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, 2024

☐ 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, 2024, the registrant had 5,640,530 shares of $0.10 (par) Common Stock outstanding.

ENB FINANCIAL CORP

INDEX TO FORM 10-Q

September 30, 2024

Part I – FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Consolidated Balance Sheets at September 30, 2024 and 2023, and December 31, 2023 (Unaudited)	3

		Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited)	4

		Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited)	5

		Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited)	6

		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 (Unaudited)	7

		Notes to the Unaudited Consolidated Interim Financial Statements	8-28

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29-47

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	48-50

	Item 4.	Controls and Procedures	51


Part II – OTHER INFORMATION			52

	Item 1.	Legal Proceedings	52

	Item 1A.	Risk Factors	52

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52

	Item 3.	Defaults upon Senior Securities	52

	Item 4.	Mine Safety Disclosures	52

	Item 5.	Other Information	52

	Item 6.	Exhibits	53


SIGNATURE PAGE			54

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,
	2024			2023			2023
	$			$			$
ASSETS
Cash and due from banks		5,669			29,519			24,962
Interest-bearing deposits in other banks		62,048			59,477			13,797
Total cash and cash equivalents		67,717			88,996			38,759
Securities available for sale (at fair value, net of allowance for credit losses of $0)		517,801			459,569			438,152
Equity securities (at fair value)		9,851			9,451			9,041
Loans held for sale		1,994			352			1,081
Loans (net of unearned income)		1,410,511			1,360,078			1,335,597
Less: Allowance for credit losses		14,742			15,176			16,349
Net loans		1,395,769			1,344,902			1,319,248
Premises and equipment		28,116			25,284			25,339
Regulatory stock		8,468			8,540			8,283
Bank owned life insurance		35,769			35,632			35,415
Other assets		26,986			28,098			33,229
Total assets		2,092,471			2,000,824			1,908,547

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing		599,025			611,968			583,145
Interest-bearing		1,216,390			1,114,830			1,077,845
Total deposits		1,815,415			1,726,798			1,660,990
Long-term debt		87,822			101,228			98,528
Subordinated debt		39,676			39,556			39,516
Other liabilities		14,399			13,588			12,011
Total liabilities		1,957,312			1,881,170			1,811,045
Stockholders' equity:
Common stock, par value $0.10
Shares: Authorized 24,000,000
Issued 5,739,114 and Outstanding 5,640,530 as of 9/30/24, 5,670,054 as of 12/31/23, and 5,651,378 as of 9/30/23		574			574			574
Capital surplus		3,994			4,072			4,237
Retained earnings		159,296			150,596			147,033
Accumulated other comprehensive loss, net of tax		(27,047	)		(34,355	)		(52,721	)
Less: Treasury stock cost on 98,584 shares as of 9/30/24, 69,060 as of 12/31/23, and 87,737 as of 9/30/23		(1,658	)		(1,233	)		(1,621	)
Total stockholders' equity		135,159			119,654			97,502
Total liabilities and stockholders' equity		2,092,471			2,000,824			1,908,547

See Notes to the Unaudited Consolidated Interim Financial Statements

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,
	2024		2023			2024			2023
	$		$			$			$
Interest and dividend income:
Interest and fees on loans		18,644		15,892			53,899			44,540
Interest on securities available for sale
Taxable		3,031		2,900			8,771			8,753
Tax-exempt		701		736			2,126			2,265
Interest on deposits at other banks		809		227			1,759			474
Dividend income		321		282			951			803
Total interest and dividend income		23,506		20,037			67,506			56,835
Interest expense:
Interest on deposits		8,017		5,390			21,953			12,348
Interest on borrowings		1,319		1,289			4,017			3,668
Total interest expense		9,336		6,679			25,970			16,016
Net interest income		14,170		13,358			41,536			40,819
Provision (release) for credit losses		497		(504	)		(354	)		1,568
Net interest income after provision (release) for credit losses		13,673		13,862			41,890			39,251
Other income:
Trust and investment services income		794		663			2,604			2,122
Service fees		1,532		1,382			4,331			3,404
Commissions		1,039		917			3,061			2,729
Losses on the sale of debt securities, net		—		—			(91	)		(1,364	)
Gains (losses) on equity securities, net		211		(103	)		74			(405	)
Gains on sale of mortgages		369		180			1,391			506
Earnings on bank-owned life insurance		279		245			979			708
Other income		315		271			937			931
Total other income		4,539		3,555			13,286			8,631
Operating expenses:
Salaries and employee benefits		8,644		7,350			25,318			22,706
Occupancy		830		833			2,493			2,429
Equipment		311		327			964			996
Advertising & marketing		371		387			816			1,074
Computer software & data processing		1,550		1,798			4,718			5,277
Shares tax		316		252			1,030			851
Professional services		831		922			2,395			2,428
Other expense		1,271		1,164			3,352			2,838
Total operating expenses		14,124		13,033			41,086			38,599
Income before income taxes		4,088		4,384			14,090			9,283
Provision for federal income taxes		752		771			2,499			1,432
Net income		3,336		3,613			11,591			7,851
Earnings per share of common stock		0.59		0.64			2.05			1.39
Cash dividends paid per share		0.17		0.17			0.51			0.51
Weighted average shares outstanding		5,658,537		5,647,965			5,663,072			5,640,214

See Notes to the Unaudited Consolidated Interim Financial Statements

ENB FINANCIAL CORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(DOLLARS IN THOUSANDS)

	Three Months ended September 30,						Nine Months ended September 30,
	2024			2023			2024			2023
	$			$			$			$
Net income		3,336			3,613			11,591			7,851
Other comprehensive income (loss), net of tax:
Securities available for sale not other-than-temporarily impaired:

Unrealized gains (losses) arising during the period		9,423			(14,528	)		9,159			(6,971	)
Income tax effect		(1,979	)		3,051			(1,923	)		1,464
		7,444			(11,477	)		7,236			(5,507	)
Reclassification adjustment for losses included in net income		—			—			91			1,364
Income tax effect		—			—			(19	)		(286	)
		—			—			72			1,078
Other comprehensive income (loss), net of tax		7,444			(11,477	)		7,308			(4,429	)
Comprehensive Income (Loss)		10,780			(7,864	)		18,899			3,422

See Notes to the Unaudited Consolidated Interim Financial Statements

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, 2022		574		4,437			142,677			(48,292	)		(2,061	)		97,335
Cumulative effect of adoption of ASU 2016-13		—		—			(619	)		—			—			(619	)
Net income		—		—			2,441			—			—			2,441
Other comprehensive income net of tax		—		—			—			7,659			—			7,659
Stock-based compensation expense		—		14			—			—			—			14
Treasury stock purchased - 8,903 shares		—		—			—			—			(147	)		(147	)
Treasury stock issued - 19,523 shares		—		(110	)		—			—			383			273
Cash dividends paid, $0.17 per share		—		—			(957	)		—			—			(957	)
Balances, March 31, 2023		574		4,341			143,542			(40,633	)		(1,825	)		105,999
Net income		—		—			1,797			—			—			1,797
Other comprehensive loss net of tax		—		—			—			(611	)		—			(611	)
Stock-based compensation expense		—		15			—			—			—			15
Treasury stock purchased - 12,431 shares		—		—			—			—			(168	)		(168	)
Treasury stock issued - 20,692 shares		—		(97	)		—			—			358			261
Cash dividends paid, $0.17 per share		—		—			(959	)		—			—			(959	)
Balances, June 30, 2023		574		4,259			144,380			(41,244	)		(1,635	)		106,334
Net income		—		—			3,613			—			—			3,613
Other comprehensive loss net of tax		—		—			—			(11,477	)		—			(11,477	)
Stock-based compensation expense		—		17			—			—			—			17
Treasury stock purchased - 8,800 shares		—		—			—			—			(125	)		(125	)
Treasury stock issued - 5,763 shares		—		(39	)		—			—			139			100
Cash dividends paid, $0.17 per share		—		—			(960	)		—			—			(960	)
Balances, September 30, 2023		574		4,237			147,033			(52,721	)		(1,621	)		97,502

Balances, December 31, 2023		574		4,072			150,596			(34,355	)		(1,233	)		119,654
Net income		—		—			3,941			—			—			3,941
Other comprehensive loss net of tax		—		—			—			(756	)		—			(756	)
Stock-based compensation expense		—		17			—			—			—			17
Treasury stock purchased - 15,699 shares		—		—			—			—			(228	)		(228	)
Treasury stock issued - 18,662 shares		—		(53	)		—			—			322			269
Cash dividends paid, $0.17 per share		—		—			(964	)		—			—			(964	)
Balances, March 31, 2024		574		4,036			153,573			(35,111	)		(1,139	)		121,933
Net income		—		—			4,314			—			—			4,314
Other comprehensive income net of tax		—		—			—			620			—			620
Stock-based compensation expense		—		14			—			—			—			14
Treasury stock purchased - 15,000 shares		—		—			—			—			(223	)		(223	)
Treasury stock issued - 19,036 shares		—		(49	)		—			—			320			271
Cash dividends paid, $0.17 per share		—		—			(963	)		—			—			(963	)
Balances, June 30, 2024		574		4,001			156,924			(34,491	)		(1,042	)		125,966
Net income		—		—			3,336			—			—			3,336
Other comprehensive income net of tax		—		—			—			7,444			—			7,444
Stock-based compensation expense		—		15			—			—			—			15
Treasury stock purchased - 51,470 shares		—		—			—			—			(867	)		(867	)
Treasury stock issued - 14,947 shares		—		(22	)		—			—			251			229
Cash dividends paid, $0.17 per share		—		—			(964	)		—			—			(964	)
Balances, September 30, 2024		574		3,994			159,296			(27,047	)		(1,658	)		135,159

See Notes to the Unaudited Consolidated Interim Financial Statements

ENB FINANCIAL CORP

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(DOLLARS IN THOUSANDS)

	Nine Months Ended September 30,
		2024			2023
		$			$
Cash flows from operating activities:
Net income			11,591			7,851
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization of securities premiums and discounts and loan fees			3,202			3,512
Increase in interest receivable			(1,225	)		(483	)
Increase in interest payable			889			1,501
(Release) provision for credit losses			(354	)		1,568
Losses on the sale of debt securities, net			91			1,364
(Gains) losses on equity securities, net			(74	)		405
Gains on sale of mortgages			(1,391	)		(506	)
Loans originated for sale			(46,287	)		(23,149	)
Proceeds from sales of loans			46,036			28,501
Earnings on bank-owned life insurance			(979	)		(708	)
Depreciation of premises and equipment and amortization of software			1,569			1,488
Deferred income tax			259			(282	)
Amortization of deferred fees on subordinated debt			120			120
Stock-based compensation expense			46			46
Other assets and other liabilities, net			(644	)		1,635
Net cash provided by operating activities			12,849			22,863

Cash flows from investing activities:
Securities available for sale:
Proceeds from maturities, calls, and repayments			32,800			26,660
Proceeds from sales			5,019			61,089
Purchases			(88,900	)		(6,982	)
Equity securities
Proceeds from sales			331			—
Purchases			(657	)		(328	)
Purchase of regulatory bank stock			(551	)		(2,398	)
Redemptions of regulatory bank stock			623			785
Proceeds from bank-owned life insurance			740			2,078
Net increase in loans			(50,672	)		(144,729	)
Purchases of premises and equipment, net			(4,104	)		(1,191	)
Purchase of computer software			(528	)		(499	)
Net cash used for investing activities			(105,899	)		(65,515	)
Cash flows from financing activities:
Net increase (decrease) in demand, NOW, and savings accounts			1,254			(104,636	)
Net increase in time deposits			87,363			126,668
Repayments of short-term debt			—			(16,000	)
Proceeds from long-term debt			—			46,989
Repayments of long-term debt			(13,406	)		(6,500	)
Dividends paid			(2,891	)		(2,876	)
Proceeds from sale of treasury stock			769			634
Treasury stock purchased			(1,318	)		(440	)
Net cash provided by financing activities			71,771			43,839
(Decrease) increase in cash and cash equivalents			(21,279	)		1,187
Cash and cash equivalents at beginning of period			88,996			37,572
Cash and cash equivalents at end of period			67,717			38,759
Supplemental disclosures of cash flow information:
Interest paid			25,082			14,514
Income taxes paid			2,300			1,375
Supplemental disclosure of non-cash investing and financing activities:
Fair value adjustments for securities available for sale			10,155			(5,607	)

See Notes to the Unaudited Consolidated Interim Financial Statements

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”). Ephrata National Bank has one wholly-owned subsidiary, ENB Insurance, LLC which is consolidated into its financial statements. This Form 10-Q, for the third quarter of 2024, is reporting on the results of operations and financial condition of ENB Financial Corp on a consolidated basis.

Operating results for the three and nine months ended September 30, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. 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, 2023.

2. Revenue from Contracts with Customers

The Corporation 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.

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

3. Securities Available for Sale

The amortized cost, gross unrealized gains and losses, approximate fair value, and allowance for credit losses of investment securities held at September 30, 2024 and December 31, 2023, are as follows:

			Gross		Gross			Allowance
(DOLLARS IN THOUSANDS)	Amortized		Unrealized		Unrealized			for Credit		Fair
	Cost		Gains		Losses			Losses		Value
	$		$		$			$		$
September 30, 2024
U.S. treasuries		19,892		—		(1,204	)		—		18,688
U.S. government agencies		19,400		—		(1,265	)		—		18,135
U.S. agency mortgage-backed securities		39,194		—		(2,485	)		—		36,709
U.S. agency collateralized mortgage obligations		59,955		445		(1,719	)		—		58,681
Non-agency MBS/CMO		91,725		278		(2,307	)		—		89,696
Asset-backed securities		59,442		47		(497	)		—		58,992
Corporate bonds		57,558		—		(4,207	)		—		53,351
Obligations of states and political subdivisions		203,967		—		(20,418	)		—		183,549
Total securities available for sale		551,133		770		(34,102	)		—		517,801

			Gross		Gross			Allowance
(DOLLARS IN THOUSANDS)	Amortized		Unrealized		Unrealized			for Credit		Fair
	Cost		Gains		Losses			Losses		Value
	$		$		$			$		$
December 31, 2023
U.S. Treasuries		19,869		—		(1,710	)		—		18,159
U.S. government agencies		19,400		—		(1,862	)		—		17,538
U.S. agency mortgage-backed securities		43,753		—		(3,597	)		—		40,156
U.S. agency collateralized mortgage obligations		21,841		—		(2,004	)		—		19,837
Non-agency MBS/CMO		59,281		22		(3,116	)		—		56,187
Asset-backed securities		66,391		20		(1,106	)		—		65,305
Corporate bonds		61,122		—		(6,118	)		—		55,004
Obligations of states and political subdivisions		211,400		1		(24,018	)		—		187,383
Total securities available for sale		503,057		43		(43,531	)		—		459,569

The amortized cost and fair value of securities available for sale at September 30, 2024, 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		12,998		12,806
Due after one year through five years		92,248		86,272
Due after five years through ten years		66,287		58,654
Due after ten years		379,600		360,069
Total debt securities		551,133		517,801

Securities available for sale with a par value of $111,969,000 and $117,525,000 at September 30, 2024, and December 31, 2023, respectively, were pledged or restricted for public funds, borrowings, or other purposes as required by law. The fair value of these pledged securities was $106,752,000 at September 30, 2024, and $109,651,000 at December 31, 2023.

