Dimeco (DIMC) 8-K Dimeco, Inc. Announces 2006 Final Quarter Earnings

Exhibit 99

NEWS RELEASE

TO BUSINESS EDITOR

DIMECO, INC. ANNOUNCES 2006 FINAL QUARTER EARNINGS

Dimeco, Inc. (Nasdaq DIMC), parent company of The Dime Bank, released unaudited financial results for the year 2006. The Company continued to experience robust growth in all categories during the year ended December 31, 2006. Comparing 2006 to 2005, total assets increased $45,373,000 or 12.7% to $403,577,000 including growth of $21,729,000 or 7.7% in total loans. Funding this growth was an increase of $43,261,000 or 14.7% in deposits during the period.

Stockholders’ equity increased 13.0% during the year, with a balance of $35,337,000 at December 31, 2006. Dimeco’s earnings for 2006 were $5,585,000, an increase of 25.4% over the $4,455,000 reported for the year 2005. The increase in net interest income of $2,084,000 or 15.9%, during the year 2006 versus the year 2005, was the primary source of this growth. Dividends declared in the fourth quarter of $.29 per share in 2006 represented an increase of 11.5% over the previous year.

Credit quality remains high, as can be seen in the ratios of allowance for loan loss to total loans of 1.46%, the allowance to nonaccrual loans of 1,049.1% and nonperforming assets to total assets of only .18%.

Gary C. Beilman, President and Chief Executive Officer, stated, “It is with sheer excitement that I report Dimeco’s fourth quarter results. Deposits, loans, and total assets have all increased handsomely, and for the first period ever, we have surpassed the $400 million mark in size. Net income increased over 25% from that of 2005. This performance becomes most evident in the return on average equity of 16.80%, and the return on average assets of 1.50%, both of which I believe will position us as a high performer within our peer group. Our credit quality remains excellent, as we focus our growth on sound principals. I am thankful for the support of our shareholders, customers, staff and the community.”

Dimeco, Inc. is the holding company of The Dime Bank, serving 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 and Trust and Investment Services. For more information on The Dime Bank, visit www.thedimebank.com

Source: Dimeco, Inc./ January 19, 2006

Contact: Deborah Unflat, Assistant Vice President Marketing

January 2007

Dear Shareholders:

It is with sheer excitement that I enclose your Dimeco, Inc. dividend check or reinvestment statement for the fourth quarter of 2006. This report contains excellent news. To begin, you will see that deposits, loans, and total assets have all increased handsomely, and for the first period ever, your company has surpassed the $400 million mark in size.

Net income increased over 25% from that of 2005. This performance becomes most evident in the return on average equity of 16.80% and the return on average assets of 1.50%, both of which we believe will position us as a high performer within our peer group. Credit quality ratios are excellent in each measurement as highlighted by the allowance for loan loss to nonperforming loans above 1000% and nonperforming assets to total assets of only .18%. Finally, with profitability of this magnitude, your dividends increased 11.5% in this fourth quarter.

I look forward to sending you our annual report in the near future. Therein you will find the complete business report of Dimeco, Inc. for the year 2006. We at Dimeco are committed to doing our part to make your investment show consistent performance and thank you for your continued support. As always, I welcome your questions and comments.

Sincerely,

Gary C. Beilman

President and CEO

DIMECO, INC

CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)

(amounts in thousands, except per share)	2006			2005			% Increase (decrease)
Performance for the year ended December 31,
Interest income	$	24,646		$	19,202		28.4	%
Interest expense	$	9,478		$	6,118		54.9	%
Net interest income	$	15,168		$	13,084		15.9	%
Net income	$	5,585		$	4,455		25.4	%
Shareholders’ Value (per share)
Net income - basic	$	3.67		$	2.89		27.0	%
Net income - diluted	$	3.55		$	2.80		26.8	%
Dividends - year to date	$	1.07		$	1.01		5.9	%
Dividends - this quarter	$	0.29		$	0.26		11.5	%
Book value	$	23.17		$	20.53		12.9	%
Market value	$	41.75		$	33.75		23.7	%
Market value/book value ratio		180.2	%		164.4	%	9.6	%
Price/earnings multiple		11.4	X		11.7	X	-2.6	%
Dividend yield		2.56	%		2.99	%	-14.4	%
Financial Ratios
Return on average assets		1.50	%		1.30	%	15.4	%
Return on average equity		16.80	%		14.53	%	15.6	%
Shareholders’ equity/asset ratio		8.76	%		8.73	%	0.3	%
Dividend payout ratio		29.16	%		34.95	%	-16.6	%
Nonperforming assets/total assets		0.18	%		0.22	%	-18.2	%
Allowance for loan loss as a % of loans		1.46	%		1.40	%	4.3	%
Net charge-offs/average loans		0.10	%		0.02	%	400.0	%
Allowance for loan loss/nonaccrual loans		1049.1	%		755.3	%	38.9	%
Allowance for loan loss/non-performing loans		624.2	%		493.5	%	26.5	%
Financial Position at December 31,
Assets	$	403,577		$	358,204		12.7	%
Loans	$	305,291		$	283,562		7.7	%
Deposits	$	338,117		$	294,856		14.7	%
Stockholders’ equity	$	35,337		$	31,260		13.0	%

