Company Quick10K Filing
Quick10K
ENB Financial
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$19.55 6 $111
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-17 Earnings, Exhibits
8-K 2019-07-17 Other Events, Exhibits
8-K 2019-06-03 Amend Bylaw, Exhibits
8-K 2019-05-15 Officers, Exhibits
8-K 2019-05-07 Shareholder Vote, Regulation FD, Exhibits
8-K 2019-04-17 Other Events, Exhibits
8-K 2019-04-12 Earnings, Exhibits
8-K 2019-04-01 Officers, Other Events, Exhibits
8-K 2019-02-20 Other Events, Exhibits
8-K 2019-01-31 Officers
8-K 2019-01-16 Other Events, Exhibits
8-K 2019-01-15 Earnings, Exhibits
8-K 2018-10-18 Officers, Exhibits
8-K 2018-10-17 Other Events, Exhibits
8-K 2018-10-15 Earnings, Exhibits
8-K 2018-07-19 Earnings, Exhibits
8-K 2018-07-18 Other Events, Exhibits
8-K 2018-05-08 Shareholder Vote, Regulation FD, Exhibits
8-K 2018-04-18 Other Events, Exhibits
8-K 2018-04-16 Earnings, Exhibits
8-K 2018-02-02 Other Events
8-K 2018-01-18 Earnings, Exhibits
8-K 2018-01-17 Other Events, Exhibits
UBER Uber 55,546
SIVR ETFS Silver Trust 401
ALES I-On Communications 102
QNTO Quaint Oak Bancorp 25
OPCO Ourpets 16
ORRP Oroplata Resources 15
CIIX ChineseInvestors.com 14
DIGP DigiPath 7
JGRI Joshua Gold Resources 0
ICOX Icox Innovations 0
ENBP 2019-06-30
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 2019-06-30

ENBP 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 form10q-22591_enbf.htm 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended June 30, 2019

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 x          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 x          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 x
      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 x

 

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 August 1, 2019, the registrant had 5,692,384 shares of $0.10 (par) Common Stock outstanding.

 

 

 

ENB FINANCIAL CORP

INDEX TO FORM 10-Q

June 30, 2019

 

     
Part I – FINANCIAL INFORMATION  
     
Item 1. Financial Statements  
     
Consolidated Balance Sheets at June 30, 2019 and 2018, and December 31, 2018 (Unaudited) 3
     
Consolidated Statements of Income for the Three and Six Months Ended June 30, 2019 and 2018 (Unaudited)   4
     
Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2019 and 2018 (Unaudited)   5
     
Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2019 and 2018 (Unaudited) 6
     
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018 (Unaudited) 7
     
Notes to the Unaudited Consolidated Interim Financial Statements 8-32
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33-68
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk 69-74
     
Item 4. Controls and Procedures 75
     
     
Part II – OTHER INFORMATION 76
     
Item 1. Legal Proceedings 76
     
Item 1A. Risk Factors 76
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 76
     
Item 3. Defaults upon Senior Securities 76
     
Item 4. Mine Safety Disclosures 76
     
Item 5. Other Information 76
     
Item 6. Exhibits 77
     
     
SIGNATURE PAGE 78

 

2 

Index 

Part I - Financial Information

Item 1. Financial Statements

 

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

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

   June 30,   December 31,   June 30, 
   2019   2018   2018 
   $   $   $ 
ASSETS               
Cash and due from banks   17,210    26,675    20,016 
Interest-bearing deposits in other banks   34,460    14,690    24,083 
                
   Total cash and cash equivalents   51,670    41,365    44,099 
                
Securities available for sale (at fair value)   290,927    294,065    307,253 
Equity securities (at fair value)   6,231    5,934    5,737 
                
Loans held for sale   3,473    1,429    2,436 
                
Loans (net of unearned income)   718,356    694,073    628,218 
                
   Less: Allowance for loan losses   8,957    8,666    8,171 
                
   Net loans   709,399    685,407    620,047 
                
Premises and equipment   25,339    25,551    25,814 
Regulatory stock   6,959    6,348    6,263 
Bank owned life insurance   28,429    28,085    27,693 
Other assets   9,218    9,658    10,544 
                
       Total assets   1,131,645    1,097,842    1,049,886 
                
LIABILITIES AND STOCKHOLDERS' EQUITY               
                
Liabilities:               
  Deposits:               
    Noninterest-bearing   345,483    369,081    326,296 
    Interest-bearing   596,123    550,653    551,773 
                
    Total deposits   941,606    919,734    878,069 
                
  Short-term borrowings       7,870    2,738 
  Long-term debt   74,628    65,386    68,361 
  Other liabilities   2,897    2,050    1,975 
                
       Total liabilities   1,019,131    995,040    951,143 
                
Stockholders' equity:               
  Common stock, par value $0.10 as of 6/30/19; $0.20 as of 12/31/18 and 6/30/18               
Shares:  Authorized 24,000,000 as of 6/30/19; 12,000,000 as of 12/31/18 and 6/30/18               
             Issued 5,739,114 and Outstanding 5,698,384 as of 6/30/19               
             Issued 2,869,557 and Outstanding  2,852,532 as of 12/31/18               
             Issued 2,869,557 and Outstanding 2,857,704 as of 6/30/18   574    574    574 
  Capital surplus   4,454    4,435    4,424 
  Retained earnings   108,024    104,067    100,922 
  Accumulated other comprehensive income (loss) net of tax   298    (5,678)   (6,778)
  Less: Treasury stock cost on 46,730 shares as of 6/30/19               
  17,025 shares as of 12/31/18 and 11,853 shares as of 6/30/18   (836)   (596)   (399)
                
       Total stockholders' equity   112,514    102,802    98,743 
                
       Total liabilities and stockholders' equity   1,131,645    1,097,842    1,049,886 

 

