Annual Report Financial Highlights

Dear Shareholders:

As we look back at 2020, we were all presented with personal and professional challenges that we never imagined. Not being able to physically celebrate, mourn, or council with family, friends and loved ones tested our will. As we enter 2021, let us do so with enthusiasm and hope.

Annually, our management team participates in business continuity training, an exercise that prepares us for a catastrophic event and requires management to develop alternative means of conducting business. This training prepared us well. I must compliment and thank the entire staff of the bank for their ability to adapt and their willingness to go above and beyond to keep the bank operating as smoothly as possible.

For several years, we invested in expanding our digital products and services, this too served us well during the pandemic. During the past year, the bank used the opportunity to educate our customers on our electronic services and digital banking platform. When our customers were unable to bank in person, they were able to meet their financial needs over the phone and through electronic products and solutions including Online Banking, Bill Pay and Mobile Banking. We will continue to invest in technology as a tool to supplement our high level of customer service. Additionally, to offer our customers the best service possible, a universal banker model was introduced in all branches during 2020. This model ensures that in most cases, customers can deal with one individual from start to finish to assist them with all their banking needs. We are excited about the enhanced experiences our customers will receive.

Turning to the financial performance of your company, at December 31, 2020, total assets stood at $883 million. This was an increase of $150 million or 20.5% over last year. Loan balances showed the largest growth to $645 million, a $92 million uptick. I am proud that we assisted customers not only with Payroll Protection Program (“PPP”) loans offered through the Small Business Administration, but also working with both individuals and businesses to offer help where needed. We originated almost 600 PPP loans during the second quarter of 2020 totaling $69.8 million. We continue to assist with PPP loans by processing forgiveness for 127 customers totaling $11.7 million. For the remaining $58.1 million at 12/31/2020, we look towards helping these customers with the forgiveness process as well. Loan demand in commercial real estate and construction remained strong throughout the year contributing the remaining $33.9 million in growth. Competition for quality credits is ongoing and we continue to use prudent lending practices when originating loans.

Our investment portfolio of $169 million grew $41 million or 32.1% over last year. Excess cash from government stimulus programs and higher deposit balances along with borrowings at low rates were deployed to purchase bonds that fit within our guidelines. This strategy allowed us to improve our interest income for 2020 and will help position us for the future as interest rates are projected to remain low for several years.

Management continued to work diligently throughout the year on reducing other real estate owned. We sold eight properties in 2020, decreasing the balance over $4 million or 94.8% from the previous year. Our focus remains on helping those customers with credit problems to reach mutually agreeable workouts.

We experienced growth in both non-interest-bearing and interest-bearing deposits except for Certificates of Deposit (“CD”). Deposit balances ended the year at $686 million, an increase of $106 million or 18.3% over the previous year. As rates are at all-time lows, many customers chose to move their CD balances into other accounts that provide liquidity. Other factors impacting this growth were reduced consumer spending as a result of pandemic restrictions and government economic stimulus.

Borrowings from the Federal Home Loan Bank of Pittsburgh grew by $35 million or 63.9% over last year. Low borrowing rates allowed us to fund PPP and regular loan demand as well as add to our investment portfolio in an effort to increase our interest margin. Additionally, in the fourth quarter we paid off some longer-term borrowings at higher rates to position ourselves for lower interest expense in future years.

Net income for the year was $8.9 million, $122 thousand more than the previous year. This resulted in a return on average assets of 1.08% and return on average equity of 9.66%. Net interest income was higher than last year by 7%. Given the ongoing pandemic and the current economic conditions, we prudently added to the provision for loan losses expense ending the year at $3.5 million or 366.7% greater than 2019. Increased volume on residential mortgages provided gains on their sales, helping our non-interest income, while we kept our non-interest expenses in check with an overall decrease.

