Dimeco (DIMC) 8-K Dimeco, Inc. Announces 2010 Final Quarter Earnings

Exhibit 99

NEWS RELEASE

TO BUSINESS EDITOR

DIMECO, INC. ANNOUNCES 2010 FINAL QUARTER EARNINGS

Dimeco, Inc. (Nasdaq DIMC), parent company of The Dime Bank, released unaudited financial results for the year 2010.

Dimeco’s results of operation for the fourth quarter of 2010 were represented by earnings per share of $1.00, a 25.0% increase over earnings in the third quarter of 2010 and 33.3% greater than the fourth quarter of 2009. Earnings per share for the year ended 2010 were $3.24, an increase of 16.1% over earnings for 2009. Net income for 2010 was $5,159,000, an increase of 17.2% over income reported for the year 2009. The most significant contributor to this growth was a decline in interest expense of $1,430,000, or 16.3% less than a year earlier. Net interest income for the year ended December 31, 2010 was $17,354,000, which was $1,587,000 or 10.1% greater than the previous year. At this level of income, the Company reported a return on average assets of .94% and a return on average equity of 10.43% for 2010. Dividends remained solid, amounting to $1.44 per share in 2010, producing a dividend yield of 3.99%.

The Company experienced growth in balance sheet categories during the year. Total assets grew $11,557,000 or 2.2% to end the year at $542,214,000. Contributing to this growth was an increase in the loan portfolio of $15,057,000 or 3.7%, ending the year at $425,069,000. During 2010 deposits increased $11,618,000 or 2.6%. Stockholders’ equity of $50,679,000 at December 31, 2010 represented an increase of 7.6% over a year earlier. Balance sheet growth was managed at lower levels than our historical average as part of a deliberate plan to increase profitability.

Gary C. Beilman, president and chief executive officer, stated “In the midst of continuing economic pressure, we were able to produce greater income than in 2009. Pricing initiatives that were made on both sides of the balance sheet earlier this year contributed to this increase in net income, and assisted in increasing the equity to asset ratio by over 5%. For shareholders, additional good news includes handsome increases in the book value and market value of the Company’s stock.”

Beilman continued, “While delivering this good news, we remain mindful of the challenges presented by the ongoing economic issues in our country. During the year, our loan losses were at a minimum, however, loan delinquency levels increased as some customers struggled with decreased cash flow. In recognition of these issues, we prudently raised our allowance for loan loss by over 23%. Nonperforming credits continue to be monitored as we work diligently with customers, in order to produce the best possible results for the Company.”

Dimeco, Inc. is the holding company of The Dime Bank, a full service financial institution serving Wayne and Pike counties in Pennsylvania and Sullivan County, New York. For more information on The Dime Bank, visit www.thedimebank.com.

Source: Dimeco, Inc. / January 20, 2011 / Deborah Unflat

DIMECO, INC.

CONSOLIDATED STATEMENT OF INCOME (unaudited)

(in thousands, except per share)	For the three months ended December 31,						For the year ended December 31,
	2010			2009			2010			2009
Interest Income
Interest and fees on loans	$	5,697		$	5,553		$	22,221		$	22,366
Investment securities:
Taxable		294			280			1,336			1,194
Exempt from federal income tax		281			247			1,049			938
Other		16			13			68			19
Total interest income		6,288			6,093			24,674			24,517
Interest Expense
Deposits		1,249			1,838			6,215			7,531
Short-term borrowings		29			21			142			122
Other borrowed funds		226			286			963			1,097
Total interest expense		1,504			2,145			7,320			8,750
Net Interest Income		4,784			3,948			17,354			15,767
Provision for loan losses		650			400			1,750			1,300
Net Interest Income After Provision for Loan Losses		4,134			3,548			15,604			14,467
Noninterest Income
Service charges on deposit accounts		297			381			1,292			1,497
Mortgage loans held for sale gains, net		183			140			354			601
Investment securities losses		(31	)		(93	)		(13	)		(142	)
Brokerage commissions		164			137			742			500
Earnings on bank-owned life insurance		105			104			423			408
Other income		270			332			1,262			1,094
Total noninterest income		988			1,001			4,060			3,958
Noninterest Expense
Salaries and employee benefits		1,620			1,531			6,667			6,303
Occupancy expense, net		275			264			1,117			1,087
Furniture and equipment expense		125			122			483			569
Professional fees		212			134			780			585
Data processing expense		186			192			713			664
FDIC insurance assessment		177			165			742			872
Other expense		545			536			2,345			2,391
Total noninterest expense		3,140			2,944			12,847			12,471
Income before income taxes		1,982			1,605			6,817			5,954
Income taxes		385			427			1,658			1,552
NET INCOME	$	1,597		$	1,178		$	5,159		$	4,402
Earnings per Share - basic	$	1.00		$	0.75		$	3.24		$	2.82
Earnings per Share - diluted	$	1.00		$	0.75		$	3.24		$	2.79
Average shares outstanding - basic		1,598,218			1,559,778			1,592,038			1,558,877
Average shares outstanding - diluted		1,599,933			1,580,263			1,593,035			1,580,002

DIMECO, INC.

