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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12

DIMECO, INC.
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(Name of Registrant as Specified in its Charter)

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(Name of Person Filing Proxy Statement, if other than Registrant)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11.
(1) Title of each class of securities to which the transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of the transaction:

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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form Schedule or Registration No.:
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(3) Filing Party:
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(4) Date Filed:
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[DIMECO LOGO]

March 22, 2006

Dear Stockholder:

On behalf of the Board of Directors and management of Dimeco, Inc. (the
"Company"), we cordially invite you to attend the Annual Meeting of Stockholders
to be held at the Operations Center of The Dime Bank located at 120 Sunrise
Avenue, Honesdale, Pennsylvania, on Thursday, April 27, 2006, at 2:00 p.m. local
time. The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Annual Meeting. During the Annual
Meeting, we will report on the operations of the Company. Directors and Officers
of the Company will be present to respond to any questions stockholders may
have.

You will be asked to elect three directors and to ratify the
appointment of S.R. Snodgrass, A.C. as the Company's independent accountants for
the fiscal year ending December 31, 2006. The Board of Directors has unanimously
approved each of these proposals and recommends that you vote FOR them.

Your vote is important, regardless of the number of shares you own and
regardless of whether you plan to attend the Annual Meeting. We encourage you to
read the enclosed proxy statement carefully and sign and return your enclosed
proxy card as promptly as possible because a failure to do so could cause a
delay in the Annual Meeting and additional expense to the Company. A
postage-paid return envelope is provided for your convenience. This will not
prevent you from voting in person, but it will assure that your vote will be
counted if you are unable to attend the Annual Meeting. If you do decide to
attend the Annual Meeting and feel for whatever reason that you want to change
your vote at that time, you will be able to do so. If you are planning to attend
the Annual Meeting, please let us know by marking the appropriate box on the
proxy card.

Sincerely,

/s/Gary C. Beilman

Gary C. Beilman
President and
Chief Executive Officer

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DIMECO, INC.
820 CHURCH STREET
HONESDALE, PENNSYLVANIA 18431
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 27, 2006
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Meeting")
of Dimeco, Inc. (the "Company"), will be held at the Operations Center of The
Dime Bank located at 120 Sunrise Avenue, Honesdale, Pennsylvania, on Thursday,
April 27, 2006, at 2:00 p.m., local time, for the following purposes:

1. To elect three directors of the Company; and
2. To ratify the appointment of S.R. Snodgrass, A.C. as independent
accountants of the Company for the fiscal year ending December 31,
2006;

all as set forth in the Proxy Statement accompanying this notice, and to
transact such other business as may properly come before the Meeting and any
adjournments. The Board of Directors is not aware of any other business to come
before the Meeting. Stockholders of record at the close of business on March 1,
2006 are the stockholders entitled to vote at the Meeting and any adjournments
thereof.

A copy of the Company's Annual Report for the year ended December 31,
2005 is enclosed.

YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU
OWN. WE ENCOURAGE YOU TO VOTE BY PROXY SO THAT YOUR SHARES WILL BE REPRESENTED
AND VOTED AT THE MEETING EVEN IF YOU CANNOT ATTEND. ALL STOCKHOLDERS OF RECORD
CAN VOTE BY WRITTEN PROXY CARD. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES
ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM
YOUR RECORD HOLDER TO VOTE IN PERSON AT THE MEETING.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ John F. Spall

John F. Spall
Secretary

Honesdale, Pennsylvania
March 22, 2006

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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
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PROXY STATEMENT
OF
DIMECO, INC.
820 CHURCH STREET
HONESDALE, PENNSYLVANIA 18431
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 27, 2006
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GENERAL
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This Proxy Statement is furnished to stockholders of Dimeco, Inc. (the
"Company") in connection with the solicitation of proxies by the Company's board
of directors (the "Board of Directors" or the "Board") to be used at the Annual
Meeting of Stockholders (the "Meeting") to be held on Thursday, April 27, 2006,
at 2:00 p.m., local time, and at any adjournments thereof. The 2005 Annual
Report to Stockholders, including financial statements for the fiscal year ended
December 31, 2005, accompanies this Notice of Annual Meeting of Stockholders and
this Proxy Statement, which are first being mailed to stockholders on or about
March 22, 2006.

All properly executed written proxies that are delivered pursuant to
this Proxy Statement will be voted on all matters that properly come before the
Meeting for a vote. If your signed proxy specifies instructions with respect to
matters being voted upon, your shares will be voted in accordance with your
instructions. If no instructions are specified, your shares will be voted (a)
FOR the election of three directors named in Proposal 1, (b) FOR the
ratification of independent public accountants in Proposal 2 and (c) in the
discretion of the proxy holders, as to any other matters that may properly come
before the Meeting. Other than the matters listed in the Notice of Annual
Meeting of Stockholders, the Board of Directors knows of no additional matters
that will be presented for consideration at the Meeting. Your proxy may be
revoked at any time prior to being voted by: (i) filing with the Corporate
Secretary of the Company (John F. Spall, 820 Church Street, Honesdale,
Pennsylvania 18431) written notice of such revocation, (ii) submitting a duly
executed proxy bearing a later date, or (iii) attending the Meeting and giving
the Secretary notice of your intention to vote in person. However, if you are a
stockholder whose shares are not registered in your own name, you will need
additional documentation from your recordholder to vote personally at the
Meeting.

