Tax-free loans                   16,423    16,423     
   Agriculture loans   32            32    20,462    20,494     
Consumer   14    9    8    31    5,159    5,190    8 
       Total   1,828    9    1,570    3,407    839,390    842,797    284 

 

AGING OF LOANS RECEIVABLE                     
(DOLLARS IN THOUSANDS)                     
                      
                     Loans
         Greater           Receivable >
   30-59 Days  60-89 Days  than 90  Total Past     Total Loans  90 Days and
December 31, 2019  Past Due  Past Due  Days  Due  Current  Receivable  Accruing
   $  $  $  $  $  $  $
Commercial real estate                                   
   Commercial mortgages           228    228    119,984    120,212     
   Agriculture mortgages   962        1,070    2,032    173,335    175,367     
   Construction                   16,209    16,209     
Consumer real estate                                   
   1-4 family residential mortgages   2,254    161    1,302    3,717    254,959    258,676    807 
   Home equity loans   52        92    144    9,626    9,770     
   Home equity lines of credit   43        10    53    70,756    70,809    10 
Commercial and industrial                                   
   Commercial and industrial   68        538    606    57,413    58,019     
   Tax-free loans                   16,388    16,388     
   Agriculture loans   2            2    20,802    20,804     
Consumer   14    12    4    30    5,386    5,416    4 
       Total   3,395    173    3,244    6,812    744,858    751,670    821 

15

Index 

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

The following table presents nonaccrual loans by classes of the loan portfolio as of September 30, 2020 and December 31, 2019:

 

NONACCRUAL LOANS BY LOAN CLASS   
(DOLLARS IN THOUSANDS)   
   September 30,  December 31,
   2020  2019
   $  $
       
Commercial real estate          
  Commercial mortgages   210    228 
  Agriculture mortgages       1,070 
  Construction        
Consumer real estate          
  1-4 family residential mortgages   489    495 
  Home equity loans   92    92 
  Home equity lines of credit        
Commercial and industrial          
  Commercial and industrial   495    538 
  Tax-free loans        
  Agriculture loans        
Consumer        
             Total   1,286    2,423 

 

As of September 30, 2020 and December 31, 2019, all of the Corporation’s commercial loans on nonaccrual status were also considered impaired. Information with respect to impaired loans for the three and nine months ended September 30, 2020 and September 30, 2019, is as follows:

 

   Three Months Ended September 30,  Nine months ended September 30,
   2020  2019  2020  2019
   $  $  $  $
             
Average recorded balance of impaired loans   5,060    3,721    4,062    3,278 
Interest income recognized on impaired loans   31    11    72    32 

 

There was one loan modification made during the third quarter of 2020 that would be considered a troubled debt restructuring (TDR). One $3.6 million loan was restructured to provide relief to the commercial borrower by reducing the interest rate, providing a six-month interest only period, and extending the amortization period by an additional nine years. In addition to this TDR, deferments of principal related to the impact of COVID-19 did occur beginning in late March 2020, however these modifications are not considered a TDR under the revised COVID-19 regulatory guidance. There was one loan modification that occurred during the first quarter of 2019, constituting a TDR. A modification of the payment terms to a loan customer are considered a TDR if a concession was made to a borrower that is experiencing financial difficulty. A concession is generally defined as more favorable payment or credit terms granted to a borrower in an effort to improve the likelihood of the lender collecting principal in its entirety. Concessions usually are in the form of interest only for a period of time, or a lower interest rate offered in an effort to enable the borrower to continue to make normally scheduled payments.

 

In the first quarter of 2019, a loan modification was made on a $718,000 agricultural mortgage which moved the timing of the annual principal payment and changed interest payments from monthly to annually. The farmer had suffered a fire loss in late 2018 impacting one year’s harvest. The principal and interest payment due date was reset to November 15, 2019, when it was paid. No other loans were modified during 2019 or 2020.

 

Included in the impaired loan portfolio are three loans to unrelated borrowers that are being reported as TDRs. The balance of these three TDR loans was $1,932,000 as of September 30, 2020. One of these TDR loans with a balance of $439,000 is also on nonaccrual and is included under 1-4 family residential mortgages shown in the nonaccrual table above. For both of these TDR loans the borrowers have a history of being delinquent. Management will continue to report these loans as TDR loans until they have been paid off or charged off.

16

Index 

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

The following tables summarize information regarding impaired loans by loan portfolio class as of September 30, 2020, and for the nine months ended September 30, 2020, and as of December 31, 2019:

 

IMPAIRED LOAN ANALYSIS               
(DOLLARS IN THOUSANDS)               
September 30, 2020  Recorded
Investment
  Unpaid
Principal
Balance
  Related
Allowance
  Average
Recorded
Investment
  Interest
Income
Recognized
   $  $  $  $  $
                
With no related allowance recorded:                         
Commercial real estate                         
    Commercial mortgages   699    752        716     
    Agriculture mortgages   1,492    1,521        1,972    41 
    Construction                    
Total commercial real estate   2,191    2,273        2,688    41 
                          