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

Proceeds from active sales of debt 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,
	2024		2023		2024			2023
	$		$		$			$
Proceeds from sales		—		—		5,019			61,089
Gross realized gains		—		—		—			4
Gross realized losses		—		—		(91	)		(1,368	)

Information pertaining to securities with gross unrealized losses at September 30, 2024 and December 31, 2023, for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

UNREALIZED LOSSES ON DEBT 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, 2024
U.S. Treasuries		—		—			18,688		(1,204	)		18,688		(1,204	)
U.S. government agencies		—		—			18,135		(1,265	)		18,135		(1,265	)
U.S. agency mortgage-backed securities		—		—			36,709		(2,485	)		36,709		(2,485	)
U.S. agency collateralized mortgage obligations		19,705		(328	)		18,744		(1,391	)		38,449		(1,719	)
Non-Agency MBS/CMO		39,617		(626	)		38,708		(1,681	)		78,325		(2,307	)
Asset-backed securities		15,104		(49	)		28,649		(448	)		43,753		(497	)
Corporate bonds		—		—			53,351		(4,207	)		53,351		(4,207	)
Obligations of states & political subdivisions		1,703		(337	)		181,815		(20,081	)		183,518		(20,418	)
Total unrealized losses on debt securities		76,129		(1,340	)		394,799		(32,762	)		470,928		(34,102	)

UNREALIZED LOSSES ON DEBT 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 December 31, 2023
U.S. Treasuries		—		—			18,159		(1,710	)		18,159		(1,710	)
U.S. government agencies		—		—			17,538		(1,862	)		17,538		(1,862	)
U.S. agency mortgage-backed securities		—		—			40,147		(3,597	)		40,147		(3,597	)
U.S. agency collateralized mortgage obligations		—		—			19,837		(2,004	)		19,837		(2,004	)
Non-Agency MBS/CMO		11,189		(119	)		41,966		(2,997	)		53,155		(3,116	)
Asset-backed securities		2,661		(47	)		57,049		(1,059	)		59,710		(1,106	)
Corporate bonds		—		—			55,004		(6,118	)		55,004		(6,118	)
Obligations of states & political subdivisions		—		—			186,819		(24,018	)		186,819		(24,018	)
Total unrealized losses on debt securities		13,850		(166	)		436,519		(43,365	)		450,369		(43,531	)

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

In the debt security portfolio there were 312 positions carrying unrealized losses as of September 30, 2024.

Management evaluates all of the Corporation’s securities for expected credit losses. No securities in the portfolio required an allowance for credit losses to be recorded in the first nine months of 2024 or 2023.

Unrealized losses on the Corporation’s available-for-sale debt securities have not been recognized into income because the bonds are of high credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is solely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity.

4. Equity Securities

The following table summarizes the amortized cost, gross unrealized gains and losses, and fair value of equity securities held at September 30, 2024 and December 31, 2023.

			Gross		Gross
(DOLLARS IN THOUSANDS)	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	$		$		$			$
September 30, 2024
CRA-qualified mutual funds		8,391		—		—			8,391
Bank stocks		1,553		90		(183	)		1,460
Total equity securities		9,944		90		(183	)		9,851

			Gross		Gross
(DOLLARS IN THOUSANDS)	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	$		$		$			$
December 31, 2023
CRA-qualified mutual funds		7,734		—		—			7,734
Bank stocks		1,754		144		(181	)		1,717
Total equity securities		9,488		144		(181	)		9,451

The following table presents the net gains and losses on the Corporation’s equity investments recognized in earnings during the three months and nine months ended September 30, 2024 and 2023, and the portion of unrealized gains and losses for the period that relates to equity investments held as of September 30, 2024 and 2023.

NET GAINS AND LOSSES ON EQUITY INVESTMENTS RECOGNIZED IN EARNINGS

(DOLLARS IN THOUSANDS)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2024		2023			2024			2023
	$		$			$			$

Net gains (losses) recognized in equity securities during the period		211		(103	)		74			(405	)

Less: Net gains realized on the sale of equity securities during the period		131		—			131			—

Unrealized gains (losses) recognized in equity securities held at reporting date		80		(103	)		(57	)		(405	)

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

5. Loans and Allowance for Credit Losses

The following table presents the Corporation’s loan portfolio by category of loans as of September 30, 2024 (in thousands):

	September 30,			December 31,
	2024			2023
	$			$

Agriculture		280,446			257,372
Business Loans		349,089			354,252
Consumer		6,460			6,392
Home Equity		116,748			107,176
Non-Owner Occupied Commercial Real Estate		135,006			135,117
Residential Real Estate (a)		520,889			497,553

Gross loans prior to deferred costs		1,408,638			1,357,862

Deferred loan costs, net		1,873			2,216
Allowance for credit losses		(14,742	)		(15,176	)
Total net loans		1,395,769			1,344,902

(a)	Real estate loans serviced for others, which are not included in the Consolidated Balance Sheets, totaled $328,932,000 and $301,822,000 as of September 30, 2024 and December 31, 2023.

Age Analysis of Past-Due Loans Receivable

The performance and credit quality of the loan portfolio is monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past-due status as of September 30, 2024 and December 31, 2023 (in thousands):

	September 30, 2024
			31-60		61-90		Greater Than
			Days		Days		90 Days		Total		Total
	Current		Past Due		Past Due		Past Due		Past Due		Loans

Agriculture	$	279,113	$	1,333	$	—	$	—	$	1,333	$	280,446
Business Loans		344,941		133		3,937		78		4,148		349,089
Consumer		6,455		5		—		—		5		6,460
Home Equity		116,396		79		—		273		352		116,748
Non-Owner Occupied CRE		135,006		—		—		—		—		135,006
Residential Real Estate		517,110		—		1,618		2,161		3,779		520,889
Total	$	1,399,021	$	1,550	$	5,555	$	2,512	$	9,617	$	1,408,638

	December 31, 2023
			31-60		61-90		Greater Than
			Days		Days		90 Days		Total		Total
	Current		Past Due		Past Due		Past Due		Past Due		Loans

Agriculture	$	257,372	$	—	$	—	$	—	$	—	$	257,372
Business Loans		354,008		130		—		114		244		354,252
Consumer		6,361		15		3		13		31		6,392
Home Equity		106,787		170		69		150		389		107,176
Non-Owner Occupied CRE		135,117		—		—		—		—		135,117
Residential Real Estate		495,952		1,245		—		356		1,601		497,553
Total	$	1,355,597	$	1,560	$	72	$	633	$	2,265	$	1,357,862

Nonperforming Loans

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 90 days still accruing interest as of September 30, 2024 and December 31, 2023, (in thousands):

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

September 30, 2024
	Nonaccrual		Nonaccrual				Loans Past
	with no		with		Total		Due Over 90 Days		Total
	ACL		ACL		Nonaccrual		Still Accruing		Nonperforming

Agriculture	$	1,530	$	1	$	1,531	$	—	$	1,531
Business Loans		4,523		1,171		5,694		—		5,694
Consumer Loans		—		1		1		—		1
Home Equity		417		—		417		—		417
Non-Owner Occupied CRE		—		—		—		—		—
Residential Real Estate		2,219		—		2,219		—		2,219
Total	$	8,689	$	1,173	$	9,862	$	—	$	9,862

December 31, 2023
	Nonaccrual		Nonaccrual				Loans Past
	with no		with		Total		Due Over 90 Days		Total
	ACL		ACL		Nonaccrual		Still Accruing		Nonperforming

Agriculture	$	941	$	—	$	941	$	—	$	941
Business Loans		1,817		—		1,817		—		1,817
Consumer Loans		—		—		—		13		13
Home Equity		—		—		—		150		150
Non-Owner Occupied CRE		—		—		—		—		—
Residential Real Estate		—		—		—		356		356
Total	$	2,758	$	—	$	2,758	$	519	$	3,277

The following table presents, by class of loans, the collateral-dependent nonaccrual loans and type of collateral as of September 30, 2024 and December 31, 2023 (in thousands).

September 30, 2024
	Real Estate		Other		None		Total
Agriculture	$	1,531	$	—	$	—	$	1,531
Business Loans		5,694		—		—		5,694
Consumer Loans		1		—		—		1
Home Equity		417		—		—		417
Non-Owner Occupied		—		—		—		—
Residential Real Estate		2,219		—		—		2,219
Total	$	9,862	$	—	$	—	$	9,862

December 31, 2023
	Real Estate		Other		None		Total
Agriculture	$	941	$	—	$	—	$	941
Business Loans		1,817		—		—		1,817
Consumer Loans		—		—		—		—
Home Equity		—		—		—		—
Non-Owner Occupied		—		—		—		—
Residential Real Estate		—		—		—		—
Total	$	2,758	$	—	$	—	$	2,758

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

Credit Quality Indicators

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, 2024 and December 31, 2023. 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.

●

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.

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

Based on the most recent analysis performed, the following table presents the recorded investment by internal risk rating system for Commercial Credit exposures as of September 30, 2024 (in thousands):

													Revolving		Revolving
	Term Loans Amortized Costs Basis by Origination Year												Loans		Loans
													Amortized		Converted
September 30, 2024	2024		2023		2022		2021		2020		Prior		Cost Basis		to Term		Total
Agriculture
Risk Rating
Pass	$	18,047	$	50,979	$	39,874	$	46,141	$	17,709	$	67,281	$	21,134	$	—	$	261,165
Special Mention		1,044		186		19		6,503		—		1,579		1,696		—		11,027
Substandard		491		1,765		1,447		1,045		1,329		1,957		220		—		8,254
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	19,582	$	52,930	$	41,340	$	53,689	$	19,038	$	70,817	$	23,050	$	—	$	280,446

Agriculture
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Business Loans
Risk Rating
Pass	$	36,101	$	40,910	$	89,552	$	56,573	$	33,254	$	47,199	$	35,624	$	—	$	339,213
Special Mention		—		—		—		414		—		260		—		—		674
Substandard		—		2,945		2,287		—		—		918		3,052		—		9,202
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	36,101	$	43,855	$	91,839	$	56,987	$	33,254	$	48,377	$	38,676	$	—	$	349,089

Business Loans
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Non-Owner Occupied CRE
Risk Rating
Pass	$	9,058	$	32,823	$	34,316	$	25,613	$	12,375	$	18,072	$	—	$	—	$	132,257
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		383		—		—		—		2,366		—		—		2,749
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	9,058	$	33,206	$	34,316	$	25,613	$	12,375	$	20,438	$	—	$	—	$	135,006

Non-Owner Occupied CRE
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Total
Risk Rating
Pass	$	63,206	$	124,712	$	163,742	$	128,327	$	63,338	$	132,552	$	56,758	$	—	$	732,635
Special Mention		1,044		186		19		6,917		—		1,839		1,696		—		11,701
Substandard		491		5,093		3,734		1,045		1,329		5,241		3,272		—		20,205
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	64,741	$	129,991	$	167,495	$	136,289	$	64,667	$	139,632	$	61,726	$	—	$	764,541

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

Based on the most recent analysis performed, the following table presents the recorded investment by internal risk rating system for Commercial Credit exposures as of December 31, 2023 (in thousands):

													Revolving		Revolving
	Term Loans Amortized Costs Basis by Origination Year												Loans		Loans
													Amortized		Converted
December 31, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Agriculture
Risk Rating
Pass	$	47,599	$	41,741	$	49,276	$	18,699	$	14,793	$	58,459	$	21,157	$	—	$	251,724
Special Mention		60		9		96		697		170		1,136		204		—		2,372
Substandard		—		—		424		719		361		1,772				—		3,276
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	47,659	$	41,750	$	49,796	$	20,115	$	15,324	$	61,367	$	21,361	$	—	$	257,372

Agriculture
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Business Loans
Risk Rating
Pass	$	43,670	$	102,419	$	64,030	$	36,675	$	17,785	$	45,583	$	37,269	$	—	$	347,431
Special Mention		—		43		426		—		—		270		100		—		839
Substandard		3,152		1,369		—		263		—		838		360		—		5,982
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	46,822	$	103,831	$	64,456	$	36,938	$	17,785	$	46,691	$	37,729	$	—	$	354,252

Business Loans
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Non-Owner Occupied CRE
Risk Rating
Pass	$	26,757	$	43,976	$	27,377	$	12,849	$	7,705	$	12,397	$	375	$	—	$	131,436
Special Mention		392		639		—		—		—		37		—		—		1,068
Substandard		—		—		—		—		2,312		301		—		—		2,613
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	27,149	$	44,615	$	27,377	$	12,849	$	10,017	$	12,735	$	375	$	—	$	135,117

Non-Owner Occupied CRE
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Total
Risk Rating
Pass	$	118,026	$	188,136	$	140,683	$	68,223	$	40,283	$	116,439	$	58,801	$	—	$	730,591
Special Mention		452		691		522		697		170		1,443		304		—		4,279
Substandard		3,152		1,369		424		982		2,673		2,911		360		—		11,871
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	121,630	$	190,196	$	141,629	$	69,902	$	43,126	$	120,793	$	59,465	$	—	$	746,741

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 table presents the balances of consumer loans by classes of the loan portfolio based on payment performance as of September 30, 2024 (in thousands):

													Revolving		Revolving
	Term Loans Amortized Costs Basis by Origination Year												Loans		Loans
													Amortized		Converted
September 30, 2024	2024		2023		2022		2021		2020		Prior		Cost Basis		to Term		Total
Consumer
Payment Performance
Performing	$	3,097	$	1,121	$	507	$	148	$	73	$	8	$	1,506	$	—	$	6,460
Nonperforming		—		—		1		—		—		—		—		—		1
Total	$	3,097	$	1,121	$	508	$	148	$	73	$	8	$	1,506	$	—	$	6,461

Consumer
Current period gross charge-offs	$	—	$	13	$	32	$	6	$	—	$	4	$	—	$	—	$	55

Home equity
Payment Performance
Performing	$	1,884	$	7,157	$	15,677	$	939	$	509	$	1,782	$	88,100	$	427	$	116,475
Nonperforming		—		—		144		—		—		—		273		—		417
Total	$	1,884	$	7,157	$	15,821	$	939	$	509	$	1,782	$	88,373	$	427	$	116,892

Home equity
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential Real Estate
Payment Performance
Performing	$	59,316	$	110,090	$	141,654	$	100,379	$	41,047	$	66,243	$	—	$	—	$	518,729
Nonperforming		—		1,073		812		175		—		159		—		—		2,219
Total	$	59,316	$	111,163	$	142,466	$	100,554	$	41,047	$	66,402	$	—	$	—	$	520,948

Residential Real Estate
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Total
Payment Performance
Performing	$	64,297	$	118,368	$	157,838	$	101,466	$	41,629	$	68,033	$	89,606	$	427	$	641,664
Nonperforming		—		1,073		957		175		—		159		273		—		2,637
Total	$	64,297	$	119,441	$	158,795	$	101,641	$	41,629	$	68,192	$	89,879	$	427	$	644,301

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

The following table presents the balances of consumer loans by classes of the loan portfolio based on payment performance as of December 31, 2023 (in thousands):

													Revolving		Revolving
	Term Loans Amortized Costs Basis by Origination Year												Loans		Loans
													Amortized		Converted
	2023		2022		2021		2020		2019		Prior		Cost Basis		to Term		Total
Consumer
Payment Performance
Performing	$	3,251	$	1,085	$	351	$	176	$	31	$	3	$	1,482	$	—	$	6,379
Nonperforming		—		13		—		—		—		—		—		—		13
Total	$	3,251	$	1,098	$	351	$	176	$	31	$	3	$	1,482	$	—	$	6,392