See Notes to the Unaudited Consolidated Interim Financial Statements  

3 

Index 

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

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

 

   Three Months ended June 30,   Six Months ended June 30, 
   2019   2018   2019   2018 
   $   $   $   $ 
Interest and dividend income:                    
Interest and fees on loans   8,309    6,704    16,332    13,102 
Interest on securities available for sale                    
Taxable   1,242    1,186    2,517    2,287 
Tax-exempt   608    736    1,255    1,495 
Interest on deposits at other banks   119    135    166    247 
Dividend income   184    136    354    290 
                     
Total interest and dividend income   10,462    8,897    20,624    17,421 
                     
Interest expense:                    
Interest on deposits   913    512    1,737    991 
Interest on borrowings   391    330    746    625 
                     
Total interest expense   1,304    842    2,483    1,616 
                     
Net interest income   9,158    8,055    18,141    15,805 
                     
Provision for loan losses   30    90    210    280 
                     
Net interest income after provision for loan losses   9,128    7,965    17,931    15,525 
                     
Other income:                    
Trust and investment services income   505    474    1,042    1,028 
Service fees   693    837    1,323    1,498 
Commissions   756    657    1,411    1,241 
Gains (losses) on the sale of debt securities, net   106    (62)   187    (28)
Gains on equity securities, net   27    16    44    47 
Gains on sale of mortgages   415    352    764    587 
Earnings on bank-owned life insurance   179    192    357    1,291 
Other income   81    162    178    344 
                     
Total other income   2,762    2,628    5,306    6,008 
                     
Operating expenses:                    
Salaries and employee benefits   5,105    5,221    10,293    10,181 
Occupancy   590    602    1,220    1,265 
Equipment   287    291    574    579 
Advertising & marketing   166    205    416    437 
Computer software & data processing   609    574    1,266    1,118 
Shares tax   232    229    465    443 
Professional services   556    505    1,031    938 
Other expense   672    540    1,234    1,090 
                     
Total operating expenses   8,217    8,167    16,499    16,051 
                     
Income before income taxes   3,673    2,426    6,738    5,482 
                     
Provision for federal income taxes   584    300    1,046    535 
                     
Net income   3,089    2,126    5,692    4,947 
                     
Earnings per share of common stock   0.54    0.37    1.00    0.87 
                     
Cash dividends paid per share   0.155    0.145    0.305    0.285 
                     
Weighted average shares outstanding   5,692,506    5,707,590    5,693,418    5,703,962 

 

See Notes to the Unaudited Consolidated Interim Financial Statements

4 

Index 

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(DOLLARS IN THOUSANDS)

 

   Three Months ended June 30,   Six Months Ended June 30, 
   2019   2018   2019   2018 
   $   $   $   $ 
                 
Net income   3,089    2,126    5,692    4,947 
                     
Other comprehensive income (loss), net of tax:                    
Securities available for sale not other-than-temporarily impaired:                    
                     
   Unrealized gains (losses) arising during the period   4,520    (362)   7,751    (3,730)
   Income tax effect   (949)   76    (1,627)   759 
    3,571    (286)   6,124    (2,971)
                     
   (Gains) losses recognized in earnings   (106)   62    (187)   28 
   Income tax effect   22    (13)   39    (6)
    (84)   49    (148)   22 
                     
Other comprehensive income (loss), net of tax   3,487    (237)   5,976    (2,949)
                     
Comprehensive Income   6,576    1,889    11,668    1,998 

 

See Notes to the Unaudited Consolidated Interim Financial Statements

5 

Index 

 

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, 2017   574    4,415    98,629    (3,195)   (664)   99,759 
                               
Net income           2,821            2,821 
Other comprehensive loss net of tax               (2,712)       (2,712)
Change in accounting principal for                              
adoption of ASU 2017-08           (1,663)           (1,663)
Reclassification of certain income tax                              
effects from accumulated other                              
comprehensive loss           634    (634)        
Treasury stock issued - 3,656 shares       4            123    127 
Cash dividends paid, $0.28 per share           (798)           (798)
                               
Balances, March 31, 2018   574    4,419    99,623    (6,541)   (541)   97,534 
                               
Net income           2,126            2,126 
Other comprehensive income net of tax               (237)       (237)
Treasury stock issued - 4,225 shares       5            142    147 
Cash dividends paid, $0.29 per share           (827)           (827)
                               
Balances, June 30, 2018   574    4,424    100,922    (6,778)   (399)   98,743 
                               
                               
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 

 

See Notes to the Unaudited Consolidated Interim Financial Statements  

6 

Index 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

(DOLLARS IN THOUSANDS)  Six Months Ended June 30, 
   2019   2018 
   $   $ 
Cash flows from operating activities:          
Net income   5,692    4,947 
Adjustments to reconcile net income to net cash          
provided by operating activities:          
Net amortization of securities premiums and discounts and loan fees   1,692    2,050 
Amortization of operating leases right-of-use assets   87     
Increase in interest receivable   (343)   (36)
Increase in interest payable   96    26 
Provision for loan losses   210    280 
(Gain) loss on sale of debt securities, net   (187)   28 
Gain on equity securities, net   (44)   (47)
Gains on sale of mortgages   (764)   (587)
Loans originated for sale   (20,210)   (16,557)
Proceeds from sales of loans   18,930    17,600 
Earnings on bank-owned life insurance   (357)   (1,291)
Depreciation of premises and equipment and amortization of software   783    816 
Deferred income tax   (274)   (21)
Other assets and other liabilities, net   123    1,482 
Net cash provided by operating activities   5,434    8,690 
           
