ENB Financial Corp.
03/20/2026 | Press release | Distributed by Public on 03/20/2026 12:09
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
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 annual report. The financial condition and results of operations presented are not indicative of future performance.
Strategic Overview
ENB Financial Corp (the "Corporation") and its wholly owned subsidiary, Ephrata National Bank (the "Bank"), are committed to remaining an independent community bank serving its market area. The Corporation's roots date back to the April 11, 1881 charter granted to Ephrata National Bank by the Office of the Comptroller of the Currency. The Bank's growth has been entirely organic over 144 years of existence until February 1, 2026 when it effected the Acquisition. The Board and Management are committed to the principles and values that have served the Corporation well over its history and the desire is to produce strong financial results that will engender trust from the Bank's customers and favorable returns to the shareholders.
Results of Operations
Overview
The Corporation's net income of $21,559,000 for the year ended December 31, 2025, a $6,242,000, or 40.8% increase over the year ended December 31, 2024. Earnings per share, basic and diluted, were $3.80 in 2025, compared to $2.71 in 2024. A number of items positively impacted net income and led to record earnings.
Net interest income (NII) increased by $11,963,000, or 21.1%, for the year ended December 31, 2025 compared to 2024. Growth in interest-earning assets coupled with actively managing costs of deposits resulted in increased NII, and improvement in net interest margin by 32 basis points, from 2.87% for the year ended December 31, 2024 to 3.19% in 2025.
The Corporation recorded an $887,000 provision for credit losses in 2025, compared to $1,015,000 in 2024. The lower provision in 2025 was primarily caused by favorable credit conditions.
Other income totaled $18,037,000 for the year ended December 31, 2025, a decrease of $93,000 from 2024. Excluding the impact of debt and equity securities gains of $159,000 in 2024 compared to securities losses of $206,000 for the year ended December 31, 2025, other income increased 1.5%.
Operating expenses, which included $698,000 of acquisition-related expenses pertaining to the Corporation's acquisition of Cecil Bancorp, Inc. in February 2026, totaled $59,119,000 for the year ended December 31, 2025, an increase of 7.0% from 2024. Other operating expenses outside of salaries and benefits increased due to expanded investments and initiatives in technology, increased occupancy costs with the opening of a new branch, and acquisition-related expenses.
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. These ratios for the years ended December 31, 2025 and 2024 are as follows:
| 2025 | 2024 | |||||||
| Return on Average Assets | 0.98 | % | 0.75 | % | ||||
| Return on Average Equity | 15.17 | % | 12.13 | % | ||||
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:
ENB FINANCIAL CORP
Management's Discussion and Analysis
| · | Net interest income |
| · | Provision for credit losses |
| · | Other income |
| · | Operating expenses |
| · | 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 2025, NII generated 79.2% of the Corporation's revenue stream, which consists of NII and non-interest income, compared to 75.8% in 2024. This increase is a result of higher levels of interest income in 2025 compared to the prior year. 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 (in thousands). 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 assuming a 21% tax rate, less impact of interest expense disallowance. 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.
| 2025 | 2024 | |||||||
| $ | $ | |||||||
| Total interest income | 106,109 | 92,868 | ||||||
| Total interest expense | 37,405 | 36,127 | ||||||
| Net interest income | 68,704 | 56,741 | ||||||
| Tax equivalent adjustment | 411 | 343 | ||||||
| Net interest income | ||||||||
| (fully taxable equivalent) | 69,115 | 57,084 | ||||||
NII is the difference between interest income earned on interest-earnings assets and interest expense incurred on interest-bearing liabilities. Two factors impact NII:
| · | The rates charged on interest earning assets and paid on interest bearing liabilities |
| · | The average balance of interest earning assets and interest-bearing liabilities |
NII is impacted by yields earned on assets and rates paid on liabilities. As the Federal Reserve began lowering overnight rates in 2024 and 2025, asset yields did not decline as quickly and the Corporation managed liability rates well, moderating the negative impact on net interest margin.
The Corporation's NII on a taxable equivalent basis increased by $12,031,000, or 21.1%, for the year ended December 31, 2025 compared to 2024. The improvement in NII resulted in net interest margin increasing from 2.87% for the year ended December 31, 2024 to 3.19% in 2025. Interest-earning assets increased $174,324,000 from December 31, 2024 to December 31, 2025, as the Corporation was able to grow both average loans and securities due to strong growth combined with the successful strategy of leveraging the balance sheet with derivatives. The Corporation's ability to actively manage its deposit costs also contributed to the improvement in net interest income.
Interest income on a taxable equivalent basis totaled $106,520,000 for the year ended December 31, 2025, an increase of $13,309,000, or 14.3%. Interest income on loans was the primary reason for the increase, as strong loan production combined with improvements on rates earned led to the increase. Interest income on securities also improved, as the 2024 leverage strategy implemented in the last half of the year was in effect for the entire year in 2025 and benefited from the higher yielding securities purchased. The yield earned on interest earning assets improved from 4.69% for the year ended December 31, 2024 to 4.92% in 2025.
ENB FINANCIAL CORP
Management's Discussion and Analysis
The Corporation's overall cost of funds for the year ended December 31, 2025 was 2.61%, an improvement from 2.78% in 2024. The Corporation was able to actively manage its deposit costs downward as interest rates were lowered in 2025 and contributed to the cost deposit costs. In connection with the Corporation's leverage and derivative strategy, short-term borrowings were utilized to partially fund the strategy and resulted in higher average balances and interest expense for the year ended December 31, 2025 compared to 2024. Interest expense on long-term borrowings declined principally due to a $15,984,000 advance that matured in 2025. Interest expense and the average rate paid on subordinated debt increased, as the Corporation issued $42,500,000 of debentures in December 2025, with higher rates than the first two issuances.