Commercial and industrial                         
    Commercial and industrial   495    523        524    17 
    Tax-free loans                    
    Agriculture loans                    
Total commercial and industrial   495    523        524    17 
                          
Total with no related allowance   2,686    2,796        3,212    58 
                          
With an allowance recorded:                         
Commercial real estate                         
    Commercial mortgages   3,673    3,681    1,138    850    15 
    Agriculture mortgages                    
    Construction                    
Total commercial real estate   3,673    3,681    1,138    850    15 
                          
Commercial and industrial                         
    Commercial and industrial                    
    Tax-free loans                    
    Agriculture loans                    
Total commercial and industrial                    
                          
Total with a related allowance   3,673    3,681    1,138    850    15 
                          
Total by loan class:                         
Commercial real estate                         
    Commercial mortgages   4,372    4,433    1,138    1,566    15 
    Agriculture mortgages   1,492    1,521        1,972    41 
    Construction                    
Total commercial real estate   5,864    5,954    1,138    3,538    56 
                          
Commercial and industrial                         
    Commercial and industrial   495    523        524    17 
    Tax-free loans                    
    Agriculture loans                    
Total commercial and industrial   495    523        524    17 
                          
Total   6,359    6,477    1,138    4,062    73 

 

17

Index 

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

IMPAIRED LOAN ANALYSIS               
(DOLLARS IN THOUSANDS)               
December 31, 2019  Recorded
Investment
  Unpaid
Principal
Balance
  Related
Allowance
  Average
Recorded
Investment
  Interest
Income
Recognized
   $  $  $  $  $
                
With no related allowance recorded:                         
Commercial real estate                         
    Commercial mortgages   724    765        859     
    Agriculture mortgages   1,912    1,928        1,903    43 
    Construction                    
Total commercial real estate   2,636    2,693        2,762    43 
                          
Commercial and industrial                         
    Commercial and industrial                    
    Tax-free loans                    
    Agriculture loans                    
Total commercial and industrial                    
                          
Total with no related allowance   2,636    2,693        2,762    43 
                          
With an allowance recorded:                         
Commercial real estate                         
    Commercial mortgages   92    100    49    93     
    Agriculture mortgages   718    718    60    760     
    Construction                    
Total commercial real estate   810    818    109    853     
                          
Commercial and industrial                         
    Commercial and industrial   538    549    80    261     
    Tax-free loans                    
    Agriculture loans                    
Total commercial and industrial   538    549    80    261     
                          
Total with a related allowance   1,348    1,367    189    1,114     
                          
Total by loan class:                         
Commercial real estate                         
    Commercial mortgages   816    865    49    952     
    Agriculture mortgages   2,630    2,646    60    2,663    43 
    Construction                    
Total commercial real estate   3,446    3,511    109    3,615    43 
                          
Commercial and industrial                         
    Commercial and industrial   538    549    80    261     
    Tax-free loans                    
    Agriculture loans                    
Total commercial and industrial   538    549    80    261     
                          
Total   3,984    4,060    189    3,876    43 

18

Index 

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

The following table details activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2020:

 

ALLOWANCE FOR CREDIT LOSSES

(DOLLARS IN THOUSANDS)

  

   Commercial
Real Estate
  Consumer
Real Estate
  Commercial
and
Industrial
  Consumer  Unallocated  Total
   $  $  $  $  $  $
Allowance for credit losses:                              
Beginning balance - December 31, 2019   4,319    2,855    1,784    41    448    9,447 
                               
    Charge-offs               (6)       (6)
    Recoveries   11        1            12 
    Provision   252    296    171    21    (390)   350 
                               
Balance - March 31, 2020   4,582    3,151    1,956    56    58    9,803 
                               
    Charge-offs               (10)       (10)
    Recoveries           1    1        2 
    Provision   356    146    175    5    293    975 
                               
Ending Balance - June 30, 2020   4,938    3,297    2,132    52    351    10,770 
                               
    Charge-offs           (23)   (3)       (26)
    Recoveries           1    1        2 
    Provision   1,289    75    (18)   4    (100)   1,250 
                               
Balance - September 30, 2020   6,227    3,372    2,092    54    251    11,996 

 

During the nine months ended September 30, 2020, management charged off $42,000 in loans while recovering $16,000 and added $2,575,000 to the provision. The unallocated portion of the allowance decreased from 4.7% of total reserves as of December 31, 2019, to 2.1% as of September 30, 2020. Management monitors the unallocated portion of the allowance with a desire to maintain it at approximately 5% over the long term, with a requirement of it not to exceed 10%.

 

During the nine months ended September 30, 2020, net provision expense was recorded for all sectors. The higher provision in the commercial real estate sector was due to a specific allocation of $1.1 million for a customer with ongoing business concerns. The higher provisions across the other categories were primarily caused by increasing the qualitative factors across all industry lines to various degrees as a result of the impact and effect from COVID-19 and the declining economic conditions. There were minimal charge-offs and recoveries recorded during the nine months ended September 30, 2020, so the provision expense was primarily related to the specific allocation as well as the change in economic conditions and potential for credit declines moving forward. The total amount of substandard loans at the end of the third quarter of 2020 was slightly higher resulting in slightly more provision expense.