Cash flows from investing activities:          
Securities available for sale:          
   Proceeds from maturities, calls, and repayments   10,813    8,946 
   Proceeds from sales   28,648    32,082 
   Purchases   (30,115)   (41,477)
Equity securities      
   Proceeds from sales       153 
   Purchases   (153)   (225)
Purchase of regulatory bank stock   (1,102)   (1,398)
Redemptions of regulatory bank stock   491    929 
Net increase in loans   (24,451)   (31,250)
Purchases of premises and equipment, net   (517)   (857)
Purchase of computer software   (31)   (57)
Net cash used for investing activities   (16,417)   (33,154)
           
Cash flows from financing activities:          
Net increase in demand, NOW, and savings accounts   18,222    18,857 
Net increase (decrease) in time deposits   3,650    (7,265)
Net (decrease) increase in short-term borrowings   (7,870)   2,738 
Proceeds from long-term debt   16,212    11,661 
Repayments of long-term debt   (6,970)   (9,150)
Dividends paid   (1,735)   (1,625)
Proceeds from sale of treasury stock   313    274 
Treasury stock purchased   (534)    
Net cash provided by (used in) financing activities   21,288    15,490 
Increase (decrease) in cash and cash equivalents   10,305    (8,974)
Cash and cash equivalents at beginning of period   41,365    53,073 
Cash and cash equivalents at end of period   51,670    44,099 
           
Supplemental disclosures of cash flow information:          
    Interest paid   2,387    1,590 
    Income taxes paid   800    250 
           
Supplemental disclosure of non-cash investing and financing activities:          
Fair value adjustments for securities available for sale   (7,564)   3,730 
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 second quarter of 2019, is reporting on the results of operations and financial condition of ENB Financial Corp.

 

Operating results for the three and six months ended June 30, 2019, are not necessarily indicative of the results that may be expected for the year ended December 31, 2019. 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, 2018.

 

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.

 

Leases

 

ASU 2016-02, “Leases (Topic 842).” ASU 2016-02, among other things, requires lessees to recognize a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model and ASC Topic 606, “Revenue from Contracts with Customers.” ASU 2016-02 became effective for the Corporation on January 1, 2019 and initially required transition using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842) - Targeted Improvements,” which, among other things, provided an additional transition method that allowed entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In December 2018, the FASB also issued ASU 2018-20, “Leases (Topic 842) - Narrow-Scope Improvements for Lessors,” which provided for certain policy elections and changed lessor accounting for sales and similar taxes and certain lessor costs. Upon adoption of ASU 2016-02, ASU 2018-11 and ASU 2018-20 on January 1, 2019, the Corporation recognized right-of-use assets and related lease liabilities of $1,075,000.

 

8 

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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 June 30, 2019, and December 31, 2018, are as follows:        

 

      Gross  Gross   
(DOLLARS IN THOUSANDS)  Amortized  Unrealized  Unrealized  Fair
   Cost  Gains  Losses  Value
   $  $  $  $
June 30, 2019            
U.S. government agencies   31,186    28    (183)   31,031 
U.S. agency mortgage-backed securities   46,899    65    (872)   46,092 
U.S. agency collateralized mortgage obligations   54,906    291    (289)   54,908 
Asset-backed securities   13,926        (67)   13,859 
Corporate bonds   52,680    80    (262)   52,498 
Obligations of states and political subdivisions   90,953    1,639    (53)   92,539 
Total securities available for sale   290,550    2,103    (1,726)   290,927 
                     
December 31, 2018                    
U.S. government agencies   31,025    5    (910)   30,120 
U.S. agency mortgage-backed securities   46,363    2    (1,726)   44,639 
U.S. agency collateralized mortgage obligations   55,182    74    (1,166)   54,090 
Asset-backed securities   11,440        (41)   11,399 
Corporate bonds   61,085        (1,893)   59,192 
Obligations of states and political subdivisions   96,157    69    (1,601)   94,625 
Total securities available for sale   301,252    150    (7,337)   294,065 

 

The amortized cost and fair value of securities available for sale at June 30, 2019, 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   25,499    25,363 
Due after one year through five years   133,326    132,587 
Due after five years through ten years   24,363    24,257 
Due after ten years   107,362    108,720 
Total debt securities   290,550    290,927 

 

Securities available for sale with a par value of $63,191,000 and $58,668,000 at June 30, 2019, and December 31, 2018, respectively, were pledged or restricted for public funds, borrowings, or other purposes as required by law. The fair value of these pledged securities was $64,686,000 at June 30, 2019, and $58,914,000 at December 31, 2018.

 

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.

9 

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ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

PROCEEDS FROM SALES OF SECURITIES AVAILABLE FOR SALE

(DOLLARS IN THOUSANDS)

 

   Three Months Ended June 30,  Six Months Ended June 30,
   2019  2018  2019  2018
   $  $  $  $
Proceeds from sales   18,401    23,660    28,648    32,235 
Gross realized gains   122    58    218    109 
Gross realized losses   16    120    31    137 

 

 

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 six months of 2019 or 2018.

 

Information pertaining to securities with gross unrealized losses at June 30, 2019, and December 31, 2018, 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 June 30, 2019                              
U.S. government agencies           20,813    (183)   20,813    (183)
U.S. agency mortgage-backed securities   1,983    (47)   37,732    (825)   39,715    (872)
U.S. agency collateralized mortgage obligations   2,607    (6)   33,763    (283)   36,370    (289)
Asset-backed securities   11,294    (67)           11,294    (67)
Corporate bonds   3,989    (31)   30,210    (231)   34,199    (262)
Obligations of states & political subdivisions           10,363    (53)   10,363    (53)
                               
Total temporarily impaired securities   19,873    (151)   132,881    (1,575)   152,754    (1,726)
                               
                               
As of December 31, 2018                              
U.S. government agencies           28,116    (910)   28,116    (910)
U.S. agency mortgage-backed securities           42,041    (1,726)   42,041    (1,726)
U.S. agency collateralized mortgage obligations   8,055    (85)   40,735    (1,081)   48,790    (1,166)
Asset-backed securities   5,563    (41)           5,563    (41)
Corporate bonds   20,228    (455)   38,964    (1,438)   59,192    (1,893)
Obligations of states & political subdivisions   12,367    (104)   68,982    (1,497)   81,349    (1,601)
                               
Total temporarily impaired securities   46,213    (685)   218,838    (6,652)   265,051    (7,337)

 

In the debt security portfolio there were 82 positions that were carrying unrealized losses as of June 30, 2019. There were no instruments considered to be other-than-temporarily impaired at June 30, 2019.