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VOTING STOCK AND VOTE REQUIRED
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The Board of Directors has fixed the close of business on March 1, 2006
as the record date (the "Record Date") for the determination of stockholders who
are entitled to notice of, and to vote at, the Meeting. Each stockholder of
record on the Record Date is entitled to one vote for each share held. On the
Record Date, there were 1,522,994 shares of the Company's common stock, $.50 par
value (the "Common Stock"), outstanding.

The presence in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote is necessary to constitute a
quorum at the Meeting. With respect to any matter, any shares for which a broker
indicates on the proxy that it does not have discretionary authority as to such
shares to vote on such matter (the "Broker Non-Votes") will not be considered
present for purposes of determining whether a quorum is present. In the event
there are not sufficient votes for a quorum or to ratify any proposals at the
time of the Meeting, the Meeting may be adjourned in order to permit the further
solicitation of proxies.

As to the election of directors, the proxy being provided by the Board
enables a stockholder to vote "FOR" the election of the nominees as submitted as
Proposal 1, proposed by the Board, to "WITHHOLD AUTHORITY" from all such
nominees, or to vote "FOR EXCEPT" for one or more of the nominees being
proposed. Such directors shall be elected by a plurality of votes of the shares
present in person or represented by proxy at the Meeting and entitled to vote in
the election of directors.

As to the ratification of the independent accountants, which is
submitted as Proposal 2, a stockholder may either: (i) vote "FOR" the Proposal;
(ii) vote "AGAINST" the Proposal; or (iii) "ABSTAIN" with respect to the
Proposal. Unless otherwise required by our Articles of Incorporation or by law,
Proposal 2 and all other matters shall be determined by a majority of votes cast
affirmatively or negatively without regard to (a) Broker Non-Votes, or (b)
proxies marked "ABSTAIN" as to that matter.

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PRINCIPAL HOLDERS
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Persons and groups beneficially owning in excess of 5% of the Common
Stock are required to file certain reports regarding such ownership pursuant to
the Securities Exchange Act of 1934, as amended (the "1934 Act"). A person is
deemed the beneficial owner of shares of Common Stock if he or she has or shares
voting or investment power with respect to such shares or has the right to
acquire beneficial ownership of the shares at any time within 60 days from the
Record Date. Other than as noted below, management knows of no person or group
that owns more than 5% of the outstanding shares of Common Stock at the record
date.

NAME AND ADDRESS OF BENEFICIAL AMOUNT AND NATURE OF BENEFICIAL PERCENT OF SHARES OF COMMON STOCK
OWNER OWNERSHIP OUTSTANDING (%)

Henry M. Skier
820 Church Street
Honesdale, Pennsylvania 18431 87,065(1) 5.7

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(1) See "Proposal 1 - Election of Directors"

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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Section 16(a) of the 1934 Act requires the Company's directors and
executive officers and persons who own more than ten percent of a registered
class of the Company's equity securities, to file reports of beneficial
ownership and changes in beneficial ownership with the Securities and Exchange
Commission and to furnish the Company with copies of such reports. Based solely
on its review of the copies of such reports furnished by such persons during the
past fiscal year or with respect to the last fiscal year or written
representations from such persons that no annual reports of changes in
beneficial ownership were required, all of the filings by the Company's
directors and executive officers were made on a timely basis during the 2005
fiscal year. The Company is not aware of any beneficial owners of more than ten
percent of its Common Stock.

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PROPOSAL 1. ELECTION OF DIRECTORS
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The bylaws of the Company require that directors be divided into three
classes, as nearly equal in number as possible, each class to serve for a three
year period, with approximately one-third of the directors elected each year.
The Board of Directors currently consists of eight members, each of whom also
serves as a director of The Dime Bank (the "Bank"). Three directors will be
elected at the Meeting, each to serve for a three-year term or until his or her
successor has been elected and qualified.

Barbara J. Genzlinger, John S. Kiesendahl and John F. Spall (the
"Nominees") have been nominated by the Board of Directors to serve as directors.
The Nominees currently serve as directors of the Company.

The persons named as proxies on the enclosed proxy card intend to vote
for the election of the Nominees, unless the proxy card is marked to indicate
that such authorization is expressly withheld. Should any of the Nominees
withdraw or be unable to serve (which the Board of Directors does not expect) or
should any other vacancy occur in the Board of Directors, it is the intention of
the persons named in the enclosed proxy card to vote for the election of such
persons as may be recommended to the Board of Directors by the Nominating
Committee of the Board. If there are no substitute nominees, the size of the
Board of Directors may be reduced.