 

As of September 30, 2020, the Corporation’s total delinquencies were 0.40%, a decline from 0.91% at December 31, 2019. The Corporation’s total delinquencies continue to compare favorably to the national uniform bank performance group, which was at 1.05% as of December 31, 2019.

 

Outside of the above measurements and indicators, management continues to utilize nine qualitative factors to continually refine the potential credit risks across the Corporation’s various loan types.  In addition, the loan portfolio is sectored out into nine different categories to evaluate these qualitative factors.   A total score of the qualitative factors for each loan sector is calculated to utilize in the allowance for loan loss calculation.  The agricultural dairy sector carries the highest level of qualitative factors due to the long-term weakness in milk prices. While the dairy market has improved recently, COVID-19 initially caused a sharp decline in milk prices.

19

Index 

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

The following table details activity in the allowance for loan losses by portfolio segment for the nine months ended September 30, 2019:

 

ALLOWANCE FOR CREDIT LOSSES

(DOLLARS IN THOUSANDS)

 

   Commercial
Real Estate
  Consumer
Real Estate
  Commercial
and
Industrial
  Consumer  Unallocated  Total
   $  $  $  $  $  $
Allowance for credit losses:                              
Beginning balance - December 31, 2018   4,296    2,408    1,428    102    432    8,666 
                               
    Charge-offs               (17)       (17)
    Recoveries   44        13            57 
    Provision   148    (140)   128    16    28    180 
                               
Balance - March 31, 2019   4,488    2,268    1,569    101    460    8,886 
                               
    Charge-offs               (6)       (6)
    Recoveries   43        1    3        47 
    Provision   (114)   122    (204)   (22)   248    30 
                               
Balance - June 30, 2019   4,417    2,390    1,366    76    708    8,957 
                               
    Charge-offs   (122)       (63)   (3)       (188)
    Recoveries   41    1    33            75 
    Provision   229    156    740    (19)   (476)   630 
                               
Ending Balance - September 30, 2019   4,565    2,547    2,076    54    232    9,474 

 

During the nine months ended September 30, 2019, management charged off $211,000 in loans while recovering $179,000 and added $840,000 to the provision. The unallocated portion of the allowance decreased from 5.3% of total reserves as of December 31, 2018, to 2.5% as of September 30, 2019, after being higher at the end of the first and second quarters. Management monitors the unallocated portion of the allowance with a desire to maintain it at approximately 5% or less, with a requirement of it not exceeding 10%.

 

During the nine months ended September 30, 2019, net provision expense was recorded for all sectors except consumer, which had a net credit provision. In the third quarter of 2019, management recorded charge-offs in commercial real estate and the C&I sector, unlike in the first two quarters of 2019. This also pushed up the historic loss rate and caused higher allocations in the third quarter for those sectors. The total amount of substandard and special mention loans at the end of the second and third quarters of 2019 were similar for commercial mortgages, but agricultural mortgages increased for both special mention and substandard loans, requiring more provision. The Corporation’s commercial and industrial allocation for credit losses was increased by $740,000 in the third quarter of 2019, primarily due to the classification of one $547,000 loan to doubtful status, which caused a specific provision for the same amount. This C&I loan customer is current as to payment of interest on a commercial line of credit but the line has not revolved for several years. The Corporation does have a general UCC filing against all business assets but the majority of their inventory assets are already covered by a purchase money security interest of the manufacturer. Management will continue to classify the loan as doubtful until it can be determined that sufficient collateral exists to cover the loan, or sustainable principal payments can be made on the line.

20 

Index 

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

The following tables present the balance in the allowance for credit losses and the recorded investment in loans receivable by portfolio segment based on impairment method as of September 30, 2020 and December 31, 2019:

 

ALLOWANCE FOR CREDIT LOSSES AND RECORDED INVESTMENT IN LOANS RECEIVABLE

(DOLLARS IN THOUSANDS)

 

As of September 30, 2020:  Commercial Real
Estate
  Consumer
Real Estate
  Commercial
and
Industrial
  Consumer  Unallocated  Total
   $  $  $  $  $  $
Allowance for credit losses:                              
Ending balance: individually evaluated                              
  for impairment   1,138                    1,138 
Ending balance: collectively evaluated                              
  for impairment   5,089    3,372    2,092    54    251    10,858 
                               
Loans receivable:                              
Ending balance   332,655    339,621    165,331    5,190         842,797 
Ending balance: individually evaluated                              
  for impairment   5,864        495             6,359 
Ending balance: collectively evaluated                              
  for impairment   326,791    339,621    164,836    5,190         836,438 

 

As of December 31, 2019:  Commercial Real
Estate
  Consumer
Real Estate
  Commercial
and
Industrial
  Consumer  Unallocated  Total
   $  $  $  $  $  $
Allowance for credit losses:                              
Ending balance: individually evaluated                              
  for impairment   109        80            189 
Ending balance: collectively evaluated                              
  for impairment   4,210    2,855    1,704    41    448    9,258