The Board of Directors voted to increase the dividend in the fourth quarter to $.34 per share which equates to $1.33 per share for the year. This amount is $.10 or 8.1% greater than the dividend paid for 2019. This equates to a dividend payout ratio of 37.57% which is an increase of 6.9% over 2019. Our Board remains committed to our shareholders, customers, staff and community.

As we worked through the pandemic of 2020, we noted some positives. The bank had twenty-eight employees observe anniversary milestones. These employees unselfishly donated the funds that would have been used for a celebratory dinner to local food pantries. We thank them and all our employees for their positive attitude, dedication and loyalty. Our employees continued to support our community whether through volunteering, making donations or buying local. I am proud to work with such generous people. Additionally, the bank in its commitment to be a good corporate citizen donated to local not-for-profit organizations as it did in the past. To assist with additional hardships created by the pandemic, a substantial donation was made to the Wayne County Community Foundation to benefit the local food pantry, supporting those most affected. This year, the bank also sponsored lunch to essential workers at Wayne Memorial Hospital to thank them for their courage and devotion.

I would be remiss not to mention the retirement of our longtime Chief Financial Officer, Maureen Beilman. Please join me in congratulating Maureen on her retirement. Maureen dedicated nearly 33 years of service to Dimeco, Inc. Her wisdom and commitment served your company well during her career. Thank you and best wishes, Maureen.

As we look to 2021, we have exciting news for our customers in the Greentown area. The bank is in the early stages of building a new branch which allows us to better position ourselves geographically. Our employees in Greentown are eager to service our customers using the universal banker model along with state-of-the-art technology. Construction of this new branch is to begin in the spring of 2021 with completion set for late summer/early fall.

Challenges provide opportunities. As we move forward, we look to build on the opportunities we were presented. During the past year we were able to develop new customer relationships and expand on existing ones. Our future success is dependent on our ability to provide the appropriate technology that may be required or expected. This along with our unwavering commitment and meaningful service position us to face new challenges and opportunities.

We thank you for your continued support and encourage you to recommend Dimeco, Inc. to family, friends, and colleagues.


Peter Bochnovich
President & Chief Executive Officer

Consolidated Financial Highlights 2020

Performance for the year ended December 31, 2020 2019 % Increase (decrease)
Interest income $33,950 $32,622 4.1%
Interest expense $5,071 $5,655 (10.3%)
Net interest income $28,879 $26,967 7.1%
Net income $8,856 $8,734 1.4%
Shareholders' Value (per share) 2020 2019 % Increase (decrease)
Net income - basic $3.54 $3.50 1.1%
Net income - diluted $3.52 $3.46 1.7%
Dividends $1.33 $1.23 8.1%
Book value $38.11 $34.90 9.2%
Market value $32.00 $42.10 (24.0%)
Market value/book value ratio 84.0% 120.6% (30.3%)
Price/earnings multiple 9.0X 12.0X (25.0%)
Dividend yield 4.16% 2.92% 42.5%
Financial Ratios 2020 2019 % Increase (decrease)
Return on average assets 1.08% 1.23% (12.2%)
Return on average equity 9.66% 10.38% (6.9%)
Efficiency ratio 59.99% 66.04% (9.2%)
Net interest margin 3.82% 4.16% (8.2%)
Shareholders' equity/asset ratio 10.83% 11.92% (9.1%)
Dividend payout ratio 37.57% 35.14% 6.9%
Nonperforming assets/total assets 2.11% 1.40% 50.7%
Allowance for loan losses as a % of loans 1.65% 1.53% 7.8%
Net charge-offs/average loans .21% .08% 162.5%
Allowance for loan losses/nonaccrual loans 59.19% 161.99% (63.5%)
Allowance for loan losses/nonperforming loans 58.11% 141.66% (59.0%)
Risk-based capital 13.48% 15.04% (10.4%)
Financial Position at December 31, 2020 2019 % Increase (decrease)
Assets $882,804 $732,883 20.5%
Loans $644,731 $552,428 16.7%
Deposits $686,415 $580,249 18.3%
Stockholders' equity $95,615 $87,394 9.4%