The following table sets forth information with respect to the
Nominees, the other sitting directors and the executive officers named in the
summary compensation table including for each their name, the positions held
with the Company, age, the year they first became a director of the Company or
the Bank, the expiration date of their current term as a director and the number
and percentage of shares of the Common Stock beneficially owned. Beneficial
ownership of executive officers and directors of the Company, as a group, is
also set forth under this caption.

SHARES OF
COMMON
YEAR FIRST CURRENT STOCK
ELECTED OR TERM TO BENEFICIALLY PERCENT
NAME AND TITLE AGE(1) APPOINTED(2) EXPIRE OWNED (1)(3) OWNED (%)
--------------------------------------------------------- --------- ------------- ---------- -----------------------

BOARD NOMINEES FOR TERMS TO EXPIRE IN 2009
Barbara J. Genzlinger 54 1998 2006 8,998 *
Director
John S. Kiesendahl 59 1993 2006 35,643 2.3
Director, Vice Chairman of the Board
John F. Spall 59 1999 2006 36,123 2.4
Director, Secretary

DIRECTORS CONTINUING IN OFFICE
William E. Schwarz 63 1993 2007 21,278 1.4
Director, Chairman of the Board
Henry M. Skier 65 1993 2007 87,065 5.7
Director
Gary C. Beilman 51 2005 2008 28,607 1.9
President, Chief Executive Officer and Director
Robert E. Genirs 70 1998 2008 13,628 *
Director
Thomas A. Peifer 63 1993 2008 27,308 1.8
Director

EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Maureen H. Beilman 50 - - 18,415 1.2
Chief Financial Officer, Treasurer, Asst. Secretary
Peter Bochnovich 44 - - 12,767 *
Vice President and Asst. Secretary of the Bank

Directors, nominees, named executive officers and
executive officers of the Company as a group (10 -- - - 289,832 18.1
persons)

(1) As of Record Date.
(2) Refers to the year the individual first became a director of the
Company.
(3) The share amounts include 6,428 shares for Messrs. Genirs, Peifer,
Skier and Ms. Genzlinger, 1,428 shares for Messrs. Kiesendahl and
Spall, 24,200 shares for Mr. Beilman, 5,928 shares for Mr. Schwarz,
13,600 shares for Ms. Beilman and 10,700 shares for Mr. Bochnovich that
may be acquired through the exercise of stock options within sixty days
of the Record Date under the stock option plans.
* Less than 1% of Common Stock outstanding.

BIOGRAPHICAL INFORMATION

Set forth below is certain information with respect to the directors,
including the director nominee and executive officers of the Company. All
directors and executive officers have held their present positions for five
years unless otherwise stated.

NOMINEES FOR DIRECTOR:

BARBARA J. GENZLINGER is Secretary/Treasurer of The Settlers Inn, a
country inn located in Hawley, Pennsylvania, and President of Sayre Mansion,
LLC, a country inn located in Bethlehem, Pennsylvania.

JOHN S. KIESENDAHL is the President and Chief Executive Officer of
Woodloch Pines Inc., a resort located in Hawley, Pennsylvania.

JOHN F. SPALL is an attorney, practicing in Hawley, Pennsylvania.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE ABOVE
NOMINEES FOR DIRECTOR.

CONTINUING DIRECTORS:

WILLIAM E. SCHWARZ is President of Edward J. Schwarz, Inc., an
automobile dealership, located in Honesdale, Pennsylvania.

HENRY M. SKIER is President of A.M. Skier, Inc., an insurance agency,
located in Hawley, Pennsylvania.

GARY C. BEILMAN is the President and Chief Executive Officer of the
Company and Bank. Mr. Beilman was appointed President and Director on January 1,
2005. He was previously appointed Chief Executive Officer on January 1, 2002.
Prior to January 2002, Mr. Beilman served the Company and Bank in various
capacities. Mr. Beilman is the brother-in-law of Maureen H. Beilman.

ROBERT E. GENIRS is retired. Prior to his retirement in 1998, Mr.
Genirs was the Chief Administrative Officer for Lehman Brothers where he
previously served as Chief Financial Officer and Controller.

THOMAS A. PEIFER is retired. Prior to his retirement in 2001, Mr.
Peifer was Superintendent of the Wallenpaupack Area School District, in Hawley,
Pennsylvania. He is the President of Metlag, Inc., a franchised retail Agway
store.

EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS:

MAUREEN H. BEILMAN is the Chief Financial Officer, Treasurer and
Assistant Secretary of the Company and Chief Financial Officer and Treasurer of
the Bank. Ms. Beilman is the sister-in-law of Gary C. Beilman.

PETER BOCHNOVICH is a Vice President and Assistant Secretary of the
Bank. He has been employed by the Bank since 2001 and has served as the Senior
Lending Officer since that date. Prior to his employment at the Bank, he was a
commercial lending officer of a local financial institution, having worked in
the financial services industry since 1985.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors conducts its business through meetings of the
Board of Directors and through the Bank's committees. During the fiscal year
ended December 31, 2005, the Board of Directors of the Company held 14 regular
meetings and no special meetings and the Board of Directors of the Bank held 25
meetings, including regularly scheduled and special meetings. During the fiscal
year ended December 31, 2005, no directors attended fewer than 75% of the total
meetings of the Board of Directors and committees on which they served.

The Board of Directors encourages directors to attend the Annual
Meeting of Stockholders but does not have a formal policy in that regard. All
directors attended the 2005 annual meeting. Stockholders who wish to communicate
with the Board of Directors should send their communications to the Secretary at
the Company's main office, 820 Church Street, Honesdale, Pennsylvania 18431.

The outside directors act as the Nominating Committee for the selection
of management's nominees for directors. The Company believes that the outside
directors would qualify as independent under the rules of The Nasdaq Stock
Market. The outside directors met once as a Nominating Committee during the
fiscal year ended December 31, 2005. The Company has not adopted a charter for
the Nominating Committee.

The Nominating Committee will consider candidates recommended by
stockholders. With respect to each individual vacancy, the Nominating Committee
intends to determine the specific qualifications and skills required to fill
that vacancy and to complement the existing qualifications and skills of the
other Board members. Nominations to the Board of Directors made by stockholders
must be made in writing to the Secretary and received by the Company not less
than 60 days prior to the anniversary date of the immediately preceding Annual
Meeting of Stockholders of the Company. Notice to the Company of such
nominations must include certain information required pursuant to the Company's
bylaws and the proposed nominee must fulfill the existing eligibility standards.

The Compensation Committee is comprised of Directors Genirs, Kiesendahl
and Skier, each of whom would be considered independent under the rules of The
Nasdaq Stock Market. The Committee met three times during the 2005 fiscal year.

The Audit Committee was comprised of all directors except Mr. Beilman.
The Audit Committee is a standing committee that is responsible for developing
and maintaining the Company's and the Bank's audit program. Robert E. Genirs is
the Audit Committee "financial expert" as that term is defined in Item 401(h) of
Regulation S-K. Mr. Genirs is an independent director. While the rules of The
Nasdaq Stock Market are not applicable to the Company, the Company believes that
all members of the Audit Committee would qualify as independent directors under
such rules. The Committee also meets with the independent accountants to discuss
the results of the annual audit and any related matters. The Committee met seven
times in fiscal year 2005. The Board of Directors has adopted a written audit
committee charter for the Audit Committee, a copy of which is attached as an
appendix to this Proxy Statement.

AUDIT COMMITTEE REPORT

REVIEW OF AUDITED FINANCIAL STATEMENTS WITH MANAGEMENT

The Audit Committee reviewed and discussed the audited financial
statement for the year ended December 31, 2005 with the management of the
Company.

REVIEW OF FINANCIAL STATEMENTS AND OTHER MATTERS WITH INDEPENDENT
ACCOUNTANTS

The Audit Committee discussed with S.R. Snodgrass, A.C. ("Snodgrass")
the Company's independent accountants, the matters required to be discussed by
the Statement on Auditing Standards No. 61 (Communications with Audit
Committees), as may be modified or supplemented. The Audit Committee has
received the written disclosures and the letter from Snodgrass required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), as may be modified or supplemented, and has discussed with
Snodgrass its independence. The Audit Committee considered whether the provision
of the non-audit services listed under "All Other Fees" below was compatible
with maintaining Snodgrass' independence.

RECOMMENDATION THAT FINANCIAL STATEMENTS BE INCLUDED IN THE ANNUAL REPORT

Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2005, for filing with the Securities and Exchange Commission.

AUDIT COMMITTEE:
Robert E. Genirs - Chairman
William E. Schwarz
Barbara J. Genzlinger
John S. Kiesendahl
Thomas A. Peifer
Henry M. Skier
John F. Spall

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DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
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DIRECTOR COMPENSATION

For the year ended December 31, 2005, each non-employee director
received board fees of $15,000, regardless of attendance. There are no fees paid
in connection with attendance of committee meetings. For the fiscal year ended
December 31, 2005, board fees totaled $105,000. Directors fees are paid by the
Bank; there are no additional fees paid by the Company. In addition, on December
15, 2005 each outside director was granted 1,428 options to purchase stock at a
price of $34.00 per share.

EXECUTIVE COMPENSATION

The Company has no full time employees, but relies on the employees of
the Bank for the limited services required by the Company. All compensation paid
to officers and employees is paid by the Bank.

SUMMARY COMPENSATION TABLE

The following table sets forth the compensation awarded to or earned by
the Company's President and Chief Executive Officer for the three years ended
December 31, 2005. In addition, other executive officers of either the Bank or
the Company whose combined salary and bonus for the past fiscal year exceeded
$100,000 for services rendered in all capacities to the Bank or the Company are
presented along with their earned compensation over the past three fiscal years.