 

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.

 

10 

Index 

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

3.       Equity Securities

 

The following table summarizes the amortized cost, gross unrealized gains and losses, and fair value of equity securities held at June 30, 2019 and December 31, 2018.

      Gross  Gross   
(DOLLARS IN THOUSANDS)  Amortized  Unrealized  Unrealized  Fair
   Cost  Gains  Losses  Value
   $  $  $  $
June 30, 2019                    
CRA-qualified mutual funds   5,488            5,488 
Bank stocks   754    21    (32)   743 
Total equity securities   6,242    21    (32)   6,231 
                     

 

      Gross  Gross   
(DOLLARS IN THOUSANDS)  Amortized  Unrealized  Unrealized  Fair
   Cost  Gains  Losses  Value
   $  $  $  $
December 31, 2018                    
CRA-qualified mutual funds   5,410            5,410 
Bank stocks   591        (67)   524 
Total equity securities   6,001       (67)   5,934 

 

 

The following table presents the net gains and losses on the Corporation’s equity investments recognized in earnings during the year-to-date period ended June 30, 2019 and 2018, and the portion of unrealized gains and losses for the period that relates to equity investments held as of June 30, 2019 and 2018. 

 

 

NET GAINS AND LOSSES ON EQUITY INVESTMENTS RECOGNIZED IN EARNINGS

(DOLLARS IN THOUSANDS)        

 

   Three Months Ended  Six Months Ended
   June 30, 2019  June 30, 2018  June 30, 2019  June 30, 2018
   $  $  $  $
             
Net gains (losses) recognized in equity securities during the period   27    (14)   44    17 
                     
Less:  Net gains (losses) realized on the sale of equity securities during the period       30        30 
                     
Unrealized gains (losses) recognized in equity securities held at reporting date   27    16    44    47 

 

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 June 30, 2019, and December 31, 2018:

 

 

LOAN PORTFOLIO      
(DOLLARS IN THOUSANDS)      
   June 30,  December 31,
   2019  2018
   $  $
Commercial real estate          
Commercial mortgages   104,418    101,419 
Agriculture mortgages   168,726    165,926 
Construction   18,151    18,092 
Total commercial real estate   291,295    285,437 
           
Consumer real estate (a)          
1-4 family residential mortgages   241,134    219,037 
Home equity loans   10,536    10,271 
Home equity lines of credit   66,535    64,413 
Total consumer real estate   318,205    293,721 
           
Commercial and industrial          
Commercial and industrial   61,298    61,043 
Tax-free loans   16,815    22,567 
Agriculture loans   20,641    20,512 
Total commercial and industrial   98,754    104,122 
           
Consumer   8,397    9,197 
           
Gross loans prior to deferred fees   716,651    692,477 
Less:          
Deferred loan costs, net   1,705    1,596 
Allowance for loan losses   (8,957)   (8,666)
Total net loans   709,399    685,407 

 

(a) Real estate loans serviced for others, which are not included in the Consolidated Balance Sheets, totaled $138,468,000 and $126,916,000 as of June 30, 2019, and December 31, 2018, respectively.

 

 

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 June 30, 2019 and December 31, 2018. 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.

 

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.

 

12 

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ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

·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)

 

June 30, 2019  Commercial
Mortgages
  Agriculture
Mortgages
  Construction  Commercial
and
Industrial
  Tax-free
Loans
  Agriculture
Loans
  Total
   $  $  $  $  $  $  $
Grade:                                   
Pass   102,033    156,264    17,300    55,245    16,618    18,745    366,205 
Special Mention   170    3,197    851    4,252    197    1,128    9,795 
Substandard   2,215    9,265        1,801        768    14,049 
Doubtful                            
Loss                            
                                    
    Total   104,418    168,726    18,151    61,298    16,815    20,641    390,049 
                                    

 

December 31, 2018  Commercial
Mortgages
  Agriculture
Mortgages
  Construction  Commercial
and
Industrial
  Tax-free
Loans
  Agriculture
Loans
  Total
   $  $  $  $  $  $  $
Grade:                                   
Pass   99,013    154,132    17,567    59,348    22,367    19,487    371,914 
Special Mention   176    3,478    525    518    200    453    5,350 
Substandard   2,230    8,316        1,177        572    12,295 
Doubtful                            
Loss                            
                                    
    Total   101,419    165,926    18,092    61,043    22,567    20,512    389,559 

 

 

The largest movement in credit risk profile from December 31, 2018 to June 30, 2019 was a $3.9 million commercial and industrial (C&I) relationship that was downgraded from pass to special mention. This larger relationship, which provides a wide complement of leased equipment, accounted for the $3.7 million increase in commercial and industrial special mention loans since year end, and the majority of the increase in special mention loans for all commercial loan categories. This loan is current and has performed on a timely basis since origination. Agricultural loans not secured by real estate experienced a $675,000 increase in special mention loans from year end. This was primarily the result of a downgrading of one farmer with $920,000 of C&I balance, who has a mix of operations.