DIMECO, INC.

CONSOLIDATED BALANCE SHEET (UNAUDITED)

(in thousands)
December 31,	2006			2005
Assets
Cash and due from banks	$	6,684		$	5,554
Interest-bearing deposits in other banks		2,287			33
Federal funds sold		10,000			2,890
Total cash and cash equivalents		18,971			8,477
Mortgage loans held for sale		—			211
Investment securities available for sale		67,266			54,129
Investment securities held to maturity (market value of $207)		—			199
Loans (net of unearned income of $777 and $734)		305,291			283,562
Less allowance for loan losses		4,469			3,973
Net loans		300,822			279,589
Premises and equipment		5,731			6,022
Accrued interest receivable		1,798			1,380
Bank-owned life insurance		5,892			5,254
Other assets		3,097			2,943
TOTAL ASSETS	$	403,577		$	358,204
Liabilities
Deposits:
Noninterest-bearing	$	34,172		$	36,619
Interest-bearing		303,945			258,237
Total deposits		338,117			294,856
Short-term borrowings		12,705			12,954
Other borrowed funds		13,763			16,548
Accrued interest payable		1,428			952
Other liabilities		2,227			1,634
TOTAL LIABILITIES		368,240			326,944
Stockholders’ Equity
Common stock, $.50 par value; 5,000,000 shares authorized; 1,568,024 and 1,552,669 shares issued		784			776
Capital surplus		4,775			4,445
Retained earnings		31,355			27,400
Accumulated other comprehensive income		(35	)		(299	)
Treasury stock, at cost (43,000 and 30,000 shares)		(1,542	)		(1,062	)
TOTAL STOCKHOLDERS’ EQUITY		35,337			31,260
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	403,577		$	358,204

This statement has not been reviewed or confirmed for accuracy or relevance by the FDIC.

DIMECO, INC.

CONSOLIDATED STATEMENT OF INCOME (unaudited)

(in thousands, except per share)	Three months ended December 31,				Year ended December 31,
	2006		2005		2006		2005
Interest Income
Interest and fees on loans	$	5,992	$	4,835	$	21,601	$	17,150
Investment securities:
Taxable		753		511		2,491		1,776
Exempt from federal income tax		63		41		223		151
Other		153		16		331		125
Total interest income		6,961		5,403		24,646		19,202
Interest Expense
Deposits		2,663		1,629		8,447		5,383
Short-term borrowings		87		56		371		207
Other borrowed funds		154		154		660		528
Total interest expense		2,904		1,839		9,478		6,118
Net Interest Income		4,057		3,564		15,168		13,084
Provision for loan losses		385		275		785		850
Net Interest Income After Provision for Loan Losses		3,672		3,289		14,383		12,234
Noninterest Income
Services charges on deposit accounts		396		346		1,495		1,298
Other income		479		388		1,661		1,503
Total noninterest income		875		734		3,156		2,801
Noninterest Expense
Salaries and employee benefits		1,346		1,206		5,272		4,520
Net occupancy and equipment expense		320		323		1,298		1,306
Other expense		615		668		2,771		2,672
Total noninterest expense		2,281		2,197		9,341		8,498
Income before income taxes		2,266		1,826		8,198		6,537
Income taxes		724		585		2,613		2,082
NET INCOME	$	1,542	$	1,241	$	5,585	$	4,455
Earnings per Share - basic	$	1.01	$	0.82	$	3.67	$	2.89
Earnings per Share - diluted	$	0.98	$	0.79	$	3.55	$	2.80
Average shares outstanding - basic		1,521,073		1,522,669		1,523,783		1,540,742
Average shares outstanding - diluted		1,574,918		1,571,481		1,573,775		1,592,067