Dimeco (DIMC) 8-K Results of Operations and Financial Condition

Exhibit 99

NEWS RELEASE

TO BUSINESS EDITOR

DIMECO, INC. REPORTS EARNINGS AT SEPTEMBER 30, 2011

Honesdale, PA, October 20, 2011/ Dimeco, Inc. (Nasdaq “DIMC”), parent company of The Dime Bank, reported earnings for the nine months ended September 30, 2011 of $4,118,000, an increase of 15.6% over the same period in 2010.  The main component of improved earnings came from net interest income of $14,574,000, which was 16.2% greater than the first nine months of 2010.  Earnings per share were $2.56 on September 30, 2011, an increase of 14.3% over 2010 and dividends declared year-to-date were $1.08 per share.  Return on average stockholders’ equity was 10.45% and 9.70% for the first nine months of 2011 and 2010, an increase of 7.7% for 2011.  Return on average assets was 1.00% and .87% for the first nine months of 2011 and 2010, an increase of 14.9%, over the previous year.

The Company reported total assets of $569,956,000 at September 30, 2011, an increase of $21,902,000 or 4.0% over balances a year earlier. During that time, the loan portfolio grew $21,753,000 or 5.2% to $443,881,000 and deposits increased $9,001,000 or 2.0% to $468,674,000 at September 30, 2011.  The Company reported ratios of net charge offs to average loans of .30% and nonperforming assets to total assets of 3.43% at September 30, 2011, compared to .05% and 2.18%, respectively, at September 30, 2010.  With continued stagnation in economic conditions, the Company has experienced an increase in charged off loans and in nonperforming loans.  These ratios, along with an increase in the ratio of the allowance for loan loss to total loans at 1.90% at the end of the third quarter, compared to 1.69% a year earlier, show evidence of loan issues being recognized in a prudent manner.

President and Chief Executive Officer Gary C. Beilman stated, “Our performance shows numerous positives including a healthy uptick in shareholders’ equity of 8%, and an increase of almost 4% in the shareholders’ equity to asset ratio. The continuation of our quarterly dividend at $.36 per share produces a yield of 4.24% for our shareholders. With this good news, our focus remains centered in realism. The ongoing economic downturn presents challenges every day including decreased cash flows for some customers creating a strain to meet financial obligations in a timely manner. We continue our pledge to plan, monitor and act with the best interests of all as we find our way through this economy. We thank our shareholders for their continued investment in Dimeco, and the community for their continued patronage.”

The Dime Bank, a wholly owned subsidiary of Dimeco, Inc., serves Wayne and Pike counties in Pennsylvania and Sullivan County, New York.  The Bank offers a full array of financial services ranging from traditional products to electronic banking along with a wealth management division. For more information on The Dime Bank, visit www.thedimebank.com.

Source Dimeco, Inc. / October 20, 2011

Contact:  Deborah Unflat, Vice President Marketing Officer

DIMECO, INC.

CONSOLIDATED STATEMENT OF INCOME   (unaudited)

	For the three months ended September 30,
(in thousands, except per share)	2011		2010		2011			2010
Interest Income
Interest and fees on loans	$	5,721	$	5,593	$	16,681		$	16,524
Investment securities:
Taxable		327		370		937			1,042
Exempt from federal income tax		305		254		898			768
Other		1		5		8			29
Total interest income		6,354		6,222		18,524			18,363
Interest Expense
Deposits		1,016		1,463		3,221			4,966
Short-term borrowings		29		37		90			113
Other borrowed funds		206		237		639			737
Total interest expense		1,251		1,737		3,950			5,816
Net Interest Income		5,103		4,485		14,574			12,547
Provision for loan losses		1,300		520		2,000			1,100
Net Interest Income After Provision for  Loan Losses		3,803		3,965		12,574			11,447
Noninterest Income
Service charges on deposit accounts		260		303		788			995
Mortgage loans held for sale gains, net		75		76		223			171
Investment securities gains (losses)		14		24		(14	)		18
Brokerage commissions		156		187		494			578
Earnings on bank-owned life insurance		111		108		328			318
Debit card usage		160		137		451			384
Other  income		156		194		605			631
Total noninterest income		932		1,029		2,875			3,095
Noninterest Expense
Salaries and employee benefits		1,752		1,653		5,372			5,047
Occupancy expense, net		282		265		853			842
Furniture and equipment expense		107		119		325			358
Professional fees		144		215		637			568
Data processing expense		173		172		530			527
FDIC insurance		127		204		438			565
Other expense		712		620		2,101			1,800
Total noninterest expense		3,297		3,248		10,256			9,707
Income before income taxes		1,438		1,746		5,193			4,835
Income taxes		256		471		1,075			1,273
NET INCOME	$	1,182	$	1,275	$	4,118		$	3,562
Earnings per Share - basic	$	0.73	$	0.80	$	2.56		$	2.24
Earnings per Share - diluted	$	0.73	$	0.80	$	2.56		$	2.24
Average shares outstanding - basic		1,623,718		1,597,745		1,606,811			1,589,955
Average shares outstanding - diluted		1,625,183		1,599,302		1,608,112			1,590,703

DIMECO, INC.