CONSOLIDATED BALANCE SHEET (unaudited)

(in thousands)
December 31,	2010			2009
Assets
Cash and due from banks	$	5,831		$	3,991
Interest-bearing deposits in other banks		4,821			14,296
Federal funds sold		—			3,000
Total cash and cash equivalents		10,652			21,287
Investment securities available for sale		79,655			73,628
Loans (net of unearned income of $25 and $101)		425,069			410,012
Less allowance for loan losses		7,741			6,253
Net loans		417,328			403,759
Premises and equipment		10,572			10,965
Accrued interest receivable		1,888			1,842
Bank-owned life insurance		9,545			9,175
Other assets		12,574			10,001
TOTAL ASSETS	$	542,214		$	530,657
Liabilities
Deposits :
Noninterest-bearing		43,067		$	39,687
Interest-bearing		411,667			403,429
Total deposits		454,734			443,116
Short-term borrowings		13,006			10,974
Other borrowed funds		19,552			24,402
Accrued interest payable		679			1,080
Other liabilities		3,564			3,968
TOTAL LIABILITIES		491,535			483,540
Stockholders’ Equity
Common stock, $.50 par value; 5,000,000 shares authorized;
1,652,318 and 1,613,878 shares issued		826			807
Capital surplus		6,273			5,552
Retained earnings		45,177			42,318
Accumulated other comprehensive income		470			507
Treasury stock, at cost (54,100 shares)		(2,067	)		(2,067	)
TOTAL STOCKHOLDERS’ EQUITY		50,679			47,117
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	542,214		$	530,657

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

CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)

(amounts in thousands, except per share)	2010			2009			% Increase (decrease)
Performance for the year ended December 31,
Interest income	$	24,674		$	24,517			0.6	%
Interest expense	$	7,320		$	8,750			-16.3	%
Net interest income	$	17,354		$	15,767			10.1	%
Net income	$	5,159		$	4,402			17.2	%
Shareholders’ Value (per share)
Net income - basic	$	3.24		$	2.82			14.9	%
Net income - diluted	$	3.24		$	2.79			16.1	%
Dividends	$	1.44		$	1.44			—
Book value	$	31.71		$	30.21			5.0	%
Market value	$	36.10		$	33.00			9.4	%
Market value/book value ratio		113.8	%		109.2	%		4.2	%
Price/earnings multiple		11.1	X		11.7	X		-5.1	%
Dividend yield		3.99	%		4.36	%		-8.5	%
Financial Ratios
Return on average assets		0.94	%		0.90	%		4.4	%
Return on average equity		10.43	%		9.58	%		8.9	%
Shareholders’ equity/asset ratio		9.35	%		8.88	%		5.3	%
Dividend payout ratio		44.44	%		51.06	%		-13.0	%
Nonperforming assets/total assets		3.40	%		1.90	%		78.9	%
Allowance for loan loss as a % of loans		1.82	%		1.53	%		19.0	%
Net charge-offs/average loans		0.06	%		0.12	%		-50.0	%
Allowance for loan loss/nonaccrual loans		78.2	%		83.1	%		-5.9	%
Allowance for loan loss/non-performing loans		44.4	%		64.6	%		-31.3	%
Financial Position at December 31,
Assets	$	542,214		$	530,657			2.2	%
Loans	$	425,069		$	410,012			3.7	%
Deposits	$	454,734		$	443,116			2.6	%
Stockholders’ equity	$	50,679		$	47,117			7.6	%

January 2011

Dear Shareholders:

I am pleased to present this report of Dimeco, Inc. for the fourth quarter of 2010. In the midst of continuing economic pressure, we were able to close the year with net income of $5.2 million, an increase of 17% over the previous year. Pricing initiatives that were made on both sides of the balance sheet earlier this year contributed to these very positive results. These changes assisted in increasing the equity to asset ratio by over 5%.

Furthermore, stockholders’ equity grew by more than 7% with an impressive dividend yield of 3.99%. For shareholders, additional good news includes handsome increases in the book value and market value of your Company’s stock. The average return on equity was 10.43%, an increase of almost 9% from a year earlier.

While delivering this good news, we remain mindful of the challenges presented by the ongoing economic issues in our country. Fortunately, loan losses were at a minimum during the year as evidenced by our low net charge offs to average loans ratio. However, during the same period, loan delinquency levels increased as some commercial customers struggled with decreased cash flow and demand for their goods and services. All of these credits continue to be closely monitored and we are pursuing appropriate collection activities, including taking possession of associated collateral, as necessary for commercial loan delinquencies. In recognition of these issues, we prudently raised our allowance for loan losses by over 23% at December 31, 2010, with the allowance for loan loss as a percentage of total loans at 1.82%. Economic forecasting models indicate another year of a stalled economy and we will persist in closely scrutinizing credits as they show any quality deterioration. Our resolve is to work diligently with customers, with an eye toward producing the best results for the Company.

We truly appreciate your continued loyalty and investment and as always, we welcome your comments and questions.

Sincerely,

/s/ Gary C. Beilman

Gary C. Beilman

President and Chief Executive Officer