ENBP ENB Financial Corporation (QX)

Item 4.          Description of Securities.

Common Stock

Authorized Capital. The authorized capital stock of the Registrant consists of 24,000,000 shares of common stock, $0.10 par value.

Voting Rights. Each share of common stock entitles its holder to one vote on all matters upon which shareholders have the right to vote. In addition, unless otherwise provided by law or in the Registrant’s articles of incorporation or bylaws, the affirmative vote of the holders of a majority of the shares having voting powers present at a shareholders’ meeting, in person or represented by proxy, shall decide any question brought before such meeting.

Classification of the Board of Directors. The board of directors is divided into three classes with each class serving staggered three-year terms. Shareholders cannot cumulate their votes in the election of directors.

Preemptive Rights. The Registrant’s common stock does not carry preemptive subscription rights.

Liquidation. In the event of liquidation, dissolution, or winding up of the Registrant, the holders of common stock are entitled to share in all assets remaining after payment of liabilities on a pro rata basis.

Liability for Further Assessments. The Registrant’s shareholders are not subject to further assessments on their shares of common stock.

Sinking Fund Provision. The common stock does not require a separate capital reserve maintained to pay shareholders with preferential rights for their investment in the event of liquidation or redemption. However, in the future, the Registrant may issue preferred shares that require such a fund, in which case legal restrictions may require the Registrant to maintain the fund prior to paying dividends. The Registrant is not presently authorized to issue preferred shares.

Redemption or Conversion Rights. The holders of common stock do not have a right of redemption, which is the right to sell their shares back to the Registrant, nor do they have a right to convert their shares to other classes or series of stock, such as preferred stock.

Dividends. Each shareholder is entitled to receive dividends that may be declared by the board of directors out of legally available funds.

Under the Pennsylvania Business Corporation Law, the Registrant may not pay a dividend if afterwards:

In order for the Registrant to pay a cash dividend to shareholders, the Registrant’s subsidiary, The Ephrata National Bank, must first pay a dividend to the Registrant. As a result, the legal restrictions on The Ephrata National Bank’s dividend payments under the National Bank Act also affects the Registrant’s ability to pay dividends. The National Bank Act provides that dividends may be declared by the board of directors and paid from the net profits of The Ephrata National Bank as the board of directors shall judge expedient.

In addition, the ability of The Ephrata National Bank to pay dividends may be affected by the various minimum capital requirements and the capital and noncapital standards under the Federal Deposit Insurance Corporation Improvement Act of 1991 (the “FDICIA”). Further, the Office of the Comptroller of the Currency is authorized under the FDICIA to determine, under certain circumstances relating to the financial condition of The Ephrata National Bank, that the payment of dividends would be an unsafe or unsound practice and prohibit payment thereof.

Further, ENB Financial Corp, as a bank holding company, is subject to various statutes, rules, and regulations of the Board of Governors of the Federal Reserve System (the “FRB”). As such, from time to time the FRB may issue rules, regulations, or interpretations which may affect the declaration, amount, payment, or timing of dividends.

Anti-Takeover Provisions in Articles, Bylaws and Pennsylvania Law

The Registrant’s articles of incorporation and bylaws contain a number of provisions that could be considered anti-takeover in purpose and effect. These provisions generally permit the board of directors to have as much flexibility as possible to issue additional shares, without prior shareholder approval, for proper corporate purposes, including financing, acquisitions, stock dividends, stock splits, and employee incentive plans. However, these additional shares may also be used by the board of directors to deter future attempts to gain control over the Registrant.

Supermajority Vote for Approval of Extraordinary Transactions. No merger, consolidation, liquidation, or dissolution of the Registrant nor any action that would result in the sale or other disposition of all or substantially all of the assets of the Registrant shall be valid unless first approved by the affirmative vote of at least two-thirds of the outstanding shares of common stock of the Registrant. This provision ensures that any extraordinary corporate transaction would occur only if it receives a clear mandate from the shareholders.

Classified Board of Directors. The Registrant’s bylaws provide that the board of directors be divided into three classes with each class serving staggered three-year terms. In any given year, only a minority of directors are elected to the board of directors. A classified board has the effect of moderating the pace of any change in control of the board of directors by extending the time required to elect a majority of the directors to at least two successive annual meetings.

Authorization to Consider Various Factors in Tender Offers. Another anti-takeover provision in the Pennsylvania corporate law relevant to the Registrant enables the board of directors to oppose a tender offer on the basis of factors other than economic benefit to shareholders, such as:

This provision permits the Registrant to recognize our responsibilities to these constituent groups of the Registrant and its subsidiaries and to the communities that they serve. Pennsylvania corporate law specifically authorizes this type of provision.