The following table provides an analysis of year-to-year changes in net interest income 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 (in thousands).
| 2025 vs. 2024 | ||||||||||||
| Increase (Decrease) | ||||||||||||
| Due To Change In | ||||||||||||
| Net | ||||||||||||
| Average | Interest | Increase | ||||||||||
| Balances | Rates | (Decrease) | ||||||||||
| $ | $ | $ | ||||||||||
| INTEREST INCOME | ||||||||||||
| Interest on deposits at other banks | (343 | ) | (857 | ) | (1,200 | ) | ||||||
| Securities available for sale: | ||||||||||||
| Taxable | 4,650 | 1,686 | 6,336 | |||||||||
| Tax-exempt | (208 | ) | (8 | ) | (216 | ) | ||||||
| Total securities | 4,442 | 1,678 | 6,120 | |||||||||
| Loans | 4,024 | 4,213 | 8,237 | |||||||||
| Regulatory stock | 164 | (12 | ) | 152 | ||||||||
| Total interest income | 8,287 | 5,022 | 13,309 | |||||||||
| INTEREST EXPENSE | ||||||||||||
| Deposits: | ||||||||||||
| Demand deposits | 1,033 | (2,051 | ) | (1,018 | ) | |||||||
| Savings deposits | (3 | ) | (36 | ) | (39 | ) | ||||||
| Time deposits | 2,390 | (1,957 | ) | 433 | ||||||||
| Total deposits | 3,420 | (4,044 | ) | (624 | ) | |||||||
| Borrowings: | ||||||||||||
| Short-term borrowings | 2,114 | (9 | ) | 2,105 | ||||||||
| Long-term debt | (688 | ) | 328 | (360 | ) | |||||||
| Subordinated debt | 95 | 62 | 157 | |||||||||
| Total borrowings | 1,521 | 381 | 1,902 | |||||||||
| Total interest expense | 4,941 | (3,663 | ) | 1,278 | ||||||||
| NET INTEREST INCOME | 3,346 | 8,685 | 12,031 | |||||||||
The following table shows a more detailed analysis of net interest income on an FTE basis shown 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. Additionally, the analysis provides the net interest spread and the net yield on interest earning assets. The net interest spread is the difference between the yield on interest earning assets and the interest rate paid on interest bearing liabilities. The net interest spread has the deficiency of not giving credit for the non-interest bearing funds and capital used to fund a portion of the total interest earning assets. For this reason, management emphasizes the net yield on interest earning assets, also referred to as the net interest margin (NIM). The NIM is calculated by dividing net interest income on an FTE basis into total average interest earning assets. The NIM is generally the benchmark used by analysts to measure how efficiently a bank generates NII.
ENB FINANCIAL CORP
Management's Discussion and Analysis
| 2025 | 2024 | |||||||||||||||||||||||
| Average | Yield/ | Average | Yield/ | |||||||||||||||||||||
| Balance | Interest (e) | Rate (e) | Balance | Interest (e) | Rate (e) | |||||||||||||||||||
| $ | $ | % | $ | $ | % | |||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||
| Interest earning assets: | ||||||||||||||||||||||||
| Federal funds sold and | ||||||||||||||||||||||||
| deposits at other banks | 41,304 | 983 | 2.38 | 50,416 | 2,183 | 4.33 | ||||||||||||||||||
| Securities available for sale: | ||||||||||||||||||||||||
| Taxable | 502,362 | 20,380 | 4.06 | 384,625 | 14,044 | 3.65 | ||||||||||||||||||
| Tax-exempt | 139,895 | 2,701 | 1.93 | 150,659 | 2,917 | 1.94 | ||||||||||||||||||
| Total securities (d) | 642,257 | 23,081 | 3.59 | 535,284 | 16,961 | 3.17 | ||||||||||||||||||
| Loans (a) | 1,468,948 | 81,545 | 5.55 | 1,394,437 | 73,308 | 5.26 | ||||||||||||||||||
| Regulatory stock | 10,870 | 911 | 8.38 | 8,918 | 759 | 8.51 | ||||||||||||||||||
| Total interest earning assets | 2,163,379 | 106,520 | 4.92 | 1,989,055 | 93,211 | 4.69 | ||||||||||||||||||
| Non-interest earning assets (d) | 47,500 | 52,515 | ||||||||||||||||||||||
| Total assets | 2,210,879 | 2,041,570 | ||||||||||||||||||||||
| LIABILITIES & | ||||||||||||||||||||||||
| STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||
| Interest bearing liabilities: | ||||||||||||||||||||||||
| Demand deposits | 539,226 | 13,121 | 2.43 | 500,739 | 14,139 | 2.82 | ||||||||||||||||||
| Savings accounts | 285,134 | 248 | 0.09 | 287,709 | 287 | 0.10 | ||||||||||||||||||
| Time deposits | 431,684 | 16,421 | 3.80 | 372,087 | 15,988 | 4.30 | ||||||||||||||||||
| Total deposits | 1,256,044 | 29,790 | 2.37 | 1,160,535 | 30,414 | 2.62 | ||||||||||||||||||
| Short-term borrowings | 60,729 | 2,499 | 4.12 | 9,347 | 394 | 4.22 | ||||||||||||||||||
| Long-term debt | 74,423 | 3,009 | 4.04 | 92,034 | 3,369 | 3.66 | ||||||||||||||||||
| Subordinated debt | 41,536 | 2,107 | 5.07 | 39,637 | 1,950 | 4.92 | ||||||||||||||||||
| Total interest bearing liabilities | 1,432,732 | 37,405 | 2.61 | 1,301,553 | 36,127 | 2.78 | ||||||||||||||||||
| Non-interest bearing liabilities: | ||||||||||||||||||||||||
| Demand deposits | 622,098 | 600,567 | ||||||||||||||||||||||
| Other | 13,949 | 13,164 | ||||||||||||||||||||||
| Total liabilities | 2,068,779 | 1,915,284 | ||||||||||||||||||||||
| Stockholders' equity | 142,100 | 126,286 | ||||||||||||||||||||||
| Total liabilities & stockholders' equity | 2,210,879 | 2,041,570 | ||||||||||||||||||||||
| Net interest income (FTE) | 69,115 | 57,084 | ||||||||||||||||||||||
| Net interest spread (b) | 2.31 | 1.91 | ||||||||||||||||||||||
| Effect of non-interest bearing funds | 0.88 | 0.96 | ||||||||||||||||||||||
| Net yield on interest earning assets (c) | 3.19 | 2.87 | ||||||||||||||||||||||
| (a) | Includes balances of non-accrual loans and the recognition of any related interest income. Average balances also include net deferred loan costs of $1,866,000 in 2025 and $2,000,000 in 2024. Such fees recognized through income and included in the interest amounts totaled ($245,000) in 2025 and ($115,000) in 2024. |
| (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. |
| (e) | Yields and interest income on tax-exempt assets have been computed on a tax-equivalent basis assuming a 21% tax rate, adjusted for interest expense disallowance. |
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 provision expense of $856,000 for credit losses related to loans, a provision of $31,000 related to unfunded commitments, and $0 related to available-for-sale debt securities for the year ended December 31, 2025, compared to $1,017,000 expense related to loans, $2,000 release for unfunded commitments, and $0 related to available-for-sale debt securities for the year ended December 31, 2024. The provision expense was lower in 2025 due to favorable credit conditions. As of December 31, 2025, the allowance as a percentage of total loans was 1.11%, compared to 1.13% at December 31, 2024.