13 

Index 

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

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 June 30, 2019 and December 31, 2018:

 

CONSUMER CREDIT EXPOSURE

CREDIT RISK PROFILE BY PAYMENT PERFORMANCE

(DOLLARS IN THOUSANDS)  

 

June 30, 2019  1-4 Family
Residential
Mortgages
  Home Equity
Loans
  Home Equity
Lines of
Credit
  Consumer  Total
Payment performance:  $  $  $  $  $
                
Performing   240,900    10,536    66,535    8,389    326,360 
Non-performing   234            8    242 
                          
   Total   241,134    10,536    66,535    8,397    326,602 
                          
                          

 

December 31, 2018  1-4 Family
Residential
Mortgages
  Home Equity
Loans
  Home Equity
Lines of
Credit
  Consumer  Total
Payment performance:  $  $  $  $  $
                
Performing   218,641    10,271    64,413    9,196    302,521 
Non-performing   396            1    397 
                          
   Total   219,037    10,271    64,413    9,197    302,918 

 

 

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 June 30, 2019 and December 31, 2018:

 

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
June 30, 2019  Past Due  Past Due  Days  Due  Current  Receivable  Accruing
   $  $  $  $  $  $  $
Commercial real estate                                   
   Commercial mortgages           993    993    103,425    104,418     
   Agriculture mortgages       377    816    1,193    167,533    168,726     
   Construction                   18,151    18,151     
Consumer real estate                                   
   1-4 family residential mortgages   274    184    234    692    240,442    241,134    234 
   Home equity loans   32    24        56    10,480    10,536     
   Home equity lines of credit   30            30    66,505    66,535     
Commercial and industrial                                   
   Commercial and industrial   2            2    61,296    61,298     
   Tax-free loans                   16,815    16,815     
   Agriculture loans   648            648    19,993    20,641     
Consumer   1        8    9    8,388    8,397    8 
       Total   987    585    2,051    3,623    713,028    716,651    242 

 

                     Loans
         Greater           Receivable >
   30-59 Days  60-89 Days  than 90  Total Past     Total Loans  90 Days and
December 31, 2018  Past Due  Past Due  Days  Due  Current  Receivable  Accruing
   $  $  $  $  $  $  $
Commercial real estate                                   
   Commercial mortgages           237    237    101,182    101,419     
   Agriculture mortgages   326        816    1,142    164,784    165,926     
   Construction                   18,092    18,092     
Consumer real estate                                   
   1-4 family residential mortgages   455    201    396    1,052    217,985    219,037    396 
   Home equity loans   62    35        97    10,174    10,271     
   Home equity lines of credit   95            95    64,318    64,413     
Commercial and industrial                                   
   Commercial and industrial   24            24    61,019    61,043     
   Tax-free loans                   22,567    22,567     
   Agriculture loans   118            118    20,394    20,512     
Consumer   10    15    1    26    9,171    9,197    1 
       Total   1,090    251    1,450    2,791    689,686    692,477    397 

 

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 June 30, 2019 and December 31, 2018:

 

NONACCRUAL LOANS BY LOAN CLASS

(DOLLARS IN THOUSANDS)  

   June 30,  December 31,
   2019  2018
   $  $
       
Commercial real estate          
  Commercial mortgages   993    1,017 
  Agriculture mortgages   816    816 
  Construction        
Consumer real estate          
  1-4 family residential mortgages        
  Home equity loans        
  Home equity lines of credit        
Commercial and industrial          
  Commercial and industrial        
  Tax-free loans        
  Agriculture loans        
Consumer        
             Total   1,809    1,833 

 

As of June 30, 2019 and December 31, 2018, all of the Corporation’s commercial loans on nonaccrual status were also considered impaired. Information with respect to impaired loans for the three and six months ended June 30, 2019 and June 30, 2018, is as follows:

 

IMPAIRED LOANS

(DOLLARS IN THOUSANDS)

   Three months ended June 30,  Six months ended June 30,
   2019  2018  2019  2018
   $  $  $  $
             
Average recorded balance of impaired loans   3,412    2,201    3,057    2,045 
Interest income recognized on impaired loans   11    15    22    31 

 

 

There were no loan modifications made during the three or six months ended June 30, 2019 or 2018 causing a loan to be considered a troubled debt restructuring (TDR). A TDR is a loan where management has granted a concession 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.

 

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 June 30, 2019, and December 31, 2018:

 

IMPAIRED LOAN ANALYSIS

(DOLLARS IN THOUSANDS)  

June 30, 2019  Recorded
Investment
  Unpaid
Principal
Balance
  Related
Allowance
  Average
Recorded
Investment
  Interest
Income
Recognized
   $  $  $  $  $
                
With no related allowance recorded:                         
Commercial real estate                         
    Commercial mortgages   737    772        743     
    Agriculture mortgages   2,393    2,393        2,054    22 
    Construction                    
Total commercial real estate   3,130    3,165        2,797    22 
                          
Commercial and industrial                         
    Commercial and industrial                    
    Tax-free loans                    
    Agriculture loans                    
Total commercial and industrial                    
                          
Total with no related allowance   3,130    3,165        2,797    22 
                          
With an allowance recorded:                         
Commercial real estate                         
    Commercial mortgages   256    274    106    260     
    Agriculture mortgages                    
    Construction                    
Total commercial real estate   256    274    106    260     
                          
Commercial and industrial                         
    Commercial and industrial                    
    Tax-free loans                    
    Agriculture loans                    
Total commercial and industrial                    
                          
Total with a related allowance   256    274    106    260     
                          
Total by loan class:                         
Commercial real estate                         
    Commercial mortgages   993    1,046    106    1,003     
    Agriculture mortgages   2,393    2,393        2,054    22 
    Construction                    
Total commercial real estate   3,386    3,439    106    3,057    22 
                          
Commercial and industrial                         
    Commercial and industrial                    
    Tax-free loans                    
    Agriculture loans                    
Total commercial and industrial                    
                          
Total   3,386    3,439    106    3,057    22 

 