Consumer
Current period gross charge-offs	$	—	$	40	$	17	$	1	$	1	$	6	$	—	$	—	$	65

Home equity
Payment Performance
Performing	$	7,086	$	18,476	$	1,049	$	564	$	529	$	1,847	$	76,076		1,399	$	107,026
Nonperforming		—		—		—		—		—		—		150		—		150
Total	$	7,086	$	18,476	$	1,049	$	564	$	529	$	1,847	$	76,226	$	1,399	$	107,176

Home equity
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential Real Estate
Payment Performance
Performing	$	123,368	$	148,835	$	105,283	$	43,961	$	31,514	$	44,236	$	—	$	—	$	497,197
Nonperforming		—		—		356		—		—		—		—		—		356
Total	$	123,368	$	148,835	$	105,639	$	43,961	$	31,514	$	44,236	$	—	$	—	$	497,553

Residential Real Estate
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Total
Payment Performance
Performing	$	133,705	$	168,396	$	106,683	$	44,701	$	32,074	$	46,086	$	77,558	$	1,399	$	610,602
Nonperforming		—		13		356		—		—		—		150		—		519
Total	$	133,705	$	168,409	$	107,039	$	44,701	$	32,074	$	46,086	$	77,708	$	1,399	$	611,121

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

Allowance for Credit Losses

The following table presents the activity in the allowance for credit losses (ACL) by portfolio segment for the three months ended September 30, 2024 and September 30, 2023 (in thousands):

	Beginning							Provisions			Ending
	Balance		Charge-offs			Recoveries		(Reductions)			Balance
Allowance for credit losses:
Agriculture		2,660		—			—		258			2,918
Business Loans		2,641		—			—		500			3,141
Consumer Loans		327		(19	)		5		(5	)		308
Home Equity		2,660		—			—		(113	)		2,547
Non-Owner Occupied CRE		693		—			—		(26	)		667
Residential Real Estate		5,358		—			—		(197	)		5,161

Total	$	14,339	$	(19	)	$	5	$	417		$	14,742

	Beginning							Provisions			Ending
	Balance		Charge-offs			Recoveries		(Reductions)			Balance
Allowance for credit losses:
Agriculture		3,666		—			—		(290	)		3,376
Business Loans		3,449		—			—		(432	)		3,017
Consumer Loans		357		(26	)		3		33			367
Home Equity		2,339		—			—		(26	)		2,313
Non-Owner Occupied CRE		943		—			—		(30	)		913
Residential Real Estate		6,079		—			—		284			6,363

Total	$	16,833	$	(26	)	$	3	$	(461	)	$	16,349

During the three months ended September 30, 2024, management charged off $19,000 in loans while recovering $5,000 and added $417,000 to the provision for credit losses related to loans and $80,000 in provision expense for off-balance sheet credit exposure for a net provision expense of $497,000.

The following table presents the activity in the allowance for credit losses by portfolio segment for the nine months ended September 30, 2024 and September 30, 2023 (in thousands):

	Beginning							Provisions			Ending
	Balance		Charge-offs			Recoveries		(Reductions)			Balance
Allowance for credit losses:
Agriculture		3,106		—			—		(188	)		2,918
Business Loans		2,684		—			5		452			3,141
Consumer Loans		355		(55	)		16		(8	)		308
Home Equity		2,341		—			—		206			2,547
Non-Owner Occupied CRE		818		—			—		(151	)		667
Residential Real Estate		5,872		—			—		(711	)		5,161

Total	$	15,176	$	(55	)	$	21	$	(400	)	$	14,742

	Beginning							Provisions			Ending
	Balance		Charge-offs			Recoveries		(Reductions)			Balance
Allowance for credit losses:
Agriculture		3,537		—			71		(232	)		3,376
Business Loans		3,382		—			8		(373	)		3,017
Consumer Loans		250		(41	)		3		155			367
Home Equity		2,129		—			—		184			2,313
Non-Owner Occupied CRE		875		—			—		38			913
Residential Real Estate		4,658		—			8		1,697			6,363

Total	$	14,831	$	(41	)	$	90	$	1,469		$	16,349

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

During the nine ended September 30, 2024, management charged off $55,000 in loans while recovering $21,000 and released $400,000 from the provision for credit losses related to loans and added $46,000 to the provision for off-balance sheet credit exposure for a combined release of $354,000.

The ACL is maintained at a level determined to be adequate to absorb estimated expected credit losses within the loan portfolio over the contractual life of an instrument that considers historical loss experience, current conditions, and forecasts of future economic conditions as of the balance sheet date. The Corporation develops and documents a systematic ACL methodology based on the following portfolio segments: Agriculture, Business Loans, Consumer Loans, Home Equity, Non-Owner Occupied Commercial Real Estate (CRE), and Residential Real Estate. The following are key risks within each portfolio segment:

Agriculture – Loans made to individuals or operating companies within the Agricultural industry. These loans are generally secured by a first lien mortgage on agricultural land. The primary source of repayment is the income and assets of the borrower. The condition of the agriculture industry as well as the condition of the national economy is an important indicator of risk for this segment.

Business Loans —Loans made to operating companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory or equipment financing. The primary source of repayment for these loans is cash flow from the operations of the company. The condition of the national economy is an important indicator of risk, but there are also more specific risks depending on the industry of the company. This segment also includes loans made to finance construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes. While the risk of these loans is generally confined to the construction period, if there are problems, the project may not be completed, and as such, may not provide sufficient cash flow on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal. The condition of the national economy is an important indicator of risk, but there are also more specific risks depending on the type of project and the experience and resources of the developer.

Consumer - Loans made to individuals that may be secured by assets other than 1-4 family residences, as well as unsecured loans. This segment includes personal loans and lines of credit that may be secured or unsecured. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the national

economy, in particular the unemployment rate, is an important indicator of risk for this segment. The value of the collateral, if there is any, is less likely to be a source of repayment due to less certain collateral values.

Home Equity– This segment generally includes lines of credit and term loans secured by the equity in the borrower’s residence. The primary source of repayment for these facilities is the income and assets of the borrower. The condition of the national economy, in particular the unemployment rate, is an important indicator of risk for this segment. The state of the national housing market can also have a significant impact on this segment because low demand and/or declining home values can limit the ability of borrowers to sell a property and satisfy the debt.

Non-Owner Occupied CRE - Loans secured by commercial purpose real estate for various purposes such as hotels, retail, multifamily and health care. The primary sources of repayment for these loans are the operations of the individual projects and global cash flows of the debtors. The condition of the national economy is an important indicator of risk, but there are also more specific risks depending on the collateral type and the business prospects of the lessee.

Residential Real Estate—Loans secured by first liens on 1-4 family residential mortgages. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the national economy, in particular the unemployment rate, is an important indicator of risk for this segment. The state of the national housing market can also have a significant impact on this segment because low demand and/or declining home values can limit the ability of borrowers to sell a property and satisfy the debt.

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

The following table presents the balance in the allowance for credit losses and the recorded investment in loans receivable by portfolio segment based on the estimation method as of September 30, 2024:

ALLOWANCE FOR CREDIT LOSSES AND RECORDED INVESTMENT IN LOANS RECEIVABLE

(DOLLARS IN THOUSANDS)

As of September 30, 2024:	Agriculture		Business Loans		Consumer Loans		Home Equity		Non- Owner Occupied CRE		Residential Real Estate		Total
	$		$		$		$		$		$		$
Allowance for credit losses:
Ending balance: individually evaluated		1		457		2		—		—		—		460
Ending balance: collectively evaluated		2,917		2,684		306		2,547		667		5,161		14,282

Loans receivable:
Ending balance		280,446		349,089		6,460		116,748		135,006		520,889		1,408,638
Ending balance: individually evaluated		1,531		5,694		1		417		2,158		2,219		12,020
Ending balance: collectively evaluated		278,915		343,395		6,459		116,331		132,848		518,670		1,396,618

ALLOWANCE FOR CREDIT LOSSES AND RECORDED INVESTMENT IN LOANS RECEIVABLE

(DOLLARS IN THOUSANDS)

As of December 31, 2023:	Agriculture		Business Loans		Consumer		Home Equity		Non- Owner Occupied CRE		Residential Real Estate		Total
	$		$		$		$		$		$		$
Allowance for credit losses:
Ending balance: individually evaluated		—		—		—		—		—				—
Ending balance: collectively evaluated		3,106		2,684		355		2,341		818		5,872		15,176

Loans receivable:
Ending balance		257,372		354,252		6,392		107,176		135,117		497,553		1,357,862
Ending balance: individually evaluated		1,327		1,817		—		—		—		—		3,144
Ending balance: collectively evaluated		256,045		352,435		6,392		107,176		135,117		497,553		1,354,718

Modifications to Borrowers Experiencing Financial Difficulty

The Corporation may grant a modification to borrowers in financial distress by providing a temporary reduction in interest rate, or an extension of a loan’s stated maturity date. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral.

The Corporation identifies loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower's financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future. There was one modification of a loan to a borrower experiencing financial difficulty in the amount of $2,158,000 for the nine months ended September 30, 2024 and none for the nine months ended September 30, 2023.

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

6. 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 September 30, 2024, and December 31, 2023, 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)

	September 30, 2024
	Level I		Level II		Level III		Total
	$		$		$		$

Assets
U.S. treasuries		18,688		—		—		18,688
U.S. government agencies		—		18,135		—		18,135
U.S. agency mortgage-backed securities		—		36,709		—		36,709
U.S. agency collateralized mortgage obligations		—		58,681		—		58,681
Non-agency MBS/CMO		—		89,696		—		89,696
Asset-backed securities		—		58,992		—		58,992
Corporate bonds		—		53,351		—		53,351
Obligations of states & political subdivisions		—		183,549		—		183,549
Equity securities		9,851		—		—		9,851

Total securities		28,539		499,113		—		527,652
Derivatives and hedging activities		—		9		—		9

Liabilities
Derivatives and hedging activities		—		903		—		903

On September 30, 2024, the Corporation held no securities valued using level III inputs. Most 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 U.S. Treasury bonds, 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. The Corporation’s hedging assets and liabilities are valued using level II inputs as there are quoted prices available and observable, but not necessarily quotes on identical instruments traded in active markets on a daily basis.

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

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.

ASSETS MEASURED ON A RECURRING BASIS

(DOLLARS IN THOUSANDS)

	December 31, 2023
	Level I		Level II		Level III		Total
	$		$		$		$

U.S. Treasuries		18,159		—		—		18,159
U.S. government agencies		—		17,538		—		17,538
U.S. agency mortgage-backed securities		—		40,156		—		40,156
U.S. agency collateralized mortgage obligations		—		19,837		—		19,837
Non-agency MBS/CMO		—		56,187		—		56,187
Asset-backed securities		—		65,305		—		65,305
Corporate bonds		—		55,004		—		55,004
Obligations of states & political subdivisions		—		187,383		—		187,383
Equity securities		9,451		—		—		9,451

Total securities		27,610		441,410		—		469,020

On December 31, 2023, the Corporation held no securities valued using level III inputs. Most 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 U.S. Treasury bonds, 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.

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 September 30, 2024 and December 31, 2023, by level within the fair value hierarchy:

ASSETS MEASURED ON A NONRECURRING BASIS

(Dollars in Thousands)

	September 30, 2024
	Level I		Level II		Level III		Total
	$		$		$		$
Assets:
Individually analyzed loans	$	—	$	—	$	11,561	$	11,561
Total	$	—	$	—	$	11,561	$	11,561

	December 31, 2023
	Level I		Level II		Level III		Total
	$		$		$		$
Assets:
Individually analyzed loans	$	—	$	—	$	3,144	$	3,144
Total	$	—	$	—	$	3,144	$	3,144

The Corporation had a total of $12,021,000 of individually analyzed loans as of September 30, 2024, with $460,000 of specific allocation against these loans and $3,144,000 of individually analyzed loans as of December 31, 2023, with $0 of specific allocation against these loans. The value of individually analyzed loans is generally determined through independent appraisals of the underlying collateral.

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)

	September 30, 2024
	Fair Value	Valuation	Unobservable	Range
	Estimate	Techniques	Input	(Weighted Avg)

Individually analyzed loans	11,561	Appraisal of collateral (1)	Appraisal adjustments (2)	0% to -20% (-20%)
			Liquidation expenses (2)	0% to -10% (-10%)

	December 31, 2023
	Fair Value	Valuation	Unobservable	Range
	Estimate	Techniques	Input	(Weighted Avg)

Individually analyzed loans	3,144	Appraisal of collateral (1)	Appraisal adjustments (2)	0% to -20% (-20%)
			Liquidation expenses (2)	0% to -10% (-10%)

(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.

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

The following tables provide 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 September 30, 2024 and December 31, 2023:

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

(DOLLARS IN THOUSANDS)

	September 30, 2024
					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		67,717		67,717		67,717		—		—
Regulatory stock		8,468		8,468		8,468		—		—
Loans held for sale		1,994		1,994		1,994		—		—
Loans, net of allowance		1,395,769		1,381,805		—		—		1,381,805
Mortgage servicing assets		2,185		2,701		—		—		2,701
Accrued interest receivable		8,240		8,240		8,240		—		—
Bank owned life insurance		35,769		35,769		35,769		—		—

Financial Liabilities:
Demand deposits		599,025		599,025		599,025		—		—
Interest-bearing demand deposits		362,573		362,573		362,573		—		—
Money market deposit accounts		156,541		156,541		156,541		—		—
Savings accounts		276,212		276,212		276,212		—		—
Time deposits		421,064		420,290		—		—		420,290
Total deposits		1,815,415		1,814,641		1,394,351		—		420,290

Long-term debt		87,822		88,931		—		—		88,931
Subordinated debt		39,676		35,660		—		—		35,660
Accrued interest payable		3,092		3,092		3,092		—		—

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

(DOLLARS IN THOUSANDS)

	December 31, 2023
					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		88,996		88,996		88,996		—		—
Regulatory stock		8,540		8,540		8,540		—		—
Loans held for sale		352		352		352		—		—
Loans, net of allowance		1,344,902		1,300,300		—		—		1,300,300
Mortgage servicing assets		2,151		2,904		—		—		2,904
Accrued interest receivable		7,015		7,015		7,015		—		—
Bank owned life insurance		35,632		35,632		35,632		—		—

Financial Liabilities:
Demand deposits		611,968		611,968		611,968		—		—
Interest-bearing demand deposits		214,033		214,033		214,033		—		—
NOW accounts		99,738		99,738		99,738		—		—
Money market deposit accounts		158,446		158,446		158,446		—		—
Savings accounts		308,913		308,913		308,913		—		—
Time deposits		333,700		331,680		—		—		331,680
Total deposits		1,726,798		1,724,778		1,393,098		—		331,680

Long-term debt		101,228		101,509		—		—		101,509
Subordinated debt		39,556		33,976		—		—		33,976
Accrued interest payable		2,203		2,203		2,203		—		—

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

7. Accumulated Other Comprehensive Income (Loss)

The activity in accumulated other comprehensive income (loss) for the three months ended September 30, 2024 and 2023 is as follows:

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (1) (2)

(DOLLARS IN THOUSANDS)

	Unrealized
	Gains (Losses)
	on Securities
	Available-for-Sale
	$
Balance at December 31, 2023		(34,355	)
Other comprehensive loss before reclassifications		(828	)
Amount reclassified from accumulated other comprehensive income (loss)		72
Period change		(756	)

Balance at March 31, 2024		(35,111	)
Other comprehensive income before reclassifications		620
Amount reclassified from accumulated other comprehensive income (loss)		—
Period change		620

Balance at June 30, 2024		(34,491	)
Other comprehensive income before reclassifications		7,444
Amount reclassified from accumulated other comprehensive income (loss)		—
Period change		7,444

Balance at September 30, 2024		(27,047	)

Balance at December 31, 2022		(48,292	)
Other comprehensive loss before reclassifications		7,335
Amount reclassified from accumulated other comprehensive income (loss)		324
Period change		7,659

Balance at March 31, 2023		(40,633	)
Other comprehensive loss before reclassifications		(1,365	)
Amount reclassified from accumulated other comprehensive income (loss)		754
Period change		(611	)

Balance at June 30, 2023		(41,244	)
Other comprehensive loss before reclassifications		(11,477	)
Amount reclassified from accumulated other comprehensive income (loss)		—
Period change		(11,477	)

Balance at September 30, 2023		(52,721	)

(1) All amounts are net of tax. Related income tax expense or benefit is calculated using a Federal income tax rate of 21%.