Management continues to evaluate the allowance for credit losses in relation to the growth or decline of the loan portfolio and its associated credit risk and believes the provision and the allowance for credit losses are adequate to provide for future losses. For further discussion, see the "Allowance for Credit Losses" section in Management's Discussion and Analysis.
Other Income
Other income for 2025 was $18,037,000, a decrease of $93,000, or 0.5%, compared to the $18,130,000 earned in 2024. The following table details the categories that comprise other income (dollars in thousands).
| 2025 vs. 2024 | ||||||||||||||||
| 2025 | 2024 | Increase (Decrease) | ||||||||||||||
| $ | $ | $ | % | |||||||||||||
| Trust and investment services | 3,603 | 3,665 | (62 | ) | (1.7 | ) | ||||||||||
| Service fees | 5,709 | 5,864 | (155 | ) | (2.6 | ) | ||||||||||
| Commissions | 4,123 | 4,076 | 47 | 1.2 | ||||||||||||
| Net (losses) gains on debt and equity securities | (206 | ) | 159 | (365 | ) | (229.6 | ) | |||||||||
| Gains on sale of mortgages | 1,878 | 1,826 | 52 | 2.8 | ||||||||||||
| Earnings on bank-owned life insurance | 1,144 | 1,259 | (115 | ) | (9.1 | ) | ||||||||||
| Other miscellaneous income | 1,786 | 1,281 | 505 | 39.4 | ||||||||||||
| Total other income | 18,037 | 18,130 | (93 | ) | (0.5 | ) | ||||||||||
Service charges on deposit accounts totaled $5,709,000 for the year ended December 31, 2025, a decrease of $155,000, or 2.6%, compared to the prior year, primarily as a result of lower fees on an off-balance sheet sweep product. The Corporation recorded $206,000 in losses on debt and equity securities for the year ended December 31, 2025, compared to gains of $159,000 in 2024. Sales of securities in both years were driven by asset liability management strategies to fund higher yield assets. Mortgage gains were higher in 2025, by $52,000, or 2.8%, due to favorable market conditions which led to increased profit margins on loans sold. Earnings on bank-owned life insurance (BOLI) decreased by $115,000, or 9.1%, for the year ended December 31, 2025 compared to 2024, primarily attributed to a BOLI death benefit recorded during 2024. Other miscellaneous income increased by $505,000, or 39.4%, for the year ended December 31, 2025 compared to 2024 primarily the result of sales tax refunds.
Operating Expenses
Operating expenses for the year ended December 31, 2025 were $59,119,000, an increase of $3,888,000, or 7.0%, compared to $55,231,000 in 2024. The following table provides details of the Corporation's operating expenses for the last two years along with the percentage increase or decrease compared to the previous year (dollars in thousands).
ENB FINANCIAL CORP
Management's Discussion and Analysis
| 2025 vs. 2024 | ||||||||||||||||
| 2025 | 2024 | Increase (decrease) | ||||||||||||||
| $ | $ | $ | % | |||||||||||||
| Salaries and employee benefits | 34,671 | 34,043 | 628 | 1.8 | ||||||||||||
| Occupancy | 3,606 | 3,333 | 273 | 8.2 | ||||||||||||
| Equipment | 1,637 | 1,298 | 339 | 26.1 | ||||||||||||
| Advertising & marketing | 1,387 | 1,152 | 235 | 20.4 | ||||||||||||
| Computer software & data processing | 7,339 | 6,264 | 1,075 | 17.2 | ||||||||||||
| Shares tax | 1,538 | 1,376 | 162 | 11.8 | ||||||||||||
| Professional services | 3,434 | 3,277 | 157 | 4.8 | ||||||||||||
| Merger related expenses | 698 | - | 698 | - | ||||||||||||
| Other expenses | 4,809 | 4,488 | 321 | 7.2 | ||||||||||||
| Total operating expenses | 59,119 | 55,231 | 3,888 | 7.0 | ||||||||||||
Salaries and employee benefits are the largest category of operating expenses. For the year ended December 31, 2025, salaries and benefits increased $628,000, or 1.8%, compared to 2024. The increase in salary costs was primarily due to merit increases and increased cost of health insurance, partially offset by lower levels of incentive compensation. Occupancy expenses increased $273,000, or 8.2% for the year ended December 31, 2025 compared to 2024 due to inflationary pressures combined with the opening of the downtown Lititz branch in June 2025. Equipment, computer software and data processing on a combined basis have increased 18.7% from $7,562,000 for the year ended December 31, 2024 to $8,976,000 for 2025 as a result of residual core conversion costs, evolution of products and services to meet customer needs, increased costs associated with greater transactions, and outsourcing the servicing and balancing of our ATMs. Advertising and marketing expenses increased by $235,000, or 20.4% for the year ended December 31, 2025 compared to 2024, as there was greater emphasis on media advertising and sponsorships of community activities. Shares tax expense is based on the Bank's level of shareholders' equity, and as a result of the increase in shareholders' equity, the charge of $1,538,000 for the year ended December 31, 2025 increased $162,000, or 11.8%, over 2024. Acquisition-related expenses of $698,000 were recorded related to the previously announced Cecil Bank Acquisition, which closed on February 1, 2026. Other expenses totaled $4,809,000 for the year ended December 31, 2025, an increase of $321,000, or 7.2%, over 2024 primarily as a result of higher insurance assessments, increased fraud related charges and higher levels of charitable contributions.
Income Taxes
Nearly all of the Corporation's income is taxed at the federal statutory corporate rate of 21%. The holding company is also subject to Pennsylvania Corporate Net Income Tax; however, very limited taxable activity is conducted at the holding company level. The Corporation's wholly owned subsidiary, Ephrata National Bank, is currently subject to the minimal state income tax in an adjacent state with nexus and also is subject to Pennsylvania Bank Shares Tax. The Bank Shares Tax expense appears on the Corporation's Consolidated Statements of Income under operating expenses.
Income tax expense totaled $5,176,000 and $3,308,000 for the years ended December 31, 2025 and 2024. The effective tax rate for 2025 was 19.4% compared to 17.8% in 2024. Generally, the Corporation's effective tax rate is less than the 21% federal statutory rate due to tax-exempt income, including interest earned on tax-exempt investment securities and loans, and income from life insurance policies, partially offset by disallowed interest expense and acquisition-related expenses. The increase in the effective tax rate is the result of higher levels of income before taxes subject to the statutory tax rate, combined with non-deductible acquisition-related expenses.
ENB FINANCIAL CORP
Management's Discussion and Analysis
Financial Condition
Balance Sheet Overview and Liquidity
The Corporation maintains liquid assets at adequate levels in order to meet the needs of our balance sheet. Our primary source of liquidity is core deposits and our available-for-sale investment portfolio, both of which provide more than enough liquidity to fund loans to customers and any other funding needs.