17 

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ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

IMPAIRED LOAN ANALYSIS

(DOLLARS IN THOUSANDS)

December 31, 2018  Recorded
Investment
  Unpaid
Principal
Balance
  Related
Allowance
  Average
Recorded
Investment
  Interest
Income
Recognized
   $  $  $  $  $
                
With no related allowance recorded:                         
Commercial real estate                         
    Commercial mortgages   370    901        396     
    Agriculture mortgages   1,692    1,692        1,063    45 
    Construction                    
Total commercial real estate   2,062    2,593        1,459    45 
                          
Commercial and industrial                         
    Commercial and industrial                    
    Tax-free loans                    
    Agriculture loans                    
Total commercial and industrial                    
                          
Total with no related allowance   2,062    2,593        1,459    45 
                          
With an allowance recorded:                         
Commercial real estate                         
    Commercial mortgages   647    694    132    484     
    Agriculture mortgages                    
    Construction                    
Total commercial real estate   647    694    132    484     
                          
Commercial and industrial                         
    Commercial and industrial                    
    Tax-free loans                    
    Agriculture loans               124    6 
Total commercial and industrial               124    6 
                          
Total with a related allowance   647    694    132    608    6 
                          
Total by loan class:                         
Commercial real estate                         
    Commercial mortgages   1,017    1,595    132    880     
    Agriculture mortgages   1,692    1,692        1,063    45 
    Construction                    
Total commercial real estate   2,709    3,287    132    1,943    45 
                          
Commercial and industrial                         
    Commercial and industrial                    
    Tax-free loans                    
    Agriculture loans               124    6 
Total commercial and industrial               124    6 
                          
Total   2,709    3,287    132    2,067    51 

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 six months ended June 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 
                               
Ending Balance - June 30, 2019   4,417    2,390    1,366    76    708    8,957 

 

 

During the six months ended June 30, 2019, management charged off $23,000 in loans while recovering $104,000 and added $210,000 to the provision. The unallocated portion of the allowance did increase from 5.3% as of December 31, 2018, and 5.5% as of March 31, 2019, to 8.6% as of June 30, 2019. Management monitors the unallocated portion of the allowance and has guidelines for maintaining any unallocated allowance between 5.0% and 10.0% of the calculated required allowance for credit losses.

 

During the six-months ended June 30, 2019, net provision expense was recorded for the commercial real estate segment, while net credit provisions were recorded in the consumer real estate, commercial and industrial, and consumer segments. This was due to continued very low historical loss experience for these three segments. In the past two quarters, management has adjusted the qualitative factors across the loan portfolio to better reflect the forward risk in each loan segment. This has resulted in a slightly larger allowance for commercial real estate loans and slightly lower allowances for consumer real estate, commercial real estate and consumer, while the unallocated portion of the allowance increased. The Corporation’s commercial real estate allocation for credit losses was reduced by $114,000 in the second quarter of 2019, influenced by a reduction in real estate secured agricultural delinquencies that declined materially since March 31, 2019. The allowance for credit losses on consumer real estate grew in the second quarter of 2019 relative to the sharper growth in this segment offset partially by lower delinquencies than March 31, 2019 but unchanged from the prior June 30, 2019. The Commercial and industrial allocation for credit losses was reduced by $204,000 in the second quarter of 2019 as delinquencies declined significantly.

 

The Corporation’s commercial and industrial loans continue to experience lower levels of delinquency than both commercial and agricultural mortgage loans. As of June 30, 2019 the commercial and industrial loan delinquencies were running at a fourth of the level of business mortgage delinquencies. The commercial and industrial delinquencies on June 30, 2019 were only one third of the level of delinquencies as of December 31, 2018. Therefore, the provision for commercial and industrial loans was lowered by $204,000 for the three-month period ended June 30, 2019. The provision for consumer loans was reduced by $22,000 in the second quarter of 2019 as a result of the reductions in consumer credit lines and loan delinquencies from March 31, 2019 to June 30, 2019.

 

As of June 30, 2019, the 0.44% delinquency rate for all of the Corporation’s loans was down slightly from 0.46% as of December 31, 2018 levels, but was down moderately from 0.59% as of March 31, 2019. Charge-offs for the three and six months ended June 30, 2019, were very low at $5,000 and $22,000 compared to $8,000 and $360,000 for the same periods of 2018.

 

The agricultural lending sector has generally been under stress over the past several years due to lower commodity prices within certain agricultural industries. The Corporation’s agricultural portfolio is highly affected by volatility in the protein sector; particularly dairy and broiler prices. These are the two commodity price indicators that have the most immediate impact to the majority of the Corporation’s agricultural borrowers. Due to abundant supplies of eggs forecasted through 2019, egg prices will continue to exhibit downward pressures on producers. Broiler prices have slightly increased in 2019 but are forecasted to show continued stress due to expected weak domestic demand for the second half of 2019. Slaughter levels have increased slightly year over year, but with slow growth in meat demand, poultry integrators are taking active measures to control production. Milk prices remain historically low and have not broken out of a historical low three-year range. The average milk price for the first half of 2019 slightly exceeded the average for the first half of 2018, but income over feed costs remain low. The local dairy industry continues to undergo consolidation as it deals with overcapacity.

 

19 

Index 

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

These agricultural challenges did not adversely impact the Corporation’s agricultural loans until the end of 2018 when total agricultural delinquencies rose to $1.4 million, from zero at the end of 2017. As of June 30, 2019, total agricultural mortgage delinquencies rose to $1.9 million, but had declined from the recent high of $2.3 million as of March 31, 2019. The reduction since March 31, 2019 is consistent with slightly improved milk and poultry prices that began to improve in early 2019.