(2) Amounts in parentheses indicate debits.

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

DETAILS ABOUT ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) COMPONENTS (1)

(DOLLARS IN THOUSANDS)

	Amount Reclassified from
	Accumulated Other Comprehensive Income (Loss)
	For the Three Months
	September 30,
	2024		2023		Affected Line Item in the
	$		$		Consolidated Statements of Income
Securities available-for-sale:
Net securities losses, reclassified into earnings		—		—	Losses on the sale of debt securities, net
Related income tax benefit		—		—	Provision for federal income taxes

Net effect on accumulated other comprehensive loss for the period		—		—

Total reclassifications for the period		—		—

(1) Amounts in parentheses indicate debits.

	Amount Reclassified from
	Accumulated Other Comprehensive Income (Loss)
	For the Nine Months
	September 30,
	2024			2023			Affected Line Item in the
	$			$			Consolidated Statements of Income
Securities available-for-sale:
Net securities losses, reclassified into earnings		(91	)		(1,364	)	Losses on the sale of debt securities, net
Related income tax benefit		19			286		Benefit for federal income taxes

Net effect on accumulated other comprehensive loss for the period		(72	)		(1,078	)

Total reclassification for the period		(72	)		(1,078	)

(1) Amounts in parentheses indicate debits.

8. Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Corporation is exposed to certain risks arising from both its business operations and economic conditions. The Corporation principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Corporation manages economic risks, including interest rate, liquidity risk, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and through the use of derivative financial instruments. Specifically, the Corporation enters into derivative financial instruments to manage exposure that arises from business activities that result in changes in the value of certain assets as a result of interest rate changes. The Corporation’s derivative financial instruments are used to manage these fair value fluctuations principally related to certain fixed rate debt securities.

Fair Values of Derivative Instruments on the Consolidated Balance Sheet

In 2024, the Corporation entered into certain interest rate swap contracts that are matched to closed portfolios of available-for-sale investment securities. These contracts have been designated as hedging instruments to hedge the risk of changes in the fair value of the underlying investment securities due to changes in interest rates. The related contracts are structured so that the notional amounts reduce over time to generally match the expected amortization of the underlying investment security. The following amounts were recorded on the unaudited consolidated balance sheets related to the cumulative basis adjustment for the fair value hedges as of September 30, 2024 and December 31, 2023:

ENB FINANCIAL CORP
Notes to the Unaudited Consolidated Interim Financial Statements

	Carrying Amount				Cumulative Amount of Fair Value
	of the Hedged Assets				Hedging Adjustment
	9/30/2024		12/31/2023		9/30/2024		12/31/2023
Investment Securities, Available-for-Sale¹	$	79,659	$	—	$	901	$	—

¹ Carrying value represents amortized cost

These amounts were included in the fair value of closed portfolios of available-for-sale investment securities used to designate hedging relationships in which the hedged item is in the stated amount of assets in the closed portfolios anticipated to be outstanding for the designated hedge period. As of September 30, 2024, the fair value of the closed portfolios used in these hedging relationships was $79.5 million. As of September 30, 2024, the notional amount of hedged assets was $78.9 million.

The Corporation is exposed to changes in the fair value of fixed-rate assets due to changes in benchmark interest rates. The Corporation entered into pay-fixed and receive-floating interest rate swaps to manage its exposure to changes in the fair value of its available-for-sale investment securities. These interest rate swaps are designated as fair value hedges using the portfolio layer method. The Corporation receives variable-rate interest payments in exchange for making fixed-rate payments over the lives of the contracts without exchanging the notional amounts. The fair value hedges are recorded as components of other assets and other liabilities in the Corporation’s unaudited consolidated balance sheets. The gain or loss on these derivatives, as well as the offsetting gain or loss on the hedged items attributable to the hedged risk are recognized in interest income in the Corporation’s unaudited consolidated statements of income.

9. Recently Issued Accounting Standards

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Public entities are required to adopt the changes retrospectively, recasting each prior-period disclosure for which a comparative income statement is presented in the period of adoption. The Corporation does not expect the adoption of this ASU to have a material impact on the Corporation's financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides for improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This guidance is effective for public business entities for annual periods beginning after December 15, 2024. The Corporation does not expect the adoption of this ASU to have a material impact on the Corporation's financial statements.

In March 2024, the FASB issued ASU 2024-01, Compensation – Stock Compensation (Topic 718), amended the guidance in ASC 718 to add an example showing how to apply the scope guidance to determine whether profits interest and similar awards should be accounted for as share-based payment arrangements. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. For all other entities, it is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. The Corporation does not expect the adoption of this ASU to have a material impact on the Corporation's financial statements.

In March 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements. This ASU removes various references to the FASB’s Concepts Statements from the FASB’s Accounting Standards Codification. The FASB does not expect these updates to have a significant effect on current accounting practice. That is because in most cases the amendments to the Codification remove references to Concept Statements that are extraneous and not required to understand or apply the guidance. However, the FASB has provided transition guidance if applying the updated guidance results in accounting changes for some entities. The amendments in ASU 2024-02 are effective for public business entities for fiscal years beginning after December 15, 2024. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2025. The Corporation does not expect the adoption of this ASU to have a material impact on the Corporation's financial statements.

ENB FINANCIAL CORP
Management’s Discussion and Analysis

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis represents management’s view of the financial condition and results of operations of the Corporation. This discussion and analysis should be read in conjunction with the consolidated financial statements and other financial schedules included in this quarterly report, and in conjunction with the 2023 Annual Report to Shareholders of the Corporation. The financial condition and results of operations presented are not indicative of future performance.

Forward-Looking Statements

The U.S. Private Securities Litigation Reform Act of 1995 provides safe harbor in regards to the inclusion of forward-looking statements in this document and documents incorporated by reference. Forward-looking statements pertain to possible or assumed future results that are made using current information. These forward-looking statements are generally identified when terms such as: “believe,” “estimate,” “anticipate,” “expect,” “project,” “forecast,” and other similar wordings are used. The readers of this report should take into consideration that these forward-looking statements represent management’s expectations as to future forecasts of financial performance, or the likelihood that certain events will or will not occur. Due to the very nature of estimates or predications, these forward-looking statements should not be construed to be indicative of actual future results. Additionally, management may change estimates of future performance, or the likelihood of future events, as additional information is obtained. This document may also address targets, guidelines, or strategic goals that management is striving to reach but may not be indicative of actual results.

Readers should note that many factors affect this forward-looking information, some of which are discussed elsewhere in this document and in the documents that are incorporated by reference into this document. These factors include, but are not limited to, the following:

●

National, regional and local economic conditions

●

Interest rate and monetary policies of the Federal Reserve Board

●

Inflation and monetary fluctuations and volatility

●

Instability in the banking system caused by bank failures and continuous financial uncertainty of various banks which may adversely impact the corporation and its securities values, deposit stability, capital adequacy, financial condition, operations, liquidity, and results of operations

●

Health of the housing market

●

Volatility of the securities markets including the valuation of securities

●

Real estate valuations and its impact on the loan portfolio

●

Future actions or inactions of the United States government, including a failure to increase the government debt limit, a prolonged shutdown of the federal government, increase in taxes or regulations, or increasing debt balances

●

Political changes and the impact of new laws and regulations

●

Competitive forces

●

Impact of mergers and acquisition activity in the local market and the effects thereof

●

Potential impact from continually evolving cybersecurity and other technological risks and attacks, including additional costs, reputational damage, regulatory penalties, and financial losses

●

Changes in customer behavior impacting deposit levels and loan demand

●

Changes in accounting principles, policies, or guidelines as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standards setters

●

Ineffective business strategy due to current or future market and competitive conditions

●

Management’s ability to manage credit risk, liquidity risk, interest rate risk, and fair value risk

●

Operational, legal, and reputational risk

●

Results of the regulatory examination and supervision process

●

Possible changes to the capital and liquidity requirements and other regulatory pronouncements, regulations and rules

●

Large scale global disruptions such as pandemics, terrorism, trade wars, and armed conflict.

●

Local market area disruptions due to flooding, severe weather, or other natural disasters

●

The risk that our analyses of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful

●

Business and competitive disruptions caused by new market and industry entrants

ENB FINANCIAL CORP
Management’s Discussion and Analysis

Readers should be aware if any of the above factors change significantly, the statements regarding future performance could also change materially. The safe harbor provision provides that the Corporation is not required to publicly update or revise forward-looking statements to reflect events or circumstances that arise after the date of this report. Readers should review any changes in risk factors in documents filed by the Corporation periodically with the Securities and Exchange Commission, including Item 1A of Part II of this Quarterly Report on Form 10-Q, Annual Reports on Form 10-K, and Current Reports on Form 8-K.

Results of Operations

Overview

The Corporation recorded net income of $3,336,000 for the three-month period ended September 30, 2024, a $277,000, or 7.7% decrease from the three months ended September 30, 2023. Net income for the nine-month period was $11,591,000, a $3,740,000, or 47.6% increase over earnings in the nine-month period ended September 30, 2023. The earnings per share, basic and diluted, were $0.59 for the three months ended September 30, 2024, compared to $0.64 for the same period in 2023, and for the year-to-date period, earnings per share were $2.05, compared to $1.39 in 2023, or a 47.5% increase over the comparable nine-month period in the previous year.

The Corporation’s net interest income (NII) increased by $812,000, or 6.1%, and $717,000, or 1.8%, for the three and nine months ended September 30, 2024, compared to the same periods in 2023. Interest and fees on loans increased by $2,752,000, or 17.3%, and $9,359,000, or 21.0%, for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. Conversely, interest expense on deposits and borrowings increased by $2,657,000, or 39.8%, and $9,954,000, or 62.2%, for the three and nine months ended September 30, 2024, compared to the same periods in the prior year.

The Corporation recorded a provision for credit losses of $497,000 in the third quarter of 2024, and a release of provision expense of $354,000 for the year-to-date period, compared to a release of provision expense of $504,000 in the third quarter of 2023 and a year-to-date provision expense of $1,568,000 through September 30, 2023. During the first nine months of 2023, there was a significant change in the forward credit outlook due primarily to a high interest rate environment and declining economic conditions. These forward economic indicators improved substantially moving into 2024 resulting in the release of provision expense for the year-to-date period. The allowance as a percentage of total loans was 1.04% as of September 30, 2024, 1.12% as of December 31, 2023, and 1.22% as of September 30, 2023.

Other income increased by $984,000, or 27.7%, and $4,655,000, or 53.9%, for the three and nine months ended September 30, 2024, compared to the same periods in the prior year. All categories of other income showed increases for both the quarter and year-to-date periods.

Total operating expenses increased by $1,091,000, or 8.4%, and $2,487,000, or 6.4%, for the three and nine months ended September 30, 2024, compared to the same periods in 2023. Salary and benefit expenses, which make up the largest portion of operating expenses, increased by $1,294,000, or 17.6%, and $2,612,000, or 11.5%, for these time periods, due to the competitive labor market and the cost to hire and retain qualified talent. Other operating expenses outside of salaries and benefits did not change significantly since the prior year.

The financial services industry uses two primary performance measurements to gauge performance: return on average assets (ROA) and return on average equity (ROE). ROA measures how efficiently a bank generates income based on the amount of assets or size of a company. ROE measures the efficiency of a company in generating income based on the amount of equity or capital utilized. The ROA and ROE decreased for the quarter-to-date period due to slightly lower earnings, but increased for the year-to-date period, due to higher earnings in 2024.

ENB FINANCIAL CORP
Management’s Discussion and Analysis

Key Ratios	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023

Return on Average Assets		0.65%		0.75%		0.77%		0.56%
Return on Average Equity		10.17%		13.68%		12.50%		10.11%

The results of the Corporation’s operations are best explained by addressing, in further detail, the five major sections of the income statement, which are as follows:

●

Net interest income

●

Provision for credit losses

●

Other income

●

Operating expenses

●

Provision for income taxes

The following discussion analyzes each of these five components.

Net Interest Income (NII)

NII represents the largest portion of the Corporation’s operating income. In the first nine months of 2024, NII generated 75.8% of the Corporation’s revenue stream, which consists of NII and non-interest income. This compared to 82.5% for the first nine months of 2023. This decrease is a result of higher levels of non-interest income in the first nine months of 2024 resulting in NII contributing to a smaller portion of total revenue. The overall performance of the Corporation is highly dependent on the changes in NII since it comprises such a significant portion of operating income.

The following table shows a summary analysis of NII on a fully taxable equivalent (FTE) basis. For analytical purposes and throughout this discussion, yields, rates, and measurements such as NII, net interest spread, and net yield on interest earning assets are presented on an FTE basis. The FTE NII shown in both tables below will exceed the NII reported on the consolidated statements of income, which is not shown on an FTE basis. The amount of FTE adjustment totaled $75,000 for the three months ended September 30, 2024, and $279,000 for the nine months ended September 30, 2024, compared to $135,000 and $491,000 for the same periods in 2023.

NET INTEREST INCOME

(DOLLARS IN THOUSANDS)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	$		$		$		$
Total interest income		23,506		20,037		67,506		56,835
Total interest expense		9,336		6,679		25,970		16,016

Net interest income		14,170		13,358		41,536		40,819
Tax equivalent adjustment		75		135		279		491

Net interest income (fully taxable equivalent)		14,245		13,493		41,815		41,310

NII is the difference between interest income earned on assets and interest expense incurred on liabilities. Accordingly, two factors affect NII:

●

The rates earned on interest earning assets and paid on interest bearing liabilities

●

The average balance of interest earning assets and interest bearing liabilities

ENB FINANCIAL CORP
Management’s Discussion and Analysis

NII is impacted by yields earned on assets and rates paid on liabilities. During 2023, asset yields increased with the increases in Federal Reserve rates, but liability costs increased even more dramatically as rates were held lower during 2022 when the Fed first started increasing rates and then moved much higher in 2023 due to liquidity needs and the desire to preserve deposit balances. Market interest rates have stabilized and moderated in 2024 but the Corporation is still feeling the lingering effects of the prior rate movements as customers continue to move funds to higher yielding deposit products. While higher market rates have helped the Corporation’s asset yields, the higher cost of funds has put pressure on the NIM causing slight compression. Management believes this compression will moderate through the remainder of 2024 as the cost of funds has started to decline and asset yields are stable.