A portion of our liquidity consists of cash and cash equivalents and borrowings. At December 31, 2025, cash and cash equivalents amounted to $60,573,000, a decrease of $8,336,000, or 12.1%, from balances at December 31, 2024. Our primary sources of cash are principal repayments on loans, proceeds from the sales, calls, and maturities of investment securities, principal repayments of mortgage-backed securities and asset-backed securities, and increases in deposit accounts. As of December 31, 2025, we had outstanding borrowings from the FHLB of $127,838,000 and subordinated debt of $81,413,000.
At December 31, 2025, the Corporation had $603,034,000 in outstanding loan commitments, which included $68,145,000 in firm loan commitments, $507,785,000 in unused lines of credit, and open letters of credit of $27,104,000. Certificates of deposit due within one year totaled $332,212,000, or 82.6% of certificates of deposit. The Corporation believes, based on past experience, that a significant portion of certificates of deposit will remain at the Corporation upon maturity and ample liquidity exists outside of these funds. We have the ability to attract and retain deposits by adjusting the interest rates offered.
As reported in the Consolidated Statements of Cash Flows, our cash flows are classified for financial reporting purposes as operating, investing, or financing cash flows. Net cash provided by operating activities was $25,116,000 and $15,815,000 for the years ended December 31, 2025 and 2024, respectively. Net cash used for investing activities was $38,367,000 and $237,881,000 in fiscal years 2025 and 2024, respectively, reflecting our loan and investment security activities in the respective periods. Cash provided by financing activities amounted to $4,915,000 and $201,979,000 for years ended December 31, 2025 and 2024. Financing activities in 2024 were influenced by brokered deposits and short term borrowings that were used to fund investment growth and increase net interest income.
Investment Securities
The Corporation classifies all of its debt securities as available for sale and reports the portfolio at fair market value. As of December 31, 2025, the Corporation had $588,949,000 of debt and equity securities, compared to $626,140,000 at December 31, 2024.
In the third quarter of 2024, the Corporation adopted an investment strategy to add $200 million of investments, both agency and non-agency collateralized mortgage obligations consistent with investment policy credit quality parameters, in order to protect interest income in a rising rate environment. The goal of this strategy was to reduce the interest rate risk that management believes was necessary to address the Corporation's long-term fixed rate assets. The Corporation paired the investments with off-balance sheet pay-fixed interest rate swaps to mitigate the identified rates-up risk. The leverage strategy was funded primarily by callable brokered certificates of deposit and a small portion of short-term FHLB borrowings. The funding was chosen to allow for maximum flexibility to protect against rates-down risk. With this strategy, the Corporation has the ability to call the brokered CDs and replace them at lower market rates or unwind the swaps and offset with gains on the investments.
Outside of the strategy discussed above, the largest movements within the securities portfolio were shaped by market factors, such as:
| · | slope of the U.S. Treasury curve and projected forward rates |
| · | interest spread versus U.S. Treasury rates on the various securities |
| · | pricing of the instruments, including supply and demand for the product |
| · | structure of the instruments, including duration and average life |
| · | portfolio weightings versus policy guidelines |
| · | prepayment speeds on mortgage-backed securities and collateralized mortgage obligations |
| · | credit risk of each instrument and risk-based capital considerations |
| · | Federal income tax considerations with regard to obligations of tax-free states and political subdivisions. |
ENB FINANCIAL CORP
Management's Discussion and Analysis
The Corporation's U.S. Treasury sector and U.S. government agency sectors stayed relatively flat since December 31, 2024. U.S. Treasuries represent a safe credit at a market appropriate yield which added some diversity to the portfolio. These bonds pay monthly principal and interest, and the Corporation has invested into this sector in conjunction with the strategy discussed above. The Corporation began investing in non-agency MBS and CMO instruments in 2022 as a way to achieve a higher yield with bonds that are well protected from a credit standpoint. As of December 31, 2025, this sector stood at $143.5 million, a decrease of $1.7 million year over year. There were no concentrations of issuers greater than 10% of the securities portfolio.
The Corporation's asset-backed securities (ABS) decreased since December 31, 2024, by $6.3 million, or 11.0%. ABS are floating rate student loan pools which are instruments that perform well in a rates-up environment and offset the interest rate risk of the longer fixed-rate municipal bonds. These securities provide a variable rate return above the overnight Federal funds rate in a safe investment with a risk rating very similar to that of U.S. Agency bonds. The asset-backed securities generally provide monthly principal and interest payments to complement the Corporation's ongoing cash flows. Management views the ABS sector as a safe, higher yielding option than cash, with the qualities of cash in a rates-up environment.
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 but have a higher yield because of the longer interest rate risk. These instruments also experience significant fair market value gains and losses when interest rates decrease and increase. The Corporation sold some municipal bonds early in 2025 recognizing that the earn-back period would be within the same calendar year due to the higher yield of the replacement assets. As a result, the portfolio declined by $6.6 million, or 3.7% from December 31, 2024, to December 31, 2025. Municipal bonds represented 29.7% of the debt securities portfolio as of December 31, 2025, compared to 29.0% as of December 31, 2024. The largest geographical concentrations as of December 31, 2025, were obligations of states and political subdivisions located in the states of Pennsylvania and California.
As of December 31, 2025, the Corporation's corporate bonds decreased by $7.9 million, or 15.0%, from balances at December 31, 2024, as certain corporate bonds were called and redeemed as they converted from fixed to floating rates of interest. Corporate bonds add diversity to the portfolio and provide strong yields for short maturities; however, by their very nature, corporate bonds carry a higher level of credit risk should the entity experience financial difficulties. The fair value of corporate bonds decreased primarily as a result of maturing bonds during 2025.