CONSOLIDATED BALANCE SHEET (unaudited)

(in thousands)
September 30,	2011			2010
Assets
Cash and due from banks	$	7,762		$	5,756
Interest-bearing deposits in other banks		2,583			12,106
Total cash and cash equivalents		10,345			17,862
Mortgage loans held for sale		-			170
Investment securities available for sale		85,863			81,007
Loans (net of unearned income of $6 and $37)		443,881			422,128
Less allowance for loan losses		8,444			7,152
Net loans		435,437			414,976
Premises and equipment		10,108			10,456
Accrued interest receivable		1,978			1,857
Bank-owned life insurance		9,965			9,451
Other real estate owned		4,192			1,111
Prepaid FDIC insurance		1,211			1,780
Other assets		10,857			9,384
TOTAL ASSETS	$	569,956		$	548,054
Liabilities
Deposits :
Noninterest-bearing	$	52,988		$	48,964
Interest-bearing		415,686			410,709
Total deposits		468,674			459,673
Short-term borrowings		24,733			13,536
Other borrowed funds		18,110			20,022
Accrued interest payable		510			757
Other liabilities		3,604			3,779
TOTAL LIABILITIES		515,631			497,767
Stockholders' Equity
Common stock, $.50 par value; 5,000,000 shares authorized;
1,653,746 and 1,652,318 shares issued		827			826
Capital surplus		6,347			6,184
Retained earnings		47,568			44,155
Accumulated other comprehensive income		1,650			1,189
Treasury stock, at cost (54,100 shares)		(2,067	)		(2,067	)
TOTAL STOCKHOLDERS' EQUITY		54,325			50,287
TOTAL LIABILITES AND STOCKHOLDERS' EQUITY	$	569,956		$	548,054
This statement has not been reviewed or confirmed for accuracy or relevance by the FDIC.

DIMECO, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)

	(amounts in thousands, except per share)									% Increase
		2011				2010				(decrease)
	Performance for the nine months ended September 30,
	Interest income	$	18,524			$	18,363				0.9	%
	Interest expense	$	3,950			$	5,816				(32.1	%)
	Net interest income	$	14,574			$	12,547				16.2	%
	Net income	$	4,118			$	3,562				15.6	%
	Shareholders' Value (per share)									��
	Net income - basic	$	2.56			$	2.24				14.3	%
	Net income - diluted	$	2.56			$	2.24				14.3	%
	Dividends	$	1.08			$	1.08				-
	Book value	$	33.96			$	31.46				7.9	%
	Market value	$	34.00			$	34.90				(2.6	%)
	Market value/book value ratio		100.1	%			110.9	%			(9.7	%)
*	Price/earnings multiple		10.0		X		11.7		X		(14.5	%)
*	Dividend yield		4.24	%			4.13	%			2.7	%
	Financial Ratios
*	Return on average assets		1.00	%			0.87	%			14.9	%
*	Return on average equity		10.45	%			9.70	%			7.7	%
	Shareholders' equity/asset ratio		9.53	%			9.18	%			3.8	%
	Dividend payout ratio		42.19	%			48.21	%			(12.5	%)
	Nonperforming assets/total assets		3.43	%			2.18	%			57.3	%
	Allowance for loan loss as a % of loans		1.90	%			1.69	%			12.4	%
	Net charge-offs/average loans		0.30	%			0.05	%			500.0	%
	Allowance for loan loss/nonaccrual loans		65.6	%			72.5	%			(9.5	%)
	Allowance for loan loss/non-performing loans		55.1	%			66.0	%			(16.5	%)
	Financial Position at September 30,
	Assets	$	569,956			$	548,054				4.0	%
	Loans, net of unearned	$	443,881			$	422,128				5.2	%
	Deposits	$	468,674			$	459,673				2.0	%
	Stockholders' equity	$	54,325			$	50,287				8.0	%
*	annualized

October 2011

Dear Shareholders:

It is my honor to present this report of Dimeco, Inc. for the third quarter of 2011.  As you peruse this report you will see numerous positives.  To begin, please note that the growth of your Company continues.  When compared to the same period last year, both deposits and loans have increased.  Total assets are now almost $570 million, a growth of 4%.

Performance has also increased nicely.  Net income, probably the most notable indicator of performance, is up a significant 15.6%.  With that comes a healthy uptick in shareholders’ equity of 8%, and an increase of almost of 4% in the shareholders’ equity to asset ratio.  Furthermore, the return on average assets of 1.00% is almost 15% greater than a year ago, and the return on average equity, at 10.45%, has grown by almost 8%.  With the continuation of dividend payments at the same level as last year, your investment return shows a dividend yield of 4.24%.  It is our hope that you find all of this information gratifying.

With that good news as a backdrop, our focus remains centered in realism.  While we are optimistic about the long term for our country’s recovery, the ongoing economic downturn in our country presents challenges every day.  Two of our area’s primary industries, construction and real estate activities, continue to struggle.  This situation has resulted in decreased cash flows for some customers creating a strain to meet their obligations in a timely manner.  As we experience this trend with some of our borrowers, and without seeing a national economic turnaround in the immediate future, our reaction is to be as prudent as possible. In accordance with our detailed analysis, the financial results reflect a significant increase in the provision for loan losses expense during the quarter.

As we, together with our customers, find our way through this troubled economy, we continue our pledge to plan, monitor, and act in manners that have your best interests in mind.  No matter what the economy, that pledge never waivers.  As always, your comments and questions are welcome.

Sincerely,

/s/ Gary C. Beilman

Gary C. Beilman

President and Chief Executive Officer