Long-Term
Annual Compensation Compensation Awards
------------------------------------------------
Securities
Fiscal Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Options(1) Compensation ($)
- -------------------------------------------------------------------------------------------------------------------

Gary C. Beilman 2005 148,000 25,000 4,200 21,458 (2)
President, Chief Executive 2004 139,000 10,000 -- 19,239
Officer and Director 2003 130,000 15,000 -- 19,825

Maureen H. Beilman 2005 93,000 16,000 2,200 16,180 (3)
Chief Financial Officer, 2004 88,000 8,000 -- 14,418
Treasurer and Assistant 2003 81,827 8,500 -- 14,815
Secretary

Peter Bochnovich 2005 90,000 13,000 3,700 13,212 (4)
Vice President and Assistant 2004 85,000 7,750 -- 9,639
Secretary of The Dime Bank 2003 75,481 8,500 -- 6,793

(1) See"-- Stock Option Awards"
(2) Includes a salary continuation plan contribution of $9,478, a matching
401(k) contribution by the Bank of $5,920, an additional profitsharing
contribution by the Bank of $5,920 and $140 tax payment in relation to the
deferred compensation plan.
(3) Includes a salary continuation plan contribution of $8,613, a matching
401(k) contribution by the Bank of $3,720, an additional profit sharing
contribution by the Bank of $3,720 and $127 tax payment in relation to the
deferred compensation plan.
(4) Includes a salary continuation plan contribution of $5,925, a matching
401(k) contribution by the Bank of $3,600, an additional profit sharing
contribution by the Bank of $3,600 and $87 tax payment in relation to the
deferred compensation plan.

STOCK OPTION AWARDS

The following table sets forth information with respect to stock
options granted to the named executive officers in the last fiscal year. The
Company did not grant any stock appreciation rights in the past fiscal year.

OPTION GRANTS IN LAST FISCAL YEAR
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POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM (1)
- ---------------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN FISCAL BASE PRICE EXPIRATION
NAME GRANTED (#) YEAR ($/SH) DATE (1) 5% ($) 10% ($)
- ---------------------------------------------------------------------------------------------------------------

Gary C. Beilman 4,200 19.09% 35.95 9/22/2015 94,937 240,639

Maureen H. Beilman 2,200 10.00% 35.95 9/22/2015 49,739 126,049

Peter Bochnovich 3,700 16.82% 35.95 9/22/2015 83,652 211,992

(1) Calculation of the potential realizable dollar value of grant calculated by
multiplying the number of securities underlying options granted by the
quantity of the future value of the underlying shares at the given column's
assumed annual interest rate of appreciation through the expiration date
less the exercise price.

(2) Options for 200 shares became exercisable on October 18, 2005 and the
remainder became exercisable on December 1, 2005. All such options are
incentive stock options.

The following table sets forth information with respect to previously
awarded stock options to purchase the Common Stock granted to the named
executive officers and held as of December 31, 2005. The Company has not granted
any stock appreciation rights.

Aggregated Option Exercises in Last Fiscal Year, and FY-End Option Values
- -------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Options at FY-End (#) Options at FY-End
-------------------------------------------------------
Shares Acquired Value
Name on Exercise (#) Realized Exercisable/Unexercisable Exercisable/Unexercisable(2)
- -------------------------------------------------------------------------------------------------------------------

Gary C. Beilman -- $ -- 20,000/-- $410,000/-- (3)
4,200/--
Maureen H. Beilman 275 $ 6,806 (2) 11,725/-- $240,363/-- (3)
2,200/--
Peter Bochnovich -- $ -- 3,000/-- $ 51,750/-- (4)
4,000/-- $ 49,800/-- (5)
3,700/--

(1) Options are considered in-the-money if the fair market value of the
underlying securities exceeds the exercise price of the option.
(2) Based upon the difference between the exercise price of $13.25 per share
and the estimated fair market value of the Common Stock on the dates of
exercise.
(3) Based upon the difference between the exercise price of $13.25 per share
and the estimated fair market value of $33.75 per share at December 31,
2005.
(4) Based upon the difference between the exercise price of $16.50 per share
and the estimated fair market value of $33.75 per share at December 31,
2005.
(5) Based upon the difference between the exercise price of $21.30 per share
and the estimated fair market value of $33.75 per share at December 31,
2005.

OTHER BENEFITS

SALARY CONTINUATION PLAN

The Bank entered into non-qualified salary continuation agreements
with Messrs. Beilman and Bochnovich and Ms. Beilman. If such officers continue
to serve as officers of the Bank until they become 65 years old, the Bank agrees
to pay the officer 120 guaranteed consecutive monthly payments of $4,166.67
commencing on the first day of the month following the officer's 65th birthday.
If such officers attain age 65, but die before receiving all of the guaranteed
monthly payments, or die before age 65 while serving as an officer, then the
Bank will make the remaining payments to that officer's designated beneficiary
or to the representative of his or her estate. For the year ended December 31,
2005, Messrs. Beilman and Bochnovich and Ms. Beilman had accrued salary
continuation plan benefits of approximately $70,740, $8,722 and $64,281,
respectively, and such benefits were fully vested.

CHANGE-IN-CONTROL SEVERANCE AGREEMENTS

The Bank has entered into change-in-control severance agreements with
Messrs. Beilman and Bochnovich and Ms. Beilman. The severance agreements have
terms of three years, renewable annually thereafter, and severance protection
upon a termination of employment up to two years following a change in control
of the Bank, with such payment equal to three (3) times the executive's average
annual compensation for the five most recent taxable years that the executive
has been employed by the Bank or lesser number of years in the event that
executive shall have been employed by the Bank for less than five years. In the
event of a change of control at December 31, 2005, Messrs. Beilman and
Bochnovich and Ms. Beilman would have been entitled to lump sum payments of
approximately $467,662, $289,990 and $315,215, respectively. These agreements
also include a provision to continue all benefit coverages provided under the
Bank's (or its successor's) employee benefit and welfare plans and programs up
to thirty-six (36) months following the termination of employment date.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee consists only of independent directors. The
Compensation Committee, at the direction of the Board of Directors, has prepared
the following report for inclusion in this Proxy Statement.

The Compensation Committee is responsible for conducting periodic
reviews of the executive compensation of senior executives, including the Chief
Executive Officer ("CEO"). The Compensation Committee determines salary levels
for senior executives and amounts of cash bonuses to be distributed to those
individuals, if and as appropriate.

This report is submitted by the Compensation Committee to the Board of
Directors of the Company to summarize the Compensation Committee's involvement
in the compensation decisions and policies adopted by the Bank and the Company
for executive officers generally, and for the President and CEO, Gary C.
Beilman, in particular, during 2005.

GENERAL POLICY

The executive compensation practices of the Company and the Bank are
designed to reward and provide an incentive for executives, based on the
achievement of corporate and individual goals. Compensation levels for
executives are established after considering measures that include, but are not
limited to, financial performance of the Company and competitive labor market
conditions. Furthermore, qualitative factors such as overall job performance,
leadership, teamwork, and community involvement are considered in compensation
deliberations. The Compensation Committee utilized publicly available
information to gather information related to compensation practices for
executive officers of financial services companies with assets of between $300
million and $500 million located in Pennsylvania. The Compensation Committee has
complete access to all necessary Company personnel records, financial reports
and other data.

COMPONENTS OF COMPENSATION

In evaluating executive compensation, the Compensation Committee
concentrates on three fundamental components: salary, incentive bonus
compensation and retirement income opportunity.

Salary levels for senior executives are reviewed by the Compensation
Committee on an annual basis. The levels reflect an individual's job
responsibilities, experience and performance and the Compensation Committee's
analysis of competitive marketplace conditions.

In the past, incentive bonuses have been used to provide cash
distributions to executives, depending upon a variety of factors relating to
Company and Bank performance and individual performance. Although the
Compensation Committee's decisions are discretionary and no specific individual
goals were set, the general factors that were used to determine bonuses were the
individual's contribution to the Company's and the Bank's success since the
executive's last evaluation and the demonstrated capacity to adapt to meet the
future needs of each. No particular weightings of these factors were used to
calculated bonuses.

COMPENSATION OF CHIEF EXECUTIVE OFFICER

After reviewing the Company's 2005 results, as well as his individual
contributions, the Compensation Committee concluded that the CEO, Mr. Beilman,
performed with exceptional skill and diligence in 2005. The Company generated
earnings and business growth in accordance with the Company's budget and
operating plans, and Mr. Beilman deserves a large measure of the credit for this
leadership role in the Company's accomplishments. Finally, the Compensation
Committee believes that Mr. Beilman has made significant contributions to the
ongoing success of the Company and the Bank, and continues to set the stage for
their continued success.

Accordingly, Mr. Beilman's salary was increased from $148,000 to
$160,000 for 2006 and he was awarded a bonus of $25,000 in 2006 (for 2005).

THE COMPENSATION COMMITTEE:
Robert E. Genirs
John S. Kiesendahl
Henry M. Skier

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee consists of Directors Genirs, Kiesendahl and
Skier. No member of the Compensation Committee was an officer or employee of the
Company or its subsidiaries during the last fiscal year or formerly an officer
of the Company or its subsidiaries. No member of the Compensation Committee is,
or was during 2005, an executive officer of another company on whose board of
directors or on whose compensation committee one of the Company's executive
officers serves. No member of the Board of Directors was an executive officer of
a company on whose board or compensation committee an executive officer of the
Company served.

- --------------------------------------------------------------------------------
STOCK PERFORMANCE GRAPH
- --------------------------------------------------------------------------------

Set forth below is a stock performance graph comparing the cumulative
total shareholder return on the Common Stock with (a) the cumulative total
return on stocks included in The Nasdaq Stock Market index and (b) the
cumulative total return on stocks included in the Nasdaq Bank index, as prepared
for Nasdaq by the Center for Research in Securities Prices ("CRSP") at the
University of Chicago. All three investment comparisons assume the investment of
$100 at the market close on December 31, 2000 and the reinvestment of dividends
paid. The graph provides comparison at December 31, 2000 and each fiscal year
through December 31, 2005.