The following table presents investment securities at December 31, 2025 by expected maturity, including scheduled repayments, and the weighted average yield for each maturity presented. Actual maturities may differ from expected maturities because of differences in assumptions on prepayment or call options embedded in the securities. The yields presented are calculated using tax-equivalent interest and the amortized cost (dollars in thousands).
| Within | 1 - 5 | 5 - 10 | Over 10 | |||||||||||||||||||||||||||||||||||||
| 1 Year | Years | Years | Years | Total | ||||||||||||||||||||||||||||||||||||
| % | % | % | % | % | ||||||||||||||||||||||||||||||||||||
| $ | Yield | $ | Yield | $ | Yield | $ | Yield | $ | Yield | |||||||||||||||||||||||||||||||
| U.S. Treasuries | - | - | 14,927 | 1.40 | - | - | - | - | 14,927 | 1.40 | ||||||||||||||||||||||||||||||
| U.S. government agencies | 2,500 | 0.74 | 13,900 | 0.80 | - | - | - | - | 16,400 | 0.79 | ||||||||||||||||||||||||||||||
| U.S. agency mortgage-backed securities | 199 | 2.36 | 27,308 | 2.41 | 5,524 | 2.71 | 255 | 2.96 | 33,286 | 2.46 | ||||||||||||||||||||||||||||||
| U.S. agency collateralized mortgage obligations | 79 | 2.72 | 17,889 | 2.13 | 80,635 | 4.52 | 8,989 | 3.57 | 107,592 | 4.04 | ||||||||||||||||||||||||||||||
| Non Agency MBS/CMO | 5,872 | 6.30 | 25,152 | 5.62 | 39,654 | 4.57 | 74,209 | 4.55 | 144,887 | 4.81 | ||||||||||||||||||||||||||||||
| Asset-backed securities | 2,186 | 5.48 | 30,531 | 5.07 | 18,589 | 5.09 | - | - | 51,306 | 5.09 | ||||||||||||||||||||||||||||||
| Corporate bonds | 4,013 | 1.56 | 28,702 | 1.75 | 14,650 | 3.89 | - | - | 47,365 | 2.39 | ||||||||||||||||||||||||||||||
| Obligations of states and political subdivisions | 2,018 | 3.02 | 54,025 | 1.82 | 58,060 | 2.14 | 77,327 | 1.98 | 191,430 | 1.99 | ||||||||||||||||||||||||||||||
| Total securities available for sale | 16,867 | 3.79 | 212,434 | 2.73 | 217,112 | 3.85 | 160,780 | 3.26 | 607,193 | 3.30 | ||||||||||||||||||||||||||||||
ENB FINANCIAL CORP
Management's Discussion and Analysis
Loans
Net loans outstanding totaled $1,515,745,000 at December 31, 2025, an increase of $88,476,000, or 6.2%, from $1,427,269,000 at December 31, 2024. Strong sales efforts led to an increase in balance across most categories of loans. The Corporation's strategic plan specifically focused on managed loan growth while maintaining quality of credit standards.
Agriculture loans increased to $317,957,000 at December 31, 2025, from $289,284,000 at December 31, 2024. Business loans increased by $33,753,000 during the year end December 31, 2025 from $360,805,000 at December 31, 2024.
Consumer loans not secured by real estate represent a very small portion of the Corporation's loan portfolio, at $5,703,000 as of December 31, 2025, and $6,603,000 as of December 31, 2024. These loans consist of personal loans, automobile loans, and other consumer-related loans. Home equity loans increased by $23,040,000 during 2025 from $118,329,000 million at December 31, 2024.
Non-owner occupied CRE loans increased by $33,286,000 during 2025, from $136,298,000 at at December 31, 2024 to $169,584,000 at December 31, 2025. The non-owner occupied CRE loans are further segmented by property type with the largest concentration in multi-family representing 20.1% of total non-owner occupied CRE loans outstanding at December 31, 2025. Office space loans represent only 4.2% of total non-owner occupied CRE loans outstanding and retail center loans represent 6.1% of total non-owner occupied CRE loans outstanding. There is no significant single concentration in this category of loans. Total non-owner occupied CRE represents 71.0% of total risk-based capital at December 31, 2025.
The residential real estate category represents the largest group of loans for the Corporation. The residential real estate category of total loans decreased from $514,120,000 on December 31, 2024, to $484,337,000 on December 31, 2025. This category includes closed-end fixed rate or adjustable-rate residential real estate loans secured by 1-4 family residential properties, including first and junior liens, and construction loans. The decline in the residential real estate category is the result of less construction loans at December 31, 2025 than the prior year, and as individual residential loans moved to permanent financing they were sold on the secondary market. Additionally, some other residential projects were completed and moved to other loan categories. The Corporation strategically generated more fixed-rate mortgages during 2025 that were sold on the secondary market resulting in higher levels of gains on mortgages sold.
The following tables show the maturities for the loan portfolio as of December 31, 2025, by time frame for the major categories, and also the loans, which are floating or fixed, maturing after one year (in thousands):
| Due After | Due After | |||||||||||||||||||
| One Year | Five Years | |||||||||||||||||||
| Due in One | Through | Through | Due After | |||||||||||||||||
| Year or Less | Five Years | 15 Years | 15 Years | Total | ||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| Agriculture | 2,937 | 50,951 | 89,375 | 174,694 | 317,957 | |||||||||||||||
| Business Loans | 5,691 | 109,230 | 147,006 | 132,631 | 394,558 | |||||||||||||||
| Consumer | 232 | 4,190 | 342 | 939 | 5,703 | |||||||||||||||
| Home Equity | 193 | 4,339 | 23,034 | 113,803 | 141,369 | |||||||||||||||
| Non-Owner Occupied CRE | 26,385 | 33,597 | 51,672 | 57,930 | 169,584 | |||||||||||||||
| Residential Real Estate | 1,354 | 7,620 | 40,439 | 434,924 | 484,337 | |||||||||||||||
| Total amount due | 36,792 | 209,927 | 351,868 | 914,921 | 1,513,508 | |||||||||||||||
ENB FINANCIAL CORP
Management's Discussion and Analysis
The breakdown of loans due after one year, broken down between fixed and floating or adjustable rates is as follows (in thousands):
| Floating or | ||||||||||||
| Fixed Rates | Adjustable Rates | Total | ||||||||||
| $ | $ | $ | ||||||||||
| Agriculture | 19,852 | 295,168 | 315,020 | |||||||||
| Business Loans | 72,057 | 316,810 | 388,867 | |||||||||
| Consumer Loans | 2,902 | 2,569 | 5,471 | |||||||||
| Home Equity | 23,519 | 117,657 | 141,176 | |||||||||
| Non-Owner Occupied CRE | 29,029 | 114,170 | 143,199 | |||||||||
| Residential Real Estate | 158,971 | 324,012 | 482,983 | |||||||||
| Total amount due | 306,330 | 1,170,386 | 1,476,716 | |||||||||
The majority of the Corporation's fixed-rate loans have a maturity date longer than five years. The primary reason for the longevity of the portfolio is the high percentage of real estate loans, which typically have maturities of 15 or 20 years. Out of all the loans due after one year, $306,330,000, or 20.7%, are fixed-rate loans as of December 31, 2025. These loans will not reprice to a higher or lower interest rate unless they mature or are refinanced by the borrower. The remaining $1,170,386,000, or 79.3% of loans due after one year, are made up of loans that are floating rates of interest or loans that will reprice at a predetermined time in the amortization of the loan. True floating rate loans that would immediately reprice according to changes in the prime or LIBOR rates are favorable in reducing the Corporation's total exposure to interest rate risk and fair value risk should interest rates increase.
For more details regarding how the length of the loan portfolio and its repricing affects interest rate risk, please see Item 7A - Quantitative and Qualitative Disclosures about Market Risk.
Non-Performing Assets
Non-performing assets (dollars in thousands) include:
| · | Non-accrual loans |
| · | Loans past due 90 days or more and still accruing |
| · | Other real estate owned |
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| $ | $ | |||||||
| Non-accrual loans | 9,336 | 11,887 | ||||||
| Loans past due 90 days or more and still accruing | - | - | ||||||
| Total non-performing loans | 9,336 | 11,887 | ||||||
| Other real estate owned | - | - | ||||||
| Total non-performing assets | 9,336 | 11,887 | ||||||
| Non-accrual loans to total loans | 0.62% | 0.83% | ||||||
| Non-performing loans to total loans | 0.62% | 0.83% | ||||||
| Allowance for credit losses to total loans | 1.11% | 1.13% | ||||||
| Allowance for credit losses to non-accrual loans | 180.87% | 135.63% | ||||||
| Allowance for credit losses to non-performing loans | 180.87% | 135.63% | ||||||
ENB FINANCIAL CORP
Management's Discussion and Analysis
Non-performing assets decreased by $2,551,000, or 21.5%, from December 31, 2024, to December 31, 2025, primarily due to the payoff of two unrelated agricultural loans with two separate borrowers that were experiencing payment defaults and a real estate loan that was taken by the Corporation through sheriff sale and later sold.
Management continues to monitor delinquency trends and the level of non-performing loans as a leading indicator of future credit risk. At this time, management believes that the potential for material losses related to non-performing loans remains low but is likely to trend higher in recessionary periods. The level of the Corporation's non-performing loans remains low relative to the size of the portfolio and relative to peers.
As of December 31, 2025 and 2024, the Corporation had no properties classified as other real estate owned (OREO). Expenses related to OREO are included in other operating expenses and gains or losses on the sale of OREO are included in other income on the Consolidated Statements of Income.
Allowance for Credit Losses
The allowance for credit losses is established to cover any losses inherent in the loan portfolio. Management reviews the adequacy of the allowance each quarter based upon a detailed analysis and calculation of the allowance for credit losses. This calculation is based upon a systematic methodology for determining the allowance for credit losses in accordance with U.S. generally accepted accounting principles. The calculation includes estimates and is based upon losses inherent in the loan portfolio.
The calculation, and detailed analysis supporting it, emphasizes the level of delinquent, non-performing and classified loans. The allowance calculation includes specific provisions for non-performing loans and general allocations to cover anticipated losses on all loan types based on historical losses. Based on the quarterly credit loss calculation, management will adjust the allowance for credit losses through the provision, as necessary. Changes to the allowance for credit losses during the year are primarily affected by three events:
| · | Charge off of loans considered not recoverable |
| · | Recovery of loans previously charged off |
| · | Provision for credit losses |
The Corporation's strong credit and collateral policies have been instrumental in producing a favorable history of loan losses. In recent years, the Corporation has primarily recorded provision expenses in order to account for the growth in the loan portfolio as well as adjustments for asset quality trends.
The Net Charge-Off table below shows the net charge-offs for each segment of the Corporation's loan portfolio as of December 31, 2025 and December 31, 2024 (in thousands):
ENB FINANCIAL CORP
Management's Discussion and Analysis
| 2025 | 2024 | |||||||
| $ | $ | |||||||
| Loans charged-off: | ||||||||
| Agriculture | - | 25 | ||||||
| Consumer Loans | 69 | 73 | ||||||
| Home Equity | 3 | - | ||||||
| Residential Real Estate | 84 | - | ||||||
| Total loans charged-off | 156 | 98 | ||||||
| Recoveries of loans previously charged-off | ||||||||
| Agriculture | 25 | - | ||||||
| Business Loans | 6 | 6 | ||||||
| Consumer Loans | 33 | 21 | ||||||
| Total recoveries | 64 | 27 | ||||||
| Net charge-offs (recoveries) | ||||||||
| Agriculture | (25 | ) | 25 | |||||
| Business Loans | (6 | ) | (6 | ) | ||||
| Consumer Loans | 36 | 52 | ||||||
| Home Equity | 3 | - | ||||||
| Residential Real Estate | 84 | - | ||||||
| Total net charge-offs (recoveries) | 92 | 71 | ||||||
| Average loans outstanding | ||||||||
| Agriculture | 299,362 | 269,693 | ||||||
| Business Loans | 370,027 | 361,303 | ||||||
| Consumer Loans | 6,186 | 6,415 | ||||||
| Home Equity | 131,282 | 112,985 | ||||||
| Non-Owner Occupied CRE | 158,518 | 132,524 | ||||||
| Residential Real Estate | 500,359 | 508,795 | ||||||
| Total average loans outstanding | 1,465,734 | 1,391,715 | ||||||
| Net charge-offs (recoveries) as a % of average loans outstanding | ||||||||
| Agriculture | (0.01% | ) | 0.01% | |||||
| Business Loans | 0.00% | 0.00% | ||||||
| Consumer Loans | 0.58% | 0.81% | ||||||
| Home Equity | 0.00% | 0.00% | ||||||
| Non-Owner Occupied CRE | 0.00% | 0.00% | ||||||
| Residential Real Estate | 0.02% | 0.00% | ||||||
| Total net charge-offs as a % of average loans outstanding | 0.01% | 0.01% | ||||||
ENB FINANCIAL CORP
Management's Discussion and Analysis
The following table provides the allocation of the Corporation's allowance for credit losses by major loan classifications. The percentage of allowance indicates the percentage of the total allowance, and the percentage of loans indicates the percentage of the loan portfolio represented by the indicated loan type as of December 31, 2025 and December 31, 2024 (in thousands):
| 2025 | 2024 | |||||||||||||||||||||||
| % of | % of | % of | % of | |||||||||||||||||||||
| $ | Allowance | Loans | $ | Allowance | Loans | |||||||||||||||||||
| Agriculture | 4,352 | 25.8 | 21.0 | 3,303 | 20.5 | 20.3 | ||||||||||||||||||
| Business Loans | 3,248 | 19.2 | 26.1 | 3,234 | 20.1 | 25.3 | ||||||||||||||||||
| Consumer Loans | 365 | 2.2 | 0.4 | 327 | 2.0 | 0.5 | ||||||||||||||||||
| Home Equity | 2,785 | 16.5 | 9.3 | 2,644 | 16.4 | 8.3 | ||||||||||||||||||
| Non-Owner Occupied CRE | 1,342 | 7.9 | 11.2 | 933 | 5.8 | 9.5 | ||||||||||||||||||
| Residential Real Estate | 4,794 | 28.4 | 32.0 | 5,681 | 35.2 | 36.1 | ||||||||||||||||||
| Total allowance for credit losses | 16,886 | 100.0 | 100.0 | 16,122 | 100.0 | 100.0 | ||||||||||||||||||
The movement within the classifications is consistent with the individual categories' end-of-year balances.
Deposits
The Corporation's total ending deposits at December 31, 2025 of $1,873,361,000 decreased by $17,082,000, or 0.9%, from December 31, 2024. Customer deposits are the Corporation's primary source of funding for loans and securities. During 2025, the Corporation grew core deposits at a slower pace due to the rapidly rising rate environment and the financial/product options available to customers. Also, 2024 included brokered deposit growth for the Corporation's leverage strategy, which was not replicated in 2025.
The Deposits by Major Classification table, shown below, provides the average balances of each category for December 31, 2025 and December 31, 2024 (in thousands):
| 2025 | 2024 | |||||||||||||||
| $ | % | $ | % | |||||||||||||
| Non-interest bearing demand | 622,098 | - | 600,567 | - | ||||||||||||
| Interest-bearing demand | 371,787 | 2.75 | 342,043 | 3.22 | ||||||||||||
| Money market deposit accounts | 167,439 | 1.74 | 158,696 | 1.96 | ||||||||||||
| Savings accounts | 285,134 | 0.09 | 287,709 | 0.10 | ||||||||||||
| Time deposits | 431,684 | 3.80 | 372,087 | 4.30 | ||||||||||||
| Total deposits | 1,878,142 | 1,761,102 | ||||||||||||||
The average balance of the Corporation's core deposits (total deposits less time deposits), increased by 4.1%, or $57,442,000 from December 31, 2024, to December 31, 2025. Average non-interest-bearing demand accounts increased by $21,531,000, or 3.6%, and are the Corporation's cheapest source of funding for balance sheet growth. Average interest-bearing demand accounts grew by $29,743,000, or 8.7% . Average money market account balances increased by $8,743,000, or 5.5%, and average savings accounts decreased by $2,575,000, or 0.9%, from December 31, 2024 to December 31, 2025. The growth in average balances in demand and money market accounts is due to competitive interest rates and deepening retail and commercial customer relationships.
Time deposits are typically a more rate-sensitive product, making them a less reliable source of funding. Time deposits fluctuate as consumers search for the best rates in the market, with less allegiance to any particular financial institution. In 2025, average time deposit balances increased $59,598,000, or 16.0%, compared to average balances during 2024, due to a full year of the derivative strategy that funded investment growth primarily with callable brokered CDs, compared to a partial year in 2024.
As of December 31, 2025, time deposits of $250,000 or more made up 17.1% of the total time deposits. This compares to 15.4% on December 31, 2024. The total dollar amount of time deposits of $250,000 or more increased $2,666,000, or 4.0%, from December 31, 2024 to December 31, 2025. Since time deposits of $250,000 or more are made up of relatively few customers with large dollar accounts, management monitors these accounts closely due to the potential for these deposits to rapidly increase or decrease. The following table provides the total amount of time deposits of $250,000 or more and related uninsured amounts for the past two years by maturity distribution (in thousands).
ENB FINANCIAL CORP
Management's Discussion and Analysis
| Add December 31, | Add December 31, | |||||||||||||||
| 2025 | 2024 | |||||||||||||||
| Total | Uninsured | Total | Uninsured | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Three months or less | 18,854 | 7,104 | 39,025 | 16,025 | ||||||||||||
| Over three months through six months | 24,920 | 11,169 | 14,014 | 4,514 | ||||||||||||
| Over six months through twelve months | 25,115 | 10,116 | 12,907 | 5,407 | ||||||||||||
| Over twelve months | - | - | 288 | 38 | ||||||||||||
| Total | 68,889 | 28,389 | 66,234 | 25,984 | ||||||||||||
As of December 31, 2025 and 2024, the total uninsured deposits of the Corporation were approximately $258,136,000 and $227,993,000, or 13.8% and 12.1% of total deposits, respectively. 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. Certain deposits over $250,000 are also secured by pledged investment securities.
Borrowings
Total borrowings were $209,251,000 and $183,538,000 at December 31, 2025 and 2024. Short-term borrowings with the Federal Home Loan Bank (FHLB) remained at $60,000,000 at December 31, 2025 and December 31, 2024. Long-term borrowings with the Federal Home Loan Bank (FHLB) decreased to $67,838,000 at December 31, 2025 from $83,822,000 at December 31, 2024. These borrowings are used as a secondary source of funding and to mitigate interest rate risk. The increase in total borrowing balances during the year was related to an issuance of $41,500,000, net of costs, in subordinated debt. As of December 31, 2025, all the borrowings of FHLB were fixed-rate loans. The Corporation continues to be well under the FHLB maximum borrowing capacity which is $731.4 million as of December 31, 2025.
In addition to the long-term advances funded through the FHLB, the Corporation has completed three separate subordinated debt offerings in 2020, 2022 and 2025. Total subordinated debt outstanding at December 31, 2025 and 2024 is $81,413,000 and $39,716,000. The purpose of the subordinated debt offerings was to fund Bank growth, as the proceeds raised are considered Tier 2 capital for the Corporation, and portions of the cash proceeds were contributed as capital to the Bank, which is considered Tier 1 capital. Each of the notes has a fixed rate of interest for the first five years and then converts to a floating rate of interest for the last five years. After the fixed rate period, the Corporation can redeem the notes at par. In January 2026, $20,000,000 subordinated debt, representing the entire 2020 first issuance, was redeemed at par with proceeds raised from the 2025 subordinated debt issuance.
For additional information on borrowings, refer to Note G, "Short Term Borrowings," and Note H - "Other Borrowed Funds" included in Part II, Item 8, "Financial Statements and Supplementary Data."
Stockholders' Equity
Capital Resources. The management of capital in a regulated financial services industry must balance return on equity to its stockholders while maintaining sufficient levels of capital and related risk-based regulatory capital ratios to satisfy statutory regulatory requirements. The Corporation's capital management strategies have historically been to provide an attractive rate of return to investors from both dividend payments and stock appreciation, while maintaining a "well capitalized" position of regulatory strength.
Total stockholders' equity increased $30,070,000 from $130,984,000 at December 31, 2024 to $161,054,000 at December 31, 2025. The primary reason for the increase in stockholders' equity was net income of $21,559,000 less dividends declared of $4,084,000. In addition, market conditions led to $12,006,000 of other comprehensive income for the year, primarily in appreciation in securities available for sale.
Capital Adequacy. Federal regulatory authorities require banks to meet minimum capital levels. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material impact on the Corporation's and Bank's financial statements. The Corporation, as well as the Bank, maintains capital ratios above those minimum levels.
ENB FINANCIAL CORP
Management's Discussion and Analysis
Quantitative measures established by regulators to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total and Tier 1 capital (as defined in regulations) to risk-weighted assets (as defined), common equity Tier 1capital (as defined) to risk weighted assets, and of Tier 1 capital to average assets (as defined). Regulatory guidelines determine the risk-weighted assets by assigning assets to defined specific risk-weighted categories. The Bank and Corporation have elected not to include accumulated other comprehensive income (loss) in their Tier 1 and total capital calculations. However, the changes in investment unrealized gains and losses do impact tangible capital on the balance sheet and was adversely impacted by the dramatic increase in market interest rates during years prior to 2024. The primary difference between Tier 1 and total capital is the inclusion of the allowance for credit and off-balance sheet losses, and in the case of the Corporation, eligible subordinated debt.
The consolidated asset limit on small bank holding companies is $3 billion and a corporation 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. The differences between the Bank's and Corporation's Tier 1 capital and ratios is the manner in which subordinated debt is treated. At the Corporation it is treated as Tier 2 capital. The Corporation uses a portion of the cash proceeds of subordinated debt and contributes it as additional capital to the Bank, which qualifies as Tier I capital.
Tables presenting the Corporation and Bank's capital amounts and regulatory capital ratios at December 31, 2025 and 2024 are included in Note M, Regulatory Matters and Restrictions, to the Consolidated Financial Statements appearing in Part II, Item 8, "Financial Statements and Supplementary Data". The Corporation considers the capital ratios of the Bank to be the relevant measurement of capital adequacy. The Bank's capital ratios at December 31, 2025 and 2024 are as follows:
| To be Well | ||||||||||||
| Capitalied Under | ||||||||||||
| Prompt Corrective | ||||||||||||
| 2025 | 2024 | Action Regulations | ||||||||||
| Tier 1 leverage (to average assets) ratio | 9.8% | 9.1% | 5.0% | |||||||||
| Common Tier 1 capital (to risk-weighted assets) ratio | 13.9% | 13.2% | 6.5% | |||||||||
| Tier 1 risk-based capital (to risk-weighted assets) ratio | 13.9% | 13.2% | 8.0% | |||||||||
| Total risk-based capital (to risk-weighted assets) ratio | 15.0% | 14.4% | 10.0% | |||||||||
On February 1, 2026, the Corporation completed its Acquisition of Cecil Bancorp, Inc. in an all-cash transaction. The additional assets and risk-weighted assets that Cecil will contribute to combined assets will lower the Corporation and Bank's capital ratios as no additional capital was issued in connection with the transaction.
Contractual Cash Obligations
The Corporation has a number of contractual obligations that arise from the normal course of business to fund loan growth, for asset/liability management purposes, to meet required capital needs and for other corporate purposes. The following table summarizes the contractual cash obligations of the Corporation as of December 31, 2025 (in thousands) and shows the future periods in which settlement of the obligations is expected. The contractual obligation numbers below do not include accrued interest. Refer to Note O to the Consolidated Financial Statements referenced in the table for additional details regarding these obligations.
ENB FINANCIAL CORP
Management's Discussion and Analysis
| Less than | 1-3 | 4-5 | More than | |||||||||||||||||
| 1 year | years | years | 5 years | Total | ||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| Time deposits (Note F) | 332,212 | 8,066 | 62,133 | - | 402,411 | |||||||||||||||
| Short-term borrowings (Note G) | 60,000 | - | - | - | 60,000 | |||||||||||||||
| Long-term FHLB advances (Note H) | 28,158 | 39,680 | - | - | 67,838 | |||||||||||||||
| Subordinated debt (Note H) | - | - | 20,000 | 61,413 | 81,413 | |||||||||||||||
| Operating leases (Note Q) | 542 | 698 | 305 | 1,375 | 2,920 | |||||||||||||||
| Total contractual obligations | 420,912 | 48,444 | 82,438 | 62,788 | 614,582 | |||||||||||||||
Actual settlement of these obligations may occur prior to settlement date, as the Corporation has the ability to call the brokered deposits and subordinated debt, and payoff borrowings.
Off-Balance Sheet Arrangements
The Corporation is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and, to a lesser extent, standby letters of credit. At December 31, 2025, the Corporation had unfunded outstanding commitments to extend credit of $575,930,000 and outstanding standby letters of credit of $27,104,000. Because these commitments generally have fixed expiration dates and many will expire without being drawn upon, the total commitment level does not necessarily represent future cash requirements. Please refer to Note O - "Commitments and Contingencies" in the Notes to the Consolidated Financial Statements for a discussion of nature, business purpose, and importance of the Corporation's off-balance sheet arrangements.
Critical Accounting Policies
The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect many of the reported amounts and disclosures. Actual results could differ from these estimates.
Allowance for Credit Losses
A material estimate that is particularly susceptible to significant change is the determination of the allowance for credit losses. Management believes that the allowance for credit losses is adequate and reasonable. The Corporation's methodology for determining the allowance for credit losses is described in an earlier section of Management's Discussion and Analysis. Given the very subjective nature of identifying and valuing credit losses, it is likely that well-informed individuals could make materially different assumptions and, therefore, calculate a materially different allowance amount. Management uses available information to recognize losses on loans; however, changes in economic conditions may necessitate revisions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation's allowance for credit losses. Such agencies may require the Corporation to recognize adjustments to the allowance based on their judgments of information available to them at the time of their examination.
Sensitivity Analysis
The table below indicates the impact to the allowance for credit losses on loans if the factors described below were adjusted in the Corporation's CECL model as of December 31, 2025. Scenario 1 (S1) models 10% chance the realized economy will be better than the baseline, whereas Scenario 3 (S3) models a moderate recession. Management's best estimate at December 31, 2025 is the baseline scenario, however.
| Increase/(Decrease) ($) | Adjustment Factor | ||
| Economic Forecast | (2,454) | If the S1 scenarios were used instead of the Baseline scenario | |
| Economic Forecast | 1,200 | If 80% Baseline, 10% S1, and 10% S3 weighted scenarios were used instead of the Baseline scenario | |
| Economic Forecast | 3,598 | If 40% Baseline, 30% S1, and 30% S3 weighted scenarios were used instead of the Baseline scenario | |
| Economic Forecast | 14,448 | If S3 scenario was used instead of Baseline scenario |
ENB FINANCIAL CORP
Management's Discussion and Analysis
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