 

Agricultural mortgages over 90 days delinquent remained unchanged at $816,000 from December 31, 2018 to June 30, 2019. The agricultural mortgages over 90 days delinquent are made up of two loans to one dairy farmer, with the largest loan of $766,000 backed by a 90% FSA guarantee. Both of the loans were placed on non-accrual at the end of the fourth quarter of 2018. The borrower has been trying to sell the property since mid-2018. As of June 30, 2019, the Bank was proceeding on foreclosure proceedings on this loan. Management does not anticipate any charge-off on this loan due to the sufficiency of collateral and the FSA guarantee. Outside of this relationship, it was the 60-89 days past due delinquencies that were primarily responsible for the increase in total agricultural mortgage delinquencies. Management will continue to closely monitor the level of agricultural mortgage delinquencies for trends like declining borrower performance.

 

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. The majority of the qualitative factors had little change during the first half of 2019. Minor adjustments to the qualitative factors covering changes in lending policies and procedures, trends in the nature and volume of the loan portfolio, and levels of and trends in delinquency, non-accruals, and charge-offs were made throughout the first half of 2019 as these levels increased or decreased. The other qualitative factors remained consistent since December 31, 2018, requiring no adjustments to the allowance.

 

The following table details activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2018:

 

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, 2017   3,863    2,052    1,829    98    398    8,240 
                               
    Charge-offs   (224)       (110)   (18)       (352)
    Recoveries           4    1        5 
    Provision   408    137    (422)   (9)   76    190 
                               
Balance - March 31, 2018   4,047    2,189    1,301    72    474    8,083 
                               
    Charge-offs               (8)       (8)
    Recoveries           2    4        6 
    Provision   (43)   (7)   (21)   63    98    90 
                               
Balance - June 30, 2018   4,004    2,182    1,282    131    572    8,171 

 

20 

Index 

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

During the six months ended June 30, 2018, provision expenses were recorded for the commercial real estate, consumer real estate, and consumer segments with a credit provision recorded for the commercial and industrial segment. The increase in the allowance for commercial real estate loans was primarily a result of higher levels of charge-offs in the first six months of 2018. The increase in the amount of the allowance for loan losses allocated to the consumer real estate and consumer segment was primarily a result of growth in these portfolios during the six months ended June 30, 2018. The decrease in commercial and industrial loans from December 31, 2017 to June 30, 2018 was caused by a qualitative factor change across the portfolio and also by the declining level of substandard commercial and industrial loans. The qualitative factors were adjusted across the loan portfolio to better reflect the forward risk in each portfolio. Commercial and consumer real estate carried heavier risk factors, while commercial and industrial was adjusted down. While commercial and industrial did have charge-offs in the first quarter of 2018 they were relative to the size of the allowance and sufficiently covered with prior provisions. There was no commercial and industrial charge-offs in the second quarter of 2018, as well as the commercial and consumer real estate areas. Meanwhile the amount of commercial and industrial loans rated substandard, declined from $3.2 million on December 31, 2017, to $2.8 million as of March 31, 2018, and to $2.0 million as of June 30, 2018. While the balances of commercial and industrial loans increased moderately from December 31, 2017 to June 30, 2018, the required allowance and related provision for these loans is influenced more heavily by the amount of classified loans.

 

 

 

21 

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 June 30, 2019 and December 31, 2018:

 

ALLOWANCE FOR CREDIT LOSSES AND RECORDED INVESTMENT IN LOANS RECEIVABLE

(DOLLARS IN THOUSANDS)

 

As of June 30, 2019:  Commercial Real
Estate
  Consumer
Real Estate
  Commercial
and Industrial
  Consumer  Unallocated  Total
   $  $  $  $  $  $
Allowance for credit losses:                              
Ending balance: individually evaluated                              
  for impairment   106                    106 
Ending balance: collectively evaluated                              
  for impairment   4,311    2,390    1,366    76    708    8,851 
                               
Loans receivable:                              
Ending balance   291,295    318,205    98,754    8,397         716,651 
Ending balance: individually evaluated                              
  for impairment   3,386                     3,386 
Ending balance: collectively evaluated                              
  for impairment   287,909    318,205    98,754    8,397         713,265 
                               

 

As of December 31, 2018:  Commercial Real
Estate
  Consumer
Real Estate
  Commercial
and Industrial
  Consumer  Unallocated  Total
   $  $  $  $  $  $
Allowance for credit losses:                              
Ending balance: individually evaluated                              
  for impairment   132                    132 
Ending balance: collectively evaluated                              
  for impairment   4,164    2,408    1,428    102    432    8,534 
                               
Loans receivable:                              
Ending balance   285,437    293,721    104,122    9,197         692,477 
Ending balance: individually evaluated                              
  for impairment   2,709                     2,709 
Ending balance: collectively evaluated                              
  for impairment   282,728    293,721    104,122    9,197         689,768 

 

22 

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ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

5. Fair Value Presentation

 

U.S. generally accepted accounting principles establish a hierarchal disclosure framework associated with the level of observable pricing utilized in measuring assets and liabilities at fair value. The three broad levels defined by the hierarchy are as follows:

 

  Level I: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
     
  Level II: Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date.  The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair-valued using other financial instruments, the parameters of which can be directly observed.
     