The Corporation’s net interest margin remained stable at 2.89% for the quarter ended September 30, 2024, compared to the same quarter in 2023, but for the year-to-date period, the Corporation’s margin was 2.86%, compared to 2.99% for the year-to-date period in 2023. The Corporation’s NII on a fully taxable equivalent basis increased by $752,000, or 5.6%, for the three months ended September 30, 2024, and $505,000, or 1.2%, for the nine months ended September 30, 2024, compared to the same periods in 2023.

The Corporation’s overall cost of funds rose significantly throughout 2023 and into 2024. Core deposit interest rates have risen over the past year; however, time deposit rates have risen to higher levels and more quickly than core deposit rates. The change in deposit rates has resulted in some movement from low interest bearing core deposits to higher cost time deposits or other higher yielding money market deposits. This resulted in the total cost of deposits increasing by $2,627,000 for the quarter and $9,605,000 for the nine months ended September 30, 2024, compared to the same periods in the prior year. The average balance of borrowings was slightly lower for the third quarter, but slightly higher for the first nine months of 2024 compared to 2023, and interest rates were higher, resulting in the total cost of borrowings increasing by $30,000, and $349,000, for the three and nine months ended September 30, 2024, compared to the same periods in 2023.

The following table provides an analysis of year-to-date changes in NII on a FTE basis by distinguishing what changes were a result of average balance increases or decreases and what changes were a result of interest rate increases or decreases.

RATE/VOLUME ANALYSIS OF CHANGES IN NET INTEREST INCOME

(TAXABLE EQUIVALENT BASIS, DOLLARS IN THOUSANDS)

	Three Months Ended September 30,									Nine Months Ended September 30,
	2024 vs. 2023									2024 vs. 2023
	Increase (Decrease)									Increase (Decrease)
	Due To Change In									Due To Change In
							Net									Net
	Average			Interest			Increase			Average			Interest			Increase
	Balances			Rates			(Decrease)			Balances			Rates			(Decrease)
	$			$			$			$			$			$
INTEREST INCOME

Interest on deposits at other banks		481			100			581			977			308			1,285

Securities available for sale:
Taxable		60			76			136			(622	)		694			72
Tax-exempt		(40	)		(64	)		(104	)		(147	)		(209	)		(356	)
Total securities		20			12			32			(769	)		485			(284	)

Loans		1,015			1,747			2,762			4,043			5,321			9,364
Regulatory stock		8			26			34			110			(16	)		94

Total interest income		1,524			1,885			3,409			4,361			6,098			10,459

INTEREST EXPENSE

Deposits:
Demand deposits		71			221			292			(2	)		1,953			1,951
Savings deposits		(13	)		—			(13	)		(40	)		11			(29	)
Time deposits		1,567			781			2,348			4,769			2,914			7,683
Total deposits		1,625			1,002			2,627			4,727			4,878			9,605

Borrowings:
Total borrowings		(69	)		99			30			(38	)		387			349

Total interest expense		1,556			1,101			2,657			4,689			5,265			9,954

NET INTEREST INCOME		(32	)		784			752			(328	)		833			505

ENB FINANCIAL CORP
Management’s Discussion and Analysis

The following tables show a more detailed analysis of NII on a FTE basis with all the major elements of the Corporation’s balance sheet, which consists of interest earning and non-interest earning assets and interest bearing and non-interest bearing liabilities.

COMPARATIVE AVERAGE BALANCE SHEETS AND NET INTEREST INCOME

(DOLLARS IN THOUSANDS)

	For the Three Months Ended September 30,
	2024						2023
					(c)						(c)
	Average				Annualized		Average				Annualized
	Balance		Interest		Yield/Rate		Balance		Interest		Yield/Rate
	$		$		%		$		$		%
ASSETS
Interest earning assets:
Federal funds sold and interest
on deposits at other banks		60,165		808		5.33		22,715		227		3.97

Securities available for sale:
Taxable		367,002		3,166		3.45		359,965		3,030		3.37
Tax-exempt		149,755		700		1.87		157,807		804		2.04
Total securities (d)		516,757		3,866		2.99		517,772		3,834		2.96

Loans (a)		1,398,128		18,721		5.36		1,317,484		15,959		4.83

Regulatory stock		8,550		186		8.71		8,114		152		7.48

Total interest earning assets		1,983,600		23,581		4.75		1,866,085		20,172		4.32

Non-interest earning assets (d)		55,485						41,128

Total assets		2,039,085						1,907,213

LIABILITIES &
STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Demand deposits		507,942		3,742		2.92		497,850		3,449		2.75
Savings deposits		280,915		70		0.10		332,615		83		0.10
Time deposits		374,017		4,205		4.46		221,755		1,858		3.32
Borrowed funds		129,293		1,319		4.05		136,812		1,289		3.74
Total interest bearing liabilities		1,292,167		9,336		2.87		1,189,032		6,679		2.23

Non-interest bearing liabilities:

Demand deposits		603,768						602,012
Other		12,707						11,369

Total liabilities		1,908,642						1,802,413

Stockholders' equity		130,443						104,800

Total liabilities & stockholders' equity		2,039,085						1,907,213

Net interest income (FTE)				14,245						13,493

Net interest spread (b)						1.88						2.09
Effect of non-interest
bearing deposits						1.01						0.80
Net yield on interest earning assets (c)						2.89						2.89

(a) Includes balances of nonaccrual loans and the recognition of any related interest income. The quarter-to-date average balances include net deferred loan costs of $1,873,000 as of September 30, 2024, and $2,426,000 as of September 30, 2023. Such fees and costs recognized through income and included in the interest amounts totaled ($29,000) in 2024, and ($92,000) in 2023.

(b) Net interest spread is the arithmetic difference between the yield on interest earning assets and the rate paid on interest bearing liabilities.

(c) Net yield, also referred to as net interest margin, is computed by dividing NII (FTE) by total interest earning assets.

(d) Securities recorded at amortized cost. Unrealized holding gains and losses are included in non-interest earning assets.

ENB FINANCIAL CORP
Management’s Discussion and Analysis

COMPARATIVE AVERAGE BALANCE SHEETS AND NET INTEREST INCOME

(DOLLARS IN THOUSANDS)

	For the Nine Months Ended September 30,
	2024						2023
					(c)						(c)
	Average				Annualized		Average				Annualized
	Balance		Interest		Yield/Rate		Balance		Interest		Yield/Rate
	$		$		%		$		$		%
ASSETS
Interest earning assets:
Federal funds sold and interest
on deposits at other banks		47,198		1,759		4.98		18,777		474		3.38

Securities available for sale:
Taxable		354,451		9,192		3.46		379,437		9,120		3.20
Tax-exempt		151,209		2,207		1.95		160,783		2,563		2.13
Total securities (d)		505,660		11,399		3.01		540,220		11,683		2.88

Loans (a)		1,384,562		54,097		5.21		1,274,727		44,733		4.68

Regulatory stock		9,740		530		7.26		7,734		436		7.53

Total interest earning assets		1,947,160		67,785		4.64		1,841,458		57,326		4.15

Non-interest earning assets (d)		53,650						43,137

Total assets		2,000,810						1,884,595

LIABILITIES &
STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Demand deposits		488,338		10,449		2.86		488,441		8,498		2.33
Savings deposits		291,186		217		0.10		345,160		246		0.10
Time deposits		352,646		11,287		4.28		179,235		3,604		2.69
Borrowed funds		134,091		4,017		4.01		133,655		3,668		3.67
Total interest bearing liabilities		1,266,261		25,970		2.74		1,146,491		16,016		1.87

Non-interest bearing liabilities:

Demand deposits		598,016						623,384
Other		12,635						10,875

Total liabilities		1,876,912						1,780,750

Stockholders' equity		123,898						103,845

Total liabilities & stockholders' equity		2,000,810						1,884,595

Net interest income (FTE)				41,815						41,310

Net interest spread (b)						1.90						2.29
Effect of non-interest
bearing deposits						0.96						0.70
Net yield on interest earning assets (c)						2.86						2.99

(a) Includes balances of nonaccrual loans and the recognition of any related interest income. The year-to-date average balances include net deferred loan costs of $2,047,000 as of September 30, 2024, and $2,541,000 as of September 30, 2023. Such fees and costs recognized through income and included in the interest amounts totaled ($159,000) in 2024, and ($260,000) in 2023.

(b) Net interest spread is the arithmetic difference between the yield on interest earning assets and the rate paid on interest bearing liabilities.

(c) Net yield, also referred to as net interest margin, is computed by dividing net interest income (FTE) by total interest earning assets.

(d) Securities recorded at amortized cost. Unrealized holding gains and losses are included in non-interest earning assets.

ENB FINANCIAL CORP
Management’s Discussion and Analysis

The Corporation’s average balances on securities decreased by $1.0 million, or 0.2%, for the three months ended September 30, 2024, and $34.6 million, or 6.4%, for the nine months ended September 30, 2024, compared to the same periods in 2023. The tax equivalent yield on investments increased by three basis points for the quarter-to-date period and 13 basis points for the year-to-date period when comparing both years. Interest income on securities increased by $32,000, or 0.8%, for the three months ended September 30, 2024, and decreased $284,000, or 2.4%, for the nine months ended September 30, 2024, compared to the same periods in the prior year.

Average balances on loans increased by $80.6 million, or 6.1%, for the three months ended September 30, 2024, and $109.8 million, or 8.6%, for the nine months ended September 30, 2024, compared to the same periods in the prior year. Loan yields increased by 53 basis points for the quarter and year-to-date period and loan interest income increased by $2,762,000, or 17.3%, and $9,364,000, or 20.9%, for both time frames due to the increase in loan balances and higher yields.

The average balance of interest-bearing deposit accounts increased by $110.7 million, or 10.5%, and $119.3 million, or 11.8%, for the three and nine months ended September 30, 2024, respectively, compared to the same periods in the prior year. Total interest-bearing deposits increased as rates increased due to funds shifting from non-interest earning accounts to interest earning accounts due to the rapid increase in market rates. The average balance of savings accounts decreased as funds moved into higher-yielding time deposit accounts. The interest rate paid on all interest-bearing deposits increased significantly for both time periods. The combined rate on interest-bearing deposits increased by 70 basis points for the quarter ended September 30, 2024, and 96 basis points for the year-to-date period, compared to the same periods in the prior year. The combination of these changes resulted in an increase in interest expense on deposits of $2,627,000, for the three months ended September 30, 2024, and $9,603,000, for the nine months ended September 30, 2024, compared to the same periods in 2023.

The Corporation’s average balance on borrowed funds decreased by $7,519,000, or 5.5%, for the three months ended September 30, 2024, and increased by $436,000, or 0.3%, for the nine months ended September 30, 2024, compared to the same periods in 2023. The Corporation’s borrowed funds consist of FHLB advances as well as subordinated debt issued in December of 2020 and July of 2022 which was used to support capital growth for the Corporation. The rate paid on borrowed funds increased by 31 basis points for the three months ended September 30, 2024, and 34 basis points for the nine months ended September 30, 2024, compared to the same periods in the prior year.

For the three months ended September 30, 2024, the net interest spread decreased by 21 basis points to 1.88%, compared to 2.09% for the three months ended September 30, 2023. For the nine months ended September 30, 2024, the net interest spread decreased by 39 basis points to 1.90%, compared to 2.29% for the nine months ended September 30, 2023. The effect of non-interest bearing funds increased to 101 basis points from 80 basis points for the three months ended September 30, 2024, and increased to 96 basis points from 70 basis points for the nine months ended September 30, 2024, compared to the same periods in 2023. The effect of non-interest bearing funds refers to the benefit gained from deposits on which the Corporation does not pay interest. As rates go higher, the benefit of non-interest bearing deposits increases because there is more difference between non-interest bearing funds and interest bearing liabilities. The Corporation’s NIM for the third quarter of 2024 was 2.89%, compared to 2.89% for the third quarter of 2023. For the year-to-date period, the Corporation’s NIM was 2.86%, compared to 2.99% for the same period in 2023.

The Asset Liability Committee (ALCO) carefully monitors the NIM because it indicates trends in NII, the Corporation’s largest source of revenue. For more information on the plans and strategies in place to protect the NIM and moderate the impact of changes in rates, refer to Item 7A: Quantitative and Qualitative Disclosures about Market Risk.

ENB FINANCIAL CORP
Management’s Discussion and Analysis

Provision for Credit Losses

The provision for credit losses includes a provision for losses on loans, available-for-sale debt securities, and unfunded loan commitments. The provision provides for losses inherent in the financial assets as determined by a quarterly analysis and calculation of various factors related to the financial assets. The amount of the provision reflects the adjustment management determines necessary to ensure the Allowance for Credit Losses (ACL) is adequate to cover any losses inherent in the financial assets. The Corporation recorded a release of provision expense of $400,000 for credit losses related to loans, a provision expense of $46,000 for unfunded commitments, and $0 related to available-for-sale securities for the first nine months of 2024, compared to provision expense of $1,469,000 related to loans, $99,000 for unfunded commitments, and $0 related to available-for-sale securities for the nine months ended September 30, 2023. During the first nine months of 2024, there was less economic impact in the forward credit outlook due to improving economic indicators allowing the release of provision expense. As of September 30, 2024, the allowance as a percentage of total loans was 1.05%, compared to 1.22% at September 30, 2023. More detail is provided under Allowance for Credit Losses in the Financial Condition section that follows.

Other Income

Other income for the third quarter of 2024 was $4,539,000, an increase of $984,000, or 27.7%, compared to the $3,555,000 earned during the third quarter of 2023. For the year-to-date period ended September 30, 2024, other income totaled $13,286,000, an increase of $4,655,000, or 53.9%, compared to the same period in 2023. The following tables detail the categories that comprise other income.

OTHER INCOME

(DOLLARS IN THOUSANDS)

	Three Months Ended September 30,
	2024		2023			Increase (Decrease)
	$		$			$			%

Trust and investment services		794		663			131			19.8
Service charges on deposit accounts		1,442		1,283			159			12.4
Other fees		90		99			(9	)		(9.1	)
Commissions		1,039		917			122			13.3
Net gains/(losses) on debt and equity securities		211		(103	)		314			—
Gains on sale of mortgages		369		180			189			105.0
Earnings on bank owned life insurance		279		245			34			13.9
Other miscellaneous income		315		271			44			16.2

Total other income		4,539		3,555			984			27.7

OTHER INCOME

(DOLLARS IN THOUSANDS)

	Nine Months Ended September 30,						Increase (Decrease)
	2024			2023
	$			$			$		%

Trust and investment services		2,604			2,122			482		22.7
Service charges on deposit accounts		3,966			3,133			833		26.6
Other fees		365			271			94		34.7
Commissions		3,061			2,729			332		12.2
Net gains (losses) on debt and equity securities		(17	)		(1,769	)		1,752		—
Gains on sale of mortgages		1,391			506			885		174.9
Earnings on bank owned life insurance		979			708			271		38.3
Other miscellaneous income		937			931			6		0.6

Total other income		13,286			8,631			4,655		53.9

ENB FINANCIAL CORP
Management’s Discussion and Analysis

Trust and investment services income increased for the quarter and year-to-date as a result of higher levels of assets under management and the gain on sale of a limited number of trust assets. Service charges on deposit accounts increased for both time periods driven primarily by fees earned on an off-balance-sheet sweep product. Commissions are higher for both time periods as a result of higher income on debit card interchange transactions. The Corporation incurred $211,000 of gains on debt and equity securities in the third quarter of 2024 as a result of the sale of several bank stock positions, and $17,000 of losses for the year-to-date period as a result of strategic sales of debt securities to fund higher yielding loan growth. This compared to net losses of $103,000, and $1,769,000 for the three and nine months ended September 30, 2023, as a result of a higher volume of debt security sales to fund loan growth in the prior year. Mortgage gains increased by $189,000, or 105.0%, in the third quarter of 2024, compared to the third quarter of 2023, and $885,000, or 174.9%, for the nine months ended September 30, 2024, compared to the same period in 2023. This was primarily a result of the strategic decision to generate more mortgage volume for sale on the secondary market as opposed to held for investment on the Corporation’s balance sheet. Earnings on bank owned life insurance were higher by $34,000, or 13.9%, and $271,000, or 38.3%, for the three and nine months ended September 30, 2024, compared to the same periods in the prior year as a result of a death benefit received in the second quarter of 2024.