COMPARISON OF CUMULATIVE TOTAL RETURN

[Line graph appears here showing 5-year cumulative total return on $100 invested
in the Common Stock compared to cumulative total returns on $100 invested in the
Nasdaq Bank Index and Nasdaq Index, respectively. Line graph starts at December
31, 2000 and shows the cumulative total returns at December 31, 2001, 2002,
2003, 2004 and 2005. Plot points are shown below]

HISTORICAL TOTAL RETURN VALUES
- ------------------------------------------------------------------------------------------------------------------
INDEX 12/31/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004 12/31/2005
- ------------------------------------------------------------------------------------------------------------------

DIMECO, INC. 100.00 140.41 167.10 351.88 280.28 277.77
NASDAQ STOCK MARKET (US 100.00 79.30 54.80 82.00 89.20 91.10
COMPANIES)
NASDAQ BANK INDEX 100.00 108.30 110.80 142.60 163.20 159.40
- ------------------------------------------------------------------------------------------------------------------

There can be no assurance that the Company's future stock performance
will be the same or similar to the historical performance shown in the above
graph. The Company neither makes nor endorses any predictions as to stock
performance.

- --------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------

The Bank, like many financial institutions, has followed a policy of
granting various types of loans to officers, directors and employees. The loans
have been made in the ordinary course of business and on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with the Bank's other customers, and do not involve
more than the normal risk of collectibility, or present other unfavorable
features.

- --------------------------------------------------------------------------------
PROPOSAL 2. RATIFICATION OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

Snodgrass was the Company's independent public accountants for the 2005
fiscal year. The Board of Directors has appointed Snodgrass to be its
accountants for the fiscal year ending December 31, 2006 and is seeking
ratification by the Company's stockholders of such appointment. A representative
of Snodgrass is expected to be available at the Meeting to respond to
stockholders' questions and will have the opportunity to make a statement if the
representative so desires.

Fees paid to Snodgrass for the last two fiscal years were as follows:

2005 ($) 2004 ($)
-------- --------

Audit Fees(1)........................ 70,033 65,290
Audit-Related Fees(2) ................ - 4,277
Tax Fees(3)........................... 16,439 11,675
All Other Fees(4)..................... 27,365 23,805

(1) Audit fees consist of fees for professional services rendered for
the audit of the Company's financial statements and review of
financial statements included in the Company's quarterly reports
and services normally provided by Snodgrass in connection with
statutory and regulatory filings or engagements.
(2) Audit-related fees consisted principally of attestation services
related to agreed upon procedures related to Trust Department
services.
(3) Tax fees consist of compliance fees for the preparation of state
and federal tax returns and consultation on depreciation methods.
(4) All other fees are primarily made up of consulting services for
compliance and other consulting fees for information technology in
2005 and for outsourced regulatory compliance reviews in 2004.

The Audit Committee approves all non-audit work performed by Snodgrass
in advance and has not adopted any pre-approval policies and procedures.

Ratification of the appointment of the accountants requires the
affirmative vote of a majority of the votes cast by the stockholders of the
Company at the meeting. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF SNODGRASS AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE 2006 FISCAL YEAR.

- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------

In order to be considered for inclusion in the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held in 2007, all
stockholder proposals must be submitted to the Secretary at the Company's
office, 820 Church Street, Honesdale, Pennsylvania 18431, on or before November
23, 2006. In order to be considered for possible action by stockholders at the
2007 annual meeting of stockholders, stockholder nominations for director and
stockholder proposals not included in the Company's proxy statement must be
submitted to the Secretary of the Company, at the address set forth above, no
later than February 27, 2007.

- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------

The cost of soliciting proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by e-mail or telephone without additional compensation.

- --------------------------------------------------------------------------------
FORM 10-K
- --------------------------------------------------------------------------------

A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2005 WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE
RECORD DATE UPON WRITTEN REQUEST TO MAUREEN H. BEILMAN, DIMECO, INC., P O BOX
509, HONESDALE, PENNSYLVANIA 18431.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ John F. Spall

John F. Spall
Secretary

Honesdale, Pennsylvania
March 22, 2006

APPENDIX A

THE DIME BANK and DIMECO, INC.
AUDIT COMMITTEE CHARTER

COMMITTEE RESPONSIBILITIES

The Audit Committee of the Board of Directors of The Dime Bank and Dimeco, Inc.
(the "Company") shall be a standing committee and is responsible for oversight
of the Company's financial reporting and internal controls. The Audit Committee
(the "Committee") reports to the Board of Directors (the "Board") and its
primary function is to assist the Board in fulfilling its responsibility to
shareholders related to financial accounting and reporting, the system of
internal controls established by management and the adequacy of auditing
relative to these activities. The Committee is granted the authority to
investigate any activity of the Company and it is empowered to retain persons
having special competence as necessary to assist the Committee in fulfilling its
responsibilities.