  Level III: Assets and liabilities that have little to no observable pricing as of the reported date.  These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

 

The following tables provide the fair market value for assets required to be measured and reported at fair value on a recurring basis on the Consolidated Balance Sheets as of June 30, 2019, and December 31, 2018, by level within the fair value hierarchy. As required by U.S. generally accepted accounting principles, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

 

ASSETS MEASURED ON A RECURRING BASIS

(DOLLARS IN THOUSANDS)

   June 30, 2019
   Level I  Level II  Level III  Total
   $  $  $  $
             
U.S. government agencies       31,031        31,031 
U.S. agency mortgage-backed securities       46,092        46,092 
U.S. agency collateralized mortgage obligations       54,908        54,908 
Asset-backed securities       13,859        13,859 
Corporate bonds       52,498        52,498 
Obligations of states & political subdivisions       92,539        92,539 
Equity securities   6,231            6,231 
                     
Total securities   6,231    290,927        297,158 

 

 

On June 30, 2019, the Corporation held no securities valued using level III inputs. All of the Corporation’s debt instruments were valued using level II inputs, where quoted prices are available and observable, but not necessarily quotes on identical securities traded in active markets on a daily basis. The Corporation’s CRA fund investments and bank stocks are fair valued utilizing level I inputs because the funds have their own quoted prices in an active market. As of June 30, 2019, the CRA fund investments had a $5,488,000 book and fair market value and the bank stock portfolio had a book value of $754,000, and fair market value of $743,000.

 

Financial instruments are considered level III when their values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable. In addition to these unobservable inputs, the valuation models for level III financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly. Level III financial instruments also include those for which the determination of fair value requires significant management judgment or estimation.

23 

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ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

ASSETS MEASURED ON A RECURRING BASIS

(DOLLARS IN THOUSANDS)  

   December 31, 2018
   Level I  Level II  Level III  Total
   $  $  $  $
             
U.S. government agencies       30,120        30,120 
U.S. agency mortgage-backed securities       44,639        44,639 
U.S. agency collateralized mortgage obligations       54,090        54,090 
Asset-backed securities       11,399        11,399 
Corporate bonds       59,192        59,192 
Obligations of states & political subdivisions       94,625        94,625 
Equity securities   5,934            5,934 
                     
Total securities   5,934    294,065        299,999 

 

 

On December 31, 2018, the Corporation held no securities valued using level III inputs. All of the Corporation’s debt instruments were valued using level II inputs, where quoted prices are available and observable but not necessarily quotes on identical securities traded in active markets on a daily basis. The Corporation’s CRA fund investments and bank stocks are fair valued utilizing level I inputs because the funds have their own quoted prices in an active market. As of December 31, 2018, the CRA fund investments had a $5,410,000 book and market value and the bank stocks had a book value of $591,000 and a market value of $524,000.

 

The following tables provide the fair value for each class of assets required to be measured and reported at fair value on a nonrecurring basis on the Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018, by level within the fair value hierarchy:

 

ASSETS MEASURED ON A NONRECURRING BASIS

(Dollars in Thousands)

   June 30, 2019 
   Level I   Level II   Level III   Total 
   $   $   $   $ 
Assets:                    
Impaired Loans  $   $   $3,280   $3,280 
Total  $   $   $3,280   $3,280 

 

 

   December 31, 2018 
   Level I   Level II   Level III   Total 
   $   $   $   $ 
Assets:                    
Impaired Loans  $   $   $2,577   $2,577 
Total  $   $   $2,577   $2,577 

 

 

The Corporation had a total of $3,386,000 of impaired loans as of June 30, 2019, with $106,000 of specific allocation against these loans and $2,709,000 of impaired loans as of December 31, 2018, with $132,000 of specific allocation against these loans. The value of impaired loans is generally determined through independent appraisals of the underlying collateral.

24 

Index 

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis for which the Corporation has utilized level III inputs to determine fair value:

 

QUANTITATIVE INFORMATION ABOUT LEVEL III FAIR VALUE MEASUREMENTS

(DOLLARS IN THOUSANDS)  

  June 30, 2019
  Fair Value Valuation Unobservable Range
  Estimate Techniques Input (Weighted Avg)
         
Impaired loans  3,280 Appraisal of Appraisal -20% (-20%)
    collateral (1) adjustments (2)  
      Liquidation -10% (-10%)
      expenses (2)  
         

 

  December 31, 2018
   Fair Value  Valuation Unobservable  Range
  Estimate Techniques Input (Weighted Avg)
         
Impaired loans 2,577 Appraisal of Appraisal -20% (-20%)
    collateral (1) adjustments (2)  
      Liquidation  -10% (-10%)
      expenses (2)  

 

(1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level III inputs which are not identifiable.

(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.      

25 

Index 

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

The following table provides the carrying amount for each class of assets and liabilities and the fair value for certain financial instruments that are not required to be measured or reported at fair value on the Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018:

 

FINANCIAL INSTRUMENTS NOT REQUIRED TO BE MEASURED OR REPORTED AT FAIR VALUE

(DOLLARS IN THOUSANDS)

   June 30, 2019
         Quoted Prices in      
         Active Markets  Significant Other  Significant
         for Identical  Observable  Unobservable
   Carrying     Assets  Inputs  Inputs
   Amount  Fair Value  (Level 1)  (Level II)  (Level III)
   $  $  $  $  $
Financial Assets:                         
Cash and cash equivalents   51,670    51,670    51,670    —      —   
Regulatory stock   6,959    6,959    6,959    —      —   
Loans held for sale   3,473    3,473    3,473    —      —   
Loans, net of allowance   709,399    712,886    —      —      712,886 
Mortgage servicing assets   806    828    —      —      828 
Accrued interest receivable   4,097    4,097    4,097    —      —   
Bank owned life insurance   28,429    28,429    28,429    —      —   
                          
Financial Liabilities:                         
Demand deposits   345,483    345,483    345,483    —      —   
Interest-bearing demand deposits   21,982    21,982    21,982    —      —   
NOW accounts   92,578    92,578    92,578    —      —   
Money market deposit accounts   138,793    138,793    138,793    —      —   
Savings accounts   205,902    205,902    205,902    —      —   
Time deposits   136,868    137,833    —      —      137,833 
     Total deposits   941,606    942,571    804,738    —      137,833 
                          
Long-term debt   74,628    73,671    —      —      73,671 
Accrued interest payable   493    493    493    —      —   

 

26 

Index 

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements