Fair Value Presentation

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value Presentation

5. Fair Value Presentation

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

Level I:     Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

19

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

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 March 31, 2022, and December 31, 2021, 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)

	March 31, 2022
	Level I		Level II		Level III		Total
	$		$		$		$
U.S. treasuries		—		34,291		—		34,291
U.S. government agencies		—		25,891		—		25,891
U.S. agency mortgage-backed securities		—		54,077		—		54,077
U.S. agency collateralized mortgage obligations		—		34,448		—		34,448
Non-agency MBS/CMO		—		23,032		—		23,032
Asset-backed securities		—		90,793		—		90,793
Corporate bonds		—		78,785		—		78,785
Obligations of states & political subdivisions		—		248,176		—		248,176
Equity securities		8,994		—		—		8,994
Total securities		8,994		589,493		—		598,487

On March 31, 2022, the Corporation held no securities valued using level III inputs. All of the Corporation’s debt instruments were valued using level II inputs, where quoted prices are available and observable, but not necessarily quotes on identical securities traded in active markets on a daily basis. The Corporation’s CRA fund investments and bank stocks are fair valued utilizing level I inputs because the funds have their own quoted prices in an active market. As of March 31, 2022, the CRA fund investments had a $7,258,000 book and fair market value and the bank stock portfolio had a book value of $1,623,000, and fair market value of $1,736,000.

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

20

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

ASSETS MEASURED ON A RECURRING BASIS

(DOLLARS IN THOUSANDS)

	December 31, 2021
	Level I		Level II		Level III		Total
	$		$		$		$
U.S. Treasuries		—		14,813		—		14,813
U.S. government agencies		—		29,021		—		29,021
U.S. agency mortgage-backed securities		—		51,988		—		51,988
U.S. agency collateralized mortgage obligations		—		31,077		—		31,077
Asset-backed securities		—		101,219		—		101,219
Corporate bonds		—		82,509		—		82,509
Obligations of states & political subdivisions		—		247,466		—		247,466
Equity securities		8,982		—		—		8,982
Total securities		8,982		558,093		—		567,075

On December 31, 2021, the Corporation held no securities valued using level III inputs. All of the Corporation’s debt instruments were valued using level II inputs, where quoted prices are available and observable but not necessarily quotes on identical securities traded in active markets on a daily basis. The Corporation’s CRA fund investments and bank stocks are fair valued utilizing level I inputs because the funds have their own quoted prices in an active market. As of December 31, 2021, the CRA fund investments had a $7,240,000 book and market value and the bank stocks had a book value of $1,570,000 and a market value of $1,742,000.

The following tables provide the fair value for each class of assets required to be measured and reported at fair value on a nonrecurring basis on the Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021, by level within the fair value hierarchy:

ASSETS MEASURED ON A NONRECURRING BASIS

(DOLLARS IN THOUSANDS)

	March 31, 2022
	Level I		Level II		Level III		Total
	$		$		$		$
Assets:
Impaired Loans	$	—	$	—	$	3,784	$	3,784
Total	$	—	$	—	$	3,784	$	3,784

	December 31, 2021
	Level I		Level II		Level III		Total
	$		$		$		$
Assets:
Impaired Loans	$	—	$	—	$	3,177	$	3,177
Total	$	—	$	—	$	3,177	$	3,177

The Corporation had a total of $4,035,000 of impaired loans as of March 31, 2022, with $251,000 of specific allocation against these loans and $3,324,000 of impaired loans as of December 31, 2021, with $147,000 of specific allocation against these loans. The value of impaired loans is generally determined through independent appraisals of the underlying collateral.

21

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)

	March 31, 2022
	Fair Value		Valuation		Unobservable		Range
	Estimate		Techniques		Input		(Weighted Avg)
Impaired loans		3,784		Appraisal of collateral (1)		Appraisal adjustments (2)		-20% (-20%)
						Liquidation expenses (2)		-10% (-10%)

	December 31, 2021
	Fair Value		Valuation		Unobservable		Range
	Estimate		Techniques		Input		(Weighted Avg)
Impaired loans		3,177		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.

22

ENB FINANCIAL CORP

Notes to the Unaudited Consolidated Interim Financial Statements

The following table provides the carrying amount for each class of assets and liabilities and the fair value for certain financial instruments that are not required to be measured or reported at fair value on the Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021:

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

(DOLLARS IN THOUSANDS)

	March 31, 2022
					Quoted Prices in Active Markets		Significant Other		Significant
					for Identical		Observable		Unobservable
	Carrying				Assets		Inputs		Inputs
	Amount		Fair Value		(Level I)		(Level II)		(Level III)
	$		$		$		$		$
Financial Assets:
Cash and cash equivalents		79,154		79,154		79,154		—		—
Regulatory stock		5,406		5,406		5,406		—		—
Loans held for sale		2,223		2,223		2,223		—		—
Loans, net of allowance		937,592		933,932		—		—		933,932
Mortgage servicing assets		1,958		2,737		—		—		2,737
Accrued interest receivable		5,694		5,694		5,694		—		—
Bank owned life insurance		35,574		35,574		35,574		—		—
Financial Liabilities:
Demand deposits		675,519		675,519		675,519		—		—
Interest-bearing demand deposits		66,083		66,083		66,083		—		—
NOW accounts		134,018		134,018		134,018		—		—
Money market deposit accounts		164,893		164,893		164,893		—		—
Savings accounts		363,300		363,300		363,300		—		—
Time deposits		114,144		112,113		—		—		112,113
Total deposits		1,517,957		1,515,926		1,403,813		—		112,113
Long-term debt		44,206		44,042		—		—		44,042
Subordinated debt		19,700		18,675		—		—		18,675
Accrued interest payable		444		444		444		—		—

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

(DOLLARS IN THOUSANDS)

	December 31, 2021
					Quoted Prices in Active Markets		Significant Other		Significant
					for Identical		Observable		Unobservable
	Carrying				Assets		Inputs		Inputs
	Amount		Fair Value		(Level I)		(Level II)		(Level III)
	$		$		$		$		$
Financial Assets:
Cash and cash equivalents		158,449		158,449		158,449		—		—
Regulatory stock		5,380		5,380		5,380		—		—
Loans held for sale		3,194		3,194		3,194		—		—
Loans, net of allowance		907,973		914,251		—		—		914,251
Mortgage servicing assets		1,768		2,129		—		—		2,129
Accrued interest receivable		5,152		5,152		5,152		—		—
Bank owned life insurance		35,414		35,414		35,414		—		—
Financial Liabilities:
Demand deposits		686,278		686,278		686,278		—		—
Interest-bearing demand deposits		63,015		63,015		63,015		—		—
NOW accounts		139,366		139,366		139,366		—		—
Money market deposit accounts		168,327		168,327		168,327		—		—
Savings accounts		341,291		341,291		341,291		—		—
Time deposits		113,936		113,919		—		—		113,919
Total deposits		1,512,213		1,512,196		1,398,277		—		113,919
Long-term debt		44,206		43,060		—		—		43,060
Subordinated debt		19,680		19,088		—		—		19,680
Accrued interest payable		255		255		255		—		—