The Committee shall:

o Provide for an open avenue of communications between the independent
accountants and the Board and, at least one (1) time annually, meet
with the independent accountants in private session.
o Facilitate open communication among the internal auditors, the
independent accountants and the Board. o Review internal audits, the
annual external audit and any other financial statements, regulatory
and/or legal matters or reports as deemed necessary.
o Review the qualifications and evaluate the performance of the
independent accountants and make recommendations to the Board
regarding the selection, appointment or termination of the independent
accountants. The independent accountants shall be ultimately
accountable to the Board and the Committee, as representatives of
shareholders.
o Receive on an annual basis a written statement from the independent
accountants detailing all relationships between the independent
accountants and the Company consistent with requirements of the
Independence Standards Board Standard 1, as may be modified or
supplemented. The Committee shall actively engage in a dialogue with
the independent accountants with respect to any disclosed
relationships or services that may impact objectivity and independence
of the independent accountants, and take, or recommend, that the full
Board take appropriate action to oversee the independence of the
independent accountants.
o Review and approve the independent accountants' annual engagement
letter.
o Review with the independent accountants (1) the proposed scope of
their examination with emphasis on accounting and financial areas
where the Committee, the independent accountants or management believe
special attention should be directed, (2) results of their audit, (3)
their evaluation of the adequacy of the system of internal controls,
(4) significant disputes, if any, with management and (5) cooperation
received from management in the conduct of the audit.
o Review significant accounting, reporting, regulatory or industry
developments affecting the Company.
o Review interim results with the Company's financial officer and the
independent accountants prior to the public announcement of financial
results and the filing of the Form 10-Q.
o Discuss with management and the independent accountants, any issues
regarding significant risks or exposures and assess the steps
management has taken to minimize such risk.
o Discuss with the independent accountants SAS 61 matters, as may be,
modified or supplemented.
o Make a recommendation to the Board as to whether the financial
statements should be included in the Company's Annual Report on Form
10-K.
o Approve the report of Audit Committee to be included in the Company's
Proxy Statement for its Annual Meeting of Shareholders.
o Perform such other functions as assigned by law, the Company's bylaws
or as the Board deems necessary and appropriate.

A-1

COMMITTEE MEMBERSHIP

The membership of the Committee shall be:

o appointed by the Board
o comprised of independent directors as defined by the applicable
regulatory authorities, and
o consist of at least three members.

At least one member of the Audit Committee must have past employment experience
in finance or accounting, requisite professional certification in accounting or
other comparable experience or background.

COMMITTEE MEETINGS

Meeting will be held as required, but no less than four (4) times a year.
Minutes will be recorded and reports of committee meetings will be presented at
the next Board meeting.

COMMITTEE CHARTER REVIEW AND APPROVAL

This Audit Committee Charter shall be reviewed, reassessed and approved by the
Board annually and shall be included in the proxy at least every three years.

Last Board Approval: December 15, 2005

A-2

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ANNUAL MEETING OF STOCKHOLDERS
APRIL 27, 2006
- --------------------------------------------------------------------------------

The undersigned hereby appoints the Board of Directors of Dimeco, Inc.
(the "Company"), or its designee, with full powers of substitution, to act as
attorneys and proxies for the undersigned, to vote all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Annual Meeting of
Stockholders (the "Meeting"), to be held at the Operations Center of The Dime
Bank located at 120 Sunrise Avenue, Honesdale, Pennsylvania on Thursday, April
27, 2006, at 2:00 p.m., local time, and at any and all adjournments thereof, in
the following manner:

FOR
FOR WITHHELD EXCEPT
--- -------- ------

1. The election as directors of the nominees
listed below for a three-year term: [_] [_] [_]

Barbara J. Genzlinger
John S. Kiesendahl
John F. Spall

INSTRUCTIONS: To withhold your vote for any individual nominee, mark
"FOR EXCEPT" and insert the nominee's name on the line provided below.

-----------------------------------------------------------------------------

FOR AGAINST ABSTAIN
--- ------- -------
2. The ratification of the appointment of [_] [_] [_]
S.R. Snodgrass, A.C. as independent
public accountants of the Company
for the fiscal year ending
December 31, 2006.

In their discretion, such attorneys and proxies are authorized to vote upon such
other business as may properly come before the Meeting or any adjournments
thereof.

The Board of Directors recommends a vote "FOR" each of the above listed
propositions. ---

THIS SIGNED PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS SIGNED PROXY WILL BE VOTED FOR EACH OF THE NOMINEES AND FOR THE
PROPOSITION STATED. IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS
SIGNED PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT.
AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
PRESENTED AT THE MEETING.

PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE MEETING. |_|

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

Please be sure to sign and date this Proxy in the box below.
_____________________
| |
|Date |
________________________________________|___________________|
| |
| |
|___________________________________________________________|
Stocholder sign above Co-holder (if any) sign above

Should the undersigned be present and elect to vote at the Meeting, or at
any adjournments thereof, and after notification to the Secretary of the Company
at the Meeting of the stockholder's s decision to terminate this Proxy, the
power of said attorneys and proxies shall be deemed terminated and of no further
force and effect. The undersigned may also revoke this Proxy by filing a
subsequently dated Proxy or by written notification to the Secretary of the
Company of his or her decision to terminate this Proxy.

The undersigned acknowledges receipt from the Company prior to the
execution of this Proxy of a Notice of Annual Meeting of Shareholders, a Proxy
Statement dated March 22, 2006, and the 2005 Annual Report.

Please sign exactly as your name appears on this Proxy. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.

PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.

IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.

__________________________________