Operating Expenses

Operating expenses for the third quarter of 2024 were $14,124,000, an increase of $1,091,000, or 8.4%, compared to the $13,033,000 for the third quarter of 2023. For the year-to-date period ended September 30, 2024, operating expenses totaled $41,086,000, an increase of $2,487,000, or 6.4%, compared to the same period in 2023. The following tables provide details of the Corporation’s operating expenses for the three and nine-month periods ended September 30, 2024, compared to the same periods in 2023.

OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

	Three Months Ended September 30,
	2024		2023		Increase (Decrease)
	$		$		$			%
Salaries and employee benefits	8,644		7,350		1,294			17.6
Occupancy expenses		830		833		(3	)		(0.4	)
Equipment expenses		311		327		(16	)		(4.9	)
Advertising & marketing expenses		371		387		(16	)		(4.1	)
Computer software & data processing expenses		1,550		1,798		(248	)		(13.8	)
Bank shares tax		317		252		65			25.8
Professional services		831		922		(91	)		(9.9	)
Other operating expenses		1,270		1,164		106			9.1
Total Operating Expenses		14,124		13,033		1,091			8.4

OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

	Nine Months Ended September 30,
	2024		2023		Increase (Decrease)
	$		$		$			%
Salaries and employee benefits		25,318		22,706		2,612			11.5
Occupancy expenses		2,493		2,429		64			2.6
Equipment expenses		964		996		(32	)		(3.2	)
Advertising & marketing expenses		816		1,074		(258	)		(24.0	)
Computer software & data processing expenses		4,718		5,277		(559	)		(10.6	)
Bank shares tax		1,032		851		181			21.3
Professional services		2,395		2,428		(33	)		(1.4	)
Other operating expenses		3,350		2,838		512			18.0
Total Operating Expenses		41,086		38,599		2,487			6.4

ENB FINANCIAL CORP
Management’s Discussion and Analysis

Salaries and employee benefits are the largest category of operating expenses. For the third quarter of 2024, salaries and benefits increased $1,294,000, or 17.6%, and for the nine months ended September 30, 2024, salaries and benefits increased $2,612,000, or 11.5%, compared to the same periods in 2023. This was primarily due to a competitive labor market that resulted in higher costs to attract and retain employees inclusive of costs related to merit increases, costs related to accruing for a bank-wide annual incentive plan, and higher employee benefit expenses. Advertising and marketing expenses were lower by $16,000, or 4.1%, and $258,000, or 24.0%, for the three and nine months ended September 30, 2024, compared to the prior year. This decrease was primarily related to lower costs related to various media advertising channels. Computer software and data processing expenses decreased by $248,000, or 13.8%, and $559,000, or 10.6%, for the three and nine months ended September 30, 2024, as a result of a debit card conversion in 2023 that resulted in amortized contract costs. Shares tax expense is based on the Corporation’s level of shareholders’ equity and has increased due to the increase in the Corporation’s level of shareholders’ equity. Other operating expenses increased by $106,000, or 9.1%, and $512,000, or 18.0%, for the three and nine months ended September 30, 2024, compared to the same periods in the prior year due largely to higher FDIC insurance costs and a larger amount of charitable contributions.

Income Taxes

Federal income tax expense was $752,000 for the third quarter of 2024 compared to $771,000 for the same period in 2023. For the nine months ended September 30, 2024, the Corporation recorded Federal income tax expense of $2,499,000, compared to $1,432,000 for the nine months ended September 30, 2023. The effective tax rate for the Corporation was 17.7% for the nine months ended September 30, 2024, and 15.4% for the nine months ended September 30, 2023. Certain items of income are not subject to Federal income tax, such as tax-exempt interest income on loans and securities, and Bank Owned Life Insurance (BOLI) income; therefore, the effective income tax rate for the Corporation is lower than the stated tax rate.

ENB FINANCIAL CORP
Management’s Discussion and Analysis

Financial Condition

Investment Securities

The Corporation classifies all of its debt securities as available for sale and reports the portfolio at fair value. As of September 30, 2024, the Corporation had $517.8 million of debt securities available for sale, which accounted for 24.7% of assets, compared to 23.0% as of December 31, 2023, and 23.0% as of September 30, 2023. Based on ending balances, the debt securities portfolio increased 18.2% from September 30, 2023, and 12.7% from December 31, 2023.

The debt securities portfolio was showing a net unrealized loss of $33,332,000 as of September 30, 2024, compared to $43,488,000 as of December 31, 2023, and $66,736,000 as of September 30, 2023. The valuation of the Corporation’s debt securities portfolio is impacted by both the U.S. Treasury rates and the perceived forward direction of interest rates. Additionally, the Corporation sold approximately $61 million of available-for-sale debt securities in 2023 to fund higher yielding loan growth. The sale of these bonds also resulted in less exposure to unrealized losses with interest rate fluctuations, resulting in an improvement from September 30, 2023, to September 30, 2024.

Each quarter, management sets portfolio allocation guidelines and adjusts the security portfolio strategy generally based on the following factors:

●

ALCO positions as to liquidity, credit risk, interest rate risk, and fair value risk

●

Growth of the loan portfolio

●

Slope of the U.S. Treasury curve

●

Relative performance of the various instruments, including spread to U.S. Treasuries

●

Duration and average length of the portfolio

●

Volatility of the portfolio

●

Direction of interest rates

●

Economic factors impacting debt securities

The investment policy of the Corporation establishes guidelines to promote diversification within the portfolio. The diversity specifications provide opportunities to shorten or lengthen duration, maximize yield, and mitigate credit risk.

The Corporation’s U.S. Treasury and U.S. government agency sectors remained stable during the first nine months of 2024 with little movement in balances. These sectors represent safe credits, but carry a lower yield due to the investments made in 2020 and 2021 when rates were lower.

The Corporation’s U.S. agency mortgage-backed securities (MBS) and collateralized mortgage obligations (CMO) have changed since December 31, 2023, with MBS decreasing $3.4 million, or 8.6%, and CMOs increasing $38.8 million, or 195.8%. The increase in the CMO sector was primarily related to an investment strategy based on purchasing low coupon, deeply discounted bonds to achieve an above-market yield, while offsetting the interest rate risk with a pay-fixed interest rate swap. MBS and CMOs both consist of mortgage instruments that pay monthly interest and principal, however the behavior of the two types vary according to the structure of the mortgage pool or CMO instrument. Management desires to maintain some amount of MBS and CMOs in order to assist in adding to and maintaining a stable five-year ladder of cash flows, which is important in providing stable liquidity and interest rate risk positions. U.S. agency MBS and CMO securities pay contractual monthly principal and interest, but are also subject to additional prepayment of principal. The combined effect of all of these instruments paying monthly principal and interest provides the Corporation with a reasonably stable base cash flow. Cash flows coming off of MBS and CMOs do slow down and speed up as interest rates increase or decrease, which has an impact on the portfolio’s length and yield.

The portfolio of non-agency MBS and CMO securities stood at $89.7 million as of September 30, 2024, or 17.3% of the total portfolio. This sector better structures the portfolio to achieve higher yields and shortens the duration while also protecting in a rates-up environment. The non-agency portfolio stood at $56.2 million at December 31, 2023. The increase in balances is part of the above-mentioned investment strategy coupled with off balance sheet interest rate swaps to protect the Corporation’s risk in a rates-up environment while taking advantage of the yield curve to earn more interest income.

The Corporation’s asset-backed securities declined by $6.3 million, or 9.7%, from December 31, 2023, to September 30, 2024. Many of the bonds in this sector receive regular monthly principal payments which caused the value to decline. These bonds are primarily floating rate instruments, so in the current higher rate environment, they have added to the overall yield increase for the portfolio.

ENB FINANCIAL CORP
Management’s Discussion and Analysis

As of September 30, 2024, the fair value of the Corporation’s corporate bonds decreased by $1.7 million, or 3.0%, from balances at December 31, 2023. Like any security, corporate bonds have both positive and negative qualities and management must evaluate these securities on a risk versus reward basis. Corporate bonds add diversity to the portfolio and provide strong yields for short maturities; however, by their very nature, corporate bonds carry a high level of credit risk should the entity experience financial difficulties. As a result of the higher level of credit risk taken by purchasing a corporate bond, management has in place procedures to closely analyze the financial health of the company. Financial analysis is conducted prior to every corporate bond purchase with ongoing monitoring performed on all securities held.

Obligations of states and political subdivisions, or municipal bonds, consist of both tax-free and taxable securities. They carry the longest duration on average of any instrument in the securities portfolio. Municipal tax-equivalent yields generally start above other taxable bonds. These instruments also experience significant fair market value gains and losses when interest rates decrease and increase. Municipal securities were purchased throughout 2020 and 2021 due to the levels of excess liquidity experienced due to deposit inflows. The balance of municipal bonds decreased by $3.8 million, or 2.0%, in the first nine months of 2024, primarily due to the sale of a number of these bonds during the first quarter. Municipal bonds represented 35.4% of the securities portfolio as of September 30, 2024 and 40.8% as of December 31, 2023.

Loans

Net loans outstanding increased by 5.8%, to $1,395.8 million at September 30, 2024, from $1,319.2 million at September 30, 2023. Net loans increased by 3.8%, an annualized rate of 5.0%, from $1,344.9 million at December 31, 2023. The following table shows the composition of the loan portfolio as of September 30, 2024 and December 31, 2023.

LOANS BY MAJOR CATEGORY

(DOLLARS IN THOUSANDS)

	September 30,					December 31,
	2024					2023
	$			%		$			%

Agriculture		280,446			19.9		257,372			19.0
Business Loans		349,089			24.8		354,252			26.1
Consumer		6,460			0.5		6,392			0.5
Home Equity		116,748			8.3		107,176			7.9
Non-Owner Occupied CRE		135,006			9.6		135,117			10.0
Residential Real Estate (a)		520,889			36.9		497,553			36.5

Total loans		1,408,638			100		1,357,862			100
Less:
Deferred loan costs, net		1,873					2,216
Allowance for credit losses		(14,742	)				(15,176	)
Total net loans		1,395,769					1,344,902

(a) Residential real estate loans do not include mortgage loans serviced for others which totaled $328,932,000 as of September 30, 2024 and $301,822,000 as of December 31, 2023.

There was moderate growth in the loan portfolio since December 31, 2023. Agriculture loans, consumer, home equity loans, and residential real estate loans grew since December 31, 2023, while the other categories of loans decreased minimally.

The agriculture loan segment increased $23,074,000, or 9.0%, the business loan segment decreased $5,163,000, or 1.5%, the consumer loan segment increased $68,000, or 1.1%, the home equity segment increased $9,572,000, or 8.9%, the non-owner occupied CRE segment decreased $111,000, or 0.1%, and the residential real estate segment increased $23,336,000, or 4.7% from balances at December 31, 2023. The agriculture segment is concentrated primarily in loans to dairy operators, poultry operators, and crop farmers. Business loans are fairly diverse with small concentrations in lessors of residential buildings and dwellings and lessors of non-residential buildings. These concentrations are less than 10% of the total business loan portfolio.

ENB FINANCIAL CORP
Management’s Discussion and Analysis

In the first nine months of 2024, mortgage production decreased 14% compared to the first nine months of 2023. Purchase money origination constituted 93% of the Corporation’s mortgage originations for the nine months ended September 30, 2024, with construction-only and construction-permanent loans making up 55% of that mix. As long term mortgage rates continue to slowly decline, the held-for-investment portfolio has decreased to 45% of total originations. As of September 30, 2024, adjustable-rate mortgage balances were $323.4 million, representing 62.1% of the 1-4 family residential loan portfolio of the Corporation.

Non-Performing Assets

Non-performing assets include:

●

Nonaccrual loans

●

Loans past due 90 days or more and still accruing

●

Other real estate owned

NON-PERFORMING ASSETS

(DOLLARS IN THOUSANDS)

	September 30,		December 31,		September 30,
	2024		2023		2023
	$		$		$

Nonaccrual loans		9,862		2,758		2,816
Loans past due 90 days or more and still accruing		—		519		713
Total non-performing loans		9,862		3,277		3,529

Other real estate owned		—		—		—

Total non-performing assets		9,862		3,277		3,529

Non-performing assets to net loans		0.71%		0.31%		0.28%

The total balance of non-performing assets increased by $6,333,000, or 179.5%, over balances at September 30, 2023, and $6,586,000, or 201.0%, over balances at December 31, 2023. The increase for both periods was due to the addition of a number of relationships experiencing payment defaults. Non-accrual loans increased by $7,046,000, or 250.2%, since September 30, 2023, and $7,104,000, or 257.6%, since December 31, 2023. No loans were past due 90 days or more at September 30, 2024, compared to $713,000 at September 30, 2023, and $519,000 at December 31, 2023. The primary reason for the increase in non-accrual loans was the addition of a commercial loan relationship with balances of $4.1 million, a residential mortgage loan in the amount of $1.1 million, another residential mortgage loan in the amount of $813,000, an agriculture mortgage in the amount of $664,000, and a number of other much smaller loan relationships. The Corporation has taken a more disciplined approach to classifying loans as non-accrual when they hit 90 days past due which is why there are no loans at September 30, 2024, that are 90 days or more past due. While non-performing asset balances have increased in the first nine months of 2024, the Corporation’s total level of non-performing assets is in line with its peer group.

There was no other real estate owned (OREO) as of September 30, 2024, December 31, 2023, or September 30, 2023.

Allowance for Credit Losses

The allowance for credit losses (ACL) is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on total loans. Management reviews the adequacy of the ACL on a quarterly basis. The ACL represents management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. The ACL is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The Corporation measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. Additionally, the ACL calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. These qualitative adjustments may increase or reduce reserve levels and include adjustments for lending policies and procedures, loan portfolio trends, lending management experience, asset quality, loan review, underlying collateral, credit concentrations, and external factors. Loans that do not share risk characteristics are evaluated on an individual basis. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date adjusted for selling costs as appropriate. Based on the quarterly calculation, management will adjust the ACL through the provision for credit losses as necessary.

ENB FINANCIAL CORP
Management’s Discussion and Analysis

Strong credit and collateral policies have been instrumental in producing a favorable history of credit losses for the Corporation. The Net Charge-Off table below shows the net charge-offs for each segment of the Corporation’s loan portfolio as of September 30, 2024 and September 30, 2023.

Net Charge-Offs

(DOLLARS IN THOUSANDS)

	September 30,			September 30,
	2024			2023
	$			$

Loans charged-off:
Agriculture		—			—
Business Loans		—			—
Consumer Loans		55			41
Home Equity		—			—
Non-Owner Occupied CRE		—			—
Residential Real Estate		—			—
Total loans charged-off		55			41

Recoveries of loans previously charged-off
Agriculture		—			71
Business Loans		5			8
Consumer Loans		16			3
Home Equity		—			—
Non-Owner Occupied CRE		—			—
Residential Real Estate		—			8
Total recoveries		21			90

Net charge-offs (recoveries)
Agriculture		—			(71	)
Business Loans		(5	)		(8	)
Consumer Loans		39			38
Home Equity		—			—
Non-Owner Occupied CRE		—			—
Residential Real Estate		—			(8	)
Total net charge-offs (recoveries)		34			(49	)

The Corporation has historically experienced very low net charge-off percentages due to conservative credit practices. As of September 30, 2024, there were $55,000 in charge-offs and $21,000 of recoveries, representing a net charge-off position of $34,000 as shown above. As of September 30, 2023, there were $41,000 in charge-offs and $90,000 in recoveries, representing a net recovery position of $49,000.

Management regularly reviews the overall risk profile of the loan portfolio and the impact that current economic trends have on the Corporation’s loans. The financial industry typically evaluates the quality of loans on a scale with “unclassified” representing healthy loans, “special mention” being the first indication of credit concern, and several successive classified ratings indicating further credit declines of “substandard,” “doubtful,” and, ultimately, “loss.”

The Corporation’s level of classified loans was $21.1 million on September 30, 2024, compared to $12.9 million on September 30, 2023. Total classified loans have increased from the prior year due to the downgrading of a number of unrelated agriculture and business relationships. Despite the increase in total classified loans during the nine months ended September 30, 2024, the Corporation’s prudent credit underwriting process has resulted in very few historical losses associated with classified loans. As certain loan relationships began experiencing deterioration during 2024, the Corporation determined it was appropriate to evaluate these loans individually for specific reserves. There was a higher balance of loans individually evaluated for impairment as of September 30, 2004, but only a $460,000 specific allocation due to these strong credit practices and the quality of loan collateral.

Deposits

The Corporation’s total ending deposits at September 30, 2024, increased by $88.6 million, or 5.1%, from December 31, 2023, and $154.4 million, or 9.3%, from September 30, 2023. Customer deposits are the Corporation’s primary source of funding for loans and securities. The mix of the Corporation’s deposit categories has changed marginally since September 30, 2023, as customers have moved from non-interest bearing and low-interest bearing accounts into higher yielding checking accounts and time deposits. Since September 30, 2023, there has been a $15.9 million, or 2.7% increase in non-interest bearing demand deposit accounts, a $27.0 million, or 8.0% increase in interest bearing demand balances, a $1.1 million, or 0.7% decrease in money market account balances, a $47.8 million, or 14.8% decrease in savings account balances, and a $160.6 million, or 61.6% increase in time deposit balances.

ENB FINANCIAL CORP
Management’s Discussion and Analysis

The increase in time deposit balances was partially the result of issuing brokered certificates of deposit in order to fund a leverage strategy coupled with available-for-sale investment securities purchases and interest rate swaps. Brokered CDs grew $58.1 million from $39.1 million at September 30, 2023 to $97.2 million as of September 30, 2024. The remaining increase in time deposit balances was a result of the increased rate environment and offering several promotional rates on specific time deposit terms throughout 2023 and the first nine months of 2024. Time deposits are typically a more rate-sensitive product, making them a source of funding that is prone to balance variations depending on the interest rate environment and how the Corporation’s time deposit rates compare with the local market rates. Time deposits fluctuate as consumers search for the best rates in the market, with less allegiance to any particular financial institution.

As of September 30, 2024 and 2023, the total uninsured deposits of the Corporation were approximately $204,998,000 and $204,614,000, respectively or 11.3% and 12.3%, of total deposits. Total uninsured deposits is calculated based on regulatory reporting requirements and reflects the portion of any deposit of a customer at an insured depository institution that exceeds the applicable FDIC insurance coverage for that depositor at that institution and amounts in any other uninsured investment or deposit accounts that are classified as deposits and not subject to any federal or state deposit insurance regime.

The Deposits by Major Classification table, shown below, provides the balances of each category for September 30, 2024, December 31, 2023, and September 30, 2023.

DEPOSITS BY MAJOR CLASSIFICATION

(DOLLARS IN THOUSANDS)

	September 30,		December 31,		September 30,
	2024		2023		2023
	$		$		$

Non-interest bearing demand		599,025		611,968		583,145
Interest bearing demand		362,573		313,771		335,611
Money market deposit accounts		156,541		158,446		157,684
Savings accounts		276,212		308,913		324,053
Time deposits		421,064		333,700		260,497
Total deposits		1,815,415		1,726,798		1,660,990

The growth and mix of deposits is often driven by several factors including:

●

Convenience and service provided

●

Current rates paid on deposits relative to competitor rates

●

Level of and perceived direction of interest rates

●

Financial condition and perceived safety of the institution

●

Possible risks associated with other investment opportunities

●

Level of fees on deposit products

Borrowings

Total borrowings were $127.5 million, $140.8 million, and $138.0 million as of September 30, 2024, December 31, 2023, and September 30, 2023, respectively. There were no short-term borrowings as of September 30, 2024, December 31, 2023, or September 30, 2023. Short-term funds are used for immediate liquidity needs and are not typically part of an ongoing liquidity or interest rate risk strategy; therefore, they fluctuate more rapidly. When short-term funds are used, they are purchased through correspondent and member bank relationships as overnight borrowings or through the FHLB for terms less than one year.

ENB FINANCIAL CORP
Management’s Discussion and Analysis

Total long-term borrowings, borrowings initiated for terms longer than one year, were $87.8 million as of September 30, 2024, $101.2 million as of December 31, 2023, and $98.5 million as of September 30, 2023, respectively. The long-term borrowings for the Corporation were made up entirely of FHLB long-term advances. FHLB advances are used as a secondary source of funding and to mitigate interest rate risk. These long-term funding instruments are typically a more effective funding instrument in terms of selecting the exact amount, rate, and term of funding rather than trying to source the same through deposits. In this manner, management can efficiently meet known liquidity and interest rate risk needs. The Corporation continues to be well under the FHLB maximum borrowing capacity (MBC), which is currently $714.0 million. The Corporation’s internal policy limits are far more restrictive than the FHLB MBC, which is calculated and set quarterly by FHLB.

In addition to the long-term advances funded through the FHLB, on December 30, 2020, the Corporation completed the sale of a subordinated debt note offering. The Corporation sold $20.0 million of subordinated debt notes with a maturity date of December 30, 2030. These notes are non-callable for 5 years and carry a fixed interest rate of 4% per year for 5 years and then convert to a floating rate for the remainder of the term. The notes can be redeemed at par beginning 5 years prior to maturity. The notes are structured to qualify as Tier 2 capital for the Corporation and any funds it invests in the Bank qualify as Tier 1 capital at the Bank. As of September 30, 2024, $16.0 million of funds were invested in the Bank. The Corporation paid an issuance fee of 2% of the total issue that will be amortized to the call date on a pro-rata basis.

On July 22, 2022, the Corporation completed the sale of an additional subordinated debt note offering. The Corporation sold $20.0 million of subordinated debt notes with a maturity date of September 30, 2032. These notes are all non-callable for 5 years and carry a fixed interest rate of 5.75% per year for the 5 years and then convert to a floating rate for the remainder of the term. The notes can be redeemed at par beginning 5 years prior to maturity. The notes are structured to qualify as Tier 2 capital for the Corporation and any funds it invests in the Bank qualify as Tier 1 capital at the Bank. As of September 30, 2024, $17.0 million of funds were invested in the Bank. The Corporation paid an issuance fee of 2% of the total issue that will be amortized to the call date on a pro-rata basis.

Stockholders’ Equity

Federal regulatory authorities require banks to meet minimum capital levels. The Corporation, as well as the Bank, as the solely owned subsidiary of the Corporation, maintains capital ratios well above those minimum levels. The risk-weighted capital ratios are calculated by dividing capital by total risk-weighted assets. Regulatory guidelines determine the risk-weighted assets by assigning assets to specific risk-weighted categories. The calculation of tier I capital to risk-weighted average assets does not include an add-back to capital for the amount of the allowance for credit losses, thereby making this ratio lower than the total capital to risk-weighted assets ratio.

The consolidated asset limit on small bank holding companies is $3 billion and a company with assets under that limit is not subject to the consolidated capital rules but may disclose capital amounts and ratios. The Corporation has elected to disclose those amounts and ratios.

ENB FINANCIAL CORP
Management’s Discussion and Analysis

The following tables reflect the capital ratios for the Corporation and Bank compared to the regulatory capital requirements.

REGULATORY CAPITAL RATIOS:

			Regulatory Requirements
			Adequately		Well
As of September 30, 2024	Capital Ratios		Capitalized		Capitalized
Total Capital to Risk-Weighted Assets
Consolidated		14.7%		N/A		N/A
Bank		14.4%		8.0%		10.0%

Tier 1 Capital to Risk-Weighted Assets
Consolidated		14.7%		N/A		N/A
Bank		13.3%		6.0%		8.0%

Common Equity Tier 1 Capital to Risk-Weighted Assets
Consolidated		10.9%		N/A		N/A
Bank		13.3%		4.5%		6.5%

Tier 1 Capital to Average Assets
Consolidated		7.8%		N/A		N/A
Bank		9.5%		4.0%		5.0%

As of December 31, 2023
Total Capital to Risk-Weighted Assets
Consolidated		14.8%		N/A		N/A
Bank		14.4%		8.0%		10.0%

Tier I Capital to Risk-Weighted Assets
Consolidated		10.9%		N/A		N/A
Bank		13.3%		6.0%		8.0%

Common Equity Tier I Capital to Risk-Weighted Assets
Consolidated		10.9%		N/A		N/A
Bank		13.3%		4.5%		6.5%

Tier I Capital to Average Assets
Consolidated		7.7%		N/A		N/A
Bank		9.4%		4.0%		5.0%


As of September 30, 2023
Total Capital to Risk-Weighted Assets
Consolidated		14.7%		N/A		N/A
Bank		14.3%		8.0%		10.0%

Tier 1 Capital to Risk-Weighted Assets
Consolidated		10.7%		N/A		N/A
Bank		13.1%		6.0%		8.0%

Common Equity Tier 1 Capital to Risk-Weighted Assets
Consolidated		10.7%		N/A		N/A
Bank		13.1%		4.5%		6.5%

Tier 1 Capital to Average Assets
Consolidated		7.7%		N/A		N/A
Bank		9.4%		4.0%		5.0%

As of September 30, 2024, the Bank’s Tier 1 Leverage Ratio stood at 9.5% while the Corporation’s Tier 1 Leverage Ratio was 7.8%. Tier 1 Capital at the Corporation level were not impacted by the subordinated debt issue since subordinated debt only qualifies as Tier 2 Capital at the corporate level. As such, in terms of the Corporation’s regulatory capital ratios, only the Total Capital to Risk-Weighted Assets ratio was enhanced as a result of the $40 million subordinated debt issue. Most of the marked improvement in capital ratios occurred at the Bank level.

ENB FINANCIAL CORP
Management’s Discussion and Analysis

Off-Balance Sheet Arrangements

In the normal course of business, the Corporation typically has off-balance sheet arrangements related to loan funding commitments. These arrangements may impact the Corporation’s financial condition and liquidity if they were to be exercised within a short period of time. As discussed in the following liquidity section, the Corporation has in place sufficient liquidity alternatives to meet these obligations. The following table presents information on the commitments by the Corporation as of September 30, 2024.

OFF-BALANCE SHEET ARRANGEMENTS

(DOLLARS IN THOUSANDS)

	September 30,
	2024
	$
Commitments to extend credit:
Revolving home equity		258,218
1-4 family residential construction loans		40,230
Commercial real estate, other construction and land development loans		43,284
Commercial and industrial loans		104,824
Other		154,576
Standby letters of credit		17,317

Total		618,449

Market Risks

Bank failures and bank uncertainties have created in the past and may continue in the future to create market and other risks, for all financial institutions and banks, including the Corporation. These risks include, but are not limited to:

Market risk and loss of confidence in the financial services sector, and/or specific banks;

Deterioration of securities and loan portfolios;

Deposit reductions with higher volumes and occurring over shorter periods of time;

Increased liquidity demand and utilization of sources of liquidity; and

Interest rate volatility and abrupt, sudden and greater than usual rate changes.

These factors individually, or in any combination, could materially and adversely affect:

Financial condition;

Operations and results thereof; and

Stock price.

In addition, bank failures and uncertainties may result in an increase of FDIC deposit insurance premiums and/or result in special FDIC deposit insurance assessments, which also may adversely affect the Corporation’s financial condition, operations, results thereof or stock price.

The Corporation cannot predict the impact, timing or duration of such events.

Significant Legislation

Dodd-Frank Wall Street Reform and Consumer Protection Act

In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) was signed into law. Dodd-Frank is intended to affect a fundamental restructuring of federal banking regulation. Among other things, Dodd-Frank creates a new Financial Stability Oversight Council to identify systemic risks in the financial system and gives federal regulators new authority to take control of and liquidate financial firms. Dodd-Frank additionally creates a new independent federal regulator to administer federal consumer protection laws. Among the provisions that have already or are likely to affect the Corporation are the following:

ENB FINANCIAL CORP
Management’s Discussion and Analysis

Holding Company Capital Requirements

Dodd-Frank requires the Federal Reserve to apply consolidated capital requirements to bank holding companies that are no less stringent than those currently applied to depository institutions. Under these standards, trust preferred securities will be excluded from tier I capital unless such securities were issued prior to May 19, 2010, by a bank holding company with less than $15 billion in assets. Dodd-Frank additionally requires that bank regulators issue countercyclical capital requirements so that the required amount of capital increases in times of economic expansion and decreases in times of economic contraction, are consistent with safety and soundness.

Deposit Insurance

Dodd-Frank permanently increased the maximum deposit insurance amount for banks, savings institutions, and credit unions to $250,000 per depositor. Additionally, on February 7, 2011, the Board of Directors of the FDIC approved a final rule based on the Dodd-Frank Act that revises the assessment base from one based on domestic deposits to one based on assets. This change, which was effective in April 2011, saved the Corporation a significant amount of FDIC insurance premiums from the significantly higher FDIC insurance premiums placed into effect after the financial crisis.

Corporate Governance

Dodd-Frank requires publicly traded companies to give stockholders a non-binding vote on executive compensation at least every three years, a non-binding vote regarding the frequency of the vote on executive compensation at least every six years, and a non-binding vote on “golden parachute” payments in connection with approvals of mergers and acquisitions unless previously voted on by shareholders. The SEC has finalized the rules implementing these requirements which took effect on January 21, 2011. The Corporation was exempt from these requirements until January 21, 2013, due to its status as a smaller reporting company.

Consumer Financial Protection Bureau

Dodd-Frank created the Consumer Financial Protection Bureau (CFPB), which is granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy Provisions of the Gramm-Leach-Bliley Act, and certain other statutes. The CFPB has examination and primary enforcement authority with respect to depository institutions with $10 billion or more in assets. Smaller institutions will be subject to rules promulgated by the CFPB but will continue to be examined and supervised by federal banking regulators for consumer compliance purposes. The CFPB will have authority to prevent unfair, deceptive, or abusive practices in connection with the offering of consumer financial products. Dodd-Frank authorizes the CFPB to establish certain minimum standards for the origination of residential mortgages including a determination of the borrower’s ability to repay. In addition, Dodd-Frank will allow borrowers to raise certain defenses to foreclosure if they receive any loan other than a “qualified mortgage” as defined by the CFPB. Dodd-Frank permits states to adopt consumer protection laws and standards that are more stringent than those adopted at the federal level and, in certain circumstances, permits state attorneys general to enforce compliance with both the state and federal laws and regulations.

Interstate Branching

Dodd-Frank authorizes national and state banks to establish branches in other states to the same extent as a bank chartered by that state would be permitted. Previously, banks could only establish branches in other states if the host state expressly permitted out-of-state banks to establish branches in that state. Accordingly, banks will be able to enter new markets more freely.

Limits on Interstate Acquisitions and Mergers

Dodd-Frank precludes a bank holding company from engaging in an interstate acquisition – the acquisition of a bank outside its home state – unless the bank holding company is both well capitalized and well managed. Furthermore, a bank may not engage in an interstate merger with another bank headquartered in another state unless the surviving institution will be well capitalized and well managed. The previous standard in both cases was adequately capitalized and adequately managed.

ENB FINANCIAL CORP

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a financial institution, the Corporation is subject to three primary risks:

●

Credit risk

●

Liquidity risk

●

Interest rate risk

The Board of Directors has established an Asset Liability Management Committee (ALCO) to measure, monitor, and manage these primary market risks. The Asset Liability Policy has instituted guidelines for all of these primary risks, as well as other financial performance measurements with target ranges. The Asset Liability goals and guidelines are consistent with the Strategic Plan goals related to financial performance.

Credit Risk

For discussion on credit risk refer to the sections in Item 2. Management’s Discussion and Analysis, on securities, non-performing assets, and allowance for credit losses.

Liquidity Risk

Liquidity refers to having an adequate supply of cash available to meet business needs. Financial institutions must ensure that there is adequate liquidity to meet a variety of funding needs, at a minimal cost. Funding new loans and covering deposit withdrawals are the primary liquidity needs of the Corporation. The Corporation uses a variety of funding sources to meet liquidity needs, such as deposits, loan repayments, cash flows from securities, borrowings, and current earnings.

As noted in the discussion on deposits, customers have historically provided the Corporation with a reliable and steadily increasing source of funds liquidity. The Corporation also has in place relationships with other banking institutions for the purpose of buying and selling Federal funds. The lines of credit with these institutions provide immediate sources of additional liquidity. The Corporation currently has unsecured lines of credit totaling $30 million. This does not include amounts available from member banks such as the Federal Reserve Discount Window or the FHLB of Pittsburgh.

The Corporation regularly reviews its liquidity position by measuring its projected net cash flows at a 30 and 90-day interval. The Corporation stresses the measurements by assuming a level of deposit out-flows that have not historically been realized. In addition to this forecast, other funding sources are reviewed as a method to provide emergency funding if necessary. The objective of this measurement is to identify the amount of cash that could be raised quickly without the need to liquidate assets. The Corporation also stresses its liquidity position utilizing different longer-term scenarios. The varying degrees of stress create pressure on deposit flows in its local market, reduce access to wholesale funding and limit access of funds available through brokered deposit channels. In addition to stressing cash flow, specific liquidity risk indicators are monitored to help identify risk areas. This analysis helps identify and quantify the potential cash surplus/deficit over a variety of time horizons to ensure the Corporation has adequate funding resources. Assumptions used for liquidity stress testing are subjective. Should an evolving liquidity situation or business cycle present new data, potential assumption changes will be considered. The Corporation believes it can meet all anticipated liquidity demands.

Historically, the Corporation has satisfied its liquidity needs from earnings, repayment of loans and amortizing investment securities, maturing investment securities, loan sales, deposit growth and its ability to access existing lines of credit. All investment securities are classified as available for sale; therefore, securities that are unencumbered can be used as collateral for borrowings and are an additional source of readily available liquidity.

ENB FINANCIAL CORP

The Corporation analyzes the following additional liquidity measurements in an effort to monitor and mitigate liquidity risk:

●

On-hand Liquidity/Total Liabilities – Net liquid assets as a percentage of total liabilities

●

Non-Core Funding Dependence – Non-core liabilities minus short-term investments as a percentage of long-term assets

●

Reliance on Wholesale Funding – Wholesale funding as a percentage of total funding

●

Net Short-term Liabilities/Total Assets – Short-term liabilities minus short-term assets as a percentage of total assets

●

Loan to Deposit Ratio – Total loans as a percentage of total deposits

●

Investment Securities to Assets Threshold – Total investment securities as a percentage of total assets

These measurements are designed to prevent undue reliance on outside sources of funding and to ensure a steady stream of liquidity is available should events occur that would cause a sudden decrease in deposits or large increase in loans or both, which would in turn draw significantly from the Corporation’s available liquidity sources. As of September 30, 2024, the Corporation was within guidelines for all of the above measurements.

The Corporation’s liquidity measurements are tracked and reported quarterly by management to both observe trends and ensure the measurements stay within desired ranges. Management is confident that a sufficient amount of internal and external liquidity exists to provide for significant unanticipated liquidity needs.

Interest Rate Risk

Interest rate risk is measured using two analytical tools:

●

Changes in net interest income

●

Changes in net portfolio value

Financial modeling is used to forecast net interest income and earnings, as well as net portfolio value, also referred to as fair value. The modeling is generally conducted under seven different interest rate scenarios that can vary according to the present level of interest rates. The scenarios consist of a projection of net interest income if rates remain flat, increase 100, 200, or 300 basis points, or decrease 100, 200, or 300 basis points.

The results obtained through the use of forecasting models are based on a variety of factors. Both the net interest income and fair value forecasts make use of the maturity and repricing schedules to determine the changes to the balance sheet over the course of time. Additionally, there are many assumptions that factor into the results. These assumptions include, but are not limited to, the following:

●

Projected forward interest rates

●

Slope of the U.S. Treasury curve

●

Spreads available on securities over the U.S. Treasury curve

●

Prepayment speeds on loans held and mortgage-backed securities

●

Anticipated calls on securities with call options

●

Deposit and loan balance fluctuations

●

Competitive pressures affecting loan and deposit rates

●

Economic conditions

●

Consumer reaction to interest rate changes

As a result of the many assumptions, this information should not be relied upon to predict future results. Additionally, both of the analyses discussed below do not consider any action that management could take to minimize or offset the negative effect of changes in interest rates. These tools are used to assist management in identifying possible areas of risk in order to address them before a greater risk is posed. Back testing of the model is completed to compare actual results to projections to ensure the validity of the assumptions in the model. The back testing analyses indicate that the model assumptions are reliable.

ENB FINANCIAL CORP

Changes in Net Interest Income

The change in net interest income measures the amount of net interest income fluctuation that would be experienced over one year, assuming interest rates change immediately and remain the same for one year. This is considered to be a short-term view of interest rate risk. The analysis of changes in net interest income due to changes in interest rates is commonly referred to as interest rate sensitivity. The Corporation’s interest rate sensitivity analysis indicates that if interest rates were to change immediately, the Corporation would realize less net interest income in all up and down rate scenarios. In past years, the Corporation was generally showing asset sensitivity meaning in a rates-up environment, assets would reprice faster than liabilities resulting in higher net interest income. In the past year, this increase in net interest income shifted to a decline primarily due to the increased impact from a higher cost of funds if rates continue to rise. While the Corporation would recognize higher interest income on its variable-rate assets, it would also now be repricing liabilities at a much faster pace resulting in increased interest expense that would offset the rise in interest income. Likewise, in the down-rate scenarios, asset yields would decline in conjunction with market rate moves, while deposit repricing would be slower to retain existing deposit balances.

The third quarter of 2024 analysis projects net interest income expected in the seven rate scenarios over a one-year time horizon. As of September 30, 2024, the Corporation was within guidelines for the maximum amount of net interest income change in all rate scenarios.

The assumptions and analysis of interest rate risk are based on historical experience during varied economic cycles. Management believes these assumptions to be appropriate; however, actual results could vary significantly. Management uses this analysis to identify trends in interest rate sensitivity and determine if action is necessary to mitigate asset liability risk.

Changes in Net Portfolio Value

The change in net portfolio value is considered a tool to measure long-term interest rate risk. The analysis measures the exposure of the balance sheet to valuation changes due to changes in interest rates. The calculation of net portfolio value discounts future cash flows to the present value based on current market rates. The change in net portfolio value estimates the gain or loss in value that would occur on market sensitive instruments given an interest rate increase or decrease in the same seven scenarios mentioned above. As of September 30, 2024, the Corporation was within guidelines for all rate scenarios except the down-300 basis point scenario. The Corporation shows a favorable benefit to net portfolio value in the rising rate scenarios, due primarily to the large amount of core deposits on the Corporation’s balance sheet. The non-interest bearing demand deposit accounts and low-interest bearing checking, and money market accounts provide more benefit to the Corporation when interest rates are higher and the difference between the overnight funding costs compared to the average interest bearing core deposit rates are greater. As interest rates increase, the discount rate used to value the Corporation’s interest bearing accounts increases, causing a lower net present value for these interest-bearing deposits. This improves the modeling of the Corporation’s fair value risk to higher interest rates as the liability amounts decrease causing a higher net portfolio value of the Corporation’s balance sheet. However, as interest rates decrease, the discount rate used to value the Corporation’s interest bearing accounts decreases, causing a higher net present value for these interest-bearing deposits.

The analysis shows a valuation loss in the down rate scenarios. Policy allows for a valuation decline of 30% for the down-300 basis point scenario and actual projected results show a valuation decline of 42%. While this loss is outside of policy guidelines, it is unlikely that rates would move down immediately by 300 basis points. The Corporation will continue to monitor these measurements in the down-rate scenarios and adjust balance sheet structure as necessary to prepare for future potential lower rates.

The weakness with the net portfolio value analysis is that it assumes liquidation of the Corporation rather than as a going concern. For that reason, it is considered a secondary measurement of interest rate risk to “Changes in Net Interest Income” discussed above. However, the net portfolio value analysis is a more important tool to measure the impact of interest rate changes to capital. In the current regulatory climate, the focus is on ensuring adequate asset liability modeling is being done to project the impact of very large interest rate increases on capital. The asset liability modeling currently in place measures the impact of such a rate change on the valuation of the Corporation’s loans, securities, deposits, and borrowings, and the resulting impact to capital. Management continues to analyze additional scenario testing to model “worst case” scenarios to adequately plan for the possible severe impact of such events.

ENB FINANCIAL CORP

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures.

Management carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer (Principal Executive Officer) and Treasurer (Principal Financial Officer), of the effectiveness of the design and the operation of the Corporation’s disclosure controls and procedures (as such term as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2024, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer (Principal Executive Officer) along with the Treasurer (Principal Financial Officer) concluded that the Corporation’s disclosure controls and procedures as of September 30, 2024, are effective to ensure that information required to be disclosed in the reports that the company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

(b) Changes in Internal Controls.

There have been no changes in the Corporation’s internal controls over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

ENB FINANCIAL CORP

PART II – OTHER INFORMATION

September 30, 2024

Item 1. Legal Proceedings

Management is not aware of any litigation that would have a material adverse effect on the consolidated financial position or results of operations of the Corporation or its subsidiaries taken as a whole. There are no proceedings pending other than ordinary routine litigation incident to the business of the Corporation. In addition, no material proceedings are pending, are known to be threatened, or contemplated against the Corporation by governmental authorities.

Item 1A. Risk Factors

The Corporation continually monitors the risks related to the Corporation’s business, other events, the Corporation’s Common Stock, and the Corporation’s industry. There have been no material changes in risk factors applicable to the Corporation from those disclosed in "Risk Factors" in Item 1A of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases

The following table details the Corporation’s purchase of its own common stock during the three months ended September 30, 2024.

Issuer Purchase of Equity Securities

Total Number of

Maximum Number

Total Number

Average

Shares Purchased

of Shares that May

of Shares

Price Paid

as Part of Publicly

Yet be Purchased

Period

Purchased

Per Share

Announced Plans *

Under the Plan *

July 2024

10,000

15.35

10,000

79,812

August 2024

21,670

17.10

21,670

58,142

September 2024

19,800

17.32

19,800

38,342

Total

51,470

* On October 21, 2020, the Board of Directors of the Corporation approved a plan to repurchase, in open market and privately negotiated transactions, up to 200,000 shares of its outstanding common stock. The first purchase of common stock under this plan occurred on October 28, 2020. By September 30, 2024, a total of 161,658 shares were repurchased at a total cost of $2,677,077 for an average cost per share of $16.56.

Item 3. Defaults Upon Senior Securities – Nothing to Report

Item 4. Mine Safety Disclosures – Not Applicable

Item 5. Other Information

During the three months ended September 30, 2024, no director or officer of the Corporation adopted or terminated a Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.

ENB FINANCIAL CORP

Item 6. Exhibits:

Exhibit No.	Description
3(i)	Articles of Incorporation of the Registrant, as amended (Incorporated by reference to Exhibit 3.1 of the Corporation’s Form 8-K filed with the SEC on June 7, 2019)
3 (ii)	By-Laws of the Registrant, as amended. (Incorporated herein by reference to Exhibit 3.2 of the Corporation’s Form 8-K filed with the SEC on July 21, 2021.)
10.1	Form of Deferred Income Agreement. (Incorporated herein by reference to Exhibit 10.1 of the Corporation’s Quarterly Report on Form 10-Q filed with the SEC on August 13, 2008.)
10.2	2022 Employee Stock Purchase Plan (Incorporated herein by reference to Appendix A to the Corporation’s Definitive Proxy Statement filed with the SEC on April 4, 2022.)
10.3	2020 Non-Employee Directors’ Stock Plan. (Incorporated herein by reference to Exhibit 99.1 of the Corporation’s Form S-8 filed with the SEC on June 3, 2020.)
10.4	Employment Agreement by and among ENB Financial Corp, The Ephrata National Bank and Jeffrey S. Stauffer dated as of October 28, 2022. (Incorporated herein by reference to Exhibit 10.2 of the Corporation's Form 8-K filed with the SEC on November 1, 2022.)
10.5	Employment Agreement by and among ENB Financial Corp, The Ephrata National Bank and Rachel G. Bitner dated as of October 28, 2022. (Incorporated herein by reference to Exhibit 10.4 of the Corporation's Form 8-K filed with the SEC on November 1, 2022.)
10.6	Employment Agreement by and among ENB Financial Corp, The Ephrata National Bank and Joselyn D. Strohm dated as of June 5, 2023. (Incorporated herein by reference to Exhibit 10.1 of the Corporation's Form 8-K filed with the SEC on June 7, 2023.)
31.1	Section 302 Chief Executive Officer Certification (Required by Rule 13a-14(a)).
31.2	Section 302 Principal Financial Officer Certification (Required by Rule 13a-14(a)).
32.1	Section 1350 Chief Executive Officer Certification (Required by Rule 13a-14(b)).
32.2	Section 1350 Principal Financial Officer Certification (Required by Rule 13a-14(b)).
101	Interactive Data Files
104	Cover Page Interactive Data File

ENB FINANCIAL CORP

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ENB Financial Corp
	(Registrant)


Dated: November 14, 2024	By:	/s/ Jeffrey S. Stauffer
		Jeffrey S. Stauffer
		Chairman of the Board
		Chief Executive Officer and President
		Principal Executive Officer


Dated: November 14, 2024	By:	/s/ Rachel G. Bitner
		Rachel G. Bitner
		Treasurer
		Principal Financial Officer